Can a coffee company save forests?

By Arshiya Bose on Feb. 12, 2018 in Perspectives

A few years after I completed my doctoral research on markets for biodiversity conservation, I started a private limited company in an attempt to conserve forests in the Western Ghats. While this may at first seem like a logical trajectory, the backstory is that my research was critical of market based ideas. Both narratives – the academic inquiry into markets as well as the more entrepreneurial journey – are forays in an attempt to understand one of the most complex, unpredictable and yet relevant networks of our times.

The idea that markets can be used to drive social and environmental change is not new but clearly uncommon in the nature conservation space in India. In the recent past, normative benchmarks for social and environmental justice were scripted by governments, labour unions and religious institutions. However, in the current scenario of globalizing economies, ideas and cultures, where social and environmental issues can be transnational rather than national, norms about what is and is not acceptable are increasingly being vocalized by a new set of actors – NGOs, businesses and public-private partnerships. These norms can take the form of ‘naming and shaming’ bad practices or creating market based incentives to follow good ones.

Outside the nature conservation space, examples of market based tools include certifications like the Fair Trade label that attests to a particular commodity being bought and sold via equitable trading conditions. So as a conscious consumer, I can purchase a guilt-free or feel-good shirt because the clothing label carries an additional Fair Trade or Fair Wear or Direct Trade label or has stitched on it some information about the factory’s working conditions (e.g. ‘American Apparel is sweatshop free’).1 Similarly, if I want a more ethically crafted shampoo, I might opt to buy a brand that is labelled ‘Cruelty Free’ or ‘Against Animal Testing’.

In fact, the US based B-Lab now certifies businesses as B-Corporations if they meet the highest standards of social and environmental performance. Their tagline is ‘using business as a force for good’ and amongst the 1200+ certified B-Corporations, some of the more well-known companies include Patagonia Inc (sells outdoor apparel and tools), Alter Eco (sells Fair Trade chocolate and quinoa), Roshan (Afghanistan’s largest telecom provider), Natura (Brazil’s largest cosmetics company), Etsy (an online market-place connecting small creative businesses with buyers) and Ben and Jerry’s (an ice cream company and subsidiary of Unilever that promotes responsible practices across its supply chain). Some businesses operate by carrying labels from third party certifications (e.g. Fair Trade) and others have their own internal monitoring systems (e.g. Starbucks has a C.A.F.E. practices standard which it follows whilst sourcing coffee beans).

In India, the proliferation of impact oriented businesses has created an active social entrepreneurship ecosystem. Spend five minutes on platforms like Your Story or The Better India and you will encounter numerous stories of entrepreneurs leaving behind corporate careers to build technologies for communication, education, financial inclusion, health care and agricultural services for under-served communities in India. A well known example is that of Ramon Magsaysay awardee, Harish Hande, who started his for-profit business SELCO twenty years ago with the purpose of making solar power technology and smokeless cook stoves available to over 2,00,000 homes across Karnataka. Of course, many entrepreneurs also claim that Bharti Airtel is amongst the largest social enterprises in the country with 84 million of its 188 million subscribers coming from areas with otherwise poor mobile telephony (but debates on what constitutes a social enterprise is the subject of an altogether different article).

The point here is that whatever shape and form market based tools might take, they operate on one key premise: that there is a demand (often at a premium price) for those particular goods and services being traded. Yvon Chouinard who founded Patagonia surely started his company with the strongly held belief that consumers care and are therefore willing to pay a premium for the additional investments that Patagonia would need to make towards using recycled materials and switching to organic cotton, not to mention bearing the higher costs for obtaining Fair Trade certification.

As a conservation entrepreneur and academic, I am confounded about the nature and fate of market based tools for conservation and, in particular, need to ask two questions: (a) Do good conservation decisions also make good business decisions? (b) Is there a market for biodiversity related goods and services? My disclaimer is that my love for the subject of geography and, in turn, its love for place-based analysis allows me to explore these questions within a fairly narrow canvas of what I know best – promoting sustainable coffee production through eco-certification labels!

In the nature conservation space, labelling has been used to distinguish a range of products in the timber and agrifoods industry. For example, the Forest Stewardship Council (FSC) accredits timber harvested from forests managed according to FSC’s environmental standards. Similarly, the Marine Stewardship Council (MSC) recognizes and rewards sustainable fishing and provides ‘eco-labels’ on sea-food that can be traced back through its supply chain to fisheries that have been certified by the council.

