Examination of Witnesses (Questions 126
- 139)
TUESDAY 13 MARCH 2007
MS JUDITH
BATCHELAR, MS
HILARY PARSONS
AND MS
EMMA REYNOLDS
Q126 Chairman: Given what Joan Ruddock
has just said about women, I guess you are proving the point.
Can I thank you for coming in. Obviously, you are here as three
separate organisations, not as a group, it is important that is
understood, and you are speaking on your own company's account,
so the questions will kind of dot around a bit. If I can start
first of all perhaps with Nestlé, we have an interest in
the fact that you have become a Fairtrade company. I will ask
you, first of all, because there was some controversy at the time,
why you decided to launch a Fairtrade brand and whether or not
it has worked, in other words, the extent to which it has been
profitable? Given that, as we confirmed when we had the Fairtrade
Foundation here, there is obviously a cost of certification and
regulation of the Fairtrade brand, is that absorbed by Nestlé,
or is it part of the price; are you able to give us a feel for
that?
Ms Parsons: We launched our first
Fairtrade certified product in October 2005 and that was a product
which took a couple of years to develop and was not envisaged
originally as a Fairtrade product; originally we were planning
to launch a sustainable product using criteria that we had developed
for sustainable coffee practices over many years. We have been
collaborating directly with coffee farmers for over 30 years,
we have a very large direct purchasing scheme and we are very
supportive of various sustainability projects in many coffee-producing
countries, including the Common Code for the Coffee Community,
which is about to become a reality this year. The projects that
we established for Partners' Blend we set up in Ethiopia and El
Salvador working with smallholder farmers; at the same time we
were having confidential discussions with the Fairtrade Foundation
and we realised that with a few small adjustments the product
could become Fairtrade certified. We launched the product in October
2005, it is now available also in Ireland, and a product called
Zoégas Hacienda has been launched in Sweden, which uses
the same source of supply, so it uses exactly the same beans from
Ethiopia and El Salvador but it is a roast and ground product
rather than a soluble product. In terms of success, the coffee
that we buy from Ethiopia and El Salvador, from the Fairtrade
certified co-ops and from the sustainability projects that we
have there, amounts now to about 2% of all Nescafé sales
in the UK, so it is the equivalent of about 91 million cups. There
were some costs involved in the certification; we met all those
costs for the farmers, which normally the farmers would have to
pay, we paid for that. Of course, there are licence fees which
Nestlé have to pay, so the Partners' Blend coffee makes
slightly less profit than one of our normal coffees, we do accept
that.
Q127 Chairman: That is not added
to the price?
Ms Parsons: No. The price is in
line with other ethical coffees in the marketplace, so it is similarly
priced.
Q128 Chairman: Does that mean it
is slightly less profitable than your other brands?
Ms Parsons: It is, yes.
Q129 Chairman: That would mean if
it expanded faster you would suffer, so does not that have a disincentive
for you to promote it?
Ms Parsons: We believe in the
sustainable practices which are at the base of the product, so
it very much reflects Nestlé's core principles, and as
a business model it is profitable; as I say, it is slightly less
profitable than other products. The reason that we launched it
was because we wanted to produce a product which also had a direct
although practical effect on the smallholder farmers, who had
been affected badly in 2001 by the coffee price crisis, so that
was the reason for launching it.
Q130 John Battle: Some companies
which are profitable, such as Marks & Spencer and the Co-op,
have switched all their own brand coffee and tea to Fairtrade
and I wonder why you have restricted your engagement to just one
product. Is it just a toe in the water job, to say "We're
flying a little bit of a flagship here", to say "we're
vaguely interested but we don't really believe in it"?
Ms Parsons: No; absolutely not.
We have a very large, direct purchase scheme and I think the launch
of Partners Blend needs to be seen in the context of Nestlé's
broader coffee operations. We purchase around 120,000 tonnes of
coffee, which broadly could be classed as where we are working
towards sustainability. Of this we have about 100,000 tonnes bought
directly from farmers: we have buying stations in seven coffee-producing
countries, where the farmer can come and bring us his coffee cherries
directly, and by cutting out the middle-men they retain more of
the value. We have a team of agronomists who also work with those
farmers. We also have Nespresso, where we have an AAA Sustainable
Quality Programme with farmers, which is verified by the Rainforest
Alliance, and 30% of all our Nespresso production is produced
using that method at present. We are also supporting the Common
Code for the Coffee Community, which is very much a mainstream
approach to sustainability. It is about setting up baseline criteria
for sustainability which will be benchmarked with existing certification
schemes, for example, Utz Kapeh and Rainforest Alliance, and providing
a kind of basic sustainable criteria. We are committed to buying
that coffee as soon as it comes on the market, this year. Partners'
Blend and our collaboration with Fairtrade I think need to be
seen in that broader context.
Q131 John Battle: That is the purchasing
end from the producer. I am looking at the retail end really.
What about other products; Nestlé chocolate, why have you
not moved that towards Fairtrade, or do you intend to, and extend
your range a lot more than you have done?
Ms Parsons: Nothing is ruled out.
At present we are concentrating on Partners' Blend and the Zoégas
product and making that a success; but obviously we could look
at other things for the future.
Q132 Ann McKechin: You have mentioned
your Sustainable Quality Programme and I understand you have got
what is called a Creating Shared Value scheme. Can you tell me
what you think is distinct about the value of Fairtrade from these
programmes?
