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Better Cotton Chain of Custody & Traceability

Kerem SaralBCI Supply Chain Manager

2014

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Overall Goal:

Transforming cotton production worldwide by developing Better Cotton as a sustainable mainstream commodity.

SPECIFIC AIMS:

Improve… livelihoodsand economicdevelopment in cottonproducing areas

Increase… commitment to and flow of Better Cotton throughout the supply chain

Reduce… The environmental impact of cotton production

Ensure… the credibility and sustainability of the Better Cotton Initiative

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 Livelihoods Environment Supply Chain BCI Sustainability

GlobalIndicators  

Number of Better Cotton farmers

Better Cotton hectares under cultivation

Better Cotton lint volume in MT

Earned income as % of global costs 

2012 actual 165,000 685,000 670,000 50%

2015 target 1 million 2 million 2.6 million 75%

2020 target 5 million 9 million 8.2 million 100%

BCI GLOBAL TARGETS

Countries where Better Cotton is grown via a partnership agreement between BCI and a national actor

Better Cotton Countries with BCI owned legal entities and operations

In the pipeline

Mali, Senegal, Burkina Faso, Cote d’Ivoire, Ghana

Mozambique, Malawi, Zambia, Zimbabwe

India, Pakistan, China

Australia

USATurkey Tajikistan

Brazil

WHERE DOES BETTER COTTON GROW?

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New vs. Old

» New Better Cotton CoC requirements for traders, spinners, and intermediaries and retailers

» Introduction of Better Cotton Claim Units» No more UBICS» Output declaration forms from spinners» Making Better Cotton volume claims

» Better Cotton Traceability System

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New Chain of Custody Guidelines - But Why?

» Inform all supply chain actors about their role in tracing Better Cotton throughout the supply chain

» Enable retailers to make claims with confidence

» Eliminate past challenges that led to low uptake rates » Availability issues, inventory management problem, timing

problems, overstock/out of stock suppliers, premiums

» Lay the groundwork for introducing physical traceability as an option in 2016

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BEFORE July 1st 2013

AFTER July 1st 2013

Better Cotton Chain of Custody

Ginners Physical Segregation Physical Segregation

Traders Physical Segregation Mba w/ Country Scope

Spinners Physical Segregation Mba w/ Site Scope

Intermediaries Physical Segregation Mba w/Site Scope

Retailers Claim UBICs Claim BCCUs

Better Cotton Traceability System

Supply chain actors in BC traceability system Ginners, Retailers

Ginners,Traders, Spinners, Retailers

Traceability System Bale Tracking System (BTS)

Bale Tacking System (BTS) +

Better Cotton Tracer (BCT)

Better Cotton Chain of Custody & Traceability SystemBefore and After

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What is a Better Cotton Claim Unit?

BCCU = Better Cotton Claim Unit

» The units of conventional cotton that can be substituted for equivalent units of Better Cotton - Due to Mass Balance

» 1 BCCU represents 1 kilo of physical Better Cotton

100% BC Bale Products with associated BCCU (Better Cotton Claim Units)

BCI membership not required

Ginner Monitoring Guidelines

SEGREGATION MASS-BALANCE ADMINISTRATIVE

BCI membership not required but encouraged

Retailer clients monitoring requirements

Registered BCI membership required

Membership Code of Practice

Trader

Chain of Custody Guidelines

Membership Code of Practice

BCI membership required

100% Seed BC

Farmer

BTS Better Cotton Tracer Better Cotton

Tracer

Better Cotton Chain of Custody

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Better Cotton CoC Guidelines – Gin Level

Better Cotton is kept physically separate from conventional cotton at the gin level in all countries

In order to create 100% Better Cotton Bales = Total available lint Better Cotton at a global level

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Better Cotton Conventional Cotton

100 Kilos of Brazilian

Better Cotton Bales

100 Kilos of Brazilian

Conventional Cotton Bales

Mass-balance with Country ScopeTrader’s warehouse in Brazil

BC CC

CC

CC

BC

BC

Having bought 100 kilos of BC Bales gives the trader 100 Better Cotton Claim Units. They can then ship 100 kilos of conventional cotton bales with the same country of origin to fulfil a BC order using these 100 BCCUs – by attaching earned BCCUs to conventional cotton bales

Volume In = Volume out

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Better Cotton CoC guidelines - Traders

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Mass-balance with Site Scope Spinning factory in Bangladesh

Better Cotton Bales can be swapped with conventional cotton bales of any origin as long as they are in the same site, using BCCUs earned by buying bales with allocated BCCUs from BCI traders or BCI-registered ginners.

