THE HISTORY OF SUSTAINABLE COFFEE
A DETAILED LOOK AT THE PROCESS OF PURCHASING COFFEE AND THE SUSTAINABILITY OF THAT PROCESS
The amazing world of sustainable coffee awaits you – we guarantee that you will be pleasantly surprised after reading this blog article! First and first, it is necessary to consider what it means to produce sustainable coffee. “Three coffee packets for the price of ten euros,” organic coffee, Fairtrade coffee: how do these practices impact coffee producers and the long-term viability of the industry? Whether the kind of coffee a customer purchases makes a difference is debatable.
About two years ago, we took a thorough look at all of these factors and began searching for our sustainable coffee, which would be a unique model for the future. Consider reading about what we discovered and how we got to our opinions about the whole experience. Relax, get yourself a good cup of (hopefully environmentally friendly) coffee, and take it easy.
Sustainable coffee, according to our definition, is one in which all actors in the coffee value chain (from the coffee farmer to the coffee roaster) have the opportunity to make a profit while also adhering to human rights and generally sound business principles. This is done so that every individual involved in the coffee value chain may go to sleep pleased and wake up ready to prepare a nice cup of coffee that he or she knows is fair to all of those who have contributed to it.
The difficulty with this equation is that this is not the current scenario; there are significant challenges in the coffee value chain, which is why we as a coffee roaster want to do our bit to help.
In recent years, the problems with coffee procurement have been extensively documented, but the problem has been well recognized for a long time, particularly among those who work in the coffee sector – in fact, it has existed since global coffee prices began to fall. It is particularly vital in Finland to have a long-term perspective on sustainability, not only because we have the capacity to purchase sustainably produced coffee, but also because Finnish people consume the greatest amount of coffee per capita in the world (year 2018 an average Finn drank coffee worth 12 kgs of roasted coffee beans).
Farmers who grow coffee are currently facing the most serious challenges, and the primary reason for this is a drop in world coffee prices of approximately -35 percent since the end of 2016, which has coincided with an increase in costs (such as wages and energy prices), resulting in a significant reduction in the amount of money that the farmer receives from the coffee (during the decades the purchasing power has decreased even -80 percent in some regions).
The farmers’ position is the weakest in this coffee value chain (since they have the least bargaining strength), and they get just the amount of money determined by the market, and that’s all they get. In particular, this applies to the bulk coffee that the largest coffee roasters purchase. The coffee berry develops slowly and the harvest fluctuates over time, but the costs remain constant
it is difficult for the farmer to prepare for what is coming and what kind of price he or she will receive from the coffee, especially when other support from society / government is not on the same level as it is, for example, in Finland, and when the costs remain constant.
THE HISTORY OF SUSTAINABLE COFFEE
PRODUCTS SUCH AS COFFEE CAN HELP TO BUILD TRAFFIC
In order to entice people into their shops, larger merchants use a tactic known as “traffic building.” Coffee has long been a key commodity in attracting people to supermarkets and other retail establishments (as we Finns and other Scandinavians drink so much coffee). The difficulties of the coffee producers, on the other hand, are not addressed as extensively as they should be in the Finnish media. It’s possible that this is due to the fact that, from the viewpoint of a Western nation, everyone really receives more money.
At the very least, the coffee roasters make more money because the price of their most important ingredient decreases (the coffee bean accounts for 60-70 percent of the total cost of production of a coffee package), and the consumers “win” because the price of the coffee package remains low in the supermarket and it can still be used as a traffic-building product. Please keep in mind that this has absolutely nothing to do with the flavor or quality of the coffee.
Is it possible to use coffee as a traffic-building product? In order to attract customers to their stores, the retailers sell their coffee at a loss to maximize their profit margin. This is something that the retailers can do, but given the fact that the coffee farmers are experiencing severe difficulties, we believe that this is an entirely incorrect approach.
Retailers “win” as well, since they are carefully following the international market pricing of the things they sell and because they attract people to their establishments. In order to persuade coffee roasters to drop their prices, they may use the low pricing as a justification, stating that “right, the coffee market price has now gone down -x percent, and we want to buy this product with a -y percent discount.” Ultimately, the ones that pay for this are the coffee growers, who have the least amount of bargaining leverage along the coffee value chain.
