Discover how Ecuador, the world’s third-largest cocoa exporter, has embarked on the development of a traceability and transparency system for its cocoa industry. Learn about the challenges, objectives, and impacts achieved by the EU REDD Facility and its partner as they work to create a sustainable and accountable cocoa value chain.
Ecuador y Colombia iniciaron con el Centro REDD de la UE un diagnóstico participativo para anticiparse a las nuevas políticas y requerimientos de los mercados importadores de cacao. El objetivo es disponer de un sistema nacional de información para el monitoreo del riesgo de deforestación de las cadenas de valor del cacao.
In collaboration with the EU REDD Facility, Ecuador and Colombia started a participatory diagnosis to anticipate the policy developments and future requirements of cocoa-importing markets. The aim is to build a national information system to monitor deforestation of cocoa value chains.
I love coffee in the morning, its taste, its aroma and the boost of energy it gives me to start the day. While enjoying a fresh brew some years ago, I began to think about what was behind my morning cup – where do the beans come from? What are the landscapes where they are produced like? And who are the people that harvest this coffee?
These are questions I continue to reflect on in my work. Over the last 10 years, I have supported efforts to reduce deforestation, much of which has been driven by the production of agricultural commodities, including coffee. In my current work, I focus on finding ways to support sustainable coffee production in Vietnam.
In recent decades, the Central Highlands region of Vietnam has become the world’s main production area of robusta coffee. Major companies like Nestle, Jacobs Douwe Egberts, Lavazza, Olam and Starbucks source from this region, bringing Vietnamese coffee to supermarket shelves and cafés around the world. Likewise, national coffee companies like VinaCafe and Trung Nguyen have arisen as a symbol of the coffee-culture in Vietnam.
The transformation of the Central Highlands into a coffee capital reminds me of Colombia, my home country. In Colombia, the famous Coffee Triangle landscape experienced a boom in the production of arabica coffee at the beginning of the 19th century owing to agricultural expansion policies. Currently, the region has become the symbol of the ‘Café de Colombia’ origin certification, which is recognised as one of the best coffees in the world.
I see many parallels between the coffee stories of the two countries, and the economic, social and environmental impacts associated with coffee cultivation. The environment in the Central Highlands of Vietnam, just like in my country, is suffering from the negative effects of unsustainable coffee production. Rapid expansion of coffee crops is driving deforestation. Coffee is also spreading to areas inappropriate for its cultivation because of unsuitable soils and limited access to water. As a result, coffee farmers deplete groundwater resources and use an excessive amount of chemicals and fertilisers.
Environmental issues are mixed up with socioeconomic challenges. Despite coffee being a valuable commodity, the region has not bore the fruits of increased coffee production and has one of the highest rural poverty rates in the country. Opportunities for minority groups to benefit from the coffee trade are limited, especially for women. Between the ’70s and the ’90s, the arrival of international companies and an accelerated immigration caused by national resettlement policies, including the establishment of new economic zones and the land-use reform or “Doi Moi”, led to the boom in the price of coffee. Since then, local communities and ethnic minorities have been largely marginalised, being unable to adapt their traditional practices to the economic development of the region, due to their limited formal education and lack of capacity to adapt to the new business requirements. This gives a bittersweet taste to coffee coming from the region.
Instead of exacerbating the situation for farmers and the environment, I want my cup of coffee to contribute to addressing climate change, while leaving no one behind. But how can I sweeten up my morning cup of coffee and make it sustainable?
There is a common understanding that soil, water, forests and other natural resources are limited, and that our planet that is warming because of humans activities. Making the transition towards sustainability is therefore our duty. These efforts should involve the whole coffee supply chain – producers, traders and, of course, consumers. We all must ensure that our cup of coffee is sustainably produced. But what does than mean?
I like the definition of sustainability used by the United Nations, which includes three dimensions:
Vietnam has an ambitious agenda for transitioning towards sustainability. Among other things, the country has committed to implement an ambitious national plan to address climate change as part of its nationally determined contribution (NDC) under the Paris Agreement and has committed to the Sustainable Development Goals (SDGs). Both incorporate sustainability as an inalienable principle and include several policies and measures in the agricultural and forest sectors aimed at curbing carbon emissions and reducing poverty.
International commitments are a good starting point, but how can we implement sustainability on the ground?
A first attempt has been through certification schemes that aim to improve the environmental and social impacts of coffee production by encouraging the use of organic fertilisers, the protection of forest and biodiversity, and fair labour practices. Certification schemes for coffee were first introduced in Vietnam more than 20 years ago. Some of these schemes, including Rainforest Alliance, Fairtrade, C.A.F.E or 4C, are active in the Central Highlands. In 2019 and 2020, Vietnam was reported to be the world’s top sustainable coffee producer (GCP, 2021) with more than 360,000 tons annually, which is almost double Brazil’s and triple Colombia’s production of certified coffee.
