Date post: | 14-Dec-2015 |
Category: |
Documents |
Upload: | david-whitehead |
View: | 214 times |
Download: | 0 times |
Sustainable coffee contracts
Contracts as a mechanism for improving sustainability
in the coffee sector
Contracts as a mechanism for improving sustainability
in the coffee sector
Peter H. MayFederal Rural University of Rio de Janeiro
UNITED NATIONSONFERENCE ON TRADE AND DEVELOPMENT
SCI Workshop – December 8-9 2003 - Geneva
Sustainable coffee contracts
Presentation topicsPresentation topics
Sustainable development concept Challenges for the coffee production sector Research question posed by SCI participants Current standard and alternative contracts and arrangements
in the coffee sector– contract systems we reviewed– sustainability aspects they address
Potential applicability of contractual mechanisms to address sustainability in the coffee sector
Coffee sector stakeholders’ views (survey results) Possible actions to implement “S”-contracts aiming to
improve sustainability in the coffee sector
Sustainable coffee contracts
Sustainable development conceptSustainable development concept
Equity
– toward future generations
– towards the current generation Participatory processes promoted Environmental values incorporated in
economic policies
Sustainable coffee contracts
Challenges for sustainable development in the coffee sector
Challenges for sustainable development in the coffee sector
Unfavorable terms of trade Uncertainty Poor access to information Lack of capital Deficient infrastructure Inequitable social relations Environmental impacts
Sustainable coffee contracts
Research question posed by SCIResearch question posed by SCI
How can contracts be designed to ensure the economic viability of social and environmentally
adequate production practices?
Analyse standard and alternative coffee contracts and arrangements to assess the extent they contribute to enhance sustainability in the coffee sector
Suggest components of contracts for sustainable coffee production and trade involving multiple stakeholders
Sustainable coffee contracts
Contract systems reviewedContract systems reviewed
“Standard”– ECF 2002 European Coffee
Contract– Green Coffee Association
Contract – Physical coffee– “C” and “Mini-C” contracts for
arabica futures –NYBOT– LIFFE Exchange Contract nº
406 Robusta Futures– Bolsa de Mercadorias e
Futuros – B&MF (Brazil) Futures (robusta, arabica) Options ( “ “ )
“Alternative”– FLO small farm organisation
coffee standards
– FLO generic standards for hired labour
– Starbucks Preferred Supplier Green Coffee Purchasing Pilot Programme
– Utz Kapeh Code of Conduct
Sustainable coffee contracts
Standard coffee contract contentStandard coffee contract content
Volume Delivery date and port Quality parameters
– origin– classification (organic, gourmet...)– impurities
No reference to production practices or arrangements (unless organic)
Sustainable coffee contracts
Sustainability analysis of current contractual arrangements
Sustainability analysis of current contractual arrangements
ALTERNATIVE CHARACTERISTICS OF COFFEE CONTRACTS STANDARD
FAIR TRADE STARBUCKS UTZ KAPEH
DRIVERS SUSTAINABILITY DIMENSIONS
Market price and product quality
driven
Socially driven; ILO principles;
Process -oriented
Environmentally and quality
driven
Code of Conduct Eurep -GAP
SA 8000
ECONOMIC CRITERIA Qual ity and origin (Must)
Obligatory (Must)
Obligatory (Must)
Enforced (Should)
Long -term contracts No Yes Yes Yes Preferred suppliers No Yes Yes Yes
Differential pricing Product and origin related
Floor price Point system for price differential
Sustainabil ity differential
Community premium No Yes No No Advance on sales No Yes No No Coverage of certification costs No Yes No No Traceability and transparency Low High High High
SOCIAL CRITERIA Not Included (Free)
Obligatory (Must)
Included (Should)
Obliga tory (Must)
