Updated on August 28, 2019
We all know that certified products can cost a bit more – after all, certification is an investment in better farming, a better environment and better quality of life for farmers. But why is the additional cost for UTZ certified ingredients different from supplier to supplier? And does this extra cost always benefit the farmer? Time to find out more, using cocoa as an example. We asked Sven Drillenburg, Europe Lead Markets, to tell us about what influences sustainability costs: “Just as each farm is different from the next, the cost of investing in certification can vary too. We as an organization don’t set the price for premium or investment payments, but we do want everyone to be clear about the costs of certification and open about what’s included in the price of UTZ certified ingredients.” In general the cost of sustainability includes the following:
The UTZ premium is the extra amount paid to farmers on top of the market price for their UTZ certified coffee, cocoa or tea. In 2018, globally, the average UTZ premium for cocoa was €83/MT cocoa beans. But there is no set premium – the amount is negotiated between the first buyer and the farmer or farmer group. We do check that the cash premium goes directly to the farmers; with this premium they can cover management costs, products and services. In the case of a farmer group, in general 50% goes to the individual farmers in cash. All group members must benefit.
Cost 2 – investments
Investment in a sustainable supply chain is broader than just the cash premium. Many farmers need support to get organized and trained in e.g. good agricultural practices. The support is often organized via traders and this comes at a cost. Also, farmer groups need to be audited to get their certificate. The cost of these investments are usually passed on in the supply chain. As each farm is different, the costs can vary too.
The first buyer in the cocoa supply chain (or the last, in coffee and tea) pays a program fee to the UTZ program, calculated on the volume they buy. The current fee is €10 per ton of cocoa beans. However to make chocolate, you need to process beans into liquor and later on into butter and powder. When processing beans into liquor an average of 18% is lost, that’s why the conversion rate is set at 82%. Therefore the program fee per MT of liquor differs from the program fee per MT of beans. The program fee and conversion rates are fixed. The program fee covers the running costs of the UTZ program and our investments in research and innovation.
Find out more
Sven concludes: “We encourage companies to ask their supplier to give them a breakdown of the sustainability costs within their price. Or if you are a supplier, to give your buyers more information on this topic. It’s good for everyone to be clear about the investment involved in sustainable farming.”
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