For many in the manufacturing business who supply brands, regular audits of factories to ensure compliance with buyers’ corporate social responsibility standards can be seen as a burden. Not so for two top executives at the footwear leather producer ISA TanTec.
Throughout the nearly three decades that the company has been in business, its Founder and Executive Chairman Thomas Schneider has always seen the arrival of auditors as an opportunity to better understand customers’ needs and compliance standards.
“Audits were always positive for me,” he says. “They help us to understand where we are. When we have someone from the brand who comes for three days and they give us an audit protocol and later on a score, that gives us something to work for and helps us improve.”
This is especially important, adds Uwe Hutzler, ISA TanTec’s Chief Executive Officer, because the company places a strong emphasis on reducing its impact to the environment – something that gives its leather and other materials added value for brands that want to reassure customers about the sustainability of their products.
“Leather is one of the most environmentally friendly products,” Uwe reveals, though he notes it does not always have that reputation, meaning the company has had to work harder than some to earn its sustainable credentials.
We evaluate every work step, every machine, every formulation for energy and water usage, and therefore, we also have to individually polish up and refine the process. – Thomas Schneider
The company sells to big names including Timberland, Wolverine and Dr. Martens. “Being a supplier for brands has the advantage that we are getting challenged on sustainability and CSR regularly,” Thomas points out.
Evaluate everything
The result of consistently meeting those challenges is what the company calls ‘LITE’ – Low Impact To the Environment – leather. The concept involves working alongside brands to change the production process to reduce the amount of energy and water consumptions used for each square metre of leather.
“We evaluate every work step, every machine, every formulation for energy and water usage, and therefore, we also have to individually polish up and refine the process,” Thomas says.
ISA TanTec, which Thomas started in China in 1993 with five people, now has revenues of more than US$200 million and employs over 1,000 people. Headquartered in Macau, it operates four tanneries plus showrooms across the US, Vietnam and China.
Being a supplier for brands has the advantage that we are getting challenged on sustainability and CSR regularly. – Thomas Schneider
Five years ago, the majority shareholding of ISA TanTec was sold to a private equity firm, and Thomas, who is now 66, stepped back from the day-to-day running of the business and took on his current role.
The company’s new ownership means there is now a renewed emphasis on growth.
“A private equity firm has clear expectations,” Thomas shares. “They want to buy something for one and sell it for two after four to six years. So we have to achieve this, and you achieve this by growth, but in a sustainable way. It’s a combination of volumes and margins.”
Additional materials
To make that growth happen, ISA TanTec is now expanding into additional sustainable materials and products. One avenue is to grow through new products closely related to the core business, such as leather shoelaces and leather patches for the footwear and apparel industry.
The other avenue is to look for additional materials. The company recently started another division called Creation of Sustainable Materials (COSM), which is producing materials for consumers seeking animal-free materials.
This consolidation of the industry has definitely given us a push, and as a strong player, I think we’ll definitely emerge from this as a winner. – Uwe Hutzler
As a by-product of the meat industry, Uwe explains, leather has lots of sustainable credentials. But it is becoming more and more difficult to convince certain consumers due to the growing market demand for vegan and climate-friendly products.
“Sometimes, you cannot work against people’s opinions, and you have to find a way to make use of them instead,” Uwe says. “That’s why we started COSM, so we could offer products additional to leather without cannibalising it, to give our customers the option to design other materials into their shoes, in case they do not want to use leather.”
The COSM line will eventually consist of several sustainable materials as additional products to ISA TanTec’s LITE leathers. Currently the materials manufactured in the COSM line are highly bio-based and biodegradable, and are made out of plant-based materials such as mushroom and cellulose, but are not limited to those.
“It was very important for us to have another section where we can grow to eventually add another US$50 million to US$100 million turnover,” Thomas says. Over the next four years, the plan is for the division to bring in an extra US$30 million, but the focus on the core business will still be key.
“We want to enter the market and replace plastics, which are falsely called sustainable, that are being used as alternatives to leather right now,” he adds.
Emerge as a winner
These growth plans require long-term thinking, although Uwe admits that is something that has become extremely difficult amid the COVID-19 pandemic. The company has long supply chains stretching across the world, meaning it could be affected by lockdowns and restrictions at numerous points.
“The biggest challenge we face is uncertainty in the markets. What is valid today may not be valid tomorrow,” he says.
“On the supply chain side, you can see in Vietnam how quickly everything can change. Until recently, it was a country where there was nearly no virus, and for the last year-and-a-half, everything went really well.”
Despite that early success, an outbreak in the middle of 2021 meant that ISA TanTec had to facilitate having its staff live onsite at its tanneries in order to adhere to regulations. It even had to temporarily close one of its facilities when it was hit by an outbreak.
Amid those challenges, Uwe remains optimistic. “Weaker players in the supply chain are disappearing, so we have less competition,” he confirms. “This consolidation of the industry has definitely given us a push, and as a strong player, I think we’ll definitely emerge from this as a winner.”
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