IOB Review
Riding the wave of sustainable
commodity sourcing
Review of the Sustainable Trade Initiative IDH 2008-2013

| no. 397 | Riding the wave of sustainable commodity sourcing | IOB Review | no. 397 | Riding the wave of sustainable commodity sourcing | IOB Review | no. 397 |

IOB Review
Riding the wave of sustainable
commodity sourcing
Review of the Sustainable Trade Initiative IDH 2008-2013

August 2014

﻿
Foreword

Foreword
The Sustainable Trade Initiative IDH (Initiatief Duurzame Handel) was set up in 2008 as a
multi-stakeholder initiative of private companies, non-governmental organisations (NGOs),
trade unions and the Dutch government with the aim of improving smallholder production
systems, market integration and enhancing sustainable sourcing from developing
countries. The activities undertaken by IDH focused on improving and transforming the
supply chain performance of internationally traded commodities (such as coffee, tea,
cotton, cocoa, timber, palm oil and fish). They rely on promoting good agricultural practice,
farmers’ training and certification as key activities.
This review looks at where IDH stands after six years of support (2008-2013) from the
Netherlands Ministry of Foreign Affairs (hereafter referred to as the Ministry). The review
was conducted by the Policy and Operations Evaluation department (IOB) to enable the
assessment of progress, acknowledge the results achieved and to appreciate IDH’s potential.
Given the limitations of fully registering the outcomes and net impacts of IDH-supported
activities at the primary producer level, IOB decided to focus the review on (a) the aim,
strategy, organisation and operational management of IDH activities, and (b) the
characteristics of public-private cooperation against the backdrop of wider evidence on the
added value of supply chain certification efforts, thus contributing to greater transparency
related to the prospects for reaching effectiveness, efficiency and sustainability in
sustainable commodity sourcing programmes.
IOB’s findings from the review emphasise IDH’s active role in promoting public-private
cooperation, the positive – albeit modest – impact for smallholder producers and workers
and the prospects for moving the work beyond certification. Due attention is given to the
procedures for guaranteeing the ‘additionality’ of public funding, the requirements for
pre-competitive support and the criteria for rightly assessing private sector contributions.
Given IDH’s dynamic and innovative character, this report outlines several options for
deepening current sustainable sourcing activities (including attention for gender),
broadening the knowledge and dissemination programmes, and upgrading the public role
vis-à-vis IDH.
The review was conducted by IOB inspectors Jan Klugkist and Ferko Bodnár, with support
from IOB researcher Bart Woelders and financial controller Albert Stuijfzand. The review is
based on 70 interviews with key stakeholders, extensive literature analysis regarding the
results base of value chain programmes, analysis of IDH’s financial statements, and input
from an international expert workshop (organised together with the Environmental Policy
Group of Wageningen University) on the evidence on and perspectives for enhancing
sustainable sourcing and reducing poverty.
The reference group for this review consisted of two external specialists – Professor Onno
Omta (WUR) and Bo van Elzakker (Agro Eco-Louis Bolk Institute) – and Paul Schoenmakers

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Riding the wave of sustainable commodity sourcing

on behalf of the Ministry of Foreign Affairs/DDE. They provided valuable comments on the
Terms of Reference and on earlier versions of the report.
As part of IOB quality assurance, IOB inspectors Piet de Lange and Jan Bade acted as
co-readers and provided comments on the outputs of the review team.
IOB would like to thank the IDH staff – and in particular Dave Boselie and Esther Bosgra
– for the excellent support they provided for conducting this study.
The final responsibility for the review rests with IOB.

Prof. dr. Ruerd Ruben
Director Policy and Operations Evaluation Department (IOB)
Ministry of Foreign Affairs, the Netherlands

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﻿Table of contents

Table of contents
Foreword		
List of figures, tables and boxes
List of acronyms and abbreviations

3
7
9

Summary and conclusions

12

1

2

3

4

5

Introduction and methodology

26

Purpose and review questions
Methodology and approach
Limitations
Layout of the report

27
28
29
29

Fostering sustainable commodity production through value chains

30

The booming business of standards and certification
The theory of combining public and private goals for development
Market shares and commitments of brands and retailers
Indications of limited positive effects of certified standards on sustainability
Could current standards and certification make the difference?

31
32
34
37
41

Origins and strategy of IDH

48

Origins of IDH and initial programme
IDH Action Plan 2011-2015
IDH theory of change and intervention logic

49
50
51

Organisational and financial development of IDH

54

Rapid expansion of budget, programmes and personnel
New public donors entered in 2013
The Ministry’s subsidy was concentrated on cocoa, cotton, timber and tea
Project funding practice is shifting towards more in-house operational management
Expenditures in sector programmes are lagging behind
Costs of the IDH organisation are substantial
Administrative organisation, financial procedures and M&E have improved
Public role in IDH largely confined to funding

55
56
60
61
63
65
66
68

IDH’s contribution to sustainability initiatives in commodity sourcing

70

Building coalitions and setting up support structures
Accelerating sustainability programmes
Outputs in IDH programmes are sizeable and generally according to plan
Programmes boosted supply of certified products, but market uptake lags behind
Indications of positive effects on the ground in IDH-supported programmes
The business case for the farmer in the certification schemes that IDH supports

71
73
75
76
78
82

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Riding the wave of sustainable commodity sourcing

More IDH programmes work ‘beyond certification’
Some activities beyond certification raise questions about ‘additionality’
Balancing public and private objectives in programmes
From voluntary sustainability standards to national standards and regulations
IDH knowledge work has produced relevant outputs, mainly focussed on
the sector programmes
Gender is not an explicit issue in IDH work
In conclusion: positive effects, but genuine market transformation requires more

86
87
89
90
91
92
93

Annexes		
Annex 1 About IOB
Annex 2 References
Annex 3 List of persons interviewed
Annex 4 IDH expenditure 2008-2013, including private sector and other
contributions to programmes
Annex 5 IDH’s work on Natural Stone
Annex 6 IDH’s work on Aquaculture

96
97
99
105
108
109
111

Evaluation and study reports of the Policy and Operations Evaluation
Department (IOB) published 2009-2014

114

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﻿List of figures, tables and boxes

List of figures, tables and boxes
Figures
Figure 1
Figure 2
Figure 3
Figure 4

Figure 12
Figure 13
Figure 14
Figure 15
Figure 16
Figure 17
Figure 18

Timeline of sustainability standards and organisations (starting dates)
Supply chains as a channel for public funding to achieve goals in production countries
Growth of certified production 2008-2012 in hectares
Volume of certified commodity production (2008 and 2012) and sales of certified
products (2012), as a percentage of global production
Certified coffee and cocoa producers compared to uncertified producers
Price structure of a fairtrade chocolate bar
Profit along the chocolate value chain and what a cocoa farmer would need to
escape extreme poverty
Logos of companies and organisations working with IDH in 2010
The four phases of market transformation, as presented by IDH in 2010
IDH intervention logic
IDH budget expenditure 2008-2013, including private sector and other public
and NGO contributions
Increase in number of programmes and personnel
Ratio private to public funds in IDH sector programmes 2008-2013
Public (IDH) and private contributions to sector programmes 2008-2013
IDH’s use of MFA subsidy in sector programmes 2008-2013
Development of IDH staff numbers (FTE) and positions 2009-2013
Number of contracts signed by IDH per annum 2008-2013
Ratio IDH office costs to total expenditure 2008-2013

Tables
Table 1
Table 2
Table 3
Table 4
Table 5
Table 6

Examples of company commitments on sustainable sourcing
Turnover, profits and premiums in chocolate production
Current public sector funding arrangements for IDH
Overview of the use of the MFA grant IDH 2008-2015 up to end 2013
IDH organisational costs (in EUR thousand)
Achievement by 2013 of IDH targets for sector programmes by 2013

Figure 5
Figure 6
Figure 7
Figure 8
Figure 9
Figure 10
Figure 11

32
33
35
36
40
43
46
50
51
53
55
56
58
58
61
62
63
66

36
44
57
64
65
76

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Riding the wave of sustainable commodity sourcing

Boxes
Box 1
Box 2
Box 3
Box 4
Box 5
Box 6
Box 7
Box 8

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Inclusion and exclusion of smallholders in certification schemes
Profits and poverty reduction along the cocoa supply chain
What part of public programme funding reaches target groups?
The trustea standard in India
Unfounded impact claims in IDH communication
Certifying poor smallholders versus high-end cotton farmers from Brazil,
Australia and the USA
Kenyan tea farmers see benefits in certification, in particular fairtrade
Criteria for ‘additionality’ in private sector development initiatives

42
45
68
71
81
83
85
89

﻿List of acronyms and abbreviations

List of acronyms and abbreviations
4C Association
ADR
ASC
BC
BCI
CEN
CIP
CmiA
COSA
CPQP
DANIDA
DDE
DGIS
DG-norm
DME
EUR
FFS
FIT Fund
FLO
FMO
FOB
FTE
FTP
GlobalGAP
ICT
IDH
IFOAM
ILO
IP
ISEAL Alliance
ITC
KPI
KTDA
M&E
MDGs
MFA
MFO
MFS
MSC
MT
NGO

The Common Code for the Coffee Community Association
Central Audit Service
Aquaculture Stewardship Council
Better Cotton
Better Cotton Initiative
European Committee for Standardisation
Cocoa Improvement Programme
Cotton made in Africa
Committee on Sustainability Assessment
Cocoa Productivity and Quality Program
Danish International Development Agency
Sustainable Economic Development Department
Directorate General for International Cooperation
Director General norm
Environment, Water, Climate and Energy Department
Euro (€)
Farmer Field Schools
Farmers in Transition Fund
Fairtrade Labelling Organisations International
Dutch Entrepreneurial Development Bank
Free on Board
Full Time Equivalent
Fast Track Programme
Global Good Agricultural Practices
Information and Communication Technology
Sustainable Trade Initiative (Initiatief Duurzame Handel)
International Federation of Organic Agriculture Movements
International Labour Organisation
Implementing Partner
International Social and Environmental Accreditation and
Labelling Alliance
International Trade Centre
Key Performance Indicator
Kenya Tea Development Agency
Monitoring and Evaluation
Millennium Development Goals
Ministry of Foreign Affairs
Co-financing Organisation
Co-financing System
Marine Stewardship Council
Metric tonnes
Non-Governmental Organisation

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Riding the wave of sustainable commodity sourcing

ODA
ODI
PEFC
PPP
PSD
RA
RSB
RSP
RSPO
RTRS
SECO
TFT
US
UTZ
VSS
WEF
WGDN
WWF
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Official Development Assistance
Overseas Development Institute
Programme for the Endorsement of Forest Certification
Public-Private Partnership
Private Sector Development
Rainforest Alliance
Roundtable on Sustainable Biomaterials
Responsible Stone Programme
Roundtable on Sustainable Palm Oil
Roundtable on Responsible Soy
State Secretariat for Economic Affairs (Switzerland)
Tropical Forest Trust
United States
UTZ Certified
Voluntary Supply Chain Standards
World Economic Forum
Working Group on Sustainable Natural Stone
(Werkgroep Duurzame Natuursteen)
World Wildlife Fund

﻿List of acronyms and abbreviations

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Summary and conclusions
Hoofdstuktitel

Summary and conclusions

Introduction
The Sustainable Trade Initiative IDH (Initiatief Duurzame Handel) was set up in 2008 on the
initiative of the Dutch government, private companies, NGOs and trade unions. The aim
was to improve the economic, social and environmental sustainability of production
systems in developing countries, focussing on internationally traded commodities like
cotton, coffee, tea, cocoa, timber and fish. IDH would work in particular with committed
private sector companies in the value chain of these products, ranging from Adidas and
Mars to Unilever and Zeeman. Public-private coalitions were to develop sector improvement
plans built around voluntary sector-wide sustainability standards such as UTZ Certified and
Better Cotton. IDH aimed for a transformation to sustainable commodity markets by
bringing public funding and private financial commitments together in large-scale projects
for improving production methods and boosting certification of primary producers. This
transformation would contribute to the millennium development goals on poverty
reduction (MDG1), environmental sustainability (MDG7) and fair trade (MDG8).
This review looks at where IDH stands after six years of support from the Ministry of Foreign
Affairs. For the period 2008-2015, the Ministry committed EUR 123 million in official
development assistance (ODA) to build and run the IDH organisation and to co-finance
commodity programmes with the private sector. A new subsidy for the period 2016-2020 is
currently being considered at IDH’s request. The purpose of this IOB review is therefore to
provide an assessment of the progress, results and potential of the initiative, thus enabling
the Ministry to make an informed decision about appropriate modalities for further
supporting IDH.1
IOB prepared the report on the basis of desk research, some 70 interviews and a workshop
with experts and stakeholders on the prospects for sustainable commodity sourcing. A
broad range of academic literature, evaluations and impact studies was consulted, in
addition to primary sources such as IDH baseline and feasibility studies, annual reports,
financial statements, monitoring reports and data on key performance indicators. IOB’s
research and interviews focussed in particular on five commodities in IDH’s programme:
cocoa, cotton, tea, aquaculture and natural stone.
A limitation encountered was that outcomes and impacts of the new generation of
sustainability standards and initiatives have often not been studied deeply enough over
longer periods of time. This is also the case for IDH’s own impact studies that started in
2012.2 Another difficulty is attributing results in global supply chains to a single actor: as
IDH generally works in partnerships with multiple stakeholders and often supports
pre-existing initiatives in strongly changing market settings, it is difficult to isolate the
effects to which IDH contributed effectively.

1

2

A fully-fledged evaluation was considered premature in view of the limited evidence so far from impact
evaluations that IDH had commissioned at the request of the Ministry in 2011-2012.
The exception was the tea programme in Kenya, for which evidence over a longer period (2010-2014)
was available.

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Riding the wave of sustainable commodity sourcing

Findings
Based on currently available evidence, IOB presents the following main findings.
1. IDH has become a key player in advancing coalitions of companies and other stakeholders for sustainable
commodity sourcing. IDH’s combination of funding and convening activities have given a strong boost to
certification of primary producers on mainstream sustainability standards, achieving concrete outputs.
Backed by sizeable funding from the Ministry, IDH has within a few years become a key
player in boosting public-private partnerships for sustainable international commodity
sourcing. It has built on the wave of interest in more sustainable business models that had
emerged among private sector companies in the new millennium.
IDH has given a strong impulse to several pre-existing or nascent commodity initiatives. In
several cases, the combination of its funding capacity and its role as convener of
stakeholders was effective in building or strengthening results-oriented coalitions and
scaling up sustainability programmes. Some typical examples of IDH’s accomplishments
are:

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• The Better Cotton Initiative (BCI) was a small capacity building effort for cotton farmers
initiated by IKEA, WWF and ICCO until the IDH-led Fast Track Programme was launched in
2009. Within three years over 200,000 cotton farmers were trained and licensed, while
Better Cotton became the dominant sustainability product on the cotton market,
surpassing the combined market share of Organic, Fairtrade and Cotton-made-in-Africa.
Brands like H&M, Levi’s and Adidas are involved in the initiative, provide it with funding
and use Better Cotton lint to fulfil their commitments on sustainable sourcing.
• In cocoa, UTZ, Solidaridad, Mars and Cargill had started a coalition just before IDH was
set up and joined the initiative. All stakeholders indicated that without the funding and
IDH’s active engagement via the Cocoa Improvement Programme 2008-2012
(implemented by Solidaridad), and the subsequent Cocoa Productivity and Quality
Program, the training of 277,000 cocoa farmers and the certification to UTZ Certified of
about 267,000 cocoa farmers in West-Africa and Indonesia would have taken far longer to
mature.
• In tea, IDH contributed to the training and certification of more than 0.5 million tea
smallholders in Kenya (on the Rainforest Alliance tea standard) in a programme initiated
by Unilever with the Kenya Tea Development Agency (KTDA). IDH also played a useful
convening role in bringing the global competitors Tata Global Beverages and Unilever
together in the Indian ‘trustea’ initiative, a promising national standard for tea
production, which was initiated by Solidaridad and other players.
• When the Aquaculture Sustainability Council (ASC) was founded in 2009 by WWF, IDH
provided immediate financial and administrative support to make it operational. Also,
IDH set up the ASC Accelerator Program in Vietnam (implemented by SNV) to provide

Summary and conclusions

technical assistance to pangasius farmers. This contributed to 350,000 tonnes of fish
being produced under the ASC label by 2013.
From its inception, IDH aimed to work towards concrete outputs and outcomes in the
sector improvement programmes. At the output level, the larger programmes achieved
practically all the targets set for the period up to 2013, or surpassed them. Smaller
programmes like natural stone, electronics, spices and tourism did not meet some of their
performance indicators.
IDH is recognised by all stakeholders for its active contribution to sustainable commodity
sourcing and for bringing companies together in a pre-competitive setting. The strong drive
and commitment of senior staff in the organisation has contributed to the results.
Companies consider IDH a useful partner that is well-positioned for fostering precompetitive collaboration, and can bring along funding and (sometimes) expertise to help
them deliver on their sustainability challenges. The combination of convening and funding
capacity is seen as a core asset of IDH. Likewise, NGOs recognise and value IDH’s work. Some
expressed concerns that IDH was recently working more exclusively through companies,
making less use of experience and knowledge available in the not-for-profit sector.
As part of its role as knowledge broker (in addition to its role as convener and funder), IDH
has commissioned a range of useful programme-specific studies, the development of
training curricula, and has contracted reliable impact studies. It has also engaged with some
NGOs and institutes to address specific issues (such as child labour) in value chains. It
appears, however, that there is still room for developing a broader knowledge strategy with
a strategic agenda for generating and disseminating knowledge on sustainable value chains
and sharing this widely among stakeholders. The effectiveness of IDH’s learning
programmes for reaching market transformation deserves attention.
2. Evidence from both wider literature and specific field studies on IDH-work indicate that the outcomes and
impacts for primary producers of standards and certification are likely to be positive, albeit rather modest. As
such, these efforts will not be sufficient to accomplish IDH’s goal of sustainable market transformation.
Evidence so far suggests that the new generation of voluntary standards has positive, albeit
rather modest effects on the ground in developing countries. Mainstream standards like
Better Cotton, RA and UTZ Certified accomplish bigger market shares than Fairtrade and
have positive effects related to their scale, but they appear to lack the substance to be a
major influence on local poverty and the environment in developing countries.
Concerning income and poverty, studies indicate that certification on mainstream
standards leads to modest positive effects. Production volumes and yields often increase as
a result of the accompanying training in good agricultural practice. However, the costs of
input use like labour and fertiliser tend to rise as well; the net effect depends on the balance
between costs and benefits. In Kenyan tea production, Rainforest Alliance certified
smallholders trained in an IDH programme achieved a 30% yield increase, compared to a

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Riding the wave of sustainable commodity sourcing

15% yield increase achieved by non-trained farmers.3 However, because of increased costs
for hired labour for more frequent tea plucking the effect on the farmer’s net income was
far smaller. Cocoa farmers in an IDH programme for UTZ certification in West-Africa were
found to receive an almost 5% better price (because of an UTZ premium) and produced 6%
more cocoa. While positive, the resulting 10% net farm income increase would not be nearly
enough to lift the average Ghanaian cocoa farmer’s family of five – with a total farm income
of USD 1,000 – out of their extreme poverty. A meta-analysis of data on certified and
non-certified coffee and cocoa farmers – not specifically related to IDH programmes
– indicates average differences in yield of 14% and in net-income of 7%.

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Premiums for certified produce in new standards are – if available at all – limited or
temporary, and are only partly passed on to farmers or used for covering the cost of
certification. Unilever offered a ‘sustainability premium’ for RA-certified tea in Kenya as an
incentive when the IDH programme started, but skipped the fixed premium once all
half-a-million smallholders became certified. In UTZ cocoa there is a price premium
negotiated between producers and traders, but traders use part of it to recover costs of
certification and auditing. In Better Cotton there are no premiums for a licensed cotton
farmer; the training on better practices is expected to deliver benefits (higher yield, less
pesticide use and related costs) that would keep the farmer in the scheme. In ASC
certification of pangasius fish farms in Vietnam, a sector with relatively large-scale and
well-off producers, the main benefit appears to be secure access to the Western European
market.
Concerning the business case for primary producers, IOB noted benefits of becoming certified
for smallholders: they receive free training, learn about better agricultural practice, may
experience a certain improvement in yield as a result and can possibly economise on
pesticide use, while the starting costs of certification and auditing are often borne by others
(like IDH). However, the benefits of staying certified may be far smaller: recurrent costs of
certification are often to be borne by the producer, while premiums are phased out or
evaporate as certified production becomes more abundant. Moreover, producers can
benefit from lessons learned regardless of whether they remain licensed/certified, or not.
Unless market access would be at stake, the incentives to stay certified appear rather small
in several schemes.
In the environmental dimension, there are some indications of small positive effects of
standards and certification, but the evidence base is still very narrow. Plausible
improvements include less use of harmful agrochemicals (cotton), better soil conservation
methods (coffee, cocoa), and improved management schemes for forests and fish stocks
(FSC, MSC). Standards on soy and palm oil (RTRS, RSPO) include criteria to halt further
deforestation, but there is no evidence yet that this works beyond the certified production
unit.

3

This may partly be a spill-over effect of the trainings.

Summary and conclusions

In the social dimension, the evidence base is similarly small. Gender has received
remarkably little attention in most value chain studies. In IDH programmes, gender issues
occasionally surfaced and led to some specific actions. All standards aim to keep out bad
practices – child labour, forced labour, human rights violations – and demand compliance
with national legislation and labour standards. Incidental reports on child labour (WestAfrican cocoa) and abuse of women workers (Kenya tea) illustrate that certification cannot
fully exclude bad practices. Yet setting standards does often contribute to more debate and
action by local government and industry on such issues. When there is regular auditing for
compliance to standards, existing health and safety regulations will be applied more
frequently. The emergence of national standards and better implementation of existing
national legislation can be important indirect effects of standards and certification. This
adds to the overall picture of positive results.
While IDH programmes reached many poor farmers (for instance in cocoa and cotton),
several certification efforts have so far focussed on ‘low-hanging fruit’. The work on ASC has
covered the relatively large-scale and well-off producers of pangasius and tilapia, while the
standard for the far more dispersed and generally poorer smallholder production of shrimp
was launched only in April 2014. Over 50% of the dramatic growth of Better Cotton
production was the result of the inclusion of 100 large-scale Brazilian farmers in 2012, who
produced more cotton than all the 140,000 Pakistani and Indian smallholders involved in
the BC-scheme.
Despite growing market shares, uptake in the market of the quickly growing supply of
certified produce is a major challenge. Certified sales of cocoa, coffee, tea and cotton are
less than a third of what farmers currently produce. Dozens of major companies have
committed to buy ‘sustainable products’, but their combined uptake of certified products
currently doesn’t keep up with the sharp increase in supply. This increases costs on the
production side, because certification and auditing costs often fall to the producer. IDH
works in some value chains with other stakeholders to promote market uptake.
In its external communications, IDH sometimes presents an overly rosy picture of the
‘impact’ of its efforts. IOB analysed underlying documents for IDH’s recent claims of
‘impact’ in cocoa, tea and cotton and had to conclude that several of the claims were not
well founded. Nevertheless, IDH’s work on (impact) evaluation is generally of good quality
and can be expected to deliver proper indications of the net effects of IDH’s supported
interventions over the coming years.
In summary, it can be concluded that there are likely positive and important outcomes in
IDH-supported certification schemes, also in view of the large-scale and broad reach of
these initiatives. However, the level of sustainability improvement is still shallow. Current
voluntary standards and certification, even when accompanied by the IDH-supported
Farmer Field Schools, are not sufficient for producers and workers to escape chronic
poverty. Nor do these actions successfully de-link deforestation and loss of biodiversity from
commodity production. Structural transformation towards sustainable commodity markets,
the lofty ambition with which IDH started, is therefore unlikely to happen only as a result of

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Riding the wave of sustainable commodity sourcing

the standards and certification schemes currently operating. IDH has become aware of these
limitations and has over the years added other activities to its interventions in supply
chains.
3. In recent years, IDH has moved into broader areas of work ‘beyond certification’. While this is certainly
opportune, IDH should take care not to lose focus.
Realism with respect to the results of current certification efforts and opportunities in
working with private sector companies and governments have led IDH in new directions, in
particular in its cocoa and tea programmes. Building on its network around standards and
certification, IDH is aiming to achieve more impact with activities beyond certification.

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In the cocoa programme, which is IDH’s biggest sector programme in terms of grant
funding, it has developed a strong focus on improving productivity. IDH is supporting a
range of new projects with companies such as confectionary producer Mars and cocoa
trader Armajaro aimed at providing cheaper fertiliser and credit to cocoa smallholders in
West-Africa. In tea, the IDH programme with Unilever and the KTDA in Kenya already
combined the trainings for Rainforest Alliance certification with broader Farmer Field
School trainings (about more than tea) to achieve better results for farmers. Issues such as
living wages and sexual harassment are now also taken up in close collaboration with the
private sector and non-governmental stakeholders in tea production. In countries such as
Ivory Coast (cocoa), Vietnam and Brazil (coffee), IDH is active in national platforms in which
the private sector and government discuss policies and regulations to prioritise
sustainability issues in commodity production.
Furthermore, IDH is considering an active role in supporting the inclusion of smallholders
in certain international companies’ investment plans related to the Grow Africa initiative
(an offspring of the World Economic Forum in which African governments and private
companies aim to work together to boost investment in agriculture). IDH has suggested
linking a blended finance component to its partnership options, in order to be able to
provide guarantees related to high-risk greenfield investments in African smallholder
production.
While there are good reasons for exploring opportunities beyond certification in supply
chains, IDH will have to ensure that it is not taking on board too many different activities
and work streams. This could undermine its useful focus and the unique position that it
currently occupies in the spectrum of development organisations.

Summary and conclusions

4. IDH’s recent work is more engaged with individual companies, which can raise questions about the
appropriateness of public support and puts ‘additionality’ at risk.4
IDH started its work in the pre-competitive area, convening companies by sector and
supporting joint programmes on the sector level. Specialised development organisations
(like SNV or Solidaridad) led the implementation of the programmes in the field on behalf
of the coalition.
IDH’s key work is still convening company commitments towards sector-wide change
agendas, but in several programmes the project applicants are now individual companies
that have been selected in calls for proposals. In cocoa, the project applicants are often
cocoa traders and chocolate manufacturers. The work that IDH foresees with respect to the
inclusion of smallholders in greenfield investments is with individual companies.
IDH sees the emergence of individual companies as project applicants as a logical step
towards ‘business-driven development’. The private sector parties would now be better
equipped to ‘embed’ sustainability efforts in their activities.
While this may be relevant, IOB notes that these developments may lead to several
dilemmas. By making a trader the implementer of a cocoa productivity improvement
project, IDH facilitates with public funds that this trader builds a more or less exclusive
relationship with cocoa farmers. There can be benefits for farmers (like bypassing local
middlemen and more secure market access), but this could also reduce their competitive
environment, limiting their bargaining power and making them more dependent on a
single outlet. By supporting a single trader’s efforts, the public funding intervenes in the
market structure and may restrict competition.
Similarly, the question is whether public funds should be used to support a single
company’s commercial investments in which development goals are ‘embedded’. An
investment in expansion of smallholder production surrounding a private estate could
basically be considered core business for the private enterprise, in view of anticipated
scarcity of supply. The use of public funding through IDH to support such strategies may
surpass the confines of proper ODA resource allocation.
If IDH is moving towards actions in the competitive area – linking with and supporting
interventions of single companies – then the requirements of the ‘additionality’ of public
funding deserve due attention.

