SUSTAINABILITY REPORT2017

For future-proof coffee farming: Continued support for the trans­for­mation process

Management approach: GRI 203; 304; 308; 407; 408; 409; 411; 413; 414  

GRI 102-9; 308-2; 407-1; 409-1; 414-2 

For over 65 years, we have offered our customers top-quality coffee. To be able to keep deliv­ering on this aspiration in future, we not only place a premium on flavour and taste, but also work to maintain and contin­ually improve the condi­tions needed for growing high-quality coffees. We commit to our local supply chains by cooper­ating with coffee farmers and standards organ­i­sa­tions and promoting sustainable farming practices. We also contribute our expertise to inter­na­tional initia­tives to support a sustainable devel­opment of the coffee sector: systemic challenges can only be effec­tively met by working together with all protag­o­nists in the sector. 

As we work towards becoming a 100 % sustainable business, our medium-term goal is to offer only coffees whose culti­vation meets ecological as well as social and economic require­ments. By doing so, we contribute to safeguarding the liveli­hoods of coffee farmers and their families long-term – which also ensures the long-term avail­ability of the raw coffee qualities we need, and the future viability of our business. We apply a holistic concept to the sustainable devel­opment of the coffee supply chain and the entire coffee sector. 

Challenges in the supply chain 

Our Arabica and Robusta coffees are grown in the ‘coffee belt’ along the equator in South and Central America, Africa and Asia. The culti­vation areas are predom­i­nantly located in devel­oping and emerging countries. The majority of the producers are small­holders whose farms usually comprise less than 2 hectares of arable land. 

Due to the many small­holders that make up the supply chain, it is a great challenge to create trans­parency from cup to plantation, and to promote better condi­tions locally. Collab­o­ration with reliable partners in the growing regions and the supply chains is therefore essential for us. We cultivate mutually trustful, long-term supplier relation­ships with exporters and traders from the growing regions, as well as with cooper­a­tives and individual larger farms. Through our demand for sustainably grown coffee grades and our efforts on the ground, we can influence the culti­vation methods and condi­tions in coffee-growing. 

The coffee beans’ journey

After the coffee harvest, the coffee beans go through initial processing locally – either the farmer delivers them directly to a processing plant, or they are delivered by an inter­me­diary. From dry, wet or semi-washed processing, the coffee beans continue on to the mill, where they are peeled and then sorted by export grade. Again, the beans arrive at the mill either directly or via an inter­me­diary. If the processor does not possess an export licence, they sell the beans to an exporter or importer, if necessary through an inter­me­diary. Alter­na­tively, the beans may go to auction. The beans are then sold to a roaster, such as Tchibo, a process that again may involve several steps. Once the coffee beans have been trans­ported to Germany, they are put in interim storage, cleaned again, roasted, packaged, and finally arrive at their consumer via retail. 

Challenges in coffee growing

Around two-thirds of the world's approx­i­mately 17 to 20 million coffee farmers are small­holders with just one or two hectares of land. Their resources are as limited as their access to technology, financial resources, and education. They often lack knowledge about eco-friendly and efficient culti­vation methods. In the medium-term this situation leads to declining yields, lower quality, and increasing environ­mental pollution. for instance, toxic pesti­cides are used – often without taking protective measures – and the soil is over-fertilized. The reper­cus­sions of climate change additionally threaten the future viability of coffee farming, because farmers often lack knowledge how to adapt to changing weather patterns. 

The soil’s loss of fertility reduces the yield per hectare. At the same time, production costs rise because additional fertilizer is needed to maintain yields as far as possible. In many cases coffee culti­vation stops being an econom­i­cally viable propo­sition: in order to buy the fertilizer, many farmers have to take the risk of financing, without being able to hedge against the strongly fluctu­ating green-coffee prices on the world market. As a result, many small­holders can no longer live off coffee farming alone, so they give it up or merely grow coffee as a side-line. Moreover, tradi­tional coffee farming without modern technical resources is regarded as hard work by many people and therefore not very attractive. Young farmers in particular therefore no longer consider it as a source of income if more lucrative alter­na­tives are available to them.  

