2023 Coffee Barometer Shows Growing Pressure for Sustainable Coffee

The 2023 Coffee Barometer launched today, describing an agricultural sector in a “state of crisis” while outlining mounting pressures on coffee companies to more clearly address sustainability in their own supply chains.

Spanning 58 pages while offering a refreshingly no-holds-barred take on the various successes and failures of corporate sustainability in the coffee industry, the 2023 Coffee Barometer is the first edition since the pandemic year of 2020.

“Amidst the grand claims of sustainability and rosy promises of a prosperous future in coffee agriculture, the harsh reality faced by coffee producers is marked by price volatility and rising production costs due to higher prices for fertilizers and labor,” the authors wrote in the 2023 version. “Coupled with rampant inflation and the profound consequences of a rapidly changing climate in the most vulnerable origins, the coffee sector finds itself immersed in a state of crisis.”

For coffee roasters and trading companies, the 2023 Coffee Barometer offers compelling cases for improved sustainability collaboration, reporting, transparency and supply chain due diligence.

The 2023 edition also tackles relatively new and emerging issues in coffee sustainability, including:

• the looming European Union deforestation regulation (EUDR);
• the efficacy of multi-stakeholder initiatives (MSIs);
• promising new work on “living income” for farmers;
• a new Coffee Brew Index, which involved scouring public data and questionnaires to evaluate the strategies of 11 of the world’s largest coffee roasting companies;
• and last but not least, climate change.

Produced through a collaboration between three international nonprofit organizations — Conservation International, Solidaridad and Ethos Agriculture — the  2023 Coffee Barometer is officially launched today. It should be noted that each of those NGOs is engaged in sustainability programming design.

The full report is available here.

Inside the 2023 Coffee Barometer

Following are just a few of the highlights from the 2023 Coffee Barometer…

Green Coffee Prices and Purchasing Practices

Readers jumping straight to the conclusion will find a common refrain among many sustainability-minded actors in the coffee world that goes something like this: Large companies wishing to make an immediate positive impact on sustainability should pay more for green coffee.

“The trade of commoditized coffee at affordable prices continues to promote an extractive model of production that results in widespread poverty among small-scale farmers and thus prevents comprehensive sustainability within the coffee sector,” the authors wrote.

They added that improved purchasing practices would have an immediate effect on the income and security of farmer livelihoods while also empowering farmers “to reinvest in their own businesses, upholding crucial ecosystem services, and the adoption of responsible land-use practices like agroforestry.”

The report routinely underscores the reality that no matter what positive sustainability steps have been taken by large coffee companies, particularly those in the U.S. and Europe, the combined effect of the global coffee trade continues to leave millions of small-scale farmers in poverty.

“While the sector’s total economic value has significantly increased, the benefits seem to be disproportionately concentrated in Europe and North America,” the report states. “This lack of economic retention is jeopardizing the sustainability of the coffee value chain. To address this, the debate must confront trade inequities, particularly the disconnect between market prices and production costs. Businesses need to demonstrate greater willingness to compensate small-scale farmers for sustainable practices by offering prices that account for social and environmental costs and by investing in long-term trading relationships.”

EUDR and Other Regulations/Mandatory Compliance

The 2023 Barometer notes increased government legislation towards sustainability and supply chain due diligence in the coffee industry.

Chief among these is the EU Deforestation regulation, which took effect in June and gave large companies 18 months for implementation, with smaller companies receiving an additional six months.

The Barometer suggests that coffee companies throughout the EU are at this point not adequately prepared for compliance.

“The magnitude of the mandatory requirements expected in the coffee industry is significant, and it is clear that many coffee companies are ill-equipped to handle this transformation,” the authors wrote.

Additionally, the authors wrote that the new law may have unintended adverse consequences, including additional burdens on the governments of coffee-producing countries and, by extension, small-scale farmers.

“A distinct risk linked to the EUDR, highlighted by both industry and civil society, lies in the absence of a thorough evaluation of its implications on smallholder producers prior to its enforcement,” the report states. “Despite the clear legal responsibility for compliance falling on traders, roasters, and retailers within the EU, there is a significant risk that industry actors shift costs, obligations, and administrative burdens onto small-scale farmers in order to access the European coffee market.”

Living Income and Living Wages

The report notes that the concepts of living incomes and living wages — and addressing income and wage gaps among farmers and workers — have gained some traction throughout the industry.