Despite the implementation of these schemes, certified coffee remains a fraction of overall production (around 1.75 million tons in 2020), and environmental, social and economic challenges persist in the Central Highlands. Among other things, most coffee growers cannot afford the costs of obtaining certification. The premiums offered for certified coffee do not compensate for the production costs associated with meeting the standards. In fact, the labour’s wage is usually not integrated into the certification schemes.
And finally, there are difficulties in implementing the traceability systems, which track coffee beans from the plantation to the final consumer. These systems are highly time consuming to set up. But they are also characterised by low monitoring and evaluation level of social and environmental issues, such as child labour, local communities’ inclusion and compliance with regulations on the use of pesticides and other chemicals.
Although certification initiatives have helped increase sustainable coffee production and allowed consumers to recognise sustainable products, they cannot address the deforestation that occurs at the margins or outside of certified concession areas or farms. Measuring sustainability performance at subnational jurisdiction level, rather than at farm or concession level, can help achieve impact at scale while ensuring the participation of smallholders and minorities. With this orientation, stakeholders from different sectors, positions, interests and needs, including local governments, civil society organisations and companies, can dialogue on sustainable coffee production.
With a jurisdictional approach, stakeholders can measure the sustainability in an entire administrative area (province, district or others). By working at the jurisdictional level, it is possible to safeguard forests, carbon and biodiversity across the landscape, not just at farm level. Such an approach also reduces costs for groups of farmers and for small and medium agribusinesses. It further provides a strong incentive for identifying and supporting collective, joint solutions, given that failure to reach or maintain the standard impacts all actors involved. This helps to transform entire landscapes towards sustainability.
At EFI, we are testing this new recipe to promote sustainable coffee in two districts of Vietnam’s Central Highlands. It is composed of few but powerful elements:
We are developing a system to measure, track and assess the sustainability of coffee production at the jurisdictional level, beyond farms. It includes the participation of all stakeholders along the supply chain, fostering collaboration and transparency, while working to protect the forest, water and soil in the jurisdiction and improve working conditions. At the end of the day, we aim to transition the entire coffee sector towards sustainablity.
That’s the cup of coffee that I want to smell and taste.
On 2 May 2022, as part of the XV World Forestry Congress, the EU REDD Facility and RECOFTC will co-host a hybrid side-event. The side-event will show how improved accessibility and transparency of information along complex commodity supply chains can help improve governance, build trust among trade partners, and support accountability. It will explore how to achieve this while ensuring that smallholders, local communities, and indigenous peoples can benefit from international trade.
At the COP26 Indonesia Pavilion on 8 November, European Forest Institute (EFI) expert Thomas Sembres presented ideas on promoting sustainable trade through transparency and traceability in forest, agriculture commodities and trade. Speaking at the Indonesian Pavilion, Sembres made the case for raising the visibility of sustainability, and for creating more differentiation in global markets between what is sustainable and what is not. This needs to be done at scale for mainstream markets, he said, “not just for the niche markets of certified or premium products.”
While more robust traceability systems are needed as a support to more visibility for sustainability, they will not be enough unless accompanied by broader access to information, said Sembres. “Most traceability systems that exist nowadays are non-transparent traceability systems. This means that most market actors don’t have access to this information and cannot use it to promote sustainable production and trade.”
Bringing transparency to a traceability system is a delicate task, he said, with some actors fearing that more accessible information would be used against them. “At EFI we are working on this delicate task of helping governments use supply chain transparency to encourage progress towards sustainability.”
On the question of bridging differences between producer countries and consumer countries related to transparency and traceability systems, Sembres confirmed that more data was now available than ever before – but said that dialogue between market actors or between governments remained difficult. The key reason for this gap are the complexity of numerous data and traceability platforms, he said, along with distrust around the use of the data.
What is needed now, Sembres said, is simplicity and trust based on transparency and inclusive, structured and equitable processes on choice of data sources and data use. The experience of Terpercaya was a good example of how this could be achieved, he said.
“We need to build supply chains of understanding and trust. The Transparency Pathway is a way to bring public and private supply chain actors together to shift mainstream commodity markets towards sustainability.”
The EU REDD Facility has released a new Transparency Pathway Insights series, showing that supply chain and trade data can support sustainability.
The first Insight of the series explores market connections between the European Union (EU) and Brazil, Colombia and Indonesia for three major agricultural commodities — soy, coffee and palm oil.
Examining subnational data, the Facility finds that significant portions of these markets – more than half of the traded volume in Brazilian soy and Indonesian palm oil and up to 86% of traded Colombian coffee – have strong relationships with the EU market.
The scope of EU influence is even more striking when considering total traded volumes — 86% of internationally traded coffee from Colombia, 56% of palm oil produced in Indonesia and 50% of Brazilian soy.
There is now more publically available data on the trade of agricultural commodities linked to deforestation than ever before. This review of subnational supply chain data makes the case that there is significant potential for producer countries, the EU and companies in the middle to collaborate and build partnerships for a shift towards sustainable supply chains.
