by Daniele Giovannucci
As more food industry leaders adopt visible sustainable procurement, private firms weigh the value of their own in-house approach versus partnering with existing public initiatives – even competitiveness guru Michael Porter is talking about it.
A common groan sounded recently when Andrea Illy, the chief executive of the esteemed Italian coffee roaster (Trieste-based illycaffé S.p.A.) announced they were to launch yet another private sustainability certification scheme onto the market. Some in the sustainability community see the move as counter-productive. I have not met Andrea but have had the pleasure of knowing other leaders in the firm and I do not doubt that there are some good intentions behind this but I cannot help but agree with those that think this may hurt farmers, particularly small and poor ones, more than help them.
Coffee farmers face more standards that demand certification (or verification) than any other commodity producers. There are currently eight that are widespread, six public and two private:
Each has its own level of difficulty, depending on a farmer’s starting conditions. Each has its own standards, certification criteria, and procedures. Each has its own costs of learning, adaptation, and inspection. There was talk nearly a decade ago that having four distinct standards was more than necessary when only Organic, Fairtrade, SMBC, and Rainforest Alliance were around. Unlike the later addition of Utz and the 4C, the standards set by a private firm are typically only accepted and remunerated by that firm’s own buyers. If you want to sell to somebody else, the new buyer cannot use the private certifications and is unlikely to offer any remuneration for it.
As a producer, this can force you into a costly bind. Which certification do you seek? What will it cost if you guess wrong? Make no mistake, it is a guess because very few producers have more than an inkling of what the implications of their choices are. In fact, I know only a few who can clearly articulate the differences. To make matters worse, achieving certification, any certification, does not guarantee that your coffee will be purchased.
Until the work of the Committee on Sustainability Assessment (COSA) captures the actual costs and benefits of the many certifications under different conditions, farmers are left to figure it out themselves. It is already clear that some poor choices could easily diminish their sustainability rather than enhance it. But even when farmers are better informed, they will still face risks with these initiatives because each has somewhat different outcomes depending on the application context. In other words, the results can be different from farmer to farmer especially when you have a different agro-ecological zone, farm size, production method, country, etc. Early results from COSA efforts in a number of countries indicate that there is a considerable cost, in both time and capital, for farmers to adopt a new standard and its accompanying certification or verification process.
So why does a notable 76 year-old business undertake to create its own certification? Ernesto Illy, the noted coffee scientist that led the company from a modest regional business in Italy to a globally recognized brand, and a US$ 300 million company, before his recent death was not a big fan of sustainability certifications. He sent me erudite notes on the shortcomings of one or another. He felt that cultivating, processing and harvesting a high quality coffee was basically all that was really needed for sustainability (I hope he would forgive this oversimplification). The rest would take care of itself. Well, we disagreed, but not that much and I always respected him for his candid views and his willingness to discuss; he was a good scientist, always willing to look at facts and data. I find it harder to muster respect for the company’s current move.
Sure, companies need to grow and evolve and I am glad to see Illy more actively considering sustainability issues But does the coffee world need another certification claiming sustainability? It is likely that one or more of the six existing public certifications have adequate sustainability criteria for any occasion since they cover the range of options quite thoroughly. Illy notes that it wants strict quality criteria as well, something not explicit in the public standards. Fair enough. But do you need a certification for that? The buyers always apply quality criteria anyway, and this is somewhat standardized within the firm’s purchasing guidelines already. Why not just widely publish that – so folks in their supply chains know whether they can meet the grade or not? What is the point – if producer sustainability is the objective – of requiring farmers to take on the costs and effort of yet another certification process, particularly when it applies to only one buyer?
Illy notes that this certified coffee will be marketed with a distinct label that they also plan to license to other roasters. I wonder how many competitors would want to use that label. Does anyone really believe that it will become a new public standard to be used by more than one company? Of the firms that have recently moved toward the use of certifications in their purchasing, all of the food industry leaders have all elected to use public, not private, certifications.
Very recently, Mars, one of the world’s largest and most profitable food companies, made announcements about its commitments to public sustainability certifications such as Rainforest Alliance and Utz Certified for both its coffee and chocolate-based brands. Similarly, Kraft Foods, the world’s second-largest food and beverage company, has partnered with Rainforest Alliance for its certification needs. Cadbury, a leading global chocolate and confectionary brand recently announced that its flagship product will be Fairtrade certified. Even Wal-Mart, the world’s largest food retailer – and a leading seller of certified products – has chosen to go with public certifications such as organic, Fairtrade and Rainforest Alliance. Perhaps these firms’ strategic thinkers know something about the value of working with public systems when they want consumers to believe that they have an interest in the public good.
In a paper with Stefano Ponte (Food Policy Journal) we suggest that in this age of global capitalism, public–private partnerships with civic organizations or NGOs provide the normative framework that corporations use for social legitimacy. Leading firms have been researching the issues for years and nearly all elect to support existing public approaches. They go this route not only for the credibility that these offer but also because they realize the burdens that come with managing a certification transparently. Similarly, most pundits in the sustainability arena understand that adding yet another certification only makes a small producer’s life harder.
One could have taken a lesson from the experience of Starbucks, the world’s largest private coffee firm that is using its own certification. They get kudos from consumers, media, and the sustainability community when they increase their purchasing of a public certification such as Fairtrade. As the largest buyer of Fairtrade coffees in the world this recognition is well-deserved. But few give Starbucks credit for getting farmers to meet its private C.A.F.E. Practices standard. And there is certainly plenty of grumbling in the field about it.
This is unfortunate because the investments of Starbucks and Nespresso — the only two firms seriously mounting their own standards — have been substantial. And I believe that leaders in both firms had good intentions when these approaches were designed. Even the ongoing administrative costs alone are a considerable and perhaps unnecessary burden to the firms. Nespresso’s management is already shifting its sustainability focus toward having farmers certified by Rainforest Alliance. The discussion of the value of its C.A.F.E. Practices program has come up within Starbucks as well. When firms take the time to independently measure their real impacts, they can better understand how their sustainability investments could yield higher returns in terms of farmer relations, sustainability, and public credibility. Consumers may trust a corporate claim to quality and the long-term growth of Illy, Nespresso and Starbucks attests to that. Yet it would be foolish to assume that such trust extends to issues of corporate social responsibility. Most consumers have long ago stopped trusting firms’ own claims about their goodness or their commitment to sustainability.
An FAO report on coffee certifications co-authored in 2008 notes that such essentially private standards are seldom credible because they are under the private control of firms that can at any time alter, dilute, or simply not fully use the standard (Chapter 3). Most are formulated for corporate needs perhaps more than for farmer sustainability and give rise to accusations that they are designed by well-off northerners that have little empathy for the producers that supply them in a developing country.
I wonder if there are any credible voices suggesting there ought to be more certification standards. Taking the available lessons, is there a good business case to be made for such a decision? A sustainability case? In fact, after a recent presentation and discussion by noted Harvard Business School professor and competitiveness expert Michael Porter, I would venture to say that the consensus is that having more sustainability standards will make it more difficult for farmers and for firms. So, is this going to be Illy’s contribution to sustainability? I hope not. They have a talented and very creative team and surely they can come up with a bolder and better idea.