Nestlé/Nespresso

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 / 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:

Corporate coffee / Nestlé/Nespresso

Nespresso AAA quality program guidelines

Updated in April 2016

In 2009, Nespresso, the premium capsule coffee unit of the giant Swiss multinational food corporation Nestlé, announced a sustainability initiative they called Ecolaboration. I covered the goals in this post.

One major focus has been Nespresso’s AAA Sustainable Quality Program (“AAA program” for short). The goal in 2009 was to source 80% of Nespresso’s coffee from this program by 2013. They reached that goal, and in 2015 they were at 85%, with a goal of 100% by 2020. It is important to note that parent company Nestlé buys around 850,000 tons of green coffee annually, of which only about 0.2% is eco-certified (via Fair trade/organic).  Nespresso, which has a separate supply chain, sourced 55,000 tons of coffee through the AAA program in 2013, which represented 84% of their purchases. Thus, Nespresso buys about 65,500 tons of coffee, a small fraction of the total purchased by the company.

The AAA program’s three “A’s” are Quality, Productivity, and Sustainability. Once a farm meets the quality requirements (about 50 criteria) and is accepted into the AAA program, they enter a process to evaluate their social and environmental sustainability efforts. This aspect of the program was developed in partnership with Rainforest Alliance. For many years, the criteria or guidelines were not available to the public.  The Generic Tool for the Assessment of Sustainable Quality (TASQ) is now available online. What follows is an overview of the requirements for producers to be included in the AAA program under this TASQ, with an emphasis on the environment. Many of the statistics providing context for the guidelines come from Nespresso’s Ecolaboration Full-term Report, 2009-2013, published September 2014 (PDF), or the Coffee Barometer 2014 (PDF).

Criteria and scoring

The TASQ is based on the 2010 Sustainable Agriculture Network (SAN) standards used for Rainforest Alliance farm certification.  Nespresso has divvied up and tweaked the 10 principals and 99 criteria in the 2010 SAN standard into 42 principals and 296 criteria. Of those, 36 are classified as “critical” (12% of total). They include prohibitions on such things as hunting endangered species, paying below the minimum wage, or not documenting coffee transactions, and are considered “internationally accepted minimum standards for sustainability.”

If a farm does not meet all the critical criteria, they are designated as Under-performing but allowed time to resolve the shortcomings. Once a farm meets all the critical criteria, they are then considered compliant and at the Basic performance level. Thus, there is a low bar (especially regarding environmental standards) for inclusion in the program.

There are three more performance levels in the AAA program, reached by complying with increasing percentages of criteria on top of the critical ones: Emerging (at least 33% of non-critical), High Performing (66%) and Certified (80% or greater and at least 50% per principal).

“Certified” here does not mean that a farm automatically receives Rainforest Alliance (or any other) certification. If a farm chooses to apply for RA certification, Nespresso pays for the first year of certification audits. This is encouraged because at the farm level, only 30% of each harvest from participating farmers meets Nespresso’s quality requirements. Nespresso maintains that due to overall quality improvements and/or certification, farmers are able to sell the rejected portion of their crop at a higher price to other buyers.

As of 2015, according to the company Creating Shared Value Report, there are 75,000 farmers in the AAA program, but Nespresso does not disclose the percentages of farms at each performance level. The progress report stated that as of 2013, overall compliance of participating farms with the AAA standards reached 79.8%.  I took this to mean that 79.8% of farms in the program were in compliance (i.e., at least at the Basic level). It could mean that on average farms were compliant with 79.8% of criteria, but I’m not sure why it would not have been worded that way. Also unclear was whether “overall compliance” included quality criteria, or just TASQ criteria. No further similar reports have been published as of early 2016.

On a positive note, the report also noted that 30% of Nespresso coffee was Rainforest Alliance certified1.

The level of documentation required for various criteria varies depending on the size of the farm — 10 ha or less or greater than 10 ha. Nespresso doesn’t indicate how many of their producers are smallholders.

Inspections are done by Nespresso agronomists, and verified by SAN partner auditors. These include Rainforest Alliance’s own auditing division in many of the countries where Nespresso sources coffee2.

Ecological criteria

Nespresso states that 30% of their criteria fall under the umbrella of the environment. These include topics such as waste disposal and soil preservation.

More narrowly, there are 5 principals covering ecosystem management and wildlife conservation: Protection of Natural Areas, Reforestation, Shade Management, Conservation of Biodiversity, and Susceptible Species Protection. There are 37 criteria in these principals (12.5% of total).

The four shade criteria are fairly general, e.g., one is “There is a shade planting program with records.” One is very similar to the shade guideline from the 2010 SAN standard — this is the one that has been proposed to be watered down in the upcoming revision of the SAN standards. Overall, the ecological criteria tend to be quite generic and many are not quantifiable. Further examples include “Farms provide support to the conservation of nearby protected areas and conform to the management plans of those areas” and “Wild animals bred in the farms are supervised by a competent professional.”

Of the 37 ecological criteria, 7 are critical (none of the shade criteria nor any of the reforestation criteria), which represents 19% of the 36 overall critical criteria, and 2% of all criteria. Some of the critical criteria also seem open to interpretation, such as “The ecosystems conservation program takes into account natural ecosystems restoration and the reforestation of on-farm areas that are not appropriate for agriculture.” However, there are supporting documents to the TASQ that are not available publicly that may clarify some of these criteria.

Bottom line

  • Nespresso is sourcing a small fraction of the total coffee purchased by parent company Nestlé under guidelines that are similar to those used by Rainforest Alliance or UTZ.
  • The bar for inclusion in this program is much lower than other true certifications, with producers being allowed in the program (at least temporarily) even if they do not meet all critical criteria representing baseline sustainability standards.
  • A small percentage of the criteria are related to the ecology of farms, many are generic and without quantifiable goals.
  • Nespresso does not disclose a breakdown of the percentage of farms at each performance level.

Future plans

The next iteration of Ecolaboration is dubbed The Positive Cup by Nespresso. Their new coffee sourcing goal is to source 100% of its permanent Grand Cru range through the AAA program by 2020. There are now there are 45 Grand Cru coffees of which 19 are in the permanent range. These numbers seem to change as limited editions come and go; we don’t know if the new goal will translate to an amount that is more or less than the 80% of Nespresso’s total tonnage it is currently sourcing under the program.

You can read more about the various aspects of sustainability efforts at Nespresso, including those beyond coffee sourcing, at their web site.

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1It is not known how many of these producers obtained Rainforest Alliance certification as a result of going through the AAA program, or if they already had it. Many producers carry multiple certifications or affiliations. For example, according to their Mid-term Report Coffee Target 2011, about 25% of Nespresso’s coffee came from Colombia. The same year, Starbucks published a report on over 200 of their farmers in Colombia (PDF). Forty-two percent of them were also Nespresso suppliers, but nearly all were already in Starbucks CAFE Practices program (with its more stringent environmental requirements) first.

These overlaps make it difficult to assess any single program without accounting for producers that participate in multiple schemes because the credit for improvements might be due to the pre-existing affiliation.

2This arrangement is a little cozy. As noted in Table 15.7 of the chapter cited below, the Nespresso AAA standards are defined by RA, RA controls the accreditation process, and RA auditors controls compliance standards (certification). These authors do not consider Rainforest Alliance certification itself as third party accredited.

Soto, G., and J.-F. Le Coq. 2011. Certification process in the coffee value chain. Chapter 15 in Ecosystem Services from Agriculture and Agroforestry: Measurement and Payment. Rapidel, B., et al., eds. London, Earthscan.