Sebastian Martin: An Ethical Coffee Perspective

at Green Drinks China, Shanghai 9th January, 2014

Breaking Down the Certifications

My Coffee Education� Masters Dissertation (2011)

� The social and environmental impact of the coffee

� Bolivian Coffee Industry� Los Yungas Region

� Visits to Coffee Plantations� Interviews with Coffee

Farmers, Exporters & Local Community Members

My Coffee Education� Environmental Issues

� Use of harmful chemicals & pesticides

� Soil Erosion� Irresponsible Water

Treatment� Irresponsible Waste

Treatment� Deforestation� Destruction of Animal

Habitats & Ecosystems� Carbon Footprint of

Import-Export

10%

30%60%

My Coffee Education� Social Issues

� Generally poor rural communities� Lack of infrastructure, health care,

land ownership, job opportunities, gender equality, child welfare, education, technical assistance & access to international markets

� Agricultural Economy� Often low income generation� Coffee Prices subject to

International Market Price Fluctuations

� Subject to Environment� Disease & Climate Change

� Very Hard Labor� Farmer Exploitation

Cambio Coffee Launch (2012)

� Wanted to start a social enterprise� Wanted to maximize benefits for marginalized

populations in developing countries� Wanted to build a very cool product & brand

� Start an ethical coffee company- that could improve the lives of growers in the best way possible and encourage environmental protection

� Questions?� What kind of coffee to promote?� How to source in the most ethically

responsible way?

What Does All Of This Mean?

4C Association� Since 2003� A mainstream code of conduct for sustainability

� 10 Unacceptable Practices� Rules of Participation & Coffee Trading� Traffic Light System

� Membership driven organization� Includes coffee farmers & buyers� Promote more sustainable, socially responsible,

and transparent practices� Member benefits: workshops, training & tools� Requirements

� Third Party Auditing (ISO Standards)� Membership Fees

4C Association

� Virtues� Minimal Fees to Producers� Offer free training

� Limitations� No product claim, seal or on-product labeling� No minimum price for growers—

negotiation between 4C members. � Driven by voluntary membership & goodwill� Limited Market Recognition

UTZ Certified � Since 1997 � Emphasis on traceability &

sustainability in supply chain� Farm professionalism� Standards to preserve wildlife & soils� Worker Health & Safety� Web-based traceability systems

� Requirements� Third Party Auditing (ISO Standards)� Certification Fees

UTZ Certified� Virtues

� Certify cocoa, tea, soy, and palm oil� Ensures price premium for farmers:

USD$0.05¢ per pound average for Arabica

� Provided at very low cost to producers� Technical assistance available worldwide

� Limitations� Limited Market Recognition

Organic � General Definition� Agricultural products grown without the use of

chemical fertilizers and pesticides� Producing food in harmony with nature,

supporting biodiversity, and enhancing soil health.

� Benefits� Healthier for consumers� Better for the environment� Better price premiums for farmers

� Requirements� Organic Farming Practices (vary by country)� Annual Inspections� Fees

� More than 40 nations supplying the global market with organic certified products � More than any other certification

Organic� Virtues

� Variety of agricultural products can be certified

� Price premiums awarded� For USDA certified coffee, average price

premiums of USD $0.255¢ per pound are paid to producers.

� Limitations� Certification costs vary by certifier, but

fees range from $700 to $3000 USD annually.

� International Standards not applicable in China

Shade Grown Coffee� Since 1997 � Started by Smithsonian Migratory Bid

Center� Research and education around migratory

bird populations� Promote coffees grown under the shade of

trees to protect forests, soil, and habitats for birds and other organisms.

� Requirements:� Organic Certification is a prerequisite� Inspections every 3 years to assess leaf

foliage, shade & biodiversity

Shade Grown Coffee� Virtues

� Spearheads wildlife protection as well as sustainable farming practices

� Niche Market Appeal of Bird Watchers� Free training workshops for Certified � Ensures Price Premiums of USD $0.05 -.10¢

per pound on top of what they receive for organic (usually 18% plus total)

� Minimal add-on fee to organic inspection costs for growers

� Limitations� Hard for volumes to compete with ‘sun-gown’

coffee� Only available to Organic Certified farms

Rainforest Alliance� Since 1992� Promote:

� Biodiversity & wildlife conservation� Community development & workers’

rights and benefits� Comprehensive sustainable farm

management.� Requirements

� Annual audits� More than 200 criteria points that are

field tested� Fees for auditing Costs

Rainforest Alliance

� Virtues� Global Scope

� Consumed in 44 countries on 6 different continents

� Minimal Fees for Growers—often audit costs are paid for by buyers

� Limitations� No minimum price for growers—

negotiation between buyers & sellers.

