Business innovation | Qa

Market movers make sustainable cotton mainstream

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Sustainable cotton at conventional prices

Ikea’s Pramod Singh explains why more-sustainable cotton needn’t be an expensive niche

What has been Ikea’s relationship with sustainable cotton and how important is it for your business?

Sustainability is very important for Ikea. It is one of our four business pillars. It also reflects our values and the fact that we want to have a positive impact in society.

Beyond that, there is a huge business case for us to work on sustainable cotton. Ikea is a major international consumer of cotton – our customers like cotton products so we want to be able to meet that demand in a sustainable way.

Developing sustainability in our cotton supply chains also helps us guarantee our long-term supply.

How is this relationship changing?

We are working to help drive the industry towards sustainable cotton and bringing sustainability – and transparency – down the supply chain, including farmers and the ginners. We map our supply chains and take into account environmental and social costs.

Increasingly, consumers are also asking where the cotton in the products in our stores comes from and how it is produced. So it’s important that we can reassure them about the lengths we go to.

What proportion of your cotton products are produced with sustainable cotton?

As we published in our recent sustainability report for financial year 2014, 76% of our cotton is from sustainable sources. We have a goal to reach 100% during 2015.

We primarily work using the Better Cotton Initiative (BCI) standards, and BCI partnership programmes such as Cotton Made in Africa and ABR, which is BCI’s Brazilian partner standard.

As we are trying to transform the market, the key thing for us is to try and increase the number of farmers growing sustainable cotton. The process needs to be inclusive and it’s important that standards have an inbuilt element of continuous improvement.

Even for farmers with small landholdings there needs to be a business case for them to engage with such standards. More than 75% of the world’s cotton comes from farmers who cultivate between one and five hectares – these are smallholders, engaging in subsistence agriculture who can’t afford to make mistakes, and who are also in a good position to take advantage of a more sustainable approach. 

What are the principal challenges in developing a sustainable cotton supply chain?

For Ikea, changing the business behaviour of many of our supply chain partners has been challenging at times. A major reason for this is that despite rapid increases, the market volume for sustainable cotton has always been small – and is likely to remain so for some time.

And if sustainable cotton is only grown in some parts of the world, then this impacts the continuity of supply – having cotton available at all times of the year in all geographies becomes tricky.

We also need to focus on traceability. We must have certainty about the cotton we’re using. But there is an inevitable trade-off between achieving this and the costs involved. Getting the balance right is a major challenge.

Internally we need to align within our own organisation. Inevitably, people have particular ways of working and when you bring sustainable materials into product lines there needs to be change.  

But the rules of business have to apply. We are trying to challenge the perception that sustainable materials have to be more expensive. If it is sustainable it does not necessarily mean that it has to be higher cost. A few years ago, typically there would be a 15% price difference between conventional cotton and that produced under the BCI standards. Now it is either no price difference or if there is one it is less than 0.5% – the result of up-scaling and creating more volume of sustainable cotton supply.

Drawing on your work with WWF, and other partners, what are the necessary elements for a successful partnership?

One of the key things for developing any partnership is to remember that it is precisely that: a partnership, and not a one-way relationship.

Successful partners need to find common ground for working together. In the case of Ikea and WWF, this part of the process was straightforward. We found we had a lot in common with WWF, particularly around issues such as the opportunity to improve water use standards and address environmental impacts in cotton farming.

The real benefit comes from identifying and utilising the knowledge and strength of both partners, and challenging each other as well.

What do you find is the most successful approach when engaging farmers?  

Communication is so important when working with farmers that have small landholdings. Take the issues of water and chemicals use. These are matters where it is essential that you communicate with the farmers in a language they can understand – both literally in terms of dialect (for example) and figuratively in terms of their own farm.

You need to be able to relate to their business. You need to show how growing cotton more sustainably will improve their livelihoods.

Bringing out the right elements for them is so important. You need to create that business case for the farmers, and demonstrate this to them. Don’t forget: if their crop fails to make the right return, then their farm fails.  

Do they see the local benefits?

We thought that it would be hard to persuade the farmers to consider switching to more sustainable practices, but in fact they make brave decisions based on the hope of better margin, with lower costs.

Our local partners are the key here, bringing the farmers with them. Farmers can see the immediate benefits from a more sustainable approach in terms of better margin and lower costs. But they also see that they using less water, for example, has other wider benefits – the local water supply may be viable for longer periods of the year, for example.

The proof of the success of this approach is to look at the number of farmers adopting these measures. Despite this being a new direction for them, they are making the changes, taking the plunge and reaping the benefits.

How do you then ensure there is a market for this cotton?

Certainly there is a responsibility from our side, from the retailers, to complete the loop, and ensure there is a market for the sustainable cotton and that the number farmers participating are growing.

What we are trying to do is to change the market overall. Having a premium price for sustainable cotton is, we believe, a short-term solution. The long-term solution is to operate in the main market and develop the overall use of sustainable cotton in the same market as conventional cotton.

A differentiated market price is very sensitive to an economic downturn – cotton buyers, and the eventual consumers of cotton products will be less prepared to pay a differentiated price.

So we want to change the supply at the farmer level and show them that they can reduce costs producing sustainable cotton, and make more profit when selling at the same price as conventional cotton.

Finally, how have you engaged with your customers about why sustainability matters?

Ikea is a low-cost product company and we believe that sustainability should not be a luxury few can afford. That’s why we offer our customers products made from sustainable cotton at the same price as conventional – and in the process help to change the market.

We know this matters to our customers too so we make sure we communicate our work on more sustainable cotton in our stores, on our website and in other places. But we will do even more over the coming years – sharing the stories around how their cotton products are made and how it is changing the lives of the farmers. After all, this is a positive movement our customers are very much part of and we couldn’t do it without them.

Pramod Singh is cotton leader at Ikea. He will be speaking at Innovation Forum’s cotton conference in London on March 16-17.

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