Child Labor and the Citrus Industry in Brazil

Presentation Roadmap

• The Citrus Industry in Brazil

• Child Labor and Cargill’s Challenges

• Responsible Supply Chain Management

Citrus Industry in Brazil

• Two main players in global citrus fruit production:– São Paulo, Brazil (#1)– Florida, U.S.A. (#2)

• These two regions produce 85% of world orange juice supply

• Brazil exports 99% of its production• Harvest period is from June to

February• Primary products:

– Fresh fruit– Frozen concentrated orange juice– Not-from-concentrate orange juice

Orange Juice Supply Chain

Orange Producers (Growers)

• Supply of fruit to major juice producers in Brazil:• 80% - Long-term

contracts with medium and large scale farmers

• 20% - From farmland owned by the juice producer

• Small independent growers sell to fruit merchants or co-ops

Juice Processors• Processor/Packers:

• Sell juice packaged under their own brands

• Retail distribution and consumer marketing

• Largest are in Florida• Bulk Juice Processors:

• Sell in large quantities to juice packers

• Requires efficient logistics infrastructure

• Distribution and marketing of agricultural commodities

• Processors in Brazil are primarily in this category

Transportation• Bulk products are shipped in

tanker vessels, tanker trucks, or individual containers

• Efficient shipping is essential for citrus products

• Largest Brazilian producers have port terminals in Brazil, Europe, Japan, and the USA

• Terminals are specialized to handle frozen concentrated juice using tanks

Cargill

• Privately held international producer and marketer based in the United States

• Business Segments:– Agriculture Services– Food Ingredients & Applications– Origination & Processing– Industrial– Risk Management & Financial

• 131,000 employees in 66 countries• $107.9 billion revenue, $2.6 billion net earnings in FY 2010• Parent company of Brazilian subsidiary Cargill Agrícola S.A.

Cargill Agrícola S.A.

• Formed in Brazil in 1965• Began operating in the citrus sector in 1976 attracted by low

costs and high profit margins• In 1980 Cargill was the only multinational company in the citrus

sector in Brazil• At this time orange production increased by 57%.• In 2002 Cargill was still one of largest companies in the citrus 

industries in Brazil.• Sold to competitors Citrosuco and Cutrale in 2004• Cargill benefited from lower production costs due to child labor

used by its suppliers

Cargill’s Competitors

Juice processor, subsidiary of Brazilian based Fischer Group

Brazilian based citrus grower and juice processor, privately owned

Bascitrus (Brazilian) Citropectina (Brazilian)Dreyfuss (French) Coinbra-Frutesp (Brazilian)

Industry Organizations

Abecitrus• Brazilian association for citrus

exporters formed in 1988 • Goals:

– Lobby and influence legislation in Brazil – Manage international reputation of

Brazilian products.

• Members, including Cargill & Citrosuco, were dissatisfied with governmental interference in the industry

• Members signed the Pact of Araraquara in 1996 which pledged to eliminate child labor

• Replaced by new organization CitrusBR in 2009

Procitrus / Fundecitrus• Procitrus was aimed to

develop research for the citrus sector (formed in 1992)

• Absorbed by Fundecitrus in 1995, a research-oriented scientific institution

• Fundecitrus was one of the first institutions to cooperate in the eradication of child labor in the citrus sector and conducted research in this area.

• Founded by Cargill, Cutrale, and Citrosuco

Cargill’s CSR Policy

• Cargill’s current Corporate Responsibility policy, as stated on their website:– Work with industry, governmental, NGO, and local

community partners– Identify and encourage adoption of responsible

and sustainable supply chain practices– Committed to:

• Conducting business with integrity and responsibility

• Treating people with dignity and respect• Helping to protect and conserve the environment

– Cargill is a signatory to the Brazilian National Pact for the Eradication of Slave Labor which monitors suppliers

– They will not do business with suppliers who appear on the list

 Overview of Child Labor • Closely related to level of education, economic development, employment and general

development of a country. • Child labor is a concern when the work conditions harm a child's physical, mental,

educational, social, emotional and cultural development. • Biggest dangers include working long hours under the sun or in cold weather, using

unsafe tools and machines, carrying heavy loads and even dangerous animals in the area.

