Scott Exo – Head of Field Performance & Large Farm Countries at Better Cotton Initiative

Borna (ClimateAi) 0:03
This is Agriculture Adapts by ClimateAi. Every week we speak with industry leading executives farmers and academics to get a 360 view of how the agriculture sector is innovating to stay ahead of a changing climate. I’m your host Borna Poursheikhani, and I am your co-host Himanshu Gupta. We’re a team of climate scientists and agriculture entrepreneurs trying to make farming more resilient, profitable and equitable as we transition to a new age of agriculture. This podcast is our journey as we explore the hurdles and opportunities that lie ahead for the industry to feed the world. Hello, and welcome. We have another exciting episode for you here today with us we have Scott Exo, the head of field performance and large farm countries for the Better Cotton Initiative, the world’s largest sustainability program for cotton. I believe you guys had about 2 million BCI farmers across 21 countries. Is that correct? Scott?

Scott Exo 0:54
That’s about right.

Borna (ClimateAi) 0:56
That is no small feat. So So thank you very much for for joining joining us here today, Scott and I actually got lunch last week at the textile sustainability conference. So excited to dive a bit deeper here with you, Scott, can you tell us a little bit more about your background and how you came to be involved with BCI as well as just the agriculture sector as a whole?

Scott Exo 1:17
Yeah, I’ve been with PCI about five and a half years, but I’ve been involved in the world of agricultural sustainability programs. Since about 1999. I had worked in cotton, or excuse me, I’ve worked in conservation related issues, including agriculture related since the early 90s. But I joined a what was a young organization in Oregon called the food lines, which was very similar to BCI. Except that it wasn’t nearly as big an adult with food crops of many different types going in the United States and I worked there for more than a decade, when I made a transition from consulting falling that gig to my current position I had to learn all About the world of cotton, but the issues regarding sustainable agriculture and fair livelihoods and fair treatment for farm workers and things were very similar in the standard system. So I had a I had a bit of a leg up there. But it’s really been fun to work on a global scale, learn about the differences in different settings in the world, but also to experience some of the commonalities and sustainability challenges in this world. So it’s never been dull, to say the least.

Borna (ClimateAi) 2:28
So tell us a bit more about BCI. And I guess one of the core problems that you guys are really trying to solve there.

Scott Exo 2:34
As with many sustainability, standard systems and sustainability programs were focused on social, economic and environmental issues. In the standard system itself. We are working on improving or lightening the environmental footprint of production around the world, but also trying to improve the livelihood of cotton farmers and their communities by making cotton farming both more lucrative As well as making it safer and having fewer negative impacts on on the people who grow cotton in the communities in which cotton production happened. My role is a relatively new one for four years, I ran the the US better cotton program, I helped start that program in 2014 and then shepherded through where where it is now. I’m currently responsible for our relationships in Israel, Australia, and Brazil, where we have relationships with national organizations that work with cotton farmers that our strategic partners and implement their own sustainability standards systems which are benchmarked with PCI. And I’ll talk a little bit about that in the context of the of the conversation, but I get to experience large scale cotton production, much like his practice in the United States, in other other parts of the world. I also head up a group of colleagues at bcit are concerned with improving the performance of our field programs and support we provide to our many implementing partners equal any partners, our sub national partners that work directly with farmers and projects in various parts of the world. So that’s called the field performance group, and hence that part of my title. So that’s a relatively new role and a very exciting one that that puts me in touch with a whole host of issues.

Borna (ClimateAi) 4:25
Sounds like you got a lot on your plate there. I would imagine the metrics that you use, and the different things you look for both on the environmental and social front are different from country to country, both because of the way that certain cultures view issues as well as just the baseline that you’re at in each country that you’re going into. So how do you go about, you know, sort of giving the BCCI stamp of approval if there’s such a level of variance across these different countries?

Scott Exo 4:51
Well, let me talk first about the things that are common and I’ll talk about some of the things that are different when when we talk about we refer to it as BCI life Something so what defines the conditions under which those 2 million farmers around the world qualify to market better cotton. And what’s common to all of them is that there are indeed a set of minimum criteria that must be met everywhere all scales, whether it’s smallholder farmers in in Gujarat, in India, or whether it’s large farms in Australia, there are some differences in the criteria that apply at different scales in addition to those minimums, but there is some uniformity with respect to some minimum requirements. So that better cotton in essence means the same wherever it comes from. There’s also a commonality related to a commitment to continuous improvement over time. So even those large farms in Australia are making commitment as a term of their participation to improve their production practices over time and the outcomes from from those practices. Just as the groups of smallholder farmers that are the subject of work on by our partners in in that Indian contacts are are committed to continual improvement over time. They also have in common an obligation to share data related to production at all scales. They share data on the inputs that were applied to grow that cotton that ultimately is licensed water, fertilizer, chemicals, and they’re obligated to share the outcomes of that production, what was the yield, and other factors. And then all of their cotton regardless of scale is tracked through the cotton supply chain all the way to retailers and brands so that those are common factors related to everybody that’s participating, every farm that’s participating. We also have a common set of metrics that are gathered at all scales and that’s, that’s related to pesticide fertilizer and water which I already mentioned, and yield, but in the small and what we call medium farm context, and medium farm is anything from two to 20 Hector’s we’re also collecting data related to the profitability of the farm. The kinds of training and partnerships local that are specifically focused on eliminating child labor and the cotton production process. And we’re telling figures related to the inclusion of women both in training and in, and women’s involvement in the cotton production process on those farms. So all of those are what we call result indicators are gathered every year at the individual farm level and in the context of large farms. And at the producer unit level, which is a collection of many, many small farms in the smallholder context. We use that data both to measure changes over time and to provide feedback to those farmers about how they’re doing what kind of what’s their performance level to date, are they reducing total sprays of pesticides over time? Are they making progress in that regard? Are they making efficient use of fertilizer in the like, so data, gathering data processing data, analyzing and reporting in cycling back as a big part of the program?

