Sustainability due diligence... over coffee

One of the things I always wonder when I hear about acquisitions of smaller companies by larger companies is to what extent sustainability due dilligence formed part of the acquisition deliberations and whether an assessment of social and environmental risks was included in the analysis and final decision to buy. So when today, I learned of Strauss Group's acquisiton of the Russian Ambassador Coffee brand, my first thoughts went to whether this new purchase will be a sustainability asset or a sustainability liability. Strauss Group is developing its sustainability journey and coffee is an important and highly strategic part of the company's portfolio. Strauss's most recent sustainability report can be found here.

A review of the Ambassador brand website reveals values:  Professional, Open minded, Ethical, Trustworthy, Competitive, Smart and also that all coffee processing from harvesting to transportation of beans is certified by the FNC (Federacion Nacional de Cafeteros de Colombia)- a Columbian state body, founded in 1927 as a business cooperative that promotes the production and export of Colombian coffee, representing more than 553,000 coffee growers, most of whom are small family owned farms of less than about 4 acres.

What is also interesting about the FNC is their Sustainability Report, which covers eight decades! Yes, that's right. Most companies have trouble reporting sustainability performance for one year, but the FNC has managed to cram the years 1927 - 2010 into one report of 175 pages. You can download it here. It's a first report of the Federation and includes a GRI Index and actually, probably anything you ever wanted to know about Columbian coffee. One learns so much from Sustainability Reports, as I have said before on this blog.

So here's an example - a  little Columbian coffee quiz (Answers below. No prizes. Just answers):

1. What is a coffee cherry?
2. What is Juan Valdez's mule called and what does she remnind us of?
3. Who is Juan Valdez?
4. What effect did corn and bean intercropping have on coffee growers' income in 2010?
5. What is intercropping?
6. What actions can be taken to preserve coffee quality and contribute to the sustainability of coffee growing regions ?
7. What is the most popular flavor of ice cream in Columbia?  

The FNC report is primarily a good news report about the activities of the Federation to preserve, protect and promote the Columbian coffee industry, ensuring fair prices and added value options for specialty coffee and sustainable livelihoods for the coffee growers of Columbia, as well as encouraging the development of environmentally friendly cofee growing. After a brief glance at the report, it does seem that the Federation is making a positive difference. While this type of report does not quite conform to the GRI framework as it refers to a sector rather than one company, and relies on case studies and stories rather than actual data about the impacts of the sector, it does offer some interesting insights into sustainability issues and challenges in the coffee business in Columbia. Perhaps the real power of a Federation such as this whose members are small family operations would be to actually harvest data from the member companies on certain social and environmental parameters to measure sustainability impacts accross the board. I have written about association- type reports also in the past. It's a delicate balance between a sector marketing effort and a materiality driven sustainability performance report. The FNC's report is pretty much like most of the others, tending towards the marketing end.

Anyway, I wonder if the team at Strauss Group who finalized the Ambassador deal read this report or considered sustainability aspects of this newly acquired business prior to signing away $10.4 million. Perhaps in terms of coffee sourcing, there maybe cause for optimism, but this, of course, is only one aspect of the overall deal. 

And for those of you who have waited patiently for the Quiz Answers, here they are:

1. The fruit of the coffee plant which is picked when ripe. Each cherry contains 2 coffee beans.
2. The mule is called Conchita and she is a reminder of the challenging mountain topography that produces mild Colombian coffee.[Sic].
3. The icon of Columbian coffee, created in 1960, representing trust and family values. 
4. It made them an additional $123 million.
5. Coffee trees can be planted in an overlapping, inter-mixed fashion, called intercropping, with other plants such as tamarillo fruit trees, plantain, blackberry and cocoa trees, among others. Some of these crops, such as corn and beans, help to increase the productivity of the land.
6. Planting across slopes to help avoid soil erosion; reliable seeds; ecological seed-beds; pest, disease and weed control; shade-systems for coffee cultivation; environmentally friendly milling processes which use less water and result in less waste water.
7. Chunky Monkey. Coffee flavor. Of course.  

elaine cohen, CSR consultant, Sustainability Reporter, HR Professional, Ice Cream Addict. Author of CSR for HR: A necessary partnership for advancing responsible business practices Contact me via www.twitter.com/elainecohen  on Twitter or via my business website www.b-yond.biz/en  (BeyondBusiness, an inspired CSR consulting and Sustainability Reporting firm)

Who moved my Cottage Cheese 2.0 ?

The world of social media has its upsides and its downsides and recent events in Israel prove that you never know which side is coming next!  We have all been witness to major social media campaigns serving uprisings in the Middle East about freedom, the fabric of democracy and human rights, while acknowledging the critical role that social media has to play in the role of disaster relief and recovery. More and more Corporate Social Responsibility Reports are now online, and with them, the link to Facebook pages, Twitter accounts and Linked In conversations. Just recently, I wrote about the digital advances of the Strauss Group in Israel whose recent CSR report publication was digital, facebooked and launched with a live-streamed stakeholder engagement discussion.

