Do tea farmers benefit from sustainable certification schemes?

At least a quarter of the world’s tea is produced in compliance with a voluntary sustainability standard (VSS)/third-party certifier such as Rainforest Alliance, Fairtrade International and organic, but are they improving smallholder tea farmers’ profitability?

New research from the International Institute for Sustainable Development (IISD) reveals the latest consumption and production trends in the sector, explores why so many tea farmers are struggling to make a living, and examines whether VSSs make a difference to smallholder farmers’ livelihoods. 

There are 13 million people working in the global tea industry, two thirds of whom are smallholder farmers in developing countries. IISD research finds – and those in the tea industry know – that farmers are challenged with producing an affordable, quality, and more sustainable product in a highly competitive market and under increasingly harsh and unpredictable weather conditions. 

“Smallholder farmers bear the biggest brunt of low auction prices and volatility in the tea sector,” said Steffany Bermúdez, policy advisor, IISD, in a statement. “They receive meagre prices for their green leaves – prices that represent a minimal share of the price tea fetches after it has been blended and packaged – and the added unpredictability of auction prices exposes them to even greater financial uncertainty.” 

The international tea trade is unique in that three quarters of the world’s tea is traded through public auctions. Overall, tea auction prices have been declining for the past four decades, with more severe drops in recent years due to overproduction, pandemic-related disruptions, and the Russia–Ukraine conflict, among other factors. 

Similar to coffee, tea farmers also bear all the risks of extreme weather changes as well as variations in the cost and availability of necessary items like fertilisers. Furthermore, in some tea-producing countries, smallholder farmers make no profit at all, as their total production costs often exceed their earnings. Farmers can do little to change this scenario as they have no influence over tea auction prices and have limited market knowledge, therefore they continue to pay brokers steep prices to sell their tea. 

IISD’s new report examines whether voluntary sustainability standards (VSSs) such as Rainforest Alliance, Organic, and Fairtrade International make a difference to smallholder farmers’ livelihoods. 

Voluntary sustainability standards (VSSs) have been working to address sustainability challenges in the tea sector for 30 years, per the IISD. Many focus on building climate resilience while some seek to improve the prices and incomes of smallholder farmers. 

VSS-compliant tea now represents at least a quarter of total global production. However, evidence of VSSs’ impact on farmers’ incomes is limited and tends to be very context specific. “It is not clear if minimum prices, premiums, and other differentials really make a difference to tea farmers’ livelihoods—or even make up for the costs of certification,” states the IISD report. 

Farmers in some major producing countries can receive up to 23% higher prices than conventional producers when selling VSS-compliant tea. However, the IISD finds that further evidence of VSSs’ impact on farmers’ incomes is limited. “Results are context and location specific, and it is not clear if the prices they fetch even make up for the costs of certification. They certainly don’t if VSS-compliant tea is sold as conventional, which estimates suggest happens 90% of the time,” the report reveals. 

“Global demand for VSS-compliant tea climbed after the pandemic and is expected to keep on growing — with room to grow even faster,” said Vivek Voora, senior associate, IISD, said in a statement. “Challenges need to be overcome, particularly in producing countries, to make VSS-compliant tea more readily available — and more affordable.” 

In the report, IISD experts also argue that there is an urgent need to develop new approaches to recognising the social and environmental costs of conventional tea production so that farmers can be adequately rewarded for using more sustainable practices. “This is particularly challenging given that tea auctions are heavily influenced by multinational companies downstream in the value chain that hold all the power and most of the profit in the sector yet are rarely concerned with the social and environmental impacts of conventional tea production.” As a minimum, IISD experts believe the multinationals should be paying prices that cover farmers’ production costs and basic household needs. 

The report conveys the urgent need to develop new approaches to recognising the social and environmental costs of conventional tea production so that farmers can be adequately rewarded for using more sustainable practices. It further provides recommendations for how governments, private sector actors, and standard-setting bodies can better support smallholder farmers and make tea production fairer and more sustainable. These recommendations range from modernising tea auctions to place greater value on VSS-compliant tea to encouraging all standard-setting bodies to establish minimum prices and premiums — as well as strengthening those that already do. 

To read or download the IISD report, click here. To learn more about members of the global tea industry’s views on sustainability within the sector, read T&CTJ’s and Firsd Tea’s 2023 Tea Sustainability Survey. 

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