The Bottomless Cup: Nespresso’s Bid to Save Coffee From Climate Change
Nespresso is racing to save coffee from climate change.
Nespresso (the widely-known brand name of Nestlé Nespresso, S.A.), is a business unit under Switzerland’s Nestlé Group that sources, processes, and sells coffee in single-serving aluminum pods for its proprietary espresso brewers. Unlike its Keurig competitor, which accepts an array of plastic pods containing coffees and teas sold in grocery stores, Nespresso’s utilizes proprietary aluminum-encapsulated coffee pods. The pods are only available from Nespresso boutiques, the Nespresso website, or from a select few online vendors in the US (third-party coffee offerings are available in Europe).
Nespresso devotes considerable effort to providing an exceptional coffee experience, and enjoys a strong reputation in the coffee community for sourcing quality coffee—especially for a buyer of their scale.[1] As the owner and manager of a closed coffee sourcing ecosystem, Nespresso faces significant supply chain risk from the impending effects of climate change. This risk manifests in two forms: climatological threats to the small coffee farms responsible for 85% of production, and the potential for significant impairment of its materials supply chain due to climate legislation.[2],[3]
To address these threats, Nespresso has undertaken several proactive measures. The most significant of these is the Nespresso AAA Sustainability Program. Started in 2003, the program seeks to safeguard the production of its high-quality coffees through a comprehensive effort to combat the effects of climate change at the farm level. Upon entry into the AAA Sustainability Program, farmers receive technical training and hands-on assistance via two key subprograms: Resilient Farming Communities (RFC) and Coffee Landscape Conservation. The RFC initiative focuses on securing overall farm yield and economic stability, with intergenerational succession planning and local climate adaptation efforts.[4] Coffee Landscape Conservation promotes reforestation on farms—termed “agroforestry”—along with biodiversity assessments and water stewardship planning.
As climate change alters rainfall patterns, the AAA efforts have focused heavily on innovating how farmers use their water supplies. In 2012, Nespresso extended the program from its base in Latin America to East Africa in a bid to safeguard its coffee supply chain in Ethiopia’s Sidama region. There, Nespresso helped renovate the Bokasso wetmill, allowing local producers to separate coffee pulp from wastewater. The resulting process reduced the pollution burden on the adjacent wetlands and allows the mill to recycle 40-60% of its water.[5] The Bokasso wetmill echoed a similar 2011 effort in Colombia, where the creation of a centralized processing mill unburdened farmers from processing their own harvest and reduced the annual crop loss of 50-53% to near zero.[6]
In concert with efforts to insulate the coffee supply against climate change, management is also taking steps to protect the capsule supply chain and move the total production process to carbon neutrality. Accordingly, Nespresso helped form the Aluminum Stewardship Initiative (ASI), a voluntary legal entity focused on aluminum sustainability. By 2008 estimates, 54% of the greenhouse gas emissions in aluminum production result from raw aluminum smelting.[7] Through ASI and management’s internal goal of 100% pod recycling capacity and sustainable aluminum sourcing by 2020, Nespresso hopes to weather any future legislation against greenhouse-intensive bauxite[8] mining and production.[9]
Over the next five to ten years, Nespresso’s management should focus on deepening the reserves of sustainable coffee varieties within their ecosystem by partnering to create genetically-modified and microbially-enhanced coffee plants that can thrive in higher temperatures and reduced rainfall levels. This, combined with continued emphasis on water management at the producer and processor level, stands as the single best hedge against climate-based disruption to the global coffee supply chain.
At the same time, Nespresso cannot afford to ignore the human element, especially in places like Ethiopia where climate change will demand that current coffees be grown at higher altitudes.[10] This presents the problem of limited mountaintop land rights and arable acreage in a country where coffee production is one of the few consistent economic opportunities, and yet coffee-suitable land could be reduced by 60% by next century. Current initiatives in education, agronomics, and retraining will be vital to attracting a new generation of innovative farmers into coffee production as agricultural challenges mount and new economic opportunities arise elsewhere.[11]
As Nespresso moves forward with its comprehensive sustainability plan, three pressing questions come to the fore. First, how should Nespresso address total packaging waste, given that 100% capsule recycling capacity is no guarantee that customers won’t opt for the convenience of the trash can? Secondly, how can Nespresso protect the price and variety of select coffees as climate change strains agriculture in food-constrained countries where that coffee is produced? Thirdly, what (if any) involvement should Nespresso have in combating the spread of the Coffee Berry Borer and Coffee Rust, two natural enemies of coffee plants whose footprint will expand as the climate warms?[12]
(775 words)
[1] Anne Costello Johnson, interview by Thomas Root, July 4, 2017.
[2] Nespresso, S.A., 2017 Positive Cup CSV Report, p. 59, https://www.nestle-nespresso.com/asset-library/documents/nespresso-positive-cup-csv-report-interactive.pdf, accessed November 2017.
[3] Charlie Mitchell, “The Coffee Bean Belt: Climate Change Map,” Financial Times, September 24, 2017. https://www.ft.com/content/a3b5748e-51c8-11e7-a1f2-db19572361bb, accessed November 2017.
[4] Nespresso, S.A., 2017 Positive Cup CSV Report, p. 27, https://www.nestle-nespresso.com/asset-library/documents/nespresso-positive-cup-csv-report-interactive.pdf, accessed November 2017.
[5] Nespresso, “The Nespresso AAA Sustainable Quality program in Ethiopia,” Youtube, published May 15, 2017. https://youtu.be/8KyizEtfZR8, accessed November 2017.
