September 24, 2020

Circular Economy Models and Digitalisation In The Coffee Sector

The wider coffee industry has been pushing for greater sustainability at every step of the supply chain for some time now. Minimising waste and switching to biodegradable packaging are, rightly, top priorities across the sector. 

However, it is also incredibly important to deliver long-term impact by implementing sustainable circular models in the coffee sector and digitalising key industry processes.

Read on to learn more about what a circular economy model is, some examples of how it’s already being used in the sector, and how it can be driven by digitalisation.

Lee este artículo en español Economía Circular y Digitalización en el Sector Del Café

What Is A Circular Economy Model?

To understand what a circular economy is, we must first examine the alternative: the linear economy model.

The Linear Economy Model

The linear model follows a very simple process: take-make-dispose.

Let’s take mobile phone manufacturing as an example. A company takes the raw materials to build a mobile phone. They then make the phone, and sell it. The phone is then used for a period of time, until it breaks or becomes obsolete. The phone’s owner then disposes of it.

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This linear model is focused on consuming resources and outcomes, but it isn’t sustainable. It is wasteful, especially at the end, as the product is disposed of and often not recycled.

The Circular Economy Model

The circular economy model is grounded in self-renewal. It is a cycle, rather than a series of processes with a beginning and an end. Instead of disposing of an obsolete product or byproduct, the circular economy model looks to recycle, repair, refurbish, or even reinvent.

There are a number of examples where companies are looking to reduce their waste in the coffee sector. At farm level, pruned coffee stems are used to fuel furnaces for coffee dryers. Coffee cherry pulp is used as fertiliser or to produce cascara. Some companies are even developing compostable or reusable coffee pods, and others have developed cups from used coffee grounds or coffee husk.

How Does This Help Farmers?

By implementing a circular economy model, we improve sustainability across the supply chain. By improving sustainability, we provide farmers with the ability to invest in their farms and grow.

As farms grow and improve both the productivity and quality of their crops, exporters can then commit to buying more and more of their output, rather than cherry-picking the best micro-lot coffees. This then provides the farmer with more income, allowing them to invest in their farm and start the cycle again.

A Circular Economy Model In East Africa

Today, millions of East African coffee producers find themselves in a critical situation. This is a result of a number of factors, including low productivity levels, a lack of access to credit, difficulties with market access, poor infrastructure, low coffee prices, and many more.

Sucafina is a leading sustainable farm-to-roaster coffee company headquartered in Switzerland. It has origin operations across East Africa, Latin America, and Asia. To support farmers in East Africa, Sucafina created the Farmer Hub Initiative.

The Farmer Hub Initiative is designed as a sustainable, circular model which provides farmers with better access to resources and goods. It does this in a number of different ways across a number of different countries.

I spoke to Justin Archer, Sucafina’s COO for East Africa & Sustainability Manager, to understand how the initiative works. He says: “We work in a loop with the farmers. We buy coffee from farmers and also provide necessary services and goods at favourable prices to the community. So, that’s the kind of circle that we mean with this model.” 

This circular model also empowers producers to use their assets throughout the entire year. By doing so, farmers generate and free up more income, covering their costs more effectively. This creates a more sustainable cycle – all year round.

Darshit Shah is Head of Strategic Projects at RWACOF, a Rwandan coffee exporter that’s part of the Sucafina Group. He says: “Our operations in each of the East African countries are tailored to the varied supply chain dynamics of each country.

“Therefore, the needs of farmers, and consequently our approaches, in each of these countries are highly specialised. However, the common theme across Farmer Hub initiatives is to make a positive impact on the livelihood of coffee growers.”

The Farmer Hub Initiative was developed to support farmers in coffee producing countries in East Africa, including Rwanda, Kenya, and Burundi. 

Grocery In Washing Stations in Burundi 

Burundi is home to roughly 600,000 smallholder coffee farms. 

I spoke to Luis Garcia, Country Manager of Sucafina Group in Burundi. BUGESTAL, Sucafina’s coffee washing station arm in Burundi, works with a local partner who also privately owns washing stations in rural Burundi.

Luis says: “Through the Sucafina East Africa Farmer Hub initiative, our project in Burundi revolves around offering basic goods at wholesale prices to their farmer communities.

“Farmers in upcountry Burundi are very vulnerable to basic goods prices changing. On top of that, middlemen across the supply chain for those goods take significant margins, inflating the end prices for the farmers.” 

To resolve this, BUGESTAL worked in partnership with local communities to found a retail chain called “Akacu”, which means “Ours”. Akacu stores offer wholesale products to local communities, but also promote local entrepreneurship. They are operated as franchises, which means that the profit they make stays within the community.

“We provide entrepreneurs with brand and operational procedures, equip them with basic furniture and an IT system to operate their shops, and most importantly we use our scale to bargain competitive prices for the goods they sell.” As part of the Sucafina Group, BUGESTAL also buys goods for lower prices, and passes this discount on to farmers. 

Akacu stores are currently exclusively located in 9 BUGESTAL-owned stations and its partner’s 13 washing stations. The aim is to open an additional 28 stores outside of washing stations to reach a wider rural audience by end of 2020, with another 150 by the end of 2021.

