As well as the ethical and environmental considerations surrounding your supply chain there is an increasingly important social need to be met, the income threshold above which an individual is able to ‘live’.
We are becoming more familiar with the concept of a living wage as a salary paid by an employer to a worker that covers a basic standard of living. A living income is the same idea but applies to people – like small-scale farmers and plantation workers in developing countries – who don’t earn a salary from an employer but undertake activities like farming to sell their produce to earn a livelihood. It is calculated as the net annual income needed to afford a decent standard of living for all members of that household. Elements of a decent standard of living include food, water, housing, education, healthcare, transport, clothing, and other essential needs such as provision for unexpected events.
This year’s Fairtrade Fortnight sees a renewed effort to make more people aware of supply chains by campaigning publicly for the right to a living income for farmers.
For many countries, ingredients we love are one of the most important sources of national income, but high levels of poverty affect small-scale farmers and their families, preventing them from accessing basic human rights. The price that smallholder farmers receive for their crops can fail to cover the costs they incur to produce it, leaving them in a debt trap and with little capital to reinvest in farms. This affects the entire community, as farmers often rely heavily on their families for help, limiting people’s opportunities for education and perpetuating the cycle of poverty. This also means that producers do not receive the support they need to invest in improving productivity and new technology.
Currently over 1.66 million farmers and workers spread across more than 73 countries are participating in Fairtrade. Fairtrade is the only certification scheme that has a mandatory minimum price, which provides a safety net for farmers when market prices fall. Additionally, the Fairtrade Premium, an additional amount paid by companies above the purchase price, provides farmer organisations with funds to invest in their businesses and communities according to their priorities.
More recently, Fairtrade have introduced a new living income reference price for cocoa in Ivory Coast and Ghana. It is the first target price based on living income benchmarks and real farm costs. Fairtrade is playing a leading role in calculating what the living income should be for farmers of various crops and putting in strategies to close the gap. Unlike the Fairtrade Minimum Price, the Living Income Reference Price is not mandatory. Fairtrade plan to develop projects with committed partners to test the Fairtrade Living Income Strategy, including price and diversification initiatives, and share learning that will move industries closer to supporting a living income.
ARTICLE 13 VIEWPOINT
More and more companies are making commitments to source their ingredients sustainably but when looking at the true sustainability of your supply chain, only with living incomes being paid to farmers can any ingredient be considered sustainable. Living Income should be viewed as a human right and as a contribution to the maintenance of the Social Thresholds for work and income, food, housing, health, education and inequality.
By calculating the cost of a decent standard of living in a particular geographic area, this figure can be used as a living income benchmark in order to assess any gap with actual income. Any gap that exists can then be assessed in order to inform supply strategy decisions.
Does your supply chain support a living income?
If you are interested in assessing the impact your supply chain could, or does, make on social thresholds please contact us.