This article was offered to you thanks to the collaboration of The European Sting with the World Economic Forum.
Author: Alia Malik, Senior director, Data and Traceability, Better Cotton
- Fashion retailers often don’t know where their cotton comes from, as it is shipped and processed in bulk.
- Buyers worry about where their clothes come from and demand higher and higher standards.
- Better Cotton is bringing together a group of industry leaders to consider how to better track the origin of the cotton they use.
Ask a fashion retailer where the cotton in their clothes comes from and most put their hands up – they just don’t know. ‘We buy through intermediaries’; ‘Cotton fibers mix’; “The mechanisms for tracing individual farms simply do not exist.”
The reasons they give for not knowing are innumerable and, in most cases, perfectly authentic. Along with ubiquitous commodities like crude oil, soybeans and wheat, cotton is one of the most traded commodities in the world. As with these other high-volume raw materials, it is shipped in bulk, processed in bulk, and sold in bulk.
What is traceability and why is it a growing problem?
Shoppers care about where their clothes come from and act with their wallets. Just look at the rising sales of organic cotton. The fact that this is the only market segment that remains physically separate once the cotton leaves the company, and therefore is traceable (albeit with some question marks), is no coincidence.
Lawmakers are also starting to wake up. The European Commission, for example, is currently considering a far-reaching proposal that would require companies to drastically tighten due diligence requirements in their supply chains. Likewise, US customs authorities are now imposing stricter transparency conditions on cotton imports from high-risk countries.
Why does the cotton sector not open up about the origin of its products?
This is a question that retailers and other key players in the industry are asking. The vast majority of the cotton industry now accepts that traceability is no longer a “nice to have”. Our recent survey of Better Cotton network suppliers found that more than 8 in 10 (84%) see the origin data of the cotton they buy as a “business need to know.” Yet currently only about 15% of apparel companies say they have comprehensive information on the raw materials that make up their products, according to recent research from KPMG.
The sticking point is how the market works. To reduce costs and increase efficiency, the production of individual cotton growers is consolidated with the production of other growers as soon as it exits the farm gate. It is not impossible to keep it segregated or to use emerging technologies to digitally mark raw cotton, but the time and costs to do so are considerable.
Cotton also does not go directly from the farm to the retailer. There are more intermediary players, from ginners, merchants and spinners to fabric factories, sewers and, finally, the brands themselves. Again, introducing controls and controls at each stage may be feasible, but it is expensive and technically demanding.
Finally, there are legitimate questions to consider about intellectual property. Yarn and fabric manufacturers often draw on multiple types of cotton to get the specific blend they are looking for. The net result is that the cotton in a garment is likely to come from many farms, possibly from multiple countries.
What is being done to address these challenges?
It is possible for us to meet these challenges, even if no one pretends that they are easy. But neither are they insurmountable, especially given the speed of technological innovation in this space. Hence our Better Cotton decision to bring together a group of industry-leading players to consider what a viable traceability solution could be and how we can create it collectively.
The group, which includes retailers and brands such as Bestseller, Marks & Spencer and Zalando, is examining every step of the procurement process, from existing chain of custody systems to emerging methods for managing and sharing product origin data. .
A radical rethinking of this kind takes time. In some cases, potential disruptions will drive many retailers out of business. In other cases, the technological solutions are not yet ready for large-scale use. In some cases the actors are not ready for change.
Aside from all these problems, there is the question of physical segregation to consider. Currently, Better Cotton is promoting a volume tracking system similar to the green energy market. It allows retailers and brands to purchase credits that guarantee the benefit of licensed farmers and that the equivalent amount of Better Cotton is fed into the supply chain, but does not necessarily mean that the specific cotton they buy comes from farms that participate in the Better Cotton program .
To meet the level of traceability that both customers and regulators are starting to demand, it may be necessary to introduce mechanisms to physically keep cotton from licensed farms physically separate. This will add rigidity to trading, as well as reduce the opportunities for mixing and blending. Our top priority, therefore, is to find ways to make this work in order to deliver what consumers want (in terms of traceability) and what farmers need (in terms of a well-functioning market).
Fortunately, we are not starting from the starting point. Better Cotton is already tracing cotton from farm to gin and can build on a wealth of trade and processing information already flowing through our platform for the best cotton.
What impact could it have?
Consumer confidence is the great victory of a cotton supply chain where raw materials can be traced with ease and precision. With origin data in hand, the nearly 300 brands currently sourcing through Better Cotton can also speak more credibly about their sustainability efforts. But farmers will also benefit from it. A robust and accessible traceability system will allow producers who follow Better Cotton standards to enter international value chains that are becoming increasingly regulated. They could risk being left behind otherwise.
What is the World Economic Forum doing on climate change?
Climate change represents an urgent threat that requires decisive action. Communities around the world are already experiencing increased climate impacts, from droughts to floods to rising seas. The World Economic Forum’s Global Risks Report continues to rank these environmental threats at the top of the list.
To limit global temperature rise to well below 2 ° C and as close as possible to 1.5 ° C above pre-industrial levels, it is essential that business, policymakers and civil society promote global action on the short- and long-term climate in line with the objectives of the Paris Agreement on climate change.
The World Economic Forum’s climate initiative supports the scalability and acceleration of global climate action through public and private sector collaboration. The initiative works through different workflows to develop and implement ambitious and inclusive solutions.
This includes the Alliance of CEO Climate Leaders, a global network of business leaders from various industries who develop cost-effective solutions for the transition to a low-carbon, climate-resilient economy. CEOs use their position and influence with policy makers and business partners to accelerate the transition and realize the economic benefits of creating a safer climate.
Contact us to get involved.
Better information on individual farmers will also make it possible to better reward farmers for improving the sustainability of their farms through opportunities such as preferential financing, bonuses and other tailored forms of support. A case in point is linking the best cotton farmers to international carbon credit markets in recognition of their 19% lower emission rate.
Much remains to be done, but the wheels of change are turning. We plan to launch a series of pilot projects in key markets this year, with a view to the full roll-out of an advanced traceability system late next year. Traceability does not go away. Indeed, the demands for transparency throughout the cotton supply chain will become increasingly tough. We don’t have all the answers right now, but we will. Not knowing is no longer an option.