{"id":25919,"date":"2017-11-15T21:24:45","date_gmt":"2017-11-16T02:24:45","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/enjoy-your-morning-espresso-while-you-still-can\/"},"modified":"2017-11-16T21:36:25","modified_gmt":"2017-11-17T02:36:25","slug":"enjoy-your-morning-espresso-while-you-still-can","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/enjoy-your-morning-espresso-while-you-still-can\/","title":{"rendered":"Enjoy your morning espresso (while you still can)."},"content":{"rendered":"

Is coffee under threat?<\/strong><\/p>\n

Could you imagine a year without coffee? While this idea may seem far-fetched to the millions of individuals who rely on their morning espresso to fuel their day, it is certainly an area of concern for all the stakeholders in the global coffee value chain, including roasters such as Nespresso.<\/p>\n

There are two major species of coffee: Arabica and Robusta. Arabica is typically associated with higher quality and better taste, while Robusta has a higher caffeine content and a stronger, harsher taste. Coffee is a particularly demanding crop, which grows only within certain temperatures and humidity ranges. This is particularly true for Arabica, which accounts for accounts for ~70% of the worldwide coffee production. Arabica coffee\u2019s optimal temperature range is 64\u00b0\u201370\u00b0F (18\u00b0C\u201321\u00b0C) [1].<\/p>\n

\"\"<\/a>
Projected reduction in areas suitable for production, ICO, 2017<\/em><\/figcaption><\/figure>\n

If Earth\u2019s climate continues to warm over the coming decades, obstacles to coffee cultivation will certainly arise. The International Coffee Organisation (ICO) estimates that by 2050, the proportion of current areas suitable for Arabica bean production will be reduced by 70% in South East Asia, 60% in Brazil, and 48% in Central America [2].<\/p>\n

Perhaps more worrying, however, is the impact climate change is already having on the livelihoods of smallholder farmers globally. Smallholder farmers account for 95% of the coffee farming households, and for 80% of the total coffee production globally [3][4]. They typically operate under limited financial flexibility, lack access to capital, and rely on coffee as a cash crop to feed their family.
\nAs rainfall patterns keep shifting across the world [5], and price volatility keeps increasing [6], the long-term sustainability of coffee farming is being tested: while one bad harvest could have a dramatic impact on a farming household income, multiple bad harvests in a row could lead a farmer to drop coffee altogether to focus on other crops [7].<\/p>\n

Nespresso: the commitment to a “positive cup”.<\/strong><\/p>\n

Nespresso\u2019s parent company, Nestle, has committed to reducing its greenhouse gas emissions by 2020. They are targeting a 35% reduction from manufacturing operations (vs 2010), a 10% reduction from distribution operations (vs 2014), and 10% reduction from their warehouses (vs 2014) [8]. Along these lines, in 2014 Nespresso set the objective to inset 100% of its operational carbon footprint by 2020 by actively investing in productive projects throughout its supply chain [9]. For example, Nespresso committed to plant 10 million trees in coffee farms by 2020; these trees will not only help with carbon sequestration, but also positively impact the quality of the soil and help protect coffee bushes from adverse weather events [10].<\/p>\n

Nespresso also seeks to mitigate the social consequences of climate change for farmers. Through its Nespresso Sustainability Innovation Fund (NSIF), it has invested in a number of projects to reduce the uncertainty and risk to the livelihoods of smallholder farmers stemming from climate change and economic volatility. For example, Nespresso partnered with Fairtrade and invested 2.2m$ to develop an innovative savings plan for the retirement of coffee smallholders in Colombia [9].<\/p>\n

Nespresso\u2019s focus on quality also enables the company to pay its farmers ~30-40% above the standard market price [11]. This approach is particularly impactful in a context of increased uncertainty for coffee farmer (price volatility in the top 5 origins has increased by 56% between the 2004-2010 period and the 2011-2017 period) [12].<\/p>\n

\"\"<\/a>
Price volatility by time period, standard deviation of prices paid to growers calculated based on historical data from ICO, 2017<\/figcaption><\/figure>\n