Salaries and benefits No Yes Yes Yes Labour conditions No Yes Yes Yes Living conditions No Yes Yes Yes Gender equity; respect minority rights No Yes Not specified Not specified Restriction on child labour use No Yes Not specified Yes
Dem ocracy and community self -management
No Yes Not specified Yes
ENVIRONMENTAL CRITERIA Not Included (Free)
Included (Should)
Obligatory (Must)
Obligatory (Must)
Water management No Yes Yes Yes Soil conservation No Yes Yes Yes Forests and biodiversity No Yes Yes Yes Pest control No Yes Yes Yes Energy use No Yes Yes Yes Waste management No Yes Yes Yes
EXTENT MARKET -DRIVEN High Low Medium High
Market penetration High Low
(Niche -oriented) Medium
(Brand -specific) Low/Medium
Mainstream market potentia l High Low/Medium Medium High
Sustainable coffee contracts
Potential for contractual mechanisms to improve sustainability (1)
Potential for contractual mechanisms to improve sustainability (1)
FACTORS THAT REDUCE SUSTAINABILITY POSSIBLE SOLUTIONS CONTRACTS (Applicability)
UNFAVORABLE
TERMS OF TRADE
Trend toward Decline in Prices Long-term contractsPreferential sourcing
Supply control policies
YesYesNo
Prejudicial Price/Cost Relationship
Differential prices for sustainable production
Yes
Volatility in Prices Long-term contracts
Yes
Low Value-Added
Systems of nomenclature of originSpecialty coffeesOrganic coffees
YesYesYes
Market Power Transparency along the production chain
Yes
UNCERTAINTY In production Agricultural insurance Yes
In trade Long-term contracts Yes
In supply Penalties in contract for non-supply or delay
Threat of severance of future commercial relations
Yes
Yes
Sustainable coffee contracts
Potential for contractual mechanisms to improve sustainability (2)
Potential for contractual mechanisms to improve sustainability (2)
FACTORS THAT REDUCE SUSTAINABILITY POSSIBLE SOLUTIONS CONTRACTS (Applicability)
LACK OF CAPITAL Crop conversion Preferential and differential credit for producers in process of conversion
(multilateral sources)
No
Expenses to harvest Pre-financing on the part of the importer Yes
POOR ACCESS TO INFORMATION
On the market Informational bulletin / DatabanksMarketing training
PartiallyNo
On prices Informational bulletin / Databanks Partially
DEFICIENT INFRA-STRUCTURE
Lack of resources to support production, infrastructure and
marketing
Price premium for community development
Differentiated credit lines of collective infrastructure (multilateral sources)
Yes
No
INEQUITABLE SOCIAL RELATIONS
Inadequate salaries and working conditions; sexual discrimination;
child labour
Internalization of social costs in pricingDifferentiated income and financing
policies
YesNo
ENVIRONMENTAL IMPACTS
Unsustainable production processes
Internalization of environmental costs in pricing
Differentiated financing policies for environmentally appropriate practices
Yes
No
Sustainable coffee contracts
Stakeholder feedback: most viable “S” contract elements
Stakeholder feedback: most viable “S” contract elements
Producer commitments environmentally sound management practices compliance with national labour laws
Buyer commitments for observance of socio-environmental criteria
long-term contracts preferred supplier status pay a premium
Source: Coffee sector stakeholders’ responses (20% of 65 participants in Feb.)
Sustainable coffee contracts
Steps to implement “S”-contracts in the coffee sector Steps to implement “S”-contracts in the coffee sector
Actions to implement sustainable coffee contract scheme SHORT-TERM
MEDIUM-TERM
a) Invite negotiating partners to the table IMMEDIATE
b) Achieve consensus on definition of sustainable coffee
c) Define parameters for price differentials (sustainability gradients)
d) Define long-term contract provisions and pre-harvest financing
e) Priority for purchase of sustainable coffees
f) Establish basis for third-party certification
g) Evaluate potential for a global reference label
h) Create mechanisms for traceability and transparency
i) Design and implement product delivery and credit guarantees