At the Rainforest Alliance, we have worked for years to increase yields and incomes, improve social practices and embed environmental sustainability requirements in our certification programs. Yet, a gap remains between the status of certified farms and what we consider truly sustainable production. Progress towards this goal is made more difficult by systemic poverty and lack of resources available to producers, including those who choose for more sustainable forms of production. To address this and accelerate impact, producers must have the means to invest in their business and in their members or workers.
We believe that creating truly sustainable global supply chains requires a shared responsibility approach. This means that the costs and benefits of certification are evenly distributed between farmers and buyers along the supply chain, so that both are rewarded for their efforts to embrace more sustainable practices.
To achieve this, we are implementing two supply chain requirements for companies as part of our 2020 Certification Program: the Sustainability Differential and Sustainability Investments. The Sustainability Differential (SD) is a mandatory additional cash payment made to certified producers over and above the market price of the commodity. Sustainability Investments (SI) are mandatory cash or in-kind investments from buyers of Rainforest Alliance Certified products to certified producers for the specific purpose of helping them meet the Farm Requirements of the Sustainable Agriculture Standard. You can read more about them in our SD/SI guidance specific to the tea sector.
With these requirements, we are encouraging companies to acknowledge the value of sustainability and invest in and reward more sustainable production. For these requirements to be effective, they need to be adapted to meet the needs and operating realities of each of our sectors.
Shared responsibility in the tea sector
Companies in the tea sector are becoming increasingly aware of the sustainability performance of their supply chains, as well as the environmental and social risks in them. Together with our partners, we’re helping over 500 tea farms made up of over 950,000 farmers and 790,000 workers implement good agricultural practices and secure access to mainstream markets that are essential for their long-term livelihoods.
At the same time, our certification program and traceability platform, are helping these companies contribute to more sustainable supply chains while targeting their investments to where they are needed most, including to workers wellbeing. Shared responsibility helps ensure that there is increased transparency on the sustainability investment needs of farmers and allows companies to more closely track the associated impact of those investments in their supply chain.
A step-by-step, brand-led approach to transforming tea supply chains
The tea supply chain is complex, with a number of channels through which tea is moved from farm to consumer, including via auctions in key countries. There are also many types of tea sold into the market – green leaf, made tea, tea powders and liquids. This makes it difficult to work with a one-size-fits-all approach to Shared Responsibility. To ensure our tea program addresses the needs of all the stakeholders involved, we consulted many actors across the supply chain, including farmers, buyers, processors, manufacturers and packers, non-commercial tea sector actors, and tea brand companies – corporate, foodservice and retail.
Through these discussions we recognized that, especially for the tea sector where investments and premiums are the exception and not the norm, and where there is pressure on prices, transforming supply chains must happen in incremental steps.
It also became clear during these consultations that tea brands—particularly retail ones— have a key role to play in advancing a shared responsibility approach and stand to benefit greatly from it. As such, it was determined that they should be responsible for SD and SI payments.
The brand owner is the market actor who connects most strongly with consumers. Today brand owners often make investments into sustainable supply chains and make claims to demonstrate their commitment to achieving specific corporate sustainability goals. The brand owner is also the market actor who benefits from displaying the Rainforest Alliance seal on pack, online, or making certified sourcing claims on company materials and websites.
As consumers increasingly seek brands that do good for people and the environment, shared responsibility provides a mechanism for companies in certified supply chains to demonstrate their impact. Companies that source Rainforest Alliance Certified tea can make certified sourcing claims about their SD and SI payments on their website and company materials. In turn, consumers can connect with these claims and support sourcing practices that reflect their values. This brand-led approach also allows other supply chain actors, such as retailers, to directly contribute to farm improvements and farmer livelihoods in the shape of payments through their manufacturers and packers.
Timelines for SD and SI implementation in the tea sector
The transition period for tea producers to the 2020 standard is July 2021-June 2022. The SD and SI requirements for tea will go into effect in 2022. This means that brands will make commitments for volumes of tea that is certified under the Rainforest Alliance 2020 standard and which enter their supply chains from 2022 January 1, with first payments due 2023 January 1.
