New Insights and Pragmatic Lessons to Accelerate Sustainability

by Committee on Sustainability Assessment - COSA

“The inequality is glaring, and it’s getting worse” is the first salvo of Daniele Giovannucci, president of the Committee on Sustainability Assessment, COSA, interviewed on a recent ‘Cheddar Reveals’ program to break down the most significant problems when it comes to sustainability in the coffee industry, and how to support coffee growers around the globe.

Farmers producing the world’s most traded agricultural commodity are facing enormous difficulties from climate change, to the exodus of youth from farming, and poverty-scale prices. Some coffees – like heirloom varieties - are even in danger of vanishing. That diversity could disappear, he says, along with their unique flavor profiles and genomic protection.

The path to real sustainability starts with understanding three critical and inter-woven issues: incomes, risks, and markets.

Globally, 65% of the world’s poorest are small farmers and laborers who primarily depend on agriculture, according to World Bank data. In coffee – which involves some 20 million families - the price paid to producers generally has only occasionally topped $1/pound for decades 1 . To put it bluntly, the majority of coffee farmers (and laborers working on the farms) do not earn a living wage or a living income. That is “the income required for a household to afford a decent standard of living, in terms of basic food, education, and healthcare”. Income inequality has grown to glaring proportions. Today, a coffee farmer earns about 3 cents from a $3 latte. To make matters worse, the farmer also bears most of the risks in the supply of coffee. As supply chains alter and adapt to the fallout from the pandemic, the farmers and rural laborers of the Global South who supply world markets will likely see their livelihoods fall further below their already low levels. The International Coffee Organization’s historical data helps us understand that even as farming has become more efficient in some geographies, it has also become globally somewhat riskier in all of them. The random effects of climate change combined with crop pests and disease introduce uncertainties that make it difficult for resource-poor farmers to invest in their crops. Add to that the record-levels of price volatility, often untethered from underlying fundamentals of supply-demand, and the fabric of any argument to be a coffee farmer looks threadbare for most. It does not require much calculation to understand what will happen when we offer minimal profit margins with increasing levels of risk. As most other costs have steadily risen, coffee farming is becoming untenable for many small farmers. A number of origins see fewer and fewer young people choosing to be coffee growers. Today, coffee farmers are typically near to 60 years old, on average, with a few notable country exceptions. That does not bode well for a labor-intensive crop.

Next-generation farming is therefore emerging as a Will you miss me when I am real concern. Youth in these gone? communities are increasingly Along with fewer small and drawn away from farming medium farmers, we will also lose and often choose migration unique heirloom varieties – those instead. We know that evidence with unique flavor profiles and of ‘passing the torch to next precious genomic diversity that can generations’ in smallholder protect the entire sector from pest families is a key indicator of their or disease pandemics. sustainability. Most coffee research does not focus Markets are shifting, with two on protecting these varietals as factors driving the change. many do not lend themselves to As consumers recognize and commercial viability. Without the appreciate more diversity in efforts of small farmers, many will coffee origins and profiles, we vanish. We must laud and support are also increasingly able to those who pay more for this monetize that interest. There is uniqueness. recognition of value in a variety of intangibles that include preparations, qualities, origins, varietals, and characteristics such as fulfilling standards for sustainability. 1.The first factor is the evolving role of micro-messaging channels such as baristas and social media that are opening up new areas and opportunities that have historically been the domain of big brands and their marketing muscle. These new market niches can operate at the level of small lot purchases that are often characteristic of these differentiations. While volumes are small, the Third Wave can sway a broad swath of consumer interests, even somewhat in mainstream coffee channels. 2.The second factor is the evolution of data and technology to rapidly inform decision-makers. This includes a new interest in consistently measured indicators that add new levels of understanding to discussions about sustainability, at least for the companies, co-ops, and farmers that use them. Smart money is realizing that the increasing application of artificial intelligence (AI) in consumer segmentation is now spreading to every level of the coffee industry, from logistics to predictive farm-level risks. AI depends on data, quality data that is consistent, and it can take a few years

to secure and manage such data adroitly in a supply chain. The Global Coffee Platform, the ISEAL Alliance, and the Sustainable Food Lab were among the first umbrella organizations to collaborate with COSA to define clear and consistent metrics that can be compared across time and geographies. They have, in essence, set the stage for the kind of data that can power AI. Leading companies like Nestlé, McDonald’s, and Mars are also invested in good data efforts. The push by major retailers such as Walmart, Target, and European supermarkets toward consistent and credible reporting of traceability and carbon is also contributing to a rapid increase in industry demand for better information.

Among the more useful metrics available today are those that indicate resilience. These are especially useful when problems or pandemics arise. While there may be a temptation for some companies to reduce or delay sustainability programs given current uncertainties, this will likely diminish the resilience of producer communities at a critical time. Some major

brands like Nespresso, Costa, Lavazza, and Starbucks are not backing off their sustainability commitments to support farmers. McDonald’s is another leading company that is doing a lot more than many major brands in sustainability. The International Coffee Organization (ICO) is also pioneering a healthy vision that includes Living Income and how to help farming communities be more resilient and so that supply chains can become more resilient. Despite the efforts of some leaders, many coffee companies are frankly failing to help the most vulnerable parts of the supply chain.

What can the coffee industry do? It can appear complicated to integrate sustainable procurement as an essential business practice. For companies to accelerate that, we offer here the five key elements of a successful sustainable sourcing program that have consistently worked for companies large and small:

1.Align strategic direction and sustainability objectives. There are at least nine factors to consider in any strategy, so that requires a bit of process.

Still, when done, you should be able to mobilize and inspire staff and stakeholders with articulate and measurable goals as well as be prepared to apply global best practices in your operations.

2.Select the right Key Performance Indicators: measure only what matters with simple and reliable SMART metrics (Specific, Measurable, Actionable,

Realistic, Time-bound) that can be integrated into everyday business processes to help you monitor performance and to foster continuous improvement. No need to reinvent the wheel, just ensure that metrics align with key international norms and are standardized so you can benchmark across origins and supply chains.

3.Use pragmatic tools to simplify sustainability management in vital business areas. Simple and proven technologies help gather, analyze and 4.Ensure accuracy and credibility with verification to protect your reputation and investments (such as training or programs). Integrated digital systems can validate data and significantly reduce verification costs.

Use analytics to help identify and locate risk before it becomes a problem

5.Tell Stories that Matter. A good sustainable sourcing program delivers sustainability intelligence that will engage your customers, stakeholders, and staff. It provides reliable insights and meaningful reporting at your fingertips, cutting the clutter with dynamic visuals. Results-based management enhances your ability to succeed and scale-up fast.

However, you choose to approach sustainability, know that it matters to millions of people, and so it is worth getting it right. Consider a pragmatic approach that mirrors good business practices and is results-oriented.

Committee on Sustainability Assessment - COSA

COSA is a global, neutral nonprofit advancing science-based systems for understanding, managing, and accelerating sustainability.

1 Blended simple average of all producing countries