And what is sustainability in the coffee industry? Is fair trade coffee fairer than other coffees?
The coffee industry abounds in sustainability. Nevertheless, it is more unfair than ever, and the challenges are great. What is really sustainable coffee?
The coffee industry, built on the legacy of imperialism, and well seasoned with the best (or worst, if you will) of capitalism, appears today as a symbol of global inequalities. The farmer is left with around 5% of the value of a product that is largely enjoyed by the privileged in Western countries. In East Timor, the average income of a coffee farmer is around NOK 3,000 (per year, yes), which makes the household completely dependent on its own food production in order to survive at all. And that has major consequences: Around every second child growing up in the country is critically malnourished.
Globally, a quarter of all small-scale coffee farmers live in extreme poverty. Fairtrade itself wrote this not long ago:
The fact that farmers cannot make a living in coffee is a tragic commentary for the industry and a huge risk for the future of the global coffee sector as a whole
Monika Firl, Senior Manager for Coffee at Fairtrade International
If you consider the development of the last 50 years, the future does not look bright. In 1970, the farmer received around 30% of the value in the entire value chain and the production country over 50%. Today, less than 10% of the value is often left in the country of production. The price of coffee has been more or less stable since 1970. In comparison, the average salary in Norway has increased tenfold in the same period.
On top of all that, more and more coffee farmers are threatened by climate change: Extreme weather and a warmer climate make the prerequisites for a good income base challenging for many. In East Timor, crops were almost halved in 2022 due to heavy rain. And unlike Norwegian farmers, these coffee farmers do not have a welfare state behind them to cover the cost loss.
A rain shower during an interview with a farmer leader in East Timor in 2023
Sustainable certifications
The industry's response to these challenges has for many years been sustainability certifications. Fairtrade, Rainforest Alliance and organically certified coffee, to name a few. In short, these certifications work so that a farmer adapts his production methods to a given standard, in return for which he or she receives a monetary reward. The catch with these standards, however, is that they rarely have a significant positive effect.
The vast majority of independent research on sustainability standards shows that they improve social conditions or economic conditions to a very small extent. The potential for environmental improvements is greater, where, for example, organic production can have a number of advantages.
What makes these standards not work better? The reasons are many, but below are some:
High opportunity costs. The coffee industry - and other commodity industries - are struggling with low prices. Although Fairtrade guarantees a minimum price, this is so low that the vast majority of farmers would have earned better if they spent their time doing something else. If meeting a standard requires investments in time or money, time that would otherwise have been spent on other work, farmers may risk going into the red.
A lot of farmers had businesses: Kiosks, selling vegetables, transportation. When the intervention (relationship coffee) took place, farmers started to focus more on coffee and rehabilitation. We got information on practices and motivation. [What happened to the total income?] Income before was higher. Income from coffee is only once a year. Off-farm income is both more stable and higher. Farmers liked their old business life, but they would also like to take care of their culture and heritage.
Locally employed in a relationship coffee company (not the person in the picture)
Did you know
A coffee farmer in East Timor earns an average of NOK 2,000 and NOK 3,000 in the year on its coffee production
Structural conditions > certifications. The world is not a laboratory, and even if something works in village A, it is far from certain that it will work in village B. Coffee is produced and processed across parts of the world, governance systems and cultures, and traded in value chains with huge power differences. Certifications have little ability to adapt to local institutional conditions, or to change global structures that live on from the colonial era.
Certification schemes are not introduced upon a black canvas. They overlay complex sets of social, economic, cultural, and political institutions, and the varied impacts reported in the literature primarily reflect these pre-existing institutional settings.
Bray and Neilson (2017) i Reviewing the impacts of coffee certification programs on smallholder livelihoods
In East Timor, local conditions are absolutely decisive for whether Fairtrade-certified farmers get a higher income. The research I have done suggests, for example, that the size of the cooperative is a decisive factor in whether farmers actually receive a minimum price for their coffee.
Did you know
In East Timor, it works so that the farmer is never guaranteed a minimum price, but rather receives a price based on local price competition between buyers, of which the cooperative is one. The money the cooperative earns rarely benefits the members, and only 25% of the four kroner the cooperative receives per kilo of coffee from Fairtrade goes back to the local community. (It may therefore work somewhat differently in other locations).
High certification costs. Being certified is not free. It costs money to both apply for and to keep a certification, which many smaller cooperatives or groups of farmers cannot afford. In East Timor, all coffee production is organic, both as a result of a lack of financial leeway to buy artificial fertiliser, but also due to their religious beliefs. Nevertheless, only a very small proportion of the coffee is certified organic, simply because the certification is too expensive.
