Introducing UTZ CERTIFIED Good Inside

UTZ CERTIFIED Good Inside is dedicated to creating an open and transparent marketplace for agricultural products. To achieve this UTZ CERTIFIED’s main tools are the UTZ Traceability System and the Code of Conduct. These tools are like the two chambers of the heart or core of UTZ, whereby the Code of Conduct leads to good agricultural practices and the Traceability System leads to transparency of trade markets.

Traceability System Good agricultural practices

Transparency of trade markets Code of Conduct

UTZ CERTIFIED’s vision is to achieve sustainable agricultural supply chains in which:

Farmers are professionals implementing good practices. Industry (food, non-food, energy) takes responsibility by demanding and rewarding sustainably grown products. Consumers buy products that meet their standard for social and environmental responsibility.

UTZ CERTIFIED Good Inside Annual Report 2008 3 Message from the Board The Credit Crisis and

In 2008, a single question gradually became more pressing: what will be the influence of the credit crises on companies’ willingness to make their production chains more sustainable?

Early last year there was still talk of the food crisis and the energy crisis. Food and oil prices reached all time highs, only to drop sharply as a result of a rapidly deepening financial crisis. In the international debate, the relationship between crises in finance, food and fuel became the central theme.

There seems to be cause for concern over the short-term effects of the financial crisis. Depending on its scope and duration, the sustainability agenda will come under pressure as companies struggle to survive in a difficult market. They will increasingly need to cut costs, and short- term considerations may then be decisive. This will make UTZ CERTIFIED’s core activity – making production chains sustainable – perhaps more challenging. But in the long term there are, above all, opportunities. The credit crisis can set off new thinking. Like Einstein, we know that you cannot solve a problem with the same way of thinking that caused it.

Good Governance The concept of the retreating government is bankrupt. The crisis has everything to do with failing governments, inadequate regulation and insufficient supervision. A modern government can be understood as an active government again; a government which provides boundaries and incentives, and leads market processes in a socially desirable way. This matches the idea that can only be realized when there is interaction between: a democratic government that provides good governance, social organizations which make up civil society, and a market sector which exercises corporate social responsibility.

A New Business Model Business as usual is a thing of the past. Sustainable development demands a restyling of the system for entrepreneurial production.

4 UTZ CERTIFIED Good Inside Annual Report 2008 Companies will need to enter into long-term, tribution of purchasing power in the world. committed trade relations. Buyers will need Broadening the availability of food is the to become chain managers. Throughout the second focus point. More and more stom- chains sustainability has to be realized. Parties achs have to be filled, and a rising income must share responsibilities, risks and costs, as leads to a more varied eating pattern with we move from an anonymous market to a an inevitable increase in demand for meat transparent and globally linked value chain. This and other food products. Meanwhile, space is a change from a short-term to a long-term for is under pressure as millions of perspective, from ‘good for me’ to ‘good for hectares of farmable land are lost every year us’; to trading equitability for producers and the through inappropriate land use. Cities and planet. And sustainability is key in this. infrastructure are expanding. Land is not just being used to grow food, but also for feed, Running Out of Nature’s Credit fibre, forest and fuel. Smart and sustainable The World Wide Fund for Nature’s ‘Living planet land use is the only answer. report 2008’ illustrates a dramatic picture. Our global footprint exceeds the earth’s capacity Sustainable Innovation by 30%, so that in 2035 we’ll need two earths Innovative thinking must drive the way we to sustain our lifestyle. Nature’s credit will solve the various crises we face. Old thinking run out. An underlying cause is the fact that cannot solve new problems. It is time for in- everyone has access to it and it is for free. clusive thinking, and for inclusive action. The Social costs are not included in product new economy will calculate external effects prices, even though we are producing at the and include the conservation of the ecosys- expense of the earth’s biodiversity. We must tem in its balance sheet. Furthermore it will start valuing what really matters. The poorest include professionalizing producers in the of the poor depend most on natural resources economy and in society. This is the only way but are the least able to invest in managing to beat one crisis without sowing the seed of them sustainably. Postponing this agenda is the next. UTZ CERTIFIED as a good agricultur- irresponsible, will shorten the time we have al practices standard setter and traceability and increase the chances of further disruption program, facilitating transparency for various of the world economy. agricultural products, is an important tool for our sustainable innovation. Distribution and Availability of Food In 2050 there will be nine and a half billion people on earth, with a right to a decent and dignified existence with first of all, food. Global food security is first and foremost a distribution issue related to the unequal dis- Nico Roozen · President of the Board

UTZ CERTIFIED Good Inside Annual Report 2008 5 From the Desk of Juliette Caulkins Interim Executive Director

The global economy finished 2008 in crisis, with volatile food and energy sectors compounding the problems. The world’s attention turned elsewhere, understandably to the financial markets. But, as Nico Roozen also questioned, does this now mean that Sustainability and Corporate Social Responsibility has fallen off business agendas? We at UTZ CERTIFIED think not.

