Sustainable Coffee: Ethical Trade

This post is part of a series on sustainability in coffee and exploring what that means, the various schemes, and how they work.

My move to Singapore brought me within a few hours flight to several coffee producing countries so I have committed myself to exploring and learning as much as I can about that end of the industry and supply chain while I am here.  My first origin visit was to Kintamani, Bali and it was an eye-opener.  I do not use the term "life-changing" very often but my first two trips to origin were indeed life-changing.

First I should qualify a few things.  I have seen, first hand, true poverty in developing nations and it is starkly contrasted to what qualifies as poverty in Western, developed nations, namely America.  The poor in developing nations don't likely have running water in their homes, let alone multiple iPhones, a flat-screen TV and broadband Internet access.  Often workers in developing countries do not have the backing of an OSHA*-like entity to ensure work-place safety.  And they work for pennies an hour.  A coffee picker in Indonesia can expect a pay of about 10¢/kilo of picked cherries and the average picker can harvest around 45 kilos a day.  Believe it or not, that pay rate is above the international poverty line.  That brings things into perspective when you think about going to Starbucks and paying $4.50 for a drink.

Granted, the cost of living is very cheap where these people live but there are two caveats:  1) That is by design.  For example, if no one can afford to pay $3 for a bottle of water, the price (along with the quality) will drop and 2) there is a difference between 'living' and 'thriving.'  At these wages, people can afford to get by but they ca not necessarily afford to get ahead.  The typical rut ensues; get a loan to buy something needed, such as farm equipment, then have to repay the loan plus interest, diverting money that could be used elsewhere.

The typical salary chain in the early phases of coffee goes something like this*:  pickers are paid by the farmer who sells the harvest to a processing mill that in turn sells processed, un-roasted coffee beans to a number of different entities such as exporters, distributers, roasters, etc.  We need to target each link in the supply/salary chain if we want to make a difference in the lives of producers.  How do we do that?

Going back to the example of the picker getting ¢10/kilo; getting paid by weight means there is no incentive to selectively pick the reddest, ripest cherries that will produce the best quality coffee.  The solution is pay gradients based on quality — the more red, ripe cherries in the picker's harvest at the end of the day, the more pay they should get.  Mills have to do the same for the farmers; the higher the quality of the harvest brought to the mill, the higher the pay to the farmer.  And on it goes along the supply chain; each link must incentivize the previous with pay gradients based on quality.

That is the definition of ethical trade.  Wherever you are in the supply chain, your focus should be on conscientiously supporting quality through premiums.  I intentionally do not use the term 'direct trade' because green coffee buyers, the middle men, can provide a huge benefit to the industry.  Not all coffee shops can visit coffee farms or mills and deal directly with these entities — in fact the majority can not.  But coffee shops can ensure they work with importers and distributers who trade ethically with processors and producers.

Consumers have a role in this as well — a big role in fact.  Consumers' buying power is the key to supporting the entire chain and it begins with ethical consumption, as I have mentioned in the article titled Sustainable Coffee: Ethical Consumption:

There are two ways ethical consumption has an impact; directly via purchases of ethical products or indirectly via boycotting or abstaining from purchasing non-ethical products.

Working with entities that pass premiums up the chain is the best way to help improve the lives of those who produce coffee and who are vulnerable to poverty.  We do not need another scheme that picks winners and losers* or overcharges simply for participation*.

This post is part of a series:

Sustainable Coffee: Ethical Consumption
Sustainable Coffee: Fair Trade Coffee
Sustainable Coffee: Ethical Trade
Sustainable Coffee: Organic Coffee

Updated July 23, 2017: changed format of series links.


Michael C. Wright

Michael is an American expat living in Singapore where he writes about many things coffee-related. A roaster by trade, Michael is also a licensed Q Grader and an Authorized SCA Trainer (AST).

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