Starbucks, and Joanne Sonenshine and Bambi Semroc of Conservation International

ii | Reducing Risk: Landscape Approaches to Sustainable Sourcing

Author Gabrielle Kissinger, Lexeme Consulting

Acknowledgements This report was prepared by the authors on behalf of the Business Working Group of the Landscapes for People, Food and Nature Initiative and with the assistance of a strategic advisory group.

The author would like to acknowledge the assistance of Kelly Goodejohn of Starbucks, and Joanne Sonenshine and Bambi Semroc of Conservation International. For complete acknowledgements, please see landscapes.ecoagriculture.org/global_review/reducing_risk.

This report is funded by the Gordon and Betty Moore Foundation.

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License. To view a copy of this license, visit http://creativecommons.org/li- censes/by-nc-nd/3.0/

All or portions of this report may be used, reprinted or distributed, provided the source is acknowledged. No use of this publication may be made for resale or other commercial purposes.

Correct Citation Kissinger,G., 2013. Starbucks and Conservation International case study. Reducing Risk: Landscape Approaches to Sustainable Sourcing. Washington, DC. EcoAgriculture Part- ners, on behalf of the Landscapes for People, Food and Nature Initiative.

Cover Photo Coffee Landscape of Minais Gerais, Brazil. Courtesy of Starbucks.

Correspondence Please contact one of the Business Working Group co-leaders with inquiries: Lee Gross, EcoAgriculture Partners | Email: [email protected] John Buchanan, Conservation International | Email: [email protected] Edward Millard, Rainforest Alliance | Email: [email protected]

Landscapes for People, Food and Nature is a collaborative Initiative to foster cross-sec- toral dialogue, learning and action. The partners involved aim to understand and support integrated agricultural landscape approaches to simultaneously meet goals for food production, ecosystem health and human wellbeing. The Business Working Group seeks to expand the potential for this innovative approach in sustainable sourcing, test the concept with key commodities or sourcing regions and identify future partnerships. For more information, please visit: landscapes.ecoagriculture.org. Starbucks Case Study | iii

Contents

Executive Summary iv

Case Study 2

Context and company profile 2 Quality and price of beans 2

Business rationale for landscape approach: Addressing climate, operational, reputational and community risks 3 Operational Risks 3 Operational and local community risks: Thriving coffee farmers and compliance to voluntary standards 4

Modes of engagement in landscape approach 7 Regional producer support: Agronomy and access to capital 7 Partnership: Conservation International 8 Partnership: Multi-stakeholder dialogue, planning and management 8 Carbon finance: Mitigating business risk and building resilience 8

Starbucks landscape approach in practice 9

Chiapas, Mexico 9 Business risks and rationale for engaging the landscape approach 10 Mode of intervention in the landscape 10 Partnership 11 Outcomes in Mexico 12 Value proposition of landscape approach to Starbucks 12

Aceh, Sumatra, Indonesia 13 Business risks and rationale for engaging the landscape approach 13 Mode of intervention in the landscape 13 Partnerships 14 Outcomes 14 Value proposition of landscape approach to Starbucks 14

Key lessons learned and next steps for Starbucks’ approach to landscape issues 14 Landscape health is at the core of coffee production 14 Partnerships 14 Thriving coffee communities 14 Timelines for investment in landscape approaches is years 15 Climate change adaptation solutions across the landscape 15

Overview of Starbucks’ business case for the landscape approach 15 Next Steps for Starbucks: Brazil 16 iv | Reducing Risk: Landscape Approaches to Sustainable Sourcing

Executive Summary

Starbucks is a global coffee brand, and experienced rapid growth over the last ten years. However, the company faced operational risks from climate change impacts in key sourcing regions and poor prospects for farmers in the coffee sector, due to low coffee bean prices. With coffee production and yields more erratic over the last ten years due to climatic variability, the quality of coffee beans was of concern, as well as increasing price volatility. Some key coffee producing areas were identified as particularly vulner- able to climate change impacts. For instance, in Chiapas, Mexico, climate vulnerability research projected a 77% reduction in areas suitable for growing Arabica coffee by 2030. A partnership with Conservation International, formed in 1998, resulted in creation of the Coffee and Farmer Eq- uity (C.A.F.E.) Practices, which are now embedded in Starbucks operations, and form the basis for piloting landscape approaches. This case study reviews landscape pilots promoting climate-smart coffee production, producer support, and partnerships with government in Chiapas, Mexico and Sumatra, Indonesia. In these landscapes, Starbucks has mitigated operational risks in supply and key sourcing areas, leveraged capacity and expertise through partnerships, and is integrating climate resiliency in the coffee sector. Further, Starbucks is delivering producer support, addressing livelihood needs and income supplements through carbon payments, and providing incentives for farmers to not expand coffee growing areas into surrounding forests, thus reduce deforestation pressure. Starbucks is now looking to build on their experiences in Brazil—the world’s largest coffee producer—in We take a holistic order to improve coffee production practices, support farmers approach“ using respon- adopting C.A.F.E. Practices, maintain biodiversity and increase sible purchasing prac- carbon stocks within coffee production landscapes. tices, farmer loans and forest conservation programs. ” —Starbucks