The growing realization around the world that the future will be resource constrained, combined with high energy and fuel prices, the biofuels debate, agricultural subsidies, , water stress and environmental degradation. These are all issues which clearly point to the fact that sustainability is a business reality as well as the challenge and opportunity for businesses, and governments alike, to re-think their roles and to push forward policies together.

Sustainable Society One of the definitions of sustainability is a “society of permanence”; a world in which humanity ensures its well-being across the generations by improving the stability of economic, ecological and socio-cultural systems. The transition to sustainability is urgent, it is necessary and it will certainly not be easy. Achieving a sustainable society will require decision makers to address issues of scale, just distribution, and economic efficiency.

The 3 Dimensions Our approach to sustainability in the agricultural commodities with which we work is to focus on interlinking the three dimensions of the pillars of sustainability; economic health, environmental responsibility, and social equity. These three dimensions affect but also require one another. Economic growth without taking into consideration environmental quality or social stability as essential factors is impossible in the long term. Economic development is the basis of income development and economic performance. Social issues such as solidarity and well-being must be facilitated

6 UTZ CERTIFIED Good Inside Annual Report 2008 and environmental responsibility for the use of Collaborate with Vision and Courage natural resources and conservation of our living As consumer awareness and expectations rise space must be borne. Altogether, it becomes and they become increasingly knowledgeable obvious that sustainable development can not and discerning in their food purchases, be reached without taking all three mutually sustainability will remain critical to businesses interactive dimensions into account. even in an economic downturn. Issues such as creating less waste, creating more real wealth Transparency and Credibility and quality of life, climate change, and corruption UTZ CERTIFIED Good Inside continues to will not vanish as a result of economic decline. In contribute to the sustainability of the agriculture fact, one could say, that the business case for sector by expanding its responsibility to create managing these and other issues, for companies open and transparent marketplaces. Our operating in a difficult economic environment, is Traceability system facilitates transparency in even stronger and they have much to gain by the supply chain from origin to consumer, can improving their corporate social responsibility. enable independent assurance of sustainable production and sourcing, and offer online The global economy is experiencing a severe real-time tracking. Suppliers of food and downturn. The world faces the worst financial agricultural products are finding this essential in crisis in recent memory. However, the principle maintaining their markets and demonstrating of conducting business in an economically, to both existing and potential consumers that socially and environmentally responsible manner they can deliver products within demanded remains at the core of sustainable businesses. safety and quality specifications. Our voluntary The challenges ahead are too big for one standard system (Good Inside 2009 Code sector, one country, or one strategy to address of Conduct & Chain of Custody) focuses alone. We need to face them with vision, with on developing and implementing Good courage, and in collaboration with others. Agricultural Practices and Food Safety Aspects Join us in achieving professionalism in thereby enabling continuous improvement of sustainable production & trade! production practices and professional business partners for demand markets. Together the UTZ CERTIFIED Good Inside Traceability and Certification systems stand for transparency and credibility in the agricultural sector. Juliette Caulkins · Interim Executive Director

UTZ CERTIFIED Good Inside Annual Report 2008 7 The Core of UTZ: Certification Credible Assurance: the UTZ CERTIFIED Good Inside Code of Conduct

In 2009, UTZ CERTIFIED will launch its improved The ‘Guidance comments’. These comments Good Inside Code of Conduct for . In give extra explanation on how to comply with order to prepare for this revision, consultation and the control points. research have been carefully carried out in 2007 and 2008 in origin, during meetings and workshops; The ‘ICS guidance comments’. This docu- proposals were made and discussions were held ment is a reference for producer groups on with several stakeholders including industry, NGO’s how to interpret and implement the control and representatives of producer groups. points in a group certification with an inter- nal control system (ICS)/ internal manage- When developing the standard, UTZ CERTIFIED ment system (IMS). evaluated how best to include a risk based approach as well as the principle of continuous It is the intention of UTZ to develop and interpret improvement in the Certification Program. The goal the above documents at national levels in at all times is to further increase the positive impact 2009. UTZ CERTIFIED will closely co-operate with of sustainable practices in the production system. the Solidaridad - Coffee Support Network in order to translate the concept into reality on UTZ CERTIFIED has the intention to formulate the the ground. control points as precisely as possible. Additional guidance documents are available and will be In collaboration with Solidaridad - Coffee Support developed to help interpret and implement the Network, UTZ CERTIFIED has also developed a control points. The guidance documents, “Annex guide on how to establish an Internal Control for Individual Farm Certification” and “Annex for System. This guide is available in Spanish and Group Certification” contain: will be available in 2009 in English.