Ms Parsons: I think the benefit
that Fairtrade offers, particularly in a market like the UK, is
that the Fairtrade Foundation has spent a lot of time creating
awareness of their programmes with consumers. It is very easy
to communicate the benefits of your product by working with the
Fairtrade Foundation, there is very clear consumer recognition,
and we have tested this out in our own research; the logo is very
well recognised. I think from the point of view of a branded goods
manufacturer then obviously there is a benefit in the excellent
work that the Fairtrade Foundation and the NGOs that they work
with have achieved.
Q133 Ann McKechin: Would you not
agree that one of the advantages might be the fact that they are
viewed as being an independent organisation, they are not there
for profit, they are not part of your shareholders, so that people
can actually trust and rely on their form of certification?
Ms Parsons: Yes, and I think people
do, although our research shows that people are not too sure perhaps
of what exactly lies behind the Fairtrade logo; but, yes, clearly
they are trusted.
Q134 Ann McKechin: Do you think that
consumers are confused when people start having their own programmes?
You are not the only large organisation and company which has
its own quality controls, but this plethora of different certifications
makes it very confusing for the consumers?
Ms Parsons: I would agree. I think
one of the aims of the Common Code for the Coffee Community is
to avoid precisely that confusion. The four-C programme is not
going to be a product certification programme, so you will not
see a logo on pack, just to avoid that confusion. There will be
a baseline of sustainability criteria, which will be benchmarked
against the other certification schemes; members might be able
to refer to their membership perhaps on the back of pack in small
print. The advantage for farmers, we hope, is that if they have
the baseline of 4-C then they can build on it with the other certification
programmes, so that if they wish to be Rainforest Alliance they
can do a bit extra to be Rainforest; if they wish to be Utz Kapeh,
etc.; you would avoid the problem of a farmer having lots of different
manuals in his farm office and perhaps lots of additional expenses.
That is the aim of the four-C programme, which is about a mainstream
sustainability approach.
Q135 Ann McKechin: Can I just clarify
that Common Code for the Coffee Community, because I think it
is the first that the Committee has heard about it; can I confirm
whether or not it is certified independently, in any manner, or
audited, also whether it includes the right to have trade union
membership encouraged?
Ms Parsons: It is verified independently;
there are criteria across social, environmental and economic aspects
which will include labour standards and those types of issues.
I have not got the standards with me but I can send you all of
that.
Q136 Ann McKechin: That would be
helpful, because I think we want to know whether it complies with
ILO standards?
Ms Parsons: Yes; absolutely.[5]
Q137 Chairman: Is that the intention,
that it would comply with ILO standards?
Ms Parsons: My understanding is
that it complies with all these basic standards, yes.
Q138 Richard Burden: On that point,
if the Code is there and that reflects ILO core labour standards,
to what extent are those standards, labour standards specifically,
incorporated in Nestlé's own coffee or chocolate plantations,
or the ones from which you draw your goods, or factories located
in developing countries?
Ms Parsons: Our corporate business
principles are very clear and they do incorporate all the relevant
ILO Conventions. Nestlé does not actually own any plantations
or farms. I think that is a distinction I must make. We do have
some sourcing direct from coffee farmers; in the coffee and cocoa
market many of the suppliers actually are very small farmers.
You have been to Ethiopia. In Ethiopia, for example, the farms
are virtually like small gardens and you find, for example, in
the cocoa sector in West Africa, there are about two million smallholders,
who then supply perhaps to a middleman or company, which perhaps
then will supply on to the open market. In terms of our standards,
it is absolutely very clearly set out in the corporate business
principles that these are checked up on and audited, but the supply
base is smallholder farmers, and not necessarily organised in
a way which can make some of these labour standards particularly
relevant, if you are perhaps just one family, living on a farm,
supplying into that marketplace.
Q139 Richard Burden: There have been
reports that in the Ivory Coast, for example, child labour is
being used, and not saying simply that this is children helping
their parents, actually it is a much more organised thing than
that. In The Guardian on 24 November last year, your Chief
Executive was asked about this and he said there was "no
doubt that there were children of a certain age working on farms,
especially during harvesting time" and that the company was
working with international agencies. He said: "We are trying
to ensure that there is not undue child labour on those farms"
which seems to be a rather odd way of putting it, "undue
child labour". Is child slave labour being used on farms
from which you source?
Ms Parsons: In the cocoa sector
in West Africa there have been issues reported of child slavery,
and it is correct that family labour probably would be used on
farms. The industry came together in 1999 to tackle the issue
of the worst forms of child labour and forced labour, and it has
been driven largely out of the United States but there is a Protocol,
which was published in 2001 by Senator Harkin and Rep. Engels,
which sets timelines and actions for industry to complete. Nestlé
is very supportive and is a key part of that process, working
with other manufacturers, like Mars, Hershey, etc., and a lot
of progress has been made and there are programmes underway in
West Africa to address this issue. There is an organisation called
the World Cocoa Foundation which is active on the ground. There
is also an organisation called the International Cocoa Initiative,
which brings together NGOs and industry, which undertakes programmes
on the ground to address these issues of child labour. We are
working towards a certification scheme, in which 50% of the cocoa-growing
sector will be certified by the middle of 2008, on this precise
topic, and there has been good progress, particularly in Ghana,
where the first pilot of this certification has taken place and
the results should be published later this year. What I cannot
do is say to you that I can guarantee that in every farm in West
Africa there will be no child labour or no forced child labour;
that is just not possible for me to say.
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