This title is part of the IDH Case Study Series, published in December 2010. Another title in this IDH Case Study Series is: •  sustainable , Part II: Reaching out to smallholders Case study

IDH also has a Best Practices Series, whose titles include: • Marketing Unilever • among SME’s • Beyond auditing • Sustainable trading • Retailers and sustainability sustainable tea • Sustainable sourcing and procurement Part I: Leapfrogging to mainstream

By Tania Braga, Aileen Ionescu-Somers and Ralf Seifert, IMD’s Center for Corporate Sustainability Management

Dutch Sustainable Trade Initiative (Initiatief Duurzame Handel) Utrecht, The www.dutchsustainabletrade.com [email protected] Foreword

A tipping point happens when a critical mass One of the arenas that is rapidly moving of people begin to shift their perception of toward a sustainability tipping point and which an issue and take action in a new direction. offers exemplars of creative partnerships is that of commodity market transformation. As I look across the global landscape, I feel This is the collective effort by businesses, that we are approaching a tipping point NGOs, labour unions, and governments to concerning global sustainability. It is catalyzed restructure the production and distribution by at least three important realizations by systems of commodities to be more business, government, and civil society: sustainable, while building broad market The first is a realization that the world is demand for sustainable products. If done finite and that a growing population with well, these improved markets will deliver a higher ambition for living standards will large-scale social and environmental outcomes inevitably lead to a world which will be that advance the millennium development resource and carbon constrained. goals and strengthen the economic viability of entire commodity sectors and the leading The second is the realization that to solve companies involved. the challenges for this future world we need systems solutions. We cannot solve individual A recognised catalyst of this kind of market problems in silos. The connections between transformation is the Dutch Sustainable energy, climate change, water, , urban Trade Initiative (IDH). IDH’s mission is to infrastructure and the imperative of upscale and accelerate the mainstreaming functioning ecosystems are very . of sustainability in global commodity chains. Through innovative public-private partnerships, A third realization is that no part of society IDH joins the forces of multiple stakeholders can solve this on its own. Individually, to build and execute programs that tackle governments, businesses, and civil society social, ecological, and economic bottlenecks to lack the technology, financial resources, and commodity market sustainability. In addition management skills to build a sustainable world IDH acts as a knowledge broker, capturing on their own. Yet collectively, we already and sharing best practices in supply chain have – or can develop – everything that is sustainability. needed for this large-scale transformation. As a result, there is growing interest in new This booklet is part of a series of IDH- types of public-private partnerships that supported case studies that focus on the jointly find solutions to these issues. In such “know-how” of commodity market transfor­ partnerships, the skills and resources of both m­ation. These studies are filled with practical the private sector and civil society are insights, wisdom, and time-tested advice from combined with the legislative and regulatory those deep in the trenches of driving real power of governments. change in global markets. I encourage you to take these lessons learned and innovative ideas straight to the heart of your own work. By doing so, we will take another powerful step toward a tipping point for global sustainability.

Björn Stigson President, World Business Council for Sustainable Development Contents

1.0 Executive Summary 4

2.0 Background 8 2.1 Tea Markets and Value Chain 9 2.2 Sustainability Challenges of Tea Production 12 2.3 Commodities Market Transformation 14 2.4 at Unilever 15

3.0 Case study 16 3.1 Taking on the Mainstreaming Challenge 17 3.2 Hitting the Road 21 3.3 Reaping Results in the Market 24 3.4 Challenges Ahead 25

Unilever sustainable tea: Leapfrogging to mainstream — 3 Commodity value chains around the world are increasingly stressed; some even face severe and dire circumstances. This is due to myriad social, Chapter 1 environmental and economic challenges linked to Executive summary the finite nature of natural resources and rapidly growing populations. ‘Unilever’s commitment to fully These pressures threaten not only the raw By reading this case study, business material supply for key industries such as executives and other stakeholders will learn convert to certified food & beverage and textiles, but also the from Unilever’s journey in multiple ways. livelihoods of tens of millions of people and The company, recognising that no single the natural resources they depend on. For this entity can solve the complex issues around sustainable tea sent reason, companies, NGOs, and governments conversion of the tea value chain on its are actively seeking solutions to render own, entered into a partnership with the commodity value chains more sustainable. . Through Rainforest Alliance a powerful signal to certification of tea plantations, the partner­ship Tea – production, processing and has accelerated a transformation to sustainable consumption – is one of the commodity Unilever tea products. Concurrently, they have the supply chain that value chains in question. This case, the first built an effective, groundbreaking approach of IDH’s Market Transformation case series, to communicating this shift effectively to tea- documents a groundbreaking initiative by drinkers without undermining its consumer certification was now Unilever, the Anglo-Dutch food & beverage base. The lessons learned from building the company, to make its own tea value chain partnership and the “win-win” outcomes for sustainable. This initiative started with the the players involved are carefully extracted a market reality.’ popular and PG Tips in specific and reported in the case. countries and is gradually rolling out in other An innovative communications and marketing regions of the world. strategy that enabled the company to successfully link sustainability to mainstream Edward Millard, brands (as opposed to the more usual “niche” Rainforest Alliance approach) is also documented.

Unilever sustainable tea: Leapfrogging to mainstream — 4 Unilever sustainable tea: Leapfrogging to mainstream — 5 The case emphasizes both the intangible To accelerate momentum towards the (e.g., /reputation) and tangible (e.g., requisite “sustainability tipping points” supply chain security) business benefits across commodity value chains, it is vital that drove Unilever’s value creation strategy. that such cases enter mainstream business As such, it is an excellent example of how thinking, reflection and learning. To attain companies, by carefully building multi­ this objective, this case, and forthcoming dimensional business cases for sustainability “market transformation” best practice and strategic execution plans that account examples, will be converted to a series of for the specific challenges of sustainability teachable cases used in the core curriculum and partnerships, can grasp opportunities and of IMD business school, other academic forge new markets. It shows how companies institutions and in company training programs. can become first movers and leaders in This case is already an integral part of an contributing to more sustainable business annual Masterclass Workshop for mainstream models, while simultaneously ensuring the managers in companies linked to commodity financial and longer-term sustainability of value chains that is run by IMD in partnership their core business. with the Sustainable Agriculture Initiative Platform (SAI Platform) and the Dutch Most interestingly in this case, the moves Sustainable Trade Initiative. made by Unilever have had a knock-on effect of contributing to a “tipping point” for sustainability in the tea sector. As a direct result of Unilever’s initiatives, several other major companies and brands followed in Unilever’s footsteps and are certifying their own tea supply chains. This has happened without the loss of business benefits to Unilever, implying that the business rationale was founded on more than a “first mover” competitive advantage. Thus, the case documents the first tangible framework of this “systems solution” to the complex sustainability dilemmas around tea production.

Although excellent and leading examples of certification initiatives have existed for some time, this may be the first time that such a partnership will succeed in impacting an entire commodity value chain far beyond the activities of the actual company involved.

