Fair Trade & Ethical Policy
'Ethical Business Policy'
From our long experience in Sri Lanka (Ceylon), we know of the long standing commitment by the estates over many generations, to first establishing a resident workforce based on whole families. Then developing over time facilities for those families and constantly improving those facilities for their workers. As with the development of any new industry, the level of housing the both planters and their Tamil workers started at a very basic level. When the early planters cleared the land they erected small huts with grass thatched roofs and the workers asked for long lines of rooms of a similar construction but in attached rooms in a line which to this day are called 'lines' and this was so that inter-related families could be housed together. In the early years worker welfare was unsophisticated and was easier for the estates to afford. In the 1960's & 70's there arose the threat of the government nationalising the estates and the UK estate companies became cautious cutting back capital expenditure and this led to standards going backwards. During the late 1970's there was much in the U.K. press about the level of welfare provision being poor, the Sri Lankan Government blamed the U.K. companies for stirring this up in the press. During the late 1970's and through the 1980's the Government in response to the bad publicity injected huge sums of money together with help from two European countries. The standards were rapidly raised and with International bodies such as UNESCO becoming involved in setting clear guidelines together with investment the provision was excellent. In the 1990's once the estates returned to private management companies from their previous nationalisation system, the Government/Netherlands/Norwegian welfare trust was started in 1993 after the disastrous prices of 1992 when commercial companies were purchasing teas at prices that only returned 60 % of the cost of production. The Trust changed in nature and funding in 1995 but still continued to shoulder the major share of welfare provision. The estates were encouraged to certify to as many levels of I.S.O. standards as possible, later all the packing stations in the islands were also required to apply and raise standards.
We work very closely with the estates and promote them by name. The estates make special teas to our specifications and we in turn pay the estates an agreed price for that service. These prices are well above the market averages and are directly of considerable benefit to the estates.
The Relevance of Fair Trade Organisations in this region:
Whilst there are certain schemes being operated from the West, such as 'Tea Sourcing Partnership', Forest Alliance and 'Fairtrade'. To-date we have tried to asses what these are specifically doing to help the estates in this particular area. In our discussions with the estates, we note a level of scepticism about schemes that are born in the West to promote Western aims. It is my firm belief that they view the commercial development of their tea trade by the large commercial companies in the West as another form of Colonialism and perhaps a rather negative form of Colonialism at that. Having looked at the literature about the 'Tea Sourcing Partnership', we believe that this requires the estates to upgrade their status without any funding to achieve this so called reward. Funding certifications mushroming in every direction is not a rewarding exercise for the estates. Furthermore, we already are aware that all Ceylon tea estates have been on a programme to certify their activities via the International I.S.O. system and the estates comply with Government statutes on 'Wages', 'Conditions of employment', 'Maternity provisions', 'Age limits on employment' and all estates aspire through continuing efforts to meet all other goals.
Traditionally for many generations now, estates have maintained hospitals, schools & Creches for children. However they need consumers to understand the cost of maintaining & improving this huge infrastructure impacts on their cost of production and they would like a 'Fair reward' ALL YEAR ROUND for their efforts. This business works directly with the estates and has we believe, an excellent reputation for fairness undertaking promotional efforts on behalf of the estates. This may include visits by consumers, trade buyers or directors of companies on my special tours to the island to view the very commendable progress that these estates together with the Government departments have made and are continuing to make, within the limited funding returned them from the market place. Devaluation of their currency over the years has been a constant threat to increased prices that have undoubtedly occurred.
Estate - Union negotiations
Union negotiating strength is very strong and whilst this strength of negotiation may satisfy Western concerns about worker satisfaction, it also has a huge influence on the cost of production for the estates and then commercial buyers complain that their teas are too highly priced. We always try and make consumers aware of the problems in raising standards against the rising cost of production that these standards create. In the 2007 bi-annual union / estate negotiation a 44 % wages increase was forced on the industry and this huge one year increase has been fed into the estate costs of production. Again in the next negotiation in 2009, completed in January 2010 the unions extracted a 102 % wage rise and an 80 % increase in the OVER KILO bonus (previously known as the 'Overpounds bonus).
As an ex planter and with a long line of family connections with the tea business there, I am deeply moved on my visits there, by their struggling efforts in the face of Western 'Commercialism'. Ceylon teas are again renowned for their quality and strict control of the use of chemicals, it is these policies which have raised popularity of Ceylon teas in a very competitive world market. The estates are involved in many projects to ensure that their worker families feel appreciated as they are fully aware that this is vital to retain their skilled workers and stopping the flow to the erroneously perceived bright lights of Colombo, with supposed streets made of gold in the garment & tourist industries. In the 1960's we had plenty of labour available, partly due to the fact that most estate workers had not been granted citizenship by the government. This changed after 1970 when the government made an agreement with India to accept ana greed number of repatriations to India and the balance Tamils were then granted citizenship which meant they could leave the estates & seek employment anywhere in the island or indeed in the Middle East. This free movement of workers has led to a situation where estates were losing workers at a fast rate and the only way to hold their workers was to raise wage levels & standards of welfare provision so that they wish to remain on the estates. In 2009 we enterted a totally different era where tea prices were rising much faster than in the past due to the factors shown in the PDF document 'Statistics on the Ceylon Tea Industry' available through the button under Districts & estates.
