This essay explores the question of how digital technologies can help to solve human rights abuses in the coffee supply chain. First, a brief outline of the coffee supply chain is given as an example. Then, in a second section, the prevailing problems and hurdles in coffee production are illustrated. The third section then looks at possible solutions. Besides a brief mention of the new German supply chain law, blockchain technology is presented as a possibility for a more sustainable supply chain in the view of a human right perspective. In conclusion, the final chapter draws upon the entire topic and summarizes the discussed points.
Coffee is one of the most consumed beverages in the world and is considered one of the most important goods in world trade. Thereby, coffee is one of the most traded commodities after oil. Every year, around 168 million bags of green coffee are harvested and sold worldwide. According to estimates, there are about 12.5 million coffee plantations worldwide. A total of about 25 million people are involved in coffee cultivation, processing and trade. 74 percent of the coffee grown worldwide is exported. The largest exporter of green coffee is Brazil with a market share of 40 percent.
The coffee industry is worth 200 billion dollars. However, only less than 10 percent of the money remains in the producing countries. As the coffee industry is one of the so-called buyer-driven businesses, the difference in distribution is very strong. Smallholder farmers in particular have a small share and face particular challenges. But how can these inequalities be adjusted? How can the supply chain be made sustainable and fair?
From Production to Consumption – How Digital Technologies can help to solve Human Rights Abuses in the Coffee Supply Chain
Coffee is one of the most consumed beverages in the world and is considered one of the most important goods in world trade. Thereby, coffee is one of the most traded commodities after oil. Every year, around 168 million bags of green coffee are harvested and sold worldwide. According to estimates, there are about 12.5 million coffee plantations worldwide. A total of about 25 million people are involved in coffee cultivation, processing and trade. 74 percent of the coffee grown worldwide is exported (German Coffee Association). The largest exporter of green coffee is Brazil with a market share of 40 percent (Szeponik & Much, p. 2).
The coffee industry is worth 200 billion dollars. However, only less than 10 percent of the money remains in the producing countries (Miatton & Amado, 2020, p. 1). As the coffee industry is one of the so-called buyer-driven businesses, the difference in distribution is very strong (Blowfield, 2003, p. 17). Smallholder farmers in particular have a small share and face particular challenges. But how can these inequalities be adjusted? How can the supply chain be made sustainable and fair?
This essay explores the question of how digital technologies can help to solve human rights abuses in the coffee supply chain. First, a brief outline of the coffee supply chain is given as an example. Then, in a second section, the prevailing problems and hurdles in coffee production are illustrated. The third section then looks at possible solutions. Besides a brief mention of the new German supply chain law, blockchain technology is presented as a possibility for a more sustainable supply chain in the view of a human right perspective. In conclusion, the final chapter draws upon the entire topic and summarizes the discussed points.
The Coffee Supply Chain
The coffee supply chain is very complex. The following diagram shows in simplified form the steps coffee takes from cultivation to consumption in, for example, Germany.
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Figure 1: The Coffee Supply Chain
The first station in the coffee supply chain is the cultivation and harvesting of the coffee cherries. This step requires a lot of manual labour. Around 70 percent of this work is done worldwide by so-called smallholders with less than 25 acres of cultivated land (Vogt, 2019, p. 45). The next step is the preparation of the coffee cherry. Here, a distinction is made between dry peeling and wet peeling. In the further process, the hulled green coffee bean is exported through up to five intermediaries. The commodity traders usually trade in forward transactions, which influence the price of the crop on international markets (Miatton & Amado, 2021, p. 9). After transshipment by exporters and importers, the beans are then freshly roasted in a roasting facility in the importing country (for example in Germany). These are then either sold directly to the end customer on site or resold to retailers, who in turn sell the roasted or ground coffee in their stores, restaurants, and boutiques.
illustration not visible in this excerpt
Figure 2: The “Coffee Belt”
A large part of the world's coffee is grown in the so-called "coffee belt". This belt extends largely over the entire southern hemisphere of the earth. Coffee, on the other hand, is mainly consumed in the global north. The largest consumers are the USA and Europe. This global contrast between production and consumption leads to a certain dependence.
The psychological, biological, financial, and cultural dependence in consumer countries versus the financial, cultural and livelihood reliance on coffee within the coffee belt indicates a reciprocal dependence within the coffee trade. Dependency is a classification of poverty, yet interdependence is considered an aspect of sustainable development (Vogt, 2019, p. 43).
The dependency described above is considered one of the indicators for further problems in the value chain of the coffee industry.
