At the Rainforest Alliance, we recognize that we all have a role to play in creating a better future for people and nature. To make sectors truly sustainable, both the value and the risks must be shared across the supply chain. Our shared responsibility approach aims to distribute benefits and costs of certification more evenly between farmers and companies.
The inclusion of shared responsibility is crucial to addressing inequity in global supply chains. Often, only a small part of certification value reaches the farmer, though they carry most of the risks, burden of compliance, and impacts of climate change. All this while having little to no power in negotiating prices, terms of trade, and the additional resources required for sustainable production. We want to ensure that Rainforest Alliance Certified farmers participate in a more balanced system.
The challenges faced by farmers informed our shared responsibility approach, in which:
- Farmers’ sustainability efforts are rewarded.
- Costs of investments in more sustainable farms and production are shared between farmers and companies.
Therefore, the Rainforest Alliance will use the 2020 Certification Program (including our Sustainable Agriculture Standard) to drive more economic transparency and steer more resources to farmers.
Sustainability Differential and Sustainability Investments
Our Sustainable Agriculture Standard outlines two mandatory financial requirements for the buyers of Rainforest Alliance Certified commodities:
- A Sustainability Differential (SD), an additional monetary payment to individual certified farmers, on top of the market price of the commodity. This is intended to reward farmers for implementing more sustainable agricultural practices.
- Sustainability Investments (SI), cash or in-kind investments to farm certificate holders that directly support farmers to implement sustainable farming practices. These payments also help farms reach compliance with the Sustainable Agriculture Standard. Investments may fall under the following categories: administrative management, agriculture, social (such as farmworker housing, working conditions, and health & safety), or environmental. Thus, companies can directly contribute to farm improvements.
In addition, all actors along the certified supply chain—not just farmers—need to demonstrate their commitment to sustainability business practices. Certified companies must refer and commit to the human rights and environmental due diligence guidelines of the UN Guiding Principles on Business and Human Rights and the OECD.
Benefits of SD and SI for companies, farmers, and consumers
We asked Aparajita Bhalla, the Rainforest Alliance’s Senior Director of Markets Transformation, how the new SD and SI requirements will help different companies, farmers, and consumers. Here’s what she said:
“For companies: By helping farmers to develop robust investment plans, companies sourcing certified ingredients gain a better understanding of sustainability gaps and needs on the farm level. This then provides the opportunity for market partners to make investments toward those needs. In turn, they build an active partnership with farmers that leads to a more resilient and sustainable supply chain. Finally, this data will vastly improve companies’ ability to report to their stakeholders on their sustainability investments over time, as well as their improvements in performance.
“For farmers: By incorporating SD/SI requirements into the 2020 Certification Program , we aim to provide farmers with the necessary resources to implement sustainable agriculture. The process of creating an investment plan also provides them with a more detailed understanding of investments associated with the Rainforest Alliance standard; information that’s useful for planning future investments.
“For consumers: Once we start capturing the data on sustainability gaps and investments made, we can show consumers how their favorite brands are supporting sustainable development and how working with us helps companies address global development and conservation priorities at scale.”
Shared responsibility implemented in the sectors
Once farm certificate holders have transitioned to the 2020 Standard, companies will be required to make SD and SI payments. The below articles offer guidance on the implementation in each sector:
- Timelines: Implementation of the Sustainability Differential and Investments
- Overview of SD/SI Requirements Per Sector
Banana and other fresh fruits
- SD/SI Banana and Other Fresh Fruits Sector Guidance
- Shared Responsibility: This Is What It Means for the Banana and Other Fresh Fruit Sectors
We understand that the application timelines for the Sustainability Differential and the Sustainability Investment requirements of this approach can vary according to the market structure of each crop. For flowers, Shared Responsibility requirements will only become mandatory as of 1 January 2023.
We will be reaching out to flower farmers and supply chain actors to further align the implementation of the requirements with the needs of the sector and will keep you updated on any relevant changes.
In order to share responsibility, we must all do our part to create more sustainable supply chains from the farmer all the way to the end consumer. For more resources, please see our one-sheet and the Frequently Asked Questions below.
FAQ: Shared responsibility
What is the Sustainability Differential?
The Sustainability Differential is a mandatory additional monetary payment made to certified producers over and above the market price of the commodity. It is intended to reward producers and workers for their efforts in implementing sustainable agriculture practices.