Fair Trade � Since 1997� Promotes:

� Fair prices for Farmers� Community Development & Environmental

Stewardship� Access to International Markets

� Minimum Prices & Social Premium for cooperatives

� Organic premium for organic coffees� Empowers coops to compete in the global market

� Requirements� Must be a Cooperative� Adoption of Fair Trade Standards

� Coop Size, Democratic organization, Contractual Transparency, Reporting & Environmental Standards

� Annual inspections by TransFair (USA) & FLO (Internationally).

� Inspection Fees

Fair Trade Virtues� Global Scope:

� FLO collaborates with 19 labeling initiatives around the world

� Covers a variety of goods: tea, cocoa, bananas, sugar, honey, rice, flowers, cotton, and even sports balls.

� For coffee, ensures a Price Premium of USD $1.20 USD per pound (2013), and when applicable , a social premium of USD$0.10 per pound and an Organic Differential of USD$0.20 per pound.

� Global Market Penetration� Has raised the profile of ethical goods and consumer

following in Western markets especially� Organizations funds awareness campaigns, media and

on-product labeling

Fair Trade Limitations� Only Works with Coops� Small Producers (land owners) that come together

to share contacts and resources, productive, beans for blends, and importantly, container space to export coffee in volumes.

� Usually democratically controlled equally by all of its members

� Benefits & Higher Prices for all coop members

� Excludes:

� Social Estates � Grower Owned Micro-lots

� Poorest Coffee Farmers (Hired)

Fair Trade Limitations� Benefits Not Always Trickling Down

to Farmers� FLO regulations require a great amount of record keeping

� Time-consuming� Literacy Barriers (Fairtrade Forms only recently made available in

Spanish)� Illiteracy among Coop Members

� Misappropriation of Funds� Records kept by cooperatives have shown that premiums paid for

Fair Trade coffee are often used not for schools or organic farming but to build nicer facilities for cooperatives or to pay for extra office staff.

� ‘Even analysts sympathetic to the movement have suggested that only 25 per cent of the premium reaches producers.’ (The Telegraph)

Fair Trade Limitations� It’s Too Expensive

� Costs approximately $2000 USD in the first year, followed by annual auditing & reinspection costs

� For many struggling coffee growers and cooperatives, this is a totally unaffordable.

Limitations� Negative Attitude Adjustment

� For Farmers� For Buyers� For Consumers

� No Assurance of Quality!

VIDEO

� http://www.huffingtonpost.com/2013/12/31/fair-trade-coffee_n_4523577.html?utm_hp_ref=green

Cambio Coffee Sourcing Trip (2012)

Direct Trade Coffee� Popularized since 2010

� Coffee companies going to visit coffee plantations at origin

� Forming direct relationship with Farmers & Communities

� Cutting out Intermediaries, offering Premium Prices Directly to Growers

� Self-auditing responsible farms: not relying on certifications

� Rewarding them for very high quality Coffee (Specialty Coffee)

80+

• Specialty Grade Coffee• Awarded 80+ Points according to SCAA Standards•Teaching Growers that Producing High Quality Coffee is

More Valuable than Fairtrade

Specialty Coffee

Direct Trade Coffee� Virtues

� Specialty Grade Coffee ensures Price Premiums up to 60% higher than Fair Trade Coffees

� Great Story & Marketing Materials� Freedom for coffee companies to

partner directly with social & eco-friendly farms

� No need for certifications� Best quality product

� Limitations� Cost & Time taken for Sourcing Trips� Company must train for quality control

and social & eco auditing

Tips for Consumers

� Fairtrade & Certified is better than nothing!

� Read up on Labels & Certifications

� Get informed about Origins & Sourcing Practices of your food

� Don’t put so much stock in Certifications—all have their limitations

� Support Direct Trade if you can!