Bringing Good Practice to Scale UTZ Certified Annual Report 2013 Table of Contents

Bringing good practice to scale UTZ Certified Annual Report 2013 Table of Contents

3 Introduction 4 Message from the UTZ team 6 Highlights of 2013 8 Monitoring & Evaluation: Proving and improving impact 14 Field Development: Reaching out to farmers 20 Standards & Certification: Enhancing the rigor and relevance of the UTZ Code 22 Traceability: Tracing UTZ Certified, RSPO and BCI crops 24 Market Development: Creating sustainable markets 30 Governance 32 Global Presence 34 General Notes on the Accountings 35 Comments on the 2013 Financial Statements 36 Financial Accounts 2013 38 Auditor’s report 39 Funders INTRODUCTION UTZ CERTIFIED Better Farming. Better Future.

UTZ Certified was established over a decade ago to make UTZ REQUIRES UTZ CONTRIBUTES TO sustainable farming the norm. Since then we have achieved a lot and seen phenomenal growth, but our core purpose remains the same. We stand for sustainable farming and better opportunities for farmers, their families and our planet. BETTER FARMING BETTER CROP METHODS

The UTZ program enables farmers to learn better farming methods, improve working conditions and take better care of BETTER INCOME their children and the environment. Through the UTZ program BETTER WORKING CONDITIONS farmers grow better crops and generate more income while safeguarding the environment and securing the earth’s natural BETTER FARMING BETTER FUTURE resources, now and in the future.

BETTER CARE BETTER FOR NATURE Coffee, cocoa and tea products do not get the UTZ label easily. ENVIRONMENT Our strict requirements on good agricultural practices and management, safe and healthy working conditions, no child BETTER CARE FOR labor and protection of the environment are closely monitored NEXT GENERATIONS by independent third parties. UTZ tracks and traces the coffee, cocoa and tea from the farm to the store. This way, consumers can be sure that their trusted product was grown, harvested and processed sustainably. And that tastes a lot better.

Annual Report 2013 - 3 Message from the UTZ Team 2013 has been a year of growth and consolidation for our program. With more farmers and clients joining our program, we are now coming close to a point where sustainability is seen as an essential part of production and sourcing in the coffee, tea and cocoa sectors. At the same time a growing volume of evidence is demonstrating the positive impact of UTZ.

Bringing good practice Demonstrating and improving impact to scale With growth comes greater impact. One of the most We are proud to report important achievements in 2013 was the work done to significant growth this year in publish the UTZ Certified Impact Report in January 2014. both the supply and demand of Bringing together the results of 24 independent studies, UTZ certified products. Cocoa it shows the positive change that UTZ is creating for had the highest growth, with farmers. The findings reveal the impact the UTZ program supply increasing by almost is having, with farmers tending to achieve higher yields of 30%. The supply of UTZ certified cocoa is almost as large as better crops and being able to improve the quality of their UTZ certified coffee and cocoa has now surpassed coffee lives as well as those of their families and their workers. For in terms of demand. We saw continued support from major example, Kenyan tea farmers were able to improve their global brands as well as new partners joining the program, yields by 11% and Vietnamese coffee farmers found that increasing the volumes of UTZ certified products on store they were able to market their coffee more easily, thanks shelves around the world. to higher-quality crops. The report also shows challenges, which we seize as learning opportunities. Certification once meant niche products for niche consumers. Today that picture has completely changed. According to We will continue to measure our impact through further the IISD’s State of Sustainability Initiatives Review (2014), studies over the coming years to help us strengthen and of all cocoa produced in the world, 13% is UTZ certified and improve what we do. together all certification schemes account for 22% of global production. In coffee, certified production is now at 21%, Our work to update and strengthen our Code of Conduct with UTZ contributing 9%. Together, we are approaching the continued this year, as we prepare to relaunch it in 2014. This tipping point where sustainable farming is becoming the rule process has involved wide consultation with our stakeholders rather than the exception. As more major brands and retailers and we are confident that the new Code will help us achieve commit to sustainable sourcing, this process will accelerate. even more for farmers in the years ahead.

4 - UTZ Certified Innovation and partnership partners, the farmers and farmer groups, traders, brand Our continued success and growth enable us to look beyond manufacturers, retailers, governments and NGOs across the our core activities at new and innovative ways of creating globe who, like us, are committed to progress in sustainable positive change on some of the most challenging issues for farming. It is through our partnerships with industry on sustainable farming. topics such as climate change, with civil society on, for example, child labor and with fellow certification schemes Climate change is one such issue, with agricultural production on living wage that we can create the momentum needed to at risk from the impacts of a changing climate while also bring about real change. We look forward to continuing to contributing to growing volumes of greenhouse gas emissions work with you in 2014. in the earth’s atmosphere. The results from an exciting UTZ pilot project were gathered in November, demonstrating a new Next year will see a focus on the quality and consistency of our way that coffee producers can reduce emissions, conserve standards and assurance processes. While the UTZ Certified water and improve their own health and livelihoods. These standard provides a clear and trusted definition for sustainable results are widely available for UTZ partners and producers farming, there will always be local differences in how it is to learn from and possibly adopt in their own work. We have implemented and the effort needed to monitor compliance. launched a second project in Vietnam, looking at further ways coffee producers can cut emissions and adapt to the effects During 2014 particular attention will be given to: of climate change. yy UTZ presence in producing countries through a network of We are also looking at new ways we can collaborate to extend representatives, consultants and partner organizations. the reach of our work. One example is our collaboration with yy Ensuring the quality of audits and certification bodies, the Brazilian certification scheme Certifica Minas Café, which through close monitoring and intensive training. will support many more small- and mid-size coffee producers in yy Monitoring and evaluation of our program through the Brazilian state of Minas Gerais to access the UTZ program. systematized data collection and in-depth impact studies. yy Finalizing and implementing the new UTZ standards: We are pleased to report that we began the process of through communication and training for our network. extending UTZ standards to a new crop – hazelnuts. We plan to test our draft hazelnut module during the 2014 harvest which will allow us to work towards the first UTZ certified hazelnuts following the 2015 harvest.