4

Additionality can be defined as the net positive difference that is expected to result from a donorbusiness partnership (DCED, 2014). It is the extent to which activities (and associated results) are larger
in scale, at a higher quality, take place quicker, take place at a different location, or take place at all, as a
result of a donor intervention related to a private sector intervention. To establish whether donor
support is additional, agencies have to consider the counterfactual: would the activity happen anyway,
and would it happen in the same way, without donor support?

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Riding the wave of sustainable commodity sourcing

Moreover, concerning the balance of public and private goals in the partnerships, relevant
questions are raised in several interviews whether in IDH’s cocoa programme the strong
focus on increasing production – scarcity of supply is a major concern for the cocoa industry
– is sufficiently addressing the wider goals of reducing poverty and improving
environmental sustainability in the West-African cocoa sector.
5. Private sector contributions to IDH programmes have reached the agreed target, but cover a wide variety of
cost items.
The target set by the Ministry in 2011 of attracting at least 1.2 private Euros for every public
Euro was reached in the sector programmes as of 2012, and increased to 1.8 in 2013. Over the
period 2008-2013, public funding for sector improvement programmes to the amount of
EUR 43 million was matched by EUR 56 million in private contributions. The ratio of private
versus public contributions varied in individual programmes: private contributions were
relatively high in cocoa, cotton, electronics and tourism, and low in timber, aquaculture,
stone and cashew. The contributions are audited by auditors hired in projects. IDH’s auditor
KPMG is responsible for IDH’s annual financial statement. No major irregularities have been
found. IDH correctly reports to the Ministry the audited total contributions per programme;
it does not report on the character or details of the private contributions to a project, as it
has not been asked to do so.
| 20 |

IOB noted that a very wide variety of contributions has been accepted by the Ministry as
private sector match funding, based on a proposal submitted by IDH in 2010. The
contributions vary from cash grants and in-kind contributions to a project (calculated as
time spent by company staff at a maximum rate of EUR 500 per day), to the costs of
investments in, for instance, protective gear for farmers (in tea), treatment ponds and
pumps for water or sludge (in aquaculture), additional costs of ‘responsible’ fish feed, the
cost of auditing and certification, and even the premiums paid for certified products during
the project (in aquaculture, cocoa and soy). The private contributions can thus be from the
international companies that are partners in or lead the programme, but also costs and
investments made by the target groups (the farmers). Reconstruction at the request of IOB
indicated that in-kind contributions varied from 0% of total project expenditure in the
cotton programme, to 22% in tea and 29% in natural stone.
Now that PPPs are more prominent in development cooperation, the government’s audit
service ADR has advised the Ministry to devise more precise guidelines for such
contributions in PPPs.
6. Planned increases in expenditures for sector programmes have lagged behind. The IDH organisation has
grown and become more professional.
By the end of 2013, IDH had spent slightly less than half of the available MFA funding for the
2008-2015 period. In particular, the spending in sector programmes lagged behind
ambitions and projections. The level of new commitments in the last two years suggests
that setting up new agreements requires more time than foreseen, given the scrutiny that
IDH wants to apply. For the period 2013-2016, SECO (Switzerland) and Danida (Denmark)
have also made available significant amounts of public funding for the sector programmes.

Summary and conclusions

IDH would have to commit and spend substantially more funds in its sector programmes in
2014 and 2015 than it did over the past two years in order to deplete the public funding at its
disposal. IDH has indicated that the pipeline of new projects is large enough to ensure
proper spending and that the level of contracting is picking up in 2014.
The operational costs of the IDH organisation have grown steadily and are substantial
compared to the programme spending realised. Until 2013, the ministry paid the full cost of
the IDH organisation, the learning and innovation programme and the programme
outreach. As of 2013, SECO and Danida also cover an agreed (small) proportion of these
costs. IDH has set a 7.9% target – as of 2011 – for the ratio of ‘IDH office costs’ (personnel,
housing & ICT, organisational cost, communication, and congresses) to total annual
expenditure (which includes private sector contributions in programmes). So far, it only
achieved this target in 2012.
Increased costs are primarily related to growth in operational capacity, in particular by
hiring more programme officers, administrative and financial support and legal officers.
Whereas initially IDH transferred complete sector programmes to implementing partners
such as Solidaridad and SNV, project funding practice has shifted towards more in-house
operational management. IDH wanted to increase its influence in programmes and benefit
more in terms of learning.
Costs are also related to IDH’s role as a convenor, for which it needs a secretariat with
sufficient professionals to interact with the businesses and other stakeholders in the value
chains. Indeed, IDH appears to have a relatively heavy senior management structure with six
directors in an organisation of about 40 staff. Consultants have been hired to work more or
less permanently at the local level on key programmes for IDH, while also part of IDH staff is
effectively stationed most of their time in developing countries. IDH is setting up legal
entities in Vietnam and Indonesia with a view to strengthening its local/regional convening
work.
IOB noted that IDH’s administrative and financial practices have become more professional
over the years. IDH now has a solid internal control and management information system
in place.
7. The public commitment in the partnership facility has been largely limited to providing funding; the public
partner role has been fulfilled too much at a distance.
While IDH was set up as an entity for public-private-partnerships (PPPs), the public role in
the initiative has been confined largely to providing the finance to facilitate IDH to build
and run the organisation and to set up the programmes with private partners. In the first
years, the Ministry of Foreign Affairs took a position as observer on the interim board. When
IDH became a foundation with a supervisory board in 2011, the Ministry stepped down. In
view of the innovative character of the initiative, IDH was given much leeway to develop the
organisation and its way of working. Cooperation with IDH in Dutch embassy programmes
is still limited, as is collaboration between IDH and other instruments of the Dutch private
sector development programme (except with FMO). Few efforts were made to combine

| 21 |

Riding the wave of sustainable commodity sourcing

economic diplomacy and IDH interventions. IOB suggests that more intensive coordination
would be possible in this area.

Issues for consideration
With a view to the Ministry’s decision on funding for a next phase in IDH’s work, IOB gives
the following issues for consideration.
1. Sustainable sourcing in value chains is still unfinished business and IDH is well positioned to continue and
deepen its work on standards, certification and related activities beyond certification. It would be better to
focus the scope of the work on critical issues, and to not broaden activities too widely.
IDH’s position and role would best be judged against the backdrop of the broader PSD
programme that the Ministry supports, and the wider perspective of what kinds of
organisations are active globally, and in Europe in particular. IDH is a unique organisation
in as far as it works closely - in a pre-competitive setting - with companies and other
stakeholders on building coalitions for sustainable sourcing in value chains and translating
commitments into effective sector programmes that combine public and private funding.
However, would it be given the opportunity to take on board wider goals and ways of
working, it would enter an area in which many more development organisations are active.
Retaining focus is part of the strength of an organisation like IDH.
| 22 |

Moreover, sustainable commodity sourcing is still unfinished business. While the first wave of
mainstream certification may have reached its peak, the supply chain approach with
committed companies offers plentiful opportunities for further work. The challenge
appears to be identifying how such standards and related private sector commitments can
work as stepping stones towards deeper market transformation efforts that offer prospects for
reaching more substantial societal and development impacts.
While the full market potential of standards, certification and partnerships for sustainable
sourcing is not clear, there is ample space at this stage to continue along this line and IDH is
well positioned to play a role in its further development. Recent literature, seminars and
interviews suggest the following opportunities that could further increase the relevance and
effectiveness of sustainable commodity sourcing initiatives.
•

Extending the reach of current schemes, beyond ‘low-hanging fruit’
Much low-hanging fruit has been harvested in the certification schemes, such as the
relatively large-scale Vietnamese pangasius and tilapia farmers, organised tea
smallholders in Kenya, and modern Brazilian cotton farmers. Moving to the next phase
of certification will be more difficult. This would entail including more smallholders
and more vulnerable producers into the schemes. IDH’s recent work on including
shrimp farming in ASC is a good example. Similarly, keeping the focus on smallholder
production would be important in the Better Cotton initiative. Much of this is ongoing
IDH work, which deserves further support.

Summary and conclusions

•

Working on higher uptake of certified products in the market
Since in many cases less than half or a third of certified produce is used as such in
consumer markets, uptake is a key challenge for anyone involved in sustainable
commodity sourcing. Reputation and brand management are generally seen as key
drivers for uptake, which suggests the importance of public campaigns and awareness
building. While this may not be the central area of work for IDH, it could be important
for IDH to work with NGOs and companies on strategies to renew and increase public
attention to the sustainability issues that stood at the cradle of the wave of new
standards.

•

Stepping up the substance of the standards
The standards could be further developed as programmes for continuous improvement,
including thorny issues such as living wages/income (already in debate concerning tea).
Far more attention needs to be devoted to strengthening the gender dimension. In
addition, the issue of premium payments to primary producers needs further debate, in
view of the apparently limited viability of the business cases for farmers of certification
without premium. IDH is not a body that sets standards, but from its position as key
player in sustainable sourcing initiatives it could stimulate further debate on higher
standards.

•

Stimulating local/national standards in developing countries
An indirect effect of standards and certification in Western markets is a growing interest
in developing countries of devising national standards (and sometimes legislation),
partly aligned with international standards. Trustea in India is a typical example. This
offers new perspectives, in particular in developing countries with substantial local
markets, or with high commodity exports to other than Western markets. Working on
these standards requires closer involvement with governments and other authorities in
developing countries (IDH’s local convening ambition), whereas developed countries’
governments could also play a facilitating role.

•

Supply chain work beyond certification
This could include finding ways of ensuring better access to (short- and long-term)
credits for producers, providing additional support for improving productivity, working
on better links with (development) organisations providing longer-term investment
finance for upgrading production in the supply chain. While such activities can be very
important, the question always needs to be asked as to which role IDH should play in
view of the expertise of other organisations supported by the Ministry (such as FMO, IFC
and AfDB in finance, and IFDC, Agriterra in areas of local value chains and producer
organisation, et cetera).

•

Increasing transparency of the distribution of value added along the value chain
Value chain work has focussed mainly on sustainability issues at the primary producer
level. However, the trade margins are often defined further downstream in the value
chain. In several commodities (like cocoa), prices paid to primary producers are not
reflecting actual or future scarcity of supply. IDH would be well placed to analyse and

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Riding the wave of sustainable commodity sourcing

discuss such matters with all stakeholders in the value chain, to help provide more
transparency and to suggest possible remedies that would empower primary producers.
This could be part of its knowledge strategy.
2. Upgrade the public role vis-a-vis IDH in terms of closer guidance on behalf of the Ministry, paying attention
to the balance between public and private goals in the programmes, exploring options for synergies with
other programmes, and updating guidelines for private sector match funding and the ‘additionality’ of public
support.
The Ministry should define its role in the initiative more clearly, given the importance of
IDH in the Dutch private sector development programme. Combining public and private
goals in development activities is a relatively new area of work in international cooperation.
Whereas this is a promising business and core to the Dutch government’s mission, this
review (and the recent IOB report on Private Sector Development) suggests that the Ministry
could strengthen its policies, presence and operational guidelines.
•

Firstly, appointing a qualified representative for the ministry in the IDH supervisory
board is recommended. This individual should have a clear task and an arrangement for
regular feedback. It is not uncommon for a funder to keep an eye on the development
of the organisation that it is supporting in this way. Such a commissioner would,
among other tasks, have to oversee the balance between the private goals and public
goals in programme development. This would include ensuring that voices from the
not-for-profit sector, local producers and authorities are heard and acknowledged when
devising IDH’s sector strategies and project interventions.

•

Benefitting from the public-private partnership character of IDH would also require the
Ministry to take on more pro-active role at an operational level. In response to IOB’s
evaluation of the Dutch Private Sector Support policy, the minister has underlined the
call for more synergy and coordination between the different instruments that it
supports. IOB realises that the capacity within the Ministry to actively engage in
development cooperation efforts has been reduced over the years. Yet, given the
importance of IDH in the ministries’ programme, promoting synergy between IDH
work and that of other PSD organisations could be assigned greater priority. Options to
combine economic diplomacy efforts and IDH work could be explored further.

•

This review also suggests that the Ministry’s current guidelines for private sector match
funding are very wide. The Ministry should consider, in consultation with the
government’s audit service ADR, how the guidelines currently applied could be specified
in more detail to guide IDH’s (and other PPPs’) match funding provisions and lead to
more transparent reporting as to their use.

| 24 |

Summary and conclusions

•

In order to provide more clarity on when public finance can be considered ‘additional’
to private contributions, it is recommended that the Ministry uses the guidelines that
the DECD (of which the Ministry is an active member) has developed recently.5 These
criteria provide closer guidance to IDH and other PPP programmes on what can and
cannot be considered appropriate use of public funding in combined programmes.

| 25 |

5

Demonstrating Additionality in Private Sector Development Initiatives: A Practical Exploration of Good
Practice for Challenge Funds and other Cost-Sharing Mechanisms; DCED, 2014.

Riding the wave of sustainable commodity sourcing

| 26 |

1
Introduction and methodology

Introduction and methodology

This chapter describes the review’s purpose and methodology.
Purpose and review questions
IDH has received financial support from the Ministry of Foreign Affairs for its organisation
and programmes up to the end of 2015. The Ministry intends to take a new funding decision
in the second half of 2014 concerning IDH’s forthcoming strategy for the years 2016-2020.
The Ministry asked IOB to conduct an evaluation, to be completed by mid-2014.
In early 2014, IOB agreed to set up a review of IDH. A fully-fledged evaluation was considered
somewhat premature, in view of the limited evidence so far as to the impact evaluations
that IDH set up on the Ministry’s request in 2011-2012.
The purpose of the IOB review is therefore to provide an independent assessment of the
progress, results and potential of the initiative to date, in order to assist the Ministry in
making an informed and strategic decision about further support to IDH.
The review addresses the period 2008-2013 and is structured around the question: To what
extent is IDH a relevant, effective and efficient organisation in view of the Dutch
government’s policy on aid and trade? This includes the following key issues.6
| 27 |

On general knowledge about the field of work in which IDH is active (covering aspects of
relevance and potential effectiveness):
• What is known about whether and how promoting sustainability through voluntary
standards in supply chains is effective in delivering impact on MDGs 1, 7 and 8?
• What is known about the role and magnitude of public funding as compared to private
sector funding in promoting market transformation towards sustainable value chains?
• What is the perception of stakeholders and experts on the prospects of public-private
partnerships for making value chains more sustainable?
On the available evidence on IDH’s effectiveness to date:
• To what extent has IDH’s role as convener, funder and knowledge broker contributed to
improvements in commodity markets?
• To what extent have IDH’s programmes contributed to increased yields, higher incomes,
better working conditions, and environmental improvements in commodity production?
• What is known about the financial sustainability of the product-specific business cases
(for primary producers/farmers) in IDH programmes?
On the organisational and financial aspects of IDH:
• How has IDH developed in terms of organisational capacity and financial efficiency?
• To what extent is IDH’s financial contribution from public funds matched by additional
private sector contributions, and how does the balance evolve over the different phases

6

The review questions are shown in simplified form. The full review questions are provided in the terms
of reference of this review, which can be found at www.iob-evaluatie.nl.

Riding the wave of sustainable commodity sourcing

of market transformation? What part of public funding is spent at the level of the farmer
or primary producer?
Methodology and approach
The review was conducted on the basis of desk research and interviews with stakeholders
and experts. In addition, a workshop was organised to discuss general prospects for
sustainable commodity sourcing.7 The desk research draws on various types of secondary
sources, including academic literature, impact studies and annual reports. It also analysed
primary sources such as IDH financial statements, IDH’s paper trail on specific
commodities, and data on key performance indicators.

| 28 |

The review was centred on five commodity-specific case studies that provide more in-depth
knowledge with respect to IDH’s work. These case studies have been complemented with a
general analysis of IDH’s work and approach, which includes all commodities. The
commodities selected are: cocoa, cotton, tea, aquaculture and stone. The first three
commodities were selected because baseline and impact studies have been conducted or
commissioned for these commodities. This permits a preliminary analysis of the (potential)
impact of IDH’s work. These three commodities account for almost half of IDH’s
expenditure of DGIS funding during the review period. Aquaculture has been added because
IDH was involved early on and played a role in establishing the Aquaculture Stewardship
Council. Finally, natural stone was selected in view of the exit strategy that IDH was
preparing and because it was one of the first four commodities for which IDH initiated a
programme after its foundation in 2008.
The interviews were used to collect and compare views from different angles (triangulation).
A total of 70 interviews were conducted with IDH directors and programme officers,
representatives from the Dutch government, implementing organisations, NGOs and a
large number of companies. A small number of representatives from local governments or
producer organisations were also interviewed. The full list of persons interviewed is
provided in Annex 3. Most interviews were conducted within the framework of one of the
case studies. These interviews were semi-structured.8 About twenty interviews had a more
general nature and can be characterised as open interviews.
In addition, IOB and the Environmental Policy Group of Wageningen University organised a
workshop to take stock of current sustainable value chain practices and to look forward to
new ways of increasing sustainability. Around 30 international and Dutch experts and
stakeholders participated in the debate, for which seven international experts provided

7

8

An additional literature review that IOB had commissioned did not provide sufficient evidence to
function as a relevant input for the review of IDH.
Standard questions in the semi-structured interviews covered an appraisal of developments in the
commodity chain; the role of IDH in the sector sustainability initiative; whether the emphasis in IDH’s
role was on convening, funding or knowledge; what if there had been no IDH support; future role of
IDH in the initiative. The relatively small number of interviews per sector, with great differences
between sectors and the phase of the initiatives, did not allow for aggregation of the answers to the
questions (for instance on the exact role of IDH) on a more quantitative basis.

Introduction and methodology

written contributions. The input provided within the framework of this meeting was used
to deepen understanding of the prospects for sustainable sourcing initiatives. The report of
the meeting has been published separately on the IOB website.9
Limitations
A fully-fledged evaluation of IDH was not feasible, given the short time available and in view
of the limited information available so far as to the effectiveness of IDH-supported
interventions in the producer countries; such an evaluation would be more appropriate by
2016-17 when the results of the impact studies started in 2012 become available.
The review character of this study implies limitations. IOB is not able to fully judge IDH with
respect to the classic OECD evaluation criteria (efficiency, effectiveness, impact, relevance
and sustainability). However, the review does provide an overview of available evidence on the
relevance (ex-ante) and effectiveness of IDH. Part of the reporting is more descriptive, rather
than judgmental, for instance on several efficiency aspects and cost indicators. In this way,
the review aims to contribute to transparency and informed decision-making at the Ministry
concerning further funding to IDH.
Layout of the report
Chapter 2 sketches the general theory and practice of promoting sustainability through
commodity supply chains. This is based mainly on a study of available literature, while IOB
added some of its own research on issues such as on profits and margins along the cocoa
value chain.
Chapter 3 looks back at how IDH started, what it intended to accomplish and how its
interventions were supposed to deliver impact. It describes IDH’s theory of change related
to market transformation, and the intervention logic and results chain, as presented in
IDH’s funding proposal 2011-2015.
Chapter 4 describes IDH’s organisational and financial development and assesses aspects of
the organisation’s operational efficiency. It also looks at the role of the Dutch government
in the development of the organisation and its programmes.
Chapter 5 is the main chapter in the report. It analyses IDH’s accomplishments, in particular
in cotton, tea, cocoa, aquaculture and natural stone (outputs, outcomes and impact, as far
as available evidence goes).10 It looks at IDH’s role as convenor, funder and knowledge
broker.

9

10

http://www.iob-evaluatie.nl/sites/iob-evaluatie.nl/files/Chains%20for%20Change%20workshop%20
report.pdf.
The annex contains basic information on IDH’s sector programmes for aquaculture and natural stone.
For more background information on coco, tea and cotton we refer to the IDH website:
http://www.idhsustainabletrade.com/.

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Riding the wave of sustainable commodity sourcing

| 30 |

2
Fostering sustainable commodity
production through value chains

Fostering sustainable commodity production through value chains

This chapter sketches the theory and practice of promoting sustainability through
commodity supply chains. It analyses general evidence as to whether and how standards
and certification can deliver positive impacts on poverty and the environment in developing
countries. Evidence related to specific IDH interventions are dealt with in chapter 5.
The booming business of standards and certification
The pursuit of sustainable production, manufacturing and trade in global value chains has
gained momentum over the past decade.11 Certified products claiming some aspect of
sustainability are penetrating mainstream markets in Western industrialised countries.
Companies running global brands, major retailers and non-governmental organisations
work together in partnerships to expand supply and demand of products certified by
voluntary standards such as UTZ and Rainforest Alliance certified, RSPO (palm oil) and MSC
(fish). There are currently 447 registered labels claiming some aspect of sustainability.12
These initiatives have in particular taken root in food and beverage production, but also in
non-food products like tropical timber and cotton. Most operate on a business-toconsumer level, while others are business-to-business standards, such as 4C, Bonsucro and
GlobalGAP. For an overview, see IISD & IIED (2014) or PBL (2013).
The earlier standards and certification schemes on sustainability – Organic and Fairtrade
– did not have the ambition to involve actors in the mainstream supply chains, at least not
initially. They emerged as a sort of ‘niche chains’, in the case of Fairtrade initiated by an
alternative movement providing direct trade relations between third world producers and
conscious consumers in Europe.13 While their ambition became to reach a larger group of
consumers through uptake by major retailers, market shares remained fairly limited.14
Most of the more recent standards emerged as a result of public campaigns and advocacy
efforts by NGOs (such as WWF, Solidaridad, Oxfam-Novib and Rainforest Alliance) aimed at
engaging key private sector players on sustainability issues related to their supply chains.
This coincided with a growing debate and consciousness about corporate social
responsibility. Retailers and manufactures came to the negotiating table to discuss
possibilities for reducing environmental and social harm in production and trade (RESOLVE,

11

12
13

14

In this context, standards are a defined set of social, environmental, and/or economic criteria that are to
be translated into concrete practices by producers/enterprises. Certification is a means of providing
assurance that products or services comply with the criteria (RESOLVE, 2012).
Website http://www.ecolabelindex.com/ecolabels/ (accessed 29 May 2014).
The standard for organic agriculture came up in the early 1920s to harmonise existing growing
practices. The members of the organic agriculture movement established the International Federation
of Organic Agriculture Movements (IFOAM) in 1972 to have a communication network for the various
initiatives. The Fairtrade standard evolved in the 1980-90s from direct trading relations of European
Third World shops and was built in particular on coffee. The Fairtrade Labelling Organisations
International (FLO) was set up in 1997 to bring different national initiatives (like Max Havelaar) under
one roof (RESOLVE, 2012).
UTZ started in 2002 as a deal between a coffee producer in Guatemala and a coffee roaster in the
Netherlands who believed that a new simpler standard promoting good practice in coffee production
could reach out to a broader market of consumers than Fairtrade could.

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Riding the wave of sustainable commodity sourcing

2012). While some NGOs continued the ‘naming and shaming’ of free riders, other NGOs
became cooperative partners in developing standards with front-running companies such
as IKEA, Douwe Egberts and Unilever. FSC, MSC and RA/SAN-Certified emerged in the 1990s,
UTZ in 2002. In the second half of the 2000s, round tables on palm oil, soy and sugar were
set up with participation of major industry players. Figure 1 sketches the timeline of the
emergence of key voluntary standards.

Figure 1

Timeline of sustainability standards and organisations (starting dates)
Global Aquaculture Alliance
1997
Fairtrade Labelling Organisations
International
1997
Ethical Tea Partnership
1997

IFOAM (organic agriculture)
1972

| 32 |
Fair Trade
Original
1973

1972

Rainforest
Alliance
1985

1986

Stichting Max Havelaar
1988
Organic receives legal
status in US/EU
1990
FSC (timber)
1993
1990

1995

Cotton made in Africa
2005

UTZ
Certified
1999
PEFC
1999

Legal framework for
organic
labelling
EU/US
2002

MSC
1999

ISEAL
Alliance
2002
RSPO
2003

GlobalGAP
1999
2000

4C Association
2006

BCI
2005

2005

Source: composed by IOB.

The theory of combining public and private goals for development
In developing countries, the production, processing and trade of commodities can be
related to various sustainability issues: poverty induced by low (farm) prices and low
productivity; poor labour conditions, including child labour; and negative environmental
effects such as deforestation, soil degradation and water pollution.
In conventional commodity markets (often: spot markets), there is no backward market
integration or traceability system. This implies that the final buyer or consumer has no
means to know about the labour, income or environmental conditions in the country of
origin. By transforming the supply chain into an integrated and traceable supply chain,
buyers and consumers in developed countries would be able to influence the sustainability
issues in production countries. The key assumption is that social, economic or
environmental sustainability issues related to production can be effectively addressed via
supply chains, in particular in countries where these issues are not sufficiently dealt with by
government or other local organisations (RESOLVE, 2012).

RSB
2007

RTRS
2006

Bonsucro
2008
ASC
2009
2010

Fostering sustainable commodity production through value chains

The basic logic behind certification against sustainability standards is that this would
provide credible information to consumers about sustainability aspects of products, while
offering companies the means to communicate and work on their corporate social
responsibility commitments (Dragusanu, Giovannucci, & Nunn, 2014). With growing
market share for certified produce and more private stakeholders entering the scheme,
commodity markets could gradually transform from conventional to sustainable (PBL,
2013).
The process of market transformation in supply chains would serve both private and public
objectives. Apart from working on brand reputation and corporate social responsibility,
private sector goals include securing access to resources in the long-term: with limited
arable land surface and growing global demand, particularly from emerging economies in
the South, assuring continuity of supply has become an issue for many companies. Public
objectives include reducing poverty and negative environmental impact related, for
instance, to the UN Millennium Development Goals (MDGs). The overlap between the
private sector sustainable sourcing objectives and the public poverty alleviation and
environmental objectives would create the possibilities for fruitful public-private
partnerships.
Transformation to an integrated sustainable supply chain requires a range of actions. These
include creating a network and a critical mass of market players; developing a productspecific code or sustainability standard (if this is not yet in place); setting up a traceability
system; providing support to producers and other actors to work according to the new
standard; and certification of producers. Voluntary sustainability standards will have their
limit in terms of market share, and government policies and regulations in production
countries would eventually be needed to address all production (PBL, 2013).
Figure 2

Supply chains as a channel for public funding to achieve goals in production countries
Production country: public goals
Reduced enviromental impact

Government

Improved labour conditions, income, producers
?