8 UTZ CERTIFIED Good Inside Annual Report 2008 In June 2008, UTZ CERTI- process. Nowadays having a standard and making FIED became an associate it available is not enough, independent assurance member of the ISEAL Alli- for your credibility is expected. ISEAL also provides ance. This platform of volun- sustainability support programs with tools to help tary standard initiatives will enable UTZ to share members to deliver on their social and environmental knowledge and contribute to the development goals. Last but not least we are looking forward to of good social and environmental practices. participate in discussions, working groups and share ISEAL codifies best practice for the design and experiences with other ISEAL members!” implementation of social and environmental standards systems. UTZ CERTIFIED has 3 years to UTZ CERTIFIED actively participated in ISEAL’s initiative comply with the ISEAL Code of Good Practice for the development of ‘Common Requirements for Setting Social and Environmental Standards for Group Certification’. The first public version of assuring open, participatory and balanced the document was released in November 2008 process for defining international principles and and the requirements will serve three purposes: criteria. When complying with all the aspects To streamline the processes by which groups of the ISEAL Code of Good Practice (and other can demonstrate standards compliance for membership criteria), UTZ CERTIFIED will become different markets. a full member of the alliance. To create a shared understanding of the UTZ CERTIFIED’s Certification Manager Britta Wyss practices that are necessary to instill confi- Bisang is pleased that UTZ CERTIFIED joined the dence in a group’s performance. alliance as an Associate Member: “UTZ CERTIFIED is working hard to make the organization even more As a basis for a common policy position to robust, credible, transparent and accessible. Being gain greater acceptance for the concept of an ISEAL Alliance Associate Member helps us in this group certification.

% compared Production of UTZ CERTIFIED Coffee 2003 2004 2005 2006 2007 2008 to 2007

Total number of UTZ- certificates 38 66 135 250 312 347 11.22%

Estimated number of producers (farms and group members certified incl. small holders) 17,900 32,000 34,000 46,200 60,100 76,944 28.03%

Volume of green coffee certified (tons) 40,400 53,600 108,500 185,500 218,358 308,464 41.27%

Volume of green coffee (60-kilo bags) 673,400 893,300 1,808,300 3,091,600 3,639,300 5,141,059 41.27%

Weighted average premium paid ($cents/lb) - 2.7 4.4 4.4 4.7 6.2 24%

Number of producing countries 10 14 16 18 18 19 5.56%

UTZ CERTIFIED Good Inside Annual Report 2008 9 The Core of UTZ: Traceability The Ability to Sustain is the Ability to Trace

Definitions Webster’s Dictionary says: “Traceability is the ability to follow or study out in detail, or step by step, the history of a certain activity or a process.”

For Food Traceability specifically, the ISO standard and EC regulation give the following definition: “Traceability is the ability to trace and follow a food, feed, food producing animal or ingredients, through all stages of production and distribution.”

UTZ CERTIFIED believes “Traceability” and “Sustainability” are intrinsically linked; both share accountability for how food is produced, processed, and transported. While the issue of sustainability continues to grow, so does the issue of ity traceability. Traceability which is transparency delivered is a key to sustainability. The ability to sustain is the ability to trace.

Implications Stripped to its essence, the idea is that consumers and retailers should be able to track back every product they buy or sell to the manufacturers or growers involved. This is important to:

Assure food safety

UTZ CERTIFIED Annual Report 2008 · Continuous improvement in multi comod Track farm development Increase efficient production Strengthen credibility Build trust & loyalty UTZ Traceability System In this globalized world UTZ CERTIFIED takes requirements regulate the mixing of certified responsibility for creating an open and trans- and non-certified product at every stage of the parent marketplace for agricultural products. supply chain. Together the system and Chain of UTZ does this by enabling online real-time Custody requirements bring transparency. traceability of products back to their origin. Traceability assures a diverse range of Good UTZ CERTIFIED offers traceability through a web Inside products. At this moment coffee and based track-and-trace system together with palm oil are traceable commodities trough Chain of Custody requirements. Where the UTZ the UTZ CERTIFIED system. And UTZ will con- traceability system traces the certified product tinue to develop the Traceability system for throughout the supply chain, the Chain of Custody other commodities.

Sales record

Sales announcement

Identification number 0-000-04-890 0-000-04-890 0-000-04-890

CoC CoC CoC CoC

Producer Exporter Trader Manufacturer

Chain of Chain of Chain of Chain of Code Custody Custody Custody Custody

UTZ CERTIFIED Good Inside Annual Report 2008 11 Coffee Coffee · Origin Development

