Fairtrade
Living Income
P R O G R E S S R E P O R T 202 3

Contents
Executive summary

3

Fairtrade’s Living Income Strategy:
Reflecting progress and learnings

4

Sustainable production

8

Responsible procurement

12

Tracking progress:
What do the data tell us?

18

Advocating for an
enabling environment

22

Looking ahead

26

EXECUTIVE SUMMARYFAIRTR ADE LIVING INCOME PROGRESS REPORT 2023

Executive
summary
Achieving sustainable livelihoods
for smallholder farmers andworkers is at the core of Fairtrade’s
mission. In order to enjoysustainable livelihoods, farmers
need to earn sufficient income topractice sustainable agriculture
and afford a decent standard ofliving. In reality the gap to a living
income is still large for many
farmers in the countries where
Fairtrade works.

Our holistic living income strategy encompasses
three interconnected building blocks:•••

Sustainable production
Responsible procurement
Enabling environment

This report describes our actions in each of theseareas, and the progress we’ve made to date.
For instance, Fairtrade producer networks and project
partners work with cooperatives to strengthen
services to their farmer members. These include
coaching on better farm management, and support for
productivity improvement (such as cocoa cooperatives
subsidising “labour brigades” to help with pruning, thesustainable banana programme in Latin America or
investment in a biofertilizer plant by Red Ecolsierra
in Colombia). It also includes enabling income
diversification (such as through a dynamic agroforestry
project in Ghana or an incubator hub for alternative
income generation by ECAM in Côte d’Ivoire).
Under responsible procurement, we have madesignificant progress in establishing Living Income
Reference Prices, which are what a full-time farmer
needs to be paid to earn a living income, assuming
a sustainable productivity level is reached. To date
we have set country-level reference prices for cocoa
in two countries, coffee in seven countries, vanillain two countries, and coconuts in one country. We
have also developed supply-chain specific reference
prices on demand for companies and their supplying
cooperatives for a range of products and origins,
including cashews, oranges for juice, robusta coffee
and fine flavour cocoa. As intended, these prices areserving as a “reference” for the industry; we know anumber of other companies are using our reference
prices to inform their own internal pricing strategies.
This report includes promising results from the firsttwo years of the Living Income Learning projectwith Tony’s Open Chain and Ben & Jerry’s and six
partner cocoa cooperatives, which combine activities
to improve farm profitability towards the target
values for cocoa yields, crop diversification and cost
efficiency, alongside the companies paying the Living
Income Reference Price. The participating farmers
earned on average 15 percent more compared to
the government-regulated farmgate prices, while
cooperatives that sold more than average earned up to
47 percent higher cocoa revenues.
Advocacy efforts have also advanced, from the “ISCOs”(national multi-stakeholder initiatives for sustainablecocoa), to European Union legislation on humanrights and environmental due diligence, to changes toEuropean competition law that allow collaboration onsustainability initiatives. We hosted a farmer-led summit
in May in Abidjan, which resulted in a joint declaration
calling for sustainable procurement practices andpolicies that support living incomes and enforcement oflaws to protect people and the environment.
We look forward to continuing our work andcollaborations in 2024, including continuing to diveinto data and learnings, channelling resources into
scaling up what works, setting reference prices,and developing ways to highlight the additional
commitments and progress that companies andcooperatives are making toward living incomes.

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STR ATEGYFAIRTR ADE LIVING INCOME PROGRESS REPORT 2023

Fairtrade’s Living
Income Strategy:
Reflecting
progress andlearnings
Achieving sustainable livelihoods
for smallholder farmers andworkers is at the core ofFairtrade’s mission. In order toenjoy sustainable livelihoods,
small-scale farmers need to earnsufficient income to practicesustainable agriculture and afford
a decent standard of living. In
reality the gap to a living income
is still large for a majority ofsmallholder farmers in the global
south. The painful results of a large
household income study among
cocoa farmers in Côte d’Ivoire
served as a wake-up call, uponwhich Fairtrade launched in 2017its first roadmap to make progress
towards living incomes.

Last year this Living Income Strategy was updated
to capitalize on early learnings from implementationand to incorporate developments in the sustainability
landscape. The strategy encompasses threeinterconnected building blocks:•

responsible procurement to enable farmers
and their organisations plan their business andsecure a decent return on their investment, by
establishing long-term sourcing partnerships andpaying living income based prices••

enabling environment that creates the conditions
for farmers to produce sustainably and drives
collective action by putting in place policies thatlevel the playing field for the entire industry.

sustainable production to optimize farm yields,
efficiency and resilience, in harmony with thenatural environment

POLICY & REGULATIONSECTOR COMMITMENTSACCESS TO SERVICESENABLING ENVIRONMENTRESPONSIBLE
PROCUREMENTSUSTAINABLE
PRODUCTION

LIVING INCOME
REFERENCE PRICESYIELD & QUALITY
IMPROVEMENTLONG-TERM SOURCINGRELATIONSHIPS

COST EFFICIENCYRISK SHARING

CROP RESILIENCE& DIVERSIFICATION

4FAIRTR ADE LIVING INCOME PROGRESS REPORT 2023

STR ATEGY

Closing the gap between farmers’ current average
incomes and living incomes requires an integrated
multi-stakeholder approach, in which farmers andproducer organisations play an active role.
Farmers are primarily responsible for increasing
farm productivity and resilience by implementing
sustainable agricultural practices, supported by theirorganisations. Producer organisations create value
for their members by delivering the services they need,such as technical assistance, access to subsidized
inputs or loans, to improve farming practices andquality or diversify their incomes.
Companies are in the first place responsible forsustainable purchasing practices, including establishinglong-term sourcing relations and paying sustainable
prices. This way, producer organisations can plan theirbusiness and pay their members a price that supports
their farm investments and a decent standard of living.
Finally, the required collective action to fulfil these
conditions at scale can be driven by governments
putting in place policies that level the playing field forthe entire industry.

