Textile Brands Underestimating Wood-Fibre Exposure as Climate and Regulation Converge

The starting point for understanding MMCF supply risk is the broader market for wood fibre—because dissolving pulp does not trade in isolation. It competes, within the same forest base, against bioenergy and construction timber, each of which is growing on its own independent demand curve.

Global bioenergy use rose 30% between 2000 and 2021. That growth is structurally linked to national climate policy: governments across the United States, countries in Europe, and parts of East Asia have pursued wood-based biomass as a transitional alternative to coal and nuclear, under the rationale that biogenic carbon operates on a different accounting basis to fossil fuel emissions. The scale of wood demand this implies is significant. According to research cited in a recent Canop[y publication Paper Thin Comfort, meeting just an additional 2% of global energy demand through wood biomass would require doubling today's commercial wood harvests. That is a single percentage-point shift in the global energy mix, and a 100% increase in wood harvest volumes.

Construction adds further pressure. Demand for engineered wood products in the EU alone is projected to grow 4.5 times between 2023 and 2030, as the construction sector seeks lower-emission substitutes for steel and concrete. That demand is also policy-driven, attached to decarbonisation targets with legislative backing.

Within this landscape, virgin wood pulp accounts for approximately 20% of global wood use—a substantial share of a resource being competed for by sectors each backed by government policy and projected growth. Dissolving pulp, the specific grade required for MMCF production, sits inside that broader wood pulp market and is subject to the same tightening forces. The structural implication is not merely that prices may rise. It is that the availability and predictability of supply—the two prerequisites for any fibre security strategy—are being systematically eroded from multiple directions simultaneously.

For MMCF, in particular, this context raises questions that sourcing strategies have not yet answered. How much capacity expansion in viscose and modal assumes stable or growing pulp availability? Are brands modelling fibre security against bioenergy growth trajectories? And which geographies dominate dissolving pulp supply—and how directly are they exposed to the demand pressures reshaping global wood markets? The fibre positioned as renewable is embedded in a supply system that is becoming structurally tighter across each of its major uses.

Total wood supply is one constraint. The availability of wood that is legally compliant, traceable, and credibly certified is a narrower and more acute one. For MMCF producers sourcing dissolving pulp under tightening regulatory and commercial standards, it is this compliant subset—not the global aggregate—that determines practical fibre security.

Land competition is the first and most persistent pressure on that subset. Permanent agriculture drove approximately six million hectares of tree-cover loss annually between 2015 and 2024. Projections for an additional 200 million hectares of cropland demand by 2050 indicate that conversion pressure will be sustained, not episodic.

The financial consequences of that competition are already visible. A major Brazilian pulp producer—Brazil being one of the world's principal forest-product exporters—reported a 62% increase in land prices between 2019 and 2024, driven by agricultural and other competing land uses. Rising plantation land costs, coupled with ongoing investment in pulp mill capacity, translate directly into upward pressure on wood-fibre prices over the medium term.

Climate disruption adds a second, more volatile layer of supply risk. The Food and Agriculture Organization estimated that wildfires destroyed between 393 and 667 million cubic metres of industrial roundwood between 2001 and 2021—a cumulative export value of USD 45–77 billion. Extreme fires are projected to increase by up to 14% globally by 2030.

That is not a background risk; it is a measurable, quantifiable source of inventory loss with a directionally worsening trajectory. Drought compounds the picture: global drought incidence rose 29% between 2000 and 2022, posing ongoing risks to tree health across commercial forestry regions. Climate-adaptive management responses—species diversification, transition to slower-growing varieties—may reduce vulnerability in the long term, but in the near term they constrain the supply of fast-growing commercial trees that dissolving pulp production depends upon.

Together, these pressures act on the supply pool in a compound way. Land competition reduces the area available for sustainable commercial forestry. Climate shocks destroy existing inventory and raise management costs. Resilience strategies that forest managers adopt in response can reduce the speed of replenishment.

