Q1 2018: 1 January – 31 March

BCI QUARTERLYREPORT

This document contains confidential information and is intended for the use of the individual or entity to whom it is addressed.

The Better Cotton Initiative exists to make global cotton production better for the people who produce it, better for the environment it grows in and better for the sector’s future, by developing Better Cotton as a sustainable mainstream commodity.

Table of Contents

Q1 Highlights 3

Upcoming Events and Meetings 4

Data Snapshot 5

Q1 Summary Report 6

Swedish Postcode Lottery Foundation Grant 6

Membership and Supply Chain 7

BCI Council 9

Standards and Assurance: Rolling out the Revised Standard 9

Selected Country Highlights

China

Mozambique

India

Pakistan, including a Story from the Field

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Communications 14

Better Cotton Growth and Innovation Fund Update and Financial Statement

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Secretariat Financial Statement 16

This report is made possible by the generous support of the American people through the United States Agency for International Development (USAID). The contents are the responsibility of the Better Cotton Initiative and do not necessarily reflect the views of USAID or the United States Government.

The Better Cotton Initiative (BCI) is the largest cotton sustainability programme in the world. Last year, with its partners, BCI provided training on more sustainable agricultural practices to close to 1.6 million farmers from 23 countries and mobilised €8.9 million in field-level investment. BCI is truly a global effort, encompassing organisations all the way from farms to fashion and textile brands, driving the cotton sector towards sustainability.

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€250,000 Grant Awarded from the Swedish Postcode Lottery Foundation The Swedish Postcode Lottery awarded €250,000 to BCI to develop a new Better Cotton Training Academy. The Academy will provide a scalable and sustainable solution that will ensure Implementing Partners and BCI Farmers have access to high quality learning opportunities as they adopt more sustainable farming practices and commit to continuously improve.

Read more.

Standards and Assurance: Rolling Out the New Principles and Criteria The revised Principles and Criteria became effective on 1 March 2018. They’re now applicable at field-level and can be found here.

Read more.

UptakeBCI Retailer and Brand Member declarations on the Better Cotton Platform (formerly Better Cotton Tracer) were up 44% in Q1 2018 compared to Q1 2017, 205,212 MT was declared in total.

MembershipIn Q1, BCI Membership grew to 1,273 members. We welcomed new Retailer and Brand Members: Guess? Inc., OLYMP Bezner KG, Punto FA S.L., Rusta AB and Scotch & Soda. Applications from civil society organisations (CSOs) were received and are pending.

Q1 Highlights

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BCI 2018 Global Cotton Conference and Member Meeting: 26-28 June 2018, Brussels, BelgiumThe theme of this years Global Cotton Conference will be ‘Towards 2030: Scaling Impact through Collaboration.’ The meeting, hosted by BCI, will be held in Brussels on 27-28th of June, with members-only events taking place on the 26th. Members only meetings will include the BCI 2018 Annual Member Meeting & General Assembly and ‘An Introduction to BCI.’

The BCI 2018 Global Cotton Conference will bring the entire sector together to collaborate on a more sustainable future for cotton. Industry leaders and experts will gather for an interactive opportunity to explore themes at field level, in the supply chain and in consumer facing business.

During the General Assembly, BCI Council election results will be revealed and attendees will receive updates on membership benefits, Better Cotton supply figures and global strategy. C&A will address why they support Better Cotton, what it means for them, how they are rapidly increasing their uptake and how their adoption model can be replicated for different sized companies.

