What's the buzz? Ecosystem services and coffee
What's your morning buzz worth? Does the market value the landscape on which the coffee is grown? Does it value the people that grow it? The Ecosystem Marketplace visits the front lines of the certification debate.
Judging by the booming $11 billion U.S. specialty coffee business, ecosystem services are worth big money. Standards—grown coffee—Organic, Fair Trade, Rainforest Alliance, Smithsonian Bird Friendly, Utz Kapeh, 4Cs, and Starbucks CAFE Practices—can command a premium in the market. Fair Trade coffee has tripled its volume in three years, leading growth in the specialty market, which is the fastest growing segment of the overall trade. Companies from Starbucks to McDonalds and Wal-Mart are moving to capitalize on this consumer interest.
How these market valuations weather the jump to the big top could reverberate far beyond your morning cup. Not only is coffee "the most important cash crop in the developing world," explains Daniele Giovanucci, a consultant to the World Bank Group and other aid organizations, but it's also at the forefront of developing global standards. Despite the rapid growth of these standards, little is known about their impacts. "Soya, sugar cotton are all much slower moving than coffee," he says. "Coffee is going to set the benchmark for sustainability. The battle is to be fought here. Who defines sustainability?"
Serendipitously, coffee is a promising test case for the challenge of pricing ecosystem services. It is grown in more than 50 tropical nations, typically in regions with high native biodiversity. Coffee also has great intangibles. Like sweeping vistas or beautiful sunsets, we don't actually need it. But our desire is so intense we've created a commodity market rivaled only by oil. Coffee is an engine of civilization, the psychic fuel of the creative classes. " Coffee is coming out of an enormously complex system that provides life in so many levels and layers," says Kristen Kosidowski, who runs the Shade Grown Coffee campaign for Seattle Audubon. "Coffee is so much more than a commodity. It's very much a culture."
Getting the Science Right
In 1996 a small cadre of scientists at the Smithsonian Migratory Bird Center organized the first global conference on sustainable coffee. At the time the lure of commodity cash was leading farmers to convert huge tracts of forest into large-scale production, environmental destruction that was also devastating traditional small-scale producers.
What the Smithsonian scientists knew was that coffee can also be grown within an otherwise natural forest. The arabica variety—preferred by connoisseurs—does best with an overstory that provides shade needed by the coffee and, conveniently, by a wide range of species. Indeed, significant numbers of migratory birds were dependent on certain coffee growing regions. "Birds are a very good indicator of overall environmental health," says agroecologist Robert Rice. "If you've got a tremendous amount of bird diversity in a system, even if it's an agricultural system, they're there for a reason. Coffee production can have an environmental value—providing habitat—hat outstrips all other kinds of agricultural land use."
Smithsonian looked at existing Fair Trade and organic standards, but concluded they did not include enough shade management or other conservation elements. Thus was born Smithsonian's Bird Friendly guidelines for coffee cultivation. Among the requirements: A minimum of 10 species of trees should provide a canopy of at least 40% shade. Pruning should leave dead limbs and snags, and trimming of epiphytic plants and vines on the shade trees is discouraged. Many farms plant a few backbone species for shade, and the guidelines suggest a mix of species with a staggered blooming cycle. These trees should reach at least 12 to 15 meters in height, with other trees above and below them. Streams and roads require 5- meter buffer zones.
Another goal, says Rice, was "to get small growers some recompense for what they've already been doing for many, many years in terms of good land stewardship." Small growers have no problem meeting the criteria, especially small peasant producers. "The nature of being a peasant farmer anywhere in the world is that you're trying to reduce your risk. If you have coffee, you can have shade trees over your coffee, you can have lots of different things coming aside from the annual harvest of the coffee bean itself."
"Our goal is to make people aware that there is an environmental side to their morning ritual," explains Rice, although he admits that without dedicated marketing staff Smithsonian's dollar impact is miniscule—only 4 to 5 million pounds of beans are certified every year. But the guidelines set the environmental bar high. "Our reason for making them as rigorous as they are is that there is just so much still unknown about what constitutes a truly environmentally friendly shade coffee in terms of supporting birds and insects. It's always easier to relax criteria than to ratchet it up."
