Harvard Case - BeautifulCoffee and Fair Trade: Working with Local Farmer Co-operatives in Nepal
"BeautifulCoffee and Fair Trade: Working with Local Farmer Co-operatives in Nepal" Harvard business case study is written by Jinhwan Kim, Luciano Barin-Cruz. It deals with the challenges in the field of Business Ethics. The case study is 23 page(s) long and it was first published on : Feb 28, 2018
At Fern Fort University, we recommend that BeautifulCoffee implement a comprehensive strategy to strengthen its commitment to fair trade practices and ethical sourcing. This strategy should prioritize building trust and transparency with stakeholders, including farmers, consumers, and investors, while ensuring long-term sustainability and profitability.
2. Background
This case study focuses on BeautifulCoffee, a family-owned coffee roaster and distributor based in the United States, aiming to expand its operations into Nepal. The company is committed to ethical sourcing and fair trade practices, seeking to partner with local farmer cooperatives in the region. The case highlights the challenges and opportunities associated with establishing a sustainable and ethical supply chain in an emerging market like Nepal.
The main protagonists are:
- David Miller: The founder and CEO of BeautifulCoffee, passionate about ethical sourcing and committed to fair trade principles.
- The Farmer Cooperatives: Local farmer groups in Nepal, facing challenges like low coffee prices, lack of infrastructure, and limited access to markets.
- The Nepalese Government: Plays a role in regulating the coffee industry and promoting economic development in the region.
3. Analysis of the Case Study
This case study can be analyzed through the lens of Stakeholder Theory, which emphasizes the importance of considering the interests of all stakeholders involved in a business decision.
Key Stakeholder Concerns:
- Farmer Cooperatives: Seeking fair prices, access to markets, and improved livelihoods.
- BeautifulCoffee: Aiming to secure high-quality coffee beans, maintain its ethical reputation, and achieve profitability.
- Consumers: Demanding ethically sourced and sustainable products.
- Investors: Seeking financial returns and responsible corporate practices.
- Nepalese Government: Interested in promoting economic development, ensuring fair labor practices, and protecting the environment.
Challenges:
- Transparency and Trust: Building trust with farmers and ensuring transparency in the supply chain is crucial.
- Pricing and Fair Trade: Balancing fair prices for farmers with market realities and BeautifulCoffee's profitability.
- Infrastructure and Logistics: Addressing challenges related to transportation, storage, and processing in Nepal.
- Regulatory Compliance: Navigating the legal and regulatory landscape in Nepal.
- Social and Environmental Impact: Ensuring sustainable practices and minimizing negative impacts on the environment and local communities.
Opportunities:
- Market Demand for Ethical Products: Growing consumer demand for ethically sourced coffee offers a significant market opportunity.
- Building Strong Partnerships: Collaborating with farmer cooperatives can create mutually beneficial relationships.
- Innovation and Technology: Leveraging technology to improve efficiency, transparency, and traceability in the supply chain.
- Economic Development: Contributing to economic growth and poverty reduction in Nepal.
4. Recommendations
To address the challenges and capitalize on the opportunities, BeautifulCoffee should implement the following recommendations:
1. Develop a Comprehensive Fair Trade Strategy:
- Establish clear and transparent fair trade principles: Define specific criteria for fair prices, working conditions, and environmental sustainability.
- Develop a Code of Conduct: Outline ethical standards for all stakeholders, including suppliers, employees, and partners.
- Implement a robust monitoring and auditing system: Regularly assess compliance with fair trade principles and ethical standards.
2. Strengthen Relationships with Farmer Cooperatives:
- Invest in capacity building: Provide training and resources to farmers on sustainable farming practices, quality control, and business management.
- Establish long-term partnerships: Sign multi-year contracts with cooperatives to ensure stable income and predictable supply.
- Promote farmer ownership and empowerment: Encourage cooperatives to participate in decision-making and profit sharing.
3. Enhance Transparency and Traceability:
- Develop a traceable supply chain: Implement a system to track coffee beans from farm to cup, allowing consumers to verify the origin and ethical sourcing.
- Utilize technology: Leverage blockchain technology or other digital tools to enhance transparency and traceability.
- Communicate openly with stakeholders: Regularly publish reports on fair trade practices, environmental impact, and social responsibility initiatives.