Borna (ClimateAi) 7:57
That’s really interesting. So you guys are tracking that profitability. And I would imagine, I guess what what portion of these guys medium sized firms you guys are working with are already sort of tracking their inputs and their profitability because I would imagine, not all them are not a large portion of them have like a p&l.

Scott Exo 8:16
It’s common in what we what we call large farms in bcis world, the largest farm is more than 200 Hector’s at the medium and small farm level, it’s far less common for a farmer to be calculating profitability. I would say even at the large farm level, they know, at the large farm level, there’s a lot of data that’s recorded, but I don’t know the extent to which that analysis is always done at the end of the year, to measure profitability. That is an issue and a challenge. I mean, that alone I would imagine would provide a ton of value like just tracking it so that you can get a system in place to learn what works and what doesn’t work. In and of itself, I feel like would provide a ton of value for these individuals who has the potential if taken to the next step. It has the potential To change the decision making process with regard to management practices. And by that, I mean, you know that a lot of farms even very large farms are often engaged in a pretty relentless pursuit of yield, increasing yields, right. But less commonly are the assessing the return on investment from an additional application of fertilizer, for example, or weighing the cost of an additional spray of a certain herbicide or insecticide, relative to the potential benefit in terms of either yield or quality or other parameters that affect the final financial outcome. So yes, you can apply more pesticide and get more yield, but is the cost benefit of that management decision? Does it really pencil out in terms of margin? There are some really interesting farm management software platforms that that enable farmers to do that analysis but I think I think the deployment of those tools is still the exception rather than the rule.

Borna (ClimateAi) 10:04
That makes sense. And how much of like, I mean, I think when you and I were talking, you said 20% of the world’s cotton is is BCI cotton. Is that correct? Yep. You guys must be gathering of ton of data across climatic zones that are fairly similar to one another across soil types that are similar to one another. See, I would imagine you guys kind of have a database of like the optimal way of growing cotton and each of these different climate zones and soil types apply to different. So

Scott Exo 10:33
the short answer is no. And here’s why. There are some commonalities common factors related to soil and climate and latitude and things like that. But the difference is, I would say in most cases, between farms that farm at 30 degrees latitude in one continent and a farm that farms at 30 degrees latitude and another continent that may or may not have similar soils. He’s so incredibly different that that the the opportunity for compare ability is really slim to none. And what makes them so different the prevalence of a particular past, for example, that changes entirely the calculation about seed varieties maturation length for certain cc variety, the kind of pre planting and in season, pests and disease management strategies that need to be pursued. There are just so many variations in production methods and outcomes that it’s very, very difficult to compare.

Borna (ClimateAi) 11:36
The interesting thing like where my brain goes being on like a team of climate scientists here is that as climate zones start to shift, I would imagine you guys have data on like what has worked in a similar or in a parallel situation beforehand and you’ll be able to help people adapt as climate zones move around.

Scott Exo 11:56
We’re getting to that point I don’t think we’ve we’ve engaged A level of analysis of that data yet to enable us to do that know one of the one of the casualties of growing as fast as BCI is growing we our first season of implementing the BCI standard in you know, just a handful of countries was 2010 it’s only been nine years Oh wow, to grow to 2 million plus farmers and more than 5 million Hector’s our ability to manage and draw conclusions from that day that mountain of data has been hamstrung somewhat by the sheer volume and the speed with which we’ve grown. So, we’re starting to get a handle on that bomb BCI building a data warehouse to enable us to to better manage and make use of that data. We’re working with other certification schemes that are part of the ICL Alliance on trying to achieve consensus in the context of a project called the Delta project on some common metrics. So that other standards systems are using the same language and and measurement methods that we have some of those things in common, particularly things like greenhouse gases. So we’re starting to lay the foundation for doing what you’re suggesting. But we’ve got we’ve got some some miles to travel and maybe some sleepless nights before we have that.