“Continuous Improvement in Origin” UTZ CERTIFIED Good Inside was present in 19 coffee producing countries in 2008 and is looking Coffee Sales Numbers per Producing Country at potential new areas according to estimations Quantity Quantity on market demand and sales growth. Below is Country % of total in Kg in MT a summary of the trends that have been noted and reported on in origin countries. Brazil 32.53% 25,210,891 25,211 Vietnam 18.88% 14,628,144 14,628 With crop reduction in Colombia, Peru and most of Central America, the differentials for mild Arabica Colombia 15.96% 12,370,905 12,371 has increased beyond normal situations, stressing the availability of certified coffee as farmers can Honduras 7.69% 5,958,177 5,958 get better prices on the conventional market. This Peru 5.85% 4,531,113 4,531 has caused certified farmers and exporters to reduce sales of UTZ CERTIFIED coffee and created India 4.16% 3,226,050 3,226 for some buyers a change in buying behavior in Indonesia 2.93% 2,267,064 2,267 other origins or through other channels. Guatemala 2.66% 2,065,239 2,065 Sales of certified coffee like UTZ CERTIFIED tend to concentrate among a group of 75% of the Costa Rica 2.60% 2,014,731 2,015 total certificate holders. Most of these producers Nicaragua 2.12% 1,645,660 1,646 already had commercial relations with UTZ buyers or are more apt in offering certified coffee. The Kenya 1.42% 1,104,321 1,104 other 25% consists of farmers that want to use the UTZ certificate as a diploma or recognizable proof Uganda 1.14% 880,020 880 of being responsible farmers and business partners. Ethiopia 1.00% 778,380 778 Some certified farmers are opportunistic and wait for a premium of buyers and tend to shift among Mexico 0.82% 633,420 633 programs or drop out when this opportunity does not arise. This last issue is the main cause for the Bolivia 0.21% 164,800 165 reduction of certified volume in a few countries El Salvador 0.02% 18,975 19 where several producers have used UTZ as an improvement model. Total 77,497,890 77,498

12 UTZ CERTIFIED Good Inside Annual Report 2008 A Practical Improvement Model a growth of producers entering the new program for With last year’s integration of the UTZ CERTIFIED this reason end 2009, beginning 2010. This not only Field Team in Solidaridad’s Coffee Support Network creates a broader base of certified volumes and (CSN), UTZ has increased its focus on further qualities but more importantly allows for the imple- expanding the support network and developing mentation of sustainability by a group of producers practical tools for implementers and farmers. broader than the current market interest, as the di- The UTZ CERTIFIED program, with its new Code of rect reward in income improvement at production Conduct 2009, is quickly developing into a base level is not connected to the premium market. sustainability model for continuous improvement that carries the needed ingredients (a new dynamic % Of Total Sales per Producing Country Code, support to farmers on improvement and 1,14% an external inspection) that are key, especially in 1,00% 1,42% 0,82% the first years of improvement. Combining market 2,12% 0,21% interests in sustainability with producer interest in 2,60% 0,02% improving income and well-being, the model has 2,66% become sustainable in its essence.

2,93% With the new Code, Support Program and network, the UTZ CERTIFIED program has 4,16% 32,53% become a practical one that allows efficiency improvement at farm level while integrating 5,85% the most common sustainability issues in the international markets. Feedback from producers and traders from countries like Vietnam, Uganda 7,69% and Honduras is that UTZ CERTIFIED is used as the basis for sustainable improvement of farmers and coffee production and allows an easy shift to other programs. By implementing 15,96% UTZ CERTIFIED, producers are prepared for other 18,88% certifications by multiple programs depending on the market opportunities which producers and traders might see. Brazil Costa Rica Vietnam Nicaragua Colombia Kenya This adapted model creates more value for pro- Honduras Uganda ducers on productivity, quality and efficiency than Peru Ethiopia India Mexico any premium system could offer as it focuses on the Indonesia Bolivia issues that are important to them. We expect to see Guatemala El Salvador

UTZ CERTIFIED Good Inside Annual Report 2008 13

Coffee · Monitoring & Evaluation of Impact

“Making a Difference in Origin” Feedback from the field shows that applying the UTZ CER- TIFIED Good Inside Code of Conduct increases sustainabil- ity in production processes and benefits the producers. To demonstrate these positive effects to stakeholders - such as buyers of certified products, donors and civil society - as well as to continuously improve our program, collecting impact data is essential.

UTZ CERTIFIED is implementing a system to continuously monitor the results of certification in the field. In 2008, UTZ has set up the monitoring system for coffee and has conducted a first test round in the field. To set up a similar system for , feedback has been collected from local tea experts and UTZ is developing a comparable list of indicators. For our cocoa program, UTZ works together with Solidaridad and COSA to collect baseline data from pilot projects.

Planned Activities for 2009 In 2009 UTZ will further test and develop the monitoring questionnaire and set up the structures for the implementation of the monitoring system. In addition UTZ will be conducting achievement studies, collecting data on a number of key objectives of UTZ certification, by means of spot checks in key producing countries.

Impact Studies Case studies conducted over the last year have been systematically analyzed, filtering out the main economic, social and environmental impacts of UTZ certification.

Please note: most of these cases have been collected in the last year (2008), reporting on impact over the year before (2007).

16 UTZ CERTIFIED Good Inside Annual Report 2008 Economic Impacts A quote from UTZ CERTIFIED farmers in Guatemala expressed during a case study in July 2008: The positive effect of the UTZ CERTIFIED program on the incomes of certified producers is achieved as a result “The best opportunity that UTZ has offered is an opportunity of good agricultural practices, efficient and professional of teaching us how to act like a business. Based on their farm management, leading to lower production certification program and therefore on their standards and higher prices, including a premium which is an we have been able to become much more productive additional benefit, like the icing on the cake. and have been able to run like a business”.

