Coffee certifications. Between aspiration and reality

Intro

I'm standing in front of the fish counter at the supermarket. Half of the displayed fish, mussels, oysters and langoustines are certified in one way or another. The labels are almost exclusively blue and green, bearing the keywords "fair", "responsible" and "friends" in their names, and they give me a good feeling, which is the intention.

But I'm confused:

which label is exactly good?

Or are they all?

And what does "fair fish" mean for a dead animal?

More and more questions come up, and with them a lack of understanding that makes me insecure, then critical and finally; suspicious. So I don't buy anything - because I don't eat seafood - but also because I get the feeling that I don't have a clear understanding here. I simply lack the background.

Fortunately, I work with coffee and the label situation is much clearer there - or actually, not at all.

Because the coffee shelf in the supermarket, which I scan from time to time to get a feel for the pulse of the times, unfortunately doesn't look much more organized.

Labels are actually a heuristic, a shortcut to quickly grasp facts,

sustainability communication expert Anja Schröder told me in a podcast. Actually, she says, because the multitude of labels can often be overwhelming. Because the use of buzzwords like fair, direct, organic and sustainable has long become normal and therefore seemingly no precision is needed anymore, even though it is needed more than ever.

It seems there is a desire for certifications, for products that have been manufactured according to a catalogue of requirements. If we look at coffee here, however, it becomes clear: certified coffees don't all find their market. As citizens we wish for it, but as consumers we don't live up to our noble aspirations.

In the specialty coffee sector, there are even obvious movements that view certifications as a poorer reference for their own actions and have no good words for them. It seems to me that there's more mood-making than precise argumentation at work.

But one could ask: Aren't certifications simply already "ok", and shouldn't rather the coffees without certification be examined more precisely?

When I hear from coffee drinkers that they prefer to buy coffee without certification rather than buy coffee from an undefined label, it's a sign of being overwhelmed and a reflex we also know in climate discourse - often companies are pointed out that compensate all emissions, but more than 90% of companies don't compensate at all.

So what exactly do these certifications do, and what don't they?

What do they bring to producers?

How expensive are they?

Are they trustworthy and where does our mistrust come from?

Don Roque from the Toca project in Mexico on his way to the farm (Photo: Miguel Guevara)

The Basics of Coffee Certification

What is a certification?

I ask where linguistic precision is desired and verbal creativity is frowned upon: at DIN ISO; the German Institute for Standardization. A certification is accordingly

"a measure by an impartial third party that demonstrates that appropriate confidence exists that a properly labelled product, process or properly labelled service is in accordance with a specific standard or specific other normative document."

In this case, the standard is shortened with a seal, the normative document would be the guidelines of a seal, and the impartial third parties would be the audit bodies that in our case examine the coffee producers and processing facilities against the ruleset of the respective seal.

In the coffee industry, there is no single binding seal to which all actors along the supply chain are obliged to commit. That's why we're talking about so-called VSS, Voluntary Sustainability Standards. The standards issued by Fairtrade, Rainforest Alliance, 4C etc. are all established, but no market participant is required to accept them.

These VSS are so far the most widely accepted tool to promote transparency in the supply chain.

They also create comparability between certified and non-certified coffees, in that the criterion catalogues are publicly accessible. Each label defines more or less clearly where the focus lies.

The ITC Standards Map is probably the best place to identify, understand and compare different standards.

In this example, I compare three well-known labels on their social, ecological, quality and ethical components.

On https://www.labelinfo.ch/de/ you can also compare different labels based on product categories.

Both platforms provide detailed information on the label requirements, with the Standards Map always pointing to the relevant legal basis. It's fun to click through the platforms and get a sense of how many different criteria each seal actually addresses.

This also means how many criteria producers and their organizations have to meet.

"It's certainly not a walk in the park",

the managing director of one of our partner cooperatives told me. Because the transparency that should build trust on the consumer side only comes about when an audit body goes through all the questionnaires with the producers. In the process, nothing is left unturned.

Don Adrian from the Toca project has been working on soil improvement for years

Like any audit, the goal here is to do as much as possible as well as possible, but under no circumstances to do anything wrong.

If a deficiency, such as "improper" storage of fertilizer according to the criterion catalogue, is noted, corrections are needed. Other non-compliant criteria are considered deal-breakers and result in the label being withdrawn.

This stringency and strictness gives the label its credibility and its reason for existence. But what role do certified coffees play in the market, and what do they mean for producers who are certified and want to bring their coffee to such a market?

The Reality Check

At the Retailer

"There are many different certifications, besides the generally known ones also company-owned ones like C.A.F.E Practices from Starbucks or AAA from Nespresso",

notes Christian Cvrljak, trader at InterAmerican, the specialty department of the world's largest trader Neumann Kaffee Gruppe.