Of course, none of our achievements in 2013 could have Han de Groot happened without the support of our funders and our Executive Director

Annual Report 2013 - 5 Highlights of 2013 164,721 Coffee smllholders were reched b the UTZ prorm in 2013 in 2013 845 Coffee frms or enouh coffee ws esttes were In 2013, enouh coco UTZ certified ws sold s UTZ certified to mke over UTZ certified to mke over 7.3 billion milk-chocolte brs 88 of 100 rms. billion You cn drink cup cups of of UTZ certified te in sustinbl 29countries sourced of22% coco produced The te cn oriinte from coffee lobll is certified. More thn hlf of this different is UTZ certified. 10countries

6 - UTZ Certified The public consulttion rounds for our Code revision received input from The sles of UTZ diﬀerent certified coco 220 stkeholders More thn incresed b 1.5 million metric tons of RSPO certified plm oil were trced 149% in the eTrce in 2013 99% trcebilit s stem of UTZ coco frmers re smllholders

In 2013, enouh 350,786 UTZ certified te ws sold to brew 21%of coﬀee produced workers more thn lobll is certified. (includin sesonl Almost hlf of this workers) in our 1.3 billion is UTZ certified. coﬀee prorm. cups of te

Annual Report 2013 - 7 Monitoring & Evaluation: Proving and improving impact By investing in monitoring and evaluation, UTZ aims to measure, understand and improve our impact, enabling us to assess progress in creating positive change for farmers, their communities and the environment. In 2013 we developed the first UTZ Certified Impact Report to give our partners, funders and other stakeholders information on the impact that UTZ is making.

Assessing our impact and research collaboration UTZ collaborates with local and international academic We finalized the development of the UTZ performance researchers to shed light on the role of voluntary standards indicators during 2013, to create a robust tool to assess the in addressing the most pressing sustainability issues for impact of UTZ Certified. To improve monitoring, we have the production, trade and consumption of the commodities integrated data collection for some indicators such as volumes covered by the UTZ Code. By working together with third and numbers of participating farmers (our level 1 indicators) into parties, we get a better insight into the progress made and the our audit and traceability systems. We ran training sessions challenges to address. open to all certification bodies on these new indicators, in line with the ISEAL Code of Good Practice for Assessing the Impacts One example from 2013 is our work with Utrecht University of Social and Environmental Standards (see ISEAL box). and Teri University (New Delhi, India), to support field researchers in a study comparing UTZ certified and non- Level 2 indicators (data on specific topics, such as climate certified tea estates in India. Students from Teri University change and productivity) are collected via case studies and collected and analyzed the data, which is significantly level 3 indicators (in-depth data on farm level over a longer improving our knowledge in this area. period of time) via impact studies. In 2013, we commissioned studies among tea farmers in Kenya and Malawi, coffee Living wage – a good example of collaboration farmers in Vietnam and Colombia and cocoa farmers in Workers should be able to earn a wage that enables them to Ghana and Côte d’Ivoire. The completed studies were reviewed meet their basic needs and those of their families. However, by the UTZ management and published on our website. The for many workers around the world, minimum wages as set by studies have shown, among other things, that UTZ farmers governments do not ensure a living wage. That is why UTZ has achieve higher yields and better crops. The data collected by joined forces with five other certification programs to design UTZ and our partners is enabling us to improve understanding and test a common methodology to estimate living wage levels of progress in the field. for the areas in which we work. In addition to UTZ Certified,

8 - UTZ Certified “It was interesting for Utrecht University to partner with UTZ because it gave us both the opportunity to exchange, match, fine-tune, synthesize and implement our views and experiences in analysing the impacts of private certification in developing countries.”

Dr W.J.V. Vermeulen Associate Professor Sustainable Production & Consumption at Utrecht University, who conducted research on UTZ certified tea farms in India in collaboration with TERI University, New Delhi

Fairtrade International, Forest Stewardship Council (FSC), GoodWeave, Sustainable Agriculture Network/Rainforest Alliance (SAN/RA) and Social Accountability International (SAI) are involved. It is encouraging to see such diverse certification organizations making a long-term agreement to work closely together, aiming to improve workers’ conditions, including wage levels, in the farms and supply chains participating in our certification systems and beyond. About ISEAL The ISEAL Alliance is a global membership association whose mission is to strengthen sustainability standards systems for the benefit of people and the environment. As a member, UTZ meets the ISEAL Codes of Good Practice.

In 2013 UTZ Certified took the final steps towards full compliance with the ISEAL Impacts Code. A description of our M&E system (‘M&E system report’), the intended change we are working to create (our ‘M&E framework’) and a list of our indicators are now publically available on the UTZ website (see our M&E webpage). We will undergo an independent evaluation to show full compliance at the beginning of 2014.

Communicating our impact The Impact Report that was published in early 2014 is based on the findings of 24 independent studies carried out in Latin America, Africa and Asia. Researchers looked at the impact of UTZ certification and certification in general on farming practices, and on the lives of farmers, workers and their families. Key findings from the illiterate farmers and investigating opportunities to reduce UTZ Certified Impact Report costs by, for example, combining audits. The UTZ Certified Impact Report indicated that higher yields and better-quality crops are the result of The full Impact Report can be found on the Media Center implementing good agricultural practices on UTZ certified of the UTZ website. farms. The impact of training on the UTZ Code of Conduct is significant in helping farmers to improve their % diﬀerence in yield between UTZ certified and non-certified coﬀee farmers in Colombia knowledge and adopt professional farming practices such as record keeping and the efficient use of fertilizer and 200% 169.1% pesticides. As a result, farmers are often able to sell their 180% crops at a better price. 160% 140% Other benefits include: improved access to sanitation 120% 100% facilities and clean drinking water; greater use of personal 76.1% 80% protective equipment; and higher school attendance. 51.9% 60% 40% The research also illustrates challenges that we are 20% working to address such as illiteracy among farmers and 0% Year 1 Year 2 Year 4 lack of access to finance. We are working to tackle these, Based on the study “Figures on UTZ performance in Colombia” for example through alternative ways of record keeping for

Perception of quality changes and attribution

100% 80% 51% 60% 41% 40% 19% 20%

% of farmers who farmers % of changes quality noted 0% Perceived improvement Changes in farming practices Changes in processing in quality due to certification due to certification

Based on the study “Vietnam Coﬀee: A COSA survey of UTZ certified farms”