Borna (ClimateAi) 13:18
Could you mind like zooming us into like one specific, maybe farm that you’ve worked with in the past with a BCI is worked with and what the before and after has looked like

Scott Exo 13:27
at that textile exchange conference in where you and I met last week, we shared some of those examples. We have increasing number of those in story form. And one of them this is not an environmental example. It’s rather a Yeah, it’s probably an environmental accident example. But it’s also a socio economic example. The story is about a farmer in the Punjab area of Pakistan where this farmer was struggling with debt and was subject to the pressures of input salesman people selling pesticides in particular To use a lot of, you know, several, several kinds of products and didn’t really have the the personal knowledge necessary to make good decisions of his own about what was appropriate and what was maybe excessive. And he was in debt and his personal economic situation as a cotton grower was was somewhat precarious. And one of the outcomes of that was that his son who was about nine or 10, had to leave school and come back and work on the farm and help I try to, you know, contribute to the, to the labor on the farm so that they didn’t have to have to pay cash for outside labor. And the story about this man is that once he started participating as a BCI grower and participate in the trainings that were offered by our implementing partner in that part of Pakistan, which happens to be the local office of the World Wildlife Fund, he began in massing it enough now is where he could push back against these guys who were trying to sell them a host of products that he may or may not have needed, and he reduced his input costs significantly without affecting his yield, his yield actually went up. So his personal economic situation, the farms economic situation, profitability went up sufficiently, that he was able to put his son back at school, which was a really tremendous source of pride for him. And what about, you know something about what she felt really good. And of course, your son, who apparently had shown a lot of promise as a young scholar was, was tremendously excited as well. So that’s an example of a number of things where, you know, a basic set of practices transmitted in the form of new knowledge to a farmer, by a BCI partner can sort of empower that farmer to to be a better farmer to a more profitable farmer, a farmer who’s in this case later on the environment, but also benefit his personal household situation by sending his Back to School. That’s it’s pretty heartwarming story. There’s actually a video about him on the, on the stories from the field section of our website, along with a whole bunch a whole bunch of others.

Borna (ClimateAi) 16:11
Yeah, that’s awesome. And that’s our CEO was giving me I mean, come on, she’s usually hosting with me on this podcast, but he has a meeting. He can’t be here right now. But he gave me the same exact example when I was talking to him about the situation in India. And he was like, Yeah, when you’re only making $10 a day, and you have to pay an extra $1 to purchase all these inputs that people are telling you, you need to maybe purchase a certain type of seed so that you can get insurance, whatever it may be. That’s coming away largely from the kids education because there’s a certain amount of you have to pay for education. And I didn’t know that beforehand.

Scott Exo 16:43
Yeah, to you and me, that seems like nothing like whoa, how could that be an issue but, you know, when when household income is as as small as it is, in those rural, agricultural communities, it’s, it can make a big difference.

Borna (ClimateAi) 16:57
Definitely. And so how do farmers Like this one in the story you just said find BCI like, I know you guys have these partners that you work with on that are on the ground. Are they going out and talking to growers are our growers coming to them is it like that well known in these places,

Scott Exo 17:13
they’re usually forming these groups of farmers based on an area in which they operate or seek to operate. So these are, our implementing partners can take a number of forms. They could be a local version of the local chapter of a national international NGO. They could be a domestic NGO, they could be a cotton trading company that has local relationships with farmers and may provide technical assistance and inputs and other services to farmers already, but they want to market you know, they want to acquire market better cotton through their marketing channels. It takes a number of different forms in different settings in the US, most of the implementing partners that that recruit farms are merchants or marketing co ops in In in India, it’s a it’s largely local NGOs. In Africa. It’s a mix of NGOs, in some case, government organizations and cotton marketing company, it’s a mixture.

Borna (ClimateAi) 18:13
So for this farmer, it makes sense, the incentive is very clear. There are things to be learned that can make his process or his operation more efficient, or that could make it a little more profitable. But is that always the case? Or is is there sometimes convincing that needs to happen on your guys’s end or on your partners and to get people to sign up and be part of BCI?

Scott Exo 18:31
Yes, there is some convincing in some cases, and that’s more often true in settings like the United States or Brazil or large foreign countries where vci is not in the business of providing technical assistance or trying to train farmers how to be better cotton farmers, they know far more than we do about that they also have access unlike the Indian setting or the or the African setting where extension and technical assistance is very rare. They have access to a number of resources to help them improve their practices. So the additive value of BCI participation in that respect is not so great. What we offer in that context, though, is an opportunity to be relevant in a marketplace with changing expectations is how I would express it. There is among their cost their ultimate customer customers, retailers and brands and users of cotton. There are rising expectations about supply chain transparency, for shareholders for the public, or, you know, NGOs and interest groups that scrutinize their operations. And those companies are seeking to meet those rising expectations for transparency, but that that expectation is being extended downward through their supply chain. It’s being extended to the middle of the supply chain, were dying in And finishing and other things happen that that can have deleterious environmental effects if not managed well. But it’s also true the farm increasingly, you know, Levi’s and i, k, and Nike and Adidas and h&m all want supply chain transparency for their raw materials. And meeting that expectation is easily done by becoming a BCI. Farmer, because all of those companies are primarily using licensed better cotton, the cotton that’s grown by licensed farmers as a benchmark for their procurement to deal with that transparency expectation.

