A sustainable cup of coffee?
Building multi-stakeholder relationships
in sustainability programs
Nespresso’s AAA Sustainable Quality Program:
Gabriela Alvarez
Cranfield Corporate Responsibility Network
February 5th, 2009
A proposed agenda
 A ‘niche’ program: Learning to collaborate in the Nespresso
AAA program
• Context : Coffee: A steaming industry
• Program evolution and key challenges
 Stakeholders and the evolution of roles
• Buyers, Sellers, NGOs, development agencies
 Scaling up sustainability: Can sustainability go mainstream?
• Experiences from Rainforest Alliance
 Open discussion
A sustainable cup of coffee? Nespresso AAA Sustainable Quality Programme
Gabriela Alvarez – Cranfield Corporate Responsibility Network– June 16, 2009
2
The context: Coffee’s price and average producer costs
Average cost
Colombia 70-90
India 45-60
Brazil 30-40
Source: International Coffee Organization, Technoserve
A sustainable cup of coffee? Nespresso AAA Sustainable Quality Programme
Gabriela Alvarez – Cranfield Corporate Responsibility Network– June 16, 2009
Context: Coffee as a percentage of total exports
Coffee as a percentage of total product exports
Colombia
6.9%
Guatemala
11.4%
21.2%
Burundi
Rwanda
Nicaragua
14.6 %
Uganda
48.7 %
86.7 %
Source: 2005 data - TradeMap based on Comtrade data
A sustainable cup of coffee? Nespresso AAA Sustainable Quality Programme
Gabriela Alvarez – Cranfield Corporate Responsibility Network– June 16, 2009
Context: Coffee business model in the 1990s
Distribution of coffee income along the coffee chain (1971-80 to 1989-95)
Source: Ponte, S. “Standards and Sustainability in the Coffee Sector”, iisd, 2004
Note: Coffee income = weighted average of retail prices in ICO member importing countries, expressed in
green bean equivalents.
A sustainable cup of coffee? Nespresso AAA Sustainable Quality Programme
Gabriela Alvarez – Cranfield Corporate Responsibility Network– June 16, 2009
Context: Coffee crisis
Activists pressure and media attention
Activist campaigns
Media and academic attention
A sustainable cup of coffee? Nespresso AAA Sustainable Quality Programme
Gabriela Alvarez – Cranfield Corporate Responsibility Network– June 16, 2009
Nespresso
A sustainable cup of coffee? Nespresso AAA Sustainable Quality Programme
Gabriela Alvarez – Cranfield Corporate Responsibility Network– June 16, 2009
Nespresso
1’700
1’163
819
600
449
352
206
264
A sustainable cup of coffee? Nespresso AAA Sustainable Quality Programme
Gabriela Alvarez – Cranfield Corporate Responsibility Network– June 16, 2009
Nespresso’s AAA Program
A sustainable cup of coffee? Nespresso AAA Sustainable Quality Programme
Gabriela Alvarez – Cranfield Corporate Responsibility Network– June 16, 2009
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Sustainability programs: Where to start?
Direction setting
Context
Context
evolution
Partnerships
Context
Phase 1:
Conception /
Creation
2002-05
Phase 2:
Organization /
Consolidation
2005-07
Phase 3:
Expansion /
Next Challenges
2007 ->
Conditions/
Activities
Conditions/
Activities
Events
Assessment
Results
Actions
Results
A sustainable cup of coffee? Nespresso AAA Sustainable Quality Programme
Gabriela Alvarez – Cranfield Corporate Responsibility Network– June 16, 2009
10
Phase 1: Stakeholder relationships in 2003
Local
Ecom
LGiorgia
National
Ecom
CRica
RFA
CRica
Global
Ecom
Nespresso
RFA
Expocafé/
Cafexport
EC
Caldas
Funda
natura
Processors and or exporter
NGO
International development agency
A sustainable cup of coffee? Nespresso AAA Sustainable Quality Programme
Gabriela Alvarez – Cranfield Corporate Responsibility Network– June 16, 2009
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Phase 1: Conception and creation of the program...
