Navigating the Maze: How EU Green Legislation Could Reshape the Cotton Industry
This pro bono piece was written for CotLook Cotton Outlook “World Cotton Day 2024”
In March this year, I gave a presentation in Bremen summarising global sustainability commitments and the extent to which these are reflected - or more accurately, not reflected - in current and proposed green legislation.
‘Interesting’ I hear you say, but why should I care? What does it mean for me and my business prospects? So, let’s take a quick look at how EU green legislation might impact different players in the cotton industry.
The EUDR or EU Deforestation Regulation is already active. It currently applies to cattle, wood, cocoa, soy, palm oil, coffee, rubber, and some derived products, such as leather, chocolate, tires, or charcoal. It requires that every plot of land on which the relevant commodity was produced be identified by verified geolocation data. And evidence must be provided that said land was not deforested after December 31, 2020. The need and feasibility of extending EUDR’s scope to further commodities, within two years, is written into the legislation itself.
Based on the two recent controversies around Better Cotton and Brazil, there is considerable speculation that cotton will be included in the next round. What would this mean for cotton farmers and traders?
In Brazil, cotton is a secondary crop in the rotation of soy farms. EUDR already applies to soy. So, for Brazilian cotton production, it will mean little. US and Australian farmers should also find it easy to comply. Based on recent reports, Indian cotton farmers may not find it that simple, and sub-Saharan African farmers will find it very difficult.
But before Brazilian, American, and Australian farmers and their traders sit back and count the ways they can benefit from others' misfortunes, a word of caution. Every uncontested piece of green legislation encourages another. I would expect ESPR or the EU Ecodesign for Sustainable Products Regulation to follow closely behind the successful implementation of EUDR.
The ESPR currently includes a “performance requirement on maximum limit of water consumption related to the production of cotton”. If cotton is included in EUDR, this performance requirement will presumably be tacked onto the verified geolocation reporting. Indeed, if EUDR is deemed a success, verified geolocation could be required for all green legislation targeting primary production. Actual water consumed will have to be stated. This will then be weighted by scarcity. Producers and traders of Brazilian cotton have little to fear. Their cotton is almost entirely rainfed. Such a requirement would also be advantageous for virtually all sub-Saharan cotton. For the Indian sector, it would be something of a mixed bag according to the State concerned. But those involved in the US and Australian cotton trade can be far less sanguine.
So far, the future for Brazilian cotton is looking pretty rosy. But not so fast. ESPR includes a second performance requirement for cotton: a “performance requirement on maximum limit of fertilisers, pesticides and insecticides to the production of cotton”. That performance requirement would again benefit Sub-Saharan African and indeed Indian producers who use globally, relatively low levels of pesticides. Australian cotton is renowned for its eco-efficiency and has strong IPM in place. I assume Australian farmers too would be able to manage this. Things might look a little less favorable for US cotton, but the real losers will be Brazil. The US, and particularly Brazil, both use pesticides that are currently banned in the EU, and Brazilian cotton pesticide consumption per kg of cotton production is amongst the world’s highest.
Let’s move on to the Product Environmental Footprint (PEF) and Green Claims. These are related. The original plan was that the PEF would be obligatory and that all green claims would have to be PEF-based. With one more legislative round to go, the PEF is no longer obligatory. Green claims do not have to be PEF-based. And the rise of Shein and Temu appears to be making the PEF ever less likely. This is because the data underpinning the current system seriously underestimates the impact of polyester. Oil and gas extraction emissions alone are between 9x and 35x higher than the commonly employed values. And most Shein and Temu garments are polyester. Labels showing that these are more sustainable than a silk dress from Chanel or Max Mara are unlikely to be acceptable to EU politicians. A Digital Product Passport (DPP) remains on the cards. So far, it’s not PEF-dependent but membership of Cirpass might be advisable.
As things currently stand, DPP aside, if brands continue to make LCA-based index claims, they will most likely use the Higg MSI. The MSI only has 5 variables and is already integrated into many major brands’ reporting systems. The PEF has 16 variables and integrating it would require a whole new setup and considerable additional data. Why would any brand do that?
Just what the MSI means for cotton is summarised in the chart below.
