1. Better Cotton
Kerem Saral
BCI Supply Chain Manager
2014

2. BCI Chain of Custody & Traceability System
Mass-balance system for all members
Concept & application & implications
Better Cotton Tracer
Traders
Spinners
Retailers
Q&A
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!

3. 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.

4. Better Cotton CoC Guidelines
Separate chapters for each actor
This is the table of contents for the Better Cotton CoC Guidelines. As you can see it is composed of several different chapters. Apart from the first four chapters which describe the contents of the guidelines and give descriptions of terms that are used in the guidelines, the rest of the document includes separate chapters for each actor – POINT OUT ginner, trader, etc…
Each of these can be pulled out and used independently depending on your role in the supply chain.

5. Better Cotton CoC Guidelines
Content of each chapter
Physical Better Cotton – Physical and Mba Rules
Better Cotton Traceability System
Documented procedures, training and responsibilities
Record Keeping
Outsourcing
Penalties
Material input records
Material output records
When we zoom into the chapters for each SC actor, you’ll see that each chapter has content under identical titles for ease of reference. These main titles in each section are as follows – READ THEM OUT
These are the main titles that we will go through during this presentation for each sc actor

6. 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
No Access
Better Cotton Tracer

7. 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

8. Trader’s warehouse in Brazil
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)
Purchase declaration from ginner BCCUs in trader’s account
Sales declaration to a spinner BCCUs in trader’s account & +100 BCCUs in spinner’s account

9. Trader’s Purchase Declaration
When we zoom into the chapters for each SC actor, you’ll see that each chapter has content under identical titles for ease of reference. These main titles in each section are as follows – READ THEM OUT
These are the main titles that we will go through during this presentation for each sc actor

10. Trader’s Sales Declaration
When we zoom into the chapters for each SC actor, you’ll see that each chapter has content under identical titles for ease of reference. These main titles in each section are as follows – READ THEM OUT
These are the main titles that we will go through during this presentation for each sc actor

11. Better Cotton CoC guidelines – Spinners
Mass-balance with Site Scope
Spinning factory in Bangladesh
Volume In = Volume out
100 Kilos of
West African Bales w/ BCCUS
Better Cotton Bales
100 Kilos of
Indian Conventional
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
Purchase declaration from ginner or trader BCCUs in spinner’s account
Sales declaration to a fabric mill BCCUs in spinner’s account

12. Spinner’s Purchase Declaration
When we zoom into the chapters for each SC actor, you’ll see that each chapter has content under identical titles for ease of reference. These main titles in each section are as follows – READ THEM OUT
These are the main titles that we will go through during this presentation for each sc actor

13. Spinner’s Sales Declaration (Combed Yarn)
When we zoom into the chapters for each SC actor, you’ll see that each chapter has content under identical titles for ease of reference. These main titles in each section are as follows – READ THEM OUT
These are the main titles that we will go through during this presentation for each sc actor

14. Spinner’s Sales Declaration (Carded Yarn)
When we zoom into the chapters for each SC actor, you’ll see that each chapter has content under identical titles for ease of reference. These main titles in each section are as follows – READ THEM OUT
These are the main titles that we will go through during this presentation for each sc actor

15. BCCU Transfers Online BCCU Transfer Physical Document Transfer LEARN
LEAD
DRIVE THE CHANGE
AMSTERDAM 2014
BCCU Transfers
Ginners
Traders
Online BCCU Transfer
Spinners
Fabric Mills
ODF
BCCUs
Physical Document
Transfer
Since the Better Cotton Tracer is extended only up the spinner level electronically, BCI had to come up with a manual/physical method that will facilitate the transfer of BCCUs from spinners’ accounts to the retailer’s and brand’s accounts. A single-page form named an “Output Declaration Form” (ODF), which indicates the name of the spinner in a retailer's supply chain as well as the number of BCCUs allocated to that specific order can be generated automatically by spinners to achieve this transfer. An example of this form can be seen in the next slide.
Though, it sounds like an easy process, the receipt of ODF by retailers has not been easy. Two leading reasons for this are:
Spinners’ not generating this document using our traceability system in a timely manner for their shipments
The discrepancy between the quantity of yarns bought by fabric mills and the quantity of yarns they use for each fabric order. Since fabric mills don’t have access to the BCI’s traceability system, they are having to keep track of received and allocated BCCUs manually
BCI is working hard to solve this problem. However, until an alternative method can be established, it is still the retailers’ responsibility to make sure that they receive this form from their suppliers as this is the only proof of BC use in their supply chains.
Garment Man.
Retailer

