Bonsucro Certification Results in Benefits For Sugarcane Mills

17 Nov 2014 --- Investments in compliance with the Bonsucro Production Standard have resulted in significant operational benefits for mills with cane under management in Brazil. Bonsucro certification also proved to be a driver of legal compliance, leaving milling companies less exposed to legal liability. These research results were announced at the annual Bonsucro Week in Manila, The Philippines.

Michelle Morton, Biofuels Sustainability Manager at Shell: ‘This study brings much needed independent evidence regarding the economic benefits of Bonsucro certification and also clarifies the impacts of full legal compliance in Brazil.’

Solidaridad, the International Finance Corporation (IFC) and Royal Dutch Shell have commissioned a study to better understand the business case for Bonsucro compliance and certification. The outcomes are meant to inform players in the sugarcane supply chain, as well as Bonsucro itself about the costs and benefits of using the Bonsucro Production Standard.

The study was carried out by Agroicone, a leading Brazilian research agency in the fields of agriculture, energy and sustainability. An oversight committee made up of the research funders provided the research team with guidance on the process, while ensuring independent analysis by Agroicone.

The results of the study show a payback period of less than 12 months for investments made in Bonsucro compliance and certification, provided the costs for reaching legal compliance are left out of the equation. Under this scenario, the Net Present Value of Bonsucro certification is 0.25 – 0.30 US $ per ton of sugarcane (i.e. 2 – 2.4 US $ per ton of sugar).

<Bonsucro> operates the most widely used global standard for sustainable sugarcane production and processing. Since its inception in 2011, 39 mills were certified representing 3.7% of land under cane globally. The majority of these mills is based in the Centre-south of Brazil.

The determining cost factor for the NPV is related to reaching legal compliance, as required by Bonsucro Principle 1 (Obey the law). The study sample showed sizable differences in costs levels, ranging from negligible to 1.4 US $ per ton of sugarcane.

Operational benefits far outweighed marketing benefits, reduced legal liability and premiums. The researchers included input costs related to pesticides and fertilizers a well as a decreased absenteeism rate and work accident rate in the calculation of operational benefits. Operational benefits were larger for more traditional mills than for modern mills.

The positive Net present value, NPV and short payback period mean that Bonsucro certification can be beneficial without a price premium.

Sven Sielhorst, International Programme Manager Sugarcane at Solidaridad: “ This is consistent with the idea that sustainable production should be a market qualifier, instead of a market differentiator. However, the prospect of a temporary premium may critically lower the barrier for mills to invest in Bonsucro certification. This is particularly relevant for mills that require considerable investments.”

While the research was sufficiently rigorous to assume that the results are valid and relevant, it is important to make some footnotes to it. The mill sample size is relatively modest (12 mills from 6 mill groups) and not representative of mills throughout Brazil or the rest of the World. Both costs and benefits are expected to be higher for the vast majority of mills globally. Also, the methodology for quantifying and validating benefits from compliance and certification is still prone to improvement.

It is therefore recommended to repeat an improved study as the international experience with Bonsucro certification grows over time. Also, a similar study is recommended for farmers that work towards compliance with the Bonsucro Production Standard.

Solidaridad, IFC and Shell wish to express their sincere gratitude to the mill groups that have participated in this study.