Know more about the Transparency Pathway.
Global supply chains are notoriously complex and opaque, making it very difficult to address sustainability issues in mainstream markets – including deforestation, sustainable livelihoods, child labour and land grabbing.
In recent years, however, there’s been a surge of global supply chain transparency instruments, data and analysis to help company and government efforts to stop deforestation associated with commodity trade. These include:
These advances in supply-chain transparency are transforming capacities to identify more systematically the greatest opportunities for action. For instance, subnational data analysis across major commodity producing countries in the tropics shows that the vast majority of deforestation linked to the production and trade of agricultural commodities occurs in a handful of places where the commodities are produced.
However, this is not where efforts to manage deforestation risks in commodity supply chains are systematically concentrated.
Traditional approaches to tracing and verifying forest-risk commodities rarely penetrate a market far enough to be able to separate the bad from the good, at scale. The bad is often kept hidden in complex and opaque supply chains. Good practices like sustainable production don’t get the market visibility they deserve, and thus often fail to receive incentives from commodity markets to sustain their efforts.
The following are illustrations of the proportion of total world production covered by a sustainability certification scheme (green) versus the proportion that concentrates 80% of commodity-driven deforestation within four global supply chains (red). These are estimations made by EFI based on various sources.
This is a situation without prioritisation of efforts, with a high disconnect between areas concentrating the highest risks and voluntary certification and verification efforts.
Clearly, the data revolution alone is not enough. Many actors are overwhelmed with information or remain unable to seize the opportunities that it can provide. Increasingly, the most significant challenge is making data useful for specific policy purposes, based on shared understanding of trusted information.
A new approach is possible: one that leverages transparency at both ends of major agricultural commodity supply chains, and that can turn policy aspirations into pragmatic measures to decouple deforestation and trade.
Our new Transparency Pathway offers a pragmatic method to shift commodity markets towards sustainability, by harnessing the potential of existing information and transparency instruments.
The Transparency Pathway is a tested method that builds on our experience in supply chain transparency in various countries. In particular, it draws on our partnership with Trase, the first initiative to unlock subnational supply chain transparency at scale in tropical countries.
The method charts six pragmatic steps designed to make collaboration between public and private supply chain actors more impactful and inclusive, while reducing costs and gaining positive visibility in global commodity markets. Incremental information disclosure is used as a mechanism to reduce information asymmetry among actors, improve governance and support increased accountability.
These steps are adaptable to the country and supply chain context, and the whole process can be applied to any measurable sustainability issue.
We have chosen to take a jurisdictional approach in the Transparency Pathway for several reasons:
Governments, supply chain organisations and anyone convening a multi-stakeholder process to improve the sustainability, governance and reputation of a sector or supply chain will find the Transparency Pathway a practical guide for harnessing the transformative potential of data.
Its principles have been informed by several initiatives supporting the sustainability of commodity supply chains. These initiatives have facilitated constructive engagement among stakeholders, and made the Transparency Pathway a tested way to inform domestic policy making, investment decisions and commodity trade.
We invite you to explore the method further – take a look at the new Transparency Pathway website and don’t hesitate to get in touch for more information.
The EU REDD Facility has published its annual report for 2020, with highlights and insights into work achieved over the year.
In 2020, COVID-19 brought unprecedented challenges for the world’s forests and the people depending on them. While some forest and agricultural sector operators and producers prioritised economic survival over environmental standards, the Facility’s partners remained committed to improving land-use governance as part of efforts to slow, halt and reverse deforestation.
The EU REDD Facility annual report highlights growing interest in supply chain transparency approaches in response to evolving market requirements. Building on progress made in tracking jurisdictional sustainability of Indonesian palm oil, the Facility worked with public and private sector stakeholders to assess feasibility of transparency approaches for cocoa sectors in Côte d’Ivoire, Ghana, Colombia and Ecuador.
The Facility’s Land-use Planner was increasingly used in 2020 by partner countries to support decision-making. An updated version of the tool brought together a wider set of information to the community of users, including land-use data, methods and case studies.
In Colombia and Indonesia, the Facility worked on community forestry as path to improving livelihoods and achieving climate commitments.
As a means of deforestation-proofing investments to leverage finance to meet climate and forest goals, the Facility continued roll out of its Land-use Finance Tool. In 2020 Cambodia used the tool to help to build the case for more international support and improve spending coherence. The Democratic Republic of the Congo also started to use the tool to track all public land-use spending since 2009.
In assessments of payment for environmental services models for progress towards sustainably produced cocoa, the Facility confirmed the importance of incentive mechanisms for covering initial investment costs of shifting to sustainable production.
This year, COVID-19 brought unprecedented challenges for the world’s forests and the people depending on them. The pandemic has had serious social, economic and environmental consequences in our partner countries. Forest-risk commodity exports decreased dramatically, jeopardising financial security in agricultural sectors. At the same time, operators and producers prioritised tactics for their economic survival over environmental standards.
