EXECUTIVE SUMMARY: FASHION CRIMES

For many years, the world’s attention has been fixed on the terrible crimes against people and planet being ravaged in the forests of the Brazilian Amazon, to supply beef and soy. There is a growing awareness of the need to address the impacts on the Amazon of what we eat. But similar destruction in another crucial biodiversity hotspot in South America, driven by a very different commodity, has gone largely unnoticed.

South of the Amazon lies the vast Cerrado, one of the richest biomes on Earth, home to 161 species of mammal, including giant anteaters, giant armadillos, jaguars and tapir. Millions of people are also dependent on its forests and savannahs for their livelihoods. Yet the destruction being wrought in the Cerrado by industrial agriculture in recent decades has been even worse than that seen in the wet, dense forest to the north. About half of the biome’s native vegetation has already been lost, mostly to make way for agribusiness expansion. And while the latest news from the Amazon is cautiously positive¹, in the Cerrado the opposite is true. The problem is getting worse, not better: in 2023 rates of deforestation in the biome increased by 43 per cent compared to the previous year.² 

Earthsight’s year-long investigation reveals that corporations and consumers in Europe and North America are driving this destruction in a new way. Not by what they eat – but what they wear. Earthsight has discovered that cotton used by fast fashion behemoths H&M and Zara is linked to large-scale deforestation, land grabbing, human rights abuses and violent land conflicts in the Brazilian Cerrado.³

H&M and Inditex, which owns Zara, are the world’s largest clothing companies. They had combined profits of around US$41 billion in 2022. H&M has 4,400 shops around the world while Zara and other Inditex brands – Pull&Bear, Bershka, Massimo Dutti, Stradivarius – have nearly 6,000. H&M and Zara are global leaders in the fast fashion industry, churning out numerous clothing collections each year.

Over the last decade Brazilian cotton has gained prominence in the global fashion market. The country is now the world’s second largest exporter and expected to overtake the US as the number one cotton supplier by 2030. In the decade to 2023, Brazil’s exports more than doubled. Almost all this cotton is grown in the Cerrado. 

But H&M and Zara do not buy this cotton directly. Like most Western fashion giants, they source their clothes largely from suppliers based in Asia. These companies transform raw cotton into the finished goods we find at clothing shops. By trawling through thousands of shipment records, our investigators found that H&M and Zara’s suppliers source cotton grown in the western portion of the Brazilian state of Bahia by two of the country’s largest producers: SLC Agrícola and Grupo Horita (Horita Group).

SLC and Horita’s cotton production in western Bahia – a part of the Cerrado biome that has been heavily impacted by industrial-scale agribusiness – is linked to a number of illegalities.

SLC – with 44,000ha of cotton plantations (equivalent to over 60,000 football pitches) in western Bahia alone – is Brazil’s largest cotton producer while Horita – which operates on at least 140,000ha of farmland in the region – is one of the top six. They are both owned by families believed to be among Brazil’s wealthiest.

The dark history of agribusiness in the Cerrado

The Horita Group and SLC Agrícola are emblematic of a broader reality of export-oriented agribusinesses inflicting harm on the Cerrado, its traditional communities and the climate.

The Cerrado, which sprawls over almost a quarter of Brazil, is home to five per cent of the world’s species and a third of Brazil’s biodiversity. But Bahia alone has lost nearly a quarter of its native Cerrado – an area the size of Wales – to agricultural expansion in recent decades. High plateaus once teeming with blue macaws and jaguars are now vast cotton and soy monocultures. Nearly a fifth of the Cerrado’s species, including the maned wolf and blue-eyed ground dove, face extinction due to habitat loss.

Local residents showed Earthsight dry riverbeds and lost springs. Agribusinesses in western Bahia extract nearly two billion litres of water per day. They pay this back by dumping 600 million litres of pesticides on the Cerrado every year.