2 | Reducing Risk: Landscape Approaches to Sustainable Sourcing

Case Study

Risks to Starbucks: Coffee + Community + Climate Context and company cally source 100% of its coffee by 2015, profile Starbucks seeks to control coffee pur- Operational risks chasing, roasting and packaging, and »» Declines in production Starbucks serves millions of custom- the global distribution of coffee used and yields due to climate ers daily through almost 18,000 retail in their operations. The volatility of change stores in 60 countries, has 200,000 coffee prices is of concern. Starbucks »» Risk coffee farmers in key employees, and net revenues in 2012 prefers to purchase its high-altitude regions would switch of US$13.3 billion.1 The company is arabica coffee on a negotiated basis commodities noted for its coffee, with coffee buy- above commodity prices. Starbucks’ »» Increasing price volatility ers travelling to coffee farms in Latin 2012 Annual Report notes, “Supply America, Africa and Asia to source and price can be affected by multiple Local community risks beans, custom roasted by Starbucks factors in the producing countries, »» Farmers faced low com- to create a range of blends and sin- including weather, natural disasters, modity prices, thus en- gle origin coffee products. The brand crop disease, general increase in farm ticed to convert coffee portfolio includes Starbucks Coffee, inputs and costs of production, inven- farms to other uses. Seattle’s Best Coffee, Tazo Tea, Tea- tory levels and political and economic vana, Evolution Fresh, La Boulange conditions,” and other factors. The Lack of best practices and and Torrefazione Italia Coffee. company has also been acutely aware standards of climate change impacts in sourcing »» Critical to ensuring sup- The Starbucks Coffee company prom- regions. Starbucks notes future price plies and quality inently features its commitment to risk can only partially be mitigated »» Value-chain inefficiencies ‘responsibility’ in its company profile, through purchasing practices and seeking to strike a balance between hedging activities. profitability and a social conscience. Box 1. Risks to Starbucks The company commitment to re- Most of these risk factors affecting sponsibility is based on three focal ar- price also affect quality of the beans. eas: ethical sourcing, environmental To support sustainability and future stewardship and community involve- supplies of high-quality green cof- ment. Ethical sourcing involves taking fees, Starbucks operates Farmer Sup- a holistic approach to sourcing coffee port Centers in six countries, staffed in a fair and sustainable manner. This with agronomists and experts who includes responsible purchasing prac- work with coffee farming communi- tices, supporting farmer loans and ties to promote best practices, thus forest conservation programs. improving coffee quality and yields. Ethical sourcing is viewed as a critical Quality and price of beans means of delivering the quality beans Starbucks requires, thereby decreas- In 2011, Starbucks total coffee pur- ing risks. This is described in more chases amounted to 194 million Kg detail below, as Ethical Sourcing pro- 2 (428 million lbs). Seventy-five per- vides the basis for Starbucks’ to step cent of the company’s retail sales are beyond farm-level interventions to 1 Starbucks 2012. Annual Report. from beverages, with most being cof- more robust landscape approaches. 2 Starbucks 2011. Global Responsi- fee.3 As the company seeks to ethi- bility Report Scorecard. 3 Starbucks 2012. Annual Report. Starbucks Case Study | 3

More broadly, Starbucks recognizes Robusta coffee will be negatively We are working climate change can have long-term affected by climate change, though together with CI to mit- impacts on coffee supplies and the Robusta (accounting for 42-45% of “ health of the communities it sources global production) is better adapted igate the impact of cli- from. Starbucks seeks to reduce the to lower altitudes, higher tempera- mate change on coffee environmental impact of its business tures and humidity than Arabica (ac- growing communities operations, via energy and water effi- counting for 55-58% of global pro- ciency and recycling (focus is mostly duction).5 While a shift in suitable globally, and to ensure on direct operations). Starbucks also growing areas will occur in many the long-term stability of works with other companies to advo- coffee growing countries, so too will cate for stronger clean energy and cli- the increased use of irrigation and coffee farms and coffee mate policies as a founding member pesticides. Increased and poor irriga- quality. of the Business for Innovative Climate tion practices will increase pressure — Ben Packard and Energy Policy (BICEP) coalition in on scarce water resources. Incidences Vice-President the United States. of pests and diseases, such as coffee ” berry borer, leaf miner, nematodes, Global Responsibility Starbucks’ commitment to ethical and coffee rust, are predicted to rise, Starbucks sourcing, environmental stewardship while also decreasing coffee bean and community involvement means quality.6 All of the above factors will that when the company identifies increase price volatility. While coffee risks and future challenges beyond its prices have generally increased be- farmers and supply chain, the com- tween 2000 and 2010, price volatility pany is open to finding innovative is of growing concern. solutions, described below. Coffee production and yields are not Business rationale consistent, and have become more erratic over the last ten years, despite for landscape overall global production increasing. approach: Addressing Brazil’s production remains strong, climate, operational, though for the 2012/2013 season, it is reputational and forecast slightly below last year’s due community risks to frost damage and dry conditions in Minas Gerais, the primary growing Operational Risks region. Indonesian coffee area has declined While global consumption of coffee over 5% as higher prices for cocoa, has increased over the last 20 years, rubber, and palm oil have encouraged 4 International Coffee Organiza- production in key coffee producing substitution. Colombia’s production tion, 2009. Climate Change and regions is at risk. Climatic variabil- is at a four-decade low, and over the Coffee. ICC 103-6 Rev. 1. ity is the main factor responsible for past five years has seen production 5 Starbucks procurement depart- changes in coffee yields.4 It is gen- decline due to the coffee berry borer, ment statistics. erally agreed that both Arabica and erratic climate conditions, large reno- 6 International Trade Centre, 2010. Climate Change and the Coffee Industry. Geneva. SC-10- 174.E. 4 | Reducing Risk: Landscape Approaches to Sustainable Sourcing