4. Ensure Sustainability and Environmental Stewardship:
- Promote sustainable farming practices: Encourage organic farming, water conservation, and biodiversity protection.
- Invest in renewable energy: Support the adoption of solar power or other renewable energy sources in coffee production.
- Reduce carbon footprint: Minimize transportation distances and optimize logistics to reduce environmental impact.
5. Manage Risks and Compliance:
- Conduct thorough due diligence: Carefully evaluate potential partners and suppliers to ensure compliance with ethical standards and legal requirements.
- Maintain regulatory compliance: Adhere to all relevant laws and regulations in Nepal and the United States.
- Develop a crisis management plan: Prepare for potential risks and challenges, such as price fluctuations, natural disasters, or social unrest.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: The recommendations align with BeautifulCoffee's core values of ethical sourcing, fair trade, and sustainability.
- External customers and internal clients: The recommendations cater to the needs of consumers demanding ethical products and employees seeking to work for a responsible company.
- Competitors: By embracing fair trade practices and transparency, BeautifulCoffee can differentiate itself from competitors and attract customers who value ethical sourcing.
- Attractiveness ' quantitative measures: While quantifying the impact of ethical practices is challenging, the recommendations can contribute to long-term profitability by building brand loyalty, attracting investors, and reducing operational risks.
6. Conclusion
By implementing these recommendations, BeautifulCoffee can establish a successful and sustainable business in Nepal, while upholding its commitment to ethical sourcing and fair trade principles. This strategy will not only benefit the company but also contribute to the economic development and social well-being of the Nepalese coffee farming communities.
7. Discussion
Other alternatives not selected include:
- Focusing solely on profitability: This approach would prioritize maximizing profits without considering ethical implications, potentially damaging the company's reputation and alienating stakeholders.
- Adopting a purely charitable approach: While commendable, this approach may not be sustainable in the long term and could lead to financial instability.
Risks and Key Assumptions:
- Market demand for ethical products: The success of this strategy depends on the continued growth of consumer demand for ethically sourced coffee.
- Cooperation with farmer cooperatives: Effective collaboration and trust-building are crucial for the success of the partnership.
- Government regulations and policies: Changes in government regulations or policies could impact the business environment in Nepal.
8. Next Steps
To implement these recommendations, BeautifulCoffee should:
- Develop a detailed implementation plan: Outline specific actions, timelines, and responsibilities for each recommendation.
- Secure funding and resources: Allocate sufficient financial and human resources to support the implementation of the strategy.
- Establish a dedicated team: Form a cross-functional team to oversee the implementation and monitor progress.
- Engage stakeholders: Communicate the strategy and seek input from farmers, consumers, investors, and other stakeholders.
By taking these steps, BeautifulCoffee can create a positive impact on the Nepalese coffee industry, while building a sustainable and ethical business for the future.
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Case Description
Not long after John, BeautifulCoffee's (BC) newly appointed producer partnership manager, began his evaluation of the business relationship between BC and its coffee producer organization in Nepal, he realized that the relationship fell far short of internationally recognized fair trade standards. Furthermore, production quality was low because of poor management at DCF-Gulmi. BC was investing substantial resources in helping the local community in Nepal, and the term "fair trade" had significant appeal to Korea's ethical consumer segment. The fact that BC was unable to guarantee that DCF-Gulmi was being managed according to a democratic governance system - a key requirement for fair trade certification - raised legitimacy concerns for BC. John had to decide whether to prioritize social or business considerations. If he decided to prioritize the business aspect of fair trade, he would need to replace the partner supplier with a fair-trade certified, democratically run organization with the management capability to provide high-quality coffee beans. If this path was chosen, BC would still make a positive contribution to the well-being of coffee farmers - somewhere else - but would not help DCF-Gulmi improve its current situation, leaving it worse off than it was before it partnered with BC. Alternatively, BC could maintain its relationship with DCF-Gulmi, deepening its commitment to helping the farmers' organization improve its quality management capability and comply with fair trade standards. But this would require a larger financial and human resource commitment to pay for the recruitment and training of personnel with the necessary expertise in organizational change, co-operative management, and capacity building. Students will discuss the moral and strategic issues surrounding these two choices.
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