The impact of new regulation on farmers

Noor Jehan Sadiq of Pakistan-based Interloop explores the effects of new global regulations on raw material farmers in the textile & apparel supply chain. 

By 2025, companies will need to fully map and declare their supply chains under new regulations, including the European Union’s (EU’s) Corporate Sustainability Due Diligence Directive (CSDDD) and the Eco-design Sustainable Products Regulation (ESPR). These mandates push businesses to ensure that forced labour is eliminated from supply chains, and product claims are verifiable. In the US, the Uyghur Forced Labor Prevention Act (UFLPA) already requires detailed documentation on product origins for goods entering the country.

For the textile and apparel industries, these regulations mean tackling long-standing supply chains that have been built over decades. These supply chains span multiple tiers across continents, making them challenging to monitor. Without clear industry benchmarks, companies often rely on their own sets of reporting criteria, many without a ground-level presence to understand the landscape for those at the bottom of the supply chain—the farmers. The complexity is heightened by the industry’s reliance on cotton, one of the most widely used fibres in the world.

New regulations reshape approaches

Cotton has become the immediate focus of these sweeping regulations. According to the Textile Exchange’s Materials Market Report 2023, cotton made up 22% of global fibre production in 2022, totalling 25.5 million tonnes. While sustainability certifications like Fairtrade, Organic, Cotton made in Africa (CmiA), and Better Cotton cover 27% of the world’s cotton, the new rules demand even more detailed traceability, requiring brands to document every stage of production.

Cotton supply chains are vast, fragmented networks involving farmers, ginners, spinners, fabric makers and garment manufacturers—often operating across multiple countries under widely varying conditions. Better Cotton reports over 2.2 million licensed Better Cotton farmers across 22 countries, each with its own topography, social norms, and farming practices. In regions like Pakistan and India, small landholdings dominate, versus the large industrial farms in Brazil and Australia covering thousands of acres.

This fragmentation creates huge traceability gaps. Despite a rise in traceability solutions designed to track products back to their origins, many small-scale farmers in India, Pakistan, and Africa lack the access to such technologies or training to meet the new requirements.

Small farmers risk being left behind

Farmers in developing regions are at risk of losing access to global markets if they can’t meet these stricter traceability standards. Large, industrial farms are better equipped to comply, while smaller farms face more challenges. Faryal Sadiq, chief marketing officer at Interloop, notes that customers are already demanding cotton sourced through traceable programmes such as the US Cotton Trust Protocol. Trust Protocol offers data capture, aggregation, and reporting services, aimed at continuous improvement across six key sustainability metrics and article-level supply chain transparency.

With more than 25% of global cotton coming from India and Pakistan, these regulations could severely impact millions of farmers if they are not prepared in time. Those who can’t comply may be shut out of international trade, threatening not only their livelihoods but the entire textile supply chain, which relies on cotton from these regions.

Collaboration across the supply chain is essential to mitigate these risks, showing that traceability isn’t just possible—it’s scalable. Looptrace, Interloop’s traceability solution, starts at the farmer level, tracking cotton through each tier of the supply chain, all the way to the finished garment. Over 58,000 farmers in Punjab, Pakistan, have been trained to record, manage and upload data into Looptrace’s database, ensuring compliance with traceability regulations.

Better Cotton has also launched a traceability programme as part of its 2030 strategy. Pilots are underway in South Asia, focusing on chain-of-custody standards and digital data collection. These efforts offer a glimmer of hope to millions of small-scale farmers in regions where the majority hold Better Cotton licenses. In Pakistan alone, 65% of the country’s cotton is Better Cotton licensed.

Collaboration is crucial

Looptrace assigns farmers a unique ID and trains them to input data via mobile or web interfaces, allowing them to document their cotton’s journey throughout the supply chain. This ensures accurate data collection and empowers farmers to be active participants in the system, creating a more transparent process from the ground up.

Traceability alone is not enough, though. A shift towards organic and regenerative farming is gaining momentum as a more sustainable and resilient approach to cotton production. While Better Cotton dominates, several garment manufacturers in Pakistan have partnered with farmers to make the local supply chain more adaptable to market dynamics. Interloop is addressing this demand with its Kapas initiatives, supporting IC-2 certified organic cotton and developing a regenerative cotton supply chain in Punjab.

Creating a resilient local supply chain

The transition to organic farming isn’t without its challenges. One major hurdle is the “in-conversion” period, where farmers switch to organic methods but haven’t yet received certification. During this time, yields are typically lower, making it hard for farmers to compete with conventional cotton in the market. Last year, Interloop stepped in to purchase IC-1 Organic Kapas at a premium price, helping farmers offset short-term losses and maintain their commitment to sustainable farming.

Tech-driven solutions such as Loopkisan are also helping bridge the gap. Integrated with Looptrace, Loopkisan takes traceability a step further, allowing farmers to directly input data on crop life cycles, water quality, GPS coordinates, and farm acreage. A pilot involving 15 organic cotton farmers is already showing positive results, with reduced resource consumption. Subhan Ali, an organic cotton farmer in Punjab, shared his experience: “We used to overuse water and chemicals without much thought. Now, we measure and record everything. We’ve cut back, and our crops are healthier with less environmental impact.”

While the benefits of traceability are clear, implementation remains a challenge, especially for smallholder farmers. The cost of adopting these systems can be prohibitive for many small farmers, and resistance to new technologies is common, particularly in regions with low digital literacy. But with collaboration from brands, governments and NGOs, these barriers can be overcome. Financial support, training and access to resources can ensure that farmers adopt the technology needed to meet global standards.

Making traceability systems scalable

As the textile and apparel industries continue to evolve, traceability will be a key factor in ensuring ethical and sustainable practices. Technologies such as blockchain, IoT sensors and AI could further enhance traceability systems, making them more robust, scalable and affordable for farmers globally.

Companies that are proactively addressing social and environmental risks in their supply chains—through due diligence and by collecting product information at the source—will be best positioned to thrive in this new regulatory landscape. Beyond compliance, businesses that consider the needs of all stakeholders, including farmers and the communities in which they operate, will lead the way in building resilient, purpose-driven supply chains.

Key takeaways

• New regulations are reshaping how companies ensure transparency across their supply chains, adding pressure to already complex sourcing networks.
• Without inclusive solutions, small farmers risk being left behind as traceability becomes an industry baseline.
• Collaboration is crucial to ensure traceability, especially for smallholder farmers.
• Supporting organic cotton means creating a resilient local supply chain that can withstand the challenges posed by new regulations.
• Technology will play a key role in making traceability systems scalable and affordable for all farmers.

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