Sustainability certification is big business for cash crops around the world. When it comes to coffee, for example, Indonesia exports around 47,000 tonnes of certified coffee annually with an estimated value of US$91,000,000. Depending on the scheme, certification promises premium prices, training, investments in infrastructure or agricultural equipment, with the idea to improve the livelihoods of smallholders. But the benefits to Indonesia’s farmers appear marginal.
In 2015, a four-day Global Certifying Partnerships workshop, funded by the Royal Netherlands Academy of Arts and Sciences (KNAW) and DIKTI (Indonesia’s Directorate General of Higher Education), brought together a number of Indonesian and Dutch experts on the matter. Participants shared insightful and interesting ideas about the pitfalls and successes of private and public certification and agreed that more needs to be done to improve the certification process and ensure farmers reap the rewards.
From the 1980s, NGOs and businesses from the Global North began to set voluntary private standards to regulate crop production in the Global South. The intention was to increase the sustainability of production through contributing to safer, environmentally friendly, and more efficient agricultural practices.
Sustainability standards range from factors such as ending child labour to the construction of wastewater ponds, and limiting the use of pesticides and fertiliser. The standards are accompanied by compliance education programs for farmers.
The impact of these standards on smallholders is ambiguous, but generally reveal moderately positive effects on the environment and farmers’ health. Certified farmers also receive slightly higher prices for their products compared to uncertified farmers.
But in other ways, farmers remain vulnerable. Around 90 per cent of the 1.24 million hectares of coffee plantations in Indonesia are owned and cultivated by smallholders. These smallholders generally own plots of one to two hectares and often face economic hardship. Farmers are sometimes indebted and their incomplete understanding of market pricing and price setting mechanisms, as well as their limited access to markets, puts them in a weak position.
Under certification schemes, profits to farmers do not increase significantly because certification involves higher costs. Also, the slightly higher gate-prices result from improvements in the quality of the products rather than from the certificate. Most Indonesian smallholders still do not participate in any certification scheme.
The government’s response
The Indonesian government is increasingly confronted with Northern-based initiatives to regulate the production of Indonesian crops. The proliferation of different certification initiatives and standards has brought confusion. The government is also sensitive to how global certification schemes impact on Indonesia’s sovereignty over its own agricultural markets.
According to Atika Wijaya from the International Centre for Integrated Assessment and Sustainable Development (ICIS) at Maastricht University, liberalisation of the agricultural market that accompanied reformasi encouraged the government to adopt a passive attitude towards the standards and leave implementation to the market and private actors.
Since then the Indonesian government has become increasingly active. In response to the Round Table on Sustainable Palm Oil (RSPO), the minister for agriculture issued Law No. 19/2011, which instituted a national standard, Indonesian Sustainable Palm Oil (ISPO). The goal was to reach more smallholders and increase the competitiveness of Indonesian palm oil in the global market. Similar initiatives can be observed for cocoa and coffee. These public standards are comparable to the private standards, though they tend to be compulsory instead of voluntary and less strict in terms of requirements.
The question is, however, whether these public standards will do a better job than the private standards in improving the vulnerable position of farmers.
The benefits of organising
Farmer organisation is important for the livelihoods of coffee, cocoa and palm oil farmers. Farmers who are organised in cooperatives, or who are linked to a company, generally hold a stronger position than those farmers less effectively organised, or who do not belong to any type of organisation.
Certification is one way to organise farmers. Group membership allows farmers to benefit from economies of scale, offers farmers a more powerful position in the market, and provides opportunities for credits, learning and training.
The Indonesian government could also empower farmers to form their own cooperatives, or support cooperatives that function well already. This does not necessarily mean government-initiated cooperatives, as these may not fully correspond to farmers’ needs, nor guarantee farmers’ motivation to participate. Rather, an investment in collective processing and value adding (which implies more focus on end-products instead of only intermediate products) could further help to empower farmers to improve their livelihoods.
What does ‘value adding’ actually mean? In supermarkets, uncertified coffee is generally less expensive. If you pay more for certified coffee compared to uncertified coffee, where does this additional price end up?
According to coffee experts Surip Mawardi and Esther Sri Astuti, roasters benefit most from the additional price being paid for certified coffee. This makes sense from an economic point of view as the roaster adds value to a raw product and transforms it into a consumer product. But it is the farmer that adjusts his/her practices to make the product more sustainable, and yet farmers receive a smaller financial benefit. Also, as most roasters are located abroad, financial benefits of value creation hardly benefit Indonesian actors.
Cocoa expert Soetanto Abdoellah argues that value creation in Indonesia could help keep the younger generation motivated and enthusiastic about taking over their parent’s cocoa plantations, instead of migrating to the cities to search for alternative job opportunities. While the younger generation lacks pride in being a cocoa producer, they demonstrate an interest in processing, trading in end products and using small mechanic technologies.
Plantation instead of crop certification
On a visit to the Satri coffee plantation in Bali, I observed how coffee and cocoa smallholders grow at least two to three crops at the same time. The current certification system is highly inefficient (both private and public) because it demands a separate certification process (with separate certification costs) for all different crops. According to Soetanto, it could be worthwhile exploring possibilities for plantation or farmer-based certification, instead of crop-based certification. This could even develop into a new niche-market for the Indonesian government.
Currently, certification costs are too high for poor smallholders. In some cases, exporters (for coffee) or companies (for palm oil) take over the certification costs. Consequently, these exporters or companies hold the certificates, creating a dependency relationship for the smallholders.
Alternatively, traders pay the certification costs. But when traders pay, farmers are locked into trading with them to repay the debts, leading to higher costs. Experts at the workshop suggested that the government could offer subsidies for certification costs so that farmers can avoid engaging with middlemen.
Using farmers’ knowledge to increase sustainability may also be a way to include impoverished and excluded farmers in the governance system. Jacqueline Vel of the Van Vollenhoven Institute has emphasised that many farmers are left behind, particularly those living in areas prone to conflict, or in areas where companies decide to withdraw. They may lose part of their production and do not have a chance to become certified.
Certification schemes should focus on the needs of the farmers as much as they do the desires of western consumers. Such an approach guarantees a better fit with local realities and the challenges that farmers face. By being more attentive to local conditions and the needs of all farmers, including the marginalised, certification can begin to benefit more than just a small proportion of Indonesia’s smallholders.
Dr Astrid Offermans (firstname.lastname@example.org) is a post-doctoral researcher at the International Centre for Integrated Assessment and Sustainable Development (ICIS), Maastricht University, the Netherlands.
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Thanks John, we'll follow this up asap.