As I mentioned in my greeting, 2019 is a year of transition for both the Responsible Minerals Initiative (RMI) and Responsible Sourcing Network's new initiative, YESS: Yarn Ethically & Sustainably Sourced (YESS). Let’s begin with RMI. As of January 1, 2019, RMI now requires all smelters or refiners (SORs) to implement a responsible sourcing program that conforms with the revised Responsible Minerals Assessment Program (RMAP) standard that was first introduced on June 1, 2017 and was effective (but not yet required) on June 1, 2018. Some of the requirements introduced in the revised RMAP standard are challenging for many SORs to meet. These include (but are not limited to) expanding the geographic region globally from the Democratic Republic of Congo (DRC) and nine surrounding countries, and adding specific human rights abuses and financial wrongdoings in addition to funding armed groups in regions of conflict. These changes require SORs to develop a procedure to identify conflict-affected and high-risk areas (CAHRAs); conduct due diligence of each supplier, including whether or not the suppliers’ beneficiaries are associated with financial misconduct; conduct assessments of mines when sourcing from a CAHRA; and publicly report on its due diligence program. As you could imagine, these activities are beyond the core talents of SORs.

Luckily RMI offers ample support to the SORs (at no cost) to help them meet these new expectations. RMI provides trainings, advisory services and support (the work I am currently conducting), and other helpful tools and resources. These resources help SORs that would otherwise not know how to get started to develop a foundational program that positions them for success. And, for those that identify risks in their supply chains, they can aid in addressing or mitigating those risks with the support of the RMI community.

The aspect of the RMI program that excites me the most at the moment is the newly created fund to financially support conflict and human rights abuse assessments in CAHRAs. SORs operate on very slim profit margins and would otherwise struggle to pay for the required assessments. In addition, assessing conflict or human rights abuses on the ground requires a special expertise that most, if not all, SORs lack. Without RMI’s support, high-quality assessments at mine sites would be very limited.

Unlike RMI, which just celebrated 10 years of impact, YESS is a fledgling initiative that proudly completed the critical first steps of establishing a global standard complete with assessment tools and trainings. The YESS standard will be published in March or April of 2019 after nearly a year-long public consultation and Feasibility Assessment process. The public consultation process resulted in much more detail on the methodology used to evaluate which cotton-producing countries are considered high-risk for forced labor on cotton farms under the YESS standard. The final standard includes an annex with the methodology and results.

The September 2018 Feasibility Assessment included visiting four spinners (the cotton supply chain’s initial processors) in Bangladesh and Turkey to assess current sourcing procedures and operations against the YESS standard as well as the spinners’ ability and willingness to make adjustments in order to conform with the YESS standard. Many of these changes centered on adding clarity or specification to the YESS standard to help spinners and other readers understand the intention and expectations of the standard better.

In addition to publicly launching the final YESS standard this year, YESS will focus on piloting its assessment program by training and assessing five to ten spinning mills against the YESS standard as well as strengthening support for YESS by expanding its working group and increasing its partnership with stakeholders (e.g. funders, partners, in-kind contributors).

Establishing these two important elements of a standard-based assessment initiative will position YESS to grow within two important segments of the value chain--spinners, to whom the YESS standard applies, and brands, who can encourage spinners to participate in YESS—while engaging other affected and supporting stakeholders.
With these goals in mind, YESS is actively seeking funding to position itself for scaling up the initiative in 2020 and beyond. Please let me or Patricia Jurewicz, Vice President and Founder of the Responsible Sourcing Network that created YESS, know if your organization would like to support YESS’s effort to eradicate forced labor from cotton farms globally or if you know of donor organizations that might help fund this initial start-up phase of this important initiative.

I look forward to the opportunity to update you on the progress RMI and YESS make over the next year and beyond!

I have been assisting the Responsible Sourcing Network (RSN) with drafting the YESS: Yarn Ethically & Sustainably Sourced (YESS) standard and creating accompanying assessment tools. You may also recall that the goal of YESS is to create an industry-wide approach to encourage yarn spinning mills to develop and implement risk-based due diligence management systems to avoid sourcing cotton produced with forced labor. The standard is based on the Organisation for Economic Co-Operation and Development’s (OECD’s) Due Diligence Guidance for Responsible Supply Chains in the Garment and Footwear Sector.

