· 4C Reaffirms Commitment to Ethical Labour Practices

4C Statement on “Ghost Farms and Coffee Laundering: how labour violations enter Starbucks’ and Nestlé’s Chinese coffee supply chain” published by China Labor Watch (with the support of Coffee Watch)

U.S.-based China Labor Watch, supported by Coffee Watch, published a report about “ghost farms,” “coffee laundering,” and labour issues in coffee supply chains in China; these coffee supply chains are either certified under C.A.F.E. Practices or 4C.

4C is an independent stakeholder-driven organization, which values external findings and constructive feedback, as provided in the report. 4C views these findings as an opportunity for reflection and will consider this valuable input to improve the operations, monitoring, and system. 4C certifies 1.8 million tons of green coffee annually in 20 countries. More than 90% of the 4C farmers are smallholders. The average size of the more than 300,000 farms is 2.5 ha. Nestlé is a system user of 4C, as are several other major brand owners.

4C takes the report seriously, and would like to clarify and comment on the key findings as follows:

  • Informal employment relationships and piece-rate pay systems incentivise labour rights violations

4C is aware that informal employment relationships and piece-rate payment systems pose a risk to the protection of labour rights. Therefore, the 4C Code of Conduct explicitly requires fair labour contracts for all workers, with written agreements mandated, unless verbal agreements are permitted for temporary workers complying with national laws and regulations. 4C does not accept informal employment relationships and requires authorized worker representation.

A piece-rate payment system may cause labour rights violations if the equivalent total remuneration (e.g. for an 8-hour workday) is lower than the minimum wage. Piece-rate payment systems are common in the agricultural sector; the coffee sector is not an exception and is often a necessity for seasonal harvesting work. According to 4C criteria, all workers must be paid at least the minimum wage, therefore requiring that piece-rate payment systems are fair and implemented effectively. Piece-rate systems applied accordingly enable workers to earn higher wages than the minimum wage.

  • Lack of direct contractual relationships between coffee firms, certified estates, and smallholder farms

In the 4C system, the sourcing from unregulated “ghost farms,” allowing coffee to be laundered into the global market, is explicitly not allowed and classified as a critical non-compliance, which will result in the withdrawal of the certificate.

The 4C system includes robust traceability requirements to ensure transparency and accountability across the coffee supply chain. Coffee must originate from farms and supply chain entities that are part of the 4C Unit. 4C requires that all farms supplying coffee within a 4C unit must be registered and accounted for. These requirements enable buyers to verify that coffee labelled as 4C-compliant meets the sustainability criteria and originates from certified sources. Certified entities must maintain detailed records to track the flow of 4C-compliant coffee through the supply chain.

The report implies that smallholders cannot be certified under the 4C framework and are therefore obliged to sell to large estates in an informal manner. This is not correct, as 4C pursues an inclusive approach to enable smallholder coffee producers to enter certification and not to be marginalized in global markets. The 4C system offers tailored support and certification pathways to ensure smallholders can participate. This includes group certification options, capacity-building programs of the 4C Managing Entities, and simplified documentation requirements to accommodate their limited resources. In the 4C system, smallholders are producers whose workforce consists primarily of family or household labour or workforce exchange with other members of the community, and whose coffee farm size is context-dependent but usually ranges from less than 1 hectare to 5 hectares of coffee-growing land. Based on this definition, most of the farmers certified under 4C in China are smallholders.

In addition, the 4C Code of Conduct requires the establishment of traceability systems to verify that the volume of 4C certified coffee is traded only between registered farmers (regardless of their size), service providers and the Managing Entity. Coffee trade has to be reported, and physically segregated from non-4C certified coffee. The traceability system is audited on-site to verify that the amount of 4C certified coffee sold aligns with the size and capacity of the registered fields within a 4C unit, which must be supported by documentation such as contracts, invoices, and delivery notes. This should avoid a situation in which “ghost farms” laundering non-certified coffee into global markets.

