Selling Sustainability
I read sustainability reports. Coffee industry, mostly. A lot of them. And when there isn’t a formal report, there are sustainability communications of some kind: A webpage outlining values and ‘ethical sourcing standards’, lists of various certifications, affiliations, and projects at origin… There are videos, too. Got to love a good coffee-origin video.
In my former role as the B2B partnership director for World Coffee Research (WCR), in order to evaluate the likelihood that an organization would invest in us, I needed to understand where they were on their sustainability journey, the extent of their investments, and the motivations and rationales behind them. Once a new partner joined the WCR effort, I worked with marketing people, PR departments, and — to a lesser degree — sales teams, providing messaging, talking points, and photos. This has given me a ‘point in time’ understanding of the state of sustainability communications in the coffee sector, and how marketing and PR are attempting (or not) to utilize this to sell more coffee.
Throughout the coffee supply chain, people are making impressive, inspiring efforts to support producers and the environments in which coffee is grown. Frankly, I don’t think there’s another industry that even gets close. Because farm-gate traceability and the producer relationships that result add value to the end product, market forces are connecting increasing numbers of producers with roasters. Perhaps it’s this physical proximity between roasters and producers that is driving a powerful, human, highly motivating, and empathetic response. It’s one thing to talk about the plight of poor coffee farmers in the abstract and quite another to meet the producer herself, break bread with her family, and strive to understand the context that is her community and her hopes for the future.
And yet, it will shock exactly no one when I say that ‘greenwashing’ is alive and well in coffee sustainability communications. Green suppliers frequently use their sustainability offerings to gain a competitive advantage and to differentiate themselves from competitors. When sustainability falls squarely into the remit of marketers, it’s inevitably going to be someone’s job to put a positive spin on things. Who are the intended audiences of sustainability communications? What are the objectives of the various webpages, videos, and reports? And what is it about these communications that contributes to the ‘green sheen’ we see? Before we examine these questions more closely, let us first cast our eye briefly over the history of corporate sustainability.
The rise of CSR
‘Sustainability’ is a term in ubiquitous use among contemporary roasters, green suppliers, and producers, but it was not always so. In the 1970s and ’80s, the accepted point of view on sustainability and business was driven by the research of the Nobel Prize-winning economist Milton Friedman, who concluded that the valuation of a company should be based almost entirely on the bottom line. His research and influence provided an acceptable academic basis for the argument that the costs of conducting business ethically usually cost more than they would ever return to the business.
Since then, a growing body of research and data analysis has begun to tell a different story. John Elkington’s seminal publication, Cannibals with Forks: The Triple Bottom Line of 21st Century Business, highlighted a cluster of non-financial behaviours that significantly influence financial performance over time. Elkington coined the phrase the ‘triple bottom line’, which added environmental and social factors to the valuations typically found on profit/loss statements and balance sheets. As sustainability performance came to be correlated with positive corporate financial performance, often exerting a positive impact on recruitment and brand reputation, old-school assumptions about the financial impact of sustainability came increasingly to be challenged.
In Fortune: 100 Best Companies to Work For — a book based on the Fortune magazine column of the same name — Robert Levering and Milton Moskowitz compiled a list of the companies that follow the best corporate social responsibility (CSR) practices in the United States, based on a comparative analysis of their financial performance. Soon after, Alex Edmans, a finance professor at the Wharton business school, published a paper in the Journal of Financial Economics that stated that the ‘100 best companies to work for’ outperformed their peers in terms of stock returns by 2–3 per cent per year in the period 1984–2009, exceeding analysts’ expectations.
The prevailing belief among contemporary investors and corporate board members was captured in a statement from the Principles for Responsible Investment, a UN-sponsored network of investors: ‘Failing to consider long-term investment value drivers — which include environmental, social and governance issues — in investment practice is a failure of fiduciary duty.’
At the turn of the 21st century, corporate sustainability performance was a new data point that was rapidly gaining weight and significance among individual and institutional investors, while over the following two decades, ‘sustainability’ has gained as much heat and momentum as our warming climate. The notion that sustainability adds tangible value has transcended investor relationships and become a permanent fixture in business-to-business and business-to-customer sales, communications, and branding.
