Synopsis: Who benefits from the rapidly increasing voluntary sustainability standards?

ESSP Research Note 35."Synopsis: Who benefits from the rapidly increasing voluntary sustainability standards? " by Minten, Bart, Dereje, Mekdim, Engeda, Ermias and Tamru, Seneshaw

Summary of ESSP Working Paper 71. Voluntary Sustainability Standards (VSS) are rapidly increasing in global value chains. While consumers, mostly in developed countries, are willing to pay significant premiums for such standards, it is not well understood how effectively these incentives are transmitted to producing countries. We study VSS in Ethiopia’s coffee sector, the country’s most important export commodity, using a unique census of transaction data at the export level and large-scale data at the production level. We find that transmission of the VSS premiums to coffee producers is limited, with only one-third of the value of these premiums being passed on to coffee producers. Moreover, as VSS premiums are small and average production levels in these settings are low, these premiums would only lead to an average increase in income for coffee farmers of 20 USD per year even with a perfect transmission scenario, and therefore would have little effect on their welfare. Download the pdf.

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