infocus - NRI

Summary

in focusValue Chains: Lessons from the Kenya tea andIndonesia cocoa sectorsAlly Bedford, Mick Blowfield, Duncan Burnett and Peter Greenhalgh3

2 in focus Lessons from the Kenya tea and Indonesia cocoa sectors

Indonesian cocoa and Kenya tea production are dominated by smallholder producers whose products reach consumersthrough long and complex value chains. Stakeholders in the

smallholder sector may face a number of threats to their well-being.

The main social responsibility strategies for tea imported into theUK involve the supplier certification procedures of mainstreambuyer groups such as the Tea Sourcing Partnership, but they applyonly to tea estates and factories. There is no equivalent socialresponsibility process for Kenyan smallholder green leaf producersnor is there any social responsibility strategy for Indonesian cocoasmallholders.

The relationships in the smallholder tea and cocoa sectors involvemany scattered independent individuals and families and acomplex range of traders and other actors. On the one hand theserelationships are flexible and entrepreneurial and marketing canbe highly efficient (e.g. cocoa marketing in Indonesia, wherefarmers receive a large share of the world market price). On theother hand, these types of market are not conducive to promotinggood product quality nor do they offer straightforward routes topromoting social responsibility.

This study suggests that new social responsibility strategies need tobe developed for smallholder tea and cocoa producers. Anystrategy aimed at smallholders needs to recognise that:• Smallholders are often simultaneously entrepreneurs, employers

and workers. • Different types of smallholder have different expectations or

concerns. • Some issues, such as core labour standards, may be relevant to

both tea and cocoa smallholder production, but other issuessuch as terms of trade, land and environmental managementthat are relevant to smallholders are not covered in existingschemes to improve social responsibility.

• Criteria on issues are confounding, particularly where thechildren are likely to come from the grower’s own family.

• Issues such as freedom of association are relevant to estateworkers but of little relevance to independent smallholders.

The future challenge for the cocoa and tea industries is to: • Define what constitutes well-being and good social performance

for smallholders (in the cocoa and tea sectors and forsmallholders generally), and

• Find ways of working within the chain to look for points ofinfluence to drive and monitor social responsibility.

Background 3

The Kenya and UK tea sectors 4

The Indonesian cocoa sector 7

Conclusions 10

Contents

The Resource Centre’s In Focus series highlights key lessons frompartnership action research projects aimed at business, civil society,governments and international agencies engaged in responsible businesspractices.

The Resource Centre for the SocialDimensions of Business Practicehas commissioned this research

as part of a programme promotingsocially responsible business tocontribute to poverty elimination. Itsspecific aim is to examine the socialdimensions of value chains (see box 1)in international trade in commoditiesbetween developing and developedcountries; using the case studies ofIndonesian cocoa and Kenyan tea.

Tea and cocoa were selected becausethey are major commodities exportedfrom developing countries to the UK.They are converted into popular andimportant consumer products(confectionery and beverages), whichhave strong generic and brandimages. In addition, the tea andcocoa sectors are already active in theareas of ethical sourcing, responsiblebusiness practice, social and welfareissues and environmentalsustainability.

Some of the questions addressedduring the research included:• What are the social issues for each

stakeholder in the chain?• What issues of concern to any

stakeholder might affect the wellbeing of others?

• What issues for any stakeholder area consequence of otherstakeholders’ actions?

• What mechanisms/systems exist orcould feasibly be put in place foridentifying and monitoring socialissues?

• What can stakeholders do toinfluence positively the behaviourof others in the chain?

MethodThe use of social standards in valuechain management is the mostcommon approach to sociallyresponsible business in internationaltrade between the South and theNorth. Some of these standards focuson core labour and human rightsissues (e.g. Ethical Trading Initiativeor SA8000), while others are

beginning to tackle wider issues suchas terms of trading and criteria forsmallholders. The AccountAbilityInstitute of Social and EthicalAccountability developed the AA1000framework to carry out socialaccounting, auditing and reporting oforganisations. This standard wasadapted for use in this researchduring the preparation of checklistsand questionnaires.

During 2000/2001 visits were made toIndonesia and Kenya, wherediscussions were held with keystakeholders. The method involvedthe following three elements:• Literature and data reviews: On

economic, social and politicalaspects of the sectors.