  • Child Labour

The report describes a case of child labour in which a child was sorting defective beans in a workshop. The report also mentions young family members helping out during summer breaks by picking and sorting coffee beans. These tasks are not considered hazardous work and are in principle in line with international conventions.

4C does not allow the employment of children below the legal minimum age as per the laws of the country where the coffee is produced or in alignment with international standards. In case of discrepancies, the stricter rule shall always be followed. The 4C system strictly prohibits any type of child labour as defined by international conventions, such as ILO C182.

Children carrying heavy loads and being exposed to chemicals are issues not in compliance with 4C. 4C includes specific requirements to ensure that children are not exposed to agrochemicals, in alignment with its sustainability standards and the prohibition of child labour in hazardous environments.  E.g., children are strictly prohibited from handling, applying, or being involved in the preparation of agrochemicals (e.g., pesticides, herbicides, or fertilizers) or entering fields or areas recently treated with agrochemicals. The 4C system includes several requirements regarding appropriate handling and storage of chemicals, in line with ILO, Stockholm Rotterdam, and Montreal Conventions, e.g. prohibition of hazardous chemicals, minimization of chemical uses, safe storage and application practices, disposal and waste management.

4C is committed to further strengthening the external verification of any form of child labour within 4C certified units. The report refers correctly to the 4C Guidance on the Protection of Children’s Rights, which already includes clear definitions and examples of child labour, as recommended in the China Labor Watch report. In addition, the new 4C Code of Conduct will require certificate holders to perform a holistic Child Labour Risk Assessment (CLRA). This process will evaluate the likelihood and underlying drivers of child labour in the regions of operation, enabling 4C certificate holders to identify risk factors and implement targeted measures to address them effectively.  This will take effect with the 4C System Revision of the Code of Conduct v.5.0 aimed for 2025.

  • Contractual conditions (wages, working hours, paid leave, insurance)

4C requires certified units to be compliant with at least legal regulations and fair employment conditions, including working hours, breaks, and holiday entitlements. These regulations and the 4C audit checklist are regularly reviewed and benchmarked against SAI Platform’s Farm Sustainability Assessment 3.0 (FSA) Silver and Gold requirements to ensure compliance with internationally recognized standards. The report states that coffee pickers are being paid RMB 80 – 200/day, barely meeting minimum wage. The minimum wage for piece-rate workers in Yunnan province is RMB 1,990 per month. If the median of the wide range mentioned in the China Labor Report is taken, a piece-rate worker working 5 days a week would earn RMB 2,800, 40% above minimum wages.

According to the Labour Law of the People’s Republic of China, employees who have worked continuously for more than one year are entitled to paid annual leave. Therefore, by law, temporary workers are not entitled for paid annual leave if they have not worked continuously for more than one year. Another issue reported is a 7-day workweek schedule for three consecutive months – this is not allowed in the 4C system. Regarding insurance, which is clearly an institutional issue, the report states that farmers have signed in to the new Rural Medical Insurance scheme.

  • No protective gear

The report indicated that workers were not provided with protective equipment, thereby increasing the risk of injuries. 4C requires its farmers, service providers and Managing Entities to establish a health and safety program to identify major risks at the workplace and train workers accordingly. In addition, workers must be provided suitable protective clothing and equipment for free. This is a major requirement in the 4C system; non-compliance requires immediate corrective measures to rectify the bad practices, otherwise, the certificate will be withdrawn.

  • Discrimination against indigenous communities

The report also highlights systemic discrimination against indigenous communities, including cultural and linguistic marginalization, and exclusion from key processes. 4C emphasizes the importance of equal rights and non-discrimination, requiring certified entities to identify and support groups potentially vulnerable to exploitation or marginalization. 4C certification includes robust requirements on non-discrimination and gender equality with regards to access to rights, resources, education, and representation.

