Corporate Social Responsibility is a management model to which business organizations take care of the society and the environment as part of their social responsibility. In most cases, the corporation pays the ultimate price regarding pollution and other difficulties for the business to run smoothly. Oil spills are the most conspicuous examples, especially in chemical manufacturing and do detrimental damage to the local ecosystem. However, today most companies use this strategy to enhance competitive advantage as well as enhance their profits. In Africa, to meet corporate responsibility, companies should have in place procedures to protect the environment, human rights and labor practices, employees and customers’ apprehension as their primary strategy. This paper focuses on Nespresso sustainability policy, corporate social responsibility and how the procedures have influenced world trade in coffee.
Sustainability
Born out of Nestlé’s creating shared value philosophy, Nespresso began its sustainability journey in 1991( Siegert, 2013). This was done through the need for partnership and building competencies that would ensure that the supply chain in the coffee growing increased drastically. To ensure this, Nespresso would provide that the coffee collected from various farms was AAA certified. This would ensure that not much of the coffee collected would go through the recycling efforts hence reducing the carbon footprint. However, only a small percentage of the coffee meets the company standards. This was as a result of changing the climate and unpredictable weather patterns.Nespresso came up with a program that was meant to educate and train farmers on how to use their land as well as the right time to start planting. To ensure that the coffee plants were protected, the other tree would be planted to offer the shade required for the coffee plants to produce the desired aroma and taste. Since 2009, various programs such as the AAA have been launched in multiple countries in Africa. This is to help farmers achieve high certification in areas such as treating their workers appropriately and biodiversity in coffee production.
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Various partnerships such as the Fairtrade has been crucial in ensuring that loyal rate among the farmers are paid at the appropriate time so that the supply to Nespresso is maintained. This program has been designed to ensure that the farmers receive a greater incentive for them to continue staying in business ( Auld, 2010). Working with the various government agencies such as the Ministry of labor and coffee cooperatives, Nespresso launched a program in multiple countries such as Southern Sudan to provide yearly incentives. This initiative has created trust between the coffee farmers and the Nespresso Company.
To ensure it reaches its target of getting high quality certified coffee, it must ensure that coffee reaches its destination without delays. In most African countries, the infrastructure is not well developed. Thus, the value coffee farmer is supposed to get, is not throughout the supply chain process. Most of the traded coffee passes through an auction type of exchange to reach them, hindering the directing relationship with the farmers at the production level. Through partners such as the Techno serve, various alternatives such as the private farms have been created to ensure that they can interact with the farmers. This also will help in reducing poverty as the initiative will help them increase their yield hence higher profits.
Corporate Social Responsibility towards the Communities
Education and Healthcare
More than Africa’s 5 million small-scale farmers live on less than a dollar a day. This means that most of the children of the small farmers are unable to access quality education. Apart from improving the quality of the coffee produced through the various sustainability programs, Nespresso has come up with multiple applications that are meant to enhance the education of farmers and that of their children. The Rainforce Alliance has been a useful tool that has ensured that the livelihood of thousands of South Sudan enterprising farmers has improved. Through the non-profit program, thousands of children have been able to access quality education in the country. According to William Warshauer, the CEO, this kind of investments will hold a long-term development impact of Nespresso in Africa.
Just like education, access to health facilities to most farmers is a problem, especially in the geographically isolated regions. Majority of the employees and the communities do not have health insurance. Research conducted by Scherer, Palazzo, and Seidl (2013), reveals that 94 percent of the residents lack insurance that covers outpatient services, and about 70 percent are uninsured for hospital services. In consideration of the CSR regulations, Nespresso partnered with the Blue Marble Micro insurance company to provide viable insurance company to the poor and uninsured in the society. By addressing this kind of issues, farmers will be able to concentrate on producing better quality coffee more efficiently as most of their primary needs are taken care of.
Environmental Improvement
Over the past decade, there has been persistent disruption to the supply chain of coffee which has been attributed to climate changes. For the last three years, torrential rains have affected nearly 2 million farmers destroying their coffee plantations and displacing them from their homes. To minimize these changes, Nespresso has taken various actions that are meant to improve the environmental effects of carbon emission. Since 2005, the company has used a scientific approach known as the life cycle assessment (LCA). This experimental approach assesses the environmental impact of carbon emission and identifying the various areas that need improvement ( Siegert, 2013). Through this strategy, the company has been able to reduce the carbon footprint by 20% between 2008 and 2012( Siegert, 2013). Besides, their machines have been equipped with automatic power-off functions that are meant to reduce the amount of carbon emitted by the environment.
The Pur project is an initiative by Nespresso in collaboration with other non –governmental organization to educate coffee farmers on to improve the ecosystem. The degradation of the environment and natural ecosystem is a threat to coffee farming sustainability as well as the production of quality coffee. The Pur Project will use the agroforestry approach to ensure the regeneration of old coffee plantation enhancing environmental sustainability. This is because it based on the belief that trees protect the landscape by providing that there is no soil erosion ( Kilian, 2013). Besides, the natural ecosystem is restored and improved water availability by regulating evaporation. This will enhance soil fertility hence improving the economic benefits of coffee to the farmers and the society.
For long Nespresso has received much criticism because of its reliance on over packaged goods that are a threat to the environment, to prevent this Nespresso is finding ways of recycling its coffee pods. To ensure that there is no wastage the company has started using aluminum as it can be reprocessed as compared to other packaging products. It has also expanded programs that will ensure collecting of pods and recycled into other products.