• Case studies and stakeholderprofiling: These provide context,identify key relationships andrecognise the potential powers,influences and leverages, which canbe used as catalysts of change.Semi-structured interviews wereused to collect information fromprimary and secondarystakeholders.

• Workshops: In London (on cocoaand tea) and in Nairobi (on tea) topresent results and get reaction andfeedback from stakeholders.

The various consultations were heldin a variety of formats, languages andlocations and included issues raisedby both the Tea Sourcing Partnership(TSP) and Ethical Trading Initiative(ETI). Major areas of discussionincluded employment (wage levels,child labour, hours of work, regularityof employment), health and safetyconditions, education, maternity andhousing. However, a wide range ofother issues impacting on socialconditions, such as government,weather, infrastructure, marketconditions, land use, security andcorruption were also discussed.

Background

in focus Lessons from the Kenya tea and Indonesia cocoa sectors 3

New social responsibility

strategies need to be

developed for smallholder

tea and cocoa producers

The value chain is defined ascomprising those stakeholders involvedin converting an agricultural crop intoa packaged product available for saleto consumers. At each stage along thechain, various activities areundertaken that can add value to theproduct. A “responsible” chain willoptimise the expectations of eachstakeholder without jeopardising theviability of the value chain as a wholeand without putting unfair degrees ofrisk or hardship on any particularstakeholder or adding cost to theconsumer.

Box 1 The Value Chain


The UK is a major tea importer;approximately half of itsannual imports (75,000 tonnes)

are from Kenya. Kenya producesapproximately 260,000 tonnes oftea, with around two-thirdsmanufactured from smallholdergreen leaf production. Tea is thecountry’s major foreign exchangeearner, employing some two millionpeople.

We have identified four maincategories of primary stakeholders inthe tea industry, those involved in (1)green leaf production (smallholdersand estate field workers), (2) greenleaf collection and processing intoblack tea, (3) blending and packinginto brands and (4) retail andconsumption. In addition, there arealso secondary stakeholders, notdirectly involved in the above, such asbrokers, traders, shipping companies,warehousemen and bankers, who areaffected by, or have an affect onprimary stakeholder activities. Box 2contains a summary of the tea (andcocoa) value chains.

UK sector organisations involvedwith responsible sourcingThe Tea Sourcing Partnership: Themost important UK organisation

dealing with corporate socialresponsibility in the tea sector is theTea Sourcing Partnership (TSP).Formed in 1996, its aim is to addressissues of core labour and humanrights standards being practiced bytheir suppliers of tea worldwide. TheTSP members currently account forapproximately 60% of UK tea sales.

Its philosophy assumes that the UKtea trade should be jointlyresponsible for the social and ethicalconditions involved in sourcing teafrom developing countries and thatactivity in this area should be non-competitive and apolitical, andrespectful of cultural and legislativedifferences in each country.

The TSP aims to demonstrate thatproducers comply with locallegislation and union agreementsrelating to terms and conditions ofemployment (including minimum ageand wage levels); health and safety;education; maternity provisions andhousing. The TSP has currentlyundertaken independent audits inKenya and Malawi and is planning toconduct further audits in the othermajor tea producing countries of SriLanka, India, Indonesia, Tanzania andZimbabwe. The TSP claims that this

There are two key

elements to any effective

social responsibility

strategy: defining

well-being, and managing

the process of achieving

and demonstrating that

well-being.

The Kenya and UK tea sectors


unique scheme results in noadditional charges to producers orconsumers with all costs being met bythe membership.

Premier Brands: The first UK teagroup to address issues of ethicaltrade was Premier Brands, whichintroduced its own quality andassurance scheme. This involvesregular inspections and audits of itssuppliers operations. In common withthe TSP scheme, it does not

immediately exclude suppliers whofail to meet the standards but rathersuppliers are requested to rectify thesituation prior to the next visit.

Smallholders312,000 licensed land-owning familysmallholders produce almost two-thirds of Kenya’s tea. They grow andpluck the green leaf, which isdelivered to KTDA buying stations andfactories. Social and welfareconditions are largely dependent on

the level of production and pricereceived. Unlike tea plantationworkers, smallholders have to pay foraccommodation, utilities, health careand education from net income.Further expenses often includeextended family unemployment andthe devastating impact of HIV/AIDS.

Smallholder’s income is derived fromthe average price received for each kgof green leaf produced along with atwice-yearly “bonus” lump sum.

