What is Cotton Traceability & Why Does it Matter?

Cotton is one of the most traded commodities in the world, with 114 million bales produced across 2023/2024. But fashion and apparel businesses are under increasing pressure from regulators, consumers, media and other audiences.

Cotton traceability has become an important tool to enable these businesses to verify the integrity and authenticity of their products.

In this guide, we’ll unpack cotton traceability to provide everything you need to know – how it works, why it matters, and how you can implement it successfully in your business.

Contents:

1. Understanding cotton traceability
2. Why cotton traceability matters
3. How cotton traceability works
4. Overcoming common challenges
5. Managing your cotton supply chain

1. Understanding cotton traceability

In this section, we’ll define the concept of traceability and explore its relevance within the cotton, fashion and textile industries.

Definition & scope of traceable cotton

Cotton traceability is the process of tracing raw cotton or cotton goods throughout production, from material sourcing to retail sale. This production involves a number of stages as the cotton advances from point of origin through the supply chain.

Cotton is grown in over 75 countries around the world but possesses different characteristics depending on growing location. With the right technology solutions in place, this makes it a highly traceable commodity.

Raw cotton can be analyzed using scientific methods to identify where in the world the cotton was grown. Specific sourcing locations can be determined based on unique environmental elements within the cotton itself.

That means cotton from China can be clearly distinguished from cotton grown in the United States, for example.

Effective traceability systems allow fashion brands to trace their cotton products through every step of this supply chain (often referred to as tiers). Any issues with their product can be pinpointed to specific stages and specific vendors, making it easier to resolve them.

How fabric traceability works

Cotton is a hugely versatile material used in a wide range of products from clothing and sheets to textiles and towels. To make these products, cotton fibers are spun, woven and otherwise processed to make different cotton fabrics.

Each of these fabrics can be traced back to specific stages of manufacture through cotton fabric traceability.

Once the fiber leaves the farm it passes through many stages of processing and refining. This includes:

• Harvesting
• Ginning
• Cleaning
• Spinning
• Weaving
• Knitting
• Dyeing
• Distributing
• Selling

Finished cotton goods can be traced through the supply chain regardless of any cleaning, blending, dyeing or other processing that has taken place.

2. Why cotton traceability matters

This section explores why cotton traceability is critical for modern supply chains. We’ll examine the impact of cotton regulation and compliance, the growing importance of sustainability and ESG, and the role of traceability in maintaining product integrity.

Compliance & risk management

Cotton and fashion businesses are facing a wave of new and evolving regulations. These have increased demands on leaders, and many are struggling to keep up. 43% of chief ethics and compliance officers (CCOs) say new regulatory requirements are their biggest compliance challenge.

Forced labor laws, most prominently the UFLPA, but also the imminent EU forced labour ban and Canada forced labor law, have had a huge impact on the sector. Businesses must now prove that no cotton used in their products is sourced from areas of the world linked to forced or child labor.

Regulators also identify that traceability documentation supplied from vendors is often insufficient to substantiate sourcing.

The penalties for noncompliance include shipment seizures, financial penalties, loss of market access, and reputational damage.

Since the UFLPA was introduced, more than 2,200 shipments of apparel, textiles and footwear goods, worth nearly $92 million, have been detained. Of these CBP detained shipments, 62% were denied entry into the United States.

Businesses operating in the EU also face enhanced environmental legislation. This includes the Corporate Sustainability Due Diligence Directive, where businesses must identify and mitigate any adverse environmental and social effects from their operations. Importers must review the accuracy of traceability information received from vendors.

Most legislation requires businesses to have oversight throughout their supply chain. This includes the processes and practices of upstream suppliers that source the materials a company uses to produce products. If suppliers are in contravention of regulation, brands will also be liable.

Therefore, verification of the sourcing origin claims for cotton is critical to ensure products and raw materials are free from illegal, unethical or unsustainable practices. It allows fashion brands to minimize risk and puts them in a much stronger position to meet compliance requirements.

Sustainability & environmental stewardship

ESG (Environmental, Social and Governance) will be a significant driver of future business success. Investors will increasingly fund businesses that have credible ESG credentials, robust processes around social and environmental practices, and are less susceptible to regulatory capture.

But businesses that don’t substantiate their ESG claims with credible evidence risk accusations of greenwashing – misrepresenting ESG achievements for commercial advantage. An EU commission report found that nearly half of sustainability claims made online were judged to be false or deceptive.

Source: PwC Global Investor Survey 2022

Consumers, regulators and other markets are all growing wiser about greenwashing. Brands now need to back up their claims with evidence.

Traceability programs support sustainable sourcing and impact reduction by providing businesses with oversight of where their raw materials are sourced from. It delivers assurance that their products are free of association with forced labor, deforestation, or other such practices.

