The move illustrates the growing power of the premium coffee market, and increasing awareness among suppliers and retailers that consumers are concerned about the environmental and social impact of the coffee industry.
On top of this, Starbucks has expressed concern about the future supply of top-notch coffee, the world's second biggest traded commodity, as it moves forward with long-range plans to open 25,000 stores worldwide.
The coffee giant signed a memorandum of understanding with the US Agency for International Development, or USAID, and Washington-based Conservation International yesterday in Mexico City, to provide economic incentives for high-quality coffee growers that minimise their environmental impact.
Starbucks president Orin Smith said the alliance is partly his company's effort to pass on the high price of a cup of coffee to farmers.
Since the beginning of the 1990s the amount western consumers spend on coffee has grown from $30 billion to $80 billion a year, according to the International Coffee Organisation. The net result is that producers' take of consumer expenditure has fallen from one-third to one-thirteenth.
Under the alliance, Starbucks will pay higher prices to suppliers that can demonstrate that money gets to farmers without being diverted, comply with environmental practices outlined by Conservation International, and meet humanitarian standards of the home country or international authorities. In return, the company will receive a guaranteed high-quality supply of coffee.
"By uniting the strengths of the government, conservation and private sectors, we are breaking new ground in supporting small-scale coffee farmers and raising the scale of biodiversity conservation in Mexico and Central America," said Glenn Prickett, senior vice president, Conservation International.
Smith said that the company's goal is to buy 60 per cent of its coffee under these standards by 2007. Starbucks, which now runs over 8,000 stores worldwide, reported a turnover last year of $4.1 billion, up 24 per cent from $3.3 billion in fiscal 2002.
This has been a significant month for the international coffee industry. Last week, the International Coffee Organisation (ICO), an intergovernmental organisation created under the auspices of the United Nations to serve the international coffee community, welcomed back the United States, the world's largest coffee importer, as a member after an absence of 11 years.
"This is a very important development for the Organisation and for theglobal coffee community as a whole," said spokesperson for the European Community Enzo Barattini.
UK-based development charity Oxfam also welcomed the announcement, saying it was an important step toward international cooperation to address the global crisis facing coffee farmers in poor countries.
"There can be no solution to global economic problems without the US," said Phil Bloomer, head of Oxfam International's Make Trade Fair Campaign.
More than 100 million families are estimated to depend on coffee, and since prices began falling precipitously in 1998, the earnings of the 50-plus producer countries in Africa, Asia and Latin America have halved from $10 billion a year to $5.5 billion, according to the ICO.
However, the speciality market is growing at about 15 per cent a year, while Fair Trade, which guarantees $1.21 a pound plus 5 cents for social projects, is doubling in size every two years.
At present however, Fair Trade's share of the worldwide market is just 0.4 per cent.