The causes for the decrease in global coffee prices are well known: overproduction has played a role in parts of the price decline, while financial market speculation has played a role in others. But it doesn’t really matter since it’s something that’s completely out of control for the average Joe to deal with. What counts is what we do in response to this situation. In supermarkets, is it OK to utilize a sensitive product such as coffee, which has a broad range of difficulties, as a traffic-building product to increase foot traffic? We believe that, given the present circumstances (in which some farmers are hungry), our response is: definitely not acceptable.
In addition to informing the general public, it is our aim to educate various types of enterprises and businesses on the fact that the kind of coffee served at the workplace has a significant impact on the productivity of both workers and consumers. Many Finnish companies have strict guidelines and codes of conduct on sustainability issues, but when it comes to the coffee that is used in the coffee machine, it can be anything from the lowest category of bulk coffees, whose origin is unknown and there is no guarantee of the coffee’s sustainability, to the highest category of specialty coffees, which are all guaranteed to be sustainable (and believe us, there are many kinds of issues).
What are the REAL Challenges Facing Farmers, and why does COFFEE Ukraine care about these issues?
Warrior Coffee is guided by strong ethical principles that guide our business practices. One thing is certain: we will not be able to abuse anybody along the coffee value chain, particularly those who are the most vulnerable (meaning the farmers). It is our mission to supply our customers with environmentally friendly coffee ->
when a client consumes a cup of “black gold,” he or she can be 100 percent certain that the coffee cup is not being used to exploit anybody else. We need to be honest about these issues since the stakes are high. For example: https://dailycoffeenews.com/2018/09/04/coffees-price-collapse-how-did-we-get-here-and-what-can-we-do/. This page also contains information on how the price of coffee is determined. The following is an excerpt from the article:
“Debt is stacking up for producers, and revenue is dwindling. Food insecurity is on the horizon. Farmers are mortgaging their properties, slashing expenditure on education and health care, and missing meals in order to make ends meets. With their small riches at best, and increasingly with their capacity to bear privation, they are supporting your morning cup of coffee.”
It has become absolutely evident to us that, despite the fact that we are a tiny roastery, we must do our part to help solve the challenges. We, as a coffee roastery, can make a profit nearly regardless of global coffee prices, but the farmers are unable to do so. As a specialty grade coffee company, the coffee we’ve bought has always been more costly than the bulk coffee we’ve purchased since we only buy and sell premium grade coffee (which is always more expensive than the bulk coffee).
The majority of the coffee is sourced from South America, Africa, and Asia, where living conditions are generally lower than those seen in Western nations in the broad sense. Furthermore, since the farmers do not have financial buffers or safety nets supplied by the government, the remuneration they get for their efforts is instantly reflected in their bank accounts and, therefore, in their ability to survive.
As a result, it is clear that something has to be done. For example, the European Union is taking action and providing assistance to Ethiopian coffee farmers. Our organization wants to make certain that when we purchase raw coffee beans, we can be certain that the farmers are receiving a fair wage and that their working circumstances are favorable for them. Consequently, they will be more likely to conduct profitable business and manufacture the delightful beverage known as coffee in the future.
The most common sustainable coffee sourcing programs were examined and compared.
Our journey to develop our sustainable coffee sourcing program began in the summer of 2018, even though we have been purchasing the most ethical coffee available since the beginning of the company – this is influenced by our coffee supplier selection as well as the fact that we are a specialty coffee roaster (more on that later). Even though we have gone a long way in adapting the sourcing software to our requirements, the process has been unexpectedly time-consuming and challenging.
Here are some of the things we looked at and evaluated:
-models of direct commerce
establishing a social program in the nation of origin issuing several types of certifications
Overall, the subject is not a simple one to handle, and choosing the finest model for our organization has proven to be a difficult task. In this situation, there are several approaches that may be taken, and there is no one best solution. All of the approaches are required. As with so many other aspects of life, the important thing is to get started on the issue as soon as possible and to continue to refine the model over time.
As soon as we started working with Warrior Coffee, we understood that 1) the direct trade model alone would not be sufficient to achieve our objectives.
Most of this is due to the fact that there is no way for us to confirm that the nation of origin, cooperative, or farmer works in an ethical manner throughout the year. The farm is accessible to us as a corporation once or twice a year, but what happens during the other 364 days? Is it possible to ensure that coffee farms adhere to our standards and requirements – and, more importantly, what exactly are our standards and specifications?