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STR ATEGYFAIRTR ADE LIVING INCOME PROGRESS REPORT 2023

Given the above, Fairtrade’s new strategy lays out
what needs to be done beyond Fairtrade businessas usual to deliver on our ambition. It describes six
interdependent areas of interventions that we arefocusing on for the coming years.
1. Standards – Fairtrade Standards form the
backbone of all our work and provide a solid basis
for accomplishing our strategic goals, including
living incomes. Standards are continuously
reviewed and new requirements for traders andproducers will be considered for inclusion once
voluntary interventions have proven effective.
This way, elements of the strategy may move frombeing voluntary to becoming embedded in ourbusiness as usual.
2. Living Income Reference Prices – Sustainablepricing is a critical component of Fairtrade’s Living
Income Strategy. Living Income Reference Prices
indicate the price a typical farmer household witha viable farm size and a sustainable productivity
level needs to earn a living income from the salesof their crop. The price discovery process is basedon an assessment of current yields, cultivated land
areas and farm investments, to set realistic targets
for each of these key income drivers. Reference
prices will co-exist with the Fairtrade Minimum
Price and Premium as a complementary pricing andadvocacy tool, which companies can decide to pay
on a voluntary basis.

3. Bespoke business services – Beyond FairtradeStandards, industry partners who want to go astep further in assuming their responsibility forliving incomes in their supply chains can work with
Fairtrade to develop bespoke projects that suit
their sourcing partners and shared priorities. We
offer committed commercial partners a range ofpossible interventions from which a customised
project can be designed.
4. Producer support programmes – Expanding on
successful programmes that Fairtrade’s Producer
Networks already provide, services to strengthen
producer organisations will be scaled up so thatthese organisations in turn are better equipped tosupport their farmer members in increasing theirincomes. This includes organisational capacity
building in areas such as entrepreneurial skills,
productivity improvement, climate resilience,
gender and youth inclusion.
5. Advocacy – An enabling environment so thatindustries can take the required collective action
is crucial to bring about income improvement at
scale. Fairtrade advocates for raising the bar at
multiple local, national and regional initiatives.
Opportunities include integrating living incomesupporting requirements into human rights andenvironmental due diligence legislation, andinfluencing sector agreements to include ambitious
living income commitments for the industry.

6. Monitoring, evaluation and learning – Collecting
farm economic baseline data and assessing
gaps to living incomes are key to understanding
the levers to improve farmers’ incomes anddesigning appropriate strategies and establishingsustainable price levels. Then closely monitoring
income improvement for households thatparticipate in any of our living income-related
projects is crucial to evaluate the effectivenessof our interventions, learn what works best andbuild on successes. Through transparent reportingon key performance indicators, Fairtrade aims toshow the way to living incomes and encouragebusinesses to come on board.

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STR ATEGYFAIRTR ADE LIVING INCOME PROGRESS REPORT 2023

Engaging with businesses on living income
There are many ways for businesses to work with
Fairtrade on their journey towards living incomes that
go beyond certification, addressing one or more of thestrategic pillars for attaining living income goals.
The most straightforward way is to adopt Fairtrade
Living Income Reference Prices wherever these are
set and commit to not purchase products below theseprice levels. FLOCERT offers independent verification
services of these payments, as well as tracking
payments made to farmers.
In case a reference price has not yet been
established for the product or origin of interest,
Fairtrade offers a fast-track methodology to
calculate ‘proxy’ Living Income Reference Prices
for specific supply chains and/or for less common
Fairtrade products at a fee for service.
Various combinations of interventions are also alreadybeing implemented with cocoa and coffee farmers,
distinguishing between living income projects which
include the payment of a Living Income Reference
Price, and income improvement projects that do not.

Ways of working with Fairtrade on living income•

Living income projects, encompassing
interventions in all aspects of the living income
roadmap by supply chain actors•

Income Improvement projects, partially
implementing the living income roadmap
depending on priorities identified by therespective partners•

Living income innovation fund for common,
experimental and scalable projects, especiallysuitable for commercial partners with nontraceable supply chains, many different
sourcing partners or those who source
only small volumes and would not deliversignificant measurable impact on their own.

•

Living Income Reference Price establishment,
either supporting baseline and gap analysis forcountry-level price discovery or customized
calculations for customers who wish to knowwhat price is needed to enable living incomes in
specific supply chains.

•

Programme support through investments
in targeted producer facing interventions
towards strengthening producer organisations,
optimizing farm profitability and resilience,
income diversification, fostering genderinclusive household economic management, etc.

•

Campaigning to raise awareness and increasepressure for living income commitments.

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SUSTAINABLE PRODUCTION

FAIRTR ADE LIVING INCOME PROGRESS REPORT 2023

Sustainableproduction
Increased productivity – in harmony
with the surrounding environmentand resilient against shocks due
to changing climate conditions –is an important lever to improve
farmer incomes. In most producer
realities there is potential forsignificant income improvement
through optimizing farm yields andefficiencies, whether of their main
crop or diversified income sources.
Yet, numerous programmes aiming
at productivity improvement overthe past decades have not beensuccessful in lifting smallholder
farmers out of poverty.

Fairtrade believes in the power of farmer ownershipand self determination to enhance sustainableagriculture, enabled through fair trading practices.
Stable, long-term trade relationships provide thesecurity for farmers to take the risk that comewith doing things differently on their farms, likerenovating trees and wait for a few years before they
become productive. This starts with gaining a better
understanding of the economics of their small-scale
farming business and the medium and long term
effects of certain investment decisions.

Better farm management
through record keeping
Through the implementation of farm records, farmers
gain better insight into the various expendituresand revenue flows, and learn how to manage theirfarms and their household budgets more efficiently.
Farm record tools have been introduced to farmer
households, who – with the help of coaches from theirorganisations – have learnt to track their expenses,
labour and incomes. Special attention was paid tomaking sure that couples were jointly involved in thisexercise to get a complete picture of the family businessand more recognition of the work done by womenand the income they generate for the household. The
assumption was that this would lead to women having
a stronger say in running the farm and deciding how thehousehold money is spent.
A gender inclusive household economics training
module was developed to strengthen the involvementof women in farm management and overall economic
decision making.