Looking at the findings of the case studies conduct- ed during the last year, the main advantages from A case study in Kenya showed that an UTZ CERTIFIED cooperative in Kenya last year did not only receive a certification that are expressed by UTZ CERTIFIED pro- premium of $5 per bag, but also increased their sales ducers are increased and more stable prices, better price by $9,70 per bag due to improved quality. With a quality, new buying channels and better relations with total sale of 3043 bags, their total income increased by buyers, more professional business practices (espe- almost $30.000 on top of the premium. cially record keeping), increased productivity and lower production costs.

On the UTZ CERTIFIED Nicaraguan farm ‘La Cumplida’, the first 5 houses of the project ‘El Talismán’ were inaugurated in August 2008. Farm owner Clemente Poncon always wanted to improve the social Social Impacts conditions of the people working on the coffee plantation. ‘El Talismán’ started in 2007 when the land for the planned 100 houses was bought. By the end of 2009 hundred families are expected to enjoy their new homes. The main social impacts of the UTZ Each house has two rooms, a living room and a kitchen with a stove. To certification showed to be improved make this project possible a number of investments were made. The coffee living conditions (housing and sani- quality was improved, the production became environmentally friendly and tary facilities for workers and their without contamination, a reforestation project was started. They obtained families), improved access to health the UTZ certification and receive higher prices for their product. care and education (schools and clinics being built) and healthy and safe working conditions (training, “Because of our high productivity “Cooperative San Pedro Yepocapa” was now able to open a new pharmacy. Through good management we are safe storage and handling of agro- now able to give clients a 20% discount on all the medicines that we offer. chemicals, protective clothing and This has been possible because we have applied the standards that UTZ equipment). Another important ef- gives us to have quality coffee and it has worked great for the pharmacy. fect is the improved relation between Until now we have more than 120,000 quetzales in medicine when only 2 cooperative members leading to years ago we had only 20,000 quetzales.” stronger producers’ organizations. (Case study Guatemala, 2008). Environmental Impacts

The main environmental impacts, according to the different case studies, are treatment and re- use of water during processing, conversion of coffee pulp to organic fertilizer, re-forestation, implementation of Integrated Pest Management practices, and waste management.

“On a trip visiting some of UTZ CERTIFIED projects in Honduras and Guatemala the visitors saw good examples of good environment practices such as ongoing reforestation plans, water re-use and treatment plants, worm farming to treat coffee pulp, use of water for energy generation, increased biological treatment of plagues and the production of bio diesel for internal farm consumption”.

(Report IFTN Central America Program, 2007).

“Farmers in Honduras learnt how to treat the pulp generated from wet milling processes to create organic fertilizers. They received guidance on fertilizer management, in which the soil composition of their farms was analyzed and customized formulae developed. These formulae improved crop yields and reduced the quantities of fertilizers needed. Sustainable farming methods have also contributed to reducing pollution in the farms. In a community where water and pulp have never been treated, a quantity equivalent to over 33 Olympic sized pools of residual water and over 6500 metric tons of pulp have been treated through APS (Alianza para la Sostenibilidad worked with UTZ) program. Reforestation initiatives have also been implemented.”

(Corporate Social Responsibility Initiative Report No. 20, Harvard University, 2007).

© Olaf Hammelburg Olaf ©

Cocoa

Since mid 2007, UTZ CERTIFIED is working on the UTZ CERTIFIED organized training sessions for Good Inside cocoa program, together with a agronomists and independent certifiers to get broad group of company and NGO partners. familiar with the program and approach. Testing of The start-up period lasts until the end of 2009, the draft Code of Conduct is taking place and led by when the program will be fully operational. the partners in origin, , Ecom and Solidaridad. Cocoa farming is done almost exclusively by small The traditional and established chocolate farmers, which creates specific challenges. The maker Chocolat Frey took the opportunity to feedback collected from these pilots will be used participate in this early phase and joined the to deliver the final Code of Conduct, mid 2009. program at the end of 2008. Chocolat Frey is part of the MIGROS retail group and leader in In order to create transparency for buyers and the Swiss chocolate market. consumers, the certified cocoa also needs to be traceable. A working group on traceability In 2008, activities were focused on the de- and labeling has been formed to guide the velopment of a mainstream standard for development of the cocoa supply chain ap- sustainable cocoa production. An intensive proach from the producer group through to process took place with an international work- the final consumer. ing group, followed by a well-visited and live- ly stakeholder workshop in Côte d’Ivoire, the Partners: MARS, Nestlé, ECOM, Cargill, Ahold, world’s largest cocoa producing country. The Heinz, Solidaridad, Oxfam Novib, WWF. Code of Conduct and in particular the new stepwise improvement approach has been For more information on the cocoa program, well-received. go to www.utzcertified.org/cocoa.

22 UTZ CERTIFIED Good Inside Annual Report 2008 Tea

Together with coffee and cocoa, tea is one of those special natural products that people have known and enjoyed all over the world for centuries. Seeing tea as a natural fit, UTZ CERTIFIED engaged in the set-up of the Good Inside tea program, together with long-standing coffee partners Sara Lee and Ahold.