Sustainability in business
Sustainability rating agencies abound in the investment world. Publicly traded companies are repeatedly asked to fill out or verify info in this or that sustainability survey, and big retailers in turn send out surveys to vendors. However, there is an important difference between the needs and objectives of investors and those of wholesale and retail customers. Investors like to draw links between sustainability and higher financial performance, but the latter is not what a green supplier is selling to a roaster, or a private label roaster to a retailer, or roasters and cafés to individual consumers; rather, private labels and consumers are looking for impact on the ground. They want to harness their business activities and purchases to create a better world. The investor, on the other hand, is looking for that 2–3 per cent financial performance bump and is not particularly concerned whether that increase comes as a result of improved talent acquisition and retention, rather than sustainability values or programmes. While the wholesale and retail customer both want impact, they often don’t have the time or expertise to evaluate a ‘theory of change’ or enough context to make sense of the myriad sustainability issues at play in various growing regions, let alone critically evaluate those efforts for their real or potential impact.
Generally speaking, roasters do not understand the complexity of the coffee supply chain at origin. Roasting is manufacturing, and one can become a successful roaster without knowledge of sustainability practices at origin — the critical knowledge required to be a successful roaster, including procurement, roasting, marketing, and sales, has little crossover with the pre- and post-harvest services and support that producers require to be sustainable: Quality plant material from nurseries, best-in-class agronomy, farm economics and market knowledge, cooperative governance and efficiency, wet and dry milling, and the complex and sometimes ad-hoc systems farmers utilize to get their crop to market and get paid.
This prompts the question: Who is the intended audience for sustainability communications? It is rarely the retail consumer. Although the largest roasters may employ full-time sustainability professionals, it’s procurement managers who make most of the decisions. On the one hand, this makes sense in that in a roasting business, it is the procurement team that is closest to origin, but on the other, it’s problematic because procurement managers are evaluated based on their ability to control costs, and the needs of cost control and sustainability often run counter to each other.
Giacomo Celi, the sustainability director at Mercon Group, gave the matter an insider’s perspective in an interview with Standart: ‘One of the performance objectives of procurement managers is the price of coffee; they are evaluated based on the cost savings they can negotiate. Since sustainability is becoming a norm in the market, procurement managers are following the same logic as they do when they source sustainable coffee. Short-term objectives do not fit with long-term development in coffee origins, but for coffee farmers, sustainability is still a long-term investment; we are not there yet. Now is the time to build a better coffee world because in the future, sustainability may be sold without a premium, and non-sustainability at a discount.’
Given that sustainability challenges vary greatly from country to country, it is not enough to perform a few origin trips to each growing region in the world. One of the reasons why roasters tend to struggle to talk about the sustainability that lies behind their brands is because they don’t understand the complexity of the problem. Although pre-Covid procurement managers were often the road warriors of their teams, as Falcon Coffees CEO Konrad Brits told Standart, ‘for roasters, the supply chain structure is a fraction of their responsibilities. They may need to visit multiple supply chains across numerous origins throughout the year. As their green coffee suppliers, our role is to organize and facilitate these trips to provide the greatest value. They’re our clients and we are there to educate, but we’re also there to look after them and ensure that they don’t get sick from the food or water and that they have a rewarding and valuable experience. There’s only so much time on each trip, so we — as everyone else does — emphasize the aspects of our supply chain that illustrate our strengths.’
Roasting and selling coffee is a sizeable task and more often than not, roasters are content to work happy in the belief that others are addressing the sustainability issue. It should not be surprising to learn that most B2B sustainability communications are designed to inspire trust. However, given the limited attention that busy professionals can spare, green suppliers are frequently unable to share more than the tip of the iceberg. The best they can do is make it clear that there are myriad sustainability values and behaviours that lie below the surface and are far more substantial than a report or webpage can convey.
‘It’s very hard to communicate what we’re doing’, Alejandro Cadena, the co-founder and CEO of Caravela Coffee, told Standart. ‘We do so many things. Where do we start? Our sales team must be able to offer the famous elevator pitch in one–two minutes. Of course, we focus on quality, but we are also concerned about sustainability, transparency, traceability, and long-term producer relationships, bit what we have found is that you have to choose one of these.’
Brits again: ‘The Falcon website is visited almost exclusively by existing clients whose relationships we have forged already. The projects highlighted on the website show a dimension of our sustainability endeavours that isn’t typically communicated during routine interactions. For example, one customer told me that the Falcon supply chain supports her brand equity. She said: “Buying through Falcon supports the ethos of our company and brand. My entire supply-chain ethos is aligned with this relationship.” That’s the ideal in terms of how our clients view our role and value.’
Selling sustainability to a customer is different to selling it to an investor, and most organizations that include sustainability efforts as part of a sales pitch are ultimately saying: ‘Trust us. We’ve got this handled.’
