Better Cotton Chain of Custody & Traceability Kerem Saral BCI Supply Chain Manager

1. Better Cotton Chain of Custody & Traceability Kerem Saral BCI Supply Chain Manager 2014

2. Overall Goal: Transforming cotton production worldwide by developing Better Cotton as a sustainable mainstream commodity. SPECIFIC AIMS: Improve… livelihoods and economic development in cotton producing areas Increase… commitment to and flow of Better Cotton throughout the supply chain Ensure… the credibility and sustainability of the Better Cotton Initiative Reduce… The environmental impact of cotton production

3. BCI GLOBAL TARGETS

4. USA Turkey Tajikistan India, Pakistan, China Mali, Senegal, Burkina Faso, Cote d’Ivoire, Ghana Brazil Mozambique, Malawi, Zambia, Zimbabwe Australia 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 WHERE DOES BETTER COTTON GROW?

5. 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

6. 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 • Eliminatepast 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

7. Better Cotton Chain of Custody & Traceability System Before and After

8. 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

9. Better Cotton Chain of Custody MASS-BALANCE ADMINISTRATIVE SEGREGATION Chain of Custody Guidelines Membership Code of Practice Ginner Monitoring Guidelines Membership Code of Practice Retailer clients monitoring requirements BCI membership not required Registered BCI membership required BCI membership not required but encouraged BCI membership required Trader Farmer 100% BC Bale Products with associated BCCU (Better Cotton Claim Units) 100% Seed BC Better Cotton Tracer BTS Better Cotton Tracer

10. 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

11. Better Cotton CoC guidelines - Traders Mass-balance with Country Scope Trader’s warehouse in Brazil Volume In = Volume out 100 Kilos of Brazilian Conventional Cotton Bales 100 Kilos of Brazilian Better Cotton Bales 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

12. Better Cotton CoC guidelines - Spinners Mass-balance with Site Scope Spinning factory in Bangladesh Volume In = Volume out 100 Kilos of Indian Conventional Cotton Bales 100 Kilos of Chinese Better Cotton Bales Better Cotton Conventional Cotton 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.

13. Better Cotton CoC guidelines – Intermediaries Mass-balance with Site Scope Fabric manufacturer in India Volume In = Volume out 100 Kilos of yarn without any allocated BCCUs from India 100 Kilos of yarn with allocated BCCUs from China Yarn with BCCUs Yarn without BCCUs 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.

14. 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

15. Output Declaration Form from Spinner

16. Mass-Balance & BCCUs help BCI to: 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) Traders Spinners Fabric Mills

17. Better Cotton Volume Claims by Retailers • Cotton Tracer Retailer Total claims reported to BCI Product with allocated BCCUs (indicated on spinners’ ODFs) Yarn with BCCUs Yarn without BCCUs

18. How would it work starting with the retailer?

19. Spinner’s ODF w/BCCUs Retailer’s Claim • H O W ? Coordination effort Engage with suppliers down to the spinner or fabric mill level – suppliers’ suppliers Inform about Better Cotton requirements – no UBICS, mass-balance, no certificate, ODF Ask for ODF to be transferred to you – how? The actual document or information on it? Due diligence Fabric mill level redistribution of BCCUs BCCUs in = BCCUs out for your specific orders Ask 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 cases Cancelled orders – when to enter claims into the Better Cotton Tracer?

20. Things to take away • NewBetter Cotton CoC requirements for all • Ginners 100% Segregation CoC • Traders Mass-Balance Admin. with country scope • Spinners Mass-Balance Admin. with site scope • RBs 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

21. Better Cotton Tracer • General web site functions • How the transfer of BCCUs work between members • Entering purchase and sales transactions • Generating output declaration forms • How retailers and brands make their claims using ODF from spinners.

22. Thank you! Please contact me or my country teams to: Ask any questions regarding our traceability system Your account on Better Cotton Tracer To get a copy of this presentation Report troubles you identified in your BC supply chain Kerem Saral – BCI Supply Chain Manager kerem.saral@bettercotton.org Direct Line: +41-22-939-1293 Skype ID: keremsaral Selvin Lloyd - India Supply Chain Coordinator selvin.lloyd@bettercotton.org Muhammad Shuiab – Pakistan Supply Chain Coordinator muhammad.shuaib@bettercotton.org Leo Xiao - China Supply Chain Coordinator leo.xiao@bettercotton.org