1. Chain of Custody & Traceability
Better Cotton
Chain of Custody & Traceability
Kerem Saral
BCI Supply Chain Manager
2014

2. Overall Goal: SPECIFIC AIMS: Improve… Increase… Reduce… Ensure…
Transforming cotton production worldwide by developing Better Cotton as a sustainable mainstream commodity.
SPECIFIC AIMS:
Improve…
livelihoods
and economic
development in cotton
producing areas
Increase…
commitment to and flow of Better Cotton throughout the supply chain
Reduce…
The environmental impact of cotton production
Ensure…
the credibility and sustainability of the Better Cotton Initiative

3. BCI GLOBAL TARGETS Livelihoods Environment Supply Chain
Livelihoods
Environment
Supply Chain
BCI Sustainability
Global
Indicators   
Number of Better Cotton farmers
Better Cotton hectares under cultivation
Better Cotton lint volume in MT
Earned income as % of global costs
2012 actual
165,000
685,000
670,000
50%
2015 target
1 million
2 million
2.6 million
75%
2020 target
5 million
9 million
8.2 million
100%

4. WHERE DOES BETTER COTTON GROW?
Countries where Better Cotton is grown via a partnership agreement between BCI and a national actor
Better Cotton Countries with BCI owned legal entities and operations
In the pipeline
Mali, Senegal, Burkina Faso, Cote d’Ivoire, Ghana
Mozambique, Malawi, Zambia, Zimbabwe
India, Pakistan, China
Australia
USA
Turkey
Tajikistan
Brazil

5. New vs. Old
New Better Cotton CoC requirements for traders, spinners, and intermediaries and retailers
Introduction of Better Cotton Claim Units
No more UBICS
Output declaration forms from spinners
Making Better Cotton volume claims
Better Cotton Traceability System
By the end of this presentation, I would like to make sure that everyone in this room understands these major take-away points – READ THEM
We have 2 breaks built into the presentation for your questions; one in about 25 minutes and another at the end of this training session; so please kindly make notes of your questions until that time.
Without further delay, let’s get started!

6. New Chain of Custody Guidelines - But Why?
Inform all supply chain actors about their role in tracing Better Cotton throughout the supply chain
Enable retailers to make claims with confidence
Eliminate past challenges that led to low uptake rates
Availability issues, inventory management problem, timing problems, overstock/out of stock suppliers, premiums
Lay the groundwork for introducing physical traceability as an option in 2016
It is important to understand why we even have a set of chain of custody guidelines for Better Cotton.
It provides a great insight for BCI on
who handles BC
which countries use more of the product
which supply chain actors use BC and how much of it they use, and finally
it allows us to see which retailers ends up using how much BC in their supply chains
Knowing all of these facts about BC is essential for us to support you and to achieve our strategic goal of increasing uptake of Better Cotton by…(READ THE SLIDE)
Now let me show you all the specific changes we have made to the previous CoC for each actor

7. Better Cotton Chain of Custody & Traceability System
Before and After
BEFORE July 1st 2013
AFTER July 1st 2013
Better Cotton Chain of Custody
Ginners
Physical Segregation
Traders
Mba w/ Country Scope
Spinners
Mba w/ Site Scope
Intermediaries
Mba w/Site Scope
Retailers
Claim UBICs
Claim BCCUs
Better Cotton Traceability System
Supply chain actors in BC traceability system
Ginners, Retailers
Ginners,Traders, Spinners, Retailers
Traceability System
Bale Tracking System (BTS)
Bale Tacking System (BTS) +
Better Cotton Tracer (BCT)

8. What is a Better Cotton Claim Unit?
BCCU = Better Cotton Claim Unit
The units of conventional cotton that can be substituted for equivalent units of Better Cotton - Due to Mass Balance
1 BCCU represents 1 kilo of physical Better Cotton
READ the definition out loud
In other words, BCCU is what helps all of us trace the “volume” of Better Cotton throughout our supply chain rather than the physical lint content.

9. Better Cotton Chain of Custody
SEGREGATION
MASS-BALANCE ADMINISTRATIVE
Chain of Custody Guidelines
Ginner Monitoring Guidelines
Membership Code of Practice
Retailer clients monitoring requirements
Membership Code of Practice
BCI membership not required
Registered BCI membership required
BCI membership
not required but encouraged
BCI membership required
Trader
I’d like to now show visually which SC actor applies which type of CoC throughout BCI’s SC:
Physical Segregation – For ginners – physical segregation of Better Cotton at all stages – receipt of BC, processing of BC, baling of BC (creation of 100% BC bales), and shipping of BC.
Mass-Balance – Recording volumes-in and volume-out of cotton rather than the physical cotton itself.
Mba w/ country scope – Traders
Mba w/ site scope – Spinners and all intermediary SC actors
So what is the difference between these different types of terminologies? We will now examine each actor one by one in the context of the CoC Guidelines starting with the traders who use Mba w/ country scope
The units of conventional cotton that can be substituted for equivalent units of Better Cotton.
Farmer
100% Seed BC
100% BC Bale
Products with associated BCCU
(Better Cotton Claim Units)
BTS
Better Cotton Tracer
Better Cotton Tracer

