Introduction to Unlock - Preview

the challenge

what are we trying to address?

Analysis from McKinsey and Global Fashion Agenda shows that the global fashion industry produced around 2.1 billion tonnes of GHG emissions in 2018, equalling 4% of the global total. This is equivalent to the combined annual GHG emissions of France, Germany and the United Kingdom. 38% of these emissions come from raw material production, of which cotton makes up 27% by volume. If no further action is taken over the next decade beyond measures already in place, the industry’s GHG emissions will likely rise to around 2.7 billion tonnes a year by 2030, reflecting an annual volume growth rate of 2.7%

farmer incentives

One of the most challenging areas of action in reducing textile raw material and cotton impacts is the shift from conventional agriculture fibre production to lower climate impact and regenerative practices. Demand far outstrips supply for more sustainable cotton programmes - with many brands setting targets for 100% more sustainable sources knowing that there is not yet sufficient volume of those sources available on the market. Demand signals are not making their way down the supply chain to farmers - who do not receive sufficient incentives or support to allow them to shift their practices. Many farmers do not have the funds to apply improved practices, or are concerned about reduced yields due to changes. Therefore, if mechanisms are created to fund farmers at the start of their journey, it can support their transition to improved practices and ultimately decarbonise production and increase the volumes of low climate impact cotton being produced.

funder incentives

In order to fund a more rapid transition to decarbonised production and farmer incentives, it is important to not only rely on regulation and government subsidies but also to leverage the support of the private sector - in this case the fashion brands using the majority of cotton. However, there are some major barriers to leveraging brand support for action. The first is that existing cotton programmes struggle with accurate GHG emission measurement, which makes it challenging to demonstrate the credibility and effectiveness of climate interventions with farmers. The second is that even where data does exist, there are challenges making claims. The programmes with Life Cycle Assessment data that can be used to make claims are not yet widely available on the market, and also need to wait till farmers reach certification to make claims which can take several years. The programmes designed to support claims (e.g. conventional offset programmes), are widely criticised by NGOs and are not permitted under the leading company target setting and reporting mechanisms such as the Science Based Targets Initiative and CDP. There is also significant new guidance emerging from SBTi and the Greenhouse Gas Protocol on how to credibly claim GHG removals (soil carbon) from agriculture, which is challenging for individual brands or certification schemes to navigate alone.

the solution

what will unlock do?

- Quantify GHG emissions reductions and removals at farm level when farmers apply lower climate impact and regenerative agricultural practices, supported by qualified Implementing Partners who can provide technical advice.

- Financially reward farmers for GHG reductions and removals, by allowing companies with supply chain links to the farmers to fund these GHG benefits (‘Unlock Units’). All Unlock Unit funds are disbursed directly back to farmersoperational costs are covered by the project operational budget.

- The project will also go beyond GHG emissions reductions by measuring co-benefits of the implemented practices (water, biodiversity, soil health) as well as the livelihood benefits for farmers participating in the programme.

- The project also aims to provide learning and technical support to the wider textiles industry as well as those working on farm level GHG emissions measurement, claims and incentives mechanisms, by developing publicly available white papers on Unlock pilot learnings

how does unlock address the existing challenges?

challenge 1: accurate measurement of impacts at farm-level

GHG quantification models will be combined with satellite and remote sensing data, data on farmer practices, and soil sampling to calculate GHG reductions and removals at farm level for all participating farmers, with Implementing Partners gathering relevant farm data. Co-benefits will also be measured on biodiversity, soil health, water and farmer livelihoods, while mechanisms will be developed for permanence and supply chain traceability for claims. Implementation Partners will work with farmers to identify and implement the most appropriate practices from a list of potential interventions.

challenge 2: brand scope 3 ghg claims

Quantification approaches and supply chain links will be validated by the Value Change Initiative and GHGP, with technical oversight from SBTi and other relevant bodies. This will allow reductions and removals from the Unlock workstreams to be quantified into Unlock Units, supporting brand Scope 3 reduction and/or removal claims. Brands will be guided on relevant targets, claims, and reporting approaches to ensure alignment with the GHG Protocol Land Sector & Removals Guidance, FLAG requirements, and other leading requirements.

challenge 3: incentives for farmers

Unlock Units will have a fixed price per tonne of CO2 equivalent, which is linked to EU Carbon Futures price + premium of 50 Euros. This price will be paid by any brand purchasing an Unlock Unit, and the whole fee will be sent directly to the relevant farmer to provide support and incentives for practice change and improved impacts. The aim of Unlock Units is to incentivise more farmers to shift to low climate impact and regenerative farming and get through ‘pain point’ and risk of transitioning practices.

details of the pilot project

The Unlock Pilot will test 2 different quantification data providers (Indigo and Regrow), as well as test 2 different guidelines to support brand claims (draft GHGP Land Sector and Removals Guidance and VCI guidelines). These pilots will evaluate how to set up programs to support farmer transition while enabling brands to make scope 3 GHG claims.

Multiple implementation partners will support farmers in both India and the USA, to ensure this program can be successful as possible in large and smallholder farming contexts, positioning Unlock to offer financial incentives and accelerate adoption of lower climate impact practices – including those with limited access to finance and those from underserved minority groups.

key outcomes from the pilot

Focus of the 2023 pilot is proof of concept and preparation for full rollout:

- Tested and validated GHG modelling approach - in line with emerging guidance.

- Brands enabled to make scope 3 claims under SBTi and other key initiatives

- Farmers successfully provided with Unlock Unit funds

- Learnings gathered from testing different methodologies and data partners - and from IP and farmer feedback - in order to create a successful post-pilot rollout

- A series of white papers published for the benefit of the wider industry

- Setup is in place for post-pilot rollout

To note, Unlock does not compete with existing low climate impact and regenerative cotton schemes - it is a tool that can be added on top to provide quantification, claims and incentives.

unlock stakeholder roles

unlock intervention activities

There are three groupings of potential practice changes which farmers may select to implement as a result of the Unlock programme incentives - lower impact tillage, revised crop management plans, and optimisation of farm inputs and application of inputs. Below is a detailed description of each of these types of eligible interventions with examples (non-exhaustive):

long term unlock approach

Building upon the learnings from the pilot, the Unlock project will implement a full scale programme from 2024 onwards. The first step will be to expand the program in the US and India, to include many additional farmers as well as increase the number of implementing partners engaged to work with farmers. Beyond 2025, the programme will also consider expanding to other priority cotton growing countries, such as Brazil, Australia, Pakistan, Bangladesh, and Turkey.

The programme will also explore how to further support farmers growing cotton in crop rotation with other crops - through calculating Unlock Units for the other products produced by farmers and engaging other industry partners in the private sector that are able to fund farmers for those GHG reductions and removals related to their products. An example might be that a farmer grows cotton in rotation with soy - and the Unlock programme can engage with major soy traders or users to explore whether they could fund Unlock Units for the relevant decarbonisation of soy production.

https://www.mckinsey.com/~/media/mckinsey/industries/retail/our%20insights/fashion%20on%20climate/fashion-on-climate-full-report.pdf

https://www.mckinsey.com/~/media/mckinsey/industries/retail/our%20insights/fashion%20on%20cli mate/fashion-on-climate-full-report.pdf

https://www.mckinsey.com/~/media/mckinsey/industries/retail/our%20insights/fashion%20on%20cli mate/fashion-on-climate-full-report.pdf

https://www.wri.org/research/roadmap-net-zero-delivering-science-based-targets-apparel-sector

https://www.mckinsey.com/~/media/mckinsey/industries/retail/our%20insights/fashion%20on%20cli mate/fashion-on-climate-full-report.pdf