The report entails an accurate description of 4Cs criteria and refers to the main due diligence requirements. Verification of compliance with the 4C requirements are conducted by independent external certification bodies. Only if units are compliant with 4C requirements, can a certificate be issued. It is a core focus of 4C to make sure that non-compliances are detected by auditors. Furthermore, 4C requires certification bodies to conduct risk assessments prior to conducting audits. Risk assessments allow for audit planning based on specific ecological and social challenges present in the respective area.  Auditors therefore need to fulfil a high level of qualifications and are trained by 4C.

4C operates its own integrity program, which double-checks the work of the auditors (“watch the watchman”) and also manages a grievance and complaint channel, open to all stakeholders. Findings from the integrity program and our grievance and complaint channels contribute to the continuous improvement of the 4C system. Integrity audits of Nestlé units carried out so far have not shown major non-compliances as described in the China Labor Watch report.

Social auditing remains challenging due to the complexity of the topics. 4C has recently been granted the ISEAL Innovations Fund for a project aimed at enhancing social auditing and the identification of human rights violations for both external third-party certification bodies and internal monitoring by the certificate holders. Learnings from the project will be integrated into the revision of the 4C system.

4C is fully committed to analyse the risks of relevant issues reported and address them with tailored interventions. 4C will evaluate the actual situation and compliance with 4C requirements through its integrity program. 4C invites China Labor Watch to share details of the assessment and is open to discuss recommendations arising from this.

This statement is available here in PDF format.

4C, as a leading organization in sustainable coffee certification, has been awarded a grant from the ISEAL Innovations Fund for a groundbreaking project aimed at enhancing social auditing and the identification of human rights violations for both external third party certification bodies and internal monitoring by the certificate holders.

Project Overview

Over the next 24 months, 4C will develop a holistic and socially sensitive auditing methodology, including practical tools and supporting materials to enhance the detection of human rights violations during on-site audits. This project will be executed in collaboration with partners such as Meo Carbon Solutions, ISCC and a number of 4C cooperating Certification Bodies.

Key Objectives and Activities

The primary goal is to improve the identification, assessment, and management of social risks and human rights violations. Initial efforts will focus on stakeholder consultation and needs assessment to design effective auditing and capacity-building methodologies.

Activities will include:

  • Baseline assessment with Certification Bodies and auditors on current auditing techniques and challenges.
  • Consultation with 4C Managing Entities and ISEAL community members
  • Revision of the Internal Management System (IMS) and creation of templates for internal risk assessment
  • Developing a hybrid auditing approach and tools combining in-person and e-learning methods
  • Elaborating a comprehensive training package (including a training pilot with Certification Bodies and Managing Entities) to support the capacity building of auditors and improve the internal management and monitoring system of the MEs.
  • Integration into 4C System and results dissemination.

Innovation and Impact

The project emphasizes a participatory approach, ensuring the inclusion of voices from affected communities. Auditors will be trained to recognize, and document nuanced human rights issues while maintaining confidentiality and objectivity. The initiative aims to integrate these improvements into the 4C Certification System, enhancing its social impact.

By improving social auditing techniques that support transparency, risk mitigation and stronger grievance mechanisms, the project aspires to foster greater accountability and continuous improvement in the internal and external detection of human rights violations. Certified entities, auditors, and local communities will benefit from increased capacity to detect social risks, ultimately leading to better protection of human rights across the coffee supply chain.

Conclusion

With the grant from the ISEAL Innovations Fund, 4C’s project represents a significant step towards detecting human rights issues in the coffee sector. By enhancing social auditing processes and integrating community voices, the initiative aims to create a more transparent and accountable certification system, ultimately improving the wellbeing of coffee farming communities worldwide.

This project was made possible thanks to a grant from the ISEAL Innovations Fund, which is supported by the Swiss State Secretariat for Economic Affairs SECO and UK International Development from the UK government.

