How Effective is Multiple Certification in Improving the Economic Conditions of Smallholder Farmers? Evidence from an Impact Evaluation in Colombia’s Coffee Belt

Abstract

Voluntary sustainability standards (VSS) in the coffee sector have become a popular tool to improve the livelihoods of smallholder coffee farmers. As third-party and company-led VSS have proliferated, an increasing number of producer groups are turning toward multiple certification to diversify their export channels. Yet, each certification requires added efforts and expenses, both at the farm and the organisational level. Hence, it is important to evaluate the additionality of multiple certification in bringing benefits to smallholders’ farm economy. This study addresses this research gap using a sample of over 600 coffee farmers from two Fairtrade-certified cooperatives in Colombia’s coffee belt to assess the additional economic impact of Starbucks C.A.F.E. Practices, Nespresso AAA, 4C, and the combination of Rainforest Alliance/Nespresso AAA certification. In examining coffee gross profit and household income, we find limited gains from the addition of industry and company-led standards to the Fairtrade certification. Evaluating pathways to improved economic performance, gross profit improvements appear most likely if higher average prices are combined with lower production costs. Finally, we show that the majority of farmers are unable to break even, irrespective of their certification status. This alarming result illustrates the need for further intervention in the coffee value chain.

Acknowledgements

This work was supported by the Land Nordrhein-Westfalen, Ministerium für Kultur und Wissenschaft through its financial support of the research group TRANSSUSTAIN. We are grateful to comments by Bernd Schlipphak, Jan Börner, Doris Fuchs and Steve Boucher, and to Nadav Chudler for proof reading the article. We are also immensely thankful to Laura Deal for her help with the final edits and formatting of this piece.

Disclosure statement

No potential conflict of interest was reported by the authors.

Supplemental material

Supplementary Materials are available for this article which can be accessed via the online version of this journal available at https://doi.org/10.1080/00220388.2019.1632433

Notes

1. Having been conceived in a multi-stakeholder initiative as a baseline code that would allow participating farmers to slowly move up to more stringent certifications such as UTZ or Rainforest Alliance, the Code of Conduct for the Coffee Community (4C) stands out among these programs due to its comparatively low requirements. However, we still include it in our analysis as a program that may show economic additionality over cooperative-wide Fairtrade certification for two reasons: One, much of the 4C code focuses on disseminating good agricultural practices, for instance through training programs, which may lift participating producers over non-participants in terms of their yield or production efficiency. Two, it again becomes relevant as an additional access to (somewhat) differentiated markets, given the limited uptake of Fairtrade certification.

2. 4C mentions access to finance as one of the services members should have, but does not indicate how to attain it (4C Association, 2015).

3. For certified farmers, we also recorded the certification costs, which typically focused on from infrastructure improvements to the acquisition of occupational health supplies. Given the rationale laid out above, we do not include such costs in the gross profit measure, since they were one-off costs. However, in a separate sensitivity analysis we did recalculate the main economic indicators taking certification costs into consideration, and the results remained similar.

4. This is a tool developed by the Grameen Foundation and managed by Innovations for Poverty Action (IPA, 2012).

5. The STATA command teffects psmatch was chosen for the estimation of treatment effects, as it incorporates Abadie and Imbens (2016) adjustment, taking into account estimated propensity scores rather than true ones, which improves the calculation of standard errors.

6. Although the average price does not reflect the variation of prices throughout the coffee cycle, in Colombia, as opposed to other producing countries, coffee is produced during most of the year (FNC, 2010). Monthly price data for cooperative B can be found in the Supplementary Material.

7. For the ‘Rainforest Alliance’ category, we added the sales made as double-certified coffee (Rainforest Alliance/Nespresso AAA) to the sales made only as Rainforest Alliance certified, which did not meet the Nespresso AAA quality standard. Nespresso AAA requires that less than 2 per cent of coffee per batch is affected by the coffee berry borer (CBB) pest, while Rainforest Alliance has a requirement of less than 4.5 per cent of CBB.

8. At least that specific year, this cooperative had a higher share of low quality coffee than cooperative B. Descriptive statistics per cooperative, including the share of low quality coffee, can be found in Appendix B in the Supplementary Materials.

Additional information

Funding

This work was supported by the Land Nordrhein-Westfalen, Ministerium für Kultur und Wissenschaft [Project number: 005-1503-0008].