16. 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

17. Retailer and Brand BCCU Claims
Spinner’s name and # of BCCUs are taken from the spinner’s ODF
When we zoom into the chapters for each SC actor, you’ll see that each chapter has content under identical titles for ease of reference. These main titles in each section are as follows – READ THEM OUT
These are the main titles that we will go through during this presentation for each sc actor

18. Better Cotton CoC guidelines – Fabric Mills
Mass-balance with Site Scope
Fabric manufacturer in Turkey
Volume In = Volume out
100 Kilos of yarn
with BCCUs
from India BC CC
100 Kilos of yarn
without BCCUs
from Turkey
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
Can use ANY yarn made with ANY origin of cotton

19. Mass-Balance System LEARN LEAD DRIVE THE CHANGE
AMSTERDAM 2014
Mass-Balance System
One of the most important roles of the Better Cotton Tracer (BCI’s traceability system) is to allow a retailer or brand to say “My total cotton footprint for the year was 10,000 MTs and I’ve sourced 50% of this volume “as Better Cotton”; here are the ODFs (and UBICs) as proof”. In order for us to be able to allow our retailer and brand members to make this type of a claim, we must link the physical cotton content in each intermediary and finished product to the volume of lint cotton that had to be consumed by the spinners in their supply chains. In order to achieve this, BCI uses 2 fixed lint-to-yarn conversion rates: 10% for carded yarn and 20% for combed yarn. This means that BCI assumes:
This means that a spinner making 100 KGs of 100% Better Cotton combed yarn, they must buy 120 KGs of lint Better Cotton (or bales with 120 BCCUs). And for a spinner making 100 KGs of 100% Better Cotton carded yarn, they must buy 110 KGs of lint Better Cotton (or bales with 110 BCCUs). These rates are embedded in our traceability system. As soon as a spinner enters a sales declaration of yarn into our system, the system automatically adds 10% or 20% to the net weight of yarn entered by the spinner in order to determine the allocation of BCCUs to that shipment. During this process, the % of BCI cotton requested by the fabric mill also plays an important role. For example:
1) The fabric mill requests 100 KGs of 100% combed yarn. The Better Cotton Tracer’s BCCU allocation will be: (20% of 100) = 120 BCCUs
2) The fabric mill requests 100 KGs of 50% combed yarn. The BC Tracer’s BCCU calculation will be: 50 (100* 50%) + 10 (20% of 50) = 60 BCCUs
For carded yarn, the same above also applies.
After this automatic BCCU allocation, BCI can ignore the salvage rate during fabric production, or cut & sew process. And this is why it is important that the retailers and brands receive the ODF from the spinners – in order to see and make claim on their lint cotton consumption; not the physical volume of cotton in the finished products. If retailers and brands were to just calculate the physical cotton content in the finished products and made claims on this volume, their total BC claims would have been 30-40% less than the claims made on lint cotton used in their supply chains.
Moving forward, if BCI and its members decides to add fabric mills into its traceability system, different conversion rates will have to be applied in fabric mills accounts in order to link the physical weight of the cotton in the fabric being shipped to the lint cotton that was used in the production of the yarn that was used to make that fabric.

20. Placing Orders with BCCUs
Traders
Receive PO from spinner
Buy physical Better Cotton bales from ginner accordingly
Ship lint bales to spinner
Spinners
Receive PO from fabric mill
Calculate needed BCCUs for the ordered yarn
Order lint accordingly
Fabric Mills
Receive the PO with a fixed % of BCCU allocation to the fabric
Calculate the net weight of yarn needed
Place order with spinner and indicate the % of BCCU allocation to the yarn
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

21. Fabric Mill Challenge
Fabric Mill Purchases 100 MT of yarn – ODF w/ 120,000 BCCUs to fulfil multiple retailers’ orders
BCCUs must be reallocated to different fabric shipments
Allocates 20,000 BCCUs to Retailer A
Allocates 20,000 BCCUs to Retailer B
Keeps the rest of the BCCUs for future orders

22. 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?

23. Advantages of Mass-Balance 4 Spinners
Zero wait time on bales to arrive
Same lead time as conventional
Flexibility in bale use
White fabrics with BCCU
Easy traceability
No UBICS; easy system to use
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!

24. Thank you! Kerem Saral – BCI Supply Chain Manager
Please contact us at any time 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
Manish Gupta - India Supply Chain Coordinator
Muhammad Shuiab – Pakistan Supply Chain Coordinator
Leo Xiao - China Supply Chain Coordinator