The climate impact has been enormous: clearing Cerrado vegetation for agricultural production generates as much carbon per year as the annual emissions of 50 million cars. Cotton production has an extremely high carbon footprint compared to other commodities due to the heavy use of pesticides for its production. 

Local civil society told our investigators it is hard to find a single large-scale cotton or soy farm in all of western Bahia that is not the result of land grabbing. This report will show that corruption, violence and government neglect have helped transform Bahia’s Cerrado into an unsustainable, violent agribusiness hotspot over the last 25 years.

Land grabbing, violence against traditional communities and corruption

In the municipality of Formosa do Rio Preto, Horita grows cotton, soy and other crops on a third of a mega estate called Estrondo. While different agribusinesses have plantations at Estrondo, the Horita Group – the largest landholder at the estate – has been closely linked to the violent land disputes pitting Estrondo against traditional communities that have inhabited the area since the 19^th century.

Such communities, known as geraizeiros, have lived in harmony with nature for generations, hunting, fishing, growing traditional crops and driving cattle. They are protected by law and should have the right to their traditional lands guaranteed.

In 2018 Bahia’s attorney general found Estrondo was one of the largest areas of land grabbed in Brazilian history. Estrondo’s lands are public lands, which belong to the state of Bahia and should be environmentally protected and set aside for geraizeiro communities.

In the 1970s and 1980s, however, Estrondo’s owners illegally appropriated over 400,000ha of public lands covered in native Cerrado vegetation. Over half of this area has been deforested so far. More than 10 years ago geraizeiros started experiencing intimidation and harassment by armed men working for Estrondo’s owners and tenants. In two violent episodes in 2019, two community members were shot by Estrondo’s security guards.

An ongoing lawsuit against Estrondo by Bahia’s attorney general aims to recover these public lands.

In the municipality of Correntina, another case of land grabbing has afflicted the traditional community of Capão do Modesto. There, large agribusinesses have been accused of misappropriating public lands to convert them into ‘legal reserves’ –, areas landowners must set aside for environmental preservation. But instead of setting aside part of their productive properties as legal reserves, several agribusinesses have acquired land elsewhere for this purpose. The Horita Group has a 2,169-ha property at Capão do Modesto. SLC’s Paysandu farm, which grows cotton, is linked to a legal reserve at Capão do Modesto called Tabuleiro VII.

Bahia’s attorney general has referred to Capão do Modesto as "one of the most serious land grabbing cases in Bahia,” and requested the suspension and eventual cancellation of all land titles overlapping it. The local community has suffered harassment, surveillance, intimidation and attacks carried out by gunmen linked to the agribusinesses.

One of the owners of the Horita Group, Walter Horita, has been named as a protagonist in a shocking corruption scandal. A Federal Police investigation has revealed the widespread sale – for large sums of money – of court rulings related to land disputes in Bahia, including those affecting the Horita Group. Phone conversations wiretapped by the police reveal Horita’s apparent attempts to influence judicial and political actors in Bahia, while there have also been reports of him transferring US$1.2 million to a court official.

Illegal deforestation

Both the Horita Group and SLC Agrícola have a brazen history of illegal deforestation and environmental infractions in western Bahia.

In 2014 Bahia’s environment agency found 25,153ha of illegal deforestation on Horita farms at Estrondo. In 2020 the same agency indicated it could not find permits for 11,700ha of deforestation carried out by the company between 2010 and 2018. Ibama, a federal law enforcement agency, fined Horita over 20 times between 2010 and 2019 (totalling $4.5 million) for environmental violations.

Satellite images analysed by Earthsight reveal a Horita farm embargoed by Ibama since 2008 due to environmental infractions – a measure to shut off a piece of land from further commercial exploitation and let it regenerate – has grown cotton repeatedly since 2017, in breach of the embargo.

