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2013 Report on Cloth Diaper Co-ops

Contents 2013 Report on Cloth Diaper Co-ops .................................................................................................................... 1 Introduction ........................................................................................................................................................ 2

Why WE (RDA) created this report ................................................................................................................... 2 Definitions and Scope ...................................................................................................................................... 3

Legitimacy and Legality of Co-ops ........................................................................................................................ 3 Sanctioned by manufacturer? .......................................................................................................................... 3 Legal? .............................................................................................................................................................. 4

Sales or use tax ............................................................................................................................................ 4 Federal and state income taxes .................................................................................................................... 5 Import duty and taxes .................................................................................................................................. 5 Product safety .............................................................................................................................................. 5 Intellectual property .................................................................................................................................... 7

Ethics: labor and environmental costs.................................................................................................................. 7 Labor ............................................................................................................................................................... 7 Environment .................................................................................................................................................... 8

Sustainability of cloth diapering ........................................................................................................................... 9 Quality concerns .............................................................................................................................................. 9

Cloth Diaper Warranties ............................................................................................................................. 10 Co-op Impact on Cloth Diaper Businesses ...................................................................................................... 10

We Advocate Cloth Diapering..................................................................................................................... 11 Co-ops Cost Quality .................................................................................................................................... 11 Co-ops Create Unsustainable Expectations ................................................................................................. 12 Co-ops Cost Businesses Time...................................................................................................................... 12 Co-ops Cost Communities Stability ............................................................................................................. 13 Co-ops Put People out of Business ............................................................................................................. 14 Cloth Diapering Communities ..................................................................................................................... 14 Buy According to Your Values ..................................................................................................................... 14

RDA Policy on Cloth Diaper Co-ops..................................................................................................................... 15 Supporting Low-Income Families with Cloth Diapering....................................................................................... 16 Acknowledgement ............................................................................................................................................. 17 Further Reading ................................................................................................................................................. 18 Sources .............................................................................................................................................................. 18 Real Diaper Circle Cloth Diaper Co-op Guidelines ............................................................................................... 19 Recommendations to Retailers on Cloth Diaper Co-ops ..................................................................................... 20 Recommendations to Cloth Diaper Co-op Participants ....................................................................................... 21



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Introduction Over the past year, cloth diaper co-ops have become increasingly common. The Real Diaper Association (RDA)

has been approached by a number of stakeholders about our position on cloth diaper co-ops and their impact

on the cloth diaper movement. As we delved into the details, we realized that a simple “for” or “against”

position would be inadequate to address the needs of our diverse audience. Additionally, co-ops themselves

exist in a wide variety of formats, some of which appear to be more problematic than others. Of course, some

co-ops are legal, sanctioned by manufacturers, and offer high quality cloth diapers.

This paper is intended to identify the specific concerns we’ve encountered with cloth diaper co-ops and to

provide guidance about co-ops to protect consumers and to continue to advance our mission to increase the

use of reusable cloth diapers.

This paper is NOT intended to malign cloth diaper users who choose to buy cloth diapers via co-ops. We will

continue to support ALL cloth diapering parents and caregivers by providing educational materials, training

and supporting volunteers within local communities, and working to change the systems that prevent families

from choosing and using reusable cloth diapers in whichever situation they choose.

Why WE (RDA) created this report

The Real Diaper Association supports end users through Real Diaper Circles led by volunteer Circle Leaders in

communities across the US and Canada. One of our Circles has a volunteer (not the accredited Circle Leaders)

who developed and taught a class within the Circle called “Co-op 101.” Somehow, this information was

interpreted as RDA running or at least endorsing co-ops run by our volunteers, which rumor spread and led to

some concerned emails and phone calls from our stakeholders. We were alarmed and embarrassed to be

perceived as directly harming the cloth diaper movement, the advance of which is the core of our mission.

The truth is that we hadn’t provided any direct guidance to our Circle Leaders on the subject. The Real Diaper

Association has long focused on being brand-independent, which slowed us down with respect to a response to

cloth diaper co-ops. We advocate the practice of cloth diaperING, not cloth diaper products. On the other

hand, as cloth diaper co-ops become larger topics of conversation within Real Diaper Circles, it became apparent

that we needed to understand this issue in depth in order to provide that guidance for our Leaders on how to

handle such conversations.

We are supported by a number of cloth diaper businesses who are concerned about the impact of cloth diaper

co-ops on the long-time viability of the industry. These members share our mission “to increase the use of

simple, reusable cloth diapers”. They have requested that the Real Diaper Association research the impact of

cloth diaper co-ops on the cloth diaper movement and provide guidance to all stakeholders based on our

findings.



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“Lots of co-ops have

buys from WAHMs, and

that is how I try out

their wares.” – survey

respondent, 9/13

Lastly, the co-op conversation often includes reference to the necessity of supporting low-income families with

cloth diapering. Despite the fact that cloth diapers can save families thousands of dollars even at non-co-op

prices, the initial investment in cloth diapers can appear daunting. Co-op cloth diaper prices can offer a lower

barrier to entry, which story we’ve heard over and over as we’ve researched the issue. The Real Diaper

Association has long supported simple, reusable cloth diapers especially with the focus of supporting families in

financial need. To continue to support this community, we need to improve our educational materials and

messaging to help families diaper inexpensively, safely, and sustainably.

Definitions and Scope

In this report, co-ops are defined as groups of people combining orders to access bulk quantity pricing for cloth

diapers. Co-ops can exist to purchase other products, but the scope of this paper is limited to addressing co-ops

for cloth diapers and cloth diaper-specific accessories.

