[S4:E5] Weekly Coffee Report

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This week I discuss three articles that dive into sustainable coffee production, namely economic sustainability and what that means for the industry.

All three articles at Daily Coffee News

Mentioned in this episode

Improving Farmgate Coffee Prices

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The goal with the weekly coffee report is for me to share enough information about some articles to get you interested in exploring the topic deeper. These episodes are meant to be of low production cost to me and low consumption cost to you. And I’m talking mainly about the time it takes to produce and consume.

The three columns I’m covering this week by Cory Gilman are really good and I won’t do them justice with just a simple summary. But hopefully I can cover enough of the good points to get you interested in exploring the columns much deeper on your own.

The first of three articles is titled "It’s Time To Deconstruct Sustainability In Coffee". And it was published in the Daily Coffee News by Roast Magazine on August 17th, 2022. These columns were all three written by Cory Gilman.

The first column provides a definition of sustainability by defining what it is not and then by defining what it is along with its three commonly accepted dimensions or domains, and those are the economic sustainability, social sustainability, and environmental state… sustainability.

Here’s a quote from the first article. "There are countless claims, labels, stories, partnerships, press releases, and tools or indexes, touting sustainability in coffee. Often these claims surround one or more things organizations are doing to promote sustainability. These things might ensue might be installing solar panels on a roastery roof, facilitating agricultural trainings among farmers, focusing on certifications, donating money towards the school building, or simply repeating the sustainability claims of sus suppliers. Yet without concrete definitions and sets of unified practices or ideally outcomes to qualify sustainability coffee, this massive uptick in sustainability claims has rendered the phrase essentially meaningless.

She goes on to say "while there are certainly PR implications regarding sustainability. The concept is indeed practical, hinging on enduring viability through intentional investment in human and natural capital."

I’m going to focus on two concepts that she just mentioned in that last paragraph. One is enduring viability and the other is intentional investment. I’m going to come back to those two terms, but enduring viability is a synonym of sustainability and then intentional investment focuses on the fact that sustainability costs money. And it’s more than just ticking a box of some generic practice.

So the first article defines sustainability by defining what it is not, and it is not charity. Charity is quote, "donating to a cause, organization, or a project. It is generally hands-off straightforward and without commitment." So it is not an intentional investment.

Sustainability is also not corporate social responsibility or CSR. An example of CSR is when a coffee shop notices empty cups, littering the opposite park. Social responsibility. might entail weekly cleanup programs.

" CSR is often driven by an imperative to protect against reputational risk, which is why it’s often housed under a communications or marketing department and targets opinion- shapers like media and activists as its core audience." So CSR is a box to check for corporations to protect their reputation, to show that they are doing something socially responsible. But it’s not sustainability.

The article goes on to define what sustainability is, quote, "this is the big nebulous kahuna. In its simplest terms this is a comprehensive approach to ensuring the business can continue its existence, i.e., sustain itself, while maximizing long-term value for all stakeholders."

And the following paragraph is in context of the business. "Sustainability is centered around materiality, encompassing the entire value chain from procurement to operations to consumers. Thus if sustainability is housed in your marketing department, which it probably is, it’s time to reevaluate."

So to summarize sustainability is systematizing policies and practices to achieve tangible outcomes. It is forward-thinking and future oriented. And it hinges on enduring viability through intentional investment in human and natural capital.

The article goes on to break down the three dimensions to sustainability: environmental sustainability, social sustainability, and economic sustainability.

And Cory states in the article, "this dimension economic sustainability, is when I’m personally most invested in, particularly because it is often the most neglected. Especially when it comes to sustainable sourcing."

So that brings us to the second article titled "What Is Meaningful Economic Sustainability In Coffee?". It was also produced in Daily Coffee News by Roast Magazine.

And that article discusses the fact that social sustainability hinges on the product or service being a viable source for livelihoods.

One of the quotes I pulled from the article was "experience and more importantly, farmers directly, tell us that essentially all the dimensions of sustainability including economic and social components, hinge upon agricultural products, being a viable source for livelihoods."

She continues to say, "as any entrepreneur knows profitability is the means through which other impacts and initiatives can come to life, while a lack ah, lack of profitability carries the opposite effect." So remember from the first article she talked about intentional investments and that’s what profit is used for.

She goes on to say "if the basic farm economics don’t net out, meaning the efforts required to produce and sell coffee, eat up all reasonably available time and resources yet still don’t result in a proper payoff, then further investment is a nonstarter."