“As a couple participating in this training, we cansay that this training opened our eyes to many
aspects of couple life. It’s as if our relationshiphas been renewed. In any case, the project has
been of considerable benefit to us.”
Mr and Ms Koko, CAPRESSA“The project created a single vision within the
couples regarding the economic management of
the household. Now there is transparency andgood communication between the woman andthe man who put together their different incomesto manage it for the benefit of the household. In
the past, only the man made the decisions. Withthe training, we have understood that we must
always involve women in decision-making.”
CAPRESSA‘’We are very happy to have participated inthis living income project, because since thepassage of coaches and the training we received,
we follow our farm records regularly and thefinancial management is going well. I now involve
my wife in the management of the household andharmony and cohesion reign in our household.”
Daouda Coulibaly, producer, ECOJAD

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SUSTAINABLE PRODUCTION

FAIRTR ADE LIVING INCOME PROGRESS REPORT 2023

A better environment forfarmers – and for bananas
A collaboration between French retailer
Carrefour, the French Development Agency, andFairtrade producer network CLAC in the Latin
America and Caribbean region is an example ofimproving yields, sustainability, and resilienceat the same time. The Sustainable Banana
Programme supports 11 small-scale banana
cooperatives and more than 1,000 farmers in
Peru and the Dominican Republic to increase
their productivity in eco-friendly ways, to build
business management skills, and to better
include women in these opportunities.

Sustainable yields in the mix
A sustainable yield from a farmer’s available landis part of the living income equation. Productivity
targets for a crop in a specific context are set
by analysing the current productivity, and thenconsulting with farmers and local experts todetermine what can realistically be achieved,
given the circumstances in the country. Producer
organisations play an important role to reach these.

Better cooperative services supporting
their members to be efficient farmers
The three regional Fairtrade producer networks
provide services that strengthen certified
organisations to improve farming practices andincrease productivity. Strong cooperatives can

reduce costs for their farmer members by organisingpurchases or services at scale. This saves farmers
money, and can at the same time contribute to higher
farm incomes by spreading good agricultural practices.
In addition, farmers can be sure to receive the right
inputs from a guaranteed source.
For example, several cocoa cooperatives in West
Africa have organised and employed “labour brigades”
that travel to members’ farms and take care of tree
pruning or other labour-intensive but productivityimproving practices. The well-equipped brigades,
staffed by trained young members of the communityand subsidized by the cooperatives offer high quality
labour services. This represents a form of in-kind
contribution to farmers’ incomes, as it saves themhiring workers and increases their yields.

CLAC conducted a number of workshops
to train farmers on agricultural practices
to increase soil fertility and to test crop
diversification. Farmers are also learning how
to identify and prevent the spread of Fusarium“wilt,” an extremely harmful plant fungus,
which is deterred in part by soil biodiversity.
The project provides funds for the cooperatives
to set up “microfactories” to produce organic
fertilizers and biological pesticides for use by
their members, both reducing costs as well as
improving their ecological footprint.

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SUSTAINABLE PRODUCTION

FAIRTR ADE LIVING INCOME PROGRESS REPORT 2023

Income diversification
Sustainable production is not only focussed onincreasing yields but also very much about improving
farm and income resilience. Crop losses due to theeffects of climate change or pests and diseases,
price drops following market fluctuations, all havea severe impact on farmers incomes and can be
mitigated by diversifying the sources of income,either on farm or off farm. Traditional intercropping
practices, such as growing food crops in association
with the main crop, are therefore strongly promoted.
Dynamic agroforestry initiatives go a step further.

The Sankofa project in Ghana, implemented by
Fairtrade Africa and its partners, is scaling up
dynamic agroforestry methods within Fairtradecertified farmer union Kuapa Kokoo. The project
aims to have a first cohort of 400 farmers eachfarming at least one hectare of land using dynamic
agroforestry practices by 2025, with another 1,000
farmers started along the path as well. Planting fruit
trees (mango, citrus, avocado) and timber provides
shade for cocoa trees and keeps soil moist, whileyam, cassava and cowpea can be grown on the sameland and contribute additional income and foodsecurity. Farmers reported earning between 25 and125 percent more thanks to the additional cash crops
they have planted, besides the biodiversity wins.

Creating off-farm income generating opportunities isparticularly important for large households, or thosewith very small plots of land, for whom farm revenues
alone are unlikely to bring in enough to reach a living
income. ECAM cocoa cooperative in Côte d’Ivoire
shows how this can be done by setting up an incubator
programme for its members, who receive training andseed funding to set up micro enterprises, like small
scale food processing initiatives, dress making, shops,
or poultry farms.

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SUSTAINABLE PRODUCTION

FAIRTR ADE LIVING INCOME PROGRESS REPORT 2023

Increased coffee yields and diversified incomes: a partnership between Fairtrade Original and Red Ecolsierra
Organic fertilizer or compost is quite expensive on
the market and represents a high cost for organic
coffee farmers. Through the investment in thecompost factory, Red Ecolsierra has been able toreduce the cost of production for their members by
20 percent and they expect a yield increase of five
percent already after only one year.

Red Ecolsierra is a coffee producer cooperativein the Sierra Nevada de Santa Marta in Colombia.
Since joining Fairtrade in 2011, they have oriented
part of their Fairtrade Premium towards improving
productivity and the quality of their coffee.
A milestone in this effort was the construction of a
production plant for organic fertilizers, in order toimprove the soil health and reduce production costs.
Even better, these changes also made the farmers

more competitive to buyers and more resilient toclimate change.

In addition, the cooperative is actively promoting
income diversification among their members to
reduce their dependency on coffee revenues.
With co-investment from their commercial
partner Fairtrade Original, who are also
committed to paying a Living Income Reference
Price, they have developed production packages
and set up technical assistance services forcocoa, beekeeping and timber projects. Cocoa isparticularly relevant as an alternative crop andsource of income for farmers in the lower partsof the Sierra, which have become less suited for
growing coffee due to rising temperatures causedby climate change.

The “Biofabrica” compost factory has a capacity
to produce 180,000 litres of soil-restoring
bioferments to serve its nearly 400 members,
who in total farm around 560 hectares of organic
coffee. Based on the analysis of soils frommembers’ farms, they have developed 16 tailored
fertilizer products.

With this two-pronged strategy of investingin organic production and diversification, Red
Ecolsierra has been able to consolidate a healthy
environment with sustainable organic productionof a variety of crops, reducing soil and waterpollution, while improving productivity and qualityof their products and resilience of their farms.

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RESPONSIBLE PROCUREMENTFAIRTR ADE LIVING INCOME PROGRESS REPORT 2023

Responsible
procurement
Long term sourcing agreements at
reliable prices that cover the costof sustainable production and allow
farmers to provide for their families
are critical for them to invest in
their farms. In order to improve theiryields farmers need the assurance ofa decent return on their investment.
A higher production at a lower pricewill not help them to achieve a
decent income.

A first step: Fairtrade Minimum
Price and Premium

Living Income Reference Price model

Fairtrade sets minimum prices for most of our majorcommodities, including cocoa, coffee, bananas, tea
and cotton. The Fairtrade Minimum Price aims tocover the average costs of sustainable production andacts as a safety net when market prices drop, while
producer organisations get the market price when
this is higher and can always negotiate for more. The
Fairtrade Premium is a fixed amount on top of theselling price. Producers jointly decide how to invest
this premium to meet their priority business andcommunity needs and can also opt for paying it out incash to supplement farmer incomes.
Fairtrade Minimum Prices and Premiums form a solid
basis for helping producers improve their incomes,
but they are not sufficient for realizing living
incomes. The Fairtrade Minimum Price doesn’t coveradditional costs incurred to reach the target yield, to
pay hired workers a living wage nor to remunerate
own work with a living income.

LivingIncomeReferencePricecost ofliving+cost ofproduction

sustainable
yields×

viable area=

This is why Fairtrade developed its holistic Living
Income Reference Price model, a way to calculate what
price a fulltime, productive farmer needs to receive toearn a living income. The model is based on the joint
responsibility concept, in that farmers need to reach asustainable productivity target and buyers have to pay
a price that covers the costs involved.
Country-level Living Income Reference Prices havebeen calculated for cocoa from Côte d’Ivoire andGhana, coffee from Colombia, Indonesia, Uganda,
Honduras, Ethiopia, Peru and Nicaragua, following
a rigorous process of farm economic baseline
analysis, based on farm records introduced among a
representative sample of farmers, and stakeholder
dialogue through technical roundtable workshops.
During this process, the current farming context isthoroughly analysed in order to define what sustainableproduction looks like in the given context and agree
on realistic target yields, as well as the required
investments to reach those productivity levels,
including the payment of a living wage to hired workers.
The third variable in the equation is a viable farm size, orthe crop area needed for the household to fully dependon that crop for a living income. Smallholder farmers
who do not have the enough land to be working on it
fulltime may therefore need complementary income
sources to make a living income.

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RESPONSIBLE PROCUREMENTFAIRTR ADE LIVING INCOME PROGRESS REPORT 2023

Global LIRP map

CoffeeEthiopia
garden org:
$1.35/kg
forest org:
$0.90/kg
cherryCoffeeHondurasorganic:$3.89/kg*(Nov 2022)(May 2023)

CoffeeNicaragua
conventional:$3.61/kg*organic:$4.86/kg*

Coconut
Sri Lanka
108 rupees/nut(Nov 2023)(2022)

CoffeeColombia
conventional:$3.03/kg*organic:$3.03/kg*(updated Dec 2022)

Cocoa
Côte d’Ivoire€2.20/kg(Oct 2023)*dried parchment

VanillaUganda€15.60/kg

VanillaMadagascar€13.16/kg(2019)(2021)

CoffeePeru
organic:$3.78/kg*

Cocoa
Ghana
$2.12/kg

CoffeeUgandaarabica org:
$3.06/kg*
robusta org:
$1.88/kg*(Oct 2023)(Oct 2022)(Sept 2022)

CoffeeIndonesia(Aceh)
organic Gayo:$0.95/kg
cherry(Nov 2021)

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SUSTAINABLE PRODUCTION

FAIRTR ADE LIVING INCOME PROGRESS REPORT 2023

Living income
technical roundtables
Hafursa Cooperative, part of Yirgacheffe
Union, participated in Fairtrade’s farmincome baseline assessment for Ethiopian
coffee farmers and subsequent living
income technical roundtable workshop in
Addis Abeba in May 2023. We interviewed
coffee farmer and member, Mr. Tesema
Mengesha, and cooperative manager
Mr. Meskelu Gebre, about their experience
with this reference price setting process.

What have you learnt about your coffee farm bykeeping track of your expenses and income?

What was your experience participating in the living
income roundtable workshop?

Mr. Tesema: We were previously unaware of the true
cost required to maintain our farms and families.
However, after receiving training and begin using therecord book, we can now properly control and know
the costs. If a person understands his expenses andincome, he will know where he should go.

Mr. Tesema: I’ve gained valuable experience that willallow me to serve as an example to other farmers andimprove our livelihood by taking proper care of the
farm in order to increase our income.

Mr. Meskelu: Our farmers’ livelihoods are largely
dependent on coffee, but they did not know how
to separate their income and expenses for coffee
production in the past. Based on this project, ourfarmers now have a better understanding of the costs
and income associated with coffee production. The
study findings were discouraging for coffee farmers
as they realized they are not getting enough payment
for the coffee they produce, so we are very happy that
Fairtrade works to improve the price of coffee.
Did you gain any new/surprising insights?
Mr. Tesema: Yes, it helped us to be more mindful ofwhat we spend, especially for leisure, and not misuse
our money. It assisted us in understanding the costand income, and we realized that if we do it well in the
future, it can bring about a change.
Mr. Meskelu: [Farmers] should cut costs, divide work at
the family level, and use other crops that can generate
income besides coffee or jobs that can generate moreincome until the price of coffee improves.

Mr. Meskelu: We admire the participatory approachof defining the price and the way Fairtrade involves
producers in every step of the entire process. We
are satisfied with the outcome of the workshop. The
living income price will surely change the livelihoodsof our farmers.
Have any concrete action points resulted
from these insights?
Mr. Meskelu: We are planning to start a beekeeping
business in the future so that we can get more income
as members of the cooperatives. Coffee naturally
blooms well. When coffee blooms, it is possible topollinate that flower and make good honey.