SLC has an equally troubling track record. Its Piratini, Palmares and Parceiro farms, all of which grow cotton, lost at least 40,000ha of native Cerrado in the last 12 years. Despite a zero-deforestation policy adopted in 2021, the company was accused of clearing 1,365ha of native vegetation at its Palmares farm in 2022.

Ibama has fined SLC over US$250,000 since 2008 for environmental infractions in Bahia. The Norwegian pension fund divested from the firm in 2017 due to SLC’s links to environmental abuses.

The role of Western consumption

Our undercover investigators posed as foreign investors to infiltrate the worlds of Brazilian agribusiness and European fashion. They pored over thousands of shipment records, company reports, suppliers’ lists and websites. They discovered a stark reality: cotton tainted by deforestation, land grabbing and violence against traditional communities is ending up in the supply chains of the world’s two largest fashion retail chains: Zara and H&M.

Shipment records show the Horita Group and SLC Agrícola directly exported at least 816,000 tonnes of cotton from Bahia to foreign markets between 2014 and 2023.⁴  Other sources of information suggest⁵  the true total exports of the two firms during that period was well over 1.5 million tonnes, with the difference exported via intermediaries.

We identified eight Asian clothing manufacturers using Horita and SLC cotton while at the same time supplying H&M and Zara with millions of items of finished cotton garments. 

These include PT Kahatex in Indonesia, the largest buyer of Horita and SLC tainted cotton we found. H&M is the Indonesian firm’s second largest customer, and has purchased millions of pairs of cotton socks, shorts and trousers from it. These items can be found at H&M stores in the US, Germany, the UK, Sweden, Netherlands, Belgium, Spain, France, Poland, Ireland, Italy, and other countries in Europe and elsewhere. Another buyer of Horita and SLC cotton is the Jamuna Group, one of Bangladesh’s largest industrial conglomerates. In the year to August 2023 Zara stores in Europe sold €235 million’ worth of jeans and other denim clothes, which are made with cotton, manufactured by Jamuna in Bangladesh – approximately 21,500 pairs a day. Inditex imports items made by Jamuna to Spain and the Netherlands, from where it distributes them to its Zara, Bershka and Pull&Bear stores across Europe. A Horita and SLC customer in Pakistan, Interloop, shipped some 30 million pairs of cotton socks to H&M in Germany, Sweden, USA, Belgium, Spain, UK, Italy and the Netherlands in 2023.

As part of their sustainability efforts, H&M and Zara rely on a fundamentally flawed ethical supply chain certification system called Better Cotton (BC).⁶  Most of both firms’ products are made with BC-certified cotton, making them by far the world’s biggest users of cotton carrying the BC seal of approval. Brazil produces the world’s largest amount of Better Cotton-licensed fibre, accounting for 42 per cent of the global volume.

But Earthsight found a glaring problem with all this: the cotton we linked to land rights and environmental abuses in Bahia carried the Better Cotton label. This should not be surprising. BC has been repeatedly accused of greenwashing and criticised for failing to allow for full traceability of supply chains.

While Better Cotton is putting new standards and procedures in place, the scheme will continue to suffer from several weaknesses. Requirements for a producer to comply with local laws are excessively vague and say nothing about land ownership or land disputes. A new ban on conversion of natural ecosystems after December 2019⁷  fails to address illegal deforestation that took place prior to that date. A new traceability system being rolled out in the coming years is woefully inadequate as it only traces cotton back to the country of origin, not to individual farms. Rules on mitigating harm to indigenous and traditional peoples only apply to communities outside farm boundaries, ignoring violations against those whose lands have been stolen. On the other hand, criteria meant to protect local communities within farm boundaries fail to demand that agribusinesses seek their full consent for projects that affect their livelihoods.

Earthsight also identified worrying problems with BC’s accreditation and compliance systems. In Brazil, a national cotton producers’ association (ABRAPA) is in charge of the certification programme, a serious conflict of interest. Similar issues exist in auditing processes where auditors are paid by and depend on the certified companies for their business.

