The 'Nescafé Plan': Buyer Beware
Nestlé has announced with typical media fanfare a 10-year "Nescafé Plan" to help the company "further optimize its coffee supply chain". Nestlé plans to double the amount of Nescafé coffee purchased directly from farmers over the next five years. There's also a specific Nespresso component to the plan - unsurprising, since Nespresso is Nestlé's fastest-growing brand.
That Nestlé should be seeking to extend direct control over its coffee supply chain hardly constitutes news. The price of coffee beans has hit a 13-year high; coffee futures have risen by 35% in the last three months, meaning traders and speculators are doing better than roasters. So the Nescafé Plan is dressed up in the language of 'sustainability'. Nestlé is "Creating Shared Value", according to CEO Bulcke, "for its shareholders and the communities in which it operates." Nestlé pledges to meet sustainability standards in coffee growing, to support farmers with technical assistance and microfinance programs, and to reduce the environmental footprint of its factories.
Genuine moves to improve the situation of small coffee growers - a group particularly hard hit by price volatility, buyer concentration and environmental degradation - are certainly welcome. Will the "Nescafé Plan" bring relief? Experience advises caution; farmers on the "Nescafé Plan" will still be bearing all the risks.
Nestlé's recent 'Creating Shared Value' report, for example, vaunts the growing number of dairy producers it increasingly sources directly from, but says nothing about the actual content of those relationships and how they work in practice. Despite Nestlé's bogus claim that the report is in compliance with the sustainability reporting requirements of the Global Reporting Initiative (see IUF Downgrades Nestlé CSR Rating from B+ to Junk), the report contains no substantive information concerning working conditions along its vast agricultural supply chain - and not a word about child labour in coffee or the situation of the many migrant workers on whom the global coffee harvest depends.
Nestlé has 12 Nescafé factories in coffee-growing countries. Under the plan these factories will all be supplied with 'sustainably produced' coffee by 2015. What about the workers who are processing the coffee? The plan has nothing to say about what sustainable coffee means for their jobs and livelihoods. How can Nestlé meet "internationally-recognized sustainability standards" by 2015 when the company shows no concern to meet internationally-recognized ILO labour standards in the factories which produce the jars, packets and sachets of Nescafé coffee?
When Nestlé speaks of "optimising the supply chain", does this include creating a trade union under management control as it did in its Nescafé factory in Panjang, Indonesia, to undermine the legally-recognized Nestlé Panjang Workers Union? Is the refusal to negotiate with the legitimate union unless the management-controlled union is invited to the "bargaining" table part of the "Nescafé Plan"?
The Nestlé Panjang Workers Union has been struggling to defend basic trade union rights for the past 3 years. Their struggle continues, with or without a "Nescafé Plan".
Volatile coffee bean prices and the related risks of commodity futures can blow a hole in company balance sheets. No one should confuse a strategy for diversifying financial risk with sustainable practices grounded in internationally-recognized labour standards, the Conventions of the United Nations' ILO.
When it comes to sharing value, some 'stakeholders' and their communities are clearly more equal than others. The 500 million Swiss francs over the ten-year life of the "Nescafé Plan" should be weighed against the more than 9 billion earmarked for 2010 alone for Nestlé to buy back its own shares. If they are to be credible, efforts to raise standards for the women and men who grow, harvest and process the coffee we drink should look behind the greenwash.