I am not sure that Strauss really expected their conspicuous (and earnest) commitment to dialog and engagement to be put to the test so quickly in what has become one of the almost unheard-of protests by the normally fairly lethargic Israeli public. What's it all about? You may find this hard to believe.. but the issue that has engaged (at the last count) 93,269 consumers in a Facebook campaign is all about... the price of cottage cheese! 

No, it's no joke. The Israeli public is  finally moving out of its comfort zone and leveraging 2.0 tools of the day (in some very creative ways) to make their voice heard in a campaign which has become the talk of the nation in just a few short days and which may well be the first iconic 2.0 consumer Israeli pushback.

Cottage cheese in Israel is one of the most basic elements of the local diet with Israelis spending almost half a million $ a year on the stuff. The price of cottage cheese has risen by 39% in since 2008 and the price that sparked the protest is close to 8 shekels ($2.33) for a 250 gram carton. See this article written for Bloomberg News for more background. The protesters argue that cottage cheese is a staple and should be priced accordingly. 

The major cottage cheese producers in Israel are Tnuva who holds 70% of the market, Strauss Group and Tara. Both   Tnuva's Facebook Page and Strauss's Facebook Page have been inundated with comments, questions, complaints, photos and even a video clip with a Cottage Song comparing the price of cottage cheese to taking out a mortgage. Now it's cottage cheese, tomorrow it's your house! 

The subject has been on the daily news and was the highlight of, coincidentally and perhaps unfortunately, a high-profile annual Food Conference taking place just this week, at which the big shots representing all the relevant food manufacturers were present. The Minister of Finance may not have clicked "like" on Facebook but he certainly backed the consumers' corner, threatening to reduce protection on the local milk market and allow foreign exports, or even bring back price control on these products. The manufacturers, however, are seeking joint solution - farmers, regulators, retailers and all those involved in the supply chain - claiming they are being witch-hunted on price drivers which are not entirely their responsibility. Consumers are not convinced. The call to boycott cottage cheese throughout the month of July continues and 200 more people just "liked" the Facebook campagin in the time it has taken me to write these few lines.

What can we learn from all this and where's the sustainability message?

Consumer 2.0 is alive and kicking. If the most apathetic consumer in the Western Hemisphere is getting riled about cottage, then we can truly believe that consumer 2.0 is here to stay and that every consumer issue will now be an Issue 2.0. The full arsenal of social media tools are available to Consumer 2.0's and no manufacturer has any corner to hide in. As I have said in the past: either you are transparent, or you are transparent. 

If you can't stand the heat, get out of the kitchen. Not much point in declaring that you are committed to dialog if you do not engage when the issues get scary. It's one thing to open up your "good news" corporate responsibility report for debate, and seek feedback, as many companies do. It's another to respond promptly and pertinently to consumers when they voice a concern about the way you are conducting your core business and its effect on them. Both Strauss and Tunva have responded on their Facebook pages, in alignment with the Messages at the Top of their Companies, which are not quite satisfying the angry protesters, but they are nevertheless responses, and for that, they should be commended.  

When the market's don't self-regulate effectively, regulation happens. Here we see a beautiful case study in market dynamics. Sooner or later, someone wakes up. If the businesses involved do not skillfully manage this cottage cheese situation, the government will do it for them. What's preferable? Concede the battle (partially at least) in order to win the war, or have the government decide for you and restrict your trading practices indefinitely?  I can think of many who would opt to take control rather than be controlled. Before anyone moves your cheese, you better be sure you move it yourself.

There's opportunity in crisis:  The cottage cheese scenario an example of a situation in which a smart company can win major reputation (and business) points, By responding humbly, by accepting accountability, by taking practical steps to address a situation which is clearly high on the materiality stakes, the protest can be broken and a competitive edge can be secured. Fear of precedents should never immobilize real action. However, the realization that there is already a precedent (in the way consumers are finding their Voice 2.0) should lead to new ways of thinking and responding. What we need is Response 2.0 to Consumer 2.0 about Issue 2.0 in the battle of Cottage Cheese 2.0.

In the meantime, maybe I will start a Facebook campaign to make ice cream a basic human right.

elaine cohen, CSR consultant, Sustainability Reporter, HR Professional, Ice Cream Addict. Author of CSR for HR: A necessary partnership for advancing responsible business practices Contact me via www.twitter.com/elainecohen  on Twitter or via my business website www.b-yond.biz/en  (BeyondBusiness, an inspired CSR consulting and Sustainability Reporting firm)

Strauss: a lesson in stakeholder engagement

Working in my home market, Israel, on sustainability, I am often reminded of the two shoe salesmen who visit Africa and find that people do not wear shoes. The first reports back to his boss: "They have no shoes. Great. What a market opportunity!". The second reports back, saying: "They have no shoes. Terrible. We have no market." Here in our small market, the advancement of corporate responsibility and sustainability should be characterized by the first approach, but  is regrettably, mostly characterized by the second. The number of companies which have shown leadership in truly advancing sustainable practices is low, the number which operate with a respectable degree of transparency is even lower, and the number of companies which engage in stakeholder dialog in a meaningful way is lower still. Against this background, it is a pleasure to praise one company who has taken the lead in demonstrating all three. It is no coincidence that I write this post now, having just returned from participating in a stakeholder engagement event which is certainly a first in our market and, I believe, a world first.