H&M and Inditex currently lack the policies and tools to make up for BC’s shortcomings. H&M’s human rights and sustainability policies fail to address communities’ rights or deforestation. Inditex’s environmental commitments do not seem to extend to its cotton suppliers. Better Cotton and all the companies mentioned in the report were contacted for comment. The responses can be found throughout the report and accessed in full here. 

Consumer country regulation

Weak supply chain oversight, including by the leading brands, and an ineffective certification system mean regulatory action by governments and robust enforcement are needed to reform the cotton and fashion sectors. Fortunately, governments on both sides of the Atlantic are gradually realising this.

In the EU, the Corporate Sustainability Due Diligence Directive (CSDDD), if enacted, would require large companies operating in the block, such as H&M and Inditex, to identify and minimise adverse human rights and environmental impacts in their supply chains. 

However, a last-minute decision by Germany to withdraw support for the CSDDD in February 2024, after it had been through negotiations between the EU Parliament and the Council of the EU, not only nearly killed it but led to a weakening of the text that severely restricted the law’s applicability. Germany’s U-turn – which is contrary to the EU practice – was driven by the pro-business FDP party, a minor partner in the country’s governing collation which has received funding from businesses that stand to be affected by the law. While the CSDDD is far from perfect, its passing can bring much-needed accountability to some European supply chains.

The EU Deforestation Regulation (EUDR) came into force in June 2023⁸ and demands that firms trace goods back to the land where the raw materials were produced. It requires that production not only be deforestation-free, but also legal.

The EUDR has, however, a serious limitation: it does not cover cotton or goods made with cotton.

In the UK, a new law, the Environment Act, has been enacted⁹ to regulate consumption of forest-risk commodities such as beef and soy. In the US, a draft law, the FOREST Act, has been tabled in Congress. These laws have significant limitations too. They only cover illegal deforestation¹⁰ and do not include cotton.

The US, UK and EU must ramp up their ambition. The CSDDD must be passed by the Council of the EU and the EU Parliament. EU Member States which had sought a stronger law should consider passing their own, stricter national legislation. The UK Environment Act and EUDR must include cotton. In the US, the inclusion of cotton in the draft FOREST Act should be considered. Above all, it is essential that all these laws are properly implemented and enforced, something that is far from certain.

Action in Brazil

In Brazil, the federal government is promoting a plan, the PPCerrado, to reduce deforestation in the Cerrado. However, the plan targets illegal deforestation only and fails to address deforestation authorised by local governments, leaving the door open for unsustainable policies at the local level.

Successive Bahia governments have adopted regulations that undermine the state’s constitutional provisions on environmental and traditional communities’ protection. The state has failed to map all public lands in order to grant land rights to the traditional communities inhabiting them. Approval of deforestation permits has skyrocketed, with over 750,000ha authorised for clearance between 2012 and 2021.

The federal government should put in place a plan to halt all large-scale deforestation in the Cerrado, not only the illegal kind. Bahia’s government should map all public lands to ensure they are preserved and that traditional communities fully enjoy their land rights. The series of setbacks in environmental policies should be reversed immediately.

What clothing retailers and the cotton sector must do

The private sector must also act.

Better Cotton must require certified farms to meaningfully seek the consent of traditional communities and indigenous peoples for all activities that affect them, whether these communities’ lands are within or outside farms’ boundaries. Rules on deforestation need to ban certified cotton from growing on land that was illegally deforested before December 2019. Conflicts of interest issues must be resolved by ensuring that impartial actors are in charge of certification and audits.

In addition to strengthening these standards, Better Cotton must also implement a meaningful traceability system, and ensure both are properly enforced. H&M, Zara and other big retailers must pressure it to do so. Until it does, businesses must go beyond using certification schemes to ensure their goods are ethically sourced, and must institute their own, more rigorous policies and checks.

Full reference list and footnotes can be found here.