With Forum’s eight year Cotton 2040 initiative now drawn to a close, Forum’s Principal Manager, Hannah Cunneen, with Principal Sustainability Strategist Yamini Srivastava, and Forum Affiliate Dhaval Negandhi, reflect on the landscape of the cotton industry and the complex value chain which underpins it. Here, they explore climate adaptation, decarbonisation and mitigation, and what emerging trends will support - or further inhibit - the ability to build a socially-just, agro-replenishing and resilient cotton sector.

This blog is part two of a two-part blog series looking at learnings from our ‘Climate Adaptation in the Cotton Sector’ Masterclass series, and what to expect from the cotton sector in the coming years, and beyond.

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The cotton and apparel value chain, particularly at production level, is underpinned by economic, social, and environmental vulnerabilities, all of which are being exacerbated by the climate crisis. Without deep and urgent transformation to these systems, we are much more likely to see even more supply chain volatility and disruption, disparity and inequality for those working in cotton, eventually impacting the financial viability of brands and retailers that rely on cotton.

Here, we consider the emerging trends that are affecting the ability to build a just and resilient cotton sector.

1. Our warming world is deeply impacting cotton production globally.

Cotton is the most used natural fibre in the textile industry from the 1700s. To this day, it represents almost a quarter of all fibres processed by the global textile sector. Yet the industry is proving to be deeply exposed to climate change and unprepared for the future.

We’re seeing ongoing heat stressors, concerning declines in biodiversity, and weather extremities in many cotton growing regions. In fact, various climate hazards exist and deeply impact cotton across the world.

And they do not exist in siloes. Such events are often experienced in tandem with other physical risks, such as drought and wildfire, further propelling ecological and social vulnerability.

2. As climate risks increase, adaptation and mitigation are now critical. 

The world is well off-track to limit global warming to below 1.5°C. Of course, we must remember too that 1.5°C shouldn’t be the goal - rather,  we should be actively cooling the earth. And yet, as per the UNEP’s Emissions Gap Report (2022), implementation of current pledges will likely see temperature rises of 2.4-2.6°C by the end of the century, which is beyond ‘permissible’ limits. 

Looking through the specific lens of the cotton industry, we’ve experienced a multitude of devastating climate-related impacts as of late. We are already experiencing serious impacts of climate change in cotton globally, including mass crop failure due to drought. In 2022, Texas farmers abandoned 74% of their cotton crop due to heat and parched soil. Perhaps most devastating was the severe floods in Pakistan in late 2022 which not only - and importantly - deeply impacted around 33m producers, and approximately 15% of Pakistan’s population, but also caused a global shortage of cotton.

The latter illustrates an affecting and also poignant tale of how the world’s most vulnerable are disproportionately impacted by the volatility of the changing world. It also highlights how reliant the world’s commodity sectors, including cotton, are on farmers living in “rising economies”, where alternative forms of financing and therefore resilience are minimal.

3. While there are efforts to adapt, current practices fall short of what is required.

Current practices in adapting to climate change are not enough. According to the Adaptation Gap Report (UNEP, 2022) even with an incline in adaptation action. Accelerating climate risks are likely to eclipse these efforts.  Adaptation-related funding flows to and within developing countries are five to ten times below estimated needs, we will need over US$300 billion per year by 2030.

Indeed, adaptation actions fall along a spectrum of responses. Many are about anticipating or reacting to urgent and immediate climate change impacts, others work to provide financial buffers and support to withstand emergencies. 

Innovative insurance solutions such as microinsurance products for small farm holders at the producer level can be used to reduce climate-related risk and improve equity and agency. Watch our masterclasses relaying how more effective insurance methods can support climate adaptation objectives in cotton here.

Yet others work at more fundamental levels to shift ecological and socio-economic systems towards long term resilience. For example, in the face of crop failures caused by climate change, responses range from better financial protection of farmers,  to decisions to abandon fields, to transformative agricultural practices that enable stability and resilience in the midterm.

We have aimed to make the case for meaningful climate adaptation action, in addition to the need to globally decarbonise in our Transition Risk and Decarbonisation Masterclass here

4. There are limits to adaptation, and in some situations, it’s not possible to adapt further to climate change impacts.

One of the highlights at COP27 was the agreement to set up a loss and damage fund to provide financial assistance to nations most vulnerable and impacted by the effects of climate change. What this means for food and fibre commodities, including cotton, is yet to be seen but we believe is of utmost importance.

In fact, so far, only six countries have pledged funds which can be mobilised for climate-related loss and damages at this stage, with a further 18 countries primed to collaborate and contribute next year. 2023 is certainly a very important year for collectively tackling the many financial climate finance gaps, and we hope to see G7 leaders affirming new and further commitments to collective climate goals and debt structures during the next summit in Hiroshima, Japan. COP28 in November will also be very telling in terms of how serious we are on driving collective global financing to reduce and remove GHG emissions.

There is momentum for change, but we already know that further, incremental funding will not go far enough between climate science, policies and action, to meet the deep and urgent transition necessary in the apparel and food sectors, and beyond. 

5. While commodity markets focus on ‘business-as-usual’, others are beginning to recognise the role they play in driving traceability to support the transition. 

Of course, the climate crisis fuels and exacerbates financial vulnerability in already delicate supply chain models. No doubt, the long-standing, complex and often opaque production-through-consumer supply chain model is flimsy - and there's little doubt it is, as current volatilities in cost and logistics, surging agro-input prices and squeezed profit margins demonstrate.

It also makes it more difficult to engage meaningfully with actors across the supply chain on critical matters such as decarbonisation, to convene and collaborate on agroecology, to access and use data as a means in which to drive the equity and sustainability agenda. All of which is essential if we are indeed to turn the climate emergency around. 

Without building in traceability and transparency measures to improve financial and equity landscapes for all, and driving land and ecological resilience, it is only likely to eventually drive a downward trend in production of cotton for the apparel sector, further burdening all actors across value chains, especially to farmers themselves.

Fortunately, there are examples¹ of how traceability has increased meaningful engagement across supply chains to drive collaboration for meeting sustainability and social outcomes, and ensuring resilience of supply. For the most part, however, the commodity sector continues to operate a model with such opacity that we often do not know the origins of our products at all, including cotton. So the question for the cotton industry is: how can we meet our sustainability objectives if we do not know how our cotton is grown and travels to us, and under what conditions?

What does this mean for the future of the cotton sector?

As climatic impacts continue to play out in severe ways, we need not only to step up mitigation efforts but also adapt with urgency, and together. No one actor nor one segment of the value chain can overcome the challenges the cotton industry is facing. 

It’s time to turn the cotton sector around, and this is why it is critical that all private sector businesses rise to the occasion. Beyond regulation, we need to adopt climate adaptation methods that are both just and regenerative if we have a hope in sparing the world from further ecological and social turmoil, and to even consider the likelihood of a future cotton industry.

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^{1 Uncommon Cacao is a pioneer for publishing data relating to their supply chain, as the first Transparent Trade cacao supply chain company. Open Supply Hub is an open source, open data platform which maps supply chain production facilities across the world. Brands can use it to dig into their supply chains, and identify opportunities for collaboration. Karma Drinks is working directly with suppliers to support projects across sustainable infrastructure, local enterprise and fair wages.}