One year ago, we published our inaugural issue brief on the emerging business case for financial institutions to conduct due diligence on the social and environmental practices of their borrowers and investees. To stimulate a broader dialogue on the topic, we also released the social and environmental scorecards that Root Capital loan officers use to evaluate the performance of our clients: small and growing businesses (SGBs) that aggregate and serve thousands of smallholder farmers.
Today, we are releasing updated versions of the scorecards, which are now available for download on our website. The new scorecards build on our existing “practices as proxies” approach, focusing on specific practices that we’ve found to be sufficient proxies for positive social and environmental impact.
Above: Our impact framework highlights how the activities of Root Capital’s clients improve rural livelihoods.
The scorecards now place greater emphasis on two high-impact practices: providing farmers with agronomic assistance and including women in influential enterprise roles, such as administrators, accountants and agronomists. (As described in our second issue brief, Applying a Gender Lens to Agriculture, we believe women in these “hidden influencer” roles are critical.)
The scorecards also have new sections devoted to different business structures (i.e., private farms, cooperatives and businesses sourcing from independent farmers) and agricultural activities (i.e., crop and livestock production and processing) to allow users to understand performance and potential impacts in a wider variety of contexts.
Mainstreaming social and environmental due diligence
We hope that by continuing to share our methodology and tools we can lower the barrier for other institutions looking to incorporate social and environmental indicators into their due diligence or impact measurement.
One example is our partner Counter Culture Coffee, a leading specialty coffee roaster with a focus on premium quality and a deep commitment to sustainability. Counter Culture’s sustainability team recently piloted the previous version of Root Capital’s environmental scorecard with some of their suppliers to better understand the sustainability profile of these businesses.
Last month, we sat down with Kim Elena Ionescu, Counter Culture’s Coffee Buyer and Sustainability Manager, to hear about her experience using the scorecard.
Root Capital: First, tell us a little bit about how sustainability fits into Counter Culture’s work as a coffee roaster.
Kim: Sustainability is one of the three tenets of Counter Culture’s vision statement. Since 2007, it has been my job to define environmental and social sustainability for our business – in the context of being a fiscally sustainable operation, of course. Many initiatives are supply-chain-focused, like our small-grants program, known as Seeds, and our commitment to supporting organic agriculture in coffee-producing communities globally. We also make donations and create partnerships in our local communities in North Carolina and Massachusetts to support sustainability here at home.
Root Capital: In 2014, you piloted the environmental scorecard with two of your suppliers in the Democratic Republic of Congo (DRC) and Burundi. Why were you interested in using the scorecard?
Kim: Over the past two years, I have been thinking hard about how to broaden our understanding of environmental sustainability without weakening our sourcing standards. While I'm a passionate advocate for organic agriculture, I get frustrated when sustainability is presented as a dichotomy (good or bad, certified or not certified) instead of a continuum.
I discovered Root Capital's environmental scorecard over a year ago, and it immediately appealed to me because it seemed to strike a good balance. It provides enough detail to be a real benchmark for environmental performance, while not going so deep into the nitty-gritty that only science nerds could use it. Also, I liked the idea of adopting a tool already in use – the last thing I want to do is repeat work that is already being done or put extra onus on a coffee producer.
I reached out to members of the Root Capital team to understand how the tool was developed and how to use it, and I was thrilled by their enthusiasm for adopting it and sharing my feedback. I resolved to give it a go on my next trip to see suppliers, which happened to be to the DRC and Burundi. Both are countries I'm less familiar with, and good agricultural practices there are less ingrained in the coffee-growing culture of smallholder farmers than in other places I work, like Peru. So, it felt especially useful to have a tool to guide my questions.
Root Capital: What did you learn from using the scorecard?
Kim: I learned how to identify potential sustainability “hotspots” for any coffee producer, regardless of how comparatively ecologically friendly their farming practices may be. Everyone has room for improvement, and the scorecard's questions create space for a dialogue about how to make progress in the context of the place and organization being measured, as opposed to measuring against a single, inflexible standard. Again, sustainability needs to be viewed along a continuum.
Root Capital: Counter Culture has some ambitious sustainability goals for 2015, including the release of a new study on climate change adaptation pathways for coffee farmers, as well carbon neutrality for your operations. Do you see the environmental scorecard informing some of your sustainability work going forward?
Kim: Yes, I have big plans for this scorecard! I plan to train our coffee buying team in the use of the new version of this tool in 2015, and I aim to have performed an initial audit of 50% of our suppliers by the end of the calendar year.
I take immense pride in the fact that our team sets goals for every supplier relationship, regardless of the volume we're buying or whether it's the first year we're working with a group. The scorecard will give us a great framework for setting environmental sustainability goals that are simultaneously unique to each supplier and also linked to global targets.
We invite others to provide feedback or to share their approaches as well, so that a community of practice can develop around these topics. Over time, we hope that social and environmental due diligence tools become increasingly accessible, so that more institutions can incorporate them into their existing processes – and we can collectively manage toward greater impact. We encourage you to download the updated scorecards and let us know what you think.
Kim Elena Ionescu is the Coffee Buyer and Sustainability Manager at Counter Culture Coffee, a specialty coffee roaster based in Durham, North Carolina. Root Capital and Counter Culture Coffee work with many of the same coffee cooperatives in Latin America and East Africa, and we share a common learning agenda around how the specialty coffee sector can drive livelihood and sustainability improvements at origin.