Socioeconomic well-being of tobacco-farming communities

Moreover, in 2020 we started our partnership with Social Accountability International and the Living Income Anker Research Network to conduct living income studies, comprising both living income benchmarks and reference values.¹

During the year, we ran two living income benchmark studies in Malawi and Pakistan. Due to the COVID-19 pandemic, we could only secure partial results (i.e., based on secondary data only) and, in 2021, we expect to have access to the primary data needed for the completion of the studies. In addition to this, we completed three living income reference values in Argentina, Mozambique, and Turkey, which were used in the design of comprehensive action plans that will help address the income gaps over time.

In parallel, we conducted farmer income studies in Malawi, Mozambique, Pakistan, the Philippines, and Turkey to assess the current income levels of our contracted farmers. We are using local and international partners in these countries. We had planned to conduct a farmer income study in Argentina; however, due to COVID-19 and the travel restrictions, this was delayed to 2021.

¹see Glossary.

To set those targets and develop our framework, we aligned with the Joint Monitoring Programme for Water Supply, Sanitation, and Hygiene (JMP) established by the World Health Organization (WHO) and UNICEF.¹ Our WASH program is following JMP´s service ladder, which starts with basic water access defined as from an improved source and less than 30 minutes away. Currently many of our farmers are using unimproved sources, often more than 30 minutes from their home, which means that the next few years will be focused on monitoring WASH access, mapping water source locations, and building new infrastructure (or improving existing infrastructure) where needed. In 2020, we also developed global WASH Monitoring Guidelines to standardize our approach (again connecting with JMP) and have shared these with our suppliers. In 2021, we will collect WASH data through farm-by-farm monitoring in the field, applying JMP’s universal indicators to determine our final WASH priority markets, setting a baseline for each of them.

During the year, together with our suppliers, we continued the work started in 2019 in our two preliminary priority countries, building 47 hand-pump boreholes in Malawi and 50 in Mozambique—with each borehole estimated to benefit approximately 500 people in Malawi and 1,000 people in Mozambique —while continuing to raise awareness around WASH among community members. The economic benefits of improved sanitation can include increased productivity, reduced healthcare costs, and the prevention of illness, disability, and early death. People who have access to clean, safe, and convenient sanitation services also experience greater dignity, privacy, and security. This is especially important for women and girls, who may miss work or school when they are menstruating and do not have access to safe sanitation facilities. It also reduces the risk of sexual assault by reducing the walking distance to water sources.

¹WHO/UNICEF Joint Monitoring Programme for Water Supply, Sanitation and Hygiene (JMP).

Since the inception of our ALP program, gender equality and fair treatment have been included as key principles in all the countries where we source tobacco. Gender equality is not only a fundamental human right but a necessary foundation for a peaceful, prosperous, and sustainable world. When we evolved our ALP program to include a Step Change approach in 2018, our objective was to address the root causes of the most prevalent and persistent issues in our tobacco supply chain. We saw an opportunity to strengthen our approach, considering the instrumental role women play in improving household economic conditions, while also addressing child labor and other social challenges.

We included women’s empowerment as one of the 10 principles of our Step Change approach. Based on local needs, we are developing targeted initiatives in several priority countries.

Our activities include conducting focused women’s training, hiring female field technicians to perform farm-by-farm monitoring, financial literacy training, and empowering women through entrepreneurial opportunities to bring positive change to their households and communities.

A representative example of our work on women’s empowerment is found in India. Alongside the local NGO, ASSIST, we support Self Help Groups (SHGs) developed by local government. In 2020, we rolled out a project with the aim to build entrepreneurial capabilities of 200 women, members of the SHGs, by training them on financial and organizational skills. ASSIST uses a “train the trainer” approach equipping selected women with knowledge to empower and train others after them. Some 100 women from 11 SHGs, after having received training, have been selected to set up their own microbusinesses; these include dairy farms and grocery stores. In turn, they will support the funding of microbusinesses for 100 new beneficiaries, creating a positive domino effect. The approach is that all women participating in the project are committed to support other women within the community by donating a portion of their profit to ensure continuity, reach, and greater impact. In 2021, we plan to train an additional 200 women who can in turn further cascade their knowledge and provide funding for 100 additional women.

