Fairtrade & Rainforest Alliance certification: How fair is fair coffee?

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I drink coffee every day. Could I stop? Probably not. Do I want to stop? Definitely not. But I would like to know more about the people who make a living out of coffee – and what difference certifications like Fairtrade or Rainforest Alliance make.

Growing and drying of coffee-beans in Vietnam, the world’s second largest coffee producer © ILO/Nguyễn ViệtThanh [1], CC BY-NC-ND 3.

Overview

The Origin of Coffee
Working Conditions in the Coffee Sector
Rainforest Alliance
Fairtrade
How to buy coffee?
Footnotes

The Origin of Coffee

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According to legend, coffee was first discovered in the former empire of Abyssinia – today’s Ethiopia. A much cited legend takes place in 850 and tells of the goat herd Kaldi, who let his goats graze in the Ethiopian plateaus. He noticed the goats’ unusual activity after they had eaten berries from a coffee tree. He took the berries to a nearby monastery. The monks, however, decided the berries to be “devil’s fruit” and threw them into the fire. But the enticing aroma made them change their minds. They rescued the berries from the fire and prepared a brew out of them. This story exists in different tellings, playing at different times and places, and whether or which version is true, does not really matter. Genetic studies however have confirmed the Ethiopian Empire to be the birthplace of the Arabica species.

From the African continent coffee quickly made its way into the whole world. Today it is grown in many countries close to the equator:2

Worldwide coffee production 2020.

In these countries 125 million people depend on coffee production for their livelihoods.3 But what are the conditions for these livelihoods?

Working Conditions in the Coffee Sector

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The vast majority of people working in the countries that cultivate coffee work on the plantations – about 95 %.4

Reuters reported on forced labour, child labour and unsafe working conditions on plantations in Brazil in 2019. Brazil is the biggest coffee-producer worldwide. The plantations were certified by Rainforest Alliance (the logo with the frog) and produced amongst others, for Starbucks and Nespresso. Workers earn less than 4 US-$ for 60 liters of coffee beans, which is the amount that some workers harvest in a day. Amongst the workers were children as young as 13 years. According to estimations about two thirds of the workers on coffee plantations in the state Minas Gerais are undocumented workers. Minas Gerais is responsible for more than half of Brazil’s coffee production. People working without papers are more vulnerable to exploitation, e.g. by payment below minimum wage or missing protective equipment.5

In 2017 journalists from Spiegel accompanied seasonal workers in Guatemala, who harvest up to 75 kilograms of coffee cherries in a day. The worlds’ second biggest coffee producer, Starbucks, is one of the buyers of these cherries. At night, the workers sleep in huts, often sharing one room amongst 2 families.6

Reporters from fluters visited the Columbian coffee farmer and owner of the plantation Neftaly Madrid in 2019.7 Neftaly Madrid cannot afford to pay his workers social security – for illness, unemployment, or pension – because then he would not be able to provide for his family. He grows beans, corn, and plantains on the side in order to make ends meet.

A 2020 survey from the International Labour Organization (ILO) interviewed more than 150.000 people working on coffee plantations. The interviews took place in Ethiopia, Costa Rica, India, Indonesia and Vietnam. Amongst other results, the survey showed that a significant amount of coffee workers do not earn money, as they work as unpaid family workers. This is quite common in countries, where the majority of plantations are small, family-led businesses, as is the case in Columbia, Ethiopia or Indonesia. However, even on industrial-like plantations children often work unpaid to increase the low wage. Generally, the amount of unpaid workers is higher for women than men. In Vietnam and Indonesia, the majority of female workers on the plantations are unpaid family workers. In Ethiopia, a high percentage of child labour was found – about 25 % of workers are under 16 years old.8

On average an employee in the coffee sector earns this as a wage:9

Wages 2020 in the coffee, agricultural sector and medium, minimum wage.

Coffee is a 50 billion Euro market, the second largest exported commodity after crude oil, drunk billions of times every year.10 Clearly, there is a lot of money in the industry. Why does so little end up in the pockets of the farm workers?

