Plummeting prices provide sustainable investment opportunity in Chinese cotton industry
International brands and retailers are being called upon to take advantage of a 'valuable window of opportunity' to invest and build a more resilient supply chain in the Chinese cotton market.
A new report released on Thursday by social enterprise CottonConnect outlines the opportunity for businesses to secure a sustainable future for the world’s largest and fastest-growing cotton market, due to changes in subsidies.
With prices hitting a six-year low, CottonConnect says the time is ripe for international companies to invest and build a more resilient cotton supply, providing the technical, financial and political support needed. By investing, brands and retailers have the chance to mark themselves out as sustainability leaders.
Cotton prices in China have fallen by 60% since the Chinese Government removed its cotton reserve policy which was keeping prices artificially high and providing a safety mechanism for farmers. China is the world’s largest producer, holding around 58% of the world’s total stockpile of the raw material. However, cotton is becoming a less appealing crop for farmers and plantings are predicted to fall 6% by 2015-16 without investment.
CottonConnect warns that support is also needed for smallholder cotton farmers to help them deal with environmental, economic and social challenges. On top of falling prices, growers are also struggling with changing rural demographics, an emerging water crisis, rising labour costs and a lack of access to credit and financial literacy.
Time of transition
CottonConnect chief executive Alison Ward said: “As the biggest market for cotton in the world, international brands have a vested interested in ensuring that the market and supply chain is thriving. The Chinese cotton industry has reached a pivotal point.
“There is a growing need – and a huge opportunity – for international and leading Chinese brands to support the cotton sector in this time of transition by showing leadership, collaborating with others and investing to help build a more sustainable cotton industry for the future.”
CottonConnect has worked closely with companies such as Primark on interventions to improve productivity and reduce environmental impacts. Since 2013 Primark has been teaching cotton farmers about sowing, water efficiency, soil quality and how to reduce the use of pesticides in the Hebei province of China.
In August 2014, retailer H&M topped the list of the world’s biggest users of certified organic cotton, with 10.8% of its cotton used in 2013 certified organic, and Ikea has pledged to secure 100% cotton from more sustainable sources by the end of 2015.
Last year CottonConnect called for help from global brands to help reduce the water footprint of the Chinese cotton industry.