This is the fourth part of a five-part series comparing three alternatives to the traditional coffee market for the socially responsible consumer: fair trade, direct trade, and Starbuck’s C.A.F.E. program.
Part one explained why fair trade emerged as an alternative to the traditional coffee market. Part two explained fair trade certification and addressed several criticisms that have been made against it. Part three explained what direct trade coffee is.
Starbucks buys more fair trade coffee than any other roaster, purchasing 18 million pounds in 2006 and 20 million pounds in 2007. However, these figures represent only 6% percent of the company’s total green (unroasted) coffee purchases for each of the past two years. By contrast, the company has dramatically increased purchases of coffee grown by producers who adhere to its own "Coffee and Farmer Equity" (C.A.F.E.) standards. In 2007, Starbucks bought 65% of its coffee from C.A.F.E. approved suppliers, and the company intends to increase that amount to 80% by 2013.
What are C.A.F.E. standards?
According to Starbucks’ 2007 Corporate Social Responsibility Report, C.A.F.E. standards focus on four areas: product quality, economic accountability, social responsibility, and environmental leadership.
Requiring participating farmers to produce high coffee quality is one factor that differentiates the C.A.F.E. program from fair trade, which focuses on social and environmental responsibility alone. In this regard, Starbucks is similar to small direct trade roasters in the premium coffee market.
Economic accountability means that all C.A.F.E. coffee purchases must include transparency to the level of the farmer so that contracts clearly reveal what share of the price goes to the farmer and what share goes to other "middlemen" such as exporters. In 2007, Starbucks paid an average $1.43 per pound for its coffee, which was 29 cents over the "C" market price paid on the traditional coffee market. The amount paid to individual farmers varies according to differences in coffee quality, delivery structures, and production costs from one region to another. One difference between C.A.F.E. practices and fair trade is that fair trade publishes a minimum price that all qualifying farming cooperatives will receive, whereas Starbucks does not publish a minimum price. In some regions, such as Latin America where the C.A.F.E. program is firmly in place, Starbucks pays its farmers well. However, in other regions, such as East Africa, this has not been the case; the company is aware of the need to expand its C.A.F.E. practices and improve oversight of their implementation.
Social responsibility means that C.A.F.E. suppliers must protect workers’ rights. For example, participating cooperatives or plantations must pay workers at least the minimum wage and provide safe working conditions. Child labor, forced labor, and discrimination are prohibited. The social responsibility standards cover access to health and education and protect freedom of association, including the right to join a union.
Environmental responsibility means that suppliers must manage waste, protect water supply and quality, and conserve energy. Farmers must protect the local ecosystems through use of shade and limiting their use of agrochemicals.
These standards are broken down into measurable criteria and over 200 published indicators that are used to evaluate suppliers according to a three-tiered point system. Participants that achieve a score of less than 60% in each of the social and environmental areas are designated as "verified suppliers." "Preferred suppliers" achieve scores of 60%-79%, and "strategic suppliers" achieve scores of 80% or higher. This is an incentives-based system in which farmers are rewarded for achieving higher scores.
Is this Independent Verification?
Are the standards used to evaluate the company’s performance developed and applied by the company itself or independently verified as is the case with fair trade labeling?
Starbucks has included independent stakeholders in the development of the standards and their application in the field. They contracted with Scientific Certification Systems (SCS), an independent certification and auditing service for agricultural products. In order to create C.A.F.E. standards, SCS got input from coffee suppliers, Fair Trade, the Rainforest Alliance, and Conservation International. However, SCS does not directly verify or inspect plantations to determine whether they are in compliance with C.A.F.E. standards. According to a November, 2007 investigative report in the Sacramento Bee, it is common practice for plantations to hire companies that carry out the verification process. In Wrestling with Starbucks, Kim Fellner reported that the Rainforest Alliance provides many of Starbucks’ verifiers. In any case, SCS is responsible for providing oversight, training, accreditation, and auditing of verification organizations in order to ensure that the inspectors in the field are doing quality work.