Most Timorese are animists - a belief that nature has a soul. Therefore, it is unthinkable for them to use artificial fertilizers or pesticides, even if it will increase production.
Greenwashing? A number of academics believe that sustainability standards in coffee must be understood as a form of greenwashing or ?social washing?. These critics believe that certifications:
Largely used by large companies to reduce risk, and better negotiating cards in meetings with manufacturers.
Is a way for companies to increase profits. Higher prices for the customer and lower costs through, for example, long-term agreements with manufacturers.
Is there a way for companies to comply with an expectation from society to operate sustainably?> sustainability strategy is about marketing/positioning rather than improving actual conditions
First and foremost, the focus is on what consumers want to see, and not on what the farmer or the local community needs.
The gradual mainstreaming of sustainability that underpins green capitalism has been driven by cost-cutting and eco-efficiency efforts which provide corporations with a 'business case' for applying environmental improvements.
Stefano Ponte i We must move beyond 'green capitalism'
What about relationship coffee?
Does relationship coffee - coffee bought directly from a farmer or a cooperative - have a positive effect? The research in this field is marginal, but preliminary studies also find few signs of major positive changes in terms of social and economic conditions. A challenge in relationship coffee is that resourceful farmers with large farms gain access to such opportunities more easily than marginalized small-scale farmers.
Many ?relationships? in such value chains is also run through local agents, who, in true Tinder fashion, set up coffee farmers with buyers, and where the buyers then have little actual insight into the conditions in the production country. Relationship coffee is also dominated by specialty coffee, where both the price and the effort to produce the coffee are significantly higher. The extent to which the high price the farmer receives reflects the extra work, however, is uncertain.
Tim Wendelboe summarizes the relationship coffee / specialty coffee industry this way:
The small 'not' / 'nuts' error is on KI's coat
Hopeless?
A little, maybe. It must of course be emphasized that there are both Fairtrade and relationship-based projects that have a major impact on individual farmers and that make a difference. The challenge is that they are in a clear minority. We hope that Konfiansa can be an actor that paves the way for a new way of thinking about coffee. Through a strong local presence, and a short, efficient and open value chain, we want to show that the coffee industry's biases can be addressed.
Bermudez, S., Voora, V., & Larrea, C. (2022) Global Market Report: Coffee prices and sustainability. IISD and SSI. Retrieved 20 February 2023 from https://www.iisd.org/publications/report/2022-global-market-report-coffee
Bondevik, B. (2023). The power of coffee: A study of livelihoods and value chains in Timor-Leste. Master's thesis, Copenhagen Business School.
Bray, JG, & Neilson, J. (2017). Reviewing the impacts of coffee certification programs on smallholder livelihoods. International Journal of Biodiversity Science, Ecosystems Services & Management, 13(1), 216?232. https://doi.org/10.1080/21513732.2017.1316520
Edelmann, H., Quiñones-Ruiz, XF, & Penker, M. (2022). How close do you like your coffee? – Examining proximity and its effects in relationship coffee models. Journal of Rural Studies, 91, 24?33. https://doi.org/10.1016/j.jrurstud.2022.02.007
Giovannucci, D. & Potts, J. (2008). Seeking Sustainability: COSA preliminary analysis of sustainability initiatives in the coffee sector. MPRA Paper 13401, University Library of Munich, Germany.
Grabs, J. (2020a). Selling sustainability short? The private governance of labor and the environment in the coffee sector. Cambridge University Press.
Grabs, J., & Ponte, S. (2019). The evolution of power in the global coffee value chain and production network. Journal of Economic Geography, 19(4), 803?828. https://doi.org/10.1093/jeg/lbz008
Holland, E., Kjeldsen, C., & Kerndrup, S. (2016). Coordinating quality practices in Direct Trade coffee. Journal of Cultural Economy, 9(2), 186?196. https://doi.org/10.1080/17530350.2015.1069205
Khamis, S. (2015). Timor-Leste Coffee: Marketing the ?Golden Prince? in Post-crisis Conditions. Food, Culture, & Society, 18(3), 481?500. https://doi.org/10.1080/15528014.2015.1043109
Ponte, S. (2019) Green Capital, Brown Environments: Business, Power and Sustainability in a World of Global Value Chains. New York (NY): Zed Books.Vicol, M., Neilson, J., Hartatri, DFS, & Cooper, P. (2018) Upgrading for whom? Relationship coffee, value chain interventions and rural development in Indonesia. World Development, 110, 26?37.
