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Sustainability Issues in the Tea Sector a Comparative Analysis of Six Leading Producing Countries

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Sustainability Issues in the Tea Sector a Comparative Analysis of Six Leading Producing Countries SO M O Sustainability Issues in the Tea Sector A Comparative Analysis of Six Leading Producing Countries Sanne van der Wal June 2008 Sustainability Issues in the Tea Sector A Comparative Analysis of Six Leading Producing Countries Tea is the second most popular drink in the world, after water. For a number of developing countries it is an important commodity in terms of jobs and export earnings. Tea production is labour intensive and the industry provides jobs in remote rural areas. Millions of livelihoods around the world depend on tea picking and processing. However, as with many other agricultural commodities, real primary producer prices have fallen dramatically over the last three decades. Low prices are affecting the sustainability of the tea sector, with working conditions and the livelihoods of plantation workers and small- scale farmers in tea producing countries under pressure. Meanwhile, tea trade and distribution is dominated by a few international companies that benefi t from stable retail prices. In this report, SOMO is presenting for the fi rst time ever a more detailed and comparative analysis on social, economic and ecological conditions in the tea sector in 6 of the most important tea-producing countries: India, Sri Lanka, Vietnam, Indonesia, Kenya and Malawi. The research is based on an extensive fi eld study of civil society organisations in these countries, thus providing a unique perspective on this sector. The report also presents an overview of trade, production and stakeholders in international tea supply chains, and makes recommendations to various stakeholders for improving conditions, particularly for plantation workers and tea smallholders the most vulnerable in the tea industry. The study found that working conditions for pickers are often poor, with low wages, low job and income security, discrimination along ethnic and gender lines, lack of protective gear and inadequate basic facilities such as housing and sometimes even drinking water and food. At the same time there is no possibility for tea plantation workers to improve working conditions because trade unions are ineffective or absent and/or are not representing them because most of them are temporary workers. While tea production by smallholders is growing worldwide, their situation is often problematic because the prices they are paid for fresh tea leaves tend to be below the cost of production, among other factors. The sector’s environmental footprint is considerable, with reduced biodiversity as the result of habitat conversion, high energy consumption (mainly using logged timber) and a high application of pesticides in some countries. Sustainability Issues in the Tea Sector A Comparative Analysis of Six Leading Producing Countries Sanne van der Wal Amsterdam, June 2008 Sustainability Issues in the Tea Sector Colophon Sustainability Issues in the Tea Sector A Comparative Analysis of Six Leading Producing Countries Sanne van der Wal June 2008 Editor: Jim Turner Cover Design: Annelies Vlasblom Cover Layout: Frans Schupp Photo: Hollandse Hoogte Print: Felix Offset ISBN: 978-90-71284-23-6 Funding: This report is made possible with funding from the Dutch Ministry of Foreign Affairs and with co-funding from Oxfam Novib Published by: Stichting Onderzoek Multinationale Ondernemingen Centre for Research on Multinational Corporations Sarphatistraat 30 1018 GL Amsterdam The Netherlands Tel: + 31 (20) 6391291 Fax: + 31 (20) 6391321 E-mail: [email protected] Website: www.somo.nl This document is licensed under the Creative Commons Attribution-NonCommercial-NoDerivateWorks 2.5 License 2 Contents Executive Summary ....................................................................................................... 7 1 Introduction........................................................................................................ 12 2 Sector profile...................................................................................................... 17 2.1 Tea production and processing ........................................................................... 17 2.2 Worldwide production, exports and consumption................................................ 18 2.2.1 Consumption ........................................................................................................ 19 2.2.2 Exports ................................................................................................................. 20 2.2.3 Importance of tea for producing country economies ........................................... 22 2.3 Market structure................................................................................................... 23 3 Critical issues in the tea Sector ....................................................................... 27 3.1 Social issues........................................................................................................ 27 3.1.1 Low wages ........................................................................................................... 27 3.1.2 Housing ................................................................................................................ 29 3.1.3 Health and safety ................................................................................................. 30 3.1.4 Discrimination and gender ................................................................................... 31 3.1.5 Representation of Workers .................................................................................. 32 3.1.6 Casualisation of Labour ....................................................................................... 33 3.1.7 Child labour and child work ................................................................................. 35 3.1.8 Gender and declining workforce .......................................................................... 36 3.2 Environmental Issues .......................................................................................... 37 3.2.1 Habitat conversion ............................................................................................... 37 3.2.2 Energy use ........................................................................................................... 37 3.2.3 Agrochemical use ................................................................................................ 38 3.3 Economic issues.................................................................................................. 39 3.3.1 Uneven value distribution .................................................................................... 39 3.3.2 Falling prices ........................................................................................................ 41 3.3.3 Concentration in buying power ............................................................................ 42 3.3.4 Smallholders ........................................................................................................ 43 4 Forces of hindrance and advancement .......................................................... 48 4.1 High cost of primary production........................................................................... 48 4.2 Changing modes of production and restructuring .............................................. 50 4.3 Capturing value added ........................................................................................ 51 4.4 Diversification ...................................................................................................... 55 4.5 Standards ............................................................................................................ 55 4.6 Quality.................................................................................................................. 57 4.7 Corporate Social Responsibilty ........................................................................... 58 5 Conclusions and recommendations ............................................................... 63 Annexes: SOMO comparative international tea research.......................................... 70 3 Sustainability Issues in the Tea Sector Case study summary India ..................................................................................70 Case study summary Indonesia ..........................................................................82 Case study summary Kenya................................................................................86 Case study summary Malawi...............................................................................92 Case study summary Sri Lanka...........................................................................95 Case study summary Vietnam.............................................................................103 4 Acronyms ADB Asian Development Bank ABF Associated British Foods PLC BLF Bought Leaf Factory BSCI Business Social Compliance Initiative CIS Commonwealth of Independent States COC Code of conduct CPDA Christian Partners Development Agency CSO Central Statistical Organisation CSR Corporate Social Responsibility CTC Cut, Torn and Curl CTTA Calcutta Tea Traders Association DTI Dutch Tea Initiative DFID Department for International Development (UK) EATTA East African Tea Traders Association EIA Environmental Impact Assessment ETI Ethical Trade Initiative ETP Ethical Tea Partnership FAO Food and Agriculture Organization of the United Nations FDI Foreign Direct Investment FLO Fairtrade Labelling Organizations International HACCP Hazard Analysis and Critical Control Points
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