Donors and Supporters Meeting – Pre-Competitive Partnerships and the Sustainable Development Goals: 26 June 2018, Brussels, BelgiumOn 26 June, BCI will host a Donors and Supporters Roundtable Meeting in Brussels. The meeting will focus on how precompetitive partnerships, supporting more sustainable cotton production, contribute to the Sustainable Development Goals. For more information, please contact Claudia Busch, Head of Development, Claudia.Busch@BetterCotton.org

Upcoming Events and Meetings

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China 97,939 86,575 246,000 415,000 62,115 51,746 401,000 932,000 80,676 80,676 540,000 1,226,000

India 424,664 408,948 638,000 373,000 445,065 303,886 501,000 325,000 686,672 625,585 948,000 622,000

Israel 91 91 10,000 19,000 84 84 8,000 14,000 75 75 7,000 12,000

Kazakhstan -- -- -- -- 45 43 2,000 1,000 169 169 2,000 1,000

Mali 51,124 49,293 138,000 56,000 53,272 0 0 0 53,961 3,879 14,000 6,000

Pakistan 139,957 129,574 498,000 352,000 128,393 90,441 359,000 316,000 288,930 251,292 811,000 701,000

Senegal 5,511 5,511 6,000 1,000 5,036 0 0 0 4,604 2,957 3,000 1,000

Tajikistan 820 820 12,000 11,000 1,051 1,051 13,000 13,000 1,261 1,261 22,000 22,000

Turkey 561 441 13,000 23,000 374 342 16,000 30,000 1,155 791 20,000 41,000

USA 84 84 25,000 34,000 127 121 85,000 109,000 365 365 226,000 238,000

Madagascar 2,712 1,229 2,000 1,000 4,915 2,106 7,000 1,000 2,209 not yet available 5,000 4,000

Mozambique 87,920 72,571 89,000 16,000 100,038 68,599 59,000 9,000 166,744 not yet available 165,000 83,000

South Africa 147 30 2,000 1,000 1,618 553 7,000 4,000 1,169 not yet available 16,000 15,000

BCSS Global Totals 811,530 755,167 1,679,000 1,302,000 802,133 518,972 1,458,000 1,754,000 1,287,990 967,050 2,779,000 2,972,000

Australia (MyBMP) 53 44 27,000 52,000 76 76 62,000 138,000 97 97 93,000 229,000

Brazil (ABR) 212 198 607,000 832,000 250 217 551,000 897,000 250 not yet available 770,000 1,200,000

CmiA (AbTF) 773,128 773,128 1,178,000 319,000 780,000 780,000 1,182,000 320,000 700,000 683,000 969,000 301,000

1,584,923 1,528,537 3,491,000 2,505,000 1,582,459 1,299,265 3,253,000 3,109,000 1,988,337 1,667,397 4,611,000 4,702,000

Questions or feedback on the data? Contact Kendra Park Pasztor, M&E Manager: kendra.pasztor@bettercotton.org.

Notes» Figures for Area and Production, including global sums, are rounded off.

2015-16 Harvest (Final) 2017-18 Harvest (Non-Final Figures)

» CmiA countries include: Zambia, Zimbabwe, Tanzania, Mozambique, Ghana, Ethiopia, Cote d’Ivoire, Cameroon and Burkina Faso. (Without Uganda and Malawi as they are not benchmarked with BCI)

» Purple - pre-season projections

» Yellow - licensed figures. Final, actual figures will be known 16 to 18 weeks after the season ends (per country), on the basis of final Result Indicator Reports. As a result, global totals are also subject to change.» Pink - early season figures

» Grey - final, actual figures

Licensed BCI Farmers

S. H

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Hem

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Global TOTALS

N. H

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Participating Farmers

Licensed BCI Farmers

DATA SNAPSHOT – April 2018

Area under Better Cotton

Cultivation [Ha]

Participating Farmers

Licensed BCI Farmers

Area under Cotton

Cultivation [Ha]

Better Cotton Volume [MT lint]

Better Cotton Volume [MT lint]

The figures provided here are provisional. Find BCI's published figures in the annual and harvest reports at www.bettercotton.org.

Country

2016-17 Harvest (Non-Final Figures)

Area under Cotton

Cultivation [Ha]

Better Cotton Volume [MT lint]

Participating Farmers

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BCI Receives Swedish Postcode Lottery Foundation Grant BCI was awarded €250,000 for a new project to develop a Better Cotton Training Academy. The Academy will provide a scalable and sustainable solution to ensure that Implementing Partners (IP) and BCI Farmers have access to learning opportunities that support their adoption of more sustainable farming practices and their commitment to continuously improve.