Small Farms Meet Big Business
One certification scheme that incorporated much of the Smithsonian's science is the Rainforest Alliance, which started out certification work with forest products (SmartWood) and bananas, then added coffee in the mid 1990s. Business is booming: in 2003 RA certified 22 million pounds of coffee; in 2006 that number will top 135 million pounds.
R.A.'s mission is to provide sustainability tools to business. Their first big success was to certify the entirety of Chiquita's banana business; 15% of bananas in international trade now carry the Rainforest Alliance seal. And in March they inked they're biggest coffee deal yet with Kraft's Yuban brand, to ensure a minimum of 30% Rainforest Alliance certified beans in all Yuban coffee. Another deal put Rainforest Alliance beans into Members Mark, a specialty brand at the Sam's Club stores run by Wal-Mart.
The growth has been exhilarating, but they're still a small non-profit NGO; only a quarter of their revenue comes from certification. Their size has made it difficult to engage in as much marketing or research as they'd like, says Sabrina Vigilante, senior manager of marketing and business development. "We're working right now on doing a whole lot more monitoring and evaluation," she says, speaking to the challenge of measuring ecosystem services. "Wouldn't it be cool if coffee and cocoa farmers could measure how much carbon is being stored on their farm and somehow link this to the product?"
Fair Trade coffee certification has experienced even faster growth; an average annual increase of about 75% since 1999. Despite a primary focus on economic and social factors, Fair Trade provides significant environmental value as well, argues TransFair USA spokesperson Nichole Chettero. While it does not necessarily meet strict Smithsonian standards, the vast majority is grown under natural shade. "That's simply how small coffee producers operate. And all of the Fair Trade certified producers are small scale, democratically run cooperatives," she says. "I would argue that shy of organic certification we are one of the most rigorous environmental certifications."
The Fair Trade minimum—$1.26 for a pound of coffee—gives some farmers security against a volatile market, but it's also a foundation. "For many farmers being Fair Trade certified is a stepping stone to not only having a really tight sustainable farm management program in place, but also to raise the revenue needed to embark on organic certification," says Chettero.
TransFair is also actively courting big business—it's working with Dunkin' Donuts, McDonalds, Costco and Sam's Club, among others—despite the controversial nature of this approach with its political base. "It's not our business to say who and who can't get involved in Fair Trade," says Chettero. "It's up to consumers to decide, it's up to the market to decide." And Fair Trade needs the market: Last year, only about 35% of the coffee available as Fair Trade certified was actually sold on those terms. "There is far more potential supply of certified producers ready and waiting with quality coffee than there is actual market demand or market channels," says Chettero. "What the Fair Trade producers need right now is a watershed of companies tapping into their market."
THE LIMITS OF SCIENCE
The competing yet complementary certification visions would benefit from a clearer understanding of the environmental services underpinning coffee production, but fine tuning that knowledge and putting it into practice may be some time in coming.
Scientists have teased out many of the factors in play. We know shaded coffee plantations have a greater diversity of vertebrates, plants, and invertebrates––including pollinators, which can increase production. Diverse shade trees also sequester carbon, build soil fertility, and prevent erosion.
One major problem, says Ivette Perfecto, professor of Natural Resources at the University of Michigan, is that while shade is good for biodiversity, it also depresses yield. Balancing the equation between coffee production and biodiversity varies widely depending on things like climate, elevation, soil type, and forest type. There is no universal solution.
Most forest in coffee growing regions is already highly fragmented. The role of the coffee agroecosystem as both a wildlife corridor and a reservoir for biodiversity within this larger matrix is also difficult to calculate. Consider El Salvador, where more than 90% of original forest cover has been destroyed, and shade grown coffee makes up about 80% of remaining forested area.
Perfecto's work in Chiapas has left her with mixed feelings about the value of certification. "In general I am skeptical of market solutions to environmental problems because markets change, are driven by profit above all, and if or when these solutions are successful, they tend to be taken over by large corporate interests," she says. "On the other hand, I really think that the coffee certification programs have contributed positively to the economies of farmers (small and large) and to the environment, especially during the coffee crisis."
Historically low prices from 1999 to 2002 are thought to have driven some 300,000 small producers out of coffee in Chiapas alone, but Perfecto knows anecdotally that organic and other premiums kept many more on the land, which she says is poorly suited for other cultivation. A few years back one local grower tried to emulate the coffee monoculture he saw on a visit to Costa Rica and removed the forest overstory. When the next rainy season brought him a bumper crop of landslides, he knew he'd made a mistake and immediately began to replant the trees.