Annual Report 2013 - 11 EXTERNAL FACTORS THE UTZ THEORY OF CHANGE

UTZUTZ RREEQQUUIIRREESS UTZUTZ CONTRIBUTESCONTRIBUTES TOTO

BETTER FARMING BETTER CROP METHODS PROFESSIONAL TRANSPARENT GROUP GOOD AGRICULTURAL HEALTHY SOIL OPTIMAL OPTIMAL FARM QUALITY MEETS BETTER ACCESS FARM MANAGEMENT MANAGEMENT PRACTICES YIELD EFFICIENCY MARKET DEMAND TO SERVICES

! INCREASED BETTER WORKING PROFITABILITY AND BETTER INCOME CONDITIONS SAFE WORKING TRAINING WORKERS RIGHTS SKILLED & MOTIVATED LIVING WAGE DECENT STANDARD PRODUCTIVITY CONDITIONS LABOR OF LIVING FARM LEVEL FARM

BETTER CARE FOR NATURE BETTER PROTECTION OF EFFICIENT REDUCED WASTE EFFICIENT BIODIVERSITY IS NATURAL RESOURCES REDUCED GHG ENVIRONMENT NATURAL HABITAT WATER USE AND POLLUTION ENERGY USE BETTER PROTECTED ARE SAFEGUARDED EMISSIONS

INCREASED SOCIAL, ENVIRONMENTAL AND ECONOMIC RESILIENCE

BETTER CARE NO CHILD HEALTHY AND SAFE ACCESS TO FOR NEXT CHILDREN GO BETTER HEALTH INVESTMENT IN LABOR LIVING CONDITIONS HEALTHCARE GENERATIONS TO SCHOOL BASIC SERVICES

STRATEGIES DIRECT OUTPUTS EXPECTED OUTCOMES DESIRED IMPACT

UTZUTZ RREEQQUUIIRREESS UTZUTZ CONTRIBUTESCONTRIBUTES TOTO

INCREASED SOCIAL, ENVIRONMENTAL AND ECONOMIC RESILIENCE

BETTER CARE NO CHILD HEALTHY AND SAFE ACCESS TO FOR NEXT CHILDREN GO BETTER HEALTH INVESTMENT IN LABOR LIVING CONDITIONS HEALTHCARE GENERATIONS TO SCHOOL BASIC SERVICES

STRATEGIES DIRECT OUTPUTS EXPECTED OUTCOMES DESIRED IMPACT

More farmers effectively Field development Trainers, farmers and groups are trained implement good Sustainability of Enable farmers to become entrepreneurs Increased reach & Inclusiveness of the program UTZ standards are meaningful & practical agricultural practices the sector: and manage their farms Sustainable farming Standards and certification Audits are credible Effective implementation of the UTZ code profitably with respect for is the norm Make the improvements visible people and planet Sustainability claims are credible BETTER CROP BETTER INCOME Traceability Increased trust and transparency Industry invests in and rewards Connect parties in a transparent chain in the supply chain sustainable production SECTOR LEVEL Potential partners and the public are reached BETTER Sustainable products are visible/endorsed ENVIRONMENT Consumers can enjoy Market development in the market Tell the story & create demand Increased demand for UTZ certified products and trust the products they buy Field Development: Reaching out to farmers We aim to generate a growing and reliable supply of sustainable crops, working towards a world where sustainable farming is the norm. With our partners, we are reaching out to more farmers and providing access to the support they need to adopt good agricultural practices. Together we pioneer innovative approaches to create sustainable change in rural communities. In 2013, production of UTZ certified crops increased significantly. UTZ Certified Coffee 2009 2010 2011 2012 2013*

Certified volume of green coﬀee (metric tons) 365,972 394,003 476,903 715,648 726,591

Certified volume of green coﬀee (60 kilo bags) 6,099,525 6,566,717 7,948,377 11,927,467 12,109,850 Weighted average premium paid (US$cents/lb) 4.97 4.91 4.14 4.29 3.5

Number of producing countries 21 21 22 23 21

* Whereas in previous years we measured certified volumes from March 5th one year to March 4th the following year in order to include the last half of the main harvesting season, we have now switched to a calendar year approach (January 1st - December 31st).

Supporting farmers through training “To be certified means to be Training is essential to enable the hundreds of thousands constantly aligned with the of individual farmers that we work with to introduce good best practices for agriculture agricultural practices. In 2013, we explored ways to enhance and coffee production. It is also training capacity and increase the effectiveness of the UTZ recognition of the arduous daily train-the-trainer programs and training materials we provide. work of our teams in terms of We launched the UTZ Academy to bring cross-departmental sustainable and responsible expertise together to reach the next level of quality in this treatment of the products.” fundamental part of our program. Together with Hivos, Ricardo Pereira Gomes Almorim SECO, 4C Association and IDH, we also supported the General Director, São Carlos Coffee Farm development of SustainabilityXchange, an online platform Brazil that will enable producers to access training and resources on sustainable farming and to share experiences. It is being implemented by the International Trade Centre and several others and will be launched in 2014.

Working with Nucoffee, we launched the Caminho Sustentia In- itiative, a training and technical assistance program for farmers in the Minas Gerais and São Paulo states of Brazil. This will reach over 10,000 smallholders within five years, helping them to adopt good agricultural practices and improve efficiency.

Annual Report 2013 - 15 UTZ Certified 2010 2011 2012 2013* UTZ believes productivity, quality and efficiency are the Cocoa most important drivers of income improvement. In addition, Certified volume 70,228 212,690 534,614 691,490 premiums can constitute an added benefit or market incentive (metric tons) to farmers and groups. The premium entails an additional cash Number of 41,037 149,633 256,111 336,351 amount paid above the market price for a similar conventional smallholders (non-certified) product. UTZ Certified’s online traceability system (the Good Inside Portal) records the premiums of all Number of estates 2 4 9 40 sales from the Code of Conduct certificate holder to the first buyer. UTZ has no interference in the height of the premium. Number of producing countries 8 14 14 16 The UTZ Codes of Conduct require transparency on how the premium is spent. In 2013 the registered global average premium was 3.5 $c/lb for UTZ coffee, resulting in a total UTZ Certified 2010 2011 2012 2013* amount of 12.4 million euros (17.2 million dollars). For cocoa, the Tea registered average premium was €122 per metric ton, resulting Certified volume 17,280 48,142 64,053 58,901 in a total amount of over 36 million euros and for tea the (metric tons) registered weighted average premium was €48 per metric tons. Number of 1,124 23,450 30,669 9,000 smallholders Coffee prices in 2013: promoting economic Number of producing countries 3 7 9 9 resilience among farmers In 2013, coffee prices reached their lowest level since 2009, mainly as a result of oversupply. The strategy UTZ Certified 2010 2011 2012 2013* of the UTZ program rests on promoting economic Rooibos resilience by diversifying farmer incomes, improving Certified volume 135 990 1,079 1,078 good farm management and empowering farmers (metric tons) by enhancing their negotiation skills. In addition, UTZ Number of 0 0 88 0 seeks dialogue on the importance of the economic smallholders viability of UTZ farms with all players in the supply Number of chain and supports farmers in their negotiations on farms/estates 1 9 7 7 the UTZ premium. In this way, we aim to support profitability that is sustainable and focused on the * Whereas in previous years we measured certified volumes from March 5th one year to March 4th the following year in order to include long-term benefits for the farmers. the last half of the main harvesting season, we have now switched to a calendar year approach (January 1st - December 31st).