The Better Cotton Training Academy includes two key elements to facilitate learning.

• New training modules will be developed, which will help IP staff better understand the core Principles and Criteria that BCI Farmers are required to follow. The modules will also provide guidance for how BCI Farmers can continuously improve.

• A Qualification Management System (QMS) will also be developed to ensure all BCI Staff, Implementing Partners and Third-Party Verifiers carrying out assurance and field-based training activities are fully qualified and competent. This will increase consistency in the way training events, Second Party Credibility Checks and Third-Party Verifications are implemented globally.

Q1 Summary Report

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Membership and Supply Chain Aiming to Reach 1.1 Million Metric Tonnes Uptake Target, a 50% Increase on 2017 Result

During Q1, retailer and brand declarations on the Better Cotton Platform (formerly Better Cotton Tracer) were 205,212 metric tonnes (MT), while spinner uptake was 414,736 MT. Retailer and brand declarations showed a 44% increase against the same period in 2017. The Membership Team will continue to foster supply chain uptake through recruitment, on-boarding, engagement, and supporting companies within the textile industry to adopt Better Cotton sourcing at an increasing rate.

Membership Events

A supplier and manufacturer event was held in Portugal in collaboration with BCI Retailer and Brand Members Burberry, LVMH, John Lewis, Next and Tommy Hilfiger. The event, Introduction to BCI, provided an opportunity for the brands to come together to introduce

their supply chain partners to BCI and explore how they, together, can increase uptake of Better Cotton.

BCI also hosted other engagement events and supplier training workshops with Members including Target (in the US), Hugo Boss (in Germany and Switzerland) and Decathlon (in Pakistan).

Members by Category

Retailers and Brands 89

Producer Organisation 31

Civil Society 32

Associate Member 13

Suppliers and Manufacturers 1110

Total Members 1275

Members by Region

Africa 25 2.0%

Asia 883 69.8%

Europe 295 23.1%

North America 47 3.7%

Oceania 6 0.5%

South America 19 1.5%

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* There could be up to 5% discrepancy between these figures and actual figures due to pending cancellation requests and withdrawn transactions at any given time.

Retailer/Brand Uptake in MT *

Months 2015 2016 2017 2018

January 6,234 17,450 55,996 72,798

February 4,620 32,058 39,891 54,284

March 9,946 27,242 49,537 78,130

April 11,006 42,402 38,148

May 14,219 27,629 51,345

June 41,732 47,864 63,105

July 35,000 29,276 63,340

August 24,469 27,591 48,015

September 25,566 71,753 65,847

October 13,945 28,613 72,000

November 17,559 47,008 72,886

December 23,729 80,573 129,425

Total 228,026 479,459 749,535 205,212

Spinner Uptake in MT *

Months 2015 2016 2017 2018

January 38,242 73,466 102,819 171,593

February 38,573 57,963 145,675 104,031

March 37,821 64,826 105,236 139,112

April 36,909 49,746 85,367

May 23,891 77,604 95,218

June 23,549 56,030 78,262

July 30,687 53,135 66,860

August 23,189 58,022 93,000

September 39,243 48,786 43,069

October 37,231 54,791 104,184

November 63,076 79,622 143,767

December 96,899 133,595 175,623

Total 489,310 807,586 1,239,080 414,736

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BCI Council The BCI General Assembly approved a revision to the Association’s Statutes to further strengthen its governance model as BCI grows. The Council also initiated the process for elections, which will be held in May (electronically). Six seats are available from all four categories. BCI will host the General Assembly, as well as the second BCI Global Cotton Conference, in Brussels on 26-28 June 2018.

Standards & Assurance: Rolling Out New Principles and Criteria After the approval of the revised Better Cotton Standard System Principles and Criteria by the BCI Council in Q4 2017, work now focuses on preparing the roll out of the new Principles and Criteria for the 2018-19 season. BCI finalised the Principles and Criteria document, and it was officially launched at the beginning of March and is now applicable at field-level.

