By 2013, we may need two planets to sustain our demand for resources on Earth. At the risk of being repetitive: climate change is real. The level of urgency is rising to the point where it is not only unacceptable, but also increasingly unwise for businesses to ignore the issue. Businesses are being called upon to move faster and more significantly, so much so that boldness is becoming a competitive capital.
Where Things Are Headed
At the Unilever annual general meeting in 2010, CEO Paul Polman had this to say on the topic, “We are living beyond the limits of the world’s resources…it is not sustainable…by 2020 we aim to halve the environmental footprint of our products, source 100 percent of agricultural raw materials sustainably, help a billion take action to improve their health and well-being. It’s the right thing to do, but it’s also good for business.”
And here is the brilliant part, “In the context of building our business for the long-term, we have chosen to abandon guidance to the market…” Polman essentially informed short-term investors to look elsewhere, giving both humanity and the health of the world a higher priority in their business model. These statements came with few market repercussions, and analysts continue to recommend Unilever as a strong buy. Other giants, such as Wal-Mart, are also making big moves in the direction of sustainability. This will raise the bar for everyone, and coffee companies with sustainability activities could soon find their efforts dwarfed.
Another interesting trend in the business world is more capital flowing to firms that have established defined approaches for sustainable development. A recent article in Harvard Business Review states, “…nearly one in every eight investment dollars goes to a company that qualifies as a socially responsible investment.” An explanation is also put forth in the article, “One last consideration driving fund managers toward sustainability-focused investments is hard to prove but widely suspected: companies taking the lead in environmental, social, and governance matters have better management teams.” For a long while, consumers were leading interest around sustainability issues but this points to another and very significant driver.
Whether or not all investors are using sustainability ratings to direct their funds, shareholders are showing more active interest in the issues. Recently, shareholders filed suit against J.M. Smucker Co., demanding that the company clarify how climate change will affect the supply and price of coffee beans, and ultimately, how it will affect investors. This follows a ruling last year by the Securities and Exchange Commission requiring publicly-traded companies to disclose risks posed by climate change to their assets and supply chains. As business and industry take positions and act, whether proactively or in reaction to external demands, businesses that don’t will likely suffer in the marketplace.
With mounting evidence and increasing external pressure, it would seem change is inevitable, yet that isn’t the case. The issues are complex, solutions are hazy, and, of course, change is hard. Fundamentally, the way we think about competition needs to shift and new approaches are necessary. From a white paper published by Blu Skye, a sustainability strategist group, “The theme of this approach is collaboration, and it signals a shift in views on competitive advantage. What’s required to drive the needed innovation—new knowledge, tools, and practices—is so significant that it is cost-prohibitive, slow, and foolish to go it alone.” Which all comes down to: we must work together.
Specialty coffee has long claimed leadership position in issues of sustainability and, to its credit, there are innumerable examples of commitment, philanthropy and strategic development. However, many solutions are oriented to the problems of 20 years ago, not those that loom ahead. The role of certifications is shifting, supplies are strained, and poverty persists. The future demands a new, bolder type of leadership, explained by Blu Skye as, “The new model for leadership is to be part of an industry recognized for creating a new playing field for sustainability innovation and to out-execute our peers, share what you have learned, and continue to set the pace in the race to the top.” In other words, collaboration has become the foundation of competitive advantage.
This change pertains to everyone, not just the big boys. You might be reading this, thinking, “I don’t have shareholders,” or “I’m not a massive corporation,” so it doesn’t matter as much to me. Untrue. The giants will change what is considered important, and the implications on small businesses could be monumental, especially for those small companies that don’t have a plan in place. All those small coffee roasters and shops that currently offer recycling, a few certified-coffee selections, and donate to a charity or two will have to do far more to be considered responsible. Changes aren’t reserved solely for the “giants” and small organizations will have to consider their role more strategically.
Putting this philosophy in place industry-wide is going to be far from easy. There is no quick path from an understanding of collaborative benefits to realization of those benefits. However, the climate is more encouraging today than ever before. Financial calculations considering the non-financial drivers of human capital, customer relations, and innovation are more sophisticated than in the past. Systems for measuring impact have been developed and tested, with investor action moving in the right direction. This action creates a shift where sustainability can no longer be considered as a separate activity. Sustainability will be an integral part of how business is conducted, and complexity will no longer be an excuse to not engage. For specialty coffee to maintain its claim as a leader in sustainability, it will require deeper strategies, stronger collaboration, and much bolder choices.
With more than 15 years of marketing experience, Tracy Ging has spent the bulk of her career in the coffee industry, where she has worked on both sides of the supply-chain, developing a deep understanding of the market and the trends driving it. Tracy currently serves as Deputy Executive Director of SCAA.