Issues: Health

V. MARKETPLACE ACTIONS FOR SUSTAINABLE COFFEE

The impetus for ecologically sound coffee production in Latin America must come from the "demand side," as discriminating companies and consumers insist upon coffee that comes from growing and processing systems that protect environmental values and enhance economic conditions for farmers and rural communities. The potential is enormous given the skyrocketing international growth in demand for specialty coffee. In the U.S., which accounts for about half the global market for roasted gourmet coffee, sales of such coffee increased from approximately $1 billion in 1990 to $2.5 billion in 1995.^[63] The question is how continued market expansion can be harnessed to promote forest conservation, environmental quality and higher incomes for coffee growers who implement methods to protect the environment.

Coffee drinkers who are concerned about issues such as migratory bird decline, pesticide impacts, or rural poverty in developing countries need to make their views known to the supermarkets and specialty coffee outlets where they shop. Consumers should press coffee retailers to provide specific information on the environmental and social conditions under which their coffee was grown and processed. Businesses and government agencies should consider the environmental dimensions when choosing the coffees they provide to their customers or employees. Shareholders in firms dealing in coffee should urge company managers to integrate environmental criteria into their commercial decisions.

The specialty coffee industry has yet to begin any large-scale, concerted initiative to promote environmental protection in coffee producing countries. Nevertheless, the Specialty Coffee Association of America recently established an Environmental Policy Task Force to address ecological issues associated with coffee.^[64] The International Coffee Organization (ICO), the principal coffee trade group worldwide, held a seminar on "Coffee and the Environment" in May 1996 at the ICO's headquarters in London. A number of specialty coffee firms will be participating in the First Sustainable Coffee Congress on September 16-18, 1996, in Washington, D.C., which is being hosted and organized by the Smithsonian Migratory Bird Center.

Environmentally conscious consumers should use the power of their purchasing decisions to support coffees that are certified organic, marketed through alternative trade or social justice channels, or backed by environmental criteria such as forest conservation or water pollution prevention. These three categories vary in areas of emphasis, but share a common thread of environmental protection.

A. Certified organic coffee

At present, organic coffee accounts for just one or two percent of the $5 billion worldwide market for specialty coffee. However, organic coffee currently exhibits the fastest growth among gourmet coffee types.^[65] In addition to exports, significant growth potential exists in coffee producing countries where gourmet coffee is just beginning to emerge in domestic markets. For example, coffee co-ops from Chiapas, Mexico, have recently established retail outlets in Mexico City to sell their organically-grown "La Selva" coffee.

Production of certified organic coffee has expanded recently in northern Latin America. Such production can be found in all countries throughout the region (see box on Supporting Sustainable Coffee). One example is Indígenas de la Sierra Madre (ISMAM), which is made up of 1,200 small-scale "campesino" coffee growers in Chiapas, Mexico. The ISMAM co-op exported 20,000 sacks of gourmet organic coffee in 1995 directly to Europe, the United States and Japan.^[66] Within Latin America, Peru outstrips other countries in terms of area, with nearly 44,000 hectares under certified production. Mexico, which produces nearly as much organic coffee as Peru, does so on just under 26,000 hectares. Other countries with land devoted to certified organic coffee include Guatemala (more than 7000 hectares), El Salvador (4900 hectares), Nicaragua(1400 hectares), and Costa Rica (550 hectares).^[67]

Certified organic coffee fetches significant price premiums on the order of 10 to 15 percent above gourmet coffee without the organic trademark. The price premium often translates into substantially higher returns for coffee growers, although the net benefits of moving to certified organic production can vary substantially from producer to producer, depending on added production costs and other variables.^[68] Organic coffee co-ops pay thousands of dollars each year to cover certification costs such as the time and travel expenses of field inspectors.^[69] The downside to organic certification from many growers' perspective is the cost of periodic inspection. For the multitude of small coffee growers who are de facto or "passively" organic producers because they cannot afford to use agrochemicals, inspection costs can present a formidable obstacle to certification, and hence to the premium price they might otherwise obtain for their coffee.

