Cecily Zamora
Several laws and regulations can significantly impact the coffee market. For example, labour laws that aim to protect workers' rights and ensure ethical labour practices can have implications for the coffee industry, which relies heavily on manual labour for harvesting. Additionally, due diligence legislation, such as the German Supply Chain Due Diligence Act, requires large companies to increase transparency and address human rights issues within their supply chains, which can include the sourcing of coffee beans. Health and safety regulations can also affect the coffee market, such as debates around cancer warning labels on coffee products in California, and FDA guidelines restricting the sale of pure caffeine in bulk quantities to consumers. Environmental regulations and sustainability initiatives can further shape the coffee industry's practices and marketing strategies. Understanding and complying with these laws are crucial for coffee companies to mitigate legal and reputational risks and maintain a stable market presence.
| Characteristics | Values |
|---|---|
| Cancer warning labels | In California, there is a proposal to exempt coffee from "cancer warning labels" |
| Due diligence legislation | Companies must identify and address human rights and labor risks in their supply chains |
| Administrative fines | Companies that fail to comply with due diligence legislation may face fines or be excluded from public contracts |
| National and regional laws | Laws focused on human rights and labor issues can vary across different countries and regions |
| Product safety regulations | The U.S. Food and Drug Administration (FDA) prohibits the sale of bulk quantities of pure caffeine to consumers due to health risks |
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What You'll Learn
Cancer warning labels
The chemical acrylamide, which is created during the coffee bean roasting process, has been a subject of concern. Acrylamide is a chemical compound that occurs naturally in many foods when exposed to high heat, such as baked goods and fried potatoes. While IARC has classified acrylamide as a probable carcinogen based on animal studies, the majority of human studies have found no significant association between dietary acrylamide intake and cancer.
Coffee industry advocates and scientists have pushed back against warning labels, citing additional research from IARC indicating that coffee drinking had no carcinogenic effects. They argue that forcing coffee companies to include a cancer warning on a product that does not cause cancer violates the First Amendment. Furthermore, the World Health Organization, after reviewing the research on coffee and cancer, concluded that coffee is not a known carcinogen and may even help protect against certain types of cancer.
In 2019, the California Office of Environmental Health Hazard Assessment (OEHHA) adopted a regulation stating that acrylamide in coffee does not pose a significant danger to consumers, exempting coffee from Proposition 65 warnings. This decision was supported by scientific evidence and well-received by both scientists and coffee enthusiasts. However, prior to this ruling, some coffee roasters and retailers in California had to include cancer warnings on their products due to the presence of acrylamide, which resulted in concerns about the accessibility of their products in the state.
While the recent developments in California have exempted coffee from Proposition 65 warnings, the debate highlights the ongoing discussion surrounding consumer product warnings and the need for clear and accurate labeling to ensure consumer confidence and understanding.
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Human rights due diligence
The coffee industry has long been associated with widespread human rights abuses, including child labour, slavery, forced labour, and environmental degradation. In recent years, there has been a significant increase in regional, national, and state-level laws focused on human rights due diligence, which has had a profound impact on companies sourcing coffee globally.
To address these issues, several European countries and the European Union have developed legislation requiring companies to implement due diligence measures in their extended supply chains. For instance, the French Corporate Duty of Vigilance Law of 2017 mandates that large companies identify, prevent, and remediate human rights and environmental risks in their operations and those of their suppliers. The German Supply Chain Due Diligence Act, which came into effect in January 2023, also requires large companies to increase transparency on human rights issues and implement human rights due diligence measures.
Coffee companies are advised to use internationally recognised frameworks, such as the Organisation for Economic Co-operation and Development (OECD) Due Diligence Guidance, to develop human rights due diligence systems. The OECD provides guidance on embedding human rights into policies and management systems, identifying adverse impacts, and implementing remedial actions. However, these guidelines are broad and not specific to the agricultural sector, so coffee companies must tailor their due diligence approaches accordingly.
To effectively implement human rights due diligence in the coffee industry, several challenges must be addressed. These include the prevalence of temporary seasonal workers, low levels of social services and government support in coffee-producing regions, and capacity limitations of implementing partners. Collaborative efforts between coffee companies, suppliers, producer organisations, cooperatives, government agencies, and civil society organisations are necessary to overcome these challenges and ensure robust due diligence systems in agricultural supply chains.
Open-source tools, such as the Socially Sustainable Sourcing Toolkit (S3T) developed by Verité, can assist coffee companies in detecting, preventing, and addressing labour violations. Additionally, the EU's Regulation on Deforestation-free Products (EUDR) aims to address human rights and environmental degradation in agricultural supply chains by ensuring products sold in the EU are not grown on deforested land. Coffee companies can ensure EUDR compliance by communicating with suppliers and buyers about their certification levels and understanding the requirements for importers.
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Child labour risks
Child labour is a significant risk in the coffee market, particularly in countries such as Honduras and Brazil. The U.S. Department of Labor estimates that over one million Hondurans, including children, are involved in selecting, picking, and processing coffee beans. In fact, there are nearly 158,000 children engaged in child labour in Honduras, with a large proportion working in the agricultural sector.
Efforts to eradicate child labour in the Honduran coffee sector face challenges such as limited enforcement of labour laws and limited access to education. To address these issues, the Department of Labor is working with businesses to implement systems that prevent, detect, and eliminate child labour and exploitation from supply chains. They are also developing social compliance tools, such as the Comply Chain methodology, to help businesses identify and address labour abuses.
In Brazil, labour inspectors have uncovered instances of child labour and slave labour in certified coffee farms in the state of Minas Gerais. At least 14 companies and cooperatives have exported coffee to Starbucks units in the US from these farms in the past two years. Similar problems have been exposed among suppliers of Nestlé and McDonald's. In 2022, 159 workers, including teenagers, were rescued from modern slavery in coffee farming in Brazil.
To protect themselves from legal and reputational risks, coffee companies need to proactively identify labour and human rights risks in their supply chains. The Dutch Child Labor Due Diligence Law of 2019 is an example of legislation aimed at addressing this issue, requiring companies to assess their supply chains for any child labour risks.
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Dietary supplement laws
Dietary supplements containing pure caffeine are unlawful when sold in bulk quantities directly to consumers, according to the FDA. This is due to the high risk that consumers will erroneously consume excessive doses, which can have serious health consequences, including death. The FDA has determined that, for healthy adults, caffeine intake of up to 400 mg per day is safe and not associated with negative health impacts.
Under supplement regulations, ingredients like caffeine that were on the market before 1994 are presumed safe unless the FDA has evidence to the contrary. Supplement manufacturers must demonstrate that the levels of all ingredients in their products are safe, based on label instructions or, if no instructions are provided, under normal conditions of use.
The FDA has the authority to review dietary supplement labeling and can remove a supplement from the market if it poses a significant risk of injury or illness. Manufacturers of liquid caffeinated products may choose to label their products as beverages or dietary supplements, but there are regulatory requirements for both.
Food companies are responsible for ensuring any use of caffeine in their products is safe. All packaged foods are required to list caffeine in the ingredients when it is added as a standalone ingredient. Many packaged foods, including beverages and dietary supplements containing caffeine, voluntarily provide information on the label about how much caffeine they contain.
Restaurants and other retail food establishments serving food and drinks are not required by law to disclose how much caffeine is in the products they serve.
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Supply chain transparency
The coffee industry is growing, with sales of coffee, tea, and other hot drinks predicted to reach a total value of over $261 billion annually between 2017 and 2021. However, small farmers and producers often lack adequate market access and resources, and the industry as a whole faces challenges in ensuring ethical sourcing and sustainability.
In recent years, there has been an increase in regional, national, and state-level laws focused on human rights due diligence, which has had an impact on companies that source products globally, including coffee. For example, the German Supply Chain Due Diligence Act, which came into effect on January 1, 2023, requires large companies to increase transparency on human rights issues and implement human rights due diligence measures in their operations and supply chains. Companies that fail to comply with the Act can face significant fines or be excluded from consideration for public contracts.
To ensure compliance with such laws and meet consumer demands for transparency, coffee companies can utilize technology such as blockchain to create a transparent and immutable record of every transaction and movement of coffee beans. This allows for better traceability and verification of sustainability claims, helping companies meet certification requirements and providing consumers with the transparency they demand.
Additionally, coffee shops, buyers, and roasters that prioritize transparency and traceability can benefit from increased demand for their products in the specialty coffee market. By working with links in the supply chain that value traceability, growers and producers can develop stronger relationships and expand their businesses.
Overall, supply chain transparency is crucial for the coffee industry to address ethical and sustainability concerns, comply with relevant laws and regulations, and meet the evolving demands of consumers.
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Frequently asked questions
The German Supply Chain Due Diligence Act came into effect on January 1, 2023. It requires large companies to increase transparency on human rights issues and implement human rights due diligence measures. Companies that fail to comply with the Act can face fines of up to €800,000 or up to 2% of their annual global turnover.
The French Corporate Duty of Vigilance Law of 2017 was the first law to require large companies to implement a formal due diligence process. It requires these companies to identify, prevent, and remediate human rights and environmental risks in their operations and supply chains.
The Dutch Child Labor Due Diligence Law of 2019 requires companies to assess their supply chains to identify any child labor risks, including forced child labor.
A proposed rule in California may exempt coffee from "cancer warning labels" on the basis of scientific evidence supporting the health benefits of coffee.
The U.S. Food and Drug Administration (FDA) has issued a guidance clarifying that selling dietary supplements containing pure or highly concentrated caffeine in bulk quantities directly to consumers is unlawful due to the risk of erroneous consumption at excessive doses.
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