Trader

NGO

Processor
Exporter

Importer
NL Government goals
and budget

Industry
Retailer
Consumer
Consumption country: public goals

NGO

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Riding the wave of sustainable commodity sourcing

During market transformation, public support (ODA) can bridge the period between
investment and (visible) benefits and motivate private actors and producers in the short
term. Public support can be needed for convening stakeholders, standard development, to
pilot fieldwork, and for supporting local governments with policies. Once a certain market
share of sustainable produce is reached, other companies would follow, and less or no
external support would be required any more. Eventually, a voluntary standard may become
the norm among buyers and retailers: ‘a license to operate’. Also, governments, both in
producing and importing countries, may adopt the norm in national programmes or even
in legislation to promote compliance by market players that lag behind (PBL, 2013).
Public support could be justified if the funding would be crucial for initiating the
transformation or if certain public objectives would not be achieved when market
transformation would be driven by the private sector alone. Through public-private
partnerships, temporary ODA would be able to leverage long-term private sector investment
in development (PBL, 2013). Once the market is well integrated and a long-term relationship
and trust are built along the supply chain, buyers, processors and producers will be more
motivated to further invest in, for example, productivity and product quality.

| 34 |

Basically, the rationale for public funding of standard development is that, without it, the
public objectives – reducing poverty, improving labour conditions and reducing negative
environmental impact – would not be achieved to the same extent or in the same rhythm.
This is either because such objectives would be less anchored in the sustainable supply
chains, or because market transformation would not take place at the same pace or on the
same scale.
The roles that governments or government funding in developed countries can play varies
per commodity and depends on the phase of market transformation (niche market,
mainstream). This ranges from subsidising pilot programmes, convening frontrunner
market players and NGOs, creating networks and exchanging knowledge of mainstream
players, strengthening transparency and competition, to putting legislation in place.
Market shares and commitments of brands and retailers
The supply of certified produce has expanded dramatically over the past decade. As figure 3
shows, the area of certified production of major sustainably produced crops practically
tripled to 10 million hectares in five years’ time (IISD & IIED, 2014).

Fostering sustainable commodity production through value chains

Figure 3

Growth of certified production 2008-2012 in hectares

10
9

Hectares compliant (EUR million)

8
7

Coffee

6

Cocoa

5

Palm Oil

4

Cotton

3

Sugar

2

Soybeans

1

Bananas

0
2008

Tea
2009

2010

2011

2012

Source: State of Sustainability Initiatives Review 2014 (IISD & IIED, 2014).

However, uptake in the market lags behind (see figure 4). For most products except
bananas, certified sales are just a third or half of what is currently available (KPMG, 2013a;
IISD & IIED, 2014). Oversupply might lead to a downward pressure on prices for such
certified products.
In the Netherlands, market shares for several sustainably sourced products are significantly
higher than global averages. This is in particular the case for wood products (around 60%
sustainably sourced in 2011), palm oil, coffee, fish and tropical timber (around 40% in 2011)
(PBL, 2013). The Netherlands is a frontrunner even within Europe in this regard. Several
recent sector-wide initiatives with global ambitions, such as the round tables for soy (dating
back to 2006) and palm oil (2004), were set up by Dutch stakeholders.

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Riding the wave of sustainable commodity sourcing

Volume of certified commodity production (2008 and 2012) and sales of certified products
(2012), as a percentage of global production

Figure 4
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Coffee

Cocoa

Palm Oil

Production 2008

| 36 |

Tea

Wild fish

Cotton
lint

Production 2012

Sugar
cane

Bananas

Soy
beans

Farmed
fish

Sales 2012

Source: State of Sustainability Initiatives Review 2014 (IISD & IIED, 2014) and IOB calculations.

Some of the gap between production and uptake of certified produce may well be
transitional. Many leading brands and retailers have made commitments to sustainable
sourcing, often targeting a certain percentage by 2015 or 2020 (see Table 1). However, the
full potential is not known. Much will depend on how the interaction between consumer
demand, NGO advocacy and public campaigning, and brand and retailer commitment
develops in western consumer markets over the coming years.

Table 1		

Examples of company commitments on sustainable sourcing

Company

Commitments or current status

Adidas

100% sustainable cotton by 2018

Ahold

100% sustainable cocoa, coffee, tea, palm oil, soy and seafood by 2015

Anova

60% sustainable seafood by 2016

Cargill

100% sustainable palm oil by 2020

DE Master Blenders

25% sustainable coffee by 2015

Ferrero Rocher

100% sustainable coffee by 2013, palm oil and sugar by 2014, cocoa by 2020

Friesland Campina

100% sustainable cocoa, palm oil and paper by 2014

H&M

100% sustainable cotton by 2020

Hershey’s

100% sustainable cocoa by 2020

Ikea

100% sustainable cotton by 2014 and 50% sustainable wood by 2017

Fostering sustainable commodity production through value chains

Jumbo

100% sustainable cocoa, coffee and paper as of 2012 and palm oil as of 2013

Marks & Spencer

100% sustainable cotton, palm oil, seafood and paper by 2020

Mars

100% sustainable coffee as of 2013, palm oil by 2015 and cocoa and
seafood by 2020

Migros

100% sustainable paper and 90% sustainable soy by 2014, 100%
sustainable palm oil by 2015 and seafood by 2020

Nestlé

100% sustainable palm oil as of 2013 and 40% sustainable cocoa, coffee,
soy, sugar and seafood by 2015

Olam

100% sustainable cocoa, cotton, coffee and paper by 2020

Procter & Gamble

100% sustainable palm oil by 2015 and paper by 2020

Sainsbury’s

20% sustainable cotton by 2014

Tchibo

70% sustainable cotton and 35% sustainable coffee by 2014

Tesco

100% sustainable palm oil by 2015

Unilever

100% sustainable palm oil by 2015 and cocoa, tea, wood, palm soy and
sugar by 2020

Verkade

100% Fairtrade cocoa as of 2009, palm oil as of 2010 and coffee as of 2013

Zeeman

10% sustainable cotton as of 2020

Source: company annual reports and websites. Compiled by IOB.

Indications of limited positive effects of certified standards on sustainability
While the literature on this subject is expanding, it is still early to pass judgement as to
whether the wave of standards and certification is actually creating impact on the ground.
The evidence base is relatively new and small. Potential impacts of the new generation of
standards have often not been studied over longer periods of time. Fairtrade has been the
subject of far more research, but early studies in particular were anecdotal rather than
systematic and more focussed on outputs (training, prices) than on outcomes (net-income,
use of harmful pesticides) or impact (livelihoods, health). Robust studies that compare
certified producers with comparable non-certified producers over a period of time are
scarce.
Drawing from a range of overviews and specific commodity studies, the following picture
emerges on the effects of voluntary standards.
In general, studies indicate that standards and certification are limited instruments for the
purpose of making production sustainable and improving the livelihoods of small and
vulnerable producers. In a 2010 review of the small number of methodologically credible
studies available (14), Blackman and Rivera concluded that the ‘empirical evidence that
sustainable certification has significant benefits is limited’ (2010). Recent overviews point to
‘mixed results’ with evidence of ‘positive impacts’ (Molenaar et al., 2013), ‘plausible positive
effects’ (Kessler et al., 2012) or are ‘cautiously positive’ about the effects of standards on
producers in developing countries (International Trade Centre, 2011b).

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Riding the wave of sustainable commodity sourcing

Concerning economic aspects, there is some evidence of increased farmer productivity and
of moderate improvements in net income. Training for farmers required to enter the
certification schemes can help to improve yields (and in some cases product quality), in
particular in smallholder production where education in good agricultural practices has so
far been lacking (Kessler et al., 2012). Resulting higher yields can translate into limited
income improvements, depending on other factors such as changes in input cost as a result
of better practice (more/different fertiliser use, hired labour instead of child labour, etc.)
and the cost of certification as such.15
Moderate improvements in income are also associated with the floor price and price
premiums paid in Fairtrade schemes (Ruben, 2008). A recent overview concludes that
‘studies generally find that Fairtrade farmers receive higher prices, have greater access to
credit, perceive their economic environment as being more stable, and are more likely to
engage in environmentally friendly farming practices’ (Dragusanu, Giovannucci, & Nunn,
2014). The effects on livelihoods remain, however, small: most studies emphasise that
Fairtrade producer families are still only surviving and covering basic needs (Nelson &
Pound, 2009).

| 38 |

Limited uptake in the market and over-certification are factors that reduce the potential
economic benefits of Fairtrade production. Coffee cooperatives are generally unable to sell
more than a fifth to a third of their Fairtrade certified coffee (Hoebink et al., 2014). The costs
of certification, however, fall on the full production of the cooperative and so reduce
benefits from the certified sales.
Premiums and price guarantees are generally not part of mainstream standards such as
Rainforest Alliance Certified and FSC. Yet some premium payments occur in the market,
often based on the (perceived) quality of certified produce.16 Any premium paid is small
compared to price fluctuations in the market. A main economic benefit to producers of the
recent certification schemes could well be the indirect effects of their relationships with
buyers and marketing guarantees, contributing to more secure market access (RESOLVE,
2012; International Trade Centre, 2011b).
On the environmental dimension there are also indications of some limited positive effects,
often situation- and case- specific. Standards specifically require adoption of more
environmentally friendly practices in fisheries (MSC and ASC), forestry and timber extraction
(FSC, PEFC), appropriate use of agro-chemicals, soil conservation practices and better waste
management. According to Molenaar et al. ‘it is plausible that these practices will lead to
improved ecosystem quality and biodiversity, but the evidence on this point is inadequate,
and the relative contribution of these measures is uncertain’ (Molenaar, et al., 2013).

15

16

Certification costs are sometimes (temporarily) subsidised by NGOs or donors, which can obscure the
cost/benefit picture.
UTZ allows for negotiation between buyer and seller on a premium. Current premiums paid are
monitored and published on the UTZ website.

Fostering sustainable commodity production through value chains

There are some indications of better soil management methods related to certification of
specific crops (Dragusanu, Giovannucci, & Nunn, 2014; COSA, 2013). This is related to
training in good agricultural practices, which can also help to reduce the use of (harmful)
agro-chemicals, in particular in crops and in situations where use was relatively high. There
is hardly any proof of increased fixed investments, for instance in tree renovation or soil
structure improvements, also because access to long-term finance is usually lacking.
Several standards for tropical crops - such as the recent RTRS for soy and RSPO for palm oil
- include criteria to stop further deforestation and forbid expansion of production by the
certified unit into surrounding primary forest. There is still no evidence as to whether this
has an effect on ongoing deforestation in major palm oil and soy producing countries such
as Indonesia and Brazil. FSC and MSC certification are associated with improved
management of forests and fish stocks, but mainly in developed countries. Studies on FSC
certification found limited additional effects, largely because the certified forests were
already relatively well managed (Blackman, Raimondi, & Cubbage, 2014). In general,
securing forests and biodiversity requires broader efforts than certification programmes
alone can provide (International Trade Centre, 2011b).
On the social dimension, the evidence base is similarly small to date. All sustainability
standards aim to keep bad practices off the market, such as child labour, forced labour and
human rights violations, while demanding compliance with national social legislation and
labour standards. Incidental media reports on child labour (like in Ivory Coast cocoa
production) and the abuse of female workers (as in Kenya tea production) illustrate that
certification cannot fully exclude bad practices. Yet there is some evidence of reduced child
labour practices in certified production (Tulane University, 2011). The gender dimension has
received remarkably little attention in many studies (Nelson & Pound, 2009).
The Fairtrade premium is to be used for social or economic development programmes
within the producer community or estate, to be selected democratically by a representative
fund committee.17 Studies find a broad range of uses, such as building classrooms and
housing for teachers, dormitories for workers, fellowship funds, latrines for girls, water
wells, road improvement, as well as individual bonuses for producers (Ruben, 2008; Nelson
& Pound, 2009; Stathers & Gathuthi, 2013). One study reports the partial purchase of a
tea-processing factory by smallholders in Kenya (Stathers & Gathuthi, 2013). There are also
reports that suggest incidental misuse and distrust of members concerning the use of the
funds (Dragusanu, Giovannucci, & Nunn, 2014; Stathers & Gathuthi, 2013).

17

Prior to 2008, the premium for Fairtrade coffee was 10 dollar cents per pound. Now it stands at 20 cents
per pound. In 2013, world prices for coffee stood at about 120-150 dollar cents per pound for Arabica,
depending on type and quality. This is around the current Fairtrade Minimum Price of 140 to 170 cents/
lb for different qualities types of Arabica. The 20 cents Premium is additional. In 2012, Transfair USA
alone paid over 35 million USD in premiums to Fairtrade producer organisations, the bulk of which
related to coffee (Dragusanu, Giovannucci, & Nunn, 2014).

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Riding the wave of sustainable commodity sourcing

Recent studies indicate that the benefits of Fairtrade for smallholders are not necessarily
passed on to the workers they hire. In East African production of tea and coffee at certified
farms, poor farm workers (often female) got very low pay and had to work under difficult
conditions (SOAS, 2014). Another study showed that the income increases in Fairtrade coffee
production in Costa Rica over the past decade were confined to farm owners and skilled
labour, and were not extended to unskilled workers on the coffee farms (Dragusanu,
Giovannucci, & Nunn, 2014).
As part of a broad ongoing effort to document the effects of voluntary standards, the
Committee on Sustainability Assessment produced a meta-analysis of observed differences
between certified and non-certified coffee and cocoa farmers in 12 countries (COSA, 2013).
The study noted a substantially higher number of farmers trained, improved farm practices
(soil and water conservation, conserving biodiversity), higher yield (+14%) and a modest but
significant difference in net income (+7%).18 See figure 5.

Figure 5

Certified coffee and cocoa producers compared to uncertified producers
+78%
+70%

| 40 |
+43%

+42%
+23%
TRAINING*

YIELD*

14%

32%

WATER & SOIL*

33%

BIODIVERSITY*

17%

NET
INCOME*

7%

-8%

-3%
-13%

-7%

-15%

Source: The COSA Measuring Sustainability Report; Coffee and Cocoa in 12 Countries (COSA, 2013).

18

The data points derived from 3,500 to 16,000 farm surveys, undertaken in 12 countries in Latin America,
Africa and Asia, comparing certified producers of coffee and cocoa to control group farmers.
Certification included Organic, Fairtrade, Rainforest Alliance, UTZ Certified, Starbucks CAFE Practices,
Nespresso AAA, and 4C. Please note in particular that part of the data represent only an initial
difference, and not an outcome over time. Moreover, certified farmers and control group farmers were
not sufficiently matched on all potentially relevant characteristics in all studies, creating the possibility
of selection bias. The difference presented can therefore not be attributed to certification as such with
certainty. The aggregated data obviously hide detailed and context-specific differences. The variation
found among certified producers is presented by the range lines in the graph. The significance level is
indicated in the chart by means of asterisk: * = 90% level of confidence; ** = 95% level of confidence;
*** = 99% level of confidence.

Fostering sustainable commodity production through value chains

Several authors note indirect effects of sustainability standards in producer countries
(Kessler et al., 2012). Indirect effects would include more policy dialogue on minimum
standards, stimulating better enforcement of national legal frameworks on social and
environmental issues (like child labour), and supporting the emergence of local standards
(as in tea, soy, aquaculture and palm oil). Spill-over effects of certification are well
documented: studies in East-African coffee production for instance find that yield/quality
improvements after training soon enter non-certified production, reducing visible net
effects of joining a standard scheme in just a few years (Hoebink et al., 2014). Effects at the
regional or landscape level are not indicated (Molenaar et al., 2013). In addition, there are
indirect effects of VSS in global value chains, such as increased transparency and traceability,
enhanced brand and market value, et cetera.
Could current standards and certification make the difference?
The role that sustainable sourcing of commodities can play in addressing poverty in
developing countries should not be overestimated. Apart from the evidence of the limited
positive effects on the ground described in the previous paragraph, there are a number of
reasons why sustainable sourcing – as it is developing up to now – is an important but
modest instrument for change, given the challenges at stake.
1. There are important limitations in the way current schemes have been set up and operate:
- The poorest producers are often not engaged in the latest generation of certification
schemes. While Fairtrade works more often with poorer farmers (Hoebink et al.,
2014), the large majority of certified soy, palm oil, coffee and tea comes either from
estates or well-organised producer organisations (Molenaar et al., 2013). Many of
these producers are poor, but the very poor or often not part of the schemes.
- Certification schemes tend to start with ‘low-hanging fruit’. The supply of
sustainable products is concentrated in regions with more developed production
capacity: within developing countries, sustainable production is concentrated in
Latin America (IISD & IIED, 2014).19 In countries like Vietnam or Ivory Coast, the most
organised, well-connected and capitalised farmers are more likely to be included
than others. Some observers point therefore to the danger that certification leads to
the exclusion of the most vulnerable farmers from the market, while others show
that new production arrangements such as out-grower schemes can include also
smallholder producers in certified supply chains (WUR / IOB, 2014).
- Newer, mainstream-oriented standards tend to apply criteria of reduced depth and
breadth to allow for more rapid uptake (IISD & IIED, 2014). Most initiatives contain
few criteria related to economic sustainability, reflecting a general belief that
economic benefits will follow automatically upon reaching compliance. ILO core
labour standards, as well as environmental practices with direct quality and yield
outcomes, show the greatest degree of coverage in these mainstream standards.

19

When developed countries can supply sustainable markets (as in the forestry sector), they tend to
dominate supply (IISD & IIED, 2014).

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Riding the wave of sustainable commodity sourcing

Box 1

Inclusion and exclusion of smallholders in certification schemes

Voluntary standards are not necessarily inclusive. The group of commodity producers
is not homogeneous and not all producers can access certification. A KPMG study for
IDH on cocoa farmers in West-Africa noted that 90-95% of these farmers are
smallholders and relatively poor. They can be classified in four segments. The first,
small segment is already certified. The second, small segment is not yet certified, but
with little effort they can be certified, mainly because they are already organised in
producer organisations or cooperatives. A third, larger segment is more difficult to
reach because they are remote and not yet organised. Certification will require larger
investment costs. A fourth large segment cannot be reached at all with certification:
farmers live too remote and their production is too small to cover the annual costs
for certification (KPMG, 2011b).

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2. Factors related to economic structures in developing countries reduce potential impact:
• The potential impact of certified production on poverty and livelihoods is limited by
the simple fact that, often, smallholders do not depend solely on the certified crop.
In Kenyan coffee production, for instance, coffee makes up a quarter to a third of the
coffee producer’s income (Hoebink et al., 2014). In West-African cocoa production
the percentage is larger, around two-thirds of total income (IDS and University of
Ghana, 2008).
• A growing part of commodity production in developing countries does not enter
Western consumer markets. It is either consumed nationally, or exported to
expanding markets such as China and other emerging economies. While
sustainability concerns may increase in such major economies also (see examples in
tea in chapter 5), it is unlikely that this will happen soon on a very large scale.
• In smallholder production of commodities like cocoa, cotton and coffee, there is
also a deeper structural factor that influences the potential of certified production:
the size of the farm of some smallholders is too small to provide a decent income in
the longer run (International Trade Centre, 2011a). It would require a structural
transformation of the economy to alleviate their poverty: a process by which the
smallest farmers leave the primary sector to take up wage- or self-employment in
other growing sectors, facilitating the scaling-up and intensification of the
remaining smallholder farm production. While this process is ongoing or has
already taken place in Latin America and many parts of Asia, this is not (yet) the case
in most parts of Africa, where recent growth has largely been fuelled by commodity
extraction (and price increase) rather than structural growth in the non-agrarian
economy (Timmer & Akkus, 2013).
3. The allocation of costs and benefits across the value chain does, generally, not work to
the benefit of primary producers:
• The producer’s share in the end value of many commodities is often remarkably
small. A kilogram of made tea leaves Kenya for around EUR 2 (FOB Mombasa, RA
Certified or not), while after repacking and distribution it is sold in Dutch

Fostering sustainable commodity production through value chains

supermarkets for kilo prices of EUR 5 (for low-end low quality packs) to EUR 50 (for
high end teabags). Of a chocolate bar that contains 34% cocoa, only 3-5% is paid to
the cocoa farmer (Oxfam-Novib, 2009).
• The distribution of value added remains largely unaffected by certification.20 The
share of the price paid by the final consumer that accrues to the producer is very
small, even in Fairtrade schemes. According to an ITC literature review, additional
revenues for Fairtrade products were distributed unevenly along the value chain,
mainly to the benefit of the retailer.21 However, they also noted that logistics,
inventory and marketing costs could be higher for the retailer in view of the limited
volumes of such products (International Trade Centre, 2011a). Figure 6 presents the
price structure of a Tony Chocolonely Fairtrade chocolate bar, which suggests that
the farm gate price plus premium represent only 6% of the chocolate bar, just about
a tenth of the gross margin for brand and retailers (Tony Chocolonely, 2014). The
price structure of mainstream certified chocolate bars will be similar, with more
limited premiums.

Figure 6

Price structure of a fairtrade chocolate bar
Farm gate price (5%)
Premium (1%)
Local taxes (1%)
Milk powder (6%)
Sugar and Fairtrade premium (4%)
Production and packaging (19%)
Transport and storage (1%)
Licence fee Fairtrade (1%)
Chocolonely Foundation (1%)
Gross margin brand and retail (55%)
Value Added Tax (6%)

Source: Tony Chocolonely, 2014.

20

21

The recent (Dutch) FairChain coffee initiative aims to change the tendency that a decreasing percentage
of the consumer price ends up at the primary producer level by supporting local processing of high
quality coffee in Ethiopia. See: http://www.moyeecoffee.com/.
A study on Finnish coffee consumption found that consumers (in average and across coffees) paid 55%
more for Fairtrade certified coffee from Nicaragua in 2006 and 58% more in 2008. The average (gross)
price received by farmers in Nicaragua (excluding the Fairtrade social premium!) was found to be only
7% higher compared to the price paid by one of the largest local coffee export companies. Source:
Valkila et al. (2010) ‘Empowering Coffee Traders? The Coffee Value Chain from Nicaraguan Fairtrade
Farmers to Finnish Consumers’.

| 43 |

Riding the wave of sustainable commodity sourcing

| 44 |

• While growing scarcity of cocoa is seen as a major threat to continuity of sourcing in the
chocolate industry – and is a reason for the strong industry involvement in standards and
productivity projects in cocoa producing regions – prices for cocoa have hardly increased
(in Ghana basically at the same pace as food prices). It appears that mechanisms
downstream in the supply chain (role of traders, stock keeping for speculative purposes)
can reduce the translation of growing scarcity into higher prices for primary
commodities. In cocoa, for instance, there is a large stock (34% of annual grinding)
hanging above the market, which implies that prices may not increase in the short run
(Hardman & Co, 2014). Many of the certified commodities – with the exception of palm
oil – continue to have low economic value while their (potential) scarcity is increasing.
• It can also be noted that private sector inputs into sustainable chain development with
smallholder producers have grown substantially, but remain fairly marginal compared to
margins and profits downstream in the value chain. The net confectionary sales of the
top-4 chocolate manufacturers (Mars, Mondelez, Nestlé and Ferrero – all involved in IDH
programmes) added up to USD 41 billion in 2013 (Hardman & Co, 2014). Table 2 presents
the annual turnover of global chocolate confectionary sales, the turnover and estimated
profit of the chocolate industry, the total cocoa trade, the value of premiums paid for
certified product, and the annual private sector and ODA budget of the IDH cocoa
programme. This overview suggests that the input from the private sector (in cash and in
kind) towards a major sustainability programme in cocoa – the IDH-led programme – is
still very modest compared to the profits in the industry (see also Box 2). Weak or
non-existing farmers’ organisations, dispersed production, limited information and
transparency on price structures and concentration of trade in a few hands are factors
that contribute to this situation.

Table 2

Turnover, profits and premiums in chocolate production

Annual turnover, profit, premium, budget
Chocolate market (est. 2014)

million €
85,000

1

Chocolate manufacturers sales (est. 2012) 1

62,000

Manufacturers own profit estimate (4%)

2,500

2

8,400

Total cocoa trade (2012) 3
Premium paid for certified cocoa, (2011, 2012)

40

4,5

IDH cocoa programme 2012: Private sector contribution
IDH cocoa programme 2012: ODA contribution 6

6

9
5

Sources: Candy industry Jan 2014 cited in Hardman & co, 2014; No profit data available, own estimate; others
estimate 8% profit. 3 IISD&IIED, 2014, 2014. 4 IISD&IIES 2014 estimates 300.000 t cocoa sold as certified; 5 180$/t
average premium (IDH, 2013f); 6 IDH, 2013f.
1

2

Fostering sustainable commodity production through value chains

Box 2

Profits and poverty reduction along the cocoa supply chain

Until recently, little was known about the profits along the cocoa value chain. What is
the farmers’ share of the profit made on a chocolate bar, and how does this relate to
farmers’ income and poverty? The Cocoa Barometer Consortium has recently
drafted discussion papers on the cocoa value distribution (Fountain, Elshof, De Graaf,
& Hütz-Adams, in press) and on living income for cocoa farmers (Fountain &
Hütz-Adams, in press) based on studies and interviews. The consortium estimated
profit margins of 34% for cocoa traders, 3% for cocoa processors, 8% for the
chocolate industry, 1.5% for wholesale and 3.4% for retail (no profit estimate was
made for local traders). Using their estimates on value addition and profits, and
combining this with results from the IDH cocoa baseline study in Ghana (Waarts, Ge,
Ton & Van der Mheen, 2013a), IOB calculated the profit made along the value chain of
a 100g chocolate bar with 33% cocoa, for which 36g of cocoa is needed (Figure 7). IOB
used data of an average cocoa farmer in Ghana with 5.5 members per household,
where 66% of household income comes from cocoa. The resulting gross margin for
such a farmer – farm gate price minus cost – would be about EUR 0.03 for the
chocolate bar. The average cocoa farmer’s household in Ghana and Ivory Coast lives
on about EUR 0.45 per person per day. In order to move beyond the extreme poverty
line of USD 1.25 per person per day (all other factors remaining the same), the farmer
would need a gross margin of about EUR 10. In other words: the farmer has a ‘deficit’
of almost EUR 0.07 per bar, if he/she were to escape extreme poverty. If the farm
gate price for cocoa would double, the farmer could ‘break even’ and just escape
extreme poverty. Assuming this higher farm gate price was transferred through the
chain, this would make the chocolate bar about EUR 0.07 more expensive. The figure
also shows that a more equal distribution of profit would as such hardly be sufficient
to make up the ‘deficit’ for cocoa farmers.

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Riding the wave of sustainable commodity sourcing

Figure 7

Profit along the chocolate value chain and what a cocoa farmer would need to escape
extreme poverty22

€ 0,08
€ 0,06
€ 0,04
€ 0,02
€ 0,00
-€ 0,02
-€ 0,04
-€ 0,06
-€ 0,08
Retail

| 46 |

Wholesale

Chocolate
manufacturer

Cocoa
processor

International
Farmer's
trader
gross margin

Farmer's
deficit

Source: Fountain, Elshof, De Graaf & Hütz-Adams (in press) plus calculations IOB.