This document constitutes the RDA position on cloth diaper co-ops and includes our policies for Real Diaper

Circle Leaders as well as guidance for potential co-op participants.

Legitimacy and Legality of Co-ops

It may be possible for cloth diaper co-ops to be legal, safe, ethical, and sustainable. However, there are many

ways for a co-op to cause trouble for their administrators and members and to negatively impact the cloth

diaper movement. One concern is whether and how the co-op buy is allowed by the manufacturer of the

product. Other concerns are legal issues surrounding co-op purchases.

Sanctioned by manufacturer?

Legitimate co-ops will be transparent with the manufacturer that they’re organizing a

group buy through a co-op and will also be transparent with co-op participants about

the products they are getting.

On the other hand,

Co-ops that obtain wholesale pricing dishonestly from suppliers put the group at risk if the supplier

learns of the product destination. In this case, the co-op organizer may be posing as a new, legitimate

retailer with the manufacturer, so may require secrecy from members so that the manufacturer doesn’t

find out that it’s actually a group of consumers buying at wholesale prices.

Meanwhile, secret offers from manufacturers to co-op organizers unethically undercut agreements with

authorized retailers, who frequently are unable to compete due to contractual obligations to honor

manufacturer suggested retail pricing (MSRP). In this case, though the co-op itself may be approved by

the manufacturer, the ethics of the agreement are questionable.



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Legal?

Many co-op organizers don’t consider their co-op to be a business as they neither manufacturer nor retail

products or because they don’t make a profit. Cloth diaper co-ops, however, are providing a service for which

they are taking payment (fee) and are therefore subject to business regulation. Examples of regulatory

expectations to which co-ops could be subject, depending on the municipality, include (but are not limited to):

registering the business name,

obtaining a business license,

complying with restrictions of the local Zoning Board,

reporting income on federal and state tax forms, and

registering with the appropriate state agency to get a resale license and pay sales tax.

The legal requirements described below are specific to the United States. Canada has its own taxation and

import fees and requirements, as well as regulations regarding product safety. Of course, Canadian co-ops are

subject to the legal requirements specific to their country and municipality, which are similar in spirit, if not in

detail, to the regulations described here.

Sales or use tax

Cloth diapers are tangible personal property, which are therefore subject to state sales or use tax. (Use tax is

simply the name for sales tax when it is paid by the end user of the product because it was purchased online or

out of state.) Each state has slightly different rules and rates for sales tax, and a few don't have any sales tax

(MT, OR, NH, DE, and AK). Also, a 2012 report from the National Diaper bank indicates that several states

currently exempt diapers from sales taxation (MA, MN, NJ, NY, PA, RI, and VT). You should always be careful to

check your specific state to confirm the need for a sales or use tax payment. The sales or use tax is paid to the

state where the final user of the product lives. So, if you’re buying diapers from a manufacturer in Washington

through a coop in Oklahoma and you live in Texas then the tax is due to the state of Texas using their rules and

rates.

In a cloth diaper co-op, sales or use tax can be collected and remitted in several possible ways. The setup can

depend greatly based on the locations and relations of the different involved parties:

1. Remitted by the manufacturer / distributor.

The sales tax would be collected from the end user by the coop administrator and paid to the

manufacturer or distributor along with payments for the goods themselves.

2. Remitted by the coop administrator.



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The sales tax would be collected from the end user by the coop administrator and remitted to the

state(s) where the end users live. This would require that the coop is setup as a business entity with a

state resale certificate.

3. Remitted by the end user (consumer).

The sales tax is calculated and remitted by each individual end user as Use Tax. Generally forms are

available online with each state Department of Revenue and often can be filed and paid directly online.

How will the state know that you’ve procured these items and owe sales or use tax? Per U.S. Customs and

Border Protection (CBP), “States that require taxes to be paid on goods brought in from overseas periodically

audit CBP declarations to identify residents who entered the state from abroad with new items. The state then

sends a bill to those residents requiring them to pay sales / usage taxes.”

Please keep in mind, if no sales tax is collected and remitted to the states where it is due at any point in the

process, then the co-op and the end users are acting illegally and, in addition to the taxes due, each end user

and the co-op could face penalties and interest for failing to remit taxes properly.

Federal and state income taxes

A true co-op is a corporate entity with a board of directors and voting members. The entity files a tax return in

which any net income is passed on to its members. If no formal corporate entity is setup, when the co-op

host(s) is buying and reselling goods, it is automatically assumed that they are doing so as a sole proprietor (or

partnership), and they are required to report the gross income and deductions on a Schedule C with their

Federal 1040 (or 1065 partnership return) income tax returns. Similar reporting is required for state income

taxes, where those exist. Even if there is no profit, they should be reporting the activity. Any income earned by

a sole proprietor over $400 is subject to self-employment taxes.

Import duty and taxes

All imported goods, whether imported by individuals or commercial entities are subject to an import duty (and

other possible taxes and fees) when entering the United States if the value of goods exceeds $200. These duties

and fees are paid to, and monitored by, the U.S. Customs and Border Patrol. Statements on shipping documents

that underestimate the value or contents of a shipment are illegal and can results in seizure of products and

fines.