In some of the factories, Nespresso uses river water to cool some of the systems in the factory. This kind of innovative energy recovery plays an essential role in saving the amount of gas used per year hence reducing the amount of carbon being emitted into the air. The heat emitted in the factory is partly redistributed in some homes in the areas, thus providing enough energy for domestic use. To further reduce the carbon footprint, Nespresso green coffee is distributed by rail to all the production centers.
Economic Sustainability
According to Du, Bhattacharya, and & Sen (2010), most of the small-scale farmers are the ones that produce a vast majority of coffee. Ethiopia, for instance, produces 89 percent while Rwanda produces nearly 100 percent. This means that the company has to implement strategies that are intended to improve coffee production in large scale to reduce the systemic poverty associated with small-scale farming. To deal with this challenge, Nespresso launched a new sustainability strategy known as the Positive Cup that includes a partnership with Techno serve to help the small-scale farmers improve their livelihoods. In this initiative, more than $16 million is to be used for six years to aid in supporting the farmers in Ethiopia, South Sudan, and Kenya hence building stronger supply chain linkages. Africa is the birthplace of the best coffee and holds the potential of producing premium coffee in the world. But occasionally, farmers are often held back due to low productivity, lack of efficient processing capabilities and reduced market access. The money invested will, therefore, help in dealing with these challenges by showing them proper farming practices, processing and improving the quality of coffee, thus, promoting sustainability.
In Ethiopia and Kenya, to further promote economic sustainability Nespresso intends to expand the AAA sustainability Program. The initiative offers a unique approach that combines quality and durability to produce benefits and sustainability to farmers and the community. In collaboration with the local government and the stakeholders, the program will help in enhancing coffee processing capabilities and offer a solution to the challenges in the coffee supply chain. Through this improvement and others, Nespresso will help farmers double the amount of coffee they harvest from 10000 tons by 2020.
To also ensure that coffee farming becomes an attractive activity for the younger generations, the expansion of AAA program in Africa has launched a pilot retirement saving plan. This program will help the government widen the reach of retirement saving scheme of farmers who have not been covered by the traditional government. In Caldas, for instance, a pilot program with Aguadas Coffee Growers Cooperative was launched to take care of 1,200 coffee farmers. The program is meant to guarantee the welfare of the elderly and also the leverage the relationship they have built with the farmers. In future, the program can be expanded to accommodate over 40,000 farmers in Colombia.
HOW CSR has influenced World Trade in Coffee
Nespresso social corporate responsibility has affected the coffee world trade in various ways. In the last few decades, there has been demand for increased innovation and price competition which have led companies to find new ways of differentiating themselves. Through CSR the coffee industry has received much publicity in the media and attention in the public debate in the recent years ( Kolk, 2005). Thus, there has been the higher demand of coffee among the population. Coffee companies no longer need to advertise their products as it has been established that consumers like products that companies that are involved in CSR. This has made it easier to market the coffee worldwide making it easier to trade.
In the recent years, investors are changing the way they assess companies’ performance and are making critical decisions from ethical concerns. A research done by the Environics International revealed that more than a half of the share-owning investors took into consideration the ethical considerations of a company when buying and selling stocks( Du, Bhattacharya & Sen, 2010). Due to the coffee industry investment in CSR, many of the investors have bought shares and invested their money in the coffee industry. This has played an essential role in the enhancement of the coffee brand in the global business landscape.
In the past, the government always relied on various legislation and regulations to ensure that organizations deliver social and corporate objectives. Recently, most companies have voluntarily included social and corporate responsibility in their business strategies through corporate sustainability activities. Nespresso has integrated this strategy as part of its way of doing business rather than it being a case of philanthropy. As a part of the aligned plan, Nespresso has used this as a tool to drive innovation and mitigate risks. Many other products besides coffee have been introduced in the market such as chocolate. They have given the coffee industry more opportunities in the more globalized and connected industry.
In conclusion, Corporate Social Responsibility has become one of the standard business practices of our time. Nespresso has committed to CSR to enhance an overall business reputation as competitiveness in the coffee industry. This has been done through integrating environmental, social, and economic sustainability as part of its business operation. The result ha is achieving a positive impact on society and creation of shared value among the investors, shareholders, and stakeholders.
References
Kolk, A. (2005). Corporate Social Responsibility in the Coffee Sector:: The Dynamics of MNC Responses and Code Development. European Management Journal , 23 (2), 228-236.
Auld, G. (2010). Assessing certification as governance: effects and broader consequences for coffee. The Journal of Environment & Development , 19 (2), 215-241.
Du, S., Bhattacharya, C. B., & Sen, S. (2010). Maximizing business returns to corporate social responsibility (CSR): The role of CSR communication. International Journal of Management Reviews , 12 (1), 8-19.
Kilian, B. (2013). Decision processes in introducing hybrid agricultural plants: ECOM coffee group case study. Informing Science: The International Journal of an Emerging Transdiscipline , 16 , 213-228.
Scherer, A. G., Palazzo, G., & Seidl, D. (2013). Managing legitimacy in complex and heterogeneous environments: Sustainable development in a globalized world. Journal of Management Studies , 50 (2), 259-284.
Siegert, L. (2013). Sustainable Development Approaches in the Food and Beverage Industry: A Comparison Between Nest ‚SA and Kraft Foods Inc . Anchor Academic Publishing (aap_verlag).
