From 4 percent in 2005, the share of global coffee production sold as Voluntary Sustainability Standards (VSS) certified grew to 18 percent in 2015, and latest estimates reveal it is likely to reach higher levels in the near future. A bulk of this growth is led by international buyers and consumers who are willing to pay a higher price mark up on certified coffee products.
One of the main objectives of VSS is to improve welfare of the small coffee farmers, but findings reveal that less than one-third of the price premiums realised at the export level - and even lower shares from the premium paid by the ultimate consumer - are passed on to coffee farmers in Ethiopia.
In absolute terms, the incremental dollar figure earned by the farmer selling her coffee crop under a VSS certification becomes even more insignificant. If a coffee farmer in Ethiopia were to market all 400 kilograms of her red cherries (coffee fruit) as VSS certified, then at the present VSS premium transmission rates, her income would increase by a mere $6.7 as compared to a non-certified farmer. Even more concerning is this: If price premium transmission were to be perfect, a coffee farmer stands to gain only an additional $22 a year. While at the export level, we found there are significant price premiums attached to the VSS certifications, these premiums are not reaching small farmers in Ethiopia.
Limited monetary benefits also help to explain the slow growth in adoption of VSS certification in Africa in general and Ethiopia in particular, even though the East African country is the largest producer of coffee in the region and coffee trade accounts for a quarter of its foreign exchange earnings. In fact, most of the Ethiopian farmers surveyed indicated they do not believe cooperatives offer higher prices, but the reason they stick to them are other advantages linked to advice, proximity, and dividend payments.