What does climate change mean for the cotton value chain?
The entire cotton value chain – from producers and processors to brands, retailers or traders – is facing increasing exposure to climate risks. At the same time, the sector itself can also contribute to climate change. To thrive in an increasingly climate-disrupted world, the cotton sector, and the wider textiles industry, require radical change, which can only be achieved through sector-wide collaborative action.
‘The Commodities and Supply Chain Risk: From Farm to Factory’ masterclass was the first in a series of six sessions co-hosted by WTW and Forum for the Future in October 2022. The sessions cover a range of topics, tailored for brands and retailers, to encourage a shift towards a sustainable, regenerative and climate-resilient cotton sector.
Whilst there are targets and pledges in place, in line with the Paris Agreement, to limit global temperature rise to below 2 degrees, the world is currently not on track to meet this target. Physical climate risks increase significantly in temperature scenarios above 2 degrees. For the cotton and apparel sector, enhancing supply chain resilience is therefore essential in the face of future climatic changes.
In the masterclass, the presenters highlighted the impact that physical climate risks could have on cotton production, drawing on the findings of the first globally consistent and comprehensive analysis of physical climate risks to cotton growing regions by 2040.
The study looked at a range of different hazards including heat stress, drought, wildfires, changes in rainfall, fluvial and coastal flooding. The research showed that no cotton growing area will be unaffected by climate change, and extreme and compounding weather conditions, such as those currently seen in Pakistan, impacts the entire supply chain - including the universal prices of the commodity - including reserves. The complex and non-transparent nature of cotton value chains make the industry more vulnerable to climate impacts.
As around 90% of cotton farmers are in developing countries, growing cotton on less than 2 hectares of land, the total extent of climate risk to cotton extends far beyond the direct impact on cotton plants themselvers.
Having provided a global overview, the masterclass then explored a recent
The WTW and Forum for the Future study provided a district-by-district understanding of three states in India and two stages of the value chain: rural agricultural communities and urban manufacturing communities engaged up to the pre-garment manufacturing stage. The key drivers of risk vary greatly from one district to the next, and a broad brush approach will not be effective. Approaches to building resilience require a good understanding of the location of production.
Climate vulnerability in the sector is inextricably linked with social and environmental risks to cotton-growing communities. Climate vulnerability stems from factors including low wages, lower access to finance and other banking services, low levels of technology and access to information. In rural agricultural communities, cotton growers are reliant on rainfed cotton instead of irrigated cotton, poor soil quality and low organic carbon, and a high gender pay gap. In urban manufacturing communities, climate vulnerability stems from low work participation rates, low literacy rates, and water stress.
“Brands and retailers can support resiliency by implementing programmes, or arguably more importantly, integrating climate adaptation into existing programmes that address wider sustainability and social livelihood objectives.”
Alastair Baglee | Senior Director at WTW Climate and Resilience Hub
The masterclass focussed on opportunities and actions that brands and retailers can take to manage climate risk and build resilience in the cotton value chain. The starting point is supporting supply chain transparency in terms of the climate and social vulnerabilities of stakeholders at each link. In many cases communities have already adapted to existing climate hazards. This is often undervalued alongside their capacity to adapt using local knowledge and methods. Brands and retailers should seek to understand the key drivers behind risk, and support reductions in community vulnerability through building their adaptive capacity.
Climate resilience and positive ESG outcomes can be achieved when brands and retailers engage with producer communities to identify risks, support adaptation, and address underlying vulnerabilities for farming and production. Critical next steps include linking grassroot initiatives with corporate governance, and industry-wide dialogue to facilitate awareness and collective action. At grassroot, societies know what they need, the issue is with delivering the resources to help address these needs.
This is the session recording from Masterclass 1: Commodities and Supply Chain Risk held on October 11, 2022. This was the first of a six-part “Insights to Action” masterclass series on climate risks to the cotton and wider apparel sector.
| Title | File Type | File Size |
|---|---|---|
| Physical climate risk and vulnerability asessment for India’s cotton value chain | 1.7 MB |