10. Better Cotton CoC Guidelines – Gin Level
Ginners are still required to follow physical segregation CoC, which means that they are to receive, process, and store all seed and lint Better Cotton separately from the conventional cotton they handle. The main purpose of the physical segregation requirement is the creation of 100% Better Cotton Bales. Having said this, please remember that we don’t require the gins to clean their machines before they start processing BC – important to bear in mind when we say 100% BC bales. So, there is no change here from what ginners have been doing in the past.
They will also continue to number bales as the normally do. They will no longer number each bale with a UBIC because only volumes of Better Cotton, and not individual bales, will be tracked through the rest of the supply chain. SO NO MORE UBICS.
As you can imagine, this is indeed a task that requires extra time and effort spent on the ginner’s part. But at the same time, this is absolutely a necessary task for the rest of the BCI supply chain simply because it lays the groundwork for introducing physical traceability as an option in 2016, and increases the likelihood of Better Cotton being used in finished products even with a Mass-Balance Chain of Custody for other actors.
Now let’s move onto the next SC actor, which is the trader…
Better Cotton is kept physically separate from conventional cotton at the gin level in all countries
In order to create 100% Better Cotton Bales = Total available lint Better Cotton at a global level

11. Trader’s warehouse in Brazil Conventional Cotton Bales
Better Cotton CoC guidelines - Traders
Mass-balance with Country Scope
Trader’s warehouse in Brazil
Better Cotton
Conventional Cotton
Volume In = Volume out
100 Kilos of Brazilian
Better Cotton Bales
100 Kilos of Brazilian
Conventional Cotton Bales BC CC
Traders are to follow a Mba CoC with country scope. What this means is that they can substitute Better Cotton bales that they buy with any conventional cotton bales for as long as the conventional cotton originates from the same country.
Now, let’s build a warehouse for our trader in Brazil and see how the MB w/ country scope works.
(Trader’s ware house shows first) – this is our warehouse
Let’s say that the trader bought 100 kilos of BC – (writing and green bales show)
Let’s say that the same trader also has 100 kilos of conventional cotton in the same warehouse – (writing and bales in blue show)
Having bought 100 kilos of Better Cotton bales provides the trader with 100 BCCUs, which they can allocate to any Brazilian conventional cotton bales they have to fulfil a BC order – SHOW the arrows now.
This is also allowed should the trader have two separate warehouses in the same country of origin i.e. substituting Better Cotton bales in Brazilian warehouse 1 with conventional cotton bales from Brazilian warehouse 2.
The important thing to remember with country scope is that the BC and the CC have to originate from the same country AND that the volume of Better Cotton purchased must not exceed the volume of cotton out with allocated BCCUs. (SHOW the scale here)
Having bought 100 kilos of BC Bales gives the trader 100 Better Cotton Claim Units. They can then ship 100 kilos of conventional cotton bales with the same country of origin to fulfil a BC order using these 100 BCCUs – by attaching earned BCCUs to conventional cotton bales

12. Spinning factory in Bangladesh Conventional Cotton Bales
Better Cotton CoC guidelines - Spinners
Mass-balance with Site Scope
Spinning factory in Bangladesh
Volume In = Volume out
100 Kilos of Indian
Conventional Cotton Bales
100 Kilos of Chinese
Better Cotton Bales BC CC
Better Cotton
Now let’s talk about MBa with site scope, which spinners are to follow. This is quite similar to MBa with country scope in the sense that BC bales are allowed to be substituted with conventional bales, but with one substantial difference: the spinner can swap any conventional bale with BC bales as long as the bales are in the same site – even if the cotton has different origins.
In this example, let’s assume that the rectangular shape to represent a spinning factory in Bangladesh. Let’s also assume that the spinner has bought 100 kilos of BC from a participating Better Cotton ginner in India – green “bales” are Better Cotton bales and blue bales are conventional cotton. Having bought 100 kilos of Better Cotton bales provides the spinner with 100 BCCUs, which they can allocate to any conventional cotton bales they have to fulfil a BC order.
The benefits of the system for spinners –
You do not need to segregate and store Better Cotton, you can sell it when you need to as long as you have recorded your purchases on the Cotton Tracer
You can buy and sell Better Cotton year round because you will be trading BCCUs not physical lint
You do not need to keep and manage thousands of UBICs
You do not need to use 10 different traceability systems, only BCI’s
You cannot sell only your BCCUs – there must be a physical transaction of good for you to be able to allocate BCCUs
MBa with site scope is also what all other intermediary SC actors follow
TAKE QUESTIONS BEFORE YOU MOVE ON
Conventional Cotton
Better Cotton Bales can be swapped with conventional cotton bales of any origin as long as they are in the same site, using BCCUs earned by buying bales with allocated BCCUs from BCI traders or BCI-registered ginners.