16 - UTZ Certified About Swisscontact Swisscontact is an an international development agency established by the Swiss private sector, with 30 years of global experience. In Indonesia, it runs the Extending our network large-scale Sustainable Cocoa Production Program Close relationships with farmer organizations and our other (SCPP) which is supported by IDH, the private sector, stakeholders in the field are key to the success of our program. SECO and the Indonesian government, amongst As UTZ grows to include more farmers in more countries, we others. Since we both recognize that sustainability in are expanding our network of field representatives to ensure the Indonesian cocoa sector cannot be accomplished we can provide the support that producers and our partners unless a broad range of stakeholders work together, we need. During 2013 we added new field representatives to our have made a commitment to exchanging information, teams in East and West Africa and Indonesia. experiences, capacity and lessons learned. UTZ Certified works in close collaboration with SCPP As we continue our long-standing cooperation with Solidaridad, to provide capacity building training to key SCPP we have also expanded the network of organizations we work staff and interested private sector partners on with in producing countries. In Latin America, for instance, UTZ’s sustainability standards, especially Internal we work with SNV. In West Africa the International Cocoa Management System (IMS) and Good Agricultural Initiative (ICI) is key in coordinating efforts to tackle child Practices (GAP). By the end of 2013, out of the 60,000 labor in cocoa production. In close cooperation with the target farmer 31,000 were trained in GAP and IMS and Ford Foundation and Douwe Egberts Foundation, we are 8,2000 of them were also trained in Good Nutrition working with Sandra Kruger & Associates on enabling rooibos Practices (GNP). The target for 2014 is to add about smallholders in South Africa and black tea smallholders in 15,000 new farmers all over the 6 provinces where we Zimbabwe and Malawi to become UTZ certified. In India work, plus expanding the GNP target to about 25,000 we collaborate with Prakruthi to train local producers and households. Furthermore in 2014 an agribusiness manufacturers of coffee on meeting all UTZ requirements financing facility will be started to provide access to regarding Chain of Custody, Code of Conduct and traceability. finance for the 7 cooperatives so far under the program. Also, in Indonesia we now work with Swisscontact.

Annual Report 2013 - 17 Fostering innovation Our work does not stop with implementation of our Code of Conduct. Working with our partners, we develop ways to tackle some of the most challenging social and environmental issues affecting farming. For example, in 2013 two innovation projects tested new approaches to reduce climate change impacts associated with coffee production.

yy Coffee Climate Care (C3) project This joint initiative with the DE Foundation will help farmers in Vietnam to adapt to the effects of climate change and to measure and reduce greenhouse gas emissions from coffee production. To launch the project we secured funding from the Deutsche Investitions- und Entwicklungsgesellschaft (DEG) and the German Ministry for Economic Cooperation and Development (BMZ). Findings from the pilot will be shared within UTZ to help us strengthen our work in the area of climate change mitigation and adaptation.

yy Energy from coffee waste Results from our Energy from Coffee Waste pilot projects in Nicaragua, Honduras and Guatemala were published in 2013. These showed that by adopting a new water treatment and reuse system, coffee producers can reduce water consumption by over half and turn waste methane from coffee production into a new energy source to run machinery and household stoves. Producers were also able to reduce pollution associated with wood-burning stoves. Manuals and Energy from Coffee Waste Project in Nicargua: Blandon family of Cooperativa training courses have been developed to help other farmers El Polo, participating in the project, and a bio-reactor at Cooperativa Hermandad install, run and maintain the equipment needed.

18 - UTZ Certified Christopher Cuello, Director of Strategic Initiatives for Mars Chocolate North America, traveled to Côte d’Ivoire in October 2013, where our UTZ representative showed him how cocoa farmers live and work. His blog can be found at www.utzcertified.wordpress.com

Expanding UTZ Certified to new crops Hazelnuts are a tree crop grown around the world, but “Rather than just donating money to the region, UTZ primarily in Turkey. The hazelnut industry has been associated Certified invests in farmers. What is really making in the media with child labor and other unsustainable a difference is the training and investment in the practices. UTZ Certified and partners like Rewe, Migros and farmers’ skillset. That is the gift that keeps giving. I Natra see potential to improve standards in the sector by have heard several stories of farmers doubling their launching the first major better farming scheme for hazelnuts. yield and profits and that makes a bigger difference in their lives than the premium.” During 2013 we established draft guidance for UTZ certified hazelnuts after securing financial commitments, providing a Christopher Cuello, Mars Inc. wonderful opportunity to work towards sustainability in the hazelnut industry.

Annual Report 2013 - 19 Standards & Certification: Enhancing the rigor and relevance of the UTZ Code Our Code of Conduct is the basis of our work. It provides a challenging while pragmatic set of standards that all producers must adhere to. We need to make sure it remains relevant and up-to-date and is implemented consistently. During 2013 we continued the process of updating and revising our Codes to reflect best practice and stakeholder feedback.

Strengthening the UTZ Code During 2013 we held nine workshops in producing countries Our new Code will be published in 2014. For the first time, and one in the Netherlands involving producers, certification there will be one core Code that will be used together with bodies, supply chain actors, roasters, brand manufacturers, more detailed modules for each crop. The core Code is processors, NGOs and trade unions. The feedback from available in two formats – one for individual farm certification these sessions was reviewed at two meetings of the UTZ and one for group certification. In addition to modules for Standards Committee. We also held two rounds of public coffee, cocoa, tea and rooibos, we have developed new draft consultation on the Code, which attracted comments from guidance on hazelnuts that will also be piloted in 2014. over 220 people/organizations around the world.

