How Nespresso Supports Local Farmers to Business Success
An Interview with Jean-Marc Duvoisin, CEO, Nespresso
In the business of coffee, the taste and quality of the bean can make or break your product. So Nespresso CEO Jean-Marc Duvoisin is well aware that the success of his business depends on the success of local farmers. Through that connection, Nespresso—a brand of shared value pioneer Nestlé—creates long-term value for local agricultural systems to ensure success for not only his business, but also society.
The following interview is part of the series Leading Shared Value, spotlighting the presenters at the 2015 Shared Value Leadership Summit: Business at its Best.
Creating Shared Value (CSV) is essential to build a sustainable future for our business and secure our brand promise of coffee quality and taste. It is about securing the future of the farmers we work with and ensuring they run sustainable businesses, so we can deliver on our brand promise to our customers. Without creating value for the farmers we work with and ensuring they are sustainable, we couldn’t be sustainable ourselves. It is also about bringing value to our consumers. By working closely with farmers, we can ensure high quality sustainable coffees for our consumers, regularly bring new exceptional coffee experiences to them, but also secure long-term supply to ensure we remain sustainable as a company. For shared value to be created, the approach has to be closely connected to one’s business model. That’s why CSV is embedded in our company.
Our sustainability approach has always been designed to do more than simply minimize impacts. The innovative sustainability programs we develop with our partners, such as an extensive agroforestry plan we are currently carrying out or our project to revive high quality coffee production in South Sudan, demonstrates our continuous commitment to creating shared value and generating positive impacts for all stakeholders across our entire value chain. With our 2020 sustainability commitments, we have set our ambition of providing the highest quality and most sustainable portioned coffee worldwide.
What is the burning social issue that’s affecting your industry? How can this issue be addressed through shared value solutions?
The socio-economic context and adverse climate conditions have increased the risk to the supply of highest quality coffee and, more broadly, to the well-being of coffee farming communities. Farmers are exposed to the general issue of decreased productivity and additional factors such as price volatility, currency exchange rate fluctuations, a lack of disability and accident insurance, a lack of provisions for retirement and lack of crop insurance.
We have also seen that coffee farmers are getting older and that the younger generations tend to move away from coffee farming to go to cities and purse other careers. As a coffee company, it is critical for us to find ways of ensuring that coffee farming remains attractive by creating enough value for farmers, so that there will be enough farmers growing coffee in the future to sustain global consumer demand for our Grands Crus.
How are you innovating for shared value at your organization? Share an example.
As part of our AAA Sustainable Quality™ Program, we have been working to address some of the challenges I have just mentioned, one key focus being on finding ways of enhancing farmer welfare through innovative solutions. That’s why we launched last year a pilot retirement fund to coffee farmers who take part in our AAA Program in Caldas, Colombia, as part of a ground-breaking public-private partnership with the Colombian Ministry of Labour, the Aguadas Coffee Growers’ Cooperative, coffee supplier Expocafé and Fairtrade International. We have also carried out financial trainings in Guatemala to develop farmers’ business and financial skills to ensure they run their businesses profitably.
Our AAA Program itself is an example of an innovative approach to creating shared value for farmers and consumers, in collaboration with our NGO partner the Rainforest Alliance, based on innovative methodology and tools. This unique direct-from-farmer sourcing model, combining quality, sustainability and productivity principles, has resulted in better coffee quality, better environmental conditions, better social conditions and even higher income for farmers.
What we strongly believe in is that working in partnerships is essential in driving shared value and positive impact. One cannot work in isolation.
What are you learning about measuring the link between social and business value?
Interestingly, when you integrate your shared value approach within your business model, you can find innovative solutions that drive business, but also environmental and social value for farming communities. Research performed on the ground in Colombia by CRECE (Centro de Estudios Regionales Cafeteros y Empresariales) has shown the concrete positive impact that our AAA Program has had on farming communities. Indeed, AAA farms have shown 22.6% better social conditions, 52% better environmental conditions and 41% better economic conditions than non-AAA farms.
I also would like to share a very specific example where social and business value was even coupled with environmental value. In Colombia, we co-funded with local partners a central mill (community coffee-processing centre) to improve the quality of the coffees we purchase. Indeed, instead of each farmer processing its own coffee to transform coffee cherries into coffee beans, a centralized facility brings more consistency in the bean quality and reduces the occurrence of damages to the beans, something we are keen to secure to guarantee highest quality coffees for our consumers.
As a result, the mill not only has reduced quality rejection rate of the coffee beans from nearly 50% before the mill to 0%, but it also has improved the livelihood of farmers and their families by allowing them to double their volume of AAA coffee and increase their net income by 17%. The mill also saves farmers four or more hours a day during the harvest. This extra time can be used to spend more time managing their farm or to be with their families. And on an environmental point of view, the mill has reduced water usage by 63% and eliminated water pollution previously resulting from farmers’ milling. This is what I call a triple win.
What’s the biggest challenge that you’ve faced in implementing shared value? What opportunities do you see on the horizon to overcome it, whether alone or in partnership with collaborators?
Implementing shared value takes time and resources. You have to commit to it every day in your business. You have to be patient, you have to be humble, you have to continuously adjust and improve. And you cannot do it alone. One of the roadblocks we faced was in approaching farmers to convince them to integrate our AAA Program. We didn’t want to come in and tell them what to do. They had to understand the benefits they could get out of it. As part of the program, we support and advise them on improving quality, sustainability and productivity through enhanced farming practices. Some of them were telling us: “I have done things like this for my whole life, I know what I am doing, why should I change?” By being present and approachable on the ground with our network of over 300 agronomists, by providing practical solutions for sustainable quality coffee sourcing, by listening a lot, we managed to integrate over 60’000 farmers in the program in 11 years! One farmer in Costa Rica only joined our program to show us that we were wrong and that he was better off doing what he had been doing for over 20 years. He then told our team that he had been wrong, that the recommendations were helping his farm and that he was glad to have joined the program. That’s the best reward!
Don't miss Jean-Marc Duvoisin discuss collaboration best practices at the 2015 Shared Value Leadership Summit, taking place May 12-13 in New York.