We have developed and are implementing action plans to address these recurrent issues in collaboration with key stakeholders, including our strategic partner Verité, local NGOs, and governments. While Control Union was able to finalize their assessment in Argentina (covering two suppliers) early 2020, due to COVID-19 no additional external assessments were conducted during the year. However, local expert organizations were able to complete external verification in some priority countries. External verification allows us to evaluate the effectiveness of our initiatives and the accuracy of our internal monitoring. In 2020, we completed external verifications in seven markets: Three where we conducted an external verification for the first time (India, Malawi, and Mozambique), and four where we did it for the second time, in order to assess progress (Argentina, Indonesia, Mexico, and Turkey).

Furthermore, in 2020 we conducted a human rights impact assessment in Mozambique, the first one targeted on our tobacco supply chain, in collaboration with a peer company and our common tobacco leaf supplier. This assessment focused on identifying and addressing human rights risks and impacts resulting from our production and supply chain activities there.

The overwhelming majority of our relationships with contracted farmers feature a shared commitment to continuous improvement in addressing social issues. In the event of a contracted farmer’s noncompliance and a continued failure to address gaps identified, we may end our business relationship with that farmer. In 2020, 1,794 contracts were terminated due to ALP violations (up from 641 in 2019). Some 83 percent of the increased number of contract terminations in 2020 was due to child labor violations, predominately coming from Mozambique and Turkey. The increase can be attributed to the introduction (in 2019) of standardized guidelines related to due diligence, consequence management, and rewards.

To further support compliance, in 2020 we reviewed our ALP training materials (including some developed locally) and delivery methods. In terms of content, our objective is to update the training materials to align with changes on the ALP code, reflect changes driven by our Step Change approach, and bring consistency across sourcing markets. When it comes to delivery methods, we are exploring options and potential solutions accessible to all people working within our ALP structure, including suppliers’ relevant personnel and field technicians.

First of all, our field technicians, where possible, continued performing farm-by-farm monitoring and supporting farmers to address and remedy child labor incidences. Such support included awareness-raising and training (often redesigned to be delivered virtually); efforts to promote school access and attendance through scholarships, school feeding programs, afterschool activities, and improvements in school infrastructure; vocational training for older children; and initiatives to improve household income levels such as women’s self-help groups.

In markets where community initiatives, key to preventing child labor, could not be implemented due to restrictions, programs have been redesigned and funds reallocated to ensure continuous support to children and their families. For example, in Mexico, PMI-funded migrant childcare centers were closed due to the pandemic. In response, and in partnership with our supplier and a local implementing partner, we delivered food baskets to more than 180 migrant families reaching over 370 children that could not attend the centers. A similar approach was taken by our team in India, where food baskets were provided to over 800 families who were under full lockdown.

Our progress toward our target of zero child labor is measured based on internationally defined ILO standards. It includes the following three categories: Children performing hazardous tasks, children under 15 hired, and children under 13 doing any tobacco related tasks. In this respect, in 2020 we enhanced our reporting on child labor issues by expanding its scope to include the latter two categories. During the year, field technicians monitored 99 percent of farms for child labor related issues and recorded a total of 2,352 prompt actions. Out of that, 2,285 cases involved children performing hazardous tasks (versus 2,712 recorded in 2019), three cases of children under 15 hired, and 64 cases of children under 13 working. In total, these prompt actions involved 2,502 children, with 95 percent of them being the farmers’ children. A significant proportion of child labor incidents (1,560 prompt actions) were recorded in Turkey across a farmer base of around 23,600 farms. These involved 1,692 children, of which over 99 percent were family members. The predominant activities performed by these children were harvesting or handling green tobacco and stringing.

