Market Reports

Solidaridad on dealing with the effects of climate change

That climate change is negatively affecting the coffee industry should be of surprise to no one. Brazil and most of Central America have both seen drastic reductions in their production from erratic weather. As a result, coffee roasters are experiencing the early signs of what could happen to their supply chains if nothing is done to help farmers deal with the ongoing effects of climate change. In this space, the conclusion released in the Coffee Barometer 2014 report that “climate change is already affecting coffee production in many ways” isn’t news. What is news, however, is the report’s very sobering conclusion that few tools exist in the modern industry to help farmers deal with the effects of climate change. From certification schemes to voluntary standards, there seems to be a plethora of initiatives out there to help roasters feel better about where they source their coffee from. Nico Roozen, Executive Director of Dutch NGO Solidaridad, tells GCR Magazine that the problem is that these are tools designed to deal with yesterday’s problems. “For the last two to three years, we’ve seen a lot of attention on how climate change is affecting agriculture,” says Roozen. “This is a topic that is not at all addressed by certification or verification systems.” Roozen is well placed to be discussing the original intentions of these schemes. Roozen, via Solidaridad, is perhaps best known for launching Max Havelaar, the first Fairtrade certification initiative in 1988 in The Netherlands. It’s from this background that Roozen finds himself critical of the systems that are currently in place. Certification schemes such as Fairtrade and verification schemes such as the 4C Association can be collectively referred to as voluntary standards systems (VSS). It was a decade after launching Max Havelaar that Roozen saw some serious drawbacks to VSSs, and in particular the Fairtrade system.  “I remember around 10 to 12 years after the launch, we started the discussion in the Fairtrade movement, asking the questions: ‘What have we achieved? What is the potential of this system moving forward?’ It was a critical analysis of our market outreach,” he says. In the 1990s, a consumer-directed focus took a back seat to the emergence of corporate social responsibility (CSR). Companies started looking at taking increased responsibility for their supply chain. In this space, Roozen went on to cofound the Utz Certification system, one that not only guaranteed a premium price for farmers, but encouraged sustainable farming practices. While these certification schemes continue to exist, Roozen is sceptical of their effectiveness on two fronts. The first downfall is major roasters are falling behind on their commitments to source VSS coffee. “Our main conclusion is that we have to be disappointed with companies. Some companies have promised to source up to 85 per cent of their coffee under certification, and they’re not even in the middle,” says Roozen. “We have to pressure these companies to get to higher levels.” The Coffee Barometer report compares top roasters’ commitment to purchasing VSS coffees versus their actual share. The report puts current VSS sourcing levels for Nestlé at 30 per cent, Mondelez at 44 per cent, D.E Master Blenders 1753 at 25 per cent, Tchibo at 30 per cent and Keurig Green Mountain at 31 per cent. Although these are high levels compared to a few years ago, Roozen points out that there is still a long way to go. Many of these companies, including Tchibo and Keurig Green Mountain, have committed to one day sourcing 100 per cent of their coffee under a VSS. A common explanation among roasters for the shortfall is that they can’t source the quality or types of coffee they need under certification schemes. It’s an excuse Roozen isn’t buying. “I don’t think that’s the real reason they’re lagging behind,” he says. “They always give this argument, but this coffee is available. They just have to pay the price.” Indeed, The Coffee Barometer’s figures on the disparity between VSS coffee that is produced versus what is sold are staggering. Fairtrade saw just 140,000 tonnes of coffee sold under its label, versus 440,000 metric tonnes of coffee produced. Utz Certified sold just 224,000 of 727,000 tonnes produced, while the 4C Association sold just 450,000 of over 2.2 million tonnes of coffee produced. In some instances, Roozen has observed companies launching their own VSS, pointing to Nespresso’s AAA program or Starbucks’ CAFE Practices as successful examples. The result saw 100 per cent of produced coffee sold, and in Starbucks’ case it sources 95 per cent of all of its coffee under this verification scheme. Roozen notes that these company-run schemes only work when the company is sourcing high quality coffee, and can therefore afford to make the investment necessary to do it right. “Otherwise, a much better approach is to follow existing VSS,” he says. Roozen stresses, however, that an increased take up of VSS isn’t enough to address modern challenges of climate change. Hereby lies the second front that modern certification schemes will need to battle.These systems were designed to help farmers deal with price fluctuations, sustainable practices, and workplace practices – not to deal with climate change. “The effects of climate change are really affecting the income of farmers,” says Roozen. “Farmers can’t afford to make the investment. The vast majority of farmers are still smallholder farmers with low incomes. We have to close the bridge to address these issues.” Solidaridad is putting forward a potential solution in the form of Climate Smart Agriculture (CSA). CSA is a tool for farmers to help them improve their productivity and strengthen their resilience to climate change issues. It is a set of proved practical techniques, such as improved waste water and soil management practices, and other resources such as better weather forecasting, more resilient food crops, and risk insurance. “We want to inform farmers about climate change, and what they can do about it,” he says. “There are changes in rainfall patterns caused by climate change. We need to teach farmers better water management.” Solidaridad has already launched CSA activities in Colombia, Mexico, and Peru, and is seeking to upscale its collaboration with the coffee sector. Roozen would like to see CSA integrated into the code of conduct with major VSSs. The implementation of this scheme, Roozen says, will mean little without increased investment at the grassroots level. He says more cooperation needs to be done among NGOs, local governments, and industry groups to help farmers cope with the risks of climate change. “It is absolutely necessary to make higher investments in the supply chain,” he says. “You see this in the cocoa industry. There is a dynamic related to the expected shortage of cocoa, and companies are making huge investments that are addressing social and ecological issues. You don’t see this investment in the coffee sector.” Roozen says one challenge is that in these cooperative arrangements, local governments need to take a leading role. As coffee continues to be grown mainly in poorer nations with under resourced governments, this can be a challenging feat. Additionally, Roozen says it’s a mistake for NGOs to see their role as being primarily critical of current practices. “At every level we need to address what’s on the agenda. We need to encourage NGOs to take a more proactive role,” he says. Roozen says that creating a real sense of scarcity can help bring relevant bodies into action. He says that most people in the cocoa industry know that by 2020, they will face a 20 per cent supply shortage if they don’t do anything now. “This figure is top of mind for the industry,” he says. As the coffee industry looks at another potential consecutive year of production deficit, a similar crisis sentiment in the coffee industry may be setting in soon. 

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