Borna (ClimateAi) 20:43
And what does that look like for the ultimate end consumer like you or me? Does that mean that we can go pick out a shirt at a store and it’ll say, this was made from better cotton or does that mean that you know if you go on Nikes website or Patagonia’s website on their website, it will say you We try to source from better cotton or we or 80% source from better con Like what? How does that look for the end consumer,

Scott Exo 21:06
the end consumer may see on product marketing about the brand’s support for better cotton about the the degree to which the brand’s participation enables certain things to happen in those communities. But they will never see unless the unless the the unprimed marketing violates our claims rules they will never see they will never see a content claim. Because of the way that we account for the better cotton that moves through the supply chain. We don’t use physical segregation and traceability as a way to track the amount of cotton or the equivalent amount of cotton that brands are taking up in their supply chains. People will see other types of in storm Marketing. They’ll see other types of web marketing and social media marketing. In many cases of brand saying we purchase the equivalent of 80% of our total cotton footprint in 2018. For example, as better cotton and many of our 360 or so, brand members are making public claims This is part of the transparency piece. They’re making public claims, or public charter setting public targets for the amount of better cotton in some cases, they seek to procure by a certain date or they’re making alternatively, a claim about a portfolio approach by 2020. We will source 100% sustainable cotton and their definition of sustainable cotton is typically a portfolio that includes better cotton recycled organic and in some cases Other so called identity Cotton’s as a part of that mix. Almost all those cases better cotton is the largest slice of that portfolio pie because it’s so widely available at such an attractive price.

Borna (ClimateAi) 23:14
Right? And today, these retail brands for the most part are not getting a premium on their products because they’re quote unquote sourcing from better cotton, correct?

Scott Exo 23:25
That’s correct. There, they are decidedly not seeking to they’re trying to bake the procurement of sustainable cotton into their operations rather than use the sourcing of sustainable cotton to create distinct lines of product lines. Many apparel brands tried that 10 and 15 years ago and learned that it was not it was not on as a strategy that people aren’t we’re not gonna pay more and what what I hear Brand representatives, you know, C suite and senior brand representatives say frequently is that we’re not trying to create a niche product. We’re trying to bake it into the operations. And we know that our customers expect this of it. They expect us to regularize. So sustainability practices throughout our operations, they just expect that we’re going to do that. And if they have reasonably we’re not doing it as well as our competitors, or that were greenwashing or making insincere claims, they’re going to take their brand loyalty and go somewhere else. Yeah, that’s fine. Because you You and I were talking about this exact point at the conference and that in your guys’s list of people who were using better cotton was Hmm, and gap and I had seen this documentary like five or so years ago, I don’t know how long it was a few years ago, called the true cost that was speaking very poorly of those companies. And in my head, like that was like one moment where I heard that and I never shopped at those companies ever again, and maybe in In the past few years they’ve they’ve totally improved. But it’s crazy how much a single incidents can just make you drop after you’ve been working towards a certain goal for so long. The flip side of the coin about transparency and genuine claims for brands, the flip side of that coin is brand risk, right? It’s threats to brand equity. So untoward incidences incidents in their supply chain. bad things that happen or get reported in their supply chain reverberate amongst their customers. And once that happens, they’re difficult to erase from people’s minds, even if they subsequently do a bunch of really exemplary things. You don’t get all those people back or you don’t get them back very quick, then it sounds like maybe you’re a you’re a prime example.

Borna (ClimateAi) 25:48
Bad news travels faster than good news.

Scott Exo 25:51
Yes, there you go.

Borna (ClimateAi) 25:53
But I mean, this the question of being able to collect put on the shirt that it comes from, from BCI Is that something that you guys are doing to work towards because it seems to me that so right now we’re at 20% of the cotton industry is better cotton. In order to get to 100% do we not to need to put more pressure on the brands and the merchants that are not using a sustainable or a better cotton type product?