"But with Robusta there isn't much certified coffee yet. New farmers are being certified every year, but the numbers are still low."

The Neumann Kaffee Gruppe trades globally with approximately 40% third-party certified coffees, InterAmerican with approximately 70%.

"The trend is clearly towards certified coffees", says Cvrljak, "especially when we look at the new EU guidelines. By the end of 2024 comes the Deforestation Law. If the law comes the way it's intended, you can only buy certified coffee in the EU and Switzerland."

The Market...

From 2010 to 2020, more and more producer organizations became certified. According to the Coffee Barometer, between 2020-22, approximately 55% of globally produced coffee was certified in one form or another.

If so much coffee is being certified, shouldn't we be seeing an effect and shouldn't we be reading more positive news?

Graphic from the Coffee Barometer, 2023

55% of the coffee was certified, but in 2021 only 26% of it was taken up in the market as such. The other 74% of certified coffee ended up in the conventional coffee market.

This means that certified producers have done their homework to achieve certification in the first place, but don't receive a premium at the end of the season because the market for certified coffee is too small. Or because too much coffee is certified.

... Doesn't Exist

It won't happen that 100% of certified coffees find their intended market, as this is also a matter of supply and demand. "50-60% should be the target", a well-informed contact told me. Because: as long as the supply of certified coffees is greater than the demand, certifications remain cheap.

With 4C, for example, premiums are at 2-3cts/lb (1 lb = 1 pound = 0.45kg), with Rainforest Alliance at just under 5 cts/lb - this is significantly less and not comparable to the fixed prices and premiums that Fairtrade offers. The only problem is that Fairtrade is too expensive for many buyers (=traders and roasteries). The motto is: it can be sustainable, but it doesn't have to cost so much.

So those looking for a cheaper sustainability seal than Fairtrade find it in Rainforest Alliance, 4C or company-owned certifications, which are cheaper in part because they are not audited by a third party.

As long as there is an oversupply of certified coffees, they are theoretically attractive to buyers. If this imbalance tips in the direction that the supply of certified coffees becomes smaller, certified coffees will become more expensive and be even less attractive to buyers than they are today.

When it became clear to me what I had written in the last four sections, I had to pause several times - a system with good intentions recruits producers for something that offers no guarantee of success.

It's a bit like a lottery with 30 instead of 100 digits. The chances are quite good that I'll win something, but it also might not happen. In one place the wheel of fortune decides, in the other those who shop.

Coffee producers ask themselves daily: what will the market price bring? (Photo: Miguel Guevara)

"It's Simply Also a Business"

"It's simply also a business", says Kleber Cruz from GEPA. On one hand, producer organizations pay a fee to use the seal. On the other hand, retailers pay the licensing costs, which at Fairtrade currently amount to 20-24 cts/kg, according to Cruz. Producers pay the audit fees, consumers pay the licensing fees. They are different billing parties, but it's about the same label.

So more and more producers are being certified, yet at the same time the market for certified coffee is growing only partially to not at all - Fairtrade and Organic are stagnating, RFA and 4C - the cheaper alternatives - are growing.

It feels to me like the recycling rate for plastic. It seems that everyone is orienting themselves to making everything recyclable, but the rate is growing far too slowly. The consumption of new plastic is growing much faster.

So where exactly is the appeal for producers to participate?

Why should someone get certified, what comes with additional costs and hopes, but with low success prospects?

The Significance of Certification for Coffee Producers

Cooperatives, producer organizations, as well as individual producers can open up new markets with certification. Once again, Kleber Cruz from GEPA.

"Of course, certifications are needed if an organization wants to get into retail."

Retailers like to advertise that they're doing "more" for sustainability in coffee, and often do so by committing to certifications. The coffees that have made it as certified coffee to the shelf have reached their target market. Many others don't make it to the shelf at all, or were purchased under unfair conditions, so-called Combos.

Few supermarkets take responsibility themselves and create new solutions within their assortment, seek direct exchange and invest locally. In Switzerland, there are examples of this with Migros and Coop. Anyone who knows other examples (from Germany and Austria) is welcome to share them in the comments.

The need for certified coffee at supermarkets in Germany, Austria and Switzerland seems to be increasing, but still remains a smaller portion of the assortment compared to overall. Retailers are generally open to VSS, but very large roasteries like Nestlé, JDE and others often have their own sourcing and sustainability programs, which are then only 2nd party verified, meaning not third-party audited, and therefore cheaper.

What does this situation mean for everyone who produces coffee and gets certified?

Certification Costs for Coffee Producers

FairTrade and FairTrade/Organic

"The costs of certification are a problem", notes Kleber Cruz, who is responsible for raw coffee purchasing at GEPA. The price of the annual certification audit depends on the size of the cooperative. In this, Cruz is referring to Fairtrade, which only certifies democratically organized cooperatives of small producers.