Unilever sustainable tea: Leapfrogging to mainstream — 6 Unilever sustainable tea: Leapfrogging to mainstream — 7 Historically, the tea market has shown a persistent state of oversupply, which has kept a downward pressure on prices. Even though falling prices might sound like good Chapter 2 news for tea consumers, they represent a threat to the Background long-term economic health of the industry. ‘Like any tropical crop, tea raises Low margins and underinvestment jeopardize 2.1 Tea Markets and Value Chain productivity and quality and act as barriers to a number of the improvement of the working conditions In 2008, black tea accounted for approximately and livelihoods of growers, creating a down­ 65% of global production and 80% of global ward spiral that make it hard for the sector trade. , and were the environmental to act in a more sustainable manner. biggest world producers of black tea, while was mainly grown in . The two Unilever is the world’s largest tea company. biggest producers, China and India, were also and social issues, It purchases around 12% of the world’s total tea major tea consumers and their domestic production and is vertically integrated in the markets accounted for over half of global value chain, being present from the production consumption. Consumption in non-producing each with a cost/ site all the way to commercialization. Therefore, countries was led by the European Union, the company is strategically placed to be the Russia, North Africa, Japan and North America. catalyst for transformation in the industry Western and North America together benefit balance and has laid the foundation for large-scale accounted for approximately 10% of total social and environmental improvements while tea consumption. The UK was the largest attempting to reverse the commoditization tea consumer within Europe, with a market that can be tipped trend of the tea market. share of 63%. Figure 1 shows data on major tea production and consumption countries. in a positive way.’ Significant future growth and improvements in market fundamentals are expected in the global tea market and are supported by FAO Rainforest Alliance, projections from Spring 2010 (see box 1). Sustainable Tea brochure

Unilever sustainable tea: Leapfrogging to mainstream — 8 Unilever sustainable tea: Leapfrogging to mainstream — 9 Figure 1: Production, Exports and Consumption of Tea in 2008 Box 1. Current and future trends on tea market fundamentals Tea Production 2008 Tea Exports 2008 Tea Consumption 2008

There have been signs of improvement in tea negative growth of 0.6%. These improvements market fundamentals in the past few years. are expected to consolidate, since supply and According to the FAO3, between 2005 and demand of black tea is owing to be in 2009 there was a reversion of the oversupply equilibrium in the medium term, promoting trend since black tea consumption grew by relatively stable prices at higher levels than the 0.8%, outpacing production which had a average over the previous three decades.

Tea production, exports and consumption: Global market China 32% China 18% Producers 54% India 21%

India 25% India 13% EU 7% Other poducers 8% Estimated Projected Growth Rates

Kenya 9% Kenya 20% North America 3% China 25% 2009 2019 2000-2009 2009-2019 Sri Lanka 8% Sri Lanka 18% Japan 4% (thousand tonnes) (percent per year)

Others 26% Others 31% North Africa 4% Black Tea Russia 5% Production 2374.6 3006.2 1.3 2.1 Other non-producers 23% Exports 1173.1 1493.1 0.9 1.8 Source: FAO Report of the 19th session of the intergovernmental group on tea. New Delhi, India, 12–14 May 2010 Consumption 2505.6 3049.3 1.6 2.1

The tea value chain 1 is characterized by a high and demand. However, access to market Green Tea level of vertical integration. Major companies information by producers is limited due control various production stages upstream to substantial variation in quality, quantity Production 1200.9 1900.9 7.0 4.7 and downstream of operations, and demand of tea and the small numbers including ownership of plantations. In addition, of brokers controlling the market. Blending, Exports 278.8 476.0 5.4 5.5 when compared to other commodities, such packaging and marketing are the most as cacao or coffee, the tea value chain is lucrative part of the value chain and are Future growth in the tea market will partly green-tea market outside Asia and an less fragmented and significantly shorter usually carried out in buyer countries. come from the strengthening of trends that increasing perception of tea as a healthy (see figure 2). Thus, it is an industry in which Blending strongly influences tea flavor and have already emerged in the market, such beverage. The second growth trail in the tea a few players can have a substantial impact “the composition of a blend, in terms of as consumers moving away from other market is a result of the increase in use of on the market. origins and estates, is a closely guarded drinks to tea due to the wide range of value- tea bags in developing and emerging markets commercial secret.” 2 added products, for example ready-to-drink where most people had traditionally made Traditionally, tea cultivation is carried fruit and flavored , expansion of the tea using loose leaves. out in large plantations – the tea estates. However, in countries like Kenya and Sri Source: FAO Report of the 19th session of the intergovernmental group on tea. Lanka, approximately 3 million smallholders New Delhi, India, 12–14 May 2010. accounted for over 60% of production in 2009. Tea factories, the first critical node of the value chain, are usually located close to tea plantations, since primary processing of the tea leaves should start within five to seven hours of picking. Tea is mainly traded at auctions and brokers play the crucial role of linking producers and buyers and communicating information on supply

Unilever sustainable tea: Leapfrogging to mainstream — 10 Unilever sustainable tea: Leapfrogging to mainstream — 11 Figure 2: Overview of Major Players in the Tea Value Chain and Tea Consumption Although there are significant differences Box 2. Examples of specific between regions and plantation types sustainability challenges of tea (estate or smallholding), sustainability production in different regions and challenges of tea production can include: 58% 42% plantation types. • The contamination of soil, surface water Regional differences: and final product by pesticide residues • In Asia pesticides are used on a large • Soil erosion, soil degradation and the Producing & Trade Blending & Consumption scale in tea plantations, while their sedimentation of rivers processing packaging use in East Africa is minimal. • Land conversion and logging for firewood, • HIV/AIDS is a very serious problem potentially leading to local-scale Major players Major players Major players Producing countries 58% among workers on tea plantations in and biodiversity loss 5 Unilever Unilever Unilever China 24% India 22% East Africa, while water-related • Low wages and poor working conditions Tata Tea Tata Tea Tata Tea Turkey 4% Others 8% infectious diseases and malnutrition at certain tea plantations, in particular for Mcleod Russel Van Rees Non producing countries 42% is of high concern in tea plantations seasonal workers with very reduced or no James Finlay James Finlay Western Europe 6% rest EU 8% in Sri Lanka and India. access to social benefits, such as medical John Keells North America 4% Asia 11% • In India, most workers in large care, housing, education and pension funds Africa 8% Others 5% plantations have access to basic • Uneven value distribution facilities such as housing, drinking • Work-related injuries and health problems water and sanitation. In Kenya, house- due to contamination by agrochemicals Source: Reenen M. van; Panhuysen S.; Weiligmann B. (2010) Tea Barometer 2010, Tropical Commodity Coalition. Page 5. sharing is common on large tea • Pollution and energy inefficiency estates that can get overcrowded in in processing tea peak season when seasonal laborers • Endemic diseases 2.2 Sustainability Challenges of Tea Production Investments and the improvement of are employed. In Sri Lanka, most tea • Poor housing/living conditions agricultural practices in tea plantations workers share rooms in old barracks • Gender/ethnic discrimination. Tea plantations are typically located in tropical have been undermined in the three past with no access to (piped) drinking forest areas within about a dozen countries decades by commoditization, downward water and proper sanitation facilities. On the one hand, making tea farming more and “like any tropical crop, tea raises a pressure on prices and upward pressure sustainable has the potential not only to bring number of environmental and social issues, on primary production costs. Poor yields Large estates have a number of environmental benefits to tropical forest each with a cost/benefit balance that can and quality have led to high vulnerability specific challenges: areas but can also improve the livelihoods be tipped in a positive way.” 4 of smallholders’ livelihoods in this • High discrimination and gender of millions of smallholders, by enabling them labor-intensive crop. inequality to obtain higher prices for their tea. On the Tea grows year-round and is a labor-intensive • Low representation of workers other hand, overcoming the sustainability crop, employing over 13 million workers – of • Poor living conditions challenges of tea production (and distribution) which around 9 million are smallholders – in the • Low wages can only be achieved by liberating the sector four main producing countries. Tea production • Replacement of permanent workers from its downward spiral in price, quality and in smallholdings is usually combined with by casual and temporary ones. investment, and by promoting a structural other subsistence crops and livestock market transformation. and has an important role as a cash crop, Smallholders also have a number providing income to pay for food, education of specific challenges: and health­care for the farmers’ families. • High reliance on tea for livelihood • Low level of farmer organization • Lack of land title deeds • Lack of market information, market access and (technical) training • Low productivity and low prices versus high production costs

