UTZ GUIDANCE DOCUMENT
UTZ PREMIUM (Version 1.0 | August 2016)
Guidance on premium, as required in the UTZ Core Code of Conduct for group and multi-group certification (version 1.1)
This guidance document is part of a set of documents designed to assist with implementation of specific topics within the UTZ Core
Code of Conduct.
This document is intended for use by farmer groups and the technical assistants supporting them in the certification process.
UTZ AND PREMIUM
A better crop is a key driver for a better livelihood and the
UTZ premium is an important incentive for producer groups
and their members to implement sustainable farming
practices. The UTZ premium is an additional pay to cover
the investments for the implementation of certification, but
also to reward group members for their efforts to produce
sustainably. UTZ aims to create transparency on the
amount and use of the UTZ premium to make sure farmers
benefit.
The aim of this document is to
BOX 1 •• Explain the UTZ approach to the premium;
•• Inform groups and their trainers on how to use and distribute the premium
correctly and transparently
•• Show groups and trainers what documentation is required on premium use.
WHAT IS THE UTZ
PREMIUM? ABOUT THE UTZ PREMIUM AND GROUP MEMBER
PREMIUM
The UTZ Premium is an additional The UTZ Code of Conduct covers the UTZ premium and the Group member
cash amount paid above premium. The UTZ premium is a cash amount paid by the first buyer to the
the market price for a similar certified producer group. The payment of premium is mandatory, but the
conventional (non-certified/non-
amount depends on the negotiation between the buyer and the producer
verified) product, because the
product is sustainably produced group. The UTZ premium that is paid to the group is net of any deductions for
and meets the UTZ standards. repayment of pre-financed goods or services and is entered in the Good
The UTZ premium is mandatory Inside Portal (GIP)i. This means that the amount visible in the GIP is the actual
and agreed upon between the amount that the group receives in its bank account.
certified group or producer and
the first buyer. It is paid net of any
The producer group allocates the UTZ premium to pay for: group
deductions for repayment of pre-
financed goods or services and is management costs (e.g. audits); products and services used for the group
registered in the UTZ Good Inside (e.g. training); and in-kind or cash payments to certified group members.
Portal. The part of the UTZ premium that is forwarded to the certified group members
is called the Group member premium.
The Group member premium
is the part of the UTZ premium
received by an UTZ certified group
BOX 2: what does the Code say (version 1.1)
that is forwarded to the individual
group member, in cash and/ G.A.26
or in kind. The group member •• A “Use of UTZ premium” procedure is in place and communicated to
premium does not include group group members.
management spending (such as •• The UTZ premium clearly benefits group members in cash and / or in
use of premium for audit costs and kind.
other administrative purposes), •• The procedure and records cover: group management spending (e.g.
nor services or products delivered audit cost); products and services delivered to the group (e.g. training,
to the whole group/community storage facilities); and Group member premium; benefits in form of cash
(such as facilities or trainings). or tangible goods (in kind).
•• Records are kept updated.
G.A.27
•• The Group Member premium is paid in a timely and convenient
manner.
•• Prices, premiums, and timing of premium payment are clearly
communicated and transparent to group members.
i
UTZ is aware that some producer groups receive (large) in-kind investments
that in some cases are considered similar to premium payments by first buyers.
However, knowing the complexity of quantifying the in-kind investments in a
consistent and transparent way across products and countries, UTZ decided
to firstly address transparency on the payment of the cash amount from first
buyer to producer groups.
2 - © UTZ Version 1.0 - August 2016
UTZ does not prescribe how the UTZ premium should be divided between
management, group and group members. However, the Code requires
that certified group members should clearly benefit from the UTZ premium.
This means that not all UTZ premium can be spent on management. Group
members should be informed how the premium is used for management,
group and group members.
Allocating the UTZ premium
The allocation of the UTZ premium is depicted below:
UTZ premium:
Good Inside Portal
Cash registered in GIP
Management Products and services Group member premium
for the group (in cash and/or in
tangible goods)
Group members clearly
benefiting from UTZ
premium
The UTZ premium may be spent on, for example, the following:
For group management:
•• Training for group staff (IMS staff, and workers at central locations)
•• Compensation for internal inspectors and child labor liaisons, where
relevant
•• External audit
For products and services delivered to the group:
•• Training for group members, workers and their families
•• Technical advice from service providers
•• Facilities, such as nurseries and storage
•• Community development
Provision of cash and inputs for group members, such as:
•• Tools, planting material, pesticides, fertilisers and shade tree seedlings.