The rules and requirements for an ethical supply chain are not something we are very knowledgeable with. It makes more sense, in our opinion, to delegate certain responsibilities to professionals and to engage actively in other areas. This research indicated that even global giants like Nespresso and Starbucks, who invest millions in their own direct-trade models, do not do well when compared to well-known nongovernmental organizations (NGOs) in terms of social and environmental impact (non-governmental-organisation, such as Fairtrade, UTZ, etc.).
Furthermore, according to a relatively recent report in Helsingin Sanomat (August 27, 2019), “With complicated sourcing and supply chains, it is difficult to maintain control over accountability. As a result, certain international retail chains have only in a few instances switched Fairtrade items to their own private label products. Even with all of their resources, they are unable to maintain control over all of the supply networks “,,,,,,,,,
The coffee procurement and supply chains, we’ve discovered, are quite complicated, making it almost difficult for us to maintain complete control over the whole process.
How could we (or any other small-scale artisan coffee roastery) be confident in the direct trade model, is the question at hand.
The price given to coffee producers is a particular emphasis of these direct trade models, which are often referred to as “direct trade models.” Certain aspects of appropriate compensation for agricultural labor are critical, but money is just one issue in the overall improvement of the farming community’s financial position. It is also critical that coffee plantation employees get at least the minimum pay (which is not always the case) and that free child labor is not used on the plantations (for example, while harvesting coffee) (and this not the case always either).
Aside from that, fair working hours should be the norm, and workers should have the ability to organize themselves into labor organizations. It’s incredibly difficult for the roastery to keep track of these things when purchasing directly from the nations themselves, even if the roastery is acting as a “supervisor” of sorts over the transaction. Without a doubt, it is essential to place your faith in the farmer from your nation of origin, but as a wise man once remarked, trust is a good thing, but assurance is better.
Organic production and implementation in Finland are monitored by the Finnish Food Agency (previously Evira), which is independent of the organic firms themselves. Working conditions in Finland are also monitored by the Regional Government Office.
It was also considered whether to build a social program in the nation of origin.
It is possible to support the origin in a variety of ways. Examples include the construction of schools and the acquisition of new coffee processing equipment by our coffee importers for the benefit of the farmers. Yet these models present the same challenges as direct trade models for us: how can we assure that our resources and financial assistance are directed to their intended recipients? We must guarantee that child labor is not employed on coffee grounds, and that money and resources are not wasted on supporting corruption, among other things.
The third and last point of emphasis was on the many types of certifications that are awarded to both coffee and coffee producers.
Even though we exclusively roast organic coffee, the organic coffee certification does not place as much emphasis on the ethical and social aspects of the coffee as it does on the agricultural practices and absence of use of fertilizers itself. The Rainforest Alliance, UTZ, and Fairtrade certifications are also significant for coffee. In January of this year, the Rainforest Alliance and UTZ combined, although their coffee certifications remain distinct for the time being.
The representatives of these organizations engaged in a lengthy conversation with us, and we subsequently conducted research into third-party assessments of these certificates. “Kaalimaan vartijat,” an assessment of certifications in general published by Finnwatch in 2016, and Trans Sustains’ comparison of coffee certificates published in 2017 were the finest reviews we found (2018).
We found the findings of these research to be really intriguing. According to Finnwatch, “Fairtrade certification is the most thorough and typically the finest certification available – it was better in terms of basic standards as well as the quality of the criteria it employs. With regard to the certificate’s effect as well as communication, it received first place; nonetheless, it received second place in terms of quality and independence.
In the meantime, according to Finnwatch, “the most significant area where Fairtrade has to expand is to strengthen the transparency of the program as a whole.” As a result, we’ve learned an essential lesson: there is no one certification that is completely better to all others and that addresses all of the issues. To be successful as a coffee roastery, we must make some kind of compromise and choose the certification and sustainability program that, to the best of our knowledge, matches our business beliefs and purpose.
Furthermore, in yet another article, Finnwatch writes that “Finnwatch advocates that both firms and customers utilize the most ambitious certification methods, which in the case of coffee is Fairtrade certification.”
In the case of coffee, FINNWATCH RECOMMENDS that both businesses and consumers use the most ambitious certification systems available, which in this case means Fair Trade Certification.