Product safety

There are a number of laws are intended to improve the safety of children’s products. If the manufacturer has

not handled all of the required safety testing and labeling, the importer is responsible by law and subject to

penalties for noncompliance, which could include fines, imprisonment, and/or product seizure. When

importing cloth diapers, all co-op hosts should be confirming the product’s safety compliance status with



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Under CPSIA, “Anyone who makes, produces or assembles a

product is considered to be a manufacturer... Under the law,

importers are also considered to be manufacturers and must

meet the same requirements.” -

http://www.cpsc.gov/PageFiles/113995/cpsiasbguide.pdf

respect to the legal requirements listed below (or those appropriate for their country), and should get the

manufacturer’s confirmation in writing.

Consumer Product Safety Improvement Act (CPSIA)

The Consumer Product Safety Improvement Act (CPSIA) is a law administered by the Consumer Product Safety

Commission (CPSC) that requires proof of safety for children's products in the U.S. It was created to protect

your baby from products that could be dangerous.

CPSIA requires that:

Cloth diapers containing PUL or snaps must be

tested for lead by a third-party CPSC-approved lab.

Products must include a tracking label including the location, date, and batch information.

Proof of compliance must be documented through Children’s Product Certificates.

“The law requires manufacturers or importers to issue a Children's Product Certificate…and that the certificate

be provided to the CPSC, upon request.” - http://www.cpsc.gov/en/Business--Manufacturing/Testing-

Certification/Third-Party-Testing/FAQs-Certification-and-Third-Party-Testing/

Flammability Testing

Certain fabrics (such as cotton velour, cotton fleece, cotton sherpa, bamboo fleece, hemp fleece, bamboo

velour) are also required by the CPSC to be third-party tested for flammability.

Care Labeling

Per the Federal Trade Commission, “The Care Labeling Rule requires manufacturers and importers to attach care

instructions to clothing and some piece goods.”

Business Liability Insurance

Legal businesses should carry liability insurance policies to cover the products they sell. Co-op hosts and

administrators could be at risk if a product malfunctions in a way that harms a baby (such as a needle being left

in a diaper post-manufacture).

Manufacturer Testing

It’s worth noting that there are several safety concerns related to cloth diapers that can’t be caught currently by

the above laws. Here are some examples:

diapers including microfiber against baby’s skin.

Some baby furniture manufacturers have added cloth diapers to fill out their product lines. Without

experience in this industry, some manufacturers have designed and sold cloth diapers with microfiber

directly against the baby’s skin. This fabric is far too absorbent for this use and could cause significant

rashes and skin irritation.

http://www.cpsc.gov/PageFiles/113995/cpsiasbguide.pdf

http://www.cpsc.gov/en/Business--Manufacturing/Testing-Certification/Third-Party-Testing/FAQs-Certification-and-Third-Party-Testing/

http://www.cpsc.gov/en/Business--Manufacturing/Testing-Certification/Third-Party-Testing/FAQs-Certification-and-Third-Party-Testing/



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experimental fabrics.

A recent fabric introduced to the market through co-ops before appearing in major brand cloth diapers is

charcoal bamboo rayon, which has alleged (though unsupported by hard evidence) benefits. How does this

fabric react with urine or stool? What’s stopping the nano-particles from being absorbed into the baby’s

skin? Is it possible that known harmful particles can be included in the extruded fibers during the

manufacture process? Has sufficient testing to be done to understand the long-term effects on babies using

this fabric?

Manufacturers who stand behind their products spend a lot of time developing and testing new cloth diaper

product configurations. Companies that are focused on the cloth diaper industry and on developing reputable

name brands that seek customer loyalty can be more reliably safe than those that offer unbranded products

at high volumes or that work primarily on product lines outside of the cloth diaper segment.

Intellectual property

After all that design and testing effort, manufacturers are protective of their work. Another legal issue for co-

ops (and other importers) is whether the cloth diapers they’re purchasing infringe on intellectual property of

other manufacturers. Both patterns and designs have been found to be copied in the past couple of years.

Manufacturers are taking legal action against factories that make cloth diapers which infringe on their

intellectual property and against the retailers and co-ops that sell them.

Ethics: labor and environmental costs

There are a number of other ethical and sustainability questions to be addressed beyond the legitimacy and

legality of a co-op. While some consumers are concerned only about the above issues, most families

demonstrate some willingness to pay extra for products that support their values, whether those be a concern

for the livelihood of the people involved in providing the product or stewardship of their environment. This

section will help those families understand the ethical choices they’re making with respect to their cloth diaper

purchases.

While these ethical and sustainability choices can be broadly applicable to all our purchasing decisions, they are

included here in the interest of creating a comprehensive source of information for cloth diaper consumers

considering participation in a cloth diaper co-op.

Labor

Is it possible to pay living wages and ensure acceptable working conditions (both in manufacturing and

distribution) below a certain price point?

Let’s take a look at the $2 diaper, which must cover the following costs:



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Materials, such as the fabrics (probably multiple types), the snaps or Velcro, the elastic, and potentially

some packaging. Keep in mind that these materials themselves will have to have been manufactured by

someone (also including labor costs) from their petrochemical origins.

Cutting, sewing, assembly of diaper and package.

Third-party safety testing to comply with CPSIA and labeling to comply with FTC requirements.

Shipping to the US.

To ethically support living wages for workers in the factories that co-ops are buying from, many questions must

be asked:

Who are the workers in the factory?

The Bureau of International Labor Affairs publishes a list of countries and industries that utilize child labor or

forced labor. For example, per the 2011 report, the production of cotton and textiles in China can involve

child labor and the production of cotton and garments there can use forced labor.

What is the average pay of workers at the factory, both on producing your products and on the other

products produced there? Does this constitute a living wage (not a necessarily just meeting minimum

wage standards)?