With the new Principles and Criteria, BCI has increased our emphasis on environmental issues with a reinforced approach towards pesticide use with restrictions on the use of Highly Hazardous Pesticides and the use of minimum personal protective equipment when applying pesticides. With respect to water efficiency, the focus was shifted to the more holistic approach of water stewardship approach in order to promote more collective action towards local sustainable use of water. The new approach to biodiversity centres on the identification, mapping and restoration or protection of natural resources.

Regarding social issues, the revised BCSS Principles and Criteria align more clearly with the International Labour Organisation Decent Work requirements on gender. Updated guidance on various topics such as child labour, sanitation facilities and equal payment are also are included to better help IPs fully understand the intent of this Principle and Criteria.

Another key addition is the new ‘land use change’ approach, using a simplified high conservation value assessment (HCV) is now included as a safeguard against any

planned conversion of land for the purpose of growing Better Cotton. The new procedure was finalised during Q1 and will be tested in high-risk countries during the second half of 2018. HCV assessment have, to date, never been adapted to be usable in a smallholder context. BCI is now leading the way for other standard systems.

Pilot Project

A water stewardship project was launched in October 2017 to help test the most innovative aspects of the new water stewardship across small, medium and large farms in India, Pakistan, China, Tajikistan and Mozambique. In Q1, the first module on water resource mapping was developed and face-to-face trainings were delivered to IPs in China. Water Stewardship is a difficult concept to apply in a smallholder context, and BCI is working with global leaders in the field to develop the guidance and support required for rural communities to play a role in safeguarding global water resources.

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Successful training on the revised Better Cotton Principles and Criteria was completed for Implementing Partners (IPs) in China from 12-15 March. The BCI China Team organised a three-day cross-learning workshop in Lijiang, Yunnan Province for nine IPs, who together reach 80,000 cotton farmers.

The training addressed the revised Better Cotton Principles and Criteria with an enhanced focus on biodiversity, water management and soil health, with training from Dr. Zeng Nan from The Nature Conservancy, Ms. Zhenzhen Xu from the Alliance for Water Stewardship and Dr. Li Wenjuan from Cotton Connect. IPs shared best practices on Integrated Pest Management and farmer capacity building.

BCI Training in MozambiqueIn February 2018, the BCI Mozambique Team travelled to four provinces. 67 Producer Unit (PU) Managers and many Field Facilitators were trained. Participants came from three Implementing Partners (IP) in Mozambique: SAN JFS, SANAM and OLAM, an IP with three projects areas – Morrumbala, Ribaue and Algodão de Valle Zambeze. 31% of the training participants were new to the process, and 61% successfully passed the qualifying exam.

Compared to the last season, the number of participating farmers increased by 64%. There was a proportional increase in the area planted with cotton, and an increase in cotton production is expected as a result. According to BCI IPs, the increase was driven by more farmers choosing to plant cotton, the decrease in the market price of competing crops like maize and beans, and favourable weather and rainfall forecasted for the current season.

Equipping Lead Farmers to Be MentorsIn an effort to empower farmers to take the lead in the implementation of BCI activities in their communities, BCI´s IP SAN JFS has extended its farmer outreach programme by identifying Lead Farmers and giving them the opportunity to become BCI mentors in their communities. SAN JFS shared tools and information with the selected farmers, such as an electronic tablet to allow the farmers to measure exactly how much land is being cultivated by BCI Farmers, using digital measuring techniques. Through this effort, Lead Farmers also had the opportunity to take photos and videos of best practices and share them with the farmers in their communities as a way to promote sustainable cotton practice. Further training resources were provided to help BCI Farmers to communicate easily and exchange experiences with other farmers in the community. This activity is being used as a model that will further strengthen the IPs and PUs ability to reach out to other farmers to encourage them join the BCI programme and demonstrate continuous improvement.

Selected Country Highlights China Mozambique

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Pink Bollworm OutbreakThe 2017-18 season brought challenges for farmers in most cotton growing regions except the North. There were unusual outbreaks of pink bollworm, and in the largest cotton growing state of Maharashtra, the yield losses were estimated at 10%-30%. Pink bollworm is a late season pest generally occurring in November, although infestations can spill over into January and February. Most of the losses were experienced at the end of 2017, but for some farmers, it continued into the beginning of 2018. In response to these outbreaks, BCI Implementing Partners launched several campaigns in Q1 to educate farmers on how to manage outbreaks in the future.

Partnership with the Central Institute for Cotton ResearchBCI renewed its longstanding partnership with the Central Institute for Cotton Research (CICR), the premier research institute for cotton research in the country. Several of its useful publications are being translated into local languages so they can serve as resources for BCI Implementing Partners, strengthening their ability to train farmers on more sustainable practices.

India

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CollaborationIn the 2017-18 season, the Australian Government’s Department of Foreign Affairs and Trade (DFAT) co-funded three BCI projects in Pakistan through the Better Cotton Growth and Innovation Fund. At the end of the season, Timothy Stewart (Practice Area Specialist, Economic Growth, at ‎consultancy firm Palladium) visited Pakistan to conduct a project review on behalf of DFAT.

Timothy met the BCI Pakistan Team and visited two project areas: Vehari and Muzaffargarh. He spoke with BCI Farmers, ginners, Implementing Partners and other stakeholders including the Government of Punjab’s Agricultural Department, the Regional Agriculture Economic Development Centre, and the Integrated Rural Development Council (a local NGO). He was impressed with the field activities and the progress that has been made.

BCI Pakistan also has a strong partnership with the German Government’s GIZ-International Water Stewardship Programme (IWaSP) through the Punjab Water Stewardship Programme. GIZ-IWaSP, together with BCI, Aljazari Academy and Lok Sanjh Foundation (a BCI Implementing Partner) conducted a three-day training in February. The training targeted Producer Unit Managers and Project Coordinators from two BCI projects run by Lok Sanjh Foundation. The session covered water stewardship, WASH (Water, Sanitation and Health & Safety), modern irrigation techniques and PRA (Participatory Rural Appraisal) tools.

Supporting Gender Equality in PakistanIn Pakistan, our six Implementing Partners (IPs) currently reach 140 female BCI Farmers and 117,500 female farm workers (workers are defined as people who work on cotton farms but do not own the farm and who are not the main decision makers) in the Punjab and Sindh provinces.

Rural Women’s DayRural Women’s Day was organised by Sangtani Women Rural Development Organization (SWRDO) on 13 January, in the Rajanpur Project area. The objective of this event was to bring working women of the area together, especially female BCI Farmers and female farm workers. The event provided an opportunity for rural women to learn from each other, have fun and learn about women’s rights. More than 200 female BCI Farmers and female farm workers participated in the event. Ms. Mina Laghari, a development activist and ex-parliamentarian, was named the honorary guest of the event.

Pakistan

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Bringing Communities Together to Celebrate WomenOn 8 March 2018, International Women’s Day, many female BCI Farmers and workers came together in Muzaffargarh, Punjab, to learn from each other, to deepen their understanding about their rights and gender equality, and most importantly, to celebrate and have fun. The festival was organised by the Social Welfare Department in Muzaffargarh with support from our IP, WWF Pakistan, and brought communities together to celebrate and challenge entrenched attitudes about the traditional roles of women. The festival was called ‘Women Mela.’ In Urdu, Mela means a ‘gathering of people celebrating local cultures, traditions, food and handcrafts.’

More than 250 people gathered at Women Mela, including people from cotton growing communities and public and private sector organisations. Many men also participated, joining in and celebrating the day with women and taking the opportunity to deepen their understanding about women’s rights. In

rural agricultural communities in Pakistan, because of entrenched gender bias, men and women rarely sit together in public settings. At Women Mela, attitudes towards segregation were dismissed and men were sitting amongst the women to encourage them and show appreciation. The general mood of the women who participated in Women Mela was energetic and jubilant while many proclaimed, “This is our day and we are here to enjoy it!”

