Governance

As we face the potential for a double dip recession in the U.S., threatened dismantling of the Eurozone and market instability worldwide, the importance of social protection has never been more evident. Effective and efficient social programs reduce poverty, lessen inequality and build resilience by helping individuals and families handle such shocks. The need for adequate social protection in the cotton sector is especially important in these times of extreme price volatility and increasing risk of crop failure due to climate change if farmers and other supply chain actors are to remain in this industry.

A recent study conducted for the World Bank [Building Resilience and Opportunity, the World Bank’s social Protection & Labor Strategy 2012 – 2022] makes the case for strengthening social protection programs that improve opportunities and mitigate risks by:

• Preventing drops in overall well-being from income and expenditure shocks. This goal can be achieved through social insurance programs – unemployment and disability insurance, public works programs – as well as crop and health insurance.
• Protecting from catastrophic losses of human capital through the use of such things as emergency shelter, food and health services.
• Promoting improved opportunities and livelihoods through connecting those in need to better jobs and opportunities to improve livelihoods. This objective includes efforts to build trade or financial skills, promoting employment opportunities, and reducing gender inequality.

Social protection programs can be informal (family or community-based), private (e.g. faith-based organizations) or government-run. In some instances, non-governmental organizations have more flexibility as to what they fund or and how they provide services, making them more nimble when shifts in support programs are needed due to natural disasters, economic recessions, etc.

As large organizations such as the World Bank work to strengthen social protection opportunities they are shifting their attention from implementing individual programs to building cohesive and holistic protection systems. Any protection system should include a focus on core strengths such as knowledge sharing, innovation and capacity building.

The World Bank study also identifies four global gaps in social protection that should be addressed to maximize benefits of the systems:

• An integration gap: Programs are often operating in isolation from one another, with redundancies or lack of harmonization limiting their full potential.
• A coverage gap: Many developing countries have large informal economies and workforces. Social protection for the informal workforce is often not provided and should be integrated into future systems.
• A promotion gap: While programs may exist in many countries, those in need often do not know of the services or opportunities available to them.
• A global knowledge and results gap: Mechanisms to share experiences, results, challenges and successes across social protection programs globally are limited.

The development of holistic and cohesive social protection systems that integrate sharing knowledge, technology and innovative thinking across different regions can lead to more progressive and productive social protection programs – eventually resulting in a bigger, more widespread benefit. Raising awareness among potential beneficiaries further increases positive outcomes. Communities and industries all benefit if individuals are able to maintain their socioeconomic status and remain part of an economy’s workforce. An effective social protection system needs a new framework and approach as individual program owners may have to adjust their level of influence and control. Such a shift calls for a robust and equitable governance framework and the engagement of multiple stakeholders early in the process. The framework will need transparency and knowledge sharing, accountability, equitable distribution of services, and measured effectiveness.

Question to consider

How should the private sector help provide social protection systems?

I would like to discuss partnerships in the context of helping retailers and other members of the supply chain to understand the basics of cotton production and trade – production regions, lint characteristics and quality, global trade flows, roles of each member of the supply chain – and how all actors one of the world’s largest supply chains do their part in delivering the right product for the ever-changing fashion trends.

I have conducted extensive research and have spoken to many members of the cotton supply chain. One thing that I have found is that the majority of retailers don’t have a basic understanding the global cotton supply chain. Many don’t know any suppliers beyond their first tier cut and sew operators or how and where cotton is grown. They tend to have short-term purchase orders with the cut and sew facility, while some may have non-contractual relationships with mills. Very few have direct relationships with spinners.

Yet many of these same brands have established sustainability goals such as sourcing increasing amounts of sustainable cotton, reducing greenhouse gas emissions and/or water consumption, or banning unethical cotton from their supply chains. They would also like to track sustainable cotton along the entire chain – from farm to end products.

Few will succeed without a basic understanding of this extremely complex supply chain and strong transparent partnerships with key supply chain members.

To reach these sustainability goals retailers should begin by mapping their supply chain. The retailers will then need to gain a commitment from top suppliers to meet their sustainability expectations.

Each supplier will have different opportunities to improve their environmental and social footprints. Production will be different from spinning (e.g. electricity), which will differ again from mill and dyeing (e.g. water) or cut and sew (e.g. labor). When different members of the supply chain work together to prioritize efforts and share costs and benefits equitably should lead to a stronger partnership and add longevity to the partnership.

When it comes to traceability, retailers must focus on getting spinners to segregate and report the cotton that ends up in their products. Spinners remove the lint’s origin identity and mix it with several sources of cotton lint when they spin cotton into yarn. The retailers must work – most likely through their mills – to gain the commitment of spinners to identify the origin of each bale that feeds into a lot of yarn.

The cotton industry and individual actors within the cotton supply chain could benefit from sharing knowledge and perspectives – and possibly exploring supply chain partnerships. By developing strong partnerships, all supply chain actors can  improved capacity building, greater efficiencies and other shared benefits. These results in turn can lead to a more secure and predictable base of suppliers/buyers, improved contract sanctity, lower risks associated with supply and demand volatility, and an improvement in the overall well being of the cotton industry (and avoiding losing market share to other materials).

Questions to consider

Should the cotton industry help apparel companies understand the basics – and complexities – of the cotton supply chain?

Would this assistance allow for effective and mutually beneficial partnerships?