Collector

Grower Factory Broker Auction

Blender/packer

International trader

Merchandiser

Retailer

Grower Local trader

Internationaltrader

Commodities market Processor Merchandiser

Retailer

Box 2 Tea and cocoa value chains

tea

cocoa


Kenya Tea Development Agency Limited (KTDA): Owned by all Kenya’s small-scale farmers through their respective factorycompanies. The KTDA buys green leaf from smallholders, operates and managesthe factories, markets black tea internationally and assists farmers with extensionand input supplies.

Tea Board of Kenya (TBK): Part of the Ministry of Agriculture responsible for regulating the tea sector. Itlicenses tea growers, factories, regulates and controls tea cultivation andprocessing, scrutinises research, promotes Kenyan tea and collects anddisseminates tea statistics.

Kenya Tea Growers Association (KTGA): A private and voluntary group promoting the interests of large and medium privatetea growers. It negotiates workers’ social, welfare and employment conditions onthe larger estates with the Kenya Plantation & Agricultural Workers’ Union(KPAWU). The latter also negotiates with KTDA on behalf of employees who arecovered by the union.

East African Tea Trade Association (EATTA): This brings together producers, brokers and buyers of tea across East Africa. Itfacilitates the tea auctions at Mombasa and direct tea sales and regulates theinternational trade in Kenyan tea and other East African teas.

Tea brokers: Negotiate sales between producers and buyers.

Tea packers: Blend and pack tea for local and export markets.

Tea Research Foundation Kenya (TRFK): Tea research organisation, the technical arm of the Tea Board of Kenya.

Box 3 Kenyan tea sector organisations Kenyan organisations involved in production, processing, marketing and exporting include:

BBK was chosen as one example of estate sector teaproduction. It is part of the Unilever group, which hasextensive interests in tea production, processing andmarketing. BBK produces approximately 30,000 tonnes ofblack tea per year and has 18,000 employees, of which 90%are tea pluckers, mostly living in company houses with utilitiesand land for food gardens being provided free by thecompany. The workforce is predominantly unionised and BBKcomplies with Kenyan collective bargaining agreements. Pay isrelatively good and the company places high importance on

health and safety, providing free primary and hospital care,training, including HIV/AIDS awareness training. Primary andsecondary education for dependents is also provided.Procedures are embedded in company policy to ensurecompliance with social and welfare standards, including theemployment of children. BBK has an environmental strategy,which includes research and development for sustainability,the expansion of renewable energy sources, fostering besthusbandry practices and the growth of trees for firewood.

Box 4 Brooke Bond Kenya Ltd. (BBK)

However, interviews withsmallholders suggest that theirincome can be substantially reducedby a number of direct interventions(including weight of bag, road cess,fertiliser costs) as well as indirectdeductions arising from poorlymaintained roads and trucks, longdelays at the buying stations,inadequate power supplies, limitedprocessing capacities. Somesmallholders occasionally employmigrant pluckers on piece rate terms.

There are a number of factors thatcan affect smallholders’ health andsafety, including: • limited medical care • carrying of heavy loads • use of child labour • lack of suitable footwear • long working hours • limited food and water.

In the smallholder tea sector, theenvironment is characterised bydeforestation which is exacerbatedby: • the continual cultivation of land• the use of wood for the factory• exhaust fumes from trucks• the increased use of generators • coal at factories polluting

green leaf.


Since the 1970s Indonesia’scocoa production has grownrapidly, mainly because of the

expansion of smallholder output onSulawesi. Indonesian productionnow exceeds 300,000 tonnes, thethird largest in the world. There are between 250,000 to 300,000smallholders involved in production,accounting for in excess of 80% ofoutput. Unlike other major cocoaproducing countries the estatessector, both public and private, hasaccounted for a sizeable share ofproduction (though the share hasdeclined rapidly in recent years).Typically a smallholder family has 2to 4 productive members lookingafter a cocoa farm of 2-4 hectares(though labour requirements varywith the age of the farm). As inother parts of the world (e.g. WestAfrica), migrants have played amajor role in Indonesian cocoaexpansion, particularly theBugis/Buginese ethnic group, whichhas a strong ethnic identity andsupport network. To a lesser extent,transmigrants from Bali have alsobeen involved.