While the report applauds living-income-related efforts among larger roasting and trading companies, it notes that such work will require deeper commitments and collaborations in order to achieve meaningful sector-wide change.

“While the coffee sector is increasingly emphasizing the importance of living income and living wage benchmarks, a significant gap persists in terms of comprehensive data for each coffee-producing region,” the authors wrote.

Additionally, the report notes that living wage gaps throughout the coffee sector among workers — often seasonal pickers — remains largely “overlooked.”

“Available research indicates that farmworkers in the coffee industry receive wages that do not adequately meet their fundamental needs,” the report states. “The findings further reveal that these wages not only fall below the national averages, but also fall below the average wages paid in the broader agricultural sector.”

Multi-Stakeholder Initiatives (MSIs)

As corporate sustainability efforts have evolved in the coffee sector, so too have multi-stakeholder initiatives, often pre-competitive sustainability initiatives, referred to in the report as MSIs.

The report credits the success of MSIs in engaging more actors in sustainability initiatives — including governments, NGOs and large players in the private sector — while creating some form of accountability and third-party legitimacy.

Yet it also warns against the potential of MSIs to allow large companies to position themselves as champions of sustainability, rather than as part of the problem.

“One might expect civil society to challenge how corporations are reshaping the sustainability narrative in the different MSIs,” the authors wrote. “However, as partnerships deepen and NGOs become entangled in webs of corporate and governmental fundraising schemes, an increasing number of NGOs seem to accept, or at least refrain from openly criticizing, the corporate sustainability narrative.”

Climate Change and Adaptation

The 2023 Barometer shares many dire findings related to climate change and its projected effects on the coffee landscape and coffee farmers, including widely circulated research predicting that half of the available land for arabica production will become unsuitable by 2050 due to climate change.

Because coffee plants live and produce for decades, the authors noted that urgency is needed among coffee industry players in order to promote climate adaptation measures, especially given the lack of investment capital available to the world’s millions of small-scale farmers.

“Climate smart, regenerative agriculture as well as agroforestry, in particular, have emerged as a promising solution for sustaining coffee production in the face of climate change,” the authors wrote. “These approaches involve intercropping coffee plants with shade trees and promote practices that enhance soil health.”

Coffee Brew Index

New to the 2023 edition of the Coffee Barometer is the Coffee Brew Index, a written evaluation and visual representation of the sustainability concerns of 11 of the world’s largest coffee companies, primarily multinational roasters based in Europe and the U.S..

An underlying premise is that these companies — encompassing scores of roasted coffee brands globally — represent an outsized share of the global coffee market, and therefore contribute more to sustainability problems, as well as solutions.

“In an era where supermarket shelves overflow with an array of brands and coffee chains dot every street corner, the notion of real consumer choice proves to be a mere illusion,” the authors wrote. “For example, only 4 companies provide 68% of coffee in the US: J.M. Smucker, Starbucks, JDE Peet’s and Kraft Heinz.

For the Index, the Coffee Barometer team reached out to each of the 11 companies with questionnaires. Kraft Heinz was identified as the only one not to reply. The report also involved extensive research of corporate sustainability reports and other publicly available documents and data.

Ultimately, the Index rated each of the companies in numerous sustainability categories, while also providing overviews of group performances in environmental sustainability, social issues, and economic sustainability and purchasing.

On the latter sustainability pillar, the authors wrote, “Despite companies making bold claims in their public communications regarding their commitments, this part of the assessment proved to be the most challenging for the companies to answer, resulting in disappointingly low overall scores… For example, very few companies share up-to-date public information about their certification and verification processes, sustainability premiums and long-term contracts, let alone their supplier base.”

Conclusion

If it encourages nothing else, the 2023 Coffee Barometer urges coffee companies — particularly large roasters and traders — to reconsider their business practices if they want to legitimately work towards a more sustainable coffee sector.

“Implementing sustainable business practices in the coffee industry requires adjusting existing business practices, leveraging proven knowledge and approaches,” the authors wrote. “However, it is important to recognize that making this work in practice will also necessitate substantial investments. The lack of any transparency regarding procurement practices or funding raises concerns that none of the roasters are demonstrating a willingness to compensate small-scale coffee farmers for operating sustainably, such as by paying a price that reflects the social and environmental costs involved.”

---

[Note: Any opinions expressed in the 2023 Coffee Barometer are those of the authors/publishers and are not necessarily shared by DCN or its management.]