Coffee is a $20 billion industry.
After crude oil, it is the highest earning industry in the world. It has a strong reputation for also being one of the progressive industries in the world, pumping millions of dollars a year into establishing fair trade schemes and sustainability innovations.
And yet, with such a high worth, problems remain. Corruption within the industry extends across the supply chain, and environmental damage continues to occur. It’s a massive industry machine that stretches across the entire world economy, and yet change is at your fingertips.
In this article, we will look at the five biggest ethical issues facing the coffee industry today. By educating yourself into what is happening ‘behind closed doors’, you will be equipped as a business owner to choose what and where you invest your money.
#1: Bean prices vs. retail prices
What is the real cost to a cup of coffee? This is a question not enough retailers are asking themselves as the production cost continues to grow… and the retail cost doesn’t.
According to the Northeast Organic Farming Association (NOMAFASS), the ratio between what a coffee farmer earned in the 1970’s versus what the retailer received was roughly 1:3. Today, it’s now about 1:8 or 1:10.
So whilst the cost to grow, pick, roast, and ship your coffee beans has continued to rise with global inflation, the price of a cup of coffee has barely changed in the last 30 years. And yet, with boutique roasters pushing the industry average price upwards in coming years, these costs are unlikely to be passed onto the growers any time soon.
Despite demand increasing, the profits are not being reflected in market prices for the beans - even the Fairtade industry standard prices are barely covering the farmer’s costs.
“Fairtrade started as an effort to mitigate the crises caused by crashes in commodity prices, such as coffee, helping farmers in the developing world to live a decent life,” they write in ‘Fair for who? The crisis of Fairtrade for coffee farmers.’
“Our fieldwork, undertaken in Costa Rica, Nicaragua and India tells a different story. In these countries, some farmers are leaving the Fairtrade scheme since it does not always cover the basic costs of production.”
The easiest way to look after the farmer’s financial needs is to endeavor to connect directly - or encourage your supplier to do so. By communicating with them directly over what coffee is costing more to grow, you know where and why to be increasing your retail price to properly reflection their production costs.
#2: Fair Trade Certifications
There is no longer a singular ‘fair trade’ certification, either globally or nationally. In fact, more and more are cropping up each day and muddying the waters for ethically-minded consumers.
There are 1,226 fairtrade certified producer organisations in 74 countries across the world.
What defines ‘ethical’ or ‘fair trade’ is not as clear cut as it once was. Consumers are left scratching their head as they juggle wildly varied price points with an assortment of ethical accreditations. Who’s the real deal?
In an ideal world, a central accreditation model would provide an even playing field. Once this element of confusion is taken out, price competition would decrease, and customers would be able to naturally gravitate towards the more demonstrably ethical products. It would then be the hope that producers will feel compelled to review their own production and distribution processes and raise the bar.
However, this is not the case. There are many different types of ethical labels and promotions on the market. For more information about the different types of fair trade certifications, read our article What you need to know about ethical coffee accreditations.
#3: Fair Trade or Direct Trade?
In recent years, the buzz term ‘direct trade’ has confused the hospitality industry, appearing to be in direct competition with the better known ‘fair trade’ model. What’s the difference?
‘Direct trade’ prices are created and regulated by the coffee roasters themselves. They are able to work with the farm to determine the quality of the coffee, create accurate sale prices, and ensure that the standards are being met in regards to safety, sustainability, and the farmer’s progress.
‘Fair Trade’ standards, on the other hand, are regulated by Fair Trade USA, a non-profit third party. Whilst their original incarnation was monumental in regards to establishing standardised prices across the coffee industry, it seems to have lost its way.
“The global Fairtrade organisation sets a global, rather than country specific, price for its products,” writes ProBono Australia. “Whilst this could be a small fortune in one country, it may be a pittance in another, and is inflexible to change quickly depending on country context.”
Many coffee roasters are now shifting towards a ‘direct trade’ agreement, in order to establish direct ties with their farmers. In fact, many are becoming quite vocal about their distrust of the Fair Trade certification.
“As a professional in the burgeoning Melbourne specialty coffee industry I have lost count of the times customers have expectantly asked me if the beans we use are Fairtrade Certified,” says journalist Laura McCormack. “Most are horrified when I say they certainly are not, and they certainly never will be.”
#4: Environmental Impact And Sustainability
In the Fair Trade produced paper, ‘A Brewing Storm: The climate change risks to coffee’, the negative effects of coffee growing on the landscape are laid out in detail. In short, coffee growers are being pushed to move their plantations to higher ground as climate change causes heavier downpours, flooding lower land. This move is causing deforestation and major socio-ecological problems for the local communities.
“Without strong action to reduce emissions, climate change is projected to cut the global area suitable for coffee production by as much as 50% by 2050. By 2080, wild coffee, an important genetic resource for farmers, could become extinct.”
Consumer-led action is the only solution. Information about where your coffee is sourced from, and what sustainable programs are being implemented to help avoid further destruction. The paper suggests the following action.
“Choose brands that guarantee a fair return to smallholder farmers and their communities, helping them build their capacity to adapt to climate change; and demand action from companies and governments.”
The environmental impact of coffee growing extends to many other sectors of the industry, too: plastic packaging and shipping carbon emissions also need more attention in order to be reduce and eventually phased out.
#5: Education For Farmers
At the start of of the supply chain are our farmers. By improving their knowledge and standard of living, you are building an ethical industry from the bottom up. Education for the farmers and their families is crucial in establishing sustainable farming schemes, and empowering them to make positive choices on behalf of the end consumer.
Furthermore, the treatment of women in the coffee industry has become a major focus in recent years.
“In many under-developed rural areas, women and girls are already disadvantaged, with stark inequalities in power, labour, health and other areas. Female farmers tend to be denied the same access to market knowledge and new technologies, such as mobile phones, increasingly used to garner information on climate and weather,” reports Fair Trade.
“Where water access becomes even more difficult, women—who are often the traditional water carriers—may face a greater burden, with consequences for the health and education of their children. Men may be forced to migrate to new areas in search of paid work, further hampering the women left behind.”
Investing in coffee companies that will pump profits back into their farming communities is a choice that will benefit everyone, including your customer.
The coffee industry turns out the second largest profit in the world. It’s a huge machine that spans multiple countries - rich and poor - and for that reason is still riddled with ethical and moral challenges.
As a business owner, it is your responsibility to choose with your wallet. Do your due diligence, research what’s happening in the industry, and invest your money with the people who are working hard to right the wrongs.