Bananas: The Path to Sustainable Pricing

BananasBananas are some of the most delicious—and cheapest—fruits you’ll find in the supermarket. Nutritionally dense, packed with potassium and other micronutrients, bananas sell for astonishingly low prices, especially when you consider that they’ve travelled thousands of kilometres to arrive in your fruit basket. Bananas require a precise temperature to ripen properly and gentle handling methods to prevent bruising or other damage. However, these efforts—the costs of specialized harvesting, shipping, and processing—are not reflected in the final price.

Julie Sage of Discovery Organics, an organic and fair trade produce distributor based in Western Canada, points to the supply chain: “The biggest banana importers are vertically integrated. This means they can control costs at every step, from cultivation to harvest, to packing, shipping, and delivery.”

While it’s no question that economies of scale play a role in managing costs, a lack of regulation and oversight in terms of worker wages and rights and environmental impacts means big banana importers can save money in less ethical ways as well.

Costs of Banana Production
ResiprocateIn a 2017 study, Fairtrade International partnered with two organizations, True Price and Trucost, to determine and compare the costs of conventional and Fairtrade banana production. Both True Price and Trucost aim to educate consumers and organizations by conducting research on sustainability and the environmental impact of the goods and services.

This particular study used a series of calculations to quantify the negative external costs involved in banana production in Colombia, Dominican Republic, Ecuador, and Peru. In simple terms, negative external costs or “externalities” are the detrimental impacts on people or society that are not accounted for in the standard costs of production. For example, if fertilizer pollutes a nearby lake, the rest of society must “pay” for it with unsafe drinking water, a threatened food supply from reduced fish populations, and rising healthcare costs from ingesting the toxic chemicals. Likewise, if a worker becomes ill from poor working conditions, the financial impact on a banana company is minimal, especially if it does not provide benefits or sick days. The worker, however, must pay with lost wages, treatment costs, and impacts on financial security.

The study separated negative externalities into two categories: social costs and environmental costs. Social costs included potentially exploitative labour practices, such as low pay, gender discrimination, unsafe working conditions, harassment, and the like. Environmental costs were defined as pollution and waste, water depletion, climate change, and land use.

The study found that the external costs of the industry came to an average of US$6.70 per box of bananas. In essence, this means each box of bananas costs an additional US$6.70 in environmental and social impacts. Considering the sheer number of bananas produced and exported throughout the world, this seemingly small number adds up. And while Fairtrade bananas fare better, they too are accompanied by external costs, calculated at US$3.65 per box. Because of Fairtrade’s focus on worker well-being, much of the difference is a result of lower social costs. In contrast, environmental costs vary from country to country but are somewhat consistent between conventional plantations and Fairtrade producers, implying that all growers face similar challenges in this particular area.

Limiting External Costs
How can producers reduce the social and environmental impacts of banana production? The study offers a few suggestions, like better training for workers and more productive farming techniques. With these initiatives, resources like water, fertilizer, and energy can maximize yields without increasing environmental costs. In addition, these practices can make operations more efficient for the company. Tackling social externalities is often a greater challenge, since empowering workers and providing more employee benefits do not represent cost savings for banana companies.

CaminoResetting Consumer Expectations
Sage worries that consumers have grown accustomed to rock-bottom banana prices and may have difficulty accepting prices that account for worker wages, environmental impacts, and other costs.

Other barriers stand in the way as well. Many grocery chains have entered into exclusive contracts with large banana importers, and this keeps them from signing on with a more sustainable supplier.

Bananas are often marketed as loss leaders, steeply discounted to entice customers into a store. Because grocery stores already make so little from banana sales, they may be reluctant to take on the risk of pricier (yet more sustainable) bananas, especially if they do not believe customers will see the value in spending more. Despite all this, there are promising developments.

Working Together to Find Solutions
Delegates and stakeholders around the world gathered in Montreal this past October for the World Banana Forum to discuss best practices, challenges, and collaboration in the banana industry. The forum runs year-round, with working groups focused on improving environmental, economic, and social sustainability.

Jennie Coleman, president of Equifruit, the only Canadian member of the World Banana Forum, is encouraged by the participation of multinational banana chains in the forum’s working groups. Coleman said, “Much like Walmart or McDonald’s, these large organizations can make huge positive impacts downstream by adopting progressive policies that better respect workers and the environment.”

Shifts in consumer awareness and a growing demand for socially responsible goods may pressure banana companies to make more sustainable choices and lead retailers to offer ethical alternatives. Members of the millennial and Gen Z cohorts have significant purchasing power, and studies have found that they place a higher value on ethical products, with sustainability as one of their primary concerns when making a purchase. Older generations, too, are more likely to pay extra for socially and environmentally sustainable products than they were even a few years ago.

The success of specialty health and grocery stores shows that modern shoppers are willing to pay for sustainable products. In light of this, consumers may very well be ready to support a more sustainable banana industry even if it means paying more, as long as social and environmental externalities are minimized, and the costs of the product are fair for everyone—including the people who grow them.

Author: Kimberly Leung is a Toronto-based freelance writer with a special interest in sustainable and ethical living.

Originally published in Fair Trade Magazine - Winter/Spring 2019 Edition