CHAPTER 6 Sustainability standards and agro-food exports from East Africa By Evelyne Lazaro, Lone Riisgaard, Fredy Kilima, Jeremia Makindara and Raymond Mnenwa Pages

WHAT ARE SUSTAINABILITY STANDARDS ALL ABOUT Intend to operationalize and codify the concept of environmental and social sustainability Seek to address consumers’ concerns over deficiencies in the existing food standards w.r.t. content and/ the way standards are implemented Cover both environmental and social requirements E.g. organic agriculture, Fair Trade, Rainforest Alliance, UTZ CERTIFIED, and GlobalGAP

THE DEBATE ON STANDARDS Standards, labels and certification vary w.r.t their functions and impacts: Does it really pay to comply? Some impacts are indirect and realized in the long-run: Can these costs and benefits be quantified accurately? Do standards such as private labour standards favour some groups of workers? Can these standards constitute new non-tariff barriers for smallholders farmers in Africa? Are farmers in Africa competent enough to maintain an appropriate level of documentation as required? Do the necessary infrastructure to facilitate cost- effective and credible quality and safety assurance mechanism exist? THE CHAPTER ATTEMPTS TO INVESTIGATE THESE ISSUES

KEY ISSUES DISCUSSED 1.Who adopt the standards and what types of operator participate in different initiatives? 2.i) How are the standards implemented? ii) Are there provisions to allow partial implementation of these standards? iii) If any, is partial implementation attributable to measurement problems and/poor adaption to local conditions? iv) What are the consequences of specific instances of such mismatch? 3.What have been the economic and social costs and benefits of standard adoption in each case and the opportunities and threats 4.What are the lessons on the key issues investigated?

THE CASE STUDIES

UTZ CERTIFIED COFFE I) IMPLEMENTATION IN PRACTICE Standard manuals to guide farm operation are available but producers can adapt the manuals to suit their unique farm operations -There are some grey area: E.g. the choice of native tree (shade) is not specified

UTZ CERTIFIED COFFE 2) VALUE CHAIN RESTRUCTRURING AND STANDARD COMPLIANCE A buyer driven chain Many actors in the conventional chain are excluded Smallholder farmers have not been able to adopt this standard: Many are not aware about the standard No local collective initiatives to support compliance Many certified firms capable to operate without the support of the farmer extension or other local organizations

UTZ CERTIFIED COFFE 3) COMPLIANCE COSTS AND BENEFITS Changes to farm infrastructure, waste disposal and environmental conservation and certification and inspection were the major cost components Average annual cost for complaint and non-compliant firms were about USD 913/ha and 626/ha Additional earning over conventional coffee was about USD 0.52/kg, however lower grades of certified coffee were sold in the coffee auction at Moshi Compliance costs entailed higher costs compared to non-compliance, but there were considerable direct and indirect benefits

UTZ CERTIFIED COFFE 4) THREATS, OPPORTUNITIES & LESSONS Certification is an opportunity to expand market coverage and reduce risks, especially price shocks Participation is not a necessary requirement for market access Certified estates can participate in conventional and niche markets Premium is negotiated (never guaranteed) Reliability and consistency of product matter! Certification limited to plantations Unless they cooperate or liaise with certified plantation smallholder farmers may not afford it Demonstration effects felt among non certified farmers in the neighbourhood of certified plantations

GLOBAL GAP I)IMPLEMENTATION IN PRACTICE Certification is flexible and it allows individuals (option 1) and producer groups to seek certification (option 2) Equivalent benchmarking is also considered (option 3) Smallholders in Tz were certified under option 2 (as producer marketing organizations (PMO)) and were all linked to exporters

GLOBALGAP I)IMPLEMENTATION IN PRACTICE (CONT..) There were two sets of requirements: Major ‘musts’ (e.g. the use and handling of chemicals)—compliance was mandatory Required investment in infrastructure and upgrading of human resources, especially for exporters Individual farmers were not required to undertake major investment in infrastructure Minor ‘musts’—compliance needed but not a big deal! Excessive use of chemicals was reported among smallholders—exporters were compelled to spray smallholders’ plots (not for free)

GLOBALGAP I)VALUE CHAIN RESTRUCTURING Certification was a requirement for entry into the EU-based main retailers Exporters also retain access to market for uncertified products The adoption of standard has made certification of smallholders possible: albeit under contractual arrangement

GLOBALGAP II) COMPLIANCE COSTS AND BENEFITS Several benefits Knowledge on GAP, which can be applied to non- GlobalGAP production Market access for smallholders and better prices ($0.85 vs $0.6 for uncertified fine beans) Higher land productivity attributable to introduction of new crops with short production cycles (<4 months) and GAP PMOs as platforms to solicit external support in training Costs: Certification was financed by external parties (EU, DANIDA, African Bank and Kilimo Trust programmes)

GLOBALGAP 4) THREATS, OPPORTUNITIES & LESSONS High costs of compliance and inadequate technical know how with w.r.t. standard compliance Inadequate facilities for vegetables (e.g. airfreight capacity at KIA) High rates of produce spoilage Sorting is not done at farm level Denies farmers an opportunity to sell in the domestic market or use for home consumption products that don’t meet export standards

GLOBALGAP 4) THREATS, OPPORTUNITIES (CONT.) Exports to the UK should comply with one, two or a combination of three standards namely EurepGAP, Tesco’s Natures Choice (TNC) and British Retailers Consortium (BRC).

SUSTAINABILITY STANDARDS IN THE CUT FLOWER INDUSTRIES I)IMPLEMENTATION IN PRACTICE (CONT..) Some provisions, like pesticide storage, sanitary facilities and overtime pay are relatively easy to verify Other provisions such as the presence of gender or ethnic discrimination and the presence of freedom of organization are inherently more difficult to verify

SUSTAINABILITY STANDARDS IN THE CUT FLOWER INDUSTRIES II) VALUE CHAIN RESTRUCTURING Coverage is related to the outlet to which the flowers are sold and the value chain strand considered. The adoption of social and environmental standards is a requirement for producers participating in the direct value chain selling to large EU retailers Producers selling through the auctions are not compelled to adopt the standards Thus, adherence to sustainability standards is one out of many capacities required for entering the direct export

SUSTAINABILITY STANDARDS IN THE CUT FLOWER INDUSTRIES 4) LESSONS Labor organizations may use some of the more rigorous standards to: Enhance union organization and obtain collective bargaining agreements; Understand better the operations of cut flower markets and; Participate in discussions related to social issues Effective organizations can use stringent private social standards to further their influence

SUMMARY The standards considered enhanced the possibility for producers to: Undertake direct export Increase their security of contracts and financial gains Except for coffee, compliance was a condition for market access Small holder farmers are not compliant except for fresh vegetables in Tz (they were supported to comply) Where smallholders comply, there are several direct and indirect benefits