“The coffee farmer is the weakest link in the trade chain. […] Those who make the most profit in the trade chain are ultimately the exporters, middlemen and the people who transform the beans into a cappuccino or espresso.” says Jason Randon, agronomist & coffee-expert.11

There is an imbalance between sellers and buyers, leading to low sales prices. The coffee trade is a demand-driven supply chain. About 25 million people make their living with coffee and 70 % of the world-wide coffee production comes from small-scale plantations. On the other hand, there are only a small number of roasters. In 2010 more than 50 % of the world market was being controlled by 5 big companies – Kraft, Nestlé, Proctor & Gamble, Sara Lee und Tchibo.12 The organization into co-operatives with other coffee farmers can balance out this mismatch at least partially. This leads to a better access to market informations and greater liquidity, because farmers can help each other out.13

In the end only 10 – 20 % of the money we pay for our coffee ends up in the pockets of the farmers, who produce the coffee cherries and do the first processing steps. 40 % of the money are made with import and trade, and 20 % with the roasting of the beans.14

Another challenge for the farmers are the high fluctuations of the sales prices, because a majority of coffee sales bases the price on the stock exchange prices of different kinds of coffee – and these stock exchange prices are volatile:15

Fluctuations of the stock prices for coffee, 2016 being 100 %.

If one does not want to support all these negative phenomena – forced labour, child labour, lack of protective equipment, low wages and volatile stock price – what are the options? The closest decision is to opt for a certified product. The two largest certifications are Rainforest Alliance and Fairtrade.

Rainforest Alliance

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This certification-giant (the label with the frog) certifies about 25 % of the worldwide cocoa and coffee production.16 There are social criteria – e.g. minimum wages or – and ecological criteria – e.g. a ban on converting natural forest or eco systems into agricultural areas.17 However, the new criteria do not meet the standards of the International Labour Organisation (ILO) regarding overtime and child labour.18 The ILO standards are an important benchmark for the extent to which workers’ rights are respected. Rainforest Alliance does not have a price floor like Fairtrade, only varying premiums which are added on the stock prices.19

The Reuters research mentioned above, which discovered forced labour, child labour and a lack of safety equipment on Brazilian coffee farms, found that only a fraction of certified farms are inspected as part of the certification process. In another industry – the banana and pineapple sector – Oxfam reported appalling abuses on Rainforest Alliance certified farms in 2016 – repression of workers who want to form unions, lack of protection of workers from toxic pesticides, payment below minimum wage, and others.20

In the end, Rainforest Alliance seems to neither be a label for fair trade nor for organic farming, but rather for discreet fair and greenwashing.

Fairtrade Coffee

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For some time now I have been buying Fairtrade coffee. Because I assume Fairtrade to ensure fairer trade just like the name says. But does Fairtrade actually lead to less poverty?

The vision of Fairtrade is to shape trade more fairly, to empower small scale producers and guarantee sustainable livelihoods. The entities which are certified are cooperatives of many coffee farmers, rather than single plantations. The most important tool for the goals of Fairtrade is a price floor. Depending on the kind of coffee – Arabica or Robusta, organic or not – this price floor is between 1.01 US-$ and 1.70 US-$ per pound of coffee beans.21 If the stock price of the corresponding type of coffee falls below this, at least the price floor is paid; if the stock exchange price is above this, the stock price is paid. In addition, there is a premium of 0.20 US-$ per pound of coffee beans to be spent on social and economic investments in the community or cooperative. There are other instruments to make Fairtrade fairer than conventional trade, but these two are the most important. But do these two instruments work?

