Report links H&M and Zara to major environmental damage in biodiverse Cerrado

 

By Dimitri Selibas 

 

Clothing giants H&M and Zara have been linked to large-scale illegal deforestation, land-grabbing, violence and corruption in the Brazilian Cerrado, according to an investigation by Earthsight.

Using satellite images, court rulings, shipment records and by attending undercover global trade shows, the U.K. NGO tracked nearly a million tons of tainted cotton going from companies in western Bahia, in the Cerrado, in supply chains serving H&M and Inditex, Zara’s holding company. The two companies in focus, SLC Agrícola and Grupo Horita (Horita Group), have a long history of illegal deforestation and environmental abuse.

The report also deplores the lack of supply chain traceability provided by Better Cotton (BC), a certification system that aims to ensure sustainability in cotton farming, widely used by H&M and Zara. Yet investigators found that the cotton linked to illicit activities in the Cerrado carried the BC label.

Unlike the Brazilian Amazon, where deforestation has been decreasing, the Cerrado has seen forest loss in 2023 jumping by 43% year on year; the savanna biome hosts a third of Brazil’s biodiversity and 5% of the world’s species, yet it has lost more than half of its native vegetation to large-scale agriculture.

Brazil’s booming cotton industry is putting more pressure on the region, as the country, which grows almost all of its cotton in the Cerrado, is predicted to become the world’s top cotton supplier by 2030.

“If you read Zara and H&M’s sustainability policies and human rights policies, they don’t deny that they have a responsibility over their supply chains,” Rubens Carvalho, Earthsight deputy director and report co-author, told Mongabay. “The problem is that they aren’t putting these policies into practice by properly checking and monitoring the supply chains.”

Tracing the source

Between 2014 and 2023, SLC and Horita Group exported at least 816,000 tons of cotton from Bahia to foreign markets, although the total amount could be almost double, additional sources say. The two companies also supply eight Asian clothing factories that provide millions of finished cotton garments to H&M and Zara, the report shows.

Horita Group and SLC’s business have long wreaked havoc on the Cerrado and its communities, Earthsight shows. Since 2008, SLC has received more than $250,000 in fines from IBAMA, Brazil’s environmental protection agency, for environmental crimes in Bahia, while Norway’s pension fund stopped funding the company over its negative environmental record.

In 2014, Bahia’s environment agency found 25,153 hectares (62,154 acres) of illegal deforestation on Horita farms at the Estrondo estate—a 200,000-hectare (494,000-acre) mega-farm in western Bahia — while in 2020, it indicated it could not find permits for 11,700 hectares (28,911 acres) of deforestation carried out by the company between 2010 and 2018. IBAMA fined Horita more than 20 times between 2010 and 2019, totaling $4.5 million for environmental violations.

The report also denounces Bahia’s government for mostly supporting agribusiness expansion and thus encouraging widespread land-grabbing and vegetation loss.

“Since colonial times, there’s a very intertwined and interdependent relationship, as the private sector has a lot of influence and is often too close to the state,” said Julia Neiva, development and socioenvironmental rights coordinator at Brazilian NGO Conectas.

In 2011, Zara was accused of purchasing cotton from Brazilian suppliers using slave labor, Neiva said; the retailer lost the case and the appeal in 2017, with analysts arguing that the incident exposed significant deficiencies in the company’s monitoring system.

Is it better cotton?

The certification used by the two retailers could also contribute to harm in the Cerrado, Earthsight said, as the tainted cotton identified had the BC label. Although meant to guarantee a clean supply chain, BC’s policies contain several weaknesses: Cotton is traced only to the country of origin, not to individual farms; harm prevention is limited to Indigenous and traditional communities outside farms; those within farm boundaries, whose land might have been stolen, are disregarded, while agribusinesses don’t need to obtain their full consent for projects affecting their livelihoods.

BC’s accreditation and compliance in Brazil is also based on a conflict of interest, Earthsight shows, as the national cotton producers’ association Abrapa oversees BC implementation.

“Brazil is an agribusiness frontier in the world. When you need to create new areas for production, you don’t want costs for that land,” said Fábio Pitta, coordinator of Brazilian NGO Network for Social Justice and Human Rights, which works with Cerrado communities. In 2023, he co-authored a report exploring how business operations and investments contribute to widespread human and environmental rights violations in the region.

Pitta explained that after the 2008 financial crash, international financiers looked for new investment opportunities in Brazilian agricultural commodities, with the land required needing to come from somewhere.