The main conclusion that can be drawn from the evidence in this chapter is that efforts to
achieve sustainable commodity sourcing have to date produced positive but fairly limited
effects on poverty and the environment. Standards and certification as we know them are
useful but limited instruments for this purpose. Promoting sustainable commodity
sourcing through public-private coalitions is delivering positive effects, but the full
potential of this rather new area of work is not yet clear.

22

The margin and profit of international traders is small compared to the large volumes traded, so this
doesn’t show up in the figure (34% profit over a EUR 37 added value per ton cocoa).

Fostering sustainable commodity production through value chains

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Riding the wave of sustainable commodity sourcing

| 48 |

3
Origins and strategy of IDH

Origins and strategy of IDH

This chapter looks back at how the initiative started, what it intended to accomplish and
how its interventions were supposed to deliver impact.
Origins of IDH and initial programme
The idea to initiate an organisation like IDH arose early 2007 within the Ministry of Foreign
Affairs. Companies like Unilever were putting forward proposals for public-private
cooperation in developing countries. However, there was no adequate public funding
programme available to accommodate such initiatives, taking into account that direct
public support to individual companies was not considered appropriate.23 Setting up a
dedicated public-private partnership facility that would build on the growing interest in
sustainable sourcing within the private sector resonated well with Minister Koenders’
(development cooperation) efforts to reinforce support for development by engaging new
actors, beyond the traditional aid constituency.
On 30 June 2007 on the former island of Schokland, a number of companies, NGOs and
three ministers – Koenders (development cooperation), Verburg (agriculture) and
Heemskerk (foreign trade) – signed an agreement that initiated IDH as a public-private
partnership facility.24 The Ministry contracted consultants to further explore the potential
partnerships in a range of commodity sectors and to prepare the initial programme. One
year after the Schokland event, 37 companies, 24 NGOs and 2 trade unions had expressed
their commitment to the initiative. End 2008, the Ministry provided a 5-year subsidy of EUR
31 million (2008-2013) to a total IDH budget of EUR 58 million; the balance was to be
contributed by other partners in the initiative, in particular the private sector.
The starting subsidy for IDH was related to the government’s intention of up-scaling
support for the Millennium Development Goals (MDGs). Its purpose was ‘to improve the
sustainability of international trade and production chains, addressing social,
environmental and economic aspects in developing countries, with a view to contribute to
MDGs 1 (poverty reduction), 7 (sustainability) and 8 (fair trade)’ (Ministry of Foreign Affairs,
2008).
IDH would contribute to these goals by setting up sector programmes in four sectors: cocoa,
soy, tropical timber and natural stone. Up to 10 programmes were to be developed in total.
Working within the supply chain with all stakeholders towards more sustainable and (often)
certified production by primary producers would be a key element in the programmes. IDH
would also facilitate the exchange of knowledge between international value chain actors
and explore ways of addressing cross-cutting issues such as child labour, living wages,
reduced use of chemicals and conservation of biodiversity (Ministry of Foreign Affairs,
2008).

23

24

The AIV (the government’s Advisory Council for International Affairs) had in 2006 advised in favour of
support for private sector development in Dutch development cooperation, but cautioned against ODA
targeted at individual firms.
On 30 June 2007, in a massive public event in support of the Dutch development cooperation policy of
the newly elected government coalition (Balkenende-IV 2007-2010), over 50 ‘Schokland Agreements’
were signed by a wide range of public, private and non-governmental organisations.

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Riding the wave of sustainable commodity sourcing

IDH Action Plan 2011-2015
Once the initiative was formally started and the secretariat was recruited, IDH quickly gained
momentum. In Autumn 2010, IDH submitted an additional and ambitious ‘match funding
proposal’, inspired by the new government coalition’s focus on private sector development
and by a growing appetite among private companies for sustainable sourcing.25 This ‘Action
Plan Sustainable Trade 2011-2015’ was presented as a ‘public-private sustainability
investment portfolio’ from a coalition of more than 70 companies (many international and
not of Dutch origin – see figure 8), civil society organisations, labour unions and trade
associations, coordinated through IDH. The Action Plan was presented as ‘a unique
opportunity to transform commodity markets into engines of sustainable economic growth
and global welfare’ (IDH, 2010b).

Figure 8

Logos of companies and organisations working with IDH in 2010

| 50 |

Source: IDH, 2010b.

The proposal contained plans for scaling up programmes in eight sectors: cocoa, tropical
timber, tea, natural stone, soy, tourism, cotton and aquaculture. For a further 10 products
IDH would lead scoping exercises and the development of new programmes focused on
market transformation: cashew nuts, electronics, spices, fruit & vegetables, sugar cane,
shoes & sporting goods, beef, flowers & plants, fishery and palm oil.
In the original set-up agreed in 2008, the Ministry was to finance the IDH secretariat and up
to a maximum of 50% of individual sector programmes. The remaining 50% of the sector
programmes had to be contributed by other partners, of which at least 25% from the private
sector. This was changed in the second subsidy arrangement agreed in 2010: the funding
contributed by IDH to a sector programme would not be more than the contribution from
the private sector.26 In this way, the commitment from the private sector would influence

25
26

Cabinet Rutte- I, 2010-2012.
In 2012 the requirement of 50/50 match funding was extended to the whole IDH budget.

Origins and strategy of IDH

the public contribution in a sector. Both cash contributions and contributions in kind would
be accepted. The contributions would have to be validated by means of an auditor’s certificate.
In 2010, the Ministry provided an additional subsidy to IDH based on this proposal, bringing
the total subsidy available to IDH for the period 2008-2015 to EUR 123.2 million.
IDH theory of change and intervention logic
Market transformation is the key word in IDH’s approach. The essence of market
transformation would be that (lead) companies (together with supply chain partners)
internalise the socio-economic and environmental externalities of production and trade
and change their business practices accordingly. Certification of products to a sustainability
standard would be the main first tool of this transformation. Growing scarcity of supply
would stimulate global commercial players to invest in their ultimate supply base: the
millions of farmers and enterprises in developing countries. This win-win proposition
(supported by increased attention to issues of corporate social responsibility and protecting
brand value) would drive the move towards market transformation, creating new
possibilities for making global market chains more sustainable on all three dimensions
(socially, environmentally, economically). Once a critical mass of companies and consumers
used certified sustainable produce, a tipping point would be reached and the market would
gradually transform from traditional to sustainable, according to IDH. Using the certified
products would then become ‘a license to operate’ for companies along the value chain and
the market would become fully based on sustainable production. Figure 9 sketches the S-curve
and the different phases that IDH saw as typical for this process of market transformation.

Figure 9

The four phases of market transformation, as presented by IDH in 2010

100
90

Impact on MDGs

% Certified in market

80
70
60
50
40
30
20
10
0
Initiation

Source: IDH, 2010b.

First-movers

Critical mass

License to operate

| 51 |

Riding the wave of sustainable commodity sourcing

In this model, IDH would work as a catalyst in the first phases of market transformation. It
would play several roles, in particular as a convenor, funder and knowledge broker. As a
convenor, IDH would bring relevant stakeholders – including front-running companies
– together to facilitate pre-competitive collaboration and create broad coalitions also with
NGOs to address sustainability issues in the value chain. As a funder, IDH would finance
activities (such as scoping papers, feasibility studies and conferences) to get coalitions off
the ground and moving and then to co-finance large-scale sector improvement plans
together with private companies and NGOs. In its role as knowledge broker, IDH aimed to
expand and deepen the knowledge base and learning capacity on sustainable commodity
sourcing, both within specific sectors and across sectors.

| 52 |

The exact role IDH would take depends on the degree of development already achieved in a
particular value chain, along the supposed S-curve. When the initial base was still small,
IDH would commission research to identify the potential for market transformation and
explore possibilities with private and other stakeholders. This scoping phase would be
followed by development of an implementation plan together with stakeholders for sectors
that showed good potential. When there would be enough support across the sector for
collaboration and up-scaling the production and trade in sustainably produced products,
IDH would work towards joint implementation plans, bringing private and public funding
together in ambitious plans.
These sector programmes, ‘powered’ by IDH, would focus on primary producers in
developing countries – generally farmers producing commodities like tea, coffee, cocoa,
cotton, soy or palm oil for international markets. The programmes introduce the
sustainability standard to producers not yet certified and support their entry into the
scheme, in particular by providing training on the (agricultural) practices required for
compliance to the standard. Becoming certified would potentially improve the demand and
possibly the value of the product (quality or price premiums), creating better opportunities
for the producer on the market. The training of the producers in good agricultural practices
would in many cases (in particular when traditional smallholders were involved) also
contribute to higher yields, creating possibilities for improved income.
In particular in the last years of the programme, IDH also set up additional programmes
with private sector actors to further improve productivity and quality compliance, beyond
the direct requirements for certification. These programmes focus mainly on providing
inputs and credits to smallholders (based on commercial funding).
By dovetailing its funding and expertise with private sector interest in sustainable sourcing
in this way, IDH aimed to promote and support large-scale sector initiatives to train, certify
and support producers in developing countries in order to increase their production while
reducing environmental side-effects. By doing so, lasting positive impacts on poverty,
livelihoods and environmental sustainability were to be achieved, contributing in particular
to MDG 1 and 7.

Origins and strategy of IDH

IDH worked towards concrete outputs and outcomes in its sector improvement
programmes, with specific Key Performance Indicators (KPIs) identified for programmes in
four results areas:
• improvements in conditions of production in countries of origin (such as number of
farmers trained, hectares certified);
• improvement in sustainable markets (such as market share for a certified product);
• effective collaboration and institutionalisation at sector level (such as number of
partnerships, coalitions); and
• knowledge and sustainability & supply chain approaches developed and shared (such as
the number of studies).
Figure 10 sketches IDH’s intervention logic and results chain. In chapter 5, IOB reviews to
what extent IDH has been able to achieve outputs, outcomes and impacts as intended.27

Figure 10

IDH intervention logic

Impact

Poverty reduction &
sustainable livelihoods
(MDG 1)

Environmentally
sustainable production
(MDG 7)

Sustainable trade
(MDG 8)

Gradual market transformation
Sustainable sourcing commitLess pollution and soil
degradation – Less pesticide ments – Uptake of certified
and water use –
commodities – Value chain
Less deforestation
efficiency and traceability

Outcomes supply
chain level

Increased yields – Higher
income – Better working
conditions – Less child
labour – Access to credit

Outcomes primary
producer level

Farmers and producers trained – Producers and products certified – Credit and inputs
programmes provided – Producers linked tot sustainable buyers

Outputs primary
producer level

Establishment of farmer field schools and other training activities – Initiation and
scaling-up of certificartion and traceability systems – Establishment of credit and
input programmes – Market linkages

Direct outputs IDH

Coalitions and company commitments to programmes –
Sector transformation agendas and programmes – Studies and reports

Activities IDH

Convening – Coalition building – Programme development – Commissioning studies

Inputs IDH

Public Funds – Human Resources - Expertise

Source: adapted by IOB from IDH Match Funding Proposal 2011-2015 (IDH, 2010b).

27

In response to IOB’s draft findings, IDH has argued that its approach to market transformation is now
more based on ‘the convening of company commitments to integrating sustainability into the
business’, in which certification is only a tool. However, in practice, the use of standards and
certification has been the dominant tool in practically all major sector programmes. Moreover, IDH’s
funding proposal 2011-2015 described standards and certification as the means through which the
transformation was supposed to take place – see for instance figure 9 in this review, taken from IDH’s
funding proposal.

| 53 |

Riding the wave of sustainable commodity sourcing

| 54 |

4
Organisational and financial
development of IDH

Organisational and financial development of IDH

This chapter describes IDH’s organisational and financial development and assesses aspects
of the organisation’s operational efficiency. It also looks at the role of the Dutch
government in the development of the organisation and its programmes.
Rapid expansion of budget, programmes and personnel
Within a few years, IDH has become a full blown development organisation with an annual
budget of EUR 40-50 million (including private sector contributions in programmes) and
over 40 core staff, running programmes in 18 sectors in many developing countries. IDH’s
expenditures increased from EUR 5 million in 2009 to almost EUR 50 million in 2012, before
falling back to just over EUR 40 million in 2013 (see figure 11). Figure 12 illustrates the
development of the number of sector programmes and personnel working in IDH office.

Figure 11

IDH budget expenditure 2008-2013, including private sector and other public and NGO
contributions

60

50

| 55 |

EUR million

40

30

20

10

0
2008

2009

IDH expenditures

Source: data provided by IDH, adapted by IOB.

2010

2011

Private sector contributions

2012

2013

Other donor contributions

Riding the wave of sustainable commodity sourcing

Increase in number of programmes and personnel28

Figure 12
40

36,8

35
30
25,4

25
20

17

15

16

15,3
9,4

10
5

28,6

6

18

11

8

0
2008

2009

Number of programmes

2010

2011

2012

2013

Number of FTE

Source: data provided by IDH, adapted by IOB.
| 56 |

Starting as an offspring of MVO-Nederland (an institution promoting corporate social
responsibility), IDH became a separate foundation (stichting) based in Utrecht in 2011. An
external Supervisory Board oversees IDH’s policy and operations, supervises the Executive
Board and signs off annual plans and (financial) reports.29 The Executive Board, composed
of the Executive Director and one of the Programme Directors, is responsible for managing
the organisation. The tasks of the Executive Board include preparing a long-term strategy
and executing IDH’s Annual Plan and the accompanying budget. The Executive Board is
accountable to the Supervisory Board.30
New public donors entered in 2013
IDH managed to broaden its sources of public funding by attracting substantial support
from the Swiss State Secretariat for Economic Affairs SECO and a small commodity-specific
grant from Danida, Denmark’s official development cooperation. At the end of 2013, the
environmental department of the Netherlands Ministry of Foreign Affairs (DME) also
approved an additional subsidy for environmental activities of IDH at landscape level.31

28
29

30

31

Excludes personnel hired for learning and innovation.
The Supervisory Board is composed of members from internationally operating businesses, NGOs and
labour unions (although there is no union representative on the Board currently). Meetings of the
Supervisory Board take place three times a year. The Board appoints and selects its own members. The
Supervisory Board has established an Audit Committee, a Nomination and Remuneration Committee
and an Impact Committee.
In March 2014, the IDH Supervisory Board agreed a Governance Code that can be found at
http://www.idhsustainabletrade.com/organization.
As this programme became operational in the course of 2014, it has not been reviewed in this IOB
study.

Organisational and financial development of IDH

Table 3

Current public sector funding arrangements for IDH

Public sector funding arrangements for IDH

Committed funding for
the period (in EUR million)

MFA/DDE 2008-2015 Core funding and sector programmes

123.2

MFA/DME 2013-2019 SLWP (Sustainable Land & Water Programme)

20.0

SECO

2013-2017

23.8

Danida

2013-2016 Coffee & cotton

1.4

Source: data compiled by IOB.

Private sector contributions in programmes have increased, covering very diverse inputs.
The goal of leveraging private sector contributions with public funding has generally been
achieved in the sector programmes. The private sector contributions have been
accompanied by audited statements, as agreed with the Ministry. The target set by the
Ministry in 2011 of attracting at least 1.2 private Euro for every public Euro has been
achieved. As of 2012, the overall ratio in the programmes was above this target, reaching 1.8
in 2013 (see figure 13).
The ratio of private versus public contributions in individual programmes varied (see figure
14). Looking at the period 2008-2013, private contributions were relatively high in cocoa,
cotton, electronics and tourism, while they were low in timber, aquaculture, stone and
cashew. As there is no programme-specific benchmark, a higher private sector contribution
in one programme can compensate for a lower one in another programme. IDH has
indicated that, in general, private co-funding increases when a sector programme matures.
In the roll out of the coffee programme, IDH applies a minimum of 70% private
contribution for the field level projects, while in the new activities in floriculture a 50%
contribution is required.

| 57 |

Riding the wave of sustainable commodity sourcing

Ratio private to public funds in IDH sector programmes 2008-2013

Figure 13
2,0

1,81

1,8
1,61

1,6
1,4
1,2
1,0
0,8

0,65

0,54

0,6

0,74

0,4
0,2
0,17

0

2008

2009

2010

2011

Ratio private to public funding

2012

2013

Norm private to public funding

Source: data provided by IDH, adapted by IOB.
| 58 |

Public (IDH) and private contributions to sector programmes 2008-2013

Figure 14
25

EUR million

20

15

10

5

IDH

Private Sector

Source: data provided by IDH, adapted by IOB.

Pulp & Paper

Mining

Apparel

Spices

Flowers

Fruit &
Vegetables

Palm oil

Cashew

Natural Stone

Tourism

Electronics

Coffee

Aquaculture

Soy

Tea

Timber

Cotton

Cocoa

0

Organisational and financial development of IDH

A wide range of different types of actions, inputs and expenditures has been accepted as
private sector contributions in IDH programmes. The Ministry agreed in 2010 to an IDH
proposal to distinguish five categories:
• Monetary (cash) contributions, either to the implementing partner, via IDH, or directly to
the project in the field;
• In-kind contributions, counted as time spent in providing services to the programme, at a
maximum daily rate of EUR 500 (excluding VAT) for companies based in the North, or
actual costs of staff, to achieve agreed results;
• Purchasing contracts, to a maximum of 5%, depending on the character of the
programme;
• Capital investments for infrastructure, machinery and equipment, all related to the
objectives of the programme; and
• Monitoring, evaluation and learning related to the programme.
Inputs accepted as private sector contributions are sector-specific and specified in calls for
proposals. For instance, in the aquaculture programme (Farmers in Transition fund), a
broad range of investments and running costs in fish or shrimp farming can count as the
private contribution: establishing new treatment ponds for water, raising dikes to prevent
escape, pumps, oxygen meters, testing costs and laboratory equipment, probiotics or water
disinfectants, insurance for labourers, sceptic toilets, the price difference between
responsible feed and conventional feed and between high-quality fish seed and
conventional seed, et cetera. Remarkably, the premium paid by traders to producers for the
certified or responsible fish/shrimp or the running costs for maintaining certification or
responsible production are also counted as a private sector contribution. Also in cocoa and
soy, premiums for certified produce have been accepted as private contributions to IDH
programmes. IDH excludes certification costs in more ‘mature’ commodity initiatives, such
as in coffee.32
It should be noted that the match funding is not limited to contributions of the
international companies that are IDH’s direct partners in a programme. In fact there appear
to be at least three categories: the international companies; local private sector actors at the
intermediary level; and the beneficiary primary producers/farmers themselves. In the
aquaculture programme, the investments by the fish farmers themselves can make up the
bulk of the private sector contributions to the programme. IDH accepts all auditable private
sector contributions directly related to a project objective, which is in line with the
guidelines agreed with the Ministry.
IDH does not administrate what proportion of the private sector contributions is cash or
in-kind, nor what the character is of the cash or in-kind contributions. IDH argues that
providing flexibility is important in a results-oriented approach with the private sector.

32

Fairtrade premiums are not accepted as private sector contributions. According to Max Havelaar, this
implies that sector improvement projects based on a Fairtrade scheme would have little or no chance of
leveraging enough private resources to meet the criteria in IDH’s calls for proposals.

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Riding the wave of sustainable commodity sourcing

Moreover, the contract that IDH agreed with the Ministry does not oblige IDH to report on
this matter, as long as the contributions as such have been properly audited at the
programme level. In short: IDH acts fully within the guidelines of the Ministry, but these
guidelines are quite wide and do not require much reporting.
IOB has worked with IDH to reconstruct the proportion of in-kind contributions to the
programmes. In cotton, there were no in-kind private sector contributions. In the tea
programme, in-kind contributions reached 22% of the total costs (including the public
contribution), while in natural stone in-kind contributions came to 29%. IDH indicated that
brand companies further down the supply chain contribute more often in cash, whereas
traders and other companies working directly with smallholders (sometimes as
implementing partners of IDH) tend to contribute a mixture of cash and increased in-kind
contributions.

| 60 |

IOB believes that the Ministry should take a closer look at the current use of private sector
contributions in PPP activities (like the IDH programmes) and consider more strict
guidelines on what can and what cannot be accepted as genuine private sector
contributions. Also, the requirements for reporting on these contributions could be better
elaborated, in order to provide a reasonable level of transparency. The ADR, the
government’s internal accountancy agency, argued in 2012 that the Ministry should develop
clearer guidelines in view of the increasing use of match funding and in-kind contributions
in PPPs and the lack of clarity concerning the valuation bases. The ADR argued, for instance,
that both cash and in-kind contributions should be calculated in advance and be made
verifiable in the private partners’ administration.
The Ministry’s subsidy was concentrated on cocoa, cotton, timber and tea
Apart from covering almost the full cost of the IDH secretariat and the learning programme
(about EUR 19 million over 2008-2013), most of the MFA subsidy was used in four sector
programmes: cocoa, cotton, timber and tea took almost three-quarters of the Ministry’s
contribution to IDH sector improvement programmes (see figure 15).

Organisational and financial development of IDH

Figure 15

IDH’s use of MFA subsidy in sector programmes 2008-2013

12

10

EUR million

8

6

4

2

Pulp & Paper

Mining

Apparel

Spices

Flowers

Fruit &
Vegetables

Palm oil

Cashew

Natural Stone

Tourism

Electronics

Coffee

Aquaculture

Soy

Tea

Timber

Cotton

Cocoa

0

Source: data provided by IDH, adapted by IOB.

Project funding practice is shifting towards more in-house operational management
IDH has gradually changed its way of working concerning the funding of sector projects. In
the first years, IDH generally transferred the full management of complete sector
programmes to selected Implementing Partners (IP) like Solidaridad and SNV.33 This IP was
contracted and funded to coordinate the projects and work with firms, NGOs and other
organisations in implementing the programme. This way of working implied that the
operational management and the administration of projects was largely the task of the IP.
The IP reported to an IDH programme manager, who could run several programmes at a
time.
Now IDH has become more directly involved in running an increased number of sector
activities. IDH argued that by contracting out complete programmes, its sphere of influence
was sometimes too limited to be sufficiently effective and to be able to – for instance
– redirect programmes during implementation. Also learning, sharing best practice and
data collection and use would benefit from closer involvement in programme
management. IDH still uses IPs in all programmes, which, generally after a call for proposal,
are contracted for specific tasks, but programme coordination and management by IDH is
now more intensive. Three funds – cotton, coffee and timber – are now fully managed
‘in-house’.

33

Some of these arrangements (as with Solidaridad in cocoa in West-Africa) were set up before IDH was
officially launched.

| 61 |

Riding the wave of sustainable commodity sourcing

Consequently, IDH has gradually expanded its operational capacity, in particular by hiring
additional programme officers, administrative and financial support and legal officers (see
Figure 16). Also, IDH hires external consultants for a longer period in several sector
programmes to support implementation and the facilitating/convening role that IDH
intends to play.
IDH has no real field structure in place, unlike implementing partners such as SNV or
Solidaridad, and has confirmed that it does not have the intention to build one. However,
some consultants have been hired to work more or less permanently at the local level on
key programmes for IDH, while at the same time part of IDH staff is effectively stationed
most of their time in developing countries. IDH is setting up legal entities in Vietnam and
Indonesia.
By building up this limited capacity in developing countries, IDH aims to strengthen its
local/regional convening work. IDH considers a presence in key producing regions to be a
requirement for working with procurement officers of major companies (who often operate
regionally), with national governments and with the embassies of its donor countries.

| 62 |

Figure 16

Development of IDH staff numbers (FTE) and positions 2009-2013

40
35
Management Team
30

Programme Management
Programme Officers

25

Learning & Innovation

20

Operations
Finance

15

Legal Counsel

10

Fundraising & Public Affairs
Communications

5

Office

0
2009

2010

2011

2012

2013

Source: data provided by IDH, adapted by IOB.

Closer project management by IDH is reflected in the sharp increase in the number of
contracts agreed in recent years (see figure 17). In 2013, IDH signed over 300 contracts with
consultants or implementers for aspects of sector programmes. In the last three years, the
number of contracts has increased faster than the financial volume of the contracts, which
suggests a growing project management burden. A large proportion of these contracts is
related to the three programmes in which IDH has assumed the role of fund manager.

Organisational and financial development of IDH

Number of contracts signed by IDH per annum 2008-2013

Figure 17
350

306
300
250
200

197

150
100
77

50
6

8

2008

2009

18

0
2010

2011

2012

2013

Source: data provided
by IDH, adapted by IOB.
Number of new contracts per year

A recent development is that the public IDH funding is directly provided to a programme or
project run by a private company. This is in particular the case in cocoa and coffee. In cocoa,
private companies like Mars, Cemoi and Barry Callebout are implementing partners in the
sector improvement programme, each running a project supported by IDH funding. IDH
sees this as a next step in encouraging companies to work on their commitments to
sustainable sourcing and market transformation. Also, this could reduce overhead in the
programmes because a separate implementing organisation is no longer required. These
developments are discussed further in Chapter 5.
Expenditures in sector programmes are lagging behind
In 2013, less than half of the MFA budget available for that year for sector programmes was
spent.34 Cocoa, cotton, apparel and tourism were the only programmes that came close to
(or above) the anticipated expenditure in that year. All other programmes showed
significant underspending, including large ones like aquaculture, coffee, soy and timber.
The reasons for underspending in 2013 mentioned by IDH include delays in putting
programmes together, while sometimes less IDH funding was required because needs were
lower (e.g. in the ASC pangasius programme) or others could fund it (as in a large vanilla
project in the spices programme). In general, IDH appears to be overoptimistic about
spending rhythms in the programmes.

34

The original 2013 budget indicated that EUR 22.7 million of the MFA grant would be used in sector
programmes, whereas eventually only EUR 9.6 million (43%) was spent in the programmes by using the
MFA funding. In addition, EUR 1.8 million of SECO/Danida funding was spent in the programmes
(budgeted originally at EUR 2.4 million).

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Riding the wave of sustainable commodity sourcing

Over the past two years, the financial volume of new contracts in the sector programmes
was also relatively small compared to available funding. While in 2011 an exceptional
amount of EUR 29 million was contracted on the MFA-grant for sector programmes, this
figure dropped to just over EUR 5 million in 2012 and EUR 9.5 million in 2013.
By the end of 2013, IDH had spent in total slightly less than half (49%) of the available MFA
funding for 2008-2015 (see Table 4 and Annex). While spending on organisational costs
increased steadily over the years, spending in programmes lagged behind ambitions.
Cumulative programme expenditure on the MFA grant reached EUR 42 million by the end of
2013, leaving 54% of the MFA funding available for IDH sector programmes still to be spent
in the two years up to 2016. Moreover, by the end of 2013, IDH still had EUR 27 million (30%)
of the MFA grant left for new programme commitments. Also, SECO and Danida have made
available significant amounts of funding for the sector programmes (around EUR 13 million
for 2014-2016).

