As more businesses and organizations adopt market-based instruments for sustainability, what do we know about making them successful? Working with hundreds of companies and organizations over the last two decades, including a significant number in the coffee sector, we have distilled five important skills that are part of successful programs. Applying these simple lessons and managing with a results-based mindset can effectively transform the sustainability of organizations.
To appreciate this evolution, we recognize that a new form of Corporate Social Responsibility (CSR) is becoming a standard feature particularly for large and consumer-oriented firms. What started in the late 1960s as something closer to charity or philanthropy has evolved dramatically in recent years toward businesses integrating responsible practices into their day to day operations.[1] Yet, there is limited understanding of how to actually operationalize CSR and how to manage it for desirable results. This gap is particularly salient in the purchasing relationships with producers in developing countries. Undefined concepts of sustainability and CSR are giving way to specific and auditable standards. These include corporate standards as well as Voluntary Sustainability Standards (VSS) such as Organic, Fairtrade, Rainforest Alliance, Forest Stewardship Council, Soy and Palm Round Tables, and GlobalG.A.P.
For investments in such market-based initiatives to be tangibly effective and to provide lasting results, organizations must ensure their integration into operations and procurement practice. We offer five key elements of a successful sustainable sourcing program that have consistently worked for companies large and small.
1. Align strategic direction with sustainability objectives. There are at least nine factors[2] to consider in any sound sustainability strategy, so that requires a bit of process, but when done, an organization should emerge with an integrated process that makes sense and can not only mobilize but also inspire staff and stakeholders. Paired with articulate and measurable sustainability objectives to drive effectiveness and performance, an organization will be ready to apply global best practices in all of its operations.
When McDonald’s US designed the sustainability principles for its coffee program, it consulted stakeholders widely across many of the key sustainability factors. The result took time but yielded great benefits in terms of clarity and workability for its large supply base. The system integrates substantial goals with pragmatic business needs across its supply chains. The result is a program that achieved goals a year ahead of schedule and has high levels of credibility among stakeholders.
2. Select the right Key Performance Indicators: measure only what matters with simple and reliable, S.M.A.R.T. metrics (Specific, Measurable, Actionable, Realistic, Time-bound) that can be integrated into everyday management processes to help monitor performance and to foster continuous improvement. No need to reinvent the wheel, just ensure that metrics align with key international norms and are standardized so you can benchmark across origins and supply chains.
Accountability to actually achieve reductions in climate risk, deforestation, and an array of human rights will only be possible with clear and standard metrics in place. The Global Coffee Platform, the ISEAL Alliance, and the Sustainable Food Lab were among the first umbrella organizations to collaborate with COSA to define clear and consistent metrics that can be comparable across time and geographies. They have, in essence, set the stage for the kind of consistent data that will be necessary in the future to power AI. Leading companies like Nestlé and Mars are also invested in good data efforts. The push by European governments and major retailers such as Walmart, Target, and Tesco toward consistent and credible reporting of traceability and carbon is also contributing to a rapid increase in industry demand for better information.
3. Use pragmatic tools to simplify and improve sustainability management in vital business areas. Impact Evaluation is withering except in some academic circles, and the dependence on unverified self-reporting presents risks. Simple and proven technologies help gather, analyze, and visualize data that tracks programs or activities. Other tools facilitate traceability and can even automate compliance – noting however that while today’s tendency to seek compliance and traceability will only increase, it will be with a significant shift: organizations will see more clearly that, while valuable, compliance and traceability are not a credible substitute for sustainability.
The inherent simplicity of Performance Monitoring – taking a reasonable number of key metrics and integrating them into the operations that a business is already conducting – makes it minimally disruptive, and more likely to be wholly adopted by companies and organizations. When Mondelēz-JDE merged into the world’s second largest coffee company, one of the assets was a simple system and the right KPIs to measure progress on their investment performance that also improved their relationships with origin partners whose local field staff learned new skills gathering vital data cost-effectively. Performance Monitoring offers critical competitive advantage for rapid adaptation, tactical decisions, and sustainability performance while also serving as a natural precursor to impact evaluation.
4. Ensure accuracy and credibility with verification to protect company reputation and ensure sound investments (such as financing, training, or programs). Using advanced analytics, that need not be complex, can help identify and locate risk before it becomes a problem. Integrated digital systems can validate data and significantly reduce verification costs – although they cannot yet fully replace the value of an in-person audit. Applying results-based management to verification enhances the ability to succeed, demonstrate what works, and scale-up fast.
New technology is radically altering our visibility into supply chains and into the conditions at origin. World-leading brands such as the Coca-Cola Company know that the implications are considerable. It is dangerous for companies that lag behind in adoption, leaving them dependent on suppliers or intermediaries to provide information and risk management. Smart money is realizing that the increasing application of artificial intelligence (AI) in consumer segmentation is now spreading to every level of the food and beverage industry from logistics to predictive farm-level risks. AI depends on data, quality data that is consistent. Content is critical, software choices also matter, Coca-Cola is mastering both in its coffee supply chains. It can take a few years to secure and manage such data adroitly in a supply chain; get started.
5. Tell Stories that Matter. A good sustainable sourcing program delivers sustainability intelligence that will engage customers, stakeholders, and staff. That engagement and support is vital to create continuity and justify investment. Powerful, data-backed stories with dynamic visuals can provide meaningful reporting that cuts through the clutter of sustainability claims. The most powerful and lasting narratives are those that are backed up with credible data. They inspire confidence and participation.
Real and measurable impact should be a critical part of the story. Patagonia is a sterling example and a model for the coffee sector. Its credibility and innovation are born of its genuine listening and translating that to not only communicate sustainability but to taking a stand and actually advancing sustainability in creative ways as a unique value for its customers. The types of investments in sustainability are altering. They are more specific now and more controlled. In the near future, they will be more results-oriented and will increasingly seek different forms of ROI, and not just at a financial level but in risk and reputational calculations also. They will increasingly be conducted through partnerships rather than solo efforts.
The increasing importance of market-based sustainability approaches for the coffee industry is predicated on the ability of organizations to integrate them effectively. Corporate standards can have considerable value, yet the Voluntary Sustainability Standards have a clear role in keeping the sustainability dialogue transparent and open to the public. There is wide agreement that, as intractable problems persist, we need such new tools to cultivate the ability to listen to each other, understand sustainability, and to act intelligently.
[1] Giovannucci, Daniele & Hagen, Oliver & Wozniak, Joseph. (2014). Corporate Social Responsibility and the Role of Voluntary Sustainability Standards. In Voluntary Standards Systems – A Contribution to Sustainable Development. Springer Publishing
[2] Materiality-Objectives, Programs-Investments, KPS-Metrics, Sustainability Intelligence and Analytics, Stakeholders, Communications, Credibility-Trust, Cost Effectiveness, and the Competitive Landscape.
