Governance

Cotton is an important crop and product. Nearly every person around the world uses it on a daily basis. The cotton industry employs more people than any other industry and is a significant contributor to the gross domestic product of many developing countries. Despite its global significance, cotton production can still optimize the benefits of cotton production while minimizing the potential negative impacts.

The Better Cotton Initiative (BCI) aims to transform cotton production worldwide by developing Better Cotton as a sustainable mainstream commodity with the following aims:

• Reduce the environmental impact of cotton production
• Improve livelihoods and economic development in cotton producing areas
• Improve commitment to and flow of Better Cotton throughout the supply chain
• Ensure credibility and sustainability of the Better Cotton Initiative

The BCI itself has transformed since I had the pleasure of acting as its first Chairperson five years ago, when a dozen passionate council and staff members came together to design the initial principles and framework for implementation.

When we envisioned the evolution and global expansion of the BCI we saw three stages:

A start-up phase with limited members and a goal to build credibility and collect data to make a compelling business case for engaging more farmers, involving more governments, and gaining support from other value chain actors.

An expansion phase with additional regions and value chain actors. During this stage we would be collecting data (e.g., key performance indicators) and following other business benefits to tell an increasingly convincing story for more farmer participation and industry support.

A normalization phase that would include further expansion to new regions. Better Cotton would flow into already existing systems without much direct engagement from actors. Farmers’ participation, industry and government support expands with program expansion.

I see evidence of great change when Reading the many accomplishments and metrics in the BCI’s 2011-12 Annual report. The BCI is moving into a new phase. I would like to share a few of these milestones with you here.

This past year the BCI worked with 125,000 farmers (approximately 90,000 of whom produced Better Cotton) on 450,000 hectares through a network of farmer learning (training) groups and implementing partners[1] to produce approximately 490,000 metric tons of Better Cotton lint in Brazil, India, Mali and Pakistan.

In addition, 25,000 workers, including over 20,000 women, received training tailored to what was most important to them. For example, while farmers typically were trained on all Better Cotton principles, most women and workers were trained only on decent work and fiber quality principles – the principles that directly correspond to their needs.

Membership more than doubled to 119 organizations by the end of 2011, with the largest growth in the supplier and manufacturer categories. The cotton consumption of BCI brand and retail members now represents over 5 percent of the world’s total consumption.

The following table provides a snapshot of the BCI’s key performance metrics for each BCI indicator from 2011 to 2012.

*Brazil’s data are estimates due to the fact that its harvest has not been completed.

The BCI’s recent accomplishments are impressive for this initial stage of development. With this said, the BCI recognizes that there is much more to do as they enter a new stage of development. Better Cotton is perched on the edge of expanding to become a mainstream commodity. To this end the BCI recently developed a strategy for the years 2013 to 2015 that is aimed at scaling up Better Cotton and working towards financial self-sufficiency.

Some changes to the BCI system include their membership options and structure. I have highlighted these below with the hope that some of you will consider exploring supporting the BCI in a way that makes most sense for your organization.

Suppliers and manufacturers will be able to choose between basic and registered membership.

• Basic membership is for entry-level companies that want to support BCI in a more hands-off way while they learn about what it means to market, buy and sell Better Cotton.
• Registered membership is for those suppliers and manufacturers who are active in the Better Cotton supply chain.

Brands and retailers can choose between standard membership and pioneer membership.

• Standard members contribute to supply creation by investing in farmer support, communicating about Better Cotton and accessing all BCI benefits, such as the traceability system, field data and results.
• Pioneer Members are the driving force behind the success of BCI. They invest significant financial support both in BCI capacity and for farmer support, work closely with members and their staff to ensure that Better Cotton is entering their supply chain. They are also members of the Better Cotton Fast track program.

Brands are also able to start with a learning membership as they get ready to start supporting and procuring Better Cotton the following year.

The Rockefeller Foundation has commissioned a four-part series of Impact Evaluation Guidance Notes to help non-governmental organizations (NGOs) (and others) in conducting high quality impact evaluation as a means to demonstrate and measure the effectiveness of their efforts. The first guidance note in the series is Introduction to Impact Evaluation. I found the guidance note to contain a lot of helpful and practical guidance and suggestions that I would like to share with you.

