Certifications

Coffee awards and competitions / Rainforest Alliance

Rainforest Alliance Cupping for Quality – Dec 2010

The Rainforest Alliance Cupping for Quality award breakfast at the Specialty Coffee Association of America (SCAA) annual trade show is always the first function we attend each year at this event. The award is designed to recognize exceptional coffees carrying the Rainforest Alliance seal and to highlight the linkage between sustainable farm management practices and cup quality.

The number of farms that are RA certified, and thus participating in the award program, has grown a lot since the awards began in 2003. Last year, RA sought to manage this growth by having two annual cuppings and awards, divided by geography. In December, coffees from the southern hemisphere — including Brazil, Peru, Kenya, Tanzania and Indonesia — compete. These are the results of the December 2010 cupping, which included coffee from 35 competitors. In my next post, I’ll give the most recent winners, announced this morning at the breakfast.

  1. Quecha, Peru (85.88). A brand of the CECOVASA farmer cooperatives, the Quecha coffees are grown at 1400 to 1750 meters in the Sandia valleys region of the Andes. CECOVASA is Fair Trade certified, and about half the members grow organic-certified coffee. Since 1998, CECOVASA has worked with Conservation International, and two years ago was recognized for its work preserving biodiversity by the Peruvian ministry of the environment. Last year, another CECOVASA coffee, Tunki, placed second in this competition (it also won best of origin in the SCAA Coffee of the Year competition), and Quecha came in 5th. Congrats to this hard-working federation for the excellent coffees they are producing, in a really sustainable manner!
  2. Wahana Grahamakmur (exporter), Indonesia (83.65).
  3. Fairview Estate, Kenya (83.23). Managed by Coffee Management Services. Growing the SL28 variety on 121 ha at 1750 m. Natural forest on the property is preserved, reforestation efforts have taken place, as has the planting of shade trees. Also UTZ certified.
  4. Thiriku Farmers Co-op Society, Kenya (83.02). Nyeri – SL28 and SL34 at 1700 m.
  5. Ipanema Agricola, Brazil (82.96). An enormous enterprise, often considered the largest single producer in the world, at 2600+ ha. They do produce single-farm brands, but no information on the particular source of this coffee was given.
  6. Ibonia Estate, Kenya (82.81). Managed by Coffee Management Services.
  7. Fazenda Itaoca, Brazil (82.75). 215 ha total, of which 30% is reserve land, in Mantiqueira region, southern Minas Gerais.
  8. Korona Enterprise Ltd, Papua New Guinea (82.67). Female owned from near Aiyura in the Eastern Highlands.
  9. Yandini Estate, Kenya (82.46). Managed by Coffee Management Services. Also UTZ Certified.
  10. Baragwi Farmers Co-op Society, Kenya and Kandara Farmers Co-op Society, Kenya (tie, 82.17). Baragwi has 1200 members, and is in Kirinyaga district and grows both SL28 and SL34 at 1600 m. Kandara grows SL28 and Ruiru 11 varieties at 1600 to 1800 m in the Kandara area, and this was one of the first producer organizations in Kenya to get RA certification.

Previous results reported on here:

Certifications

How much does eco-certification cost?

Introduction

Third-party certifications are great aids to consumers who want to know their coffee was produced under specific standards. Coffee produced under various certification schemes is still a pretty small fraction of total global production. One frequent question I get is why more coffee isn’t certified (Bird-Friendly, organic, etc.), or why the coffee costs more for the consumer. Part of the answer is that certification is expensive for farmers, and often for other players further up the supply chain. If farmers cannot make up these additional expenses in the sale price of their coffee (and, they frequently are not), the added expenses are not worth it.

A number of different types of expenses are involved in obtaining and maintaining certified status. Most producers will have to take steps to conform to the criteria outlined in the standards of the certification they are seeking. This can involve capital outlay, increased labor, etc. Then the farm or production unit has to pass an inspection by an auditor from an authorized certifying agency; these agencies typically charge a per diem fee plus transportation and other costs. There is usually a fee for the certification itself —  to the certifying agency and/or to the organization that developed the standards (i.e., Rainforest Alliance, Smithsonian Migratory Bird Center). Finally, all certifications require periodic audits and renewals which incur costs.