13. with allocated BCCUs from
Better Cotton CoC guidelines – Intermediaries
Mass-balance with Site Scope
Fabric manufacturer in India
Volume In = Volume out
100 Kilos of yarn
without any
allocated BCCUs
from India
100 Kilos of yarn
with allocated BCCUs from
China BC CC
Yarn with BCCUs
Yarn without BCCUs
Let me now touch upon the requirements for all intermediaries such as fabric makers, sock makers, garment makers, etc. All intermediaries are to follow Mba with a site scope just as the spinners. They are allowed to swap materials that were made with Better Cotton with those that were made with conventional cotton for as long as these materials are in the same site.
Let’s take a look at an example for a fabric manufacturer: fabric manufacturers use yarns as raw materials. Given that they are to follow Mba with a site scope, they are able to swap yarns that have allocated BCCUs with those that don’t and still can transfer these BCCUs to the fabric they produce. Here a fabric manufacturer who has bought 100 kilos of yarn that have 100 BCCUs allocated to it can go ahead and use 100 kilos of conventional yarn and still allocate 100 BCCUs to the fabric they produce. Of course, the original yarn that they received with allocated BCCUs no longer carry those BCCUs.
Please remember this is how we make sure that volume-in equals volume-out.
TAKE QUESTIONS BEFORE YOU MOVE ON
Yarn with allocated BCCUs can be swapped with yarn without any BCCUs of any origin as long as they are in the same site and volume-out doesn’t exceed volume-in.

14. Output Declaration Forms from Spinners
Tracing the “volume” of Better Cotton
Until now – BCI has enabled retailers to claim individual bales of physical Better Cotton.
From now – BCI enables retailers to claim usage of lint Better Cotton (a certain amount of it) in their supply chains.
But How?
Output Declaration Forms from Spinners

15. Output Declaration Form from Spinner

16. Mass-Balance & BCCUs help BCI to:
Trace the volume of physical Better Cotton throughout retailer and brands’ supply chains
This is done by transfer of BCCUs from one supply chain actor to the next using output declaration forms (ODF)
Traders
Earn BCCUs purchasing physical BC
Transfer these BCCUs along with bales they sell
Spinners
Earn BCCUs purchasing bales w/ BCCUs
Transfer these BCCUs along with yarns they sell
Fabric Mills
Receive ODF from spinners
Pass ODFs to retailers and brands
(Coordination is required)
Retailers/Brands
Receive ODF that was generated by spinners on Better Cotton Tracer
Enter claims accordingly
Traders are to follow a Mba CoC with country scope. What this means is that they can substitute Better Cotton bales that they buy with any conventional cotton bales for as long as the conventional cotton originates from the same country.
Now, let’s build a warehouse for our trader in Brazil and see how the MB w/ country scope works.
(Trader’s ware house shows first) – this is our warehouse
Let’s say that the trader bought 100 kilos of BC – (writing and green bales show)
Let’s say that the same trader also has 100 kilos of conventional cotton in the same warehouse – (writing and bales in blue show)
Having bought 100 kilos of Better Cotton bales provides the trader with 100 BCCUs, which they can allocate to any Brazilian conventional cotton bales they have to fulfil a BC order – SHOW the arrows now.
This is also allowed should the trader have two separate warehouses in the same country of origin i.e. substituting Better Cotton bales in Brazilian warehouse 1 with conventional cotton bales from Brazilian warehouse 2.
The important thing to remember with country scope is that the BC and the CC have to originate from the same country AND that the volume of Better Cotton purchased must not exceed the volume of cotton out with allocated BCCUs. (SHOW the scale here)
Traders
Spinners
Fabric Mills