Initial activities to develop the YESS standard and accompanying tools included a 2017 research trip to spinners in India, Bangladesh and Turkey and to gins in India and Turkey, and incorporating the initial findings from this trip into a draft standard that underwent public consultation in the spring of 2018. After addressing the thoughtful and helpful feedback we received through the public consultation, Patricia Jurewicz, Founder and Vice President of RSN, and I recently visited four spinners in Bangladesh and Turkey—with the much appreciated support from H&M and VF Corporation—to assess whether or not spinners would be able to conform to the draft YESS standard. We also sought feedback from spinners on the assessment tools (i.e. whether they are understandable, practical and appropriate).

Patricia and I learned a lot during the Feasibility Assessment. Here are just a few highlights, which I will go into more detail on below: where spinners can meet the YESS standard today, what is achievable with minimal adjustments, what requirements of the YESS standard will be challenging, and other considerations that should be addressed. I will also look at next steps and opportunities to learn more about YESS.

Requirements currently met by the industry
Some expectations outlined in the YESS standard for a due diligence management system (e.g. validating the origin of cotton lint, internal material controls) are already standard practices across the industry, and will require little or no change to operations. For example, a Country of Origin certificate and phytosanitary permit (to address agricultural pest concerns) must accompany all shipments of cotton exported from one country to another. Additional documents, such as a bill of lading, invoice, and description of cotton lint characteristics, accompany all transactions as an industry standard. The eight spinners that participated in YESS’s 2017 research and 2018 feasibility assessment confirmed that it is standard practice for all spinners to review the detailed information contained within the various transaction documents (e.g. weight, date, origin, destination, supplier) to validate the origin of cotton. Additionally, all spinners take appropriate care to weigh cotton lint upon receipt and account for all of that lint as it is processed into yarn or captured as wastage or byproduct.

What is achievable with minor adjustments
Some requirements of the YESS standard are not currently met but could be incorporated into a spinner’s operations with minimal changes, if industry standards are developed and widely adopted. These include developing a policy to avoid sourcing cotton that may have been produced with forced labor and communicating that policy to the public and to suppliers. Similarly, spinners currently conduct due diligence of suppliers through informal processes (e.g. evaluating a supplier’s reputation across the industry or through conversations with other spinners). The feedback we received from spinners indicates that formalizing a Know Your Supplier process (as required by the YESS standard) would be achievable with minor adjustments to their existing supplier due diligence and procurement processes.

Areas that pose significant challenges to meet
Unlike many other commodity supply chains, spinners do not have leverage over many of their suppliers--namely the large global merchants that often supply imported cotton lint. Spinners suggested that RSN could discuss the goals and expectations of YESS with global merchants to assess their willingness and ability to support the efforts of YESS.

One specific question Patricia and I sought to answer was whether or not spinners could require that all Better Cotton originating from high-risk countries as defined in the YESS standard[1] be “physical” Better Cotton rather than “substituted” Better Cotton. Here’s what that means. “Physical” Better Cotton refers to cotton that was actually produced by a Better Cotton Initiative (BCI) licensed farmer), as opposed to “substituted” Better Cotton, which refers to cotton that was produced in the same country of origin as an equivalent amount of Better Cotton, but the actual “substituted” cotton may or may not be produced by a BCI farmer. The preference for “physical” Better Cotton would only be relevant in the high-risk countries (where “substituted” Better Cotton may pose a risk of being produced with forced labor) that have BCI programs.

Other considerations
Our conversations with spinners left us with some other considerations that we should bear in mind. We learned that spinners would find it helpful if YESS created trainings, resources and tools to help them understand and implement specific requirements of the YESS standard. For example, spinners could use a checklist of what constitutes sufficient due diligence of suppliers, gins and farms in high-risk countries. Other helpful resources include a Know Your Supplier questionnaire or sample letter to send to global merchants asking them to conduct due diligence of the gins or farms from which they source.

Spinners feel that BCI has a good system—using a mass balance approach—that is easy for spinners to implement. The systems for organic and fair trade (which include segregating organic or fair trade cotton from other sources of cotton during spinning) are difficult for spinners to implement.