Because coffee production systems vary so widely, and certifying agencies all have their own fee schedules, it’s difficult to pin a precise dollar amount on how much it costs a given farm (or unit of production) to get one of the major certifications. Below, I’ll present some guidelines, fees, and variables that give a sense of the cost of obtaining and maintaining certification. I’ve only included the three certifications that are most concerned with ecological standards, and therefore incur costs related to growing methods.

Costs that influence any coffee certification

Costs to meet the standard. The major coffee certifications have a whole suite of rules and standards that must be met. Some are elaborate and complex, especially the standards set by the U.S. Department of Agriculture for products sold as organic in this country. Few farms will be able to meet all these standards without some adjustments.

  • Meeting the various standards could include a wide variety of time, labor, and material outlay. Examples might be starting up a major organic composting program, planting native trees, constructing wastewater treatment facilities, or soil testing.
  • For organic certification, there is a three-year conversion period after the farmer stops using prohibited materials. During those three years, the producer farms organically, but cannot sell his crop as organic or receive any price premiums.
  • Costs to bring a farm into compliance with ecological criteria such as shade cover, riparian buffers, etc. can be significant. For example, Rainforest Alliance has criteria relating to setting aside or enhancing natural habitat. In one study (CI 2005), two estates in Brazil reported this cost was $10,000 to $50,000 for consulting fees, seed and plant material, planting, and management of these areas. In addition, there was the opportunity cost of losing this land from production. Another study in El Salvador (Romanoff 2010) found the average cost of on-farm investment to achieve Rainforest Alliance or Starbucks CAFE Practices conservation and environmental standards only was  $58/ha ($42/ha for farms larger than 100 ha, $61/ha for smaller farms, 43 farms surveyed). Total costs to meet all the standards, plus needed technical assistance, was $111/ha for larger farms, $156/ha for smaller ones.
  • Even if a farm produces coffee in a manner that complies with many, most, or all of the requirements set forth by a particular certification, it’s up to the farmer to prove it. This involves forms and paperwork. On the plus side, this typically improves farm management by forcing a fair amount of organization and administrative streamlining. On the downside, literacy levels of many producers can make this challenging.

Auditing expenses. An auditor has to come and inspect the farm, check all the paperwork, and make sure the farm is in complete compliance with the standards. Each certification scheme authorizes various certification agencies around the world to perform this work (e.g., OCIA International, Biolatina). Usually, one agency can perform audits for multiple certifications, if needed. Factors influencing the price of this audit include:

  • The number of certification organizations/bodies available in the producer’s area (a higher number leads to more competition and therefore lowers prices).
  • The speed with which an auditor works and the size of the operation being audited (most charge a per diem rate, so the longer they are on site, the more it costs to perform the audit).
  • Distance to travel to the audit location, as well as they condition of the roads (transportation costs and time add to the cost of the audit).

Continuing indirect costs. Once certification standards are met and the certification is awarded, there are usually on-going costs in addition to annual inspections.  All certifications have some sort restrictions that require segregation of coffee and chain of custody documentation, and  internal controls and compliance. For organic (and therefore Bird-Friendly) and standards that include environmental criteria, there are the added labor costs of weeding, pruning, pest control, and production of organic compost. Losses in yield are common in both shade and organic production systems after the transition from conventional farming, and may increase as time goes on.

Specific costs for major coffee certifications

Again, I’ve only included the three certifications that are most concerned with ecological standards, and therefore incur costs related to growing methods.

ORGANIC

Direct costs to producer: Organic certification fees vary, since each agency sets its own fee schedule. They are based on the size of the production unit, previous years’ sales, and which or how many different countries (and therefore different standards) the crop will be certified to sell to. In addition, a fee ranging from $150 to $300/day is charged is charged for the inspection itself, plus transportation and other costs. Conversion to organic takes three years once a producer complies with the standards. Initially, there are annual audits the first two years, with a certification audit in year three.