In a German study22 in Nicaragua, the living conditions of 327 members of coffee cooperatives producing either conventional, organic, or organic & Fairtrade coffee were studied for 10 years. It showed that the proportion of farmers affected by poverty grew more in the organic and organic & Fairtrade sectors than in the conventional sector. A disappointing result. What were the reasons? One reason is the higher production costs in organic & Fairtrade farming, which apparently cannot be absorbed by the price floor. In addition, the certified farmers had to wait an average of 8 – 9 months for their money after the harvest – even though one of the aims of Fairtrade is pre-financing. Also, joining Fairtrade is not for free. A one-time fee of 600 US-$ has to be paid, annually 1300 – 4000 US-$ depending on the production volume.23 However when stock exchange prices are low, Fairtrade does work quite well – during the coffee crisis at the turn of the millennium, for example, farmers in Mexico, Guatemala and El Salvador earned 2 – 3 times the price that conventional farmers received.24

Another problem is the lack of guarantee for interested buyers – the effort of certification is made without knowing whether it will pay off. This problem exists across the Fairtrade product range. In 2014, for example, only 6% of Fairtrade tea produced was sold to Fairtrade buyers – for bananas, in contrast, there were 66% Fairtrade buyers in 2018.25

Who profits from coffee products, and how much? A Norwegian study26 calculated this for both a packet of Fairtrade coffee from the supermarket and a cup of Fairtrade coffee from the university cafeteria. Of the selling price of a pack of coffee, the Guatemalan producer earns 13%. For a cup of coffee, he earns 2% of the sales price. Is that fair? In the case of the cup of coffee, 96 % of the sales price falls to the consuming country, only 4 % to the producing country. The authors of the study conclude: “Both value and added value are increasingly surrendered to the consumers’ countries. […] These ethically attractive products do not deliver what they promise in terms of social and economic benefits for producers. The bottom line is that large multinational companies are using the Fairtrade system to “fairwash” their products.”

Even though the above points were initially devastating for me, as a customer I have not completely written off Fairtrade. But for me, Fairtrade is now just one piece of the fair trade puzzle.

How then to buy coffee?

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The economist Victor Claar, who has done research on fair coffee, proposes the following in a talk on the topic: you simply buy your favorite coffee, no matter if it is fair trade or not. And every time you do, you throw 25 cents, or 50 cents, or 1 € in a piggy bank. And that money then goes to a charity that you know to do really great work.

I think that is an interesting approach. But I did not find it satisfactory. And during my research I encountered coffee-sellers who adopted a different approach than Fairtrade to market fairly produced coffee. It is about more direct, more longterm trade relations. This coffee is called “relationship coffee”. This means that producers are not at the mercy of the volatile stock market price, have fewer risks of not getting rid of the coffee, and there are fewer middlemen who actually only earn money from the coffee through their market connections.

Meanwhile, I also pay more attention to whether a coffee is organic or not. Apart from the effects on the eco-systems, this also has health consequences due to the frequent lack of protective equipment for workers, as already mentioned. The workers apply pesticides that have been banned in the EU for a long time, or continue to work while they are being sprayed above them by aeroplanes.27 In today’s industrial cultivation, coffee trees are mostly planted in the blazing sun instead of in the partial shade of other trees. This increases the need for pesticides and fertilisers in industrial cultivation. The coffee plant does prefer partial shade.28

A final point of reference for me is the roasting of coffee in the country of cultivation. Roasting is not a labour-intensive activity like cultivation and harvesting, but a capital-intensive activity. As a result, roasting traditionally takes place in the richer consumer countries – and the profits flow mainly there. If, on the other hand, roasting takes place in the country of cultivation, the country benefits more – more jobs, more money.

For me, these criteria are the missing pieces of the puzzle. I will not be able to pay attention to all 4 of them every time I buy a cup of coffee. Nor am I of the mindset that consumption can save the world – that is 1. impossible, and 2. we need to shake up much deeper structures to reduce forced labour, child labour and exploitation. But with these 4 pieces of the puzzle – Fairtrade certification, relationship coffee, organic, roasting in the country of cultivation – I and everyone else can make a more conscious decision.

The English translation of this article was partially translated using DeepL.