 <\/p>\n


\nEngaging all actors: a necessity.<\/strong><\/p>\n

Nespresso\u2019s premium positioning has allowed the company to invest in climate change mitigation and to truly support its own supply chain.
\nHowever, as of 2017, only 70,000 farmers are part of Nespresso\u2019s AAA Sustainable Quality program [9]. This is negligible compared to the 25 million smallholders globally [4]. If climate change is truly threatening the long-term sustainability of the coffee industry, it is crucial for coffee roasters to work together on developing structural joint solutions to improve farm resilience.<\/p>\n

In addition to developing joint efforts with competitors, Nespresso could also consider developing more public-private partnerships. Coffee is a major source of revenue for producing countries, and the number one export for many of them. In order to maximize its impact, Nespresso could seek to partner with Governments to help shape local coffee strategies.<\/p>\n

Questions going forward.<\/strong><\/p>\n

A number of questions remain: can we realistically expect competing firms to join forces on this issue? And if not, are Nespresso\u2019s efforts enough to ensure the long-term sustainability on its own supply chain?<\/p>\n

As we witness an inevitable reduction in the areas where high-quality coffee can grow, how can companies and governments mitigate the risk of deforestation (deforestation is the primary source of new coffee land [2])?<\/p>\n

Finally, could technology be the answer? What existing, or emerging, technologies could help mitigate the impact of climate change for all actors along the coffee value chain, from roasters to smallholder farmers?<\/p>\n


\nWord count: 791<\/strong><\/p>\n


\nReferences:<\/strong><\/p>\n

[1] Scott, M., “Climate & Coffee” \u00a0Climate.gov\u00a0<\/i>https:\/\/www.climate.gov\/news-features\/climate-and\/climate-coffee<\/a>, last accessed on 12 November 2017<\/p>\n

[2] Stylianou, N., “Coffee under threat” \u00a0BBC\u00a0<\/i>http:\/\/www.bbc.co.uk\/news\/resources\/idt-fa38cb91-bdc0-4229-8cae-1d5c3b447337<\/a>, last accessed on 13 November 2017<\/p>\n

[3] Technoserve<\/em>,\u00a0http:\/\/www.technoserve.org\/our-work\/areas-of-focus\/Coffee<\/a>, last accessed on 13 November 2017<\/p>\n

[4] Fairtrade,<\/em>\u00a0http:\/\/www.fairtrade.org.uk\/Farmers-and-Workers\/Coffee<\/a>, last accessed on 13 November 2017<\/p>\n

[5] Henderson, R. M., et al, Climate change in 2017: Implications for business<\/em> (HBS No. 317-032)<\/p>\n

[6] Terazono, E., “Coffee industry warned of volatile prices” Financial Times<\/em>\u00a0https:\/\/www.ft.com\/content\/e994faf8-1eb8-11e7-a454-ab04428977f9<\/a>, last accessed on 12 November 2017<\/p>\n

[7] Garcia-Navarro, L., “Coffee and climate change: in Brazil, a disaster is brewing” NPR\u00a0<\/em>https:\/\/www.npr.org\/sections\/thesalt\/2016\/10\/12\/497578413\/coffee-and-climate-change-in-brazil-a-disaster-is-brewing<\/a>, last accessed on 12 November 2017<\/p>\n

[8] Nestle company website<\/em>, http:\/\/www.nestle.com\/csv\/environmental-sustainability\/climate-change<\/a>, last accessed 13 November, 2017<\/p>\n

[9] Nespresso, The Positive Cup report 2017<\/em>, https:\/\/www.nestle-nespresso.com\/asset-library\/documents\/nespresso-positive-cup-csv-report-interactive.pdf<\/a>, last accessed 13 November 2017<\/p>\n

[10] Smedley, T., “Forget carbon offsetting, insetting is the future” The Guardian<\/em>\u00a0https:\/\/www.theguardian.com\/sustainable-business\/2015\/jan\/09\/carbon-offsetting-insetting-supply-chain<\/a>, last accessed 13 November 2017<\/p>\n

[11] Nespresso company website<\/em>,\u00a0https:\/\/www.nespresso.com\/de\/en\/thepositivecup\/initiatives\/aaa-sustainable<\/a>, last accessed 14 November 2017<\/p>\n

[12] International Coffee Organisation<\/em>, “Historical data on the global coffee trade”, http:\/\/www.ico.org\/new_historical.asp<\/a>, last accessed 12 November 2017<\/p>\n","protected":false},"excerpt":{"rendered":"

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