Key factors facilitating growth inoutput are the availability of landand labour. Access to land forexpansion of cocoa has been througha complex system of land rights.Growing land shortages, alongsidelower world cocoa price, is nowlimiting further expansion. At the

same time, pests and disease,particularly the pod borer, arereducing production in several areas.

Three main types of smallholdercocoa grower exist in Indonesia:• Owner farmers, who may also use

family labour and occasionallyhired labour.

• Sharecroppers, who farm anotherperson’s land for a share of thecrop (normally 25%); they are morelikely to use family labour.

• Farm managers, who cultivateanother’s land for a wage or fee ora future share of the holding.

These types of smallholder growerscombine the roles of entrepreneur,employer and labourer. Various typesof additional labour supplement thefarmers’ efforts: family labour(mainly nuclear family), wage-labouralongside sharecropping-typearrangements. Overall, there is acomplex range of economic, socialand cultural factors that impact oncocoa production. Some of theinfluences affecting behaviourinclude ethnic origin, age, wealth,gender and the price of cocoa.

There is a long and complex tradingchain in the worldwide cocoa sector.The chain takes cocoa frompredominantly smallholder producersin developing countries toconfectionery manufacturers mainlyin northern industrialised countries.

The Indonesian cocoa sector

The existing value chain

system does not provide a

ready structure for

managing social

responsibility.


Within Indonesia, stakeholdersinclude village collectors (handlingpredominantly wet and partiallyfermented beans), middlemen/localtraders, exporters, a few processorsand ASKINDO (the Indonesian cocoaassociation, whose role in recent yearshas diminished). The cocoa passesthrough a complex trading networkinvolving a large number ofintermediaries with a variety of roles– village collectors, middlemen,traders, exporters (who since 1997 are predominantly foreign owned and financed), commodity exchanges(which, other than providing reference prices, have limited use for Indonesian stakeholders)processors and chocolatemanufacturers. In addition, othersinvolved include freight companies,warehouses operations, banks andother financial intermediaries.

Farm production and pre-exportmarketing in Indonesia is fragmented,but minimal government involvementcombined with good infrastructurehas created an efficient marketingsystem, making Indonesia the world’smost competitive producer.Indonesian growers receive a highproportion of the free on board price,though this is heavily discountedbecause of poor quality (caused byhigh moisture content and inadequatefermentation).

Processing and manufacturingProcessing and manufacturing intofinal products takes place mainly inthe country or region of consumption.In 2000 almost half of the world’scocoa bean production was ground inEurope. Indonesia exports over 90percent of its bean production. Asmall number of companies accountfor most of the processing (e.g. Cargill,ADM, Hosta), while well-knownmultinationals account for a largeshare of the final product market,particularly Nestle, Mars, Hershey,Kraft Jacob Suchard and CadburySchweppes.

Land rights Access to land is vital for cocoaproduction and has a major impacton the well-being of smallholders inthe cocoa value chain. Rights overland are invariably complex andcreate both opportunities andobstacles to migrants wishing tocultivate cocoa. Legal uncertaintiesover indigenous land are used bymigrants to establish individual rights(rarely in the form of legal title) eitherby:• Laying a claim to uncultivated land

(normally forested land) andclearing and cultivating it; or

• Negotiating access with thetraditional owner or custodian,which may then be used as a basisfor registering ownership.

The challenge is not only

to understand what

constitutes good social

performance but also to

find new ways of working

within the chain in order

to make responsibility a

manageable dimension of

business practice.


However, it should be noted thatthese rarely take the form of legaltitle; rather, the claim is recognised bypayment of local taxes or some formof letter from the village or districthead.

Producer associationsProducer groups of smallholders helpto increase bargaining power andwell-being but in Indonesia, incontrast to West African cocoaproducing operations, there are veryfew co-operatives or farmers’ groups.Reasons cited for this include adistrust of co-operatives, this is partlybecause of their history of corruptionand political control. The Bugis preferto mobilise the extended familynetwork for trade rather thancollaborating with neighbouringfarmers. Efforts are being made underthe externally-funded pod borercontrol programme to establish co-operatives, but there is somescepticism as to whether this effortwill be successful.

Smallholder remuneration and riskThe Sulawesi cocoa chain is anexample of successful free marketcapitalism. Growers capture a highshare of the export price (c. 65-75%)because of greater marketingefficiencies, access to marketinformation and lower taxation. Theproportion received by Indonesiansmallholders compares veryfavourably with that received by cocoaproducers in Ghana and the Coted’Ivoire and “fair trade” producers(although West African and “fairtrade” producers receive a higherabsolute price due to quality andtrading considerations).