Phase 1:
Conception / Creation
2002-05
Phase 2:
Organization / Consolidation
2005-07
The first phase of the program was characterized by a strong sense
of vision, motivation and experimentation
Phase 3:
Scaling up / Expansion
2007 ->
“We believe there’s more impact in trying to see how you can together
[with corporations] improve things than just criticize companies…”
NGO representative
“Everybody knew that the CEO wanted AAA in
Nespresso, he wanted to have the best of the best…”
Nespresso executive
“When Nespresso started talking with us about sustainability, we got really
excited, we have been working on education, infrastructure and other farmer
support project for a long time and this program fits perfectly with our mission”
A sustainable cup of coffee? Nespresso AAA Sustainable Quality Programme
Gabriela Alvarez – Cranfield Corporate Responsibility Network– June 16, 2009
12
Phase 1: Stakeholder views (cont.)
“We actually all knew each other quite well…”
Exporter
“We didn’t know what it would take. Maybe that was better …”
Exporter
“Everybody was talking with everybody and no one seemed to write anything
about anything. It was fast and effective, but sometimes we ended up playing
broken phone …”
Exporter
A sustainable cup of coffee? Nespresso AAA Sustainable Quality Programme
Gabriela Alvarez – Cranfield Corporate Responsibility Network– June 16, 2009
13
What worked well in the creation phase?
What worked well
during this phase?
 Vision and motivation
 Top management support
What could have
been better?
 An earlier clear view of the
mission and activities of the
program
 The higher prices offered by
Nespresso
 Resource planning
 Informal dialogue and preexisting relationships
 Relative “secrecy” of the
program inhibited engagement
by some stakeholders
 “Linking pin” actors: could speak
the different organization
“languages” and help build
relationships
A sustainable cup of coffee? Nespresso AAA Sustainable Quality Programme
Gabriela Alvarez – Cranfield Corporate Responsibility Network– June 16, 2009
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The program evolution: 2006
Local
Ecom
Orosi
Ecom
LGiorgia
National
Ecom
CRica
Ecom
Proj
Nespresso
CA
Ecom
Mex
RFA
CRica
Global
SAN
Mex
Ecom
Ecom
Proj
Ecom
Guat
Nespresso
RFA
EFICO
Cafexport
SAN
Guat
Cooxupé
Imaflora
Cooxupé
Fed Nac
Café
Colb
Expocafé/
EC
Caldas
Processors and or exporter
NGO
International development agency
Funda
natura
FNC
Nariño
FNC
Cauca
A sustainable cup of coffee? Nespresso AAA Sustainable Quality Programme
Gabriela Alvarez – Cranfield Corporate Responsibility Network– June 16, 2009
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Phase 2: Organization and Consolidation
Phase 1:
Conception / Creation
2002-05
Phase 2:
Organization / Consolidation
2005-07
The second phase of the program was characterized by intense structuring
and an evolution from project based to a program base initiative
Phase 3:
Scaling up / Expansion
2007 ->
“We had a phase of consolidation, working on structure, on process,
on KPIs and all these other things. It was important to do so…”
Nespresso executive
“When farmers start seeing increased productivity after a soil analysis was done
and they incorporated the recommendation, then they really start listening!”
Local exporters office
“As a supplier, to be able to be jointly looking out two or three years
with a strategic buyer as Nespresso is very attractive”
Exporter
A sustainable cup of coffee? Nespresso AAA Sustainable Quality Programme
Gabriela Alvarez – Cranfield Corporate Responsibility Network– June 16, 2009
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“It is easier now for an exporter to join the program.. This is the program, this
process, this is what you need to do, this is the commitment, etc…It is much
easier now to take this to their board and ask for commitment…”
Nespresso executive
“It took a Colombian to start this and a German to
organize it!”
A sustainable cup of coffee? Nespresso AAA Sustainable Quality Programme
Gabriela Alvarez – Cranfield Corporate Responsibility Network– June 16, 2009
17
What worked well in the organization and consolidation phase?
What worked well
during this phase?
 High prices offered by
Nespresso
 Increased clarity of objectives,
structure and relationship
mechanisms
 Longer term horizons and
planning discussions with
suppliers
 “Facetime”: CEO and executive
visits to the field, stakeholder
meetings, training events
What could have
been better?
 Manage the transition for “first
entrants” (clusters, suppliers) to new
structure and characteristics of
program
 Program very focused on relatively
few people within each of the
stakeholder organizations,
challenging to effectively engage the
rest of the organizations
 Reflect on a model for the emerging
role of buyer-seller relationships,
leveraging value added and
managing tensions and expectations
A sustainable cup of coffee? Nespresso AAA Sustainable Quality Programme
Gabriela Alvarez – Cranfield Corporate Responsibility Network– June 16, 2009
18
The program evolution:2007-2008
Local
Ecom
Orosi
Ecom
LGiorgia
Volcafé
S Dgo
National
Ecom
CRica
Ecom
Proj
Nespresso
CA
Ecom
Mex
Global
SAN
Mex
Volcafé
CRica
Ecom
Guat
Kenya
Volcafé
Neumann
Nespresso
RFA
Other?
