First study on the distribution of value and impact of living income implementation in mine-to-market value chains

Providing living wages and incomes to workers at mica mines and processors is a vital step on the path to lift workers, their families, and their communities out of poverty and exploitation and toward a life of self-sufficiency and self-worth. The findings of the new study that BASIC conducted with the RMI are key to advancing RMI’s mission to establish a fair, responsible, and sustainable mica supply chain that is free of child labor.

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A root cause of poverty and child labor throughout India’s mica belt straddling the states of Jharkhand and Bihar has been the low prices paid to villagers for the mica they pick. Main reasons for the current price structure include pending formalization which impedes that the households profit from price increases, and intransparency in the supply chain. Therefore, the RMI prioritized alignment with the local government on formalization. To supplement meagre incomes and because village childcare and schooling has been virtually non-existent, parents had little choice but to bring their children with them to collect mica. If parents start earning enough on their own to support their families, they will not need to put their children to work. Paying adult-workers a living income or wage is likely to play a key role in reducing child labor and break the vicious circle.

To evaluate the complex interactions between mica prices, worker incomes and wages, and the impact that increases in both would have on downstream costs, RMI commissioned studies by Fair Wage Network (FWN) and BASIC, two internationally recognized experts in worker compensation and supply chain economic analyses. FWN determined the amount of a living income or wage and the mica market price increase that would be required to support fair compensation. BASIC assessed the economic impact of higher raw material prices on costs along the downstream supply chain all the way to end-market consumers.

The combined findings of the FWN and BASIC reports conclude that:

  • A living income for a typical mica picker family of two adults and three children in rural Bihar and Jharkhand was estimated at 15,000 INR/month. A living wage for a similar mica family member worker in a processing unit in an urban area of Jharkhand would need to be 17,000 INR/month.
  • To achieve the target rural and urban living income and wage, the average price paid to mica pickers would need to be increased five-fold, raising the average price of mica to 41 INR per kilogram from 9 INR per kilogram using 2022 data.
  • Paying a fair but higher price for mica would almost always have an impact of less than a 0.1% increase in the cost of common end-products that use mica such as cosmetics, paints, or electric vehicles’ batteries, among others.

RMI’s goal is by 2030 to work with mica supply chain members to ensure that (1) 100% of the village workforce engaged in mica picking in Jharkhand and Bihar receives the higher price per kilogram of mica recommended by FWN and BASIC and (2) that 100% of workers working in mica processing units and mines earn a living wage. The ability to achieve these goals depends on enhanced and new initiatives under RMI program pillars which will contribute to removing remaining complex barriers for change. These start with the length and related complexity of the supply chain and include the lack of a robust legal framework in sourcing country, where the sector is typically dominated by artisanal and informal mica collection, and the lack of supply chain transparency which has hindered the ability to implement formal and verifiable payment mechanisms. These and other hurdles can be overcome with a matrix of strategies, on which RMI has started to work, and which include strengthening supply chain traceability, expanding workplace standards, establishing a minimum mica price, formalizing the sector under worker cooperatives, and joining broader coalitions in the mica ecosystem.

Pesticides are often in the news. We can read or hear about them in new research publications, political agendas, and numerous campaigns and press releases. Meanwhile, the future of European agriculture and sustainable food systems is being negotiated in the form of the EU Farm-to-Fork strategy (which calls for a 50% reduction of pesticide use by 2030) and reform of both the CAP and the EU rules on pesticide (the Sustainable Use Directive revision).

These discussions are sure to once again bring up the controversy surrounding synthetic pesticides, which is fuelled in particular by opposition between:

  • the economic influence of the sector and its capacity to “feed the world”, which is championed by the manufacturers and users of pesticides,
  • and its negative impacts on the environment and health, in Europe and elsewhere in the world.

It’s with the goal of examining these issues objectively that Basic, CCFD-Terre Solidaire and Pollinis are publishing the study “Pesticides: a model that’s costing us dearly”.

The study provides new data to help discuss the issue, based both on an assessment of the costs and benefits of the pesticide sector in Europe and on an analysis of recent trends in the sector and among its main players (BASF, Bayer, Corteva, Syngenta). Above all, the study questions the social and economic rationality of the production and use of pesticides and, more generally, that of the agricultural model that depends on them.