Scott Exo 26:17
Well, some of that pressure already exists, but maybe I should explain the way that we account for the system which is at the root of the root reason why we don’t allow contact, we use a system called mass balance and mass balance is simply is an accounting system really is a way of accounting for the better caught the licensed cotton as it moves through the supply chain. But in a mass balance system instead of insisting on physical separation of the raw cotton and all the products that are made of that raw cotton as it moves through the chain, which just adds cost and not does it is that that physical segregation requirement adds cost but it doesn’t add the value to the cotton Instead of that we use a system of credits that serve as a proxy for that original license bale of cotton for example from a licensed farm. And the reason we do that is it directly supports our one of our larger objectives which is to mainstream better cotton to move it quickly as into the mainstream as a really easy choice and easy choice to choose BCI sustainable cotton for mainstream retailers and brands, and identity cotton it’s physically segregated has all of the auditing and physical you know, segregation requirements for a physical physically segregation system is by definition relegated to creating a niche. So you have to deliver a premium to repay all those people that had to segregate and be audited throughout the supply chain and the supply chain for cotton products is really it’s long and costly. blacks are maybe a different entities or actors that touch that cotton before it gets to the shirt. So it gets really expensive without any adding a lot of value to that final product and the farmer doesn’t necessarily see a lot of that. So instead, we created this system of credits which are a proxy for the the physical cotton that was grown in the farm it has to be segregated to the gin and segregated to the merchant who buy it but after that point, it can be exchanged for other cotton from the same country at the at the merchant level, and spun into yarn with cotton from multiple countries. But those tokens are those credits if you will, one one kg of raw lid cotton is the equivalent of one credit, move and are accounted for in an online accounting system that every ball actors participate in through the supply chain. That’s how we know if Levi’s sourced 80% of its cotton as better cotton for example. It’s similar as you you’re very familiar with credit, the green green tags and other credit systems in in alternative energy in renewable energy. It’s not dissimilar from that, and retailers and brands and suppliers, they love it because apart from the obligation to log those transactions and for their, the other party to the transaction to acknowledge the veracity of that transaction, there’s very little overhead associated with it. And so it doesn’t slow commerce down. It doesn’t add a lot of expense to commerce. And it has allowed us to scale up very quickly. But one of the net effects is you can’t make a content claim because the physical cotton that was in that shirt because another bill from a non vci farm can be substituted in an equivalent amount for the actual product. We can verify a content claim for the shirt, the shirt can say, arrow or Levi’s or Hmm supports the better cut initiative last year, we, you know, we contributed funds, it allowed 200,000 farmers to be trained in brands only get to make those on product claims after they reached a certain threshold of procurement as a percentage of their cotton footprint.

Borna (ClimateAi) 30:15
I think you were telling me last time that that amount at which they can make those claims is increasing, right? Like,

Scott Exo 30:22
it has been 5%. And now it is increasing to 10%. So until they reach 10%, they can make what we call basic claims about being a member and supporting a better cotton initiative and, and things like that, but they can’t make any on product claims until they reach 10%. And the other precondition is that they have to have a plan to reach 50% within five years.

Borna (ClimateAi) 30:46
Yeah, that’s so smart. That makes things move so much faster.

Scott Exo 30:50
They can’t get to 10 and stop. You got to keep going. So then the other thing I’ll mention you asked, you know, we got to push their breath, you know, maybe we should push them harder. BCI is a nonprofit organization. It’s a charity registered in Switzerland, but it is also a membership Association. So the governance of BCI the people that sit on the council, what we would call the board come from all sectors of the cotton industry. So there are three representatives of producer organizations, three representatives of suppliers and manufacturers, three representatives from retailers and brands. They’re also three representatives from civil society, environmental and social organizations. They all have one vote. So when decisions are made about whether we’re going to use physical traceability or mass balance or whether the standard is going to change or whether, you know whether we’re going to reopen the standard and make it more stringent in in a variety of ways. Those are decisions taken by that collection of multiple interest in the cut in the outcomes of of cotton production and No, you know, the retailers and brands may contribute more in the in the form of membership fees, because they have deeper pockets, but they still only have one vote. All of those decisions are made by consensus. Everybody has to agree. It’s a powerful balancing of multiple interests. We call it a multi stakeholder approach. It’s a fancy, you know, NGO type name for it, but it really, it really yields benefits in terms of balancing interests and ensuring that we get the best possible outcomes.

Borna (ClimateAi) 32:31
I want to dig a little bit more into the physical metrics that you guys are using, like what types of things are you guys tracking at the farm level, in order to determine whether or not a certain operation is sustainable or is on the way to becoming sustainable by your guys’s definition.