For instance, the Fair Wear Foundation’s 2010 report on wages in China, the legal minimum wage only

covers ~60% of monthly expense needs for workers in China’s garment industry.

What are the working conditions in this factory?

Here, you’d need to get a trusted insider to give you the details they won’t necessarily show you on a tour or

in company photos. Making these kinds of connections within factories overseas can be very difficult, which

is why it’s easier to work locally where you can have some measure of oversight.

Knowing who is making your diapers helps, which is much easier to do locally. Reputable cloth diaper

companies that outsource manufacturing to China do much of this research for their customers, but ensuring

living wages and good working conditions for workers usually causes diaper costs to rise above $2 per diaper.

Production for many products has moved to China, where materials, labor, and other costs have been low for

the past decade. Regulations and costs are rising now in China, though, and the competitive advantage of

manufacturing in China is fading fast. (See Shaun Rein, The End of Cheap China: Economic and Cultural Trends

that Will Disrupt the World, 2012.)

Environment

The price of products can be reduced when some of the costs are externalized, such as properly disposing of

waste or complying with pollution limits. Manufacturing in the US and Canada costs more due to regulation of



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wastes that cause air and water pollution. When manufacturing is outsourced to a country without those strict

regulations, it can be done more cheaply, but at the cost of the environment and the health of the workers

and community in which the factory is located.

Additionally, many families choose cloth diapers to lessen their impact on the environment. It’s worth noting

that the carbon footprint of diapers increases the further they travel to your doorstep.

Sustainability of cloth diapering

For years, members of the Real Diaper Association have anticipated a potential threat to the long-term success

of cloth diapering, specifically that cloth diaper products will be produced at such low quality that users are

discouraged by their poor performance. These users could be led to generalize the poor performance of this

subset of diapers to all cloth diapers, then cease using cloth diapers, and malign all cloth diapers within their

network. Worse, if these cloth diapers are offered to users at such low cost that existing quality manufacturers

can no longer compete, the cloth diaper industry could collapse, and the availability of good quality cloth

diapers could vanish.

Quality concerns

Stakeholders of the Real Diaper Association have reported activity that indicates this threat could be becoming a reality. Poor quality diapers are beginning to flood the market via some cloth diaper co-ops. Per a survey conducted in September 2013 by the RDA, ~12% of co-op diapers purchased were of low quality, causing ~10% of co-op participants to decide not to participate in future co-ops.1

While we are not seeing that ALL cloth diapers from co-ops are of low quality, even this level of difficulty is causing a drain on the time of volunteers (and even local retailers) to support users of these diapers, as co-op participants are usually distantly removed from the manufacturer of the diapers and unable to obtain support from them. These volunteers are also reporting that users are giving up on cloth diapering following their experiences with these low-quality diapers. (Additionally, we are concerned that quality will continue to erode to well below current levels, which will be described in more detail below.)

1 An additional 17% of co-op participants say they won’t participate in future co-ops for other reasons, including

dissatisfaction with co-op fees or timelines of buys, concerns about safety of cloth diapers sold through co-ops, or a

preference to support local retailers.

“I do not agree with cloth diapering co-ops. They hurt the cloth diapering industry. When families purchase low quality cloth diapers and have a bad experience it gives the whole cloth diapering industry a bad name.” – survey respondent, 9/13

“While I think it's a good thing in the sense that it can allow moms who have monetary constraints to cloth diaper, I think it also increases the chance that they will give up more quickly than they would with better brands because they are more likely to encounter problems with co-op diapers.” - survey respondent, 9/13



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Cloth Diaper Warranties

Cloth diaper users obtain protection via warranties if a product is defective. Most diapers sold through co-ops

(though not all) come without warranties. Without that warranty, non-functional diapers are the risk of the

buyer, who will have no recourse if they receive a defective product through a co-op.

The feedback loop of warranties also helps ensure long-term quality. When manufacturers or retailers back

their products with a warranty, they have opportunities to gain insight into product defects and can make

necessary improvements.

Co-op Impact on Cloth Diaper Businesses

In our research and interviews for background to this Real Diaper Association study, we have found several

concerning impacts that co-ops have on cloth diaper businesses:

1. Co-ops cost quality. Co-ops make cloth diapers a commodity, resulting in an inevitable reduction in

quality.

2. Co-ops create unsustainable expectations. Co-ops often operate illegally, creating expectations among

consumers that legitimate business costs are optional.

3. Co-ops cost businesses time. Co-ops result in less support for end-users to learn to use cloth diapers,

which can mean that co-op buyers come to local businesses for support without buying products from

those businesses.

4. Co-ops cost communities stability. Co-ops remove all possibility of living local economies as consumers

spend their money overseas rather than locally.

5. Co-ops put people out of business. When all of the other consequences of co-ops feed together,

legitimate, local businesses that support cloth diaper communities cannot survive.

You might not care at all about the cloth diaper industry, but you probably do care about the communities that

local cloth diaper stores build. You probably do benefit from the support of cloth diaper businesses of all kinds

not only through their membership donations to Real Diaper Association but as they participate in the Great

Cloth Diaper Change and other RDA events in your community. They provide space for classes, locations for

events, donations of products, and funds through sponsorships and memberships. If those businesses can’t

survive changes to the cloth diaper industry, RDA’s ability to support cloth diapering is limited as we have fewer

donors and local volunteers.