The Trans Sustain comparison focuses on one product in particular: coffee. Fairtrade USA placed in second position in their study, quite close to UTZ, which came out on top in the comparison. Fairtrade International, on the other hand, came in eighth position, and Trans Sustain did not go into detail about the reasons for the discrepancies in this comparison. However, all certificates issued by non-governmental organizations (NGOs), such as Fairtrade, beat certifications issued by coffee industry heavyweights, such as the Nespresso AAA and Starbucks, in terms of overall performance (C.A.F.E. practices).
In practice, we will continue to source coffee that is at the very least organically certified, with as many as feasible also being Fairtrade certified. In stages, we will make the transition to Fairtrade coffee; nevertheless, the majority of Warrior Coffee brand coffees are presently double certified (Organic and Fairtrade).
Also available on our website are current data on the prices we pay and the calculated RTO percent (Return to Origin percent) that we pay to the cooperative (we challenged our coffee partners to disclose this information, which wasn’t easy, but we succeeded!).
– FAIR TRADING WITH EVERYONe
Starting with this as a starting point, we identified three objectives that our own sustainable coffee program must achieve:
For the sake of the environment, coffee must be cultivated in a natural and sustainable manner.
Coffee growing must be a profitable business for the coffee grower in order to be successful.
We do not want to undertake the monitoring ourselves; instead, we want to enlist the help of an independent third party to keep track of the criteria and standards.
Part number 1 of our organic certification is covered by our present organic certification. Fairtrade also addresses the second and third portions of the equation.
For us, one of the most important reasons for choosing Fairtrade coffee is that it is the only certification that establishes a bare minimum price for the coffee that the farmer gets. As a result, the coffee producer / cooperative is 100 percent certain of what the minimum price will be for their coffee crop. Because, although the Fairtrade minimum price does not make the farmer extraordinarily wealthy, the compensation is nevertheless sufficient to enable the farmer to make a profit and expand his or her company, this is a huge comfort for the farmer.
Bulk coffee growers, on the other hand, who have not been part of the Fairtrade system for the last couple of years, are in a tough position and, in many cases, have even suffered losses as a result of their coffee growing operations. In the present coffee price crisis, this is the most serious issue to contend with.
Minna Halme, Professor of Responsible Business at Aalto University, said in a recent article published in Helsingin Sanomat that “Fairtrade has shown that it is feasible to produce coffee, tea, and bananas in an environmentally friendly manner. Farmers, who are in the most vulnerable position in the production chain, are provided with reasonable working conditions and a fair wage for their efforts.” As a result, Fairtrade compensates the coffee producer fairly for his or her product, which is a significant achievement.
This remuneration is open and transparent, and it may be seen on the Fairtrade organization’s official website. Additional certifications, such as UTZ or Rain Forest Alliance, do not have minimum pricing for farmers, despite the fact that their programs provide a variety of other benefits.
Yes, Warrior Coffee purchases premium coffee beans (Grade 1), which are by nature more costly than the Fairtrade minimum price, but we have recently been formally accredited as Fairtrade producers and distributors.
Take a look at the price and return to origin information that we offer on this page.
The essay delves a little further into the mathematics now, but it is critical that you grasp what is going on. When we purchase Fairtrade coffee, we pay a minimum of $1.90 USD each pound of the coffee purchased. When purchasing Fairtrade coffee, the bare minimum price is $1.44 USD, with 30 cents coming from organic certification and 20 cents coming from Fairtrade premium, of which at least 5 cents goes to quality and production improvements. As a result, the minimal price that the co-operative obtains is around 3,7€ per kilogram, which is equivalent to 1,9 USD per pound when converted to euros and kilograms.
Remember that this figure represents simply the amount of money received by the co-operative in the nation of origin. In addition to this price, the coffee is carried to Europe, stored, and delivered to Warrior Coffee’s roastery, with margins and profits accruing to the participants at each stage of the process.
When we purchase coffee for our roastery, we typically spend 5-8 euros per kilogram of coffee. Yet with that 3,7€/kg price, farming is profitable and sustainable for the farmer, as quality coffee production costs are clearly above one dollar per pound, with differences between countries (https://www.perfectdailygrind.com/2018/07/this-is-what-it-costs to-produce-coffee-across-latin-america/), and the farmer’s income is sufficient to support his family.