Scott Exo 32:48
The standard system is arrayed in a hierarchy that starts with seven principles and then has criteria underneath each of those seven, and each of those Criteria may have multiple indicators to determine what is happening on Soil and Water stewardship and things like that. So I can talk a little bit about that. But I think I talked earlier about the the data we’re gathering in terms of outcomes on the farm. We’re now starting to look at ways as I mentioned earlier on ways to use the data, we have to render metrics on additional outcomes, like the greenhouse gas impacts of some of those inputs. So in some regions, electricity for pumping water for irrigation might come from coal, fire, fire power plants, for example. There the GHG impact of that kind of irrigation is much higher than it is in areas where you have irrigation that comes from hydro power resources. So we’re starting to develop some metrics related to that and we’ll bake that into the metric reporting process in the future, but The basic seven principles are minimizing the harmful impact of crop protection practices. And that’s a fancy way of talking about managing pests and making decisions about when pesticides are used and which ones are used and with what frequency and the second principle is related to water stewardship, how are we ensuring that water is both rainwater and irrigation water is used efficiently and managing the rainfall and the irrigation used on the farm is is retained for productive use for crops and not lost to the greatest extent possible. We have a principle related to soil health and a set of criteria and practices that we’re promoting to enhance soil that not just protect soil but but enhance it enhancing similarly enhancing biodiversity. And that can be plant biodiversity, insect biodiversity, you know, there are plenty of what we call beneficial insects Or predator insects that feed on past that damage cotton crops and in their well understood ways to enhance their populations. There’s mammalian biodiversity, you know, creating habitat for, for birds and four legged creatures that live in and around the farm. And farms can be managed in a way that enhances their, their frequency and, and, and habitat. The fifth one is related to taking steps to ensure that the quality of the fiber that’s grown, the quality of the final cotton lid is as high as it can be. And those those are factors related both to how the cotton is grown, but somehow is subsequently handled, how it’s picked, how it’s stored, how it’s protected between the farm and the gin. There’s a lot that can be done there to improve the quality and that has a direct impact on on profitability particularly in small holder countries. We’ve we’ve been able to make some dramatic improvements in that budget with some very simple training and simple steps. The sixth one is related to what we call decent work. And it’s a host of things that have a lot to do with both fairness and safety and decent treatment of workers on the farm, ensuring that they have access to equipment to keep them safe and protecting risk to their health from certain farming practices. But also ensuring that the terms of their employment and engagement on the farm is is conducted properly and there’s no no opportunity for exploitation or or abuse of any kind. And then the last one is a seventh one that we added in the most recent revision of the better cotton standard in what we call a management systems. And we added that because we realized that a lot of the principles, the other six principles are supported and improvement with respect to them as advanced When farmers keep good records when they set goals and plans for how are they going to improve soil health? What are their what are their, you know, multi year objectives with regard to that, and how, how can BCI and its partner support them in meeting those meeting those goals that they define in a management system on a smallholder farmers takes a very different form than a management system on a big 2000 acre farm in Southern California, obviously.

Borna (ClimateAi) 37:25
So you guys mentioned before you talk about the seven metrics, you mentioned, greenhouse gases, where does that slot in? Or how does BCI think about that? It is still early in the process of being slotted in or what is the status of that component of the metrics?

Scott Exo 37:42
You and I talked about this a little bit, we very much. We feel very strongly that climate is a very urgent priority for cotton producing areas and cotton farmers in cotton production systems. We think that cotton farmers in particular are going to feel the brunt of climate change, and that adaptation now and increasing resilience is really is really crucial to to meeting that challenge. And that’s if anything that’s more important in smallholder settings than it is in large farm settings. In general, because, you know, wealthier nations and farmers have more resources for adaptation, just by definition, they have more built in financial resilience. That doesn’t mean that it’s any less urgent. In places like Australia, Australia is really suffering right now, from a prolonged drought that they openly attributed to climate change. And I think rightly so. They’re on the forefront of that right now. But as we discussed earlier, you know, how much $1 can mean to a to a farmer in Pakistan when you’re when you’re living on the edge and climate change means that you may not have a crop in a given year that can be catastrophic. We feel a very strong obligation to pay close attention to that and To our partners. So, what we did in the recent revision to the standard was we, we essentially looked at several of the principles in particular soil water, biodiversity, and then some of the social economic factors with an eye toward adaptation in resilience. So we call those out we did not create a separate principle or set of criteria for climate change because we wanted to acknowledge that most of the effects of climate change will be felt in relation to those factors, soil water and, and biodiversity and on and on people’s livelihoods. We tried to revise criteria related to those three or four issues with that in mind. So for example, with regard to soil were emphasized emphasizing the use of management systems that are effective under a broad ranges oil and climatic condition. So our effort to measure inputs and also the greenhouse gas footprint and do environmental resources mapping is an attempt to try to move cod production in a direction that you might might be termed climate smart management, reversing the degradation of land by adopting a sustainable land use change approach. So we’re not taking we’re identifying areas of high carbon density for us in particular and protecting them from significant loss through conversion to agricultural land. So, for example, we put in place a streamlined but fairly stringent analysis that was required. If and when lands were being considered for conversion to agriculture, and if they have high conservation value, then they’re ineligible for conversion or at least Conversion that on which better cotton production subsequently happens. So that any conversion done to those kinds of lands would not qualify for better con. So we’re creating a disincentive there. The challenges related to the changes in pest pressures as climate changes are also something that is very much on our minds. We, you know, research institutions are struggling with this as well. But there are a number of what I would term advanced IPM integrated pest management practices that if deployed effectively, can enhance resilience and reduce the incidence of any kind of past or at least, result in better earlier, better earlier surveillance of past and treatment of those past before they reach thresholds that cause greater economic damages is a fundamental principle of IPM that that contributes to resilience.

Borna (ClimateAi) 42:00
question that just popped up in my head was like is, so there’s two different parts. When we talk about climate, there’s, you know, you have climate change mitigation, which is less emit less. And then you have adaptation, which is saying, you know, the climate is shifting or we’re going to have more of X or Y type of event like a drought or a flood, how can we be better prepared to deal with that? When we look at the climate change mitigation component? Is that more of an issue in your guys’s standard for countries like the US because I would imagine if you’re going to like a smallholder farmer in a developing country, you know, you’re not going to tell them to change their tractor to one that is more efficient than doesn’t use diesel or something. Because for them, the more pressing concerns are a little bit different than they are for us.