We also discovered that spinners see any efforts to align with BCI as beneficial and suggest that these efforts may lead to wider adoption of YESS and growing support of BCI. Another suggestion for wider industry adoption is to simplify the YESS standard and assessment workbook. 

Next steps
In the coming months, I will incorporate the input and lessons from the recent Feasibility Assessment trip as I finalize the YESS standard and assessment tools. You can learn more about YESS, insight from our recent Feasibility Assessment, and planned next steps for YESS by participating in a November 5th webinar hosted by the American Apparel & Footwear Association (AAFA) (if you are a member of AAFA). There are several resources on the YESS website, including a recording of a webinar that Patricia and I gave for the Textile Exchange community earlier this year.

[1]  The YESS standard defines high-risk countries as Benin, Burkina Faso, China, India, Kazakhstan, Pakistan, Tajikistan, Turkmenistan and Uzbekistan.

For the past eight years, much of my work has been centered on supporting initiatives that promote OECD’s due diligence frameworks and guidance for two commodities—minerals and cotton. These initiatives, Responsible Minerals Initiative (RMI) and YESS: Yarn Ethically & Sustainably Sourced (YESS), have developed standards and supporting tools and trainings to help initial processors—smelters and spinners, respectively—conduct due diligence to ensure the material they source does not involve or contribute to specific human rights abuses at the raw material stage of the supply chain (e.g. mine or farm).

Initial processors are the last point in those supply chains where the raw material can be traced back to its origin. Once smelters and spinners combine and process raw material from various mines or cotton farms,[1] these processors render their products untraceable back to the origin of the raw material, which is why focusing on the last traceable point for suppliers and regions makes sense.

One of the many talents these initial processors possess is the ability to convert their raw materials into products that meet the specifications of their customers (and ultimately the end buyers (e.g. global brands)). In fact, they excel at doing what their customers mandate—including implementing responsible sourcing requirements—if they are motivated to do so. This desire to please the customer can require the smelter or spinner to drive requirements further up the supply chain, affecting multiple suppliers who would otherwise be unreachable by brands or end buyers.

The initial processors have a different talent—and fulfill a separate role—than the brands or end buyers do in these supply chains. Brands contribute to the sector by creating a global market for the raw material as well as various intermediaries and products. Brands can also establish requirements, including ethical or environmental parameters, which suppliers and sub-suppliers must meet.

I feel we should acknowledge each supply chain actor’s talents—and limitations—in order to develop a partnership to affect large-scale change all along the supply chain, including at the elusive raw material stage.
One of the limitations that many of the initial processors face is the lack of in-house expertise on evaluating or determining when ethical wrongdoings occur. This step requires an evaluation by trained experts—especially at the raw material production stage of the supply chain (e.g. mining or farming), where these issues are complex and very difficult to detect or assess.

Of course we want all supply chain actors—including initial processors—to be aware of risks posed by their supply chain, and to do their part to avoid contributing to human rights abuses or funding other forms of violence. With this said, we should not expect all supply chain actors to become human rights experts or be solely responsible for identifying or assessing human rights abuses at each mine, farm, or wherever the raw material originates. Without a sufficient level of understanding or expertise, the initial processors might not be effective or have the leverage to mitigate any identified risks on their own. This is an instance where effective solutions require support of the entire industry.

Additionally, when each initial processor develops their own set of criteria and thresholds to define a high-risk origin, the result will include multiple definitions and priorities, which runs counter to what most supply chain initiatives try to achieve: one standard for the industry.

Yet, in order to align with OECD recommendations under RMI’s Responsible Minerals Assurance Process (RMAP), individual smelters or refiners are required to develop their own unique procedure to determine which parts of the world are more at risk of funding conflict or involving human rights abuses than others. In other words, individual smelters and refiners must identify conflict affected or high-risk areas (CAHRAs) in their own way.

Throughout this year, I have helped several smelters and refiners that struggle with the RMAP’s new requirement to develop a procedure to identify CAHRAs and, if warranted, commission a human rights assessment of a mine. It is simply not their area of expertise. At the same time, I have noticed that they don’t have trouble implementing additional Know Your Counterparty (KYC) requirements or even incorporating their new CAHRAs identification procedure into their transaction approval process. Implementation is what they do best.

