Sustainabilitea: the Dutch tea market and corporate social responsibility

Sustainabilitea: the Dutch tea market and corporate social responsibility

Issues and developments regarding the global and Dutch tea markets

The report examines issues and developments related to the global and Dutch tea markets and of relevant corporate social responsibility initiatives. It examines the global tea market and the power concentration well as practices of the big blending and packaging companies such as Unilever, Tata Tea, Hillsdown, Holding, Sara Lee International, Teekanne, Twinings, Ostfriesche Teegesellschaft, etc.

The paper highlights that:

  • to some extent, falling tea prices account for the downward pressure on wages paid for tea plantation labour, as well as the price paid to small tea farmers for their produce. An estimated 55-60% of the total production costs of (Indian) plantation tea are made up of labour costs
  • however, due to smart marketing, fierce competition and product innovation, the tea trade is still highly profitable, at least for the successful market players
  • market concentration is high, or, in other words, the global tea market is in the hands of a small number of companies
  • prices for tea are determined to a significant extent by the purchasing practices of large tea blending and packaging companies
  • critical analysis of companies' behaviour reveals how they deliberately reduce differences in quality among the different teas produced all over the world, to create interchangeable teas, to be bought wherever the prices are lowest
  • the global price for tea is strongly influenced by the trade at the tea auctions, and it is often hinted that these companies are involved in cartelisation and in pre-auction price agreements at auctions, but evidence is hard to get
  • child labour is frequently used in the production of tea, as is demonstrated by studies on tea production in India, Kenya, Malawi, Indonesia and Tanzania
  • generally speaking, trade unions in tea-producing countries are weak and labour rights are easily sidestepped
  • the global tea industry has undertaken some initiatives in the field of corporate social responsibility to address social and environmental issues; critical analysis of the quality and effectiveness of these initiatives, however, indicates that labour rights, social issues, environmental concerns and economic imbalances are not being adequately addressed.

The paper concludes that, supply chain responsibility is an underdeveloped concept in the tea industry. Generally speaking, CSR initiatives do not offer more than a token involvement of stakeholders on an advisory level. Direct involvement of workers or workers’ organisations on an equal basis in remedying problems is very rare.