A sector whose costs are twice as high as its profits

Pesticides are an integral part of an agro-industrial model that has been developed since the middle of the 20th century and is based on four pillars: synthetic fertilizers, “improved” seeds, agricultural machinery and pesticides.

Over the last 20 years, the global pesticide market has doubled, reaching turnover of €53 billion in 2020. The European Union is simultaneously one of the main consumers and one of the main exporters internationally.

Systemic impacts on biodiversity and human health

This intensive use of pesticides has multiple impacts. Many studies point to the role of pesticides in the declines in insects (especially bees and other pollinators), birds and biodiversity more generally. Such decline ultimately threatens the provision of ecosystem services that are critical to agriculture: pollination, pest control, and soil, water and climate regulation.

The effects on human health are also being increasingly documented and recognized, not only in Europe but also in the countries of the Global South, where the consequences are even more worrying because of insufficient regulations to protect people from the most toxic substances.

A sector on life support

To examine the economic repercussions of these various impacts objectively, we conducted a cost-benefit analysis of the pesticide sector that investigates both of the following:

  • The real costs generated by pesticide use and paid for by European society (i.e., public expenditure linked to the negative impacts of pesticides and public support received by the sector),
  • The book profits generated by major firms through pesticide use.

On a European scale, the costs directly attributable to pesticides– around €2.3 billion in 2017, which must be borne by our societies – are twice as high as the net profits directly made by the industry (nearly €0.9 billion that same year).

Without official aid for the pesticide sector, and without our collective payment of the costs linked to its negative consequences, the sector would not be profitable today.

The lobbying of pesticide manufacturers to maintain the status quo

How is this economic absurdity made socially acceptable? To defend its interests, the sector carries out large-scale lobbying targeting public authorities. Expenditures related to lobbying approach €10 million per year, just for the European market. This amount is greater than the budget of the European Food Safety Authority (EFSA) dedicated to regulate pesticides.

An agro-industrial system that no longer delivers on its main promises

Beyond the hidden costs of the pesticide sector, our study reminds us that the agro-industrial model, of which it is an integral part, is far from having resolved the social, health and economic problems that justified its development in the 20th century.

A system that produces more? – Limits to the race for yields

While global agricultural production has more than doubled since the 1950s, agricultural yields are now reaching a ceiling. More worryingly, yields are beginning to decline in many areas where specialized crops are grown. This is because modern production systems – dependent on pesticides – have led to growing phenomena such as pest resistance, soil and biodiversity degradation, and also the destruction of natural resources needed for agricultural production (soil, fauna and flora required for crop development, etc.). At the same time, these same systems are helping to make the effects of climate change worse.

A system that “feeds the world”? – The growing scourge of food insecurity and malnutrition

Agricultural production could feed a population 1.5 times greater than the world’s current population. Yet, food insecurity is still a problem for 40% of people, of whom most are farmers! The issue is thus not just one of available quantities, but also of food waste, access to food for all… and food quality. Indeed, the shift towards diets that are less varied and contain more meat and processed foods has led to an explosion in problems of overweight, cardiovascular disease and obesity – a global pandemic caused by the dysfunctional nature of our current agricultural and food systems.

Farmers, the big losers of the current food model

The agri-food industries and large-scale distribution sector seem to be the big winners of this model – not farmers or consumers. For these latter, the price of food has increased fivefold since the 1960s (at current currency values). Meanwhile, commodity prices of the major agricultural products have fallen by half, with the share of value obtained farmers constantly declining. Over the same period, millions of agricultural jobs have been destroyed by the processes of farm intensification and expansion, which are encouraged by public policies under pressure from global competition.

A system that goes counter to food sovereignty

More fundamentally, beyond assessing the hidden costs of the pesticide sector, our analysis questions the ability of an agricultural and food system that depends on pesticides to achieve any food sovereignty objective.

Industry consolidation via mergers and acquisitions

Currently, four companies – Bayer, BASF, Syngenta/ChemChina and Corteva – hold nearly three quarters of the pesticide market and nearly 60% of the agricultural seed market. Syngenta/ChemChina is a Chinese state-owned company. In contrast Bayer, BASF and Corteva are all partly owned by the same five American investment funds: Blackrock, Vanguard, State Street, Capital Group and Fidelity. These funds also own between 10% and 30% of the capital of the world’s leading food companies, such as Unilever, Nestlé, Mondelez, Kellogg, Coca-Cola and PepsiCo.