YESS takes a different approach. Working closely with human rights experts, YESS has created one list of high-risk countries, rather than requiring each spinner to develop their own unique set of criteria and procedure for each country from which they source to determine the risk of forced labor in cotton production—the specific human rights abuse that YESS addresses.

The YESS approach allows the spinners to focus on identifying sources of cotton that originate in the listed countries. This is much easier to understand and—most importantly—implement. They can contribute to YESS’s goals of eliminating forced labor in cotton production by conducting due diligence of their suppliers and cotton origin to avoid sourcing from high-risk countries, unless they have assurances that the actual cotton they source originated from a cotton farm (or community) that has been deemed to be free of forced labor by qualified assessors.

Similar to RMAP, YESS requires spinners to implement procedures to validate the sources of all of their cotton, educate their suppliers on the YESS requirements, and assess their suppliers’ risk level through KYC processes. These are important requests to help spread these new expectations down and across global cotton supply chains. YESS has the added benefit of establishing one set of high-risk countries that will be easier to communicate, implement, and scale up across the entire industry.

I recognize the objective of the OECD requirement to hold each supply chain actor responsible for identifying, assessing and mitigating risks, and I applaud OECD for creating one due diligence framework to apply across entire industries. However, I would prefer to see industry initiatives such as RMI or YESS establish one common set of criteria (or identify high-risk origins) with input from qualified experts, and let the processors do what they do best—implement.

[1] Minerals and cotton can undergo some processing prior to being sent to smelters and spinners, respectively, but it would not be mixed with sources from other countries.

Plastic waste is getting a lot of attention these days, in part due to China's ban on waste imports at the beginning of 2018, along with a growing awareness of the massive plumes - or gyres - of plastic waste floating in our oceans and rivers. At the same time, production of plastics materials is rapidly expanding on the US Gulf Coast.

The kind of attention people are paying to plastic is not nearly as glamorous as what we saw 51 years ago in a famous conversation from the 1967 hit movie, "The Graduate," when plastic represented all great things to come:

Mr. McGuire: There is a great future in plastics. Think about it. Will you think about it?
Benjamin Braddock: Yes, I will. [1]  
 
Unfortunately, Mr. McGuire and Benjamin Braddock - along with society at large - did not "think about it" responsibly. Specifically, we did not consider the end-of-life impact of this now ubiquitous, non-biodegradable material, including how to collect, recycle and reuse waste plastic.

According to Wikipedia, a 2017 study conducted by scientists from the University of California, Santa Barbara, and the University of Georgia, of the 9.1 billion US tons (tons) of plastic produced since 1950, close to 7 billion tons are no longer in use.The authors estimate that only 9 percent of the plastic was recycled over the years, while another 12 percent was incinerated, leaving 5.5 billion tons of plastic waste littering the oceans and land. The study states further that 50-80 percent of debris in marine areas is plastic.[2] The authors show that 8 million metric tonnes (8.8 tons) of plastic are entering the ocean per year, and 80 percent of that comes from land sources.
 
To put this in perspective, in 2016, China accepted approximately 7.3 million tons of waste plastics from Japan, the EU, the US, and other developed countries.[3]
 
In response to China's decision to ban waste imports, which went into effect January 1, 2018, the EU nations and European Parliament have agreed to set a legally-binding target to recycle 55 percent of plastic packaging waste by 2030. They are now exploring mandates to ensure all plastic packaging is fully recyclable.[4]
 
Unfortunately, things are not looking very good for the US. Our recycling industry struggles to survive due to the high costs to collect, transport, and process bottles from mixed curbside recycling streams, which are directly competing with the relatively low prices for new (virgin or prime) plastics. In 2016 alone, 7 of 28 American polyethylene terephthalate (PET) recyclers shut down due to economic conditions.[5]
 
If one quarter of the PET recyclers are shutting down even in the US, where garbage separation, collection, and management infrastructure exists, stop and think about the implications for the many developing countries that don't yet have sufficient waste management systems and infrastructure. As you can imagine, the situation is horrendous. Consider this statistic: 10 rivers, two in Africa and the rest in Asia-discharge 90 percent of all plastic marine debris.[6]
  
Even though plastic waste is not our greatest environmental or public health issue, it is one that we can - and must - solve. Otherwise, our plastic problem will out of control in 50 years.
While I appreciate innovative successes - such as clothing or consumer products made with recycled PET, for example - their overall impact is negligible.[7] Whether it is the product itself or the packaging it comes in, we need to hold companies responsible for the end life of the plastics they sell. Companies and industry associations - such as the American Beverage Industry - can provide leadership, know-how, and "boots on the ground" in their consumer markets in developing countries. They should not rely on free volunteers or public sector workers to clean up their post-consumer product waste.

