Private Sustainability Standards in the Ugandan Coffee Sector: Empty Promises or Catalysts for Development?

Abstract

In this paper we investigate whether private sustainability standards in the coffee sector in Uganda live up to the promises they make to consumers to improve the welfare and productivity of smallholder farmers. We use cross-sectional household survey data from Eastern Uganda and instrumental variable methods to reveal how participation in two different coffee certification schemes affects smallholders. We find that smallholder participation in a double Fairtrade - Organic certification scheme neither increases producer income, nor reduces poverty. While certified producers do receive higher coffee prices, the certificate results in lower land and labour productivity and the price premium does not compensate for that. For participation in a triple Utz - Rainforest Alliance - 4C certification scheme, we find increases in coffee income, in land and labour productivity but no significant impact on poverty reduction. The results imply that almost a decade after their introduction, the certification schemes have failed to contribute to poverty reduction in a region that is faced with a high incidence of poverty. The results indicate that a price premium to producers is neither necessary, nor sufficient, for private sustainability standards to contribute to rural incomes, and that yields are more important than prices in increasing net returns to coffee farmers. In areas with degraded soils and low average yields, FT certification focusing on fair producer prices, might be better for smallholder coffee farmers when combined with standards that focus on good agricultural practices and productivity growth, such as Utz, than when combined with Organic standards. The results put doubt on the sincerity of private sustainability standards and the justification of the price premium consumers pay for certified products, as standards may not always live up to the expectations they create.