vation programs and coffee leaf rust. that they would switch back to coffee Although coffee leaf rust has been production when markets improve, present and constrained production given the time it takes to grow cof- in Central American countries,7 it has fee trees. There is also an added en- recently become very problematic vironmental risk in land clearing due and will have a greater negative effect to release of greenhouse gas emis- on production for the next few years. sions. The solution for Starbucks was to find a way to pay farmers more, Starbucks also felt exposed to reputa- but to base those higher commodity tional risks from the deforestation as- prices on farmers adhering to best sociated with coffee production and practices, thus ensuring social and sourcing. This risk is a key factor that environmental benefits. Starbucks led to the development of certifica- also recognized that while they are a tion/verification programs for coffee major global buyer, the supply chain (in addition to social/labor risks) and is much larger. Therefore, to be effec- is the only zero tolerance indicator on tive, they would need to work beyond environment in Starbucks coffee pro- their own supply chains in order to duction standard, C.A.F.E. Practices support thriving coffee growing com- (described in more detail, below). munities. Operational and local Most of the world’s key coffee-grow- community risks: Thriving coffee ing regions also contain rich biological farmers and compliance to diversity which are being threatened voluntary standards by the combined effects of deforestation and climate change. Thus, a col- Starbucks is concerned about the 7 USDA, 2012. Coffee Markets and laboration with Conservation Interna- Trade. http://www.fas.usda.gov/ future prospects of the coffee sec- tional (CI) was formed in 1998, in order psdonline/circulars/coffee.pdf tor. The sourcing and procurement to create a system of agricultural best 8 FAO and ILO Statistics Divi- staff increasingly heard from farmers practices for coffee production that sions. See: http://www.fao-ilo. about the growing challenges related maintained ecosystem services while org/fileadmin/user_upload/ to climate change, and at the same protecting biodiversity. The result is fao_ilo/pdf/World-Wide_Esti- time, commodity prices were declin- mates__Projections_of_the_Ag- Starbucks’ own tailor-made coffee ricultural_Population__Labour_ ing. With such low prices, farmers standard—Coffee and Farmer Equity Force_1950-2010__3_.pdf were questioning staying in the busi- (C.A.F.E.) Practices. C.A.F.E. Practices ness. The importance of committed 9 Indicator CG-CB3: on Conserva- combine roughly 200 economic, envi- tion Areas contains “zero toler- farmers and thriving farming commu- ronmental and agronomic indicators ance” for conversion of natural nities is important to Starbucks. The into a single reporting tool. C.A.F.E. forest to agricultural production percentage of ‘economically active Practices are farm-level and mill-spe- since 2004, and a standard indi- population’ working in agriculture in cator that the farm will assess cific performance indicators and best for areas of high conservation developing countries fell from 81.8% practices, with a sub-set of indicators 8 value, and these areas will be in 1950 to 49.4% in 2010. While this reaching beyond the farm-level.9 The defined and managed for HCV. general trend is of concern to a coffee focus on quality as a pre-requisite is There is also a requirement of a company, the nature of coffee farm- 5% conservation set-aside on the and remains an important aspect of farm (resulting in over 102,000 ing makes such declining numbers the standard that sets it apart from hectares (250,000 acres) as even more troubling. When farmers other industry standards. Farms and conservation areas, in each year, rip out coffee trees, it is very unlikely between 2008 – 2010). While not landscape-level indicators, these can have landscape benefit. Starbucks Case Study | 5

