Chapter 7

Coffee—Natural Capital: Case Study

As discussed in chapter 4, when we employ natural capital—defined as the various natural resources we utilize in the production and distribution process—our focus is on inputs rather than outputs for our new business model experiments. Why? Because we contend that paying attention to the variables that we can directly affect allows us to make measurable improvements quickly by being more resource efficient—which has the dual benefit of making the best use of planetary resources while also delivering bottom line savings. One illustrative example of the way marginal gains can be identified systematically can be found in the pilot study of the inputs required to deliver a single cup of coffee from the farms in Colombia to the consumer in the United Kingdom.

We knew, from prior research carried out by our Wuppertal Institute partners, that differing stages of production and distribution make highly variable demands on the types of resources employed. For example, it was apparent that topsoil erosion and biotic inputs are utilized mainly at the farm level, whereas abiotic, water, and air inputs are utilized across several stages of the life cycle—but weighted toward the point of use. With this broad knowledge, we were then able to refine the research and look in greater detail at four main categories—supply, distribution, manufacturing, and demand—and measure the inputs required at each stage.

On the supply side, we looked at four areas: the agricultural inputs by small-scale coffee farmers in Colombia, the inputs required for primary processing in Colombia, the secondary processing inputs in the UK, and finally the inputs required in the process of packaging production in the UK. On the distribution side, there were two main aspects to consider. The first was transport from the place of origin to the UK, which involved small- to medium-size trucks in Colombia and marine freight. The second set of inputs focused on the primary and secondary logistic hubs in the UK, such as trucks and vans. On the manufacturing side of the coffee business (segment cups), there were three areas where inputs could be measured and adjusted: the UK business site, the packaging of Colombian coffee sachets, and the assembling and disassembling of single-serve coffee machines for recycling and reuse. The fourth and final category was the demand side, where we identified two areas for investigation: the resources used by clients when they consumed coffee, and what we called end-of-life issues involving the disposal of coffee, packaging, cups, stirrers, etc.

The value of this focus is that it enabled us to identify metrics that highlighted not only the percentage of resources used at a specific stage of the product life cycle, but also the physical quantities. For example, it became clear that much of the topsoil erosion happened at the farming stage (see table 7.1).

An example of the new information the methodology revealed is the discovery that a cup of coffee required 3.4 liters of water during its life cycle and that 85 percent of this water was used in the packaging, processing, and drinking stages. In other words, only 15 percent was used at the growing stage. Therefore, focusing attention on minimizing water use at the farming stage would have minimal impact overall, and attention would be better focused on other areas of the life cycle. Not every impact on every metric is actionable for every business because they typically play in different parts of the ecosystems in which they happen to operate, but the methodology makes it possible to identify and address those that are actionable in ways that improve resource efficiency with multiple positive downstream effects.

Table 7.1. The Journey of a Cup of Coffee (input analysis of a sachet of Colombian coffee)

This led us to develop the idea of measuring the effectiveness in dealing with what we called hot spots (i.e., environmental issues occurring at each phase of the product life cycle). If addressed systematically, focusing on these areas in the business would enable us to make better use of the inputs. What we discovered was that the three areas where we could make the maximum gains were in agriculture, packaging, and use (drinking).

Figure 9. Hot Spot Analysis

Next steps for natural capital

The importance of the methodology described in this case study is that it provides a scalable way of expanding the pilot program; in fact, we are now in the process of enlarging the number of natural capital pilots to test its stability across other commodities, such as cocoa. We also intend to enlarge the number of academic partners in follow-on piloting to refine the approach further. During this expansion we will seek to bind the input metrics with specific brands to help create an even more robust and coherent model (for measurement and communication externally). We also have begun to develop a natural capital accounting system with our partners at Oxford University’s Saïd Business School; this will help us transfer the methodologies and findings from proof-of-concept to full operational deployment.

This final stage of development, to operational status, will result in us being able to introduce the inputs concept (and the five metrics—abiotic, biotic, water, air, and topsoil erosion) into the broader language of the company and to make the use of natural capital a key focus for the company and for others. The natural capital methodology we outline herein is transferable to other industries because the metrics for natural capital are universal in nature and not specific to the sponsoring company. It is our hope to integrate natural capital accounting into future business pilots that are structured around leveraging human and social capital, to add a further non-monetized driver of enhanced business performance, along with a dimension—nature—that can deliver greater individual and community well-being, along with resource efficiencies that will be valuable to the company.