Corporate coffee

Coffee regions / Corporate coffee / Nestlé/Nespresso

Deforestation from commodity coffee drags on

The New York Times Magazine published a well-written account about the ongoing illegal coffee growing in Sumatra’s Bukit Barisan Selatan National Park. The article focuses on the Wildlife Conservation Society’s investigations into continued forest clearing in the park by small farmers who sell their coffee at rock-bottom prices to middlemen, who then sell to large coffee companies. The article notes this probe began around 2015. However, the World Wildlife Fund put out a detailed report on this issue in 2007, and a paper in a well-respected peer-reviewed journal in 2009 outlined that this problem had already existed for 30 years. Below I list all the posts in which I summarized or wrote about the illegal coffee growing (and purchasing) in this region.

The Times piece nicely laid out the complexities of the situation and the plight of the exploited farmers. The Wildlife Conservation Society concluded the certifications and traceability were not working because the supply chain was so complicated that the auditing was “too expensive for exporters specializing in cheap, bad coffee.” Nor was expelling or punishing farmers the solution, so WCS launched a program to help farmers improve their yields and livelihoods, even at the borders or within the park with the goal of reducing additional deforestation and eventually reforesting plots.

I’m not going to delve into the pros and cons of this approach, other than to say that I don’t think conservation organizations need to be in the business of agricultural extension services when the giant corporations raking in billions of dollars of profits at the expense of farmers and the environment could and should easily be funding and executing these efforts in totality*. Once again, the responsibility for ensuring environmental ethics and sustainability is fobbed off on a third party. There is no mention in the article on the importance of the “demand” side of the equation, although the author provides this brilliant and not-so-subtle hint:

The reality is that such beans are sold into the anonymity of a commodity market designed to make uniform products for placeless destinations. The point of this coffee was to forget that it had ever come from anywhere at all.

A company can decide to sacrifice profit for ethical responsibility, but only to the degree that shareholders allow them to. And it is the people who buy the products that influence the bottom line which pushes the shareholders to make a company change policies. The article, while illuminating, leaves the average reader feeling rather helpless, or at least with the impression that some organization out there is working to solve the problem.

The average reader is you, and there is something you can do to move the needle in this complex situation. It’s simple and elegant: Remember that your coffee does come from somewhere, and make the choice not to buy and support cheap, anonymized, corporate coffee.

My posts — tons of background:

*And indeed some of them are partnering with WCS to tackle this problem, such as Olam International and JDE. If you believe that corporate giants are sincere or effective in their efforts, consider Nestlé’s “zero deforestation” claim. Despite the fact that Nestlé purchases more coffee than three of the five raw products included in the plan (soy, meat, or palm oil), it was not a commodity Nestlé chose to include in this plan.

Corporate coffee / Nestlé/Nespresso

Nestlé 2015 sustainability report: What you need to know

Update, April 2024: Shared value is a joke for coffee farmers in Chiapas, Mexico. Promises and assistance by Nestlé have fallen so short of covering costs for these farmers they burned sacks of coffee in the streets.

Nestlé has released their 2015 Creating Shared Value report. The Swiss multinational is one of the largest food companies in the world and produces one of the most correspondingly voluminous CSR reports. I delved into the 2013 report in some detail, and you can refer to that post for context. Here, I will just highlight the most salient reports regarding coffee.