Partnership between Starbucks and Conservation International Partnership: Conservation International Solutions: Improving coffee production in conservation landscapes Operates in: Mexico, Indonesia and Brazil Timeline: 1998: Partnership launched to develop recommended practices and methodologies to support shade coffee producers in the multiple-use zone of El Triunfo Biosphere Reserve in Chiapas, Mexico to improve quality, increase production and improve environmental performance. 2000-2003: Jointly committed to continue support of shade coffee cultivation in El Triunfo Biosphere Reserve in Chiapas, Mexico and expand into Colombia, Costa Rica, Panama and Peru. 2004: USAID agrees to support partnerhip to co-fund a 3-year GDA project to continue work in all 4 regions. Results led to the development of the Preferred Supplier Programme which eventually became the C.A.F.E. Practices programme. 2008: 5-year collaboration agreement focusing on climate and coffee, impact assessment of C.A.F.E. Practices, and marketing and communications. This agreement is being implemented in two phases. The first completed in June 2011. The second, and current phase, began in July 2011.

Key Outcomes: • Development and implementation of C.A.F.E. Practices; 86% of Starbucks’ coffee now verified to this standard. • Chiapas: Regional climate change adaptation vulnerability and mitigation strategy in place, government adoption and commitment, successful PES benefitting farmers, 110 farmers participating in coffee + climate carbon programme, improved best practices among over 1000 farmers in region. • Indonesia: Increasing coffee yields, restricting deforestation, integrating climate resiliency into the coffee sector and public policy. 2013 and Beyond: Experiences from Mexico and Indonesia (shade growing coffee regions) inform new developments being piloted in sun-growing coffee production areas in Brazil.

Box 2. Partnership between Starbucks and Conservation International 6 | Reducing Risk: Landscape Approaches to Sustainable Sourcing

mills are evaluated by third-party verification organizations, overseen by SCS Global Services. In 2011, 86% of Starbucks coffee was verified through C.A.F.E. Practices. Starbucks has purchased Fairtrade coffee since 2000, and by 2011, 8% of coffee purchases were Fairtrade certified. Certified organic coffee accounted for 2.2% of purchases in 2011. While C.A.F.E. Practices has ad- dressed operational and community risks for Starbucks, it has also promoted value-chain efficiencies. Since C.A.F.E. Practices was developed with CI and SCS in 2004, Star- bucks estimates it has had positive social, environmental and economic impacts for more than one million workers employed by participating farms. CI continues to measure the impact of C.A.F.E. Practices within individual countries and globally. This experience has led Starbucks to apply the knowledge gained Carrying coffee. Photo courtesy of Lee Gross. through work with coffee farmers to sourcing approaches for other product ingredients. For exam- ple, Starbucks’ Tazo tea brand is a member of the Ethical Tea Partner- ship, working with other buyers to improve conditions for workers on tea estates. And Starbucks seeks a long-term supply of high-quality, ethically sourced cocoa via its Co- coa Practices program which seeks to verify the supply chain for cocoa beans used in Starbucks beverages, with inspections of social and environmental performance completed by independent verifiers overseen by SCS Global Services. Starbucks Case Study | 7

All of the above interventions pro- coffee production systems in the vided essential platforms for Star- multiple-use/buffer zones of - pro bucks to mitigate risks, source quality tected areas within a landscape. This beans, and promote partnerships for resulted in the development of con- shared outcomes. The farm- and mill- servation practices for coffee pro- based C.A.F.E. Practices standard duction that promoted shade-grown is embedded in Starbucks opera- coffee systems that used minimum tions. However its ability to influence inputs. Together, Starbucks and CI practices beyond the farm and larg- implemented the conservation cof- er-scale risks to ecosystem functions fee model in five countries (Mexico, in the regions Starbucks sources from Costa Rica, Panama, Colombia, and is still being developed, based on les- Peru). The results of this work led to sons learned from the pilots. Thus, the development of the C.A.F.E. Prac- the partnership with Conservation In- tices program, and the investment ternational provided Starbucks with a today in understanding the potential new opportunity to invest in and sup- impacts of climate change on these port communities across select cof- landscapes and communities, pursuit fee-growing landscapes who engage of carbon finance, and multi-stake- in climate-friendly activities, including holder engagement. The following protecting existing forests and help- modes have been applied as part of ing to restore degraded landscapes the landscape approach. to promote mutually beneficial forest conservation and the sequestration Regional producer support: of carbon. Below we investigate how Agronomy and access to capital Starbucks and CI worked beyond the farm-scale in Chiapas, Mexico and Starbucks and its partners recognized Sumatra, Indonesia, to address the that long-term business success for broader set of risks coffee production a rapidly expanding coffee company and coffee farmers face from climate depended on the success of the mil- change. These efforts have begun to lions of smallholder farmers the com- inform a new phase of the partner- pany sources from and beyond. This ship in Brazil, detailed at the end of focus began in 1998, and C.A.F.E. this case study. Practices offered one means of - pro moting environmentally and socially sound growing practices, while pro- Modes of engagement viding farmers access to markets at in landscape approach favorable prices. But Starbucks and CI recognized that was not enough. To Starbucks, in collaboration with CI implement recommended practices, and other partners, has invested in farmers also need access to capital projects promoting landscape con- and technical support. CI launched servation and broader community the Verde Ventures Fund in 1998 to development since the beginning of provide farmer cooperatives and the collaboration in 1998. Sites se- other SMEs with critically needed ac- lected for investment were based cess to financing. Starbucks was one on the need to develop sustainable 8 | Reducing Risk: Landscape Approaches to Sustainable Sourcing

of the first investors in Verde Ventures While landscape level issues have and Starbucks began growing its di- been a focus since the beginning (e.g. rect investments in sourcing regions the link between protected areas, via loans to farmers and their commu- livelihoods, and shade coffee sys- nities. Loans reached US$14.7 million tems), the partnership has evolved in 2011, made through Root Capital, as climate change was increasingly CI’s Verde Ventures and the Calvert recognized as a key risk, the science Foundation, helping 45,000 coffee evolved, and project results itera- farmers in seven countries. Starbucks tively refined management direction. hopes to increase that to US$20 million by 2015. However, there is cur- The partnership also has helped to rently no direct link between these leverage government relations and investments and the areas of focus bring regional climate change vulner- for a landscape approach. It is rec- ability and adaptation needs into - re ommended that consideration be gional and national-level policy-mak- given to how to create such linkages, ing. This has been critical to reaching in order to promote clearer synergies scale on adaptation measures. The to address environmental and social partnership was renewed in 2011 for risks in priority landscapes. another two years.

Partnership: Conservation Partnership: Multi-stakeholder International dialogue, planning and management At the heart of the partnership between Starbucks and Conservation In both Chiapas, Mexico and Sumatra, International is C.A.F.E. Practices Indonesia, assessment of coffee suit- and linking project outcomes back ability was carried out with research into the supply chain by working be- partners, and then shared with local yond the coffee farm to protect rich, producers and communities. The re- surrounding landscapes. CI brings sult was collective discussion of risks considerable technical ability, rela- and solutions in multi-stakeholder tionships in the regions and capacity workshops, which produced recom- to carry out interventions in the other mendations that informed regional two modes—carbon finance and - re government climate action plans. gional producer support. By piloting innovative projects with coffee-grow- Carbon finance: Mitigating ing communities, the partnership is business risk and building improving coffee production, con- resilience serving and restoring natural habitat, In each of the three countries, oppor- identifying solutions to help farming tunities to tap into carbon finance communities be more resilient to cli- have been evaluated to diversify mate change, and facilitating farmer farmer income and entice coffee access to alternative sources of in- farmers to stay with coffee produc- come from forest carbon markets. tion. It is also a means of promoting critical climate change mitigation and Starbucks Case Study | 9

adaptation solutions. Starbucks and CI and local partners including Ambio, have looked to the voluntary sector to sell carbon offsets, with particular success in Chiapas, Mexico. While lack of a global agreement on climate change restricts further opportunity here at scale, it is hoped this may change in the future in order to provide farmers with incentives to maintain best practices, restrict expansion into existing forests, and maintain tree cover in productive coffee farming landscapes.

Starbucks landscape approach in practice Figure 1. Starbucks’ Climate + Coffee in Mexico and Indonesia 2.2° Celsius increase in average tem- Chiapas, Mexico peratures and a 80-85mm reduction in rainfall. Thus, areas at 600 metres This region is and will remain import- altitude will become marginal ar- ant to the company as a whole, as eas for coffee and most likely to be well as for domestic offerings at Star- converted to other land uses. Areas bucks stores in Mexico. Smallholder at 600 metres currently suitable for coffee farmers in Chiapas, Mexico, coffee will shift to higher altitudes have long practiced traditional agro- at 850-900 metres. In addition, ar- forestry methods of coffee growing eas above 1700 metres may become practices, using shade-adapted va- more suitable for coffee production. rieties and maintaining tree canopy As suitability moves to higher alti- cover. Shaded coffee farms in the tudes, this creates a greater chal- area provide a natural protective buf- lenge for transportation and market fer around some of the region’s most efficiencies. Figure 2 spatially depicts biologically-rich habitats, particularly this change will affect coffee growing the 121,400 hectare El Triunfo Bio- areas. sphere Reserve, home to jaguar, tapir, Starbucks and CI launched an initial monkeys and other species. three-year programme to encourage However, this sourcing region for coffee growers in Chiapas to continue 10 Schroth, G., P. Ladderach, J. Starbucks is threatened by significant their sustainable farming practices. Dampewolf, S. Philpott, Jm. climate change impacts, with a pro- In return, they received technical as- Haggar. H. Eakin, T. Castillejos, jected reduction in the area of high sistance from CI’s field staff and Star- J.G. Moreno, L. Soto Pinto, R. suitablility for Arabica coffee produc- bucks purchased the farmers’ beans. Hernandez, A. Eitzinger and J. Ramirez-Villegas, “Towards a cli- tion dropping from current levels of Further financial incentives for the mate change adaptation strategy 265,400 ha to 60,500 ha by 2050.10 growers have come through CI’s work for coffee communities and eco- This change is due to a projected 2.1- with local partner organizations (Am- systems in the Sierra Madre de Chiapas, Mexico, Mitigation and Adaptation Strategies for Global Change (2009) 14:605-625. 10 | Reducing Risk: Landscape Approaches to Sustainable Sourcing

bio, CIAT and others) to offer farming communities payment in exchange for reforestation commitments. The carbon value is then sold on the voluntary carbon market with payment going directly back to the farmers. The vulnerability assessment and work with the Chiapas state government has integrated the adaptation recommendations in the Chiapas state climate change action plan.

