2019 SUSTAINABILITY REPORT - S&D Coffee & Tea...Creating lasting impact requires vision and...

2019 SUSTAINABILITY REPORTHighlighting 2017-2018 Impact

2019 Sustainability Report

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Ron HinsonPresident & CEOS&D Coffee & Tea

A MESSAGE FROM OUR CEOOur vision at S&D Coffee & Tea® is to drive the beverages of the future. As the industry landscape continues to evolve—economics, consumer preferences, the natural environment—we are redefining innovation and reimagining how we bring value to our customers. This is why we’re expanding our portfolio of high-quality coffee, tea and botanical extracts to give our customers the profitable, resilient edge they need. We know we cannot focus only on our range of offerings or how we blend flavors, though.

To us, being a provider of innovative beverage solutions means being rooted in impact. S&D is involved from the ground up in continuously improving the environmental, economic and social impact of the beverages we craft and of our industry as a whole. We saw significant progress in 2017–2018.

At our headquarters in North Carolina, we built the first phase of a road map to sustainable operations and we continued to focus on empowering employees to reach their full potential. At origin, our Raíz Sustainability® sourcing platform directly impacted nearly 4,600 farmers. At every point in our process, we prioritized relationships to better understand and respond with agility to specific needs of farmers, employees and customers. After all, working with beverages like coffee and tea is, at its root, about serving people. I’m excited to show you what we’ve achieved, especially at origin, over the last two years in partnership with our employees, supply chain and customers. I hope you will join S&D in creating sustainable impact in the future. Strong roots stimulate growth, and that’s exactly what we expect for S&D and for our customers as the result of being rooted in impact.

Los Naranjos farm, a member of the Andes Cooperative in Colombia.


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THE MEANING OF IMPACT To S&D, impact is more than a goal. It’s more than numbers on a page. It’s how we rejuvenate the environment. It’s how we empower each other to improve the quality and flavor of our own lives.

In our industry, impact can’t wait. Navigating market volatility is difficult and represents many challenges in maintaining consistent prices for farmers. The effects of climate change are becoming more tangible—and so is consumer demand for sustainable beverages. We realize there is a growing need for a sustainable and resilient supply chain that puts the coffee farmer’s livelihood at the center.

This is one reason we took the risk in developing Raíz Sustainability®, enabling a working partnership with farmers toward a more sustainable future. We can learn from them and what they need to improve efficiencies and stand resiliently in the face of market and climate changes. This is why we actively engage farmers, our employees, our customers and on-the-ground sustainability experts in creating different options to help alleviate these challenges. Working together, we can impact the future—and our industry—for good.

INVESTING IN CONTINUOUS IMPROVEMENTWe’ve learned that impact grows out of continuous improvement. By focusing on steady environmental, social and economic progress at origin and in our facilities, we improve our ability to respond with agility to the changing environment and market. We give ourselves room to address long-term challenges, like market volatility and climate change, in ways that make the most sense for our suppliers, our business and the people around us. Continuous improvement is also, of course, key to ensuring quality and value for our customers over time.

OUR KEY FOCAL AREASThis report highlights the impacts we made together during 2017–2018 as S&D and our partners Engaged with Purpose in the workplace and world, and as our beverages were Crafted with Care for the planet.

The report then delves deeper into sustainable sourcing. In this section, we share the positive impacts of our Raíz platform and the coffee and tea that were Sourced with Pride from farmers striving to do what’s right for their families and the environment. Through our sourcing initiatives, we seek to continuously improve how we work together with these farmers in the midst of market and environmental challenges.

“Coffee farming means a livelihood to me and the community around me. Through S&D’s Raíz Sustainability® platform, we have improved a number of our practices. We’re making an investment for the long term. These programs are helping us improve our farms and ensure their existence for the future.” – Arley de Jesus Montoya Solis Coffee Producer, Colombia

Raíz Sustainability® is designed to provide a more sustainable future for coffee plantations such as this one in the Antioquia region of Colombia.