Table 4

| 64 |

Overview of the use of the MFA grant IDH 2008-2015 up to end 2013 (in EUR million)

Funding available from
MFA for IDH 2008-2015

Sector
Programmes

90.5

Contracted
MFA-funding
for Sector
Programmes
by end 2013

Percentage

Expenditure
on MFA-fund
ing by end
2013

Percentage

MFA funds
still to be
contracted
on Sector
Programmes
2014-2015

63.5

70.1%

41.7

46.0%

27.0

2013

9.5

9.6

2012

5.3

14.5

2011

2008-2010

29.2

8.7

19.5

8.9

Learning &
Innovation,
Evaluation,
Outreach

10.5

5.3

50.4%

Office costs
(Personnel,
Organisation,
Communication)

22.1

13.8

62.4%

Other (receiving
interest,
contingency)

0.1

- 0.4

123.2
Total MFA for
IDH 2008-2015
Source: data provided by IDH, adapted by IOB.

60.4

49.0%

27.0

Organisational and financial development of IDH

This implies that, in 2014 and 2015, IDH would have to commit and spend more than double
the amount of funds in its sector programmes than it did over the past two years in order to
deplete the public funding at its deposal. IDH has indicated that the pipeline of new projects
would be big enough to ensure proper spending and that the level of contracting is picking up
in 2014 (to around EUR 10 million in the first half year). Also, IDH has proposed to postpone
spending of EUR 10 million MFA funding to 2016 (by making it part of the next contract).
Costs of the IDH organisation are substantial
Until 2013, the Ministry paid the full cost of the IDH organisation, the learning and
innovation programme and programme outreach (including staff ). As of 2013, SECO and
Danida also cover an agreed (small) part of these costs (see Table 5 for details).
The so-called ‘IDH office costs’ include personnel, housing & ICT, organisational cost,
communication and congresses. Expenditure on this cost item added up to EUR 13.8
million, which is equal to 23% of the MFA contribution and 10% of total expenditure over
2008-2013. IDH has set a target for the ratio of ‘IDH office costs’ of 7.9% of annual
expenditure as of 2011. IDH achieved this target only in 2012 (see figure 18).

Table 5

| 65 |

IDH organisational costs (in EUR thousand)
2008

2009

2010

2011

2012

2013

MFA

SECO

DANIDA

Total

Total
MFA
2008
- 2013

Grand
Total
2008
- 2013

Learning:
staff

-

-

-

304

219

29

-

-

298

821

821

Learning:
other

-

118

102

-

522

46

145

-

608

1,205

1,350

Program
Outreach

8

207

260

488

912

823

145

-

968

2,697

2,842

Mid-term
evaluations

-

52

-

50

277

150

-

-

150

528

528

Communication

3

113

96

412

199

256

-

-

256

1,080

1,080

Congresses

82

83

124

170

94

74

80

-

154

628

708

Personnel

119

745

1,424

2,013

2,305

2,398

170

47

2,615

9,004

9,221

Housing
and ICT

11

94

162

295

225

400

-

-

400

1,187

1,187

Organisation

55

250

270

425

417

467

45

-

512

1,883

1,928

Total
Expenditure

280

1,661

2,437

4,157

5,170

5,329

585

47

5,961

19,033

19,665

Source: data provided by IDH, adapted by IOB.

Riding the wave of sustainable commodity sourcing

Figure 18

Ratio IDH office costs to total expenditure 2008-2013

30%
26%
25%

20%

15%

10%

13.2%
12%

11%

9.5%

6.6%

5%

0%
2008

2009

2010

IDH office costs as % of total expenditures

2011

2012

2013

Norm IDH office costs (7.9%)

Source: data provided by IDH, adapted by IOB.
| 66 |

The costs of the IDH organisation have grown steadily over the past six years and are
substantial compared to the size of programme spending. Increased costs are related to the
growth in operational capacity with a view of being more on top of the sector programmes
(see above). Moreover, for its role as convenor, IDH needs a well-equipped secretariat with
sufficient professionals to interact with the businesses and other stakeholders in the value
chains. IDH appears to have a relatively heavy senior management structure with six
directors (including one regional director for Asia) in an organisation of about 40 staff and
an annual budget of EUR 40-60 million (including the private sector contributions in
programmes, most of which does not go through IDH’s accounts).35 The remuneration of
the two executive directors is just below the so-called DG-norm that the Ministry uses when
providing subsidies to non-governmental organisations.36 In interviews, it was forwarded
that this salary level for senior management at IDH was required to attract qualified
personnel from the business community, in order to be able to interact properly with
boardroom level executives and top senior level in government and civil society, as part of
the convening role.

35

36

IDH has twice the number of personnel (four in total) with gross salaries above EUR 100,000, compared
to the department at the Ministry that provides the subsidy and which runs a budget 10 times larger
than IDH.
Remuneration in 2013 was EUR 129,470 gross (plus EUR 25,966 pension and other insurance, total EUR
155,826) respectively EUR 120,970 (plus EUR 22,655 pension and other, total EUR 145,780) for the
executive directors (based on 40 hrs/week), while two other directors received in total about EUR
125,000-130,000, including each about EUR 25,000 in pension insurances. These levels are below the
WNT norm (Wet Normering Topinkomens) applied by the Dutch government, which is 130% of the
salary of a Minister. The DG-norm applied by the Ministry for NGOs (under MFS-II) is EUR 129,500 gross
(excl. employers pension contribution), the maximum salary level of a Director-General at the Ministry.

Organisational and financial development of IDH

Administrative organisation, financial procedures and M&E have improved
IOB notes that IDH’s administrative and financial practices have become more professional
over the years. IDH now has a fairly solid internal control and management information
system in place.37 Also the demands in the calls for proposal – that IDH uses to identify
implementing agencies for projects – have become more precise over the years. It has
recently added a standard template for financial reporting that would facilitate better and
more uniform reporting of implementing partners to IDH (see also Box 5).
The Supervisory Board has appointed KPMG as the external independent auditor of IDH.38
KPMG conducts its audit throughout the year (several interim audits and a year-end audit on
the financial statements of IDH). This audit is executed according to the guidelines
established by the Ministry and is in line with international auditing standards (IAS). In
addition, the total budget for programmes (including IDH co-funding and private sector
funding) is subject to project audits under the final responsibility of KPMG Netherlands.
This means that (local) audit firms hired to audit, for instance, a cocoa programme, report
their findings to KPMG. The audit instructions are part of IDH’s Guidelines for Planning,
Monitoring and Reporting. KPMG’s management letter over 2012 and 2013 did not require
any major improvements on the administrative or financial organisation. IDH’s financial
statements are prepared in accordance with the guidelines for annual reporting 640 ‘not for
profit organisations’ of the Dutch Accounting Standards Board.
IDH’s monitoring and evaluation mechanisms have clearly improved. In 2011, IDH picked
up on the Ministry’s demands to provide more in-depth evaluation of the impact of private
sector development programmes by commissioning a series of impact studies on its key
programmes on cocoa, tea and cotton. The IDH Supervisory Board set up an Impact
Committee with external experts to oversee the impact of IDH’s activities. Its four members
(from scientific community, private sector, NGO, public sector) come together twice a year
to assess progress and value impact reports from the IDH organisation (based on progress
reports and 3rd party impact studies).

37

38

This includes up to date Administrative Organisation / Internal Control Framework; monthly
reconciliation of the financial administration; monthly management reporting, including operational,
financial and legal risk and issue flagging and documented follow-up by the management team and
Executive Board; quarterly Programme Reviews, attended by full Management Team, Executive Board,
Operations and relevant programme team members (topics include e.g. programme progress, strategy,
risks, issues and pipeline). Also the demands in the call for proposals – that IDH uses to identify
implementing agencies for projects – have become more precise over the years. It has recently added a
standard template for financial reporting that would facilitate better and more uniform reporting to
IDH. To support the financial administrative organisation and the internal control, IDH uses two
software systems: Exact Globe for the financial administration and Compiere Project Management
System (ORION).
KPMG has also been awarded some other contracts for commissioned studies.

| 67 |

Riding the wave of sustainable commodity sourcing

Box 3

What part of public programme funding reaches target groups?

IOB’s question ‘what part of the public funding in sector programmes actually
reaches farmers/producers on the ground?’ provided a challenge to IDH’s financial/
administrative reporting system. Until recently, IDH did not use any standard cost
categories in the projects it supports. Also, IDH sometimes uses a call for proposals
that stipulates that private sector contributions should be at least, say, 60%, but this
does not indicate which activities are to be funded with public or with private funds.
This implies that it is not possible to indicate which activities the public euro is
actually funding in such projects.
However, based on estimations by project managers and contracts, IDH and IOB
reconstructed that in the tea programme 69% of the Ministry’s contribution (of
about EUR 5 million) was spent on training and organising farmers, while about 10%
was used for building demand and markets for certified tea, 8% was used for
learning studies and 11% was used for coordination by Solidaridad and for covering
other costs. In cotton, 78% (of almost EUR 8 million) was spent on training farmers
and strengthening local organisations, while the remainder was used to support the
BCI-secretariat, improvement of the standard, traceability systems, building
demand, etc.
| 68 |

Public role in IDH largely confined to funding
While IDH was set up as a public-private-partnership (PPP) under the Schokland
agreements, the public role in the initiative has been largely confined to providing the
finance to facilitate IDH to build and run the organisation and set up the programmes with
private partners.
In the first years, the government took a position as observer in the interim-board of the
initiative. It was represented by the director of the department within the Ministry of
Foreign Affairs responsible for financing IDH (DDE). When IDH became a separate
foundation in 2011, the Ministry stepped down. The argument was that combining roles of
finance-provider and of supervisor would be complex and could be conflicting (for instance:
when the supervisory board approves the annual report to the Ministry). The current
supervisory board is composed of two persons working in the NGO sector (WWF and
Oxfam-Novib) and six members from the Dutch private sector. One of the private sector
board members (Mr Gosse Boom, CFO of Nutreco) was nominated by the Ministry and has
occasionally met with the Ministry’s department DDE to discuss IDH matters. At the
Ministry, one (half-time) programme manager is responsible for overseeing the
development of the IDH programme and day-to-day communication between IDH and the
Ministry.
IDH was over the years given substantial leeway to develop. The idea behind this approach
was that – as an innovative initiative – IDH would need time and space to set up the
organisation and develop its own way of working. The multi-annual subsidy agreed in 2010
provided flexibility to IDH to move funds between sector programmes, depending on

Organisational and financial development of IDH

opportunities for scaling up the collaboration with private partners. Changes were generally
accepted by the Ministry on the occasion of the annual budget allocation. Around IDH’s
annual report 2011, the Ministry pushed IDH to improve procedures and reporting. A
significant difference in spending - such as in 2013 - was discussed, but the Ministry did not
require changes in IDH’s annual plan. IDH was allowed to expand the organisation and take
a bigger role in operating programmes because this could contribute to tighter
management of the sector activities. The Ministry welcomed and promoted IDH’s efforts
beyond certification.
There are examples of incidental collaboration between Dutch embassies and IDH,
including collaboration in Indonesia, South-Africa, Colombia, Rwanda and Vietnam. Closer
cooperation took place in Ghana where the embassy is involved in a cocoa programme.
There was also incidental interaction between IDH programmes and other interventions
that the Ministry supports directly or indirectly, such as CBI and IFC. Recently, IDH has
sought closer collaboration with FMO on the provision of credits in a cocoa programme in
Nigeria. It is IDH’s ambition to add a blending finance component to its instruments in the
next funding period: using IDH grant funding as a first loss guarantee for a concessional
credit (from FMO’s MASSIF programme for instance) in order to facilitate high-risk private
sector investments in sustainable sourcing (for an appraisal: see next chapter).
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Riding the wave of sustainable commodity sourcing

| 70 |

5
IDH’s contribution to
sustainability initiatives in
commodity sourcing

IDH’s contribution to sustainability initiatives in commodity sourcing

This chapter focuses on the accomplishments of IDH activities, building in particular on
IOB’s case studies of IDH’s work in cotton, tea, cocoa, aquaculture and natural stone. Has
IDH been successful in its role as convenor, funder and knowledge broker? Have the
intended outputs at producer level been achieved? What do we know so far about the
outcomes and impact of the sector programmes in which IDH played an important role?
What does this imply for the overall goal of market transformation and supporting the
achievement of the MDGs?
Building coalitions and setting up support structures
IDH has played an important convening role in several commodity chain initiatives and is
recognised for these efforts by stakeholders. IDH has in some cases contributed
substantially to the emergence of new coalitions.
A good example is the trustea initiative in India. Trustea is a recent effort of major players in
the Indian tea sector – in particular Hindustan Unilever, Tata Global Beverages and the Tea
Board of India – to develop a national tea sustainability code ‘based on Indian realities but
without compromising on globally accepted sustainability principles’.39 While Solidaridad
and others (Rainforest Alliance, Ethical Tea Partnership) were important actors in shaping
the framework for the domestic standard, stakeholders from all sides indicated that IDH
had played a positive role in getting the initiative going. They pointed in particular to IDH’s
role in facilitating the entry of Tata into an initiative that was on the private company side
dominated at first by Tata’s main competitor Unilever. IDH’s more neutral position
in-between private competitors and backed by official funding and recognition appears to
have been conducive for this achievement.
Box 4

The trustea standard in India40

Trustea has the potential of becoming a ground-breaking national standard for a
commodity produced primarily (80%) for domestic consumption in a major
emerging economy. The official launch of the trustea initiative took place in July 2013.
The influential Tea Board chairs the initiative. IDH acts as programme coordinator
and provides financial support to the programme, alongside Unilever and Tata.40
Solidaridad is the main implementing agency. Pilots have been set up to test the
code, which resembles UTZ and Rainforest Alliance certified. Revision and further
rollout is foreseen in the coming year. The aim is to reach 600 factories, 500,000 tea
plantation workers and 40,000 smallholders by 2017. For further information: http://
www.trustea.org.

39
40

Website trustea: http://www.trustea.org/ (accessed on 13 June 2014).
IDH has hired a former Unilever tea manager to work on its behalf on a part-time basis on the trustea
initiative.

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Riding the wave of sustainable commodity sourcing

IDH has also played an important role in facilitating the establishment of the Aquaculture
Stewardship Council (ASC). IDH has provided substantial funding, office space and
administrative support to the ASC since 2009, when the organisation was formally
established in the context of the WWF Aquaculture Dialogues, but still lacked an
institutional body. In addition, IDH played a role in increasing support for the ASC both in
Vietnam and in Europe.
In Vietnam, IDH founded the ASC Accelerator Program (implemented by SNV), which
provided co-funding for technical assistance to pangasius farmers. At the same time SNV
provided training to a pool of local consultants to provide future consultancy and
accreditation services (SNV, 2014). This contributed to the acceptance of the new standard by
Vietnamese farmers, adding to a number of other stimuli. For instance, acceptance had
been fostered during the Pangasius Aquaculture Dialogues in which the ASC pangasius
standard was developed, and which were all held in Vietnam (WWF, 2010a). Moreover, in
2010, the WWF had signed an ambitious cooperation agreement with the main sector
organisations and the Vietnamese government, in which all parties pledged to work
towards 50% ASC-certified pangasius exports in 2015 (WWF, 2010b). In 2012 IDH became a
partner to this agreement under a memorandum of understanding agreed by all parties
(IDH, 2012b).
| 72 |

In Europe, IDH contributed to making traders and retail enthusiastic for ASC fish. Most
traders indicated, however, that they moved towards ASC certification due to customer or
retailer demand for more sustainable fish. Dutch retailers already agreed in 2011 to have all
farmed fish ASC-certified or equivalent, mirroring an earlier commitment regarding
wild-caught fish and MSC certification (CBL, 2011). IDH was itself a nascent organisation at
the time the ASC was founded and was not yet well-known to most companies. IDH is
currently envisaging how to increase uptake of ASC fish in less sustainability-orientated
countries such as Italy, Spain and France. This should ensure that demand in Europe does
not fall back on rapidly increasing production in Vietnam.
Regarding natural stone, stakeholders agreed that the pre-existing Working Group on
Natural Stone would have ceased to exist if IDH had not provided funding as of late 2008.
IDH provided (co-)funding for hiring a consultant and implementing a number of pilot
projects. A considerable number of outputs were generated, including pilot studies and a
common approach to improving working conditions. The programme’s objectives proved
difficult to attain due to a fragmented market, initial underestimation of the difficulties
involved and a lack of genuine commitment by a substantial number of working group
members. Moreover, expected government policies on sustainable sourcing and the
inclusion of sustainability criteria in tender procedures did not materialise. None of the
quantitative objectives set by IDH have been fully attained (see table 6) and it is at this stage
still uncertain whether substantial results will materialise in the future. According to those
interviewed, the main contribution of the programme has been to raise awareness and a
sense of responsibility among a number of persons and companies participating in the
programme. This has led to continued participation of these companies in the new TFT
Responsible Stone Programme.

IDH’s contribution to sustainability initiatives in commodity sourcing

It should be mentioned that IDH did not itself decide to run a programme on natural stone;
the programme was assigned to IDH by IDH’s quartermasters and the Ministry (Ministry of
Foreign Affairs, 2008). According to interviewees, IDH made a wise decision when it sought
to accommodate the working group members within the infrastructure provided by the UK
organisation TFT and to make the programme self-sustaining. At the same time, criticism
has been expressed regarding the amount of funding provided by IDH in the period
2008-2012 and the balance between in-kind and in-cash contributions required from the
participating companies. According to several interviewees, the low level of in-cash
contributions made by the participating companies (only 15% of the overall budget)
sustained the ‘participation’ of uncommitted companies who wanted to appear more
sustainable. This problem was corrected after the programme was located within TFT. In
2013, the Dutch and Belgian members carried half of the financial burden while the other
half was carried by IDH. As of 2016, participating companies will have to carry full financial
responsibility.
In the cocoa sector, UTZ, Solidaridad, Mars and Cargill had started planning the Cocoa
Improvement Programme (CIP) in 2007-2008, which included the development of a new
UTZ standard for cocoa.41 In 2008, IDH joined the initiative and became the main public
funder for CIP 2008-2012, implemented by Solidaridad. IDH funded about EUR 1.3 million in
developing the new UTZ cocoa standard. There was a desire from industry for a standard
that better reflected their productivity concerns than the environmental concerns covered
in the Rainforest Alliance standard. Developing the UTZ standard involved many discussions
with industry and boosted their efforts to invest in sustainable cocoa. Also, IDH picked up
on an initiative of the Dutch Ministries of Foreign Affairs, Agriculture, Nature and Food
Quality, and Economic Affairs, and facilitated the drafting and signing of a letter of intent
on sustainable cocoa by 25 Dutch cocoa industries, retailers and NGOs in 2010. In this letter,
these stakeholders confirmed their intent to import, process and sell 100% sustainable
cocoa by 2025. In 2013, IDH convened the cocoa industry, West African governments,
fertiliser traders and other stakeholders to develop a cocoa fertiliser strategy.
Accelerating sustainability programmes
IDH-funded programmes have convincingly and effectively accelerated several emerging
commodity sustainability initiatives and supported the consolidation of other ongoing
certification programmes.
IDH’s funding and convening capacities were important for boosting the Better Cotton
Initiative and making it the leading sustainability initiative in cotton that it is today. BCI was
initiated in 2005 by IKEA, WWF and ICCO. It remained a small-capacity building effort for

41

Before IDH started, there was already wide recognition in the cocoa sector of the sustainability
challenges in cocoa. Ageing cocoa farms and farmers were undermining longer-term production
prospects. There had also been negative publicity about forced child labour in cocoa plantations in
West-Africa, and there was concern about deforestation. The underlying problem was poverty among
cocoa farmers, which made it difficult for farmers to invest in production. Low farm prices deterred
young farmers from engaging in cocoa production.

| 73 |

Riding the wave of sustainable commodity sourcing

cotton farming until the IDH-led coalition for the BCI-Fast Track Program (FTP) was
launched.42 In 2009, IDH agreed with BCI to work on scaling-up the initiative with the aim
of training many more farmers and expanding Better Cotton production in several
countries. IKEA facilitated the entry of four other private partners: H&M, Levi’s, M&S, and
ECOM, which also triggered the interest of the Rabobank Foundation. After several
meetings at IKEA and Rabobank headquarters, the coalition of private companies, NGOs
and funders launched the Fast Track Program. IDH manages the programme, brought in
most of the public funding and is commended for playing a useful proactive role in keeping
the initiative focussed on results and engaging new private partners. Over the past four
years, IDH provided about EUR 7 million to the FTP, while private partners contributed EUR
8.6 million. Better Cotton production increased from 34,000 tons in 2010 to over 800,000
tons in 2013, of which over 90% stems from FTP projects. While IDH’s role as funder may
have been crucial for starting up the Fast Track Program, several BCI stakeholders indicated
that its main role is now more that of a convener/knowledge broker, bringing in expertise
based on work in other sectors and helping to devise strategies to keep the initiative going.

| 74 |

Stakeholders in the cocoa initiative confirmed that without the funding and active
engagement of IDH via the collective Cocoa Improvement Programme 2008-2012, the
large-scale certification of West-African and Indonesian cocoa production would have taken
far longer to mature. In this CIP programme, at least 113,000 farmers have been trained and
149,000 farmers have been certified, producing 441,000 tonnes of certified cocoa
(cumulative results, IDH calculations 2014).43 The follow-up programme that started in 2012
– the Cocoa Productivity and Quality Program – consists of field programmes that are
implemented by the private sector (traders and industry), working in over 12 projects in
which 164,000 farmers have been trained and 118,000 farmers were certified in 2012 and
2013 (IDH calculations 2014).44 Some of the cocoa industry partners involved emphasise that
the strategic convening role – all moving in the same direction – was more important than
the funding role. This is seen as the relative strength of IDH compared to other funders such
as the Gates Foundation and USAID.
IDH’s approach to work with a selection of frontrunners made it possible to move fast,
which is acknowledged in many interviews. A downside of this approach, however, is that
some actors felt excluded. They argued that existing expertise and networks in sustainable

42

43

44

As one interviewee put it: ‘Around 2009 Better Cotton was on life-support. IDH put a jet engine on, the
Fast Track Program. Without IDH, Better Cotton would probably still be a tiny initiative, struggling to
survive.’
The presented number of trained farmers is lower than presented as the number of certified farmers for
CIP 1, which is probably a reporting error (IOB-IDH discussions 2014).
These figures differ from (are higher than) the results presented in the KPMG evaluation of 2013 and the
IDH annual reports, and have been recalculated by IDH and explained to the IOB evaluation team.

IDH’s contribution to sustainability initiatives in commodity sourcing

supply chains were underutilised.45 On the other hand, whereas the cocoa programme
started off with only a few actors, the recent cocoa programme with its open call for
proposals is now in principle accessible to any private sector actor.
IDH’s tea programme was also helpful in scaling up certification in tea and providing
additional (‘beyond certification’) training through Farmers’ Field Schools to several
hundred thousands of smallholders entering certification schemes, in particular in Kenya.
The boost in certification in the tea sector was, however, led by Unilever’s strategic decisions
on sustainable sourcing.46 In early 2007, Unilever had announced that by 2010 the tea in all
Unilever mainstream teabags in Western Europe (Lipton, PG Tips, Lyons) would be sourced
from Rainforest Alliance Certified farms or estates, while by 2015 the tea in all Lipton
teabags sold globally would have to be RA certified. Within a few years, other global brands
followed their example. Unilever found that sustainable tea was a useful tool in consumer
communication and a driver of market growth in several countries.47 Mainstream
certification in tea was thus primarily a market-led process, in which IDH played a
facilitating role, bringing brands together and in particular co-financing initiatives to reach
out to smallholders.
The number of pangasius and tilapia farms reached and the volume of ASC-certified fish in
just two years are impressive (see table 6). The most important drivers of ASC-certification
are a long-standing consumer demand for more sustainable fish and a previous
consolidation and professionalisation of aquaculture production. Producers wanted to
consolidate and preserve market access in Europe and North America and were generally
able to make the necessary improvements. The reported results are partially attributable to
IDH, in so far as IDH has facilitated the expedient establishment of the ASC, has promoted
farmers’ acceptance of the new standard through the ASC Accelerator, and has continued to
promote the ASC amongst traders and retailers.
Outputs in IDH programmes are sizeable and generally according to plan
In the programmes on aquaculture, tea, cotton and cocoa, output targets set by IDH for
2013 were largely achieved. Smaller programmes like natural stone, electronics, spices and
tourism missed out on some of their performance indicators (see Table 6).

45

46

47

Especially interviewed people in the organic and Fairtrade sector felt excluded, but also some of the
NGOs, certifiers, a small chocolate producer and independent experts that were important at the
startup of some of the sector programmes felt that IDH gave them less room later on. One of the
disappointments of Fairtrade was that the Fairtrade premium did not qualify as private sector
contribution in a proposal to IDH, while in other programmes IDH did accept premiums as private
sector contribution. (Seven interviews mentioned insufficient use of existing expertise and networks).
The public debate in the media about sustainable sourcing had previously been fuelled by NGO
activism, such as the Dutch Tea Initiative (including Oxfam-Novib and SOMO), formed in 2004.
See analyses of Henderson and Nelleman ‘Sustainable Tea at Unilever’, Harvard Business School, 2011.

| 75 |

Riding the wave of sustainable commodity sourcing

Table 6
Commodity

KPI

Aquaculture

Volume Produced

Cashew

Cocoa

Coffee

Cotton

| 76 |

Achievement by 2013 of IDH targets for sector programmes by 2013

Electronics
Flowers

Natural Stone

Soy

Spices

Tea

Timber

Tourism

Denominator

Target 2008-2013

Result by 2013

MT

117,000

349,000

%
298%

Feed Compliant

MT

50,000

353,000

706%

Private Partners

No.

20

31

155%

Farmers Involved

No.

13,000

19,600

151%

Capture Rate

%

N/A

83

-

Traceable Volume

MT

6,900

9,700

141%

Producers Trained

No.

209,000

277,000

133%

Certified volume sold

MT

275,000

522,000

190%

Credit offered (2013)

million US$

1

8

830%

Farmers Trained

No.

N/A

12,700

-

Market Share

%

15

16

107%

Stakeholder Structures

No.

N/A

3

-

Farmers licensed

No.

766,000

743,000

97%

Volume Licensed

MT

1,685,000

1,605,000

95%

New Investors

No.

11

10

91%

Dialogue Forums

No.

70

24

34%

Work Plans

No.

70

51

73%

EU Trade Involved

%

15

15

100%

Other Trade Involved

%

15

10

67%

Standards Included

No.

7

10

143%

Workers Benefitting

No.

5,000

4,134

83%

Commited Suppliers

No.

90

50

56%

Private Partners

No.

38

25

66%

Volume Produced

MT

1,500,000

1,579,200

105%

Hectares Certified

Ha.

250,000

265,100

106%

Volume Purchased

MT

626,000

510,000

81%

Smallholders Trained

No.

5,000

1,300

26%

Volume Purchased

MT

300

200

67%

Private Partners

No.