Business risks and rationale for engaging the landscape approach Operational risks – resource security: severe climate change impacts predicted in the region. Operational risks – labour short- age and community health: the importance of maintaining the coffee production sector was noted, as farmers faced enticements to aban- don the sector.

Mode of intervention in the landscape Partnership, multi-stakeholder planning and management: CI’s work with the communities in this key sourcing region has created in- Figure 2. Top: Present state of optimal areas for Arabica coffee, Sierra Madre centives for forest and land protec- de Chiapas. Bottom: Optimal areas expected for Arabica coffee in 2050, Sierra tion in the region via better access Madre de Chiapas. to data and financial assistance. Source: Chiapas Gobierno del Estado. 2011. Estrategia del Sector Cafetaleropara la adaptación, CI convened 10 meetings with stake- mitigación y reducción de la vulnerabilidad ante el cambio climático en la Sierra Madre de Chiapas. Analysis and maps above by CIAT, 2011. holders to identify the components necessary for a successful climate strategy. Once the suitability analysis was complete, this information was brought back to the community and other stakeholders to identify how farmers and communities currently experience climate change, Starbucks Case Study | 11

Figure 3. Coffee and Climate Change in Chiapas, Mexico improve the understanding of climate ernment as part of the Global Envi- Finance: Payments for ecosystem change impacts in the coffee produc- ronment Facility (GEF) project that services (PES) to support coffee farming community, and what interven- Starbucks contributed to, in order ers with alternative revenue streams tions communities and producers to identify the types of training nec- and protect the ecosystem services. prioritize. These results informed the essary to secure ecosystem services climate change adaptation recom- among producers and sub-watershed Partnership mendations that were adopted by the communities in the Sierra Madre de Chiapas government. Chiapas. This programme is now un- 1998: Partnership between CI and derway. Starbucks launched. Those meetings resulted in a signed memorandum of understanding to Value-chain approach with land- 2004: Results: 30% increase in build a successful coffee and climate scape elements included: Trainings number of participating farmers in change strategy for the region with on C.A.F.E. Practices. Also working coffee conservation programme, in- partners from local, regional and na- with farmers in the region (not just ternational coffee sales of these pro- tional governments, indigenous cof- those Starbucks buys from), CI has ducers doubled and incomes rose by fee federation, the social sector and provided capacity building, technical an average of 40%. Starbucks made civil society. assistance, seedlings, organic com- its first offering of a shade grown cof- post, and income diversification via fee product, Shade Grown Mexico. A capacity building needs assessment shade-tree planting (fruit trees or was completed with key partners 2008: The partnership with Ambio palm). and stakeholders and municipal gov- and Plan Vivo was established to identify incentive programs for farmers to 12 | Reducing Risk: Landscape Approaches to Sustainable Sourcing

Starbucks recog- reforest in exchange for payments »» 15,591 carbon credits sold with a nized business growth obtained from voluntary carbon off- potential of 50,000 tCO2 for the “ sets. project. Worked with 23 com- could not occur if high munities in the Sierra Madre de 2010: Success leads CI to secure a quality Arabica produc- Chiapas to consolidate efforts to grant agreement with the Global En- protect and restore 120 new hect- tion declines or is highly vironment Facility (GEF) to expand ares of forested area with Ambio, and scale up this initiative to 10 wa- volatile. Ensuring a long- adding 17,000 new tonnes of car- tersheds in the Sierra-Coast region of bon to the reserve fund for Plan term sustainable supply Chiapas. of high quality coffee Vivo carbon credits. in this region is import- Outcomes in Mexico »» Results in US $100 of new income per year (for five years) per ant. »» Farmers in 13 communities re- farmer, representing ~7.6% of ceived assistance in developing coffee income. farm plans. It is hoped regional ” adaptation plans for interven- »» 25 new permanent jobs created, tions beyond the farm scale will 253 people trained, 150 efficient become operational with addi- cooking stoves installed. tional resources and capacity. »» Regional climate vulnerability »» Eight community technicians and adaptation planning from trained on climate change miti- the initiative has been inte- gation and adaptation. grated into the regional Chiapas climate change adaptation plan »» Advanced productivity measures and the National Commission using well established sustain- for Protected Areas of Mexico able best practices for coffee (CONANP) is now utilizing com- growing for more than 1,000 ponents of the climate change farmers . strategy to launch their own ad- »» Sustainable coffee production aptation work. method trainings have reached »» Benefits to communities: - Am another 1,000 farmers via a train- bio’s assessment confirms there the-trainers approach. is supplementary value for farm- »» 110 farmers participating in ers. coffee and climate carbon- pro gramme, benefitting 197 families Value proposition of landscape in 23 communities. approach to Starbucks »» 17,152 trees planted in 442.5 Starbucks recognized business growth hectares. could not occur if high quality Arabica production declines or is highly vola- »» Three nurseries established pro- tile. Ensuring a long-term sustainable ducing 210,000 seedlings to re- supply of high quality coffee in this restore the natural forest cover by gion is important. employing shade- growing best practices. Starbucks Case Study | 13