The new core Code will enable greater consistency and allow Ensuring a quality assurance process us to increase impact and expand the UTZ program to new By the end of 2013 we had almost 1,800 certificate holders commodities. The Code has also been strengthened in a (54% in cocoa, 43% in coffee and 3% in tea and rooibos), number of areas, with new requirements introduced on topics together representing over 500,000 farmers. As the volumes such as climate change and living wage. The changes to the of commodities certified by UTZ increase, we need to make Code have been developed through extensive consultation sure that all audits are of a high quality and that certification with stakeholders in accordance with the ISEAL Code of decisions are made consistently and robustly. We established Good Practice for Standards Development. an assurance management team during 2013 that will help us to strengthen our work in this area. Their role includes In revising the Code, our goal has been to balance delivering training for certification bodies (who audit producers comprehensive and detailed standards that comply with high against the UTZ standards) and auditing their work. The sustainability ambitions with the need for a practical tool team will also perform shadow audits to gain direct insights that producers can easily read and implement. into issues taking place and increase the number of surprise

20 - UTZ Certified “I really appreciate that the UTZ Code of Conduct and related documents are translated into local languages. Another major value I see of the UTZ program is that UTZ certified farmers learn to decrease their inputs, thereby optimizing their efficiency.”

Bach Thanh Tuan Director of VSCB Certification Body Vietnam

Code revision workshop held in Ghana audits. Shadow audits have already been performed in Brazilian state of Minas Gerais, where 20% of the world’s coffee Germany, Spain, Brazil, Ethiopia and the United Kingdom. is produced. This collaboration will help to improve agricultural practices in the region and extend the reach of UTZ Certified UTZ further worked on a new monitoring system for by enabling producers who meet the Certifica Minas Café certification bodies (CBs). The aim is to improve the standards to automatically achieve the first stage of UTZ performance of CBs by providing extra training when certification. The partnership includes joint training and auditing. challenges arise in specific areas and specific topics and by clarifying communication policies. Improved performance by In India, where we are working not only to certify farms and CBs will contribute to better performance among producers. farm groups but also to expand the local market for sustainably sourced coffee, cocoa and tea, we are collaborating with the We participated in the ISEAL working group to discuss advisory committee of the Indian National Standard for assurance and crop protection products and participated in Tea, called Trustea. With this collaboration, we will be better several comparisons such as the one contributing to the ITC positioned to explore how UTZ Certified can add value where Standards Map, a tool providing information on different there is already a strong domestic standard. sustainability standards systems. Understanding the differences and relative benefits of different Using partnership to improve and widen certification certification schemes can be challenging for clients and Local certification schemes can play an important role in consumers. In 2013 we carried out a comparison of the UTZ improving standards, and we are exploring new opportunities and 4C Association baseline standards. This analysis was to partner with these schemes and to positively influence the conducted by the Colombian Coffee Growers Federation (FNC) standards they set. During 2013, we launched a partnership in partnership with IDH and Tchibo, a leading coffee roaster. Find with Certifica Minas Café, a local certification scheme in the more information online.

Annual Report 2013 - 21 Traceability: Tracing UTZ Certified, RSPO and BCI crops Traceability is one of the foundations on which the UTZ Certified program is based. Our ability to track the origin and flow of commodities provides reassurance that crops have been produced according to our standards and that buyers contribute to better farming. In 2013 we continued to strengthen our advanced traceability system.

The UTZ traceability system, the Good Inside Portal (GIP), is one of the world’s leading traceability systems. It is fully automated, making traceability reliable, accurate and efficient. It is a flexible system that can be used for different types of traceability including segregation (where certified crops are kept separate from harvesting through production and manufacturing) and mass balance (where supply chains of certified and conventional crops come together to ensure maximum investment at the farmers’ level).

Providing traceability services to others As well as tracing UTZ certified coffee, cocoa and tea, UTZ also provides customized traceability services to other organizations working in the field of sustainable agriculture, based on our Good Inside Portal. By supporting their work, UTZ can become a leading force in sustainable supply chains and together make a greater contribution to a more sustainable future. Our traceability clients share our values and our commitment to transparency, effectiveness and engagement. They include: yy Roundtable on Sustainable Palm Oil (RSPO) – the leading initiative working to promote sustainable palm oil To learn about the difference between Mass Balance production, bringing together over 800 producers, refiners, and Segregation please scan this QR code retailers and NGOs. UTZ has been a partner of RSPO with your smart phone. and a service provider for their traceability system since 2007. During 2013 we extended our traceability service for RSPO to enable certification bodies to upload audit results. This will make it easier for RSPO members to track audit “The eTrace platform, based on the traceability results and monitor any non-compliances. UTZ tracked technology of UTZ Certified, is the online structure more than 1.5 million metric tons of RSPO palm oil during that makes our certification for sustainable palm oil transparent. The platform is built to work with large 2013, a 58% increase on 2012. volumes of data, so that it can support our aim of making sustainable palm oil the norm.” yy Better Cotton Initiative (BCI) – UTZ provides traceability services to the BCI, a membership organization working Darrel Webber to make global cotton production better for people Secretary General of the Roundtable and the planet. on Sustainable Palm Oil

Annual Report 2013 - 23 Market Development: Creating sustainable markets Creating demand for coffee, cocoa and tea and expanding into other commodities which are grown with respect for people, planet and profit is vital for UTZ. In 2013 we saw significant growth in the certified products purchased by manufacturers, roasters, retailers and others. UTZ is proud to increase cooperation with partners all over the world and substantially contribute to making sustainable farming the norm.

Growing demand for UTZ certified products growing awareness of environmental and social challenges. This Demand for UTZ certified coffee, cocoa and tea products growth not only provides new opportunities but also comes with continued to grow rapidly; in 2013, following trends in the duty to source sustainably. That is why, next to our more previous years, volumes sold increased 19% in coffee, 149% traditional collaborations in producing countries where we are in cocoa and 32% in tea. Cocoa has experienced exponential increasing the supply of UTZ certified commodities, we are also growth and has now overtaken coffee as the highest volume working strategically with our partners to focus on the growing crop for UTZ Certified. demand for sustainable products in these markets.