The company is Strauss Group, Israel's second-largest food and beverage company and also an international corporation with approximately 13,500 employees operating 25 production sites in 21 countries around the world. The Group has partnerships with leading multinationals such as Danone and PepsiCo and recently Strauss Water and the global electronics giant Haier Group entered into partnership to produce, market and sell watermakers in China. Strauss is an iconic brand in Israel, carrying the name of the even more iconic Strauss family, who have been admired and respected business leaders in Israel since their humble beginnings in the 1930s. Today the Group is skillfully led by the First Lady of Israeli business, Ofra Strauss, granddaughter of the founders, who took over the helm as Chairwoman in 2001. Ofra Strauss has always been a visionary, strategic, thoughtful businesswoman who has steered the Strauss company into globalization with a good measure of talent and the entire legacy of the Strauss family values and ethical approach to business.

Strauss Group published a first Corporate Responsibility Report in 2008 (covering year 2007 and 70% of Strauss operations) and today launched their fourth report, compliant with GRI at Application Level A, covering 100% of the Company's global business. Strauss is the only company in Israel to have issued four reports, consistently, year after year, once having set the ball rolling.  The 2010 report is at present online in the local Hebrew language only but the English version will be out in a week or two.

The report is in digital / social media format, and closely linked to the Company's Facebook activity. On each page of the report, there is room to include feedback or questions (and receive responses), with all posts feeding directly to Strauss's Facebook page. Equally, there are a range of social media sharing tools for each page to Twitter, Facebook, Linkedin and RSS. This is a first for our local market and is a sign of a company who is boldly embracing transparency (Strauss has been in the top three in the Israeli Transparency Index for the past three years) and using cutting edge social media tools to do so.

However, equally important as the report itself is the way the report was launched. The Company held a Stakeholder Dialog meeting with 90 representatives of business, academia, government and non-profits, who had previewed the report a week before the launch. The stakeholders were split into different groups focusing on workplace, environment, governance, ethics, community involvement and product responsibility and all were able to provide feedback to Strauss on the report, ask questions and engage in open discussion. The entire meeting was streamed live to Facebook, and those not present were able to ask questions which were answered by a panel of senior managers in the closing session.

Stakeholder discussion on responsible workplace

Opening the meeting, Ofra Strauss, Chairwoman of Strauss Group, said that you are never 100% prepared to receive criticism. "It is not always pleasant but it is always necessary." She added that transparency is an essential part of the way Strauss runs its business, and this is not only due to increasing pressure from regulators. "It is good that the regulators are waking up", she said, "but it's not enough. As a business, we have to do more. Change is only possible when we do it together".

Ofra Strauss opening the 2010 CR Report dialog launch meeting

This launch dialog is important in many ways, and not just for Strauss. The digital format will ensure ongoing accessibility and engagement but the face-to-face meeting was pivotal.

First, I am sure that the company received important insights  - I know that in our discussion group, many important comments were made and I believe that the Strauss representatives in our group found them interesting and not entirely predictable. There is a great tendency to publish a report and sit back thinking that everyone will rush to shower praise and congratulations. In the frank discussion that took place, while there was praise, there were also clear expectations and some criticisms. I believe this form of dialog is very humbling and ensures that the report lives longer than it takes to upload it to the internet.

Second, the 90 people in the meeting all learnt something new. By participating in the dialog, they heard new perspectives and perhaps, for those who don't live sustainability reporting (guilty), gained a new paradigm about the value of reporting and how to read reports. Talking about sustainability reports is a form of educating stakeholders, not just involving them.

Third, the participation of a wide range of Strauss managers in this process placed them in the frontline of stakeholder interest and influence. None of them can now say that "CSR is not my responsibility". All of them now have a direct experience of how stakeholders feel. This reinforces their roles not only as managers but also as CSR ambassadors in their organization.

Fourth, this meeting represents a commitment to ongoing dialog. The written word, published to anonymous stakeholders, is a form of commitment. Talking about the content with real people face-to-face reinforces that commitment in an acute way. When Strauss managers think about their responsibility, they will see the faces of those who attended the stakeholder dialog meeting.

I will keep you posted when the English report is published. In the meantime, I add my praise and congratulations to the Strauss leadership and hope they are charting a path that many other local companies will follow.

Oh, and before you ask, no, there was no ice cream.

elaine cohen, CSR consultant, Sustainabilty Reporter, HR Professional, Ice Cream Addict. Author of CSR for HR: A necessary partnership for advancing responsible business practices  Contact me via www.twitter.com/elainecohen  on Twitter or via my business website www.b-yond.biz/en  (BeyondBusiness, an inspired CSR consulting and Sustainability Reporting firm)