“Less is more”: Reinvention of the sector into precision farming and new technologies

The leaders of the pesticide sector, both Western and Asian, are now trying to reinvent themselves through “digital agriculture”, by combining their traditional offers with new data collection tools (sensors, drones, satellites, etc.) and the use of robotization. At the same time, they are increasingly investing in new genetic engineering technologies.

In addition to the environmental impacts associated with these new technologies (which are based on an ever-increasing consumption of non-renewable resources), and to their high costs (which limit their accessibility), this model is making farmers even more dependent on agribusiness. But in our uncertain times, which is seeing increasingly frequent climate events, the key to farmers’ resilience lies in empowering them more and in strengthening their capacities for adaptation.

Behind the Green Revolution, double jeopardy for the countries of the Global South

The industry’s promises of a new golden age for agriculture conceal a less attractive reality: international development of the sector is still largely based on commercialization, in emerging countries, of pesticides that are banned in Europe due to their toxicity and to the ensuing health and environmental consequences.

At the same time, people in emerging countries are also suffering from the poorly regulated development of pesticide production sites on their territory, particularly following the ongoing relocation of production outside the European Union and the surge of the generic pesticide market since 2000, which has turned China and India into the top global manufacturers and exporters.

Responsibility of governments

In a few decades, and thanks to the constant support of public authorities, the agricultural world has invested massively in the use of pesticides. While the profits of this sector are becoming increasingly concentrated in the hands of a few multinationals, society faces a considerable bill to pay each year to cover the costs linked to pesticide use. But even those amounts will not be able to repair the irreversible damage caused to humans and the environment.

Our institutions continue to support the traditional players of the sector despite these visible failures. They even believe in the sector’s promises of a third agricultural revolution. As a result, social and environmental impacts as well as dependence on non-renewable resources and agribusiness are intensifying for farmers rather than diminishing.

In contrast, the varied agroecological models have proven to be more sustainable. While transition to these also requires investments, these latter will be smaller and above all more sustainable. For example, according to INRAE, the European Union’s “Farm to Fork” strategy’s goal of tripling organic farms by 2030 would cost €1.85 billion per year – less than the annual costs to society that are linked to pesticides.

Finally, in 2022, Member States will have to assume their responsibility and choose between a costly, polluting model concentrated in the hands of a few players whose decision-making centres are outside Europe, and a sustainable agro-ecological model championed by citizens and farmers. It is the future food sovereignty for the EU – and, more broadly, for the planet – that is at stake.

In the medias
In Europe
In France

Our study analyzes how DAX 30 companies have used their profits in the past few years: between 2009 and 2020, payments to shareholders rose by 85%, almost twice as much as profits (after tax) which rose by 48%, while the proportion of income taxes that the DAX 30 paid in the same period rose by only 42%.  Some companies even sometimes transferred money to their shareholders in years of loss. In addition, the cumulated financial reserves of the DAX 30 grew from 122 billion euros in 2014 to almost 200 billion at the end of 2020, which also benefits shareholders as larger reserves increase the company’s value.

Beyond, our analysis shows a trend reversal. The DAX 30 companies seem to be moving away from the historical corporate and financial management approach in which the shareholders are the last to participate in the company’s value creation, depending on the level of profits. While traditionally, dividends were only paid when all other key spendings had been made, the DAX30 now constantly increase payments to shareholders, while the allocation of profits to investment capacity has become an adjustment variable.

At the same time, investments of DAX 30 companies in the fight against climate change is not up to the challenges. Our estimates of the annual investments required in order to make the business models of these companies climate-neutral by 2050 show that they invest too little whether in the transport, energy, real estate or cement sectors. Yet, given their financial leeway, some companies would be able to do so without government subsidies or tax breaks. For example in the transport sector, if BMW, Daimler, Volkswagen and Lufthansa were to make the additional climate investments required of 13.8 billion euros per year, they would still make profits that would allow them to pay dividends as high as in 2009 or 2010.

