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.
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[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.

It’s official! After a 10-month transition Liz Muller & Partners is no longer conducting audits under the Conflict-free Smelter Program. Serving as part of this multi-industry effort from its onset has been a tremendous opportunity for me and my team. We have always felt valued by the Conflict-free Smelter Initiative and the auditees. Despite our positive experience, I do see some trends in the ethical or responsible sourcing auditing industry that I would like to share with you.

Independent third-party audits are essential for safeguarding the authenticity of, and credible claims made by, processing facilities, consumer brands and global initiatives. Still, an audit—and the overarching audit program—are only as reputable and effective as the individuals who conduct the actual audits. While auditor training and accrediting programs help to ensure a basic level of competence, these efforts are not sufficient on their own.  If we want auditors that provide true worth, we need to value the auditors themselves. In addition, multiple accreditation requirements, which are meant to improve the quality of the audits, can sometimes increase the burden on auditors, some of whom do not reap any value besides “ticking the accreditation box.”

At a time when supply chain initiatives that rely heavily on audits to effect and measure change are proliferating, I feel that auditors may soon become the weakest link in our efforts to meet our goals of improving conditions down complex supply chains. Every program that relies on audits will need to be aware of the threats it faces if steps aren’t taken to proactively support the auditors themselves. Here are a few conditions I have seen, which have contributed to my perspective (note that these are not solely or directly attributed to my work under CFSP).

Auditing can be dangerous
As an auditor, I have traveled up to 30 hours (one way) to far-flung industrial cities where my team and I were exposed to physical, chemical and, at times, radioactive hazards at the facility. In addition to experiencing long journeys and exposure to risky conditions, auditors are often in the difficult position of informing facility management that they do not comply with the subject standard. This task can escalate to uncomfortable or disrespectful accusations, refusals to participate in the audit, or attempts at bribery. In extreme—but not unheard of—situations, the auditors’ safety can be threatened by the auditee (for example, the people being audited might keep the auditors locked up in the facility).

Commoditization by large consultancies
Over the past several years, large consultancy firms have expanded their services to include ethical or environmental auditing. In my opinion, they are not always placing value on the quality or—most importantly—the outcome of the audit. That is to say, they are turning audits and auditors into indistinguishable commodities, with an increasing focus on price point and volume as their most important performance indicator. 

Some firms have openly shared that while they are not seeking to profit (and may even take a loss) by performing these audits, they instead view the audits as entry points into processing facilities or global brands, which can lead to opportunities to provide more profitable consultancy services. In addition, some large firms have full-time employees who must be billable, even at a loss, which leads them to conduct audits unprofitably. When larger firms charge less than their actual cost, the service itself is devalued, and clients expect lower prices for all audits. As a result, large firms are pushing out boutique firms that cannot afford to operate at a loss.

In addition, large firms often rely on untrained and inexperienced employees to conduct several audits a year—at times with insufficient direction or support from the home office. These auditors often know very little about the industry, processes and, to some extent, the audit protocols. Their lack of knowledge and experience will affect the quality of the audit.

Demanding more for less
As large firms drive audit costs down, I hear that brands and NGOs alike are expecting further reductions in audit costs. Many consultancy / audit firms and clients now assume that auditors do not get paid for travel time (even at a reduced daily rate). At the same time, these firms are driving down daily rates, increasing reporting complexity, and requiring additional accreditations (such as ISO), which do little to guarantee the quality of an auditor.

To expect auditors to meet increased demands and travel without appropriate compensation contradicts the very mission our industry efforts aim to achieve—to treat all workers with dignity!

Losing quality auditors
Many of the large and boutique audit firms draw from the same international pool of independent auditors. As a result, one auditor may conduct audits under one initiative for multiple audit firms (if allowed by conflicting interests). I have been speaking with several career auditors with decades of experience who are seeking alternative careers because of the direction in which auditing is heading. They no longer feel that making the sacrifices required by their roles as auditors makes sense or, even more importantly to most of them, creates enough value or impact to justify the personal costs (e.g. exhausting travel, time away from families). They feel that the audits—with the sterilization and standardization of protocols and checklist reports—are becoming an “exercise to tick the box” without leading to change.

Building an effective army of auditors
As I expressed in my last newsletter, I hope to see a shift away from initiatives that rely on “policing” audits, which focus on results or specific conditions in a facility, towards “enabling and empowering” models that include efforts to help facilities develop effective policies and supporting programs. We should take the opportunity to learn from experienced auditors who have years of experience interfacing directly with facility management and workers as we develop more improved, effective and empowering audit programs.

We must make every effort to maintain the effectiveness of audit programs as we increasingly rely on audits to encourage supply chain actors to implement more responsible sourcing practices. We should start with respecting, motivating and fairly compensating quality auditors.

Many auditors love—and believe in—what they do. We need to show them that we value their dedication and hard work, and willingness to take risks associated with their jobs.