Coffee (Coffea sp.) is a small understory tree or shrub, and has traditionally been grown amongst forest trees, in the shade. Various studies indicate that arabica coffee has the highest yields under 35 to 65% shade. In addition, growing coffee under shade also discourages weed growth, may reduce pathogen infection, protect the crop from frost, and helps to increase numbers of pollinators which results in better fruit set. Coffee grown in the shade takes long to ripen and is often thought to taste better because the long ripening times contribute to complex flavors.
However, in order to produce faster, higher yields and prevent the spread of coffee leaf rust (Hemileia vastatrix), many coffee plantations began to grow coffee under sunnier conditions. The fewer shade trees that are in coffee plantations, the less biodiversity there is in those plantations.
This loss of biodiversity, especially in birds, has led conscientious consumers to look for “shade grown” coffee. However, coffee is grown under a continuum of conditions, from rustic or traditional, to full sun, and these “shades of shade” are not all equal when it comes to the health of ecosystems. Unfortunately, there is no official definition of “shade grown,” so coffee so labeled may be grown under what are technically shady conditions, but which are little better full sun.
It is important to understand the various levels of growing coffee under shade. This lists the five most typical categories, from the most desirable, traditional growing method, to the least diverse, most modern and technified method.
- Rustic. Often used on small family farms. Coffee is grown in the existing forest with little alteration of native vegetation. Tree species are diverse, with an average of 25 species. Shade strata (layers of vegetation) three or more. Shade cover = 70-100%.
- Traditional polyculture. Coffee is grown under a combination of native forest trees and planted tree and plant species, including fruit and vegetables both for the farmer and for market, fuel wood, medicinal plants, etc. Common tree species under which coffee is frequently grown include Inga, Grevillea, Acacia,Erythrina, and Gliricidia. Shade cover = 60-90%.
- Commercial polyculture. More trees removed in order to increase the number of coffee plants, and shade is provided mostly by planted timber and fruit trees. Canopy trees are regularly pruned, and epiphytes are typically removed. More often ivolves use of fertilizers and pesticides due to the lack of vegetative cover which helps prevent loss of soil nutrients, etc. Typically only two vegetation layers, the canopy, and the coffee. Shade cover 30-60%.
- Shaded monoculture. Dense plantings of coffee under an overstory of only one or two tree species (usually Inga), which are heavily pruned. Epiphytes are removed. Shade cover = 10-30%.
- Full sun. Lacks a tree canopy, or has a few isolated trees. No shade cover.
And here is a diagram from a paper by Patricia Moguel and Victor Toledo  to help you visualize the categories:
As you can see, coffee grown in a shaded monoculture could technically be labeled “shade grown,” but it would probably not be what the consumer, concerned about biodiversity, is looking for.
The Smithsonian Migratory Bird Center has developed standards that are targeted specifically at shade management and preserving biodiversity; their certification is called “Bird-Friendly” (this is a trademarked term and should always carry theSmithsonian seal). More on their criteria here. The Rainforest Alliance has a certification program for coffee that has an array of environmental standards, although shade cultivation is not a requirement. Their optional criteria is be compared to the Bird Friendly criteria here.
There are pros and cons to the certification process, including the cost to the farmers and roasters, and problems with applying one-size-fits-all biodiversity criteria to different regions. Some roasters offer shade coffee that is not certified, but evaluated in various ways. Some say they use independent auditors, or visit the farms themselves. I don’t know how many, if any, of these evaluators have experience in actually assessing biodiversity, from a scientific viewpoint.
Smithsonian also provides a thorough history of coffee growing methods.
 Biodiversity Conservation in Traditional Coffee Systems of Mexico. 1999.Conservation Biology 13:11–21.