Source: Reenen M. van; Panhuysen S.; Weiligmann B. (2010) Tea Barometer 2010, Tropical Commodity Coalition. Page 6.

Unilever sustainable tea: Leapfrogging to mainstream — 12 Unilever sustainable tea: Leapfrogging to mainstream — 13 Figure 3: Phases of market transformation Box 3. Unilever Unilever is strongly placed in the global 100 Unilever is a company tea market with three leading brands. operating in the fast-moving consumer Lipton, one of Unilever’s 13 major global goods sector with a worldwide turnover brands, is the global market leader in both of €39 billion in 2009. It operates in 170 leaf and ready-to-drink tea, with a market countries and directly employs 163,000 share nearly three times larger than its people. The Anglo-Dutch company nearest rival. It is present in 110 countries describes itself as with sales that achieved €3 billion in 2009. 50 “a ‘multi-local multi­ national’ with consumers, customers, Lipton’s main markets are Western Europe, suppliers and shareholders on every North America, the Middle East and parts continent.” 8 In 2009, Unilever generated of Asia. PG Tips is one of the two market more than half of its turnover in developing leaders in the UK, with a market share TEA and emerging markets in Asia, Africa, Central of 25% and consumers drinking over & Eastern Europe and Latin America. 35 million cups per day. In India, a market % of sector being sustainable % of sector 0 The company’s portfolio is composed of that consumes approximately 25% of the Initiation phase First movers Critical mass License to operate 400 core brands and nearly 75% of sales tea Unilever sells worldwide, Unilever is are generated by its top 25 brands, also the market leader (for packed tea), Source: IDH Monitoring Protocol 2010-2015: Mainstreaming global supply chain sustainability. including , , , Hellmann’s, with the brand . Dutch Sustainable Trade Initiative, 2009, page 9. Copyright NewForesight 2010. Flora/ and Lipton.

2.3 Commodities Market Transformation The Dutch Sustainable Trade Initiative (IDH) uses a maturity model – developed 2.4 Sustainable Agriculture at Unilever In 2005, social and environmental The term “commodity market transformation” by NewForesight – for market transformation, considerations were brought into product refers to a deep change in the way a based on initial research with different Over the years, Unilever has developed a brand innovation and development plans commodity market works, with the goal to commodity sectors and characterized by strong corporate reputation in sustainability using a process called Brand Imprint. 9 induce lasting changes that enable a whole four phases: management in general, as demonstrated In 2009, Unilever launched a new corporate industry to do “much more” and “much “In the first phase, there is no common vision by its nomination in 2010, for the 12th vision to double the size of the business better” with “much less.” Influencing and on sustainability and only fragmented consecutive year, as the food industry while reducing overall environmental impact changing market behavior is not a new idea, initiatives by first-movers. In the second category leader in the Dow Jones Sustainability across the entire value chain. In April 2010, but as a systemic strategy to promote the phase, there are compelling success stories World Indexes.7 It is recognized among guidelines for best agricultural practices production, distribution, commercialization and the first-movers bundle their forces in industry peers and a diversity of stakeholders were converted into a sustainable agriculture and use of more sustainable commodities, multi-stakeholder platforms which pull others as a pioneer in addressing sustainability code 10 that set out Unilever’s expectations it is still in its early days. along. In the third phase, there are several issues, including sustainable agriculture, from for agricultural suppliers in terms of integrated standards in place but first-mover advantage a strategic business perspective, linking it farming principles to optimize yield while Successful market transformation of is diminishing. Unless harmonization both to product branding and supply chain minimizing environmental impacts. commodities requires the collective effort takes place, rivalry may result in loss of management. of different stakeholders throughout the momentum. In the fourth and last phase, As highlighted in Unilever’s corporate report entire value chain. The key aspect of sustainability becomes institutionalized Unilever established a sustainable agriculture on sustainability: 11 commodity market transformation is the in the public domain and it has become program in the 1990s. At that time, it developed “Sustainable sourcing not only helps us removal of market barriers that inhibit a license to operate.” 6 guidelines for sound agricultural practices manage a key business risk, it also presents the production and commercialization of for key crops. Indicators covering the three an opportunity for growth, allowing our sustainable agricultural raw materials while Today the tea industry is in the early stages of aspects of the “people, profit and planet” brands to differentiate themselves to the creating value for farmers, manufacturers, the critical mass phase, as shown in figure 3, view of sustainability – such as water, energy, growing number of consumers who choose traders, front-running brands, retailers as a result of Unilever’s innovative initiative pesticide use, biodiversity, social capital, products based on their sustainability and consumers. and its subsequent adoption by several working conditions, workers livelihoods credentials.” other major companies and brands. and animal welfare – were incorporated into contracts with growers. The guidelines were developed in consultation with key stakeholders and extended to suppliers through various tools such as regular buying visits, self-assessment questionnaires and close monitoring of high-risk suppliers.