The coffee industry has been one of the most active spaces for labelling. Walk down the aisle of a supermarket in North America and Europe and you will encounter a diversity of coffee packets, each imprinted with a label or illustration symbolic of the production story: resplendent tropical birds, faces of farmers and geographic origins and a certification stamp that says Fair Trade, Organic, Bird-Friendly, UTZ Certified or Rainforest Alliance. Incidentally, the closest one would get to drinking certified coffee in India (other than Organic certified coffee) is either at a Costa Coffee outlet that serves Rainforest Alliance certified coffee or if one directly buys coffee beans from a plantation that was Rainforest Alliance or UTZ Certified.

Contrary to the apparent scarcity of accessing certified coffee in India, a fair number of coffee farms are actually Rainforest Alliance certified. My own doctoral research covered over 150 farms in Kodagu district alone but certification agencies claim more than 300 farms are certified across just the two states of Karnataka and Kerala. The Rainforest Alliance certification constitutes a set of environmental and social standards that are aimed at protecting biodiversity. The explicit push is to incentivize producers through a price premium to discard damaging practices like spraying of toxic chemical pesticides, hunting of wildlife or indiscriminate conversion of forest land to plantation. Once a farm is audited by an external agency and found to qualify, its produce is eligible for a price premium in the market. Buyers (mostly exporters) typically purchase coffee at a premium of between Rs 1-2 per kilogram. These buyers can then also label this coffee as Rainforest Alliance certified, as in turn their buyers can and so the beans travel up along the value chain. However, at the farm level my research threw up some counter-intuitive findings. Researching the environmental and social impacts of Rainforest Alliance certification, the question I asked was whether certified farms operated differently as a result of having taken on board the certification standards. Interestingly enough, I found that certified farms were no different from conventional farms and this was true across a range of different environmental and social parameters. For example, both certified and conventional farms typically had comparable use of chemical pesticides (Rainforest Alliance only prohibits chemicals banned by the EU), waste management facilities, labour practices and working conditions. With regards to biodiversity, I observed that both certified and conventional farms had the same abundance and composition of shade trees.2

Here I take a slight diversion to describe the importance of what I have just referred to as shade trees. Coffee is a plant that has a somewhat luke-warm relationship with other trees that might coexist on a farm. The canopies of these trees shade the coffee bush from excess sunlight, thereby regulating the temperature and humidity, especially during prolonged periods of drought. At the same time, the number of fruits formed per coffee plant decreases when shade cover is more than 48%,3 which means that often the quickest way to ramp up coffee yield is to remove shade trees or heavily modify the branches to reduce the spread of their canopy. This is a trend observed in Indian coffee from the 1970s.

A study by the French Institute of Pondicherry showed a significant loss of tree cover in coffee producing districts like Kodagu between 1997 and 2007 owing to the removal of shade trees from privately owned farms.4 Similar observations were made about the impact of this transition from shade to sun farming on biodiversity. Shaded coffee plantations provide refuge for plants, insects and other arthropods, birds and mammals and, though fewer research projects have studied them, reptiles and amphibians. The role of such shade coffee farms is especially important in regions with increasing fragmentation of forest like in much of the Western Ghats.5 So thinning shade trees from coffee farms impacts the abundance and diversity of a range of species (although we cannot be sure about the time frame in which this negative impact can be seen).

At the end of my PhD work, all my observations about certification were pointing to the conclusion that except for a few minor modifications (e.g. certified farms followed some-what more systematic documentation of farm management processes), eco-certification for coffee in Kodagu promoted business as usual. I also had good reason to believe, through a number of interviews with Rainforest Alliance staff in the U.K., that the environmental and social standards in India were not about to change too dramatically anytime soon. Rainforest Alliance was not keen to strengthen their standards beyond the ‘lowest common denominator’.

For example, there was little willingness to add-on mandatory criterion that specified a minimum abundance or diversity of shade trees or discourage chemical pesticides altogether. From a social standpoint too, I encountered smallholder growers who lacked market channels, access to production costs and inputs and agronomic support. In the BR Hills, Karnataka (where we currently source coffee

from), growers receive 20-30% less than the market price on any particular day. This concerned me as a conservationist. It was clear that social and environmental problems were aplenty but the current model of certification (indeed this market tool) did not do enough.

The explanation of whether certifications are implicitly designed to achieve little is relevant. The consequences of a certification standard that fundamentally altered the structure and governance of global coffee value chains in favour of a more equitable and environmentally sound practice would be mammoth-like. My thesis explored this as well and what I found left me quite jaded about global blueprint solutions and the role of academic research in bringing about a meaningful impact.

