Earlier this year in October the Dutch Public Broadcasting system NOS reported: “Certification and Quality marks hardly help poor plantation workers”. Research from the SOMO foundation showed that quality marks such as Fairtrade, Rainforest Alliance and UTZ have little impact on workers in developing countries. According to the report, there are no quality marks currently in practice that guarantee living wages. SOMO therefore calls for more shared responsibility throughout the entire supply chain.
A living wage is a wage that covers the costs for food, shelter, clothing, education and medical care for a family, plus some extra income for unforeseen circumstances. Although several NGOs and research institutes, especially in the clothing industry, have conducted quite some research into living wages, hardly any work is being done in practice. Social certifications generally limit their analysis to minimum wages, says Gert-Jan Lieffering, QD manager at Eosta. “And these are almost always lower than living wages. In the agricultural sector, living wages are still a rather unexplored territory”.
Approach for SMEs (Small and Medium Enterprises)
Sonia Cordera, program manager at IDH: "It is a pleasure to work together with Eosta on living wages. This pilot enriches our knowledge of living wage that we have gained with other partners in the banana, tea and flowers sector. It's great to see that a company sourcing a wide range of products like Eosta is willing to investigate the living wage concept in its own supply chain and that, from the experience of analysing the specific case of an avocado supplier in Kenya, the project was able to develop a quick assessment tool that can be further applied to other suppliers and geographies in the future.”
Position of women
Caroline Wildeman, program coordinator at Hivos, points out how the pilot can have a positive impact on women’s rights: “In developing countries, particularly in the agricultural sector, women often have low-paid jobs. When you work on living wages, you specifically help improve the position of women. We therefore look forward to continue our close collaboration with Eosta regarding this important issue”
More than measuring
For the pilot, Eosta worked together with one of their organic avocado suppliers in Kenya, an exporter with more than 100 small farmers. Eosta wants to use the results not only to measure the social impact of its suppliers, but also to manage, market and monetise using True Cost Accounting. According to Eosta CEO Volkert Engelsman: “the limitation of certification and quality marks is that they do the audits afterwards. Eosta, as a supply chain coordinator, wants to intervene proactively especially in the beginning of the chain.”
The pilot was carried out by Nada van Schouwenburg, Sustainability Coordinator at Eosta. "We started this research not only to develop a generic approach for analysing living wages, but also to analyse the situation in our own supply chain. It is a complex subject also because every region has its own specific benchmark, which is not always clear or available. Furthermore, the term “wage” does not apply to farmers. After all, a farmer is an entrepreneur who gets paid per kilo or per piece. The skills and qualities of the farmer partly determine his merit. The organic farmers in Kenya get a piece rate which is 50% higher than the rate of conventional farmers. However, it can be rather challenging to supply high quality fruit for the European market”.
At least 30 trees
The pilot showed that not all avocado farmers of the exporter are currently earning a living wage. Based on the study, the exporter estimated that a farmer must have at least 30 trees in order to obtain a living income from avocados. If not, extra earnings are needed. The problem in Kenya is also that the farmland is very fragmented. When a farmer passes away, the land is divided among all his sons and this leads to a situation where the pieces of land become smaller and smaller.
Living wage as a connecting link
Gert-Jan Lieffering from Eosta: "This topic of living wages is not one which we can easily solve, but the results of a Quick Assessment are ideal for starting a dialogue. The exporter is the connecting link between the farmers and the European market, however the quality of the avocados is not always up to international standards. We are not a NGO, which means that if we want the farmers to earn more, we have to be able to sell the produce for a good price in the market. Nevertheless, living wages are proving to be a great way of getting a better grip on that market mechanism and connect the different links in the supply chain. It offers both ourselves, the exporter and the farmers a better trading perspective.”
A push for True Cost Accounting
Volkert Engelsman, CEO of Eosta, sees living wage as an instrument to further improve the methodology of True Cost Accounting: "Based on our integral sustainability model, the Sustainability Flower, we map out the ecological and social impact of the production. But in our True Cost pilot in 2017, the impact on social capital was still unexplored. Living Wages can help bridge this gap in monetizing social impact. "