Session

Creating a More Resilient Supply Chain: The Case of Coffee

How can companies address supply chain, community, and ecosystem impacts in a holistic way that improves resilience in the face of climate change? As a powerful case study, McDonald’s will describe its innovative efforts and will explain how they engage their value chains, including by forming partnerships with third parties such as Rainforest Alliance. The session will pose provocative questions such as: How do we know farmers are better off under these programs? How do we measure their impact? How do we wrestle with tough issues, such as the debate between Fair Trade (more money in the pockets of growers) and Rainforest Alliance (total impact)?

Speakers

  • Rachael Sherman, Manager, U.S. Sustainability, McDonald’s USA
  • Alex Morgan, Senior Manager, North America, Rainforest Alliance
  • Eric Olson, Senior Vice President, Advisory Services, BSR (Moderator)

Highlights

  • A very critical, vulnerable mix of factors makes a strong case for resilience within the coffee supply chain now and in the future.

  • The implementation of advanced techniques and the trainings provided though specific programs could help farms improve their productivity and reinforce the long-term stability of their community’s livelihood.

  • To address resilience, companies should focus on what’s material to and important for their business; with this leverage and an in-depth understanding of their supply chain, they can act effectively.

Memorable Quotes

“Overall what we are really talking about is engaging farmers and producers in solutions, providing them technical assistance and training, tools, and resources, which ultimately allow accessing credits and improving practices so that it will be appealing to be a coffee farmer in the future.” —Alex Morgan, Rainforest Alliance

“In absence of a unique certification scheme, companies cannot refrain from engaging and partnering with multiple actors to address these challenges.” —Rachael Sherman, McDonald’s USA

Overview

Olson introduced the topic by stating that agriculture is one of the industries that will be most acutely affected by climate change and that coffee poses some of the most pressing concerns. Olson kicked off the session by introducing the concept of resilience and sparking a discussion about the systems and services that need to be activated to get there.

Morgan contextualized the unique case of resilience for the coffee supply chain. He stressed the peculiarities of coffee, a crop that grows predominantly in very climate-sensitive tropical landscapes where plantations require particular conditions of altitude, temperature, and rain. Additionally, coffee farming is very labor intensive, with the majority of production happening on disaggregated, unorganized small farms. Social challenges are a huge pressure on laborers, who are often migrant workers, and the younger generations are less interested in assuming control of their family farms. From an economic perspective, given the crop’s quite high price volatility, the cost of production is sometimes not compensated by the price the market offers, which makes both the supply and demand sides tight. Plus, a new coffee disease, spurred by climate change, is impacting the harvest, especially in Central America.

Morgan stressed that a very critical, vulnerable mix of factors makes a strong case for resilience within the coffee supply chain now and in the future. Coffee farmers already face numerous challenges, but a lot can be done to provide them tools and resources and make coffee farming an appealing job in the future.

Sherman began her remarks by describing McDonald’s approach to coffee sourcing. She explained that the company works very closely with its suppliers, expecting them to collaborate and to extend this approach in turn to their suppliers. Sherman added that McDonald’s accepts different certification schemes, among them the one managed by the Rainforest Alliance, and also invests in programs to train and provide technical assistance and tools, because farmers, especially small farmers, may not be ready to pursue certification.

Olson asked the speakers whether the proliferation of certification systems is useful or whether a single standard should be pursued. Morgan responded that there has not been a proliferation of standards and that, even if coffee is unique, multiple certification schemes can coexist because different NGOs often focus on different concerns. Sherman added that companies sourcing raw materials would benefit from having a single solution. Nevertheless, a company cannot refrain from engaging and partnering with multiple actors that offer different solutions.

Morgan then explained the potential benefits to farmers from participating in these programs. Given the high volatility of prices and the generally high costs of farming, the implementation of advanced techniques and the trainings provided through specific programs could help farms improve their productivity and reinforce the long-term stability of their community’s livelihood. Sherman pointed out that the possible actions are numerous and include other types of collaborations that can help farmers gain access to capital (for example, direct loans) that they could invest in new technologies and techniques. Morgan added that financial literacy is important to help farmers and stimulate investments in productivity.

An audience member challenged the discussion around the reason why other types of agricultural commodities do not benefit from such efforts, while coffee does. Morgan explained that coffee emerged mainly because of its price volatility and the leadership and engagement of buyers who recognized the challenges threatening its supply chain’s resilience. Nonetheless, he added, Rainforest Alliance is working on initiatives covering more than 50 crops; mostly driven by buyers, these initiatives recognize the impacts of these problems in their supply chain.

To conclude the discussion, Olson asked what resilience would look like for the coffee supply chain. Morgan stated that Rainforest Alliance has transitioned to a landscape approach, taking a wider perspective on the interconnected environments linked to the crop. The idea is to build numerous projects that extend beyond the crop, for example, investing in diversifying the farming activities, providing differentiated trainings, and looking at reforestation.

Sherman concluded that, in order to address resilience, companies should focus on what’s material to and important for their business; with this leverage and an in-depth understanding of their supply chain, they can act effectively.

Date

November 5, 2014