Coffee firms ill-prepared for EU rules on living wages, report finds

(Corrects headline to say 'ill-prepared', not 'have not met'. Adds 'in order to comply' in paragraph 4)

By May Angel

LONDON, June 11(Reuters) - None of the world's top coffee roasters and traders have committed to paying farmers a living income even though this is set to become a legal obligation for large companies operating in the EU from 2029, according to a major coffee sector report.

The EU's landmark Corporate Sustainability Due Diligence Directive(CSDDD) requires large companies to fix human rights and environmental issues in their supply chains or face fines of up to 3% of global turnover.

According to the biennial Coffee Barometer, prepared by a group of NGOs, the law is the first EU instrument to recognise living income as a binding human right — a recognition that in turn has direct commercial implications for the coffee sector.

Large companies, moreover, will need to have set up their compliance systems well in advance of 2029 in order to comply.

"Pricing structures, contract duration and payment terms are no longer purely commercial decisions; where they are linked to adverse human rights impacts, companies are required to change them," said the report.

It noted, however, that none of the world's 15 largest roasters and traders that it reviewed disclosed the above or referenced living income commitments in their sustainability reporting.

Coffee remains a sector dominated by poverty-stricken smallholder farmers and this is its central challenge, according to the Barometer.

It estimates around 12.5 million farming households, most cultivating less than two hectares, produce the majority of the world’s coffee while struggling to secure a viable income, even at current relatively elevated price levels.

"Companies publish sustainability commitments, while core commercial operations continue to rely on low-cost commodity purchasing. Until (this changes), sustainability investments (will) work around the problem rather than on it."

The companies reviewed by the Barometer include top global roasters Nestle, Starbucks and JDE Peet's and top traders Olam, Louis Dreyfus , Ecom and Volcafe.

(Reporting by May Angel; Editing by Aurora Ellis)