Advanced Better Cotton for Fabric Mills: How to transfer BCCUs

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1 Better Cotton for Fabric Mills: How to transfer s WHAT IS THE BETTER COTTON INITIATIVE? The Better Cotton Initiative (BCI) helps farmers to grow cotton in a way that reduces stress on the local environment and improves the livelihoods and welfare of farming communities. All specifications related to the cotton remain the same (quality, lead time, availability and price). Brands and retailers that support BCI encourage the uptake of Better Cotton throughout their supply chains. WHAT ARE BETTER COTTON CLAIM UNITS (s)? To trace the Better Cotton from yarn spinner to brand or retailer, every kilogram of Better Cotton lint is worth one Better Cotton Claim Unit () a credit that retailers and brands can request to claim the use and investment in Better Cotton. Because brands want to encourage the uptake of Better Cotton in the supply chain, they require visibility of how much Better Cotton is actually used. To gain the required visibility, it is important to collect these s. s are not linked to physical Better Cotton from the yarn spinner onwards. BCI uses a mass-balance system for which each company only needs to calculate how many s they have received and how many s they transferred to their customers. HOW DOES THE MASS BALANCE SYSTEM WORK? Each company needs to record how many s they have received and how many were transferred to customers. You cannot transfer more s than you have received. +1 credit Cotton Procurement +1 credit 1kg Conventional Cotton s are not linked to physical Better Cotton. This means that you can deliver any type of cotton fabric with any properties as Better Cotton by allocating s from your balance. So if a certain quality of cotton yarn is not available as Better Cotton, you can use conventional cotton yarn and allocate s from your balance to sell the fabric as Better Cotton. HOW DO I RECEIVE s? When you buy yarn from a spinner that is a member of BCI, the yarn spinner will provide a Better Cotton Output Declaration. This declaration will state: Name and the BCI ID number of the yarn spinner Number of the Output Declaration of the yarn spinner Amount of s you received You need to keep track of this information, for instance in the Calculator for Fabric Mills tool. +1 credit Sales 1kg Conventional Cotton +1 credit Diagram: MADE-BY 1

2 Better Cotton for Fabric Mills: How to transfer s WHY ARE THE s DIFFERENT THAN THE KG OF YARN I ORDERED? One represents one kilogram of cotton lint used in a product. Due to loss of materials during the spinning process, the amount of s can be higher than the kilograms of yarn you receive. For example, 10,000 kilograms of cotton lint is used to spin 9,090 kg of carded cotton yarn (BCI assumes there is a 10% material loss during spinning of carded cotton yarn on average). You will receive 9,090 kg of yarn accompanied by a maximum of 10,000 s. The number of s can also be lower than the maximum number of s, for instance if only 50% of the cotton used is delivered as Better Cotton. In that case, you could receive 9,090 kg of yarn accompanied by 5,000 s. 1 = 1kg of cotton lint Cotton Lint Yarn Fabric Garment Carded Cotton: x 1.1 Combed Cotton: x ,000 kg 9,090 kg 10,000 10,000 Diagram: MADE-BY HOW DO I CALCULATE HOW MANY s I CAN TRANSFER? One represents one kilogram of cotton lint used in your product. If you sell fabrics made from the same bulk yarn to different customers, you first calculate the amount of cotton yarn used to make the fabrics and then allocate s to each customer, by applying the following rules: If you used carded cotton yarn: kg of cotton yarn used x the % of allocation x 1.1 If you used combed cotton yarn: kg of cotton yarn used x the % of allocation x 1.2 For example, you bought 6,000 kg of carded yarn with 6,600 s. You used 4,000 kg to weave fabric for Customer A, who wants the fabric delivered as 100% Better Cotton. You used 2,000 kg for Customer B, who wants 50% of the cotton to be delivered as Better Cotton. Customer A receives 4,000 x 100% x 1.1 = 4,400 s. Customer B receives 2,000 x 50% x 1.1 = 1,100 s. The remaining 1,100 s stay on your balance. You can use these s for a future delivery. BCI has developed a tool, the Calculator for Fabric Mills to help you calculate s and keep track of the amount of s you bought and sold. 2