In 2008, a draft Code of Conduct was created and discussed by stakeholders worldwide. Solidaridad convened National Reference Groups in India, Indonesia and Sri Lanka to pro- vide feedback. The Douwe Egberts Foundation supported producer support projects in Malawi and Indonesia, aiming for certification of the involved estates in early 2009.

Discussions took place with many tea buyers and in particular the Ethical Tea Partnership to stimulate broader market interest for Good Inside tea. These discussions will continue in 2009.

Partners: Sara Lee, Ahold, Solidaridad.

For more information on the tea program, go to www.utzcertified.org/tea

UTZ CERTIFIED Good Inside Annual Report 2008 23 Palm Oil

UTZ Partnering with Roundtable on Sustainable Palm Oil (RSPO)

Palm oil is a widely used vegetable oil which is mass balance-model, which allows mixing of used in many different consumer and industrial certified oil with non-certified oil. It is generally products. The production has been criticized regarded as an intermediate model towards heavily for its impact on the environment and the segregation-model, which will go live mid on people. The Roundtable on Sustainable Palm March 2009. A third system (Identity Preserved) Oil (RSPO) was founded by WWF and Unilever will be developed later. Together these three and many stakeholders related to the palm models provide trading opportunities to serve oil supply chain have joined since. By the end all palm oil producing and trading companies, of 2008, well over 300 organizations, including from plantation to consumer products. many big multinationals, as well as NGOs like Oxfam became member. Events and Conferences UTZ successfully presented its 3 traceability UTZ CERTIFIED is proud to be the endorsed models to a key audience of 550 people from and exclusive partner of RSPO for developing, November 18 - 20, 2008, at the RSPO’s 6th implementing and managing the supply chain Roundtable meeting (RT6) on Bali, Indonesia. trading systems for RSPO-certified palm oil By a combination of a plenary presentation, (and its different derivatives). The year 2008 a workshop and a booth in the conference started with defining the exact scope of this hallway UTZ succeeded to position itself as a challenging assignment. A dedicated working professional, knowledgeable and trustworthy group with key stakeholders from within the service provider. palm oil supply chain as well as other important stakeholders, including NGOs, was formed. This Sponsors: Adessium Foundation, Doen Foundation, group provided UTZ the essential information Solidaridad and Hivos are sponsors of the UTZ to develop its traceability system for palm CERTIFIED Palm Oil Program. oil. Based on this UTZ was able to launch the system on 22 December 2008. It facilitates For more information on the palm oil program, market actors to trade palm oil under the go to www.utzcertified.org/palmoil

24 UTZ CERTIFIED Good Inside Annual Report 2008 Soy

Soy is globally used as a vegetable oil and as an ingredient for animal feed. Due to increasing global demand and - as a result - the expansion of the growing area of this crop, negative impacts like loss of natural habitats and social conflicts occur as a mostly unintended side-effect. The Roundtable on Responsible Soy Association (RTRS) is an international multi-stakeholder initiative that brings together those concerned with the impacts of the soy economy. It is working to define what responsibly grown and processed soy is and to promote the best available practices to mitigate negative impacts throughout the value chain.

The RTRS’ main instrument is the dialogue between groups with different interests and backgrounds to define common ground for action. UTZ CERTIFIED believes the RTRS is the most credible platform aimed at transforming the mainstream soy growing and trading value chain to date. Therefore UTZ aims to partner with the RTRS and determine in cooperation with this initiative what services it can provide to improve current practices in the soy economy.

Events and Conferences UTZ participated in RTRS’ conference in Buenos Aires, Argentina on 23 and 24 April, 2008. This third RTRS Conference was attended by about 150 people mostly from Argentina, Brazil and the EU. Most other participants came from other South American countries and the US.

UTZ CERTIFIED Good Inside Annual Report 2008 25 Biofuels Sugar Cane

With global warming high on the agenda, UTZ Partnering with BIOPEC governments and companies are stimulated to Growing sugar cane has severe social and work towards a society which will strongly decrease environmental side effects. Not in the least its greenhouse gas emissions. Sustainable and due to a staggering demand from both ex- renewable sources of energy, like biofuels, are isting markets and from new markets, like the part of this quest. Next to sources like wind-, solar-, market for biofuels. UTZ CERTIFIED has been water- and other energy sources, biofuels will play assigned to develop a trading system for sus- an increasing important role in the energy mix in tainably produced (cane) sugar in Mozam- the coming years. bique. Together with partnering organization Solidaridad, UTZ aims to launch its system in In 2008 UTZ CERTIFIED continued negotiations the second half of 2009. with different actors in the electricity and transport fuels sector to determine how it could Events and Conferences best support these sectors in their quest to set October 2, 2008 UTZ participated in a confer- up renewable, sustainable supply chains for the ence aimed at developing sustainability stan- feedstock of their plants. UTZ aims to team up dards for sugar cane organized by the Renew- with mainstream existing business initiatives. able Fuels Agency and The Better Sugar cane Initiative (London). Events and Conferences UTZ has presented at different Biopec events in Partners: Solidaridad The , Biofuel Summit in Madrid and some EU-focused events in Brussels. Sponsors: Solidaridad

