Disrupted supply chains from China, India and Turkey that grow such green raw products as cotton and hemp, as well as factory shutdowns in places like Portugal, are leading to low inventory among some U.S. vendors of sustainable products.With fears of a recession, the market for green products among consumers may wither too, maintains Lora Cecere of Supply Chain Insights. That contraction could also dampen investors’ interest in those companies.The outbreak of COVID-19, which is impacting virtually all countries in different ways, will take months to sort out and for supplies to begin moving freely.
Companies that produce goods made of green raw materials — think cotton, hemp and bamboo — are finding their globally-sourced supplies dwindling due to disruptions caused by the COVID-19 pandemic.
“We are sold out,” Michael Twer, founder and CEO of Delilah Home LLC, told Karma. His company sells high-end bed sheets and towels made from organic hemp and cotton. He expects the current inventory situation to be in play for weeks to come.
A set of Delilah’s queen-size hemp sheets, which sell for about $500, is born from the plant grown in China, source of the majority of the world’s hemp. From there, the raw hemp goes to a mill in Portugal, where it is spun into fabric and then to a Portuguese factory, where it’s cut and sewn to make sheets.
For a set of Delilah’s sheets made of organic cotton, the raw material typically comes from India, then spun into fabric at an Indian mill and made into sheets at a factory in the same country.
Due to the early outbreak of coronavirus in China, most supply chains there are backed up, as the country takes steps to return to normal. India has locked down and is slapping stiff penalties on violators. Twer, who is also chairman of the Organic Fiber Trade Association Fiber Council, said the Portuguese mill and factory that make Delilah’s goods are operating at 50% capacity with a skeleton crew.
“We have experienced a month delay on shipments from Europe to here for finished goods,” he added. “I have shipments in India that won’t be released for another two weeks.” Adding to that is the reduction of both cargo and commercial flights, which typically carry goods. “There is no way now to get from Point A to Point B,” said Twer.
Not all sellers of sustainable goods are suffering. For Paper Culture, which makes notecards, wedding invitations and graduation announcements from recycled paper, it is business as usual because its source of raw materials and production are all in the U.S.
The coronavirus disruptions come at a time when sustainable products are gaining popularity. According to a June Harvard Business Review article “Research: Actually, Customers Do Buy Sustainable Products” its writers found that products that bear a sustainability claim on the package accounted for 16.6% of the 2018 market, up from 14.3% in 2013, and delivered nearly $114 billion in sales, up 29% from five years prior. Even better is that products marketed as sustainable grew 5.6 times faster than those that weren’t, according to the article.
However, Lora Cecere, founder of the consulting firm Supply Chain Insights, offered a different view. She believes that fear of a recession and the fact that many consumers aren’t buying clothing or home goods now in favor of stocking up on food, medicine and toiletries, will dampen the public’s yen for items they deem unnecessary.
Retailers in general, she said, are dealing with low sales and she believes that vendors of sustainable goods will experience a similar drop. According to the investment bank and financial services firm Cowen Inc., U.S. retail traffic is down 30% year over year. Ultimately, Cecere predicted, the health of supply chains won’t make a difference, and countries like China and India could find themselves with extra inventories of organic hemp and cotton.