Aceh, Sumatra, Indonesia The provinces of North Sumatra and Aceh in Indonesia are significant sourcing regions for Starbucks, in need of support due to low productivity. Starbucks coffees containing an Indonesian component includes: Sumatra, Christmas, Anniversary and Tribute. Indonesian coffee beans are noted for their unique flavor profile in blends, and as a single origin product. Starbucks increasingly heard from farmers that climate Figure 4. Risk and adaptation responses, Aceh, Indonesia. risks were increasing, including pests and diseases. Further impacting cli- vices needed to improve their mate change through greenhouse productivity without resorting gas emissions, coffee has historically to land- clearing for new coffee been one of the drivers of deforesta- gardens. tion due to productivity declines after several years of coffee production, Business risks and rationale pushing farmers to clear more land. for engaging the landscape There are also risks of farmers aban- approach doning coffee production, in search of Resource security: Climate change more lucrative returns from oil palm impacts coffee production quantity and other commodities. To address and quality. these challenges, Starbucks and Con- servation International began to: Operational risks: Climate change and shifts in global demand pose risks a. Test approaches to manage risks to economic viability of coffee farm- and develop new strategies for ing for smallholders. addressing climate change that will benefit both farmers and the Mode of intervention in the ecosystems upon which they de- landscape pend, Partnership, multi-stakeholder b. Work with coffee communities planning and management: CI cre- to improve production practices ated maps of both the likely changes in return for an agreement to re- in coffee suitability and partnered spect forest boundaries and re- with University of North Sumatra to duce clearing, and assess pest distribution associated c. Link coffee farmers to carbon with climate change in order to tar- markets as a means of providing get training and support programs additional income and a source in communities that are likely to of funding for the delivery of ser- have the highest vulnerability to cli- 14 | Reducing Risk: Landscape Approaches to Sustainable Sourcing

mate change. This was followed by Outcomes business model depends upon thriving multi-stakeholder workshops and coffee farming communities and land- work with the Aceh Tengah regional »» CI conducted a vulnerability as- scapes. government and several local coffee sessment for North Sumatra and cooperatives to develop a coffee and Aceh, with funding from Star- Landscape health is at the core regional climate action plan. The rec- bucks, to identify the primary of coffee production ommendations from the vulnerability risks for the next 30 years of farm- assessment fed into the action plan. ing and opportunities to manage For a rapidly expanding company those risks. seeking a sustainable business model, Regional producer support: Based while maintaining strong ethical stan- »» More than 600 farmers have been on the climate change vulnerability dards, Starbucks needs to ensure engaged in farmer extension mapping, CI was able to target tech- its supplies of quality coffee beans. programs, including farmer field nical assistance, farmer outreach and Therefore, investments the company schools and offering support on precise locations for nurseries and makes to ensure supplies of qual- certification requirements. This demonstration plot development to ity coffee are core to their business helps deliver certified volume, improve smallholder performance at model. C.A.F.E. Practices has enabled forge direct market linkages, and a landscape scale. Starbucks to have a closer connection provides motivation to reduce ex- to growers and a stronger influence Value-chain approach with ILM ele- pansion of coffee growing areas on its coffee supply chain. The investments included: Trainings on C.A.F.E. into the surrounding forests. Practices. Also working with farmers ments made at landscape scales in in the region (not just those Starbucks »» Integrating climate resiliency into key supply regions allows Starbucks buys from), CI has provided capacity the coffee sector and public poli- to mitigate risks to coffee production. building, technical assistance, seed- cies in Aceh Tengah. In particular, lings, organic compost, and income this leveraged closer work with Partnerships diversification via shade-tree planting the Aceh Coffee Forum to develop a climate change plan designed A critical enabling condition of Star- (banana trees). By increasing yields bucks’ engagement beyond farm- in the face of climate change, and ne- to improve farmer livelihoods and coffee production in the region. scales is its partnership with Conserva- gotiating specific conservation agree- tion International, and the subsequent ment with communities, a reduction partnerships CI has formed within the in farmer expansion into neighboring Value proposition of landscape approach to Starbucks regions. This partnership enables Star- forests is sought. bucks to achieve positive coffee sup- Finance: Payments for ecosystem Ensure a long-term sustainable supply ply and quality benefits, and provides services (PES) to support coffee farm- of high quality coffee. Starbucks with capacity they may not ers with alternative revenue streams currently have in-house. Further, the and protect the ecosystem services. Key lessons learned and partnership has enabled significant next steps for Starbucks’ donor and in-kind financial invest- Partnerships ments and government commitment approach to landscape in Starbucks sourcing regions (e.g. the Aceh Coffee Forum, University of issues GEF grant, Chiapas climate change North Sumatra, government agen- adaptation plans). cies, communities. While it is hard to say what the ‘business as usual’ approach would have Thriving coffee communities looked like in these key regions had Starbucks not pursued a landscape ap- Maintaining farming communities is a proach, it is clear that the company’s crucial aspect of maintaining supplies Starbucks Case Study | 15

