Today True Price and IDH Sustainable Trade Initiative release a new report on: The True Price of Cotton from India. This report contains the results of a study on the external costs of the cotton supply chain (smallholder cultivation in India). The external costs of conventional cotton were compared to certified cotton. Companies can now use this information to reduce their costs with intervention projects, like training farmers on water saving techniques or gender equality.
India is one of the largest producers of cotton in the world, producing about 25% of global cotton production. This poses a threat to the environment, specifically in terms of water use, biodiversity and pollution. The study shows that the cultivation phase accounts for about 30% of total societal costs in the supply chain. Approximately 75% of which are environmental costs. In the last decade, several sustainable interventions have improved the livelihood of cotton farmers. However, there is still room to further decrease societal costs.
Other interesting findings from the study, are for example that certified cotton farms are on average about 50% more profitable than conventional farms. Moreover, certified cotton was found to have 25% lower external costs of cultivation than conventional cotton. This is mainly because of higher productivity. Interventions that reduce scarce water use and eliminate income discrimination have the potential to further decrease the external costs of certified cotton.
This study was part of a project to investigate the true prices of four soft commodities: cocoa from Ivory Coast, coffee from Vietnam, tea from Kenya and cotton from India. This allows for interesting comparisons of external costs between sectors, which IDH, the Sustainable Trade Initiative and other stakeholders can use to inform decisions. Compared to other sectors, the external costs of cultivation are about 3 to 5 times higher for seed cotton than coffee beans and tea leaves respectively, but about 1.5 times lower than cocoa beans. Cocoa cultivation in Ivory Coast has the highest ratio of social to environmental costs. For coffee cultivation in Vietnam and cotton cultivation in India, environmental issues predominate.
Find and download all released reports on the true price of soft commodities on our publications page.