Greenwashing
The term ‘greenwashing’ was coined in 1986 by the environmentalist and researcher Jay Westervelt in an article on the growing ubiquity of placards in hotel bedrooms that bear a message to encourage guests to reuse towels. Westervelt’s point was that these hotels make few or no other sustainability efforts, and that this strategy was simply designed to strengthen the perception that they are an eco-friendly brand to increase profits.
An accusation of greenwashing might put professionals who carry the word ‘sustainability’ somewhere in their job titles in mind of the saying ‘No good deed goes unpunished’. A substantiated accusation of greenwashing can erode trust, tarnish brands, and negate years of work and financial investments. Although misleading claims about sustainability are common in many industries, those that extract resources from developing countries are just as likely to be accused of human and/or environmental exploitation. Cadena says: ‘I think that procurement managers are starting to look more closely at reputational risk, especially those from the bigger brands. Initially, they dig deep inside your model and ask a lot of questions. They want to know your child labour standards, your code of conduct … these big players know that it can be risky to buy coffee from smaller players and certification — which is not our main focus — is believed to be a hedge against reputational risk.’
Löfbergs, a large Swedish roaster that runs five coffee brands and private-label roasting for corporate entities such as McDonald’s and IKEA, has a long history of involvement with certified coffee. In addition to conducting precompetitive sustainability projects with the International Coffee Partners collective and managing competitive projects within its own supply chain, Löfbergs remains bullish on certifications; it is one of the largest purchasers of organic and Fairtrade-labelled coffees in the world, and will buy more than ever this year. Eva Eriksson, the director of quality and sustainability at Löfbergs, knows a thing or two about maximizing sustainability value from this strategy, and shared her take with Standart: ‘Not all cooperatives are equal in terms of how they use the Fairtrade premiums. In the right hands, Fairtrade can be an effective way to increase the economic and environmental sustainability of cooperatives and their members and over the years, we have learned how to leverage that investment for impact.’
However, if half of all sustainability dollars are spent on certifications and a key objective is reputational risk mitigation, the recent Nespresso child labour scandal — Nespresso was found to have been buying coffee from Guatemalan farms that employed children — brings into question just how much protection coffee certification provides. In response to the outrage that resulted, Nesspresso CEO Guillaume Le Cunff said in a press statement: ‘We work with Rainforest Alliance and Fairtrade International to reinforce good working practices and fair treatment of workers, including education on the risks of child labour. In fact, all of the farms in the cooperatives in this region of Guatemala are Rainforest Alliance and Fairtrade certified.’ In its 2016 survey, the Global Coffee Platform estimated that the industry as a whole spends over $350 million annually on sustainability; more than half of this was premiums on certified coffees. According the Specialty Coffee Association, this investment represents 2.25 per cent of the total value of green coffee.
Whatever its weaknesses, the certification system has made sustainability communications easy. Sustainability in the coffee industry could be summarized as the percentage of coffee a roaster sells that is certified. However, a widespread dissatisfaction with the uneven results certification has delivered and the weak contribution certification has made to brand differentiation drives many roasters and import/exporters to draw attention to their own sustainability projects: training for farmers; the construction of wet mills; micro financing; bird-friendly shade-tree planting; and river-saving bioswales that rejuvenate the soil and ensure that streams do not get so contaminated so as to damage the health of livestock that rely on them for water.
It is important to examine whether these projects ever reach such a scale that they impact a growing region, or even a single supply chain of a specific roaster, and whether their existence is motivated by specific issues of sustainability, rather than by the interests, needs, and priorities of the roasters paying for them. All of us who make up the speciality industry should pause to consider whether we have explained sustainability sufficiently well so as to promote a general understanding of its relevance and importance, and resisted the temptation to engage in vague and generic hand-waving about the number of poor smallholders our industry has helped. Information and reports about results and impacts need to be backed up by heavy-hitting, data-driven analyses. Narratives and stories are a useful addition to qualitative programme descriptions — after all, what is marketing, if not the stories we tell? — but a narrative is not sufficient for those of us who prefer to come to conclusions based on quantitative assessments.
Cadena again: ‘Our sales team has found that the main differentiating factor is not the traditional pillars of sustainability, traceability and transparency, or even quality; many firms claim to offer this. What’s really important here is what we’re doing with our PECA team on the ground to be able to source consistently high-quality coffee, today and tomorrow.’ Caravela’s PECA programme is a team of 45 educators in seven origins regions who every year train approximately 2,000 producers and their families on the best practices to employ to increase profitability through increased productivity and quality.