Real Diaper Association is not an industry association, but we do depend on business owners in the cloth diaper

industry to support the organization and the work we do. We recognize that strong cloth diaper businesses

“With the money I spent on co-op cloth diapers I could have bought a respectable stash of name brand cloth diapers that come

with excellent customer service/troubleshooting.” – survey respondent, 9/13



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mean a strong Real Diaper Association, a strong and growing cloth diapering community in the U.S. and

Canada, and more babies using reusable cloth diapers.

While we recognize that co-ops for imported diapers are just one aspect of the larger question of imports, we

want to focus on co-ops in this report. We cannot completely separate co-ops from other imports because they

share too many issues. The legality and legitimacy of co-ops is an issue with co-ops alone. The ethics of labor and

environment can be issues with any imports as well as with domestic products. When we write about the ways

in which co-ops put people out of business, we are addressing issues of legitimacy as well as issues of ethics and

sustainability.

We Advocate Cloth Diapering

Cloth diapers in the past 20 years in North America and Europe come with an abundance of social context in the

making, selling, and support of the diapers. Small businesses make and sell the products; people get to know

one another by name (even at a distance, such as "Betsy from Bummis says"); online and in-person communities

provide support. Cloth diapers come with community.

Much like our sister movement doesn’t advocate baby carriers, they advocate babywearing, we don’t advocate

cloth diapers, we advocate cloth diapering.

The RDA members who are business owners sell and rent the tools parents need to participate in a meaningful

act: cloth diapering.

Co-ops Cost Quality

Without social context, cloth diapers would become an artifact in isolation---a commodity.

When cloth diapers become a commodity, it just isn't possible that the construction or the materials will be of

comparable quality to those made by ethical small businesses. Profit drives commodity capitalism. A small

business will choose higher quality when the choice involves pennies because quality is one of the selling points

for most small businesses (and because they want the best for their own children). For a commodity, those

pennies turn into dollars for distant owners, so the choice will always be for the lower quality. The goal is to give

the least possible quality for the greatest possible return. It’s simply business calculus. Lower quality

construction and lower quality materials will mean measurable drop in quality of function. It's all in the

numbers. The drop will be enough for profit but not enough that the bulk of the consumers stop buying.

Even if the quality of co-op imported cloth diapers is high enough now that the majority of parents are satisfied

with function, we can expect to see that quality and that satisfaction slide gradually in order to find that sweet

spot of good enough quality and good enough satisfaction to create highest possible profits. And, if quality

sinks, the durability of diapers sinks, which will also impact the availability of cloth diapers for multiple children

or even in the second-hand market. As we see the phenomenon of cloth diaper co-ops develop over time, we



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intend to revisit satisfaction with co-ops and co-op cloth diapers. We hope to document the trends in

satisfaction and quality over time.

Co-ops Create Unsustainable Expectations

Co-ops often operate illegally, creating expectations for consumers that legitimate business costs are optional.

When co-ops forego taxes, licenses, testing fees, and other expenses of legal business, consumers who buy

those black-market co-op diapers become resistant to paying full price for the product. Being in business also

means paying the employees whose expertise helps customers make good choices, paying rent on the space

where products are stored and displayed and classes are held, and paying to keep the lights and computers on.

All of these expenses create the shopping experience and the support system a parent needs to choose and use

cloth diapers successfully.

One way manufacturers have been able to squeeze more profit from a product is to make that product for lower

cost. Production for many products has moved to China, where materials, labor, and other costs have been low

for the past decade.

The lower expense, lower quality, and lower satisfaction to be expected with products sold through direct-

import co-ops is completely apart from the lower quality of life for those extracting and processing the materials

and those piecing the diapers without a living wage. Among the consequences of the great China export are

horrific air and water pollution, as well as other predictable consequences. If those social and environmental

costs can be externalized---and these are inevitable factors in the true cost of any product---that's excellent for

business driven by profit alone.

As mentioned earlier, rising regulations and costs in China is eroding the competitive advantage of

manufacturing. China followed Taiwan, which followed Japan. The cycle of low cost, high profits, then rising

costs will undoubtedly move elsewhere in time. Even if co-ops continue to import directly from China, they will

find costs rising as Chinese manufacturing stabilizes to address some of those previously externalized expenses.

The expectations set by the current wave of cloth diaper co-ops are unsustainable not only in comparison with

legitimate local businesses but for the future of co-ops themselves.

Co-ops Cost Businesses Time

Sales through co-ops result in less support as end-users learn to use cloth diapers, which can mean that these

buyers come to local businesses for support without buying products from those businesses. The time it takes to

support products is another of those hidden expenses that small businesses cover.

Lack of support is not an issue with co-ops alone. For several years, baby product retailers have reported that

consumers come to them for support using products bought in chain stores, big-box stores, or online stores.

Consumers who come to local stores for support with products bought in co-ops are a recent addition. Real



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Diaper Association volunteers have also reported being asked more often to support the use of products that

are not supported by retailers or manufacturers.

Some store owners have responded with policies that limit consultations to customers. Before it became

apparent throughout the industry what was happening, this shift in buying patterns was reported as the reason

for some small, local businesses closing.

Most baby store owners have a sincere desire to support their customers in successful use of parenting

products. They are not volunteers, though. Their time costs them real money. Local businesses cannot be

expected to support products that are sold without the social context of support from a manufacturer or a

retailer.

Co-ops Cost Communities Stability

Co-ops remove the possibility of living local economies as consumers spend their money overseas rather than

locally. Even if the co-op were set up as an actual local co-operative with members who share the work and the

profits of the business, jointly buying products made far away with materials made far away sends the bulk of

the consumer’s money to build a different community.