•• Additional payments
UTZ does not prescribe how groups should allocate the premium to different
categories and does not require provision of free inputs, tools or cash to
farmers. However, allocating some part of the premium to cash or in kind
payments to farmers is often advisable, since it can be a way to reduce side-
selling and increase loyalty. For transparency reasons we advise the following:
•• Involving group members in deciding on the allocation and use of the
premium
•• Regular and clear communication from the group to its members
•• Proper records and documentation, which staff and group members can
access
•• Recording UTZ premium in the Good Inside Portal through which the total
UTZ premium is visible and thus transparent to both the group and the first
buyer.
Guidance to the Core Code of Conduct for group certification version 1.1 - 3
Example of how an agreement for UTZ premium is reflected in the Good Inside
Portal:
WHAT TO HAVE IN PLACE?
Setting up a procedure for the use of UTZ premium.
YEAR 1 YEAR 2 YEAR 3 YEAR 4
Create a procedure on the use of
the UTZ premium and ensure that
the UTZ premium clearly benefits
group members in cash and/or in
kind.
Communicate the procedure
to group members through
for example contracts, letters,
announcements, or posters. Keep
records of your communications.
The procedure on the use of UTZ premium (G.A. 26) should explain:
•• Who is involved in deciding the allocation of the UTZ premium;
•• The factors (percentages) that determine the allocation of the UTZ premium between group management spending, products
and services for the group, and Group member premium;
•• The factors (percentages) that determine the allocation of the Group member premium to cash and/or in kind investments;
•• How and when the Group member premium will be paid;
•• The procedure which will be used when group members are indebted to the group;
•• The person responsible for the communication of UTZ premium and prices to group members;
•• How and when the allocation of the UTZ premium for that season/year will be explained to group members.
Pay the Group member premium in
accordance
with your group’s procedure.
Pay the premium at least once a
year.
In planning the payment of the Group member premium, ensure that (G.A.27):
•• Someone is made responsible for making the payments;
•• The receipts or proof of payment are signed and provided to group members;
•• A complaints procedure is put in place (G.A. 28).
In communicating on the premium and prices, ensure that:
•• The content of the communication includes the prices for the respective qualities
of the product, the total premium received and the different amounts allocated to
group management, group and group members (in cash and/or in kind).
•• The communication is written clearly and the way of communication ensures that
illiterate group members can understand the information.
4 - © UTZ Version 1.0 - August 2016
IN PRACTICE: ACHIEVING
TRANSPARENCY ON UTZ PREMIUM
To ensure a transparent approach to the UTZ premium your
group should take the following steps:
A. ESTABLISH A POLICY ON PREMIUM
In the IMS manual, there should be a statement on what the group would
like to achieve from the premium and how it is distributed. Members should
be consulted and fully informed of the policy; this will build trust between
members and management.
B. AGREE THE PREMIUM WITH FIRST BUYER
The group management has to negotiate the premium with the first buyer. The
agreement should stipulate:
•• The amount of UTZ premium in relation to a given volume and quality,
•• Conditions for payment (e.g. quality requirements),
•• Timing of payment and how the UTZ premium will be paid,
•• If the buyer wishes: the distribution of the premium (between group
management spending and group member premium) and how it will be
paid to the group member.
C. COMMUNICATE THE PREMIUM PROCEDURE TO
GROUP MEMBERS
The premium procedure can be communicated in a number of ways, for
example:
•• Including the general principle of premium payment in the contractual
agreement between group and group member (see G.A. 9);
•• At farmer meetings at group, section or village level during which the use of
UTZ premium procedure and payment is explained;
•• Displaying posters at central locations, such as the buying office, church or
mosque.
D. REGISTER CERTIFIED VOLUMES THAT GROUP
MEMBERS SELL TO THE GROUP
The volumes bought from group members must be recorded:
•• Clear documentation (receipts, records or passbook) of the volume and
quality of the product that a farmer has sold to the group must be kept.
E. COMMUNICATE THE PRICES AND PREMIUM PAID
Official written information (e.g. letters or posters at a buying office) should be
made available to group members, covering:
•• The volumes purchased from the group members who will receive a
premium;
•• The date that premium will be paid and how;
•• The premium group members receive when they are indebted to the group
(e.g. due to pre-financed goods or services);
•• The difference between the market price paid and the group member
premium to the farmer.