We also investigated the issue of human rights and due diligence. In the case of Adidas, if the company was to  ensure the payment of living wages in the factories of most of its suppliers, it would require additional expenses of around 567 million euros. This amount would halve Adidas’ annual profits of 1.22 billion euros and potentially reduce the payments to shareholders by the same proportion; even in this case, dividends would remain at the level as in 2013, when they were among the highest in the world’s textile industry.

For further information:

 

In the German Media:

Digital technologies have become an integral part of our daily lives, changing the way the economy and society as a whole work. To what extent is it also changing the agricultural and food sectors today?

Our study highlights the multiple and still partly uncertain consequences of the development and dissemination of digital tools in the food sector, which are likely to disrupt all the players, from the provision of agricultural inputs and services to the final consumption of food products.

The digital technologies offered by private players hold out the promise of reducing environmental impacts (including greenhouse gas emissions, use of synthetic fertilisers and pesticides, etc.) and harsh working conditions. But the market is directing these advances towards the most influential players, thereby strengthening their dominant positions in the food sector and their capacity to create and capture value along the chain. Beyond, digital technologies are most often focused on optimising performance to enable players to lower their costs for each euro of value created. In doing so, they amplify the convergence towards capital-intensive and automated business models throughout food chains.

Yet, to ensure the sustainability of the food system as well as its resilience, it would be necessary today to transform production models and to allow for their diversity across territories and sectors. Achieving this objective requires to collectively choose the desired direction of the agricultural and food sector, and then use digital technologies to support it. This raises important questions with regards to public investments and public regulations of the digital market, which are critical at a time when the last arbitrations of the new Common Agricultural Policy are being played out.

For further information, see :
Our transversal analysis (in French)
Our full report (in French)
The website of our partner, the Foundation Daniel & Nina Carasso

An innovative methodology developed by BASIC has been applied to analyze the impacts of 11 sustainability labels in 15 product categories on the French food market. Based on a comprehensive literature review, the study investigates the requirements defined in their standards, as well as the ancillary actions they conduct in order to develop sustainable value chains and consumption. It is also based on a series of interviews with each pilot of label (so as to understand their intentions) as well as a modelling of the links between the effects of each label and the sustainability issues related to food.

Varying results depending on the label/standard

This new study provides precise and verified information on the potential impact of the labels analyzed on a wide range of food-related environmental issues (climate change, biodiversity, etc.) and socio-economic issues (impact on human health, animal welfare, etc.), so as to enable citizens make better informed choices of consumption.

Three groups of labels were identified:

  • The labels that share a continuous improvement approach – Agri Confiance, Zero Pesticide Residues and High Environmental Value (HVE) – have the weakest and least proven positive effects of all the labels analysed, even though they sometimes claim broad and ambitious intentions.
  • The labels that share the organic farming approach – EU organic standards & logo, Bio Equitable in France, Nature & Progres, Demeter – have strong and proven socio-economic and environmental benefits.
  • The sector-specific labels – Bleu-Blanc-Cœur, Label Rouge, PDO, C’est Qui le Patron – have very different benefits depending on the product category, which can create confusion for consumers.

In particular, the study shows that some food labels show a big gap between their socio-economic and environmental benefits and their stated intentions.

To access the full results of our evaluation, see the dedicated website developed by BASIC to navigate the results (in French).

A highly political subject

Finally, this study enables to feed the technical and political debates on food labels, the associated regulatory framework, and the forms of public support that can be granted to them. Based on the results, Greenpeace and WWF have made the following recommendations:

  • Revise the list of standards which are eligible to public support, by integrating a minimum set of criteria regarding the environment (biodiversity and climate change) and socio-economic issues (producers’ income, human health and animal welfare).
  • Make public support conditional on the concrete impacts of labels and not on their stated intentions. In particular, public support for High Environmental Value (HVE) certification should be suspended until its requirements have been revised, and the crietria used to identify ‘sustainable’ labels in the EGalim law should be significantly revised.

For further information:

In the French medias :

Based on the decarbonization pathway of the agricultural sector defined by the French government in its National Low-Carbon Strategy, IDDRI and Basic have developed two scenarios of food system transition, both aiming at the same decarbonization objectives, via two contrasting trajectories in terms of socio-political dynamics and economic strategies of private actors.