Unilever sustainable tea: Leapfrogging to mainstream — 14 Unilever sustainable tea: Leapfrogging to mainstream — 15 Bedford, UK, July 6, 2010. Mark Birch, global category supply manager for Tea at Unilever, summarized on paper his reactions to the thought-provoking Chapter 3 conversation he had just had with Michiel Leijnse, Case study global brand development director of Lipton. ‘We were formidably placed to win; Three years earlier, Leijnse and Birch had 3.1 Taking on the Mainstreaming Challenge embarked on an exciting journey. It all started with Lipton’s decision to source all its tea for Building the Business Case for both as a first mover, TM 12 teabags from Rainforest Alliance Certified Sustainable Tea farms. The two executives found themselves In 2006, Lipton was the first Unilever in the driving seat of an ambitious market brand to carry out a brand imprint exercise. and as the catalyst transformation effort. Michiel Leijnse, who had just joined the brand from Ben & Jerry’s, sat in on assessment The first year of roll-out brought quick wins group – made up of brand developers, supply of an industry-wide in tea supply chains that were supported by managers, corporate responsibility executives, already existing capacities in Lipton’s own tea outside consultants and other Unilever staff. plantations in Kenya. Years two and three were transformation.’ marked by sturdy efforts to extend training The exercise started with an integrated and certification to more fragmented parts analysis of the footprint (social, economic of the supply chain The collaboration with and environmental impacts) of the Lipton Michiel Leijnse, Unilever the Rain­forest Alliance certification program brand across the value chain. The influence was successful and by mid-2010, there was of consumers, market forces and key opinion enough certified tea to ensure that Lipton formers (customers, suppliers, NGOs and Yellow Label teabags sold in Western Europe governments) on the future growth of the were fully certified. brand was also analyzed. It was followed by a group-facilitated discussion of alternative On the market side, roll-out was faster than strategies and concluded with the design expected. The initial strategy of focusing on of an integrated brand strategy. During the the Western European market for the first three process, the assessment group identified years was replaced by the keenness of Japan, significant business opportunities in the US and to accelerate the commer­ the tea market for linking brand preference cial­ization of certified tea in their markets. to sustainability.

However, Leijnse and Birch felt that they would On the one hand, Lipton had solid encounter significant challenges in the years experience in integrating sustainability to come as certification was extended into tea production. Lipton’s tea estates globally. In addition, demand for certified tea in Kericho (Kenya) and Mufindi (Tanzania) was growing exponentially as other major fully complied with Unilever’s standards of players in the global market followed on sustainable agri­culture. The company was Unilever’s path and began to certify their working to align suppliers’ practices with own brands. Unilever was also actively those standards and had partnered with the considering the implications of extending Kenya Tea Develop­ment Agency (KTDA) 13 the sustainable tea initiative to large tea to promote sustainable practices among producer/consumer countries such as India. smallholders. But bringing suppliers to the

Unilever sustainable tea: Leapfrogging to mainstream — 16 Unilever sustainable tea: Leapfrogging to mainstream — 17 same level of sustainability as that achieved Leveraging Credibility The Rainforest Alliance is an international NGO The Mainstreaming Decision in the company’s own tea plantations was Credibility was the crucial issue to be created in 1987 with the objective of conserving Once the brand team had decided to go still very challenging. addressed to ensure that the link between biodiversity and ensuring sustain­able liveli­ along with Rainforest Alliance certification, Lipton’s brand and sustainable tea growing hoods by transforming land use practices, they decided to seek the green light from On the other hand, market research showed would be successful. Unilever had built business practices and consumer behavior. Unilever’s top management to mainstream evidence that sustainability was a growing a strong track record of keeping in touch In 2009, the Rainforest Alliance had nearly sustainability in tea production. Their proposal concern of consumers in key markets and with the pulse of the market through solid 300 staff worldwide and an operating budget was to convert the whole brand to certified that it could potentially be turned into an market research and consultation with key of US$30 million. The programs developed by sustainable tea, framing the initiative within effective differentiator factor when effectively stakeholders. It did this through participation the organization are focused on four areas: a larger context of market transformation communicated to consumers. However, in a variety of platforms, such as the agriculture, forestry, tourism and climate. of the tea industry. Lipton’s approach to communication about Sustainable Agriculture Initiative (SAI) The Rainforest Alliance is a founding member sustainability was essentially low key and Platform 14 and the Marine Stewardship of the Sustainable Agri­culture Network (SAN), This meant that every product in Lipton’s since efforts were not visible to consumers, Council (MSC). 15 The company realized a coalition of conservation groups linking teabag range would be made with tea from the potential to harvest positive impacts on that consumers would not necessarily buy responsible farmers with conscientious Rainforest Alliance Certified farms, a contrast brand value and on the bottom line were not into Lipton’s self-declared excellence in consumers by means of certification of to the usual approach of bringing sustainable being realized. sustainability. The Brand Imprint team saw sustainable farming practices according to food and beverages to the market by support and endorsement from third parties internationally recognized guidelines and introducing variant brands. Introducing a Jan-Kees Vis, global supply chain director of as the answer to the credibility challenge. auditing procedures. Tea is one of the 21 variant brand generally means creating a sustainable agriculture at Unilever, explained: commodities grown on farms certified by the niche market, since sustainable products are “Back in 2005 Lipton was not perceived as In the following months, the Lipton team Rainforest Alliance. Certification requires three distinguished from the main product line by a shiny and vibrant brand and was suffering sought a third-party certification scheme. levels of sustainability: worker welfare, farm certification and higher prices. By definition, the consequences in the market. The team Fairtrade, UTZ Certified and the Rainforest management and environmental protection. 18 niche markets have a limited reach and decided to revitalize the Lipton brand by Alliance Certified were scrutinized. invariably lead to a situation in which main­ positioning it as values-driven. During the Vis explained the process and criteria used Vis described the reasons for choosing stream consumers continue to purchase brand imprint exercise we conclude that in Lipton’s choice of partner: Rainforest Alliance Certified: standard cheaper products. By only making sustainability could potentially be an “By talking to these three organizations, “Rainforest Alliance certification had a variant brand sustainable, a company excellent attribute enabling us to engage brand managers realized that they should modest, but promising, consumer generally brings economic benefits to a small in a positive dialogue with consumers and look for the best match between the recognition in Europe. It was a nimble group of farmers but the vast majority of the to harvest enhanced brand value.” shadow brand 16 and the new Lipton brand organization, quick on its feet. The program others do not benefit economically or socially positioning. They looked for answers to was business minded, willing to grow, to and society does not see a significant Leijnse voiced Lipton’s business case for questions such as: Does the shadow brand, invest and to find co-funding for training environmental improvement. In addition, sustainable tea: or certification seal, have consumer farmers. It was expanding from its variant brands have limited capacity to “According to market research, 60% of recognition? Is there a risk that the certifier’s traditional markets and products to better change mainstream brand positioning and consumers in Western Europe declare that message would overshadow Lipton’s fulfill the mission of protecting rainforests. create long-term value, as the link between they take social and environmental factors message? Does the organization have the Its standards for sustainable agriculture the new attribute and the brand is weak. into account when deciding what products requisite scale to certify a big supply base? measured and assessed the majority to buy. However, they are often discouraged Does it have the organizational flexibility of criteria we considered important But the discussion with Unilever top executives by price and availability. Lipton, as the and capacity to certify large estates as well to sustainability.” 19 was tough. Lipton brand executives spent world’s biggest and best known tea brand, as smallholders?” five months of one-on-one discussions with had an opportunity to break down those internal key decision makers on issues such as barriers and rebuild market share by making The team took about six months to the cost of the initiative, the expected returns sustainability an integral part of the brand analyze the three certification schemes. for Lipton on the income side and the speed promise. Universally available sustainable Initially, Unilever staff leaned more toward to which conversion could be carried out. tea was a sound and sensible long-term Fairtrade as the certifying scheme of choice. business proposition from the brand point However, during the analysis they concluded of view; and it was also a good deal for that Fairtrade might lack the scale and the tea growers.” organizational flexibility to certify industrial tea estates. 17 At that point, UTZ Certified had very low consumer recognition and was therefore ruled out. Rainforest Alliance Certified, which ensures compliance with Sustainable Agriculture Network standards, turned out to be the best match.

