- From 2020 to 2022, approximately 55% of global coffee production was certified
- However, less than 26% of it was purchased by the industry
- Certification often means high upfront investment, but low profitability for producers
STATEMENTS and labels like “the first ever regenerative agriculture-certified coffee,” “100% organic,” and “product of Fairtrade,” increasingly adorn coffee packages worldwide – a promise to consumers that their purchase will contribute to a greater good.
Certifications have become a pivotal but contentious aspect of the industry. While brands leverage certifications to enhance their market position and consumer appeal, questions arise about who shoulders the burden of securing these stamps of approval and who truly benefits from them.
The allure of certifications lies in their purported human rights and environmental objectives. However, in the competitive marketplace, certifications often serve as a deciding factor for both producers and roasters based on the perceived added value they bring to consumers, typically at a premium price.
“Certification establishes a certain credibility and trust among producers, consumers, clients and other stakeholders, especially because there is a third party to validate that what you are claiming is real and you have proven evidence to demonstrate it,” says Diana Ayala Gomez, President of IWCA Spain and Coffee Expert Consultant at the Import Promotion Desk.
As roasters strive to differentiate themselves in a competitive arena, certifications are sought after as prominent badges of sustainability and ethical sourcing.
The demand for these certifications comes largely from the consumer side of the supply chain, and the benefits seem to accrue there too. So what’s in it for producers?
In the best case scenario, certification can guarantee a price premium, and a better income. However, it has always been a costly exercise for producers, and in the current tough economic landscape they are finding it increasingly difficult to justify the investment.
“In most cases, the cost of extra work and certification isn’t covered by what the market pays the producer,” says Vicente Mejia, Founder and CEO of Clearpath Coffee. “Producers have a weak negotiating position against large buyers who will only buy if they comply.”
Does certification run the risk of becoming a one way street?
Certification requires time, money, effort, and skill
Despite the noble intentions behind certifications, the reality is often grim for many producers who face significant challenges in covering the steep costs associated with it.
From audits and bureaucratic hurdles to capacity building initiatives and membership fees, the upfront investment required can place a heavy financial burden on producers.
The Coffee Barometer finds that “in the 2020-22 period, approximately 55% of global coffee production was certified,” but that “less than 26% of coffee was purchased by the industry. Consequently, certified producers, who have made upfront investments to comply with standards, suffer a reduction in profitability.”
“It takes a high amount of resources to establish an internal system and execute it,” says Diana. “I mean the qualified labour required for this implementation – costs that occur prior to those associated with audit and certification.”
“In Colombia, I’ve often found consultants recommending producers adopt certifications to reach international markets. But when they finally obtain the certificate after much effort and expenses, they don’t know how to find clients or reach the desired market.”
Alison Streacker, Operations Manager at the African Fine Coffees Association, explains that now, some certifications have put parameters in place to avoid this and decrease the costs of certification.
“For example, you need to be a business that’s existed for a certain amount of time, and you need to have secured markets – which sets producers up for success and avoids creating oversupply,” she says. “This, on the other hand, excludes those who most need the benefits of certification.”
“The licensing fee is paid by the roasters – this is how the certification stays afloat. While this is their contribution to keeping the certifications in the market, producers still bear the brunt of certification costs, including time, money, and knowledge.”
Though roasters may be willing to pay slightly more for certified coffee, both the financial load and associated gains are still rarely shared proportionately.
“Organic certification is maybe the hardest one to get,” says Vicente. “It takes a minimum 2 year transition period with a productivity decrease that in our case reached 40%. The time, effort, and money cost is huge.”
“The return on investment for certification isn’t financial or better business, but a desire to do things the right way and protect the environment. Sadly, the market doesn’t pay for that.”
One pressing question emerges: Should roasters engage in co-investment with producers, acknowledging that the demand for certified coffee originates from consumers?
Compliance runs the risk of becoming a producer tax
The current trajectory sees certification programmes and compliance audits potentially evolving into a burden akin to a “producer tax.” While producers pour substantial resources, time, and energy into meeting certification standards, roasters typically reap the rewards with relatively minimal investment.
“I wouldn’t say it’s a tax in the context of certification,” says Alison. “It’s voluntary, and it’s a choice. However, mandatory due diligence could be seen as a tax in a way. But certifications are working hard to counter this – Fairtrade and Rainforest Alliance, for example, now offer support to producers on working towards compliance and often include due diligence compliance criteria into their standards.”
With mandatory due diligence requirements looming on the horizon, the disparity between producer contributions and roaster gains is poised to widen further, exacerbating existing challenges.
“One of the potential problems that I am observing is that importers increase requirements in quality, information and certificates – especially with new regulations – without verifying the impact that this has for producers, and if producers are ready to face it,” says Diana.
“This can create a larger gap in what small and medium producers and large producers can do. There must be joint work that allows both origin and destination to be aligned.”
A model of co-investment between producers and roasters offers a glimmer of hope in navigating this issue. By sharing the financial responsibilities and acknowledging the shared benefits that certifications bring, a more balanced and fair system can be established.
“The certification is valued and paid by the final consumer and benefits the companies closer to them the most,” says Vicente. “The producer isn’t receiving enough for the certifications – maybe they should involve the whole chain paying back to the producer.”
While some initiatives of co-investment may already be in effect, a widespread adoption of this model could revolutionise the dynamics of the coffee industry, fostering greater sustainability and equity across the entire supply chain.
“Overall, we need more co-investment along the supply chain as a whole – involving the roaster and producer side, but also the traders in the middle, governments, and coffee boards as well,” says Alison.
As the coffee market continues to grapple with the complexities of certification, striking a harmonious balance between the costs and benefits for all participants is paramount for the long-term viability and ethical integrity of the industry.
Coffee Intelligence
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