 

 

About the ISEAL Innovations Fund

The ISEAL Innovations Fund (‘the Fund’) is ISEAL’s grant making-facility, co-developed and funded by the Swiss State Secretariat for Economic Affairs SECO since 2016, which supports the exploration of innovations that help sustainability systems deliver more value to their stakeholders and effectively drive improvement over time, and at scale. The Fund launched a second phase of work in 2023. Grants in phase two (2023 – 2027) are made possible through financial support of SECO and UK International Development from the UK government. This grant empowers sustainability systems to develop innovative partnerships, approaches, and scalable solutions. It offers technical support, guidance, and promotes cross-sector learning within and beyond the ISEAL community. The fund focuses on innovation, relevance, replicability, beneficiary engagement, monitoring, collaboration, and value for investment.

The EU Regulation on Deforestation-Free Products (EUDR) mandates companies to ensure that products sold in the EU do not contribute to deforestation or forest degradation, requiring stringent due diligence processes to trace the origin and sustainability of commodities like soy, palm oil, beef, wood, coffee, cocoa, and rubber.

EUDR is set to become fully applicable on December 31, 2024. Companies that fail to comply with the regulations can face significant penalties, including fines, confiscation of products, and possible bans from the EU market. Enforcement mechanisms will be in place to ensure that only compliant products enter the EU, thereby holding companies accountable for their supply chains’ environmental impacts.

It’s crucial for companies to be proactive in aligning with these regulations to maintain their market presence and contribute to global sustainability.  4C offers a comprehensive solution by partnering with Global Risk Assessment Services (GRAS) to provide tailor-made tools for risk assessment and compliance. In combination with a thorough and credible certification system this ensures that your supply chain is not only compliant but also sustainable.

We are proud to highlight some of the 4C certified companies that are already compliant with EUDR:

SIMEXCO Daklak Ltd.

SIMEXCO Daklak Ltd. is a leading exporter of high-quality coffee from Vietnam’s Daklak province. The company supports sustainable farming practices and helps farmers achieve certifications like 4C’s solutions. SIMEXCO invests in social responsibility initiatives, enhancing community infrastructure, education, and healthcare, while also implementing climate resilience programs to help farmers adapt to changing environmental conditions.

“It’s our great honor to have accompanied 4C from the early days of their certification implementation in Vietnam. Simexco highly appreciates 4C’s robust efforts in supporting enterprises to comply with the EUDR regulation. The GRAS risk assessment system offers the analysis of large datasets from various sources, providing a comprehensive view of potential risks and supporting decision-making. Furthermore, the system provides risk reports, enabling enterprises to proactively develop solutions and mitigation actions.”

Sucden Coffee Vietnam Co. Ltd.

Sucden Coffee Vietnam Co. Ltd. is a key player in the global coffee trade, specializing in sourcing, processing, and exporting high-quality Vietnamese coffee. The company prioritizes sustainability by sourcing from certified sustainable farms, promoting environmentally-friendly farming practices, and supporting local farmers with training and fair trade conditions. Additionally, Sucden engages in community development projects to enhance living standards in coffee-growing regions.

“The 4C organization has taken steps to create conditions for companies to export 4C certified goods according to EUDR standards to the European market. Sucden Coffee Vietnam Co., Ltd. is one of the leading companies in EUDR compliance according to 4C certification and has achieved 4C EUDR certification, With the support of the 4C organization, the registration and implementation of 4C EUDR is not too difficult. Currently, our company feels very happy to be able to export coffee to the European market with higher profits.”

Tin Thanh Dat Joint Stock Company

Tin Thanh Dat Joint Stock Company operates across various sectors, including agriculture and trading. The company is dedicated to sustainability, focusing on sustainable farming techniques, resource efficiency, and renewable energy investments. Tin Thanh Dat also actively participates in corporate social responsibility initiatives, supporting local communities through education, healthcare, and economic development programs.

The journey for EUDR compliance certification is challenging but also valuable. This is also an opportunity for Tin Thanh Dat to complete and enhance its sustainable coffee production system. After more than a year of tireless efforts, we have fully met the principles and criteria of the 4C Code of Conduct, complied with the EUDR and Vietnamese law, regarding topics such as farm management, labour rights, etc. and especially environmental protection“.

