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41. How should coffee companies invest at origin?

2010-05-03 Comments Off on 41. How should coffee companies invest at origin?

Over the the past few months, I have found myself talking with a broad range of stakeholders in the specialty coffee industry — importers, roasters, other NGOs, academics, etc. — about how coffee companies are investing at origin.  (Actually, I have been discussing this issue with friends and allies in the industry for many years, but for some reason, it seems the topic has come up with unusual frequency and seriousness of purpose in my conversations over the past six months or so, and especially at SCAA.)  Here are some reflections on what I am hearing in those discussions and seeing in the field, and some ideas about the directions in which industry engagement in the coffeelands may be moving. 

My recent conversations have focused on how companies are engaging at origin, and how current practices might be improved.  In fact, tomorrow I begin a series of meetings with coffee companies in the United States that will look at the ways they might enage — and we might collaborate — most effectively at origin.

One of the obvious trends in recent years is that industry investment in the coffeelands is more common and more innovative — more private-sector actors are involved and their engagement goes beyond mainstream sustainability mechanisms such as certifications and quality investment.  A good thing, to be certain.  This investment has taken many different forms, however, and it is not clear that they are equally effective.  It seems to me that people are beginning to step back and compare the advantages and disadvantages of different approaches.

  • “Outsourcing” — Contributing to development organizations.
    Some of the increase in industry reinvestment at origin has been accounted for by an increase in the number of roasters and other companies donating to dedicated coffee-focused NGOs like Coffee Kids or Grounds for Health or Root Capital — a fairly straightforward approach that offers high returns on investment in terms of impact on the ground.
  • Going direct — Independent development projects.
    On the other end of the complexity spectrum has been the proliferation of independent coffee development projects at origin — coffee roasters that donate funds to support social projects implemented in the communities where they source their coffee by the smallholder farmer organizations that grow it.

    These projects often grow organically out of direct trading relationships that bring importers and roasters into regular contact with specific communities over a period of many years.  In the coffeelands, these direct investments in local development are natural extensions of a model driven by direct relationships and mutual commitment to bring to market coffee of the highest possible quality.  In the marketplace, they are a natural extension of relationship-driven narratives that are common to roasters focused on social sustainability and quality alike.  The Fair Trade roaster may emphasize direct relationships in the name of trade justice, while the quality-obsessed roaster may underscore direct relationships in the name of traceability, quality-based differentiation and exclusivity.  In both cases, the immediacy and intimacy of the relationship narrative are more consistent with independent development projects than “outsourcing” development initiatives through investment in a certification’s social fund or a third-party agency.

    Some companies that have moved in this direction in recent years may be beginning perhaps to re-assess their approaches.  Among the concerns I have heard about this approach are project quality and impact, project administration and transparency, and mission drift — even the most progressive roasters committed to social change are still in the business of bringing great coffee to market.  The energies they devote to promoting development in the coffeelands are good energies, but may take them away from the core business model that allows them to keep the lights on (and keep investing in social change).  Roasters are not development agencies, and some are beginning to appreciate that there may be advantages to investing through more traditional development structures that offer perhaps a permanent physical presence on the ground, trained agronomists/hydrologists/nurses on staff, etc.

  • Strategic engagement — Project-specific partnerships.
    Between these two extremes, of course, are countless examples of companies that have opted for a middle road of project-specific partnership with NGOs that permits a deeper and more active engagement in programming than passive donations, without the burden associated with direct project administration in far-flung coffee communities.  This approach also takes advantage of the value that NGOs can add to industry skill sets.  This is the dominant approach that we have taken in our field-based partnerships with industry partners: our CAFE Livelihoods project, our Green Mountain-funded collaboration with CIAT on the CUP project on climate change adaptation and our ACORDAR value chain project in Nicaragua are all examples of this approach.   There are loads of other examples of this kind of industry engagement at origin around issues of coffee quality.
  • “Harmonized investments” — Coordination at origin.
    Finally, let me leave one more possibility with you — a more nascent fourth model of what I call “harmonized investments”, which involves multiple industry actors making non-overlapping, complementary investments in the same geographies on related but separate issues.   The examples of this that I am aware of have come about quite serendipitously, so I won’t spend too much time on it here.  There are some people looking at how these experiences have come about to see whether they might be replicated, however, so I hope to have the opportunity to post an update soon.

In the end, I think any and all explicit, thoughtful discussions of these approaches — especially if they are public and candid about the advantages and shortcomings of each experience — will be invaluable in improving the return everyone’s social investments in the coffeelands moving forward.