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.
Hi Michael! Thank you for sharing your insights and for whatever the online version of “thinking out loud” is. As the Sustainability and Producer Relations Manager for a coffee roasting company, I have also been mulling over some of these questions with regards to Counter Culture Coffee’s development projects in the communities where we purchase coffee. Over the past five years, we have made an almost-complete shift from outsourcing to going direct (to use your terminology) and we have first-hand experience with both the advantages and disadvantages of administering donations independently.
The primary advantage of the direct project model is that it reinforces the connection between coffee consumers and coffee producers that we try to promote in everything we do and all of the stories we tell. From a relationship-strengthening perspective, it makes sense for our business to invest energy – project energy, purchasing energy, etc – with razor-like focus, in those communities we work in already and to use the existing infrastructure to implement development projects. That said, we’ve also experienced some of the disadvantages that you mention: in particular, inefficient execution of projects and distraction from the relationship’s core purpose of bringing (great) coffee to market.
One way to find some balance is by limiting the “going direct” approach to projects that are directly relate to coffee agriculture or quality, as opposed to quality-of-life or -environment projects like health clinics, water filtration, etc. I feel pretty comfortable investing directly in a worm-composting operation, while I would definitely look for outside involvement before making a donation toward the construction of a school. Collaboration, too, whether across disciplines or between coffee roasting companies buying from the same communities, is always a good thing.
With that in mind, I’m intrigued by the fourth option that you propose here and I look forward to more details!
Thank you for this great comment — candid, thoughtful and familiar. Many companies like Counter Culture that source directly from producer organizations and develop long-term relationships are invariably drawn into discussions over what you call “quality-of-life” or “quality-of-environment” issues that confront coffee farming families — issues that go beyond what are generally considered part of a coffee company’s “core business model.” I honor your impulse to invest in these issues, understand the challenges that come with moving beyond the company’s core competencies, and am grateful to you for sharing your reflections here.
I particularly appreciate the distinction you draw between the investments you make with confidence and those that push you a bit beyond your comfort zone.
For us as a development agency, the farm family is the subject of our work and we approach our accompaniment holistically, so we don’t see those distinctions here on the ground in the same way Counter Culture and other companies may see them from the market end of the chain. Coffee productivity, coffee quality, coffee prices, soil fertility, water and sanitation, nutrition, climate change, etc. — for us these are all issues that stand between smallholder farmers and truly sustainable livelihoods. It is instructive for us to understand how these issues are viewed by roasters concerned about what is happening in coffee communities but careful about how they engage.
The “comfort zone investments” you refer to — coffee quality and productivity — are invaluable from our perspective as a development agency. In our experience, revenue from coffee sales is the primary source of household income for smallholder coffee farming families. Quality investments by companies like yours are essential in ensuring that smallholder farmers can consistently produce the quality necessary to get into high-value segments of the coffee market and stay there.
As your experience at origin has revealed, however, price premiums for high quality coffee are not enough by themselves to ensure that smallholder farmers can meet the basic needs of their families. The other kinds of investments you allude to are necessary to achieve that end. It is my sense that you might make these kinds of “non-coffee” investments with more confidence if you felt like there were a reliable mechanism to address the issues that limit human development in the specific communities where you source coffee. Does that sound right?
I see coffee companies are turning more and more to project-specific partnerships with NGOs — international or local — to address these issues. But since few coffee companies are deeply engaged in the NGO community or conversant in who does what where, it can take some time to develop the relationships necessary to invest confidently in these partnerships.
From the perspective of an international development agency, I would say that projects addressing “non-coffee” issues like hunger, climate change, water and sanitation, etc., are our natural “comfort-zone investments.” The irony is that in recent years we have been working so hard to meet the industry halfway by increasing our own competency in the issues of coffee productivity and quality that you refer to above, that we may have missed the steady movement of companies like Counter Culture out of its comfort zone and into ours! Perhaps we should do be more deliberate about finding more companies like you at origin and seeking comfort-zone complementarities.
Looking forward to continuing the conversation here and in person. Meantime, thanks again for your comment and your efforts to improve smallholder livelihoods.
Introduction, the Harsh Reality: In 1989 the C price averaged about $ 1.25. At this writing the C price is $ 1.34. A 9-cent increase? Hardly. Factor inflation and that $ 1.34 would have had a value of about $ .75 in 1988. A 50 cent DECREASE. A 40% decrease in value over 20 years.
Any premiums paid above that price are exactly that, premiums paid above a price that has continued and continues to decrease in value for farmers at a precipitous rate. In the meantime, the coffee trade remains the second largest traded commodity in the world, second only to oil. And, specialty coffee has become a phenomenal market niche where incredible wealth has been earned by both large corporations and small businesses.
Within this dynamic, farmers’ hands are tied when it comes to increasing prices. The best opportunities are offered to the few farmers and coops that are fortunate enough to negotiate premiums above the dwindling value of the C-price. Most farmers are forced to accept whatever price is offered to them by the coyote because their coffee will rot in a few days unless processed.