  • Nestlé continues to purchase about 10% of the world’s coffee production. In 2014, those purchases totalled 842,000 metric tons, in 2015 it was 849,000 tons. I track these figures in the table at Corporate coffee: How much is eco-certified?.
  • Of those 849,000 tons, only 56% is traceable back to a farm or plantation (p.115). The company defines that traceability as 4C Verified — compliant with the most rudimentary, baseline standards in the industry. Or to put it another way, over 373,000* tons is NOT traceable to source and may not even meet the most basic standards of ethical human and environmental decency.
  • More astonishing, Nestlé sources about a quarter of their coffee (225,600 tons) directly from 760,000 farmers (p. 100) via their Farmer Connect program (p.117) of which 85% is 4C compliant. That means 15% of their direct-sourced coffee — from known producers they are working with — is not even 4C Verified.
  • 85% of the approximately 55,000 tons of coffee used for Nespresso’s permanent Grand Cru coffee pod selections is sourced under their Nespresso AAA Sustainable Quality program (p. 119), about the same percentage as the past 3 years. This is their proprietary program based on Rainforest Alliance standards. Read more here.
  • There is no mention of the volume of organic or other eco-certified coffee purchases. Nestlé doesn’t place value in third-party certification for coffee (see statement below).

nestle-no-cert-clip

At 351 pages, there is much more material in the report, which you can download at their website.
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*56% of 849,000 tons = 475,440, although later (p. 118) in the report they say that 482,054 tons represents 56%. The latter would mean they purchased 860,811 tons of coffee, so I used the former figures, as they are given several times in the report.

Corporate coffee / McDonald's

McDonald’s sustainability update

mcdonalds-logoI have reported previously on McDonald’s efforts to improve coffee supply chain sustainability, part of a larger effort in overall sustainability. In my post “McDonald’s makes a substantial commitment to coffee sustainability”  I provided an overview of 2013 levels of certified coffee and farmer capacity-building partnerships. I also compared the efforts of this company which derives a relatively small portion of income from coffee to that of JM Smucker (owner of Folgers, among other brands) which makes most of its profit from coffee. I gave a brief recap and update later that year.

In their 2014 Good Business corporate responsibility report, McDonald’s declared an “aspirational” goal (versus a commitment, I suppose) of sourcing 100% of their coffee from third-party verified sustainable sources. As of 2014,

  • 32% of their global coffee (22% in the US) is from sustainable sources, including Rainforest Alliance, UTZ, or Fairtrade certified farms. This is through their network of suppliers, as they do not purchase coffee directly. That is an increase from 2012, when those figures were 25% global, 15% US.
  • 100% of caffeinated coffee is Europe is Rainforest Alliance, UTZ, or Fairtrade certified.
  • 100% of coffee in McDonald’s restaurants in Brazil, Australia, and New Zealand is Rainforest Alliance certified.
  • 100% of espresso in the US and Canada is Rainforest Alliance certified.
  • Their grocery store Espresso Roast McCafe at Home brand is 100% Rainforest Alliance certified. The bagged McCafe coffees in grocery stores are roasted by KraftHeinz.  Kraft went through a series of spin-offs and mergers, and retained some coffee operations and brands, including Maxwell House, Gevalia, and Tassimo.

These are significant efforts for a fast food chain and, as noted in my previous posts, more impressive than some coffee companies. Because McDonald’s buys through suppliers that also serve other companies, pushing the suppliers to source more certified coffees should also have positive spillover effects in the larger market.

 

Corporate coffee / Dunkin Donuts / Jacobs Douwe Egberts/KraftHeinz / McDonald's / Nestlé/Nespresso

Slave labor in your cup

danwatch-logoThe British newspaper The Guardian published an article this week, “Nestlé admits slave labour risk on Brazil coffee plantations.”The subtitle sums it up: “Nestlé and Jacobs Douwe Egberts say beans from Brazilian plantations using slave labour may have ended up in their coffee.” The article is based on an extensive investigation by the Danish independent media and research center Danwatch.  Nestlé admitted it had obtained coffee from farms found to have poor labor conditions resembling slavery. Jacobs Douwe Egberts (JDE) conceded “it was possible” they did, too.

Labor practices are outside the wheelhouse of C&C coverage; you can read the entire Danwatch report here.  But I want to point out here that this is not the first time these companies have been caught buying coffee grown under illegal or unethical conditions. It’s why I advocate for not buying supermarket coffee from large corporations and why I am so skeptical of their “sustainability” claims.