I started Black Baza Coffee Co. with the aim of taking my learning from eco-certification, deconstructing the environmental and social standards to make them more site specific and create a more farmer friendly process. Because certification does not always guarantee a buyer, I quickly realized that we would not only have to set and monitor farming guidelines but also be an active buyer of coffee. Today, coffee growers who are willing to join our programme sign an agreement to maintain a certain abundance and diversity of indigenous trees on their farms. Our agreement also restricts the use of chemical pesticides and reduces chemical fertilizers to 1.5 kgs per plant for the first year, with the aim of transitioning to zero. In turn, we guarantee a buy-back of coffee at a 15% market premium and help build capacity to improve the quality of coffee.

Each packet of coffee sold under our label can be traced right back to the farm from which the beans were harvested so that the coffee drinker knows that the coffee comes from Pallakere Estate in Kodagu or from Achukkegowda’s half acre farm in BR Hills. A number of our coffees are also single-estate. We use only the best quality grade beans from the farm, especially since we garble beans ourselves (none of our beans are pest or fungus infested). We can guarantee our online customers that coffee will be delivered to their doorstep within three days of roasting. We custom grind coffee beans depending on whether our customers brew coffee in a french press, aeropress, espresso machine, moka pot, pour-over or a classic steel filter coffee set. Our quality check, roasting and custom grinding sets us apart from many coffee players in the regular market and positions us as a specialty coffee brand. Within two business years, we have been able to work with over 180 growers in the BR Hills and Kodagu, manage approximately 200 acres (we are still under mapping) under shade grown farming and retail our coffee across the country. We have also discussed raising funds through impact investments and are being incubated at IIM Bangalore’s entrepreneurship cell. However, the subject of this article is not our achievements and milestones but what this journey into mainstream market tells us about market based conservation, however young our company might be.

The entrepreneurial journey, like the academic journey (particularly in Human Geography) has been non-linear and puzzling with many contradictory truths. One of the most important questions (both business-wise and philosophically) has been about what we are selling. In a project like this, does one sell coffee or biodiversity or a bit of both? It is critical we answer this soon because that will determine our trajectory into what activities we invest time and funds.

We currently label our coffees ‘100% Biodiversity-Friendly’ and all of our different blends are tributes to some iconic species from the Western Ghats. For example, our pure Arabica is called the ‘Wanderoo’ after the lion-tailed macaque. We have a Luna Roast, Black Baza Roast, Otter, Ficus and The Whistling Schoolboy Blends. The packaging has a ton of information about our project – our vision for shade-grown coffee, the farming philosophy, local history of the farm and finally a table showing our impact metrics: 180 farms, 200 acres, 2000 trees protected, 150 native tree species, 25 rare tree species and 988 people directly impacted. The question is, has sharing (or selling) our story worked? My opinion is a resounding no.

Contrary to my impressions, a recent Stanford based study found that labels like Fair Trade could add a competitive advantage to differentiate the same products on a supermarket shelf. Another study of coffee buyers in Belgium found that people were willing to pay as much as 27% more for Fair Trade certified coffee but only 10% of the 808 respondents were willing to do so.6 Yet another study showed that all other features being equal (price, quality and packaging), consumers are more likely to buy a certified product. It appears that how consumer demand and markets respond to the non-physical features of a product is a grey area. Second, and more important for our work, is that selling the biodiversity feature may be far more challenging than we had initially thought.

Our coffee has sold not only for its symbolic but also the physical characteristics: roasting profile and freshness, flavour notes and diversity of blends to suit varied customer preferences. The most frequent (almost embarrassingly so) feedback from customers is that we have too much information on biodiversity and not enough on the coffee flavour itself. We organize numerous coffee events in Bangalore city as a way to connect consumers to growers and to do social advocacy on ‘what goes into your cappuccino’ though an overwhelming majority of questions from participants are about different coffees (Costa Rican Tarrazu, Jamaican Blue Mountain, Ethiopian Sidamo) and ways to brew them.

In fact, the advice from every marketing expert (and we have met dozens) has been to let go of the feel-good biodiversity story; at most keep it as a byline. Apparently few coffee drinkers, discerning or otherwise, care about the impact of coffee farming on endemic and endangered wildlife of the Western Ghats or that 200 years of shade grown farming in India is now being lost. We were told that we could squeeze the smallholder angle to some extent but even that would lose its stickiness with consumers. There appears to be no demand for biodiversity friendly coffee.

The implications of this are that if we want to continue with conservation work, our efforts have to be equally if not more heavily invested in coffee, marketing and technology. Our coffee experience has to surpass that of any other specialty coffee company – biodiversity friendly or otherwise. Would this strategy compromise our conservation work? If the aim is to be a good business, it would. We would have to procure coffee from only those plantations whose coffee beans are pulped, dried and processed with utmost precision in state-of-the-art facilities (e.g. in drying racks above the ground to prevent the slightest chance of excess moisture). We would determine our price premiums based on quality factors rather than the number of shade trees. We might even limit the number of farms and regions we work in, proposing that fewer farms with higher yields would make the most business sense. In doing so, we would most likely have to exclude smallholder farms that are often located in forest fringes or corridors between fragments. No doubt this would be both a poor conservation strategy as well as a socially exclusionary one.

On the farm side of this market, the question is whether financial incentives work as catalysts of land use change. While my research on Rainforest Alliance showed that certification price premiums were not a catalyst, I find that with Black Baza Coffee Co. the picture is considerably different. Our structure wherein we guarantee a buy-back, develop trust and goodwill, prove that we want to associate with farms for the long-term, help with quality improvement, give growers visibility through single-estate labelling and, over and above this, also provide a 15% price premium, seems to be an agreeable partnership. In our case, the market incentive for farmers – in this case a price premium – albeit important, is only one of a suite of different catalysts. If we did not present the entire set of benefits, would a price premium be adequate? I believe so but some growers may prefer much higher premiums (one grower proposed 25%), especially if the decreased coffee yields from high shade-cover turn out to be significant. Re-loop these premiums into our hypothesis of demand for biodiversity-friendly coffee and we clearly face an uphill challenge.

This is what happens when geographer-conservationists step into the real world; they attempt to solve far too many problems all at one go – in our case, the conservation-livelihood-farming problem and the market. Despite the odds, there is a solution(s) here somewhere that will emerge once we have tried various market permutations. In an interview, Yvon Chouinard said, ‘We have very environmentally aware customers, but I would guess that maybe 10% care that our cotton is grown organically in Turkey. Organic farming is growing around 30% a year, but that’s mostly because you can taste the difference, and there’s an obvious health value. There’s a selfish motive for eating organic foods. But when we’re telling customers to care about how cotton is grown in Turkey, that’s still a stretch for them.’7

So one case for optimism is to rejoice that we are not alone; the second is, what a good friend and colleague once pointed out, that if we can’t do conservation with coffee, then most other crops don’t stand a chance.

1. http://www.americanapparel.net/aboutus/verticalint/workers/

2. A. Bose, C. Garcia and B. Vira, ‘Does Eco-certification in Coffee Promote “Business as Usual”? A Case Study from the Western Ghats, India’, Ambio, 2016. Available online at: DOI: 10.1007/s13280-016-0796-3

3. L. Soto-Pinto, I. Perfecto, J. Castillo-Hernandez and J. Caballero-Nieto, ‘Shade Effect on Coffee Production at the Northern Tzeltal Zone of the State of Chiapas, Mexico’, Agriculture, Ecosystems and Environment 80(1-2), 2000, pp. 61-69.

4. C. Garcia, S. Bhagwat, J. Ghazoul, C.D. Nath, K.M. Nanaya, C.G. Kushalappa, Y. Raghuramulu, R. Nasi and P. Vaast, ‘Biodiversity Conservation in Agricultural Landscapes: Challenges and Opportunities of Coffee Agroforests in the Western Ghats, India’, Conservation Biology 24(2), 2009, pp. 479- 488.

5. I. Perfecto, R.A. Rice, R. Greenberg and M.E. v.d. Voort, ‘Shade Coffee: a Disappearing Refuge for Biodiversity’, BioScience 46(8), 1996, pp. 598-608.

6. P. De Pelsmacker, L. Driesen and G. Rayp, ‘Do Consumers Care About Ethics? Willingness to Pay for Fair-Trade Coffee’, Journal of Consumer Affairs 39, 2005, pp. 363-385.

7. http://insights.som.yale.edu/insights/does-sustainability-matter-consumers

First published by Seminar Feb. 2017



Story Tags: Economic Growth, biodiversity, biological diversity, ecological sustainability, ecofriendly, ecology, farms, organic, organic farming, organic seeds, community-based, community, community conservation

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