To this end, I have asked consumer brands, beverage companies and retailers the following three questions, which are aimed to encourage them to take action to reduce plastic waste of their products:

1. Do you have publicly stated goals to track and reduce plastic waste of your products?

• • If so, what are these goals?
  • If not, why not?

1. What efforts are you taking to reduce plastic litter in the countries where you sell products and to support the development of an efficient plastics recycling infrastructure - especially in your markets in Africa and East Asia, which have weak or no waste collection and recycling infrastructure and processes?
2. What measures are you taking to educate and encourage consumers to end litter and/or recycle plastic packaging and products?

The companies producing plastic products or packaging have the technical capability, financial resources, and consumer connections that put them in a unique position to stop the litter of their own products. We must insist that businesses take responsibility for their products and packaging to the end of the material's life.

Please join me by asking your favorite brands and retailers these same questions.
---------------------------------------------------------------------------------------------------------------------------------------
[1]Mike Nichols, director. The Graduate. Embassy Pictures, 1967.
[2] https://en.wikipedia.org/wiki/Plastic
[3] https://www.nytimes.com/2018/01/11/world/china-recyclables-ban.html
[4] http://ec.europa.eu/environment/waste/plastic_waste.htm
[5] National Association for Plastic Container Resources and The Association of Plastic Recyclers, Report on Postconsumer PET Container Recycling Activity in 2016, 2017.
[6] https://www.economist.com/blogs/graphicdetail/2018/03/daily-chart-2
[7] https://www.cnbc.com/2017/04/24/almost-no-plastic-bottles-get-recycled-into-new-bottles.html

A picture tells a thousand words. I had this adage in mind when I developed my “supply web” slide that illustrates the myriad of crisscrossed connections among numerous actors at each stage of complex commodity supply chains (using cotton as an example).

Commodity and multi-component product supply chains comprise a long series of processes that subject materials to multiple points of mixing, transforming or combining by various actors around the globe.

I felt the current linear depiction of a product’s supply chain—with just one actor at each stage of the supply chain connected in a simple line—was misleading. Look at the following illustration of a supply chain and consider its simplicity when compared to the supply web above.

The complexity and scale of just one product’s supply chain is challenging for any brand to map and manage. The difficulty in ensuring that all suppliers are operating responsibly is amplified when you consider that many brands and other supply chain actors can change their supplier base daily. I have heard that a single electronic brand can have as many as 20,000 suppliers and sub-suppliers along their supply chain.

When you multiply those numbers by the various industries and products supplying goods worldwide, the impacts on the planet are exponential. Our reliance on global solutions means that we have a responsibility to consider the potential ethical and environmental damage our products create. All practitioners need to recognize the complicated reality under which we are attempting to affect large-scale positive change as we develop solutions on such a large scale so that we can begin to minimize that damage.

This dynamic element of shifting suppliers and sub-suppliers gets lost in the linear representation of a supply chain. As I have been analyzing the challenge of illustrating the complexities and shifts, I created a new animated version of my supply web slide to illustrate the connections and shifts between various levels of the supply web. You’ll find the animated supply web slide in action here.

Please share the slide (and supply web reference) with others if you would like. I only ask that you let me know when you do and that you give me credit for its creation. And, of course, please check in with me on how I can help educate others on the realities of commodity and multi-component product supply webs.

I hear a lot of buzz about blockchain technology and how it might be used in consumer product supply chains. I am particularly interested in how it might be used to streamline the transfer of information related to environmental and ethical conditions and impacts along a product’s supply chain—from raw material to final manufacturing.  