Regarding prompt actions raised for children performing hazardous tasks, there is a reduction from 2019 figures mainly driven by farm base consolidation efforts conducted in Mozambique and Malawi. Of the 2,352 prompt actions recorded in 2020, 75 percent were resolved and the remaining 25 percent were being followed up against the action plans developed with concerned farmers. This is a decline from the previous year, mainly due to local initiatives impacted by COVID-19 restrictions. The most common hazardous tasks our technicians found children doing were harvesting or handling green tobacco (49 percent), followed by stringing (26 percent) and working with sharp tools (9 percent).

Despite this decreasing trend, we remain cautious and acknowledge the limitations of our monitoring system. For example, field technicians are only present on the farms for a limited time during the growing season, and the COVID-19 pandemic restricted their ability to conduct regular visits in some countries (read more: Sustainable supply chain management). Moreover, the issues we face are complex and often persistent.

In many geographies, external assessments related to child labor are reasonably well aligned with our internal monitoring data, which show that we are enhancing the visibility on the ground and the accuracy of our data. However, in two countries, Mozambique and Turkey, significant discrepancies were revealed. In those instances, we focused on engaging our suppliers, understanding the causes of discrepancies, and developing and implementing action plans to strengthen the internal monitoring. More concretely, we increased the number of unannounced visits performed by ALP supervisors, strengthened the due diligence and consequence management process, and reinforced internal capacity on ALP monitoring and reporting while introducing in-depth data analytics. Both countries will reconduct external verification in 2021.

The challenges relate to not only substandard payment amounts but also informal terms of employment, inconsistency between supply and demand of labor, and workers’ lack of knowledge on their rights. Another challenge we face in some countries is the lack of applicable legal minimum wage or formalized agricultural benchmarks. Read the example of Argentina in our case study.

Improved visibility on workers’ wages via our monitoring system enables us to take steps to tackle the issue and ensure farmers pay the required minimum wage. We reiterated our expectations to farmers on this matter, in line with local laws. We also equipped farmers and workers with tools—such as time-recording templates and payment records—to help them track work hours and calculate payments in line with the minimum wage, a task that can be challenging when piece-rate payments or partial in-kind payments are the norm.

In countries where the pay gap is significant, we provided financial literacy training to farmers and supported them in improving their farm productivity and efficiency—and, thus, their overall incomes—to better position them to pay the minimum wage to their workers. A key component of this effort is helping farmers manage their costs responsibly by only hiring workers when necessary and according to their land size. In Mozambique, for example, our supplier ran an awareness campaign on over-hiring that discouraged farms of 0.67 hectares and below to hire full-time workers, which resulted in a 60 percent reduction of farms hiring full-time workers in this category.

In certain geographies, there are important challenges to formalizing minimum wages. For instance, in India, where a national minimum wage is a challenging issue, our third-party assessment showed that several farmers were paying below the minimum wage and that women workers often were paid less than men for the same type of work, in clear violation of the ALP Code. Informality of the labor employment has been one of the biggest challenges in enforcing compliance with the national legal minimum wage. Workers are commonly hired for certain tasks and they are paid through different payment terms such as daily payment, volume based, and piece rate. And it is common that farmers and workers agree on a fee, which although in line with prevailing community rates, is often lower than the legal minimum wage. To understand better the complexity of this issue, in 2020 we conducted a desk research with the support of twentyfifty, a human rights and business consultancy. The objective of this research was to understand the factors influencing the wage setting mechanism in the agricultural sector through stakeholder engagement of different companies and organizations. The key finding from this benchmarking exercise is that awareness, lack of documentation of wages, and enforcement of national minimum wage is still weak. Furthermore, we expect that our efforts to promote a living income for our contracted farmers will in turn help advance income levels for their workers. Our main focus in that regard will be to increase farmer’s efficiency and productivity. We will also explore the introduction of mechanization for different tobacco stages. On top of that, given the vulnerability of women in the rural economy, we also developed projects on capacity building and financial training, as well as self-help groups that work with existing governmental programs and microbusiness initiatives.