Left to right: Helen Griffith, Vice President Marketing, S&D; Arley de Jesus Montoya Solis; Olga Cuellar, Sustainability Strategy Leader, S&D


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2 A MESSAGE FROM OUR CEO4 THE MEANING OF IMPACT

Investing in continuous improvement Our key focal areas

8 ENGAGED WITH PURPOSE At home, in the world Everyday innovation Future farmers Future leaders12 CRAFTED WITH CARE A process for improvement Drafting the road map Savings on the highway Quality and sustainability assurance16 SOURCED WITH PRIDE The landscape of sourcing Cultivating long-term viability Raíz Sustainability®: A unique path forward Power of our programs Mexico: Our newest Raíz coffee origin Coffee stories Coffee producer performance data United for the future of tea Tea producer performance data Navigating the path forward32 OUR PARTNERS IN IMPACT36 IMPACT AHEAD

TABLE OF CONTENTS

Investing in continuous improvementOur key focal areas

Productivity has increased 33% at Los Cipreses farm in Peru since joining Raíz Sustainability.®


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AT HOME, IN THE WORLDAs a company with global scale and reach, S&D engages employees, partners and the supply chain with a purpose — to create positive impact around the world. Together, through investment and action, we aim to empower individuals, improve communities and foster a culture of respect, safety and inclusivity. The impact we make starts right here in Concord, North Carolina with workplace responsibility and ripples outward through corporate citizenship.

INVESTING IN EVERYDAY INNOVATION

To give everyone at S&D an opportunity to make a difference, we’ve established a formal process to submit ideas for making our workplace and culture even healthier and more sustainable. Through the Bright Ideas initiative, employees submitted more than 60 new ideas and more than 100 potential improvements in 2017 and 2018. S&D implemented more than 50 of these ideas, including:

» Paperless pay stubs, which rolled out in March of 2018 and saved about 25,000 sheets of paper over the next nine months» Updates to our internal communication systems that boost our efficiency » Safety initiatives, like new monitoring systems» Improved employee policies and onboarding processes» Summer camp sponsorship program for full-time employees’ children and grandchildren

ENGAGED WITH PURPOSE

IN CHARITABLE GIVING TO UNITED WAY AND OTHER CAUSES (PLUS FOOD, TOYS & TIME!) FROM 2017-2018

$400,000

HERE ARE A FEW OF THE WAYS S&D’S PURPOSEFUL ENGAGEMENT HAS CREATED IMPACT:

“The innovation that comes from our diverse employees fuels sustainability. When employees submit their Bright Ideas, everyone wins —the employees are directly engaged with the company’s long-term success and S&D is able to initiate practical solutions that save resources and increase efficiencies. This open door helps drive innovation in shaping our future.” – Lamarie Austin-Stripling Bright Ideas committee lead, S&D Tara Johnson, Green Coffee Quality Specialist

Commodities, is one of S&D’s certified Q-graders.

Employees from the main manufacturing facility, Concord, NC.

82%PARTICIPATION IN FIRST-EVER EMPLOYEE SURVEY 2017

$600,000INVESTED IN EMPLOYEES THROUGH INTERNAL AND EXTERNAL TRAININGS 2015-2018

$39,000 IN TOTAL SCHOLARSHIPS FOR CHILDREN AND GRANDCHILDREN OF S&D EMPLOYEES FROM 2014-2018


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S&D is proud to support farmers in both coffee-growing communities and, through our partnership with the Elma C. Lomax Research and Education Farm, here at home. Located near our headquarters, Lomax Farm is a certified organic operation that invests in training new farmers and helping them gain access to land and equipment. S&D first contributed to their mission back in 2016. During 2017 and 2018,

we continued our support financially and by repurposing our spent coffee grounds as organic soil enrichment. In April 2018, S&D employees rolled up their sleeves and helped the farm build raised embankments called “berms” out of our burlap coffee bags. These berms, constructed with the naturally durable burlap and mulch, are helping the farm control erosion and water runoff.

INVESTING IN FUTURE LEADERS

Supporting professional development for the next generation of leaders is a critical aspect of building our industry’s resilience and its ability to respond with understanding and agility to new challenges. During 2017 and 2018, we continued to invest in the Re:co Symposium Fellowship Program, which extends scholarships to up-and-coming thought leaders who may otherwise lack financial resources to attend this important industry event. Since 2015, we’ve supported over 100 future coffee professionals’ attendance at Re:co.

In 2018, S&D worked with the Specialty Coffee Association to develop the Leadership Equity and Diversity (LEAD) Scholarship. This two-year scholarship puts professional development resources in reach for people from under- represented or marginalized communities around the world. The first cohort of scholarship recipients—five women with grit, passion and potential—traveled from three countries to visit S&D headquarters and share their stories.

INVESTING IN FUTURE FARMERS

S&D volunteers build protective berms out of burlap coffee sacks.

LEAD Scholars Stephanie Alcala, Lisette Barbera, Smayah Uwajeneza, Karla Ly Quinones and Taya Brown.