Potential annual direct costs: Annual audits are required. Random audits also occur. As one example, for a single producer with about 20 ha of coffee, the cost was over $3,000 per year (pers. comm.). To help control costs, there is a provision in the National Organic Program (which regulates products sold as organic in the U.S.) that every single producer in a cooperative with many small holders do not need to be inspected every year. Only a percentage of producers are inspected annually on a rotating basis (this ruling has come under fire, as recently as 2007). Thus, total costs are spread over all members, which reduces the cost for each member. In one Mexico case study, the cost was $1300 to $1550 per annum per producer organization (Potts et al. 2010).

Costs further up supply chain: Other players up the supply chain who handle organic coffee must also be certified. As they do with producers, costs to other parties vary depending on the certification agency and size of the operation being certified. This has been estimated at $700 to $3000 a year [SCAA 2010].

RAINFOREST ALLIANCE

Direct costs to producer: In October 2010, Rainforest Alliance changed how it levied fees. The coffee importer is now primarily responsible (see Costs further up the supply chain, below). Previously, RA charged a fee to producers for certification at the rate of $5/ha for group certification and $7.50/ha for individual farms.

Costs of audits are still paid by the producer, although sometimes buyers help with costs. A study from Brazil(CI 2005) for larger producers (Ipanema Coffees was one, and is one of the largest producers in the world) stated that annual audit costs were between $1000 and $5000. A study in El Salvador (Romanoff 2010) found Rainforest Alliance audits cost up to $3.61/ha, but varied depending on the efficiency of the auditor.

Costs further up supply chain: The first buyer of the green coffee pays a Participation Fee of $0.015/lb of green coffee sold.

SMITHSONIAN BIRD-FRIENDLY

Direct costs to producer: BF-certified coffee must be certified organic, so those costs apply. Many organic certification bodies are also accredited to audit for BF certification. There is a “symbolic” fee for the BF certificate.

Potential annual direct costs: Re-certification audits for BF every three years, but are combined with organic audits.

Costs further up supply chain: Importers pay $100 a year to use the BF logo, and roasters pay $0.10/pound to do so (down from $0.25/lb) [SCAA 2010]. Fees go to Smithsonian to support program costs and bird conservation research.

Parting thoughts

Due to the wide range of variables, these guidelines only give a sense of the costs involved in environmental certifications, but nonetheless may be eye-opening to the average consumer. Of course, some context is necessary, and the topic of whether the costs of eco-certification is worth it to a “typical” producer is the subject of another post. Still — it’s worth a quick example. We’ll take some statistics from a paper examining this issue (Valkila 2009):

80% of the farmers in in Nicaragua have less than 3.5 ha of coffee. The average yields of organic small farmers are 329 kg/ha. Thus, the “typical” organic small-holder produces 2539 pounds of coffee. Let’s give that farmer a very good price, reflecting current high prices and assuming it goes right to the farmer: $2/lb. That gives the farmer $5078 gross income for the year to provide for his family, pay for farm inputs and improvements, etc., etc. The cost of the annual audit alone for organic certification puts a pretty big dent in that.

Of course, the variation in yields, farm size, production costs and so on, added to multiple factors in certification costs, make these calculations merely illustrative, but at least provide a bit of context.

Sources and more information

[CI] Consumers International. 2005. From Bean to Cup: How Consumer Choice Impacts upon Coffee Producers and the Environment. Consumers International and International Institute for Environment and Development, London. 64 pp.

Millard, E. 2011. Incorporating agroforestry approaches into commodity value chains. Environmental Management 48:365-377.

Potts, J., J. van der Meer, and J. Daitchman. 2010. The State of Sustainability Initiatives Review 2010: Sustainability and Transparency. International Institute for Sustainable Development.