Cotton supply chain traceability empowers brands to operate more sustainably. By identifying areas of poor practice, they can implement corrective measures to reduce impact and protect natural ecosystems.

Sustainability and traceability strengthen brand reputation through enabling businesses to credibly assure consumers of their green credentials.

Quality assurance & authenticity

There is a global crisis of trust in the food we eat, the clothes we wear and the products we buy, underlined by high-profile consumer scandals. Fraud and unethical practices erode the integrity of brands and harm vulnerable people, animals and ecosystems across the globe.

It also costs industries billions of dollars every year and exposes companies to serious reputational risk relating to fraud, illegal working practices and environmental damage.

Trust is imperative for every company. Studies show that consumers buy significantly less from a business that has lost their trust.

Traceability is integral to reduce cotton supply chain risks, build trust, and protect reputation. It ensures the authenticity and safety of products by verifying material origin and integrity.

This assures brands that their processes are robust and assures customers that the product they’ve purchased is what it claims to be.

In some sectors where sourcing origin determines product quality – industries such as cotton, coffee and wine – this quality assurance is essential to maintain premium pricing, competitive advantage and customer trust.

3. How cotton traceability works

This section outlines some common traceability technology and tools used in the verification of cotton and fashion products, from forensic science to DNA markers and digital platforms.

Forensic fiber fingerprinting (isotope analysis)

Forensic isotopic analysis is a scientific form of verification that is like the CSI of supply chain traceability. Forensic isotopic testing verifies product origin by evaluating chemical properties that relate to origin within a raw material against a reference database. The process is similar to how forensic detectives use human fingerprints to identify criminals.

This is called “Origin Fingerprinting”.

Our environment is made up of elements which are specific to the local climate and geological conditions. Animals, plants and other products take up elements from soil, water and feed, according to where in the world they are grown, reared, or made.

Forensic chemistry tells us the precise range and quantity of elements present in a product. These link back to the unique environmental conditions of the sourcing area, including soil composition, climate, altitude, and precipitation.

The “Origin Fingerprint” of a specific product and origin population can be defined by a collection of chemical characteristics that form a distinguishable pattern.

Like human fingerprinting, a reference database of Origin Fingerprints can be developed which can then be used to audit products throughout the supply chain to clearly differentiate the legitimate from the fraudulent.

In the case of traceable cotton, forensic analysis can verify whether cotton fibers are authentic to their claimed origin, verify if they come from regions with high risk of forced labor, and corroborate or challenge other traceability sources.

The Oritain cotton traceability solution combines our forensic methodology with comprehensive testing programs and digital platforms. It is robust enough to be admissible in court, and unlike other traceability methods it is highly resistant to being tampered with, replicated, or destroyed.

DNA tagging & molecular markers

DNA tagging is a type of technology used to mark and verify fibers at source. Molecular identifiers are applied to cotton fibers at the earliest stages of production. These microscopic markers function like DNA barcodes to enable identification and verification.

Using this tool effectively for cotton traceability relies on the accurate application and detection of the marker or tracer. It is also often applied at the ginning or spinning stages, so does not represent the full end-to-end cotton value chain from dirt to shirt.

Because this method relies on human interaction, it can be susceptible to error. The integrity of testing depends on the active participation of all parties in the supply chain.

Digital traceability platforms (blockchain & data systems)

Blockchain and AI are digital traceability tools that use real-time tracking and monitoring to automate data collection and sharing in global supply chains.

Blockchain records and verifies transactions using cryptography within a decentralized network. It provides a digital audit trail for compliance but doesn’t physically inspect or verify the authenticity of products in the system.

That means the reliability of blockchain in product verification is completely dependent on the accuracy and transparency of the data entered into the system.

AI and machine learning analyze supplier data to identify any financial ties to banned entities. It cross-references data from multiple sources to confirm product origin claims.

However, the system still relies on supplier information and cannot guarantee product integrity or protect brand reputation. It can flag potential fraudulent activities through data analysis but cannot guarantee prevention.

4. Overcoming common challenges

In this section we’ll uncover why traceability can be complex to implement for businesses. We’ll examine some common challenges, including fragmented supply chains, insufficient or inaccurate data, and financial and operational barriers.

Supply chain fragmentation

Supply chains are integral to business success, but their complex nature makes implementing robust traceability programs a challenge.

Part of the problem is that supply chains have become longer and more disjointed. Businesses are operating multi-tier supplier networks which outsource critical manufacturing functions. These functions are often dispersed right across the globe.

Unlike the global food supply chain, cotton has no harmonized system of compliance nor long history of high-quality traceability.

Many brands only engage with their Tier 1 suppliers. Most suppliers have no relationship with others in the network. This leaves large parts of the supply chain – especially raw material sourcing – unchecked. And these blind spots can mask practices which could endanger the business.