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RESPONSIBLE PROCUREMENTFAIRTR ADE LIVING INCOME PROGRESS REPORT 2023

Fairtrade Living Income Reference Prices and variables for cocoa and coffee% foodfrom farm

Living Income
Reference Price(farmgate)

target yield

viableland size

year

kg/ha

ha

USD/haUSD%%

USD/kgCote d’Ivoire (c)2022 update

800

5.3

563

7154

100%

50%

2.39 (EUR 2.20)

Ghana (c)2022 update

800

4.0

464

4292

100%

25%

2.12

•

Cashews from Tanzania with Johnny Cashew andfrom Burkina Faso with Coop Switzerland% foodfrom farm

Living Income
Reference Price(green beanequivalent at
farmgate)•

Coconut from Sri Lanka with Fairtrade Original•

Coffee from Guatemala with Bellwether and from
Mexico with Coop Switzerland,•

Robusta coffee from Uganda with Fairtrade Original•

Oranges for juice from Brazil with Rewe•

Cocoa from Togo with Gebana

cocoatarget yield(green bean viable land
equivalent)size
coffeecost of living income % income
production benchmark from cocoa

In addition, after having worked with Ben & Jerry’s
and the Sustainable Vanilla Initiative since 2019 todetermine LIRPs for vanilla from Madagascar andUganda to help stabilize the extremely volatile market
prices, we developed the “Living Income Reference
Price on demand” service offer.

cost of living income % income
production benchmark from coffee

year

kg/ha

ha

USD/haUSD%%

USD/lbGBE

Colombia – conventional

2022 update

1340

2.8

2945

7039

100%

n/a

1.85

Colombia – organic

2022 update

1120

3.8

2694

7039

100%

n/a

1.85

Honduras – organic

2022

1200

3.0

3246

7619

100%

n/a

2.19

Peru – organic

2023

1100

3.5

2865

8205

100%

n/a

2.14

Nicaragua – conventional

2023

1340

2.1

2487

6897

100%

n/a

2.05

Nicaragua – organic

2023

950

2.1

3264

6897

100%

n/a

2.76

Uganda – organic

2022

1280

0.8

2467

4974

50%

33%

1.74

Ethiopia-garden – organic

2023

550

1.4

2164

4466

100%

50%

3.68

Ethiopia-forest – organic

2023

800

2.5

3054

4466

100%

50%

2.46

Indonesia-Aceh – organic

2022

1000

1.0

1622

5245

80%

n/a

2.59

More details on the calculation method and values canbe found here.
Setting Living Income Reference Prices doesn’t only
serve Fairtrade partners, but – as the name indicates– provides a reference to the entire industry. We are

therefore pleased to hear from multiple companies
that are not necessarily Fairtrade certified who use
Fairtrade reference prices to inform their own internal
pricing strategies. This way more farmers can benefit,
as paying Living Income Reference Prices should
become the norm across all sectors.

A range of reference prices have since been calculated
for specific supply chains and minor productcategories, in collaboration with commercial partners:

Coop Switzerland has been working with us on Living
Income Reference Prices for a range of other new
products and origins, from rice, to mango, to coconuts,
as well as cocoa from Ecuador.

“We pursue the vision of
paying living wages along our
supply chains and purchasing
raw materials at prices thatenable a living income.”
Aline Roth, Sustainability Expert
at Coop Switzerland

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RESPONSIBLE PROCUREMENTFAIRTR ADE LIVING INCOME PROGRESS REPORT 2023

Setting custom Living Income Reference Prices
Bellwether Coffee recently announced theircommitment to purchase 100% of their coffee atliving income supporting prices and Fairtrade helps
them calculating those prices for a number of theirsmallholder origins.
Through the introduction of our farm record books,
coffee growers were taught how to keep track of
their actual farm expenditures and revenues forbetter business planning. This in turn provided us
with accurate data to analyse the economic situationof coffee farmers, based on which we can jointly
agree on realistic productivity targets and estimate
the costs incurred to reach these.
After having calculated a first living income
price themselves, using farm record data fromtheir Fairtrade supplier ASOPEP in Colombia, wepartnered with Bellwether to repeat this pricediscovery exercise for their Guatemala supply
chain. A sample of 30 farmers from ACODIHUE kept
records for three years in a row, serving as a richsource of data for a deep dive with farmers andtechnical staff of the producer organisation to
discuss pathways for bridging the income gap andestablish what price farmers would need to receive
for their coffee.

“Paying producers a minimum price that enables
them to earn a living income is the future of
the coffee industry. Fairtrade International has
been a great partner for Bellwether Coffee as
we look to implement Living Income Pricing
across all our supply chains by 2024. We areproud to partner with like-minded industry
leaders to push the coffee sector forward andmove the needle on better farmer outcomes.”
Grayson Caldwell, Director of Sustainability& Impact, Bellwether Coffee
With an average net income of 32,350 quetzales
against a 50,000 living income benchmark, there
is considerable effort needed to close the gap anda Living Income Reference Price is a crucial lever.
However, there are remaining challenges which asustainable price alone won’t solve. For example,
many small-scale coffee farms in Guatemala
today are run by elderly women, while the men andyouth have migrated north and labour is scarce tosupport them with the heavy duties. Moreover, theyoften have tiny, inviable plots of land that simply
produce too little for families to depend fully on
farm revenues for their livelihoods and income
diversification strategies are needed to complement.

16

RESPONSIBLE PROCUREMENTFAIRTR ADE LIVING INCOME PROGRESS REPORT 2023

Transforming Tanzania’s Cashew Supply Chain:
Johnny Cashew and Fairtrade International’s Innovative Partnership
In 2021, the pioneering Dutch startup Johnny Cashew
embarked with Fairtrade on a journey to establish
a Living Income Reference Price for their cashew
nuts from Tanzania. Johnny Cashew sources cashew
nuts from Fairtrade certified cooperative UWAMI
in southern Tanzania and processes them in the
country, instead of shipping the raw nuts to Asia forprocessing as is common practice. By processing
locally, Johnny Cashew not only generates
employment in the local community but also reducescarbon emissions.
The project pre-assessment phase revealed
that farmers lacked information about theiragricultural practices, expenses and income. So
farmers collected economic data, while the costsof decent living were estimated by the University ofWageningen using primary data from local markets
and farming communities. Cashew farmers andlocal technical experts participated in a validation
workshop to provide invaluable feedback on the
preliminary findings.
From there, we calculated a supply-chain specific
Living Income Reference Price. Johnny Cashew
currently buys all 1,000 metric tonnes of cashew

