Deteriorating soil quality is leading to lower yields

Deteriorating soil quality is leading to lower yields

Changes taking place in China’s cotton sector offer both implications and opportunities for brands and retailers, according to a new report on ‘China’s Cotton: A Growing Market Opportunity’. Here, CottonConnect, the report’s author, sets out some of the issues to watch at both the farm and strategic levels.

For further insight into the report, which calls on international fashion brands and retailers to help build a more resilient cotton supply chain in China, click on the following link: SOURCING: Why should brands care about China cotton?

6 KEY IMPLICATIONS FOR BRANDS

Strategic level

  • The need to understand the complexity of the Chinese market
    The increasing availability of good quality cotton at more competitive prices is good for buyers but poses significant challenges to farmers’ economic viability in the mid- to long-term. Set against a backdrop of growing socio-economic and environmental challenges at farm community level, this shift brings greater responsibility to brands and their supply chain partners in helping farmers to make the transition to more sustainable cotton futures.
  • Transparency is key in an increasingly volatile business environment
    Brands will increasingly need to be proactive in addressing social and environmental issues in the supply chain and communicate what they are doing in a transparent manner.
  • Time to collaborate to scale action
    The scale and reach of socio-economic and environmental challenges in China demands that the supply chain works more effectively together – including brands, suppliers, competitors and the government, to scale up their efforts. Organisations such as CottonConnect can help brands to make these connections and identify new ways of collaborating.

Farm level

  • Better understand the risk to natural resources
    Organisations with a dependency (whether direct or indirect) on land or water in China, will need to show support for government policies and priorities and community needs. Water scarcity, the over-use of pesticides, polluted soils and disruptive weather patterns will continue to take their toll on Chinese cotton farmers. Business will need to understand the scale of the risks and extent of needs in their sourcing communities and take responsibility for helping to build a more sustainable infrastructure for cotton farming.
  • Provide agricultural training to improve yield and farmer livelihoods and create new interventions to sustain longer-term growth
    The changes in China’s cotton reserve policy have created a vital opportunity – and necessity – for brands and their suppliers who wish to safeguard the quality of their cotton supply from China. Specifically, there is a need for investment in farm-level activities, training and other financial support mechanisms to sustain the viability and growth of China’s cotton-growing communities.
  • Need to address declining and ageing farmer population
    Long-term security of cotton supply is at risk if broader interventions are not made to incentivize a next generation of farmers to stay and manage cotton farms. Learnings and inspiration can be drawn from other commodity crops facing similar challenges, such as coffee and cocoa. Crop diversification, community entrepreneurship and financial training can all play a role.

6 KEY OPPORTUNITIES FOR BRANDS

At a strategic level

  • More competitive cotton prices in China
    The change in reserve pricing policy means Chinese cotton prices are falling in line with international prices, after sustaining a 30% premium for many years. This, coupled with China’s reputation for good quality cotton, represents an attractive prospect for brands sourcing in the region.
  • High quality cotton with strong downstream infrastructure
    China has long held a dominant position as the centre for textile manufacturing. While higher labour costs in China have seen a shift to cheaper South East Asian markets in recent years, China’s scale, experience and connectedness with global markets means it still retains an edge on quality and efficiency. A cheaper, better quality cotton both sourced and processed in China could create greater efficiencies for global brands sourcing from, and selling to, the China market.
  • Greater sustainability becoming a licence to operate
    Environmental sustainability in China has become inseparable from economic growth. Its 12th Five Year Plan sets out expectations for cleaner, greener growth in the textile sector, greener and more productive agriculture, better water protection and rural regeneration. A clear opportunity exists for brands to demonstrate leadership and safeguard their licence to operate in China.

Farm level

  • Support for farmer finance and literacy
    While most brand efforts currently focus on the textile processing and at factory-level, the real opportunity to demonstrate leadership comes upstream, helping farmers tackle real and practical challenges. Brands and their suppliers should be conducting a needs-assessment of priority cotton communities that can inform the subsequent development of financial interventions. For example, modules for financial training (profit and loss accounting, etc.) or micro-finance tools such as loans or crop insurance protection to better support and protect farmers from the uncertainties of the market.
  • Support for effective water management
    Brands should be seeking to understand and address water issues at a farming community level as a priority. This might include: mapping water footprints at farm level; developing training or educational programmes focused on behaviour change; or, engaging with existing or new watershed management community projects in priority sourcing regions.
  • Encouraging rural entrepreneurship in cotton communities
    An opportunity exists to support ‘left behind’ children and young adults affected by cotton migration. Brands could partner with a leading youth-focused NGO whose activities in cotton regions such as Xinjiang include centres focused on developing vocational skills, career development and personal finances for young people affected by rural migration. A tailored programme could work to support the next generation of entrepreneurs in the cotton sector.

For further insight into the report, which calls on international fashion brands and retailers to help build a more resilient cotton supply chain in China, click on the following link: SOURCING: Why should brands care about China cotton?