• In 2008 215 million children working illegally, 115 million under age 18 engaged in "hazardous work.“

• The international minimum age of legal employment is 15.• Basic factors that cause child labor

o Migration o Imbalanced income distribution o Insufficient education o Population growth o Unemployment o Poverty o Ineffective law enforcement o Unpaid family labor

Child Labor Around the World

Child Labor in Brazil Today

• Still a problem in Northeast Brazil, where child labor is justified to survive

• Although has decreased, still 4m Brazilian children (aged 5-17) working

• Generational cycle: Brazilians who grew up working don’t see a problem with it

• President Lula’s Bolsa Família program provides financial incentives to poor families

“To force a child to work is to steal the future of that child”

Cargill’s Challenge with Child Labor

• Company’s priority had to shift from lowering costs to instead, working to eliminate child labor in their supply chain

• Pressure on keeping costs low was concentrated on worsening labor conditions

• Reputation was damaged from involvement with child labor in the production chain

The Double Effect Dilemma

Positive Objectives and Results

Negative Side-Effects

No child labor at immediate end of production chain

Producing a good product, creating jobs, and paying taxes

Supporting existing citrus fruit demand with profitable margins

Legitimate and legal means: breaking no laws

Children working on farms where citrus fruit trees grew

Most of these farmers were Cargill’s suppliers

Cargill’s low cost of production partly due to child labor

Children’s education jeopardized while not in school, against Brazilian laws

Company Objectives

Minimize Costs

Supply Chain Considerations?

Control Risks

Identify Competitive Advantages

Responsible Supply Chain Management

“The company that wants to control its risks related to corporate reputation and protect its value, begins by ensuring an adequate management of the supply chain.” –The Business & Its Supply Chain: A Management Alternative

Assessing Risk in Supply Chains

Management Protocol

Recommendations

• Conduct supply chain risk assessments on a regular basis

• Perform adequate supply chain management based on risks

• Continue the success of Cargill’s educational initiatives, perhaps expanding to supplier regions

• Work with government and other stakeholders to update laws and raise public awareness about child labor

Thank You!

Questions?

ReferencesNestle, ADM and Cargill go to court over cocoa child labourhttp://www.foodnavigator.com/Financial-Industry/Nestle-ADM-and-Cargill-go-to-court-over-cocoa-child-labour

U.S. Department of Labor: Child Labor in Brazilhttp://www.dol.gov/ilab/media/reports/iclp/Advancing1/html/brazil.htm

Cargill:  Responsible Supply Chainshttp://www.cargill.com/corporate-responsibility/responsible-supply-chains/index.jsp

United States Department of Labor, 2008 Findings on the Worst Forms of Child Labor - Brazil, 10 September 2009.http://www.unhcr.org/refworld/docid/4aba3eed8.html

Child Labor of the worst conditions: child laborers cotton produciton in Turkey by Bulent Gulcubuk, 2010 Academic Journalshttp://www.academicjournals.org/ajar/PDF/pdf%202010/18%20Jun/Gulcubuk.pdf

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Child Labor Laws in Brazil by Jack Rella, December 1, 2009http://www.ehow.com/about_5218293_child-labor-laws-brazil.html

Child Labor Went Down in Brazil, But 5 Million Underage Workers Are Still Way Too Many, Nov. 2009http://www.brazzil.com/component/content/article/210-november-2009/10299-child-labor-went-down-in-brazil-but-5-million-underage-workers-are-still-way-too-many.html

Guide for Responsible Management of Supply Chain (UN Global Compact)http://www.pactomundial.org/recursos/doc/Publicaciones/ASEPAM/23526_3133132009182520.pdf

International Labour Organization (ILO):  International Programme on the Elimnation of Child Labour (IPEC)http://www.ilo.org/ipec/lang--en/index.htm

How Brazil Became the Saudi Arabia of Orange Juice, John Freivalds, Brazilmax.com, 2/6/2007.http://www.brazilmax.com/news.cfm/tborigem/fe_business/id/7

Rat Droppings, Lawsuits Don't Faze Brazil's OJ Leader Cutrale, Michael Smith, Bloomberg, 2/27/2006.http://www.bloomberg.com/apps/news?pid=newsarchive&sid=atNBtl.rLou0&refer=latin_america

CitrusBR (replaced Abecitrus in 2009)http://www.citrusbr.com/en/

Brazil Expands Program to End Child Labor by Joelle Diderich, Febuary 6, 1998http://www.pangaea.org/street_children/latin/brazilabor.htm

Child Labour Guide, November 20, 2010http://uk.oneworld.net/guides/childlabour

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Child Labor in Brazil: The Government Commitment http://www.america.gov/st/democracyhr-english/2005/May/20080818095109SrenoD0.6863672.html

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