Chapter 3:  Premium 

To make sectors truly sustainable, we believe that both the value and the risks must be shared across the supply chain. In our Standard, we aim to distribute the benefits and costs of certification more evenly between farmers and companies.  

With version 1.4 of the Standard, our approach to Shared Responsibility is changing. In this section, we will discuss the changes for Farm Certificate Holders. 

You can review all changes to this chapter in the Resources section. 

                               

Our new approach to Shared Responsibility  

With the 2020 Sustainable Agriculture Standard, we introduced the Sustainability Differential (SD) and Sustainable Investment (SI).    

This was a bold and courageous step, with the aim to:  

  • Improve Shared Responsibility across supply chains  

  • Promote fair supply chains  

  • Create a race to the top in terms of sustainability 

The idea was that, through a transparency tool, certificate holders would be able to improve their bargaining position while unlocking investments from their buyers.  While the approach to SD and SI was ambitious, we recognize that there were challenges in its uptake by market actors, and transparency around prices has not influenced market dynamics as expected. However, this experience has provided valuable insights. 

We took on a difficult challenge, and while it didn’t yield the results we expected, we are learning, adapting, and evolving. 

Our new approach:  

  • We listened to feedback that stakeholders found the terms “SD” and “SI” unnecessarily complicated. This is why we are using the term “premium” moving forward.  

  • We have merged investments previously made through both the SD and SI (cash and in-kind) into a single, simplified premium by volume.  

  • For companies and brands who want to go above and beyond premium payments and make specific investments in farms or farm groups that are not related to volume, we are developing mechanisms to make such investments outside of our Sustainable Agriculture Standard.  

                               

What has changed compared to the previous version? 

  • At least 40% of the premium should go to group members and should be paid in cash or other monetary funds, and not in kind. Before, 100% had to go to group members. 

  • The remaining premium amount kept by group management should be spent in ways that benefit producers or workers.  

  • Supply Chain Actors must pay the minimum required amount. At this point, only one crop (cocoa) has a minimum recommended amount. More information about specifics per crop can be found in the Annexes on premium. 

  • We will no longer ask for a detailed account of how group members spend premium.  

                               

Why is reporting on premium important?   

Reporting on premium is mandatory regardless of the amount. This helps in monitoring the program's impact on producers and promotes transparency to buyers.  

                               

Process for contract and reporting:

STEP 1 

Premium as part of contract or agreement 

Producer and buyer set up contract or agreement stating: 

  • Premium (regardless of amount) 

  • Terms and conditions of payment by period/cycle 

STEP 2 

Payment and reporting in traceability platform 

  • Buyer must pay the minimum required amount (if applicable) 

  • Certificate Holder reports on premium in the traceability platform (regardless of amount)  

STEP 3 

Payment to group members 

  • Group management distributes at least 40% to group members in cash or through other monetary payments 

STEP 4 

Reporting in management plan 

Management documents:  

  • Premium received by volume and in total amount  

  • The amount paid to group members 

  • How premium is utilized by group management 

 

Last modified: Monday, 6 January 2025, 4:27 PM