True Price: How much do you think your coffee cost?
The Solidaridad Network, along with the SAFE Platform and True Price, just published the report “The True Price of Climate-Smart Coffee”. The video highlights some ideas within the report that will make us think twice whenever we buy our next cup of coffee.
True Price: How to Mitigate the Impact of the Crisis of Coffee Prices onto Smallholder Farmers
The coffee sector needs to move from a purely compliance-driven approach to a more cost-benefit one, that includes a full assessment of externalities to improve the targeting of investments in sustainability, stated a last report on true price for the Colombian coffee elaborated by Solidaridad and True Price organization with the support of SAFE Platform and the Global Coffee Platform.
The international coffee price crisis is affecting the livelihood of thousands of smallholder farmers in the producing countries. Furthermore, the climate change impacts the productivity of the plantations, putting their profitability under severe pressure. Both singularities, that are seriously affecting the living conditions of communities, can be addressed by the implementation of a Climate Smart Agriculture (CSA) approach that allows the farmers to restore the profitability to healthy levels and to minimize hidden or external cost in the coffee production.
This is one of the main conclusions presented in the last Solidaridad report: The True Price of Climate Smart Coffee. Quantifying the potential impact of Climate-Smart Agriculture for Colombian Coffee.The research is based on primary data collected from a group of 60 smallholder farmers in the department of Cauca, who apply a set of sixteen CSA practices such as:
- Increased density of coffee trees per hectares;
- Planting of shade trees in order to reduce soil erosion;
- Better use of fertilizers to diminish greenhouse emissions;
- More efficient post-harvest processes to reduce water use and water pollution, among others.
The true price is understood as the market price of a product plus the social and environmental external costs (i.e. social security, occupational health and safety, water and scarce materials use, water pollution, climate change, among others). The report aims to assess the true price of producing CSA coffee in Colombia in order to help making the coffee cheaper to society and profitable to the farmer and to the all players across the supply chain, by decreasing the true price to the same level as the retail price as much as possible.
“Calculating the true price can help manage risks, steer innovations, and reduce social and environmental costs by improving transparency throughout the supply chain of a product. The final goal is to realize affordable and sustainable products: products with a low true price”, stated Joel Brounen, country manager of Solidaridad in Colombia and one of the authors.
Main Findings: CSA coffee is more profitable for smallholder farmers
In the study, the true price calculation included eight environmental externalities in scope (climate change, air pollution, water pollution, soil pollution, land use/transformation, energy, water and scarce materials use) and three social externalities (underearning of smallholder farmers, underpayment and lack of social security of hired workers, and occupational health & safety). Additionally, the impact of soil degradation was explored.
After the analysis of these externalities that impacts the final price of coffee, the report found two mains results:
- The external costs of CSA coffee are lower than conventional coffee:
The researchers found the environmental external costs and the social external costs are lower in the production of CSA coffee than in conventional. While the external costs of CSA coffee are USD 2.00, the average costs of produce conventional coffee in Cauca is USD. 2.55
“CSA is more sustainable than the conventional production model, it helps smallholders to earn a more decent livelihood and it is feasible for producers to implement”, highlighted the report.
- Investments in CSA have a positive Return on Investment (ROI) and true ROI
The report argued that the investment in CSA pay back well, but the initial expenditure might be challenging for smallholder entrepreneurs. Accordingly, even if CSA is more profitable and more cost-effective, some support to the farmers is necessary.
For more information on futher actions taken by GCP and its Members, check our latest call to action to collectively address the price crisis.