Footnotes

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  1. Source left: Plantation and production of coffee in Lam Dong Province, Viet Nam. ILO, Nguyễn ViệtThanh. 2021. Picture. https://flic.kr/p/2m1Xs9j. Last checked 20.08.2021.
    Source right: Plantation and production of coffee in Lam Dong Province, Viet Nam. ILO, Nguyễn ViệtThanh. 2021. Picture. https://flic.kr/p/2m1NjTs. Last checked 20.08.2021.
  2. Data for the map: Coffee year production by exporting countries. International Coffee Organization. 2021. Dataset. https://www.ico.org/trade_statistics.asp. Last checked 26.07.2021.
  3. Source: The World Atlas of Coffee. James Hoffmann, Octopus Publishing Group Ltd. 2018. Book. ISBN 978-1-78472-429-0.
  4. Source: Wages and working conditions in the coffee sector: the case of Costa Rica, Ethiopia, India, Indonesia and Viet Nam. Luis Pinedo Caro, International Labour Organization. 2020. Report. https://www.ilo.org/global/topics/wages/projects/WCMS_765134/lang–en/index.htm. ISBN 978-92-2-033986-2.
  5. Source: Picked by slaves: coffee crisis brews in Brazil. Reuters, Fabio Teixeira. 12.12.2019. Article. https://www.reuters.com/article/us-brazil-coffee-slavery-idUSKBN1YG13E. Last checked 19.12.2021.
  6. Source: Die bittere Wahrheit über unseren Kaffee. Spiegel, Susanne Amann, Markus Brauck et al. 21.9.2017. Article. https://www.spiegel.de/spiegel/kaffee-die-bittere-wahrheit-ueber-unser-lieblingsgetraenk-a-1168626.html. Last checked 4.8.2021.
  7. Source: Ganz schön bitter. Fluter, Nathalie Pfeiffer, Alejandro Hainsfurth. Article & video. 4.2.2019. https://www.fluter.de/kaffeeanbau-arbeitsbedingungen. Last checked 4.8.2021.
  8. Source: Wages and working conditions in the coffee sector: the case of Costa Rica, Ethiopia, India, Indonesia and Viet Nam. Luis Pinedo Caro, International Labour Organization. 2020. Report. https://www.ilo.org/global/topics/wages/projects/WCMS_765134/lang–en/index.htm. ISBN 978-92-2-033986-2.
  9. Source 1: Wages and working conditions in the coffee sector: the case of Costa Rica, Ethiopia, India, Indonesia and Viet Nam. Luis Pinedo Caro, International Labour Organization. 2020. Report. https://www.ilo.org/global/topics/wages/projects/WCMS_765134/lang–en/index.htm. ISBN 978-92-2-033986-2.
    Source 2: Jährliche Entwicklung des Wechselkurses des Euro gegenüber dem US-Dollar von 1999 bis 2020. Statista. 25.5.2021. Data Set. https://de.statista.com/statistik/daten/studie/200194/umfrage/wechselkurs-des-euro-gegenueber-dem-us-dollar-seit-2001/. Last checked 8.8.2021.
  10. Source: Die bittere Wahrheit über unseren Kaffee. Spiegel, Susanne Amann, Markus Brauck et al. 21.9.2017. Article. https://www.spiegel.de/spiegel/kaffee-die-bittere-wahrheit-ueber-unser-lieblingsgetraenk-a-1168626.html. Last checked 4.8.2021.
  11. Source: Ganz schön bitter. Fluter, Nathalie Pfeiffer, Alejandro Hainsfurth. Article & video. 4.2.2019. https://www.fluter.de/kaffeeanbau-arbeitsbedingungen. Last checked 4.8.2021.
  12. Quelle: The future of Fair Trade. Ruerd Ruben. 2010. Book chapter in Markets, marketing and developing countries. DOI: https://doi.org/10.3920/978-90-8686-699-1.
  13. Source: Do farmers benefit from participating in specialty markets and cooperatives? The case of coffee marketing in Costa Rica. Meike Wollni, Manfred Zeller, Agricultural Economics. 2007. Journal article. DOI: https://doi.org/10.1111/j.1574-0862.2007.00270.x.
