Impacts of Globalization on the Environment: The Coffee Industry

Globalization is responsible for a significant increase in international trade in addition to a corresponding escalation in the consumption of a variety of resources. One major impact of globalization is a significant expansion of the ecological footprint resulting from the broad-based upsurge in trade and production activity worldwide. The ultimate extent of the environmental impact of globalization is still up for debate, but its effect is especially noticeable in certain areas and for some industries. One business clearly impacted by globalization—directly and indirectly—is the coffee industry. This effect has altered the industry, especially beginning in the 1970s. Across all levels of the coffee industry—from growers and producers to sellers—changes in the global market are dramatic.

Over the last five decades, globalization has directly led to shifts in bean production from one country to another, as well as rapid increases in consumption of coffee due to the popularity of global chains such as Starbucks and Seattle’s Best. While such an explosion in sales benefits massive corporations like Starbucks, many of the coffee growers—especially small farmers—experience significant losses. Moreover, the continual increase in demand typically results in environmental degradation in the producing countries, as vast areas of forest are cleared to make room for cash crops such as coffee. In many cases, countries that were once independent coffee growers with a significant income gleaned from exports of coffee beans have lost control of the coffee export industry entirely at the hands of powerful multinational corporations.

Geographic Dimensions of the Coffee Industry

From its earliest known origins, coffee was utilized as a major commodity and eventually for international trade. Coffee originated on the African continent in the country of Ethiopia and was found, according to tradition, by the Oromo people of the Kafa province (Clay, 2004). The first account of coffee cultivation and use as a crop for trading purposes was recorded in 900 C.E. in the country of Yemen. The Arabs held a monopoly on the growth and trade of coffee for several hundred years (Jaffee, 2007). By the 1500s, coffee was available for purchase in coffeehouses in most major Arab cities. However, the true internationalization of coffee occurred in the 1600s when traders introduced the product to European markets and established firm relationships with the Arab suppliers (Jaffee, 2007). By the mid-1600s, coffeehouses were popular in England and by the early eighteenth century, there were nearly two thousand in London. Similar to how many coffee shops are viewed today—especially establishments like Starbucks—these early coffeehouses were viewed as social institutions where urban dwellers could meet to discuss ideas and exchange opinions.

Eventually coffee came under the control of the major colonial powers, including England, France, and Portugal. Consequently, with the demand for coffee continuing to grow across Europe, the colonial powers recognized the colonies in the Americas as fertile territory for the establishment of coffee plantations (Jaffee, 2007). Plantations were made possible through slave labor and the earliest efforts toward deforestation were initiated to clear land for planting this highly valuable crop. The political control exerted by the colonial powers instigated a steady transformation of the existing world system, leading directly to the creation of the modern nation-state (Jaffee, 2007). The production and sale of coffee were simply one of many examples of the greedy exploitation of natural resources perpetrated by the colonial powers.

The history of coffee production and its global sales is therefore rooted squarely in colonialism. Coffee ultimately was turned into a “cash crop, planted and harvested by serfs or wage laborers on large plantations, then exported to imperial countries” (James, 2000, p.11). In many cases, changes occurred in daily life, the structure of governments, and relationships between ethnic groups in countries where coffee became a major source of income. Over time, the economy of the United States became a significant factor in world trade which contributed to the continued growth of coffee exportation. Ultimately, coffee became one of the most widely exploited resources in the Americas as well as Africa and parts of Asia based largely on the legacy of colonialism (Jaffee, 2007). Colonial production and global trade meant “the growing strength and solidity of the empire and of the classes that dictated its policies” (Mintz, 1985, p. 157). The expansion of coffee production and exports resulted in the creation of the coffee elite which controlled political power and, subsequently, usurped power from the rural growers. Once these countries achieved independence, coffee continued to be a significant source of income.

In more modern times, the coffee market experienced difficulties in the 1950s due to “stockpiles, over-production and the growing popularity of African Robusta varietals” which resulted in a dramatic downturn in coffee prices (Kamola, 2007, p. 580). Based on this market crash, international coffee producers signed the International Coffee Agreement (ICA) in 1962 under the auspices of the United Nations. According to Kamola (2007), the ICA attempted to “stabilize the global coffee market by imposing quotas and price controls on…99% of the world coffee market” (p. 580). Due to the cooperation developed under the ICA, the coffee industry entered into a period of relative stability as international prices grew steadily along with the production of coffee crops in various countries.

Utilization of Coffee—Locally and Globally

Not all coffee farmers share similar conditions, but the majority are “at a disadvantage in global markets and often receive low prices for their products” (Sick, 2008, p. 194). Like the growers of most other agricultural crops, coffee growers face the unpredictability of the weather as well as “the boom and bust cycles in commodity prices, limited economic resources and political control” (Sick, 2008, p., 194). Oftentimes, the coffee industry is viewed only from the perspective of its macroeconomic impact rather than the reality experienced by local growers and the surrounding communities. Such a perspective fails to account for “the marginalization of small-scale farmers, increased environmental degradation, and overall rural decline and poverty” (Watson & Achinelli, 2008, p. 224). Globalization, and the subsequent changes in the coffee market, typically results in negative impacts on the lives of local coffee farmers. The value of the coffee crop is a significant consideration locally since it is the basis for the total livelihood of the small local growers.

This reality requires adaption on the part of local coffee farmers to respond to the changes in livelihood and ecosystems created by globalization. The impact of globalization is felt in multiple areas, including climate change, which is contributed to by the extensive transportation system (powered primarily by fossil fuels) necessary to make international coffee trade feasible. The ecosystem in coffee-producing countries is thus threatened by climate as well as deforestation (Atteridge, & Remling, 2013). Whether or not the small local coffee farmer is capable of adaptation in the face of globalization remains to be seen.

When adaptation is successful, the effects are not only observed at the local level but, especially in the case of the coffee industry, a larger social system is also impacted in a positive way. This is another ramification of globalization since the literature indicates that very little that occurs in the world can avoid the interconnected nature of global trade. Consequently, whatever affects the local farmer or the larger community—including the ecosystem of the area—is part of a complex connection on a global scale (Atteridge, & Remling, 2013). In some cases, this connection may be positive and in many others, it is negative, especially from the local perspective.

Globalization of the coffee industry means that local economies are dependent on the larger global market economy, taking the power out of the hands of local farmers. Thus, new forms of engagement in the markets, such as ‘financialization’, or the control of the coffee market by powerful elites (Bellamy Foster, 2007; Lapavitsas, 2011) dramatically influence the behavior of the market in line with the financial goals of multinational corporations (Bebbington & Batterbury, 2001). Whereas in previous times, global pricing was established solely based on supply and demand, the current method for determining coffee pricing is based on the overall worldwide financial condition or how coffee costs relate to other sectors. In general, the markets are controlled by speculators who effectively manipulate global stock prices.

The global nature of the coffee industry, therefore, creates a market shaped by global trends that force changes at the local level. For example, rather than making decisions based on what is best for the local environment, coffee farmers in countries such as Columbia decide how to utilize land based on the level of demand for higher-quality coffee beans and the perceived need to plant additional crops (Rueda, & Lambin, 2012). Increasingly, land use decisions are driven by globalization and the market forces that accompany it. Regions that have the capability to produce a variety of different coffee beans—of varying quality—typically choose to increase the area planted in coffee. There is thus a causal effect between the global market demands in the coffee industry due to globalization and the degradation of critical ecosystems in many coffee-growing nations.

The Coffee Industry Supply Chain

As mentioned earlier, coffee was introduced to Latin America by the colonial powers. By the 1800s, the coffee industry was one of the leading sources of income generated in that region (Rice, 2007). However, not until the full force of globalization was experienced in the region was the economic power of coffee truly exploited. As demand grew, new technology was introduced to increase production resulting in a period of modernization and increased economic dependence on coffee growing. Rice observed that over two-thirds of available land is affected by this increased level of industrialization of the coffee industry (2007). Traditional practices for growing coffee in Latin America used to take care of the land, often resembling gardening and the plants were customarily grown in shaded conditions. Currently, in order to keep up with the supply chain and the growing global demand, coffee farms feature high-yield plants that are mass-harvested and grown under the sun, without shade (Rice, 2007). Governments in the coffee-growing countries encourage this modernization in spite of the damage to the ecosystem since their primary goal is to provide as much product as possible to the global market.

While coffee supplied by Latin American countries once dominated the market, recent changes in the industry have resulted in modifications in the supply chain. New technology in the processing of coffee beans improved the desirability of lower-quality Robusta coffee that is commonly grown in Asia. Accordingly, the large companies that control the industry shifted much of the focus to marketing large quantities of the lower-quality coffee beans to markets once exclusively sold higher-quality Arabica beans (Eakin, Tucker, & Castellanos, 2006). Vietnam, one of the largest Asian producers of coffee, is now the source of a significant percentage of the world’s coffee supply.

Increasingly, the coffee industry is dominated and controlled by very few companies, in particular giant multinationals that are able to provide the capacity to buy, roast and distribute beans worldwide. This virtual monopoly of coffee roasters and traders depresses prices and also caused greater hardships for the small coffee farmers who receive less for their product (Eakin et al., 2006). These pressures created by the supply chain result in a transformation in the coffee industry that includes a negative impact on the environmental as well as economic wellbeing of small growers.

In light of the significant impact that globalization has on certain industries, including the coffee industry, the level of carbon emissions (the carbon footprint) produced by the supply chain is of concern to many. According to Brenton, Edwards, and Friis (2009), the ability to accurately calculate a carbon footprint for some industries across the supply chain is increasingly problematic. As supply chains become increasingly complex, especially for commodities such as coffee, a definitive assessment of the impact is difficult. In the case of the coffee industry, the supply chain is lengthy, extending from initial cultivation of the beans to disposal following consumption (Sevenste & Vehagen, 2010). Obviously, there are many processes in between that create potential problems for the environment. The coffee industry utilizes a considerable number of stages and locations over the course of its supply chain from the grower to the end consumer. Genuine transparency in the process and the ability to trace each step in the supply chain is challenging. As reported in the article Carbon Footprint Across the Coffee Supply Chain (2012), carbon emissions come from “fertilizers used by growers, decomposition of organic matter in wastewater, as well as clearing of forests which is typically accomplished by burning.” However, the supply chain utilizes multiple forms of transportation which add to the carbon emissions as the product is moved from farm, to port, to warehouse.

Certainly, the processes used in the coffee industry have a major environmental impact. The carbon footprint of the industry’s supply chain was examined in detail and confirmed to produce carbon emissions at a high intensity (Carbon Footprint, 2012). According to that report, the bulk of emissions found in the supply chain were generated by relatively few sources. As a result, it is theorized that the mitigation of these emission sources is feasible if the desire exists to make changes in the supply chain processes. The most problematic areas were fertilizers, fossil fuel usage in transportation, and the destruction of forests. Interestingly, the use of automatic brewing machines in coffee preparation was also noted as a significant contributor to the coffee industry’s carbon footprint.

Management Perspectives of Coffee as a Resource

Globalization was perhaps finally observed as a phenomenon in the 1970s. At the very least, it was during that decade that a global transition toward “flexible accumulation where inventory and production processes were downsized and goods were being produced for specialized market niches” was firmly established (Roseberry, 1996, p. 771). Moreover, that period of time also marked the creation of financial liberalization in the global marketplace and spurred the development of what Schneider (2002) termed the “global factory” (p. 71). By means of these processes, industrial production could be located on any continent based on the needs of the world market.

Also during that decade, a shift in consumer preference to fresh-brewed coffee (rather than instant) became entrenched. As a result, manufacturers became increasingly interested in higher-quality coffee beans and prices reflected this shift (Roseberry, 1996). Member countries of the international trade organizations gained greater power and control over the availability of the type of beans they wanted. Eventually, the large corporations in the United States’ coffee industry were able to develop a system of grading scales and pricing structures based on specific techniques in the processing of coffee beans. These changes were the result of adjustments at the larger, agri-business level and seriously impacted international trade in coffee (McMichael, 1996). In effect, the process just described represented a shift from the development of the coffee industry to its globalization. As with other industries affected by globalization, those in control of the coffee industry realized that a global production and distribution system was essential for stabilizing capitalism.

Deregulation, privatization, and liberalization which affected all agricultural products in the global market also impacted coffee production and resulted in “exacerbating the uncertainties faced by the coffee farmers” (Eakin, 2006, p.158). Market liberalization, which was touted as beneficial for everyone, failed to assist the local growers but di allow “corporate interests to gain a greater share of coffee’s global export revenues – meaning less profit and less power for producers, particularly small-scale farmers” (Watson & Achinelli, 2008, p. 227). Unfortunately for many small farmers, the dominance of the market by large corporations resulted in a decision to leave the business entirely or to simply work on larger plantations as laborers in order to make a living. Globalization of the coffee industry dramatically transformed (and in many cases, ended) a way of life for the vast majority of small coffee farmers who formerly comprised the bulk of coffee growers.

Conclusion

This paper revealed that the coffee industry is directly and dramatically affected by globalization. Globalization altered the industry, especially beginning in the 1970s, marking a shift from the development of the industry to its global exploitation. Over the last five decades, globalization has directly led to shifts in bean production, controls placed on prices and distribution, as well as rapid increases in consumption of coffee due to the popularity of global chains such as Starbucks. While such an explosion in sales benefits massive corporations that control the global trade, many of the coffee growers—especially small farmers—experience significant losses. Moreover, the continual increase in demand results in environmental degradation in the producing countries, as vast areas of forest are cleared to make room for cash crops such as coffee. Furthermore, the carbon footprint produced by the supply chain of the coffee industry is significant, creating damage to the environment far removed from the regions where the coffee is grown and harvested.

Globalization creates benefits for the global community in a number of ways. The ability to purchase products from around the world has created new markets as well as lowered prices in many cases. Access to foreign markets also creates the potential for improved relations between countries, as trading alliances are formed and agreements are established that often benefit consumers. The process is also beneficial for companies seeking to expand and compete in the larger, global marketplace. Above all, globalization allows the process of capitalism to expand worldwide.

However, as observed in this review of the coffee industry, globalization has generally created negative impacts on the environment. Far too often the forces of globalization are not concerned with the preservation of eco-systems but are simply focused on the exploitation of resources for personal financial gain. Such overuse of resources is clearly seen in the coffee industry, as large multinational corporations dictate the technology used to grow and harvest coffee beans, typically at the expense of small local farmers and the environment. Thus, little concern is given to the environmental impact of the expanded utilization of this highly-valuable resource, in spite of the fact that destruction of the environment may eventually limit the ability to produce coffee crops at all. Any benefit of globalization appears to be outweighed by the degradation of the environment and destruction of the lifestyle of small coffee farmers in Latin America.

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