Expocafé/
Cafexport
Funda
natura
EC
Caldas
NGO
International development agency
Imaflora
Fed Nac
Café
Colb
Nesp
Colombia
EC
Jardín?
SAN
Kenya
Neumann
Colb?
EFICO
SAN
Guat
Processors and or exporter
Kenya?
IFC
Ecom
Ecom
Proj
RFA
CRica
Neumann
Huila?
Cooxupé
Cooxupé
FNC
Nariño
FNC
Cauca
A sustainable cup of coffee? Nespresso AAA Sustainable Quality Programme
Gabriela Alvarez – Cranfield Corporate Responsibility Network– June 16, 2009
19
What are the challenges ahead? Stakeholders’ views
“All this is new, but I think we need to be better prepared as to how are we going
to face investments in the program, how we approach multi-lateral organizations
and what do we do when this approach doesn’t work
Exporter
“I get the feeling that sometimes people are giving too much attention to the
conceptual part, to the image of the program, I would like to see more of it
happening, the real impact at the farm level”
Nespresso executive
“There’s a huge opportunity for involving the consumers and Nespresso Club
Members. It can generate value for the program and value for the consumer”
Nespresso executive
“ I think we should look at how to align more the TASQ and the SAN
standard… obviously maintaining quality aspects as well…”
NGO representative
A sustainable cup of coffee? Nespresso AAA Sustainable Quality Programme
Gabriela Alvarez – Cranfield Corporate Responsibility Network– June 16, 2009
20
What are the challenges ahead? Stakeholders’ views
“On an organizational level I think we shouldn’t underestimate the level of effort
this will take it if keeps on growing. It’s growing very quickly and we need to
have enough resource and staff to work on this… both on our side and the
Nespresso side”
NGO representative
“We are doing an independent study on farmers income. If we can prove that the
farmer is really better off, we can expand these programs significantly ”
Multilateral organization
“Some of the reporting is becoming too detailed. We should focus more on
measuring outputs and not inputs”
Exporter
A sustainable cup of coffee? Nespresso AAA Sustainable Quality Programme
Gabriela Alvarez – Cranfield Corporate Responsibility Network– June 16, 2009
21
Sustainable sourcing programs: Implications
Traditional roles shift, new capabilities are required
Trader
NGO
From
Activist
Confrontation
Research
Media savvy
To
Collaboration
Technical support
Expertise
Media savvy
From
Arms-length
Commodity Trading
To
Arms-length
Quality focus
Orchestrator
Quality AND
sustainability
Quality expertise
Trading
Quality expertise
Sust. Development
Collaboration
From
Joint-projects
implementation
Logistics, finance
Sust. Development
Collaboration
Logistics
Finance
Roaster
From
To
International Organizations
To
Poverty reduction
Development
Public Sector
Poverty reduction
Environment
Public/private sector
Technical
expertise
Govmt relations
Technical expertise
Multi-stakeholder
relations
A sustainable cup of coffee? Nespresso AAA Sustainable Quality Programme
Gabriela Alvarez – Cranfield Corporate Responsibility Network– June 16, 2009
22
Sustainable sourcing programs: Implications
What were once isolated worlds converge
NGO
Roaster
Trader
Sustainable
Sourcing
Programs
International
Organizations
A sustainable cup of coffee? Nespresso AAA Sustainable Quality Programme
Gabriela Alvarez – Cranfield Corporate Responsibility Network– June 16, 2009
23
Collaborating is not that easy…
Balanced, “equitable”
relationships
Context conditions
Culture and “culture
distance”
It is not a one-and-for-all
model…
Organization and
What are factors that
Attitudes and behaviours:
personal engagement
Sustainability
is
about
Long term orientation
can enhance or inhibit
Top leadership
Trust and commitment
commitment
the creation and
collaborating,
learning,
evolution of interorganizational
creating,
implementing,
Governance
relationships?
