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May 30, 2003
World's Largest Coffee Traders Agree to Sustainability, but How Committed Are They?
    by William Baue

Rainforest Alliance's recent agreement on sustainability with the world's two largest coffee traders holds promise but the devil may be in the details.


Last week, the Rainforest Alliance, which certifies the sustainable production of coffee and other products, announced it had signed Memorandums of Understanding (MOUs) with the world's two largest coffee traders, Neumann Kaffee Gruppe and Volcafe Group. These two companies combined serve about 25 percent of the global coffee market, so increasing the amount of certified coffee they deal could help counteract the current global coffee crisis of plummeting prices due to a glut of low-quality beans.

"Our subsidiaries in 16 countries are already working with the Rainforest Alliance on implementation and certification of several farms and mills," said Paul Moeller, CEO of Volcafe Group. "We have proof that conservation of the coffee belt's biodiversity and business are perfectly compatible."

The Rainforest Alliance MOUs cover "various forms of cooperation from consulting on best practices and standards in producing countries to co-branding and marketing agreements in consumer markets."

Some informed observers, however, question the efficacy of the MOUs.

"We're all eager for some good news for coffee farmers, but this falls short," said Rodney North of Equal Exchange, a Massachusetts-based dealer in Fair Trade certified coffees. Fair Trade is another sustainability certification program. "There are no details, no firm prices for farmers, no quantifiable commitments."

Rainforest Alliance collaborates with the Sustainable Agriculture Network (SAN), a coalition of nine Latin American conservation groups, to certify the social and environmental sustainability of coffee farms. Rainforest Alliance certification standards call for biodiversity and wildlife conservation, fair treatment of workers, and the use of integrated pest management (which minimizes the use of pesticides), among other things. Rainforest Alliance certification currently covers 31 producers.

The Fair Trade certification program, which is run by Oakland-based TransFair, is much more prevalent, covering some 300 cooperatives representing over 500,000 farmers. Fair Trade standards not only guarantee a fair price to farmers, they also forbid the use of the Pesticide Action Network's "dirty dozen" pesticides (including DDT) and encourage integrated crop management. In addition, 85 percent of the Fair Trade coffee sold in the US is also certified organic.

There is concern over the effects of competing certification programs.

"I would suggest that the critical issue is getting behind a single certification scheme," said Matt Warning, an associate professor of economy and international political economy at the University of Puget Sound who works extensively with small coffee farmers in Oaxaca, Mexico. "If seals multiply, consumers will not be able to differentiate easily between legitimate social guarantees and bogus seals that emerge to protect firms from public scrutiny."

"At this point, the TransFair seal is the one with the most public credibility and I would hate to see other organizations do things that would undermine it," said Prof. Warning.

However, TransFair and Rainforest Alliance certification may complement one another. TransFair traditionally works only with cooperatives, because it believes in a bottom-up approach of empowering the growers themselves, whereas Rainforest Alliance will work with any kind of farm, including plantations.

"There are some fairly run plantations," Prof. Warning told SocialFunds.com. "TransFair is working up a set of standards for plantations, but they don't have those yet."

"In some ways Rainforest Alliance may be responding to something that TransFair hasn't been able to get around to doing," he continued. "TransFair needs to get going in coming up with those standards."

In the meantime, the degree of commitment to sustainable production standards exhibited by Volcafe and Nuemann may very well serve as a litmus test for how well the mainstream market can integrate these priorities.

Equal Exchange's Mr. North remains skeptical, citing the example of Starbucks (ticker: SBUX), which signed an MOU with TransFair in the late 1990s.

"Now, four years later, after a lot of pressure, Starbucks is still buying less than one percent of their green coffee according to Fair Trade standards," said Mr. North, who fears that the current Rainforest Alliance MOUs may meet the same fate.

"We hear large companies make nice-sounding pronouncements of intent all the time, which either amount to little real change or go nowhere at all," Mr. North added. "Only time will tell."

 

 
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