Demand grew in our existing markets of Northern Europe Coffee and we expanded into Southern and Central Europe, where UTZ coffee sales grew by 19% in 2013. Our partners – such sustainability is gaining momentum. Strong economic growth as D.E Master Blenders 1753 (DEMB) and Ahold Coffee in Australia allowed for a doubling in the client base and strong Company – continue to be committed to sustainability and support from the cocoa industry and chocolate retailers. The to increasing their purchase of sustainably produced coffee, emerging markets of Asia continued to change and develop offering more products to their consumers. and UTZ Certified is building its presence there, looking for the right opportunities in these growing but fluctuating markets. In Japan, South Korea and Taiwan, the UTZ certified Cafitesse product was successfully launched by DEMB and The international companies which make up our most important UCC. Also, King Car Food in Taiwan brought a new UTZ clients expect 70% of their future growth to come from the certified coffee product to the market, called Mr. Brown. In emerging economies of countries such as China, Brazil and India, Australia, Compass Group partnered with Lavazza to bring due to a rising middle class with strong purchasing power and a UTZ certified coffee to the market.

24 - UTZ Certified Metric tons | Sales of UTZ Certified in coﬀee

250,000

200,000 224,028 188,096 150,000 136,752 100,000 50,000 0 2011 2012 2013

Consumers in the United States are increasingly aware of environmental and social issues that require a sustainable response, and a growing number are seeking out information on the origin of their products and assurance on the product and credibility of the supplier. In May 2013, the J.M. Smucker Company partnered with the Life is good® brand to introduce its line of 100% UTZ certified coffee products.

McDonalds’ coffee suppliers buy UTZ certified coffee as part of McDonald’s USA’s sustainable purchasing program.

Apart from remaining the country with the largest production, supplying 31% of all UTZ certified coffees, Brazil is seeing domestic demand for sustainably sourced products increasing. Two new products were launched in 2013: L’Or Espresso capsules from DEMB and DOP Espresso capsules from Lucca Cafés Especials, the latter currently being the only capsules made and consumed in Brazil.

Previous page: a selection of the many new UTZ labelled products that reached markets around the world in 2013.

Other clients new to UTZ certified coffee or that expanded in their 100% sustainable sourcing commitments: Mars, the volumes they buy in 2013 include Dallmayr in Germany Ferrero and Hershey’s. and Coffee Planet in the Netherlands, which launched the first UTZ certified coffee from a roaster in the United Arab In the UK, Nestle purchased 100% UTZ certified cocoa for its Emirates. In France, Système U launched an additional UTZ Aero and Yorkie products and across all Nestlé chocolate ranges certified product. in the UK 50% of cocoa was UTZ certified. In the US Nestlé now sources UTZ certified cocoa beans for its Crunch bars. Cocoa The demand for UTZ certified cocoa grew by 149% in 2013, Twinings now purchases UTZ certified cocoa for their with 100 new clients joining the UTZ cocoa program in Ovaltine and Options ranges across Europe and Hans 2013 and others expanding the volumes of UTZ certified Freitag sources UTZ certified cocoa for its products sold cocoa. Three major chocolate makers have included UTZ in US, Austria, Germany, France, Italy, Netherlands, Spain, Portugal, Finland, Sweden, Australia, Belarus, South Korea, Russian Federation and UAE. Lebkuchen Schmidt buys UTZ Metric tons | Sales of UTZ Certified in cocoa certified cocoa for products under its Wicklein brand sold in Australia, Austria, Canada, France, Norway, Italy, Romania, 350,000 Russian Federation and the US. 300,000 295,084 250,000 The cocoa market in Australia is worth AUS$ 2.9 billion and 200,000 there is growing interest in sustainable sourcing. We increased 150,000 our presence in Australia during 2013 through members such 100,000 118,641 as Woolworth’s, ALDI, DEMB and Haigh’s Chocolates. 50,000 We saw growth in both the mainstream and luxury chocolate 42,704 0 markets. For example, Valrhona, the French luxury chocolate 2011 2012 2013 maker, joined UTZ Certified during the year.

Annual Report 2013 - 27 Tea UTZ is happy to report a growth in demand of 32%. Kesko, a leading Finnish food retailer, launched a 100% UTZ certified Earl Grey tea under its Pirkka brand. This is available in Finland and the Russian Federation. UTZ Certified accounts for the majority of Kesko’s Pirkka coffee, tea and hot chocolate drinks. Other new launches included Lidl’s rooibos “As UTZ Certified’s first partner, we are glad to see the growth UTZ Certified has made since the early tea in Poland, Hungary, Czech Republic, Slovakia, Bulgaria and days. In 2013 , UTZ continued to facilitate sustainable Romania; AS Watson’s Kruitvat rooibos in the Netherlands; sourcing with a realistic and impact-driven approach. and Denner tea in Switzerland. It is important to look at future challenges in a way that UTZ will also be able to support and maintain the quality of sustainability.” Metric tons | Sales of UTZ Certified in tea Jan Kempenaar General manager 5,000 Ahold Coffee Company 4,000 4,044 3,000 3,074 members and their marketing teams, enabling them to make 2,939 2,000 informed choices about purchasing UTZ certified products 1,000 and communicating their commitment to stakeholders. We have run several webinars to support our partners on topics 0 2011 2012 2013 such as the Good Inside Portal, supply and demand, the different programs (coffee, cocoa and tea) and labeling and communications. In addition, civil society and international Supporting clients and consumers media increasingly turn to UTZ for its views and insights on Understanding sustainability and certification schemes development and sustainability issues such as gender and can be challenging for clients and consumers. Therefore, our climate change, resulting in increased awareness of UTZ Global Support team focuses on close cooperation with our around the globe.