Supply chain problems
The coffee sector is a workplace for a great number of people. For this reason, it is essential that the coffee industry delivers a humane and sustainable working environment. But is that the case?
Various investigations report human rights violations in coffee supply chains. Large corporations such as Nespresso and Starbucks are also affected. In 2020, for example, investigations revealed that children were picking coffee cherries on coffee plantations in Guatemala, which also supply Starbucks. This case of child labour made headlines (The Guardian, 2020). According to the report, the plantation was also part of the supply chain for Nespresso. Additionally, in 2021, it came to light that there were several violations of fair wage payments on plantations in Brazil. These are part of a pattern of violations and human rights abuses in different farms (Camargos, 2021).
The coffee sector is particularly relevant from a human rights perspective. More than 100 million people depend in some way on the coffee industry for their livelihoods (Miatton & Amado, 2020, p. 1). However, only a fraction of the 200 billion US dollars that are sold remain in the producing countries and thus with the local farmers. On closer inspection, it is even the case that despite an increasing demand for coffee, the price of coffee has fallen by 2/3 since the 1980s, which has virtually halved farmers' incomes since then. As a result, people cannot freely live their fundamental human rights. This affects education, health care and infrastructure development, among other things. In many cases, this leads to dependencies and potential exploitation of people (Szeponik & Much, p. 4). With regard to a sustainable coffee supply chain, the following relevant challenges have emerged in particular.
The social challenges include, on the one hand, the living conditions of the smallholders on the coffee plantations. They have relatively limited access to the market, to credit and to the necessary inputs. They suffer above all from low wages and price fluctuations. This often means a life in poverty. On the other hand, there is child labour. This goes hand in hand with the poor conditions of the small farmers, which means that not enough workers can be hired. As a result, the children of the family often must work on the plantations and thus do not have access to education, as they cannot go to school.
From the perspective of environmental sustainability, deforestation is a relevant challenge. On the one hand, this is to create more area for planting coffee plants, and on the other hand, the wood is used for burning. Pesticides are often used in the cultivation of coffee. A large amount of water is needed to grow and process the coffee cherries. This then often leads to the pollution of surface waters, as the water is not disposed in an environmentally sound manner (Vos, 2019).
From an economic point of view, currency fluctuations and the coffee sector's dependence on the stock market are particularly worth mentioning. This leads to instability and uncertainty in the planning horizon. As coffee is primarily traded as a commodity, it is tied to international futures markets such as the New York Stock Exchange and does not reflect the actual production costs of the individual farmer (Miatton & Amado, 2020, p. 2). Furthermore, farmers have limited market access and the work on plantations is very labour-intensive. Mechanisation of harvesting would remedy the latter in times of rising labour and production costs (Miatton & Amado, 2021, p. 3).
It is clear that producers are the weakest part of the coffee value chain. In order to improve the situation of small farmers in particular, governments and also companies need to know the conditions in production. Only then is it possible to provide support in terms of good working conditions (Deutsche Gesellschaft für Internationale Zusammenarbeit, 2021).
The German Due Diligence Law as a remedy?
The general problem in today's globally connected world is that supply chains have become far more complex and larger. The number of stakeholders and participants in a product is often very high. The problems described above can also be found in many other supply chains. Overall, traceability, visibility, security and transparency of operations are challenges in the traditional coffee supply chain (Thiruchelvam et al., 2018, p. 122). One possible solution would be a coordinated and well-functioning due diligence process that addresses the key stakeholders in the supply chain. This can include the German Supply Chain Act.
In order to increase due diligence in supply chains, the newly adopted Due Diligence Law will apply in Germany from January 2023. The law obliges companies with a workforce of 3,000 or more to ensure that their direct suppliers comply with fundamental human rights. Companies are also obliged to take action if there are obvious violations at indirect suppliers. For affected local people, the Supply Chain Act should also simplify the possibility to report abuses (klima:neutral, 2021).
However, even before the official launch of the law, it is apparent that the responsibility within the supply chains is still relatively undefined, even by the law. There is also criticism for the fact that many of the violations occur at the beginning of supply chains and are not covered by the law. Additional solutions may therefore be necessary to sustainably increase transparency and accountability in supply chains and to highlight abuses.
In the search for a solution for more transparency and traceability in the supply chain, one comes across digital innovation opportunities. Blockchain is one of them. But how can digital innovations contribute to solving the irresponsibility in supply chains? To what extent can human rights violations be prevented?
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- Quote paper
- Maximilian Scheller (Author), 2022, Using Blockchain for a More Sustainable Coffee Supply Chain. A Human Rights Perspective, Munich, GRIN Verlag, https://www.grin.com/document/1359349
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