Story No 2:
Who is Esquel?
Esquel Group is one of the world's leading producers of premium cotton shirts. Esquel is vertically integrated, with production beginning in Xinjiang province in northwestern China, where the Group grows its own Extra Long Staple (ELS) cotton and organic cotton. It continues through spinning, weaving, dyeing, manufacturing, trims and packaging, and retailing.
The company started by servicing the low-end of the market. Over the years the customer base changed to prioritize high-end brands and retailers such as Hugo Boss, Lacoste, Marks & Spencer, Nike, Ralph Lauren and Tommy Hilfiger.
A strong corporate culture
Under Marjorie Yang’s leadership, a distinctive corporate culture has been established, with uncompromising emphasis on ethical business practices, creativity, and continual improvement. Esquel strives to contribute to the community and bring about positive changes in society. To achieve this, Esquel has developed 5 clearly defined business principles known as the e-Culture:
- Ethics - Maintain ethical behaviour at all times.
- Environment - Take an active and responsible role in protecting the environment.
- Exploration - Explore and embrace innovative solutions.
- Excellence - Seek excellence in everything we do.
- Education - Promote a culture of learning and continue to support education..
While striving to run a successful business, Esquel has also taken active steps to ensure the well-being of its employees. For example, Esquel endeavours to provide good working conditions for all its employees and promotes work-life balance by regularly organizing social as well as educational activities to improve the employees’ quality of life, including educational sessions on HIV/AIDS, and sponsorship for continuing studies, green transportation system, sports day and many more.
About 10 percent of the company’s total ELS cotton supply is provided by its own farms, with the remainder being purchased from other local farmers. Esquel gives purchase commitments to farmers before the cotton is planted, to secure the cotton supply and to ensure that the cotton is grown according to the company’s specifications. The company also provides incentives to the farmers based on cotton quality rather than purely based on quantity to encourage them to grow ELS cotton that meets the required quality.
Organic Cotton Farming and Ginning in Xinjiang
Esquel started growing organic cotton in 2000 at the farm near Kashgar, Xinjiang, and the farm and ginning mill were certified by OCIA (Organic Crop Improvement Association International). In Xinjiang, Esquel grows approximately 500 mt of ELS cotton a year and gins another 8,000 - 10,000 mt (roughly 8 - 10 percent of China’s ELS cotton production).
Key challenges recognised - and addressed - by Esquel
- Ramping up supply to meet increasing demand
- How to increase farm acreage
- Role of Transitional Cotton
- How to contain the price premium
- Authentication of organic fiber and products: how to ensure
integrity, while keeping authentication costs down
Esquel organizes training sessions to educate the farmers on seed selection, farming practices, ways to improve yields and reach the desired quality, and techniques to eliminate impurities during picking and storage.
Water - a scarce resource
Esquel’s research team studied irrigation methods in order to conserve water, a scarce resource in Xinjiang. A dedicated team works with local farmers in Xinjiang on sustainable farming techniques. Esquel also sponsored pilot studies at two cotton farms in Xinjiang to test the effectiveness of drip irrigation versus conventional open field watering. Based on
crop yield results, the yield from the drip irrigation field increased from 1,030kg/acre in 2003 to 2,140kg/acre in 2011, while the yield in the conventional flood irrigation field was 1,200-1,400kg/acre. This success was recognized by the local governments and farmers alike, with the latter looking to apply this technology in their fields.
Education - of paramount importance
Ethics is at the heart of Esquel’s corporate culture and it is deeply embedded in its values. As one of the largest foreign investors in Xinjiang, the furthermost northwestern part of China , Esquel undertakes initiatives to improve the well-being of its people. As such, Esquel in collaboration with the Standard Chartered Bank launched the rural MicroFinancing Program in 2007 to provide credit-based loans, without pledge or guarantee for local cotton farmers as working capital to enhance their productivity, increase income as well as improve their living standards. The program has run for 5 consecutive years and it has been warmly received by local farmers in Xinjiang and has proven to be a very effective tool in helping farmers regain their self-sufficiency and increase their standards of living. Apart from financial support, training sessions were also provided to cotton farmers on topics including budgeting, wealth and debt management.
Esquel has helped to broaden the opportunities for Xinjiang children to read and learn by donating books, establishing libraries and renovating schools, providing scholarships in the most needy areas of the region through the Esquel - Y.L. Yang Education Foundation. Mobile laboratories were also established to raise awareness and teach children on environmental concerns and protection from an early age.
For families that do not have the financial means to pay for their children's' education, Esquel set up an education programme through which children have been given the necessary financial support to return to school.
The E-Culture – Ethics, Environment, Exploration, Excellence and Education – shows how one company can redefine what success means for itself and the farm communities that supply it.
Director of Merchandising, Esquel Group