Spent coffee grounds from S&D provide organic fertilizer for the Elma C. Lomax farm.


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CRAFTED WITH CARE

A PROCESS FOR IMPROVEMENTAs we craft raw ingredients into quality beverages, we strive for continuous improvement in our operations and processes. This is how we care for the environment every day in our facilities.

Through ongoing efforts and investments in material management, operational efficiency and over-the-road fuel efficiency, here are some of the ways we created impact during 2017–2018 as we crafted our beverages.

$153,555SAVINGS IN REDUCED FUEL CONSUMPTION 2017 AND 2018

2018 GREENHOUSE GAS MEASURES*SCOPE 1 EMISSIONS 21,914.892 METRIC TONS CO2e SCOPE 2 EMISSIONS 5,571.418 METRIC TONS CO2e

25,000SHEETS OF PAPER (400 POUNDS) + ENVELOPES SAVED IN PAPERLESS PAYROLL 2018

40,000GALLONS OF WATER SAVED IN EQUIPMENT REFURB CENTER (RECYCLING WATER FROM QA PROCESS)

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DRAFTING THE ROAD MAP

Creating lasting impact requires vision and strategy. Throughout 2017 and 2018, we worked with a sustainability consulting firm to build a road map to operational efficiency and natural resource conservation. The first step was to identify actions we could implement immediately. From there, we entered the benchmarking phase. While we had collected annual data for years, this benchmarking involves more detailed information about all relevant energy, water, waste and material flows in each facility. It also includes measuring Scope 1 and Scope 2 emissions annually at our main facility. Our aim is to better understand how we use resources and identify the opportunities that make the most sense for our business while setting us up to respond with agility to the changing climate—and the changing market.

In 2019, this consulting firm will use benchmarked data as they develop the long-term road map and strategy for us to meet environmental goals in our operations and reduce operating costs.

“Operational efficiency goes hand in hand with sustainability. Our team has a passion for continuous improvement which includes building a unified and caring environment internally, while also protecting our natural resources and the environment that surrounds us. Being aware of how we use our natural resources, such as water, leads to both increased efficiency and resource conservation.” – Joey Edwards Beverage Operations Manager, S&D

*MAIN FACILITY ONLY

Coffee being cupped in commodities at S&D.

Every employee is critical to driving operational efficiency.

S&D’s West Winds roasting facility in Concord, NC.


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QUALITY AND SUSTAINABILITY ASSURANCEWhen S&D dedicated a new space to beverage equipment quality assurance, we knew sustainable innovation would soon follow. Testing and calibrating so many pieces of brewing equipment requires large amounts of water—water that would typically go down the drain. The beverage operations team saw a solution for conserving this precious resource: gray water recycling. Using a pump system, they routed all of the water used in the quality assurance process into a gray water storage tank, where it would be available for another process: cleaning and descaling hot water tanks. Over 2017 and 2018, recycling water from one process to use for the next saved about 80 gallons per day, or 40,000 gallons over this two-year period.

SAVINGS ON THE HIGHWAYTargeted management of our fleet trucks helped S&D realize a 7.67% reduction in fuel consumption (representing more than 9,000 gallons) from 2016 to 2017. This improvement earned us the 2017 High Performer achievement award from SmartWay®, a program of the U.S. Environmental Protection Agency. In 2018, the same management program helped us further increase fuel efficiency to reach 7.6 miles per gallon (the industry standard is 6.2 miles per gallon). Even when our fleet traveled more miles that year, we continued to decrease fuel costs. We saved more than $150,000 over both years.

Beverage services lab, S&D

Water management is an important consideration for the beverage services team.


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SOURCED WITH PRIDE

THE LANDSCAPE OF SOURCINGThe farmers who grow our coffee and tea are on the front lines of responding to climate and market changes. In the face of increasingly extreme weather events, dwindling yields and price volatility, they’re working toward environmental, social and economic sustainability.

Smallholder farmers, who grow 70% of the global coffee supply and make up nearly 70% of tea producers,1 face the most significant risk. They often lack access and are the most vulnerable to challenges.

On the other end of the supply chain, many brands want access to data that will help drive sustainable progress and transparent reporting to the end consumer. They, like S&D, face uncertainty of supply and demand imbalance, especially for coffee.