nuts they process from UWAMI cooperative, on
Fairtrade terms and paying the Living Income
Reference Price. Today Johnny Cashew’s “Way to
Go” nuts can be found on the shelves of LIDL storesin the Netherlands and Belgium as well as in otherstores with their own brand. The demand is steadily
increasing, allowing Johnny Cashew to expand andexplore new origins for their operations.
“For us as a company, establishing a Living
Income Reference Price is crucial in increasingtransparency in the chain and working towards
economic sustainability. In our opinion, paymentof the reference price is the best measure
to effectively fight poverty among farmers.
Fairtrade obviously plays an important role in
the entire process, from conducting the research
up to communication on the topic. The statusof Fairtrade as a household name in the foodindustry cements the credibility of the research.
Moreover, it also helps in communicating on
the outcomes when Fairtrade is involved. It istherefore a key partner in the fight for more
economic sustainability in food chains.”
Cappi Wefers, Cashew Impactor, Johnny Cashew

17

TR ACKING PROGRESSFAIRTR ADE LIVING INCOME PROGRESS REPORT 2023

Tracking progress:
What do thedata tell us?
With so many factors influencing
farmers’ incomes, progress canbe difficult to monitor and evaluate
in a way that does justice to thiscomplexity.
The best information we have so far
comes from detailed farm records
kept by cocoa farmers participating
in projects to test Fairtrade’s holistic
living income approach, including
payment of the Living Income
Reference Price. These records set
the foundation for measuring incomechanges over time.

Living Income learning project:cocoa in West Africa
Since the start of the cocoa season in October 2020,
six Ivorian cooperatives: CAPRESSA, COOPAZA, ECAM,ECOJAD, KAPATCHIVA and SOCOOPACDI, have been
involved in a Living income learning project, withthe objective to test and validate the assumptions
underlying the Living Income Reference Price model
as a key component within a holistic living income
approach, through the introduction of a farmmanagement tool.

The original living income study1 for Côte d’Ivoirecommissioned by the Living Income Community ofPractice was adopted as a benchmark.

living income
benchmark minus
the value of farm
produced foodfor domestic
consumption (50%of hh food needs)

cost of living

USD 5,526++ 70,000 value of

Through the implementation of a multi-dimensional
living income approach with Tony’s Open Chain
and Ben & Jerry’s, we aim to demonstrate what isneeded to deliver on living incomes, and confirm
that an increased price is a necessary element to be
successful. In order to validate the model, supply chain
partners implement a range of activities to support
farmers in improving farm productivity towards thetarget values for cocoa yields, crop diversificationand cost efficiency, as established in the model, while
cocoa is sold at the Living Income Reference Price.
A representative sample of 1,200 households (200in each cooperative) have continuously kept recordsof their farm expenditures, worktime investment,
production and sales, and these farm records werecompiled, analyzed and compared against theassumptions made for the Living Income Reference
Price calculation during two consecutive years.

farm investments
required to achieve
the target yieldlevel

Living Income
Reference Price

USD 2.20/kg

farmgrown food

USD 418 / ha=sustainable
yields800 kg/ha
target cocoa
productivity level1

cost ofproduction

viable cocoa area×

5.3 ha(of which 4.4 hais productive)
cocoa area needed
to fully absorb
the available
household labour,considering 18%
renovated (nonproductive) area

See the study here. The living income benchmark applied in2020 was $7271 for a typical 8-member household in CDI. Please
note that Living Income Reference Price values have been
updated since then, in parallel with published updates of thisstudy. A revised Living Income Reference Price came into force in
October 2022, based on this benchmark.

18

TR ACKING PROGRESSFAIRTR ADE LIVING INCOME PROGRESS REPORT 2023

“When making a comparison between the
producers who have been involved in the Living
Income project and those who have not been
directly involved, there is a difference in the way
their farms and their households are managed.
There is an awareness of the function of producer,
better planning of activities, better participationof women in the decision-making process.”
Mme Kambou, coach, Kapatchiva cooperative,
Côte d’Ivoire“Before the project we spent without calculations
or planning. We had no control over our expenses.
Now I know how to keep records and plan mybusiness. I know how to define clear, realistic andachievable financial objectives and I am able tofind out if my farm makes a profit.”
Kouadio Yao Emmanuel, farmer, Kapatchiva
After the first year of implementation, 21% of
farmer households had reached a living income,with an average net income of $4,735. However, thepercentage dropped to 18% in the second year withan average of $4,220. This comes in a year where
severe droughts caused production losses and thefarmgate price set by the government dropped from1000 to 825 francs per kilo of cocoa beans for the main
harvest season and farmers received on average only
$1.38/kg at farmgate versus $1.63/kg the previous year,
impacting the incomes of all cocoa farmers greatly.
Even though the price drop was cushioned by thehigher differential paid by their commercial partners,
topping up the regulated farmgate price to the level ofthe Living Income Reference Price, this couldn’t prevent
farmers from being worse off than the year before.
Apart from the price component, Fairtrade Africa
and implementing partners Tony’s Open Chain, Ben& Jerry’s and Barry Callebaut have strengthened
cooperative capacity to deliver adequate services
to their members, such as personalized coaching onfarm administration or productivity packages withsubsidized inputs, technical assistance and labour
services in times of overall labour scarcity. Specialized,
well-equipped pruning and spraying brigades were
set up to help farmers keep their cocoa plantations
in good shape, while creating attractive employment
opportunities for rural youth.

Project interventions have also boosted farm
diversification, reducing farmers’ dependency on
cocoa income. While the Living Income Reference
Price calculation considers half of the household’s
food needs to be produced on the farm for own
consumption, equivalent to approximately a quarter ofthe costs of decent living, the first year results alreadyshowed 36% of diversified farm income, which further
increased to an average of 45% last year.

