After the presentations the participants split into three discussion groups. A summary of the discussions is presented below.
The best partners will be those who can fulfil the needs of the producer or firm seeking a partner. A good partner should add value to the firm's products and be economically competitive. Partners should share common interests, values and vision. One participant felt that long-term commitment is a key criterion. For small farmers a good trading partner should provide feed back on export markets and prices. Small farmers need to create partnerships among themselves as a first step to increase their marketing and bargaining powers.
The group found that fair dealing and ethical conduct was a moral obligation for all parties. The right to obtain information on marketing of the product and its price is important. Partners should ensure transparency, which nurtures trust, a key factor for success. Some participants argued that in case of hardship a good partner should show solidarity towards farmers, helping them beyond its basic responsibilities.
The Group debated the use of contracts. It was agreed that contracts are not very useful as legal enforceable documents. Good faith, commitment and ethics give more guarantees than a contract. However, a contract can be useful as a reference document that spells out an understanding and as a framework setting agreed goals. Again, mechanisms for transparency and dialogue were mentioned as important. If problems can be detected early enough, can be discussed and solutions can be found jointly by the partners, the partnership will prove effective and last longer.
It is market power, not the contract, that determines how successful a partnership is. A working partnership is an alliance between parties of comparable strength. Again, farmers need to organize if they are to forge a successful alliance with powerful trading or retailing firms. This might be difficult due to their lack of trust and collaboration spirit. A possible solution lies in training and capacity building with support from governments and international development agencies.
However, concentration in the retail sector has given formidable power to supermarket chains. Even if farmers organize and improve their bargaining power, it will still not be sufficient to match that of large-scale retailers. Some participants thought that consumers should pressure supermarkets to commit to sustainable development. Consumer associations should scrutinize the practice of retailers and their suppliers. They have the right to detailed information on the origins of the foods found in supermarkets. This two-pronged approach, i.e. organizing producers upstream and putting pressure on large-scale retailers downstream, might help improve sustainability in the horticultural industry.
It was pointed out that all parties in an alliance should benefit from it. If some parties do not make profit, they will tend to save on environmental or social costs. The value added should be distributed in a fair way among partners. When demanding more sustainable production methods, retailers and importers should share with producers the higher costs that these methods entail.
The Group noted that common social and environmental targets should be specified and agreed from the start when the partnership is negotiated. Some participants felt governments and international agreements such as the ILO conventions could have an important impact that could improve sustainability. Nevertheless, others felt that civil society initiatives (e.g. from NGOs) were much more effective.
In some participants' opinion, it is important to change people's attitudes and show it is possible to improve practices. This can be best achieved by showing respect to producers and understanding their constraints. In some developing countries, industry codes of conduct have received wide support and led to progress (e.g. the Kenya Flower Council code). However, the dissemination of these experiences is constrained by language difficulty and the burden of information that farmers already receive. More South-South co-operation should be supported to allow exchange of experiences.
The group observed a lack of transparency in the cost building mechanisms along the supply chain. One participant stated that 30-40% of the retail prices of fresh fruits goes to the retailer. It is not clear to the other actors of the chain what costs the retailer has to cover and what the retailers' profit margins are. Some believed that the retailer's policy was to collect a 30% gross margin on all products and it was stated that in specialized natural/health shops this could even be 50%. However, nobody was sure on such figures. The question was posed that if supermarkets were such profitable business, why were there not more entrepreneurs setting up new chains, why was there instead such a concentration?
During the discussion the need for transparency to be able to negotiate fair prices was repeated frequently. FAO was asked to gather information on price building. Supermarkets need to be encouraged to sit around the table. A positive example was observed in the UK where supermarkets had been around the table with the Fairtrade Foundation and now carry fair trade bananas. It would be useful to document these examples. Supermarkets need to become partners in the chain to work together on fair prices and to promote consumption of socially and environmentally sustainable products.
Nowadays certification and food safety investments add to production costs, which should be shared in a fair way along the chain. When talking about costs and prices, external costs and benefits need to be considered, for example social and environmental services provided by farmers. It might be worthwhile for society to keep small farmers into business. It was perceived that small farmers are at a relative disadvantage if such external costs and benefits were not internalized. Certification could serve to internalize environmental and social costs better into the production costs and indirectly reduce economies of scale.
