Investor Presentaiton

MVO NEDERLAND ADDITIONAL CHALLENGES IN THE COFFEE SECTOR In this section, challenges in the coffee sector will be elaborated upon, based on the CSR Risk Check, external sources and stakeholder interviews, and to a lesser extent on our observations during field visits and meetings with sector organisations and the government. Nevertheless, this section provides some issues that from a due diligence perspective need to be taken into consideration and addressed when building a partnership with Brazilian coffee producers. - Forced labour Forced labour remains an issue in the Brazilian coffee sector, with a relatively high number of recorded cases. In 2018, the authorities found over 200 employees in coffee estates in conditions similar to slavery, the worst figure in 15 years. Apart from forced labour, the Brazilian interpretation of 'conditions similar to slavery' also includes debilitating workdays, degrading conditions and debt bondage. 10 From interviews with land owners and coffee farmers comes an image of rules and regulations - such as the thickness of matrasses, the distance to the closest restroom and number of lights - that, in their opinion cause a distorted picture. Nonetheless, given the number of cases, forced labour is an issue that should be taken into account. To help end slavery, Brazil uses a "Dirty List”: a registration of all companies where employees were found working in conditions similar to slavery. In 2013, 15 coffee estates were still on the list, almost all of which fulfilled two or more conditions of slavery. The list of 2018 included four coffee farms in Minas Gerais.11 10 https://reporterbrasil.org.br/wp-content/uploads/2017/05/Farmworker-Protections-and-Labor- Conditions-in-Brazil%E2%80%99s-Coffee-Sector.pdf 11 https://reporterbrasil.org.br/2018/12/recorde-de-casos-de-trabalho-escravo-em-fazendas-de-cafe/ 12 https://reporterbrasil.org.br/wp-content/uploads/2017/05/Farmworker-Protections-and-Labor- Conditions-in-Brazil%E2%80%99s-Coffee-Sector.pdf There seem to be more labour irregularities, including forced labour, in mid- sized and upland coffee estates, according to research by Repórter Brasil. Mid- sized companies are too big to rely on family labour but also too small to invest in machinery to replace labour. And estates located upland simply cannot mechanise due to the hilly terrains. As the use of labour is higher in mid-sized and upland coffee farms, this also increases the risk of labour irregularities. 12 Labour conditions The coffee sector often works with seasonal workers during harvest time. The seasonal workers, especially from employment agencies, get lower salaries and have longer working times compared with regular workers. A recent investigation by Danwatch revealed that 40% of agricultural workers in Minas Gerais, many of whom work on coffee plantations, are paid less than the minimum wage, and around half work without a contract. 13 Workers are often paid based on their productivity. If the conditions are right, the company pays well and the worker is productive, he or she could earn a lot but if harvesting becomes difficult (due to rain, for example), it could mean that workers end up earning less than the minimum salary. Informality is seen as the main problem for labour irregularities and first stage of labour exploitation. Apart from payments below the minimum wage and informality, other labour irregularities in the coffee sector include insufficient health and safety procedures and equipment (e.g. using pesticides without proper protection). Even estates with international certifications have these labour irregularities, according to a study by Repórter Brasil, carried out with support from the Embassy in 2016. The report indicates that the lack of enforcement and the low fines make it difficult to improve labour conditions. 14 Labour laws were reformed in 2017, but according to Repórter Brasil 15 it has only become more 13 https://old.danwatch.dk/wp-content/uploads/2016/03/Danwatch-Bitter-Coffee-MARCH-2016.pdf 14 https://reporterbrasil.org.br/wp-content/uploads/2016/12/Cafe%CC%81_ING_Web.pdf 15 In a phone call on 30 July 2019 15

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