Drain of local dollars is not an issue with co-ops alone, but co-ops have exacerbated the issue.

Sustainability isn’t just a matter of products that have lower environmental impact. It also helps to find products

with a lower social impact, products that don’t impoverish or cause harm to the health of the makers. The big

picture of sustainability requires that we look at the stability of communities and economies. Real sustainability

requires an awareness of rippling consequences.

As the environmental and social consequences of outsourcing become more obvious to consumers, a movement

builds to return social context to the artifact---to re-contextualize products by looking for businesses and

products that show a consciousness for a triple bottom line of people, planet, AND profit. Still profit; always

profit, since you can't do business without profit. We see push-back from those who still feel the pain of

departed industries. We see vocal movements to Buy Local in order to build sustainable local communities,

since, when you buy local, more of every one of your dollars stays within your community. Companies like

Patagonia make the case that businesses boost profits by making socially and environmentally sustainable

products. They have even down-sized because they prioritize sustainability over profit.

Businesses themselves are pushing back against the dominant narrative claiming that business must exploit.

Businesses are telling a new narrative of corporate responsibility. Stability of communities is becoming a

business issue.



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Co-ops Put People out of Business

When all of the consequences of co-ops feed together, it becomes far more difficult for legitimate, local

businesses that support cloth diaper communities to survive.

Of course small businesses in your community don’t like to see that there are co-ops for the products they sell,

but the reasons aren’t so simple as profit. The consequences of cloth diaper co-ops on small businesses that

make and sell cloth diapers are more complex than that.

Cloth Diapering Communities

Co-ops, no matter the quality, can commodify cloth diapers. They can remove the social context from a product

that has gained popularity precisely because of social context.

On the other hand, some co-ops are formed out of existing communities, and other co-ops become

communities unto themselves.

Nevertheless, all co-ops remove the maker from that social context, so the community becomes a social context

for an artifact separated from its maker. The replacement community is smaller than one that includes the

people who create the materials, piece the products, or ship the boxes.

Of course, we don't have to let that happen. We don’t have to let our communities shrink; we don’t have to

accept cloth diapers as a commodity. We know that we support, sell, and practice cloth diapering, the action

beyond the artifact. We know cloth diapers have meaning beyond the artifact, and we can rally the movement

to understand that.

We do not accept the inevitability of black market diaper co-ops. We reject the illegal, and we discourage the

unethical.

The Real Diaper Association mission and values have always included reference to face-to-face interactions

because we understand the importance of community in cloth diapering---that is cloth diaperING, the

meaningful action that comes with an abundance of social context in the making, selling, and support of the

diapers. It only makes sense that Real Diaper Association would continue to promote and support those actions

that build sustainable cloth diaper communities.

Buy According to Your Values

Cloth diapers CAN BE inherently environmentally sustainable, as reuse has lower earth impact, and cloth

diapering can be socially sustainable, as cloth diapers encourage community connections for support.

But, we also imagine that cloth diapers can be barely reusable, far worse for the environment, and utterly

unsustainable. If we subtract the social sustainability, the family and community building that has surrounded

the revival, cloth diapers will lose the appeal that attracted a lot of parents.



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“I want to teach my children sustainability. And to me sustainability is not just buying and using items good for the earth. It’s

knowing how to be a part of a community and economy that will thrive.” - Christy B, Northwest Florida Real Diaper Circle

The explosion of cloth diaper business since the advent of the graphic internet in the early 1990s is part of the

leading edge of socially and environmentally conscious micro business. Mega businesses have followed with

corporate social responsibility, but it was the owners of very small businesses who were the first to seek

sustainability. Some of the long-term businesses in the cloth diaper industry were among those who consciously

chose to make and sell the products they did, cloth diapers, precisely because they were socially and

environmentally responsible products. Those businesses grew from the responsible choices of their founders

rather than marketing being plastered onto a random choice of industry.

Not every manufacturer or every retailer needs to build their business on the same values. Diversity in core

values of businesses gives end users a range of values to choose from. But, if businesses all sink to the lowest

common denominator of seeking nothing more than profit from cloth diaper buyers, the cloth diaper industry as

we know it will melt away.

Change is inevitable, but the direction of that change is still within our hands.

If each of us who is a business owner doesn’t build our businesses based on our cores values, and if each of us

who is a parent doesn’t buy our diapers based on our sincerely held values, we will lose the broad variety

currently found in the industry.

If you care about the social or environmental sustainability of cloth diapering, if you care about the survival of

the cloth diaper industry, you need to buy and use diapers by your values.

Otherwise, your choices are going to go away.

RDA Policy on Cloth Diaper Co-ops

In developing this report, we’ve spoken with dozens of people in the cloth diapering world. It’s relatively easy to

find common ground against black market (illegal or illegitimate) cloth diapers, which can endanger co-op

participants, babies, and the local cloth diaper industry.

As consumers, we all consider the ethical issues related to fair labor and environmental concerns in all our

purchasing decisions, not just when participating in a cloth diaper co-op. Some would say these considerations

go beyond the scope of our organization, and that may be the case. We do want to support all families who

choose to use cloth diapers, so we try to keep our messaging narrowly focused. That said, one of the main

benefits that we promote of cloth diapering is its lessened impact on the environment. So, our audience should

be aware that their buying choices play a role in their diapers’ environmental impact.



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Sustaining the practice of cloth diapering is, however, clearly central to our mission. Because the relationship

between cloth diaper co-ops and long-term cloth diapering is less clear, it’s difficult for us to develop a strong

policy statement that would condemn cloth diaper co-ops across the board.