Organic coffee growers are typically organized into local cooperatives that are affiliated with, and bound by the standards of, international certification programs. The largest of such programs is Organic Crop Improvement Association International (OCIA), which as of late 1995 claimed more than one million certified hectares (2.5 million acres) and 30,000 grower-members worldwide.^[70] Other programs certifying organic coffee in northern Latin America include the European-based Naturland and Demeter.

The international certification programs serve several functions. For example, OCIA sponsors crop improvement seminars and other technical assistance for farmers implementing organic systems; independent third-party inspection of certified farms, with an audit trail to track coffee and other commodities from consumers to producers; and a trademark that appears as a label on OCIA-certified coffee and other organic products.

Sound environmental stewardship is a central tenet of the organic agriculture movement. For example, soil building practices are key OCIA requirements for certified organic farms.^[71] The OCIA standards permit certification only of fields or farms where no synthetic pesticides or fertilizers have been applied during the preceding three years.^[72]

Diversified forest cover appears to be one common approach by which organic coffee farmers achieve certification standards for soil quality and chemical use. For example, organic coffee growers in Mexico maintain diverse shade cover to enhance soil fertility and to reduce their production systems' vulnerability to pests.^[73] OCIA currently encourages its coffee producing members to diversify the shade cover, so that growers can benefit from a variety of products associated with their holdings.^[74] However, existing organic standards do not contain explicit, measurable criteria for diversified shade cover.

The soil building techniques used in organic coffee farms often help reduce the waste stream of pollutants to water supplies. The Asociación de Caficultores Orgánicos de Colombia, a co-op in the process of obtaining OCIA certification, composts all organic waste from coffee processing to create a rich mulch for use as a natural source of nutrients for coffee plants.^[75] Nevertheless, measurable pollution prevention standards are not part of existing organic certification regimes.

B. The alternative trade and social justice market

Coffee producers in certain countries enjoy premium prices for their coffee due to the connections they have forged during the last decade with groups that make up what is known variously as the "solidarity," "social justice," "alternative trade," or "fair trade" movement.^[76] The movement is based on the idea that producers of traded commodities in developing countries are capable of achieving economic success provided they receive fair prices in international markets for what they produce. Recent years have seen a growth of the movement, with trade unions, church groups, and women's organizations becoming involved. Throughout Europe, for example, fair trade coffee accounts for 11,000 metric tons of traded coffee annually, finding outlets in some 35,000 supermarkets.^[77]

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Some Companies Dealing in Organic Coffee
Adam's Organic Coffees: (415) 864-3830
Allegro Coffee: (800) 666-4869
Aztec Harvests: (800) 639-2378
Cafe Altura: (805) 933-3027
Elan International: (619) 239-8383
Royal Blue Organics: (800) 392-0117
Equal Exchange: (617) 830-0303
Frontier Coffee: (319) 227-7996
Harbor House Coffee: (800) 541-4699
Thanksgiving Coffee: (800) 648-6491
InterNatural Foods: (201) 909-0808
Montana Coffee Traders (800) 345-5282
Nature's Finest: (800) 237-5205
Organic Coffee Co.: (800) 758-5282
Sustainable Harvest: (510) 654-2735

Source: The Green Guide, newsletter of Mothers and Others for a Livable Planet, Feb. 7, 1996; other sources.

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Like coffee that is certified organic, coffee distributed through alternative trade channels currently represents a very small fraction of the worldwide specialty coffee market. Sales have increased, however, as more and more coffee drinkers have learned about the poverty and dismal working conditions characterizing small coffee producers' lives. Global sales of coffee in the social justice market amounted to $400 million in 1995, according to estimates from the International Federation of Alternative Trade (IFAT), an association that oversees 36 alternative trade organizations worldwide through a code of ethics established in 1990 and updated in 1995.

The social justice market is organized around the International Coffee Register, which is essentially a company owned by the fair trade groups Max Havelaar, TransFair, and the Fair Trade Foundation. A total of 286 coffee-producing cooperatives are members of the Register, representing about half a million growers around the world. Under current arrangements, grower groups are guaranteed $1.26 per pound for "green" (ready-to-roast) coffee.^[78] If world prices average above this figure, producers receive five cents per pound above the world price.