26 UTZ CERTIFIED Good Inside Annual Report 2008 Program Management and Administration The UTZ CERTIFIED Good Inside Team

(People working at UTZ CERTIFIED end of 2008)

Name Title Based in

Management Juliette Caulkins Director Sales and Marketing · (Interim) Executive Director Amsterdam

Office management Brigitte Bonekamp Office Manager Amsterdam Finance Sebe Buitenkamp Interim Finance Manager Amsterdam Administration Maria Jimenez Rojas Office and Finance Support Amsterdam

Britta Wyss Bisang Certification Manager Amsterdam Certification Vera Espindola Rafael Certification Coordinator Amsterdam Tessa Laan Certification Coordinator Amsterdam

Patricia Nieto Esteban Traceability Coordinator Amsterdam Traceability Wiard Gorter Interim ICT / Traceability Manager Amsterdam ICT Ruud van den Brink Volunteer Amsterdam

Bas Geerts Program Manager Palm Oil, Soy & Biofuels Amsterdam Marrit Rooda Product Coordinator Palm Oil, Soy & Biofuels Amsterdam Product Units Daan de Vries Program Manager Cocoa & Tea Amsterdam Charlotte Eijsbouts Product Coordinator Cocoa & Tea Amsterdam

Anita Aerni Sales Account Manager Europe Switzerland Paul Zuiderbeek Sales Account Manager Europe Amsterdam Sales Miyuki Ortiz Sales Account Manager Japan Graham Mitchell Sales Account Manager America USA Illana Burk Communication Coordinator USA

Henrike Offeringa Business Support Manager Amsterdam Business Support Elena Mihaylova Business Support Coordinator Amsterdam Loes van Rheen Business Support Coordinator Amsterdam

Sarah Goel Program Communications Amsterdam Communications Petra de Jong Corporate Communications Amsterdam

UTZ CERTIFIED Good Inside Annual Report 2008 27 The UTZ CERTIFIED Members of the Board

Nico Roozen, President Prolonging Members: Board Member since May 2007 President of the Board since September 2007 Herman Mulder, Treasurer Director of Solidaridad, The Netherlands Board Member since December 2007 Founder of Max Havelaar, AgroFair, Fair & Co Treasurer since September 2008 Former Senior Executive Vice-President, Head Group Management, Coordinator Sustain- Leaving Board Members: able Development of ABN AMRO Bank Hans Perk, Treasurer The Netherlands. Board Member Richard Holland October 2003 - September 2008 Board Member since December 2007 Coffee Program Manager of CSN Freshwater Director WWF, The Netherlands The Netherlands Carlos Murillo New Members: Board Member June 2003 - September 2008 Director of Expocert S.A., Costa Rica Adriana Mejia Cuartas Board member since September 2008 Jeff Hill Director International Cooperation Europe Board Member June 2003 - September 2008 at National Federation of Coffee Growers of CEO of Java Trading Company, USA Colombia Jan Bernhard Carlos H.J. Brando Board Member Board member since September 2008 January 2005 - September 2008 Director of P&A International Marketing, a Executive Director of Pronatur (UTZ CERTIFIED company for Coffee consulting, marketing producer group), Peru and trading, Brazil

28 UTZ CERTIFIED Good Inside Annual Report 2008 UTZ CERTIFIED Sponsors

UTZ CERTIFIED is working towards becoming self financing per program, through the administration fee. For our new programs we will get contribution from the industry in the start up phase and sponsoring from organizations such as Solidaridad, DOEN, Hivos, Irish Aid (via Irish Network), Oxfam, Adessium Foundation and IDH, to overcome the first few years before the program becomes self financing.

Solidaridad Dutch developmental organization supporting organizations, groups and persons in Latin America to encourage structural poverty reduction.

Stichting DOEN Dutch foundation that provides funding to initiatives for Developmental Issues, Nature and Environment, Human rights and Culture.

Hivos Dutch non-governmental organization committed to the poor and marginalized in countries in Africa, Asia and Latin America and to organizations promoting their interests.

Irish Aid (via Irish Fair Trade Network) Irish Aid has committed itself to developing a strategic partnership with the Irish Fairtrade Network. Irish Aid’s core mission is alleviating poverty in a measurable and sustainable way.

Oxfam Novib Oxfam Novib is fighting for a just world without poverty. Together with people, organizations, businesses and governments. Through projects and lobby. Locally and internationally.

Adessium Foundation Dutch Foundation that aspires to contribute to a world in which people live in harmony with each other and their environment.

IDH The objective of the Dutch Sustainable Trade Initiative (IDH) is to improve the sustainability of international supply chains, by tackling social, ecological and economical bottlenecks for the first chain actors in developing countries.