Tuan Loc Commodities Company Limited

Tuan Loc Commodities Company Limited specializes in trading and exporting agricultural products. Committed to sustainability, the company ensures ethical sourcing and promotes environmental protection by reducing waste and using eco-friendly packaging. Tuan Loc empowers farmers with training in sustainable practices and supports fair labor standards to improve the livelihoods of those in its supply chain.

“TLC’s composure stemmed from a deep understanding of 4C as a sustainability standard that not only addresses fundamental sustainability issues but also provides a solid foundation for tackling more advanced topics such as eco-diversity, gender balance, decarbonization, and anti-deforestation. Vinh Nguyen, TLC’s CEO, played a significant role in this understanding: back in 2007/2008, he was one of the first coffee professionals in Vietnam to translate the original 4C Code into Vietnamese and implemented it with a small group of Vietnamese farmers in a pilot project. Upon delving into the EUDR requirements, TLC realized that much of the EUDR compliance groundwork had actually already been laid through its ongoing 4C projects. The company had already located and mapped its farmers, organized a seamless supply chain to its mills, and established traceability in its procurement and processing systems. The additional work involved sending the geo-coordinate data of farmers to a centralized deforestation database and verifying that the supply chain is deforestation-free. This realization allowed TLC to stay focused and methodically complete the necessary tasks. TLC’s efforts paid off in June 2024, when the company was awarded the EUDR Compliance certificate by the 4C Organization. This certification, based on a thorough evaluation of its geo-data and adherence to EU regulations, confirms that TLC’s coffee is deforestation-free. Achieving this milestone a full six months ahead of the compliance deadline, TLC stands as one of the first exporters in Vietnam and globally to meet these stringent requirements.”

Vinh Hiep

Vinh Hiep Co., Ltd. was established in 1991. After more than 30 years of operation in the fields of production, purchasing, processing and exporting green coffee beans, pepper, roasted and ground coffee and instant coffee. We are proud to be one of the leading enterprises in exporting agricultural products, in the Top 500 largest enterprises in Vietnam. For many years in a row, it has been recognized by the Minister of Industry and Trade as a typical export unit of Vietnam.

“We at Vinh Hiep are thrilled to receive our first-ever 4C EUDR report! This report is particularly significant because it demonstrates 4C’s innovative approach in bridging the EUDR regulations with data on coffee farms and producer activities. Through its user-friendly portal, 4C has significantly streamlined EUDR compliance for producers like ourselves. While not the first to receive an EUDR report, Vinh Hiep still shares a sense of pioneering spirit in this achievement. This report will be a valuable asset in building trust with our European partners for the upcoming coffee season. A heartfelt thank you to the 4C EUDR team for their unwavering support.”

Simexco Dak Lak has become the first company to comply with the requirements of the European Union Deforestation Regulation (EUDR) using 4C certification. The EUDR aims to curb global deforestation by ensuring that commodities imported into the EU do not contribute to deforestation or forest degradation. This regulation, effective from the end of 2024 onwards, requires companies to demonstrate that their supply chains are free from deforestation and maintain detailed records of their sourcing practices. Additionally, companies must comply with national laws, international conventions, such as the International Labour Organization (ILO) core conventions, and the Rights of Indigenous Peoples, including the principle of Free, Prior, and Informed Consent (FPIC).

EUDR Overview

The EUDR was enacted to combat global deforestation. By enforcing stringent measures, the EUDR seeks to ensure that agricultural commodities, including coffee, cocoa, soy, and palm oil, entering the EU market are not associated with deforestation or forest degradation. Companies must prove that their supply chains are deforestation-free through comprehensive traceability systems, polygons and geo-coordinates to prove that their operations are in line with local legal regulations. This involves maintaining detailed records of the origin of their products and providing evidence that these sources comply with sustainable land use practices. Non-compliance can lead to severe penalties on the operator, the trader importing the respective commodity to or exporting from the EU, including fines and import bans, underscoring the EU’s commitment to environmental protection.