This introductory guidance note provides an overview of impact evaluations used to measure effectiveness of social or environmental interventions. It begins by providing definitions for key terms, such as:

• Impacts: “the positive and negative, intended and unintended, direct and indirect, primary and secondary effects produced by an intervention.” (OECD Development Assistance Committee)
• Impact evaluations: “measure the change in a development outcome that is attributable to a defined intervention, impact evaluations are based on models of cause and effect and require a credible and rigorously defined counterfactual to control for factors other than the change.” (USAID)

The guidance note then presents common reasons for conducting impact evaluations, including:

• To help funders evaluate potential investments
• To decide whether or not an intervention is having a positive change
• To replicate an initiative or scale up a pilot project
• To better adapt an intervention for a different context
• To reassure funders that resources are being invested wisely (upward accountability)
• To inform beneficiaries of beneficial outcomes (downward accountability)

Methodology

There is much debate on the best methodology for conducting impact evaluations, based on differences of views on rigor, required evidence and qualifications of evaluators. The guidance note recommends that the following elements of impact evaluation should be considered when developing a methodology:

1. Clarifying the values that will underpin the evaluation (e.g. achieve desirable impacts and avoid negative impacts, evenly distribute benefits). The guidance note provides suggestions on methods to assist with the clarification of the values.
2. Developing and/or testing a theory of how the intervention is supposed to work. The guidance note includes possible methods to assist with testing the theory of change (e.g. logical framework (4x4 matrix) approach, results chain (sequence of inputs, activities and outputs), outcomes chain, and outcome mapping).
3. Measuring or describing these impacts and other relevant variables (e.g. processes, context).
4. Explaining whether the intervention was the cause of observed impacts.
5. Synthesizing evidence into an overall evaluation.
6. Reporting findings and supporting their use.

The guidance note cites reputable sources of indicators that an organization can use to develop goals or performance indicators. These sources include Human Poverty Index, UN Millennium Development Goals, and World Development Indicators.

Evaluation team

Impact evaluations are best done by credible, external evaluators, but the parties implementing the interventions should be an integral part of data collection and monitoring. Local evaluation experts often bring a perspective on cultural, political or other relevant contexts. The guidance note recommends three practices aimed at producing high quality evaluations: 1) use an evaluator team that has both internal and external perspectives, 2) ensure transparency on data collection and evaluation, and 3) triangulate with multiple sources of evidence.

The guidance note digs deeper into more specific details on each of the subjects mentioned above. The note concludes by recommending that any effort to conduct impact evaluation should start with a clear statement of its purpose, the key questions the evaluation should answer, who would use the results, and how the evaluation will address clarifying the values, developing a theory of intervention, measuring these impacts, explaining the intervention, synthesizing the evidence, and reporting the findings.” It is a well-written and useful guidance note. I look forward to reading (and blogging on) the rest of the four-part series.

Governments are charged with establishing and enforcing laws and regulations that promote and protect fair public policies. These obligations can be fulfilled by several means and policy options including laws and regulations that increase competition.  This increased competition can benefit a country's - or industry's - economy through overall economic performance, which leads to new business opportunities, and reduces the cost of goods and services to consumers.

The Organization for Economic Co-operation and Development (OECD), - an excellent source of governance related guidance documents, toolkits or other resources- created the  OECD's Competition Assessment Toolkit to assist governments in fulfilling their charge of promoting and protecting fair public policies .

The toolkit is designed to help governments identify unnecessary regulatory restraints and develop less restrictive alternatives that achieve given objectives without limiting constructive competition. It can be used to evaluate existing or new laws and regulations - across a country's economy or in a sector such as the cotton industry.

