Sustainability, tropical commodities and certification Sustainable Materialism Symposium Sydney Network on Climate Change University of Sydney, November 30th, 2012

Jeff Neilson School of Geosciences University of Sydney

Certification schemes in the coffee and chocolate sectors

Growth in 3rd part certified coffee › Consumer demand rising by 20-25% a year as opposed to just 2% in the conventional market (Giovannucci, 2010). › Certified coffees were just 1% of market in 2001, 8% by 2010 and predicted to be 20% by 2015 (Pierrot et al. 2010).

› Nestle: an additional 90,000 MT of Rainforest Alliance certified coffee will be sourced by 2020 › Sara Lee: by 2016, they will purchase at least 350,000 tonnes of UTZ certified coffee › Mars: by 2020, all their global cocoa supplies will be sustainably certified › UTZ certified, Rainforest Alliance and FLO have all declared their intentions to rapidly increase the amount of coffee they certify: UTZ, to 1.3 million MT by 2020; FLO, to 500,000 MT by 2015; and RA, to 750,000 MT by 2020

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Growth in Certification – Kraft‘s coffee products Rainforest Alliance certified coffee purchased by Kraft after 2003. Kraft = the world‘s largest buyer of Rainforest Alliance Certified coffee.

2011 announcement: by 2015, all European coffee brands will source 100% of their coffee from ‗sustainable sources‘ › Source: http://www.kraftfoodscompany.com

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Certification as defensive brand management?

Sustainability of ......... Supplies?

A view of certification from the South

› ―some German trade interests with the blessing of the coffee roasting majors developed what would be for them a largely painless, costless social and environmental initiative that would have the combined effect of blunting NGO criticism, salvaging a damaged reputation, and transferring the entire responsibility of operating this initiative to the hapless producer while at the same time keeping their own costs and bottom lines intact.‖ (Menon, 2005: 3).

An editorial in the Planter’s Chronicle, the leading industry journal for the Indian coffee sector.

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On-farm biodiversity in the Western Ghats, India › Picture of Kodagu forests

Source: Neilson et al., 2010

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Deforestation in Indonesia

Source: Neilson et al., 2010 9

Groundwater depletion in Vietnam

Source: Neilson et al., 2010

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Supply chain changes driven by certification Traditional supply chain

Organic supply chain in Aceh

Farmer

Farmer

Collector

Collector Cooperative

Trader

Trader

Coffee Mill

Coffee Mill

Penetration of multinational capital into the rural South

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Who bears the costs of certifcation? Practice Change

Auditors Administration and traceability

Inefficient Cooperatives

Are price premiumsabsorbed by higher transaction costs along the supply chain? 4.5

Price (USD/Kg GBE)

4 3.5 3 2.5

Farmer price Export price

2 1.5 1 0.5 0 Lampung (75%)

Aceh (63%)

Toraja (83%)

Data Source: Arifin, Neilson et al. (2008)

Assessing farm-level effects of certification in Indonesia › Farmer survey tool assessing ‗sustainability‘ indicators at the farm-level › Comparisons between target groups (certified farmers) and control groups (uncertified) › Adaptation of the COSA methodology (Committee on Sustainability Assessment) › Case-studies across cocoa and coffee farmers enrolled in various sustainability initiatives (Rainforest Alliance, Utz Certifed, Common Code for the Coffee Community)

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Preliminary results from 2012 farm survey in Indonesia

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Concluding thoughts › Certification as ‗post-sovereign environmental governance‘ (borrowing from Karkkainen, 2004)

› The need to present clear signals to consumers through standard-setting processes, verification systems and labels necessarily results in a simplification of the environmental challenges being faced in producer regions. › Extra-territorial systems of environmental governance, orchestrated by downstream, branded manufacturers under the umbrella of schemes like 4C and Utz Certified risk divorcing environmental management decisions from the place

› Supply chain traceability systems addressing sustainability issues at sites of production have followed in the wake of similar systems designed to address food safety issues following widely-publicised food scares in the 1980s and 1990s. As such, buyer-driven sustainability schemes are ultimately intended to benefit the same citizenry—consumers—if not for the sake of their physical health, then for their ethical consciences. e-specific contexts of local agro-ecological problems. › By definition, both firm-based codes of conduct and collective industry standards are designed to meet the needs of their intended beneficiaries – the companies who are beholden to them. The reactive nature of recent certification schemes, driven by corporate concerns over brand reputation, leads to serious questions over their ability to make a positive difference in the producing communities they are ostensibly supposed to be benefiting. The background presented here on the evolution of a collective industry code for coffee leaves the 4C initiative, at this stage of its development, open to allegations of regulatory capture by corporate interests. Furthermore, the potential disempowerment of local communities may have unintended, yet severe consequences for the economic and environmental conditions of production. For the Indian coffee sector, consumer-led certification initiatives as typified by the 4C are perceived as being emblematic of a form of economic and political imperialism in which the claims of social and environmental sustainability by (non-Western) producers are rendered subservient to those that fit within the audit culture mentality of Western corporate models.

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Publications › The material for this presentation was based on the following published research papers, combined with an ongoing ACIAR-funded research program in Indonesia: › Neilson, J. and Pritchard, B (2007). Green Coffee: The contradictions of global sustainability initiatives from an Indian perspective, Development Policy Review 25(3), 311-331. › Neilson, J. (2008). Global private regulation and value-chain restructuring in Indonesian smallholder coffee systems, World Development, 36 (9), 1607-1622. › Arifin, B., Geddes, R., Ismono, H., Neilson, J. and Pritchard, B. (2008). Farming at Indonesia‘s forest frontier: Understanding incentives for smallholders, Australia Indonesia Governance Research Partnership Policy Brief No. 6, Crawford School of Economics and Government at ANU, Canberra. › Neilson, J., Arifin, B., Gracy, CP., Kham, TN., Pritchard, B. and Soutar, L. (2010). Challenges of Global Environmental Governance by Non-State Actors in the Coffee Industry: Insights From India, Indonesia and Vietnam. In Agriculture, biodiversity and markets: Livelihoods and agroecology in comparative perspective (Lockie, S and Carpenter, D eds), Earthscan, London. 175-200

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