Scott Exo 42:51
I think adaptation, resilience, if anything is more pressing, in that smaller context, we’ve taken largely adaptation and resilience approach in the standard. But mitigation. I think we’re hopeful that by doing more to quantify the GHG contributions from various production practices, I use the example of of irrigation and irrigation choices, that the analysis of the various contributions of different practices would contribute to better management decisions about how those what contribution they can make the mitigation by making alternative choices. I will say that in in a lot of those large farm so called large farm countries, Brazil, Australia, United States, a lot of that work has some considerable tail in not not so much in the name of climate change mitigation, but in the in the name of resource efficiency or input efficiency. So there’s a lot of work being done on optimizing trackers. Optimizing you know engine speeds and monitoring and things to, to reduce diesel consumption on the basis of, you know, algorithms that help calculate that and compensate and provide real time feedback to operators sometimes just make the decision make the decision for them, right. There is a lot of work when I was in Australia in the summer, there was a lot of work being done on solar alternatives to monitoring systems to systems for operating irrigation gates and other you know, mechanical changes remotely through micro photovoltaic installations instead of diesel pumps and things like that. Also, just minimizing the amount that people have to go out and do those things physically in Brazil has some other similar example. So those kinds of things are happening in the name of resource efficiency, and I think the current low price of cotton is actually ironically enough is controlled To the search for greater management efficiencies to be gained from some of those technologies, particularly when they’re not terribly expensive to implement.

Borna (ClimateAi) 45:10
That’s the beauty of the ag sector is like a lot of these things that are happening for efficiency, or for resilience, adaptation also just ended up being a benefit. Yeah, yeah. They also mitigate or they’re co beneficial in other ways as well. Curious to get your take on the different ways that climate change is impacting the cotton supply chain, or I guess first, is it like are we are we seeing hits to cotton growth in particular parts of the world? I know cotton plants are pretty resilient to drought, got pretty deep roots, but my understanding is that they’re fairly temperature sensitive. They sort of sit between the 60 and 100 degrees Fahrenheit band and if they go outside, they can be pretty detrimental to the crop.

Scott Exo 45:52
I’ll harken back to this Australia example. They’re in the third year of a serious prolonged drought. And what’s That that has manifest largely for them in the terms of the availability of water, irrigation water, all cotton in Australia is irrigated, because it’s, you know, it’s an arid, arid climate, the cotton growing regions of Queensland and New South Wales, that’s where most of the cotton is grown. There just isn’t water available to irrigate that cotton and even though they’ve achieved tremendous efficiencies in the last 20 years in in a way that they in the amount of water used, you know, earlier basis to grow a kg of cotton, tremendous efficiency increases, they still have been cut way back in terms of availability to grow cotton. So, between 2017 and 2018, they grew half as much cotton, as was average and this year they will grow half of what they grew last year. So they’re essentially growing a quarter of whatever is quote unquote normal in Australia as a direct result of the drought. What does that mean for the market? Like, as this stuff is becoming more and more prevalent and more and more common in terms of frequency, as well as the scale of the impact? Why are we like are we seeing like our clothing becoming more expensive or is the supply shifting somewhere else in the world, cotton has been suffering for some time from loss of market share to man made fibers for a variety of reasons, some of which are related to cost and, and others related to a number of other things. The price of cotton right now is is very low. It’s been stuck apart from a period about in the last six to 12 months when it briefly got to about 75 or 78 cents. It’s been stuck in the mid 60s since I began working for BCI in 2014. And that is 62 cents in the United States is below the cost of production and You can’t do that for very long. You can’t do that for very long. So and we have relatively high production costs, as you can imagine United States relative to other places. That’s the benchmark price for cotton from Texas, that’s, you know, that head forward to, you know, nine months. But that’s, that’s the price the world looks at. So it’s not, there isn’t a scarcity of cotton, it’s all getting sold. And there’s a slight oversupply. The Chinese have had tremendous surplus in warehouses and stocks that they’re slowly releasing into the market. And that’s a complicating factor. Cotton is not scarce at this point, they have nevertheless lost some market share or other other products. So there are always fluctuations of regional fluctuations and various catastrophes of greater or lesser magnitude in some part of the world. That’s the nature of an agricultural crop, but Australia just happens to be a pretty they’re not a large producer. relative to a number of other countries, but they have the highest yields in the world they have. They’re known for high quality cotton

Borna (ClimateAi) 49:07
per acre overall

Scott Exo 49:08
per area. Yeah.

Borna (ClimateAi) 49:10
So we sort of talked about how the social well being of the farmers is directly linked to their financial resilience. But building off of that a little bit further, like this financial resilience or like, how robust they are to whatever changes or curveballs get thrown at them, is largely dependent on weather variability and unpredictability. So what are you guys recommending to them? Like are people using like some sort of climate forecast? Are they mostly being advised to procure insurance? Are they hedging their bets with, you know, drought and flood tolerant seeds in the same season? How are they going about managing that risk?