19

TR ACKING PROGRESSFAIRTR ADE LIVING INCOME PROGRESS REPORT 2023

350
300
NUMBER OF HOUSEEHOLDS

Figure 1: Net farmincome, 2021-2022(in US dollars)
Distribution of net farmincome across sampled
farmers in 6 cooperatives
during the cocoa season
2021-22 (applied exchange
rate 609XOF: 1USD)Mediannet farm
income$2900

Average
net farm
income
$4220

250
200

14% of farmers
had a net
income equal or
above a living
income of $7271

150
100
50
0
≤0

(3,000,4,000)(5,000,6,000)(7,000,8,000)(9,000,10,000)(11,000,
12,000)(13,000,
14,000)>15,000

180
160
NUMBER OF HOUSEEHOLDS

Figure 2: Income gap
distribution, adjusted byhousehold size, 20212022 (in US dollars)Comparison of net
farm income againsthousehold-size-adjusted
living income benchmarks,
for sampled farmers in 6
cooperatives during thecocoa season 2021-22(1,000,2,000)

18% of farmers
achieved a net
income equal
or above aliving income
adjusted to theirhousehold size

140
120
100
80
60
40
20
0
-12,0000+12,000

20

TR ACKING PROGRESSFAIRTR ADE LIVING INCOME PROGRESS REPORT 2023

Figure 4: Average
price received by
farmers based on cocoa
sold at Living Income
Reference Price in
2021-2022 (USD/kg)
Breakdown of pricecomponents received on
average by farmers per
kilogramme of cocoa soldat reference price during
the cocoa season 2021-22(applied exchange rate
609XOF:1USD)

2.50

2.00

USD/kgFigure 3: Average pricereceived by farmers
based on total cocoa soldin 2021-2022 (USD/kg)
Breakdown of pricecomponents received
on average by farmers
per kilogramme of cocoa
sold in total during thecocoa season 2021-22
versus reference price(applied exchange rate
609XOF:1USD)

1.50

1.00

83%
53%

0.50

27%

41%

45%

48%

COOP 5COOP 6

TOTAL

15%
0

COOP 1COOP 2COOP 3

COOP 4

LIRP differential received in kind per kg sold

LIRP

LIRP differential received in cash per kg soldAverage farmgate price per kg sold% of cocoa volume sold at LIRP

3.00
2.50
2.00
USD/kgIn any case, the income increase farmers realized
as a result of reference price payment has beensignificant. With an average of 48% of total
production volumes sold at a Living Income Reference
Price by the cooperatives involved, farmers earnedon average 22% more for all their cocoa sold. The
cooperatives that sold an even larger share of theirvolumes at the reference price reached up to a 47%
increase in cocoa revenues (see graph right). Per kilo
sold at the Living Income Reference Price, farmers
received on average 63% on top of the farmgate pricesplit between extra cash and in-kind income.

1.50
1.00
0.50
0

COOP 1COOP 2COOP 3

COOP 4

LIRP differential received in kind per kg sold
LIRP differential received in cash per kg soldAverage farmgate price per kg sold

COOP 5
LIRP

COOP 6TOTAL

21

AN ENABLING ENVIRONMENTFAIRTR ADE LIVING INCOME PROGRESS REPORT 2023

Advocating foran enabling
environment
Advocacy is a key pillar of Fairtrade’s
2021-2025 global strategy. When it
comes to living incomes, this involves:• Amplifying the voices of farmers
to address their issues;• Building coalitions through multistakeholder initiatives• Influencing national and regional
policies such as on human rights
due diligence;• Establishing living income
benchmarks;• Working with like-minded
partners to raise the profile
of responsible procurement
practices.

Amplifying the voices of farmers: the first
producer-led living income cocoa summit
On 11 May 2023, Fairtrade Africa and Fairtrade
International organized the first producer-led
industry summit on living incomes for cocoa
farmers, held in Abidjan, Côte d’Ivoire. More than 100
participants took part in this one-day event, with
about half being farmers or representing cooperatives,
while the remainder came from business, government,
civil society organisations and academics.
Producer panels debated issues related to income
improvement, showcasing on the one hand what
cooperatives can do themselves and making clear on
the other hand what they need from buyers and policy
makers to do this. Cooperative leaders presented bestpractices in driving sustainable solutions, createdfrom the bottom up.
Examples of effective service delivery bycooperatives included personalized coaching
and technical assistance, subsidising inputs andorganizing labour brigades, setting up income
diversification initiatives, all of which are vital for
improving incomes. The active involvement of womenand youth was frequently referred to as a criticalcondition for lasting impact.

“We see it as our responsibility to implement
good agricultural practices and improve theproductivity, quality and resilience of our farms,
producing cocoa and other crops.”
Joint Declaration of cocoa cooperatives
Responsible procurement was the main ask frombusiness partners and producers spelled out what thatmeans for them, from reliable long term commercial
relationships and risk sharing across the supply chain
to higher cocoa prices.
Furthermore, they warned for potential unintended
negative consequences in new EU regulations arounddeforestation and human rights due diligence, if living
incomes for farmers aren’t embedded and secured.
“We know how to promote good farming practices.
We know how to encourage farmers to work on
income diversification. But how can we better pay
producers? That is the elephant in the room!”Alex Assanvo, Executive Secretary of the
Côte d’Ivoire and Ghana Cocoa Initiative22

AN ENABLING ENVIRONMENTFAIRTR ADE LIVING INCOME PROGRESS REPORT 2023

Cocoa cooperatives and several Ivorian cocoa andcoffee industry organisations agreed on a joint
declaration calling on specific actions by companies,
multi-stakeholder initiatives, and policymakers.
•

Companies: engage in long-term sourcing
partnerships and pay fair prices, and help invest
in income diversification and climate change
adaptation.

•

Multi-stakeholder sustainable cocoa initiatives:
create more space for producers to take part indialogue and programme co-creation; take into
account effective vs non-effective premium
contributions in monitoring frameworks; set
up grievance mechanisms to report company
behaviour that harms livelihoods.

•

Policymakers of consuming countries: enact
legislation that recognises a living income as ahuman right; ensure farmers aren’t harmed bydue diligence legislation and “cut and run” effects;
facilitate exemptions to competition policies; invest
in agricultural and rural transformation.

•

Policy makers of producing countries: enact
bolder cocoa pricing strategies and increasetransparency; enforce laws against deforestationand other environmental harms.

