Over the last five years, I have been leading a research project in Indonesia examining the livelihood and poverty impacts of sustainability standards in the coffee sector. The research, supported by ISEAL under the Demonstrating and Improving Poverty Impacts Project (DIPI) project, has involved large-scale household surveys and analysis of panel data sets over three survey rounds alongside qualitative village-based case studies.
Our research has found some benefits for participating producers, including indications that social capital has improved and that producer organisations have been strengthened. However, overall, livelihood impacts have not been overly impressive. In our study sites, impacts from standards are far less important than changes resulting from broader rural development processes as households don’t generally consider coffee production a preferred pathway out of poverty. Rather, coffee is seen as resilience-enhancing for local livelihoods, while surplus household resources are invested instead into petty trading activities.
It seems that similar results have been reported from other impact studies around the world, prompting a re-think of the future of sustainability standards in the sector. It may be that the limited livelihood impacts of sustainability standards are a consequence of the operating model itself. I suggest that a “compliance-based assurance model” has co-evolved with an audit-based approach to food safety rather than a model intended to deliver long-term benefits to producers, and this has resulted in limited impacts reported to date. The model involves the setting of a standard, an audit of producers to ensure compliance to the standard, resulting in an assurance being made to consumers that the standard has been followed. Importantly, the idea of assurance is, by definition, a benefit delivered to buyers.
The historical evolution of these standards is important. The first certified coffee products appeared in the 1980s and 90s, when standards were created for organic and fair-trade, at a time when alternative food movements became involved in a broader meta-trend of ethical consumerism. It was necessary to assure consumers that coffee marketed as organic was actually organic, resulting in adoption of the compliance-based assurance model. Meanwhile, financial benefits to producers were to be generated through a process of market-based product differentiation, where market forces would respond to restricted supply and increased demand to increase prices. The key point here is that standards were established primarily to protect consumers, with secondary benefits to producers by way of product differentiation.
Two other broad trends were instrumental in shaping the emergence of sustainability standards in the coffee sector at this time.
Firstly, a Corporate Social Responsibility agenda was already becoming mainstream in the 1990s, as companies responded to high-profile corporate boycotts by acting to protect what had become their most valuable asset – their brand. It was therefore necessary to assure consumers that their product was not associated with social and environmental neglect, or that they were perpetuating third-world poverty. A model to demonstrate ethical due diligence along the supply chain was needed.
Secondly, various food safety scares in the 1990s put increasing pressure on retailers to demonstrate due diligence regarding food safety. Again, the compliance-based assurance model, with HACCP-style audit systems, was adopted to identify food contamination risks. It was a logical step to equate brand-related risk exposure due to social and environmental neglect with food contamination risk, and so the compliance-based assurance model was applied more broadly under the theme of sustainability. The creation of Eurepgap in 1997 (later to become Globalgap) as a farm assurance program addressing food safety alongside sustainability was a key development that went on to inform mainstream sustainability models in the coffee sector.
Such assurance schemes, explicitly in the case of food safety, are primarily designed to deliver benefits to consumers and not to producers. The mainstreaming of sustainability standards, and the desire to reach as many producers as possible, has further meant that the role of sustainability standards as a mechanism for product differentiation has diminished.
Do other mechanisms, apart from product differentiation, exist that are likely to deliver benefits to producers? Many standards organisations, some encouraged through their membership of ISEAL, have prepared Theories of Change to address this question. This has helped clarify potential impact pathways, which are varied, but a central pathway seems to suggest that impacts will be achieved through a pathway of training resulting in practice change, resulting in productivity increases, resulting in increased incomes. The role of price premiums is of lesser importance.
The consequence is that we now have a compliance-based assurance model, designed to provide benefits to consumers, in a process of being re-imagined to deliver benefits to producers through service delivery and training. The evidence that this impact pathway is actually occurring remains limited, or perhaps more accurately, it is highly variable depending on context. It seems to depend a lot on how different buyers embed these standards within their broader commitments to sustainability. This is perhaps not surprising given that the compliance model does not actually explicitly require dissemination of agronomic or other knowledge. In practice, training is frequently provided, but it tends to be focused on audit preparedness, which is a direct product of the compliance-based assurance model.
One of the key developments I have observed while conducting research on the coffee industry over the last twenty years has been the massive increase in upstream investments in producer communities made by buyers. There are more direct farmer engagement activities than ever before and it is clear that the drive for certification played an important catalytic role in this trend by insisting on new channels of knowledge exchange and investments along the value chain.
However, we may be applying an operating model that is no longer fit for purpose. Substantial financial resources are being transferred along the value chain from end-users through to producers, but livelihood impacts remain limited. There seems to be increasing recognition that the conventional standards model has limitations and many in the industry would like to see more resources spent on service delivery rather than ensuring audit compliance. Yet standards are still important in doing what they were primarily designed to do – to communicate compliance with an ethical baseline to consumers and thereby reduce risk exposure for firms. As a result, they persist and continue to attract investment.
Looking ahead, a new operating model may be needed if the stated aims of improving the lives and well-being of coffee farmers are to be achieved. Such a model would need to address at least three key considerations. It would need to embed service delivery to producers alongside providing assurance to consumers. Secondly, it would need to be responsive to the specific livelihood needs and aspirations of producers living in varied geographical contexts. And finally, it would need to consider interactions with the broader institutional landscape within producer communities, including partnerships with local governments.
For more insights from this research project, listen in to this Evidensia podcast with the author.
