A TRUE PRICE FOR COFFEE
HOW MVO NEDERLAND IS BREAKING THE SPELL ON UNREALISTIC COFFEE PRICES Something has been brewing in the coffee industry. Farmers are structurally underpaid, while at the same time roasters have to contend with low margins, high costs, and fierce competition. Not to mention the impact coffee production has on people and our planet, for example in terms of carbon emissions, water pollution, soil erosion, deforestation, child labour, and labour migration. In an industry in which companies are not used to working together, MVO Nederland wanted to act as a lever. That is why, together with Solidaridad and over twenty Dutch coffee SMEs, we started the Futureproof Coffee Collective. Its main goal is to persuade companies and consumers to pay a different price for coffee. How? By developing a joint, open source method for calculating the true price of coffee: a price that includes the social and environmental costs.
AT A GLANCE
The Futureproof Coffee Collective aims to reveal and reduce the true price of coffee using true cost accounting. This project was launched in Colombia and Peru by more than 25 Dutch coffee companies and over ten of their trade partners.
The road to a true price tool
The first step towards a joint tool is creating the right conditions for cooperation. That means defining the challenges in the industry in detail and making sure everyone is on the same page. Meine van der Graaf, Business Developer at MVO Nederland: “We decided to start in Colombia by setting a benchmark for the average ‘true coffee price’ in that country. Together with expert organisations such as True Price, Soil & More and EY, we are working on an open source true cost accounting tool that monetises the coffee production footprint. For the first version, we selected five key indicators: living income, soil quality, biodiversity, CO2 and water use. Later in the process more variables will be added to get even closer to a true price. As we speak, four Dutch coffee companies are trialling the tool in a pilot project with their Colombian coffee farmers.”
“RIGHT NOW, FARMERS ARE PAID SO LITTLE THAT THEY CANNOT EVEN COVER THEIR PRODUCTION COSTS”
Towards a lower true price
Meine: “The true cost accounting tool points out which party in the chain should invest what to restore or prevent negative impact. We use the results to determine the ‘hotspots’: topics with a big impact on the true coffee price.” The participating entrepreneurs then address these key themes first. Their efforts will be measured to calculate their impact on the true price. “The successful cases of environmental impact reduction will prove useful in communication with both traders and consumers, persuading them to cover the remaining true costs of coffee production by paying the true price.”
Genuine will to bring about change The participating coffee entrepreneurs are very active in the project. “The enthusiasm and genuine will they show is heart-warming. You can tell they had been waiting for a way to scale up their efforts to make an impact. Everyone knows that market prices are too low. Right now, farmers are paid so little that they cannot even cover their production costs. But as a small coffee company, what can you do? You cannot make the difference alone. The Futureproof Coffee Collective brings new faith and energy to these entrepreneurs, a belief that we can change the system.”
Area Argote in Nariño, Colombia Involved Argote Specialty Coffee & This Side Up Impact 13 coffee producer families Indicators Biodiversity & Soil Quality
Since 2014, This Side Up has been purchasing directly from Argote Specialty Coffee in Nariño, southern Colombia. The farmers of Argote Specialty Coffee, in collaboration with This Side Up aim to create a agroforestry food forest system, starting with the transition from conventional to organic coffee growing. Juan Pablo of Argote Specialty Coffee has set up a central facility co-financed through the Futureproof Coffee Collective, where the farmers can jointly work on organic fertilizers and learn about true cost accounting as an impact tool. This Side Up expects to see more biodiversity, and more additional income through crop diversification and the increased quality of of the coffee.
Area La Victoria, Colombia Involved La Victoria, Simon Lévelt & The Coffee Quest Impact 25 coffee producing families Indicators Living Income, Soil Quality
Simon Lévelt and The Coffee Quest aim to improve the quality and sustainability of their coffee by switching from traditional production methods to organically certified production. Together, they provide the coffee farmers of La Victoria with training and technical assistance. The aim is to achieve a significant reduction in the invisible costs: loss of biodiversity, climate change, living income, soil quality and water use. Simon Lévelt supports farmers during this period of transition by paying an organic premium from the start of this process. The conversion from traditional production method to organic is done through investing in sustainable organic production methods such as the planting new seedlings and shade trees and the use of organic fertilizer. This organic fertilizer will lead to an improvement of soil quality.
