Subgroup on Covering Costs of Sustainable Production

The price dispute between large distributors in developed countries with respect to having low prices for the most preferred fruit worldwide, has forced the industry to reduce the price of bananas to levels that are increasingly seen as unsustainable. This is largely due to the fact that while prices are going down at the consumer end of the supply chain, the costs of production, maintenance and transportation in producing countries have increased significantly.

Lowering prices has created economic challenges for millions of families in developing countries that depend on banana trade for their livelihood, as this can prevent an adequate social development and reinforce poor working conditions for banana workers.

In order to address these concerns, members of the WBF came together to create the Subgroup on Covering Costs of Sustainable Production (SG-CCSP), which aims to study the distribution of value and enable pre-competitive collaboration between all actors along the global banana supply chain.

Currently, the Subgroup counts on the participation of principal stakeholders along the supply chain, including retailers, large corporations, importers, exporters, producers organizations, trade unions, civil society organizations, standards-setting organizations and research institutions. It was inaugurated during the 14th meeting of the WBF’s Steering Committee in April 2018, and officially launched during the in-person meeting of Working Group 02 (WG02) in Montreal, Canada, in October 2018.

Objectives

The main objectives of the Subgroup are to:

  • Satisfy the demand from buyers to evaluate where their investments are more sustainable;
  • Study the proposals and methodologies for calculating costs of sustainable production;
  • Study the results of the Global Production Cost Index;
  • Analyze the crucial component of costs of sustainable production – wages – in different exporting countries;
  • Adopt a common definition of a living wage and apply the same methodology in all banana-exporting countries to estimate the levels of a living wage;
  • Use a wide range of strategies and interventions, appropriate for each of the respective commercial systems, to work towards the long-term goal of improving wages;
  • Seek the support of corporations, buyers, retailers and other actors of the chain to enable salary growth in productive areas, in a global and collective way;
  • Study examples of precompetitive collaboration strategies to improve the sustainability of the global supply chain;
  • Support visibility campaigns for responsible consumers;
  • Design strategies to ensure that potential commercial agreements are reflected in the conditions of workers and owners of small plantations;
  • Support governments in establishing methodologies for setting living wages;
  • Contribute to the design of strategies to facilitate decent work.

In particular, the Subgroup seeks to carry out and support initiatives for the promotion and implementation of living wages as a crucial component of costs of sustainable production. These measures can be individual or collective, with the ultimate aim of closing possible gaps between current salaries and the results for living wages obtained from studies that apply a common methodology.

Wages as an Element of Costs of Production

For many producers in developing countries, wages are an important part of production costs. While a legal minimum wage is established in ninety percent of countries, these wages often do not allow a decent standard of living for workers and their families. As such, it is important to develop tools and provide additional information that can support effective wage policies, in combination with dialogue and stakeholder participation at all levels of the supply chain.  

Living Wages

The objective of a living wage is to enable workers and their families to receive salaries that are sufficient to guarantee that they can afford a decent basic lifestyle, acceptable to society according to their economic level of development.

At present, attention to the problem of living wages is growing due to the decrease in wage rates worldwide, the growth of inequality and the growing interest in corporate social responsibility. As members of the WBF aiming to contribute to sustainability efforts within the banana industry, the newly established Subgroup is responding to this alert by examining the best ways to effectively address wage levels through initiatives, operations and collaborative work with the extensive network of WBF members and supporters. One such initiative is the Living Wage Advocacy Initiative, which aims to establish living wage benchmarks in all banana-exporting countries that can ultimately be used for future wage negotiations and minimum wage-setting interventions in the industry in each country.

Collaborative efforts between the different actors, especially the buyers, are necessary to make the living wage a reality. The main tool to achieve these objectives will be the pre-competitive collaboration.

For further information, please contact Victor Prada at victor.prada@fao.org, Camila Reinhardt at camila.reinhardthurtado@fao.org, and/or the WBF Secretariat at wbf@fao.org.