Advocacy Groups and Shareholders Persuade Procter & Gamble
Small-scale coffee farmers around the world scored a victory in September when Procter & Gamble (NYSE: PG), the largest seller of coffee in the U.S., announced that it would introduce Fair Trade Certified™ coffee products through its specialty coffee division, Millstone.
The announcement comes in response to dialogue with shareholders about the company’s practices, as well as pressure from consumers, people of faith, human rights activists, and humanitarian organizations. With P&G’s announcement that it will offer Fair Trade Certified™ coffee through Millstone, the advocacy groups have agreed to suspend their campaigns against the corporation and the shareholders have withdrawn the resolution they had filed on the issue.
Trillium Asset Management participated in the dialogue for months leading up to the announcement. Procter & Gamble is currently one of our largest holdings.
“With world market prices as low as they are right now, we see that many coffee farmers cannot maintain their families and their land anymore. We need Fair Trade now more than ever,” says Jerónimo Bollen, Director of Manos Campesinas, a Fair Trade Certified™ coffee cooperative in Guatemala.
Over the past three years, the price of coffee has fallen almost 50 percent, and now hovers near a 30-year low. This has resulted in a widespread humanitarian crisis for 25 million coffee-growing families in over 50 developing countries. Unable to cover their costs of production, small farmers cannot earn the income necessary to feed their families, send their children to school, purchase essential medicines, and stay on their land. Grown by democratically organized cooperatives, Fair Trade Certified™ coffee guarantees farmers a minimum of $1.26 a pound for their harvest. Last month, the International Coffee Organization composite indicator average price for green coffee was 52 cents a pound.
“P&G’s action is an excellent example of what can be accomplished through the collaboration of shareholder activists and nonprofit organizations. It’s a win-win for the world’s small-scale coffee farmers, for the environment, and for P&G itself,” said Sister Ruth Rosenbaum, Executive Director of the Center for Reflection, Education and Action (CREA). CREA and Domini Social Investments (Domini) led the shareholder dialogue with P&G. “We brought very serious concerns to P&G, and after considerable dialogue, the company was willing to take action. This dialogue continues, and we have achieved a working relationship with P&G that we expect will lead to further constructive action.”
With this decision, P&G, one of the four largest coffee companies in the world, joins an impressive list of over 200 coffee companies that currently offer Fair Trade Certified™ coffee in the U.S. Procter & Gamble’s Millstone will immediately offer Fair Trade Certified™ coffee to wholesale accounts (universities, restaurants, etc.) and to consumers through its www.millstone.com. P&G has committed to build significant consumer demand for Fair Trade Certified™ coffee. This commitment is planned to result in P&G becoming a leading U.S. buyer of Fair Trade Certified™ coffee—which would represent purchase of at least 2-3 million pounds per year, based on today’s estimates.
“More farmers than ever before will now receive a fair price for their harvests,” said Deborah James of Global Exchange. “By establishing a floor price, Fair Trade enables farmers to make a dignified living while providing new opportunities to cultivate high-quality, environmentally sustainable coffee.”
“Domini is pleased that Procter & Gamble has become one of the world’s largest coffee companies to retail Fair Trade Certified™ coffee,” said Adam Kanzer, Director of Shareholder Advocacy for Domini Social Investments, the manager of the Domini Social Equity Fund. “This is a small step forward, but a significant one. It is encouraging that as a major coffee company, P&G is willing to give Fair Trade Certified™ coffee a chance, and to put marketing dollars behind it. P&G’s management has demonstrated a willingness to address serious, complex inequities in the market with forward-thinking action.”
“Procter & Gamble’s decision is a critical step to help make trade fair for the world’s 25 million coffee-growing families, who continue to face destitution and ruin. Oxfam challenges global giants Kraft and Nestlé, as well as the U.S. government, to take immediate steps to address the structural inequities that trap coffee farmers in a cycle of poverty,” said Liam Brody of Oxfam.
“With coffee prices so low, it is more important now than ever that coffee drinkers always ask for Fair Trade Certified™ coffee,” said Erin Gorman of Co-op America.
Over the course of the last two years, a range of shareholder and advocacy groups has each engaged Procter & Gamble on the issue of Fair Trade coffee. At the October 2001 P&G shareholder meeting, Global Exchange called on P&G to begin offering Fair Trade Certified™ coffee. In September 2002, Oxfam launched its “What’s That in Your Coffee?” campaign, which called on the world’s major coffee roasters — including Kraft Foods, Nestlé, Procter & Gamble, and Sara Lee — to increase the market for Fair Trade coffee, to bring the current oversupply of coffee back into line with demand, and to help ensure that coffee farmers are able to earn a decent living.
In December 2002, Domini and CREA led a coalition of investors holding more than 500,000 shares of P&G in a dialogue with the company about purchasing Fair Trade coffee. In April 2003, the shareholder coalition filed with Procter & Gamble the first-ever shareholder resolution to address the coffee crisis.
Meanwhile, Co-op America, the Interfaith Fair Trade Initiative, Oxfam, and Global Exchange all educated and encouraged concerned citizens to urge the company to begin selling Fair Trade Certified coffee.
Shareholders and NGOs cautioned that they will hold Procter & Gamble to its promises and continue to monitor its progress. “We’re glad that Procter & Gamble is making this first-step commitment to Fair Trade, and look forward to the day when it commits to paying farmers a decent price for all its coffee—like the coffee companies that pioneered Fair Trade,” said Sarah Ford of the Interfaith Fair Trade Initiative.
About the Shareholder Coalition
The shareholder coalition calling on Procter & Gamble to address the coffee crisis was led by Domini Social Investments and CREA and composed of a broad range of socially responsible investors and religious organizations. Domini and CREA were the lead filers of the P&G shareholder resolution, and co-filers were Church of the Brethren Benefit Trust, James W. Gamble, Sarah E. Gillett, the Mennonite Foundation Stock Fund, Inc., the Mennonite Retirement Trust Common Stock Fund, the Milwaukee Province of the School Sisters of Notre Dame, MMA Praxis Core Stock Fund, Real Assets Investment Management, St. Joseph Health System, the Sisters of Charity of Cincinnati, the Sisters of Charity of Saint Vincent de Paul of New York, the Sisters of the Holy Names of Jesus and Mary, Patricia A. Wagner, William Ernesto Wagner, William G. Wagner, and the Whitney Foundation. The following organizations also actively participated in the dialogue with Procter and Gamble: Boston Common Asset Management, Ethical Funds, the Evangelical Lutheran Church in America, Informed Investors Group, Newground Investment Services, and Trillium Asset Management.