17. Better Cotton Volume Claims by Retailers
Total claims reported to BCI
Product with allocated BCCUs
(indicated on spinners’ ODFs)
BCCUs
Cotton Tracer
Yarn with BCCUs
Yarn without BCCUs
Let me now touch upon the requirements for all intermediaries such as fabric makers, sock makers, garment makers, etc. All intermediaries are to follow Mba with a site scope just as the spinners. They are allowed to swap materials that were made with Better Cotton with those that were made with conventional cotton for as long as these materials are in the same site.
Let’s take a look at an example for a fabric manufacturer: fabric manufacturers use yarns as raw materials. Given that they are to follow Mba with a site scope, they are able to swap yarns that have allocated BCCUs with those that don’t and still can transfer these BCCUs to the fabric they produce. Here a fabric manufacturer who has bought 100 kilos of yarn that have 100 BCCUs allocated to it can go ahead and use 100 kilos of conventional yarn and still allocate 100 BCCUs to the fabric they produce. Of course, the original yarn that they received with allocated BCCUs no longer carry those BCCUs.
Please remember this is how we make sure that volume-in equals volume-out.
TAKE QUESTIONS BEFORE YOU MOVE ON

18. How would it work starting with the retailer?
Traders
Receive PO from spinner
Buy lint bales from ginner accordingly
Ship lint bales
Enter transaction into the Cotton Tracer
Spinners
Receive PO from fabric mill
Calculate needed BCCUs for the ordered yarn, using the fixed conversion rates built into the system
Order lint accordingly
Enter transaction into the system and generate ODF
Fabric Mills
Receive the PO from RBs given a set % of BC to be included in the fabric
Calculate the net weight of yarn needed
Place order with spinner and indicate the % of BC to be included in the yarn (same % received from retailer)
Retailers/Brands
Set BC usage target
Decide how to spread this % throughout products
Set KPIs for various departments
Ask fabric mill to provide ODF from spinners

19. Spinner’s ODF w/BCCUs Retailer’s Claim
H O W ?
Coordination effort
Engage with suppliers down to the spinner or fabric mill level – suppliers’ suppliers
Inform about Better Cotton requirements – no UBICS, mass-balance, no certificate, ODF
Ask for ODF to be transferred to you – how? The actual document or information on it?
Due diligence
Fabric mill level redistribution of BCCUs
BCCUs in = BCCUs out for your specific orders
Ask the fabric mill to keep records of BCCUs received and passed along to retailers?
Ask your spinners to pass the ODF directly to you?
Special cases
Cancelled orders – when to enter claims into the Better Cotton Tracer?

20. Things to take away New Better Cotton CoC requirements for all
Ginners % Segregation CoC
Traders Mass-Balance Admin. with country scope
Spinners Mass-Balance Admin. with site scope
RBs Enter claims against spinner BCCUs
on the Cotton Tracer
Introduction of Better Cotton Claim Units
No more UBICS
Output declaration forms from spinners
Making Better Cotton volume claims
Better Cotton Traceability System
By the end of this presentation, I would like to make sure that everyone in this room understands these major take-away points – READ THEM
We have 2 breaks built into the presentation for your questions; one in about 25 minutes and another at the end of this training session; so please kindly make notes of your questions until that time.
Without further delay, let’s get started!

21. Better Cotton Tracer General web site functions
How the transfer of BCCUs work between members
Entering purchase and sales transactions
Generating output declaration forms
How retailers and brands make their claims using ODF from spinners.
Traders are to follow a Mba CoC with country scope. What this means is that they can substitute Better Cotton bales that they buy with any conventional cotton bales for as long as the conventional cotton originates from the same country.
Now, let’s build a warehouse for our trader in Brazil and see how the MB w/ country scope works.
(Trader’s ware house shows first) – this is our warehouse
Let’s say that the trader bought 100 kilos of BC – (writing and green bales show)
Let’s say that the same trader also has 100 kilos of conventional cotton in the same warehouse – (writing and bales in blue show)
Having bought 100 kilos of Better Cotton bales provides the trader with 100 BCCUs, which they can allocate to any Brazilian conventional cotton bales they have to fulfil a BC order – SHOW the arrows now.
This is also allowed should the trader have two separate warehouses in the same country of origin i.e. substituting Better Cotton bales in Brazilian warehouse 1 with conventional cotton bales from Brazilian warehouse 2.
The important thing to remember with country scope is that the BC and the CC have to originate from the same country AND that the volume of Better Cotton purchased must not exceed the volume of cotton out with allocated BCCUs. (SHOW the scale here)

22. Thank you! Kerem Saral – BCI Supply Chain Manager
Please contact me or my country teams to:
Ask any questions regarding our traceability system
Your account on Better Cotton Tracer
To get a copy of this presentation
Report troubles you identified in your BC supply chain
Kerem Saral – BCI Supply Chain Manager
Direct Line:
Skype ID: keremsaral
Selvin Lloyd - India Supply Chain Coordinator
Muhammad Shuiab – Pakistan Supply Chain Coordinator
Leo Xiao - China Supply Chain Coordinator