Case study Unilever sustainable tea Part II: Reaching out to smallholders in Kenya and Argentina By Dr Tania Moreira Braga, Dr Aileen Ionescu-Somers and Professor Ralf W. Seifert, IMD International Foreword Contents A tipping point happens when a critical mass One of the arenas that is rapidly moving 1.0 Executive summary 4 of people begin to shift their perception of toward a sustainability tipping point and which an issue and take action in a new direction. o ers exemplars of creative partnerships is 2.0 Introduction 8 that of commodity market transformation. As I look across the global landscape, I feel This is the collective e ort by businesses, 3.0 Combining E orts in Kenya 12 that we are approaching a tipping point NGOs, labour unions, and governments to 3.1 Laying the Groundwork with the Farmer Field Schools 13 concerning global sustainability. It is catalyzed restructure the production and distribution 3.2 Combining the Farmer Field Schools with Capacity Building by at least three important realizations by systems of commodities to be more for Certifi cation 15 business, government, and civil society: sustainable, while building broad market 3.3 Certifying Kenyan Smallholders 17 The fi r s t is a realization that the world is demand for sustainable products. If done 3.4 Roll-out Challenges 17 fi nite and that a growing population with well, these improved markets will deliver 3.5 Potential for Replication 18 a higher ambition for living standards will large-scale social and environmental outcomes inevitably lead to a world which will be that advance the millennium development 4.0 Building from Scratch in Argentina 20 resource and carbon constrained. goals and strengthen the economic viability 4.1 Capacity Building for Sustainable Tea Growing 21 of entire commodity sectors and the leading 4.2 Harvesting Results 23 The second is the realization that to solve companies involved. 4.3 Challenges and Potential for Replication 25 the challenges for this future world we need systems solutions. We cannot solve individual A recognised catalyst of this kind of market problems in silos. The connections between transformation is the Dutch Sustainable energy, climate change, water, food, urban Trade Initiative (IDH). IDH’s mission is to infrastructure and the imperative of upscale and accelerate the mainstreaming functioning ecosystems are very clear. of sustainability in global commodity chains. Through innovative public-private partnerships, A third realization is that no part of society IDH joins the forces of multiple stakeholders can solve this on its own. Individually, to build and execute programs that tackle governments, businesses, and civil society social, ecological, and economic bottlenecks to lack the technology, fi nancial resources, and commodity market sustainability. In addition management skills to build a sustainable world IDH acts as a knowledge broker, capturing on their own. Yet collectively, we already and sharing best practices in supply chain have – or can develop – everything that is sustainability. needed for this large-scale transformation. As a result, there is growing interest in new This booklet is part of a series of IDH- types of public-private partnerships that supported case studies that focus on the jointly fi nd solutions to these issues. In such “know-how” of commodity market transfor- partnerships, the skills and resources of both m ation. These studies are fi lled with practical the private sector and civil society are insights, wisdom, and time-tested advice from combined with the legislative and regulatory those deep in the trenches of driving real power of governments. change in global markets. I encourage you to take these lessons learned and innovative ideas straight to the heart of your own work. By doing so, we will take another powerful step toward a tipping point for global sustainability. Björn Stigson President, World Business Council for Sustainable Development Unilever sustainable tea: Reaching out to smallholders in Kenya and Argentina — 3 Commodity value chains around the world are increasingly stressed; some even face severe and dire circumstances. This is due to myriad social, Chapter 1 environmental and economic challenges linked Executive summary to the fi nite nature of natural resources and rapidly growing populations. ‘We convinced the farmers to adapt good These pressures threaten not only the raw By reading part two of this case study, agricultural practices material supply for key industries such as business executives and other stakeholders food & beverage and textiles, but also the will learn from Unilever’s journey in multiple livelihoods of tens of millions of people and ways. The company, recognising that no through their own the natural resources they depend on. For this single entity can solve the complex issues reason, companies, NGOs, and governments around conversion of the tea value chain experiments on the are actively seeking solutions to render on its own, entered into a partnership with commodity value chains more sustainable. the Rainforest Alliance. Through Rainforest