Unilever sustainable tea: Leapfrogging to mainstream — 18 Unilever sustainable tea: Leapfrogging to mainstream — 19 In particular, it was a hard battle for the Leijnse summarized the rationality for taking In May 2007, following a preliminary review On the ground, the main challenge was to Lipton team to internally sell the crucial the mainstreaming approach: of Lipton’s supply chain carried out by the motivate suppliers to change their processes. point of the mainstreaming strategy: paying “We saw the possibility of transforming company in conjunction with the Rainforest Edward Millard, sustainable landscapes a premium to growers for sustainable tea the entire industry and guarding it against Alliance, Unilever went public with its targets: director at the Rainforest Alliance, explained: while keeping the retail price unchanged. commoditization. We were formidably • By 2010, the tea in all Unilever mainstream “We needed to persuade tea growers to At that time, they expected to be paying placed to win; both as a first mover, teabags in Western Europe (Lipton, change the way they farmed. We needed around €2 million in premiums annually by and as the catalyst of an industry-wide PG Tips, Lyons) would be sourced from to motivate growers and convince them 2010 and €5 million by 2015. If consumers transformation.” Rainforest Alliance CertifiedTM farms. that this was the right thing to do. To do were not ready to pay more for sustainable • By 2015, the tea in all Lipton teabags sold this, working with a market leader such tea, did it mean that the additional cost Once the team got the buy-in from globally would be sourced from Rainforest as Unilever was a substantial advantage. would need to be absorbed in the margin, Unilever’s top executives, PG Tips and Alliance CertifiedTM farms. Unilever’s commitment to fully convert to thus reducing profitability? The solution lay Lyons were also included in the certification certified sustainable tea sent a powerful on the income side, since additional costs in initiative. In addition, to boost mainstreaming 3.2 Hitting the Road signal to the supply chain that certification the supply chain could be recovered through impact and counter critics of the actual was now a market reality.” growth in market share that would be a direct reach of Rainforest Alliance certification, Supply-Chain Roll-Out result of Lipton’s move to a sustainable brand. Unilever decided to roll out the scheme Once the team had won sufficient internal Unilever wanted to bring its existing at a level above the minimum requirements buy-in, a roll-out strategy was put in place. suppliers on the certification journey since Unilever top executives also questioned the for using the Rainforest Alliance “green frog” Unilever hit the road, working concurrently switching suppliers risked altering the taste possibility of similar opportunities for market seal. It would only start using the seal if a on supply-chain roll-out – making sure that of tea, 21 which in turn would not please growth being captured by competitors. minimum of 50% of the tea originated from certified tea was available and that key consumers. Also, it would be unfair to break Because the Rainforest Alliance certified Rainforest Alliance Certified farms, instead suppliers became certified – and on marketing long-lasting sourcing relationships with its farms and not buyers, once the tea from of the 30% entry point. 20 roll-out. Targets were communicated existing suppliers. Unilever and the Rainforest certified farms was available on the market, internally at the company, and externally with Alliance thus worked very closely on the it could be sold to other companies. In other suppliers, consumers and key stakeholders. development of a plan in which the existing words, the Rainforest Alliance would not Setting the right priorities and translating suppliers were prioritized. Selection criteria give exclusivity to Unilever. Thus, if other them into tangible short-term targets was were based on a combination of work major tea brands switched to Rainforest crucial to enable delivery of Unilever’s already done on sustainability by suppliers Alliance certified tea it would no longer be public commitments. and Unilever’s needs to supply specific a competitive advantage factor. markets. Birch explained: The first step of supply-chain roll-out was to “Some suppliers had already invested a lot However, the Lipton team was convinced of Unilever chose to be innovative by converting work with the Rainforest Alliance to interpret of time and effort on sustainability. It was the positive economic impacts for Unilever the whole brand, rather than opting for the the SAN standard for tea and tea-producing relatively straightforward for them to get if the entire industry were to convert to more usual introduction of variant brands. countries. The Rainforest Alliance and other certified. We were sure that they would certified tea. If a significant share of both As planned, the premium was paid to the members of the SAN had little experience pass the audit, as they already had good tea producers and buyers around the world tea producers without being transferred with tea before the partnership with Unilever, practices in place. Other suppliers had switched to certified sustainable tea, prices to consumers. The tough timeframe of three and while the SAN standard is applicable significant work yet to do and needed would inevitably increase across the board. years for the conversion of all tea sold in to all crops, local indicators needed to be to invest in improvements on the ground With prices moving upward, the historical Western Europe meant that the roll-out had developed to adjust the standard for tea – buying new equipment and upgrading trend of commoditization of tea would be to be highly accelerated. Instead of taking based on field observations in Kenya. facilities – before they could attempt to get reverted, allowing retail prices to gradually the traditional approach of testing through certified. We also looked at our own needs. rise. Because Unilever had the largest global pilot projects, Unilever decided to leapfrog But in order for the actual certification We knew that we wanted to communicate market share, it would be able to capture to mainstream. process to start, the Rainforest Alliance and in certain markets; we knew how much tea the lion’s part of the income growth. the SAN had to build capacity on the ground. we needed in order to supply them; and we The company would gain a lot from an end At that time, the organization had a strong knew where the tea we used in the blend to the downward spiral of prices and quality presence in Latin America but very little sold in those markets came from.” variance on the global tea market. experience in Africa and Asia. Since it usually worked in partnership with other NGOs, considerable effort had to be put into finding local partners that could build knowledge around the standards and deliver training programs to suppliers. In addition, audit teams needed to be put together and trained.