‘Many multinational green suppliers also engage in farmer education and quality assurance, but the issue is quantitative. At Caravela, we employ 45 agronomists who serve 4,000 farmers, while a competitor might employ 100 agronomists for a half million farmers. We both inform customers about the technical support we provide our producers, but the level of support each farmer receives is not even close to being equal.’
If we are to go by what Wikipedia tells us, greenwashing is a concept developed from ‘whitewashing’; it is a form of marketing spin whereby green values are deceptively employed to persuade targeted audiences that an organization’s products, goals, and policies are environmentally friendly and therefore ‘better’. I’ve yet to meet a marketing department that is out to deceive anyone. Truly. Sustainability projects are often successful; farmers do receive training; the wet mill was built; the once-polluted river now runs clear. From these successes come the stories, which can be inspiring, hopeful, optimistic, interesting and endearing; they can increase the loyalty of customers and embellish brands. Narratives illustrate the work being done on the ground in a way that cannot be captured with charts and graph but unfortunately, these only represent one side of the coin and without the proper context with which to evaluate them, their real impact will remain elusive.
Most greenwashing in coffee sustainability communications is unintentional. It demonstrates a disconnect between the primary objectives and responsibilities of marketing and brand management and an appropriate understanding of regional coffee growing conditions, material sustainability issues, and knowledge of how to perform critical assessments of the tools at our disposal to address these issues. The objectives of marketing and brand development often ensure that firms fail to provide the context or explicitly describe the problem a sustainability effort is designed to overcome. We might be told about a roaster’s gender equity programme, but are much less likely to be informed about domestic violence among workers at origin; it is common to read about ‘premiums’ being paid to farmers, but we are unlikely to be given the context that the premiums reduce their food security from four months to two.
New initiatives
The Global Reporting Initiative (GRI) is an independent international standards organization established to help businesses understand and communicate their sustainability impacts. If a company’s report is to meet GRI standards, it is required to cover relevant matters that pertain to stakeholders; include appropriate context; address materiality thoroughly; and ensure that nothing is conveniently left out about the organization’s social, environmental, or economic impact, for better or worse. The GRI is the gold standard of reporting, but there’s a reason why only a few of the biggest players abide by this standard: The cost of doing so rivals an entire typical sustainability budget. For example, to adequately cover ‘materiality’, several employees would need to engage with a wide spectrum of stakeholders over several weeks and then disclose the findings, state how the stakeholders were selected, and clarify how the input was ascertained, weighted, and analysed. This complicated procedure is why many of the biggest names in coffee have abandoned GRI reporting altogether.
We should pause here to consider whether it is even possible to gather all the contextual data that would clearly define and weight the various sustainability issues that are commonly found at origin. Perhaps vague sustainability and impact claims are the inevitable result of limited data availability. Until relatively recently, there were simply no global datasets that could accurately describe producers’ economic, environmental, and social sustainability, at least not in a way that could be statistically extrapolated and compared regionally. Today, however, there is a growing body of baseline data on coffee producers from around the world that covers a range of material issues. Much of this data is coming from Enveritas, and it could change everything.
Enveritas was founded by David Browning, who has led coffee sustainability at TechnoServe for 13 years, and TechnoServe alumnus Carl Cervone, who focuses on the quantitative issues facing global smallholders. Enveritas may be one of the most disruptive yet positive forces for coffee sustainability we have yet seen. With its partners, Enveritas is collecting more data from actual farmers than ever before; its statistical analysis reaches a 95 per cent confidence level, with a 10 per cent margin of error.
Before Enveritas, the barriers to collecting this data seemed insurmountable. To report accurately about sustainability, one needs to know something about the farms where coffee is grown, but farm-level traceability — even cooperative-level traceability — only captures a small subset of the total arabica crop grown. If that level of traceability is a prerequisite for the development of a sustainability strategy and transparent reporting, then sustainability investments and their impact will be similarly constrained.
Enveritas’ statistical approach means that the various levels of traceability currently in place can be used to discover baseline conditions, diagnose problems, and unearth opportunities, which can in turn enable investments to be directed towards issues with the greatest potential of return for producers. To date, Enveritas samples roughly 50,000 farms annually and is statistically extrapolating that data to generate insights from roughly one-third of the global coffee farming population, approximately 4 million farms. The addition of Brazil to this roster means that Enveritas’ database represents about 50 per cent of global coffee production, and were it not for the fallout from Covid-19, they would be on their way to 100 per cent by 2021.