On the other hand, there is an increased demand for green coffee. In the last few decades it has risen steadily by about 2 % per year. If this increasing demand is to be met in future as well, yields must be increased – including and especially those of the many millions of small­holders, because their yields are often low. So the idea is to help small­holders increase their yields in a sustainable way and thus secure a good livelihood. To do this, they need a financial foundation, for only then can they invest in more sustainable forms of culti­vation and production that protect the environment and take social criteria into account. Beyond this, working condi­tions need to be improved in many places. While the large farms are inspected frequently, in the case of the smaller estates and small­holders, high production costs and the price pressure of the market often result in informal working relation­ships and working condi­tions that fail to meet ILO core labour standards. For this reason, involving small­holder farmers in the process of trans­forming the coffee sector is an important pillar of our strategic approach, which commitment at both the opera­tional (supply chain) and higher (sectoral approach) levels. 

Further devel­opment of the strategic approach 

To meet the challenges of the supply chain and in the growing regions, we have worked for a sustainable devel­opment of the coffee sector since 2006. In these past eleven years, we have triggered a number of positive devel­op­ments with our measures in the supply chain: we strengthened the culti­vation of sustainable coffee grades, and contributed to the fact that more and more sustainable coffees are offered and being demanded by consumers – as shown, for example by sales of Fairtrade coffee in the German market, which nearly doubled to more than 17,000 tonnes between 2012 and 2016. 

However, we have also had to acknowledge that we are encoun­tering the limits of what we can do and achieve as a single company. Systemic challenges at the origins, such as imper­mis­sible forms of child labour on the farms, and the lack of trans­parency in the mainstream market, are issues that require efforts on a broader scale. For instance, our partners obtain the green coffee in the quality we require from many different farms. Depending on the origin, there may be several thousand who deliver their green coffee for a container – which makes it accord­ingly difficult to create trans­parency. To find out how we can address these challenges even more specif­i­cally, in 2016 we performed a compre­hensive assessment of our previous strategic approach for sustainable raw coffee, involving key stake­holders.  

We surveyed our key stake­holders about current challenges. They included the inter­na­tional standard organ­i­sa­tions FairtradeRainforest Alliance und UTZ, local standards organ­i­sa­tions such as Coffee Care in Guatemala and CLAC in Fairtrade's Latin American network, coffee farmers in our main growing countries, and our suppliers. Deep-dive analyses of these challenges and of existing approaches were carried out. We looked at global trends, the increasing momentum in the coffee sector, and consumers’ expec­ta­tions regarding taste and sustain­ability.  

In essence, the analyses showed that major ecological and social challenges – such as the causes of imper­mis­sible child labour and use of prohibited pesti­cides – are systemic. To tackle them effec­tively, it is necessary to go beyond supply chain activ­ities and address problems at a systemic level, involving govern­ments and public interest groups. On the one hand this finding encourages us to continue our involvement in inter­na­tional collab­o­ra­tions. But on the other hand, it also shows that further efforts are required to sustainably transform the coffee sector in the long term. All coffee sector stake­holders must take even more respon­si­bility for shaping the trans­for­mation process and doing their part in their respective roles in order to bring about systemic changes. 

We want to join these forces and have therefore added a systemic programme to our integrative existing concept: ‘Mainstreaming Sustainable Coffee Production’. Our goal is to bring together all relevant stake­holders and jointly identify urgent, regional issues, to then develop various solution scenarios in dialogue with everyone involved. We are aware that such a process takes time and that we cannot create an impact overnight. That is why our programme takes a long-term approach.  

Our first test market is Brazil, as the country has already attained a high degree of maturity when it comes to sustainable devel­opment in coffee culti­vation. So a systemic, insti­tu­tional cooper­ation on imple­men­tation solutions could be realistic, especially as Brazil has already gone through an intensive stake­holder process with the National Coffee Platform, to define its own national sustain­ability standard.

As a first step, we conducted a multi-stake­holder workshop in Belo Horizonte in the Brazilian state of Minas Gerais in November 2017. In 2018, we will initiate small collab­o­ration exper­i­ments. 