In conclusion I would sum up my view of the efficacy of Fair Trade organizations in this region:
It is vital that any assessment of these organisations recognises that in this particular island the Government are the land owners & the estate companies are merely Leaseholders of the land in the production of tea. This means that the Government as the owners of the land are duty bound to fund and provide WELFARE PROVISION. This means that in this island the industry already complies with all the standards that these organisations require to be in place and whilst Fairtrade has been tried on some estates, those estates have suggested that as the Government provides funding for Welfare Provision, safe handling provision etc, they believe that Fairtrade should help with the funding of the wages structure and the very costly re-planting programme which requires that all estates re-plant 2 % of their total hectarage (acerage) every single year to maintain renewal of the tea stock on a 50 year average programme. Unfortunately these organisations have not been flexible enough to help and the only contribution that they make is a $1.10 cts per kilo payment to a workers fund to fund the occaisional cow, or a sewing machine for a family unit. Because of their inability to make top-up payments to the estates, they have decided to place a floor price on Ceylon tea changed in 2010 from $2 per kilo to the new $2.60. The average auction price for 2008 was recorded as Rs.310.81 & the $ exchange for 2008 was Rs.111/= to $1 which equals $2.80 and the 2010 auction average is now running at $3.60 and rising as I write this. It is important to realise that the auction price includes all teas, including the cheap off grades which may end up in tea extracts etc. The stated policy of the Fairtrade organisation is that their clients can only purchase teas via the Colombo auction, this therefore precludes them from purchasing direct special manufactures that will in fact always be above the auction average as we do.
1. There are a lot of small producers and family units in other countries without established auctions, agents and transport to reach the ports and I understand that they may well need help to start and support their marketing. It is important for consumers to differentiate between the needs of various producer groups or countries and not expect blanket solutions to work in all areas. Mature areas like Ceylon estates do not want charity, they want recognition of the quality of the product that they produce and a reasonable return. They have an infrastructure of union negotiation, Government orders and a sophisticated auction system in place. That should satisfy consumers and encourage them to seek quality Ceylon teas and paying a satisfactory price for those teas. Unfortunately we see that U.K. buyers have virtually abandoned Ceylon teas because they are more expensive and do not suit the low cost blended tea market that the U.K. promotes. The Tea Council is funded by both the production countries plus U.K. packing and marketing organisations but with Ceylon tea imports into the U.K. running at less than 2 million kilos per annum out of a total production of around 300 million kilos per annum the U.K. is an insignificant market and points perhaps to any perceived active promotion of Ceylon tea in the U.K. I am hoping that 2012 may see some redressing of that situation.
We operate with a company who are certified with Fairtrade as a trial to see if Fairtrade can become more flexible in their dealings with the estates to fund areas that are not covered by the Government trsut fund but which are in urgent need of funding such as wage levels & re-planting costs. The director of that company agrees that he has to pay out the high costs of certification, the costs of clerks filling in the all the paperwork required by Fairtrade and costs of complying with fairtrade requirements for a small return to a workers fund but as the workers are now the most highly paid estate workers in teh world they no longer need small handouts. The company has 5 top mark estates certified but Fairtrade has so far only been able to take teas from 3 of these and out of a total production of 300,000 kilos, they have managed to market only 70,000 kilos which is less than 25 % of production.
Therefore on a moral basis I cannot see why we should join fairtrade as our contribution to the company's coffers is more than we would contribute through Fairtrade and we would not be able to source the high quality teas that we obtain from direct purchases.
Converstaion with Mr. Byers at Fairtrade September 2010
I am always reviewing our trading ethics and if it can be morally justified to join these organistaions I would do so. The unfortunate thing is that the U.K. in particular is using these certifications as a commercial marketing tool that increases their profits and they hope it will silence concerned consumers.
I discussed the presnt method of operating in Sri Lanka and explaied to Mr. Byers that we now have an almost ridiculous situation on the estates where a plucker can earn Rs.12,000/= per MONTH, she can also earn another Rs.250/= per DAY in overpounds bonus, her husband can earn Rs.11,500/= per month both on a five day week when in fact the estates often operate on a 6 day week and even a 7 day week in times of heavy leaf flush after rain. Their children over the registerable age of 16 can also earn Rs. 10,000/= to Rs. 12,000/= per month. NB Present sterling exchange rate is Rs. 180/= per £1. To be fair Mr. Byers was not aware of the impact of the lastest wage negotiation on wages at the time of our conversation.
Now take a clerk or security guard in the city of Colombo where people have to find and pay for their accommodation, they earn approximately Rs. 7,500 to 8,500/= per month and yet instead of investing in the tea industry to support the very high wages that they have to pay, Fairtrade is continuing to make a very small contribution to a worker fund.
Mr. Byers did in fact accept that in my case I would find it hard to justify joing a fair trade organisation with the levels that we pay for our teas and he did also admit that the way that they operate in Sri Lanka is not ideal and that they may have to review the way that they operate but he assurred me that their system works well in other countries such as Malawi and Kenya where the estate companies own the land. Whilst that maybe so, the discussion was about Sri Lanka!