Fair Trade, Direct Trade or something else?

We've been airing our laundry in a series of explainer posts to show some of the ways the coffee trade is pretty messed up — and what we're doing about it.

For many people, one of the biggest leaps in coffee ethics has been the Fair Trade movement. Many caring people ask us, "Is your coffee Fair Trade?" People familiar with the rise of specialty coffee will also ask, "Is it Direct Trade?"

Here's our evergreen response: Those models made progress, but aren't good enough.

Why not Fair Trade?

We think that the specialty industry has correctly identified that Fair Trade isn’t really all that fair for coffee. The Fair Trade-certified price for coffee is tied to the New York Stock Exchange price for coffee and is still frequently below the cost of production for small, environmentally friendly farmers. This doesn’t seem particularly fair to us. Additionally, only the larger and more wealthy farmers can actually afford the process of obtaining a Fair Trade certification, so it often doesn’t help those most in need. We think Fair Trade has some good elements, but until it fixes these fundamental problems, we’ll keep buying non-certified coffees while paying 2-3 times the Fair Trade price.

What about Direct Trade?

We think that direct trade was a good attempt for specialty roasters to go further than Fair Trade. However, we think it’s based on incorrect ideas of how to change the ethics of coffee. Roughly speaking, here’s how we see the common idea of change for most specialty coffee roasters:

However, this theory of change mis-diagnoses both the problem and the solution in some key ways. We disagree with some of the assumptions in this model. Here are the realities we see:

 

1. The “middle-man” isn’t the problem (at least not in the way people think). Farmers generally don’t have an issue with exporters and importers making a fair margin for the services they provide (see below). Roasters often use lots of disparaging language about cutting out “middle men” in their marketing, even while all those roasters use importers/exporters.
2. Roasters control most of the profits (per kilo), and have by far the most power in the supply chain. 
3. Specialty roasters can behave even less ethically towards farmers than commercial roasters -- .
4. Just like every other profit-driven set of companies, roasters are terrible at self-governance of sustainability standards. Whether this is through lack of time, lack of knowledge, fragmentation, or corporate greed, any industry or company that claims to be regulating its own ethics (without full transparency) is usually negatively affecting the outcomes for that supply chain. This isn't our opinion, but the result of peer-reviewed researhc. New sustainability standards will generally fail to have the imagined impact because they aren’t correctly identifying roaster profit margins and outsized power as the issue. 

It ain't all bad

As is often the case when we diagnose a problem, we fail to look in the mirror — “we,” in this case, being specialty coffee people and roasters in particular. Does this seem like a massive downer? We should make clear that there are hundreds of specialty roasters worldwide who are doing genuinely great things and doing their best within the models above. There are plenty of good people running roasteries who try to pay a fair price for their coffee and are transparent about it. There are also other roasteries with interesting, innovative models and a good understanding of their place in the value chain. The point isn’t to disparage everyone with a broad brush but to add to the community of research pointing toward what we believe to be the actual systemic problems in the industry.

There are also a depressing number of specialty coffee roasters who sell coffee branded with ethical claims while using the profits to fund extravagant offices, state-of-the-art machines, fat salaries for owners and fancy company cars. We’d like to suggest that isn’t the most ethical distribution of resources when coffee farmers and workers in less developed countries are struggling to meet the cost of production and sustain their families.

What do growers think?

In our years working within coffee supply chains, we’ve talked to literally hundreds of coffee farmers. They generally feel that exporters and importers (those moving coffee around the world) are making a fair margin for the services they provide. To be clear, this isn't a scientific sampling. However, in our experience what really upsets coffee producers is NOT the middle man. Instead, it’s the roasters who buy their crops for £6 per kilo and then set a retail price at £32 while making ethical claims to justify that margin.

In a nutshell, we think it’s absolutely necessary for roasters to pay a fair and transparent price for their green coffee. But it isn't enough, if what we want is real social change. Want to read more on this? See our annual transparency report and look at what we're paying right here.