The companies

Most people are familiar with the mega-giant transnational food and beverage company Nestlé. They own the coffee brands Nescafé, Nespresso, and Taster’s Choice, as well as other international brands.

The name Jacobs Douwe Egberts (JDE) is probably unfamiliar to most people outside of Europe, and the company has a rather convoluted pedigree. It was created in 2015 after a merger between Mondelez International (which had previously taken over most of the coffee brands of Kraft Foods) and European coffee giant D.E Master Blenders 1753 (which itself was spun off from the coffee business of Sara Lee Corp.). Coffee brands include Maxwell House, Gevalia, Kenco, Tassimo, and Senseo, plus many international brands.

The privately held JAB Holding Company owns the majority share in JDE.  It also has majority stakes in Peet’s Coffee and Tea, Caribou Coffee, Keurig Green Mountain, Einstein Noah, and (via Peet’s) Intelligentsia and Stumptown.

Nestlé and JDE together control approximately 18% of global coffee production, and over 40% of global retail market share.

Caught before

In 2007, a World Wildlife Fund report revealed that coffee illegally grown in Sumatra was being purchased by Nestlé and Kraft (most of Kraft’s coffee business is now controlled by Jacobs Douwe Egberts, see above) and other large coffee buyers. Land was being cleared in a national park to grow coffee, threatening habitat for endangered elephants, rhinos, and other wildlife.

At the time, Nestlé admitted the difficulty of determining the precise origin of their coffee. Nearly a year later, in an ABC News follow-up story, Nestlé made the cavalier comment “It might come – we have no way of  knowing – from illegal sources. Law enforcement is not our task.”

Indeed, the enormous amount of coffee purchased by Nestlé, JDE/Kraft, and Smucker’s (Folgers) follows a complex supply chain that would require effort and investment to ensure it does not originate under dubious conditions. It isn’t as if these companies can’t afford it. They make hundreds of millions (in Nestlé’s case, tens of billions) in profits annually.

You can read more about Nestlé’s various sustainability claims, and my take on them, from this page. As for JDE, the fact that the majority owner (JAB) is privately held will only reduce transparency regarding their supply chain, including that of many of their acquisitions. JAB is engaged in a quest to dominate the global coffee scene. I can’t see how this race, a competition with its main rival Nestlé, can advance the cause of coffee grown in a manner that is sustainable to farmers or the environment.

Epilogue regarding other buyers

Starbucks was also implicated in receiving illegally-grown Sumatran coffee in 2007. Prior to 2007, only about half of Starbucks’ coffee was sourced under their CAFÉ Practices guidelines, which identifies their suppliers and requires various criteria and transparency, verified by a third party. Now greater than 96% is sourced through this program. In the current Brazilian case, Starbucks told Danwatch that while they had done business with cooperatives and/or middlemen connected with the guilty farms, they knew each of their farm sources and did not obtain coffee from the farms in question.

McDonald’s and Dunkin Donuts were also mentioned in the Danwatch report because they use the Canadian distributor Mother Parkers, which in turn purchased coffee from a Brazilian firm that may have gotten coffee from one of the implicated farms. McDonald’s responded that their communication with suppliers indicated conditions described by Danwatch were not present in their supply chain. I’ll add that McDonald’s has been making considerable efforts in cleaning up their coffee supply chain. They have a goal of sourcing 100% of their coffee from verified sustainable sources by 2020, and are about a third of the way there. I’ll be writing a post about their progress in these efforts.

Dunkin Donuts response was more vague: “Dunkin Brands will continue to communicate and enforce our code of conduct standards throughout our coffee supply chain. Any material breach of this Code that does not have an immediate corrective action plan would result in termination of the supplier’s approval status.” They gave this same answer to multiple questions from Danwatch.

UPDATE: For in-depth perspective on slave labor in coffee, please see Michael Sheridan’s always deeply insightful posts: