Revealed: Complacency and data manipulation at Better Cotton

25.06.2024

  • According to a former employee, data is repeatedly manipulated at Better Cotton, the world-leading cotton sustainability programme used by H&M and Zara
  • This whistleblower also exposed fundamental flaws in Better Cotton’s processes that undermine its effectiveness, worsened even further by conflicts of interest and an absence of accountability within the scheme
  • These alarming new revelations come in the wake of Earthsight’s Fashion Crimes report, which was published in April after a year-long investigation. It exposed links between the supply chains of H&M and Zara and cotton produced by agribusiness giants SLC Agrícola and the Horita Group. SLC and Horita are connected to illegal deforestation, land grabbing and conflicts with traditional communities in the Brazilian Cerrado
  • Better Cotton's own audit carried out in response to Earthsight's findings has been criticised for its flawed analysis of land grabbing. The scheme now admits that its claims that it was consulting local communities on land use and ownership as part of this audit were false

Cotton harvesting, Bahia. © Thomas Bauer

Fashion Crimes shook the fashion industry. For the first time, European retail giants were linked to land grabbing, illegal deforestation, violence, human rights violations and corruption in the Brazilian cotton sector. Zara and H&M were exposed for failing to carry out their own due diligence, instead relying on Better Cotton – a scheme that aims to promote sustainable sourcing of cotton while supporting farming communities, but in reality is riddled with holes.


Fashion Crimes Summary:

Expand for further details on the report

Sprawling across almost a quarter of Brazil, the Cerrado – a vast mosaic of savannahs, wetlands, grasslands and forests – supports five per cent of the world’s species and a third of Brazil’s biodiversity. By replenishing several major South American rivers, it serves as a ‘cradle of waters’. In western Bahia state, where Earthsight’s investigation focused, the biome is home to dozens of traditional communities, known as the geraizeiros and fundo e fecho de pasto, who have lived in harmony with nature for generations.

In recent decades, the expansion of industrial farming has destroyed about half of the Cerrado’s native vegetation. Grown in rotation with soy and maize, cotton is part of the problem. Bahia is currently Brazil’s second largest cotton producer. Most of its cotton is shipped abroad.

Agricultural businesses SLC Agrícola and Horita Group are two of the country’s leading exporters. These controversial cotton producers have a brazen history of environmental infractions in western Bahia. Repeatedly facing accusations of illegal deforestation, they are also associated with land grabbing and violence against traditional communities. Horita Group’s co-owner, Walter Horita, was implicated in one of the most shocking corruption scandals in Brazil's recent history, which centred on the widespread sale – for large sums of money – of court rulings related to land disputes in Bahia.

Between 2014 and 2023, the two groups directly exported 816,000 tonnes of cotton from Bahia to foreign markets. Using available shipment records, Earthsight traced raw cotton from SLC Agrícola and Horita farms in Bahia to eight clothing manufacturers in Asia. Zara and H&M are among these manufacturers’ customers for cotton clothing and home textiles.

Read the Fashion Crimes report and company responses here.


In the wake of our exposé of Better Cotton’s abject failure to detect illegal activities and conflicts of interest in cotton supply chains, Earthsight has now been privy to startling new revelations from one of the scheme’s former employees.

DATA MANIPULATION REVELATIONS

Our whistleblower told us that some Better Cotton staff in its Swiss and UK offices have manipulated the scheme’s data on its online platform. This means brands using Better Cotton, including Zara and H&M, may be making sustainability claims to their consumers based on flawed data. 

To understand the kind of manipulation that has allegedly taken place, it’s necessary to know how the Better Cotton Platform works. For scheme-registered companies – including cotton ginners, yarn producers, garment manufacturers and retailers – it is the tool for tracking the volumes of Better Cotton within supply chains. Currently, over 13,000 users across the world buy, sell or source Better Cotton on the platform. 

The platform operates using Annual Authorised Volumes (AAVs) – the volume of cotton projected to be produced in a season by licensed farmers, referred to as ‘physical Better Cotton’. 

Each large farm has a unique code that ginners use when entering the volume of physical Better Cotton they’ve purchased from them. Meanwhile, smaller farmers are organised into groups, with up to 4,000 sharing a single code. A group’s AAV informs the amount of physical Better Cotton that these farmers are expected to sell during a growing season. With so many farmers sharing a code, it is not clear how errors can be traced back to specific farmers. 

The problem lies with how those volumes are entered into the platform. A large number of ginners use the platform each season to record the volumes of physical Better Cotton they have purchased. However, according to Earthsight’s source, these volumes are not verified, making the platform unreliable and potentially full of inaccuracies. According to our whistleblower, this lack of data verification creates a system vulnerable to data manipulation because it allows ginners to enter greater volumes of physical Better Cotton than they purchase. This leads to discrepancies between the amount projected to be produced and the amount subsequently declared on the platform.

In these instances, our source revealed that Better Cotton staff at the scheme’s European offices have manipulated the numbers so they match. This means conventional cotton – grown without any sustainability guarantees – is potentially traded as physical Better Cotton. 

Earthsight’s source revealed that Better Cotton rarely checks supply chain companies for compliance with its Chain of Custody Guidelines, which sets out how Better Cotton should move through the supply chain. For example, many new Better Cotton Platform users only need to complete online training before they can start trading. The former employee also said that companies using the platform don’t have to provide invoices or other supporting documents, because it can’t hold large volumes of data. Moreover, the scheme doesn’t have enough staff to analyse it. Compliance checks only take place on a few occasions, when companies appear to be involved in suspicious transactions. 

Cotton harvesting in São Desidério, Bahia. © Thomas Bauer

BETTER COTTON’S RESPONSE TO THESE NEW REVELATIONS

When asked for comment on these fresh allegations, Better Cotton stated that there is “implied second-party verification” on the Better Cotton Platform because any transaction on the platform must be confirmed by both actors involved. The scheme’s staff, it said, will reach out to actors where inconsistencies are identified to correct possible errors. Better Cotton states that staff can at no time change or manipulate any of the data entered into the system. 

Better Cotton’s response did not address the allegation that checks on members are rarely carried out, nor did it explain how the scheme ensures that supply chain actors are not in breach of its Chain of Custody guidelines if they are only required to complete online training on how to use the platform. Its statement also did not sufficiently address the risk that volumes of physical Better Cotton entered on the Better Cotton Platform could be inaccurate – reaching out to actors to “correct errors” appears to include no steps to find out why such errors occur in the first place, or to verify the true volume of Better Cotton purchased.

For the ex-employee, the issue is that Better Cotton is more concerned with growth than ensuring compliance with its own standard. Crucially, its retailer and brand members pay membership fees and volume-based fees, which are linked to how much Better Cotton they purchase. As a result, there is a financial incentive for the scheme to recruit new members and for those members to buy large volumes of cotton. 

In a clear conflict of interest, the same members of staff who recruit and onboard new companies are then tasked with assessing their compliance. The former employee is blunt in affirming that the scheme’s chief operating officer and chief executive officer have been in their roles too long and have become complacent.

"Better Cotton's CEO and COO have been in their roles too long and have become complacent."

- Former Better Cotton employee

BETTER COTTON’S REACTION TO FASHION CRIMES

Complacency was certainly apparent in Better Cotton’s response to Earthsight’s Fashion Crimes report. Almost two weeks after its publication, the scheme released the results of its own investigation into our findings, which it claimed proved its innocence, but in reality was deeply misleading and failed to address several points highlighted in our report. 

Better Cotton’s audit covered just three certified farms in Bahia, excluding others where we found evidence of wrongdoing. These additional farms are owned by SLC Agrícola and Horita, who claim all their cotton is certified by Better Cotton. Tellingly, none of the farms that Better Cotton chose to investigate are in the Estrondo estate, one of two major case studies highlighted in our report and where Horita faces accusations of land grabbing in an ongoing lawsuit led by the Bahia Public Prosecutor's Office.

It is unsurprising that Better Cotton couldn’t identify links between the Horita Group and corruption, as the scheme has acknowledged that its assessment only applies to farms and not the companies that own or operate them. Additionally, it demonstrated a lax approach to sustainability with its admission that it knew SLC Agrícola and Horita’s farms had been fined for environmental infractions before it certified them.

 The Horita Group and SLC Agrícola have denied any wrongdoing. Both Inditex and H&M said they take the allegations detailed in Fashion Crimes very seriously and are working with Better Cotton to improve transparency and traceability. Their full statements, as well as responses provided by other companies named in Fashion Crimes, can be read here

Perhaps the most blatant lie in Better Cotton’s white-wash investigation was the claim that it was speaking to affected communities. Earthsight has been informed by local civil society that the traditional community members in Capão do Modesto in western Bahia were not contacted by the auditors hired by Better Cotton. 

Meanwhile, an NGO that works in the Cerrado promoting nature conservation and supporting traditional communities – Instituto Sociedade, População e Natureza (ISPN) – has questioned Better Cotton’s claim there are no land rights issues. It criticises the scheme’s overreliance on CAR, an untrustworthy self-declaratory rural cadastre for environmental monitoring purposes in Brazil, as proof that there are no land rights issues linked to these properties.

“Considering the complexity of Brazil's land ownership, any analysis of a property's land situation must include consultation with notary offices, the National Rural Cadastre System, both the state and federal land agencies, but also consultation to any possible legal actions questioning ownership of property,” ISPN told Earthsight.

In its response to these new allegations, Better Cotton finally acknowledged the complexity of land rights issues. While it has promised to work with cross-commodity partners to assess the problem, it hasn’t provided details of what this will look like in practice. 