“Before I started working with S&D, I didn’t know what a soil analysis was—now we are getting the necessary nutrients to the plant to improve quality and achieve the best outcome.” – Oliver Efren Vasquez Coffee Producer, Nicaragua

“We impact thousands of lives through our sourcing, in the way we buy, and in the fact that we buy so much ...We’re in a situation to drive change. We can use our scale for good to impact mainstream coffee.” – David Piza Director of National Accounts, S&D

1 Solidaridad. https://www.solidaridadnetwork.org/supply-chains/tea.

At S&D, we help alleviate the burden felt by actively investing in farmers.

In coffee and tea producing regions around the world, we’re partnering with farmers, exporters and on-the-ground experts to create innovative solutions that benefit individuals and the entire industry.

Family members at Los Naranjos farm in Colombia.

For Oliver Efren Vasquez (second from left), Raíz means ensuring the future of his family farm, La Curva.

A coffee grower takes a break from harvesting on Los Naranjos farm in Colombia.

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CULTIVATING LONG-TERM VIABILITY We introduced our first sustainability efforts at origin in 2012. These pilot programs provided rich insights and experiences that we used to develop Raíz Sustainability®, which we officially launched in 2015 to serve medium and smallholder coffee farmers in our supply chain. A year later, we expanded the platform to serve tea farmers as well.

Raíz provides access to needed resources and equips farmers in practical ways to improve in six focal areas:

» Optimizing productivity» Reducing cost of production» Enhancing soil health» Implementing water management» Conserving forests » Ensuring fair labor practices

RAÍZ SUSTAINABILITY:® A UNIQUE PATH FORWARDAt S&D, we support third-party certifications and continue to grow our sourcing platform, Raíz Sustainability®. We chose a model beyond certifications so that we could see directly into our supply chain and create relationships with the farmers who make our business possible.

RAÍZ DIFFERS FROM OTHER MODELS OF IMPROVEMENT BY:

» Engaging smallholder farmers through our network of on-the-ground agronomist and

export partners

» Focusing on long-term continuous improvement

» Providing farmers immediate access to training, technical assistance and cash premiums

» Providing our customers with the transparency and brand security that come from clear, verified records of sustainable impact

Liliam del Socorro Cardona Garcia on his 10-acre Casa Blanca farm in Colombia.

Recordkeeping is an important part of optimizing productivity and reducing costs.Best practices in agriculture are critical for building

resilience to changes in the market and climate.

Those improvements add up to significant environmental, social and economic benefits —and provide farmers with different ways to work toward long-term viability for their land and their business. By 2018, farmers across six countries were participating in Raíz to help rejuvenate the communities and natural environments that surround them, expand their farms’ productivity and build resilience to changes in the market and climate.

As these farmers do the hard work of improving sustainable practices, we simultaneously work to expand the end market for their sustainably grown coffee and tea. Increasing demand can help support farmers and alleviate the effects of these challenges by providing a market for the coffee produced. It also shifts our industry to a better, more sustainable norm for beverages.


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POWER OF OUR PROGRAMS“Raíz” (pronounced rah-ease) means “root” in Spanish. Looking at the program’s growth between 2015 and 2018, there’s no doubt it’s rooted in impact.

In 2017, Raíz Sustainability® expanded into Mexico for coffee farmers. By 2018, it directly served nearly 4,600 farmers. Counting family members who also benefited, more than 13,500 lives were impacted in positive ways by this platform.

COFFEE & TEA6countries

12producing regions

15fully engaged projects

4,600farmers directly impacted

13,500farmers indirectly impacted

Mexico (1)

Nicaragua (2)

Colombia (6)

Peru (3) Brazil (2)

Argentina (1)

JANUARY 2019

RAÍZ REACHES A MILESTONE

Raíz Sustainability® guides farmers on a three-year path of continuously improved performance. In 2018, farmers began the second three-year program cycle—an exciting milestone in our mission to create impact.

We used 2018 to dig into our strategy, specifically for engaging farmers who had already completed the first three-year cycle. We also began working on new ways to turn the data we collect into valuable resources for farmers, partners and our customers.

“An important part of the Raíz platform is caring for farmers and their families. S&D is always planning for complete training at every farm.” – Julio Robledo Coffee Producer, FNC Antioquia Committee, Colombia

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Luis Eddy Blandon (third from right) and family on El Tríunfo farm in El Salto community, Nicaragua.

Rudolfo (left), an experienced coffee producer, receives advice from a young agronomist through Raíz Sustainability®.


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The region of Chiapas celebrates its coffee-producing culture. There, farmers cultivate small farms (mostly around 3 hectares, or 7.5 acres) on community-owned land along the edges of forest preserves. Many of these farmers have long protected the water and wildlife by using almost no pesticides.