[6] Nespresso, “Central Mill – Jardín, Colombia,” Youtube, published November 16, 2015. https://youtu.be/4xhoVOIVBLM, accessed November 2017.
[7] Nico Tyabji and William Nelson, “Mitigating Emissions from Aluminum,” Columbia University Climate Center Website, April, 2012, http://climate.columbia.edu/files/2012/04/GNCS-Aluminum-Factsheet.pdf accessed November 2017.
[8] Bauxite is the raw ore mined to produce aluminum.
[9] Nespresso, S.A., 2017 Positive Cup CSV Report, p. 55, https://www.nestle-nespresso.com/asset-library/documents/nespresso-positive-cup-csv-report-interactive.pdf, accessed November 2017.
[10] Courtney Columbus, “Ethiopia’s Coffee Farmers Are ‘On the Front Lines of Climate Change,’” NPR News, June 9 2017. https://www.npr.org/sections/thesalt/2017/06/19/533538555/ethiopias-coffee-farmers-are- on-the-front-lines-of-climate-change, accessed November 2017.
[11] Nancy Coleman, “Climate Change Could Lower the Quality of Your Coffee,” CNN, June 21, 2017. http://www.cnn.com/2017/06/21/world/coffee-climate-change-trnd/index.html, accessed November, 2017.
[12] The Coffee Berry Borer is a destructive insect and Coffee Rust is a destructive fungus. Both are becoming more widespread as cooler mountain temperatures that once kept them at bay are changing.
TJ, this was a fascinating read on how Nespresso is handling the current and looming climate change. I agree that their goal to achieve a 100% recycling rate is admirable, but unrealistic. There are several other competitors who have turned to more innovative solutions, such as cups made of dissolvable sugar or biodegradable material such as plant-based fibers (http://www.bbc.com/news/magazine-35605927). Given the costs of Nespresso’s recycling program and its publicity efforts to justify aluminum, it seems that the reason behind sticking with aluminum has more to do with brand image than sustainability. Did Nespresso ever consider other alternatives to aluminum, and have they reported the success of their recycling program? In the spirit of authenticity and accountability, Nespresso should publicly report its performance and even consider a change to a core aspect of its product.
It is amazing that Nespresso is partnering with farmers to overcome the challenges that climate change represents on coffee growers; however, I think that the Resilient Farming Communities and Coffee Landscape Conservation subprograms won’t be enough to keep up with the quantity and quality of the coffee crops that the company requires to fulfill its demand. Therefore, I agree with your suggestion of Nespresso partnering to create genetically-modified and microbially-enhanced coffee plants that can survive climate change effects.
Other important players in the coffee industry, such as Starbucks, are already investing in the development of hybrid coffee plants with great characteristics: they maintain the good taste of other plants, allow productions with higher yields, and provide disease resistance and drought tolerance. It is difficult to expect that small farmers can access these hybrids, though. The developed hybrids are 2.5 as expensive as conventional plants, so they might be only available for big companies with more financial backing.
Thinking of this scenario and referring back to your second question, I wonder whether Nespresso will have the incentives to protect the coffee price in the future or not. Maybe consumers will accept the situation and end up paying a premium to indulge themselves with a cup of coffee.
Source: Caitlin Dewey, “The race to save coffee,” The Washington Post, October 19, 2017. https://www.washingtonpost.com/graphics/2017/business/the-race-to-save-coffee/?utm_term=.28d39ab15a9e , accessed November 2017.
What a great read Mr President! I’m glad Nespresso has taken its responsibilities to climate change seriously. Something that strikes me is that many of their initiatives are similar to those of Starbucks; I wonder if these coffee power houses could come together to collaborate on solutions and promote their good work. Hopefully this will accelerate change and make headway in bringing the rest of the industry up to speed.
TJ – fascinating article. I read it with great interest. I think these types of sustainability programs will become more commonplace as effects of climate change become more widespread. Corporations have a vested interest in protecting their supply chains, even if they wouldn’t otherwise be concerned with the environment. A few reactions to some of the questions you’ve posed:
– I think the environmental aspects of disposable “pods” of all types will continue to be problematic. One potential course of action is to offer a redemption deposit or reward for recycling the pods (similar to how bottle deposits work in most US states). In theory, a reward of 5-10 cents per pod may be enough incentive to remove most of the pods from the garbage. Of course, this would add a significant expense to the unit economics of these pods so the financial math may not work out… but it could be investigated further.
– Unfortunately I consider it to be close to inevitable that certain commodities (coffee among them) will decrease in supply and increase in price as climate change lowers crop yield and quantity of suitable land. Nespresso can (and probably should) attempt to mitigate these effects by investing in new generations of agricultural technology and seed strains that seek to maximize yield for remaining farm resources.
Thanks for the write-up TJ, great analysis!
I agree, it is admirable that Nespresso has become involved in so many initiatives to combat climate change. However, other than the training programs for farmers, I think the efforts are more focused on a marketing play rather than a practical one. I agree with Eugene above that the continued reliance on aluminum pods exhibits a reluctance to change due to perhaps brand image issues.
I do agree with your conclusion that Nespresso should invest more in genetically modified coffee plants that can thrive in harsher conditions caused by climate change. I would worry about the negative perceptions this may cause in the market though. To combat this, I think it would be prudent for Nespresso to proactively sponsor studies showing that genetically modified crops, specifically coffee plants, are indeed safe for consumption. Many such studies have come out in the past year (https://www.nbcnews.com/health/health-news/genetically-modified-crops-are-safe-report-says-n575436).