The result is a tightening of the certified, compliant fibre pool at exactly the moment when demand for that specific category of fibre is increasing—driven by brand commitments to deforestation-free sourcing and approaching regulatory requirements. Whether certified dissolving pulp volumes are sufficient to meet projected MMCF growth trajectories, and what happens to viscose margins under sustained wildfire or drought disruption in key supply regions, are questions that current sourcing models have not yet been required to answer publicly.

The third dimension of wood-fibre exposure is where ecological and operational risk converts into measurable business liability. That conversion is happening through two distinct but connected channels: regulatory compliance requirements that tighten market access, and capital market pressure that ties financing conditions to environmental performance.

On the regulatory side, the most structurally significant near-term development is the EU Deforestation Regulation, which enters into force in December 2026. The EUDR requires that all relevant commodities placed on or exported from the EU market are deforestation-free and degradation-free, with traceability obligations applying across the value chain. For textile brands sourcing wood-based fibres, this translates directly into due diligence and traceability expectations at the dissolving pulp level—shifting MMCF compliance from a voluntary certification exercise to a legal market-access requirement.

The cost implications will be driven by market structure rather than a single reference point. As certified dissolving pulp becomes the only compliant input for brands selling into the EU, demand for that specific, verified grade will intensify against a supply pool that—as Sections I and II establish—is already tightening. Compliance burdens across the value chain, combined with the cost of robust traceability systems, will add further pressure to input pricing.

Illegality within the existing timber trade adds a further layer of liability. An estimated 15–30% of the global timber trade—valued at USD 51–152 billion annually—involves illegally harvested wood. Supply chains of that opacity carry legal and reputational exposure that EUDR due-diligence requirements will force into the open. Human rights due diligence compounds this: a study found that only three of the 39 largest global forestry companies were able to demonstrate how they check for forced labour risks in their supply chains. As mandatory human rights due diligence requirements expand in parallel with deforestation regulation, that gap becomes a compliance liability rather than a disclosure omission.

The second thread runs through capital markets. At COP26, financial institutions collectively managing USD 8.7 trillion in assets committed to eliminating deforestation-linked investments from their portfolios. A subsequent survey of UK institutional investors found that 79% believed companies with material ESG failings should be avoided, even where short-term returns remained attractive. These are not aspirational signals; they are directional commitments with portfolio allocation consequences.

Reinforcing them are mandatory climate-related financial disclosure regimes, now expanding across the EU, United Kingdom, Canada, and Brazil, aligned with TCFD frameworks that require companies to report on how they are managing and anticipating climate-related risks. For apparel firms with significant MMCF exposure, wood-fibre dependence will increasingly need to be disclosed, quantified, and stress-tested—not as a sustainability narrative, but as a material financial risk. The cost of capital implications for brands that cannot demonstrate credible fibre traceability and supply resilience are not yet fully reflected in valuations, but the regulatory and investor architecture to drive that repricing is already in place.

Risk Calculus Has Changed

The structural squeeze on forests does not eliminate manmade cellulosic fibres from the textile mix. It changes the risk calculus for how they are sourced and scaled.

Three responses follow from the evidence. First, reducing virgin wood reliance by scaling recycled and Next Gen fibres—sourced from waste textiles, agricultural residues, and industrial by-products—decouples MMCF growth from primary forest harvest and reduces exposure to the price and compliance volatility documented above. Second, de-risking remaining wood supply through end-to-end traceability, high-integrity certification, and robust supplier due diligence manages the legal and reputational exposure that opaque supply chains now carry. Third, integrating fibre-risk scenario analysis and stress testing into sourcing strategy, capital allocation, and disclosure ensures that future shocks—whether regulatory, climatic, or market-driven—are anticipated rather than absorbed.

The question for fashion is no longer whether wood-based fibres are renewable. It is whether scaling them without diversifying inputs exposes brands and investors to tightening markets in a finite forest world.