Yarn & Fabric
Spinning, weaving, dyeing, and finishing. Where raw fibre becomes usable material, and where the industry's chemical pollution and water contamination problems concentrate.
What happens here
The yarn and fabric stage covers spinning (converting staple fibre or filament into yarn), weaving or weft/warp knitting (producing greige fabric), wet processing (dyeing, bleaching, printing), and finishing (softening, water repellency coatings, antimicrobial treatments). Each sub-stage typically involves distinct actors: yarn spinners, fabric mills, dyehouses, and finishing houses are often separate businesses in a subcontracted chain, with each handoff creating a visibility gap.
The sector is geographically concentrated in South and East Asia: China accounts for roughly 50% of global fabric production; India, Bangladesh, Vietnam, and Turkey make up much of the remainder. Wet processing is the industry's primary water pollution source: dyehouses use approximately 200 litres of water per kilogram of fabric, and an estimated 20% of global industrial freshwater pollution comes from textile dyeing and treatment. The discharge often contains heavy metals, azo dyes, and finishing chemicals, a significant proportion of which are restricted under REACH but unevenly enforced in producing countries.
Chemical use is a defining issue at this node. Restricted Substances Lists (RSLs) maintained by brands and the OEKO-TEX STANDARD 100 set limits on hazardous chemical residues in finished fabrics. REACH (the EU's chemical regulation) applies to imports entering the EU market, creating a compliance obligation that falls on the brand or importer rather than the mill itself, but that effectively determines which mills European brands can source from.
The economics
Margins at this stage are thin and contract-dependent. Volume fabric mills in China, India, and Bangladesh compete primarily on price, with gross margins of 5–12%. Specialist mills with proprietary fabric technologies, blended constructions, or recognised certifications (GRS, OEKO-TEX, Bluesign) can extract modest premiums, particularly in the premium and performance apparel segment. Dyehouse operations are energy and chemical-intensive, with margins compressed by commodity chemical pricing and rising energy costs.
DPP will require mills to provide primary sustainability data (fibre composition, chemical inputs, water and energy consumption, and certification status), which creates a new compliance infrastructure cost. This burden falls on the mill, not on the brand that uses the data, and no mechanism in the DPP framework currently compensates mills for the cost of becoming DPP-compliant data providers. Smaller mills, without the IT systems to automate data collection and transfer, face a structural disadvantage.
Tensions
Mills sit between brands demanding more sustainable fabrics and procurement teams that won't pay the premium those fabrics require. A brand may have a stated commitment to Bluesign-certified fabrics while its pricing model makes Bluesign certification economically untenable for most of its Tier 2 mill base. This internal contradiction in brand purchasing is documented but rarely resolved.
The DPP data obligation lands here with significant weight: mills must generate, verify, and transmit traceability records that brands use for their own compliance filings. The cost of creating those records (data collection systems, third-party verification, and format compliance) is a new uncompensated obligation on actors operating at very low margins. This creates pressure toward consolidation: large, integrated mill groups with existing data infrastructure will absorb compliance more easily than small single-stage operators.
PFAS (per- and polyfluoroalkyl substances) used in durable water repellency (DWR) coatings represent a specific near-term tension. PFAS are in the process of being broadly restricted under REACH and are already restricted in several EU member state markets. The alternatives (silicon-based and wax-based DWR treatments) underperform on durability, and no broadly adopted replacement technology exists at volume. Brands with outdoor and performance product lines face a reformulation challenge without a clear technical solution.
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