Speaking to Standart, Nicholas Kirby, the partnership manager at Enveritas, explained how it works: ‘Geographically, we try to find clusters of roughly 10,000 farmers, which is what we call a “supply unit”. It functions like a district. If we randomly select a sample from that population of 10,000, we need [a dataset] of about 120 to maintain the statistical gold standard of 95 per cent confidence, with a 10 per cent margin of error. We then further refine these “supply units” using machine learning, artificial intelligence, and other data sources such as satellite imagery to identify the specific locations of district farmers. For example, we can control for altitude, among many other factors. When this has been done, we make a random selection of farms for our field teams to visit in person during the harvest, when the sustainability risk is greatest. This large-scale data collection allows us to measure the reality on the ground in a way that has never been done before.’
And what can Enveritas do about traceability? Says Kirby: ‘If all you know is that a coffee comes from Ethiopia, we can aggregate all the data we have from Ethiopia into a single set of results. But if you happen to know it’s from four specific wet mills in Guji, we can use the data collected from those sectors in the immediate vicinity of those mills to represent the conditions in the communities that supplied the coffee you’ve purchased. And if you source from specific cooperatives, we can get a list of the farmers there and take a random sample.’
Green suppliers are service providers. When purchasing coffee, it’s not uncommon for roasters to request a certain cup quality, price point, attributes, and delivery dates, so when Enveritas engages with a new roaster, they are engaging that roaster’s entire supply chain. Kirby again: ‘Over the last few years, we’ve developed strong relationships within the industry. I ask traders, “When you tell your roaster the coffee comes from Huila in Colombia, do you work with the same wet mills there, or are your sourcing areas in the same municipalities?” Whatever additional info a trader has, we can use it to provide more granular data specific to those specific sourcing areas.’
It’s this level of analysis that yields the comparative data needed to evaluate and communicate sustainability. ‘If we know the specific cooperative you’re sourcing from, we can see how that group is doing in comparison to the surrounding region. Right away we can see the impact of farmer training programmes, certifications, investment, infrastructure, access to finance… It’s easy to see that long-term investments pay off over time’, Kirby says. And ultimately, isn’t that what we’re all looking for in sustainability communications? What’s working and what’s not? ‘Valuable insights are yielded along the way. You start to make helpful connections and realise, “Oh, the farmers in this group who are employing more sophisticated agronomy practices tend to be younger, have higher altitude farms, or have higher yields”.’
Today, an organization can claim to have trained thousands of farmers, but fail to communicate the impact of that training on incomes or quality. This isn’t obfuscation so much as it is a lack of data because the actual impact is not known; impacts will be vastly different, depending on whether ‘training’ refers to an agronomist making quarterly farm visits or a two-hour presentation. If the key performance indicator is simply ‘number of farmers impacted’, then the two-hour training session looks extremely cheap and effective.
Agricultural sustainability in coffee is still a young field, in terms of both programme development and communications, and brands that celebrate ‘100 per cent sustainability’ do so at great risk to their reputation. It is riskier than ever to get sustainability communications wrong by issuing vague statements, leaving out context or materiality, or trumpeting an impact when no data are available. It’s vital to understand that most sustainability efforts focus on increasing farming efficiency through the more profitable utilization of inputs (such as labour, land, and fertilizers) and post-processing strategies that increase quality. However, farming efficiency is only half the equation; the other half is the price that a producer receives at the farm gate. Green suppliers that can know farmgate prices and distinguish whether the price paid was for cherry, parchment, or green bagged coffee hold the keys to the other half of the equation.
Caravela, This Side Up, and Nordic Approach are just a few of the green suppliers that are pushing this level of transparency. Morten Wennersgaard, the founder/coffee buyer at Nordic Approach in Oslo, told Standart: ‘We want to showcase the reality of what farmers actually get paid for their coffee in the local currency. … We believe it’s important to communicate the notion of “farmgate” as a standard, together with an understanding of the supply chain. The goal here is to find ways to measure impact over time and to lead more people in the coffee sector to ask for those numbers.’
Selling sustainability is good and necessary, but if we value honesty and authenticity, we’ll need to accept that unpleasant realities might emerge. Coffee enthusiasts will not stop brewing their favourite cup, just because producers are struggling — if anything, the opposite reaction is more likely; but they want to know what sustainability drives they are helping to finance, and whether they should retain their brand loyalty.
Let’s tell the whole story. Let’s sell all the coffee.
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