UTZ CERTIFIED Good Inside Annual Report 2008 29 Financial Accounts 2008 General Notes to the Accounts

UTZ CERTIFIED Good Inside is a not-for-profit foundation, established in Amsterdam, the Netherlands, on July 3 2001.

Significant Accounting Policies

Assets and liabilities Unless otherwise indicated, assets and liabilities are stated at nominal value.

Tangible fixed assets Tangible fixed assets are stated at their historical cost less depreciation. Depreciation is provided in equal annual instalments over the estimated useful lives of the assets.

Intangible fixed assets Intangible fixed assets are stated at their historical cost less amortization. Amortization is provided in equal annual instalments over the estimated useful lives of the assets.

Result of the year The result represents the difference between the receivable subsidy and turnover and the costs and other charges of the year. The results on transactions are recognized in the year they are realized; losses are taken as soon as they are foreseeable.

Turnover Turnover represents fees billed for the use of the’ UTZ CERTIFIED’ certification by coffee producers, and is calculated on the basis of volumes sold.

Taxation The activities of the Foundation are exempt from corporate income tax till the reserve of the foundation will reach one million.

30 UTZ CERTIFIED Good Inside Annual Report 2008 The Facts & Figures · Report on Financial Developments 2008

Operating results increased to €743 retained to correspond to the growth in products and earnings for the year 2008 from a loss of €61,663 additional leased space is being sought to for the year 2007. support these needs.

Total income increased by 34% to € 2,481,828 Employees for the year 2008 from € 2,147,073 for the year At the end of this period we have 18 employees, 2007. This increase primarily reflects more sales of which 8 have an open-ended employment of certified coffee. Palm Oil as a new product is contract and 10 have short-term employment launched in 2008. contracts. In addition, the company employed 1 person through a staffing agency and 2 The investment amount more than doubled in people as internship. 2008 on the same level as in 2007. The increase was due to development of the traceability During the year 2008, the Foundation had an system for the new products. average number of employees based on full time employee of 20.66 (2007: 13.1). This number does Currently the UTZ CERTIFIED Good Inside team not include interns that supported UTZ CERTIFIED is working hard on the development and during the year. implementation of projects in cocoa, tea and biofuels. Without losing its focus on coffee, Remuneration of Directors UTZ CERTIFIED Good Inside wants to transfer its The directors of the UTZ CERTIFIED Foundation expertise to these products and thereby expand received a gross salary of € 153 K in 2008. The its contribution to other sustainable agricultural members of the Board of Directors participate on sectors. It is anticipated at this time that all a voluntary basis. They receive no remuneration current operations and future growth can be for their participation and they are partially funded out of cash flow from existing operations reimbursed for out-of-pocket travel expenses to and sponsoring. Employee growth is anticipated attend board meetings.

UTZ CERTIFIED Good Inside Annual Report 2008 31 Balance as per December 31 · 2008

2008 2007 ASSETS € € Fixed assets Tangible fixed assets 49,241 46,885 Intangible fixed assets 260,967 101,425

310,208 148,310 Current assets Accounts receivable 273,055 179,418 Taxes and social premiums 82,245 30,174 Other receivables and prepaid expenses 13,311 72,443 Current accounts 0 0 Cash at banks 953,720 673,871

1,322,331 955,906

1,632,539 1,104,216

EQUITY AND LIABILITIES

Capital Account Paid in capital 3,325 3,325 Accumulated result 116,488 115,745 Continuity reserve 305,000 305,000

424,813 424,070 Current liabilities Accounts payable 89,120 97,709 Taxes and social premiums 69,938 77,615 Current account Guatemala 0 0 Other liabilities 1,048,669 504,822

1,207,726 680,146

1,632,539 1,104,216

32 UTZ CERTIFIED Good Inside Annual Report 2008 Profit and loss account for the year ended December 31, 2008

2008 Budget 2008 Actual 2007 Actual INCOME € € € Administration Fees 1,050,870 1,283,445 863,804 Subsidies 1,173,333 1,183,072 1,185,806 Contributions 270,679 4,512 0 Other 0 10,800 97,463

2,494,882 2,481,828 2,147,073 OPERATING EXPENSES

Personnel expenses 1,543,474 1,446,930 1,371,623 Office rent and service 118,563 62,836 66,251 Sales expenses 256,811 183,031 212,522 Travel expenses 250,062 271,465 210,864 Office supply and equipment 107,330 218,784 116,071 Other office expenses 45,754 54,458 17,477 Professional services 300,325 148,391 90,538

2,622,320 2,385,893 2,085,346

EBITDA (127,438) 95,935 61,727

Depreciation 153,845 104,631 71,623

153,845 104,631 71,623

EBIT (281,283) (8,696) (9,896)

Exchange result 0 1,383 0 Interest 0 11,000 0 Other 0 (2,944) (51,767)

Total financial result 0 9,439 (51,767)

Result for the year (281,283) 743 (61,663)

UTZ CERTIFIED Good Inside Annual Report 2008 33