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Better Cotton CoC guidelines - Spinners

Better CottonConventional Cotton

100 Kilos of Chinese

Better Cotton Bales

100 Kilos of Indian

Conventional Cotton Bales

Volume In = Volume out

BC CC

CC

CC

BC

BC

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Mass-balance with Site Scope

Yarn with allocated BCCUs can be swapped with yarn without any BCCUs of any origin as long as they are in the same site and volume-out doesn’t exceed volume-in. 13

Better Cotton CoC guidelines – Intermediaries

Yarn with BCCUs Yarn without BCCUs

100 Kilos of yarnwith allocated BCCUs from

China

100 Kilos of yarnwithout any

allocated BCCUsfrom India

Volume In = Volume out

Fabric manufacturer in India

BC CC

CC

CC

BC

BC

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Tracing the “volume” of Better Cotton

Until now – BCI has enabled retailers to claim individual bales of physical Better Cotton.

From now – BCI enables retailers to claim usage of lint Better Cotton (a certain amount of it) in their supply chains.

But How?

Output Declaration Forms from Spinners

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Output Declaration Form from Spinner

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Trace the volume of physical Better Cotton throughout retailer and brands’ supply chains

This is done by transfer of BCCUs from one supply chain actor to the next using output declaration forms (ODF)

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Mass-Balance & BCCUs help BCI to:

Traders Spinners Fabric MillsTraders

Earn BCCUs purchasing physical BC

Transfer these BCCUs along

with bales they sell

SpinnersEarn BCCUs

purchasing bales w/ BCCUs

Transfer these BCCUs along

with yarns they sell

Fabric MillsReceive ODF

from spinnersPass ODFs to retailers and

brands(Coordination is

required)

Retailers/Brands

Receive ODF that was generated by

spinners on Better Cotton

TracerEnter claims accordingly

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Better Cotton Volume Claims by Retailers

Yarn with BCCUs Yarn without BCCUs

Product with allocated BCCUs

(indicated on spinners’ ODFs)

Total claims reported to BCI

Retailer

BCCUs

BCCUs

Cotton Tracer

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How would it work starting with the retailer?

TradersReceive PO from

spinnerBuy lint bales from ginner accordingly

Ship lint balesEnter transaction into the Cotton

Tracer

SpinnersReceive PO from

fabric millCalculate needed

BCCUs for the ordered yarn, using the fixed

conversion rates built into the

systemOrder lint

accordinglyEnter transaction into the system and generate

ODF

Fabric MillsReceive the PO

from RBs given a set % of BC to be included in the

fabricCalculate the net

weight of yarn needed

Place order with spinner and

indicate the % of BC to be included in the yarn (same % received from

retailer)

Retailers/BrandsSet BC usage

targetDecide how to spread this % throughout

productsSet KPIs for

various departments

Ask fabric mill to provide ODF from

spinners

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Spinner’s

ODF w/BCCUsRetailer’s

ClaimH O W ?

Coordination effortEngage with suppliers down to the spinner or fabric mill level – suppliers’ suppliersInform about Better Cotton requirements – no UBICS, mass-balance, no certificate, ODFAsk for ODF to be transferred to you – how? The actual document or information on it?

Due diligenceFabric mill level redistribution of BCCUsBCCUs in = BCCUs out for your specific ordersAsk the fabric mill to keep records of BCCUs received and passed along to retailers?Ask your spinners to pass the ODF directly to you?

Special casesCancelled orders – when to enter claims into the Better Cotton Tracer?

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Things to take away

» New Better Cotton CoC requirements for allGinners 100% Segregation CoCTraders Mass-Balance Admin. with country scopeSpinners Mass-Balance Admin. with site scopeRBs Enter claims against spinner BCCUs

on the Cotton Tracer

» Introduction of Better Cotton Claim Units» No more UBICS» Output declaration forms from spinners» Making Better Cotton volume claims

» Better Cotton Traceability System

General web site functions

How the transfer of BCCUs work between members

Entering purchase and sales transactionsGenerating output declaration forms

How retailers and brands make their claims using ODF from spinners.

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Better Cotton Tracer

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Thank you!Please contact me or my country teams to:

Ask any questions regarding our traceability systemYour account on Better Cotton TracerTo get a copy of this presentationReport troubles you identified in your BC supply chain

Kerem Saral – BCI Supply Chain Managerkerem.saral@bettercotton.orgDirect Line: +41-22-939-1293Skype ID: keremsaral

Selvin Lloyd - India Supply Chain Coordinatorselvin.lloyd@bettercotton.orgMuhammad Shuiab – Pakistan Supply Chain Coordinatormuhammad.shuaib@bettercotton.orgLeo Xiao - China Supply Chain Coordinatorleo.xiao@bettercotton.org