If you’re unfamiliar with the term, I like this explanation of blockchain technology from Wikipedia:

A blockchain"…is a distributed database that is used to maintain a continuously growing list of records, called blocks. Each block contains a timestamp and a link to a previous block. A blockchain is typically managed by a peer-to-peer network collectively adhering to a protocol for validating new blocks. By design, blockchains are inherently resistant to modification of the data. Once recorded, the data in any given block cannot be altered retroactively without the alteration of all subsequent blocks and a collusion of the network majority."

Essentially, the application of blockchain technology in a product supply chain would collect any history associated with a product or the material used in the product in multiple “blocks” that are encrypted, cannot be modified, and are added to one another as the product or material moves through the supply chain.
 
While I am not a blockchain expert, I do believe that this technology can be applied in commodity supply chains by creating “responsible networks” and rolling up and reporting impact data. I have provided a very basic sketch of my ideas on how such an application could work based on “responsible network” membership criteria—for example, conducting due diligence of suppliers and the material they provide using the OECD Due Diligence Framework—and product-level or operations-level criteria—such as reporting water use and greenhouse gas (GHG) emission footprints of their operations.
 
First, we would need to create a blockchain network of supply chain actors who will adhere to, or have been audited against, “responsible network” criteria (e.g. conducting due diligence of suppliers). Once an entity qualifies as a network member, it would then be able to buy and sell with other, similarly qualified members. In addition to fulfilling obligations to become a member of the blockchain network, some entities also may be required to upload data related to their water use or GHG footprints, depending on the types of operations and significance of their impacts. As material is processed, mixed with material from other origins, and split into production lots, the water use and GHG footprints would first be combined and then allocated appropriately.
 
While I do have a lot to learn about the actual mechanics of a blockchain and how it could be applied in responsible supply chains, I do believe such an approach would be an improvement over the current supply chain model, which is disaggregated, with brands conducting their own due diligence and trying to collect (and then make sense of) numerous data points along several complex supply chains. As we try to shift entire industries to more responsible behavior and require individual actors to report on their impacts, we must explore blockchain. I am eager to learn more about it.

I am assisting the Responsible Sourcing Network (RSN) to conduct research for the YESS: Yarn Ethically & Sustainably Sourced initiative. The goal of YESS is to drive forced labor and the worst forms of child labor (WFCL) out of cotton production in “higher-risk” countries.[1]

YESS will concentrate its efforts at the point in the supply chain where the ability to trace cotton lint back to its place of origin ends: the yarn spinning mills, where mixing of various sources of cotton or other fibers occurs. YESS will focus on two steps: helping cotton spinners to implement an effective due diligence program to keep cotton that may have been produced with forced labor or WFCL out of their supply chain; and confirming that such programs are in place.

The YESS program will include a protocol that will establish policies, material management systems, and transaction-level documentation expectations that participating spinning mills must meet to demonstrate that they are implementing an effective due diligence program.

YESS will align with the Organization for Economic Co-Operation and Development’s Due Diligence Guidance for Responsible Supply Chains in the Garment and Footwear Sector (OECD’s Due Diligence Guidance), which has been proven to be effective and scalable in minerals and other commodity supply chains.

The OECD’s Due Diligence Guidance includes the following process and supporting measures:

1. Embed responsible business conduct in enterprise policy and management systems
2. Identify potential and actual harm in the enterprise’s own operations and in its supply chain
3. Cease, prevent or mitigate harm in the enterprise’s own operations and in its supply chain
4. Track, verify, monitor and validate progress on due diligence and its effectiveness in the enterprise’s own operations and in its supply chain
5. Communicate on the enterprise’s due diligence processes publicly and to affected stakeholders
6. Provide for, or cooperate in, remediation—when appropriate

You can read more about the OECD Due Diligence Guideline in my August 2, 2017 blog.

With this goal in mind, Patricia Jurewicz of RSN and I traveled to India, Turkey and Bangladesh to conduct research for YESS. The objective of our trips—that was funded by Humanity United and The Walt Disney Company’s Supply Chain Investment Program and facilitated by H&M—was to assess if spinners can implement due diligence programs that reach back to cotton farms and, if so, to allow us to design such a system.