So, if you have a farmer who is unable to make ends meet, you’re not going to fix the solution by coming to them and saying, "I’ll pay to rejuvenate your farm. I’ll pay to rejuvenate that specific plot over there" …because the basics of the business aren’t being met.pathways This is something I touch on in my article titled "Improving Farm Gate Coffee Prices." And in that article I state "not all impoverished farmers can succeed in integrating into globalized value chains. In those cases where they can’t, they should focus on local markets. Or they should be assisted in alternative pathways out of poverty; from shifting out of the coffee industry entirely or even migrating when possible. As a coffee professional, I don’t necessarily want to see someone leave the coffee industry entirely. But if it also means leaving poverty behind, then it’s the right choice."

Remember the goal is enduring viability of the business as a source for livelihoods. If the coffee farmer can’t make ends meet we need to revisit the basics of business.

Here’s another quote from Gilman from her second article: "the poverty cycle dictates that investing in longer term future forward shifts when current compensation is inadequate, simply to make ends meet in the present, is impossible."

In other words, if the business is struggling to get by that means there’s nothing left over to invest in the future. Nothing to invest in the sustainability, or the enduring viability of the business.

For coffee farmers, a struggling business could mean keeping plant stock for too long and having to deal with ever decreasing yield and increased disease incidence on the aged trees. It could mean reducing or even eliminating fertilizer use to cut costs. But that reduces yield. And this all means that there’s a downward spiral that’s impossible to reverse without investment money.

Going back to the article; quote, "ensuring sustainable economic returns should be considered a precondition or essential infrastructure when considering all other initiatives."

The article talks about short-term returns, disincentivizing long-term sustainability. And this is something that I find important. And we need to understand upstream of the farmers. Here’s a quote from the article. "Growing coffee under a tree canopy is critical for a host of ecosystem services such as carbon sequestration, micro climate control, biodiversity, soil health, nutrient cycling, water usage, mitigation of agrichemical usage and associated pollution and runoff, as well as resilience to disease and pests. However such cultivation can inherently limit output." And this is because. When you grow up plant in the shade, it’s not going to get as much solar energy to be able to produce fruit and flowers then it would, if it were in full sun, Now the downside of full-sun production is. When those trees get all that solar energy they need more inputs as far as fertilizer. So when you’re growing full sun trees, you need to increase your nutrient application and that’s costly.

So what she’s saying there is that basically, shade, grown coffee is an opportunity cost. Where you to grow that those same trees in full sun, you’re going to get a higher yield, but you’re also going to have to pay to increase your nutrient application.

The article also mentions low economic rewards for sustainable production. Here’s a quote. "The predominant price structures for sustainable coffee are heavily reliant on voluntary sustainability schemes or VSS where price premiums on top of the C market price are provided when certifications are met. Unfortunately, in many cases, even prices with attached premiums for certification don’t adequately compensate farmers for the increased cost of compliance."

And that’s something that came up in the World Coffee Producers Forum in 2017. I tweeted about this at the time. One of the producers in a Q-and-A session stood up and said, ‘growers don’t see financial benefits of sustainable coffee’ and the room erupted with applause from that statement. So it shows that the farmers are bearing the brunt… often the farmers are bearing the brunt of the sustainability programs. And. They’re not able to get that cost passed on down the line to their buyers.

The third article in the series is titled "Coffee Is Life. It Should Also Be A Living." and this was also published by Daily Coffee News by Roast Magazine.

In this article Gilman talks about living incomes and living wages as benchmarks.

And according to Heifer International, who Gilman works for; "both living incomes and living wages must fulfill adequate provisioning of the following: number one, a nutritious diet number two, decent housing number three, uh, other basic necessities, including education, healthcare, transportation, clothing, communication, and cultural events, and also unexpected costs."

Now we have to tease out the difference between living wages and living incomes, living wages are most applicable to farm workers. So think about daily workers that show up to pick coffee. Versus the living incomes, which pertain to farmers and it represents their annual net revenue. So the living incomes go to the business owners, living wages, go to their employees.

Now, my experience has been that those lines are often blurred between farmer and worker. I often saw farmers who owned land and had their own plots of coffee go and pick coffee from… for other farmers for extra money. And this. To me illustrates. The severity of the situation. If you have a land owner who has his or her own coffee plots and yet they aren’t able to make ends meet without going and becoming day labor for another farmer, there’s an issue.

Now going back to the article, she closes it with this statement in part: " coffee must facilitate living incomes for farmers. That critically means accounting for workers, living wages and production costs. While there are certain production improvements and farm level business oriented shifts that can support this, it will really entail re slicing the whole pie into more equitable sizes."

the key takeaways I see from these articles are number one; viewing sustainability as a business’s enduring viability through intentional investment number one. Number two; treating the family farm as a business. And then number three; remembering that the coffee supply chain is a complex system of inter- and intra-dependencies.

This is Michael with Oil Slick Coffee. And this was the weekly coffee report. Thank you for listening.