Businesses no longer need to be convinced that the world is changing at an alarming rate. That’s old news. Today’s companies understand that global warming is happening now, that weather patterns are increasingly unpredictable and that millions are at risk from rising sea levels in some parts of the world and water shortages in others.
After the 2015 Paris Agreement, businesses also know that in many countries political support for taking action on climate change is growing.
Even in countries where political action is stagnating, there is a significant discerning, well-informed and increasingly worried electorate. Where once the cost of inaction was outweighed by the cost of action, it’s a very different story today.
What is less well understood is how these factors — climate change, climate regulation and customer demand — will affect their businesses and what they, as companies, need to do to safeguard the future of their operations.
So how can a business capitalize on the opportunities, mitigate the risks and navigate its way through so much environmental, economic and social uncertainty?
Sustainability as a commercial imperative
For many businesses, particularly those reliant on global exports and commodities, a big part of the solution lies in building resilience across the supply chain. Ensuring the continuity of supply is a strategic must for all long-term planning.
This is no truer than in the tea and coffee sectors, where the impacts of climate change already affect production in some areas — a problem compounded by migrating workforces and increased competition for land, energy and water. Rural poverty is also rife in many farming communities and there are unsettling reports of forced labor and human trafficking.
For companies such as Taylors of Harrogate, the family-owned company behind the Yorkshire Tea brand, quality product is the lifeblood of the business. Without its steady supply, the company simply will not survive.
After years of building a reputation for responsible trading, the U.K.-based company established a bold and ambitious sourcing strategy in 2012 based on a vision “to guarantee the long-term supply of quality tea and coffee in a safe, ethical and sustainable way, enabled by relationships.”
Taylors’ Sourcing Approach, which formally recognizes the inextricable link between quality, sustainability and the value of relationships, has led the company to completely transform the way it works with its suppliers and growers, and go far beyond environmental compliance and good practice.
This has meant collaborating with its key suppliers to identify and address sustainability challenges; establishing long-term contracts that provide suppliers with security and access to funding; and working together on quality and continuous improvement.
At the same time, Taylors, a comparatively small company with a loud voice, has been using its influence to leverage change at the industry level. It is an active participant in the Ethical Tea Partnership (ETP), World Coffee Research, Rainforest Alliance and other industry bodies.
In recognition of its achievements, Taylors was awarded a prestigious Queen’s Award for Sustainable Development in the U.K. in April.
Simon Hotchkin, head of sustainable development at Taylors, said building resilience in its supply chain was based on a strong business case, rather than simply a desire to “do the right thing.”
“None of this has been about philanthropy or CSR. This is about sustainability being a commercial imperative for the business, about ensuring business continuity for everyone in the value chain,” he said.
“The strength of our relationships means that producers benefit from our long-term commitment to purchase, meaning they can plan into the future with some sense of security. They also benefit from transparent pricing mechanisms designed to reward quality, and support in coping with sustainability challenges like the effects of climate change, which ensures that they can continue to produce a quality product. In return, we get a secure supply of that quality product and come to be seen as the buyer of choice. It works both ways.”
Partners, not clients
Stakeholders have different interests and incentives based on where they sit in the supply chain. For Taylors, it is about securing supply to maintain and grow its business. At the other end of the spectrum, farmers are most interested in improving their livelihoods and community development, which is dependent on a fair and consistent income for their crops and the necessary tools and support for adapting to climate change.
For Hotchkin, the mutual understanding of each other’s needs and the realization that issues such as climate change are a common threat unites all parties.
“It’s about having a shared language, and developing our plans together,” he said. “Traditionally tea and coffee buyers go around the world tasting and quality checking, deciding whether they want to buy or not. It’s tactical and transactional, rather than future focused — it’s also time-consuming and doesn’t establish trust and commitment.
“By having three- or even five-year contracts in place it pays to invest in those relationship so that our growers really understand our specifications, and we understand their needs and the context in which they are operating. As such, we regularly have face-to-face contact to build these close working relationships, and have processes in place that enable near instant feedback.”
John Gitao, factory unit manager at Makomboki Tea Factory, said Taylors’ approach to working with its supply chain has “greatly improved” the quality of lives of the local communities and tea farmers in terms of health, income and the local environment.
“In my 20 years‘ experience in the tea industry, no other tea buyer values where his product comes from more than Taylors,” he said. “This company has consistently and continuously tried to improve our relationship through programs like rewarding quality, reducing costs through energy efficiency interventions, better health through water provision support, providing bursaries to needy and vulnerable children, and buying our teas at premium prices.”
For an industry so acutely affected by climate change, it follows that Taylors is committed to becoming carbon neutral by 2020. With 67 percent of the company’s overall carbon footprint attributable to the agronomy and processing of tea and coffee in countries of origin, a lot of focus has been on training producers on energy monitoring, efficiency and management.
In Kenya, one collaborative project involving the Ethical Tea Partnership (ETP), Mars Drinks, GIZ (the Deutsche Gesellschaft fuer Internationale Zusammenarbeit GmbH) and 10 factories under the control of the Kenya Tea Development Agency (KTDA), has reduced energy consumption by more than a million kilowatt-hours, saved circa 20,000 trees and cut costs by about $300,000. The next phase of the project aims to reach all 67 of KTDA’s factories before 2019, benefitting 600,000 farmers, and saving 300,000 trees and $5 million.
Taylors also has helped establish and fund a customized carbon-finance initiative with Natural Capital Partners, specialists in working with corporations on market-based solutions for their environmental goals.
The Community Reforestation Program aims to plant a million trees across tea farms in Taylors’ supplier heartland in the foothills of Mt. Kenya. Participating farmers are encouraged to plant indigenous tree species that provide multiple benefits, such as cash crops, fodder for cattle, shade and soil nutrients. They are taught how to maximize land use to increase productivity, enhance biodiversity and adapt to the impacts of climate change. A later, second phase will see the company address similar issues in its coffee business.
“We could have gone carbon neutral pretty much overnight by buying credits from any carbon-finance project,” Hotchkin said. “But for us, this has never been about getting the badge of approval. It’s a farmer livelihoods project, it’s action on climate change, it’s a direct investment in our long-term security of supply — it’s the way that we get it and the relationships we build that counts.
“Natural Capital Partners have worked with us to develop a program that truly delivers multiple benefits in the heart of the community in which we operate, and is contributing towards a sustainable landscape.”
Joe Barclay, head of global markets at Natural Capital Partners, said: “More businesses are talking to us about reducing their supply chain impact and projects like this one in Kenya are a perfect fit. The carbon finance and GHG emission reductions from the trees are like the ‘anchor tenant’; they enable the project to get off the ground and function. But what sets it apart is the involvement of the farmers in establishing what activities will help them improve their livelihoods and be more resilient to climate change over the long term.”
A beacon of excellence
Sarah Roberts, executive director for the ETP, said Taylors’ willingness to face up to “very difficult” problems in its supply chain where there are no obvious or easy solutions stands the company apart.
“Where some other companies may be reluctant to get involved with tackling issues like extreme poverty and human trafficking, Taylors is always willing to put its head above the parapet,” she said.
“It’s like they’re saying, ‘We know we’re not going to be able to change this acting alone, but we’re absolutely determined to be part of the effort to get it changed.’ It’s an extremely bold and courageous approach, and if the industry is going to succeed in the face of so many challenges, we’re going to need a lot more companies like Taylors.”