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:
- Embed responsible business conduct in enterprise policy and management systems
- Identify potential and actual harm in the enterprise’s own operations and in its supply chain
- Cease, prevent or mitigate harm in the enterprise’s own operations and in its supply chain
- Track, verify, monitor and validate progress on due diligence and its effectiveness in the enterprise’s own operations and in its supply chain
- Communicate on the enterprise’s due diligence processes publicly and to affected stakeholders
- 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.
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.
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.
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 (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 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.
- 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.
- 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.
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?
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
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 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.
 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.
 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.