10

13

130%

Producers Trained

No.

492,800

495,400

101%

Volume Available

MT

107,500

224,600

209%

Farmer Field Schools

No.

1,600

1,500

94%

Hectares Certified

Ha.

2,300,000

2,300,000

100%

Partners Commited

No.

48

48

100%

Market Share

%

25

39

156%

Accomm. Certified

No.

884

619

70%

Source: IDH 2014 and additional data provided by IDH.

IDH’s contribution to sustainability initiatives in commodity sourcing

It should be noted that ‘results in IDH programmes’ are not equivalent to ‘results of IDH’.
Because IDH works in partnerships with several stakeholders and often supports preexisting initiatives, it is not easily possible to isolate results that could be fully attributed to
the IDH foundation as such. Reading IDH’s annual reports and other publications, one may
get the impression that all accomplishments in programmes are results of IDH, albeit with
help of partner organisations.48 Some partner organisations however argued that at least a
part of the results would also have been achieved if there was no IDH. That being said,
practically everyone recognises that IDH’s drive, funding and (sometimes) experience and
knowledge have contributed significantly to results in several programmes, particularly in
the convening phase, for getting coalitions moving on a change agenda, and for up-scaling
activities.
Programmes boosted supply of certified products, but market uptake lags behind
In just three years, Better Cotton has become the dominant sustainability product on the
cotton market, covering some 3% of cotton production. Other initiatives failed to expand
while BC accelerated, supported by IDH funding. The share of Organic and Fairtrade cotton
peaked at just over 1% of production in 2009-10, before falling back to around 0.5% in
2011-12. The German Cotton-made-in-Africa initiative (CmiA) reached a similar volume in
2011-12, but did not achieve much growth in recent years. In 2013, CmiA and BCI agreed on a
partnership that allows CmiA cotton to be sold as Better Cotton.49
Effective market uptake of Better Cotton remains a challenge, despite growing market
shares in main Western consumer markets. Only an estimated 10% of Better Cotton
produced by farmers is actually taken up by the end users.50 Several constraints can be
mentioned. First, just about 40% of cotton grown by BC-licensed farmers finds its way to a
ginnery that processes the seed cotton into Better Cotton lint for the market. Licensed
farmers often sell their cotton to other ginneries that offer better prices. This is, for
instance, the case in countries like India, where smallholders have no fixed relation with a
ginnery. Since, in principle, there is no premium available for BC cotton lint, the incentives
for both farmers and ginneries to work through the Better Cotton procedures appear
limited (see also the paragraph below on the business case for farmers).
Second, of all Better Cotton lint entering the market, only about a quarter is now purchased
by retailers/brands. The explosion of available BC-lint from 35,000 to approximately

48

49

50

Several interviewees (NGOs and private sector project implementers) expressed some irritation about
IDH’s style of communication, which sometimes gives the impression that the supply chain results are
basically IDH results, even in cases where IDH’s contribution or role had been modest.
The other way round would not be possible, because CmiA works exclusively with African smallholders
(BCI licenses farmers of all sizes and regions, including industrialised countries) and doesn’t accept
GMO crops. The partnership implies that with the inclusion of CmiA, the total number of BC licensed
farmers would practically triple (to 690,000), the area almost doubled (to 1.3 million ha), while
production would increase with some 15% (BCI, 2014).
About 25% of BC cotton lint produced is taken up by retailers/brands. BC cotton lint produced is 40% of
cotton production by BC-licensed farmers. These data are taken from several sources, including the BCI
website, and were confirmed by IDH. The data cover 2010-2013, with 2013 data being preliminary.

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Riding the wave of sustainable commodity sourcing

800,000 tonnes in 2013 (equal to some 3% of world production) is obviously challenging for
uptake. Some of the lagging procurement by retailers may therefore be transitional. The ten
brands now active in the Better Cotton initiative purchase about 10% of global cotton
production. Several have substantive commitments on sustainable sourcing (see Table 1),
which would suggest that higher uptake would be possible in coming years. Also, it could
be argued that uptake is not a prerequisite for improved production: if cotton is produced
more sustainably, then the effect is real, regardless of whether the product is used as better
cotton or mingled with regular production. Retailer uptake is therefore not one of the
programme’s primary objectives. Nevertheless, the limited uptake is seen as a priority issue
by stakeholders in the Better Cotton initiative and IDH is working with BCI on strategies to
improve this. The target that IDH envisions for 2020 – 25% of global market to be Better
Cotton – seems rather ambitious in view of the fact that the current market uptake
represents only 1%.
In cocoa, only about 30% of the total volume of certified cocoa at farmer level finds its way
to certified chocolate products (IISD & IIED, 2014).51 In the IDH CIP1 programme 2008-2012,
the figure is more positive: 46% (KPMG, 2013b).

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Uptake of ASC-certified fish (pangasius and tilapia) already exceeded the targets set for 2015
by 2013. Nonetheless, uptake was just 36% of available responsibly produced fish (IDH, 2014;
SNV, 2014). Again, transitional issues and very rapidly increasing production may be part of
the explanation.
Indications of positive effects on the ground in IDH-supported programmes
While the impact studies that IDH commissioned for its cocoa, tea and cotton programmes
are still ongoing, the first reports – in particular on tea – give some indications of what
could be expected. Combined with what we already know about this type of activity (see
chapter 2), the picture that emerges is positive, but also cautions for predictions that are too
optimistic.
In the Kenya tea programme, LEI and ODI studies conducted over the period 2010-2014 find
generally positive outcomes of the combination of RA certification training and additional
Farmer Field Schools (FFS), the core intervention supported by IDH. The FFS trainings not
only covered tea, but included also learning on good agricultural practices in other crops,
general skills such as bookkeeping and how to diversify into other crops or set up livestock
production. About three-quarters of the learning curriculum focussed on good agricultural
practice in tea production, building on knowledge available at the KTDA on existing
practices of smallholders. Promoting higher plucking frequencies (once a week instead of
twice per month) and more efficient use of fertiliser were key elements. Training for RA
certification also included specific RA issues, such as proper storage facilities for agrochemicals and use of water.

51

Uptake in 2012 varied per standard: Organic: 75%; Fairtrade: 38%; Rainforest Alliance: 36%; UTZ: 22%
(IISD & IIED, 2014).

IDH’s contribution to sustainability initiatives in commodity sourcing

The trainings had some significant effects on tea production and productivity. Tea yields in
Kenya were increasing for practically all tea farmers (spill-over effects from trained farmers
to non-trained farmers could well be part of the explanation), but were highest among
farmers who received both RA and FFS training (Waarts, Ge, Ton, & Jansen, 2012; ODI, 2012).
RA or FFS trained farmers used significantly more hired labour for plucking and applying
fertiliser in the post-training situation than farmers in the comparison group. In its latest
study, LEI found that over a four-year period and corrected for other influences, participants
in a FFS had significantly more improved their green leaf yield compared to nonparticipants: 30% compared to 15% for non-participants (Waarts, Ge, & Puister, 2014).52 Part
of the 15% yield increase among non-participants could be due to spill-over effects. The FFS
participants had also diversified their income sources more into other income-generating
activities, like livestock production.
While the increases in tea yields found in studies are certainly relevant, it should be noted
that higher yield comes with additional costs for hired labour and fertiliser. The net effects
on income from tea will therefore be smaller (but could not be distilled from the LEI study).
In cotton, LEI compared Better Cotton Fast Track farmers in India, Mali and Pakistan to
other cotton farmers in these countries looking at BCI datasets in the 2011-12 season (Ge &
Waarts, 2014). They found significant differences, including higher yields, more organic
fertiliser use, and less pesticide use. However, it was too early for LEI to assess whether these
differences were the result of the Better Cotton trainings or due to selection bias (i.e. better
farmers joining the Better Cotton initiative). Such possible bias can be assessed during
future measurements.
In aquaculture, the direct effect of certification of fish farms in Vietnam has remained quite
small. This is due to the fact that most producers involved operate large-scale, wellcapitalised and export-orientated farms that already produced according to high
environmental standards - whether certified or not (also see SNV, 2014). This partially
explains the swift adoption of the ASC pangasius and tilapia standards. Interviewees agree
that the impact on wages and the environment is limited. They do not support claims that
ASC-certification has contributed to better working conditions. In sum, the process has
largely been one of certification of existing practices. That being said, the ASC standard is
now firmly embedded in Vietnam and can serve as a reference for both producers and
policymakers. In June 2014 the Vietnam government adopted a regulation that stipulates
that all pangasius exports should be certified either ASC or VietGAP by the end of 2015
(Government of Vietnam, 2011; Vietnam News, 2014). The latter standard has lower
requirements than ASC on the environment and social welfare in order to accommodate
smallholders and mid-sized farms, but is still to a large extent inspired by the ASC standard.

52

LEI did a longitudinal impact evaluation on the effects of Farmer Field Schools sampling 240 FFS
participants and 120 control farmers. The baseline study was done in 2010, with follow-up studies in
2012 and 2014. The study combined a difference-in-difference approach, propensity score matching,
and regression analysis to net out the impacts of other factors.

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Out of 20 available impact studies on sustainable cocoa, including studies to which IDH and
UTZ refer in their ‘impact reports’ (IDH, 2013; UTZ Certified, 2014), IOB identified only one
proper impact evaluation with a valid and reliable design (Bennet, Giovannucci, Rue,
Ayerakwa, & Agyei-Holmes, 2013).53 That study compares UTZ-certified farmers with similar
non-certified farmers, in 2010 before certification and in 2012 after certification in the
IDH-supported Solidaridad programme in Ghana. The study finds a significant difference in
price of 4.6% due to the UTZ premium, an additional increase in production of 6%
compared to the increase obtained by control farmers, and related to this an increase in net
cocoa income (revenue minus costs) of USD 186 per hectare for a farmer with 2 ha, which is
equivalent to 16%. The additional production and income increases are both not statistically
significant but worth mentioning here. Assuming that cocoa income is about 65% of total
farm-household income, as found in another study in Ghana (IDS and University of Ghana,
2008), the additional family income would be about 10%. With 2 ha cocoa, total farm
income of certified farmers is about EUR 1000 per year. With on average five household
members this is EUR 0.55 per person per day. In spite of a 10% income increase, this is still
well below the extreme poverty line of USD 1.25 per person per day. A known saying among
stakeholders in the cocoa sector is whether the certification efforts are not ‘certifying
poverty’.
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An increase in production does not lead to an equal increase in net household income. First
of all, increased production is often accompanied by higher costs in labour and inputs. A
study by McKinsey estimated that doubling cocoa yields would increase income by 22%.54
Moreover, as one of the interviewed cocoa traders pointed out: structurally higher
production at scale can decrease prices, reducing income effects (depending on other
factors, such as consumer demand). In addition, substitution effects might occur, where
higher income from certified commodities is accompanied by lower returns from other
cropping activities or decreasing off-farm income, thus affecting net household welfare.
Much less is known about the environmental effects of certified cocoa. This element is
often lacking in good impact surveys on certified cocoa (Blackman & Rivera, 2010; Molenaar
et al., 2013). Evidence stems mainly from more qualitative studies or from studies with a less
valid survey design. These find plausible evidence that adoption of certain practices at field
level had improved modestly: good agricultural practices, reduced and better use of agro
chemicals (Hafid et al., 2013; Dengerink, 2013). The consensus seems to be that farmers do
adopt some practices that have a positive effect on the environment but that major
environmental problems remain largely unaddressed. For example, some Rainforest
Alliance cocoa farmers do use compost pits and plant shade trees, but not up to the

53

54

IDH has commissioned good baseline studies with a valid design, but these cannot yet be used to
assess impact at this stage. The baseline studies will be complemented by impact studies in 2015. Note
that robust and reliable impact studies on coffee certification are better available (Ruben, 2008;
Hoebink et al., 2014).
BMGF 2008. Exploration of opportunities West African Cocoa. Summary of analysis and workshop
outputs cited in a discussion paper by Antonie Fountain on Cocoa CONNECT. http://www.cocoaconnect.
org/sites/default/files/chocoa2014/Profit%20Session%20-%20Voice%20Network.pdf.

IDH’s contribution to sustainability initiatives in commodity sourcing

Rainforest Alliance standard (N’Dao, 2012). The majority of UTZ-certified and non-certified
farmers continued to clear forest for cocoa expansion (Dengerink, 2013).
Box 5

Unfounded impact claims in IDH communication

The limited evidence of field-level effects so far contrasts with the ‘impact report’
that IDH presented in 2013 (IDH, 2013d). IDH has let itself be tempted to selective use
of data.
Concerning cocoa, IDH claims that “the introduction of good agricultural practices
and responsible crop protection measures, – both components of certification
programmes – have proven to increase cocoa yields by 20-30%”. Two studies appear
to be the source of this claim. The first (KPMG, 2011a) uses the assumption of a 23%
yield increase in an ex-ante costs-benefit analysis, based on expert interviews and
previous cocoa projects; this is not based on evaluations by IDH or other certification
programmes. Moreover, this study acknowledges that this increased production is
temporary and can only be sustained if combined with increased inputs. The second
underlying study (KPMG, 2013b) is the evaluation of the IDH Cocoa Improvement
Programme 2008-2012. However, this evaluation concludes that there is insufficient
evidence for increased cocoa yields. In other words, these claims are premature, and
we will have to wait for IDH’s impact studies forthcoming in 2015.
In tea, IDH presents a 36% yield increase as impact of its interventions together with
Unilever and the KTDA, in particular through Farmer Field Schools (FFS). In the first
place higher yields come with costs (hired labour, fertiliser), which are not
considered; the real effect of the IDH intervention would preferably be measured in
terms of net-household income changes. Secondly, the yield increase figure is based
on KTDA field trials with selected FFS-farmers in which the plucking frequency was
increased to an optimal level (IDH, 2013b). It therefore shows what could potentially
be the effect of more optimal practices. The most recent LEI study (commissioned by
IDH as part of its impact evaluation work) provides valuable evidence of the real
effects of the trainings: they found a yield increase of 30% among trained farmers,
while non-trained farmers had increased their yield by 15% over the same multi-year
period (Waarts, Ge, & Puister, 2014). The net 15% yield increase is positive and
significant, but even if possible spill-over effects are taken into account (nonparticipants taking over the improved practices they see among trained farmers), it is
less than what IDH claims.
While BCI itself is explicitly cautious on its website not to claim impact of Better
Cotton until effects have been studied deep enough over a longer period (see Q&A
on http://bettercotton.org/about-bci/qa/), IDH presents differences found in an LEI
baseline study between BCI-licensed and non-licensed farmers in India, Pakistan and
Mali as impact of the initiative. LEI confirmed to IOB that the farmers in the
comparison group of the baseline study have not been matched with licensed

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Riding the wave of sustainable commodity sourcing

farmers on relevant characteristics, which implies that selection bias is likely to play a
role in the differences found. Also, IDH presents differences registered in a single
country – up to 20% less water use in Pakistan, and 67% less pesticide use in Mali
– as overall impacts of the Better Cotton initiative. This also disregards the fact that
half of BCI cotton lint in 2012 was produced by just 100 modern Brazilian farmers
who most probably didn’t have to change anything in their production methods to
live up to the BCI standard.
IDH has set up a series of good external impact studies in cocoa, cotton and tea,
which will deliver reliable results in the near future. Meanwhile, IDH should remain
prudent and fact-based when claiming impacts of its work in external
communications.

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The business case for the farmer in the certification schemes that IDH supports
In mainstream certification schemes supported by IDH in tea and cotton there are clear
benefits for smallholders of becoming certified: they receive training for free, learn about
better agricultural practices (in an environment where agriculture extension has often been
lacking for decades), may experience some yield improvement as a result and can possibly
economise on pesticide use. Also, there may be an initial price premium, while the starting
costs of certification and auditing are often borne by others (like IDH). However, the
benefits of staying certified may be far smaller: recurring costs of certification are often to
be borne by the producer while premiums are phased out or evaporate as certified
production becomes more abundant. And the producer can apply the lessons learned on
good agricultural practice, regardless of whether he or she stays licensed or certified. Unless
market access would be at stake, the incentives to stay certified appear rather small.
Consider Kenyan tea production: now that practically all 560,000 smallholders who deliver
green leaf tea to the 65 tea factories of the collectively owned Kenya Tea Development
Agency (KTDA) have been trained and certified, upholding the appetite for continued
involvement in the RA scheme is becoming challenging. Unilever buys about 30% of KTDA’s
annual production and was the main driver behind the certification. In the first years of RA
certification, Unilever applied a ‘sustainability’ premium of USD 10 cents per kilo of made
tea, which in 2011 was around 2.6% of the Mombasa auction price (IDH, 2011b). Currently,
Unilever no longer applies a standard premium for RA-certified tea. In the early days of
certification, a certified KTDA tea factory would either sell directly to Unilever or via the
Mombasa auction, in both cases collecting some premium. However, in 2013 direct sales fell
to less than 3% of KTDA production. While Unilever says that its buyers are instructed to pay
a good price for RA-certified tea at the Mombasa auction, KTDA argues that there is no
longer any difference. Indeed, Unilever now considers any tea produced by KTDA to be
RA-certified, which makes it unnecessary for tea buyers to negotiate directly with specific
KTDA tea factories, which limits the bargaining power of the KTDA members. Meanwhile,
the costs of RA-certification for KTDA, while reduced because of the increased scale, are still

IDH’s contribution to sustainability initiatives in commodity sourcing

there. IDH estimates total recurrent costs of RA-certification per farmer to be about USD 10
per year (Q&A IDH 2014).55
Similarly, the business case for Asian and African smallholders to continue producing Better
Cotton may not be very solid. There can be little doubt that the trainings offered in the IDH
supported projects have positive effects for cotton farmers. But the key question is – as a
study commissioned by IDH noted – ‘how farmers will continue producing Better Cotton
after the end of the projects’, considering that ‘there is no consensus on whether a positive
business case is possible without continued subsidising of the farmer projects’ (Steward
Redqueen, 2013). The fact that, after five years, Pakistani cotton farmers are still part of the
scheme suggests that there are positive incentives to stay engaged in Better Cotton.
Box 6

Certifying poor smallholders versus high-end cotton farmers from Brazil, Australia and the USA

Initially, the Better Cotton Fast Track Program (FTP) focused on smallholders in India,
Pakistan, China and Mali, addressing key sustainability issues such as pesticide use,
water management and decent work. Cotton farmers are trained and have to keep
records. They get a one-year license to sell their crop as Better Cotton if they achieve
the minimum production criteria of the BC standard. Licensed farmers are
encouraged to work further on situation-specific improvement requirements, and if
they do so, they can be rewarded by an extension of their license period to a
maximum of 5 years.
In 2011, the FTP started working with large-scale cotton farmers in Brazil. The
reasoning behind this step was that for BC to become a mainstream commodity, it
would be important to cover key producer countries. Cotton is a global commodity
and is often mixed from different sources and interwoven in factories. In Brazil there
were also sustainability challenges, in particular high pesticide use; as a programme
for continuous improvement, the Better Cotton standard could play a role. Also,
there was a desire to quickly expand the availability of Better Cotton to make sure
that traders who were buying the BC cotton lint from ginneries could not use scarcity
to demand premiums (as they did: up to 25% was mentioned!) from the
manufacturers and brands that were committed to use Better Cotton.
In 2012, just 100 licensed Brazilian farmers (cultivating each on average over 2000 ha
of cotton) already produced about the same amount of Better Cotton as the over
150,000 smallholders in the four initial BC countries. In 2013, the local Brazilian
standard (ABR) was successfully benchmarked with Better Cotton, meaning that all
ABR cotton can now be sold as Better Cotton.

55

A 2012 LEI study for IDH compared business models for smallholder tea certification in Sri Lanka,
Indonesia and Kenya. Their conclusion was that none of the certification programmes had developed
business models that are self-sustaining. Each model would still be dependent on outside funding for
operationalisation. Source: Brewing business models for smallholder tea certification – A quick scan of models in
Sri Lanka, Indonesia and Kenya, Bart Doorneweert and Yuca Waarts, LEI 2012.

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Riding the wave of sustainable commodity sourcing

In the past two years, Better Cotton has expanded further into Mozambique, Turkey
and Tajikistan. In these countries, a first BC harvest was achieved in 2013. Initial
projects have started in Senegal and Kenya.
Moreover, cotton farmers’ organisations in Australia and the USA have been
approached to become part of the Better Cotton venture. An Australian standard (my
BMP) is benchmarked against BC, which should soon allow Australian certified cotton
to be sold as Better Cotton. In the USA, pilot projects have been set up with the aim
of developing a full-scale programme later on (BCI, 2014).
The expansion of Better Cotton into rich and modern production areas in Brazil,
Australia and the USA can raise some issues. The use of (public) funds for this
purpose has however been quite limited: about 16% of the 2012 fund allocation of
the FTP was used for setting up the Brazilian scheme (IDH, 2013d). The FTP will not
contribute financially to farm-level capacity building in the USA or Australia. What
could be more challenging is the question what Better Cotton stands for if all
production areas in the world are included in the scheme. Even though BC is a
business-to-business scheme (not a consumer label), the ultimate demand for Better
Cotton from the brands may well be linked to the extent to which they can use the
Better Cotton story in their corporate marketing.

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The business case for pangasius farmers relies heavily on market access, rather than
increased profitability, according to a LEI study commissioned by IDH. The study weighs
mortality, juvenile costs, a price premium, feed costs, certification costs and other
investments. On the basis of a comparison between two ASC-certified and two non-ASCcertified farms, the study suggests that there is either a small or no difference in profitability
(LEI, 2013). A farmer’s benefit of certification is best seen as the difference in turnover that
he would have if his production was not certified.
In cocoa, there are different opinions about the role of the premium in sustaining the
business case for the farmers. The variable UTZ premium – around USD 150-200 in addition
to the conventional price of around USD 2000 per ton – is paid to the certificate holder,
which in the case of cocoa is often a trader.56 Most stakeholders interviewed by IOB
acknowledge the motivating effect, especially at the start of a certification programme, but
many in the private sector would rather see the premium gradually disappear and be
replaced by other market-based benefits, such as better prices for better product quality,
improved production and farm efficiency. On the other hand, some in the private sector,
NGOs and representatives of the producers stress the importance of maintaining a
premium. They consider the premium to be the main motivator for farmers and argue the

56

While Fairtrade uses a minimum price of USD 2000 per ton and a fixed premium of USD 200 for a
cooperative, UTZ encourages farmers to negotiate a premium. Over 2012 the average UTZ cocoa premium
was EUR 112. The premium is often related to quality, such as longer/better-dried beans. Source: http://
www.confectionerynews.com/Commodities/UTZ-Certification-is-our-weapon-against-cocoa-deficit.

IDH’s contribution to sustainability initiatives in commodity sourcing

need to be very transparent about premium conditions and use towards farmers and their
organisations. Apparently, many cocoa farmers in Ivory Coast have been disappointed,
receiving fewer premium payments than was expected.57
The certificate holders deduct certification costs from the premium. The evaluation of the
IDH cocoa programme 2008-2012 suggested that between 10% (according to farmers in one
case study) and 50% (according to interviews with certifiers) of the variable UTZ premium
paid to the certificate holder was passed on as cash to farmers (KPMG 2013). The rest was
used by the certificate holder to pay annual certification costs, training and in some cases
even the reimbursement of the initial certification investment.58 With 46% of the certified
cocoa being sold as certified, the UTZ premium would in this case not cover the certification
costs and efforts for farmers (KPMG 2013).
Box 7

Kenyan tea farmers see benefits in certification, in particular fairtrade

A study done for DFID (Stathers & Gathuthi, 2013) provides some insights into the
views of tea farmers in Kenya on certification and the wider benefits of the schemes.
The study found clear recognition among tea farmers of the benefits of Fairtrade
(FT). FT-certified smallholders were aware of the FT Premium payment arrangement
and most knew which community projects had been funded using the FT Premium
funds (USD 0.50/kg made tea). FT premiums had been invested in constructing
school facilities like classrooms, roofs, latrines, kitchens, dormitories and teacher
housing, in building new dispensaries and maternity wings, for secondary school
bursaries for needy children, and water projects. Also, the smallholders’ producer
organisations had used the FT Premium for investments in processing units and
collection centres, such as water and electricity, processing equipment such as
boilers, dryers, pre-sorting machines, replacing wooden sorting benches by concrete
sorting tables, etc. One producer organisation had used the FT premium for the
partial purchase of a tea-processing factory. About 18% of KTDA smallholders were

57

58

Some interviewees (private sector, NGO, experts) expressed concerns about the cost and results of
cocoa certification schemes: the costs are considered substantial and the effects in the field are not
always sufficiently clear. In response to such concerns, some companies active in cocoa initiatives in
Indonesia (in a Swiss Contact – IDH programme) are considering setting up their own traceability and
sustainability programmes without the use of international standards like UTZ or Rainforest Alliance
certified. This would be a more simple and cheap traceability system, with a tailor-made sustainability
programme plus premiums for the farmers. Compliance would be validated externally. By skipping the
cost related to an international standard, the costs for the first buyer would be reduced from about
USD 150 to USD 50 per ton of cocoa. The cash payment to farmers would be similar to that under UTZ,
around USD 40 per ton of cocoa.
Also in Fairtrade cocoa, where a fixed premium (USD 200/t) is paid to the cooperative (the certificate
holder), part is used to cover the certification and operational costs. Most, however, is used for
community development projects led by the cooperative, while perhaps a quarter is paid to individual
farmers (Tony’s Chocolonely, 2014).

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Riding the wave of sustainable commodity sourcing

FT-certified, but only a small part of their production can effectively be sold as FT tea,
due to a lack of demand.
Farmers associated Rainforest Alliance (RA) certification with environmental
conservation, proper waste management, rainwater harvesting, safe handling and
storage of chemicals, and use of protective clothes, including a personal protective
equipment kit. Many farmers found the kit they needed to buy unnecessarily
expensive as there were cheaper alternatives such as old fertiliser sacks, which can be
worn as aprons. Yet farmers felt the benefits of being certified outweighed the costs
and they valued the trainings. Currently practically all 560,000 KTDA tea smallholders
are RA-certified.
Managers of both RA- and FT-certified producer organisations indicated that due to
certification they became more proactive on enforcing health and safety standards
for workers in the tea factories. This included issues such as ear protection, dust
masks, emergency stop switches, training for fire-fighting skills, typhoid vaccination
and hand washing. Also, working conditions and employment terms, often already
covered in existing legislation, were found to be more effectively implemented than
prior to the regular auditing for compliance to the standards. The managers also
reported that certification training had increased women’s participation in producer
organisations, with RA specifying that 30% of lead training farmers must be women,
while the FT Premium Committee must have female members.

