Nespresso's 2020 goals aim at coffee-led sustainability evolution
Nespresso's 2020 goals aim at coffee-led sustainability evolution
Gathered in the heart of Milan for the latest of its sustainability advisory board meetings, the Nestlé Nespresso team is understandably excited. A year after the coffee brand formed its advisory panel — made up of the likes of Fairtrade’s Harriet Lamb and "brand ambassador" George Clooney — to help challenge and inform its business strategy, the company has emerged with a new set of 2020 goals and a snappy new name for the latest incarnation of its sustainability strategy: The Positive Cup.
First up, it will source 100 percent of its permanent range of Grand Cru coffees “sustainably” using its now-established farmer-training program and rolling it out wider across Africa.
Secondly, it will expand the capacity for collection of used aluminium capsules it uses for its coffee pods to 100 percent, wherever it does business.
And thirdly, it will become carbon neutral, using "carbon insetting," a fairly new concept that will see an extensive agroforestry program rolled out within its own supply chain.
The goals are ambitious in scale, as well as in investment. Nespresso is allocating $536 million to fund a range of projects, $16 million of which will be spent on developing its AAA Sustainable Quality Program in Africa.
So, let’s look at these goals in more detail.
Borne out of Nestlé’s Creating Shared Value philosophy, Nespresso began its sustainability journey in 1991. But in recent years there has been a clear recognition of the need to partner properly and build up the competencies of those operating further along the supply chain in the coffee-growing fields.
In 2009 it began to focus its efforts on tackling the big three challenges that headline this latest announcement. It said that by 2013, it would source 80 percent of its coffee from AAA-certified farms; it would offer 75 percent collection capacity to support its recycling efforts; and it would reduce its carbon footprint per cup of coffee by 20 percent. It achieved all three targets on time, hence the desire to move even further.
Education, education, education
The AAA program, developed in partnership with the Rainforest Alliance, has been a useful tool for Nespresso. It demands the highest quality coffee to be sourced year after year and it recognizes its suppliers have a number of growing pressures. There is pressure to maintain demand. Just 2 percent of the world’s coffee meets the company’s standards, and it sources just 1 percent of that 2 percent. There is pressure from a changing climate and more disruptive weather patterns. There are pressures associated with an aging population of farmers and an absence of a new generation coming through, as youngsters opt for jobs in the city instead.
“We improve the wellbeing of farmers as well as the quality of the product at the same time,” Karstan Ranitzsch, Nespresso’s head of coffee, told the group of journalists arranged inside the swanky downtown Milanese hotel the business chose as a backdrop for sharing its updated story.
Yes, the program educates and trains farmers to make better use of their land. But it also ensures the farms have the right conditions for supplying Nespresso for the long-term. Extra trees are planted to offer the shade required by plants that will produce signature taste and aroma associated with the Grand Cru range of coffees, for example. “It’s about improving things for the farmer step by step,” Ranitzsch said. “We systematically work with farmers to support them. Many of them have no reading or writing skills, so we take them by the hand — convince them of the risks and enable them to help themselves. This is not about hand-outs; it’s about helping them year after year.”
Since 2009 the AAA program has been rolled into eight countries and supports around 60,000 farms in places such as Costa Rica, Brazil and Colombia. It helps farmers achieve high-certification standards in areas such as water management, biodiversity and fair treatment of workers. And these farmers are being paid well, too. “We always pay above market average,” said Ranitzsch.
Underpinning this work are two important partnerships. The Rainforest Alliance provides the means to certify the farms in question. Tensie Whelan, the organization’s president, describes Nespresso’s approach to farmer welfare as “cutting edge” and she’s understandably excited by the company’s commitment to increase the amount of Rainforest Alliance-certified coffee to 50 percent in the coming years. “It’s an important next step in our collaboration and will provide further assurances to consumers that the coffee they are buying is having a positive impact,” she said.
Meanwhile, the partnership with Fairtrade has been crucial in making sure the loyalty rate of farmers continuing to supply Nespresso is maintained (currently around 90 percent). This latest strategy announcement includes a program known as the AAA Farmer Future Program, designed to offer farmers a retirement fund and a greater incentive to stay in the business.