The day began with the Chairman from the District Council, Umar Khan, giving a speech inspiring woman to take on greater responsibilities within their communities and giving thanks to WWF Pakistan for their role in bringing many women together on International Women’s Day. Afshan Sufyan, Senior Programme Officer, BCI Pakistan, spoke about women’s empowerment and shared examples about BCI Farmers and farm workers who were challenging gender norms in their communities. Afshan captivated the audience by sharing a story about a capable woman called Nasreen Bibi who had taken on ownership and

management of her family cotton farm when her husband passed away. Instead of employing a man to manage the farm, and despite not having previous training on crop management practices, Nasreen learned how to farm cotton, cultivating healthy crops and increasing her profit.

After the opening speeches, the day erupted into a riot of colour and celebrations. On the main stage, there were poetry readings and songs about women’s empowerment, including local children from different schools who sang songs celebrating women. Many women showcased their local handcrafts at stalls, designed by women for women.

Afshan concludes, “A true woman turns pain into power, and I saw many instances of courage at Women Mela. Seeing women participate in the day who had previously been hesitant to leave the house—and women and men celebrating together and enjoying the festivities—is a true indication that we are successfully spreading the word of women’s rights and gender equality in Pakistan.”

Story from the Field – Pakistan and Women

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Media/Social MediaDuring Q1, BCI had 42 media impressions. Highlights included appearances in Forbes, HuffPost UK and Marie Claire. Apparel Insider, a newly launched media platform which offers news, insight and analysis on financial and environmental performance in the global textile industry, published a particularly compelling interview ‘Making Sustainability Mainstream’ with BCI CEO, Alan McClay.

The BCI website received 30,000 visitors during Q1. Twitter followers increased to 1,389, which is an 11% increase over the previous quarter.

Member CommunicationsDuring Q1 2018, BCI approved 23 off-product marketing communications, including a consumer-facing video using BCI footage (Kathmandu). Burberry, a BCI Member, was included in an exhibition – ‘Commonwealth Fashion Exchange’ – opened by HRH The Duchess of Cambridge in which the brand’s commitment to Better Cotton was highlighted. In addition, BCI approved two brands to use the On-Product Mark. With an increase in Retailer and Brand (RB) Members focussing on consumer facing communication support from BCI, in-person training sessions took place in Q1 with 26 RB Members, including Williams-Sonoma, Levi Strauss & Co. and The North Face.

Communications

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In Q1, the BCI Membership Team focused its efforts on calculating and invoicing the Volume Based Fees (VBF) required to support the 2018-19 project portfolio. To date, approximately €6,600,000 was invoiced with another €500,000 scheduled for payment later in the year. This adds up to a total estimated 2018 contribution to the Better Cotton Growth and Innovation Fund of €7,100,000 based on 736,000 metric tonnes (MT) of Better Cotton declared on the Better Cotton Platform by Retailer and Brand Members. Sourcing intent for 2018 by existing Retailer and Brand Members currently stands at 1,100,000 MT, which could generate upwards of €8,500,000. BCI is well on track to deliver in excess of €5m in VBF for the 2019-2020 season.

Better Cotton Growth & Innovation Fund Update

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Q1 2018 Summary Income Statement

Q1 expenses are traditionally low – 18% of total budget against a 25% timeframe. The expense rate thus far in 2018 is comparable to previous years. Expenses increase towards the end of the year due to delivery of field-level assurance activities in the Northern Hemisphere.

Member Income and Better Cotton Platform Fee Income A large portion of this income has been recognised as it relates to amounts invoiced in 2017.

BCI Secretariat Financial Statement

Income and Expense Statement (K EUR)

2018 Actual Q1 2018 Annual Budget Variance

Total Income 5,494 8,562 64%

Operating Expenses (1,477) (8,032) 18%

Operating Result 4017 530

Financial Expenses (10) (121) 8%

Surplus 4,007 409

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Income Sources

Grant Income The 2018 year-to-date grant income is K EUR 585. At this stage BCI expects to achieve the 2018 target.

Other Income Other income consists mainly of sponsorship and attendance revenue from the 2018 BCI Global Cotton.

Actual Q1 Income Annual Budgeted Income

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