There are currently about 15 licensed importers of fair trade coffee. If a producer cooperative needs a cash advance to use for purposes of extending credit to individual growers, or for other expenditures, it falls to the importers to provide advanced funding that can total up to 60 percent of the contracted coffee with that cooperative, at rates of interest negotiated between the importer and the coffee cooperative.

The social justice movement and its corresponding market are much more developed in Europe, where they originated, than they are in the United States and Canada. European solidarity groups have long been active in Latin America, with institutional support available to them through social democrat governments and a solid base of non-governmental organizations. Community development projects funded by the private sector or via government funds have long been a hallmark of development work conducted by countries like Belgium, the Netherlands, Germany, France and Great Britain.

In 1988, Max Havelaar Netherlands developed a market label to link small coffee growers in Mexico directly to international markets. The label propelled the Dutch "alternative" trade in coffee from a mere 0.3 percent of national consumption to 2.3 percent by 1995.^[79] In Switzerland, it has captured 5 percent of the market.^[80] The Max Havelaar label now has a presence in at least six European countries, including its home country, Belgium, Austria, Germany, France and Switzerland. Another social justice label, TransFair, exists in eight nations around the globe, including Canada, Japan, the US, Italy, Germany and Austria.

An innovative direct marketing strategy has been employed by Aztec Harvest Coffee Company, which is owned by Mexican small-farmer cooperatives and is structured to bypass intermediaries (and thus maximize growers' profits) in selling coffee to US and European buyers. Substantial portions of the coffee traded through Aztec Harvest come from certified organic co-ops. Well-known Aztec Harvest customers have included Ben & Jerry's and United Airlines.

Although focused primarily on social justice for small coffee growers, the alternative trade movement has incorporated environmental objectives in a general way. For example, criteria for the International Fair Trade Coffee Producers' Register (overseen by Max Havelaar Netherlands in conjunction with other Max Havelaar and TransFair groups) specifies that any producer organization wanting to participate must be committed to "sustainable development strategies, applying production techniques which respect specific ecosystems and contribute to the conservation and a sustainable use of natural resources, in order to avoid as much as possible -- or even totally -- the use of chemical inputs."^[81]

Moreover, the IFAT's Code of Ethics spells out environmental expectations for the participation of alternative trading organizations (ATOs). The two-point environmental section of the code states:

a) It is also the aim of ATOs to encourage the production of goods by means which preserve the environment and conserve scarce resources and in ways which cherish the skills and develop the capacities of the producers and do not harm their health. This applies equally in the First World as in the Third World.

b) ATOs are committed to encouraging development which is sustainable and responsible in terms of the long term survival of the human species and of the natural world.^[82]

In many cases, strong overlap exists between the certified organic and social justice coffee movements. The Massachusetts-based Equal Exchange works primarily to ensure fair prices to small growers, and deals mostly in certified organic coffees. In other cases, the fair trade market makes linkages with small peasant producers who, because of their inability or unwillingless to use costly chemical inputs, produce what can be regarded as a "passively" organic or "organic by default" coffee.

C. Further integration of environmental criteria in consumers' coffee choices

There are many good reasons to buy certified organic or social justice coffee. There is also a need to develop and apply a broader range of environmental criteria than may be covered by existing certification regimes. For example, explicit criteria for coffee produced through "shade-grown" or "bird friendly®" management systems could provide a powerful market force for forest conservation and sustainable economic development in northern Latin America and other coffee producing regions. Additional criteria are needed to reflect whether pollution prevention measures have been applied in coffee processing.

To ensure consumer confidence, any new environmental criteria for coffee must be measurable, scientifically rigorous and consistent. The criteria should not be one-dimensional, but rather should reflect the complexity of coffee management systems and the biodiversity values of various levels and composition of shade cover. Additionally, the criteria should be evolutionary, that is, subject to refinement in the face of improved scientific understanding or technological innovations.