A full competition assessment includes: 1) clearly identifying policy objectives, 2) identifying alternative regulations that would achieve the same objectives, 3) evaluating the competitive effects of each alternative, and 4) comparing the impacts of each alternative. Within the toolkit there is also a Competition Checklist that serves as a strong starting place as it helps entities to screen for laws and regulations that have the potential to restrain competition so they can focus on areas of most concern. The checklist and toolkit focus on identifying laws or regulations that could potentially have one of the following three effects: 

1.     Limit the number of suppliers by:

• Granting exclusive rights to a supplier
• Establishing license, permit or authorization processes that are stricter than necessary for consumer protection
• Limiting the ability of certain types of suppliers to engage in the business, often due to geographic relevance or supplier size
• Creating high entry costs thus limiting entry of small or medium sized companies
• Creating geographic barriers for suppliers to provide goods or services, invest capital or supply labor such as limiting the flow of goods or services across jurisdictions

2.     Limit the ability of suppliers to compete by:

• Controlling or significantly influencing the prices for goods or services - minimum prices prevent low-cost suppliers from providing better value to consumers while maximum prices can reduce incentives for suppliers to innovate or improve quality
• Limiting freedom of suppliers to advertise or market themselves that can lead to false or misleading advertising or are so broad they unduly restrict competition
• Setting quality standards above what consumers require and that advantage certain suppliers such as requiring specific technologies that are only available or affordable to certain suppliers
• Raising costs of production for some suppliers relative to others such as "grandfather clauses" that exempt existing suppliers from certain regulatory or technology requirements

3.     Reduce the incentive of suppliers to compete vigorously by:

• Creating a system of self-regulation or co-regulation as this can often result in the creation of anti-competitive impacts
• Requiring information on supplier outputs, prices, sales or costs to be published which could be improperly used by large suppliers to monitor - and possibly undercut - competitors' market behavior
• Exempting the activities of a particular group of suppliers from general competition law
• Reducing mobility of customers between suppliers through "switching costs"

While this toolkit is intended for governments' use, it can be applied by other entities that have a vested interest in government trade policies, such as the cotton industry or some of its members. Alternatively, industry members that feel they are disadvantaged by conditions of anti-competition, especially in OECD countries, can use the toolkit as a framework to work with a government to address their concerns.

Question

Is the toolkit useful in the context of the cotton industry? If so, should its use be encouraged?

Voluntary standards aim to promote and reward behaviors that have positive social, environmental and economic impacts. These standards can be created to address limited compliance where government enforcement is inadequate or bolster the minimum standards established in more robust regulations and, in some cases, they eventually become incorporated into law, sanctions or subsidy eligibility requirements established by governmental bodies (e.g. EU's REACH).

As brands increasingly attempt to advance their corporate social responsibility programs, sustainability leaders are using voluntary standards as a stipulation for doing business with them. These market-based drivers can have a powerful impact on the global cotton industry.

I believe in what the standards aim to achieve and feel this change will benefit the cotton industry but the scale to which they can be applied is still in question. I have worked with voluntary standards in a multitude of capacities:  leading sustainability functions for Gap Inc., chairing the Better Cotton Initiative (BCI), designing and evaluating supply chain systems, consulting on the practical application of voluntary standards, and linking government efforts with standard expansion. Based on input from cotton industry members, I am not convinced that certification and full traceability throughout the supply chain is the only - or the best - approach. Existing traceability systems in particular are cumbersome, costly and can disturb or distract from normal business operations.

With this said, the voluntary standards have created a new expectation of businesses and industries -understand your impact and act responsibly. I value this and other contributions of voluntary standards (e.g. transparency and credibility) and feel production and processing practices must be improved for the sustained health of the industry. I simply want to help the industry move further faster than what I think can be done under voluntary standards with full traceability. In a period when cotton prices are at an all time high, the industry cannot afford to invest in any measures that don't result in direct improvements to their business and bottom line. Direct investments that improve profitability or the production of cotton - e.g. farming practices or processing efficiencies -would be of greater benefit to the industry and ensure funds are directly linked with measurable change (rather than indirect expenses related to certification and traceability efforts). Once the connection between these efforts and business benefits is made, the industry will likely take it upon itself to expand efforts that align with the voluntary standards and in a manner that is efficient, impactful and aligns with their current business and supply chain models.

One model that provides an option valuing verification of practices and improved impacts over strict certification and allows for less than full traceability is BCI.  BCI appeals to brands because it allows them to trace Better Cotton into their supply chains. Spinners appreciate BCI's promotion of contamination reductions. Ginners benefit from higher yields. These benefits must be realized - and if they are, the industry will lead the charge.

Questions

Are voluntary standards necessary or benefiical to the industry?

Are there different approaches that would work best in the cotton supply chain?