Before I share insight from our research, I would like to provide an overview of the actors in the segment of the supply chain on which YESS will focus—from farm to yarn spinner. 

Farmers
Cotton farmers can range from families in developing countries that grow cotton on a few hectares of land using hand labor to large estates using highly mechanized equipment. Small-scale farming poses a higher risk of forced labor or WFCL. It is most predominant in developing countries in areas such as sub-Saharan Africa, China, India, Pakistan and Uzbekistan or Turkmenistan, or other countries in the Commonwealth of Independent States (CIS). Mechanized farming requires less labor and poses a lower risk of involving forced labor or WFCL. It is more common in emerging and developed countries such as Brazil, Turkey, the US and Australia.

Buying agents
Farmers may sell their seed cotton to a buying agent who weighs, inspects and/or sorts the cotton. Buying agents will then transport the seed cotton to gins. Some farmers will not use buying agents, instead selling directly to ginners.

Ginners
A ginner’s core business is to separate the cotton lint from the hulls, seed, stems and leaves, and to create bales of lint. Gins are located in or near cotton production regions, and ginners purchase cotton locally. While in some regions, merchants, governments, or farmers may own gins, it is more common for gins to be independently owned.

Merchants
Merchants (also referred to as traders) buy bales of cotton lint and sell them to spinners on the global market. They tend to be more involved when cotton is exported from one country to another, but they can operate in domestic markets as well. Merchants buy cotton lint from gins, governments or other merchants.

Yarn spinners
Yarn spinners receive bales of cotton lint from a variety of suppliers and regions, depending on the quality characteristics the spinner requests. The price of cotton will be linked to these quality characteristics and market forces. The yarn spinners will mix the bales of cotton according to their proprietary “recipe” in order to produce the correct yarn quality in the most cost effective way.

There are two types of spinning techniques: ring spun and open-end.

1. Ring spun uses longer fibers (e.g. yarn counts of more than 30). It is commonly used for knits or finer fabrics. Sources of longer fiber lint include Australia, US, CIS and Turkey. The ring spun process will produce shorter fiber byproduct, which is often used in the open-end spinning process.
2. Open-end uses shorter fibers (e.g. yarn counts under 30). It is sufficient for most denim or other lower quality fabrics. Lint for open-end spinning can come from ring spun byproduct. It can also come from regions like Africa or India.
   

From the spinner, the yarn will be sold to fabric mills (sometimes through traders) and then to garment manufacturers. It is worth noting that brands often have direct relationships with manufacturers (Tier 1 supplier), non-contractual relationships with select fabric mills (Tier 2 supplier), and no direct relationship with spinners (Tier 3 supplier). Some of the spinners are “vertically integrated,” which means that the mill is spinning and knitting fabric (such as jersey for tee shirts) or spinning and weaving fabric (such as denim for jeans).
During our research trip we visited a handful of gins in one region of India only and several spinners in India, Turkey and Bangladesh. Here are some of the key questions we explored:

• Are documents that can provide corroborating evidence of certain cottons’ origin used routinely during commercial or governmental transactions?
• How do spinners account for all of the cotton they receive, process and sell, including production losses, waste and byproducts?
• Can YESS leverage, contribute to or align with the Better Cotton Initiative (BCI)’s forced labor and WFCL requirement for participating farmers and the Better Cotton Tracer system?

Our findings for each of these issues were encouraging.

We were able to confirm that each bale of cotton lint purchased and processed by spinners easily can be traced to the country—and in most instances, the region within a country—where the cotton was produced. Information in documents that are routinely used for commercial transactions can be used to validate the cotton’s origin. Here is a list of documents that can help with that validation, including the information they can provide:

• Pro forma invoice or purchase order: port of shipment, destination, shipped month, weight, cotton characteristics
• Bill of lading: sender, recipient, port of shipment, destination, ship date, weight, number of bales/containers, material description (e.g. cotton lint), packing list (optional)
• Certificate of origin: weight, country of origin, date, port of shipment, destination
• Commercial invoice: cotton characteristics, weight, date, number of bales, ports of shipment and landing
• Packing list: number of bales, weight, number of containers

Some countries have additional government import or export documents that can provide further assurances, if warranted.