Farming families regularly deal with the challenges of living miles apart from one another, from urban centers and sometimes even from their crops. Between 2013 and 2017, acute new challenges shook the area. First, a severe attack of leaf rust destroyed a large portion of coffee plantations. Soon after, an earthquake killed or injured more than 100 people.

In 2017, the Raíz Sustainability® team and local partners Olam Mexico and Oro Verde began implementing an action plan to equip farmers to recover the coffee crop and rejuvenate their economic situation. This plan, among other steps, included:

» Providing technical assistance and training» Establishing access to credits (a much-needed system in the absence of banking) » Implementing and managing records » Awarding economic and in-kind incentives to producers» Creating a high-tech nursery to provide coffee varieties resistant to leaf rust

DRIVING IMPACT IN CHIAPAS

Farmers enrolled in Raíz Sustainability® combatted leaf rust by planting resistant varieties grown in the new nursery. Two million rust-resistant plants were delivered in 2017, and an additional 545,000 were distributed in 2018.

By the end of 2018, Raíz had impacted farmers’ productivity on nearly 3,400 hectares in Chiapas. As these farmers continue to improve management practices, they’ll continue to drive their average productivity up toward the goal of 30 to 40 bags per hectare—a significant gain compared to their starting point of 10 to 15 bags per hectare.

One hundred percent of the Chiapas farms participating in Raíz are also UTZ certified, broadening their opportunities for economic growth.

“Before Raíz, we were alone producing coffee, then the leaf rust attack came and we felt we could not get ahead. The training and coffee plants provided gave us hope of having better production to improve our economy, our families and the environment. You can see the difference between what we did before and what we now put into practice.” – Héctor Ruiz Limón Coffee Producer, Mexico

MEXICO: OUR NEWEST RAÍZ COFFEE ORIGIN

Don Arturo, coffee producer, and Esteban Jaramillo, Raíz Coordinator, stand with a leaf rust resistant coffee plant.

In response to a devastating leaf rust attack, Raíz provided 2.5 million rust-resistant plants to farmers in Chiapas, Mexico.


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COFFEE STORIESA RAÍZ PRODUCER’S TRIP FROM COLOMBIA TO CONCORD

IN THE LAB

In 2016, S&D contributed to the funding of a soil analysis lab for the Cooperativa de los Andes (a collective group of coffee producers) in the Antioquia region of Colombia. Soil analysis helps farmers pinpoint their plants’ needs—which means they can use fertilizer more efficiently, eliminate unnecessary soil additives and reduce their input costs.

From 2017 to 2018, the lab continued expanding its reach and promoting more sustainable practices. It performed nearly 800 soil and foliar analyses in 2018 alone. In Colombia overall, only 5% of coffee growers utilize soil analysis practices while about 30% of farmers in Raíz Sustainability®—six times the country’s average—benefit from access to the lab’s services.

Arley de Jesus Montoya Solis traveled from his coffee farm in Antioquia, Colombia to the U.S. for the first time in late 2018. His first stop was the McDonald’s McCafé Sustainable Coffee Journey event in Chicago where consumers could see how McDonald’s is helping to protect coffee from the adverse effects of climate change.

“I had the opportunity to share my passion for coffee farming with consumers stopping by to experience a coffee farm in the middle of Chicago,” Arley said. He talked with these consumers about the critical role of sustainability. “The negative impacts of

climate change have made coffee farming challenging at times. Production is more variable, which means that our volume and quality are less predictable, and our income is less secure.” Long-term investments in sustainability from partners all along the supply chain through programs like Raiz Sustainability® help ensure the future of coffee farms. From Chicago, Arley traveled to the S&D flagship facility in Concord, North Carolina, learning what happens to coffee beans once they leave his farm. “It was inspiring to see the care and quality that goes into manufacturing coffee at S&D,” he said.

“I am very proud of the work I do and look forward to expanding my sustainability efforts alongside S&D and their customers.”– Arley de Jesus Montoya Solis Coffee Producer, Colombia

Arley de Jesus Montoya Solis saw snow in Chicago, IL before visiting with Eric Mitchell in

S&D’s commodities cupping lab in Concord, NC.

Farmers in Raíz Sustainability benefit from access to a soil analysis lab.

A healthy, productive coffee plant requires the right nutrients from the soil.


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AT THE MILL

At S&D, we look for opportunities to invest in the future of coffee around the world. While Raíz Sustainability® is concentrated in Latin America—our primary sourcing region—we also buy coffee from East Africa. To deepen our relationships there and better understand both the challenges and opportunities in that region, we joined multinational coffee merchant Sucafina SA on a pilot project in Rwanda. In 2018, we began testing an innovative, low-cost approach to reducing coffee’s water footprint during processing.