We are also extending our Tchibo Joint Forces!® quali­fi­cation programme from the level of individual small­holders to a regional level, by e.g. addressing suppliers, NGOs and other roasters and devel­oping scalable solutions. The core goal of our commitment is “Coffee farming as a viable business”. So in 2017, we expanded our Tchibo Joint Forces!® quali­fi­cation programme to include coffee-growing regions in Brazil. By devel­oping a sustain­ability approach that is effective locally, we make an effective contri­bution to the sustainable devel­opment of the coffee sector. Our measures are designed to support the shift to sustainable agriculture, strengthen local struc­tures in organ­ising farmers, and facil­itate their market access. Certi­fi­cation processes help ensure compliance and increase trans­parency in the supply chain. 

Beyond this, as a member of the steering committee of the inter­na­tional Global Coffee Platform (GCP), we contributed to the devel­opment of a new vision for the sector: Vision 2030. Its devel­opment and the estab­lishment of the GCP, in conjunction with many other efforts, mark a first decisive step in supporting the process of trans­for­mation towards becoming a more sustainable sector. The Sustainable Devel­opment Goals (SDGs) are an essential part of the identified visions. 

Focus on: supply chain and systemic solutions 

As we continue devel­oping our integrative approach, we are pursuing five coordi­nated strategic approaches. 

Supply chain: Purchasing sustainable coffee grades  
In 2017, we sourced 26,4 % of our green coffee from coffee farms that are certified according to accredited inter­na­tional standards (e.g. Fairtrade, Rainforest Alliance, UTZ, Bio), or are validated to the baseline standards of the 4C Associ­ation. (More infor­mation)


Supply chain: Tchibo Joint Forces!® quali­fi­cation program
We support small­holders and their families with our Tchibo Joint Forces!® quali­fi­cation programme, to further develop the local struc­tures in a sustainable way. The coffee farmers and their families are to be supported in improving their living condi­tions through sustainable and profitable coffee farming. Here also women, children and commu­nities are being more included. So support for farmers is not only provided at farm level, but in an integrated manner: through jointly developed activ­ities and measures to secure income, ensure childcare, and prevent child labour. (More Infor­mation


Systemic approach: ‘Mainstreaming Sustainable Coffee Production'
The ‘Mainstreaming Sustainable Coffee Production’ multi-stake­holder exper­i­ments initiated by Tchibo are our way of tackling struc­tural and systemic challenges – in partnership with the sector’s key protag­o­nists. In our pilot project in the Brazilian state of Minas Gerais, we are seeking an innovative way to develop a shared under­standing with local stake­holders of what sustain­ability means in Minas Gerais, and how we can work together to achieve it. To this end, we are shifting our focus from 4C-validated green coffees to our systemic approach. An important success factor will be to win over all relevant partners for this idea. Unlike in the textile industry, there is still very little cooper­ation at the pre-compet­itive level to develop systemic solutions. (More Infor­mation)
Cross-industry co-operation and alliances
We are involved in cross-industry cooper­ation and alliances. The Global Coffee Platform (GCP), which acts on an inter­na­tional level, and Inter­na­tional Coffee Partners (ICP) are of particular impor­tance for us. (More Infor­mation)
Education projects in the countries of origin
We promote educa­tional projects that ‘help people to help themselves’ in the coffee-growing countries. By doing this, we hope to improve social struc­tures on the ground, provide alter­na­tives to imper­mis­sible child labour, and open up additional sources of income. We want to empower local people to continue working indepen­dently on the topics addressed even after the project has ended. (More Infor­mation

Regular evaluation of the measures 

Part of our sustain­ability concept is to system­at­i­cally evaluate the effec­tiveness of the assump­tions taken in our supply chain management approach as well as those of our systemic approach. 

As regards supply chain management, we are currently devel­oping a concept to record and rate the effec­tiveness of individual measures – so that we can identify how we can further develop our approach. The goal is to incor­porate innovative forms of evalu­ation at the design stage of the project. This also makes it possible to identify challenges and to develop possible solutions with the involvement of farmers and other project partic­i­pants. It is important for us to be able to use the knowledge gained to intervene while the project is still ongoing, and not merely to discover missed oppor­tu­nities at the end of the project. That is why in 2018, we will concen­trate on selecting innovative methods. To evaluate the devel­opment of the coffee sector, the members of the Global Coffee Platform are working on indicators that show how effective the imple­mented measures are. Based on selected indicators, in future the Global Coffee Platform members will be obligated to report on their perfor­mance. The indicators will be selected and the mandatory report content compiled in 2018. Binding results are expected by the end of 2018.