Figure 5. Analytical framework applied to Starbucks of coffee. Starbucks business model risks is difficult. This is particularly Climate change adaptation depends on coffee farmers staying in acute in the case of tree crops, which solutions across the landscape the business and thriving. Solutions need lead-time in order to address ad- pursued included working beyond aptation (in the Mexico and Indonesia The mitigation of operational risks their own supply chain at landscape examples, 8-15 years is necessary). from climate change impacts is valued scales to support thriving coffee grow- Starbucks’ commitment to climate by Starbucks as a priority. Therefore, ing communities and paying farmers resiliency in Chiapas is nearing the investing in climate change adapta- more to adhere to best practices. five-year mark and its commitment in tion strategies in key sourcing regions the region dates from 1998. Starbucks is an investment in Starbucks’ long- Timelines for investment in hopes the initiative can eventually sus- term supply of quality beans, and is a landscape approaches is years tain itself, and recognizes that its role cost of doing business. five years from now will be different. It is a challenge for any business to However, given the innovative nature look five years out, let alone 15-20 of this work for Starbucks, these time- years out. However, planning for cli- lines are ever evolving. mate change adaptation takes time, and getting alignment within a company on how to address long-term 16 | Reducing Risk: Landscape Approaches to Sustainable Sourcing

Overview of Starbucks’ recent study finds no practical imple- business case for the mentation of adaptation or mitigation measures in the Brazilian coffee landscape approach sector,13 highlighting the urgency of Starbucks’ approach to mitigate op- the landscape approach Starbucks erational risks resulted in an evolution and CI are beginning this year. of their farm- and mill-based stan- • Work will occur across two land- dards and best practices to seeking scapes: East Minas Gerais and solutions via landscape approaches. South Minas Gerais. The intent This evolution mirrors the analytical is to: framework developed for this Land- scapes for People, Food and Nature • Perform an assessment of investigation. Below is a summary of C.A.F.E. Practices on socio-eco- the key rationales and modes that led nomic advancement (to be com- to the value proposition of Starbucks’ pleted by April 2013) landscape approach. • Perform a vulnerability assessment to determine how climate Next Steps for Starbucks: Brazil change has impacted the region and identify opportunities to While continuing work already ameliorate current situation and/ started in key sourcing regions, Star- or prepare for the future bucks and CI seek to specifically rep- licate the success in Mexico and In- • Identify PES opportunities linked donesia in Brazil, helping to improve to forest conservation, resto- coffee production practices and sup- ration and reforestation in each port farmers adopting C.A.F.E. Prac- landscape. An inventory has tices while maintaining biodiversity been completed of potential pro- and increasing carbon stocks within grammes to tap. Work currently coffee production landscapes. Brazil focuses on modeling potential is the world’s largest coffee producer, carbon benefits. accounting for 34% of the global sup- The Minas Gerais region supplies 80% ply.11 The International Coffee Orga- of Brazil’s coffee production. Star- nization cites Brazilian Agricultural bucks and CI’s work in Minas Gerais Research Agency EMBRAPA research with 93 farms has the ability to influ- projecting a one degree increase in ence production standards beyond 11 Starbucks procurement de- temperature reducing current suit- Starbucks direct procurement. partment data indicates 34%, able coffee growing areas by 200,000 however Haggar et al estimate square kilometres. A three degree slightly lower, at 25%. See: Haggar, J., K. Schepp, 2012. increase would remove a further 12 Coffee and Climate Change 320,000 square kilometers. While Impacts and options for adaption losses of up to 33% of the current area in Brazil, Guatemala, Tanzania of Arabica coffee production in Sao and Vietnam. Natural Resources Institute, University of Green- Paulo and Minas Gerais could be par- wich, UK. tially offset by gains in Paraná, Santa Catarina and Rio Grande do Sul, one 12 See: http://dev.ico.org/documents/ icc-103-6-r1e-climate-change.pdf 13 Haggar and Schepp, 2012.

Reducing Risk: Landscape Approaches to Sustainable Sourcing