The scheme also admitted that the communities mentioned in Fashion Crimes were not contacted as part of its audit – as it had initially stated. While it has said it will hire a new consultant to conduct interviews with them by August, it hasn’t explained what it will happen with the results and how they will be anything other than a box-ticking exercise.

THE ROLE OF FASHION BRANDS

Our new data manipulation revelations come amid the ongoing furore created by our Fashion Crimes report. Hundreds of media outlets in Europe and elsewhere have covered the story, including Le Monde, the Daily Mail, Reuters’ Context, El País, DW and Vogue Business. The media frenzy compelled the fashion giants to react. 

Inditex, the Spanish company that owns Zara, sent a letter to Better Cotton demanding more transparency from the scheme on its traceability practices, and stating that “the allegations represent a serious breach in trust placed in Better Cotton’s certification process.” Despite the validity of these concerns, Inditex simply placed all the blame on Better Cotton. As the biggest fast fashion group in the world, it took no accountability for its own role in the harms our report detailed. 

Meanwhile, H&M acknowledged that, “We have failed in our responsibility.” While this is a step in the right direction, it must be followed with concrete action. Both Zara and H&M have a responsibility to conduct their own due diligence on their supply chains, rather than rely on flawed certification schemes to do the work for them.

FASHION CRIMES CONTINUE

New damning information related to SLC Agrícola and Horita has continued to surface since the publication of Fashion Crimes. Recent data released by AidEnvironment's real-time deforestation monitoring system, RDM, detected 50 hectares of land cleared between January and February 2024 within SLC Agrícola's Fazenda Palmares – one of the cotton farms mentioned in our report. This is in clear contradiction of SLC Agrícola's Zero Deforestation Policy adopted in 2021. 

Brazil’s leading magazine, Veja, recently reported that Walter Horita had been required to pay US$6 million to the authorities in a plea bargain related to the corruption scheme highlighted in Fashion Crimes, an agreement that the Horita Group vehemently denied existed in a letter sent to Earthsight in September 2023. 

With regards to Estrondo's land ownership dispute, Brazil’s Superior Court of Justice has recognised the right of traditional communities to occupy a specific area within the estate, in acknowledgement that it forms part of their traditional land. This is a huge blow for Horita, which operates on a third of Estrondo.

Horita cotton farm, Bahia. © Thomas Bauer

RECOMMENDATIONS

Green labels and certification schemes have failed to deliver. Governments are realising that voluntary corporate action will not successfully address the negative impacts of our consumption habits. Regulation is essential.

In the EU, the Corporate Sustainability Due Diligence Directive (CSDDD) will require large companies operating within the bloc to exercise due diligence throughout their supply chains. It obliges companies with a global turnover above 450 million euros to ensure that their value chains are free of environmental and human rights abuses. They face liability for damages and fines in cases of non-compliance. Member States will have until 2026 to transpose the new rules into their national laws. 

Meanwhile, the EU Deforestation Regulation (EUDR) will demand that firms trace goods back to the land on which their raw materials were produced. Their production will not only have to be deforestation-free, but also legal under the producer country’s environmental, land and human rights laws. However, the regulation has serious limitations. Not only does it not include cotton, but it also only covers forests – excluding biomes which are made up of a patchwork of other wooded land and ecosystem types, such as the Cerrado.

These latest revelations and Earthsight’s Fashion Crimes report lay bare the reasons why certification schemes cannot be relied upon as a substitute for rigorous corporate supply chain due diligence. Policymakers must ensure this is enshrined in laws and that those laws are vigorously enforced. The destruction of the Cerrado is undermining the rights of traditional communities and contributing to a series of devastating impacts beyond the biome, including for the Amazon rainforest, putting biodiversity and the climate at risk.

More from Blog

Banned / EU finally bans Belarusian furniture

Continue reading
Sanctions breached / Evidence of laundered Russian plywood found by EU investigation

Continue reading
Russian Sanctions / US sanctions should cover blood timber

Continue reading
Paraguayan leather / Are Italian tannery’s pledges on deforestation enough?

Continue reading
EU Deforestation Regulation / Success of landmark deforestation law far from assured 

Continue reading
EU Law / MEPs must strengthen planned corporate sustainability due diligence law

Continue reading
G7 Sanctions / Cash from "conflict timber" still flowing into Russia and Belarus

Continue reading
Interview / Earthsight spoke to Andrei Sannikov about the urgent need for strong sanctions on Russian and Belarusian timber

Continue reading
Indigenous rights / “We are in mourning, but we carry on with our struggle”

Continue reading
EU Policy / EU agrees on much needed landmark law, but work still needed to fully protect forests and communities

Continue reading

Stay up to date with all Earthsight news & updates

Receive email updates for the latest news and insights from Earthsight and be among the first to read our new investigations.

We keep your data secure and don’t share anything with third parties. Read full terms.