SCA Publishes PCR Summary of Work and Recommendations

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Following the 2002 coffee price crisis, our industry turned to solutions focused on delivering greater value to consumers or introducing new market segments, but in hindsight, these have had a negligible impact on addressing the problem of stagnant producer income: only a tiny proportion of the increased value filters down to growers in the current model.

The Specialty Coffee Association (SCA) published a summary of work by the Price Crisis Response (PCR) Initiative, first commissioned in December 2018, aimed at understanding and addressing the 2018 price crisis affecting coffee farmers and threatening the supply chain. The project intentionally focused on identifying interventions with the most potential for long-term, systemic change, rather than a short-term fix. 

The full PCR summary of work spans over 70 pages and traces learnings from a landscape analysis, 160 industry representatives convened across four sector gatherings, 800 attendees across six PCR webinars, and over 200 specialty coffee stakeholders who requested to be involved in the peer review process.

Identifying unequal value distribution as a key root cause, the PCR summary of work identified opportunities to work towards a more equitable specialty coffee industry and issued five recommendations, including shifts in the balance of ownership, finance, risk distribution, information access, and governance.

These recommendations are the result of applying a systems change approach to the crisis, which aims to bring about lasting change by altering underlying structures and supporting mechanisms which make the system operate in a particular way. These can include policies, routines, relationships, resources, power structures, and values.

Access the full report here.

Therefore, the two main outputs for this initiative are a systems map and a set of recommendations to guide the industry towards the initiative’s vision: “A specialty coffee sector that distributes value equitably, fosters resilient coffee farming communities that are economically prosperous, and values diverse producers of differentiated coffees.”

Understanding the Systems Approach

The specialty coffee sector faces many complex, interrelated challenges, and it is clear many of the fundamental systems are entrenching inequity and unsustainable practices. 

Part of this systems work includes looking at the current structure and acknowledging the current economic model as originating in forced labor. By the end of the eighteenth century, coffee was second only to sugar in terms of the quantity of slaves used for production. This particular market structure—the Global North[1] exerting power over the trade of coffee that is produced in the Global South by artificially low-cost labor—is still reflected in the present-day market.

The consequences of low coffee prices for producing countries include the pauperization of rural communities, social unrest, domestic and international migration, abandonment of coffee growing, or even a transition to farming illicit crops. 

Currently, it is estimated that the average green coffee export value is less than 10% of the US$200 billion revenues generated in the coffee retail market. Though coffee prices have been volatile throughout the history of the coffee trade, the amount of value farmers receive relative to the total value created by the market has continued to decrease.

Systems Map

The work of the PCR Initiative was informed by systems change thinking and methodologies. A systems approach shifts the focus from individual parts of a system to how the parts are organized, recognizing that interactions of the parts are not static, but dynamic and fluid. This approach also acknowledges that change is non-linear and happens at multiple levels—from the niche to landscape-level changes—over multiple time scales.

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The alternative maps and insights that arose from this approach were synthesized into a map representative of not only the additional actors and actions identified by participants throughout the work of the PCR Initiative but also aspects of relationships between the actors that gave rise to the price crisis. These include, but are not limited to, the consolidation of power and information in the roasting and trading roles as well as the social and environmental systems that support the coffee system with water, sunlight, and other resources. 

This initial graphic (found in the report in Appendix E.1) inspired the SCA to create a systems map of its own that embraces complexity, recognizes previously invisible actors, tells multiple stories, and can be translated across the languages and cultures of the communities the association reaches.

Recommendations

Following the desk research, stakeholder interviews, four industry convenings, learnings from our peer review process, and countless hours of discussion among the group, the PCR summary of work has identified a series of recommendations, selected for their strong potential to foment long-term change in the coffee sector. 

Each recommendation encompasses years of work ahead, across multiple projects, organizations, and platforms.

  1.  Create more equitable and distributive models of governance (decision-making power) by pursuing new models of governance, resisting the hegemony of buyers, reimagining antitrust policies to protect smallholders, and strengthening producer institutions. 

  2. Enable equitable information sharing (access) by promoting and supporting new models and tools for trading practices, improving producers’ access to market information and bargaining power, and developing two-way transparency to support producer-consumer trust. 

  3. Pursue equitable risk distribution by redistributing the burden/risk of climate shocks across the value chain, supporting the development of price risk management tools and training directed at growers, and supporting the diversification of options for farmers in non-viable coffee-producing communities.

  4. Produce a collective mindset shift within the specialty sector by interpreting the coffee system as a complex value network rather than a linear supply chain, by defining “specialty coffee” to include sustainability in addition to taste/quality, and supporting education on the creation and sharing of value. 

  5. Support equitable distribution of finance and ownership by establishing new pricing norms based on dignified incomes, promoting “share of value” obtained by producers as a key differentiator and selling point, recognizing farmers’ value creation through irreplaceable service of cultivating the material upon which the whole sector depends, and encouraging business models where producers maintain ownership rights to the coffee at all stages of the value chain to ensure producers receive rewards commensurate to the rewards of brand owners.

The summary of work goes in-depth about ways of implementing each recommendation, as well as identifying specific goals, barriers to these goals, and strategies to overcome the barriers. Find the full report here.

A Role to Play: Looking Ahead

Addressing the creation and equitable distribution of value will require challenging the status quo, changing business practices, and reconsidering assumptions—something the SCA as a neutral organization is willing and able to do credibly—and socializing its conclusions and recommendations. As an industry leader with an audience that spans the coffee value chain, the SCA has a responsibility to address the price crisis and in doing so honors its commitment to living its values.

While the brief increase in coffee price levels in early 2020 brought much needed, short-term relief, none of the large-scale, systemic problems that make up the root causes of this situation have been addressed.

Today, just five countries produce over 70% of the world’s coffee. If nothing changes in the coffee industry and value chain, fewer smallholder farmers will be able to make a livelihood growing coffee and production will continue to shift to large-scale farming operations, many of which are located in these five countries. Not only will this limit the availability of particular flavor characteristics, it makes the coffee supply, and price, increasingly vulnerable to climatic and geopolitical events.

If the current scenario of low and volatile prices continues, the volume, quality, and diversity of the global coffee supply will be severely diminished. Tracing the flows of finance through the value chain finds it highly concentrated at the consumer end; this is at odds with the increasing level of risk borne by growers in the face of climate change and increased costs. Meanwhile, these untenable commodity prices are juxtaposed against a roaster and retailer sector that is thriving.

The PCR summary of work goes in-depth about implementing recommendations, as well as identifying specific goals, barriers to these goals, and strategies to overcome the barriers, with a long-term approach to shifting the entire value structure in the coffee industry.


Learn more about the work of the Price Crisis Response Initiative here, read a summary of the report in Issue 12 of 25 here, or read the full summary of work here.


References

[1] The terms “Global North” and “Global South” refer to a theoretical geographic divide (“the Brandt Line”) between more developed countries (generally located above the Brandt Line) and countries with a lower gross domestic product (per capita), which are generally located below the Brandt Line. The Royal Geographical Society has put together a one-page explanation of the topic here.