External Evaluation of the UTZ Tea Programme in Sri Lanka Final report, April 2016 Ben Haagsma, Trude Vredeveld, Amina Yoosuf and Dave Maurice Fair & Sustainable Advisory Services, the Netherlands and Nucleus Foundation, Sri Lanka Table of Contents Table of Contents 3 Executive Summary 4 1. Introduction 8 1.1 History of UTZ in Sri Lanka 8 1.2 Purpose and goal of the evaluation 9 1.3 Methodology and evaluation steps 10 1.4 Challenges and limitations 13 2. Context of the Sri Lanka Tea Industry 14 3. UTZ Training Programme 17 3.1 Characteristics of the programme 17 3.2 Effectiveness of UTZ training programme 20 3.3 Implementation in the UTZ training programme 22 4. Four Types of Changes 23 4.1 Management 23 4.2 Farming practices 30 4.3 Working and living conditions 34 4.4 Environment 35 4.5 Unintended changes 37 5. Sustainability 39 5.1 Overall sustainability assessment 39 5.2 External sustainability challenges 40 5.3 Internal sustainability challenges 40 5.4 Sustainability opportunities 42 6. Conclusions and Recommendations 44 6.1 Overall conclusions 44 6.2 Recommendations 47 Annex 1. Terms of Reference 49 Annex 2. Sample Interview Format 54 Annex 3. Evaluation Calendar 56 Annex 4. Essential Training List of UTZ Certification Programme 61 External Evaluation of the UTZ Tea Programme in Sri Lanka 3 Executive Summary The UTZ tea programme in Sri Lanka first began in experts, and longer-term coaching and refresher 2011, implemented by the Institute of Social training. In general, the number of people trained Development with the support of Solidaridad, has been enough to assure a decent level of UTZ, Douwe Egberts Foundation and various knowledge transfer on tea estates, in worker institutions within the Sri Lankan tea sector. communities and within smallholder groups. Building the capacity of managers and workers on The purpose of this evaluation is to inform UTZ tea estates was key to changing both mind sets and other stakeholders about the outcomes of the and commitment levels. UTZ tea programme in Sri Lanka, and to draw Changes experienced by the key target groups lessons and recommendations. The evaluation have been clustered into four categories: 1) aimed particularly to identify, describe and management; 2) farming practices; 3) working evaluate the social, economic and environmental and living conditions, and 4) environment. outcomes of the UTZ tea programme, from the perspective of different stakeholders. The Changes in management practices evaluation team was also asked to contextualise our findings within the Sri Lanka tea sector, The changes in management practices constituted referring both to the UTZ Theory of Change and to a cornerstone for all other changes. The Internal broader trends within the voluntary sustainability Management System on the tea estates provided standards sector. a widely appreciated platform for estate management and workers to discuss issues of Sri Lankan tea sector common interest. Both groups consistently reported that their relations improved as a result The Sri Lankan tea sector has a long history, and of the UTZ programme, with estate managers is still the third largest foreign currency earner for coming to recognise the essential contribution of the country. The sector has a high political workers to better estate performance. Managers profile: various tea institutions support and reported reduced absenteeism and improved work govern the sector. The tea union, representing discipline. Workers increased their sense of more than 300,000 tea estate workers, is also ownership and responsibility for the performance strongly present. However, the profitability of the of the estate, and appreciated the opportunities sector is under threat due to several external and to acquire greater technical skills. Interestingly, internal factors. Sri Lanka has lost many of her workers also developed a more dualistic view on important export markets due to the ruble crisis the role of unions, looking more critically at union in Russia and on-going war in the Middle East. demands for higher wages in relation to the Also, compared to other tea producing countries business performance of ‘their’ estate. Sri Lanka has high labour costs, low labour A key change took place in the minds of estate productivity and relatively difficult terrain management and workers. Both parties now conditions. better appreciated each other’s roles. This The UTZ training programme deeper-felt change also applied to gender relations. Estates recognised the role of female The UTZ standard is the most recent sustainability workers in tea-leaf quality and productivity, with standard to be introduced to Sri Lanka. Although a few estates starting to appoint women as field it was initially regarded with skepticism, UTZ was supervisors. As a result, women have become quickly recognised as the most comprehensive more vocal and self-confident. standard. The Institute of Social Development, a Sri Lanka based organization, trained estate Estates have also started different outgrower managers, workers and smallholder farmers to models to reduce