F. BE TRANSPARENT ABOUT PAYMENT OF PRICES AND
PREMIUM
Well-defined practices should be followed:
•• Issuing receipts to group members when they receive their group member
premium;
•• Appointing independent people who will check that payment is correctly
made.
Guidance to the Core Code of Conduct for group certification version 1.1 - 5
PREMIUM IN THE CHAIN OF
CUSTODY FOR FIRST BUYERS AND
OTHER SUPPLY CHAIN ACTORS
The UTZ Chain of Custody for Supply Chain Actors sets
requirements for transparency in relation to the premium.
The first buyer and farmer group have to agree the UTZ premium amount, any
BOX 3 conditions for payment, timing and how the premium will be paid. The agreed
UTZ premium is entered in the Good Inside Portal, net of any deductions for
repayment of pre-financed goods or services. Both the farmer group and first
buyer can enter the UTZ premium in the portal. Auditors might request proof of
payment to ensure that the producer group has received the UTZ premium.
CHAIN OF CUSTODY
AND PREMIUM - KEY The UTZ premium in the portal will also be visible to UTZ to allow reporting
STEPS on UTZ premium at an aggregated level to end-buyers. UTZ will not share
information with third parties on individual premiums paid.
The producer/producer group
and first buyer agree a procedure
for payment (covering amount
and timing) of the UTZ premium
on all product claimed (or
$
retroactively claimed) as UTZ
certified.
The UTZ premium is paid net of any
deductions for repayment of pre-
financed goods or services.
Proof of payment and
acknowledgement from the
producer/producer group of
the receipt of the UTZ premium is
made available.
The UTZ premium is indicated
in the sales or purchase
announcement in the Good Good Inside Portal
Inside Portal.
Box 4 : Good to know
In case the producer group receives in kind investments from the first
buyer, UTZ recommends that both parties stipulate in the agreement
the type of in-kind investments and the monetary value they represent.
However, these investments are not part of what UTZ considers to be the
UTZ premium.
6 - © UTZ Version 1.0 - August 2016
ANNEX 1
EXAMPLE OF A PROCEDURE ON THE USE OF UTZ
PREMIUMPROCEDURE ON THE USE OF UTZ PREMIUM
2015–2016
1. Before the harvest, group management communicates to group
members the total amount of UTZ premium the group will receive.
2. Group management will also communicate the price for cocoa.
3. Communication occurs at meetings in each section.
4. Group management allocates the the UTZ premium as follows:
a. X% for group management spending on:
i. External audits, and training of IMS staff or workers.
b. Y% for products and services delivered to the group:
i. Training of group members, group member workers and their
families on topics XYZ
ii. Technical advice from service providers/consultants on ABC
iii. 2 nurseries, 10 soil fertility analyses and 10 PPEs.
c. Z% for group members (cash and inputs):
i. Cash
ii. Inputs, such as tools, planting material, pesticides, fertilisers,
shade trees.
5. Group management keeps receipts of all payments of group
member premiums and all delivery notes of input. Group members
receive receipts of cash payments and/or delivery notes of inputs.
6. The procedure is communicated through letters to the certified
group members and through meetings at the different sections.
7. The group management will not deviate from the procedure.
ANNEX 2
EXAMPLE OF PROCEDURE WHERE FIRST BUYER IS
MAKING IN-KIND INVESTMENTS FOR CERTIFICATION
Procedure on the use of UTZ premium 2015–2016
first buyer is pre-financing certification costs
1. The group has agreed with buyer x a UTZ premium of €125 per
metric tonne, and will receive in addition an in kind investment of
€75 per metric tonne.
2. The €75per metric tonne will be spent on in-kind investments:
i. Training of producers representing €XXX
ii. Salary of agronomist representing €XXX
iii. Planting material representing €XXX
3. Group management communicates to member the allocation of
the in-kind investments and the UTZ premium of €125 per metric
tonne:
i. €75 per metric tonne for financing of in-kind investment
ii. A% of €125 for group management spending on external
inspections;
iii. B% €125 for products and services delivered to group
(agrochemicals);
iv. C% of €125 for group members in cash.
4. Group management communicates twice a year to group members
on the amount of UTZ premium and in-kind investments received.
5. Group management keeps receipts or records of all payments
6. Group members receive receipts or records of cash payments
7. Group management records UTZ premium in Good Inside Portal.
Guidance to the Core Code of Conduct for group certification version 1.1 - 7
