Towards a true price for organic bananas
Bananas are a staple in most European households. This isn't surprising, given that when it comes to fruits, European consumers prioritize flavour, health, convenience, and especially price—all qualities that bananas offer. Consumers are highly price-sensitive, with even slight increases in fruit prices significantly impacting their purchasing behaviour. Therefore, supermarkets exert immense price pressure on bananas to satisfy and attract customers with devastating social and environmental impacts up the supply chain.
However, growing pressure from national and European regulations, such as the Corporate Social Due Diligence Directive (CSDDD), is pushing companies in fruit supply chains to confront the environmental and human rights impacts of their operations. While addressing these social and environmental externalities comes with certain costs, some dedicated stakeholders within the organic banana supply chain have recognized the critical need for change and are committed to driving it from within. This is why FairMatch Support supports a consortium of retailers, traders, and producers from Peru and the Dominican Republic, to calculate and implement the "true price" of their bananas.
The true price of a product
Unsustainable practices in supply chains lead to significant social and environmental costs, including biodiversity loss, child labour, and water and air pollution. These costs are not reflected in a product's market price, which is why the True Price Foundation has developed a methodology to calculate the "true price" of products. This true price combines the market price with the unpaid external social and environmental costs, highlighting hidden costs and promoting greater transparency in supply chains.
Peeling back the layers: what’s the real cost?
The majority of bananas in European supermarkets come from Latin American countries which are the biggest producers and exporters of bananas. Peru and Dominican Republic alone produce 30% of organic bananas worldwide. Price pressures at the retail level are most acutely felt by producing countries, influencing the production methods and limiting their capacity to produce environmentally and socially sustainable bananas. Despite efforts of major retail chains to comply with CSR requirements through organic and Fairtrade certifications, these efforts and associated premiums are not sufficient to address all externalities occurring within the supply chain. Producers in Peru and the Dominican Republic face social challenges of farm workers receiving less than a living wage, often stemming from neighbouring countries. Additionally, inadequate funding to properly manage banana production results in inefficient water use and significant water waste, soil degradation and loss of soil fertility, or aging banana plantations with gradually decreasing yields.
Towards a true price for organic bananas!
A consortium of retailers, traders, and producers in the organic banana industry was formed to bring about positive changes in their supply chains. The members include retailers Odin and Ekoplaza (UDEA), traders Stiftelsen Biodynamiska Produkter and BioRey BV, and producers Grupo Banamiel SAS from the Dominican Republic and APPBOSA from Peru. While, the True Price Foundation offers assessment tools and support to calculate the true price of bananas, FairMatch Support plays a key role in facilitating the project’s implementation and guiding all participants towards their shared goal. Funding for this project came from the supply chain actors themselves, demonstrating their commitment to driving change, with additional financial support provided by RVO.
The goal of the first part of the project was to obtain greater transparency concerning the external costs. The project analysed the true price of organic bananas using the True Price assessment tool, thereby looking at the main CSR risks of the banana supply chain. Based on the outcomes of the true price assessment appropriate remediation measures were formulated to address most pressing hidden costs, implemented in the second phase of the project.
Knowledge plants the seedling, but action yields the crop!
The implementation of remediation based on true pricing marks a significant step towards fostering sustainability and transparency within the organic banana value chain. By calculating the gap between the true cost of production and the price paid by consumers, and setting up value chain funded projects for remediation, this project addresses the social and environmental externalities associated with organic banana cultivation. The remediation efforts are tailored to the respective supply chain, focusing on tree renovation, ground leveling, drip irrigation, and plastic reduction in the Dominican Republic, and on soil productivity improvement, new varieties, and the set-up of a nursery in Peru. Those investments will not only address the identified challenge but will also lead to an increase in yield, thus in higher profit margins enabling sustainable re-investment into production processes. An important step forward was the long-term commitment to collaboration between chain actors that unlocked investment to address externalities.
Engaging consumers
Actions are needed in every part of the supply chain, consumers are no exception. Within the project, great efforts were invested to find strategies to absorb the cost of addressing externalities as good as possible without putting the whole responsibility to the consumers. Key to this was to move from short-term contracts into long-term commitments which created a different setting to be able to do investments. Nonetheless, consumer engagement is a crucial element in true pricing to raise awareness and push the movement to other commodities. Therefore, Odin and UDEA aim to communicate the concept of true pricing (incl. remediation), explaining the externalities linked to banana production. This awareness empowers consumers to understand the broader impact of their purchasing decisions.
They are willing to make a true difference in sustainable business
We work worldwide with a variety of agricultural products. Our programs are always conducted in cooperation with our global network of like minded local business development organisations.
