Henry Duckworth: Co-Founder and CEO of Agridex.
From commodity to luxury, Europeans consume a significant proportion of the global supply of coffee. Some European countries, like Finland, go so far as to ensure that employees have two 10-minute coffee breaks during the workday. Such measures underscore profound differences in workplace ethos globally.
Smallholder farmers face unique challenges in the global market.
Contrary to common knowledge, smallholder farmers with less than five hectares produce 60% of the global coffee supply. Despite this, their yields are modest, often around 500 to 1000 kg/ha/year of coffee beans. For context, consider that 2 to 3 kg of coffee per year per person is consumed in Poland and is as high as 12 kg per person per year in Finland. To sum up, the EU relies on the hard work of smallholder farmers to provide a treasured commodity: coffee.
As Europe is one of the largest consumers of coffee, attempts to mitigate forest degradation or illegal deforestation for coffee farming and other products, like soybean, palm oil and cattle, are unsurprising. The world has lost approximately 420 million hectares of forest in the last 30 years, a statistic that underpins the rollout of newly revised climate-driven regulations across the EU and the U.K. As stated in the EU revision, the Common Agricultural Policy (CAP) claims to be “a modernised policy, with a strong emphasis on results and performance.”
In a recent study published in 2024, researchers meticulously mapped small-scale cropland locations and the distribution of coffee in the Democratic Republic of Congo. The study covers a vast tract of Africa spanning nearly two decades, from 2001 to 2020. It establishes small-scale cropland as the primary driver of forest loss in Africa.
Yet, the rollout of new regulations across the EU and the U.K. could end up hurting smallholder farmers and may not achieve the desired effect of reducing deforestation. Rules meant to provide transparency can disadvantage these farmers, effectively limiting their access to participate in the global supply and trade of coffee. For coffee consumers, this may have ripple effects on prices, but not for reasons one may initially think. As The Economist describes it, the new regulations could have unintended consequences and a “do-goodery risk.”
Equitable access for smallholder farmers can help keep prices fair.
Ethically sourced coffee has been an underlying proponent of the Fair Trade Agreement, encouraging direct trade between suppliers and buyers and ensuring labor rights for vulnerable populations. On the flip side and at its heart, the revised CAP is meant to protect what forests remain. As pitched, I think CAP should incentivize more sustainable practices, such as improving crop yield alongside biodiversity rather than clearing forests for agriculture expansion. But is this a means to a better end? And if so, for who?
If smallholder farmers can no longer participate in the supply and trade of coffee with one of the largest consumers, then it’s only natural for large-scale farms that can comply to step up and meet market demands.
While this may not be what the CAP intended, the current situation requires a closer investigation. For example, if small farmlands eventually become acquired, the lost labor opportunities for small-scale agriculture production will influence many rural Africans, affecting their livelihood. Whether there is an unintended risk of enabling a more centralized market to form is unclear. Should such a case unfold, economic principles dictate that market demand no longer sets prices but becomes regulated by a few large players.
Businesses can play a role in helping farmers.
So the question remains: If we want to maintain an open and competitive market where supply is decentralized and livelihoods maintained, then how can we, as business leaders, help smallholder farmers compete on equal grounds?
There is a need for solutions that reduce costs for both small and large suppliers, as well as support smallholder farmers in meeting and disclosing the stringent sustainability standards required by European markets.
Business leaders aiming to create new solutions and support farmers should start by understanding the core challenges farmers face and considering how technology can help solve them.
As the co-founder and CEO of a digital marketplace, looking to bring agricultural commodities onto the blockchain, I think it’s important to recognize that blockchain technology can create opportunities for independence and autonomy, especially on the supply side. Blockchain enables transactions to settle almost instantly, with minimal fees, giving farmers better access to markets, increased transparency and faster access to capital. This flow of resources can create positive ripple effects on the consumption side as well, enhancing market efficiency.
I suggest leaders focus on educating themselves and their teams on any new technologies and their real-world applications. Before diving into blockchain or any other trendy solution, business leaders must ensure that they are addressing a real, tangible problem.
The lesson here is that innovation must be driven by the problem you aim to solve, not the desire to simply implement the latest technology. Business leaders in this space should prioritize understanding the needs of farmers and how technology can empower them, rather than focusing solely on the tech itself.
When ethics hang in the balance, price wins trade.
Ethical consumption through a field experiment on Fair Trade coffee purchases in German supermarkets showed that a 20% price cut, rather than an appeal to morals, significantly increased Fair Trade coffee sales. The study results show that while people may claim to support ethical products, their actual buying behavior often suggests otherwise.
Considering these study results, one can appreciate the long-term vision of European initiatives and attempts to preserve forests and biodiversity. I believe European incentives and mandates would benefit if aligned with a means to maintain open trade, global livelihood and a competitive market. This could help numerous smallholder farmers comply with costly sustainability standards demanded by European buyers, with the added benefit of reducing additional costs and ensuring a fairer coffee trade.
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