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More IDH programmes work ‘beyond certification’
Recent large-scale field programmes in cocoa and in tea (and others) go beyond training
and support for farmers to become certified.
In the cocoa sector, IDH developed a number of follow-up activities ‘beyond certification’ as
of mid-2012. The goal was to deepen the impact on the ground, after noticing that
productivity and income had not improved as much as was hoped for.
The largest activity is the Cocoa Productivity and Quality Program (CPQP). Private
companies – traders and chocolate industry – have become project applicants for the field
projects. As project applicants, they have reacted to calls for proposal set out by IDH.59 The
programme started working in over 12 projects reaching 164,000 farmers in 2013. The role
for the NGO Solidaridad – the implementing partner in the first phase – is now limited to
monitoring and reporting. NGOs are not eligible for submitting proposals, but the private

59

Private sector partners in the first phase included: ADM, Ahold, Armajaro, Barry Callebaut, BT Cocoa,
Cargill, Continaf, Ecom Euromar/Transmar, Friesland-Campina, Heinz Kraft, Mars, Nestlé, Olam, Petra
Foods /Delfi, Ferrero. Additional partners in the 2nd phase of the cocoa programme are: OCP, Mondelez,
Multi-Trex, Cemoi/PACTS, AFAF, FMO, Hersheys, Intertel, LDC, Lindt, OLAM, SEAP-CI, US global business
group and Yara.

IDH’s contribution to sustainability initiatives in commodity sourcing

companies leading the CPQP projects do work with a large number of subcontracted NGOs
and (semi-) government organisations.
The programme is reported to be on track in training, certification, and basic cocoa
plantation management (pruning, cleaning). Farmers appear to have gained more
knowledge about good agricultural, environmental and social practices. Not much has been
achieved yet in rehabilitation (replanting and grafting new cocoa trees), inputs and credit,
partly because of a mismatch between project plans and national policies. The government
in Ghana has its own programme with subsidised inputs for cocoa production. Both Ghana
and Ivory Coast have not yet authorised grafting activities, because they fear the spread of
swollen root disease (Solidaridad, 2014). Farmers indicate that yields are improving, but
systematic yield monitoring is not yet in place. Available data indicate that yields are still
around 500 kg/ha.
Different private sector-led fieldwork projects in cocoa have varied relationships with the
supported farmers. For example, Mars does not buy cocoa directly and supports the cocoa
sector in a broad way through new extension service delivery models with the World
Agroforestry Centre ICRAF. On the other hand, traders like Cemoi and Biopartenaire support
farmers whom they buy from, and in that way reinforce their commercial link with the
farmer (Marchal & Ruf, 2013).
In Ivory Coast, IDH has started a fertiliser initiative to make quality and affordable fertiliser
better available for cocoa farmers. IDH facilitated the import of cocoa fertiliser. According
to interviews and monitoring, effects on the ground are not yet clear (Solidaridad, 2014).
IDH has indicated that its efforts contributed in Ivory Coast to a drop of fertiliser prices of
10-25% (IDH, 2014).
In tea, the IDH programme with Unilever and the KTDA has already combined the trainings
for Rainforest Alliance certification with broader Farmer Field School (FFS) trainings to
achieve better results for tea farmers. Thorny issues like living wages and sexual harassment
are now also taken up in close collaboration with the private sector and non-governmental
stakeholders in tea production.
Furthermore, IDH is considering an active role in supporting the inclusion of smallholders
in some international companies’ investment plans related to the Grow Africa initiative.
Grow Africa is an offspring of the World Economic Forum (WEF) in which African
governments and private companies aim to work together to boost investment in
agriculture.60 IDH has suggested adding a blending finance component to its funding
options in order to be able to provide guarantees related to high-risk greenfield investments
in African smallholder production.

60

Unilever has, for instance, recently agreed with Tanzanian government to revitalise and invest in its
Mufindi tea estates and to engage surrounding farmers in tea cultivation, with the aim of doubling tea
production. Source: http://www.unilever.com/mediacentre/pressreleases/2013.

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Riding the wave of sustainable commodity sourcing

Some activities beyond certification raise questions about ‘additionality’
The close collaboration with individual companies in the field as the ones responsible for
implementing projects raises questions about the appropriateness of providing public
funding.
IDH sees the emergence of individual companies as project applicants in IDH programmes
as a logical step towards ‘business-driven development’. The private sector parties would
now be better equipped to ‘embed’ sustainability efforts in their activities. Instead of
reinforcing public or NGO extension and support services, companies can provide private
extension and support services to, for instance, cocoa farmers, building on their
commercial relations.

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IOB notes that there are dilemmas involved in such constructions. By making a trader the
implementer of a cocoa-productivity improvement project in a certain region of, for
example, Ghana, IDH facilitates, with public funds, that this trader builds a more or less
exclusive relationship with the cocoa farmers in that region, bypassing local middlemen
and other commercial buyers. While this may not be the purpose of the public funding, it is
likely to be a side-effect. There can be benefits for farmers (if better prices are offered due to
eliminating middlemen, there is greater assurance of market access, or access to credit or
inputs is facilitated), but it would also constrain the competitive environment for the
farmers, reducing their bargaining power and making them more dependent on one
particular outlet. By supporting a single trader’s efforts – even when this company has won
an open call for proposals – the public funding intervenes in the market structure and may
restrict competition.
The question is also whether public funds should be used to support a single company’s
commercial actions in which development goals are ‘embedded’. An example raised in tea:
Future scarcity of tea supply in a market in which demand grows by some 3% per annum is
seen as a major challenge for global players like Unilever and Tata. Smallholder production
is generally regarded as the preferred mode of production, and not necessarily the
expansion of the classic tea estate. An investment in the expansion of smallholder tea
production surrounding a private tea estate could basically be considered core business for
an enterprise (like Unilever or Tata). The use of public funding through IDH to support such
strategies may surpass the confines of proper ODA resource allocation.
One could argue that engaging poor smallholders in profitable tea production could be a
public cause; there has not been much greenfield investment in smallholder inclusion on
this scale by private entities before and this may include higher risks. However, if this also
creates a relationship of dependence and is to the benefit of a single private company,
questions could be asked as to whether such actions merit public funding.
IDH started its work in the pre-competitive area, convening companies per sector and
supporting programmes on the sector level. If IDH is moving towards actions that could be
in the competitive area – linking up with and supporting interventions of single companies
– then the issue of ‘additionality’ of public funding would deserve greater attention.

IDH’s contribution to sustainability initiatives in commodity sourcing

The Donor Committee on Enterprise Development (DCED), of which the Netherlands is an
active member, has recently provided valuable guidance to address the issue of
‘additionality’. Box 8 describes the eight criteria DCED proposes to use.
Box 8

Criteria for ‘additionality’ in private sector development initiatives

The DCED has published a practical sourcebook on ‘additionality’ in private sector
development initiatives, which presents the following criteria:
1. The company has insufficient funds to self-finance the project (within a reasonable
timeframe).
2. The company lacks the knowledge or competencies to design and/or implement a
business model in a way that maximises poverty-reducing or other development
impact.
3. Without the public subsidy, the company would be unwilling to implement the
proposed business model and/or changes in operational standards because of a
perceived negative balance of costs/risks and benefits.
4. The company cannot access the services offered by the publicly funded agency on
a commercial basis – whether this is commercial bank funding or advisory support
of similar quality.
5. The cost-shared project does not displace other companies already operating in
the market, or that are ready to undertake the same project without public support.
6. The cost-shared contribution does not duplicate other donor-funded support –
whether grant, in-kind advice, loan or equity.
7. Public support leverages investment by other entities that would otherwise not be
forthcoming.
8. Conditions attached to the cost-sharing project, or agency activities
complementing it, are expected to have a positive influence on wider business
operations, the business environment or other institutional factors.
(DCED, 2014)

Balancing public and private objectives in programmes
A fundamental component of public-private partnerships is that the public objectives and
private objectives can be different, but that they show sufficient overlap. It can be useful to
explicitly distinguish the public and the private objectives, rather than assuming a single
shared objective.
In cocoa, for example, an important private sector objective is to ensure sufficient cocoa
production, in view of the anticipated scarcity. The prospect of higher income and
(temporary) cocoa price premiums are means of motivating farmers to increase cocoa
production. The main public objective is poverty reduction; many cocoa farmers are
extremely poor. Higher cocoa production can be just one of the means of achieving better
incomes, alongside other means such as diversification or a reduction in production cost.
Other public objectives include environmental sustainability – in particular reducing
deforestation – and improved labour conditions such as eliminating forced labour and

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child labour. Brands in particular can share these objectives, in view of corporate
responsibility and protecting brand reputation. However, achieving such objectives is not
necessarily related to the private sector goal of higher cocoa production.
There has been a gradual shift in emphasis in the IDH cocoa programme: from a wider
perspective on deforestation and forest degradation, productivity and income, and working
conditions (IDH, 2010a), to a more narrow focus on a productivity package: training,
fertiliser, planting material and credit (IDH, 2014). This is reflected in the monitoring in the
CPQP projects, where information is collected on the number of farmers trained and
certified, and on production achievements; farm income, environmental or social issues are
not monitored (Solidaridad, 2014). Although the importance of increased productivity is
recognised, many interviewees voiced concerns about the strong emphasis on fertiliser use
and providing credit for fertiliser in particular.61 The scientific and economic basis for the
fertiliser recommendation is considered rather weak; farmers could benefit more from
broader support for new planting material and training. Some even argue that focussing
programmes on achieving a higher cocoa yield may be in the interest of traders and industry
(in view of the forecasted scarcity of supply), while farmers could be better off if they could
diversify their income base and start producing other remunerative crops like food crops,
rubber or palm oil.62
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These signals and the trend that new IDH cocoa and coffee programmes are implemented
by private companies raise questions as to whether public objectives are ensured
sufficiently. It is important to guarantee that IDH programmes not only increase production
but also reduce poverty, and thus effectively contribute to MDG1.
From voluntary sustainability standards to national standards and regulations
In various production countries, national platforms are set up in which the private sector
and the government discuss policies and regulations. IDH supports several of these
platforms (see also Box 4 on trustea in India).
In Ivory Coast, for example, this platform discusses the cocoa programme, sets minimum
prices for farmers, and develops a national standard on sustainable cocoa. The benefit of

61

62

In December 2010, an IDH technical meeting on priorities for the future cocoa programme was held
with a broad representation from industry, government, NGO and experts. This formed the basis for the
subsequent cocoa programme of which the CPQP is the largest component. Several participants in the
2010 meeting now voice some doubts about the strong focus on production and fertiliser in the current
IDH cocoa programme. These are either second thoughts, or there was possibly not a clear consensus
in the meeting on the focus on production and fertiliser.
Concerns about the narrow focus on cocoa fertiliser were expressed in seven of 13 interviews with cocoa
stakeholders, both by private sector, NGOs, certifiers, experts and a southern organisation. Four
interviewees had the opinion that a cocoa fertiliser programme does not need ODA support. One
interviewee encouraged IDH to push fertiliser. The majority of interviewees, including a number from
the private sector, found that IDH followed too much the path of cocoa production increase and did not
give enough consideration to farmers’ livelihood, diversification and environmental matters. Three
interviewees, all private sector, encouraged IDH to keep the focus on production.

IDH’s contribution to sustainability initiatives in commodity sourcing

such a national binding standard is that it will cover all cocoa production in the whole
country and can eventually have a far greater impact than the current voluntary standards,
even if the sustainability bar of the national standard is lower than the bar of voluntary
standards. Both types of standards are expected to coexist.
In its coffee programme, IDH is piloting the use of a National Sustainability Curriculum
(NSC) in Vietnam and Brazil. The idea is that national and international stakeholders (both
public and private) together identify and prioritise the key sustainability issues in local
coffee production and help determine effective ways to address them. The resulting plan for
implementation is the so-called NSC.
Another activity beyond certification is broadening the existing voluntary sustainability
standards with a CEN/ISO standard on traceable and sustainable cocoa by industry,
European governments and governments of production countries. This may also serve as an
example for production country governments for developing national standards.
Developing such a standard is an important but slow process; the standard is expected by
2016-2017.
These public-private efforts aimed at the national level are promising and have the potential
to increase and deepen the reach of sustainability initiatives beyond the current
certification schemes.
IDH knowledge work has produced relevant outputs, mainly focussed on the sector programmes
IDH had planned to work on sector-specific and cross-sector learning activities. The initial
action plan (2008-2013) mentioned child labour, living wage and biodiversity as cross-sector
issues. The action plan 2011-2015 added carbon funding, finance for smallholders, and
sharing knowledge and impact studies on sustainable supply chains.
Most of the knowledge and learning activities have been related directly to IDH sector
programmes. IDH has commissioned a broad range of in-depth studies to deepen its sector
work. These studies include scoping studies, costs-benefit analyses, feasibility studies,
baseline studies, etc. The reports are generally of good quality and available at the IDH
website.
Concerning the cross-sector issues, IDH found that such issues were best addressed when
linked to a specific supply chain, preferably with the involvement of private sector actors.
The issue of living wages, for instance, was taken up in 2011 when low wages in tea
production came under debate. IDH has recently facilitated a study on the ‘true price’ of tea.
IDH worked with Nestlé on child labour in cocoa in Ghana and Ivory Coast, and with ICI, a
private sector initiative, on child labour.
IOB has not reviewed to what extent the knowledge products contributed to market
transformation and field level results. The effectiveness of IDH’s learning programmes for
reaching market transformation deserves attention.

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Riding the wave of sustainable commodity sourcing

IDH’s more recent activities on the broader sustainability agenda include support for
producing a ‘Practitioner’s Guide for Sustainable Sourcing of Agricultural Raw Materials’
with a number of other international organisations.63 IDH has supported institutes’ efforts
to bring information together on sustainable commodity sourcing financially, such as the
State of Sustainability report (IISD & IIED, 2014) and the work of COSA on impact evaluation
(COSA, 2013).
In interviews, IOB noted that IDH’s role of knowledge broker was clearly seen as less
important than its work as convenor and funder. Many persons interviewed did not quite
understand or see what role IDH was taking in this respect and to what extent they could
benefit. One or two interviewees mentioned that IDH’s growing experience and knowledge
of specific sectors was beneficial for developing strategies in other sectors. There were a few
complaints that IDH was not making enough use of knowledge and experience available in
related organisations (Fairtrade, certification organisations and NGOs).
Good impact studies, with baseline studies and control groups, have been set up in cocoa,
tea and cotton by LEI, focussing on the effects of certification and related interventions by
IDH. For tea, the first impact results have been reported; for cocoa and cotton, the impact
studies are expected in 2015.
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In view of the changing practices in sector programmes supported by IDH, these impact
studies will need to be complemented by additional studies on new activities and
programme components, e.g. the effect of new training methods, inputs, credits, etc. IDH
has contracted AidEnvironment to assist IDH to improve its current M&E framework,
indicators and preparing an impact evaluation plan for the period up to 2020.
Gender is not an explicit issue in IDH work
A desk review of reports on IDH’s improvement programmes in cotton, tea, cocoa and
coffee suggests that the gender dimension has not received much explicit attention in IDH’s
work.64
In principle, the relationship between certification and gender issues can be two-pronged.
Certification and related training offer mechanisms for improving the position of women
– if gender issues are addressed specifically – while improved gender dynamics can
contribute to better farm performance in view of the important position of women farmers
and workers in many production systems. Potential improvements could include a stronger
position in producer associations and increased awareness about women workers’ rights
(KIT, Agri-Profocus, IIRR, 2012).

63

64

See IMD website: http://www.imd.org/research-knowledge/global-centers/sustainability-leadership/
practitioner-tool-kits/.
This review was undertaken by IOB inspector Paul de Nooijer, as part of an evaluation of gender policies
and practices in Dutch development cooperation.

IDH’s contribution to sustainability initiatives in commodity sourcing

Limited specific data is collected about the participation of women in certification and
training programmes. Few activities specifically target women workers as key beneficiaries
and their position is not considered a main priority (Usher, Newitt & Merouchi, 2013;
Waarts, Ge, Ton & Jansen, 2012; Waarts, Ge & Ton, 2013b). This can be seen as a weakness of
current programmes, since generic interventions are generally insufficient to secure
meaningful improvements in gender roles (Riisgaard, Escobar Fibla, & Ponte, 2010).
As far as the (anecdotal) evidence suggests, female participation in training and
participation in farmers’ associations is limited. One report suggests that UTZ-certified
female coffee farmers are more likely to participate in farmers’ committees (UTZ, 2014),
while a study on the Cocoa Improvement Programme finds that women of trained farmers
are more likely to benefit from an overall increase in their household income (Waarts et al.,
2013c). Some studies on cotton, tea and cocoa suggest that certification can contribute to
pregnant women being prevented from applying agro-chemicals (Usher, Newitt &
Merouchi, 2013; Waarts et al., 2013c; UTZ, 2014).
Recently, IDH has started a project under the tea portfolio with the KTDA and the Ethical Tea
Partnership on social issues with smallholders in Kenya. This project focuses on gender
discrimination and sexual harassment. IDH has agreed with DDE to integrate gender issues
more systematically in its work.
In conclusion: positive effects, but genuine market transformation requires more
The evidence in this chapter indicates that IDH has played a very active role – both as
convener and as funder – in bringing the private sector and other stakeholders together in
sector improvement programmes that have boosted the use of sustainability standards and
certification, achieving important positive results at the field level for a very large group of
primary producers in developing countries.
In addition, the available evidence also indicates that the direct and indirect effects of these
efforts are positive, but also rather modest compared to IDH’s ambition of market
transformation and delivering impact on MDGs 1, 7 and 8. Genuine market transformation
and effective poverty reduction requires more than the current generation of standards and
certification in which IDH is active can offer. A ‘tipping point’ has not been reached in any
commodity chain and will probably require substantial deepening of the cooperation
approach. Certification against mainstream standards is a useful step, but does not bring
enough to deliver deep impact on poverty or the environment.
IDH has shown to be well aware of such limitations and has over the last years added
additional project interventions to certification efforts, building in particular on its growing
network with private companies. Farmer field schools covered more than what was strictly
needed for certification. National standards and public-private sustainability initiatives in
developing countries around specific crops have been set up or were supported. IDH has
also initiated activities with companies beyond certification, such as the fertiliser and
productivity programmes in cocoa. Recent plans for support to companies’ greenfield

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Riding the wave of sustainable commodity sourcing

development investments in smallholder inclusion, working with blended finance, explore
even wider sustainability issues related to value chains.
IDH’s more recent approach to sustainability work with individual companies can raise
dilemmas about the organisation’s focus, ‘additionality’ of public support and the balance
between public and private goals in partnerships. If such issues are properly taken into
account, IDH will be in a good position to further deepen its work on sustainable
commodity sourcing. Sustainable commodity sourcing is still unfinished business and the
supply chain approach with committed companies offers ample possibilities for further
engagement.

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IDH’s contribution to sustainability initiatives in commodity sourcing

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Annexes

Annexes

Annex 1

About IOB

Objectives
The remit of the Policy and Operations Evaluation Department (IOB) is to increase insight
into the implementation and effects of Dutch foreign policy. IOB meets the need for the
independent evaluation of policy and operations in all the policy fields of the Homogenous
Budget for International Cooperation (HGIS). IOB also advises on the planning and
implementation of evaluations that are the responsibility of policy departments of the
Ministry of Foreign Affairs and embassies of the Kingdom of the Netherlands.
Its evaluations enable the Minister of Foreign Affairs and the Minister for Foreign Trade and
Development Cooperation to account to parliament for policy and the allocation of
resources. In addition, the evaluations aim to derive lessons for the future. To this end,
efforts are made to incorporate the findings of evaluations of the Ministry of Foreign Affairs’
policy cycle. Evaluation reports are used to provide targeted feedback, with a view to
improving the formulation and implementation of policy. Insight into the outcomes of
implemented policies allows policymakers to devise measures that are more effective and
focused.
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Organisation and quality assurance
IOB has a staff of experienced evaluators and its own budget. When carrying out evaluations
it calls on assistance from external experts with specialised knowledge of the topic under
investigation. To monitor the quality of its evaluations IOB sets up a reference group for
each evaluation, which includes not only external experts but also interested parties from
within the ministry and other stakeholders. In addition, an Advisory Panel of four
independent experts provides feedback and advice on the usefulness and use made of
evaluations. The panel’s reports are made publicly available and also address topics
requested by the ministry or selected by the panel.
Programming of evaluations
IOB consults with the policy departments to draw up a ministry-wide evaluation
programme. This rolling multi-annual programme is adjusted annually and included in the
Explanatory Memorandum to the ministry’s budget. IOB bears final responsibility for the
programming of evaluations in development cooperation and advises on the programming
of foreign policy evaluations. The themes for evaluation are arrived at in response to
requests from parliament and from the ministry, or are selected because they are issues of
societal concern. IOB actively coordinates its evaluation programming with that of other
donors and development organisations.
Approach and methodology
Initially IOB’s activities took the form of separate project evaluations for the Minister for
Development Cooperation. Since 1985, evaluations have become more comprehensive,
covering sectors, themes and countries. Moreover, since then, IOB’s reports have been
submitted to parliament, thus entering the public domain. The review of foreign policy and

Riding the wave of sustainable commodity sourcing

a reorganisation of the Ministry of Foreign Affairs in 1996 resulted in IOB’s remit being
extended to cover the entire foreign policy of the Dutch government. In recent years it has
extended its partnerships with similar departments in other countries, for instance through
joint evaluations and evaluative activities undertaken under the auspices of the OECD-DAC
Network on Development Evaluation.
IOB has continuously expanded its methodological repertoire. More emphasis is now given
to robust impact evaluations implemented through an approach in which both quantitative
and qualitative methods are applied. IOB also undertakes policy reviews as a type of
evaluation. Finally, it conducts systematic reviews of available evaluative and research
material relating to priority policy areas.

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Annexes

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WWF. (2010a). Pangasius Aquaculture Dialogue Standards.
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responsibility of the pangasius industry in Vietnam for sustainable development to achieve Aquaculture
Stewardship Council certification. Hanoi.
WWF. (2014). Farmed Seafood. Retrieved June 4, 2014, from http://www.worldwildlife.org/
industries/farmed-seafood.
| 104 |

Annexes

Annex 3 List of persons interviewed
Name

Position

Organisation

Subject/case

Flavio Corsin

Senior Programme Manager

IDH

Aquaculture

Roy van Daatselaar

Programme Officer

IDH

Aquaculture

Jonas Mva Mva

Senior Programme Manager

IDH

Cocoa

Renske Aarnoudse

Programme Officer

IDH

Cocoa

Anita Chester

Senior Programme Manager

IDH

Cotton

Barbara Visser

Financial Controller

IDH

General

Dave Boselie

Senior Manager Learning &
Innovation

IDH

General

Esther Bosgra

Head of Operations

IDH

General

Joost Oorthuizen

Executive Director

IDH

General

Lucian Peppelenbos

Director Learning & Innovation

IDH

General

Ted van der Put

Programme Director

IDH

General

Tony Bruggink

Programme Director

IDH

General

Bas van den Brink

Senior Programme Manager

IDH

Natural Stone

Jordy van Honk

Senior Programme Manager

IDH

Tea

Judith Fraats

Programme Officer

IDH

Tea

Thierry van Helden

First Secretary Food Security
& Agriculture

Netherlands
Embassy in Ghana

Cocoa

Ad Lansu

Controller

BZ / DDE

General

Gerbrand Haverkamp

Policy Officer CSR

EZ / ELV

General

Marcel Vernooij

Strategic Policy Advisor

BZ / DDE

General

Paul Schoenmakers

Senior Policy Officer

BZ / DDE

General

Peter Richtering
Blenken

Controller

BZ / DDE

General

Robert-Jan Scheer

Strategic Policy Advisor

BZ / DAF

General

Aldin Hilbrands

Senior Manager Product Integrity

Royal Ahold

Aquaculture

Andrea Bolhuis

Specialist Product Sustainability

Royal Ahold

Aquaculture

Anne-Corine
Vlaardingerbroek

CSR Manager

Jumbo Supermarkten

Aquaculture

Constant Mulder

Managing Director

Anova Seafood

Aquaculture

Harry Hoogendoorn

Managing Director

Queens Products

Aquaculture

IDH

Dutch government

Private sector

| 105 |

Riding the wave of sustainable commodity sourcing

| 106 |

Mark Nijhof

Director Production and Quality
Assurance

Heiploeg

Aquaculture

Olivier Lugten

CSR Manager

Lenger Seafoods

Aquaculture

Tino Zeiske

Vice President International
Affairs Asia-Pacific

Metro Group

Aquaculture

Arjen Boekhold

Chain Director

Tony’s Chocolonely

Cocoa

Bart van der Linden

Associate Director

Supply Chain
Integrity

Cocoa

Daudi Lelijveld

Vice President Sustainability

Barry Callebaut

Cocoa

Harold Poelma

Managing Director

Cargill Refined
Oils Europe

Cocoa

Michiel Hendriksz

Director of Sustainability

ADM Cocoa

Cocoa

Peter van Grinsven

Manager Sustainable Cocoa
Supply

Mars Incorporated

Cocoa

Rahul Gopinath Nair

Head of Africa

Armajaro
Holdings

Cocoa

Harsha Vardhan

Environment Responsible

H&M

Cotton

Sean Cady

Vice President Product Stewardship and Sustainability

VF Corporation

Cotton

André Veneman

Corporate Director Sustainability
& Chair IDH Supervisory Board

AkzoNobel

General

Jan Kees Vis

Director Sustainable Agriculture

Unilever

General

Bram Callewier

Partner

Beltrami NV

Natural Stone

Frans Papma

Consultant

Independent

Natural Stone

Toon Huijps

Commercial Director

Michel Oprey &
Beisterveld

Natural Stone

Mark Birch

Sustainable Sourcing Manager

Unilever

Tea

Peter Mbadi

Sustainable Agriculture Project
Manager

Kenya Tea
Development
Agency

Tea

Sebastian Michaelis

Tea Buyer and Blender

Tata Global
Beverages

Tea

Chris Ninnes

Chief Executive Officer

Aquaculture
Stewardship
Council

Aquaculture

Jose Villalon

Director of Aquaculture
Programme

WWF US
(formerly)

Aquaculture

Pham Anh Tuan

Deputy Director General

Directorate of
Fisheries Vietnam

Aquaculture

Tom Derksen

Managing Director Agriculture

SNV

Aquaculture

NGOs and Other

Annexes

Anna Laven

PhD Researcher

Royal Tropical
Institute (KIT)

Cocoa

Bill Guyton

President

World Cocoa
Foundation

Cocoa

Bo van Elzakker

Director

Louis Bolk
Instituut

Cocoa

Hans Perk

International Programme
Manager Cocoa

Solidaridad

Cocoa

Manfred Borer

Programme Director

Swisscontact

Cocoa

Robert Yapo Assamoi

Director Production and
Sustainability

Conseil Café
Cacao

Cocoa

Christoph Kaut

Managing Director

Aid by Trade
Foundation
(CmiA)

Cotton

Hammad Khan

Global Cotton Leader

WWF International

Cotton

Patrick Laine

Chief Executive Officer

Better Cotton
Initiative

Cotton

Frank Mechielsen

Lobbyist Private Sector

Oxfam Novib

General

Han de Groot

Executive Director

UTZ Certified

General

Johan Verburg

Senior Advisor Programme
Development

Oxfam Novib

General

Nico Roozen

Director

Solidaridad

General

Peter d’Angremond

Executive Director

Fairtrade / Max
Havelaar

General

Hannah Bruce

Category Leader Household and
Hard Goods

Ethical Trading
Initiative UK

Natural Stone

Hilary Thompson

Director

TFT

Natural Stone

Marijn Peepercamp

Programme Officer

India Committee
of the Netherlands

Natural Stone

Diya Sharma

Programme Manager India

Ethical Tea
Partnership

Tea

Shatadru
Chattopadhyay

Director South and South East
Asia

Solidaridad

Tea

| 107 |

3

Communication

17,116

3,794

8,275

32

8,307

2,075

124

96

270

162

1,424

Total expenditure IDH and other
2,453 4,895
contributions
Source: data provided by IDH. Amounts in EUR thousand.