However, the Indonesian chain is alsocharacterised by distrust and short-term relationships at all levels.Moreover, volatile prices mean that allproducers face considerable price riskthroughout the growing andharvesting season. They are not in aposition to utilise price riskmanagement instruments. Risk isreduced by intercropping as well asselling immediately after production.A small minority of farmers receivecash advances and other inputs from

exporters and domestic processors inan effort to ensure a steady supply ofconsistent quality beans.

Some implications arising fromthe cocoa value chain • The long and loosely integrated

value chains mean there is littletraceability, in contrast to, forexample, tea and horticulture,where traceability is required.However, this may change, asmanufacturers / processors becomemore involved in the methods andworking practices involved in cocoaproduction. Consumers are alsoexpressing interest in trade issues.

• The relationship between thegrower and trader is short-termwith little attempt to tie growersinto longer-term relationshipsthrough credit and other inputs;growers often lack collateral such asclear legal land titles. Certainly inIndonesia, there is distrust andshort-term relationships existthroughout most of the value chainwhich reduces trust and stability.

• Inconsistencies of quality, reliabilityand volume limit the ability tobuild longer-term relationships.Moreover, traders’ profit marginsoften depend on their ability todowngrade quality though mixingand introducing foreign matter.Quality is an important but complexissue. In part, because of a lack of price differentiation at thegrower level, many growers andintermediaries are lax about quality.Some argue it would pay to try toimprove quality at the smallholderlevel rather than at the processingstage.

The existing cocoa value chain systemdoes not provide a ready structure for managing social responsibility. No single powerful driver exists(compared to, for example, retailerswith regard to horticultural imports).Major confectionery companies arethe stakeholders that come closest toit and most likely to gain from drivingsocial responsibility since they are atrisk from poor (or perceived) socialperformance (e.g. child labour).

The dominant role of

the large number of

smallholders who

are often geographically

widely spread, make

existing social auditing

techniques difficult and

expensive.


Managing responsibility in cocoaand tea value chainsManaging social performance in value chains is an important part of corporate social responsibility,enabling companies to protect their reputations and ensure stablesupply, while increasing benefits toproducers. To date, most experience inmanaging relatively simple valuechains is in manufacturing andcommercial agriculture. Sociallyresponsible value chain managementin cocoa and tea is affected by threekey factors:

1. The dominant role of the largenumber of smallholders who are often geographically widelyspread, making existing socialauditing techniques difficult andexpensive.

2. Smallholders are simultaneouslyentrepreneurs, employers andlabourers, making current socialbenchmark standards of limitedrelevance or even potentiallydamaging. Social responsibilitymeans dealing with thesmallholders’ well-being andexpectations in all of these roles.

3. The structure of the value chains,which are long and weaklyintegrated compared to those ofmany industries, with numerousintermediaries between the growerand the merchandiser or retailer. • In tea, the importance of

knowing product provenanceplus a degree of commonownership of plantations,factories, blending andmerchandising operationsstrengthens co-operation withinthe chain.

Core labour standards,

criteria on issues such as

child labour and freedom

of association may also

harm smallholders by

imposing unrealistic

burdens of social and

welfare responsibility

which have been designed

for larger corporate

entities.