Environmental criteria might find expression in the marketplace in a number of ways. Adding or overlaying new environmental metrics within existing certified organic or alternative trade systems is one possibility. Another is a separate certification regime such as the Rainforest Alliance's "ECO-O.K." Program, which is moving toward certifying coffee with criteria developed by Fundaci-n Interamericana para Investigaciones Tropicales, a Guatemalan NGO. Draft criteria for the "ECO-O.K." effort on coffee include maintenance of a minimum number of shade trees per hectare and encouragement to growers to minimize agrochemical applications. The use of native perennials as shade, as well as the maintenance of vegetational buffer zones next to rivers, streams, and lakes constitute other criteria stipulated for "ECO-O.K." certification.

One option worth serious consideration is a system that, as distinct from dichotomous certification regimes (where products are either certified or not), rates coffees according to their performance on a range of environmental parameters. Hypothetically, for example, a scoring method might be devised where a coffee receives "one star" if grown under shade cover with limited diversity, or "two stars" if the shade cover features a highly diverse plant community and forest canopy structure. Similar gradations could be developed to reflect varying degrees of pollution prevention and waste recycling in coffee processing.

These options are not necessarily mutually exclusive. However, any further integration of environmental criteria into coffee markets must proceed in a way that informs rather than confuses consumers. Moreover, such integration must ultimately satisfy coffee roasters' primary interest in product quality and competitive prices. It would be unrealistic to assume that new environmental criteria, no matter how compelling, will be sufficient to "pull" particular coffees through the market irrespective of price and quality considerations.

Notes

63. David Griswold, Sustainable Harvest Coffee Company, Emeryville, California, May 15, 1995.

64. Paul Katzeff, "Coffee Industry Environmental Policy Task Force," World Coffee and Tea (September 1994):6.

65. Thrupp, Bittersweet Harvests for Global Supermarkets pp. 126-128.

66. Ronald Nigh, Asociación de Dana, Chiapas, Mexico, personal communication, December 12, 1995.

67. OCIA data base and Tom Harding (OCIA President), personal communication, December, 1995.

68. Ayo Heinegg, Agricultural Economist, Washington, D.C., personal communication, January 10, 1996.

69. Jorge Cuevas, Director of Coffee Exports, Unión de Comunidades Ind'genas, Pochutla, Oaxaca, Mexico, personal communication, January 21, 1996.

70. OCIA Interntional brochure, Bellefontaine, Ohio, October 1995.

71. Organic Crop Improvement Association International, "1995 International Certification Standards, As Revised February 1995," (Bellefontaine, Ohio, section 2.2.1), 6.

72. Ibid., 5 (section 2.1.3).

73. Ronald Nigh, Asociación de Dana, Chiapas, Mexico, personal communication, December 12, 1996.

74. Tom Harding, President of OCIA, personal communication, January, 1996.

75. Organic Coffee Farming in Colombia, 2 Java Jive (February 1993):1-2.

76. For information on the social justice ("fair trade") movement and market, several documents are available on the Internet/World Wide Web. For information about the Netherlands, see the homepage at http://antenna.nl/fairtrade. Information is also available at homepage http://netserver.web.apc.org/~bthomson.

77. Bob Thomson, TransFair Canada, personal communication, March 7, 1996.

78. Bob Thomson, personal communication, April 10, 1996. This price refers to the "c" price quoted in New York each day, and relates to "washed arabicas" from Central America, Mexico, and Africa. The social justice guaranteed price for other qualities of coffee ranges from $1.06 per pound for "washed robustas" to $1.41 per pound for washed arabicas that are also certified organic. The $1.26 per pound figure is used as an average for the fair trade industry.

79. Bob Thomson, TransFair Canada, personal communication, December 1995.

80. Bob Thomson, personal communication, March 7, 1996.

81. Document from Max Havelaar and TransFair, Fair Trade: A Viable Alternative for Small Farmers.

82. See IFAT's Code of Ethics on its homepage on the Internet at http://www.ifat.org.