labour costs and improve implement the UTZ standard and provided initial productivity. These new arrangements may result material support, including protective equipment in a win-win situation between estate for workers and signage in tea factories. management and workers, once there is an Additionally the Institute promoted UTZ among agreement about how risks and benefits are to be tea stakeholders such as buyers, brokers and shared among the parties. However, this was not government institutions. Monthly coordination yet the case, and this development requires close meetings in Colombo were a key activity in this attention. regard. Certified smallholders combined specialisation The evaluators found that the UTZ training (for better tea production and quality) with farm programme has been effective for several diversification, investing in growing more crops. reasons: a good choice of topics, a sound gap Such improved farm management makes analysis on each estate, an effective mix of in- smallholders more resilient to external shocks, house and residential training, use of national tea and as a result they have become more External Evaluation of the UTZ Tea Programme in Sri Lanka 4 independent in their decisions on tea production adaptation was an important concern for all and selling. interviewees, but they did not have clear ideas on how to address this issue. In our view the adoption Brokers and buyers made good use of the Good of GAP already constitutes a solid basis for climate Inside Portal of UTZ (traceability platform), after change adaptation. Improved water and soil initial obstacles had been overcome. They see the (fertility) management is another pillar for potential of the portal for marketing certified tea. climate change adaptation. But to sustain the Changes in farming and manufacturing GAPs required to achieve durable environmental practices outcomes, the high costs of labour are currently of overriding concern to producers. The Good Agricultural Practices (GAP) and Good Manufacturing Practices (GMP) promoted by UTZ Unintended changes have been adopted to a large extent and are The most salient unintended change was the highly valued. This has led to less ‘clean weeding’ changed mind-set of estate management and practices (that would otherwise lead to more workers, leading to improved relations within the erosion), better handling of pesticides and tea industry. The unintended negative changes fertilisers, and the adoption of better harvesting mentioned did not always relate directly to UTZ and plucking methods. This has resulted in higher certification. They testified to the yields, better tea-leaf quality and a reduced disappointments of different stakeholders as to percentage of rejects. Smallholder farmers and the overall crisis in the tea sector, the low prices, workers also applied GAP to other crops on their lack of increased incomes and low sales of UTZ farms and plots. certified tea etc. Current low profitability in the tea sector is Sales of UTZ certified tea limiting the use of additional labour, which may stand in the way of a sustained application of GAP The market for UTZ certified tea is still limited due to its labour-intensive character. The same and has grown slowly over the past few years. applies for further investments in tea bush Although this modest growth was understood by rejuvenation and soil fertility, which has been buyers and brokers in the capital, Colombo, adopted to a lesser extent. Better care for post- expectations of a stronger market uptake of UTZ harvest handling (reducing transport time certified tea was raised by all value chain actors. between harvest in field and factory; and It was acknowledged that the supply of UTZ adherence to hygiene requirements) and GMP in certified estates did not always match the specific the factory (drying, sorting, fermenting) have quality requirements of the market. Consumer consistently increased the quality of tea. Overall, preferences in the different tea markets the high costs of production remained a concern complicate the branding and sourcing of tea. The for certified estates and smallholders. percentage of UTZ certified tea sold as certified by the estates has declined in 2014 and 2015, Changes in working and living conditions reaching very low levels. This situation is The benefits associated with working and living disappointing for producers, and has led some conditions in certified factories and communities estates to fail to renew their UTZ certification. A were clearly expressed by workers, men and critical point here is that estate managers too women. Health, drinking water and gender- easily assume that compliance with the UTZ Code related improvements were the most frequently of Conduct would automatically lead to sales of cited improvements. However, estates are facing certified tea and the corresponding premium difficulties in establishing the scope of their payment. Instead, the specific tea quality responsibility for improving living conditions for requirements of different markets require more plantation communities.