From January 1, 2023 all tea brand owners need to make SD and SI payments to the farm certificate holders whose teas are used in their supply chain —this applies to all brands (including corporate, foodservice, and retail brands). These payments will be against certified volumes purchased over the previous year.
We will closely monitor the outcomes of this approach to inform future adaptations on shared responsibility needed in the tea sector. For any questions, please refer to the guidance and our FAQ below.
FAQs
For general questions about our shared responsibility approach, please refer to our explainer on shared responsibility.
Why is the tea approach brand-led?
In most cases, the brand owner is the actor already making claims and investments and driving demand for those investments in the market. As consumers increasingly seek brands that do good for people and the environment, shared responsibility provides a mechanism for companies in certified supply chains to demonstrate their impact.
Additionally, according to Annex S14 of our 2020 Supply Chain Requirements, in the case of tea, the brand owner is the party responsible for making sure that SD and SI payments are made to tea farm certificate holders.
Why not take a first-buyer approach for tea?
The sheer number, type, and variability of first buyers for tea makes a first–buyer approach complex and challenging, if not impossible. In tea supply chains, the first buyer can be a variety of actors, such as a buying agent, exporter, importer, trader, bulker, brand owner, and others. Often the first buyer is based in the producing country, and sometimes they are part of the same company as the farm. In many cases, first buyers act under assignment or on behalf of, or are even part of, brand owners. Complicating things further, for many tea origins, tea is traded via public auctions, sometimes exclusively and often in addition to short-term or long-term private contracts.
Why is there no fixed or minimum amount of SD and SI payments for tea?
Paying a premium for certified tea, or making direct investments into certified tea farms, has been the exception rather than the norm in the tea sector. Also, in our own program, we have only required a premium for UTZ certified tea, but never for Rainforest Alliance Certified tea. Data around premiums and investments have historically not been collected in a systematic way. This also means that producers have had no template for calculating the additional costs and investments that go into compliance with the Rainforest Alliance SAS. This means that there is currently little data to base a fixed or minimum amount on with any credibility.
That’s why, in the first year of implementation (1January to 31December 2023), the Rainforest Alliance will not set a minimum for SD and SI payments. However, to create a level playing field and provide clarity to all Supply Chain Actors, we will propose as a starting point in our guidance, that:
- SDs are paid on the basis of no less than $10/MT for each MT of Rainforest Alliance Certified tea redeemed by the brand owner from their supply chain.
- SIs are paid on the basis of no less than $40/MT for each MT of Rainforest Alliance Certified tea redeemed by the brand owner from their supply chain.
From the second year of implementation (2024) onwards, we may look at introducing a fixed or minimum SD or SI based on further data and insights collected. Such shifts will be communicated to the market well in advance to allow for the necessary contracting arrangements to be made.
What will the SD payments finance?
The Sustainability Differential rewards producers for producing tea sustainably. It is an additional payment which acknowledges the added effort, money and time which goes into producing tea sustainably, and that certified tea should command a better price than conventional tea.
In the case of a group certification, the farm certificate holder transfers all of the SD received to the group members (farmers). In the case of an individual farm, the farm certificate holder may choose to spend the SD as they see fit; if the SD is used to benefit workers on the farm, this must be consulted on with worker representation.
What will SI payments finance?
SI payments directly support farm certificate holders by helping them make investments needed to meet the requirements of the 2020 Rainforest Alliance Sustainable Agriculture Standard, including those that improve workers wellbeing.
The needed investments are indicated in a producer’s Investment Plan. The Investment Plan is an Excel template provided by the Rainforest Alliance (Annex S16) to producers. In it, the potential investments, including investments towards certification costs, are categorized and directly linked to the corresponding chapters of the 2020 Rainforest Alliance Sustainable Agriculture Standard. The investment plan takes into account the results of the farm certificate holder’s risk assessment and capacity assessment tools to identify the most pressing investment needs.
Other investments can be added to the Investment Plan under the condition that core, mandatory, and self-selected improvement requirements are met. The Investment Plan and the actual investments made will be checked by a Certification Body auditor.
How will the SD and SI payments benefit tea workers?