Working with the Colombian Ministry of Labor and a number of coffee cooperatives, Nespresso has initiated a new public-private partnership in Caldas, Colombia that will provide a retirement fund to coffee farmers who take part in the AAA program. The farmers receive a contribution of 20 percent of what they have saved for their retirement by the Colombian government on a yearly basis.
It’s an initiative made possible only by the trust that has been developed in the region by the company. The multi-stakeholder approach to its training program and work over the last 10 years in Caldas has created the right conditions to launch a pilot. If it’s successful, no doubt it will be replicated. Of course, it leans on Fairtrade’s efforts on the ground to work closely with the local cooperatives to ensure collective results and make sure the farmers start planning for their retirement. The aim is to get 800 farmers signed up to the program during 2014.
“Farmers selling to Nespresso now have the option to invest Fairtrade Premiums in this first-of-its-kind retirement fund,” said an excited Harriet Lamb, CEO of Fairtrade International. “It’s good news for the farmers — whose average age is over 50 and who face an uncertain future — and one way to help protect the future of coffee in Colombia by offering better, long-term prospects.”
Expanding the AAA program
To reach its target of sourcing 100 percent of its coffee from certified sources, Nespresso knows it must expand its AAA program. A large proportion of the committed $532 million will be used to do just that, in Ethiopia and Kenya.
The business has been buying coffee from East Africa since 1998. But supply here presents multiple challenges: Farmer poverty, a lack of investment in coffee quality, environmental degradation. In Kenya, the largest producer of washed Arabica coffee in Africa, a worsening environment and demographic changes have resulted in production falling by about 20 percent over the past decade.
And there is also a real lack of an established infrastructure to drive shared value throughout the supply chain. Almost all coffee traded in Ethiopia and Kenya passes through a commodity exchange or auction system, hindering the establishment of direct relationships with farmers at farm level, which is such a key component of the AAA process.
Working with its partner TechnoServe, the business hopes to improve coffee quality and sustainability at farm level, bringing more cooperatives on board.
In regions where 100 percent coffee traceability is not feasible, the partners are exploring alternatives such as washing stations and private farms, to engage new coffee farmers. In Ethiopia and Kenya, the overarching goal is to reduce poverty among 200,000 smallholder coffee farmers by helping them improve yields and market access to the AAA supply chain.
The commitment is not insubstantial; Nespresso will invest more than $10 million over six years to address these challenges.
But the sustainable coffee strategy also involves entering new markets. Initiated by discussions with Clooney — who has a vested interest in the goings-on within South Sudan — Nespresso is pressing ahead with plans to bring a thriving coffee industry back to the war-ravaged region. But it’s not for the faint-hearted.
In 2011 it became the first major coffee company to re-enter South Sudan. And it was delighted to discover high quality coffee there.
The company’s two-year upfront investment of around $748,000 since then has demonstrated the potential for commercial coffee production in the country. About $4.26 million will be invested in the next few years to revive the industry, which was wiped out during the civil war.
This year, around 10 tons of coffee was exported. (Over dinner, we lucky journalists were treated to a first taste.) And although transporting this small amount of product out of the country was no mean feat (with poor roads and the threat of being attacked), Nespresso is “pleased with the progress.”
TechnoServe soon will run a security assessment to determine if their team can go back into the country to provide support to farmers for the 2014-2015 harvest. The idea is to pay local farmers directly for their coffee upon delivery — an incentive the company hopes will increase the number of farmers selling their coffee and increasing volumes. The goal is to double the amount of coffee meeting Nespresso quality requirements in 2015.
The two organizations hope to leverage the initial two-year investment in South Sudan to attract more funding from private and public donors so that they can scale up their efforts between 2016 and 2020 and reach around 9,000 farmers.
TechnoServe will run a security assessment in South Sudan to determine if its team can go back for the next harvest.
This is a long-term strategy. Unlike Ethiopia and Kenya, the South Sudanese industry needs complete rebuilding; trees need to be replanted and smallholder farmers require basic access to inputs and technical support. The infrastructure to support coffee commercialization needs to be developed. No marketing channels exist, for example.