787

3,065

51

3,116

1,285

83

113

250

94

745

6,232

5,047

527

Other donor contributions

52

1,831

260

102

5,870

2010

1,044

236

1,691

Private contributions

Total IDH appropriated subsidy

18

Received interest

272

1,708

Total IDH budget

Subtotal IDH personnel and office costs

82

55

Organisational

Congresses

11

119

1,436

Housing and ICT

Personnel

Subtotal programme expenditures

Mid-term evaluations

207

Programme outreach

8

118

1,454

Learning: other

Learning: staff

1,429

2009

23,531

3,900

6,781

12,850

49

12,898

3,315

170

412

425

295

2,013

9,583

50

488

304

8,742

2011

48,936

5,967

23,377

19,593

97

19,690

3,240

94

199

417

225

2,305

16,450

277

912

522

219

14,520

2012

38,924

3,330

20,696

14,899

69

14,968

3,595

74

256

467

400

2,398

11,373

150

823

463

298

9,639

MFA

| 108 |

Programme contributions

2008

1,946

0

0

1,946

0

1,946

295

80

45

170

1,651

145

145

1,361

SECO

458

0

0

458

0

458

47

47

411

411

DANIDA

2013

41,329

3,330

20,696

17,303

69

17,372

3,937

154

256

512

400

2,615

13,435

150

968

608

298

11,411

Total

135,856

19,813

55,670

60,372

315

60,687

13,781

628

1,080

1,883

1,187

9,004

46,906

528

2,697

1,205

821

41,654

Total MFA
2008-2013

138,260

19,813

55,670

62,777

315

63,092

14,123

708

1,080

1,928

1,187

9,221

48,968

528

2,842

1,350

821

43,427

Grand Total
2008-2013

Riding the wave of sustainable commodity sourcing

Annex 4 Overview of IDH expenditure
		2008-2013

Annexes

Annex 5 IDH’s work on Natural Stone
Background
India and China are major producers of natural stone such as granite, sandstone and marble
and are jointly responsible for 60 percent of EU imports of these stones (UN COMTRADE,
2014). Working conditions in these countries are dire. There is a high prevalence of bonded
labour and child labour, workers are generally in a weak bargaining position and the
quarrying and processing of stone can result in fatal accidents or in diseases such as lung
disease (silicosis). Workers are also a victim of long working hours, poor housing and
sanitation and a shortage of clean drinking water. In addition, mining usually results in
considerable and permanent environmental damage due to the contamination of water and
the dumping of rock and slurry (Centre for Education and Communication, 2009; Dhaatri
Resource Centre for Women and Children, 2010; GRAVIS, 2010; India Committee of the
Netherlands, 2005; 2006; 2007; Südwind, 2006).
To improve the performance of Indian and Chinese factories and quarries catering to the
Dutch market, the India Committee of the Netherlands and a number of other NGOs, sector
organisations and importers established the Working Group on Natural Stone (WGDN) in
2005-2006. The WGDN included a very limited number of large and mid-sized companies
such as Michel Oprey-Beisterveld and Beltrami, and a somewhat larger number of smallsized companies such as RPM Grafmonumenten (IDH, 2010a; 2011; 2012a; 2013a; 2014;
Werkgroep Duurzame Natuursteen, 2008b). IDH became involved in the project at the end
of 2008: the project was one of four projects selected by IDH’s quartermasters and the
Ministry of Foreign Affairs (Ministry of Foreign Affairs, 2008).
IDH has invested some EUR 690,000 in this programme. EUR 170,000 was provided by other
donors and EUR 450,000 was provided by the private sector. A large share (29 percent) of
private contributions was provided in-kind.
Results
IDH aimed to establish a group of committed importers that would represent a sufficient
percentage of the Northwest European market. Through these importers and their
suppliers, IDH aimed to improve the working conditions of a substantial number of workers
(Werkgroep Duurzame Natuursteen, 2008a). None of the targets have been met. The
number of importers, suppliers and workers involved has remained far beyond what was
hoped for, the market share of these importers is less than 5 percent and the percentage of
stone imports that is sourced according to a code of conduct is currently zero (IDH, 2014). It
is hoped that initial results will materialise in a number of factories and quarries before the
end of 2014.
Activities
From 2008 until 2012, IDH supported the WGDN programme. Initially it was planned to
introduce a label for sustainable stone by the end of 2010. In the process towards
introducing a label, IDH focused on three efforts: (1) implementing a number of pilot

| 109 |

Riding the wave of sustainable commodity sourcing

projects in India and China, (2) stimulating market demand for natural stone, especially
from the public sector, and (3) broadening private sector support and harmonising or
integrating various European initiatives. IDH funding was used inter alia to hire a
specialised consultant and to conduct various pilot projects. During the process, it was
concluded that a national certificate or label was too costly and not achievable for the
quarries. Moreover, implementing improvements in the producer countries proved more
challenging than expected and public sector demand for sustainable stone did not
materialise due to legal requirements (IDH, 2010a; 2011b; 2012a; 2013a; 2014).
In the course of 2011, it was decided to merge the WGDN with an existing verification or
certification scheme, and in October 2012 the programme was merged with the TFT Quarry
Working Group to form the TFT Responsible Stone Program (RSP). Under the RSP,
participating companies seek to improve production along a three-level code of conduct.
Level one addresses basic issues such as adhering to legal minimum wages and no use of
child, bonded or forced labour. Level two addresses issues such as freedom of association
and emissions to water and air. Level three requires a living wage and good relationships
with neighbouring communities (TFT, 2012).

| 110 |

TFT acts as a consultant, which helps importers to ‘clean up’ their supply chain while
concurrently improving their marketing. It has a local presence in eight different countries,
including an office in China and two offices in India (TFT, 2014). Participating companies
become a member and pay an annual membership fee of EUR 3,000 (EUR 1,250 before 2014)
and about EUR 1,000 per work plan or audit. Due to the increase in the required size of their
own contribution in 2012 and in 2014, a number of less-committed companies exited the
programme in those years.
In May 2014, 11 Dutch companies participated in the RSP, among a total of 21 members (TFT,
2014). IDH has continued to provide funding to these companies in the form of a 40 percent
compensation for overall expenditures, up to a certain maximum.
Prospects
IDH will stop funding the RSP as of 2016. By that time the programme should be selfsufficient. The increased membership fee of EUR 3,000 should contribute towards that aim.
IDH and the participating companies estimate that the first suppliers will achieve level 1 or 2
in the course of 2014. In this way it is hoped to show that clear results can be attained. This
should secure existing commitment to the RSP, as well as attract other European companies
to join the programme.

Annexes

Annex 6 IDH’s work on Aquaculture
Background
Aquaculture provides an answer to the double challenge of maintaining marine biodiversity
and meeting the increased demand for animal protein of a growing and more resourceful
world population. At the same time, aquaculture can itself have different negative
environmental impacts such as the use of fishmeal and fish-oil in feed, the discharge of
untreated effluents containing faecal matter and chemicals from antibiotics, and the
spreading of aquatic animal pathogens and invasive species. Moreover, many smallholders
or employees have to subsist from a small wage and have to work under bad working
conditions (WWF, 2014; Greenpeace, 2008).
To address these issues, the World Wildlife Foundation (WWF) initiated the Aquaculture
Dialogues, a series of roundtables involving over 2,000 stakeholders, in which it was sought
to develop a front-runner standard for the species that are most-traded and lead to the
greatest burden. In 2009, WWF founded the Aquaculture Stewardship Council to manage
the new standards (ASC, 2012b; WWF, 2014). IDH provided financial and administrative
support. The first standards, for pangasius and tilapia, were launched in the second half of
2012, followed by salmon in January 2014 and shrimp in April 2014 (ASC, 2014). The ASC has
an explicit focus on environmental and social objectives (ASC, 2012b). The standard
presupposes that producers rely on other norms or standards concerning animal health and
food safety, such as GlobalGAP.
In the period 2010-2013, IDH has spent EUR 1.9 million on this programme. Other donors
spent EUR 1.3 million and the private sector contributed about EUR 0.7 million. IDH
employed two persons who both spent about half of their time on this programme.
Results
IDH aims to increase the supply of responsibly-farmed fish and to reduce the negative
impacts of aquaculture production (IDH, 2013e; 2014). The targets set on the volume of
ASC-certified fish produced and purchased have been more than met. At the same time, the
uptake of ASC-certified fish is only 36 percent of total production. This is largely due to the
rapid acceptance of the ASC standard among producers. The number of farmers and the
number of hectares of natural ecosystem that benefit from the programme have remained
far below the target, reflecting the intensive and large-scale mode of production (IDH,
2014).
Activities
In the past years, the ASC, WWF and IDH have focused most of their efforts on the
production of pangasius in Vietnam. Vietnam accounts for three quarters of global
pangasius production and for virtually all EU imports of this species (UN COMTRADE, 2014).
Vietnamese support for ASC-certification has been engendered through the involvement of
many Vietnamese stakeholders in the Pangasius Aquaculture Dialogue (WWF, 2010a) and
was further secured in 2010 through a Cooperation Agreement between WWF and the two

| 111 |

Riding the wave of sustainable commodity sourcing

dominant producers’ and exporters’ associations and the Vietnam government. In this
cooperation agreement, the parties express their shared objective to have 100% of
pangasius exports certified by 2015, half of which should be ASC-certified (WWF, 2010b).
In 2012, IDH launched the ASC Accelerator Program for Vietnam. Under this programme,
SNV provided gap analyses, work plans and technical assistance to 37 pangasius farms. This
was done via local consultants who were trained on the job on how to perform audits and
to provide technical assistance. The programme was completed by the end of 2013 when a
sufficient volume of pangasius was ASC-certified and a sufficiently large pool of local
consultants had been trained. Currently 44 large-scale farms, representing 17 percent of
annual production, are ASC-certified (ASC, 2012a; FAO, 2014; SNV, 2014).

| 112 |

In Northern Europe, IDH has invested some effort to secure retailers’ and traders’
commitment to the programme. Large traders purchasing ASC-certified seafood include
METRO AG, Queens and Heiploeg. Not much effort was needed, since retailers and traders
decided to shift to ASC-certified seafood out of their own sustainability- or marketingrelated concerns. Dutch retailers signed a covenant in December 2011 in which they commit
to move to 100 percent ASC-certified or equivalent farmed fish in 2016 (CBL, 2011). IDH is
currently reflecting on how to increase demand for ASC-certified fish and shrimp in
Southern European countries.
Prospects
In the coming years, IDH will focus on promoting improvement in shrimp farming in a
step-by-step process towards ASC certification. In 2013, IDH established a Farmers In
Transition (FIT) Fund from which co-funding can be provided both to large shrimp farms
and to collectives of smallholders, albeit at different co-funding ratios (IDH, 2013c). The
shrimp standard was launched in April 2014 (ASC, 2014). Considering Dutch retailers’
commitment to ASC-certified fish and shrimp, uptake is likely to meet its target.

Annexes

| 113 |

Riding the wave of sustainable commodity sourcing

Evaluation and study reports of the Policy and
Operations Evaluation Department (IOB)
published 2009-2014
Evaluation reports published before 2009 can be found on the IOB website:
www.government.nl/foreign-policy-evaluations or www.iob-evaluatie.nl.
IOB no.

Year

Title evaluation report

ISBN

397

2014

Riding the wave of sustainable commodity sourcing: Review
of the Sustainable Trade Initiative IDH 2008-2013

978-90-5328-464-3

396

2014

Access to Energy in Rwanda. Impact evaluation of activities
supported by the Dutch Promoting Renewable Energy
Programme

978-90-5328-463-6

395

2014

Strategie bij benadering. Nederlandse coalitievorming en de
multi-bi benadering in het kader van de EU-besluitvorming
(2008-2012)

978-90-5328-462-9

394

2014

Autonomy, partnership and beyond: A counterfactual
analysis of policy coherence for Ghana

978-90-5328-459-9

393

2014

Balanceren tussen koopmanschap en diplomatie. Evaluatie
van de Netherlands Business Support Offices 2008-2013

978-90-5328-458-2

392

2014

Good things come to those who make them happen: Return
on aid for Dutch exports

978-90-5328-456-8

391

2014

Useful Patchwork: Direct Funding of Local NGOs by
Netherlands Embassies 2006-2012

978-90-5328-455-1

390

2014

Investeren in wereldburgerschap. Evaluatie van de Nationale
Commissie voor Internationale Samenwerking en Duurzame
Ontwikkeling (NCDO)

978-90-5328-454-4

389

2014

Op zoek naar focus en effectiviteit. Beleidsdoorlichting van
de Nederlandse inzet voor Private Sector Ontwikkeling
2005-2012

978-90-5328-451-3

388

2013

Impact evaluation of improved cooking stoves in Burkina
Faso: The impact of two activities supported by the
Promoting Renewable Energy Programme

978-90-5328-449-0

387

2013

Between Ambitions and Ambivalence: Mid-term Evaluation
SNV Programme 2007-2015

978-90-5328-448-3

386

2013

Evaluation issues in financing for development: Analysing
effects of Dutch corporate tax policy on developing
countries.

978-90-5328-447-6

385

2013

Economic diplomacy in practice: An evaluation of Dutch
economic diplomacy in Latin America

978-90-5328-446-9

| 114 |

Annexes
Evaluation and study reports of the Policy and Operations Evaluation Department (IOB) published 2009-2014

384

2013

Achieving universal access to sexual and reproductive health
and rights: Synthesis of multilateral contribution to
advancing sexual and reproductive health and rights
(2006-2012)

978-90-5328-445-2

383

2013

NGOs in action: A study of activities in sexual and reproductive health and rights by Dutch NGOs

978-90-5328-444-5

382

2013

Buscando novas relações : Avaliação da política externa dos
Países Baixos para a América Latina. Informe especial sobre
o Brasil

978-90-5328-453-7

382

2013

En busca de nuevas relaciones: Evaluatión de la politica
exterior de los Paísos Bajos en América Latina. Resumen del
informe principal.

978-90-5328-450-6

382

2013

Op zoek naar nieuwe verhoudingen. Evaluatie van het
Nederlandse buitenlandbeleid in Latijns-Amerika

978-90-5328-443-8

381

2013

Balancing Ideals with Practice: Policy evaluation of Dutch
involvement in sexual and reproductive health and rights
2007-2012

978-90-5328-442-1

380

2013

Linking Relief and Development: More than old solutions for
old problems?

978-90-5328-441-4

379

2013

Investeren in stabiliteit. Het Nederlandse fragiele statenbeleid doorgelicht

978-90-5328-440-7

378

2013

Public private partnerships in developing countries. A
systematic literature review

978-90-5328-439-1

377

2013

Corporate Social Responsibility: the role of public policy. A
systematic literature review of the effects of government
supported interventions on the corporate social responsibility (CSR) behaviour of enterprises in developing countries

978-90-5328-438-4

376

2013

Renewable Energy: Access and Impact. A systematic
literature review of the impact on livelihoods of interventions providing access to renewable energy in developing
countries

978-90-5328-437-7

375

2013

The Netherlands and the European Development Fund –
Principles and practices. Evaluation of Dutch involvement in
EU development cooperation (1998-2012)

978-90-5328-436-0

374

2013

Working with the World Bank. Evaluation of Dutch World
Bank policies and funding 2000-2011

978-90-5328-435-3

373

2012

Evaluation of Dutch support to human rights projects.
(2008-2011)

978-90-5328-433-9

372

2012

Relations, résultats et rendement. Évaluation de la
coopération au sein de l’Union Benelux du point de vue des
Pays-Bas

978-90-5328-434-6

372

2012

Relaties, resultaten en rendement. Evaluatie van de Benelux
Unie-samenwerking vanuit Nederlands perspectief

978-90-5328-431-5

| 115 |

Riding the wave of sustainable commodity sourcing

371

2012

Convirtiendo un derecho en práctica. Evaluación de impacto
del programa del cáncer cérvico-uterino del Centro de
Mujeres lxchen en Nicaragua (2005-2009)

978-90-5328-432-2

371

2012

Turning a right into practice. Impact evaluation of the Ixchen
Centre for Women cervical cancer programme in Nicaragua
(2005-2009)

978-90-5328-429-2

370

2012

Equity, accountability and effectiveness in decentralisation
policies in Bolivia

978-90-5328-428-5

369

2012

Budgetsupport: Conditional results – Policy review
(2000-2011)

978-90-5328-427-8

369

2012

Begrotingssteun: Resultaten onder voorwaarden – Doorlichting van een instrument (2000-2011)

978-90-5328-426-1

368

2012

Civil Society, Aid, and Development: A Cross-Country
Analysis

979-90-5328-425-4

367

2012

Energievoorzieningszekerheid en Buitenlandbeleid –
Beleidsdoorlichting 2006-2010

979-90-5328-424-7

366

2012

Drinking water and Sanitation – Policy review of the Dutch
Development Cooperation 1990-2011

978-90-5328-423-0

366

2012

Drinkwater en sanitaire voorzieningen – Beleidsdoorlichting
van het OS-beleid 1990-2011

978-90-5328-420-9

365

2012

Tactische diplomatie voor een Strategisch Concept – De
Nederlandse inzet voor het NAVO Strategisch Concept 2010

978-90-5328-421-6

364

2012

Effectiviteit van Economische Diplomatie: Methoden en
Resultaten van onderzoek.

978-90-5328-420-9

363

2011

Improving food security: A systematic review of the impact
of interventions in agricultural production, value chains,
market regulation, and land security

978-90-5328-419-3

362

2011

Methodische kwaliteit van Programma-evaluaties in het
Medefinancieringsstelsel-I 2007-2010

978-90-5328-418-6

361

2011

Evaluatie van de Twinningfaciliteit Suriname-Nederland

978-90-5328-417-9

360

2011

More than Water: Impact evaluation of drinking water
supply and sanitation interventions in rural Mozambique

978-90-5328-414-8

359

2011

Regionaal en geïntegreerd beleid? Evaluatie van het
Nederlandse beleid met betrekking tot de Westelijke Balkan
2004-2008

978-90-5328-416-2

358

2011

Assisting Earthquake victims: Evaluation of Dutch Cooperating aid agencies (SHO) Support to Haiti in 2010

978-90-5328-413-1

357

2011

Le risque d’effets éphémères: Évaluation d’impact des
programmes d’approvisionnement en eau potable et
d’assainissement au Bénin

978-90-5328-415-5

357

2011

The risk of vanishing effects: Impact Evaluation of drinking
water supply and sanitation programmes in rural Benin

978-90-5328-412-4

356

2011

Between High Expectations and Reality: An evaluation of
budget support in Zambia

978-90-5328-411-7

| 116 |

Annexes
Evaluation and study reports of the Policy and Operations Evaluation Department (IOB) published 2009-2014

355

2011

Lessons Learnt: Synthesis of literature on the impact and
effectiveness of investments in education

978-90-5328-410-0

354

2011

Leren van NGOs: Studie van de basic education activiteiten
van zes Nederlandse NGOs

978-90-5328-409-4

353

2011

Education matters: Policy review of the Dutch contribution
to basic education 1999-2009

978-90-5328-408-7

352

2011

Unfinished business: making a difference in basic education.
An evaluation of the impact of education policies in Zambia
and the role of budget support.

978-90-5328-407-0

351

2011

Confianza sin confines: Contribución holandesa a la
educación básica en Bolivia (2000-2009)

978-90-5328-406-3

350

2011

Unconditional Trust: Dutch support to basic education in
Bolivia (2000-2009)

978-90-5328-405-6

349

2011

The two-pronged approach Evaluation of Netherlands
Support to Primary Education in Bangladesh, 1999-2009

978-90-5328-404-9

348

2011

Schoon schip. En dan? Evaluatie van de schuldverlichting
aan de Democratische Republiek Congo 2003-2010
(Verkorte samenvatting)

978-90-5328-403-2

347

2011

Table rase – et après? Evaluation de l’Allègement de la Dette
en République Démocratique du Congo 2003-2010

978-90-5328-402-5

346

2011

Vijf Jaar Top van Warschau. De Nederlandse inzet voor verst- 978-90-5328-401-8
erking van de Raad van Europa

345

2011

Wederzijdse belangen – wederzijdse voordelen. Evaluatie
van de Schuldverlichtingsovereenkomst van 2005 tussen de
Club van Parijs en Nigeria. (Verkorte Versie)

978-90-5328-398-1

344

2011

Intérêts communs – avantages communs. Evaluation de
l‘accord de 2005 relatif à l ‘allègement de la dette entre le
Club de Paris et le Nigéria. (Version Abrégée)

978-90-5328-399-8

343

2011

Wederzijdse belangen – wederzijdse voordelen. Evaluatie
van de schuldverlichtingsovereenkomst van 2005 tussen de
Club van Parijs en Nigeria. (Samenvatting)

978-90-5328-397-4

342

2011

Intérêts communs – avantages communs. Evaluation de
l’accord de 2005 relatif à l’allègement de la dette entre le
Club de Paris et le Nigéria. (Sommaire)

978-90-5328-395-0

341

2011

Mutual Interests – mutual benefits. Evaluation of the 2005
debt relief agreement between the Paris Club and Nigeria.
(Summary report)

978-90-5328-394-3

340

2011

Mutual Interests – mutual benefits. Evaluation of the 2005
debt relief agreement between the Paris Club and Nigeria.
(Main report)

978-90-5328-393-6

338

2011

Consulaire Dienstverlening Doorgelicht 2007-2010

978-90-5328-400-1

337

2011

Evaluación de las actividades de las organizaciones
holandesas de cofinanciamiento activas en Nicaragua

-

336

2011

Facilitating Resourcefulness. Synthesis report of the
Evaluation of Dutch support to Capacity Development

978-90-5328-392-9

| 117 |

Riding the wave of sustainable commodity sourcing

| 118 |

335

2011

Evaluation of Dutch support to Capacity Development. The
case of the Netherlands Commission for Environmental
Assessment (NCEA)

978-90-5328-391-2

-

2011

Aiding the Peace. A Multi-Donor Evaluation of Support to
Conflict Prevention and Peacebuilding Activities in Southern
Sudan 2005-2010

978-90-5328-389-9

333

2011

Evaluación de la cooperación holandesa con Nicaragua
2005-2008

978-90-5328-390-5

332

2011

Evaluation of Dutch support to Capacity Development. The
case of PSO

978-90-5328-388-2

331

2011

Evaluation of Dutch support to Capacity Development. The
case of the Netherlands Institute for Multiparty Democracy
(NIMD)

978-90-5328-387-5

330

2010

Evaluatie van de activiteiten van de medefinancieringsorganisaties in Nicaragua

978-90-5328-386-8

329

2010

Evaluation of General Budget Support to Nicaragua
2005-2008

978-90-5328-385-1

328

2010

Evaluatie van de Nederlandse hulp aan Nicaragua 20052008

978-90-5328-384-4

327

2010

Drinking water supply and sanitation programme supported
by the Netherlands in Fayoum Governorate, Arab Republic
of Egypt, 1990-2009

978-90-5328-381-3

326

2009

Evaluatie van de Atlantische Commissie (2006-2009)

978-90-5328-380-6

325

2009

Beleidsdoorlichting van het Nederlandse exportcontrole- en
wapenexportbeleid

978-90-5328-379-0

-

2009

Evaluatiebeleid en richtlijnen voor evaluaties

-

-

2009

Evaluation policy and guidelines for evaluations

-

324

2009

Investing in Infrastructure

978-90-5328-378-3

-

2009

Synthesis of impact evaluations in sexual and reproductive
health and rights

978-90-5328-376-9

323

2009

Preparing the ground for a safer world

978-90-5328-377-6

322

2009

Draagvlakonderzoek. Evalueerbaarheid en resultaten

978-90-5328-375-2

321

2009

Maatgesneden Monitoring ‘Het verhaal achter de cijfers’

978-90-5328-374-5

If you would like to receive a publication in printed form, please send an e-mail
to IOB@minbuza.nl, mentioning the title and IOB number.

Annexes
Evaluation and study reports of the Policy and Operations Evaluation Department (IOB) published 2009-2014

| 119 |

Riding the wave of sustainable commodity sourcing

| 120 |

Published by:
Ministry of Foreign Affairs of the Netherlands
Policy and Operations Evaluation Department (IOB)
P.O. Box 20061 | 2500 EB The Hague | The Netherlands
www.government.nl/foreign-policy-evaluations
www.iob-evaluatie.nl
www.twitter.com/IOBevaluatie
www.oecd.org/derec
Photo cover: Ton Koene / Fresh Images | Tea production in Kenya
Lay-out: Formzet | Zoetermeer
Print: Vijfkeerblauw | Rijswijk
ISBN: 978-90-5328-464-3
© Ministry of Foreign Affairs of the Netherlands | August 2014

The Sustainable Trade Initiative IDH (Initiatief
Duurzame Handel) was set up in 2008 on the
initiative of the Dutch government, private
companies, NGOs and trade unions. The aim
was to improve the economic, social and
environmental sustainability of production
systems in developing countries. The focus would
be on internationally traded commodities like
cotton, coffee, tea, cocoa, timber and fish.
Public-private coalitions were to develop sector
improvement plans, initially built around

voluntary sustainability standards such as UTZ
Certified and Better Cotton.
This review looks at where IDH stands after six
years of support from the Ministry of Foreign
Affairs. Did the joint programmes agreed with
private companies achieve the intended results?
What was the private sector contribution in the
projects? How did the IDH organisation evolve
and what are the prospects for its work on
sustainable commodity sourcing?

ng | IOB Review | no. 397 | Riding the wave of sustainable commodity sourcing | IOB Review | no. 397 | Riding the wave of sustainable commodity sourcing | IOB

Published by:
Ministry of Foreign Affairs of the Netherlands
Policy and Operations Evaluation Department (IOB)
P.O. Box 20061 | 2500 EB The Hague | The Netherlands
www.government.nl/foreign-policy-evaluations
www.iob-evaluatie.nl
www.twitter.com/IOBevaluatie
www.oecd.org/derec
© Ministry of Foreign Affairs of the Netherlands | August 2014
14BUZ626383|E