Summary
The new Rainforest Alliance certification standard has been criticised by Latin American banana producers for failing to get to grips with the structural problems of cost and revenue distribution along the supply chain. While Rainforest Alliance is keenly aware of the problem, it holds certification alone cannot solve this structural imbalance. Rainforest Alliance is therefore looking to use other tools to leverage changes in cost and revenue distribution along banana supply chains. This could usefully focus on ensuring the inclusion of provisions on cost and revenue distribution in any EU ‘Green Deal’ regulatory initiatives aimed at promoting compliance with environmental and climate change concerns, and their coordinated implementation alongside the EU’s Unfair Trading Practices regulation. This could provide a means of getting to grips the long-term structural concerns of banana producers.
Following the establishment of ‘new standards of the Rainforest Alliance certification program’, Latin American banana producers have criticised what they call a ‘growing gap between the Rainforest Alliance and market reality’. Jose Pons, Coordinator of the Ecuadorian Banana Cluster, maintains investments in meeting environmental and social standards are ‘not reflected in the final price’, since ‘European supermarkets always impose lower and lower prices’ (1).
It is claimed Rainforest Alliance does not ‘respect the environment and social legislation of …countries of origin’, which seek to balance various needs and objectives in line with local realities. It is argued the ‘inclination to regulate in parallel causes inconsistencies in the whole chain’ and gives rise to a ‘regulatory anomaly’. It is maintained Rainforest Alliance has made no progress in changing ‘perception and participation of consumers’, with a situation still prevailing where the price paid to the producer ‘does not compensate the immense efforts and related costs that we have made in recent years both in social and environmental matters’ (1). This is seeing Latin America producers demanding the new Rainforest Alliance standards should not enter into force until January 2022, thereby allowing for further consultations and review.
In response to these criticisms, Rainforest Alliance has committed to convening a technical working group with Latin American banana producers to discuss the new standards. Banana producers have implied that should Rainforest Alliance fail to does not take producer concerns more fully into account they will look for alternative sources of certification which are consistent with addressing both revenue distribution issues and the environmental and climate change concerns and demands of international customers (1).
However, it is unclear what alternative certification bodies could meet this requirement given the ‘Rainforest Alliance program is the world’s largest banana certification program’, certifying over 8 million tonnes per annum, out of a total annual banana export trade of 19.2 million tonnes.
The Rainforest Alliance is keenly aware of the underlying structural issues faced regarding the ‘unfair distribution of value in the banana supply chain.’ It’s January 2020 published review (2) the Rainforest Alliance highlighted how in the EU, which takes 85% of Rainforest Alliance certified bananas (mainly to the Netherlands, UK and Germany), ‘some 36-43 percent of the consumer-end price’ of bananas is captured by retailers. It is maintained the market power of supermarket chains is such ‘they are able to have significant impact on the price producers can achieve for their bananas’, with over the past 30 years import prices having declined across all major markets, with a stagnation now occurring at these lower price levels (2).
In the UK where supermarket price wars have been most intense ‘consumer prices even dropped by 50%’ between 2000, and 2014. With both production costs and shipping costs having seen dramatic increases over the past 15 years ‘the value retained in producing countries has fallen some 20–50%’, while the costs of living for banana framers and workers has been constantly increasing.
The Rainforest Alliance acknowledges ‘the power imbalances and seasonality in a low-price environment’ has seen a range of Unfair Trading Practices emerge, including ‘some retailers not signing contracts with suppliers; changing or cancelling orders at short notice, unjustified quality claims, and 60-day payment periods’ being imposed on suppliers. In its January 2020 review Rainforest Alliance argued forcefully that if a flourishing and sustainable banana industry is to be promoted ‘then the extreme imbalance in value distribution must be urgently addressed so that producers are able to invest in sustainable production practices’ (2). The need for such structural change in revenue distribution along the banana supply chain is this acknowledged by the Rainforest Alliance. However, the Rainforest Alliance also claims, ‘a certification system cannot solve the structural imbalances in the supply chain’, which gives rise to this unequal distribution of revenues.
Consequently, Rainforest Alliance is planning to ‘leverage other tools in addition to certification to drive greater economic incentives to certified producers, allowing them to recover the costs and investments associated with sustainable production’. Rainforest Alliance is already an active participant in the Global Living Wage Coalition (GLWC) of which it was a co-founding member. This coalition aims to promote better wages for banana sector workers.