Scott Exo 49:51
within the large farm countries? We’re not, you know, we know better than to try to advise them because we’re, we’re enablers. We’re not really we’re not experts. So they have much better sources of of that for cutting edge information than than we provide. What they’re doing in the large farm countries is they’re, they’re turning to some new technologies. I think an example I would point to is the there are new developments in seeds themselves. But there are also developments in what are called microbial treatments for seed that are focused specifically on enabling a given seed to perform better under stressful conditions like drought, for example, to perform better and achieve higher yields. So there’s so try to try to cook using some of these microbial technologies about which I know very little. Yeah, I will admit, but there’s some pretty interesting claims. And there’s some pretty interesting data that’s being gathered as a part of it to support these claims that these microbial treatments can actually Boost yields and create resilience in the face of conditions that farmers are increasingly seeing. That’s a nod to the importance of climate change very, very openly, very openly. But farmers are doing a number of things to to do everything they can to increase their their water use efficiencies or invest investing in that because they know that that curve is bending in not in a good good direction. In Texas, West Texas, for example, you know, we know that we’re drawing down the aquifer faster than then it can can regenerate itself. But we were also now increasingly seeing in West Texas, a climatic period some of the most, you know, more warmer days, more unpredictable rains at unseasonable times and just really crappy cotton growing conditions. So farmers are doing everything they can to try to respond to that in some cases, they’re they’re cheating crops, they’re going to other crops. They’re going to dry land production. They’re abandoning irrigation because it’s, you know, kind of a crapshoot. You know that things are moving that that direction anyway, I don’t know much about the kinds of insurance that that those farmers are pursuing. But I would imagine they’re they’re considering that, you know, they have some baseline assurance from the federal government for crop losses. As we’ve scaled back on more traditional subsidies, crop insurance, issued or guaranteed by the federal government has become the means by which we support farmers and help to insulate them from from extreme risks. But there’s private insurance as well. That’s why I’m really kind of excited about the work that you all are doing, because I don’t know that the kinds of decisions that farmers are making with regard to climate are, are yet informed by a broader view of what’s likely to come next. And I do Don’t sense that with with some exceptions, I don’t sense that the universities are are able to, to provide that longer range view, longer term view and in quantify it. And in terms of risk, I think the farm that the universities and I think appropriately so are helping with some of the adaptation strategy. So in West Texas, there’s a great organization called the Texas Alliance for water conservation that’s really kind of pushing the boundaries and doing on farm trials and working directly with farmers to pilot and that and make recommendations about some of these adaptation strategies with particularly with regard to to irrigation technology, but also to using data in the short term like what’s the likelihood that we’re going to have this many degree days left in the season before this cotton matures and, and is is another application of water a wise decision. or not because applying water, it’s a little bit of what I was talking about earlier, I said, you know, farmers aren’t really making decisions about profitability. But in this case, it’s they are doing that with regard to that last water application, which costs money to pump out of the ground.

Borna (ClimateAi) 54:15
I mean, that’s the whole crux of the company was that, like, there’s this gap that exists between climate and agriculture, that if we close could, in our opinion, create a far more efficient system where you don’t have to be handing out relief packages anymore. You know, it can be built in at the systemic level, by giving people better insights into, you know, what’s going to happen, and it’s, the climate forecast is not going to be much different than the weather forecast. It’s not always gonna be right. But the idea is that, you know, if you could provide a little bit of edge into what’s going to happen, it could be pretty useful, especially if you look at a place that’s not only moving in one direction, like if you look at India, you know, you’re getting droughts and floods like at that point, what, what do you just split your seeds into half and half and you just always are going to lose half. So hopefully we’re working in the right direction, and we can Start to provide these tools for these different stakeholders that will allow them to, you know, make smarter decisions and build more more resilient operations. But, but Scott, I think we’re, we’re pretty deep. I could go for another hour or two with you here, but I’m gonna I’m gonna let you go. Thank you so much for joining us here today. I really appreciate it.

Scott Exo 55:19
Oh, you’re welcome. You’re welcome. It’s been this is not an easy issue. We appreciate your interest. And when we’re keen to see where you all take this, I think the think the work you’re doing ultimately would be cool if an informed policy and helped all of us, you know, government, NGOs, and others direct resources strategically help farmers adapt to climate change and, and be better prepared more quickly based on sound data. And that’s, I think that’s your principal contribution. Definitely.

Borna (ClimateAi) 55:49
Thanks, Scott. I’ll talk to you soon. Hey, everybody, thanks for listening. If you have any feedback, or you’d like to add your own two cents on the topic discussed today, or if you’ve just got your own idea about someone that we should discuss in the future, please feel free to shoot me an email at podcast@climate.ai. At its core, this podcast is just a way for us to learn and we want to share our learnings as we go. So we’re always open to building on these conversations and hearing new perspectives. Thanks for your support and see you next time.