LEVEL

Small holdersProducers

Large scale producers

Managementeg KTDA

Manufacturers& processors

All employeesof smallholdersplantations, driversfactories, shippers etc

Tradersinc petty traders& auctioneers

PartnersTransporters, blendersPackers & warehousing

Retailers

GovernmentsNational, state & LGA's

Consumers

Society

GOVERNANCE

Best practiceRural participation& co-operation

Best practicePolicyFull Implementation

Best practicePolicyFull Implementation

Best practicePolicyFull implementation

UnionableDiligent and compliantto contract & policiesEnsue equal opps

Fair trade policyHonour contractsFull implementation

Give value, service& developQuality of service policy

Best practicePolicyFull implementation

Ensure fair policiesProvide infrastructure &Safe & secure environment

Ensure trade descriptions actRight to complain

Ensure good legislationSociety participationand co-operation

SUSTAINABILITY

Access to training & assistance to implement EMS

Develop EMS policyTrain employeesFull implementation



Be aware of EMS PolicyUndergo trainingBe compliant to EMS policy


Develop EMS policyTrain employeesTrain employees


Publicise gov policyEncourage transparencyLitigate non compliance

UnderstandEMS policyExpose bad practice

UnderstandEMS policyExpose bad practice

HEALTH & SAFETY

Access to training & assistance to implement H&S

Develop HSS policyTrain employeesFull implementation



Be aware of HSS PolicyUndergo trainingBe Compliant to HSS Policy





UnderstandHSSExpose bad practice

UnderstandHSSExpose bad practice

COMMUNICATION

2-way informationto enable self-determination

Develop communication and transparency policy Full implementation

Develop communication and transparency Policy Full implementation


NegotiationReport failuresin policiesForums for improvements





Praise good practiceExpose bad practice


COMPENSATION

Fair & timely remuneration& full transparencyDevelopment help

Fair & timely remunerationFair compensation to Full implementation

Fair & timely remunerationPolicy Full implementation


Fair days work in return for fair days payRespect, honesty &Compliance to policies


Fair remuneration& fair tendersfor contracts

Fair & timely remunerationfor good & servicesFair price to consumers

Re-investment ofTaxes & royaltiesto improve society

Ensure value for moneyExpose poor quality

Receive fair compensationfor loss or damageEnsure access to new opps

HUMAN RESOURCES

Access to training & assistance to ensure fair conditions

Equal opps policyTraining and developmentFull implementation



Ensure equal opps policyNon discriminatorypractices in work placeUse training opportunities







Well-being responsibility framework

Conclusions


• In cocoa, product provenance atthe grower level is less of anissue, and trading andprocessing is fragmented withthe result that few companieshave regular contact withgrowers, and the existing tradingsystem does not provide a readystructure for managing socialresponsibility.

Implications for cocoa and teaindustriesThere are two key elements to anyeffective social responsibility strategy: • Defining well-being, and • Managing the process of achieving

and demonstrating that well-being.

Smallholder cocoa and tea productionrequires rethinking accepteddefinitions of well-being. Core labourstandards while relevant, do not coverother issues such as terms of trade,land and environmental management.Their criteria on issues such as childlabour and freedom of associationmay also harm smallholders byimposing unrealistic burdens of socialand welfare responsibility which havebeen designed for larger corporateentities. Furthermore, the issue ofchild labour in the “family farm”needs to be viewed in its social andcultural context.

A social responsibility strategy forcocoa and tea would need to gobeyond what is on offer today. Itwould need to recognise smallholdersas entrepreneurs, employers andworkers, and also recognise thatdifferent types of smallholder have avariety of expectations or concerns.The strategy would also need torethink the process of managing thechain. Examples from other industriesassume there is a single powerfuldriver (e.g. retailers) that can influenceothers’ behaviour, often building onthe present structure of the chain. Thepowerful driver is largely missing incocoa and tea despite the fact thathigh profile merchandisers are at riskfrom poor social performance. Equally,the long-term relationships betweenplayers in the chain are often lacking,which, in turn, limits trust andstability.

For the cocoa and tea sectors, thechallenge is therefore not only tounderstand what constitutes goodsocial performance, but also to findnew ways of working within the chainin order to make social responsibility amanageable dimension of businesspractice.

The next steps in the process forethical supply chain management forthe tea and cocoa sectors largelyrevolve around developing a new

action research agenda. However,many businesses would find it helpfulto be presented with a set ofindicators at this stage, against whichto judge their performance. Somepotential indicators are suggested inthis report, but with the proviso thatthese must be understood to be onlyindicative and temporary whilst theresponsibilities and objectives of thekey players are still being debated. Itis only when there is consensus onresponsibilities or principles thatcriteria for progress and ideas on howto measure this progress (indicators)can be specified.

This initial research, whilecataloguing various pertinentissues in value chains, has revealedsome areas that need a furtherstudy. These include:

1Future dialogue and researchmust involve retailers andconsumer organisations to be

meaningful. Current research hasviewed the retailer and consumeras the driving forces behind movesto apply social and welfarestandards along the value chain.However the profit margins ofretail brands may not reflect awillingness to share, equitably, thecosts of social responsibility to the

growers and producers at thebeginning of the value chain.Therefore, there is a need toinclude the final stages in thevalue chain, i.e., retail andconsumption, in future value chainanalysis.