Unilever sustainable tea: Leapfrogging to mainstream — 20 Unilever sustainable tea: Leapfrogging to mainstream — 21 From this process, Kenya – the world’s The scale of the challenge was significantly Marketing Roll-Out Australia, a relatively small market for Lipton biggest exporter of black tea – was the higher in Sri Lanka, where the government The strategy for the marketing roll-out was with business concentrated in the “ready-to- natural place to start and certification was was not in favor of certification, 22 and China, to focus on key markets and convert them drink” segment – Lipton Ice Tea – and Japan, relatively straightforward since Lipton owned where there were major issues regarding fully before moving on. This strategy was where also accounted for a signifi­cant large tea plantations in Kericho, where pesticides and labor. guided by the limited availability of certified share of Lipton’s sales, launching was carried sustainability initiatives had been carried tea in the first years and by the existence out very comprehensively, following the lines out for more than ten years. There were Unilever decided to go for the “low hanging of differing levels of consumer interest adopted in the UK market. In June 2009, both also a few large suppliers that already had fruits” first to accelerate the availability in sustainability in specific markets. markets had successfully been converted. achieved high standards and could be of certified tea. By mid-2010, 69 estates/ Leijnse recalled: certified relatively easily. The most challenging operations had been certified in six countries, “Marketing and supply-chain roll-out was In the US, the launch took place more part of the roll-out in Kenya was reaching covering more than 95,000 hectares and deployed concurrently and they completely gradually. Lipton’s market in the US was the large base of half-a-million smallholders involving more than 170,000 workers. rely upon each other, because we could not spread through different product ranges, organized around the Kenya Tea Development communicate with consumers without having meaning that tea originated from many Agency (KTDA), which were ranked as high enough certified tea to supply the market. different sources and supply represented priority in the supply-chain roll-out plan. Once we started with a market, we wanted a bigger challenge. The conversion of black Box 4. Harvesting results with to go all the way. We set up clear targets tea was done quickly as in other markets, Large estate suppliers in India were the smallholders in Kenya such as: We are starting now with the but specialties like Assam and Darjeeling second priority since Lipton had suppliers Unilever and the Rainforest Alliance Western European market and within three required more time to be converted. there who had already done some work in worked closely with a large partnership years it will be fully certified. In practice, it sustainability, although they were not as to reach smallholders in Kenya. The meant that all the available certified tea in the advanced as in Kenya. The Lipton team did Kenya Tea Development Agency (KTDA) first years was channeled to this key market, not expect to have difficulty in convincing and other institutions worked on the instead of being spread out across the globe.” Box 5. Adapting roll-out to market large Indian suppliers to get certified and put ground training and supporting small­ particularities in the additional work required to achieve holders with the implementation of The UK was an example of a very straight­ The French market was a challenging the standards. Also, there was a strong legal agricultural and management practices forward marketing roll-out. The market was case, since particularities of the market framework in place regulating working required for certification. Lipton’s concentrated on one product/brand; black affected not only the roll-out of certified conditions and employee benefits on tea commitment to procure its tea exclusively tea, PG Tips. The quantities of tea needed to flavored tea and specialties but also of plantations; and although regulation was from Rainforest Alliance Certified farms supply the market were significant, but once black tea. French consumers of black not well enforced, plantations that did follow by 2015, together with the premium price the company had identified which producers tea were relatively older and very the law were automatically on a good footing. paid for certified tea, gave farmers needed to be certified, it all happened traditional, rejecting any kind of change a strong incentive to engage in the relatively quickly. in the pack. Lipton had concerns that In producing countries where conditions certification process. if anything changed, sales would drop, for roll-out were more complex or where the Other European markets like France, Italy as had previously happened following supply base was more fragmented, a strategy By mid-2010, 36,000 smallholders were and Sweden required a different approach. design changes on the front of the was put in place to gradually bring suppliers certified. The certification led to benefits Because the Lipton portfolio covered different pack. Leijnse explained: into certification by 2015. In Summer 2010, such as a 5% to 15% increase in yield flavors and varieties of tea, supply and thus “The strategy we took in France was suppliers were certified in Tanzania, Malawi, through better agronomic practices, certification became more complex. In these to familiarize existing consumers before Argentina and . Others were being 40,000 native trees planted, adoption markets, a short-term shift from 0% to 100% putting the seal on the front of the pack. trained and were making their first steps of water conservation practices and as achieved in markets like the UK was less First we put the Rainforest Alliance toward introducing and keeping sustainability generalization of the use of personal feasible. The Rainforest Alliance Certified seal Certified seal on the interior of the criteria in their tea plantations in countries protective equipment. This was an did not appear on all products and ranges pack. Then we put it on the back. such as Zimbabwe, Burundi, Rwanda, Uganda, unprecedented achievement in sustain­ at the same time, and not immediately at So, consumers of Lipton black tea are Vietnam and Brazil. able agriculture and tea. A detailed case the fully certified level. These market being exposed to it and when it finally Smallholding suppliers of Lipton in India study of the roll-out of certification characteristics made the launch much more appears on the front of the pack, were also included in the gradual roll-out with smallholders in Kenya and complex as it was necessary to explain to they will already know about it, being phase and had started working toward Argentina is available at consumers why some products were certified reassured that the taste of the tea has certification in 2009. http://www.duurzamehandel.com/en/ while others were not yet. not changed, they will not be surprised.” idh-publications The initial strategy of focusing on the Western European market for the first three years was replaced by the keenness of Lipton brand teams in Japan, the US and Australia to accelerate the commercialization of certified tea in their markets.