Once the green coffee leaves origin, the situation changes dramatically and the lid blows off prices, maybe not for importers and brokers so much, but surely for roasters and retailers. The reality is that the trading system enriches a relatively few large corporations, and several small businesses at the expense of millions of producers.
This is not a new dynamic, but rather one that has been occurring and reoccurring for generations. With all the hoopla in the coffee trade about organics and fair trade, the chances of anyone being in the business unaware of these dynamics are pretty small these days. Suffice it to say, that most everyone in the trade today is aware of the trading discrepancies.
This is the good news as it has enlightened many in the trade to make a commitment at improve living conditions at origin. The not-so-good news is that many roasters, corporations and otherwise, somehow believe they have the skills to undertake social, and environmental development at origin and can do so in the interests of farmers and their families. This requires two giant leaps of faith.
The first leap: I’m not throwing stones here. However, what makes a coffee roaster think he or she has the skills to go to origin and become a development person? [There are a few who actually do have those skills, but they are the exception, not the rule.] In the meantime, trips to origin are exciting and life changing and it is easy for a traveling roaster to be seduced into the role of Indiana Jones. To a roaster, without any experience in development, the issues and needs at origin can appear to be black and white when they are actually riddled with complexities. And, for solutions to be effective, it is, indeed, those complexities that must be addressed. And, while addressing complex issues may be critical, how those issues are addressed is even more critical as related to the priorities, values and the culture of the many different communities at origin.
The second leap: By 2010, many large corporations have created Corporate Social Responsibility (CSR) departments and some of these CSR departments are staffed by professional development people. That may address the issue of experience in development. However, when the development group is also the coffee buyer, it is easy to understand why coffee producers may select, or feel obliged, to undertake a project because they want to placate the customer. [My dad used to tell me that ‘The customer is not always right. But, the customer is always the customer.’] Coffee producers must feel similarly when it comes to coffee buyers. It is not unreasonable to think that a buyer may not even intend to influence a situation while the producer might accept a project because he or she believes it is what the buyer wants.
Then there are the cases where the CSR department is directed to support development programs that ensure themselves a fluid line of supply and/or only support projects that benefit their supply line. These people have no business whatsoever participating in the development process, yet they do.
Mr. In-Between: There are some roasters and some corporations that want to be close to the development process, but they do not want to contaminate the process with their presence. In other words, they would like to be involved in the development process, but they would like to do so with respect and humility. This is a little tricky, but it is being done. These roaster/development types have a deep respect for the producers, want to be close to them, know them, share thoughts and feelings together. This they do. But, when it comes to development, they do not involve themselves in the development process, and hand the work over to independent development people and local NGO’s who have no stake in the commercial relationship.
Perfect? No. The reality is that often times the NGO feels that it must undertake projects that appeal to the donor,…….. the customer. No, not perfect. But, at least there is a layer in between the buyer and the producer. And, that’s a small price to pay to ensure that roasters continue to feel a deep responsibility to the people at origin upon whose shoulders they stand to earn a living.
Conclusion: All of us in the coffee industry are part of this trading dynamic that favors roasters over producers. We must recognize that our profits, our supermarket purchases, our investments, our homes, education for our children are all possible because of the millions of producers who, despite never-ending hardships, continue to produce a product that affords us everything we have. Once recognized, it’s easy to leap to want to help. Helping appropriately and effectively may not be as easy as it appears.
Our success is often met with praise and admiration. This can lead us to think we are actually more capable than we really. If we stop for a minute and think that development at origin is Not About Us, we may be able to undertake that pursuit with respect and humility and direct a fair share of our profits to carefully selected NGO’s who honor the priorities, values and culture of our coffee-farming partners.
My dad also used to tell me there are two important things that I must know. The first thing he told me was, ‘Never over-estimate yourself’. In other words, don’t think you’re more than you are. Then he told me, ‘Never under-estimate yourself’. In other words, challenge yourself. Undertake things you may never have dreamt of. Whatever you do, do so respectfully, that way you won’t be too self-impressed and you actually might get something done.
Wow. Thanks for this extraordinary comment, heavy with experience and wisdom. There aren’t many people out there who have been working at the intersection of specialty coffee and development as long as you have, so I appreciate you sharing so generously the insights you have developed along the way.
There is so much in your comment that I confess I am not sure quite where to begin in replying. Maybe I will start at the end and work backwards. Near the end of your comment, you write:
Amen. (Who ever said it looked easy, by the way?!?) As you know from your experience, fostering sustainable rural development in the coffeelands is tricky stuff. This is especially true when the people trying to make it happen may find themselves in unfamiliar territory when the conversation strays beyond coffee quality. I suppose if it were easy it would have been done long ago and wouldn’t be a topic that provoked comments as passionate or thoughtful as yours.
While I am aware of some of the uglier examples of corporations using development project funding as a tool to source coffee, I have had the good fortune to engage industry actors that fit your description — respectful and humble. Kim’s comment here is indicative of the other discussions I have had in the industry — companies that spend time at origin building relationships with the farmers who produce their coffee and are driven to invest more by a desire for social impact than sourcing or public relations.