Romanoff, S. 2010. Shade coffee in biological corridors: potential results at the landscape level in El Salvador. Culture and Agriculture 32:27-41.

[SCAA] Specialty Coffee Association of America, Sustainability Council. 2010. Sustainable coffee certifications comparison matrix.

Valkila, J. 2009. Fair Trade organic coffee  production in Nicaragua — sustainable development or a poverty trap? Ecological Economics 68:3018-3025.

Photo from iStockphoto, used under license.

Certifications / Fair and Direct Trade

What’s happening with Fair Trade?

Big kerfluffle, well explained in the following posts; make sure to read the comments. My thoughts on how this relates to other certifications follow.

These posts bring up a two-pronged issue that is not only at the crux of the discontent with TransFair USA/Fair Trade USA, but could apply to other certifications. It’s akin to “mission creep,” though arguably with worse consequences. It’s a veering away or dilution of the mission. First is the incorrect notion that the Fair Trade movement is about alleviating poverty, rather than creating a viable alternative market that addresses global trade systems that are unfair to small producers (and providing the resources needed to empower these producers). The Small Farmers, Big Change post has a great example regarding tea and plantation certification.

Which brings us to the second prong, and the heart of the matter, which is that the contention that TransFair USA/Fair Trade USA is more concerned with growing the “brand” than advancing the mission. Small Farmers, Big Change quotes a coffee cooperative rep from Peru:

“They are so concerned with growing the system, advancing at all costs, that they will only end with the extinction of small farmers.”

By shifting away from the small producers and trying to get as many products and players into the Fair Trade system as possible, the argument goes, the standards are being weakened. Creating a second set of modified standards to bring large (often corporate) producers into the fold allows them to “green” a small portion of their sourcing, and offer these goods at a price that can undercut that of cooperatives and smaller producers. If nothing else, this “corporatization” of Fair Trade is creating real anger and alienation, which is beginning to lead to public confusion and distrust of Fair Trade certifications in general.

This has an unsettling parallel in the eco-certification world: the rapid growth and expansion of Rainforest Alliance certified farms, forests, and products. It’s old news that many people are unhappy with Rainforest Alliance working with corporations that seem largely at odds with the spirit of the certification (you can read my post “Discontent with certifications” from more on this topic)., although it certainly hasn’t reached the revolt stage we seem to be approaching with Fair Trade. Many people are watching how the Fair Trade issue plays out, and it may shape the progress and strategies of other certification schemes in the future.

Certifications / Corporate coffee

Certified coffee: current market share, part 2

(Update: I now regularly update the post Corporate coffee: How much is eco-certified? as new information becomes available.)

I often point out that the amount of sustainably-grown coffee that various large corporate coffee roasters purchase is a very small proportion of their total coffee purchases. In a previous post, I looked at the current market share of certified sustainably-grown coffee broken down by certification. Here, we’ll look at which of the world’s major coffee buyers/roasters are purchasing this coffee.

The source of this data is the Tropical Commodity Coalition, a group of ten NGOs that puts out annual reports on various aspects of the coffee, tea, and cocoa industries.  The Coffee Barometer 2009 presents market developments in the certified coffee sector.

Among the interesting data included is a summary of the green (unroasted) coffee purchases by each of the world’s top ten coffee buyers for 2008. It highlights how much “certified” coffee each buyer purchased, including Rainforest Alliance, Utz Certified, organic, Fair Trade, 4c, and the private initiatives of Starbucks (CAFE Practices) and Nestlè (Nespresso AAA Sustainable Quality Coffee Program).

In this post, I’ll disregard coffee purchased under Fair Trade (which does not have strong environmental standards) and the 4C Code (see this post on Nestlè and deforestation for information on this bottom-rung system, which does not include environmental criteria any of us would consider as being meaningfully “eco-friendly”). I’ll leave in the Starbucks and Nespresso programs and comment on them below.

So, how much eco-friendly, sustainably-grown coffee is purchased by the big buyers?