Unilever sustainable tea: Leapfrogging to mainstream — 22 Unilever sustainable tea: Leapfrogging to mainstream — 23 3.3 Reaping Results in the Market Transforming a market Subsequently, decided to go On the supply-chain side the biggest From the beginning of the journey, Unilever for Rainforest Alliance certification, followed challenge was speed. Once the low hanging Creating Brand Value in Strategic Markets envisaged that Lipton’s conversion to certified by Twinings 23 with its Twinings Everyday fruits were harvested, implementation would Once certified tea was available in 2008, sustainable tea would help the integration of brand. In January 2010, 24 also went require more time and investment. Birch Unilever deployed its communication sustainable practices in the whole tea industry, public with its commitment to obtaining explained: campaign with consumers, linking through the creation of a significant demand Rainforest Alliance certification for the Tetley “Business does not operate on wishes; it sustainability with the brand promise for certified tea and by pushing other players brand globally. operates on plans and on putting resources “Lipton tea can do that.” The main message to move in the same direction. in place to deliver on plans. Farmers need communicated to customers was that drinking Although it was expected that other major to be trained within short deadlines in Africa, Lipton “helps people to lead a better , Back in 2006, Unilever had decided to drop brands would follow in Unilever’s steps, Asia and South America. Once trained, healthier and fitter,” but also “through making out of the (ETP), an the catalyzer effect was faster and broader they need to be able to convert practices production sustainable, lead to a better initiative created by the tea industry in 1997 to than the Rainforest Alliance had envisaged. and structures at a very accelerated pace. life for farmers and a better environment.” work on a pre-competitive basis on supply- Tallo estimated that by the end of 2011, 70% The Rainforest Alliance need to build audit chain issues, with a focus on labor conditions of the volume of the tea sold by UK retailers capacity for certification in countries it had The campaign used ads in diverse media, through monitoring and self-assessment. would be Rainforest Alliance Certified™. never worked in before. The speed required dedicated websites and a special advertising According to Vis, Unilever’s decision was She also estimated that by 2016, Unilever, is a challenge for the Rainforest Alliance presentation hosted at the National motivated by the resistance of other players Tetley and other mainstream brands would, in terms of capability growth. And it is a Geographic© website. It was run for PG Tips in adopting broader sustainability criteria and in conjunction, convert 20% of the world’s challenge for Unilever in terms of managing in the UK and for Lipton in Italy, Norway, going beyond self-assessment. tea producers to certified sustainable tea. expectations. We have ambitious targets to Sweden, Switzerland, Australia and the US. deliver and we are measuring how quickly Rainforest Alliance certification provided A robust market transformation process took we are getting close to that conversion Certified sustainable tea proved to be an Unilever with a third-party independent place following Unilever’s pioneering move. point. My bosses, and my bosses’ bosses, effective tool in consumer communication endorsement of sustainability efforts in a way all expect that we will deliver on time, but and a driver of market growth. that an industry-led organization, such as the 3.4 Challenges Ahead we need to be realistic that we are relying Leijnse explained: ETP, could not. Once Lipton, PG Tips and Lyons heavily on a third party to make it happen.” “Sustainability has proved to be a major certified tea started to appear on shelves in Going beyond the low-hanging fruits creator of value for Lipton. Our expectations Western Europe, Japan, North America and By summer 2010, Unilever had achieved its Entering new producing countries where of market share growth have been surpassed, Australia, a snowball effect took place. certification target for the Western European there was no track record would be as demonstrated by market research data. market and was ahead of scale for its 2015 increasingly difficult, as it would be more In countries where the link between the In August 2009, the ETP reviewed its position global target, but challenges remained. challenging to convert producers without brand and certified sustainable tea could regarding certification and announced a new prior experience of sustainable practices. be done in a straightforward way, sales collaboration with the Rainforest Alliance On the marketing side, the challenge was and market share went up – during and certification program to build capacity within to reach other countries where consumer Certifying tea in Sri Lanka and Vietnam following – the campaign period. Market the tea industry and streamline the certification interest in sustainability issues was not at the would still be a challenge. However, as of research also showed that certified tea had process for tea producers. Tallo explained: same level as in Western Europe. Extending mid-2010 there had been some mindset an enormous appeal to consumers and that “Engaging the ETP into recognizing third- to some of the biggest tea markets in the changes. Leijnse explained: in places like Italy, it was attracting younger party certification schemes was a very world such as India, Russia, Turkey and “I believe that since mid 2009 these consumers.” effective way of facilitating our work. Saudi Arabia would not be trivial. The Lipton governments are seeing the impact We jointly developed a program to train team expected higher costs related to of certification. They know that we are Communicating and advertising on producers on how to use ETP monitoring awareness-building and launching advertising the world’s biggest tea company and we certification also had positive indirect impacts. and self assess­ment tools as a key step in these countries. are committed to certified tea. They know Mercedes Tallo, director of Sustainable Value should they decide to pursue Rainforest that Tetley, the second largest, is also Chains at the Rainforest Alliance, explained: Alliance certification. Those producers committed. They see where the wind is “Unilever learned that by engaging in a supplying ETP member companies that were blowing. They are starting discussions, dialogue with consumers on sustainability already Rainforest Alliance Certified™ would they have already seen enough proof that and certification they could open the door to be recognized as complying with the ETP certification is unavoidable.” very powerful messages and imagery which requirements. This agreement was beneficial they were not able to communicate before.” for tea producers, since it reduced the burden of going through the different and cumulative processes of audit and assessment. This unblocked the availability of certified sustain­ able tea for the rest of the industry and we saw other main­stream brands committing to Rainforest Alliance certification.”

Unilever sustainable tea: Leapfrogging to mainstream — 24 Unilever sustainable tea: Leapfrogging to mainstream — 25 Another challenge Unilever faced was the Making Sustainable Tea Available in the On the one hand, pushing tea sustainability issue of casual and temporary workers in tea Indian Domestic Market from the demand side is not straightforward Box 6. Mainstreaming sustainable tea plantations. In May 2009, two of Europe’s The domestic market in India is particularly in India, since it is difficult to demonstrate in the Indian domestic market. largest trade unions – the Dutch FNV Bond­ challenging and of high importance to sustainability in a non-branded, commodity- By mid-2010, Unilever was considering genoten and the UK-based Unite the Union Unilever since it corresponds to roughly a like, market. In addition, market research the following alternatives for main­ – went public with a declaration that Rainforest quarter of Unilever’s tea business. Unilever shows that consumers of branded-tea in India streaming sustainable tea in the Indian Alliance certification did not necessarily (Hindustan Lever) tea sales in India are made had little interest in how the tea is produced. domestic market: mean that suppliers to Unilever comply fully under the brand Brooke Bond. • Extend Rainforest Alliance certification with the social component of the certification On the other hand, pushing tea sustainability to the Brooke Bond brand following requirements, since permanent workers were India is the biggest producer of black tea in from the supply side is also challenging. the example of Lipton and PG Tips. being replaced by casual, temporary workers the world, and the domestic market accounts Producers does not perceive sustainability • Work with verified sustainable tea in who had fewer rights. for 80% of its production. The domestic benefits, such as improved yields, safety of the Indian domestic market, as a step market in India is characterized by the products and benefits to local communities, in the journey for certification. However, the major challenge facing Unilever predominance of loose, non-branded tea to be important. Verified sustainable tea means was reaching large markets in countries where (60% of consumption). India is the fastest documented sustainability criteria tea was mainly sourced internally, such as growing market for tea in the world. Birch summarized the challenge: that would move tea producers from India, China and Turkey, where the market “The majority of producers supplying their current practices towards more was dominated by loose leaf tea and local The tea industry in India faces considerable the domestic market in India do not see sustainable practices. It would be brands, and it was very early days for local sustainability challenges. In early 2005, the the relevance of sustainable practices. based on measurable criteria to be producers in terms of sustainability issues. big players in the tea market withdrew from Resistance to certification is particularly agreed across a group of stake­ primary production and concentrated their high, as standards conflict with some holders, which will compose a national businesses on blending, packaging and current agricultural practices, such as – or regional - standard (they do not marketing tea, where margins were higher. the use of Paraquat. 25 The challenge that necessarily need to be the same Between 2005 and 2009, the profitability we now face is how to work with these internationally recognized criteria of plantations was extremely low as prices producers. Ultimately, we aim at making which is present in the Rainforest continued to fall and, in many cases, did not sustainability the standard in the tea Alliance certification). meet costs that had been pushed up by industry. For some of our brands, such • Work with suppliers and assess their a combination of mismanagement, age and as Lipton, PG Tips and Lyons, certification level of compliance by measuring decreasing productivity of the tea bushes, is already a brand promise and therefore, their practices against the Unilever high overhead costs and poor agricultural not negotiable. But Unilever did not make Sustainable Agriculture Code. practices. Tea plantations in India are usually external commitments that require certifi­ situated in remote and uninhabited areas. cation for all its brands. Unilever wants to be sure that all its tea is sourced from sustain­ Workers, mostly migrants, are often provided able sources, but no decision has been made with housing on the tea estate, along with as to whether it should all be certified.” facilities for shops, services, recreation and culture. However, during the years of crisis, companies minimized labor and infra­structure costs. Small tea farms usually employs temporary and casual workers, whose work and living conditions are considerably worse than their plantation counterparts. Energy efficiency is generally low and the use of firewood is a driver of deforestation. Tea estates usually use pesticides intensively; very few turn to integrated pest management.

