How to assess impact at origin?
Last week I asked whether it is better for roasters and importers to reinvest at origin individually or collaboratively. Those who do choose to reinvest at origin may ask the same question when they are deciding how to assess the social return on their investments.
The individual and collective approaches to impact assessment are not mutually exclusive. They answer different questions and may be used together.
Understanding impact: What is my (S)ROI?
When roasters or importers invest their hard-earned profits at origin, whether it is to improve coffee quality, reduce water pollution or alleviate seasonal hunger, they will naturally want to know what kind of financial, social or environmental returns those investments have generated. If these are competitive investments made by a single company within its own supply chain, it makes sense that the company will go it alone in its efforts to measure the impact of those investments.
Understanding impact: What is our (S)ROI?
When companies invest collaboratively — a rare occurrence, perhaps, but an idea that may be gathering some momentum — then assessing the impacts of those investments will also be a collaborative affair.
These assessments generate information that companies can use to increase the returns on reinvestment at origin: investment managers will analyze the assessment data and modify their approach to improve the performance of future investments.
Benchmarking impact: How does my initiative compare with others?
Assessing the impacts of your own reinvestment at origin can tell a company how it is doing against its own performance targets. But if companies that invest at origin want to know how their reinvestment portfolio is performing vis-a-vis those of other companies, they need to act collaboratively, even if they are investing individually. They need to share their data with others — preferably a neutral third party that is technically qualified to conduct assessments, widely trusted and without any commercial interests of its own — so that the performance of their initiatives can be compared with other, similar initiatives using a single set of criteria. This approach would help to identify the most effective reinvestment strategies and generate recommendations for further improvements.
For competitive issues that represent sources of competitive advantage in the marketplace — like coffee quality — this approach to impact assessment may be problematic. Companies are likely to see more risk than reward. Risk that the innovative approaches to reinvestment that have contributed to their market success will be widely emulated. Or risk that their approach is demonstrated to be less effective than a competitor’s. Or not effective at all.
But for “pre-competitive” investments — access to the food and water that farmers need for a sustainable livelihood, or the infrastructure they need to enter the specialty coffee market — there may be more room for collaboration and transparency.