Corporate Social Responsibility and Modern Coffee Companies’ Supply Chain

This document was presented by Dylan Thome, Co-Creator of Coffea Flock, as part of the curricular activities of the Management Ethics Class at St Thomas University in Miami Florida, within the Master in Business Administration and represents "(... ) a perspective into modern coffee companies’ corporate social responsibility (hereinafter CRS) efforts along their supply chains. (.. .)"

It is a very interesting article which develops a concept that has been used in recent years in a consistent manner not only by large companies recognized within the specialty coffee industry but also by small companies that find an interesting marketing benefit in relating to consumers from this point of view.

Dylan's research work is not fully developed in this blog since the main interest is to explain the concept of what CRS means, its modalities and when and why it is used by coffee companies. We hope you can enjoy it and leave us your comments and opinions about this topic.

Dylan starts "(...) The research draws from corporate policies, news, and scholarly articles to make conclusions regarding the motivations behind these (CSR) efforts. The paper also looks at the value consumers place on coffee with ecolabels (...)"(own underline).

"(...) The hypothesis is that consumers are willing to pay more for coffee when they believe it was sustainably sourced. (...)"

"(...) Coffee production is extremely labor intensive. Aside from general farming practices of maintenance, tilling, planting, fertilizing, pest and disease maintenance, at harvest time extra hands are needed for picking, hauling, cleaning, and depulping of fresh fruits, followed by cleaning, drying, storing, hulling, sorting, bagging, and loading onto a truck to be sent away from its origin in the tropics to first-world consuming countries like the United States. The entire process can take several months. It involves a diverse work force that includes farm owners, permanent, temporary, and migrant workers, and their families (Ionescu, 2018). These workers often come from rural communities, are the lowest earning and most vulnerable people in the entire coffee supply chain.

The average consumer knows very little about the coffee trade, aside from what they like and don’t like. Though consumers are far removed from the realities of coffee production, that does not mean they do not care. Consumers rely on companies’ claims of corporate social responsibility, ecolabels, and news media to form an opinion about a company’s ethics. These sources, however, do not paint the full picture and in some cases cause confusion.

Corporate Social Responsibility (CSR) is a concept often expressed as the voluntary assumption of responsibilities that extend beyond purely economic and legal ones (Boatright & Smith, 2017). In the coffee supply chain CSR pertains to human rights, sustainable production, and environmental practices (Library of Congress, n.d.). Companies are tasked with aligning their business practices to address these concerns.(...)" (own underline)

"(...) A look into different motivations for CSR helps to evaluate their commitments to making an impact in these areas. 

Ethical motivations fall into four types (Schaltegger, S., et. al., 2018). The most basic type, reactionary, is characterized by using CSR activities as a necessary means to a financial end. The second motivation, reputational, is when a company uses CSR solely to boost consumer confidence. The third level of motivation, known as responsible, is when management views CSR efforts as a challenge to improve a product’s efficiency, quality, or performance. Finally, the highest form of ethical motivation is collaborative and is characterized by management’s efforts to maintain a dialogue with the company’s most vulnerable stakeholders.  

Evaluating the effectiveness of CSR efforts is difficult. The value of CSR is dependent on the actual benefits that companies claim and that outside groups want (Boatright & Smith, 2017). Therefore, interpretation of the data inputs often does not translate into financial terms. (...)"

CSR In Coffee Supply Chains
"(...) Coffee companies large to small realize the importance of engaging in CSR along their supply chains because consumers respond to it. However, if the value of CSR is dependent on the actual benefits that outside groups want, then one must look beyond companies’ claims and try to understand what are the motivations behind those particular companies’ CSR activities.

Ecolabels

Many consumers rely heavily on ecolabels such as organic, Fair Trade, bird-friendly, or B-Corp certifications as a quick way to give them confidence that what they are buying is a good choice. A recent study using meta-analysis concluded that, on average, consumers are willing to pay a premium of $1.36/lb for coffee that is certified with an ecolabel (Abdu, 2021). Caveat emptor applies, however, as they are not always as straight-forward as they seem. B-Corp certificates, for example, while highly regarded by the public, are not as difficult to achieve as one would think. Also, the “legally binding commitments” required of certified B-Corps are not actually enforceable (Rodriguez, 2022). (...)"

* Principle according to which the buyer is solely responsible for checking the quality and suitability of the goods before making the purchase.

Author's Note: The study cited by Dylan in his paper "Quantifying the Intangible: How Much Are Consumers Willing to Pay for Ecolabeled Coffee?" by Nizam Abdu in December 2021, also found that consumer attitudes varied, especially regarding their location. For example, compared to other regions, North Americans were less willing to pay more for ecolabeled coffee, which may suggest that preference for such a labeling system varies across regions. The study also found that, in general, people are willing to pay $1.36 more for a pound of coffee that is produced organically, and are especially partial to coffee labeled "organic." More specifically, using the descriptive analysis technique, consumers' willingness to pay for fair trade, organic and COOL (Country of Origin Labeling) was found to be positive and significant. However, they also suggest that companies engaged in coffee ecolabelling initiatives can also use the findings of the study as a cost-benefit tool to inform their decisions about whether to continue with existing ecolabelling approaches or review their policies based on consumer preferences.

Dylan concludes in his document: "(...) The information available can be difficult to judge, but a conclusion must be made if you want to buy a brand you believe in. (...)"

"(...) Certainly, consumers want to buy coffee that they believe was sourced ethically. It is evident from the premiums they pay for coffee that is certified with an ecolabel. It is also evident from the massive CSR campaigns undertaken by the largest coffee companies to persuade consumers that they are engaged in ethical sourcing. (...)"

CSR is much more than simple policies linked with marketing and consumers, it entails social scrutiny once these actions are public knowledge and many times they can even subject the company to derision when they lack reality or have failed on its purpose. At the same time, they are very difficult to verify externally because it implies accessing data and internal information that companies often do not share on their own. However, the specialty coffee industry is increasingly approaching CSR as a mechanism to show transparency and trust between companies and consumers in relation to the products offered.

Thank you all for reading us, a sincere hug!


"Because behind every cup of coffee

There is much more than beans…”