Criticisms of C.A.F.E.
One criticism that has been leveled against Starbucks is that it is not producing enough fair trade coffee. As noted above, although the company is the largest purchaser of fair trade beans, the percentage of fair trade coffee that it buys has remained steady at 6% the past two years. Why is that figure not increasing?
One reason is that some cooperatives that qualify for fair trade certification do not fulfill Starbucks’ C.A.F.E. requirements. In a response to questions that I sent via email, Nicole Fallat, a spokesperson for Starbucks, replied that unlike fair trade, C.A.F.E. includes standards for coffee quality. Moreover, whereas fair trade requires economic transparency down to the level of the cooperative, Starbucks would like fair trade to extend transparency to the level of the individual farm.
A second reason that Starbucks is not expanding its fair trade more rapidly is that it buys much of its coffee from farms that are too large to qualify for fair trade certification. Fair trade currently certifies only small coffee farmers who belong to cooperatives. C.A.F.E. verification is open to all farms regardless of size.
Finally, Starbucks’ most recent Corporate Social Responsibility report stated that the company’s purchase of fair trade coffee has kept pace with consumer demand. This may indicate that the company’s decision about how much fair trade coffee to buy is related to how quickly consumer demand for fair trade grows.
The above-mentioned Sacramento Bee report raises a second criticism of Starbucks—that their actual practices in some regions do not live up to C.A.F.E. standards. The report identifies a plantation in southwestern Ethiopia, the Gemadro Estate, which produced one of Starbucks’ premium "Black Apron Exclusive" coffees. This coffee was packaged with a flier which claimed that the Gemadro Estate was maintaining "the highest standards of social and environmental stewardship." However, Tom Knudson, the author of the article, reported that workers were being paid as little as 66 cents a day, an amount considered by the U.S. State Department to be below a livable wage. Knudson also learned that workers were housed in rusty metal shacks and that the conservation practices of the estate came up short, using non-native trees that would change the composition of the native ecology within a rapidly shrinking rain forest.
Knudson’s article identified the point at which the C.A.F.E. program broke down in this case. The plantation hired an Africa-based company to do the inspections for C.A.F.E. verification, and SCS did not properly oversee the verification. Ted Howes, vice president of corporate social responsibility for SCS, admitted that the inspection was inadequate, and after Knudson inquired about the verification process, the inspector was fired.
In its 2007 Corporate Social Responsibility Report, Starbucks stated that the company would be evaluating data "to understand regional differences, where improvements or more training and support are needed, and how best to continue expanding C.A.F.E. Practices in East Africa and Asia Pacific." I asked Nicole Fallat if this goal is related to the problems in Ethiopia cited in the Sacramento Bee report. While she did not address the specifics cited in the article, she did respond that Starbucks intended to double its purchases from East Africa from 2006 levels by 2008 and that Ethiopia would play a significant role in that. The company intends to open Farmer Support Centers in East Africa by the end of 2008, and according to Ms. Fallat, these centers will be "integral to successfully implementing C.A.F.E. Practices in the region." The company appears to be aware that while its C.A.F.E. program has achieved success in places like Costa Rica where it was initially developed, challenges remain in the less developed, more remote regions of East Africa.
A key issue is whether Gemadro was an isolated case or reflective of systematic problems with C.A.F.E. practices. Knudson reported that Dennis Macray, Starbucks’ director of corporate responsibility, commented that the sorts of problems Knudson identified at Gemadro, "can happen in any kind of a system." Some activists may maintain that because Starbucks employs SCS to monitor verification, the independence of the process is compromised and, therefore, cannot achieve the same degree of consumer confidence as fair trade certification. However, as we pointed out in an earlier article, mistakes are made within the fair trade certification process as well. It does seem to be the case that there will be abuses in any system that attempts to monitor social and environmental responsibility on farms in remote regions. As with fair trade, on the whole, C.A.F.E. practices are a vast improvement over the traditional coffee market.