Who will be approved to offer third-party certification under Green Claims? Judging from LinkedIn, anyone with an ‘AI-enabled’ app. Certainly, Cascale - creator of the Higg MSI - will be approved. As chair of the EU Apparel PEF Technical Secretariat, they can hardly be excluded.
Consumers might previously have wondered how cultivating cotton organically could reduce water consumption by 92% and carbon emissions by 48%. As the screenshot below shows, they will now be told Patagonia’s and other’s claims are verified by Higg 3.6. And if anyone was hoping that regulators would step in, my experience suggests otherwise. I live in London, so I filed complaints about Patagonia’s claims with both the Advertising Standards Agency (ASA) and the Competition and Markets Authority (CMA) in March this year. The claims are still there. For the benefit of this article, I reached out to the ASA and CMA and enquired “whether a decision has been taken to allow unsubstantiated cotton and fiber claims”. I quote the CMA’s official response: “We cannot address claims about fabric composition that require further substantiation, nor can we discuss matters related to environmental claims. Thank you for your understanding.”
The ASA told me that the Patagonia UK website is hosted in the Netherlands, so they are powerless to regulate it. They passed my complaint to the Dutch authorities - and hope to get back to me by the end of September.
https://eu.patagonia.com/gb/en/our-footprint/cotton-for-change.html Screenshot taken 25/07/2024
As for the EU PEF itself, should it infiltrate legislation, it has two major failings that will negatively - and unscientifically - impact cotton: a) the underlying data which I have written about extensively elsewhere, and b) the weighting systems. Cotton should be very worried about these, as they influence other forthcoming legislation such as ESPR and CS3D.
All weightings are highly subjective, and both weightings currently employed by the EU disadvantage agricultural products. The first weighting that Cotton should be concerned about is the weighting that determines how impacts are combined across variables. The chart below shows how the EU does it. The truly remarkable thing to note is that even though EU green legislation is marketed as an essential response to climate change, and a reduction in carbon emissions is the only variable for which the EU has any kind of global mandate, climate change does not even constitute 50% of the weighting. Not even 25% - it’s a paltry 21%.
The second weighting that should concern Cotton is that actual water use is adjusted upward, supposedly to account for scarcity. The EU and the MSI use a tool called AWARE. A 2017 Australian research paper applied 3 different water scarcity indices in a study of milk production in SE Australia. The actual water consumed varied between 9.1 and 313 liters per liter of milk, but AWARE converted this into an average of 6,616 liters of water per liter of milk, while another tool, WSIHH, EQ resulted in an average of 18 liters. Which is correct? With such high variability can this be called science? Should it guide consumption decisions and so global trade flows? Or will it lead to misallocation and injustice? And why has nobody questioned this? It follows automatically, that based on AWARE, water enters the PEF already heavily and highly subjectively weighted. As a result, it can, and easily does, outweigh climate change.
So what is to be done? Tell people. Yes, LCAs and weightings are complicated and confusing but, as they say, If you can't explain it simply, you don't understand it yourself.
Anyone can understand that if you look at organic cotton that was rainfed, and conventional cotton that was irrigated and try to claim that the difference in water consumption was due to the cultivation system, not the climate - you are cheating.
Anyone can understand that if you decide not to include the impacts of manure when evaluating organic cotton, but do include them when evaluating silk - you are cheating.
Anyone can understand that if you say all this legislation is fighting climate change and then don’t even make climate impact the majority of the evaluation - you are cheating.
Anyone can understand that if you claim that not all water is the same and use must be weighted. But all carbon emissions, whether emitted by Saudi Aramco and BP or by a poor farmer in Benin or Burkina Faso, are identical so no weighting is necessary - you are cheating.
And anyone can understand that when 50% of global apparel production is polyester, if you demand traceability and accountability from cotton, but not from polyester - you are cheating.
Finally, this is politics, and in some EU nations, farmers are influential. France is a case in point. When our paper on the French PEF was published by the CRDC in Australia in March, it pointed out that the biophysical allocation and microfiber impact scores employed disadvantaged French wool. Within days, the French PEF’s developers reached out to a leading figure in the sector to reassure him that the score would be changed. Within weeks a major revision was published. As the screenshot below shows, as of today, according to the French PEF, the most sustainable thing that you can purchase, with an impact of only 230pts/100g, is a domestically produced French wool sweater. So, choose arguments that resonate with EU farmers. They can catalyze change.