The certification costs of the following cooperatives give an impression of how great the financial pressure is on the expenditure side:

Certification costs at Fairtrade depend on the size of the cooperative and the volume produced. All collected information ranges between 2500 - 3000 EUR per year - but only per audit.

"Audit bodies try to combine various certifications, but that's tricky",

Cruz reports. Anyone who wants to supply different markets with organically produced coffee must get certified for each target market. The EU, the USA, Australia, Japan - these are all major markets, but each has its own certification.

"If I don't want to lose the Japanese market, but can only send two containers there, I still get myself certified."

So whoever can produce, certify and ship more has lower certification costs per kilogram in the end. But if the market isn't there to absorb all the certified coffee, then certification costs are additional expenses with no corresponding value.

Rainforest Alliance

In contrast to Fairtrade, Rainforest Alliance (RFA) also certifies individual farms. We could become a member of RFA with our Finca Santa Rita if we meet the criteria catalogue.

Producers pay for the audit at a certification body of their choice. The costs incurred then depend on the audit body, not on RFA. In addition, as with any certification, there are costs for implementing the required measures. For coffee, RFA charges 0.015 dollars per pound (lb) of raw coffee as a fee that the so-called first buyer has to pay, meaning the party that first buys the coffee from the cooperative or farm.

What Premium Do Producers Get for Certified Coffee?

In the following calculation example, we compare a Fairtrade, a Fairtrade Organic dual-certified, and an RFA certified coffee to each other.

Audit costs for producers, processors (e.g. roasteries) and retailers (e.g. supermarket) must be paid annually by everyone. This is the same for all certifications listed here.

A Brutal Quintessence for Producers

Whether the effort is ultimately worth it for coffee producers needs to be discussed elsewhere. For that, a specific analysis with concrete targets is needed.

What I have heard several times in my research is: that dual-certified (Fairtrade/Organic) cooperatives have been selling their coffee increasingly on the local market in recent years because that is more attractive to them.

An example:

A cooperative in Peru sells its certified coffee in Peru because, first, the coffee is paid for in a few days and second, because the financing costs that would apply to bridging until the money comes from the international buyer fall away. Interest rates in Peru go as high as 30%. And these eat away at the premiums of certified coffees.

With the increase in Fairtrade's minimum price to 180 cts/lb, the problem described above becomes even bigger. We're told that demand in Europe has become significantly smaller. Fairtrade and Fairtrade-Organic certified coffees are in strong demand in the USA right now because Fairtrade USA simply didn't follow suit with the increase to 180 cts/lb.

When the Cat Bites Its Own Tail

Let me summarize this circular reasoning point by point again:

• Producers/organizations pay for the audit to get a label and thereby differentiated market access
• each market has its own requirements, so producer organizations often get certified multiple times, which always means multiple costs, often around 2500 to 3000 USD per audit
  
• Fairtrade guarantees a minimum price for coffee, with RFA producers and buyers negotiate the premium themselves, which is significantly lower than with FT
  
• the market is too small for certified coffee, only 26% (2021) of certified coffee found a target market and received a premium, for 74% of certified coffee there was no premium even though it met the criteria
  
• Cooperatives increasingly sell on the local market because they make more money that way than if they exported the certified coffee. Not because more is paid, but because there are fewer additional financing costs
  

The system doesn't function as intended across the board. And yet certification continues. I'll quote Kleber Cruz from GEPA again: "It's simply also a business."

What would be the alternative then? No certification?

Those who diversify and grow more can find additional sales markets (Photo: Miguel Guevara)

The Discourse

Since I've been working with coffee, I've been asked whether certifications are good, bad, effective or useless. In that time, I've had many conversations with cooperatives, certifiers, audit authorities and companies that are themselves certified. Especially with them, there's naturally an understanding that certification is the way to go.

When I listen to the voices of consumers, I think I can make out three different discourses.

"Rather Specialty Coffee Than a Label"

One of many promises from certain specialty roasteries is that they forego labels because a label doesn't provide sensory quality and the direct approach of working with producers is much more worthwhile.

The labels discussed here never had a focus on sensory quality, so this argument doesn't count. "Direct cooperation" is a vague formulation. How direct is direct? And who is excluded and why at what point in the supply chain, to what consequence?

Direct collaborations are often designed for individual producers or smaller farms, which clearly doesn't match the intention of certifiers, who work as inclusively as possible. Forgoing labels based on quality requirements and an imprecise definition of direct trade are therefore reasons that one is welcome to question.

"Label and Done"

I perceive a different discourse among meso- and macro roasteries, that they rely on certified coffees. This is often accompanied by grand promises that a roastery is now particularly sustainable and that - purely by buying certified coffees - they would turn things for the better. As if a label were insurance for a good future and an assurance of doing the right thing.