What are Sustainability Investments?
The Sustainability Investments are mandatory cash or in-kind investments from buyers of Rainforest Alliance Certified products to farm certificate holders for the specific purpose of helping them reach compliance with the Sustainable Agriculture Standard. It is intended to help producers reach and maintain compliance with the 2020 Rainforest Alliance Sustainable Agriculture Standard.
How is SD/SI different from a premium and other incentives currently provided?
A premium is not clearly tied to either resources for implementation or additional monetary reward for the farmer. Unlike a premium, SD and SI have very clear end usage and requirements set out in the standard.
Currently, the starting points on current incentives differ per sector. For cocoa and coffee, we have a premium that is paid to farm certificate holders (CHs) as well as in-kind support provided by first buyers. For tea and bananas, there is no Rainforest Alliance premium that is being paid. In bananas, we have heard from some buyers that they provide in-kind support and investments. And in tea, some brand owners that source directly from farms have reported that they provide training and support as farm investments.
By separating the two areas (monetary incentive and investments), the SD/SI approach allows us to monitor the full spectrum of resources that buyers are providing farm CHs. Moreover, by focusing on farmer-created investment plans and monitoring the investments, we can ensure that there is full transparency on the investment needs. This way, buyers and farmers have a common understanding of priorities and needs.
When will the Shared Responsibility chapter come into force?
Please see our Shared Responsibility timeline page here: https://www.rainforest-alliance.org/business/reimagining-certification/timelines-implementation-of-the-sustainability-differential-and-investments-under-the-2020-certification-program/?utm_campaign=cy21ftm&utm_source=2101aftm&utm_medium=email&c_src=ADN21AX
Do buyers of certified products have to pay both the Sustainability Differential and the Sustainable Investments?
Yes. Buyers of certified product must pay the Sustainability Differential and Sustainability Investments. The standard and related Annexes and Guidance documents define, per crop, the buyers that are responsible for direct payment of Sustainability Differential and Sustainability Investments. Those buyers must also record the amount of Sustainability Differential and Sustainability Investment paid.
How is the amount of SD determined?
The standard and related Annexes and Guidance documents define the amount of SD to be paid per crop. Where no minimum is stipulated, the amount of the SD to be paid by the buyer is the result of negotiations between the Farm CH and the first buyer and is influenced by market forces.
Why are you choosing not to set a minimum price?
The Rainforest Alliance is focused on a market-based approach. We do not see it as our role to interfere in pricing dynamics. As a starting point, SD and SI are a means for us to signal to the market that sustainably produced commodities must be priced separate from (and above) conventional production.
From there, we hope that supply-demand dynamics will help establish an appropriate price point. In the meantime, we will closely monitor the impact of SD and SI. If we don’t see an adequate impact, we are open to exploring additional mechanisms to reward and support farmers in achieving sustainability improvements.
If there is no minimum, how is the amount of SD to be paid determined?
Where no minimum level has been set, the amount will be agreed upon directly between certificate holders and buyers. The principle should be that the SD is the extra amount that the buyer will pay for a product because it is certified compared to the price they would pay for a product of the same quality and origin that is produced conventionally (non-certified).
How is the amount of SI determined?
The farm CH will develop an investment plan. The investment plan will serve as the basis for investment by buyers. Investment needs may fall under the following categories 1) Management, 2) Traceability, 3) Shared Responsibility, 4) Farming, 5) Social, 6) Environment, 7) Audit costs, 8) Other (training, printing, IMS maintenance).
Who is responsible for developing the investment plan?
Each farm certificate holder prepares one investment plan. This refers to the group management in case of a group certificate holder or the farm management in the case of the individual farm CH.
Should the investment plan include all costs of production?
No. All that is needed is the amount to be invested and the farms in which CHs ask the buyer to co-invest.
Is payment of the Sustainability Differential and Investment audited?
Yes, the requirements around Shared Responsibility, i.e. Sustainability Differential and Sustainability Investments are included in the regular certification audit, for both farm and supply chain audits. Depending on the type of audit (farm or supply chain), applicable requirements are included in the audit checklist. The CB verifies the correct implementation, as with other requirements of the standard. Same as for other chapters of the standard, there must be compliance with the relevant requirements around Shared Responsibility. With an unresolved non-compliance, certification cannot be granted.