But Nespresso is committed to make the project a reality, not least because it is keen to give its customers a new product; the chance to taste something new and exciting. And it’s a risky project. But it is one that has huge positive implications for the country. South Sudan is heavily dependent on oil and foreign aid, and coffee would be its first major agricultural export, providing income and security for thousands of farmers and their families.
What about those pesky pods?
Elsewhere, Nespresso is promising to tackle the recycling of its coffee-pod aluminum packaging — a facet of its business model not lost on many an angry environmentalist that bemoans its reliance on "over-packaged goods." To counter those complaints, sustainable development project manager Christophe Boussemart said the “biggest drinker of coffee in the world is the sink.” His point: that the pods offer the perfect portion and few cups of coffee end up being thown away as a result.
The truth is, said Boussemart, aluminum is the best option available to Nespresso. It keeps the product fresh, from farm to cup. And aluminum is incredibly recyclable. After it has housed coffee, it quite easily can be reprocessed and turned to anything from cars to construction products.
The challenge the business has is in ensuring its customers recycle the pods. It wants to give 100 percent of customers the opportunity to do so, by expanding its program of collecting pods at its range of stores or at partner sites.
However, due to the number of markets it operates in, it has no idea how its pods are being recycled or whether, indeed, they actually are being recycled. It’s a challenge and Boussemart accepts that he hasn’t quite figured that bit out yet. Wouldn’t it be great if all of Nespresso’s pods were collected and turned back into Nespresso pods? Watch this space, I’m told.
In the meantime, it will source 100 percent of its virgin-aluminium capsule material compliant with the new Aluminium Stewardship Initiative standard, being developed within a multi-stakeholder program led by the IUCN.
What is ‘insetting,’ anyway?
The final part in the jigsaw is Nespresso’s desire to become carbon neutral, but not in the traditional sense. It has worked hard to reduce its in-house impacts, reducing its carbon footprint per cup of coffee by 20 percent since 2009. But recognizing the need to tackle the climate impacts along the supply chain, it wanted to do something different.
Step forward Pur Project, an organization that is helping the company protect, regenerate and improve the ecosystems and communities where it is working — in this case, the coffee fields.
Pur Project does this through an agroforestry program. The impact of climate change and the degradation of natural ecosystems, combined with the volatile socio-economic context, are a threat to the wellbeing of coffee farming communities and the long-term supply of high quality coffee. Equally, coffee agriculture impacts the landscape beyond farm borders and becomes a threat to the global environmental sustainability (think soil erosion, water pollution, carbon emissions) if it is not properly managed.
The agroforestry approach enables the regeneration of the native environment of coffee while enabling agricultural output. It is based on the fundamental observation that trees and crops interact and create positive benefits for the farmers and more generally the landscape, such as creating more diverse, productive, profitable, healthy land-use systems aligned with natural cycles.
Again, using this injection of cash — and its partnerships with both Pur Project and the Rainforest Alliance — Nespresso will offer farmers technical assistance to implement agroforestry practices, free plantlets produced locally and a cash incentive per tree planted.
Not only will the program help to protect and restore natural ecosystems and regulate water availability by limiting evaporation and soil erosion, it also will enhance soil fertility and generate economic benefits for the farmers thanks to crop diversification and carbon certification (if that’s the route they choose to go down).
By implementing some of the measures outlined by agroforestry, coffee production can be increased by 30 to 200 percent, according to the company.
Nespresso kicked off a pilot scheme in the Huehuetenango region of Guatemala last year. Two on-the-ground technicians have started providing assistance to 150 farmers, and 50,000 timber and fruit trees were delivered in June. The pilot cost $161,000.
The next step will be to expand the pilot to Colombia later this year to reach 200 more farmers. The company will spend more than $245,000 to plant 80,000 trees.
Nespresso wants to have planted 10 million trees in the AAA value chain by 2020. That would be enough to inset — where carbon compensation integrates socio-environmental commitments at the heart of the companies’ business activities and networks — the company’s residual operational carbon footprint and become 100 percent carbon neutral.
Like many commitments outlined, it’s bold and ambitious. And the large investment suggests Nespresso is seriously committed. “Our approach has always been designed to do more than simply minimize impacts,” said the company’s CEO, Jean-Marc Duvoisin. I look forward to seeing this one unfold in the coming years.