Over 20 farmers have been involved in this conversion and are making investments in crop diversification (shade trees and additional cash crops). The coffee quest and Simon Levelt commit to monitoring the progress through the TCA method. And explore ways to communicate to the market (at the counter) what is the true price of their coffee.
Area Red Ecolsierra in Sierra Nevada, Colombia Involved Fairtrade Original, La Red Ecolsierra, Soil & More Impact 100 coffee producing families Indicators Climate change, Living income, Soil Quality
Fairtrade Original strives to gain a better understanding of the true cost and challenges in the Colombian coffee production by using the True Cust Accounting (TCA) tool. Based on these results, agroforestry activities are started and and product diversification is stimulated. To decrease the gap between the farmers' current income and the living income in Colombia, Faitrade Original will work on lowering the production costs and obtain new sources of income from beekeeping and cocoa. To anticipate and mitigate the effects of climate change, Fairtrade Original and Soil&More, invest in soil and water management, indirectly contributing to elevated biodiversity. La Red Ecolsierra invested in a biofactory, where organic compost is produced locally.
The five principles of True Cost Accounting is promoted among 25 Dutch coffee companies and various value chain stakeholders in Colombia and Peru, now connected to the experiment.
- True Price for coffee
- Need for collaboration
- Transparency and traceability
- One voice
- Immediate action
HOW IT ALL STARTED
Meine van der Graaf had been in contact with coffee companies for a while before starting the Futureproof Coffee Collective. He recalls one specific meeting that triggered him to take action. “I asked if they wanted to contribute to making coffee production more sustainable. The immediate response was: ‘that's ALL we want! But we're stuck. Stuck between sustainability goals on the one hand and the market with its ridiculously low prices on the other.’ That's when it clicked.” Soon after, MVO Nederland introduced the idea of true cost accounting, raised money and teamed up with knowledge partners to start a project. The goal was to find at least 10 SMEs to join the collective. “And here we are, with over 20 eager coffee companies. That shows how urgent the situation is.”
MVO Nederland sees a bright future for true cost accounting and True Pricing. Expansion is taking place in Colombia and Peru and as of this year we will start working with Ugandan producers to learn more about the hidden costs there and improve production and business practices where needed. Meine: “We are working with over a hundred producers and coffee companies in three countries. This is just the start. In order to really change the sector a lot more is needed. We need more frontrunning coffee companies from all over Europe to join hands. Shed light on the true cost of coffee production undo the unsustainable practices of traditional actors in the value chain.
WORKING ON A TRUE PRICE FOR COFFEE:
+100 producers have knowledge of the hidden costs of their production
TCA Tool available in English and Spanish for Peru and Colombia
+25 companies are active in the network
Start development TCA in Uganda
to bring down the true cost have started and are ongoing
1st company from outside the Netherlands has joined the network
WORKING TOWARDS THE SUSTAINABLE DEVELOPMENT GOALS:
SDG 8 | Decent work and economic growth SDG 12 | Responsible consumption and production SDG 15 | Life on land SDG 17 | Partnerships for the goals
“If we want future generations to be able to enjoy coffee too, we need to start making the coffee and tea chain fair and sustainable now. The Futureproof Coffee Collective gives us the opportunity to quantify and tackle visible and invisible problems throughout the chain, thereby contributing to a fair and sustainable chain. I believe that by joining forces we will be able to raise awareness among consumers of how underpriced their daily cup of coffee actually is.”
Milo van Velzen, Buyer Green Coffee & Tea Simon Lévelt
“True cost accounting enables you to map the value and the costs of sustainably produced coffee. That makes it a great way to describe a comprehensive business case for Colombia. MVO Nederland connects a group of pioneering coffee entrepreneurs and supports them in revealing the hidden environmental and social costs in the chain. It also encourages traders and roasters to look for solutions to minimisze those hidden costs. With MVO Nederland’s support, we're able to communicate better with customers about both the quality of coffee and the added value of a sustainable production process.”
Joel Brounen, Country Manager Colombia Solidaridad
“In 1973, Fairtrade Original was the first in the Netherlands to import coffee for which a fair price was paid. As of 2019 we're part of the Futureproof Coffee Collective. With this collective we want to take the next steps towards making the coffee sector more sustainable. MVO Nederland, thank you for this initiative and your role as a catalyst!”