Comparing these two scenarios enables to assess their quantitative implications (in terms of employment and income) and to identify the socio-political conditions for a fair transition:

  • A scenario centered on climate issues, without calling into question the logic of concentration/specialization of agrifood production would lead to significant negative socio-economic impacts: acceleration of the disappearance of farms and associated jobs (-9% in arable crops and milk sectors compared to ‘Business as Usual’ trends), loss of industrial jobs (-12% in the same sectors compared to 2015), without substantially improving the quality of food nor biodiversity.
  • A scenario that embraces the multiple challenges of our current food system (climate, biodiversity, health, employment) could generate multiple benefits: protection of agricultural employment (+ 10% in arable crops and milk sectors compared to ‘Business as Usual’ trends) without loss of income; increase in industrial employment (+ 8% in the same sectors compared to 2015); positive contribution to the restoration of agrobiodiversity and to the achievement of public nutritional recommendations.

In political terms, the economic viability of the second scenario relies on a simultaneous evolution of supply, demand and the regulation of markets, involving significant changes:

  • a proactive approach to demand at the national level, going against the current political reluctance to act, mobilizing a wide range of tools to enable consumers to make the healthiest and most sustainable choices;
  • a convergence of visions between Member States of the European Union, so that the national strategic plans – within the framework of the Common Agricultural Policy – set comparable objectives and requirements to all European farmers;
  • an ambitious approach to regulate international trade so as to promote and support the adoption of ambitious production standards.

To consolidate these initial results, it is necessary to complement the current analysis conducted on arable crops and milk sectors and extend it to all agricultural sectors and countries of the European Union. A task that Iddri and Basic have started to tackle with other partners (Solagro, I4CE), with the aim of publishing new results in 2022.

 

To know more :

Our joint research with Public Eye and “Collectif Ethique sur l’Etiquette” on Zara, the flagship brand of Inditex, reveals the hidden side of this leader of Fast Fashion.

The key to Zara’s commercial success lies in a model that enables the company to respond in real time to consumer demand, by offering them a very large number of low-cost products directly inspired by “haute couture” collections, just a few weeks after their official launch at fashion shows.

Each year, Zara  creates more than 65,000 new products (compared to an average of 3,000 to 4,000 for traditional competitors in the sector), and 75% of items sold in its stores are changed every month.

This frenetic renewal of products is addictive for customers who come back on average 17 times a year in Zara’s stores (compared to 3 to 4 times for traditional competitors), for fear of missing out on their latest innovations. It also enables Zara to limit its stocks to a minimum, as well as the quantities sold on sale/discount, and the level of discount rates applied (2 times lower at Zara compared to competitors). This success has been possible without resorting to advertisement, since Zara’s spending on advertising represents less than 0.3% of its annual turnover.

What is the impact of this business model on the workers involved in the brand’s supply chains?

To answer this question, we have investigated the detailed breakdown of the price of a typical hoody featuring the word “RESPECT” sold at Zara stores during the summer 2019.

Our results are as follows: according to our calculations, for each hoody sold at an average price of € 26.70, Inditex generates a net profit of € 4.20 per item, which is more than twice the sum of all the other players involved in the manufacturing of the product (€ 2.08), from cotton farming in India to the spinning in Kayseri and the garment factories in Izmir (both in Turkey).

According to the information gathered in Turkey, workers in this supply chain earn between 2,000 and 2,500 Turkish liras per month (310 to 390 €), about a third of the living wage estimated by the Clean Clothes Campaign (6,130 lira).

However, such low wages are not a fatality: by spending € 3.62 more per item on labour, Zara could guarantee a living wage for all workers in its suply chain. Even if this sum was deducted from Zara’s net margin, the brand would continue to generate greater net profits on each hoodie sold than any of its subcontractors in the chain…

 

The trailer of the documentary in English can be seen at the following link on the javafilm platform.

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Confronted with increasing health and environmental impacts, France and the European Union have set ambitious targets to reduce the use of pesticides in agriculture (notably through the French Ecophyto plan).

However, the pesticide use in France has continued to increase significantly over the past 10 years, even though the technical feasibility of pesticide reduction is largely documented.

How to explain this failure? To what extent public and private financing play a role in changing or maintaining agricultural systems that largely use pesticides?