Some members of the Real Diaper Association Board of Directors own businesses in the cloth diaper industry.

Our aim is not to narrow consumer choices in cloth diapering (which would, in fact, violate anti-trust laws).

On the other hand, that appears to be exactly the danger of cloth diaper co-ops. If they continue to undercut

the quality and pricing for cloth diapers, local industry - - both manufacturers that focus here in the US or

Canada AND the retailers who sell and support those brands - - will shut down. This in itself would severely limit

consumer choices, and it’s not apparent that all cloth diaper co-op participants are aware of this. If YOU are

concerned about the long-term health of the cloth diaper industry in the US and Canada and its contributions

to local jobs and communities, or if you are concerned about the long-term availability of quality cloth

diapers, we recommend that you don’t participate in cloth diaper co-ops.

That’s a strong statement. The companion statement is this: we will continue to support all cloth diapering

families with choosing and using reusable cloth diapers in whichever situation they choose, whether or not

they share our values, and regardless of the origin of their diapers.

To further spell out our position on cloth diaper co-ops, we have developed several supplements to this report.

First, we’re giving specific guidance to our Circle Leaders to fill that gap. We’re prohibiting them from running or

promoting illegal or illegitimate co-ops and are recommending that all messaging about co-ops (if they choose to

allow co-op talk in their Circles at all), includes reference to RDA’s material on the subject. Second, we’re

offering guidance to cloth diaper retailers about how to minimize the impact of cloth diaper co-ops on their

businesses. Third, for cloth diaper users who choose to participate in cloth diaper co-ops anyway, we offer

recommendations to protect themselves, their babies, and the larger community. Lastly, we offer additional

guidance to families looking for inexpensive, quality cloth diapers.

Supporting Low-Income Families with Cloth Diapering

Given our research into the many concerns with cloth diapering co-ops, we’ve recommitted to our efforts to

support families in finding and using sustainable diapering choices that fit their budget. We believe that saving

money can be one of the biggest benefits of reusable cloth diapers, and saving money is a possibility even

without purchasing cloth diapers in co-ops. So, for those users choosing not to purchase cloth diapers through

co-ops:

http://realdiaperevents.org/archives/using-cloth-diapers-on-a-budget-%E2%80%93-how-to-build-that-

stash – Starting with items around the house or even a single prefold, you can save money each week to

build your cloth diaper stash over time.

http://realdiaperevents.org/archives/using-cloth-diapers-on-a-budget-%E2%80%93-how-to-build-that-stash

http://realdiaperevents.org/archives/using-cloth-diapers-on-a-budget-%E2%80%93-how-to-build-that-stash



[email protected]

http://realdiaperevents.org/archives/cloth-diaper-for-under-5-using-items-in-your-home - Do you want

to get started using cloth diapers but can’t dig up the funds to buy them? No worries! Use what you

already have! Up-cycling items you own into cloth diapers is THE most economical way to diaper a child.

http://realdiaperevents.org/archives/how-to-buy-used-cloth-diapers - Buying cloth diapers in the

secondary market has many advantages. Not only can you save quite a bit of money but you are also

helping the environment by recycling. Includes tips on what to watch out for and how to prepare your

diapers before using them.

http://realdiaperevents.org/archives/cloth-diaper-banks-helping-families-in-need-get-started - While

families stand to save money using cloth diapers, the initial investment can be an obstacle. Diaper banks

provide cloth diapers to families in need.

http://realdiaperevents.org/archives/the-simplicity-of-hand-washing-cloth-diapers - Hand washing cloth

diapers is easy especially when using simple diapers like flats and prefolds. It takes about 5 minutes to

wash just a few diapers at a time.

Acknowledgement

Our sincere thanks go to all who contributed information, ideas, and feedback throughout the process of

creating this report.

Heather McNamara, Executive Director

Lori Taylor, Chair of the Board, President of the Corporation

Angela Torres, Vice Chair of the Board

Angela Imes, Treasurer

Elizabeth Pilgrim, Secretary

Heather Bradley, Director

Monique Bragg, Director

Marie DiCocco, Director

Rachel Dove, Director

Sara Moore, Director

http://realdiaperevents.org/archives/cloth-diaper-for-under-5-using-items-in-your-home

http://realdiaperevents.org/archives/how-to-buy-used-cloth-diapers

http://realdiaperevents.org/archives/cloth-diaper-banks-helping-families-in-need-get-started

http://realdiaperevents.org/archives/the-simplicity-of-hand-washing-cloth-diapers



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Further Reading

We are not the only members of the cloth diapering movement who have considered the impact of cloth diaper

co-ops. You can read more perspectives on the topic at the links below.

http://www.ecobabysteps.com/2013/05/04/cheapie-leakies/

http://www.ecobabysteps.com/2012/10/06/cheap-products-at-what-cost/

http://blog.bummis.com/2013/08/a-values-driven-business-part-1-looking.html

Manufacturers for a Local Economy: http://loveclothdiapers.blogspot.com/2012/09/manufacturers-for-healthy-

economy_15.html

http://www.clothdiapergeek.com/2012/09/co-ops-good-bad-and-ugly-truth.html

Consumer point of view: http://www.theclothdiaperwhisperer.com/2013/07/cloth-diaper-co-ops-one-

moms.html?m=1

More about cloth diaper imports, including co-ops:

http://dirtydiaperlaundry.com/cloth-diapers-made-in-china-what-every-consumer-needs-to-know/

http://allaboutclothdiapers.com/are-cloth-diapers-from-china-bad/

Sources

Thanks to EcoBabySteps.com for guidance in the ethics section of this report.

