Cotton is natures pig. Everything can be used. First off, the fibres. These soft white threads – over 80% of the world’s natural fibres – cover the seeds and are strong enough to deal with our sweat, the odd spillage of red wine and, be washed and ironed hundreds of times. Even today, when synthetic fibres account for 60% of the market, cotton hangs on to the rest. Then, the seeds themselves. Rich in protein, they become a major part of oil used in foods. Then, what is left over finds itself in soaps or, as feed for cattle. Finally, what is left of the plant itself is used for animals to bed down on or, as kindling for a fire. Cotton planted in April is harvested in October and spun the following Spring. By the time this white gold is processed into fabrics, a full year has passed. Let’s look closer at the logistics dimension and how inclusive value chains can make a difference.
Look at the shirt or blouse that you wear and consider the story behind the label and its price. Can you imagine the farmer that seeded the crop and the inputs that were needed to protect this fragile crop? Do we know the impact that pesticides are having on the environment or, what the intense need for water throughout the process – some 2,600 litres are needed per shirt – is doing to water supplies? Are we clear that many farms are forced to use child labour to survive and, that loan sharks are behind much of the cash that finance the crop? There is a catalogue of social consequences that need to be understood and, a lack of transparency throughout the process – often caused by the agents at every step – that makes dealing with the economic, social and environmental challenges so difficult.
Cotton – white gold – is a symbol of globalisation itself with many countries harvesting this most flexible and valuable of crops. Some 100 million rural households globally depend on the crop for their livelihoods. World production has doubled ove the past 40 years and, according to the Environmental Justics Foundation, the value of cotton production (farm to fabric) is an estimated $32 billion per year and, finished garments are worth ten times that amount. As with carpets, leather and dairy – see elsewhere on this Blog – the supply chain for cotton is a hybrid of formal outlets where consumers gather stretching right back through the informal market where farming and basic processes take place. And yet, in far too much of the Banking Community in the emerging world it is easier to get a loan on a Mercedes than it is to do so for seeds or any other transformation of the cotton story.
The whole story has become far more complex as the end-to-end process has been scattered beyond the confines of a single marketplace: cultivation and harvesting can be in one place; ginning and spinning elsewhere and then, processing (dyeing and printing) and manufacturing (cut, make and trimming) combine with accessories (zips, buttons and thread) from footloose lowest-cost producers wherever a price point can be met.
The end-to-end journey from cotton field to its many uses can help us to understand the complexities of supply and the imperative of transforming this process into an inclusive value chain that recognises the need for each actor in the story to be rewarded. In fact, cotton is fast becoming a litmus test for all sorts of supply chain initiatives that can clean up the global act.
- Farmers: on a £7 shirt an estimated 15p goes to the farmers themsleves. Over 90% of the cultivated land dedicated to cotton is in the hands of farmers with under 2 hectares each – a recipe for low productivity and high risks. How is the soil cultivated and, the crop tilled? Is enough being done to drive organic production? In India 54% of total pesticides are dedicated to cotton – though only 5% of cultivated land is attributed to it. Is harvesting by hand or, by machine? What are the social consequences and, what options exist? Under 1% of the crop is organic – though revenues have grown to $1.1 billion (2006) up from $583 million the previous year.
- Aggregation: What infrastructure is in place to link remote rural areas to local, national and global markets? What is the role of agents and, loan sharks in the early stages? This is where much of the necessary visibility from end-to-end is lost. For example, Bangladesh purchases 65% of its total annual demand of 2.7 million bales of raw cotton from Uzbekistan – with a number of problems that go unchallenged such as child labour. In fact, 75% of Bangladeshi exports, that is $9 billion, come from cotton.
- Processing & Manufacturing: Micro finance has made a signifciant impact in key areas. However, more needs to be done to scale up on finance in order to scale up on production capacity and capital equipment.
- Distribution and materials handling equipment: From end-to-end, cotton is passed down the line to the consumer in all manner of ways – few that conform to green supply chain standards.
- Retail: Media coverage has exposed all sorts of anomolies in relation to pricing and, the conditions for employees at the point of origin or throughout the process itself. Increasingly, Retailers are challenging the cost and quality assumptions that drove served demand.
- Brands and labeling: Increasingly, brands are being forced by consumers to offer greater transparency on the process and, identify themselves with ethical and responsible practice.
- Policy: Any analysis of the Cotton industry has to deal with the plain fact that few developing countries have had the capacity to particpate in adding value and, the subsidies that protect the developed world have dislocated any hope of achieving this. For example, in 2002, America handed over $4 billion to its cotton farmers whilst the EU spent over €91 billion on overall farming subsidies. These subsidies lowered prices by up to 14% in the US and then, dumping the products on the African market to make matters worse. There is evidence that this practice has been taken up by the Chinese with even more energy. Nothing new in this. Back in 1620, a Chinese community installed itself in Mexico to offer clothing at prices lower than anything the locals could reach. (See: Erik Orsenna, Voyage aux pays du coton  for a fascinating tour d’horizon).
The story of nature’s pig tells us something fundamental about our supply chains. Consumers and Retailers need to know more about them; build viable relationships from end-to-end and, establish the means to track and trace them. We need to transform them into something more inclusive of all actors in the the tale; more responsive to environmental concerns and, ensure that the whole story is conscious of social values. We are looking for moral fibre from those in power and not just raw fibre at the lowest price.