How roasters and retailers can support farmers and make coffee more sustainable
Coffee is the world’s favorite drink, with more than 400 billion cups enjoyed per year. We do our part to add to that grand total. Coffee drinkers around the world love their coffee — and appreciate it even more when they know that their coffee is grown sustainably.
That is why we and many other coffee drinkers are deeply concerned by the sustainability crisis that has hit the coffee sector. This sustainability crisis has two main aspects. First, while the price of coffee keeps rising for consumers, prices are extremely low for coffee farmers. These low prices have pushed millions of coffee-growing families into poverty. Second, coffee is deeply threatened by climate change and other environmental ills such as water stress.
It doesn’t have to be this way. Coffee can be grown sustainably and in harmony with nature, but farm families are often too poor to invest in needed solutions or too far from science-based organizations to know about them. Because of the intertwined crises of poverty and environmental stress, the future is bleak for coffee farmers in many countries, just as new consumers throughout the world are discovering the joys of this wonderful beverage.
The low prices that farmers receive can come as a surprise to some consumers. How much do you pay for a cup of coffee? If you’re in New York or Chicago, where we live, you might pay several dollars or more at a coffee shop. The farmer, on average, receives between 1 and 2 cents of this price. This is not economically viable for many coffee farmers, and these low prices are fueling deep poverty, hunger and even desperate efforts to migrate from Central America to the United States.
Although farmers’ livelihoods have been decimated by low prices, coffee roasters and retailers are flourishing at the other end of the value chain. And while many of these coffee companies have wrung their hands about the low prices received by farmers in their supply chains, few companies have taken specific steps to address the problem seriously. One of the biggest, Nestle, has argued that addressing this price crisis is beyond what any one company can do.
We agree that collective action is needed, which is why, in a recent report that we co-authored with colleagues at the Columbia Center on Sustainable Investment and the London School of Economics, we suggest the launch of a new Global Coffee Fund. Coffee companies would pay into the fund, which would be used to finance activities that support coffee farmers and increase coffee sustainability. These activities could include: providing income support to the poorest farmers during price crises; developing affordable insurance options and disaster relief funds to help farmers recover from extreme climate events; and increasing training, improving infrastructure and supporting other approaches that enable farmers to be more profitable and resilient. The Global Coffee Fund also would be used to encourage additional funds from international donors and from the budgets of coffee-producing countries, to be invested in social goods such as water, education and healthcare in coffee-producing regions.
Coffee’s sustainability challenges are big, and we suggest a big number to be raised through the Global Coffee Fund: $2.5 billion a year from "pre-competitive" private sector contributions, meaning $2.5 billion by the high-income end of the industry for the sake of the more than 12 million coffee farmers and their families, about 60 million people in total. This would amount to roughly 1 percent of the estimated revenues of coffee roasters and retailers.
That is much more than the amount of money currently dedicated to coffee sustainability. Before you laugh and stop reading this, however, let us tell you that this amount is negligible compared to how much consumers already pay for coffee, working out to no more than half of 1 cent per cup of coffee sold. We’d pay less than a penny extra for farmers to thrive; wouldn’t you? Shouldn’t the companies?
We should be clear that this money, and the Global Coffee Fund, is not charity. The fund would be a way for coffee companies to fulfill their co-responsibility for achieving a sustainable coffee sector. The fund also provides a path for coffee companies to shoulder more of the risks — such as price risks and climate risks — that currently fall too heavily on farmers alone.
Along with the Global Coffee Fund, our report recommends other steps towards ensuring economic viability and sustainability in coffee production. We think it’s critical, for example, for coffee-producing countries to develop National Coffee Sustainability Plans that set out clear sustainability strategies that take into consideration likely climate impacts. These plans would provide roadmaps for the activities that could be financed by a Global Coffee Fund.
Coffee farmers also have an opportunity to use technology to get closer to the consumer, capturing more of the value along the way. Direct-to-consumer models are currently niche, but more institutional support, combined with e-commerce strategies, could help make them feasible. Pachamama Coffee, for example, is a farmer-owned and farmer-governed company, run by five cooperatives from five countries. The model shifts some new business risks onto farmers but also moves farmers from price-takers to price-setters. Think of the sea change that could happen if more coffee farmers were similarly positioned to capture most of the profits from a cup of coffee, instead of earning just a penny or two. Sustainable coffee could then be the fuel that makes the world go round.
To access the report and learn more about what you can do to support a sustainable coffee future, visit www.ccsi.columbia.edu/coffee.