East Africa’s wet mills require large amounts of water as they process coffee from millions of smallholders. They also produce a large volume of wastewater. Due to floods and leaks, it can escape untreated into the waterways on which downstream communities depend.

During the pilot, two wet mills implemented the Vetiver grass system, which uses a specific variety of low-cost, deep-rooted grass to treat wastewater, mitigate potential damage from storms and control erosion and pollution. The pilot also involved a community engagement program designed to develop economic skills, enhance farmers’ productivity through training and promote traceability in the supply chain.

“The water treatment pilot program in Rwanda is in line with our commitment to investing in the future—the future of coffee farming, improved water management and the safety of coffee communities.”– Olga Cuellar Sustainability Strategy Leader, S&D

RAÍZ SUSTAINABILITY®: COFFEE PRODUCER PERFORMANCE DATA, 2017–2018

Through Raíz Sustainability,® we invest in the areas vital to farmers’ long-term resilience. To evaluate program progress and deepen our understanding of farmers’ needs, we teamed up with the Committee on Sustainability Assessment (COSA) to design a thorough performance survey. Our survey method differed from the industry standard required to assess compliance. By sampling a higher percentage of participants (34%), we can see where we need to expand and what new areas of impact it’s time for us to explore.

4,438 COFFEE FARMERS PARTICIPATED IN RAÍZ» 51,464 hectares were enrolled.» 45,891,074 kg of green bean equivalent were produced.

71% OF FARMERS WERE SMALLHOLDERS. Smallholders make up the majority of coffee farmers, yet they often lack access to crucial resources for maintaining their businesses and protecting the environment.

20% OF FARMS WERE OPERATED BY WOMEN, and 26% of attendees at Raíz training events were women. Although they provide about 70% of the labor in coffee production, women only operate 20%–30% of coffee farms worldwide.² The Raíz statistics track with the industry average, but none of these numbers are what they should be. Our hope is to engage and empower even more female farmers in the years to come.

COFFEE PRODUCER SNAPSHOT

2Global Coffee Organization. http://www.ico.org/documents/cy2017-18/icc-122-11e-gender-equality.pdf.

S&D partnered with Sucafina SA to pilot an innovative approach to water conservation at wet mills in Rwanda.

Ysaul Lopez Reyes, Los Cipreses farm in the Jaen province of Peru.

Vetiver grass is a low-cost solution to helping keep natural waterways clean.


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TRAINING ATTENDANCE AND PRACTICE ADOPTIONRaíz Sustainability® offers farmers ongoing training for social, economic and environmental best practices. Implementing new practices is rarely easy; just one can require significant change or investment. Despite the challenges, a high number of participating farmers chose to adopt at least one new, more sustainable practice after attending a training in 2017–2018.

SOCIAL TRAINING covered topics like worker health and safety, worker housing conditions, gender equality and community responsibility:» 79% attendance (per farmer cluster)» 71% practice adoption

ECONOMIC/BUSINESS TRAINING covered topics like traceability standards, record keeping and tracking production costs: » 63% attendance » 67% practice adoption

ENVIRONMENTAL TRAINING covered topics like ecosystem conservation, water resource protection, fertilizer management, storage and use of agrochemicals, integrated pest management and climate change adaptation:» 73% attendance» 51% practice adoption

SOCIAL HIGHLIGHTS98% OF FARMERS’ HOUSEHOLDS WERE FOOD SECURE, meaning they have access to sufficient amounts of nutritious food, and 92% were no more than 20 minutes from an accessible source of potable water.

ECONOMIC HIGHLIGHTS83% OF FARMERS KEPT BUSINESS RECORDS, which aids them in tracking which agricultural and business practices create the most positive impact. (Plus, it is another way to improve traceability in the supply chain.)

51% OF FARMERS REPORTED EARNING EQUAL OR HIGHER INCOME. In the midst of the coffee price crisis, half of farmers enrolled in Raíz had a positive perception of their income. Raíz, which is only one of many factors, contributes to a stable or improved income through improved economic and environmental practices.

80% OF FARMERS RATED THEIR QUALITY OF LIFE AS “GOOD” OR “VERY GOOD.” So much goes into creating quality of life. Raíz Sustainability® contributes to how farmers perceive their quality of life by connecting them with tools and resources needed to manage their businesses for the long term.