One challenge we discovered is that merchants do not usually identify the gins that provided the cotton lint they sell to spinners (nor do the spinners need to know), and they may remove the gin identifier from the bales being sold.

We were delighted to learn that all of the spinners we visited follow the same basic process to account for all of the cotton they purchase, process and sell, along with the waste or byproduct they produce. All spinners we visited weigh lint upon receipt and then again when it is put into the spinning process. They then weigh processing wastage, byproduct and final yarn (which combined should account for all lint that entered the spinning process). This will allow YESS to evaluate the spinners’ material mass balance and ability to account for all material they receive. We were pleased to find that all spinners experience the same range of loss from wastage: 10–15 percent for ring spun (carding process) and 20–30 percent for open-end spinning (including carding and combing (10-15 percent)). This industry standard will help YESS’s ability to identify outliers or potential mass balance-related concerns.

We were able to gather a lot more detail related to the BCI tracing system (Better Cotton Tracer). It manages all of the Better Cotton produced and sold in the world and operates under a mass balance system[2] using physical Better Cotton and Better Cotton Claim Units (BCCUs represent the sustainable and ethical attributes associated with producing the cotton under the BCI production practices). Under the Better Cotton Tracer system ginners are required to produce Better Cotton bales that contain only 100 percent Better Cotton lint with no conventional, or non-Better Cotton mixed with it. Merchants, on the other hand, can substitute conventional cotton for the actual Better Cotton and sell the associated BCCUs separately, as long as the country of origin for the BCCUs and the substituted conventional cotton is the same. This can be problematic when the conventional cotton and BCCUs come from a country that poses a high risk for forced labor or WFCL—such as India, China and some African countries. Spinners can buy actual Better Cotton, BCCUs with substituted conventional cotton, conventional cotton, or other certified cotton (e.g. organic or Fair Trade). They often mix different sources of cotton when creating yarn.
We believe that YESS can strengthen the BCI system by introducing a due diligence process with spinners, which will help brands confirm they are not receiving cotton that was produced with forced labor or WFCL, including when conventional cotton is substituted for Better Cotton from high-risk origins.  

We came away from our trips with a strong foundation of knowledge that we will use to develop a due diligence protocol, audit tools, training materials and supporting guidance documents. More importantly, we believe that YESS is essential to motivate spinners, merchants and brands to drive cotton that has been produced with forced labor and WFCL out of their supply chains—and to hold them accountable to doing so.

[1] Per the US Department of Labor (DOL) List of Goods Produced with Forced and Child Labor, the nine countries with forced labor identified in their cotton or cotton seed production are: Benin, Burkina Faso, China, India, Kazakhstan, Pakistan, Tajikistan, Turkmenistan, and Uzbekistan.
[2] In a mass balance system, the amount of certified product sourced and sold by each supply chain actor is tracked administratively. However, the certified product and sustainable certificates (e.g., documentation that represents the sustainable attributes embedded in the certified product) do not need to be sold together. Certified product does not need to be segregated from non-certified product.

The threats posed by human trafficking, child labor, forced labor and Illegal, Unreported, and Unregulated (IUU) fishing that contribute to overfishing our oceans are gaining attention from law enforcement and human rights organizations. While the seafood industry has sustainable fishing programs in place (e.g. Marine Stewardship Council, Aquaculture Stewardship Council), they do not adequately address IUU fishing or human rights abuses on a global scale. The time to develop a global solution is now.

Organization for Economic Co-Operation and Development’s (OECD’s) Five-Step Risk-Based Due Diligence Framework (Five-Step Framework), which is quickly becoming the norm for due diligence best practices. The framework includes the following steps:

1.     Establish management systems
2.     Identify and assess risk
3.     Respond to identified risks
4.     Audit of supply chain due diligence
5.     Report on supply chain due diligence

These requirements place the onus on the supply chain actors—particularly initial processors—who have more direct relationships with raw material suppliers and are often the last point where the origin of material can be validated. This proximity forces them to be accountable for all material that they purchase or process and to have robust policies, procedures, material management systems, and evidence for each transaction.

As I shared in my October 2016 blog, the Conflict Free Smelter Initiative (CFSI) has been very successful among several industries using the new model of empowering, enabling and implementing risk-based due diligence.