Simexco Dak Lak’s Commitment

Simexco Dak Lak, founded in 1993, has a history of pioneering efforts in sustainable coffee production. Over the years, the company has grown to become a leading coffee exporter in Vietnam. The company collaborates closely with local farmers, providing them with training and support to adopt sustainable practices that meet international standards.

To achieve compliance with EUDR, Simexco collected all the necessary data such as geo-coordinates and polygons required by the EUDR. These were checked by 4C and uploaded to the 4C Portal. In addition, they ran the legality self-assessment based on the 4C Code of Conduct, available open source on the 4C website and signed the attached self-declaration on legal production.

4C Certification: A Cornerstone of Success

Central to Simexco Dak Lak’s success is its 4C (Common Code for the Coffee Community) certification. The 4C certification is a globally recognized standard for sustainable coffee production, emphasizing economic viability, social responsibility, and environmental stewardship. This certification played a crucial role in helping Simexco Dak Lak meet EUDR requirements by providing a robust framework for sustainable practices.

The 4C certification ensures that coffee is produced in a manner that conserves biodiversity, reduces greenhouse gas emissions, and promotes fair working conditions, among other social, economic and environmental principles of good and recognized practices. For Simexco Dak Lak, adhering to 4C standards meant implementing comprehensive traceability systems, ensuring that all coffee production processes were transparent and verifiable. This certification validated the company’s sustainable practices and enhanced its credibility in the international arena.

Celebrating Success

The achievement was celebrated in a recent ceremony, underscoring Simexco Dak Lak’s role in the coffee industry. This milestone sets a benchmark for other companies in the region and highlights the importance of sustainable practices in ensuring long-term success and environmental protection. The company’s commitment to 4C standards demonstrates how certification can drive compliance with global regulations and promote a sustainable coffee sector.

For more details, visit the Simexco Dak Lak and VietnamPlus articles.

We are proud to announce that 4C has joined the Swiss Sustainable Coffee Platform (SSCP), a significant step forward in our mission to promote sustainability in the coffee industry.

About the Swiss Sustainable Coffee Platform

The SSCP, launched on June 6, 2024, is a collaborative initiative that brings together the Swiss coffee industry, the State Secretariat for Economic Affairs (SECO), civil society, and academia. The platform aims to create a coffee industry that respects human rights, protects the environment, and ensures sustainable sourcing practices, ultimately improving the livelihoods of coffee producers and their families.

Benefits of Membership

Membership in the SSCP offers 4C access to a wealth of shared resources, know-how, and best practices. This collective knowledge enhances our ability to address systemic sustainability issues such as climate change and living income for coffee farmers. Additionally, our participation in the SSCP enables us to collaborate on public-private partnership projects in coffee-producing countries, co-financed by SECO.

Our Commitment to Sustainability

As a member of the SSCP, 4C is committed to:

  • Leveraging collective knowledge to tackle key sustainability challenges.
  • Participating in and promoting projects that improve living conditions and economic resilience for coffee farmers.
  • Engaging in policy dialogue and peer exchanges to foster continuous improvement in sustainability practices.
  • Collaborating with other members to navigate regulatory requirements in a pre-competitive context.

Looking Ahead

Joining the SSCP aligns with our ongoing efforts to advance sustainability in the coffee value chain. We are excited about the opportunities this membership presents and look forward to working closely with other SSCP members. By sharing insights and learning from one another, we aim to make a substantial impact on the coffee industry, benefiting producers, their families, and the environment.

Stay tuned for further updates on our initiatives and progress as part of the Swiss Sustainable Coffee Platform. Together, we can build a more sustainable future for the coffee industry.

For more information about the SSCP and our involvement, please visit the SSCP website.