ENVIRONMENTAL HIGHLIGHTS

99.6% OF FARMERS POSE NO RISK OF DEFORESTATION TO THE SUPPLY CHAIN. They have avoided clearing natural ecosystems, despite the pressure they’ve faced to expand their yield due to low commodity prices.

75% OF FARMERS USED A PROFESSIONAL FERTILIZER ASSESSMENT to understand how to better balance their fertilizer application with their crop’s nutrient needs. The goal is to limit pollution and optimize crop yields by only applying what the coffee plants will actually use.

3.7 SOIL CONSERVATION PRACTICES HAVE BEEN ADOPTED on average* (examples include conservation tillage, cover crops, shade tree management and live fences).

2.25 WATER CONSERVATION PRACTICES HAVE BEEN ADOPTED on average* (examples include buffer zones, drip irrigation, water catchment systems and dry pulping and processing).

82% OF FARMERS IMPLEMENTED ALL WATER CONTAMINATION PREVENTION MEASURES supported by Raíz Sustainability® (including wastewater treatment, proper handling of discharge, and buffer zones between cultivated areas and natural bodies of water).

99% of farmers who attended Raíz training reported it was

“valuable” or “very valuable.”

Proper treatment of waste water at El Cedro farm in Peru.

*Baseline average practice adoption is 1.5 for soil conservation and 0.75 for water.


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UNITED FOR THE FUTURE OF TEA IMPROVING THE TEA INDUSTRY IN PARTNERSHIP WITH SOLIDARIDAD AND RAINFOREST ALLIANCE

RAÍZ SUSTAINABILITY®: TEA PRODUCER PERFORMANCE DATA, 2017–2018

NAVIGATING THE PATH FORWARDIn May of 2017, S&D hosted the Landscape Level Risk Workshop in Oberá, Argentina in partnership with Tea2030 (a project led by nonprofit Forum for the Future) and Finlays. This international workshop was the first of its kind for the Argentinian tea sector, bringing over 60 competitive stakeholders together to openly discuss best practices as well as shared risks such as climate change, deforestation and regional infrastructure challenges. A steering committee was formed as a result of the workshop to coordinate and lead future collective action ventures that will mitigate risks mapped out during the session.

Raíz Sustainability® expanded into the tea industry in 2016 by joining forces with Solidaridad Network and the Rainforest Alliance in the Misiones region of Argentina. The project supports about 128 small-scale tea producers as they improve their production and their livelihoods while preserving the environment around them—a unique subtropical forest ecosystem. Upon completion of the project in 2019, about 115 producers will be able to certify their tea production under the Rainforest Alliance’s Sustainable Agriculture Network (SAN) standard as a first step toward a continuous improvement process.

Together with our partners, we developed and launched a training program in 2017, completing five sessions training farmers on best agricultural practices beyond certification. In 2018, we rolled out a tool called Rural Horizons. It leads farmers through a diagnostic self-assessment and highlights the hot spots for our team to develop tailored, farm-level action plans, trainings and activities.

128 FARMERS PARTICIPATED IN RAÍZ.» 1,044 hectares were enrolled.» 20,250,000 kg of tea were produced.

20 AGRONOMISTS/TECHNICIANS WERE TRAINED to guide farmers through the Rainforest Alliance certification process.

70 FARMERS ACHIEVED RAINFOREST ALLIANCE CERTIFICATION BY THE END OF 2018. About 45 more will reach certification in 2019.

THE RURAL HORIZONS INFORMATION SYSTEM WAS DEVELOPED AND IMPLEMENTED. In 2019, farmers using Rural Horizons will monitor metrics for 30 key indicators.

Hands-on training tools help tea farmers effectively learn best agricultural practices.

Wegner Fabian Ernesto is one of 128 tea farmers participating in

Raíz Sustainability®.

Collaboration on best practices and shared risks will help the Argentinian tea sector prosper.

Tea producers in Misiones, Argentina focus on preserving the environment around them.


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“The Raíz platform benefits both farmers and the industry, presenting a wide selection of sustainability options, and integrating many farmers who might otherwise be excluded from sustainability programs.”– Matthew Himmel Senior Manager Strategic Value Chain Systems, COSA

COMMITTEE ON SUSTAINABILITY ASSESSMENT (COSA)

COSA develops science-based sustainability intelligence systems that include measurement, analysis and visualization. COSA works alongside companies like S&D to guide data collection and performance tracking. At the start of Raíz, they helped us establish best-in-class KPIs to monitor progress and evaluate impact at the farm level. We continue to work with them to better understand how each farmer enrolled in Raíz is progressing and to share what we have learned back with farmers so they can identify strengths, weaknesses and specific ways to improve performance.

