There has been a significant rise in marketing sustainable products – many based on certified sustainable ingredients - to consumers in recent years. Given the importance of climate change, resource conservation and water scarcity in today’s cultures, this trend likely will not dissipate in the near future.

As with almost any differentiated product, there is often a price premium associated with certified cotton. This premium encourages fraud by unscrupulous actors selling uncertified cotton as certified. A recent study commissioned by Solidaridad, an organization that supports the expansion of organic and Fairtrade cotton production, indicated that approximately half of the products marketed as “organic cotton” could not be substantiated.

Just a few of the many issues involved to substantiate marketing claims were mentioned in a recent story of clothing mislabeled as “organic cotton” and sold by major retailers contained genetically modified cotton from India got widespread attention. One of the most challenging issues involved in many of the “green” marketing claims is the inability to substantiate – or test – the final product against a “green” standard. In some situations, testing may be possible but is not cost effective to perform at a frequency to aid in the enforcement of claims.

Existing regulations and guidelines provide a framework to help the industry ensure the authenticity, understandability and credibility of all ‘green’ claims associated with a cotton product. The following general principles are often the basis of national regulations:

• Spell out exactly what is beneficial about a product in plain language that consumers can understand.
• Link the environmental benefit to a specific part of the product or its production process.
• Ensure you have proper documentation to substantiate your claim. This is particularly important when citing a certification standard.
• Explain how a product’s characteristic is beneficial to the environment.

Import (retail) countries establish requirements and regulations pertaining to labeling the types of material and cotton used in textiles sold in their countries. Below are brief overviews of regulations governing marketing claims on or about cotton products in key consumer markets.

Most voluntary standards use the following guidance for marketing claims.

• Products made with 100% “sustainable” fiber content can be labeled as “sustainable” or “100% “sustainable”
• Products with a minimum of 95% “sustainable” fiber content can be labeled as “sustainable cotton”
• Products with a minimum of 70% “sustainable” fiber content can be labeled as “made with “sustainable cotton” [Note: Fairtrade only requires 35% content to be labeled as “made with”.]

The question remains, however, is whether or not the industry can develop processes, controls, enforcement mechanisms, and systems to enable and ensure substantiated claims and a level playing field. If a premium continues to be applied to the extraneous attribute that cannot be authenticated at the product level, systems and controls should be developed. If fraud continues, it could diminish the market value of true and certified ‘green’ products that may stymie sustainability advances as well as damage the reputation of cotton in general.

Questions:

• Does the increased level of transparency required to substantiate marketing claims and/or trace cotton from origin to product pose any risks to the manner in which the supply chain operates today (e.g. proprietary information at risk, disruption to business)?

• What role can the cotton industry associations play in reducing fraudulent claims and/or streamline documentation processes?

• Would a central clearinghouse where all certified cotton claims are registered, monitored and reconciled with marketing claims assist?

• Would processors benefit from having guidance documents to help them manage, enter data from, and retain document in accordance with best practices and industry standards?

• Do these trends create an opportunity for more vertically integrated supply chains? If so, would this present opportunities or pose additional challenges for small and medium enterprises to access the global market?

Increasingly, end buyers and consumers want assurances that their products were produced and manufactured under equitable, and environmentally and ethically responsible conditions. This has led to a push for more transparency and tracking of cotton through the supply chain.
 
Transparency is the ability to have free and easy access to critical information. Traceability is the ability to track something as it moves along the supply chain—usually from origin to final product.

However, this shift could have negative impacts on the cotton industry and may create opportunities for supply chain actors to benefit from operating fraudulently. Implementing new systems and processes will require additional systems, trainings, and resource commitment –complicating business transactions and creating distractions from core business functions. In addition, industry members may not support such a system because they may not want to reveal all of the information requested by end buyers. For example, in highly competitive markets identification of a supplier—information often requested in tracking systems—could be considered proprietary.

In order to scale up transparency and traceability in supply chains, the industry needs to develop a system that collects needed information in a way that appeals to all parties. With the proper level of transparency, and proper assurance by a third party (e.g., tracking system provider, auditor, certifier), it is possible to set up a system that enables the end buyer to identify the source of a raw material without revealing each supplier’s proprietary information. This may require that some information remain hidden from all but a few restricted and accredited entities. The system must provide assurances to industry actors that their proprietary information will be protected, and to end buyers that the outcomes of the system are reliable and credible. Existing systems (e.g., Seam , String ) that can be models for such a system – or possibly modified to enable necessary capabilities.

Governance is participatory, consensus oriented, accountable, transparent, responsive, effective and efficient, equitable and inclusive and follows the rule of law. Any efforts to develop such systems is being driven by sustainability initiatives but must be implemented by cotton supply chain actors. Representatives from all members of the cotton industry should have the opportunity to participate in the design and development of such a system that could have a widespread impact on the industry.

Questions:

Would the cotton industry support the development and implementation of a traceability system? Would additional benefits be reaped?

Should the cotton industry get more involved in the design of such a system – or even manage all aspects of its development? If so, what organizations should be involved and how?

There are some trends in the marketplace - many related to advancing corporate responsibility and sustainability -that will likely lead to increased governance expectations of brands and industries.  Some of these new expectations will require additional standards, processes, reporting requirements, and systems. The cotton industry could help shape the solutions to optimize benefits to the industry. If done correctly, these changes could level the playing field for all actors, increase efficiencies, improve coordination, and improve knowledge sharing along the chain.

A snapshot of a few trends related to voluntary stards and their potential benefit to the industry is provided below.  

Voluntary sustainability standards: Voluntary standards are expanding, requiring new processes, systems, mechanisms and controls to limit fraud and improve enforcement. These systems could level the playing field, and improve coordination and efficiencies in the value chain if a solid governance program is in place. 

Traceability: Consumers and brands are increasing their scrutiny of the conditions under which the cotton in their products was grown and processes and chemicals used in its production. This presents the cotton industry with an opportunity to develop systems that could provide additional benefits (e.g. more precise management of resources, products).

Transparency: The shift towards more transparency along the cotton value chain is on the rise. Yet, it is important to allow industry actors to protect proprietary information. It may be beneficial for the industry to engage with standards and systems development teams to design a system that meets stakeholder requirements and protects proprietary information. This system will require robust procedures and controls.

Metrics:  The importance of credible and standardized metrics as a means of defining and assessing sustainability criteria is widely recognized.  The industry has an opportunity to facilitate comparable and conforming metrics collection, analysis and reporting across all supply chain nodes and geographic regions.

Marketing/product labeling:  As consumers' support for sustainable products increases, it is in the cotton industry's best interest to maintain the credibility of authentic claims and minimize fraud in labeling and marketing statements.

Questions: 

Would the industry benefit from the development of standards, systems, and mechanisms that improves knowledge collection, tracking, and reporting? 
If so, how should they participate in the design and development of these elements?

Should the industry develop governance policies, manuals or other mandates or resources to improve the integrity of systems and mechanisms?  

o        Principles: integrity, transparency, fairness, conformity

o        Norms: standards, guides, enforcement

o        Coordination & Enforcement: consultation, conformity assessments, certification, dispute resolution, knowledge management and sharing

o        Policies, Programs & Systems: management systems, processes, internal controls, data collection and reporting, communication and marketing