“They [farmers] always need to expand in the area, even if they are improving densification, mechanization and productivity,” said Pitta. “And when we are talking about new areas, we are talking about deforestation, displacement of small communities, peasants, Afro-descendants, Indigenous communities, using violence for creation of a new farms to produce commodities.”

Industry reaction

In response to Mongabay’s request for comment, SLC denied many of the report’s accusations, stating that its production is based on strict quality standards including certifications from Abrapa, BC and the Responsible Brazilian Cotton Program. The company also reaffirmed its commitment to transparency and respect for the environment and local communities in its areas of operation.

Horita and Abrapa did not respond to Mongabay’s requests for comment.

In September 2023, after seeing a draft report from Earthsight, Horita denied the claims and threatened legal action against fake news.

Its response read: “The Horita Group does not have any hectares in its private property complexes that are used for agriculture that do not comply with environmental legislation. All the points made by inspection bodies in the past were promptly proven to be in order or were subsequently regularized, in accordance with environmental regulations.”

ABRAPA also responded to Earthsight, stressing that producers seeking certification must follow a rigorous protocol involving hundreds of steps covering aspects from agricultural management to compliance with Brazilian environmental and labor legislation.

Abrapa said it trusts the independence of third-party audits and clarified that it does not directly approve or disqualify farms from the BC program, while welcoming BC’s initiative to enhance audit diligence.

Retailer response

Mongabay approached H&M and Inditex, Zara’s holding company, about the report findings.

Responding to Mongabay’s request for comment, H&M said report findings were highly concerning and that it takes them very seriously, highlighting that BC had started a third-party investigation when the report was brought to its attention. “We are in close dialogue with Better Cotton to follow the result of the investigation and the next steps that will be taken to strengthen and review their standard. Therefore, we kindly refer to Better Cotton for more information on the next steps that are being taken as a result of their investigation.”

Similarly, Inditex wrote in an email to Mongabay, “We take the allegations against Better Cotton extremely seriously and we urge them to share the outcome of their third-party investigation as soon as possible and take any necessary measures to ensure a sustainable cotton certification that upholds the highest standards.”

On April 8, Inditex sent a letter to BC CEO Alan McClay, requesting clarity on the certification process and progress on traceability practices, stating that it had waited more than six months for the results of an internal investigation by Better Cotton that was promised for the end of March and began in August 2023.

“It’s clear from these companies’ responses that they have very little visibility over their cotton supply chains,” Carvalho said. “They are relying on assurances provided by some of their suppliers that there is no problem.”

“It’s very questionable whether BC can reform itself sufficiently to make sure that it is a scheme that can actually guarantee sustainable and legal cotton. And this is the reason why we have been calling for regulation in supply chains.”

In response to questions from Mongabay, Better Cotton said it has conducted an independent audit relating to three Better Cotton licensed farms in Bahia state and will make a summary of findings available.

“As per our operating procedures, if there is evidence that the farms do not comply with requirements of the Better Cotton Standard, their licenses will be suspended or revoked,” it wrote. “We will work closely with the Brazilian Cotton Growers’ Association, our partner in Brazil and owner of the Brazilian Responsible Cotton Protocol, a national program recognized as equivalent to Better Cotton’s Standard, throughout this process.”

Required action

The report urges Brazil’s federal government to implement a comprehensive plan to halt all large-scale deforestation in the Cerrado, including legal activities. It also calls on Bahia’s government to fulfill its constitutional duty by mapping all public lands to ensure preservation and uphold land rights for traditional communities.

It also calls on Western states fueling cotton consumption to boost regulation in the industry. In the case of the EU, Earthsight singles out the Corporate Sustainability Due Diligence Directive, which, if approved, would require large companies operating in the block, such as H&M and Inditex, to identify and minimize negative impacts on human rights and the environment in their supply chains. It also calls on the block to review its EU Deforestation Regulation, which currently doesn’t cover cotton.

Earthsight demands that BC strengthens its standard and enforcement mechanisms. And while H&M and Zara should push for that, they should implement their own stringent ethical sourcing checks.

“For years, for decades even, we’ve heard promises and commitments and pledges saying that they’re going to improve supply chain monitoring and guarantee sustainability,” Carvalho said. “In the meantime, we’ve continued to lose forests.”

“The time for these promises is over. We need governments to just step in. Force companies to observe due diligence and to trace the commodities and raw materials they use back to origin.”

Banner image: The Cerrado in Correntina, Bahia © Thomas Bauer / Earthsight 2023.