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“Price is the final taboo in sustainability,” says Peter d’Angremond, manager Stichting Max Havelaar, in front of a packed house during the ‘Great Banana Debate’ in the Rode Hoed, Amsterdam, last week. During the debate, Adrian de Groot Ruiz, manager of True Price, presented new research into the hidden costs in the cultivation of bananas: damages that are there, but that aren’t included in the price. “I would like to head for a situation with all stakeholders in which all costs are included in the price,” d’Angremond said about the research.
The hidden costs of the banana cultivation on average amount to $6.70 per box of more than 18 kilograms. For Fairtrade certified bananas, that’s 45 per cent less. This was evidenced last week by the study of True Price and Trucost, commissioned by Fairtrade International. It’s the first major study ever into external social and environmental costs of banana production.
The Dutch eat many bananas, more than 720 million per year, about 42 bananas per person. But the cultivation of bananas has negative consequences for people and environment. Most bananas are dirt cheap, which indicates the consequences of, for example, bad pay, climate change, unhealthy working conditions and water exhaustion, which are not included in the price. These external costs are passed on to the society, either directly or by a loss of prosperity.
In a unique research project, True Price and Trucost map the hidden costs involved with growing bananas. The research occurred in the four most important banana countries: Ecuador, Colombia, Peru and the Dominican Republic. The researchers quantified the social and environmental damage, and then expressed the found values in money, according to permanent methods. They then compared external costs of the banana sector as a whole to that of Fairtrade producers. The goal was to find the best practices.
The external costs caused by the banana cultivation amount to $6.70 on average per box of bananas of 18.14 kilograms. Of that, 60 per cent is of a social nature. The highest item is the consequence of insufficient pay and a lack of social security for the workers, and an insufficient income for small farmers. In the external environmental costs, the largest wrongdoers are use of land, water exhaustion and climate change.
Fairtrade certified producers score considerably better than the sector average. In all four countries, their external social and environmental costs remain below the average. In total, their average amounts to $3.65. With that, Fairtrade certified producers caused 45 per cent less external costs than the sector as a whole.
The most important distinction is on the social side. In the complete sector, social damages are almost four times as high as with the group of Fairtrade producers, 4 dollar versus 1.05 dollar. Mainly responsible for that divide are wage levels, social security, and the income of small farmers. On the environmental side, the scores are much closer together. Compared to 2.60 dollar on average external environmental costs for Fairtrade, for the sector as a whole that is 2.70 dollar.
Better farming and inclusive prices
The research concludes that the banana sector could learn from the Fairtrade system. It indicates a number of options to copy the practices of the best growers, within and outside of Fairtrade. Higher yields per hectare are an important key to decreasing external costs. In the Fairtrade group, the number of organic farmers is considerably larger than in the sector as a whole. The art is finding the right balance between productivity increases and the optimum amount of energy, fertiliser and water. When incomes increase due to larger yields, there will also be a better base for social measures.
Stichting Max Havelaar sees the value of its model confirmed in the lead of Fairtrade growers. The Fairtrade standard is proving itself. Producers should stick to prescribed sustainability criteria, or they’ll lose their certification. But Fairtrade certification’s trade criteria are also definitely contributing to the result.
The conventional banana market ignores social and environmental costs. The safety net of a minimum price and a fixed premium of one dollar per box of bananas gives Fairtrade producers more space for expenses preventing external costs. The research calculates the effects of the premium on education, health care and productivity improvement, and recommends continuing with the strategic deployment of the Fairtrade premium.
Transition to sustainable banana cultivation
The study argues the development of a key map that could make the banana sector a leader in achieving SDGs (Sustainable Development Goals). All government leaders have committed themselves to that realisation by 2030. A condition of the desired success in the banana sector is transparency and the sharing of best practices, under a constant monitoring of changes in external costs.
Bananas with the Fairtrade quality mark have a market share of 18 per cent in the Netherlands. Given the good sustainability performance of those bananas, that share is too low. Dutch companies, after all, want to make big strides in the field of supply chain sustainability.
Organisation research True Price
True Price’s researchers, together with Fairtrade International and Trucost, gathered data on used agricultural inputs, working conditions and environmental impacts from 15 Fairtrade plantations and 97 small farmers in Colombia, the Dominican Republic, Ecuador and Peru. Sector averages on the same aspects, the benchmarks, were derived from secondary sources. Local experts helped verify and validate the results.