29th June 2023

Today we published a summary report on the market demand for certified sugarcane and its derivatives in Brazil. The report covers the key themes for sustainability standards in the different markets for sugarcane derivatives including sugar, ethanol, electricity, cachaça, and new products such as dry yeast, sustainable aviation fuels and biomethane. It also offers recommendations on the approach Bonsucro should take to build market demand for certified sustainable sugarcane. The report was produced by Pecege Consultoria e Projetos (PECEGE), a consultancy dedicated to data collection, publications and projects for Brazilian agribusinesses. 

Brazil at a glance 

Brazil is considered an upper-middle income country by the World Bank. However, in the last few years, the country’s economy has been suffering from low growth and inflation. Bonsucro is one of the main certifications in the Brazilian sugar-energy sector and it is the country that has the most certified mills and certified land area. The first ever Bonsucro certification in 2011 was in Brazil.  

In Brazil the use of ethanol as an alternative fuel has been mainstream since the 1970s – although its use fluctuates in line with the prices of gasoline. As a widely used biofuel, the sugarcane-ethanol sector is widely considered as sustainable. 

Consumers in Brazil typically aren’t willing to pay a premium for sustainable products and have little knowledge of certification. There is more concern around the health risks associated with certain products opposed to their provenance. In addition, the proliferation of sustainability standards and messaging on products makes it harder for consumers to understand the different options.  

 

Key findings – Sugar 

The report found that the production of sugar versus the demand in Brazil is pretty stable. Sugar produced in the country is mainly sold to international buyers – something that historically has been the case. The report also showed that international trade is where certification is the most relevant as companies operating in foreign markets are more likely to look for certified sugar. The report also found that sugar prices are very relevant for buyers when making a decision where to purchase from. 

Domestically, there is strong preference for varieties of sugar – especially ones of lighter colour. Brazilian consumers also tend to consume sugar through processed goods rather than consuming it purely from the package. In general, mills tend to concentrate on a small selection of industrial buyers that are usually geographically close to them.  

 

Key findings – Ethanol 

First generation ethanol is mainly sold as a fuel in the domestic market – this is either sold as pure hydrous ethanol or blended with traditional gasoline. Typically, consumers choose between gasoline C, which is a blend of gasoline and anhydrous ethanol, and hydrous ethanol, depending on their relative prices at the time of purchase. The price point tends to be if hydrous ethanol is 70% above the price of gasoline. However, consumers do not perceive value in the sustainability of ethanol production. 

Price and branding of ethanol are the top influences for consumers buying biofuel – branding serving as an indicator of the quality of the product. The report says that past work done by UNICA, the Brazilian Sugarcane Industry and Bioenergy Association, to promote the environmental benefits of ethanol had limited impact on sales.  

Ethanol produced and sold for products aside from fuel, for example for beauty products, may have a better chance of being sold as certified. This is because, like with sugar, it cannot be easily substituted and carries the same reputational risks. However, this is still mainly relevant for companies with operations in international markets. 

Second generation ethanol is a new market segment that has a lower carbon footprint that first generation ethanol. A lower carbon footprint could allow for price premiums in international markets. And, if it is being sold to the European Union, having Bonsucro certification with the EU RED II add-on is essential. However, there are only two mills in Brazil that are currently producing second generation ethanol. 

 

Key findings – Sustainable aviation fuel  

Currently, no Brazilian mills are producing sustainable aviation fuels at commercial scale. However, the market considerations are similar to second generation ethanol and Bonsucro certification would be essential to export to the European Union. Looking ahead, opportunities for sustainable aviation fuel seem more immediate than second generation ethanol, due to growing restrictions on greenhouse gas emissions by airlines. Sustainable aviation fuel certification could be relevant for airlines to assure that the fuel they are using is from agricultural sources in which social rights are respected. 

 

Methodology  

To conduct the study, PECEGE gathered data from a range of public and anonymous private sources. This included a literature review on consumer behaviour around sustainability in Brazin in general, not just for sugarcane and its derivatives. To better understand attitudes towards Bonsucro specifically, the team held 13 interviews with Bonsucro members and non-members companies that operate within the sugarcane supply chain. The information gathered was then analysed and presented as a report. 

 

Recommendations  

The report shows that consumers and some buyers don’t know enough about Bonsucro and the specific benefits of the Production Standard. This means that brands that are interested in buying products with lower carbon footprints may not realise that Bonsucro is a viable option. The recommendation is to increase communications with these stakeholders and demonstrate that the Production Standard is both robust and trustworthy. This is reflected are within our 2021-26 strategic plan, and connecting with brands and buyers across the world is a big focus for our Engagements and Markets team. 

A second recommendation is to link Bonsucro to financial markets. This is because financial markets have been a big catalyst for environmental, social and governance (ESG) practices. Increasingly lines of credit and bonds issued around sustainability have lower interest rates to help incentivise better practices. Bonsucro can do more to engage with the financial services sector to demonstrate how certification against our Production Standard is aligned to the ESG agenda. This is a relatively new area of work for Bonsucro and we are steadily building valuable relationships within the sector. 

There are also further opportunities for Bonsucro and Bonsucro members to create partnerships linked to payment for environmental services. One example given is the recent São Paulo state policy on payment for environmental services where it is stated that the payments are conditioned on demonstrating certain requirements. There is an opportunity here for linking this scheme to our Production Standard. Research we conducted in 2021 indicated that payment for environmental service schemes should be built on existing voluntary sustainability standards, such as Bonsucro certification. .  

 

Next steps 

We held a webinar to share the results of the report with our members, which also gave them the opportunity to ask questions. We will also be addressing all of the recommendations from the report and ensuring that they align with our work plan over the coming months and years. 

Download a summary of the report in English or Portuguese. If you are a member of Bonsucro and would like to access a recording of the webinar about the report in English or Portuguese, please email our Coordinator for Brazil, Natalia Pinheiro Cara.