“Linking” mechanisms,
mechanismsassessing and constantly
individuals or
Conflict resolution
organization
Coordination
tools
and
evolving!
process
Information systems
Communication processes
A sustainable cup of coffee? Nespresso AAA Sustainable Quality Programme
Gabriela Alvarez – Cranfield Corporate Responsibility Network– June 16, 2009
24
Sustainable sourcing programs:
Can this be done at a large scale?
Is sustainability ready to go
“mainstream”?
A sustainable cup of coffee? Nespresso AAA Sustainable Quality Programme
Gabriela Alvarez – Cranfield Corporate Responsibility Network– June 16, 2009
Thank you!
Gabriela Alvarez
alvarez@latitudeglobal.com
gabriela.alvarez@cranfield.ac.uk
Ruelle des Halles 2
1095 – Lutry
Switzerland
Back-up slides
27
... Complete timeline...
Consultation
with traders
and NGOs
Program
Launch
Sintercafé
2004
2005
Alignment
workshop
Colombia,
Sintercafé
2006
Summer
Campus
Second AAA
Stakeholder
Forum
2007
Today
2003
First AAA
Stakeholder
Forum
2008+
Clusters
C. Rica (1)
Colombia (1)
Mexico (1)
Guatemala (1)
Brazil (1)
C. Rica (1)
Colombia (2)
C. Rica (1)
Kenya (1-2?) +50% AAA Coffee?
Colombia (2) Number of
Brazil (1)
clusters?
Actors
Ecom
Expocafé
RFA
FNC
Cooxupé
Volcafé
IFC
Neumann
C. Rica
Colombia
Local
presence
Projects
(Costa Rica, Mexico, Colombia)
Key
components
“Initial efforts
and projects”
TASQ
Autoevaluation
“Re-organization
of program”
A sustainable cup of coffee? Nespresso AAA Sustainable Quality Programme
Gabriela Alvarez – Cranfield Corporate Responsibility Network– June 16, 2009
PPPs?
Farmer upgradingimpact? RF Certified?
“Re-dimension of program?
Sustainability and NN
strategy?
28
Project’s background
 The project is part of a Cranfield University (UK) doctoral
research project on the integration of sustainability and quality
in supply chains
 Objective of the research: The research explored the creation and
evolution of multi-stakeholder relationships in sustainable supply
chains.
 Project scope: The project studied Nespresso’s AAA Sustainable
Quality Program from 2003 to 2007.
 Research project timeline : June 2007 - March 2008
A sustainable cup of coffee? Nespresso AAA Sustainable Quality Programme
Gabriela Alvarez – Cranfield Corporate Responsibility Network– June 16, 2009
29
Over fifty interviews are being conducted during the period June November 2007
Local
ECOM (3)
Producers (4)
T. Gutierrez (Sr.)
T. Gutierrez (Jr.)
Mainor
La Giorgia (2)
Orosi (2)
National
Costa Rica
ECOM (1)
Survey 2003-07
10 producers
La Giorgia
Global
C. Alfaro
SAN (1)
C. Willie
ECOM (2)
C. Alfaro
E. Ponçon
Volcafé (1)
E. Cabrera
Nespresso (1)
Volcafé (1) SAN (2)
M. Furniss
J.D.Román
C. Willie
R. Stout
Nespresso (8)
N. Rueda
A. Mejía
J. Libanio Ferreira
EFICO (1)
E. Gonzalez T.
(1)
Nespresso (1)
Expocafé (2)
S. Arango
Expocafé (1)
L. Barragán
Technoserve (1)
Popayán (2)
Huila (2)
SAN (1)
J.C. Ardila
J. Ocampo
SAN (1)
Producers (4)
J. Libanio Ferreira
Cooperative (1)
G. Berssenbrügge
P. Installé
O. Garcia
K. Ranitzsch
IFC (1)
P. Barone
J.G. Flores
O. Quillet
J. Richter
EDE Consulting
A. Rodriguez
J. Teinemeier
D. Sanders
FNC (2)
E. Salgado
Cooperative (1)
Brazil
Colombia
SKN-Neumann(1)
FNC (2)
L. Medina
C.A. Gonzalez
C. Saldía
Cooperatives (3)
A. Ortiz Herrera
M. Gomez (CHK)
Almacafé (1)
M. Restrepo
Extensionists (2)
F. Escobar
A sustainable cup of coffee? Nespresso AAA Sustainable Quality Programme
Gabriela Alvarez – Cranfield Corporate Responsibility Network– June 16, 2009
30