Alliance certifi cation of tea plantations, the fi eld. This soon led Tea – production, processing and consumption partnership has accelerated a transformation – is one of the commodity value chains in to sustainable Unilever tea products. Part two question. Part one of this case, the fi rst of of the case study focuses on the very di erent to increased yields IDH’s Market Transformation case series, experiences of Unilever “on the ground” in documents the strategic evolution of a Kenya and Argentina. The lessons learned groundbreaking initiative by Unilever, the from building the partnerships in each country and to extra income Anglo-Dutch food & beverage company, and the “win-win” outcomes for the players to make its own tea value chain sustainable. involved are carefully extracted and reported for them.’ This initiative started with the popular Lipton in each case. and PG Tips brands in specifi c countries and is gradually rolling out in other regions of The Kenyan and Argentinian case stories are Peter Mbadi, Agriculture Manager, the world. excellent examples of how companies, by carefully building multidimensional business Kenya Tea Development Agency (KTDA) cases for sustainability and strategic execution plans that account for the specifi c challenges of sustainability and partnerships, can grasp opportunities and forge new markets. It shows how companies can become fi rst movers and leaders in contributing to more sustainable business models, stimulating multiple local environmental, social and economic pay o s while simultaneously ensuring the fi nancial and longer-term sustainability of their core business. Unilever sustainable tea: Reaching out to smallholders in Kenya and Argentina — 4 Unilever sustainable tea: Reaching out to smallholders in Kenya and Argentina — 5 Most interestingly in this case, the moves To accelerate momentum towards the made by Unilever have had a knock-on e ect requisite “sustainability tipping points” of contributing to a “tipping point” for across commodity value chains, it is vital sustainability in the tea sector. As a direct that such cases enter mainstream business result of Unilever’s initiatives, several other thinking, refl ection and learning. To attain major companies and brands followed in this objective, parts one and two of this case, Unilever’s footsteps and are certifying their and forthcoming “market transformation” own tea supply chains. This has happened best practice examples, will be converted to without the loss of business benefi ts to a series of teachable cases used in the core Unilever, implying that the business rationale curriculum of IMD business school, other was founded on more than a “fi rst mover” academic institutions and in company competitive advantage. The case stories training programs. This case is already an of Unilever’s engagement in Kenya and integral part of a Masterclass Workshop for Argentina document, on a local level, key mainstream managers in companies linked parts of a tangible framework for this “systems to commodity value chains. This is conducted solution” to the complex sustainability by IMD’ s Center for Corporate Sustainability dilemmas around tea production. Although Management annually in Switzerland and excellent and leading examples of certifi cation the United States in partnership with the initiatives have existed for some time, this Sustainable Agriculture Initiative Platform may be the fi rst time that such a partnership (SAI Platform) and the Dutch Sustainable will succeed in impacting an entire commodity Trade Initiative. value chain far beyond the activities of the actual company involved. Unilever sustainable tea: Reaching out to smallholders in Kenya and Argentina — 6 Unilever sustainable tea: Reaching out to smallholders in Kenya and Argentina — 7 In May 2007 Unilever publicly announced its goal to source the tea in all Lipton teabags sold globally from Rainforest Alliance Certifi edTM farms by 2015. Chapter 2 The supply-chain and marketing roll-out was planned Introduction to be unfolded in two phases; Phase 1 being complete when all of the tea in Lipton Yellow Label tea bags sold ‘Our experience in Western Europe became Rainforest Alliance Certifi ed.1 shows that even small To ensure an accelerated supply-chain roll- Reaching out to smallholders during Phase 2, improvements in out of certifi ed tea during Phase 1, Unilever although signifi cantly more challenging, was and the Rainforest Alliance established a not negotiable. Jagjeet Kandal, global tea priority list of large estates in a few selected sustainability manager at Unilever, explained: smallholder agricultural countries, while working concurrently to ‘We source tea from many thousands of expand certifi cation to smallholders. smallholder farmers worldwide. To ensure practices can increase a long-term supply of certifi ed tea, Working with large estates was e cient not smallholders must be on board. Having only because of obvious scale advantages – worked with them for decades we know yields, long-term income which allowed the rapid conversion of large their challenges.