Will the Rainforest Alliance intervene in price negotiations?
No, the Rainforest Alliance will not intervene in price negotiations.
Does the Rainforest Alliance have mechanisms to ensure that SD and SI reach the producers of a group?
Farm certificate holders must forward the SD (in full) to group members. During the audit of the farm CH, auditors will verify whether group members have received the SD by asking for receipt at both the management and group member level, and by conducting interviews. The different pieces of information will be triangulated to validate that the correct amount of SD has reached the group members.
What happens in case non-payment of Sustainability Differential or Sustainability Investments is detected?
Payment of the Sustainability Differential and Sustainability Investments is mandatory for buyers of certified product. If it appears that a buyer is not complying with the relevant SD/SI requirements, the general Certification and Assurance rules apply, and a non-conformity is issued. If that non-conformity is closed (for example, the SD is retrospectively paid), the certification can be continued. If, however, the non-conformity remains unclosed, the certification will be removed, and the buyer is not allowed to sell certified product any longer.
Does the farm certificate holder lose the certification if the buyer doesn't pay the SD and SI?
No. Non-payments of SD or lack of investments that were previously agreed between farm CH and buyers are a non-conformity for the buyer, not for the farm certificate holder.
What if a farm certificate holder doesn't have any investments to make or doesn't need the Sustainability Differential or Sustainability Investments?
In the logic of continuous improvement in the Rainforest Alliance 2020 Sustainable Agriculture Standard, performance is not static. Since sustainability is a journey, certificate holders will always have opportunities for improving on mandatory and self-selected improvement requirements of the standard for example. Sustainability Investments can be used to achieve compliance with Standard requirements while the Sustainability Differential is intended as a reward for efforts in sustainable production to producers and workers. Moreover, as costs related to self-assessments, internal inspections and audit will always have to be made on an annual basis, like other recurrent costs, there will always be costs related to certification.
Will Sustainability Differential payments be visible in Rainforest Alliance's traceability platform for the whole chain?
Depending on traceability level, supply chain specific reports on agreed SD values will be made available at an aggregate level to SCAs beyond the first buyer through the Power BI reporting platform. This will enable SCAs to base their SD and SI payments on the information provided.
Will the amount of Sustainability Differentials and Investments paid be publicized?
Sustainability Differential payments and Sustainability Investments made must be recorded in the Rainforest Alliance traceability platform. The Rainforest Alliance will publicly report on aggregate Sustainability Differential and Investments per country and sector and provide more transparency within supply chains as well.
Do voluntary investments for programs already implemented by farms in the social/environmental field apply as Sustainability Investments?
Mechanisms currently in place to make voluntary investments in programs supporting social and environmental sustainability at farm level can be used to fulfil the Sustainability Investment requirements. If these investments are financed or supported in-kind by buyers, they are applicable as Sustainability Investments and buyers can report these as their contribution. If farms make their own investments with their own funds, the farm can report on the investment made, but buyers cannot claim these as shared investments. Certificate holders at farm and supply chain level are expected to annually report on investments made so programs already implemented cannot be reported as new investments.
Can investing in a legal obligation (such as Occupational Safety for example) be included in the Investment Plan?
Yes, as long as it is spent on investments needed to meet the requirements of the 2020 Rainforest Alliance Standard (see question above).
How does it work if a company is both a producer and first buyer at the same time?
If an organization has farming in scope, they will usually be categorized as farm certificate holder. Farm certificate holders must comply with the requirements around redistribution of the SD to their group members (3.2.1)/allocation of SD to worker benefits (3.2.2) and the investment plan (3.3.1). In case a farm CH purchases certified product from other farm CHs (and there is change of legal ownership involved), the farm CH additionally becomes the first buyer and must pay* the SD and SI to their supplier(s) according to requirements 3.2.3-3.2.7, 3.3.4-3.3.5, respectively.
*in a crop in which first buyers are the SC CHs responsible for SD/SI payment
What is the role of the Internal Management System in relation to the Shared Responsibility requirements?
Internal Inspection must cover all applicable requirements of the standard. Therefore, the Internal Management System should verify that the investment plan meets the requirements of the standard, that investments made have been documented accurately and have been are spent in line with the plan and the proof of payment and that the investment report has been completely correctly. Internal inspectors will also verify whether the SD has been redistributed according to the relevant requirements. Implementation will be verified during the annual external audit.