Simplifying supply chains? Not so simple.
Starting out as a discussion on simplifying supply chains and sharing value more equally, THIRST’s latest TEA Talk blossomed out into a fascinating discourse on transformative business models, innovative financial approaches and the very fundamental question of how we as a global community value food.
Because neither supply chains nor how the price of tea is shared along them exist in a vacuum. There are also financing costs, political strife, supply-and-demand imbalance, a host of other challenging realities – and the one that binds them all – the profit-maximisation principle.
But let’s pare it back to what one TEA Talk participant called “a fundamental problem for society… how do you value a kilo of tea?” It’s taken a global pandemic to ram home to most of us how immeasurably valuable are the women and men who grow our food and drink – and yet how vulnerable to poverty and exploitation they remain. If measured by how much we reward them, it seems that society barely values food at all.
With a supply chain pared down to the minimum – ie buying directly from the producer – and with only a very moderate profit-making motive, Teekampagne is one of the few tea retailers that can not only spell out how much it values a kilo of tea, but displays it proudly on its website – 57% of the consumer price. Such transparency is as rare as unicorn breath in the conventional tea industry. But even without transparency, could conventional companies make similar calculations?
Would the right tools help?
Perhaps, if they used the Sustainable Procurement Kit, a tool to help companies identify where in the cost structure there is room for manoeuvre so that better prices can be paid, enabling producers to bridge the gap between prevailing and living wages for their workers.
For Erinch Sahan, who – as head of the World Fair Trade Organization “work[s] for 400+ social enterprise that fully practice Fair Trade” “the big question is what are the business models that populate these supply chains, all the way through and how do we get them to be focussed on that goal of having sustainable chains and not profit maximisation?”
Oxfam’s Rachel Wilshaw had seen first-hand how the blinkered focus on profit maximisation can undermine efforts to improve wages in the Malawi 2020 Tea Revitalisation Programme, where the principles of the Sustainable Procurement Kit were developed. “Some companies really liked the sustainable procurement model and were up for paying a bit more. But the pressure they were under from the business to maximise margins in order to satisfy shareholders and owners meant they felt they were going against the flow of what the company actually wanted of them – and that they were trying to carve out something worthwhile from a business that has another purpose.”
Participants also touched on this tension between the traditional profit-maximisation model and efforts to improve social and environmental outcomes. One said; “a big reason for [tea] prices coming down is that the wave of organic and fair trade is becoming such a main stream force. This has created a huge pressure for social enterprises and made their markets go down.” And another cited the barriers that small coffee growing social enterprises faced in prospering within a market-place that has not fundamentally changed.
So what is to be done?
Teekampagne’s Kathrin Gassert stressed that retailers should be taking much more responsibility for what happens in tea gardens. “The fair trade label is not enough. A lot of the time the finger is pointed at the producer – who [in India] has to provide many things the state would provide in other countries. And yet she had calculated that only 4 cents from the sale of a fair trade tea bag bought from a discounter would actually go back to the workers. She recommended teaching consumers about transparent supply chains and getting retailers to play their part.
What more can be done by companies themselves? Vertical integration? Estates selling their own brand tea direct to consumers? Not necessarily, said sustainable procurement advisor to IDH, Will Battle. Workers on Unilever and Tata tea estates with similar conditions to those on neighbouring estates could testify that it’s no silver bullet.
Cut out middle-men then? Do that, said Will, and you lose product experts who provide a valuable service in aggregating orders, providing finance, expertise in documentation and getting goods across borders.
What about technology? Here Will was more hopeful, if it was used in the service of transparency;
Imagine a transparent, living wage economy
“It would be great to imagine,” he said, “consumers could find out four of five key issues on the tea they purchased – about the plantation it came from, whether there is gender equality, whether there is sexual harassment, whether a living wage has been paid, what is the carbon foot print, has there been carbon sequestration on that plantation? All of that could be done through a block chain model along with a quality rating of that tea – in order to create quite an enticing opportunity for consumers.”
Rachel Wilshaw had found that encouraging conventional companies to imagine a living wage economy – “doing things that enhance income so that people can spend more” – was more compelling than talking about changing business models. Even if new business models in the supply chain could be the way to get there.
“Imagine,” said Erinch Sahan, “if we tried to set up a business ecosystem that really tried to help and support alternative trade and demonstrate that it is viable and give it credibility so that policy advocates are able to show these models work – in co-operatives, for example and focus on creating positive energy and demonstrating ‘this is happening, get on board!’”
This is happening, get on board!
Some of it is already happening in the tea sector. As well as Teekampagne’s direct trade model, there is a number of tea producers and retailers who are WFTO members, and there’s a growing number of cooperatives like Mineral Springs who contributed to THIRST’s summer Roundtable meeting on Building Tea Back Better.
Indroneel Goho told us about a particularly interesting recent development; the takeover of his company – DOTEPL – Darjeeling Organic Tea Estates Pvt Ltd. (Ambootia) – by a group of ethical investors; “It has completely changed the way we are now looking at the business,” he said. “There is a focus on social objectives dovetailed with profit maximisation – an interesting concept to make the business viable yet to ensure highest levels of social and environmental standards for the company.” That will certainly be an interesting one to watch.
Although, as a participant pointed out, change “needs to be across all supply chains and all commodities… there needs to be Government regulation, particularly in market states of the retailers who have the most power in the market…It won’t work ‘company by company’.” And for Will Battle, a key lesson from the Malawi 2020 Tea Revitalisation Programme was that “Multi-region approaches should be borne in mind in future so that there isn’t the temptation to migrate volume to cheaper producing countries.”
Imagine all the people…
So let’s not imagine just one tea company driven by social values rather than profit – let’s imagine thousands of them. Let’s imagine an entire tea industry that seeks to serve its workers as much as its shareholders, and by doing so creates a thriving, resilient living wage economy wherever tea is grown – instead of one that is plagued by industrial unrest, and endless reports of human rights violations.
And, as it’s nearly Christmas with John Lennon’s Imagine playing on the radio, let’s imagine a world in which every woman and man – especially those who produce our food – is living life in peace – because they’re being rewarded for their work with enough for a decent standard of living.
You may say I’m a dreamer, but I’m not the only one… as Erinch Sahan says – “this is happening, get on board!”