28 - UTZ Certified

Governance

UTZ Certified has a multi-stakeholder governance structure. Lastly, the Product Advisory Committees (PACs) support and UTZ is governed by a Supervisory Board, with members advise both the Supervisory Board and UTZ Certified’s staff drawn from: producers, the supply chain (including brands, on the development, implementation and revision of product- processors, trade, retailers), civil society/non-governmental specific programs. Members of the PACs possess knowledge organizations and representative trade unions. The of production, trade, manufacturing or retail. Supervisory Board meets a minimum of three times a year and oversees the Executive Team. For a number of important At the end of 2012, for technical reasons UTZ Certified matters, the Supervisory Board’s approval is required before Foundation set up a daughter limited company (Ltd or in the Executive Team can pass resolutions. The Executive Team Dutch “B.V.”), called UTZ Certified B.V. The Foundation is full is responsible for day-to-day affairs. owner of the B.V. and all profits made by the B.V. (program fees minus expenses) flow entirely back into the Foundation. The Standards Committee’s task is to adopt, on the basis So UTZ Certified as a whole remains a non-profit organization of information and data provided by the stakeholders, new and retains its charity status (in Dutch “algemeen nut Codes of Conduct as well as revise existing Codes. It checks beogende instelling”, ANBI status). This status has certain tax the content of the Code, ensuring the technical consistency advantages and is a pre-requisite for some donors before they and integration of all UTZ Certified programs. Based on the will sponsor UTZ. The change of model was a logical step in approval of the Standards Committee and the verification the development of UTZ Certified. that the UTZ Code Development Procedures have been duly followed, the UTZ Supervisory Board can then release the new/revised Codes of Conduct. The UTZ Standards Committee consists of representatives of producers and supply chain actors, NGOs and technical experts on specific sustainability issues (e.g. employees’ rights, good agricultural practices, and biodiversity), experts in the field of certification and sustainability and the UTZ Standards Director (non- voting member).

30 - UTZ Certified Supervisory Board Standards Committee yy Paul Andela · SB member from 08/12/2011. Former International yy Hugo Byrnes · VP Product Integrity Royal Ahold, Secretary FNV Bondgenoten (largest Dutch trade union), former The Netherlands President of ECF-IUF (now EFFAT), former President IUF. yy Newton Castro Moraes · Technical Advisor for yy Carlos Brando · SB member from 04/09/2008. Director of P&A Coffee of Department of Agriculture of International Marketing, a consulting, marketing and trading Minas Gerais State, Brazil company in the field of agribusiness, Brazil. yy Jean-Yves Couloud · Program Coordinator, World yy Jim Fisher · SB member from 22/06/2010. Managing Principal Cocoa Foundation, Côte d’Ivoire of Triumph Revenue Advisors, a marketing and consulting firm yy Stephanie Daniels · Program Manager, Agriculture & focused on building revenues and a special expertise in retail Development, Sustainable Food Lab, USA coffee marketing including development of a premium coffee yy Anneke Fermont · Regional Sustainability Manager, house concept for Melitta, USA. Kyagalanyi Coffee Ltd. (Volcafe), Uganda yy Richard Holland · Former SB chair, SB member from yy Juerg von Niederhaeusern · Migros, Head of Social 10/10/2007. Director Market Transformation Initiative at WWF. Compliance & Standards, Switzerland yy Ton van der Laan · SB member from 04/12/2012, SB chair yy Ximena Rueda · Research Associate, from 04/04/2013. CEO of Nidera, a commodity service and Stanford University, USA (previous: Strategic solutions provider for the global agricultural markets and also Marketing Director, Federación Nacional de worked for Cargill, Provimi, Unilever and Philips. Cafeteros de Colombia) yy Adriana Mejia Cuartas · Director for Europe at the Colombian yy Leonardo Sánchez · Environment and Certification Coffee Growers Federation FNC which promotes welfare and Expert, Aceres Consultants, Costa Rica sustainability of the Colombian coffee-growing communities and yy Winaryo Suyono · Control Union Certifications, is owned by coffee growers. Adriana herself is 4th generation Indonesia coffee-grower. yy Britta Wyss Bisang · Standards Director, UTZ yy Nalin Miglani · SB member from 10/12/2010. Chief HR and Certified (non-voting member) Corporate Development Officer at Nutreco, former Chief HR and Communication Officer at Tata Beverage Group. Executive Team: yy Stefanie Miltenburg · SB member from 28/03/2011. Director yy Han de Groot · Executive Director of International Corporate Social Responsibility at D.E Master yy Daan de Vries · Markets Director Blenders and Director of DE Foundation. yy Juliette Caulkins · Emerging Markets Director yy Paula Nimpuno · SB member from 04/04/2013. Program yy Britta Wyss Bisang · Standards Director Officer at Ford Foundation on economic fairness issues, Southern Africa. For all UTZ staff please see: yy Cees van Rijn · SB member from 09/12/2013. Worked for more www.utzcertified.org/en/whoiswho/whoiswho than 35 years in the agribusiness and food industry. He is former CFO at Nutreco and worked at Sara Lee, McCain Foods and Nutricia.

Annual Report 2013 - 31 UTZ CERTIFIED GLOBAL PRESENCE

Market Development oﬀices

Field Development oﬀices (current)

Field Development oﬀices to be rolled out in 2014

Member Support oﬀices

Headquarters

Countries in which UTZ labeled products are sold

Countries in which UTZ certified crops are grown

Both categories UTZ CERTIFIED GLOBAL PRESENCE

Market Development oﬀices

Field Development oﬀices (current)

Field Development oﬀices to be rolled out in 2014

Member Support oﬀices

Headquarters

Countries in which UTZ labeled products are sold

Countries in which UTZ certified crops are grown

Both categories General Notes on the Accountings Significant accounting policies

General Intangible fixed assets Unless otherwise indicated, assets and liabilities are stated at Intangible fixed assets are stated at their historical cost nominal value. less amortization. Amortization is provided in equal annual installments over the estimated useful lives of the assets. Accounts receivable Accounts receivable are stated at nominal value including an Result of the year allowance for bad debts. The bad debt allowance is calculated The result represents the difference between income and costs as follows: based on accrual accounting during the year. The results on yy Nominal value of invoices outstanding between transactions are recognized in the year they are realized; losses 30 and 60 days x 25%. are taken as soon as they are foreseeable. yy Nominal value of invoices outstanding between 60 and 90 days x 50%. Income yy Nominal value of invoices outstanding longer than Income represents funds received from donors, contributions 90 days x 100%. from targeted industries and administration fees billed to yy + 10% of the sum of the above to cover additional users of the UTZ Traceability system calculated on the basis debtor management expenses. of volume.

Tangible fixed assets Corporate Income Tax Tangible fixed assets are stated at their historical cost The activities of UTZ Certified are exempt from less depreciation. Depreciation is provided in equal annual corporate income tax. installments over the estimated useful lives of the assets.

