How effective is private regulation in incentivizing more sustainable production practices in the coffee sector?


The coffee sector is a recognized frontrunner in the emergence and proliferation of private standards that aim to govern its economic, social and environmental sustainability. Some of the best-known standards (such as Fairtrade or UTZ) targeted coffee as their first commodity before diversifying to others; and most schemes have been in existence for over 15 years. Furthermore, the sector is targeted by a large number of competing schemes; and an estimated 40-50% of global coffee production today is certified or verified by one of these standards (which include Fairtrade International, Fair Trade USA, Rainforest Alliance, UTZ, 4C, Nespresso AAA, Starbucks C.A.F.E. Practices, and the various organic standards). This makes the coffee sector an ideal test case to ask the question – does such market-driven regulation actually work in changing production practices on the ground? And if the answer is yes, can we identify design choices of private sustainability standards that lead to greater effectiveness in advancing sustainable practices?

My book “Selling sustainability short? The private governance of labor and the environment in the coffee sector” (Cambridge University Press, 2020) answers these questions by drawing on over three years of research in three producing countries (Honduras, Colombia, and Costa Rica). Together with my team in the TRANS SUSTAIN researcher group at the University of Münster, I collected detailed farm-level data from over 1900 coffee farms in order to compare the environmental and social production practices of certified farmers with those of similar, non-certified producers. To understand better why these results varied across certification schemes and across country contexts, I furthermore conducted over 60 expert interviews with stakeholders along the global coffee value chain, reaching from café owners in the Global North to cooperative managers in the Global South. In addition, I studied standard documents, academic and archival texts in great depth, and participated in multiple industry events such as the Specialty Coffee Association’s Expo in the USA and the Semana International del Café in Costa Rica.

Defining the goal post of a sustainable coffee sector

It will come as no great surprise to academics and practitioners in the sustainability governance space that ‘sustainability’ is a fundamentally contested concept. This also holds true for the coffee sector. Yet, to assess the effectiveness of a policy tool, it is quintessential to define its goals. So what do we actually mean by a ‘sustainable coffee sector’? The definition of coffee sustainability has evolved from a consensus centred around agroforestry, integration in natural ecosystems, long-term trading relations, and pricing that supports farmers’ welfare (as specified in the ‘Conservation Principles for Coffee Production), to one focused on ‘sustainable intensification’. In this latter definition, greater emphasis is put on yield and quality improvements as ways to lift farmers out of poverty; a change of market relations is pushed into the background; and practices that are likely to lower yields compared to commercial farming variants (e.g. agroforestry or organic practices) are de-emphasized.

How far have we come in changing producer practices toward sustainability?

To respect these changes in definition, one can examine three tiers of sustainable practices. Tier I contains economic-environmental win-win practices in line with ‘sustainable intensification’. Tier II represents intermediate practices that have short-term costs but long-term benefits for the health and resilience of both farm and farmers. Finally, Tier III contains practices that are likely to represent economic trade-offs or opportunity costs for farmers, but simultaneously have the greatest environmental or social impact (e.g. organic farming; paying higher wages; strong agroforestry practices).

Though results vary by certification scheme and country context, in the farmers I studied, certified farmers are more likely to show improvements over non-certified farmers in Tiers I and II. The strongest environmentally and socially sustainable practices in Tier III do not greatly differ from the non-certified country-specific status quo in most of the certified groups I analyzed. These results are quite similar to other impact evaluation studies of private governance in coffee sector done over the years. Private regulation through sustainability standards thus only shows partial goal attainment, and only when allowing for moving goal posts toward definition of sustainable coffee production as intensified production with minimal social and environmental safeguards in place. However, to date market-driven regulatory governance has not realized its potential to rectify market failures by internalizing social and environmental externalities.

Explaining the effectiveness gap

What can explain this effectiveness gap? Private sustainability standards faced an institutional design dilemma as they aimed to scale up and enter the mainstream. In recognition of the need to reach out to farmers with lower financial and educational capacity, most standards have shifted toward an approach of ‘continuous improvement’ whereby they establish a step-by-step approach toward compliance, alongside a softening or phase-in of criteria that show the greatest economic trade-offs. Yet, this approach also weakens the entry barriers that protected certified producers’ economic rents – the premium pricing – that motivated their participation and funded their transition.

In combination with a softening of roasters’ purchasing commitments after the 2008 economic crisis, and a lack of supply management from the side of certification organizations, these changes resulted in substantial oversupply of certified coffee – especially in light of the proliferation of standards that competed for a share of the sustainable coffee market. In consequence, the sector faced a decline in both price premiums and the volumes of certified coffee producers were able to sell. Today, producer organizations such as the National Colombian Coffee Growers’ Association (FNC) recognize that “sustainable coffees should no longer be considered specialty coffees because the increase in supply has limited their added value”. This loss of differentiation potential however also fuels considerable resentment among certified producers who made upfront investments for compliance, and lowers both their financial capacity and motivation to continue with costly practices.

Moving forward: Standard design and contextual conditions for greater effectiveness

Comparing standards and their effects in the field, one can conclude that effective governance outcomes require standards to define clear, non-negotiable rules that are passed down through continuous capacity-building activities and incentivized through higher prices passed down to producers. In addition, it requires coffee buyers to recognize their shared responsibility – especially in financial terms – of supporting a more sustainable sector, rather than using strategies that lower the cost of sustainable coffee by exerting their market power and playing off certification schemes against one another. This requires civil society actors to take up both collaborative roles (when supporting capacity building) as well as confrontational, watchdog roles (to oversee rule implementation as well as power abuse in global supply chains).

My book further hones in on the role of national-level institutional contexts by comparing the institutional environments of Honduras, Colombia and Costa Rica. It finds that institutional environments that support certification roll-out through functional extensional services and capacity-building activities (such as in the case of Colombia), but that allow for differentiated price transmission (unlike Costa Rica’s regulatory system), provide the best conditions for the implementation of private sustainability standards.

These insights aim to inform practitioners in the field of sustainable development and supply chain governance, including major players in the coffee value chain, of key challenges in the sector aiming to be the “first sustainable agricultural product,” and to show objective evidence on advances and shortcomings in addressing them.

For more insights from Janina’s book and research, listen in to this Evidensia podcast.

Janina Grabs
Post-doctoral researcher at ETH Zurich.

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