Workers are at the heart of the tea sector and improving workers’ livelihoods is a key goal of the Rainforest Alliance tea program. The Sustainability Differential and Sustainability Investments empower producers to define what investment support they need in order to better negotiate and advocate for themselves and their workers. The aim is to increase sustainability at the farm level, including improvements that directly benefit workers. Producers must include investments related to worker benefits in their Investment Plan and worker representatives must be consulted on the allocation of those investments.
How will the SD/SI approach benefit tea smallholders?
Smallholders will have the opportunity to increase their income through the additional Sustainability Differential payments which they will receive from group farm management, pro-rata, based on the volumes of green leaf they have delivered to the group, and based on the volumes sold as certified by the brand owners.
Do SD and SI payments contribute to a living wage?
SI payments can contribute to living wages. Using their Investment Plan, wage improvement plan, and the completed salary matrix, producers can allocate SI payments to incremental wage increases for workers. This ultimately helps them close the living wage gap.
SD and SI payments are always mandatory for supply chain actors. Living wage contributions are a separate set of self-selected supply chain requirements in the 2020 Sustainable Agriculture Standard. Living wage contributions by brand owners via the additional self-selected supply chain requirements come with the possibility of additional claims and narratives.
What additional claims or narratives will SD and SI contributions unlock for tea brands and tea consumers?
The Rainforest Alliance understands that brands increasingly wish to better distinguish themselves in the market and show how they have created a positive impact for people and nature. The new Rainforest Alliance Certification System offers brands and companies a way to talk about their impact and investments at origin in a more transparent way, that communicates the impact that certification, targeted program and/or shared responsibility investments have had on the farms. These results-based narratives or claims can support their consumer engagement on sustainability efforts.
The Rainforest Alliance will provide further guidance to supply chain certificate holders on the types of claims and narratives allowed with regards to shared responsibility commitments, payments, and impacts via the forthcoming Rainforest Alliance Claims Framework.
Will there be contracts for SD and SI payments in the tea sector?
No. Instead, the tea approach is based on annual forward commitments of SD and SI contributions by the brand owner and retrospective payments to the farm certificate holder for volumes sold as Rainforest Alliance Certified.
For example:
- In “year 1 (I.e. 2022)”, the brand owner commits SD and SI payments to the farms they source from.
- At the start of “year 2 (I.e. 2023)”, the brand owner makes SD and SI payments to those farms based on the volumes they have used. This will be done via a new payment facility which the Rainforest Alliance will set up in 2022.
Can already existing investments from brand owners, manufacturers or packers be considered as Sustainability Investments under the Shared Responsibility approach?
Some brands or manufacturers and packers already invest in farm sustainability. However, those investments are not always visible. We want to enable transparency for those that already support producers by making cash or in-kind investments and recognize them within the shared responsibility approach. As we develop the SD/SI approach for the tea sector in the coming years, we will be able to share how this works in practice.
What will be the mechanism to guarantee payment of the SD and SI?
We see the entire tea supply chain as responsible for realizing our shared responsibility ambitions.
The Rainforest Alliance is therefore advocating for brand owners and their suppliers to support the efforts of tea farms to achieve continuous improvement and quality implementation of the Rainforest Alliance Sustainable Agriculture Standard by rewarding certification and by making investments into the farm investment plans.
As the tea shared responsibility approach gets going, the Rainforest Alliance will be able to monitor the areas of investment required by certified tea farms, to assure correct distribution and use, and to make more visible where investments are most needed.
Although the Rainforest Alliance cannot guarantee payment, it can decertify actors who are in the certification program but who do not comply with the requirements around shared responsibility. Through the certification system, we set the expectation and provide the mechanisms to demonstrate and verify (through audits) that payment has been made.
Advocacy, in partnership with producers, is also key. With pressure from consumers, Civil Society Organizations, and NGOs, a growing number of retail chains in Europe and North America see added value in sourcing certified tea and support our efforts to improve the livelihoods of farmers and workers. Some retailers with public sustainability commitments are prepared to pay extra for certified tea, but they need a mechanism to do this, as well as assurance on the sustainability impact associated with these additional investments.