However, a label cannot bring about comprehensive change, as they are not designed for that. The respective requirement catalogues specify concrete points to be met, but these - even if detailed - are not specifically tailored to the respective partners.

Labels don't address point solutions, and that's where there's great potential for traders and roasteries to build a bridge, perhaps together with a certifier: win-win-win.

Partnerships will be the future, which various certifiers are already striving for. Furthermore, certifiers increasingly offer additional expertise. "It's increasingly about risk analyses and compliance", says Peter Lerch from Rainforest Alliance. In doing so, traders' programs must become more transparent and externally audited.

"Lies and Fraud"

I thought the times of unfounded rejection towards transparent concepts were over. But no, I was recently proven wrong.

A potential customer became interested in our coffee.

When I talked about the organic seal, the guest interrupted me and launched into a lengthy tirade against every seal. Everything was a lie, worthless, all fraud, nobody cares, etc.

I showed the guest to the door.

Labels are subject to constant criticism, in which they constantly have to reassert and justify themselves. Transparency is increasing every year, precise long-term studies on effectiveness are still lacking, but there is neither a hidden agenda nor dubious dealings. Labels are also a business, whether you like it or not, but they're not an underground organization.

Label 4.0

"Labels are no longer pure labels",

Peter Lerch from Rainforest Alliance tells me. Certifiers work intensively and scientifically on various topics in the coffee chain and even publish discussion papers to submit themselves to public reflection.

New EU laws like EUDR (Regulation on deforestation-free supply chains) naturally affect certifiers too, so they must be directly on the pulse of the times and in dialogue with their partner-producers and issue their policy statements on them.

But there's still a lot of education needed to communicate all the changes made, Lerch continues. For me, this is the all-determining discourse, because here certification organizations can prove what added value they provide in times when nothing is stable anymore.

In 2012, I first heard of the post-label era, a time when labels would no longer be needed. It was supposed to be right around the corner, they said. I still don't believe it, and I can't imagine an imminent end. Labels like Fairtrade, Bio Suisse, Rainforest Alliance or Demeter are deeply anchored in consumer perception; these labels will still exist in 20 years - but the processes behind them will continue to evolve.

Conclusion

One of my guiding questions comes from marketing guru Seth Godin: who's it for and what's it for?

Who we're doing this for and what we're doing this for. With labels, there are at least two recipients: consumers can learn with labels to shop more mindfully, and producers could find a market among these consumers.

The question about the "what" remains important and has lost none of its relevance: the goal of the labels discussed is to improve the living conditions of small-scale producers who often have their backs against the wall. Aside from how well, often and long-term this succeeds, the "what" won't change.

Labels are part of the coffee ecosystem. Katja Schmittner from Fairtrade Max Havelaar once told me in a podcast: "If Fairtrade is no longer needed, we've done our job." Labels create visibility for problems that are addressed by buying a labeled coffee.

The effectiveness of labels in coffee is contested. There are scientific papers, but most often they have to select individual case studies. The impact reports from the certifiers themselves often don't go as deep and broad - and when they do, the links are welcome to be shared in the comments.

And when I ask cooperatives directly how big the impact is, the answers are never clear, but rather describe a state of things, what labels make possible to think and why it could be worth it. So making clear claims is difficult.

The great strengths of certifiers are that they create comparability, define what is sustainable and what "sustainable" means. They also demand accountability, since a third party conducts an audit.

The risk of greenwashing is significantly smaller with certified coffees than with non-certified coffees, as the latter are not subject to external review.

Roasteries that work without labels are not forced to account for themselves. But there are voluntary alternatives where you can get involved as a roastery and share data. Transparency Coffee or self-authored transparency reports like from Vote Coffee are means to provide voluntary accountability.

From a consumer perspective, it's understandable that a label jungle can sometimes confuse more than clarify. Especially when it comes to a roastery's or retailer's own labels.

Choosing labels that are already well-established is a safe choice because the label organization must account for itself. For those who want to play it safe in a supermarket, buy double-certified coffee, FTO - Fairtrade and Organic.

Outro

I don't eat fish from the sea, but only from Swiss rivers and lakes. So I don't find anything at the fish counter and buy a smoked trout from the fish farm in the neighboring village.

The fish labels confused me, each sounded really good. This can give you the feeling that certifications give you certainty about something that might never happen, that you never fully understand, and perhaps shouldn't, because someone else takes care of it.

Label organizations have the very high ambition of tackling macro challenges in the coffee sector. But the micro is just as important, and private individuals, companies and NGOs can work on it at the same time. Their approaches are less scalable because they are targeted, but the underlying thinking is reproducible and good ideas get copied.

It will never be enough to rest on labels. But it also doesn't help to blast hard against certifications. If anyone should be held accountable, it's all those who don't buy certified coffee, take no targeted measures at origin, or buy coffee from dubious sources.