02 Sep 20 | Podcast
Innovation Forum’s guide to sugar supply chain facts and stats
Harvard report lays out a sustainability transition strategy
Sugar is one of the world’s most familiar agricultural commodities, but also one of the most complex and fragmented. Globally, an estimated 1,600 or more enterprises operate more than 2,500 mills and refineries in over 100 countries.
If the sector is to chart a transition path towards greater sustainability, six major “building blocks” need to be in place, an influential new report argues. These comprise: a shift in awareness and mindset; strong policy and regulatory support; a robust business case; better voluntary standards and codes; improved management practices; and advanced implementation capacity.
Co-authored by the Harvard Kennedy School and the industry-led group Business Fights Poverty, the report also provides a snapshot of the primary sustainability challenges facing sugar producers.
Water emerges as a particularly critical issue. Sugarcane is the third most water intensive agricultural commodity, requiring between 1,400 to 3,000 litres per kilogramme. This can affect local water supplies, even in cases of rain-fed cultivation, the authors warn. Water pollution, from the run-off of water fertiliser and sedimentation from fields, is also an issue.
Processing can also lead to pollution. The average sugar mill generates around 1,000 litres of wastewater for every tonne of sugarcane processed. The burning of bagasse (a sugarcane by-product) as fuel by sugar mills can also release fly ash, causing air pollution if not treated.
From a social perspective, priority concerns include hazardous working, forced labour and child labour. With respect to the latter, the US Department of Labour has found evidence of under-age workers in sugar production in 15 countries, including significant markets such as India, Thailand and Mexico.
Conflicts over land use represent an additional preoccupation. Anti-poverty campaign group Oxfam calculates that at least four million hectares have been acquired for sugarcane production since 2000, often resulting in the shifting of land from small-scale to industrial-scale use.
Fairtrade delivers clear benefits, but demand still lagging
New figures from Fairtrade International ahead of World Fair Trade Day in May (2015) indicate that around 100 Fairtrade sugar producer organisations now exist in 19 countries. Collectively, these are supplied by over 62,000 sugar farmers and comprise 152,200 hectares under cultivation.
Four-fifths of Fairtrade-certified production comes from poor countries in Africa, the Caribbean or the Pacific, or from “least developed countries”. Fairtrade producers, who are required to meet basic social and governance standards, received a total of €9.8m in premium payments in 2013. Half of this was invested back into organisational development or improvements in production and processing.
Belize and Fiji are the largest producers of Fairtrade sugar, followed by Brazil, Costa Rica, Ecuador, India and Malawi. Production continues to outstrip demand, however. Of the 611,900 tonnes of Fairtrade certified sugar produced in 2013, only 211,600 tonnes (equivalent to 34%) was sold with a premium.
On a more positive note, year-on-year demand increased by 24% on 2012, when 170,000 tonnes were sold with the certified premium.
Certified mills outperform non-certified peers, Bonsucro finds
Productivity on sustainably certified sugar farms is notably higher than on conventional farms, a new independent report finds. The third-party research commissioned by cane sugar certification body Bonsucro reveals that the majority (82.9%) of the mills owned by its 140 certified members post sugarcane yields per hectare above the global average
Nearly 90% of participating mills, meanwhile, record efficiency levels over and above those set by Bonsucro’s own standard. Well over half (61.8%) of Bonsucro mills are found to add more economic value per tonne of cane than conventional mills as well.
Certified mills perform better on other key measures too. For example, the lowest wage in Bonsucro mills averages out at 29% above the minimum wage. Every single certified mill, meanwhile, has a higher-than-average lost time accident frequency, with only 3% recording levels below that set out in the Bonsucro standard.
Performance on climate change is also strong, with 90.9% and 66.7% of certified mills having below-average greenhouse gas emissions from ethanol and sugarcane production respectively. Where more progress could be made is around fertiliser use, with only around one in seven (14%) of Bonsucro mills employing less fertiliser than average.
Mitr Phol pulls out of Cambodia over human rights allegations
Anyone seeking proof of the business risks related to human rights violations need look no further than the example of Mitr Phol Sugar Corporation. Asia’s largest sugar producer recently announced its intention to withdraw from Cambodia’s Oddar Meanchey province after sustained accusations of its involvement in illegal land evictions, land confiscations and other irregularities.
The Thai-based company has a stake in three others in the region: Angkor Sugar, Tonle Sugar Cane, and Cane and Sugar Valley. It is understood that auditors for the drinks brand Coca-Cola highlighted the issue of illegal eviction during a site visit to the province last year.
Mitr Phol is a major supplier to Coca-Cola, which announced a “zero tolerance” to land grabbing in 2013. The sugar producer’s record in the province is the subject of a recent report by Action Aid and Oxfam, two UK-based advocacy groups.
East Africa trade group formed to bolster sugar industry
Sugar producers, national sugar boards and other stakeholders in east Africa’s sugar industry are coming together to form a regional trade body. Officially launched in late April (2015), the new East African Sugar Industry Association (EASIA) is seen as an attempt to provide a collective response to common problems in the region, such as the slow growth and high cost of sugarcane production. Among the association’s other stated objectives are the promotion of free trade within east Africa and the creation jobs in the sector.
With the goal of becoming self-sufficient by 2030, the industry group has aspirations to raise $6bn in investments. First out of the blocks is Kenya, whose government announced in May 2015 that it intends to sell a majority stake (51%) in five publicly-owned sugar companies. It hopes the deals will be completed within a year, reports state. The companies earmarked for privatisation are the millers Nzoia, South Nyanza, Chemelil, Muhoroni and Miwani. The last two are currently in receivership. Almost a quarter (24%) of the shares will be sold to employees and farmers contracted to the mills.
The timing of the association’s establishment is not accidental. In 2017, the European Union is set to end the 45-year system of beet sugar quotas. This is leading to fears in east Africa, as well as other low-income sugar-producing countries, that exports to the EU will drop as the global sugar market adjusts to more production in the EU.