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Sustainable Profitability

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Daan de Vries, Markets Director, UTZ Certified, shares how food and beverage companies, brands, and QSRs can ride the organic wave of coffee, tea, and cocoa consumption, and also reap CSR profits.

What are the UTZ parameters for certification?

Implementing good agricultural practices on UTZ Certified farms results in higher yields and better quality crops. Life on UTZ farms is shown to be better for farmers, workers, and their families. There is improved access to sanitation facilities, clean drinking water, and better safety facilities. Very importantly, children from UTZ Certified farms are more likely to attend school. UTZ traces the coffee, cocoa, and tea from the farmer to the store shelf.”

The UTZ Code of Conduct is based on a model of continuous improvement. This code sets out requirements for farmers in areas such as professional farm management, good agricultural practices, safe working conditions, and protection of natural habitat. There is a certain minimum criteria that a producer must meet in the very first year so that he can sell his coffee, cocoa, or tea as UTZ certified. More requirements are added in the subsequent years.

This Code of Conduct applies only to the producers. There is a separate set of requirements for supply chain actors (such as roasters, blenders, manufacturers, traders, and brands) called the Chain of Custody, which relates to how the UTZ certified coffee, cocoa, or tea is handled throughout the supply chain.

Do you also have eco-labels?

The UTZ Code of Conduct and training programmes include many environmental requirements. However, the use of agrochemicals is restricted, not prohibited, so as to keep optimal balance between farmer productivity and protection of the environment. UTZ certified farmers can carry the organic label, next to being UTZ certified, and this happens in various countries around the globe.

However, UTZ is not involved in the packaging. Having said that, partners can claim UTZ Certified ingredient(s) in their product labelling on their packaging. But this needs to be approved by UTZ before printing so that we can ensure that the claims on the labelling on the packaging are legal and ethical in practice.

What are the key benefits of UTZ Certification for the Food Industry?

UTZ Certified is one of the largest programmes in the world for sustainable farming of coffee, cocoa and tea. Consumers in more than 100 countries enjoy UTZ labelled products and expect assurance in food safety, quality, and stewardship. The industry needs to find new ways of increasing consumer value while providing overall benefits to society, and, if need be, transforming business models to become more competent in the present and future global arena. UTZ certification can also provide added value for a product and a brand through transparency and independent assurance for sustainable farming.

Today, many companies are increasingly becoming aware of the need for sustainability and sourcing UTZ certified coffee, cocoa or tea, as it allows them to meet the growing public demand for environmental and social protection. For consumers, the UTZ label serves as an independent reassurance that the company sourced sustainably produced coffee. UTZ Certified believes that consumers are loyal to their favourite brands rather than to labels, so we work with brands to support their own sustainability communication.

How does the UTZ certification or the organic label impact pricing of the product?

UTZ Certified believes in integrating sustainability in the core farming practice, and is, with partners in India as well as all across the globe, making valuable progress. Having said that, UTZ requires that buyers pay a premium on top of the price they pay to reward their supplying farmers for their sustainability efforts. Normally, this premium cost is absorbed by the supply chain and not translated into a higher price at consumer level.

UTZ certified farmers are empowered to negotiate a better price for their product. The difference between the average commodity price and the price received by UTZ certificate holders is known as the UTZ premium. The premium entails an additional cash amount paid above the market price for a similar conventional (non-certified) product.

UTZ Certified’s online traceability system (the Good Inside Portal) records the premiums of all sales from the Code of Conduct certificate holder to the first buyer. UTZ has no interference in the height of the premium. The UTZ Codes of Conduct require transparency on how the premium is spent. In 2013 the registered global average premium was 3.5 $c/lb for UTZ coffee; for cocoa, it was €122 per metric ton; and for tea the registered weighted average premium was €48 per metric ton.

More importantly, the UTZ programme is geared to help farmers increase the productivity of their land, reduce input costs, enhance quality of their produce, and ultimately raise their net income.

By what percent does the crop yield and quality go up with UTZ certification?

There are no general conclusions that can be drawn about the yield increase under UTZ certification as this differs depending on several external factors like size, location, and situation of the farm. However, the UTZ Certified Impact Report, which is based on 24 independent studies, shows that an increase in yield and better quality crops are among the results of UTZ certification. For example, in Colombia UTZ certified farmers were able to maintain higher levels of production despite adverse weather conditions which led to a decline in production levels among conventional farmers. The gap in terms of production between UTZ certified farmers and the control group increased from 52 percent in the first year to 169 percent by the fourth year.

Do you also conduct some training?

UTZ Certified has local representatives who offer customised business support. We aim to help farmers and other supply chain actors towards certification. Training on the UTZ requirements is delivered to farmers by UTZ partners including companies, NGOs, extension agencies and farmer organisations.

