On October 14^th I had the honor of presenting at a seminar entitled "Challenges for a Sustainable Textile Industry" that was organized by the Taiwan Textile Federation (TTF) and the International Cotton Advisory Committee (ICAC). The event ran alongside the Taipei Innovative Textile Application Show (TITAS), which ran from 13^th-15^th October.

Presentations were very informative and ranged from the man-made fiber supply and demand trends, advances in cotton production technologies, innovation in textile processes, to name a few. Participants included TITAS participants, cotton supply chain professionals, and ministries of foreign affairs, amongst others.

I discussed what I see as a trend towards more vertically aligned supply chains to support the promotion and use of sustainable cotton by retailers and brands. I framed my presentation on the Better Cotton Initiative (BCI) because it is designed for mainstream use and uptake and its support by global brands, cotton industry associations and supply chain actors.  BCI is a global, multi-stakeholder initiative that aims to promote measurable improvements in the key environmental and social impacts of cotton cultivation worldwide to make it more economically, environmentally, and socially sustainable.

BCI was also fresh on my mind because the week prior BCI offered US stakeholders an opportunity to learn more about BCI and its supply chain system. During the BCI workshop participants heard first hand from various members of the supply chain - from an Indian BCI farmer and a cotton ginner to a trader and BCI retailers such as Levi Strauss & Co and H&M.

The BCI workshop participants included retailers such as Gap Inc., William Sonoma, Nike and Kohl's, ABRAPA (Brazilian Association of Cotton Producers) and organizations such as As You Sow, Cotton Incorporated and U.S. National Cotton Council, among others. Other supply chain actors have recently BCI.

The level of interest, support shown and range of participants at these two workshops indicate that virtually all members of the cotton supply chain are interested in sustainability. This is encouraging as I continue to be a proponent of industry-level support so that the image of cotton as a responsible and sustainable fiber is strengthened. However, industry-wide support will not likely take root for many years. In the meantime, we need vertical supply chains that more easily, efficiently and transparently link sustainably grown cotton through the supply chain to a brand or product.

With this said, what really struck me at the Taiwan seminar is the sole question that was asked - "if global brands are going to develop vertical supply chains, won't this shut out the smaller actors?"  I think this was an excellent question - and is one that I try to address through Cotton's Revolutions governance blog and resource library.

Many initiatives implement one of the following three common CoC systems: physical segregation, mass balance and book-and-claim. The following is a brief description and some advantages and disadvantages of each.

Physical segregation:  Certified products are physically segregated from non-certified products at every facility along the supply chain. Cotton description and ownership documentation accompanies the material at all stages.  Example: organic cotton.

Advantages:

• The only system that traces the final cotton back to a certified sustainable source.
• It is preferred by many non-governmental organizations because the sustainable attributes are linked with the cotton throughout the chain.
• Because documentation accompanies the segregated cotton, data verification should be easier than in other systems.

Disadvantages:

• It is incompatible with the bulk of existing cotton trade and processes.
• The extra processing, segregation, storage, and documentation requirements create a distraction from each supply chain actor's core business, can cause delays in processing, and may lead to additional charges to customers.

2.     Mass balance: The amount of certified cotton sourced and sold by each supply chain actor is tracked. However, the certified cotton and sustainable certificates do not need to be sold together. Certified cotton does not need to be segregated from non-certified cotton.

Advantages

• Its credibility may be perceived to be higher than a book-and-claim system as there is a closer physical connection between the certified cotton and the certificate.
• No physical infrastructure investments are required.

Disadvantages

• Requires administrative tracking at each stage of the supply chain, resulting in a more cumbersome system that increases costs and resource burden.
• Falsification of documentation and claims can occur at every stage in the supply chain, increasing the cost and resources required to validate claims.
• Data verification will be more cumbersome in non-segregated portions of the supply chain.

3.     Book-and-claim: Certified cotton is completely decoupled from sustainability certificate. Certified cotton would freely flow through the supply chain, just as conventional cotton does.

Advantages

• The trade of sustainability certificates does not affect the trade of physical cotton, which has clear benefits to market players and market penetration.
• Auditing and data verification would be easier and more reliable than multiple sites as required under a mass balance or physical segregation systems.
• Provides access to certificate market for small farmers who may not have any local demand for sustainable cotton or logistics for export.

Disadvantages

• There are no guarantees that the cotton used for cottons actually originates from a sustainable farm.
• Because of the need for a credible Issuing Body, setting up a book-and-claim system will require both time and high start up costs.

In order to minimize these risks, rigorous control must exist for each - and between - systems. A system, or selection of systems, should be designed to create a level playing field for all supply chain actors and benefit the environment, farmers, and the industry.

Questions

What systems or processes exist in the cotton supply chain that can serve as a starting point or foundation for a CoC system?

What additional processes or systems could be installed to minimize fraud or corruption potential of the CoC system or claims?

Should the cotton industry establish a central clearinghouse through which all certified cotton are registered , better enabling enforcement and claims reconciliation?