Wall Street Journal
Wal-Mart Stores Inc.,Target Corp. and other big U.S. retailers have become entangled in a controversy over whether one of India’s biggest textile companies has been supplying their stores with phony “Egyptian cotton” sheets.
Egyptian cotton, which since colonial times has been prized for its softness and durability, is often touted by stores that charge a premium for bed sheets or bath towels made with the material. It is found in everything, from Ritz-Carlton hotel sheets to Brooks Brothers dress shirts.
Last Friday, Target said it was pulling thousands of items off its shelves and cutting ties with Welspun India Ltd. after an investigation determined Welspun had used non-Egyptian cotton for about two years.
Wal-Mart, J.C. Penney Co. and Bed Bath & Beyond Inc., three other big Welspun customers, said this week they were opening investigations into whether the company supplied them with authentic Egyptian-cotton products.
“We will aggressively pursue our investigation and take appropriate action, if needed,” Bed Bath & Beyond said on Wednesday.
Welspun says it has commissioned an accounting firm to review its supply chain. “We are taking this situation very seriously….We won’t rest until this situation is resolved,” the Indian company said Wednesday.
Welspun’s share price has been sliced by half since the Target allegations surfaced last Friday. Mumbai’s stock exchange suspended trading in its shares Wednesday, as the stock fell to its maximum daily limit for a third-straight day.
Two-thirds of Welspun’s $898 million in sales for the year ended March 31 came from American retailers.
The textile maker also supplies towels for the Wimbledon tennis tournament and the Rugby World Cup. Welspun declined to say how it sources its Egyptian cotton, saying only that it would be covered as part of its audit.
Egypt produced less than 1% of the global cotton supply last year, according to the U.S. Department of Agriculture, and its output has suffered amid political and economic upheaval in recent years. The country’s production is estimated to be 320,000 bales in 2016, or a third of what it produced in 2006, according to the USDA.
“There are a lot more Egyptian cotton goods than Egyptian cotton,” said Jordan Lea, co-owner of Eastern Trading Co., a Greenville, S.C., cotton-trading firm. “It’s impossible.”
Like Cuban cigars or Champagne wines, the defining characteristic of Egyptian cotton isn’t necessarily its quality but where it is grown. Any cotton harvested in Egypt—there are roughly 10 varieties grown—can carry the label.
“Long fiber” cotton sourced in Egypt is nearly indistinguishable from “long staple” cotton grown in other parts of the world once it becomes yarn or fabric, analysts say.
The Cotton Egypt Association, which licenses the trademark and certifies suppliers, estimates that 90% of products labeled “Egyptian cotton” are fakes but such public rebukes for mislabeling are rare.
In October, the government-supported group said it had discovered the genomic fingerprint for Egyptian cotton and launched a crackdown to combat knockoffs using DNA testing. Welspun was one of Cotton Egypt’s certified suppliers, having received the “Egyptian Cotton Gold Seal” for its bed linens, bath rugs and towels in April this year. The Egyptian association didn’t respond to a request for comment.
DNA testing, however, isn’t widespread, said a spokesman for Cotton Inc., which represents U.S. cotton producers and importers. That has left manufacturers and retailers mostly dependent on following the raw material through a complex supply chain. Each stage of a cotton product’s production, from yarn making to fabric cutting, often happens in a different country.
A search for “Egyptian cotton sheets” on Amazon.com turns up more than 2 million results, while one on Walmart.com turns up more than 24,000 results. Both figures include items sold by third parties. Target.com now lists just six items.
A Target spokeswoman said about 750,000 sets of sheets in stores between August 2014 and July 2016 under the Fieldcrest brand were labeled as made with Egyptian cotton.
She declined to say what triggered the company’s investigation into Welspun. The company said Welspun’s conduct “was a clear violation” of its policies.
The discovery underscores the difficulties of policing a global supply chain, where large retailers assemble a sprawling network of suppliers in developing countries to produce their goods at cheaper cost.
*This story first appeared on The Wall Street Journal
By Andria Cheng
Fair Trade coffee and chocolate have become commonplace. Get ready for Fair Trade fashion and décor.
Two years after a garment-factory collapse in Bangladesh killed more than 1,100 people and put a harsh spotlight on fashion-industry working conditions, Fair Trade apparel is gaining ground.
The volume of apparel and home goods sold as Fair Trade Certified has grown rapidly in the past two years, according to the nonprofit certification group Fair Trade USA, which in 2012 introduced more than 334 compliance criteria for textile factories.
Fair Trade USA’s apparel certification now appears on 20 brands, up from just a handful before the Rana Plaza factory collapse in Bangladesh. Patagonia, Williams-Sonoma Inc. ’s West Elm unit and Bed Bath & Beyond Inc. are among retailers that began selling Fair Trade Certified apparel or home furnishings in the past two years, according to Fair Trade USA.
The number of factories certified by Fair Trade USA is expected to increase to at least 25, in countries from India to Colombia, by the end of 2015, up from fewer than five in 2012.
A range of factors are measured by the group before a factory is labeled Fair Trade Certified—which is a trademarked designation. Those include a factory’s environmental impact, its overall working conditions and the rights afforded workers. As a baseline, workers must be guaranteed local minimum wages. Brands also are required to make additional payments—based on how much they buy from factories—directly to workers in what’s called a Fair Trade Premium.
The total cost to the brands, including third-party factory auditing, worker training and the Fair Trade Premium, is, on average, about 1% to 5% of what brands pay to factories, said Maya Spaull, director of Fair Trade USA’s apparel and home goods category.
Fair Trade USA, according to a West Elm representative, is the only group certifying production facilities for home and apparel manufacturers involved in large-scale production. “Traditionally, certification has been limited to raw materials or outputs,” said West Elm spokeswoman Abigail Jacobs.
Fair Trade USA—founded in 1998 to certify coffee production—now certifies in 30 categories, ranging from furnishings to flowers to spices to lip balms, as well as clothing.
Certified ethical apparel and home goods “need to be available to a wider mass-market audience” to “effect true positive change,” just as organic food choices have gone mainstream, said Marci Zaroff, founder and CEO of Under the Canopy, a fashion brand that works with Fair Trade USA.
Under the Canopy’s Fair Trade Certified line of bedding, introduced for back-to-school season at Bed Bath & Beyond last year, sold out immediately, according to Ms. Zaroff. “Millennials are seeking authenticity and transparency,” she said. They are the ones “driving the rapidly growing movement for sustainable and ethical fashion.”
Under the Canopy has added more Fair Trade collections at Bed Bath & Beyond, including lines of organic cotton kimono robes and throws, which it also sells through Amazon.com and Wayfair.com.
West Elm is expanding the six Fair Trade Certified rug offerings introduced during the 2014 holiday season to 30 rug lines and 13 textile collections this fall, said Ms. Jacobs, adding that the broadening of its certified offerings “speaks to the customer’s interest” and “commitment to consciousness.”
Whole Foods Market Inc. began carrying Fair Trade Certified T-shirts made by Pact Apparel in the spring of 2014. The shirts, which cost $15, are one of Whole Foods’ best-selling basic apparel lines, the company said.
At yoga and outdoor-apparel brand Prana, which was acquired by Columbia Sportswear last year, the single Fair Trade Certified T-shirt introduced in 2010 led the way to nearly 100 items, including dresses, skirts and men’s shirts, said Nicole Bassett, the brand’s director of sustainability. In fact, Fair Trade products now represent about 15% of the overall assortment at Prana, which has approached some existing suppliers to help them get certified, Ms. Bassett said.
**This article first appeared on The Wall Street Journal here.