3 Better Cotton for Fabric Mills: How to transfer s SO WHAT DO I NEED TO DO? Make sure you receive the Output Declaration from the yarn spinner who is a BCI member when purchasing cotton with s. Maintain an administration of all the s you receive and transfer to your customers using the Calculator for Fabric Mills. When you sell fabric with s to customers, calculate how many s are transferred to each customer. You can use the Calculator for Fabric Mills as a supporting tool to create Output Declaration forms for each brand or retailer, if you know in advance how much fabric you will use for each customer. Create an Output Declaration (examples can be found on pages 6 & 7) and send it to you customer or ensure you communicate at least the: Output Declaration number of the yarn spinner, The name and BCI ID number of the yarn spinner, and The amount of s that are transferred from you to your customer. WHAT IF MY CUSTOMER ASKS FOR s, BUT I DON T HAVE ENOUGH s? The mass-balance system means you cannot transfer more s than you ve received. So you cannot transfer 500 s if you only received 100 s. Further detailed information on chain of custody guidelines can be found at: PRACTICAL EXAMPLE 1 You have bought 2,000 kg of Chinese carded cotton yarn with 2,200 s from a yarn spinner in China. You also bought 1,000 kg of carded cotton yarn with a blend of 50% Better Cotton 50% conventional cotton with 550 s from a spinner in India. 2,000 kg 2,200 1,000 kg 550 You have also bought 3,000 kg of Pakistani carded cotton yarn. 3,000 kg 0 You still had a credit of 450 s from a previous purchase Your customer requests 100% Pakistani cotton fabric delivered as Better Cotton. You use 2,600 kg of yarn to produce this fabric. Are you able to provide the fabric with the s? Yes. You can use the s received with the Chinese and Indian cotton for the Pakistani cotton fabric, as well as the s that you have still in your balance from a previous purchase are not linked to the physical cotton. 3

4 Better Cotton for Fabric Mills: How to transfer s PRACTICAL EXAMPLE 1 (CONTINUED) You have received 2, = 3,200 s. Using 2,600 kg carded cotton yarn, you can transfer a maximum of 2,600 (kg of cotton used in the fabric) x 100% (percentage of Better Cotton requested) x 1.1 (for the use of carded cotton) = 2,860 s with this fabric. This means you have enough s to deliver the fabric as Better Cotton. 2,600 kg 2,860 After this transaction you have 3,200 2,860 = 340 s left. PRACTICAL EXAMPLE 2 You have bought 5,000 kg of Indian Better Cotton yarn that is accompanied by 5,500 s. 5,000 kg 5,500 You have also bought 2,000 kg of Pakistani Better Cotton yarn, with 2,200 s. 2,000 kg 2,200 Customer A wants 4,500 kg of cotton fabric accompanied by 7,000 s, because your customer claims the amount of s can be higher than the kg of fabric. You use 5,000 kg carded cotton yarn to produce the fabric. Can you transfer the 7,000 s to your customer? No, the maximum amount of s you can transfer together with this fabric order, using 5,000 kg carded cotton yarn, is 5,000 x 100% x 1.1 = 5,500 s. So you need to let your customer know that you are allowed to transfer a maximum of 5,500 s, not 7,000 s. 5,000 kg 5,500 It is possible to transfer fewer s to your customer than the maximum amount. So if the customer requested 50% delivered as Better Cotton, you are allowed to provide 5,000 kg of fabric with 5,000 x 50% x 1.1= 2,750 s. PRACTICAL EXAMPLE 3 You have bought 1,000 kg of Pakistani yarn. 1,000 kg 0 You have also bought 1,000 kg of Indian Better Cotton yarn. The spinner is not a member of BCI and has not provided you an Output Declaration. 1,000 kg 0 You have 100 s left from previous purchases. 0 kg 100 Your customer has requested 500 kg of cotton fabric, delivered as Better Cotton and prefers combed yarns to be used. Are you able to produce the fabric with the s? 4