Justin says: “Our intention here, from a sustainability perspective, was to try to reduce the cost of living for the farmers. If they can buy food products at discounted prices, then this has some impact on their local economy.” In theory, this economic growth would then lead to increased productivity levels.

Crop Diversification And Digital Banking In Rwanda

As well as being one of the fastest growing economies in Africa, Rwanda is home to around 400,000 smallholder coffee farmers. 

Similar to Burundi, there are retail businesses located in all Rwandan washing stations to increase access to basic goods. At these stores, farmers can also directly exchange their cherries for other products.

However, these stores accept more than just farmers’ coffee cherries. Justin tells me that many coffee farmers in Rwanda also produce maize. This maintains their financial stability in the coffee off-season and uses existing farm equipment.

Maize cobs are dried on the same raised beds that are used to dry coffee cherries. This means that the beds are utilised to their full capacity all year round, rather than being empty for months in the off-season.

This means that the farming infrastructure is being used to its fullest, providing the farmer with additional income as a result. Consequently, operating costs go down for everyone, including the farmer and Sucafina. Everyone saves money and everyone benefits. 

According to Darshit, “most maize farmers in Rwanda harvest, dry, and shell maize in their houses and/or via cooperatives”. By offering to buy maize in retail businesses, Sucafina diversifies its income and supports producers to be more stable. 

Another service being tested in Rwanda through the Farmer Hub is a new online banking platform for farmers. Around 75 to 80% of the total population in Rwanda have access to mobile phones, but many farmers still don’t have access to banking. Most of them live in remote, rural areas, while the banks are located hundreds of miles away in the country’s cities.

Justin says: “In Rwanda, we have transformed washing stations into agency banks.” Through the Farmer Hub initiative, RWACOF has partnered with the Equity Bank to facilitate agency banking in these washing stations. 

That means that farmers can go to the washing stations, open a bank account, deposit money, send money to other accounts, and withdraw money. It also allows farmers to access credit, and to pay or repay using the cherries that they deliver to the same washing facility.

Justin tells me that, since the project started, they have opened approximately 14,000 bank accounts for Rwandan farmers. 

Darshit says: “The next step and big aspiration is for growers to be able to access loans for farm preparation and cash needs in the off-season, things like school fees, health insurance, shoes, and so on.

“By sharing data and guaranteeing off-taking, we’re at long last making progress in facilitating these loans.”

Digital Soil Analysis In Kenya

Coffee in Kenya is produced by both smallholder farms (of which there are around 700,000) and estates. While agriculture in the country is reasonably developed, there are some practices that could still be refined. One example is the correct application of fertilisers. Good fertilisation improves productivity, and therefore farm profitability.

Mette-Marie Hansen is Managing Director of Kenyacof, which is part of the Sucafina Group. She says: “We have learned that most smallholder farmers don’t know their soil quality or the available nutrients. Applying the wrong fertiliser often results in money wasted, and the product used fails to contribute to soil fertility.”

She explains that by testing farmers’ soil, Kenyacof can recommend suitable fertilisers to ensure optimal nutrient uptake. This creates more fertile soil and makes farming both more productive and more sustainable. 

Mette-Marie explains that Kenyacof have also launched an initiative to employ young people (of legal working age) from the communities they represent to carry out the soil testing. She says the plan is to turn it into a full-time occupation, covering not only coffee farms, but also other crops and animal feeds. She says: “The targeted number of farmers in 2020 is 5,000. The aim is to test the same soil again in the coming 12 months to see the results.

“An application (Kahawa Soil App) connects with the scanner and provides a soil status report. The soil status report is available on the agent’s smartphone within 10 minutes, and indicates the level of total nitrogen (N), total phosphorus (P), and exchangeable potassium (K) in the soil, as well as the pH level, organic carbon, soil temperature, and cation exchange capacity.” 

As all the data is stored on the cloud, their agronomy department can then follow up with farmers. By assisting the farmers in analysing their soil, they can improve soil quality and therefore plant productivity, benefiting both the exporter and the farmer.

The app’s soil analysis capabilities aren’t just limited to coffee, however. It can be used for other areas of agriculture and different crops altogether. Because the app can be used for a number of different crops, it is much more valuable to producers. This makes the opportunity cost of using the app (in terms of how much time it “costs” to learn) much lower.

All three of these projects across Kenya, Burundi, and Rwanda are part of one wider initiative that has a simple end goal: improving utilisation and outcomes for coffee producers.

Justin says: “We started a year ago and the shops are already very busy. We’re buying lots of maize and opening lots of bank accounts. 

“By directing resources back to farmers and back into their communities, we are unlocking untold potential; new and more sustainable supply chains for both parties, and access to resources that improve the wellbeing of families.”

Digitalisation improves access for farmers, while circular economy models drive positive impact for everyone. When both are implemented, they benefit the entire supply chain. 

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Photo credits: Sucafina Specialty, RWACOF, Julio Guevara, Meklit Mersha, Photogenix Studio

Header image: Joel, a part of Sucafina Specialty’s agricultural outreach team, signs up farmers for the Sucafina digital platform 

Please note: Sucafina Specialty is a sponsor of Perfect Daily Grind.

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