This blog post is part of a series called Why Transparency Matters. Read all posts in this series here.
What I believed as a consumer
I thought I knew about coffee before I started my first internship in a coffee roastery in Vienna. I loved drinking coffee, however, what fascinated me most about the product were the dynamics of the market and possibilities to transform it to be fairer for everyone involved. During this internship a whole new world of what coffee can be opened up to me and violently destroyed my long-held belief that buying Fairtrade coffee is the only socially right thing to do.
It was the first step in my journey to understanding more about the coffee supply chain and the challenges we face to make it more equitable.
Exploring other trade models
So what can I trust as a consumer? Like many people, I want to buy coffee that is produced and traded under circumstances that guarantee producers a decent living. At first glance Direct Trade seemed like it could ensure transparency along the supply chain, and that farmers are paid fairly. However, after my research I came to the conclusion that working with an importer, one who operates transparently and reflects your values as a roaster, may be a better option economically and ecologically.
Transparency, how hard can it be?
Just as my conclusions about trade models were quickly dismantled, so too was my understanding of transparency. The term ‘transparency’ is written on the homepage of almost every importer in specialty coffee, however I discovered that like Direct Trade, it means different things to different people.
When the team at Nordic Approach announced they were creating a transparency report, I immediately put up my hand to help out. I figured it would be very straightforward, we could just contact the producers and ask them a few questions including what they got paid for their coffees and how much they cost to produce.
Ah, no. Even if a farmer could easily report these details, it might be feasible to call one producer, or even five, but not for the 670 lots that Nordic Approach sourced in 2018/19, as of July this year.
Then I ran into even more complications.
What do these numbers mean?
Through my research at university and my time working for different specialty coffee companies I learned that several things need to be considered when asking for farmgate prices. To name a few:
Did the farmer deliver cherry, parchment or green coffee? How long and complex is the supply chain? Some can be as simple as a farmer with a dry mill and export license, or significantly more complex with hundreds of people employed in the process of transforming the cherry to green coffee and getting it on a ship. The more value a farmer adds to a coffee, the more costs must be covered by the farm gate price.
What size is the farm and what is the yield? This affects the manual labour required and per pound distribution of the fixed costs.
What are the production and living costs in the region where this coffee was produced? These differ enormously across different areas, and countries.
How did currency fluctuations impact the amount of money the farmer received in local currency?
Each piece of information the team added to the growing transparency report seemed to require another piece of information to explain it. What seemed to me to be an easy task is actually an enormous project.
Remaining competitive in a small margin business
For example, we started to explore the costs involved at each point of the supply chain at origin to know how the FOB price is constructed. Some of our export partners set up their businesses with transparency as a founding principle. Many did not. Especially in countries where the industry is crowded and competitive, companies are hesitant to share what they view as highly sensitive financial information that could reveal their business model.
Does the information exist?
Farmers don’t often run their farms like businesses, tracking expenses and incomes. They usually know what they were paid, and whether it was enough to repay loans and survive that year or not. Even businesses at origin do not usually structure their financial reporting in a way that is easily translated into a transparency report.
Asking for financial information from our partners at origin requires a great deal of diplomacy. Most coffee professionals demanding price transparency live in the developed world. Transparency might be a major priority for us, but convincing our suppliers is rarely something we can achieve by email or even in a single conversation. It takes time and trust.
Educating ourselves is key
Over the past few months I have learned that full transparency from seed to cup is a lot harder than it sounds. In order to understand transparency, one needs knowledge of coffee supply chains to give context to figures like FOB, farm gate price and production costs.
Plenty needs to be done, not just by exporters and importers but also by roasters and consumers. In the end, everyone working with or drinking coffee carries part of the responsibility to educate themselves.
Transparency at Nordic Approach
Transparency is one of the founding principles of Nordic Approach and the company has shared FOB prices with customers since it began selling coffee.
Personalised Transparency Reports
We currently offer a personalised transparency report for roasters which gives the exact breakdown of costs from FOB to the price you paid for any coffee you purchased from Nordic Approach, including our margin.
If you buy coffee from us, you can sign The Pledge. This report includes the information you need to meet the transparency goals of this initiative. Contact your sales rep to request your report.
Nordic Approach 2019 transparency report
The report I have been working on with the team will be rolled out later this year. Our goal is to include the farm gate price, the FOB, and the costs and value added in between.
Why transparency matters – blog series
This article is part of a series of blog posts called Why Transparency Matters. Beyond FOB or farm gate, beyond a number to publish on our websites or packaging, we are exploring the ways we can all use this information to transform the coffee market to be more sustainable and fair. Read Part 2 in this series The Real Power of Price Information and Part 3 Creating a Specialty Coffee Pricing Mechanism.
Have thoughts or questions?
We are very interested in conversations about transparency, and how it should be used to create a sustainable coffee industry. Email email@example.com to share your ideas.