34 - UTZ Certified Comments on the 2013 Financial Statements

The year 2013 ended with a positive result of € 883K UTZ Certified acknowledges financial support from the compared to a positive result of € 593K for 2012. This result Nationale Postcode Loterij (Dutch Postcode Lottery), Irish Aid, will is mainly transferred into the continuity reserves. Income Ford Foundation, Hivos, Douwe Egberts Foundation and the increased by 39% to € 9,480K due to increased income from German Entrepreneurial Development Cooperation (DEG). Their program fees for coffee, cocoa and tea. Operating expenses financial support has been crucial in strengthening our producer increased by 36%. programs and market linkage.

Due to the fact that a non-profit organization as UTZ Certified The main subsidies received and accounted for by UTZ Certified is more vulnerable to volatile markets and changes in donor for the year 2013 can be listed as follows: policies, a continuity reserve exists to secure continuity of its activities. When surplus funds are available, additions to this Main Subsidies 2013 Income & Expenses reserve are be made to keep up with the growth. (Euro x 1,000)

Dutch Postcode Lottery 500 Growth in existing and new activities led to an increased number of employees. At the end of the year 2013 UTZ Certified has Ford Foundation 222 employed a total of 83 FTE’s, which is a growth of 30 FTE’s compared to last year. A trainee program offered 6 young Irish Aid 150 professionals possibilities to increase their knowledge and research experience at the beginning of their working career. In Industry Support 406 addition, more than 5 persons have been trained and or gained experience as an intern. In the total personnel costs of € 4,357K Other 56 a total of € 259K is remuneration of the statutory directors. Total subsidies 1,334 UTZ Certified will use its knowledge and experience to roll out these new programs and thereby increase its contribution to agricultural sustainability. The objective is to be able to finance all current operations through program fee income. New programs in their initial phase will mainly be financed through contributions and sponsoring.

Annual Report 2013 - 35 Balance as per December 2013

(Euro x 1,000) December 31/2013 December 31/2012

Intangible fixed assets 419 307 Tangible fixed assets 406 128

Total fixed asssets 825 435

Accounts receivable 1,527 1,033 Taxes and social premiums 0 81 Other receivables and prepaid expenses 66 81 Cash at banks 2,437 1,810

Total current assets 4,030 3,005

Total assets 4,855 3,440

Paid in capital 3 3 General reserve 820 737 Continuity reserve 1,700 900

Total capital account 2,523 1,640

Accounts payable 1,369 818 Taxes and premiums 377 82 Subsidies received 154 453 Investement subsidies 67 286 Other liabilities 365 161

Total current liabilities 2,332 1,800

Total disposable reserves and liabilities 4,855 3,440

36 - UTZ Certified Statement of revenues and expenditures for the year ended December 31, 2013

(Euro x 1,000) 2013 2012 2011

Fees 7,644 4,704 3,828 Subsidies 1,334 1,683 1,321 Contributions 447 348 315 Other 55 70 90

Total Income 9,480 6,805 5,554

Personnel costs -4,362 -2,769 -2,301 Brand & advertising -147 -423 -408 Events & trainings -370 -238 -271 Materials & translation -139 -75 -98 Travel & meals -785 -451 -386 General & oﬀice -408 -290 -283 ICT services -645 -585 -343 Consultancy & research -1,108 -1,005 -485 Repres, & projects in origin -463 -351 -618

Total Operating expenses -8.427 -6.187 -5.193

EBITDA 1.053 618 361

Depreciation -164 -88 -166

EBIT 889 530 195

Exchange result -42 5 -4 Interest 27 25 12 Other 9 33 -138

Total financial result -6 63 -130

Result 883 593 65

Annual Report 2013 - 37 Auditor’s report

38 - UTZ Certified Funders

Design Mariana Álvarez Matijašević [email protected] www.marianamatija.com

Production & Publication UTZ Certified Communications, the Netherlands.

Print Prezco, the Netherlands. www.Prezco.nl

Paper Printed on FSC (Forest Stewardship Council) certified, 100% recycled and 100% Total Chlorine Free paper.

Sustainability in our daily work Sustainability is part of our DNA and visibly reflected in our daily work. Our premises are furnished with recycled and environmentally friendly materials. Every day, our Netherlands based employees commute by train, bus or bike to work. We are a paperless office, but if we do have to use paper we make sure it is recycled and chlorine- free, and we use environmentally friendly inks for our printing. And all necessary flights to meet with members, supporters, partners and other stakeholders or to attend conferences are compensated via the GreenSeat program, meaning that KlimaatNeutraal Groep offsets 100% of our CO2 emissions by planting trees UTZ CERTIFIED CONTACTS

UTZ Certified Amsterdam UTZ Certified India UTZ Certified West Africa Head office Market Development: Rohit Tandon Field Development: Siriki Diakité De Ruyterkade 6 1013 AA, Amsterdam Tel: +91 98 4534 5798 Tel: +225 07753423 The Netherlands [email protected] [email protected] Tel: +31 20 530 8000 Field Development: Neelkant Pandhare Fax: +31 20 530 8099 Tel.: +91 99 0151 7018 UTZ Certified Vietnam [email protected] [email protected] Field Development: Thiet Nguyen Tel: +84 50 956599 UTZ Certified Australia UTZ Certified Turkey Mobile: +84 914 038538 Market Development: Ruben Bergsma Hazelnut program: [email protected] Tel: +61 406 070 780 Hande Arzu Büyüklimanli [email protected] Tel: +90 53 3775 3566 For questions on Certification: [email protected] Coffee / Tea: [email protected] UTZ Certified Japan/Asia Cocoa: [email protected] Market Development: Miyuki Ortiz Rivera UTZ Certified Brazil Tel: +81 80 3528 3815 Field Development: Eduardo Sampaio For business contact: [email protected] Tel: +55 19 3661 5309 coff[email protected] [email protected] [email protected] UTZ Certified North America [email protected] Market Development: Lisa Matas Navarro UTZ Certified East Africa [email protected] Tel: +15 03 9137 834 Field Development: Julius Nganga [email protected] Tel: +25 47 2378 6719 For Traceability/Good Inside [email protected] Portal questions: UTZ Certified Switzerland Coffee: coff[email protected] Market Development: Anita Aerni UTZ Certified Indonesia Cocoa: [email protected] Tel: +41 31 921 58 67 Field Development: Mercedes Chavez Tea: [email protected] [email protected] Tel: +62 8787 629 5790 Palm oil: [email protected] [email protected] Cotton: [email protected]

40 - UTZ Certified