Social Responsibility in a Cup

 Last week I talked about coffeehouses and how they invite social discussion. They are places of debate and homes to social movements. So, doesn’t it make sense that the shops sell products that make a social statement? Enter fair trade coffee.

Fair trade is a practice that originated in the Netherlands that focuses on providing economic stability to developing countries and goods producers. By definition, fair trade is, “a trading partnership, based on dialogue, transparency and respect, that seeks greater equity in international trade. It contributes to sustainable development by offering better trading conditions to, and securing the rights of, marginalized producers and workers.”

Fair traded coffee was introduced in 1988 in response to a coffee crisis. It was the first agricultural good to be labeled fair trade. In 1988, there was an extremely high supply of coffee and little demand for it. Because of this, coffee producers had to sell their beans for next to nothing.

To address this pricing issue, the Fairtrade Labeling Organizations, FLO, was created to implement a purchasing model for coffee. The American leg of this organization, Fair Trade USA, helps regulate the fair trade process in the US. In order for coffee to be labeled fair trade, it must be purchased through FLO’s model.

So, what is this model? Before the FLO existed, there wasn’t a price floor when importers came to purchase coffee. FLO set a floor to ensure that the producers would start to see better returns. The purchasing process involves cooperatives representing various small farmers from different regions in the country. The co-ops meet with the importers and try to obtain the highest bid. As stated previously, there is a minimum price floor, so as of now, the coffee can’t be sold for anything cheaper than $1.40 a pound.

The FLO is good for the farmers in the sense that it provides consistent price points for the coffee, but the process does still contain some overhead, such as marketing costs. If this overhead creates a deficit, then farmers start receiving lower prices for their beans.

Another potential problem with this method is that it has shown consistent signs of building economic stability in the developing countries. In order to work with a cooperative, a farm must be deemed small and it can’t have any full-time employees on staff. This eliminates some farms from participating in fair trade. The Stanford Social Innovation Review went more in-depth on these issues.

Also, fair trade coffee doesn’t hold a large market share in the US. In fact, it  only makes up 4% of the US coffee market.

With that being said, the demand for socially responsible goods is on the rise in the US, and this includes fair trade coffee. Major corporations such as Starbucks, Peet’s Coffee, and Greenhouse Coffee sell fair trade coffee, and they make this known through promoting it on its websites.

There has also been a rise in a practice called direct trade. This is when the importer meets with the farmers directly and purchases the beans without working through a cooperative entity. Direct trade allows for relationships to be built between importer and exporter, and it cuts out any potential overhead created by a middleman. It allows the farmers to sell the beans for a very competitive price.

Whether is fair trade or direct trade, the socially responsible coffee movement is growing. So, the next time you’re sipping an espresso, think about what that drink stands for.