Ethical Coffee – What is it?

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November 19, 2012 by Beans Ahoy

For years we have been bombarded with messages of “sustainability”, “ethical buying”, and “Fair trade”. Coffee has traditionally been a fairly conflict free commodity and it helps over a 100 million people worldwide provide a living for themselves and their families. That does not mean however that coffee is problem free. Accusations have been leveled at large corporations around the world for paying farmers too little for their coffee, and in essence using their large bargaining positions to abuse the market. Whilst I am certain that cases of this do exist, I am not sure that it necessarily has the impact that a lot of ‘interest groups’ claim.

The main reason for the unlikely impact of this ‘problem’ is the size of the coffee market. Yes, there are a few big players on the market such as Neumann Kaffee Gruppe and Volcafe Group (which I am in no way suggesting are involved with dubious practices), but even these two only account for about 25% of the world coffee market, and they are absolute giants. So even if one of these companies did want to abuse their position, in a globalised world as we have now, it would be quite difficult to overstep the mark too far. Global players on the coffee market buy vast quantities of coffee, and there is no doubt that there is a fairly endless supply of lower quality coffee on the market, depressing the price.

Fair Trade and other such organisations

We have also in the last 10-15 years seen the rise of organisations such as Fair Trade and Rainforest Alliance. These organisations state that they ensure that farmers are paid more for their coffee, but are these programs working? Many have been left jaded by the apparent impact of Fair Trade products. A 2006 investigation into Fair Trade by the Financial Times saw Peruvian coffee growers being paid below Peruvian minimum wage, and non-Fair Trade products being marked as Fair Trade. More importantly however, we have to ask ourselves whether Fair Trade and other such organisations have made the situation for coffee growers better. It is really quite hard to tell. Is any increase in living standards down to the Fair Trade program, or is it incidental to an increase in coffee trade? Common sense would seem to suggest the latter as Fair Trade still makes up only a tiny proportion of coffee traded.

Similarly, farmers have to meet expensive requirements to be granted the Fair Trade label which again calls into question to the true impact of the price increase for Fair Trade products. There have also been questions raised as to how much of the Fair Trade increase actually makes a difference to farmers, with some studies finding that there is no impact at all. There is little collected evidence to show that there is in fact an increase in the wages of the coffee workers. Peter Griffiths is a well known economist that has spoken out against the supposed impact of Fair Trade coffee questioning many of the claims that it makes farmers lives better, also citing the lack of evidence to suggest any change.

What is clear is that you are not going to be able to effectively influence a market, without making ripples somewhere else. The lack of evidence on the effectiveness and sustainability of Fair Trade coffee is perhaps its biggest weakness and is why I take absolutely no notice of whether a coffee is Fair Trade or not.

The solution?

There is one way to ensure that coffee growers are paid more. Cut out the middle men. Every time coffee is passed through one of these middle men, they take their cut of the final price, which depresses the original purchase price of the green coffee. If you really want to make a difference as to who is being paid for your coffee then buy direct from specialty farms. More and more of them are online and can sell coffee direct. The alternative is to speak to smaller coffee companies and find out how they are buying their coffee. Are they buying from an importer or wholesaler, or are they sourcing direct from the farm. Find out what prices they are paying if you can. It is only this way can we ensure that more is being paid to the people who actually grow the coffee. Of course such an approach is hardly practical if you insist on buying chain brand coffee, but more and more people are waking up to the delights of quality coffee, and it would be good to see that when they do so, they actually show an interest in where and how they are getting their coffee.

It is also worth remembering, perhaps a little despairingly, that ‘some income’ is better than ‘no income’, and for that reason alone it is worth buying more coffee regardless of where it comes from. An increase in demand will only mean expansion of the coffee industry and more people being employed to grow coffee.  

Conclusion

The problems present, and the forces at play are very complex. It would be foolish to suggest that there is an answer to ensure that coffee farmers are paid more or that forests are not cut down to grow coffee. We can see however that the programs that give the impression that they provide a 100% gain to society rarely do.

Sure, we can pay more for our coffee, but firstly, how much of that money gets to the actual farmer, and secondly, what impact does this certification have on non-Fair Trade farmers who are now left more exposed to price fluctuations and demand in the market. What we need for Fair Trade to work is studies, not case studies, but market studies on the viability of the idea. We also need people to take more of an interest in their coffee, where it comes from, and how it is grown. Every commodity has its ups and downs, but boycotting coffee on the basis of where it comes from, or perhaps a mis-held belief will hurt no one but the coffee grower.

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One thought on “Ethical Coffee – What is it?

  1. […] has failed to assist farmers. Fair Trade is something that Beans Ahoy has commented on in the past (https://beansahoy.wordpress.com/2012/11/19/ethical-coffee-what-is-it/) as we don’t feel that it is necessarily having the intended impact. Indeed Fair Trade, it […]

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