Your dad was a wise man. This is a very perceptive comment that I think it is important for anyone engaging at origin to be mindful of. Fortunately, there are some good examples out there of approaches that engage respectfully and put farming communities in the driver’s seat.
One of the best-known rule-breakers out there is Dean Cycon from Dean’s Beans, who has been fostering his own unique brand of People-Centered Development in the coffeelands for more than two decades. As Dean recently described it to me, the approach consists of “basically hanging out” in coffee communities after he starts sourcing coffee there to understand from the farmers themselves what limits their development and what they aspire to for their future. Dean is unique, among other ways, in that he has serious development credentials, tolerance for long flights and extended stays in coffee communities as well as resistance to the varied bugs that thrive there, and a tireless commitment to use coffee as a pretext for social change. So, yes, there are execeptions worthy of mention. But I agree as a rule that few roasters can do what Dean does.
Finally, you write near the beginning of your comment that:
This comment raises a really important distinction that came up in Kim’s comment between issues that have to do with coffee — productivity, quality, etc. — and all the other many issues that confront smallholder farm families who grow coffee (among other things). You may be right that everyone in the trade knows the score in terms of how smallholder farmers fare in the marketplace. But I am no so sure that people in the industry — especially those who don’t make a habit of hanging out at origin — have a good grasp on the depth and complexity of the challenges that smallholder farmers face in their efforts to make ends meet. Should they connect the dots and infer from low margins on their main cash crop that life is a struggle? Perhaps. But even if coffee companies do make this connection, the most common “fix” is to improve the terms of trade for smallholder farmers by increasing the price. This is critically important, but won’t even begin to address a whole range of other issues that require more than coffee cash.
I am coming to appreciate this as the critical divide in the coffee development discussion — the gap between coffee-chain issues and the many threats that smallholders face that arise from outside the chain. Price is the bridge that crosses the divide, since it is a coffee-chain issue but the most critical one for farmers, since it is probably the biggest single determinant of smallholder coffee farmer livelihoods.
We want more companies to cross that bridge, and hope they give weighty considerations to the good counsel here from you (and your dad).
Thanks again for the great comment, Bill. Looking forward to ongoing discussion around these issues.
Hello again. I realize that there was another element of your comment that I meant to address but somehow forgot. You write:
This is an important issue and I am grateful to you for raising it. I have seen companies move into coffee communities with a dual “purchases and projects” agenda in which they are bringing the promise of funding for community development to bear on discussions around coffee buying. Not only does the marriage of these two issues contaminate the development process, but it also creates impossible pressure on the leadership of farmer organizations to meet the new standard of cash for coffee and cash for development. In cases like this, it seems clear that development funding is being abused. Building and maintaining a “firewall” between CSR/Foundation activities and coffee buying would seem to be the best way to prevent this kind of abuse of development funding.
But not all cases are as clear-cut as this one. I am not sure that in other, less blatant cases, there isn’t some benefit to some communication between the people working on community development and those buying coffee. From my perspective, the structural shift happens when issues currently assigned to the CSR unit – climate change, hunger, etc. – are reassigned to the team of green coffee buyers. This indicates a perception on the part of the company that investments in these issues are similarly relevant to its business model as cupping scores. It seems to me that companies are more likely to get to that point by creating an operational firewall but creating time for strategic analysis in terms of the social impact of both sets of activities. It would require a lot of restraint to limit this engagement to communication and coordination and avoid movement toward collusion, but if it is done effectively it might yield a great leap forward in terms of how the industry understands the core business model of a coffee roaster.
Also, while I agree that CSR activities undertaken with the explicit goal of securing, maintaining or increasing access to coffee are problematic when they subordinate the legitimate development needs of the community to the commercial needs of the company driving the investments. But I think that increasing product quality and trading volume may be legitimate results of a company’s sustained and effective investment in community development. In fact, in my mind, nothing would go further in making the business case for increased investment in development than seeing a bottom-line return on investments previously thought to be merely philanthropic.
A lot of great stuff here, but there was an issue, or notions, alluded that I hope you can flesh out.
You wrote “…even if coffee companies do make this connection, the most common “fix” is to improve the terms of trade for smallholder farmers by increasing the price. This is critically important, but won’t even begin to address a whole range of other issues that require more than coffee cash. ”
Are you referring to non-cash investments? If so then I get it.
Where I might get confused is if you’re suggesting that sometimes Company ABC should _not_ add $X to the price they pay to farmers/co-ops (aka “coffee cash”) but rather should funnel those same funds to the community via development projects.
My presumption is that it is the farming community that best knows what they need and that ideally they will be in the driver’s seat for the projects in their communities. So if the necessary funds come their own coffee export revenues then that would be better than the equivalent amount of funds coming from the coffee companies (& the community earning comensurately less via their coffee sales).
Since, as you know, we at Equal Exchange go about it both ways* I’m extra interested. (I should add for your readers that we lean heavily on the side of funneling resources via our coffee contracts. I’d guess that in 2011 they were worth over $21,000,000. Meanwhile we probably directed about $150,000 through groups like CRS, UMCOR, Grassroots International, and some directly to the co-ops themselves. The actual $# might have been higher, but you get the point.)