Thanks to respondents of the Real Diaper Association Cloth Diaper Co-op Survey, September, 2013.

http://www.ecobabysteps.com/2013/05/04/cheapie-leakies/

http://www.ecobabysteps.com/2012/10/06/cheap-products-at-what-cost/

http://www.google.com/url?q=http%3A%2F%2Fblog.bummis.com%2F2013%2F08%2Fa-values-driven-business-part-1-looking.html&sa=D&sntz=1&usg=AFQjCNGeO395oZNlVGEitt7PePYYK0Xakw

http://loveclothdiapers.blogspot.com/2012/09/manufacturers-for-healthy-economy_15.html

http://loveclothdiapers.blogspot.com/2012/09/manufacturers-for-healthy-economy_15.html

http://www.clothdiapergeek.com/2012/09/co-ops-good-bad-and-ugly-truth.html

http://www.theclothdiaperwhisperer.com/2013/07/cloth-diaper-co-ops-one-moms.html?m=1

http://www.theclothdiaperwhisperer.com/2013/07/cloth-diaper-co-ops-one-moms.html?m=1

http://dirtydiaperlaundry.com/cloth-diapers-made-in-china-what-every-consumer-needs-to-know/

http://allaboutclothdiapers.com/are-cloth-diapers-from-china-bad/



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Real Diaper Circle Cloth Diaper Co-op Guidelines

The following guidelines have been developed for and with our active Circle Leaders:

RDA Circle Leaders may not run black-market (illegal and/or illegitimate) cloth diaper co-ops.

RDA Circle Leaders are prohibited from promoting black-market cloth diaper co-ops in their community.

Co-op classes within the Circle (taught by anyone in the Circle, including, but not limited to, accredited

Leaders) may not be promoted unless they include RDA’s user guidance on participating in legal, ethical,

and sustainable co-ops.

We recommend that Circle Leaders respond to member mentions about cloth diaper co-ops with links

to RDA user guidance on participating in legal, ethical, and sustainable co-ops.



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“If I see a product in a coop, I drop the line. If I see it in a

bargain site more than once, I drop the line. Can't afford to

have it take space and sit on the shelf. “ – Sara Moore, 9/13

Recommendations to Retailers on Cloth Diaper Co-ops

Retailers tell us they are affected by cloth diaper co-ops in several ways:

Their customers develop unrealistic pricing expectations for quality reusable cloth diapers, either

because

- the specific diapers they retail are sold in co-ops below MSRP, or

- competing co-op brands externalize costs to achieve a low price point.

They spend a lot of time supporting people with poor quality cloth diapers that they bought in co-ops.

Here are some recommendations for protecting your business:

Report illegal co-ops to the appropriate government agency or customs.

Report unsanctioned co-ops to the manufacturer.

If you’re unhappy that your vendors are allowing legal co-ops for their products, talk to them about it.

Be firm about supporting only the diapers you sell.

Educate your customers about the impacts of their buying decisions.



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“Co ops have really helped me in

learning to cloth diaper. I am so

grateful for the two I have joined, the

community is wonderful.” – RDA Cloth

Diaper Co-op Survey respondent, 9/13

Are the diapers being sold through the co-op without manufacturer approval?

>>Report the co-op to the manufacturer.<<

Are the diapers not CPSIA compliant? Have the materials used not been tested for flammability? Report them to the Consumer Product Safety Commission (CPSC) at saferproducts.gov

Do the diapers not include care labeling? Report them to the Federal Trade Commission

Recommendations to Cloth Diaper Co-op Participants

The three major areas of concern related to a cloth diaper co-op are:

Is it legitimate? Is it legal?

Is it ethical, using fair labor and protecting the environment?

Is it sustainable, maintaining cloth diapers as a quality option into the future?

To understand the ethics and sustainability of co-ops, please read the complete Real Diaper Association

Report on Cloth Diaper Co-ops (http://realdiaperassociation.org/diaperco-ops).

To ensure that you’re participating in a LEGITIMATE cloth diaper co-op buy:

Check the manufacturer’s page to ensure they sell to co-ops

Check that manufacturer warranties are still valid if you buy through the co-op

The pricing and buy should not be secret (which usually indicates it’s an illegal or unethical buy)

To ensure that you’re participating in a LEGAL cloth diaper co-op buy:

If the co-op host is not collecting and remitting sales tax on the buy, you’re responsible for remitting your

own use tax.

Confirm that the cloth diapers are compliant per CPSC and FTC requirements and have the appropriate

labeling and certifications.

Other things to watch out for:

Watch out for under-estimated customs fees, which could result in a

second collection before getting your diapers.

Do you trust the host to complete the transaction that you’ve paid for?

Do you know how to get support from the co-op or manufacturer with

the items you’re purchasing if you have difficulty using them?

Look for local support in cloth diapering from other parents who can fill in the gap for missing care labeling

and give advice on their experience with new, experimental fabrics and diapers.

Looking for inexpensive, reusable cloth diapers?

http://realdiaperassociation.org/budgetdiapering

http://realdiaperassociation.org/diaperco-ops

http://realdiaperassociation.org/budgetdiapering

2013 Report on Cloth Diaper Co-ops - Real Diaper Associationrealdiapers.org/images/print/RDAPositiononClothDiaperCo-ops.pdf · continue to support ALL cloth diapering parents and

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