These are the main research questions of our latest study carried out on behalf of the Nicolas Hulot Foundation and published today.

First finding: in a context of dualization of French agriculture, the increase of the use of pesticides since 2009 is only due to a minority of farms (9%), which mainly produce field crops (cereals, oilseed and protein crops), and whose cumulated number and cultivated land area are fast growing.

Second finding: our analysis shows that public support and private funding mechanisms do not follow the growing societal demand for food products without pesticides.

In 2018 only 11% of public funding had a direct or indirect intention to reduce the use of pesticides: 2.7 billion euros out of the 23.2 billion euros public support to the actors of the French food system (among them, the budgets of the Ecophyto plan – the main public tool for reducing pesticides – represent only 0.3% of total public support). Moreover, less than 1% of the total amount of public support have proven effects in terms of pesticides reduction.

Regarding the private financing of French agricultural and agrifood players, they hardly include any sustainability criteria and remain mainly driven by conventional market signals.

To change this situation, the Nicolas Hulot Foundation recommends, on the one hand, to give greater responsibility to the actors of the French food sector by establishing a progressive bonus-malus based on the “polluter-pays principle”, and on the other hand, to reorient the Common Agricultural Policy (CAP) towards the protection of biodiversity by allocating more resources to organic agriculture, to payments for environmental services, and to local food projects driven by local authorities.

To go further (documents in French):

In the French press:

On the French TV and radio:

The database developed by BASIC on the agricultural projects funded by the French State in countries eligible to Official Development Assistance enables to query on 1,500 keywords and variants. It has required the consolidation and cleansing of data from 7 public databases and several institutional websites, bringing together 9,571 project lines corresponding to 5.8 billion euros public financing between 2009 and 2018.

Thanks to this tool, the 3 NGOs (CCFD-Terre Solidaire, Oxfam France and Action Contre la Faim) were able to sift through the information on projects funded by the French government and to publish the main outputs of their analyses in their report “Une pincée d´agroécologie pour une louche d’agro-industrie”.

The results are enlightening: only 13.3% of total French public financing contributed to “transformative” agroecology, acting both on agricultural practices and on food systems (modification of land rights, protection of natural resources, etc.). In addition, 9.3% of the financing supported projects related to “greening” of agricultural practices, but without systemic ambition.

In contrast, 23.6% of the total public funding supported “non-agroecological” projects (which focused on increasing yields regardless of the agricultural model implemented, on the development of industrial agriculture, etc.), frequently in partnership with large French private groups having business ambitions in the countries concerned.

As a result, the marking of funding in favour of the ecological and social transition of agriculture appears still largely insufficient in comparison with the commitments of the French government, and the contradictions between its various public policies remain to be resolved.

 

To go further (documents in French):

 

In the French medias:

With a billion meals served each year in France, school catering has major repercussions not only on children’s eating habits but also on the agricultural world which produces the food products and, by extension, on all of the population and the environment.

Based on data from the PARCEL tool it has developed, BASIC has analysed the effects of the introduction of vegetarian menus on climate change, water pollution and abstraction, and the risks of deforestation. Assuming that the EGAlim law is fully applied1 and that a mandatory weekly vegetarian menu is served to all pupils from kindergarten to high school, the impacts would already be significant:

  • 14% to 19% reduction in greenhouse gases emitted to produce the food served in canteens;
  • 16% to 18% reduction in water pollution hidden costs linked to agricultural activities that supply the canteens;
  • 8% to 11% reduction in water consumption linked to agricultural production of the food in canteens;
  • 22% to 27% reduction in imports of feed for farm animals in France (and therefore a reduction in the associated risks of imported deforestation).

In addition, the introduction of 2 vegetarian menus per week would also enable:

  • 28% to 38% reduction in greenhouse gas emitted to produce food in canteens;
  • 41% to 51% reduction in imports of feed for farm animals (and therefore a reduction in the associated risk of imported deforestation).

To read the full results of the study, click on the folllowing link: Menus végétariens dans les cantines : quels impacts pour la planète ?

In the French medias:

 

1 Under the EGAlim law, since November 2019, all French school canteens must offer their students at least one vegetarian meal per week. For the study, it was considered that 100% of canteens apply the law.

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