Unilever sustainable tea: Leapfrogging to mainstream — 26 Unilever sustainable tea: Leapfrogging to mainstream — 27 References

1 This background description of the tea 12 The Center for Corporate Sustainability 17 In 2006, the total sales of all Fairtrade 22 The government in Sri Lanka had concerns value-chain is based on inputs from Management at IMD has gathered products, globally, amount to €750 million. that certification would give Western NGOs Reenen M. van; Panhuysen S.; Weiligmann evidence, through extensive research, At that time, Lipton’s turnover was more and multinationals the power to set B. (2010) Tea Barometer 2010, Tropical on the key role played by the existence of than €1billion. What would it mean to standards and control the tea industry, Commodity Coalition. a solid business case behind sustainability Fairtrade if Lipton became 50% of the significantly reducing the reach of public initiatives of corporations. Results of the Fairtrade business? Certifying industrial tea policies on a strategic crop for the country. 2 Reenen M. van; Panhuysen S.; Weiligmann research are presented in Ionescu-Somers, estates would represent a fundamental B. (2010) Tea Barometer 2010, Tropical Aileen and Steger, Ulrich. Business Logic change in Fairtrade’s mission. Also, 23 Twinings started the Rainforest Alliance Commodity Coalition. Page 5. for Sustainability: A Food and Beverage although the Fairtrade logo was well journey in January 2010 with 30% content. Industry Perspective. Palgrave McMillan, known, it had a very strong message that Its commitment was to have its Twinings 3 FAO Report of the 19th session of the 2008, and Steger, Ulrich. The Business could overshadow Lipton’s message. Everyday brand with 100% of the tea to be intergovernmental group on tea. of Sustainability: Building industry cases sourced from Rainforest Alliance Certified New Delhi, India, 12–14 May 2010. for corporate sustainability. Palgrave 18 SAN Standards for Sustainable Agriculture gardens by 2015. McMillan, 2004. can be accessed at http://www.rainforest- 4 Rainforest Alliance. alliance.org/agriculture/documents/ 24 Tetley, the world’s second largest tea http://www.rainforest-alliance.org/ 13 KTDA is the second largest exporter sust_ag_standard_july2010.pdf. company, committed to have all branded agriculture.cfm?id=tea of black tea in the world. The farmer- tea bags and loose tea for black, green controlled company representing over 19 For a more detailed description of the and red tea certified in UK and Canada 5 Although deforestation is an issue at the half a million smallholders provides reasons why Rainforest Alliance by 2011 and US, Australia and Europe local level, tea plantation is not as big as management services for the production, certification better matched Lipton’s starting in 2012. driver of tropical deforestation as other processing and marketing of black tea. criteria, refer to Sustainable Food Lab, commodities such as and soya. Innovations for Healthy Value Chains, 25 Paraquat, one of the most widely used 14 SAI Platform is an organization created 2008 (pages 28–30). herbicides to control broad-leaved weeds 6 Source: IDH Monitoring Protocol 2010-2015: by the food industry to communicate and grasses, is explicitly prohibited for Mainstreaming global supply chain and to actively support the development 20 Companies can use the Rainforest use in all plantations and farms that are sustainability. Dutch Sustainable Trade of sustainable agriculture involving Alliance Certified “frog” seal on the front Rainforest Alliance Certified. Initiative, 2009, page 9. stakeholders of the food chain. It was of a package if at least 30% of the raw created in 2002 by Unilever, and material within it originates from 7 http://www.sustainability-indexes.com. Nestlé. http://www.saiplatform.org Rainforest Alliance Certified™ farms. Critics say that the actual reach of the 8 Unilever. Annual Report and Accounts 15 For detailed information on Unilever’s key certifying process is thin, since within a 2009. role in the creation and development of package containing 10 units of a certified the MSC, refer to Nick, A; Salzmann, O; product only 3 units would be grown 9 Brand Imprint is a proprietary planning Ionescu-Somers, A; Steger, U. according to sustainable practices. tool developed by Unilever to fuel brand Transforming the Global Fishing Industry: The Rainforest Alliance argue that 30% innovation by integrating social, economic The Marine Stewardship Council at Full is just an entry point – allowed in order to and environmental considerations. Sail? IMD case no. IMD-2-0083, 2006. recognize the need for companies to build Information on the Brand Imprint process certification over time, as supply capacity is available at http://www.unilever.com/ 16 A shadow brand is a type of brand increases – and that companies have to sustainability/strategy/vision/. architecture used to endorse, or leverage, commit to scaling up well above 30%. a brand (or a product/service) through 10 Available at http://www.unilever.com/ association with another known 21 As explained in the background section, images/sd_Unilever_Sustainable_ organization, or brand, without overstating each tea product/range uses a complex Agriculture_Code_2010_ the relationship. It is a special case of and unique blend of different origins tcm13-216557.pdf. endorsement brand with minimized and qualities of tea. Thus, changing the association and contamination. A well- composition of a tea, in terms of its origins 11 Unilever Sustainable Development known example is Disney’s relationship and estates, would mean changing its flavor Overview 2009, page 18. with Touchstone Pictures. and quality.

Unilever sustainable tea: Leapfrogging to mainstream — 28 Unilever sustainable tea: Leapfrogging to mainstream — 29 Authors Acknowledgements

Dr Tania Braga ([email protected]) This case was developed with inputs from is the Research Associate/Project Manager the staff of both Unilever and the Rainforest for the Center for Corporate Sustainability Alliance. We gratefully acknowledge the Management at IMD. She combines a solid contribution of: academic background in economics with Michiel Leijnse, Jan-Kees Vis, successful hands-on experience in project Mark Birch and Jagjeet Kandal, Unilever management. She has co-authored several and of cases studies and articles around process Edward Millard, Mercedes Tallo and and product innovations for sustainability Marc Montsarrat, the Rainforest Alliance. management. Many thanks to: Dr Aileen Ionescu-Somers Dave Boselie, Wageningen University, LEI, ([email protected]) directs the Center Marina Piatto, Imaflora for Corporate Sustainability Management at Peter Erik Ywema and Emeline Fellus, IMD, an applied research and learning center SAI Platform focused on helping companies to integrate Barrett Brown and Jolande Valkenburg, IDH social and environmental issues into their corporate strategy. She is an expert on Publisher corporate sustainability management and The Dutch Sustainable Trade Initiative (IDH). has coordinated several large scale research Copyright © 2010 by IMD (www.imd.ch), projects on, for example, the business logic IDH (www.dutchsustainabletrade.com) for corporate sustainability in the food and and SAI Platform (www.saiplatform.org). beverage industry. Design Dr Ralf W. Seifert is Professor of Operations Dietwee, ontwerp en communicatie Management at IMD and holds a tenured (www.dietwee.nl) professorship at the Swiss Federal Institute of Technology (EPFL). His primary research and Reproduction teaching relate to operations management, This publication may be reproduced in whole supply chain management and technology or in part and in any form for educational network management. Professor Seifert or non-profit services without special directs the Mastering Technology Enterprise permission from the copyright holder, (MTE) program at IMD and the Chair of provided acknowledgement of the source Technology and Operations Management is made. IDH would appreciate receiving (TOM) at EPFL. a copy of any publication that uses this publication as a source.

Unilever sustainable tea: Leapfrogging to mainstream — 30