2The social and welfareconditions of the non-wagedemployees in the tea and cocoa

smallholder sectors need to bedefined.

3Development of a set of keyindicators to monitor futuresocial economic and

environmental improvements.

This needs to be in conjunctionwith identification of actions(linked to key issues and keyindicators) that can make apositive impact on smallholders’well-being.

4Similar exercises on othercommodities. Candidatesinclude coffee and palm oil,

both produced in developingcountries and involving largenumbers of smallholder producers.Issues surrounding the monitoringand auditing of these commoditiesare of increasing interest toprocessors, manufacturers andconsumers.

Recommendations for future action

The next steps in the

process for ethical supply

chain management for

the tea and cocoa sectors

largely revolve around

developing a new action

research agenda.

References

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Christain Aid. Taking Stock: How thesupermarkets stack up on ethicaltrade.

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NRET (2001) Codes of Practice in theFresh Produce Sector: MeasuringProgress, Theme Paper 6, Chatham:Natural Resources Institute

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Finlays (2000) From Field to FinishedProduct,

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Websites

Askindo www.askindo.goto

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Cocoa Association of London Ltdhttp://www.calcocoa.com

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Resource Centre for the SocialDimensions of Business Practicehttp://www.rc-sdbp.org.uk

One Worldhttp://oneworld.org/themes/guides/index.html

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UNDPwww.undp.org

Additional resources

© International Business Leaders Forum, NRI 2002

Project managed by Peter GreenhalghEdited by Katherine Madden and Rob Moss Photographs by NRI, Jeremy Horner/PanosDesigned by Alison Beanland ❙ Printed by Folium

The Natural Resources Institute of the University of Greenwich is an

internationally recognised centre of expertise in research and consultancy

in the environment and natural resources sector. The Institute carries out

research and development and training to promote efficient management

and use of renewable natural resources in support of sustainable livelihoods.

The Natural Resources and Ethical Trade Programme (NRET) is based in NRI,

which focuses making trade work for the benefit of poor people and the

environment in poorer countries. NRET’s work covers forests, fresh fruit and

vegetables, conventional and organic agriculture, fisheries, tourism and

ethical investment.

It works with the private sector, governments, NGOs and trade unions to

provide the following:

❚ technical advice on setting up and developing socially and environmentally

responsible approaches to trade

❚ multi-disciplinary research on the impact of ethical trade on poverty

elimination in developing countries

❚ training and information services on whether to and how to carry out

ethical trade

❚ networking and partnership building between stakeholders

❚ auditing of production operations for assessment of environmental and

development impact

❚ development of methods for monitoring and verification of systems

❚ objective stakeholder analysis in the natural resources sector

❚ knowledge of legislative requirements for trade into the EU and ethical

trading systems in place in the fair trade, environmental and organic sectors

The Resource Centre aims to develop the capacity, approaches, resources and

methods to advise businesses, bilateral and multilateral agencies on socially

responsible business practices that directly contribute to poverty elimination.

The Centre has been undertaking initiatives that are helping create a business

and poverty centre of excellence with three core areas of work: risk-taking

through innovative pilot projects, influencing through researching

information and policy dialogue and empowering through promoting and

sharing good practice. Specific activities include:

❚ A series of pilot projects working to explore issues on business and poverty

such as identifying impacts of poverty, working with different communities to

understand challenges faced and exploring mechanisms, tools and solutions.

❚ Providing an information service on poverty and business issues including

developing a web-site, setting up and maintaining a resources database and

researching key issues.

❚ Awareness raising and capacity building activities in UK and selected focus

countries including discussion forums and professional development

programmes, supporting, briefing and coaching a network of consultants,

creating papers and publications.

❚ Administrating a Research Fund to distribute small research grants to

practitioners in developing countries working on the poverty business

interface.

❚ Working with DFID and other audiences to advise on and set up appropriate

local mechanisms for engaging business as development partners

Established in May 1999, nine UK-based organisations formed a Consortium

that has a wide range of leading edge experience in the social dimensions of

business practice as well as operational activities and networks throughout

the world. The Resource Centre has been core funded for its first three

years by the Social Development Department of the UK’s Department of

International Development. The Resource Centre is based in the London

office of and managed by The Prince of Wales International Business

Leaders Forum.

infocus - NRI

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