“ISCOs”: Fairtrade’s participation innational sustainable cocoa initiatives

Procurement practices are part of
DISCO’s Living Income Roadmap

Civil society, government, and businesses have set
up public-private sustainable cocoa platforms inGermany, Belgium, Switzerland, Netherlands andFrance. These ISCOs – which stand for “Initiatives
for Sustainable Cocoa” – have similar goals andperformance indicators, with ongoing efforts toalign further. Fairtrade organisations participate
in the various ISCOs, teaming up with civil society
organisations to raise the bar of these jointcommitments and increase the pressure on brands
and retailers to assume their responsibility in terms ofbetter purchasing practices that enable living incomesof farmers in their supply chains.

Signatories of the Dutch Initiative on Sustainable
Cocoa (DISCO) acknowledge that cocoa procurement
practices have great impact on cocoa sustainability.
Responsible purchasing practices are key to achieving
living income goals, complementing strategies aroundservice delivery and contribute to creating an enabling
environment. DISCO is currently working on a position
paper defining responsible purchasing practices andagreeing on a set of key principles that will guideliving income strategy of the DISCO signatories. Once
finalized, DISCO will also use this position to influenceother ISCOs to embrace the position and raise the bar
across Europe.

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FAIRTR ADE LIVING INCOME PROGRESS REPORT 2023

AN ENABLING ENVIRONMENT

Legislation to level the playing field:
Influencing EU policy
Fairtrade advocates at multiple levels for fairer tradelegislation. In 2022 and into 2023, we have been
advocating for the draft HREDD legislation in theEuropean Union – the Corporate Sustainability Due
Diligence Directive – to take into account smallholder
farmer realities. This landmark legislation willdefine rules for companies that sell products in theEuropean market, requiring them to address adverse
impacts in their value chains inside and outside
Europe. We are continuing to push for the directive
to recognize the importance of living incomes as aprecondition to protect human rights and to foster
meaningful dialogue between farmers, workers,
and European companies.
Competition law has been a stated blockade forcompanies to collaborate on discussing shared living
income goals and initiatives, including the prices paid
to farmers, as these were feared to violate antitrustand competition law. Since 2018, the Fair Trade
Advocacy Office and its partners – including cofounder Fairtrade International, AIM and the Fair Wear
Foundation – have been actively calling for change
and clarity in the law so that companies would be able
to cooperate on sustainability initiatives, including
on social issues. Years of conferences and meetings
resulted in a success in 2023: inclusion of a chapter
on “sustainability agreements” covering living
income and living wages in the revised European
Commission’s guidelines on horizontal cooperationagreements. The next stage is implementation, wherecompanies and other stakeholders must move forwardwith collaboration on living income progress.

24

AN ENABLING ENVIRONMENTFAIRTR ADE LIVING INCOME PROGRESS REPORT 2023

Setting benchmarks: the International
Coffee Organisation’s Living &Prosperous Income workstream
Facts are powerful to reinforce advocacy efforts andin order to advocate for living incomes we first need toknow how much a living income is. With a benchmark
we are able to quantify the gap and create a sense ofurgency to mobilize policy makers and industry sectors
to change their ways of doing business and enableliving incomes. Credible Living Income benchmarks are
not always available for the countries where we work.
This is why we participate in the International Coffee
Organisation’s (ICO) Living and Prosperous Income
technical workstream to coordinate living income
studies for all the major coffee origins that do not havea benchmark established, so that the entire coffeeindustry can guide its income improvement goals andinterventions by the same living income benchmarks.
Living Income benchmarks for coffee growing regionsin Colombia and Peru are already published. Other
benchmark studies for Honduras, Mexico, Indonesia,
Vietnam, Ethiopia, Rwanda and Togo are underway andexpected to be delivered in the course of 2023 and 2024.

Joint call for responsible procurement practices
In a first-of-its-kind publication, several chocolatecompanies (Tony’s Chocolonely and Jokolade), a retailer(Aldi), IDH and Fairtrade published a joint statement
sharing evidence of the combined elements that work
together to improve farmers’ incomes in specific supply
chains. One finding was that long-term commitments
between buyers and producers, which FairtradeStandards have long promoted, were found to havecontributed to stronger, more effective cooperatives.

The statement emphasises the shared responsibility
that different stakeholders in chocolate supply
chains have in toward farmer living incomes, and thatpaying a fairer price must be a part of the equation.
Such knowledge sharing and collaboration willcontinue to drive a race to the top for living incomes.
Read the full statement.

25

LOOKING AHEAD

FAIRTR ADE LIVING INCOME PROGRESS REPORT 2023

Looking ahead
Our aim for the next year is to take stock andreflect on what has been achieved so far. This
includes doing deep dives into data, assessing theeffectiveness of the Living Income Reference Prices
set so far, and use our lessons learned to develop
a portfolio of income improvement services forbusinesses and producer organisations to engage
with us in realizing living incomes for smallholder
farmers. This includes the creation of a new Living
Income Innovation Fund for implementing jointly
funded scalable projects with considerable impact,
allowing partners to take action and assume
responsibility, learn by doing and contribute toenabling living incomes. Watch out for news on thisnew opportunity, providing an easy entrance allowing
partners to work with Fairtrade on living income.

We will continue our reference price setting work in
2024, as demand continues to grow. For this we willfurther standardize Living Income Reference Pricesetting and implementation procedures to betteralign with Fairtrade Minimum Price reviews, finding
efficiencies in the data collection and consultation
processes for each.
Finally, we are also exploring the possibility ofdeveloping an add-on standard to reflect additional
living income commitments by companies, so thatthese can be externally verified and distinguished.
To further your own living income journey,
contact your national Fairtrade organisation, orFairtrade International. We need you!

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Bonner Talweg 177, 53129 Bonn, Germany
Telephone +49 (0) 228 94 92 30 • Fax +49 (0) 228 24 21 713
info@fairtrade.net • www.fairtrade.net

Photo credits
cover © Lorena Velasco Hurtado; p2, 10, 19, 20 © Mohamed Aly Diabaté; p5 © Juan Nicolás Becerra Manrique; p6 © CLAC; p7 © Brahmantyo Putra;
p9, 14, 25 © Carla Veldhuyzen; p11 © Red Ecolsierra; p16 © Thom Alva / CLAC; p17 © Johnny Cashew; p23 © Kamil Hammenecker; p24 © Fairtrade Original