The following chart depicts the market price of Arabica coffee over a five-year period (source: https://www.ifcmarkets.com/en/market-data/commodities-prices/coffee): Arabica coffee prices over a five-year period are shown in the following chart:
As seen in Figure 2, the price of coffee has decreased by around 50% during a five-year period. The price of coffee increased towards the end of 2016, but it has since plummeted by almost 35%. As you can see, the price of coffee throughout the globe is quite erratic. According to current market prices for coffee, the global market price for a pound of coffee is around 1 USD, which implies that Fairtrade farmers earn over 100 percent more for their coffee than conventional farmers (cf. 1.9 USD per pound).
When the price of coffee on the market is thus low (about $1 per pound), the majority of coffee producers suffer financial losses (at least the smallest coffee farmers). Moreover, there are a large number of these coffee farmers; around 125 million people are reliant on coffee cultivation across the globe, and 80 percent of the world’s coffee originates from these tiny farms, which number approximately 25 million globally.
It’s one of the most significant findings, since this group of farmers is also dealing with other issues as a result of climate change, which is another crucial observation. The migration of people from one nation to another will also grow if these individuals are barred from earning a living in their native country. As a result, choosing sustainably sourced coffee has a significant influence on the worldwide coffee market.
Additionally, the Fairtrade pricing scheme operates in the other direction. The farmers get the market price for their coffee when the market price for coffee exceeds the Fairtrade minimum price set by the organization. Fairtrade has also been criticized for being prohibitively expensive for the poorest farmers. On the other hand, if there is even a small amount of coffee-growing land and the business is conducted seriously, the license costs can be covered in these market conditions, when the Fairtrade price is nearly 100 percent higher than the market price.
CAN YOU TELL ME HOW MUCH THE FAIRTRADE CERTIFICATION COSTS DIFFERENT PARTIES?
Fairtrade coffee certification will come at a cost to both the grower and us as a roaster. We purchase Fairtrade coffee, which is more costly (which we gladly do). When we offer Fairtrade certified coffee to clients, the price of the coffee is higher than the price of non-certified coffee. As a relatively small company, the Fairtrade application price is € 550, and a three-year license is € 790, which is a significant investment.
In addition, we pay 0.15 € per kg for roasted coffee, which we offer to customers under the Fairtrade brand. As a result, this is an obvious expenditure for us, and it is not a trivial matter from a business standpoint. Although this is not our preferred method of doing business, we believe it is a sound one, and it allows us to express these considerations to our customers in an open and honest manner (for example, via this blog post). We hope that this will be beneficial to them as well.
The percent of return to the original and how we’ll develop in the future are both important questions.
Besides Organic and Fairtrade certification, we wanted to go one step further and make our operations more transparent. In the coffee industry, the Return to Origin (RTO) percent reflects the proportion of a coffee’s retail sale that returns to the coffee supply chain at the source of production. In the coffee industry, a variety of models have been used, including: http://www.transparenttradecoffee.org/transparentcoffees
If we sell coffee for, for example, 24,52 € / kg (VAT 0 percent), then with Fairtrade price (3,7 € / kg), taking into account approximately 15 percent of the roasting loss (evaporation of water from the raw bean), the RTO percent is approximately 18 percent, which is in line with the coffees featured on the Transparently Traded Coffee website. If we sell coffee for, for example, 24,52 € / kg (VAT 0 percent), then with Fairtrade price (3 In addition, the model may be expanded to include questions such as how much of a customer’s cup of coffee gets returned to the nation of origin. It goes without saying that this is a considerably lower value, given that a cup of coffee contains more than 90 percent water, and that when you sell a cup of coffee, you are also incurring local expenditures, such as labor and rent. During the same time period as the release of our first Organic and Fairtrade coffee, we will also be posting an updated statistics page on our RTO model.
The RTO percent statistic for the coffee market in general is less than 10 percent, and it should be at least twice that amount to alleviate poverty among coffee producers.
Once again, the transparent pricing and return to origin information that we disclose may be accessed on our website.
CONCLUSIONS
It is clear that sustainable coffee is a complicated issue, but we have attempted to simplify it in our blog article. Our approach is not without flaws, but it has brought us this far after a great deal of effort and research into the issue. We have achieved this by integrating best practices. We are always refining and improving our sustainable coffee program as we gain more knowledge.
We have also lately (summer 2020) begun to plant trees in order to combat climate change; you can learn more about this here >>.
We really hope that this blog article has provided you with a better understanding of the coffee industry. When selecting the next coffee box, you will almost certainly be able to consider the environmental impact of that lovely beverage as well.