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Unresolved sustainability issues in global tea sector

08 Apr 2014 - {{hitsCtrl.values.hits}}

Although the subject of sustainability in tea plantations had been discussed on many occasions before, yet in view of its importance to the tea sector and also as many issues still remain unresolved, this article re-examines this subject.

As with many commodities, if corrected for inflation, world market prices for tea have been fluctuating and as production costs have not been falling at the same rate and have increased lately, this has obviously put pressure on profitability in the industry. There is evidence that this in turn has negatively affected working conditions and the livelihoods of plantation workers and small-scale farmers in tea producing countries.

The most important cause for decreasing prices, whenever it happens, is a persistent situation of oversupply on the international market. There is fierce competition between a number of

producing countries for market share, by expanding production. Another reason is uneven value distribution. The tea supply chain tends to be complex, with many actors, producers, collectors, traders/brokers and packers involved. However, the buying and retailing end of the market is dominated by a handful of multinational companies that are still profiting from stable retail prices.

In contrast with other agricultural commodities such as coffee, cocoa, soy, oil palm or fruits such as bananas, pressing issues from a sustainable development and poverty eradication

perspective have received much less attention. Along with other stakeholders such as producers, officials and consumers, multinational tea packers (companies that sell often branded tea blends in bags or packets to consumers) have a clear responsibility to address these issues, and their strong position in the market gives them the opportunity to do so.

Comparative analysis
In a report, SOMO presented, a few years ago, a more detailed and comparative analysis on social, economic and ecological conditions in the tea sector in 6 of the most important tea-producing countries: India, Sri Lanka, Vietnam, Indonesia, Kenya and Malawi. The research is based on an extensive field study of civil society organisations in these countries, thus providing a unique perspective on this sector.

The report also presented an overview of trade, production and stakeholders in international tea supply chains, and made recommendations to various stakeholders for improving conditions, particularly for plantation workers and tea smallholders, the most vulnerable in the tea industry.

Social issues
Working conditions are often generally still poor. The majority of workers have no job security but are trapped in low-paid temporary labour with little or no prospects of finding a better job in the region. Being a seasonal labourer means no income when your are ill, pregnant or otherwise unfit to work. It often also means less pay and fewer social benefits such as medical care, housing, education and pensions. There are clear indications that their numbers are rising mostly because of increasing smallholder production that relies on family and temporary labour only.

Wages for plantation workers, the majority of the workforce in this sector, are generally low. Wages for workers on large plantations were found to be mostly above or at minimum-wage levels in Sri Lanka, Kenya, Malawi and India. In Indonesia, however, temporary/seasonal workers on large plantations are often paid around or below minimum-wage levels. And because piece rates are lower, workers on smallholder tea gardens are often paid less than those on large estates, in all the countries studied (except Vietnam).

Because piece rates are also common for seasonal workers on large plantations in Malawi, Indonesia and Kenya (also for permanent workers) income fluctuates with the season, strength and aptitude. Minimum wage levels are often set too low in the countries studied and are not sufficient to support a worker and his/her family.

Independent trade unions are non-existent, corrupt or ineffective, which means that workers have little or no power to bargain collectively and/or otherwise to defend their rights except to some extend in Sri Lanka and India. Because temporary workers are not unionised, they are not represented and have little possibility to change their working conditions. In addition, increasing casualisation of work also means weaker unions.

Tea picking is hard work and workers often have to protect themselves from work-related injuries at their own expense. Pesticides are often applied without proper protection. Back pains, fractures from falling and respiratory illnesses are common, while medical care is not always adequate. In some countries, malnutrition on tea estates is still a big problem which leads to all kinds of medical problems including in some cases infant death and starvation.

Many plantation communities in these countries have inadequate access to basic facilities such as drinking water, sanitation and electricity. Discrimination along both gender and ethnic lines is widespread. Women are subject to sexual harassment in Kenya and Malawi and have fewer or no possibilities for promotion in most of the countries studied.

The housing situation is often bleak, especially in some countries. Houses for plantation workers tend to be overcrowded in Kenya and are sometimes in bad condition (eg. leaking roofs and in need of repainting). There are indications that child labour is being addressed on the large estates in Malawi and Kenya. While the literature claims that it is endemic, it could not be observed directly during the research and was reported only on smallholder farms in Malawi. The current situation regarding the extent of child labour in the countries studied therefore remains uncertain.

Environmental issues
The environmental impacts of the industry are considerable. There is significant biodiversity loss when high biodiversity areas such as forests are converted to tea plantations. Along with habitat conversion, logging for firewood to process tea, in particular, has caused extensive deforestation in countries such as Kenya, Sri Lanka, Malawi and India. Energy consumption for tea processing is also high which is aggravated by often inefficient and outdated machinery. In some countries, such as India, Sri Lanka and Vietnam, abundant application of pesticides is also negatively affecting the local and wider environment (water pollution, reduced soil biodiversity).

Economic issues
Tea is “ready to drink” when exported by producing countries, but the downstream stages such as blending, packing and marketing are the most profitable. This part of the value chain is controlled by a handful of multinational tea packers and brokers, which as a result can considerably influence world prices. While real prices for tea on the shop shelves remained stable, average real auction prices in the recent past were roughly half of those in the eighties. This has led to uneven value distribution along the supply chain.

Smallholders
While tea is traditionally a product from large plantations, also known as estates, smallholders are becoming increasingly important in the industry as well. In Sri Lanka and Kenya for example they are responsible for about 65 and 62 percent of total production respectively. In these countries they have received considerable government support.

The cultivation of tea is attractive to small farmers because tea provides work and income throughout the year, requires relatively little investment, and the risk of complete crop failure is small. Small farmers may sell their green leaves to collectors, plantations or processors.

Problematic issues for smallholders include low farm gate prices, poor extension services, limited market channels, poor access to credit and low level of farmer organisation. In general workers on smallscale farms have lower wages and less benefits than workers on large plantations.

Forces of hindrance and advancement
Producers, smallholders and other stakeholders in the tea sector in the countries studied indicated that the costs of production have been clearly rising. They pointed mostly to higher costs for labour, fuel and electricity. Other factors raising production costs that were identified in the case studies include mismanagement, age of tea bushes, high overhead costs, bad agricultural practices, low labour productivity, climate change and dilapidated infrastructure leading higher transportation costs.
As a result of factors such as increasing primary production costs, falling prices and globalisation that has facilitated increased trade and enhanced competition between tea exporting countries, the tea sector is seeing restructuring take place, especially in India with estates being abandoned and closed, which often has dire consequences for plantation communities.

The plantation model, which in India and Sri Lanka is governed by strict plantation labour laws, is considered burdensome in terms of the costs of production. The costs of production on smallholder tea farms have remained relatively lower than on the estates primarily because there are many hidden family labour costs, and also because the smallholders do not have to bear any social costs.

Consequentially the smallholder production model has become more attractive and important in these and in the other tea producing countries reviewed (Malawi excepted). The growth of smallholder tea production worldwide could present sustainability challenges precisely because regulation in this sub sector is less strict and farming practices may be less environmentally friendly. But also, in the longer term, as a result of the difficulty of including these producers in export-oriented supply chains with increasing quality, social and environmental demands. This is because smallholder models also present challenges in terms of lower traceability, quality and continuous supply.

Along with the effects of restructuring and changing modes of production capturing value added in tea supply chains, increasing quality and dealing with food safety standards such as Hazard Analysis Critical Control Point (HACCP) and Maximum Residue Levels (MRL) present a challenge in varying degrees for the tea producing countries studied. Because the implementation of such private and public standards that are mostly set by Western-governments, can raise costs without necessarily raising income or increasing market share, they are often seen as non-tariff barriers in producing countries.

Especially Sri Lanka but also India and Kenya have been more successful than the other countries reviewed in capturing value added by among other things exporting tea in tea bags, tea in packets and instant tea.

Corporate Social Responsibility (CSR) has not received much attention to date in the tea sector, either in producing or consuming countries, when compared to the banana or coffee sectors, for instance. It was found that at the producing country level, more advanced CSR policies and practices have remained confined to a few big plantation companies. Awareness among other industry actors and stakeholders, such as workers, unions and smallholders, of the benefits and the concept of CSR is low. However it is also clear that CSR is increasingly becoming a focal point in the industry.

(The writer can be contacted at [email protected])

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Unresolved sustainability issues in global tea sector

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