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Inditex Partnership Fosters Organic Cotton Production in India

Zara owner Inditex aims to pioneer a revolution in India’s cotton farming sector through a new partnership with DBS Bank.

On Wednesday, the Singaporean international financial services corporation and Spanish fashion giant announced a financing program for Indian farmers that will aid in the advancement of organic cotton crops. While the country is already the world’s largest producer, boasting the largest land mass devoted to cotton cultivation, organic cotton comprises just 2 percent of the total product volume produced in India.

And as concerns about sustainability continue to deepen—especially across the fashion industry, which has been fingered for massive overproduction and wasted natural resources—brands and shoppers alike are looking to curb their impact on the environment. In India, traditional farming practices, which are water intensive and notorious for depleting land of nutrients, have resulted in soil fertility challenges. The rise of organic cotton, which is grown without the use of pesticides and GMOs and relies heavily on natural precipitation, instead of irrigation, as its moisture source, is widely viewed as a natural step in the effort to cut carbon costs.

But even as India has a leg up on other producers when it comes to farming expertise and the sheer volume of its crops, the country also faces significant challenges to its organic cotton program, DBS Bank said. The farming community is “highly fragmented,” with about 170,000 individuals scattered across nine key states. The majority are small-scale growers who lack the financial means or the expertise to implement sustainable practices, it added.

Because so much of the work is manual in nature, there’s a lack of transparency into supply and demand—as well as a lack of crop traceability. Even if farmers are producing sustainably, they are often unable to transact at a premium without proof that their crops are organic.

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Inditex and DBS Bank are aiming to address some of these issues by leveraging India’s network of local Farmer Producer Organizations (FPOs) to reach more than 2,000 farmers in the fashion firm’s supply chain. From there, they will assess their financial needs and provide capital to bring their operations up to speed with cotton sustainability protocols. The FPOs will work directly with individual farmers to facilitate orders, giving them visibility into cash flow that will enable them to more effectively grow their businesses.

The partnership with the FPOs, along with other tech-based tracking mechanisms like blockchain, will give Inditex’s network of cotton spinners (the main direct buyers of cotton from farmers) visibility into the crops’ cultivation. Through these efforts to promote transparency, farmers will be able to secure a higher premium for their product, the bank said.

“Globally, our clients are increasingly mindful of looking for ways to add societal and environmental value through their business decisions,” DBS Bank’s Terence Yong, group head of western multinational corporations, said in a statement. He added that many are “taking the leap to digitalize their supply chains to enhance transparency and traceability of transactions made.”

In addition to the Inditex partnership, DBS Bank has also vowed to step up support for other businesses looking to achieve greener operations. The financial institution has committed to $37.6 billion in funding for eco-friendly projects by 2024, and is the first bank in Singapore to offer transition financing for companies with a high carbon footprint that are looking to make their supply chains more sustainable.