Sustainable Coffee Trade

The document analyzes the sustainability challenges of the coffee sector, such as declining prices and environmental degradation, and evaluates how different contracting systems can address these issues. It compares conventional contracts with alternative models like Fairtrade (FLO), Starbucks' Preferred Supplier Program, and Utz Kapeh, concluding that while contracts cannot solve macro-economic crises, they can improve producer stability through long-term agreements, price differentials, and preferred supplier status.

• The coffee sector faces severe economic sustainability challenges, with producer prices dropping 70 per cent since the 1980s, from US$1.20 per lb. to approximately US$0.50 per lb. in 2002.
• Environmental sustainability is threatened by a shift from traditional shade-grown coffee to 'sun' or 'mono-culture shade' systems, which has reduced carbon stocks by 30 to 50 per cent in Latin American plantations.
• Conventional coffee contracts primarily focus on product quality and marketing functions, generally disregarding the production and processing methods essential for sustainable development.
• The Fairtrade (FLO) system provides the most direct economic benefits to producers through a mandatory floor price and a US$0.05 per lb. premium when market prices exceed that floor.
• Starbucks' Preferred Supplier Program uses a point-based system to offer price incentives up to US$0.10/lb. for sustainable practices, finding that 'preferred supplier status' is a stronger driver for producer adoption than the premiums themselves.
• The Utz Kapeh model is more flexible and market-based, recommending rather than requiring sustainability differentials, which makes it more vulnerable to the under-pricing of sustainable practices.
• A primary obstacle to integrating sustainability into mainstream contracts is the gap between consumer 'willingness to pay' in surveys and actual market behavior, as consumers often opt for the least expensive product.
• The authors identify several promising contractual tools to improve producer stability: long-term agreements (at least one harvest cycle), 'price to be fixed' (sellers call) contracts, and preferential supplier status.
• While contracts can improve individual relationships, they cannot resolve macro-economic issues such as the global coffee oversupply crisis.

APA

May, P. H., Mascarenhas, G. C., & Potts, J. (2004). Sustainable Coffee Trade. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/sci_coffee_contracts.pdf

Chicago

May, Peter H., Gilberto C.C. Mascarenhas, and Jason Potts. Sustainable Coffee Trade. International Institute for Sustainable Development, 2004. https://www.iisd.org/system/files/publications/sci_coffee_contracts.pdf.

Wikipedia

{{cite report |last1=May |first1=Peter H. |last2=Mascarenhas |first2=Gilberto C.C. |last3=Potts |first3=Jason |title=Sustainable Coffee Trade |publisher=International Institute for Sustainable Development |date=May 2004 |url=https://www.iisd.org/system/files/publications/sci_coffee_contracts.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{may2004sustainable, author = {May, Peter H. and Mascarenhas, Gilberto C.C. and Potts, Jason}, title = {{Sustainable Coffee Trade}}, institution = {International Institute for Sustainable Development}, year = {2004}, month = may, url = {https://www.iisd.org/system/files/publications/sci_coffee_contracts.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }