Generic Criteria Food & Beverages - Labour Policy Question NEW

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Question

Does the brand (owner) have a clear and effective policy to improve the farmers’ income that goes beyond certification?

NL: Heeft het merk (bedrijf) een duidelijk en effectief beleid, dat verder gaat dan certificering, om het inkomen van boeren te verbeteren?

DE: Setzt der Markenhersteller Maßnahmen um die das Einkommen der Landwirte über Fair Trade Prämien hinaus steigern?

References

This question specifically addresses the topic to improve the farmers working and living conditions, but is not restricted to the benefits of social certification schemes such as Fairtrade, Rainforest Alliance or UTZ Certified. This question relates to the “Guiding Principles on Business and Human Rights: Implementing the United Nations ‘Protect, Respect and Remedy’ Framework” 1, and to Theme 1-6, namely 'Decent livelihood', 'Fair Trading Practices', ' Labour Rights', 'Equity', 'Human Safety and Health' and ' Cultural Diversity' of SAFA Guidelines, Version 3.0.

In this question we focus on the sole indicator of progress made towards living wage and decent income.

Farming tropical commodities often means a life far below the poverty line. In their Cocoa Barometer, the VOICE network that is active in the cocoa industry estimates that cocoa farmers' income should be raised up to 6 fold the current cocoa farmer incomes in West Africa. To close the wide gap, the VOICE network suggest to at least double the commodity prices, apart from increasing farm size and yield. Whichever of those three directions are taken, there should be considerable funds available over a long period for farmers to have a realistic chance of escaping poverty.

With this question, brands are positively assessed when they implement policy measures to ultimately achieve the payment of living wages at small farmers and plantation workers (whether or not own employees). For that this question requires that brands report on:

- budget available and a breakdown of this budget is spent and how it indirectly (e.g. education) and directly (premium paid, higher wages) benefits farmers and plantation workers. These efforts go beyond social certification to realize decent income. The budget is related to the total commodity expenses based on market prices, as a percentage.
- results realized, brands should clearly report, whether payments (for instance additional premium rates) to the producers and plantation workers are realized, which are independent from possibly volatile market rates.

This question is not limited to reporting results, we measure commitment through investment and performance. Again taking the example from the cocoa sector, many chocolate companies have a sustainability plan with a budget committed. Taking a quick and rough glance at the current ‘investments’ of chocolate brands in farmers:
- Hersheys: US$10 million committed for the next 5 years on 200kT annual cocoa purchase –~ US$10 per ton. This is <0,5% of the commodity price of cocoa.
- Nestlé 12 million US$ for env. annually 400kT ~ US$30/ton. This is <2% on the commodity price of cocoa and a small fraction of the company’s turnover.
- Mars US$75 per ton purchased cocoa (check), this is <3% of the commodity price of cocoa.
- Mondelez: US$400 million over 10 years for annually 450kT cocoa ~ US$89 per ton, this is <4% of the commodity price of cocoa.

These percentages are far below the suggestions of the VOICE network, and do not give a realistic perspective for farmers to have their position changed. We should require these food companies to step up their commitments.

KPI's

KPI's calculated as a percentage to the annual expenses on relevant commodities based on market prices:
- average premium paid at the farm gate level of cooperatives or individual farmers
- investment in programs for e.g. education, training, infrastructure etc

“Average” is important here: it is fair to pay a higher premium to the more deprived farmers The average is calculated over the total purchase volume of relevant commodities (such as cocoa, bananas, sugar, etc). It is upon the food company to show how this is organized. At least the company should prove a plan for living wage, and prove that wages:
- can be considered ‘living wage’ with reference to external sources such as local union calculations of living wage, OR:
- are annually increasing in a reasonable timeline (covering 10 years max) towards a living wage (with reference to external sources that have calculated a living wage) AND wages are already 10% higher than the average industry wage or local minimum wage

Good Practices

In the Chocolate sector, good examples of policy measures implemented that go beyond social certification are given by the Dutch chocolate brand Tony Chocolonely and GEPA.

Tony's Chocolonely: the brand pays a premium of 25% (incl. Fairtrade premium) at farm gate level on the market price. Thereby, Tony's Chocolonely premium accounts for around 47%, next to the Fairtrade premium (53%) (see link, page 65).

GEPA: within its 'Fair+' program the brand pays - on average - a premium of around 22% on the Fairtrade premium price (see link, page 3).

In the Coffee sector, a good example of policy measures implemented that go beyond social certification is given by the German coffee brand Coffee Circle. Instead of Fairtrade certification, the brand aims to give its supplier a minimum price + additional fixed premium of 1€ per kg. coffee at farm gate level. In contrast to that: the Fairtrade premium is at 0,20€ per kg. coffee, effective by 23.10.2015.

In the Tea sector, a good example of policy measures implemented that go beyond social certification is given by GEPA. GEPA's supplier 'Small Organic Farmers' Association' receives a 109% higher premium per kilogram tea (6,44 €), compared to the regular Fairtrade premium (3,07 €) 1.

Ranking guidelines

A ‘Yes’ is applicable when:

  • The company demonstrates a substantial financial commitment to programs pursuing a living wage beyond certifications AND there is a breakdown of program expenditures AND a report on the indirect and direct results at the farmer income level

A ‘No’ is applicable when:

  • The brand (company) reports to not have a policy beyond certification to improve the farmers working and living conditions.
  • The brand (company) does not report any policy

A ‘?’ is applicable when:

  • The company is not clear about the indicators as listed under 'Yes'.

Answering guidelines

Yes:

  • [Brand] implements measures beyond certification to improve the farmers working and living conditions, [characteristics and program expenditures of the respective project]. Also, [Brand] reports on clear results: [details].

No:

  • [Brand] reports not to implement policy measures at its farmers to improve the farmers working and living conditions, that goes beyond certification.

?:

  • [Brand] does not provide tangible information about policy measures to improve the farmers working and living conditions, that goes beyond certification.
  • [Brand] implements policy measures to improve the farmers working and living conditions, that goes beyond certification, namely [characteristics of the respective project]. However, clear results are not yet reported.
  • [Brand] states that living wage payments are realized [details like number of suppliers, from which region etc.], but does not report concrete enough information regarding respective policy measures implemented.


-* You can pick the topic that applies to 'your' brand.

Note: when linking to a downloadable source document, please refer to the page(s) where to find the respective information with: (see link, page [..]).

Optional, but only for ? Answers, feel free to write at the end of a remark: Sustainability information should be easily accessible for consumers to make responsible choices.

Further resources

  • ILO 1
  • IndustriALL 1
  • WageIndicator.org 1
  • Ico.org - Daily Coffee Prices 1
  • Fairtrade - Standards 1
  • Fairtrade Deutschland - Mindestpreis 3
  • Oxfam International / ETP - Understanding Wage Issues in the Tea Industry 1