Rainforest Alliance also recognises that for ‘farmers to be able to pay their workers a higher wage, they will need to get a better price for their certified bananas’ and that for this to be attained ‘all buyers, traders, and retailers need to contribute to increasing the price paid’ (2).
It is on this basis Rainforest Alliance sought to ‘include the payment of a mandatory sustainability differential to certified farmers’ in the new 2020 Standard. However, given the recent criticism it is apparent from Latin American banana producers associations are looking for more rapid and effective action on prices, to ensure a fully sustainable basis for the operation of banana supply chains.
| Comment and Analysis The Rainforest Alliance has always been rooted in deforestation concerns, particularly in the banana sector. More specifically the Rainforest Alliance standards focus on ‘a wide range of good agricultural practices and rigorous social and environmental sustainability criteria, designed to protect workers and their families, and the surrounding environment and communities.’ These requirements are split between ‘critical requirements’ which ‘cover the highest-priority and highest-risk environmental, social and labor issues and ‘continuous improvement criteria’, which ‘requires farms to gradually increase their compliance’ (2). This focus is strongly orientated towards on-farm interventions. This focus is slightly different from the Fairtrade movement, where the initial primary focus was on the distribution of revenues along the supply chain, with the aim of ensuring producers receive a fair share of the final revenues. While both movements have sought to move beyond their initial focus to embrace each other’s core concerns, this has recently been given added importance by calls for more formal EU regulatory action to ensure more environmental and climate friendly farming practices are pursued in the production of all goods destined for sale on the EU market (see companion epamonitoring.net article, ‘What Options for Strengthened EU Regulatory Requirements Would Best Serve the Interests of African Cocoa Farmers?’, 16 July 2020). Given recent developments in the cocoa sector (see companion article, ‘Nestlé’s Withdrawal from Fairtrade Cocoa Purchases Highlights the Need for ‘Due Diligence’ Regulations to Address Price and Income Issues’, 4 August 2020), there would appear to be a need for the Rainforest Alliance to throw their weight behind ensuring any new EU sustainability related regulatory initiatives include provisions which address cost and revenue distribution issues. The implementation of any such regulations should then be coordinated with the further elaboration, operational application, and effective enforcement of the EU’s Unfair Trading Practices directive, as this applies to imports from developing countries. Any elaboration should seek to address the price depressing effects of supermarket price wars which have contributed to the progressive reduction of returns to banana producers. This is progressively pushing smaller ACP banana producers and exporters out of European market, particularly in the UK (see companion epamonitoring.net article ‘Structural Price Pressures on UK Banana Market See Winfresh-UK Placed into Administration’, 25 August 2020). There is an increasingly desperate need to promote consumer prices for bananas which both more accurately reflect the costs of more sustainable forms of banana production and the need to enhance the retained income of banana producers supplying sustainably produced bananas. This could form part of the Rainforest Alliance commitment to intensified advocacy efforts aimed at governments and corporate players involved in the banana supply chains. This could provide banana producers not only in Latin American but also in the ACP, with assurances that the increased focus on environmentally sustainable and climate friendly production practices as part of the EU’s new ‘Green Deal’, will also address the critical issue of the distribution of costs and end value along the supply chain. It needs to be recognised improving producer incomes is an essential pre-requisite for the sustainable development of new more environmentally and climate friendly production practices in the banana sector. This approach would be relevant not only in the banana sector but also in the cocoa and palm oil sectors, where there are also growing concerns over deforestation, environmental degradation, and wider climate change impacts of existing patterns of production. Given the need to ensure that any higher consumer prices for bananas are reflected in both more climate and environmentally friendly farming practices and increased returns to banana farmers and workers, the concept of sector specific Voluntary Partnership Agreements between the EU and the governments of major exporting countries could usefully be pursued, as part of any new ‘Green Deal’ linked EU regulatory initiatives to improve the environmental and climatic conditions under which all goods placed on the EU market are produced. |
Sources:
(1) freshfruitportal.com, ‘Latam banana associations slam new rainforest alliance rules’, 28 July 2020
https://www.freshfruitportal.com/news/2020/07/28/latam-banana-associations-slam-new-rainforest-alliance-rules/
(2) Rainforest Alliance, ‘The Rainforest Alliance Banana Program A More Sustainable Future for the World’s Most Popular Fruit’, January 2020
https://www.rainforest-alliance.org/sites/default/files/2020-01/the-rainforest-alliance-banana-program.pdf