A newly published Coffee Barometer 2023 report produced by Ethos Agriculture has deemed ‘sustainable coffee’ as used in the coffee sector as currently “nothing more than an illusion”. According to the report, the multifaceted challenges prevailing in the coffee sector especially in producing countries make it difficult to recognize the sector as sustainable.
According to the report, price volatility and increasing production costs as a result of higher fertiliser and labour costs are putting undue burden on coffee farmers who are earning low incomes and struggling to increase production. Additionally, the worsening climate change impact threatens future coffee production to meet future demand and consumption. Due to the burgeoning climate change, significant arable lands used for coffee cultivation are projected to become unsuitable by 2050. It is estimated that climate change has the potential to reduce global Arabica and Robusta coffee production by 45.2% and 23.5% respectively. These range of factors put the coffee sector in a “state of crisis” far from being sustainable.
Declining coffee production against increasing consumption
The coffee industry holds significant prospects in driving greater economic value in producing countries considering the high global demand and consumption of the commodity. However, production challenges put the sector in a precarious situation to be able to meet growing demand and consumption.
According to the International Coffee Organisation (ICO), global coffee production in the 2021/2022 period stood at 168.5 million 60kg-bags, which marked a 1.4% decrease year-on-year due to the off-biennial production and negative meteorological conditions in a number of producing countries. Coffee is produced in over 50 countries. Largest share of global coffee production about 48% comes from South America. Brazil remains the largest producer of the commodity accounting for 40% of the global production in 2022, with Vietnam contributing 20% as the second largest global producer. Africa contributed 11% of the global production in 2022 with Ethiopia and Uganda being the first and second largest producers respectively.
Chart source: Coffee Barometer 2023
Coffee is consumed across the globe. In the 2021/2022 period, global consumption of coffee increased by 4.2% to 175.6 million bags, following a 0.6% rise in the previous year. Globally, Europe is the largest consumer of coffee (31%) followed by the Asia and Pacific region (25%) and North America (18%). Africa consumes 8% of global coffee.
Global consumption of coffee is projected to grow but at a decelerating rate of 1.7% to 178.5 million bags for the 2022/2023 period due to the sharply rising cost of living. The world coffee market is set for another year of deficit due to increased global fertilizer costs and adverse weather conditions expected to affect global coffee production.
Unfavorable living income for coffee producers
Coffee is produced across 12.5 million farms worldwide, with about 95% less than 5 hectares and 84% less than 2 hectares. According to the Coffee barometer report, many coffee farmers especially in countries with less competitive production standings continue to live in poverty and precarious living conditions. Although the concept of living income has in recent times gained a lot of traction in the sector’s sustainability discussions and forums, net annual incomes from coffee farming fall below living income benchmarks in many producing countries.
Analysis of net annual incomes against living income benchmarks across 10 countries revealed that in 8 out of the 10 countries, average coffee incomes fell below or at the poverty line. Whilst Brazil emerged as the only country with average net coffee income above the living income benchmark estimates, Uganda had the largest gap to living income with an average income of $88 per year against living income range between $2,000 to $6,000.
Additionally, the report revealed that a significant number of coffee farm workers in producing countries receive low wages which make it difficult for them to meet their fundamental needs. Male workers earn higher than their female counterparts who constituted nearly half of the total employment in the sector.
Chart source: Coffee Barometer 2023
Limited voluntary sustainable strategies and reporting
In an assessment of sustainability strategies and reporting of major global coffee roasters and retailers, the report identified that although many companies have “overarching sustainability strategies that outline their specific thematic commitments, they often lack comprehensive, tangible, measurable, and time-bound goals, and objectives”. The report found that many companies had little evidence to show and hardly provided adequate information on their efforts in addressing sustainability risks such as human rights risks, climate change and other issues such as trading practices, responsible sourcing, fair price setting, and farmers’ living incomes in the supply value chain.
“…it was striking to discover the widespread lack of transparency coupled with inadequate disclosure. For instance, despite the well-established presence of voluntary sustainability initiatives in the coffee sector, the procurement of certified coffee appears to stagnate. It has also been clear that the implementation of VSS, in isolation, lacks the potency to foster an alternative that economically benefits producers, upholds workers’ rights, and addresses climate change adaptation” the report stated.
These myriads of challenges undoubtedly mar the sustainability of the coffee sector. Recognising and tackling these fundamental problems in the sector is necessary to transform and enhance the sustainability of the coffee sector.
According to the coffee barometer report, whilst notable legislations such as the new EU Deforestation Regulation (EUDR), Corporate Sustainability Reporting Directive (CSRD), the Forced Labour Regulation and the Corporate Sustainability Due Diligence Directive (CSDDD) are critical to enable progress towards sustainable coffee, they need to champion and advance the wellbeing of smallholder coffee farmers which should be the “paramount concern of the coffee sector as a whole”.