S&D engages partners up and down the supply chain, and across the NGO and scientific spheres, to tackle the global environmental and economic challenges wrought by climate change. We believe no one company or organization can truly make an impact in this. It takes us all.

That includes certifying organizations with which we share the same goals. As we’ve expanded Raíz Sustainability®, we’ve continued to buy certified coffee. We’ve discussed how to exchange information and lessons learned with these organizations and collaborated with them to leverage both their labels and Raíz.

Along with organizations mentioned previously, like Rainforest Alliance, Solidaridad and Sucafina SA, here are a few more we’re proud to call partners.

OUR PARTNERS IN IMPACT

Partners from COSA, Specialty Coffee Association, S&D and others work together to make positive impact.

Matthew Himmel, Senior Manager, COSA speaks at a Raíz event in Colombia.

Contributors to the Raíz Sustainability® platform gather to share results and discuss strategy.


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In June 2018, S&D invited 18 smallholder farmers, plus six agronomists and S&D staff, to participate in the professional level of the Q Processing Program™ from CQI. Post-harvest processing is a crucial step in developing coffee flavor and quality—and a deeper understanding of how it works can help farmers stand out in the marketplace and earn higher premiums. S&D has been working closely with CQI to offer this program to farmers who would not otherwise have access to this level of coffee education. With women making up one-third of the participants, this represents an important step in S&D and CQI’s ongoing partnership to equip more female farmers with the tools and education they need to achieve self-sufficiency and business success.

CONSERVATION INTERNATIONAL FOUNDATION (CI)

At the very beginning of Raíz Sustainability®, CI was instrumental in helping develop our guidelines and auditing process for participating farmers. When CI rolled out the global Sustainable Coffee Challenge in 2016, we were one of the first partners to sign on. Over 2017 and 2018, we strengthened our involvement in the challenge in two ways. First, we continued working toward our goal of producing 150 million pounds of sustainable coffee while directly impacting the livelihoods of 10,000 farming families by 2020. Second, we have served on the Advisory Council of the Sustainable Coffee Challenge. We continue to work in tandem with CI in many ways. Most recently, we partnered with them to develop the basis for better communication about Raíz.

COFFEE QUALITY INSTITUTE (CQI)

WORLD COFFEE RESEARCH (WCR)

WCR uses advanced agricultural science to address major threats to the global coffee supply and create new opportunities for farmers to improve their profitability. WCR partners with more than 80 companies, government institutes and research organizations to fund, carry out and share their research. Since helping found WCR in 2012, S&D has contributed nearly half a million dollars. We’ve supported their many “first-ever” initiatives, including the first collaborative global breeding agenda, an international network of on-farm research trials and a unique program that tests today’s best coffee varieties under local conditions in nearly two dozen countries.

Luz Adriana Henao Ocampo is a single mother who benefitted from the hands-on CQI training in Colombia.

Rocio Polania learns to calibrate a coffee pulper during CGI training.

It will take players from across the industry working together to address the continued viability of the global coffee supply.


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IMPACT AHEADCONTINUING TO BUILD A SUSTAINABLE SUPPLY CHAIN

Tastes are changing. The climate is changing. As the premier beverage innovator, S&D is using its scale and global reach to build a supply chain that can withstand the challenges on the horizon.

Through our sustainable beverage solutions, you—our employees, suppliers, investors and customers—make an impact. You help expand the market for sustainably grown ingredients and increase the long-term resilience of the global supply. You help ensure the well-being of smallholder farmers and support their efforts to not only mitigate risk but actually rejuvenate their communities and the environment they call home.

All of this becomes part of your story.

As we move forward, helping you tell this story will be one of our focal points. Raíz Sustainability® already provides a deep level of transparency, brand security and impactful storytelling for our customers who purchase sustainably sourced coffee. As we continue to grow Raíz, we’ll be able to provide even more customers with access to clear, verified records of farm-level impact. We’re also developing more ways to use our data to tailor solutions for hitting customers’ sustainability goals.

We look forward to the impact ahead. How will you join us?

TRACY GINGExecutive VP and Chief Business Officer

S&D Coffee & Tea. Rooted in impact.

Conservation at work on this preserved natural area on a Raíz farm in Beira Rio, Brazil.

2019 SUSTAINABILITY REPORT - S&D Coffee & Tea...Creating lasting impact requires vision and...

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