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39. Climate change and the “core business model”

The term “business model” is just a fancy way to refer to the way companies make money.  In my experience, people usually add the modifier “core” when the company is focused on making money more efficiently and shedding all kinds of expenses that don’t contribute mightily to that goal.  So when Ben Corey-Moran of Thanksgiving Coffee told me last week at SCAA the company would be focusing more on its “core business model” moving forward, I was deflated.  After all, this is the company that brought you the Pearl Project, The Coffee Cupper’s Manifesto, Mirembe Kawomera, and so much more.  Ben went on to explain, however, that the company’s concept of its core business model includes innovative partnerships with NGOs in East Africa to create incentives for effective climate change mitigation and adaptation.  Turns out that the concept of the core business model in the coffee industry may be evolving.

For many years, the the specialty coffee industry seems to have embraced the idea that the roaster’s core business model should be driven by product differentiation, especially on the basis of quality.  Investment — through Coffee Quality Institute, quality-obsessed roasters, development agencies and other channels — has flowed to origin in massive amounts to upgrade infrastructure and post-harvest processes and raise coffee quality.  The approach has been successful as far as it goes — anyone who has been a specialty coffee consumer during that time has tasted the results of that investment in the form of more truly extraordinary coffees in the marketplace, and many farmers have benefited from quality premiums.

But I see the quality-driven business model from the perspective of the coffeelands, where coffee quality isn’t necessarily the most imminent threat to vulnerable smallholder farming families.  From here, issues like food security, climate change and access to clean water, to name just a few, all seem like urgent threats to a family’s survival, to say nothing of their ability to produce lots of high quality coffee for the market.  To my way of thinking, this makes these issue part of coffee roaster business models.

As it turns out, this is precisely why Ben and Thanksgiving are focusing so much energy on climate change.  They see it as a direct threat to the “long-term viability of production” of fantastic coffee — a pretty central part of how Thanksgiving (or any coffee company, for that matter) makes its money.

The company has focused its efforts in this area initially in the context of its partner relationships in Rwanda, where it feels that farmers are more vulnerable to the impacts of climate change than anyplace else in the company’s supply networks.  Thanksgiving is partnered with a grassroots NGO there that is conducting climate change mitigation contests, awarding a cow to the farmer in each village who makes the most progress in the mitigation strategies that the communities themselves developed, which include improving shade cover and diversifying coffee fields with nitrogen-fixing legumes that improve soil quality and introduce additional high-protein food into the family diet.

Thanksgiving was involved in some of the pioneering investments in coffee quality at origin — investments that strengthen the coffee chain and improve the profitability and quality of life of everyone involved.  It has applied that same standard to climate change and is pushing forth into the considerably more uncertain fields of mitigation and adaptation not as charity, but as a way to protect core business processes and current profit margins. Here’s hoping for more hard-headed business decisions like this one in the industry in the months and years to come.

1 Comment

  • dean cycon says:

    Hi Michael. I thought I would share with you how we have been addressing the climate change issue (see my article on “coffee as a casualty of climate change” on alternet two years ago). In a nutshell, we have been incorporating climate concerns into our supply chain management. So rather than the farmers being the passive recipients of dubious programs like buying up their “carbon credits” (a scam started by large utilities twenty years ago – look behind the label!), we have a program that starts with the farmers themselves.

    Our program in Peru (our first foray into this) is called NoCO. We have worked with the indigenous Ashaninkas farmers of central selva Peru, through their wonderful cooperative Pangoa, to reforest a large area of their lands that had been totally degraded by earlier (partially USAID funded) “development” projects. The farmers identified the lands, chose the major hardwood species to be used for replanting (what? they didn’t need USAID, Smithsonian or another large Western agency to tell them what to plant? What a concept!), laid out the reforestation plan, and paid the farmers to grow the seedlings and replant the forest. The funds for the project have come from the sale of their coffee. Since one pound of coffee is roughly responsible for 17 pounds of CO2 (calculated from farmer through roasting and home brewing) we set up the program to purchase one hardwood tree for every 17 pounds of their coffee we roasted and sold. To date,they have planted about 100,000 tornilla trees, the anchor (they call it “grandfather”) tree for their forest ecosystem. Thus we have continues to reduce the carbon load from the entire supply chain to less than zero. We have a goal that in three years we will have the same project with all of our farmer groups, thus more than offsetting the entire carbon load of Dean’s Beans from source through consumer use and disposal. We didn’t run out and get federal (read our) tax dollars to fund this, like some of the bigger, splashier initiatives, but chose to do it out of our own cash flow because this is our responsibility. It is also farmer designed and directed, not created and overseen by a Western group with its overheads and own priorities. Pardon what seems like a little harsh judgment here, but in the thirty years I have been involved with development aid, especially in the environmental area, I haven’t seen a lot of payback for the trillion or so dollars spent. I am not saying that many people involved aren’t both highly educated and well-intentioned, but the truth is all the aid in the past thirty years has barely held back the flood of poverty, lack of education, loss of land and environment. You know what I mean.

    On a more hopeful note, I really hope that our work brings inspiration to others to come up with creative ways to work at source on environmental and social issues. Although I agree with my best friend Bill Fishbein that folks should generally not be involved in issues and areas they don’t have either a background, resources or long range commitment for, there is still lots of room for the average roaster or consumer to make a real difference out there.

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