Nestlè. Owns Nescafè, Nespresso, Taster’s Choice, Clasico. Purchased 780,000 tons of green coffee in 2008.

  • 13,000 tons under their Nespresso AAA Sustainable Quality Coffee Program, or 1.7% of total purchases –but read on. The standards used by Nestlè in this program are not publicly available. Nestlè is working with Rainforest Alliance for guidance, but currently source farms are not certified by Rainforest Alliance. From what I have been able to gather, this program probably has fewer meaningful requirements for environmental protection than Fair Trade or Utz Certified, so pegging them at 1.7% is being generous.

Kraft. Yuban, Maxwell House, General Foods International Coffee, Gevalia, Kenco, Maxim, Tassimo, Nabob, and Sanka. 740,000 tons.

  • 29,500 tons Rainforest Alliance, 4% of total.

Sara Lee. Senseo, Java Coast, various foodservice, Merrild, Kanis & Gunnink, Cafe Pilao, Cafitesse, Harris, Piazza d’Oro; Douwe Egberts is its coffee subsidiary, under which many of these brands appear. 450,000 tons.

  • 20,000 tons Utz Certified (4.4%). The Utz focus is more on traceability and the business end of the spectrum, not environmental standards.

Smuckers. Folgers and Millstone (acquired from Procter & Gamble), Kava, Dunkin Donuts grocery store coffee. 280,000 tons.

  • 1,500 tons Rainforest Alliance/Fair Trade/organic (0.5%). This is a combination of the three, rather than the total amount being triple-certified. There are few organic coffees in their line, one RA coffee (discontinued as of 2011), so the amount is heavily weighted toward Fair Trade. Because of the relatively weak environmental standards of Fair Trade, this means the percentage of eco-friendly coffee is even lower.

Starbucks. 175,000 tons.

  • 4,500 tons organic (2.6%).
  • 120,500 tons under their CAFE Practices (68.8%, for a combined total of 71.4%). I recently took a look at the environmental standards of Starbucks CAFE Practices, and found they  address many more relevant ecological issues than either Fair Trade or UTZ Certified, and they are certainly much stronger than the Nespresso program. What does this mean?

Starbucks buys nearly twice as much coffee grown under meaningful environmental standards than the four largest coffee buyers in the world combined.

Perhaps more than all nine other big buyers. And they have developed these standards, worked with farmers to meet them, and use third-party verification as part of their own corporate initiative. Say what you want about the Mermaid, they do good work on the ground.

Tchibo. 170,000 tons.

  • 5,500 tons Rainforest Alliance/Fair Trade/organic (3.2%). See note under Smuckers about this combined total.

Aldi. Purchases for their private label store brands Beaumont, Alcafe, and Grandessa Signature. 145,000 tons. Percentages not disclosed.

Melitta. Melitta, World Harvest Estate. 145,000tons. Percentages not disclosed.

Lavazza. 140,000 tons.

  • 1,400 tons Rainforest Alliance (1%).

Segafredo. Segrafredo is a brand division of Massimo Zanetti, Beverage Group, which also owns Chock Full o’Nuts, Chase and Sanborn, MJB, and Hills Bros. They grow all their own coffee on plantations in Brazil (said to be the largest plantation in the world) and Costa Rica. Presumably, the 120,000 tons quoted in the report apparently is their production, not actually purchased. None is certified.

So, not counting Aldi and Melitta, since they did not disclose how much (or if) they bought any certified coffee, the big buyers purchased 2,855,000 tons of coffee, of which less than 7% was grown under verifiable sustainable environmental standards.

As mentioned in the last post, I’ve often heard that the reason big roasters do not purchase more sustainable coffee is because there isn’t enough available. This report also gives data on the amount of certified coffee produced, versus the amount purchased. There were 124,000 tons of Rainforest Alliance certified coffee produced in 2008, a surplus of 62,000 tons that was not purchased as certified. The surplus of Utz Certified coffee was 230,500 tons. Had all this been bought, then the percentage of certified coffee purchased by these buyers would have risen to around 17%.