  14. Source: Value adding through certification? Insights from the coffee sector in Nicaragua. Tina Beuchelt, Anna Kiemen, Manfred Zeller. 2010. Book chapter in Markets, marketing and developing countries. DOI: https://doi.org/10.3920/978-90-8686-699-1.
  15. Source: Coffee Price Index, 2016 = 100, includes Other Mild Arabicas and Robustas. IMF Data. Data Set. https://data.imf.org/?sk=471DDDF8-D8A7-499A-81BA-5B332C01F8B9&sId=1547558078595. Last checked 7.8.2021.
  16. Since the fusion of Rainforest Alliance and Utz certified in 2017, Utz certified belongs to Rainforest Alliance. A new standard has been published in the summer of 2020, with inspections starting in summer 2022.
  17. Source: Rainforest Alliance: Siegel mit neuem Nachhaltigkeitsstandard. Utopia, Sven Christian Schulz. 24.10.2020. Article. https://utopia.de/siegel/rainforest-alliance/. Last checked 22.08.2021.
  18. Source: Questions about Rainforest Alliance. Ethical consumer, Clare Carlile. 29.04.2019. Article. https://www.ethicalconsumer.org/food-drink/questions-about-rainforest-alliance. Last checked 22.08.2021.
  19. Quelle: Who is the fairest of them all? The Guardian, Sean McAllister. 24.11.2004. Article. https://www.theguardian.com/lifeandstyle/2004/nov/24/foodanddrink.shopping1. Last checked 22.08.2021.
  20. Source: Süsse Früchte, bittere Wahrheit. Oxfam Deutschland e.V. 2016. PDF. https://www.oxfam.de/ueber-uns/publikationen/suesse-fruechte-bittere-wahrheit. Last checked 22.08.2021.
  21. Source: Fairtrade Minimum Price and Premium Information. Fairtrade International. 2011. Website. https://www.fairtrade.net/standard/minimum-price-info. Last checked 26.07.2021.
  22. Source: Profits and Poverty: Certification’s Troubled Link for Nicaragua’s Organic and Fairtrade Coffee Producers. Ecological Economics, Manfred Zeller, Tina D. Beuchelt. 2011. Article. DOI: https://doi.org/10.1016/j.ecolecon.2011.01.005.
  23. Source: Is „Fair Trade“ Fair? Victor Claar. 29.11.2016. Video. https://www.youtube.com/watch?v=4HcUUD_PXrk. Last checked 24.07.2021.
  24. Source: Profits and Poverty: Certification’s Troubled Link for Nicaragua’s Organic and Fairtrade Coffee Producers. Ecological Economics, Manfred Zeller, Tina D. Beuchelt. 2011. Article. DOI: https://doi.org/10.1016/j.ecolecon.2011.01.005.
  25. Source: Does Fairtrade Really Work? Food unfolded, Jane Alice Liu. 3.2.2021. Website Article. https://www.foodunfolded.com/article/does-fairtrade-really-work. Last checked 26.07.2021.
  26. Source: Who Really Benefits from Fairtrade? An Analysis of Value Distribution in Fairtrade Coffee. Globalizations, Silje Johannessen, Harold Wilhite. 2010. Journal Article. Vol.7, No. 4, pp. 525 – 544. https://doi.org/10.1080/14747731.2010.505018
  27. Source: Nestlé admits slave labour risk on Brazil coffee plantations. The Guardian, Kate Hodal. 2.3.2016. Article. https://www.theguardian.com/global-development/2016/mar/02/nestle-admits-slave-labour-risk-on-brazil-coffee-plantations. Last checked 23.08.2021.
  28. Sources: What is shade-grown coffee? Coffee & Conservation, Julie Craves. 2006. Website. http://www.coffeehabitat.com/2006/02/what_is_shade_g/. Last checked 23.07.2021.
    Coffee: Growing, Processing, Sustainable Production. Jean Nicolas Wingens, Wiley-VCH Verlag. 2004. Book. ISBN 9783527307319. DOI 10.1002/9783527619627.

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