5 Better Cotton for Fabric Mills: How to transfer s PRACTICAL EXAMPLE 3 (CONTINUED) No. The yarn was bought from yarn spinners that are not a member of the Better Cotton Initiative. Although they called it Better Cotton yarn, they were not able to transfer any additional s. Because you did not receive any more s, you currently have only 100 s to provide to your customer. This is not enough for the order. In total, you need to provide 500 x 100% x 1.2 = 600 s for this fabric to meet your customer s request. You should communicate you don t have enough s to transfer as you currently only have 100 s. Your customer could still be happy with the transfer of only 100 s for this delivery. As brands and retailers support the positive change at the farm level and encourage the uptake of Better Cotton throughout their supply chains, they might want to capture the 100 s. PRACTICAL EXAMPLE 4 You have bought 5,000 kg of Indian Better Cotton yarn that is accompanied by 2,000 s. 5,000 kg 2,000 You have also bought 1,000 kg of Pakistani Better Cotton yarn, with 1,100 s. 1,000 kg 1,100 Customer A wants cotton fabric, of which 50% delivered as Better Cotton. You used 500 kg of carded cotton yarn to produce this fabric. Customer B requires 1,000 kg of fabric, with a blend of 80% cotton 20% polyester, and the all cotton delivered as Better Cotton. In addition, this fabric needs to be made from combed cotton yarn. To calculate the amount of cotton yarn used, you assume 10% material loss from yarn to fabric. How many s do you have left after these transactions? The amount of s you receive is not always the same as the kg of yarn you purchased. Your Indian yarn only had 2,000 s. Although you bought a total of 6,000 kg of yarn, you received 2, ,100 = 3,100 s in total. Customer A only requests 50% to be delivered as Better Cotton, and will get 500 x 50% x 1.1 = 275 s. For Customer B, you first need to calculate how much cotton yarn was used to weave the fabric. Following the blend, you can assume there is 80% x 1,000 kg = 800 kg of cotton in the fabric. Assuming 10% material loss to weave the fabric, the amount of cotton yarn used for the fabric is 800 x 1.1= 880 kg of cotton yarn. Now you know how much yarn was used, you can calculate how much cotton lint was used and thus how many s can be transferred using the formula for combed cotton. Customer B will get: 880 x 100% x 1.2 = 1,056 s. 6,000 kg 3, kg kg 1,056 After transferring all s, you have 3, ,056 = 1,769 s remaining. 1,769 5

6 Better Cotton for Fabric Mills: How to transfer s OUTPUT DECLARATION YARN SPINNER (EXAMPLE) Output Declaration Number: Name: Yarnspinners Inc. Address: Yarnstreet 20, Yarntown BCI ID Number Yarn Spinner: Name: Fabric Mill Inc. Address: Millstreet 15, Milltown BCI ID Number (if applicable): n/a Important - please note The transaction listed in this declaration is <transaction status> Declaration As the seller I declare that the transaction details provided below are accurate to the best of my knowledge. This data corresponds to actual transactions of physical cotton made between the seller and the buyer named above, and is in compliance with the Better Cotton Chain of Custody Guidelines. Any misrepresentations or anomalies in data following confirmation of the transaction are the sole responsibility of the seller. The buyer does not assume any liability for false declarations. Date of declaration Volume of yarn (kg) * s transferred of yarn of physical cotton used Better Cotton 250 kg 98 Turkey India, China, Turkey 6

7 Better Cotton for Fabric Mills: How to transfer s OUTPUT DECLARATION SUPPLY CHAIN (EXAMPLE) Declaration As the seller I declare that the transaction details provided below are accurate to the best of my knowledge. This data corresponds to actual transactions of physical cotton made between the seller and the buyer named above, and is in compliance with the Better Cotton Chain of Custody Guidelines. Any misrepresentations or anomalies in data following confirmation of the transaction are the sole responsibility of the seller. The buyer does not assume any liability for false declarations. Transaction 1: Yarn Spinner Output Declaration Number: Name: Yarnspinners Inc Address: Yarnstreet 20, Yarntown Name: Fabric Mill Inc. Address: Millstreet 15, Milltown BCI ID Number Yarn Spinner: Date of declaration Volume of yarn (kg) * BCI ID Number (if applicable): n/a s transferred of yarn of physical cotton used Better Cotton India India, China, Turkey Transaction 2 Name: Fabric Mill Inc. Address: Millstreet 15, Milltown Date of declaration Name: Cut and Trim Inc. Address: Trimstreet 09, Trimtown Volume of cotton traded (kg)* Better Cotton Transaction 3 s transferred Name: Cut and Trim Inc. Address: Trimstreet 09, Trimtown Date of declaration Name: Fashion Brand Inc. Address: Fashionstreet 25, Amsterdam Country: The Netherlands Volume of cotton traded (kg)* Better Cotton s transferred Important information to collect * All volumes are expressed as net weight in kg 7