Ensuring that farmers are sustainable
Nespresso CEO Jean-Marc Duvoisin told delegates at the International Coffee Organization’s (ICO) first Global Coffee Forum in Milan on 30th September that Creating Shared Value for coffee farmers, customers and businesses is a key part of the solution to some of the current global challenges facing the coffee industry.
Drawing on real-life examples of farmers Nespresso is working with, Duvoisin said that the company was finding ways to protect the long-term interests of both farmers and the long-term supply of high quality coffee for Nespresso through the company’s AAA Sustainable Quality™ Program.
"I strongly believe that embedding the principles of Creating Shared Value into our business model is continually proving itself to be an effective way of ensuring a stable future income for coffee farmers, and ensuring our supply of coffee.”
Mitigating the impact of price volatility
Mr Duvoisin shared concerns about price volatility, which remains one of the biggest challenges of the coffee industry. Not only for businesses, but most notably for farmers, who are directly impacted by volatile market prices, bringing uncertainty in their earnings and sometimes massive drops in income.
“The Creating Shared Value approach we are pursuing through our AAA Program directly contributes to soften the impacts of price volatility for a more stable future for farmers.” he said.
He explained that Nespresso has decoupled premiums from the commodity market in order that they remain stable over time and lessen the effect of volatility on farmers’ incomes.
Building a more equitable outcome for farmers
The Nespresso AAA Sustainable Quality™ Program is helping more than 63,000 farmers in coffee-producing countries to improve the quality of their crop, boost productivity and implement sustainable farming practices.“By working with farmers to better manage their farms, their businesses and their lands, we see a direct correlation to greater volumes of higher quality crops that meet the specific quality and aroma requirements for our Nespresso Grand Cru coffees,” added Duvoisin.
“The origins of our Grand Cru coffees are not interchangeable, so we cannot buy our coffee on the commodity market. Therefore, the opportunity for farmers is clear: we are a stable long-term buyer for a high-quality supply.”
Nespresso’s approach to supporting farmers is working
More than 80% of Nespresso coffee is sourced sustainably through its AAA Program. According to independent analysis by CRECE, a research institute in Colombia, farmers taking part in the AAA Program have 22.6% better social conditions, 52% better environmental conditions and 41% better economic conditions than non-AAA farms. The study also found that the net income of AAA farmers was 46% higher than that of non-AAA farmers.
However, Duvoisin said that it was not about focusing solely on short-term income gains of farmers, but considering the long-term value being created and shared.
He gave three key recommendations that he finds are helping to create a less volatile future for coffee farmers:
- To commit to the long term, buying directly from farmers and building lasting relationships that creates stability for farmers, and consistency and quality for Nespresso. “Even when prices go up, we stay with the same farmers,” said Duvoisin.
- To create innovative models which bring about stability for whole farming communities. “By looking at the bigger picture, we can make sure that coffee production remains an attractive prospect for existing farmers as well as for the next generation should they choose to follow in their footsteps. We have, for example, created with partners a pilot retirement savings plan for farmers.”
- To invest in quality, which benefits more than just the bottom line – with the customer getting a great cup of coffee, farmers getting a better price for his higher grade crop and ensuring Nespresso is sustainable for the long-term. “Our investment in increasing the quality of the coffee our farmers grow also has an important residual effect on the market, which sees an increased supply of higher quality beans from the farmers selling surplus to the market."
“We don’t have all the answers, but we believe that Creating Shared Value is part of the solution to some of the global challenges faced by the coffee industry today,” Duvoisin concluded.
Read full speech: Nespresso Global Coffee Forum CEO Speech
On the ground partnerships are key to creating shared value opportunities for coffee farmers, said Nespresso CEO
Nespresso CEO explains how the company’s approach to creating shared value drive positive impact for coffee farmers