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The coffee sector is facing several sustainability challenges. We ask whether addressing these is transforming the entire coffee sector or rather leading to market differentiation. Drawing on stakeholder theory and global value chain analysis, we analyse how the coffee sector approaches sustainability by examining the sustainability efforts of a random sample of 513 companies. We also identify the factors shaping the adoption of sustainability strategies. A third of companies report no commitment to sustainability, whereas another third report vague commitment. The final third of companies report tangible commitments to sustainability. Company characteristics and stakeholders affect the scope and type of sustainability strategy chosen. Large, risk‐aware companies tend to conduct 'hands‐on' governance, adopting internal sustainability practices along their value chain. Small, consumer‐facing companies and producers rely on 'hands‐off' governance, adopting external voluntary sustainability standards. Several sustainability issues remain underaddressed by most companies, including climate change and deforestation. We found indications of potential greenwashing by some companies. Addressing sustainability is not yet fully mainstreamed in the sector, though ambitious commitments by sustainability leaders and large actors signal increasing importance of sustainability as part of corporate social responsibility efforts. We observe market differentiation through sustainability with progressive companies adopting sustainability strategies that align with their stakeholders, depending on value chain characteristics. Our results indicate a notable reliance on internal sustainability practices. There is a need for common coffee sustainability indicators relevant for all actors along the value chain, which are consistent with the Sustainable Development Goals, and a transparent, mandatory reporting framework. [ABSTRACT FROM AUTHOR]