Smucker’s – Environmental and Social Risks of Coffee (2011)
Our company is one of the four largest coffee companies in the world. It provides industry leadership through its Folgers brand not only in consumer expectations, but also with regard to pricing.
The coffee business is critically important for our company by providing approximately 40% of our company’s revenue. It is equally important to the well-being of 25 million coffee farm families worldwide.
Climate change may present a number of important risks and opportunities for our company and these communities, as it impacts temperature, rainfall patterns, and disease vectors in the world’s coffee growing regions. According to the Intergovernmental Panel on Climate Change, physical risks from climate change may include changes and variability in precipitation and in the intensity and frequency of extreme weather events.
The director of research at Kenya’s Coffee Research Foundation publicly stated, “We have seen climate change in intermittent rainfall patterns, extended drought and very high temperatures.” He goes on to point out that “Coffee operates within a very narrow temperature range of 19-25 degrees (Celsius). When you start getting temperatures above that, it affects photosynthesis and in some cases, trees wilt and dry up.”
Peter Baker, coffee expert at the nonprofit CABI Bioscience, publicly stated “I often call coffee a Goldilocks plant. It likes it not too hot, not too cold. It likes it not too wet, not too dry. It doesn’t like too much sun, it doesn’t like too much shade.”
Our [c]ompany’s competitors in the coffee business – Nestle, Kraft Foods, and Sara Lee Corporation – are making public efforts to address coffee sustainability and to provide for a consistent and reliable supply chain of quality coffee. All three have made public commitments to sourcing coffee in a more sustainable fashion.
While the company’s 2010 10-K identifies climate change as a risk factor, it does not provide any discussion of what the company will do to address those risks and the role of corporate responsibility in its coffee business. It also does not discuss the opportunities for the company to become a leader in environmentally and socially sustainable coffee farming.
Shareholders request that within six months of the 2011 annual meeting, the Board of Directors provide a report to shareholders (at reasonable cost and excluding confidential and proprietary information) describing how the company will manage the social and environmental risks and opportunities connected to the company’s coffee business and supply chain. We recommend the Board include in the report a concise discussion of how it will address temperature changes, changes in rainfall patterns, and the company’s responsibility for its impact on the coffee farming families in its supply chain.