In the fair-trade system the trader who sells to the retailer pays for the certification costs (and this can be supposed to be passed on to the consumer). In organic certification costs can be as high as 5-10%, which has to be paid by the producer (or a friendly NGO). It makes sense to seek fairtrade certification first and to pay for the organic conversion period with the fair-trade premium. There is a need to compare costs and methods of certification, for example in cents per kilo.
The group felt there was no evidence for this. History shows many examples of the contrary: if prices go down farmers produce more to earn the same. At the moment producer and consumer prices seem not to be related to each other. The group concluded that the effect of minimum producer prices depends on the size and type of operations concerned (plantations and small farmers react differently), on market maturity and on the type of market (conventional, organic, fair trade).
It was felt that the role of intermediaries has changed dramatically due to the adoption of new Information Technologies. In the past they were sometimes the only actors in the chain to know both supply and demand and they fulfilled a necessary broker role. Now this information is easily available for many parties. It was observed that retailers are actively cutting out middlemen from the chain. Transport and logistics are the key roles left for intermediaries. Transparency and competition are essential and liabilities have to be defined explicitly. An example was given of intermediaries not taking responsibility for rejections at import level. The producers had to bear the financial responsibility for rejections of containers even if they had delivered them in good condition at the port of export. It was observed that there is a lack of competition between intermediaries in the organic supply chain and it was argued that middlemen dealing with fairtrade certified produce should work as "fairtrade middlemen".
After the presentation of the group to the plenary it was remarked that indirect benefits of achieving standards are often overlooked, such as savings from a reduced number of accidents, reduced labour turnover and insurance costs. However, it should not be too difficult to quantify them.
Certification can be seen as a way of communication along complex supply chains. What services should certification bodies ideally provide to producers and to what extent would that be possible without compromising their verification role?
Certification bodies could give training on the standards and on preparation for certification. The implementation of ISO 65 (a standard for how certification bodies should operate) is constraining this education role of certification bodies to prevent conflicts of interest. It was felt that the certification bodies are content to focus on their control work. However, the need for training and extension may be high in many less developed countries where there are often very few sources of information. But in those cases the problem of conflict of interest is also evident: if certification bodies become the main source of information they will be auditing their own work. Exploratory, open and general training courses are no problem, but it is different if specific producers ask advice on compliance with specific standards. Farmer associations could be instrumental for training of individual farmers. The group concluded that certification bodies could provide open training courses separated from the auditing process.
Certification bodies could bring in more knowledge on buyer and consumer requirements, for example on quality. Market related legislations that have been developed over the past 10 years in the industrialized countries, for example the organic regulations, are often perceived to be inflexible in developing countries. Ideally developing countries should develop their own regulations and set their own standards. Although certification bodies cannot promote individual producers they can promote the seal and the standard and certification system in general. They can also inform producers about opportunities related to certified status to gain financial assistance or fulfil procurement preferences. They could also advocate for obtaining such general preferences for certified producers.
Certifiers have links with both producers and consumers and they could use this position to promote discussions between them. Such forums could also be used to evaluate the certification system and to prioritise issues important to both consumers and producers. Many group members felt that the certification bodies could do much more in this area. Others provided examples of cases where certification programmes already provide this forum, like the SAI business conferences.
Certification bodies have an important role in communicating their experiences with standard implementation to accreditation agencies, producers, consumers and others. They have an overview of what is possible in the field. It was felt that retailer-driven initiatives like EurepGap did not involve producers in the standard setting and that was the reason why these standards often are perceived to be imposed. Most certification bodies are open to more engagement of producers in standard setting, but producers need to take the initiative.
Reasons that retailers are setting standards could be: addressing food scares; moving more liability to producers in case of food scandals; establishing a chain of custody; setting the agenda in supply chain management; and ensuring product consistency through one baseline standard. The ISEAL Alliance or the FAO forum could take the initiative for joint negotiations with the retailer driven systems. The FAO secretariat of the Working Group on Socially and Environmentally Responsible Horticulture Production and Trade and some ISEAL members have already participated in several EUREP meetings to inform EUREP of existing certification initiatives and foreseen complications for small producers due to the EurepGap.
After the presentation of the discussions of the group to the plenary it was clarified that the EurepGap managing director could not participate in the meeting because of other duties.
