Corporate Knights

Erin Poeta is CK's Canadian Responsible Investment Conference 2012 correspondent. Follow her on twitter.

Coffee is the second most traded commodity in the world next to oil. In Canada, eight out of ten cups of java consumed are sourced and produced by Tim Hortons. Of global coffee production, 80% is managed by 20% of the largest companies, a statistic Tim Hortons strives to change through its Coffee Partnership program.

Although the company is infamous for its Send a Kid to Camp program, as well as its strong commitment to environmental stewardship, Tim Hortons has been dubbed the “quiet leader in sustainability” as its coffee-growing partnerships are less visible to Tim’s regulars.

At the most recent Toronto Sustainability Speaker Series, Tim Faveri, Director of Corporate Social Responsibility at Tim Hortons, confirmed that what we see at its restaurants only scratches the surface of the company’s corporate social responsibility strategy referred to as Making a True Difference.

Created in 2005, the Coffee Partnership program builds capacity for small farmers in the countries where Tim Hortons coffee is sourced: Columbia, Brazil and the Trifinio Region. Tim Hortons believes that for small-scale farmers to be successful they must become better farmers and better business people. To assist in doing so, Tim Hortons provides agronomy training to improve crop yield and quality, and coordinates community partnerships to reduce overhead costs. In turn, the farmers are offered better prices, have greater access to markets, and are able to diversify operational risks among stakeholders. The company also ensures the long-term viability of growing conditions through environmental education, while providing alternatives to pesticides and treating and recycling water.

Since 2005, roughly 2,500 small-scale coffee farmers in Central and South America have benefited from the Tim Hortons Coffee Partnership program. While most coffee chains collaborate with certification or standards associations to develop a corporate social responsibility strategy, Tim Hortons felt that no one-mainstream certification model was substantial to create lasting value within its supply chains.

Faveri contrasted between the certifications models that exist today within the food and beverage industry, such as Organic, Marine Stewardship Council, UTZ, Fairtrade and Rainforest Alliance. Faveri stated that few deliver outcomes that adequately address the three pillars of a truly sustainable supply chain: social, economic and environmental. Organic, for example, does not cover economic or social factors, whereas Fairtrade mainly addresses social factors.

Faveri argued that its strategy mimics a certification program, but yields outcomes across all three pillars while allowing farmers to make their own business decisions. Tim Hortons employs Control Union Certification – a third party verifier – to measure the impact and success of its Coffee Partnership program using a customized set of key performance indicators.

With the overwhelming number of certifications, standards, labels and pack-marks out there today, Faveri recommends that businesses stop to consider “why certify or label,” rather than “which certification or label”, a notion adopted by SustainAbility consultants in their book Signed, Sealed…Delivered?. Today leaders in the race to sustainability are eagerly looking for the next best thing to improve and communicate sustainability across the value chain.

Benefits of Certifications Associations

Signed, Sealed…Delivered? explores the value and challenges that businesses find in using certification and labeling as tools to improve economic, environmental and social outcomes across global value chains. These tools have made what was once invisible visible, changed societal and consumer norms, given producers access to new markets, promoted multi-stakeholder collaboration, and driven operational changes among businesses and other large buyers. The organizations that back these credentials have been pioneers in building a more sustainable economy by providing businesses with consensus-based standards developed in a pre-competitive manner. According to SustainAbility, these standards have “created a metaphorical line of sight between production and consumers.”

Signed, Sealed…Delivered? Outlines how businesses are able to use standards, certifications and labels to achieve better sustainability outcomes by:

-Defining standards for processes, performance or measurement

-Delivering through capacity-building, expertise, relationships, infrastructure and networks

-Demonstrating intent or delivery through certification or assurance

-Influencing demand by identifying and appealing to a want or need among buyers

Certifications help businesses make purchasing decisions, manage supply chains, market and sell to other businesses and customers, guide employees, help set business goals, and respond to pressure from stakeholders and regulators. Certifications can also spur demand for certified or labeled goods and provide third party assurance that a product, process, or service is in conformity with certain standards.

Limits to Certifications, Labels and Standards

In its book, SustainAbility notes that the very traits that make consensus-based standards useful for collective action also pose challenges for businesses seeking to differentiate themselves in the marketplace. Like any tool, certification and labeling have limits, including:

Limits in Defining a Company Standards:

-Trying to fit the standard may force the company to alter its business model for no reason other than to adhere to its requirements

-The failure of the standard to adapt to new knowledge or processes

Limits in Delivering Sustainable Outcomes:

-Committing to a single standard can limit sourcing flexibility

-The Business’ reputation is tied to the reputation of the standard-setting organization

Limits to Demonstrating Intent:

-Retrieving information into a company’s supply chain to demonstrate adherence to a requirement set may be a challenge, or the information may be unreliable

-Standards for reporting impacts beyond a company’s operational footprint may not measure the program’s outcomes, acting merely as a proxy for supply chain impacts

Limits to Creating Demand:

-It is difficult to create business-to-customer value, since sustainability is not a main driver of purchases

-Companies don’t always understand or appreciate the return on sustainably investments

-There are deeper limitations due to the systemic nature of social and environmental challenges that cannot be found in a company audit

-Labels preach to the converted, but are limited in what they do for outsiders

-There are limits to scale: we can’t certify every factory in the world, nor can we label every product

Emerging Best Practices

To conclude, authors of Signed, Sealed…Delivered? Offer insight into what they perceive to be the future of sustainability:

“Business will innovate to deliver to outcomes rather than standards, complement certification with strong supplier-buyer relationships, and use the power of their brands to delight and mobilize consumers into adopting more sustainable behaviors. In turn, standards will stretch and innovate alongside business, certification will be complemented by new mechanisms such as partnerships and national regulation, and labels will fade into a quieter, background role, acting as trust marks for those who seek it and leaving brands — and consumers themselves –to take the lead.”

This rather rosy statement is accompanied by a set of recommendations, the highlights of which include:

1) De-construct the classic model — and rebuild, while joining forces to create demand: companies need to deploy their insight into consumer behavior, and associations must continue to raise awareness of their issues while recognizing limitations to labels.

2) Know the value, manage expectations and partner: understand what customers are seeking and manage their expectations with other tools such as regulation and financial incentives. Quantitative approaches to measuring sustainability outcomes are difficult, so brands must come up with more directional and qualitative forms of measurement. Lastly, businesses must create partnerships with certification associations, instead of outsourcing the responsibility in order to control the outcomes.

Leading this revolution will be progressive companies such as Tim Hortons, reshaping certification approaches to improve sustainability outcomes.