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The Sustainability Paradox: Why Most Certified Coffee Is Still Sold as Conventional
Exploring the gap between sustainable coffee production and market demand.
Published September 2, 2024
Pim Polesie
Coffee experts@Era of We
In recent years, sustainability has become a central concern in the global coffee industry as consumers increasingly seek products that align with their environmental and social values. Certifications like Fairtrade and Rainforest Alliance aim to ensure that coffee is grown in a way that benefits both the planet and the farmers who produce it.
However, the 2023 Coffee Barometer reveals a striking paradox: while 55% of global coffee production is certified as sustainable, only 26% of this coffee is sold as such. The remaining 74% is marketed as conventional coffee, leaving farmers without the financial rewards they were promised. This gap between production and market demand poses significant challenges for the future of sustainable coffee.
Understanding the Gap: Why Certified Coffee Goes Unsold as Sustainable
The disconnect between the amount of coffee certified as sustainable and the amount sold as such is driven by several factors. The global coffee market is structured to prioritize low prices and high volumes, which often undercuts the demand for more expensive, sustainably produced coffee.
1. Market Dynamics and Consumer Behavior
A key factor is consumer behavior. Despite growing awareness of sustainability issues, many consumers are not willing to pay the higher prices that come with certified coffee, particularly in mass markets where price sensitivity remains high. As a result, retailers and coffee brands often opt to sell certified coffee as conventional coffee to meet consumer expectations and avoid the risk of unsold inventory.
2. Supply Chain Complexities
The coffee supply chain is another obstacle. Even when coffee is certified as sustainable, it must pass through multiple stages—exporters, importers, roasters, and retailers—before reaching the consumer. Maintaining the integrity of sustainable certifications throughout these stages can be costly, leading some stakeholders to blend certified coffee with non-certified coffee and sell it without the premium label. This erases any potential financial benefits for the farmers who invested in sustainable practices.
3. Misalignment of Supply and Demand
There is also a significant misalignment between the supply of certified sustainable coffee and market demand. The Coffee Barometer highlights an oversupply of certified coffee, with demand failing to keep pace. Sustainability certifications are often treated as niche products rather than mainstream offerings, and retailers may lack the infrastructure to differentiate sustainable coffee from conventional options.
The Impact on Farmers: Broken Promises and Financial Disincentives
The financial consequences of this market gap are severe for the farmers who have invested in sustainable practices. Sustainability certifications require significant investments in improved agricultural practices, infrastructure, and compliance with strict standards. Farmers who make these investments expect to receive higher prices for their certified coffee. However, when their coffee is sold as conventional, they are denied these premiums.
- Financial Strain on Smallholder Farmers
Smallholder farmers, who make up most of the world’s coffee producers, are particularly vulnerable. These farmers often operate on thin margins and rely on the additional income promised by sustainable certifications to support their livelihoods. When certified coffee is sold as conventional, these farmers are left bearing the costs of sustainable production without reaping the financial rewards. This can lead to increased debt, reduced quality of life, and, in some cases, abandonment of sustainable practices altogether.
2. Discouragement from Sustainable Practices
The gap between production and market demand discourages farmers from continuing to invest in sustainability. If the market consistently fails to deliver on the financial promises associated with sustainable coffee, farmers may revert to conventional methods that are cheaper and less labor-intensive. This rollback undermines global efforts to promote sustainability in the coffee industry and slows progress toward environmental and social goals.
The Role of Increased Transparency in Bridging the Gap
To close the gap between the production of certified sustainable coffee and its market demand, increased transparency throughout the supply chain is essential. Transparency can play a transformative role by ensuring that all stakeholders—from farmers to consumers—are informed and aligned on the value and impact of sustainable coffee.
1. Enhancing Supply Chain Transparency
Transparency begins with the ability to trace coffee from farm to cup. By implementing traceability systems, such as blockchain technology, coffee producers and brands can ensure that certified coffee is kept separate from non-certified coffee throughout the supply chain. This maintains the integrity of sustainability certifications and allows consumers to verify the origins and production practices of the coffee they purchase.
2. Empowering Consumers with Information
Increased transparency empowers consumers by providing them with the information they need to make informed purchasing decisions. When consumers can easily access data about the sustainability practices behind the coffee they buy—such as the environmental impact, the social benefits for farmers, and the fair pricing—they are more likely to choose certified options. This, in turn, drives demand for sustainable coffee and encourages retailers to market it as such.
3. Building Trust and Accountability
Transparency fosters trust and accountability throughout the coffee supply chain. When all parties are transparent about their practices and pricing, it reduces the risk of certified coffee being downgraded to conventional status. Retailers and brands that are transparent about their sourcing practices are more likely to build trust with consumers, leading to stronger brand loyalty and a greater willingness to pay premiums for sustainable products.
The Role of the European Union Deforestation Regulation (EUDR)
A development in improving transparency is the European Union Deforestation Regulation (EUDR). This regulation, which will come into effect end of 2024, requires companies importing coffee (and other commodities) into the EU to prove that their supply chains are not contributing to deforestation. The EUDR mandates strict traceability, ensuring that coffee is sourced sustainably and that the origins of the product are clearly documented.
The EUDR's focus on transparency is likely to have a ripple effect across the global coffee industry. By requiring detailed information on the origins and sustainability of coffee, the regulation forces companies to maintain high standards throughout their supply chains. While this level of scrutiny helps bridge the gap between the production of certified coffee and its sale as such by ensuring that sustainable coffee is not only produced but also marketed accurately, it risks cutting out small and medium-sized growers from the larger coffee market. This is largely because small and medium sized growers cannot meet the regulations standard. Down the line, this could mean less quantity and less diversity in the EU coffee market.
Moreover, the EUDR’s emphasis on transparency can help build consumer confidence in sustainable coffee products, encouraging greater demand. As consumers become more confident that the coffee they purchase meets strict environmental standards, they are more likely to seek out certified options, driving market demand and ensuring that farmers receive the premiums they deserve.
To ensure complete transparency and to improve accessibility to sustainable coffee, a robust system of data management is vital. Software like Era of We help coffee businesses source, verify, and market sustainable coffee backed up with verified data. This data-driven approach to sustainability and traceability is the future of coffee and helps coffee brands become more efficient with their procurement while also elevating their marketing strategy.
Conclusion
The paradox of sustainable coffee highlights the challenges of aligning market realities with sustainability goals. While significant progress has been made in certifying coffee as sustainable, much work remains to ensure that this coffee is recognized and rewarded in the market. Increased transparency in the supply chain, bolstered by initiatives like the EUDR, is key to closing the gap between the production of certified coffee and its market demand. By fostering trust, empowering consumers, and ensuring that financial rewards reach the farmers, transparency can help make sustainable coffee the standard rather than the exception in the global market.
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