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Land Tenure and Other Human Rights Issues in the Oil Palm and Sugarcane Sectors in Mexico Client: Pepsico

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Land Tenure and Other Human Rights Issues in the Oil Palm and Sugarcane Sectors in Mexico Client: Pepsico Land tenure and other human rights issues in the oil palm and sugarcane sectors in Mexico Client: PepsiCo May, 2017 About Proforest Proforest is an independent mission-driven organisation working in the field of natural resource management and specialising in practical approaches to sustainability. Our expertise covers all aspects of the natural resources sector, from biodiversity conservation, sustainable forestry and agricultural commodities production to responsible sourcing, supply chain management and investment. Proforest works to transform commodity production as well as supply chains and sectors through developing awareness about sustainability, helping to generate commitment to better practice, supporting implementation of these commitments in practice and working with the wider community to increase the positive impact. Proforest Ltd provides direct support to companies implementing responsible production, sourcing and investment for agricultural and forest commodities. The Proforest team is international and multilingual and comes from a wide variety of backgrounds, including industry, academia and civil society. This allows us to work comfortably with diverse organisations in a range of cultures. We have in-house knowledge of more than 15 languages, including English, Bahasa Indonesia, Portuguese, Mandarin, French and Spanish. Proforest Limited South Suite, Frewin Chambers, Frewin Court, Oxford OX1 3HZ United Kingdom E: [email protected] T: +44 (0) 1865 243439 Proforest Limited is a registered company in England and Wales (Company number 3893149). Land tenure and human rights: palm oil and sugarcane production in Mexico Executive Summary This report presents the findings of a desk-based, high-level analysis of the potential for land rights’ risks and other human rights’ risks in Mexican sugarcane and palm oil supply chains. It is designed to help inform PepsiCo – and other sugarcane and palm oil customers, in taking steps to identify issues in their specific supply chains and in acting to address them. It is not a comprehensive human rights assessment of the sector, nor of any specific suppliers. The report focuses on the risk of production-level issues related to land rights, labour rights, community impacts and transparency. Main findings of the report Mexico’s agricultural sector operates within a land tenure system with an unusually high percentage of and under the ownership of small farmers and communities. While sugarcane has a long history of cultivation in Mexico, oil palm is considered a much newer crop. Both industries have very high numbers of smallholder producers in their supply chain. Labour practices: There are serious and widespread concerns about the human rights of workers involved at the field level in the production of both commodities. This applies both to labour used by smallholder outgrowers and by agribusiness’ own plantations. The highest risks relate to: • Risks of non-compliance with workers’ rights regarding pay and conditions: especially in the case of vulnerable immigrant labour. • Risks to health and life that would be presented by extreme working conditions (e.g. from extreme physical work in high temperatures with poor hydration), inadequate supply or use of protective equipment, poor and dangerous use of equipment and inadequate storage, and handling and application of agrochemicals. • Risks to health that may be presented by potentially inadequate housing conditions of workers, including problems of overcrowding, sanitation and personal safety. • Risks to children: including child labour undertaking hazardous activities, as families of migrant labour, and/or exposure to hazardous practices. • Risk of discrimination and non-compliance with rights of indigenous peoples and other marginalized groups (illiterate, poorer sectors) engaged as employees, especially – although not exclusively – migrant labourers. Land rights: The study suggests that large-scale land-acquisition (‘land-grabbing’) by agribusiness is not considered as problematic as it is in other parts of the world. However, the increase in demand for palm oil combined with the current incentives and legal situation, lead some commentators to report increased incidences of: • Shift in ownership of land toward agribusiness (away from communal and individual landholdings), and even more control of productive landscape by agribusiness (via rental of land and/or provision of seed, control of planting, etc.) • Dependence on commercial crops at the expense of subsistence or locally- consumed produce, raising questions about long-term local food security and potential economic vulnerability. Proforest Limited | Tel: +44 (0) 1865 243 439 | [email protected] | www.proforest.net 3 Land tenure and human rights: palm oil and sugarcane production in Mexico • Gradual shift in production landscape without consideration of the large- scale impacts of this change, and without due consultation around impacts (in part because there are multiple small-scale land-use changes being made, rather than a single purchase) • There is one serious – but unsubstantiated – accusation of populations having been evicted from their land for palm oil mill or plantation establishment. Impacts on wider community: There is a risk of practices which have negative environmental impacts on neighbouring and downstream communities in relation to palm and sugarcane cultivation; Mexico is considered to have high levels of corruption and impunity, hence enforcement of legal protections relating to conservation, ecosystem protection and pollution prevention may be weak. This could potentially affect the protection of human rights of communities (e.g. access to water). This would need to be considered at site level. The most likely impacts are in relation to: • Risks to water quality and supply caused by poor storage, supply and disposal of agrochemicals, poor management of processing waste and/or overuse of water for irrigation and/or processing. • Health risks from cane burning and mill emissions related to sugarcane processing. • Forest fires caused by sugarcane harvest where burning is used. • Risks to water quality and supply, effluent pollution and land-use change. • Loss of local biodiversity due to illegal and/or poorly regulated land-use change, especially conversion of forest. Understanding, management and mitigation of human rights risks: The study highlights a low level of experience by processing companies in Mexico of assessing the social (and environmental) risks in their supply base, compared to the mill and plantations under direct ownership and management. While there has been interest and progress toward meeting international sustainability standards, processing mills have typically seen the activities of their raw material suppliers – often made up of thousands of smallholders – as difficult to influence or beyond their scope of responsibility. Therefore, mills are likely to lack the human resources, experience, and systems to identify, manage and support mitigation of problems – even serious ones – in their supply base. This therefore represents an additional risk and challenge for brands, traders and retailers seeking to address these issues in their supply chains, in that even if human rights (and environmental) threats are identified, their suppliers are unlikely to be able to react with agility and experience to address them. Recommendations It is important to note that several of the problems identified are systemic and widespread throughout the palm oil and/or sugar industries in Mexico. To address them is likely to require the participation of multiple actors, including national, state and municipal governments, civil society, unions and producer associations. Based on the finding of the study, the following steps are recommended: 1. Traceability. Supply chain mapping including an understanding of the supply base characteristics for each mill. 2. Engagement and due diligence. Engagement with Mexican suppliers, including those supplying bottlers and joint ventures, on the priority social Proforest Limited | Tel: +44 (0) 1865 243 439 | [email protected] | www.proforest.net 4 Land tenure and human rights: palm oil and sugarcane production in Mexico and environmental risks in their specific supply bases. Comprising: a. Dialogue with suppliers about their commitment to, and progress toward eliminating all negative social and environmental impacts in their own operations and in those of their supply base. This should include an understanding of the actors involved in the supply base, and type of relationship between them (e.g. Intermediaries, direct suppliers, associations). b. Field verification of the performance against sustainability criteria or on priority issues in the supply base of selected mills, including field observation, interviews with workers and local communities and consultation with local, regional and national stakeholders. Mills should be prioritized in line with the major risks identified in this report including, but not limited to - e.g. risk of expansion onto new land, operating in a region of high risk of use of migrant labour. Sustainability criteria should include: • Adequate mechanisms for due diligence on human rights risks in their supply base by the mills themselves • (for palm) Ensuring that mills and growers in their supply base have followed international good practice in acquiring the consent of the communities where palm oil is being planted. 3. Implementing action a. Develop – with suppliers – action
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