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298. What will it take for coffee farmers to make processing operations “bluer”?

2012 September 3
by Michael Sheridan

There are many water-efficient technologies currently in use by farmers selling their coffee into specialty markets.  And there are some good reasons why there is still a relatively modest embrace of those technologies.  What will it take for more farmers to “blue” their post-harvest processes?

What we think.

The barriers to adopting more water-efficient technologies in the coffeelands can be overcome by public policy and industry standards that are stronger and more clearly communicated, backed by increased financial incentives for improved water resource management and expanded access to related goods and services.

More specifically, local governments and coffee buyers can communicate more clearly to coffee growers their expectations in this area, and additional resources must be mobilized through public and private sector channels to create stronger financial incentives for smallholder coffee farmers to improve water resource management at origin, including payments for ecosystem services, new financial product development, and/or value-chain co-investment.

What we (think we) know.

Patterns of water use and water treatment in the wet milling process are shaped in large measure by public policy and private sector incentives and the availability and accessibility of related goods and services in local markets.  Sustainable solutions will require strategic public and private sector engagement to create incentives for improved performance and pathways to action.

“Positive externalities.”

Sustainable smallholder coffee agroforestry provides a bulwark against deforestation and the advance of the agricultural frontier.  Well-managed coffee agroforestry systems conserve biodiversity and generate important ecosystem benefits for downstream communities in coffee-growing watersheds: regulating the water cycle, improving recharge of local water tables, reducing soil erosion and water sedimentation, and mitigating the impacts of natural disasters.  Coffee forests also represent an important carbon sink.

Responsible water resource management in the coffee process conserves water resources, contributes to improved water quality in coffee-growing watersheds and mitigates or eliminates the impact of coffee milling on climate change.

But smallholder farmers are generally uncompensated for most of the “positive externalities” they generate when they manage their coffee under a diverse forest canopy and manage water resources responsibly.  Farmers generally have little incentive to incur the additional costs associated with more efficient milling technologies or wastewater treatment.  A sustainable solution requires wholesale changes to the incentive structure surrounding the coffee process.

Private sector – sourcing standards.

In the private sector, private voluntary certification standards and company-specific buying practices can create incentives for improved water resource management at the farm and cooperative levels.

In the case of certifications, standards for improved water resource management in coffee communities are bundled with other environmental, social and/or economic standards under leading certification schemes, including Fair Trade, Rainforest Alliance, the Smithsonian Migratory Bird Center’s “Bird-Friendly” program, etc.  Roaster sourcing standards, such as the Starbucks C.A.F.E. Practices program, can also create incentives for improved water resource management by including water-related issues in the scorecards they use to evaluate their suppliers.  When these approaches are associated with premium prices in the marketplace, they amount to an indirect payment for the ecosystem services that smallholders deliver.

The market share of certified coffees has grown significantly over the past decade, and both private voluntary standards have also proven effective in influencing company-level practices industry-wide.

But certified coffee still represents a small fraction of all coffee imported into the United States.  And the premiums neither tie performance on water resource management metrics directly to financial premiums of any kind, nor provide enough funding on their own to finance significant technological upgrades of wet-milling capacity.

Furthermore, some of the leading sustainable certifications are silent on the issues of agroforestry systems, water use, and water contamination.  In other cases, certification standards do include water-resource-related metrics, but are not specific about performance standards.

Public and private sectors – Harmonization

This comprehensive study of private certification standards conducted by the London-based International Trade Centre concludes that “there is a multitude of competing public and private standards that are rarely harmonized, and sometimes complement, but often duplicate each other.”  This “dysfunctional interplay” creates significant inefficiencies whose costs are often borne by independent smallholder farmers.  Facilitating dialogue and coordination between private certifiers and public policymakers can improve harmonization and create efficiencies that help smallholder farmers qualify for the premium coffee markets they want to access while meeting the public standards they need to achieve.

Goods and Services.

Coffee farmers will require access to an expanded set of goods and services in order to meet the water resource requirements of more rigorous public and private standards.  While new product engineering and innovation will likely be the domain of the private sector, the creation and provision of new financial services products could be performed by public or private sector actors.

Industrial engineering. If the demand for water efficient technology increases, either as a result of positive incentives (premiums, subsidies and/or payments for ecosystem services) or negative incentives (ministries that threaten to shut down mills that don’t make the grade) then there will a market opportunity for manufacturers that can develop lower-cost technologies to help smallholders improve their water management performance.

Financial services engineering.  Reducing water use and improving wastewater treatment in the post-harvest process doesn’t necessarily increase smallholder farmer incomes.  They will need expanded access to appropriate credit products to make the investments necessary to reduce the water footprint of their coffee processing operations.

 

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