What assistance do you get from the Indian Coffee Board/Tea Board?

Our collaboration with the Coffee Board and Tea Board of India helps in spreading awareness about certification in the country. Currently, we are working together on a strategy for the coming five years that will encourage sustainable sourcing. We value our association with the two bodies and look forward to working with them to build a sustainable tomorrow. Also, we have collaborated with the Coffee Board to analyse the difference between UTZ and conventional production in terms of pesticide use. This research is still ongoing.

How do you manage the supply chain for tea and coffee?

The UTZ programme respects the independent trading and profit mechanisms of the market and does not interfere directly in transactions. However, all supply chain actors must upload all relevant information on the UTZ traceability system called Good Inside Portal, so that UTZ can ensure that all UTZ certified commodities are traceable from origin to market. Every sale that is made at every stage of the supply chain can be traced. Such data includes information on the premiums paid and many other factors. UTZ offers brands the possibility to trace the coffee, cocoa, and tea from the shelf in the store to the farmer.

Sustainable farming has gained awareness globally and certification is increasingly seen as an important tool to ensure transparency and sustainability. In the future, more corporations, globally as well as in India, will require products to be sourced sustainably. However, in a context where certification meets little consumer recognition as yet, it may be challenging to engage supply chain actors in this long-term journey.

Many multinationals have committed to sustainability and are increasing their requirements. In other words, Indian exports are also affected by the characteristics of the demands. For the domestic market, a growing middle class with higher awareness about the social, environmental and economic challenges will also set standards for the future which will transform the demand. This will take place rather sooner than later.

What is the relevance of certification for retailers and brands?

Retailers and brands need to cope with a situation of growing demands against potentially decreasing production volumes in coffee, cocoa and tea. When social, economic and environmental issues are properly addressed, farmers will be more likely to continue growing these commodities, and with higher yields against equal or even lower input costs. Therefore, brands and retailers know that their investments will not only lead to better prospects for farmers, their workers, their families, and their environment in the short term, they also know that they are investing in enough supply in future to meet consumer demand.

What initiatives do you take to increase awareness of the UTZ certification?

UTZ Certified has representatives in many of the major producing countries around the world. These representatives work closely with the head office in Amsterdam, and UTZ also works closely with many partner organisations locally. Training on the UTZ requirements is delivered to farmers by UTZ partners, including companies, NGOs, extension agencies, and farmer organisations. The objective is to reach out to more and more farmers so that they can benefit from certification, and this also has the effect of increasing the supply of sustainable coffee, cocoa, and tea. We also reach out to the media because we are eager to inspire many other stakeholders to embark on our journey.

UTZ also facilitates sustainability communication by its partners by means of extensive information provision as well as ready to use audio video material and online presence. Partners like Cafe Coffee Day (the group) have proven highly proactive in communicating about the benefits they experience from their cooperation with UTZ.

How do you monitor the impact of UTZ Certified programme in India?

There are many ways: first of all, the auditing of certified farmers provides important insights in the developments taking place at the farm level. Also, by ensuring local representation for the market and field activities, UTZ ensures in-depth insights through direct and indirect contact with farmers, estates and cooperatives. In recent years, UTZ has invested substantially in impact research. A study (not yet published) on UTZ tea farming in the region of Tamil Nadu performed by Dr. Vermeulen in collaboration with TERI University, for instance, indeed shows that certified farmers perform better when it comes to economic, social, and environmental affairs. We are also working with the Coffee Board to collaborate in Monitoring and Evaluation to evaluate the impact UTZ certification specifically has on the producers in India.

What are your plans for India?

Here in India, our role is unique and meets both production and consumption. In most countries where UTZ is present, either UTZ certified commodities are grown or they are consumed. In India, most of the coffee and tea grown is consumed inside the country. Hence, UTZ aims to develop the supply chain within the country rather than focussing on export. This mission involves all levels of service that UTZ can provide such as facilitating training, auditing, traceability services, and creating awareness through partners as well as directly.

UTZ aims for a situation where 50 percent of worldwide coffee, cocoa, and tea production will be certified by 2020 – against its own or against partner codes – and in the long term to make sustainable agriculture the norm. With India being the fifth largest coffee producing nation and the second largest tea producing nation, transforming Indian coffee- and tea growing towards better farming practices is high on the global agenda. For the demand side, a growing middle class with higher awareness about the social, environmental and economic challenges will also set standards for the future, which will transform the demand.

At UTZ Certified, our mission is to make sustainable farming the norm. This means that in India, we will seek to inspire more and more farmers, farmer organisations, supply chain actors, retailers, NGOs, authorities and consumers to shift to sustainable agriculture, where people, planet, and profit are well balanced so that farmers, their families and the Indian environment can work towards a better future.