"I don't think we can put a value to these services," says Perfecto, who arguably knows as much as anyone. "To put different values to different services, I wouldn't even know how to start."
Not that scientists aren't trying. A few years ago Taylor Ricketts of the World Wildlife Fund reported on the value of wild bee pollination on a 1065 hectare plantation in Costa Rica. Coffee flowers near intact forests received double the bee visits and pollen deposition as the flowers further away. Yield was 20% higher, and there was 27% less deformed beans. The pollination alone was worth $62,000.
WHERE SCIENCE FEARS TO TREAD....
With billions of dollars in play, the markets aren't standing still. While Starbucks does buy certified Fair Trade and organic coffee, it has complicated the certification picture further by creating it's own scheme, CAFE Practices. Under this system, economic transparency and quality are obligatory, while environmental and social benefits are scored. Hit 60% and a producer can sell to Starbucks; at 80% they qualify for more money per pound and longer contracts. (Scoring is a sliding scale. For example, minimum stream buffers under CAFE Practices are 2 meters, while best practices are 5 meters plus more active conservation.)
"We think that CAFE Practices is more robust than any of these systems," claims Starbucks Andy Fouché. "More robust in terms of environmental criteria, social criteria." Certainly the volume is robust. Last year 21% of Starbucks coffee (76.8 million pounds) was CAFE Practices verified, this year it neared half, while for the next fiscal year the company projects 225 million pounds, or a majority of its coffee. In comparison, its Fair Trade purchases comprise less than 5% of the annual total.
On the other extreme is what's becoming known as the "relationship coffee" model, personified by cooperatives like Just Coffee in Madison, Wisconsin. After an early relationship with TransFair, Just Coffee broke from the organization because it wasn't aggressive enough with companies like Starbucks. "Starbucks is part of the problem," argues cooperative member Matt Early, who thinks the low numbers are charity, and not transformation. "This isn't about charity, this is about sustainable economics and it's about paying people a fair wage and working with people as partners and as equals."
Just Coffee runs it's own transparency efforts, posting contracts and other details of its business relationships with coffee cooperatives. It beats the guaranteed fair trade minimum price, and often pays upwards of $2 where quality merits. "People do come in and ask us really hard questions," he says. "That's what you're trying to secure, is that trust and that transparency."
What's the customer to do in the face of all these overlapping options?
"They all have a mission, and they are all morphing towards each other," says Daniele Giovannucci, author of a 2003 book-length study "The State of Sustainable Coffee." Organic and Rainforest Alliance each have social principles, Fair Trade is touting its eco-friendly side, while the market is driving Fair Trade toward organic. Starbucks says much of it's coffee is actually organic, but uncertified to keep prices down. "The people in the industry are confused as hell," he says. "They won't necessarily admit it to a buyer or someone in public. It's confusing, they damn well know it, and they ought to do something about it."
With companies like Wal-Mart entering the standards game, Giovanucci says those who care about the environmental integrity of the industry should act now: "We're concerned that these labels become so diffuse that a consumer can no longer distinguish, And that leaves plenty of room for anybody to come along and put a green stamp on their product and say it's eco-friendly. It will be like the word natural: it doesn't mean a damn thing."
If big companies bypass evolving standards and go their own way, their marketing savvy and muscle could easily overpower the small NGOs currently guarding the henhouse. On the other hand, if certified coffee can make the jump to the big top without sacrificing its environmental and socioeconomic integrity, environmentalists will be one huge step closer to that golden goal: true sustainability.
"I'm overwhelmed on behalf of our consumers," admits Kristen Kosidowski of the Shade Grown Coffee Campaign. "The benefit of certification is only when the system is clear to people so that they know what they are buying and what that certification means."
What's at stake amid the growth and quest for market share is the very viability of these standards. "I don't think anybody wants to stand up and point the finger and say 'Hey you're greenwashing,'" she says. "But I think if we want consumers to take responsibility and to take a stake in the system that they're literally buying into every day, we need to be a little more transparent and honest about what it is that we're trying to accomplish in the coffee industry."
Erik Ness is a regular contributor to the Ecosystem Marketplace. You may find his work at: http:erikness.com.
First published: January 2, 2007
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