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Company Values Part 1: Transparency

Posted by Michael Nelson on

Company Values Part 1: Transparency

Our company values of transparency, community, and sustainability were collectively outlined and agreed upon by the owners and staff of Junior’s/Guilder during our annual staff retreat in February 2020. Up until that point we hadn’t (publicly) articulated our values; our values were implied in our sourcing methods and café practices. With publicly stated, explicit values, we can be held accountable, and we want these values to guide the course of our business. It’s imperative, though, that these values are clearly defined if our efforts are going to have any meaning, consistency, or lasting effect. Let’s start with transparency.

What does transparency mean to us? As a company we want to always share our knowledge, and want to share what we’re working on knowing. We even want to tell everyone how we’re operating, and explain why we’re doing it this way. We want whatever we’re sharing with the public to be useful and applicable to the public. We think that a company should share its process and its motivations. Businesses wield voice and power by virtue of the fact that they are businesses operating in a local (and beyond) economy, and with any power comes, well, responsibility.

But, dear coffee consuming reader, how should we see this transparency in action? At the beginning of the new year we asked our followers on Instagram, “What does it mean to you when you see ‘transparency’ listed in a roaster’s IG bio?” and, “What do you expect to be happening if this word is used?”. Folks responded, “I’m still trying to understand the complexity of this topic”, “The first thing that comes to mind is fair trade stuff. Where did it come from? Are people being paid well for this? From procurement through employment…”, and, “OMG, such a good question!!!” to name a few.

Transparency is a complex topic. When we talk about roaster transparency we’re usually referring to how a roaster sources coffee. Sourcing coffee can be as straightforward as purchasing coffee spot (coffee that is sold to a buyer from an importer’s warehouse), and can be as complicated as working with importers, exporters, and producers to contract coffee harvests in advance. There are transparent importers out there that are very willing to provide in depth farm (and pricing) information for their spot coffee. Contracting and committing to coffee before it has shipped isn’t necessarily more transparent, but has the potential to be much more sustainable in terms of risk sharing. Companies can certainly use contracts to mitigate their own risk at the expense of producers, but it is with contracts that roasters have an entry point to start to create more equity in the supply stream with price negotiations and risk sharing terms.

There are many points at which coffee, money, and risk are exchanging hands in the coffee supply stream, and transparency in sourcing means shining a light on this exchange. The price of the coffee sold by the importer to the roaster is called the ex-warehouse (EXW) price. All roasters can make this price available to the public. The price paid to the exporter by the importer is referred to as the Free on Board (FOB) price. This information isn’t always available to roasters, but can usually be provided by the importer if roasters choose to ask. While being transparent about any price is a step in the right direction, the FOB price is very different than the farm gate price, which is the price received by the coffee producer for their coffee. Roasters should not be afraid to ask for these prices, and should not be afraid to ask to post this information publicly.

Identifying individual farm gate prices today might be easier than 20 years ago, but it isn’t always straightforward. Up until the late 1990s and early 2000s, it was uncommon to advertise single farm coffees; cooperatives and regional origin blends were more commonplace. Some cooperatives are thousands of members strong, and tracking individual prices received is challenging to say the least. Fair Trade (FT) is associated with cooperatives, and sets a premium above the C market price (the global, daily fluctuating indicative price for coffee). On the one hand, we know that the FT minimum price is always above the fluctuating daily price of coffee. On the other hand, that daily fluctuating price is always low, we don’t know if that price even covers the cost to produce a pound of coffee, and we don’t know how these costs vary for individual members of the cooperative. Coffee is sold in many different forms and at various points of the supply stream, and any transparency is good transparency (don't get me wrong, FT has done so much good for the industry!). This doesn’t mean the transparency conversation should stop at the EXW price, FOB price, or at current certification schemes. 

Transparency can be used loosely, and lacks substantive meaning without structure, data, or metrics. Transparency in the supply stream cannot arbitrarily end at the importer’s price; a transparent supply stream means the entire supply stream, which includes the roaster’s price. Revealing one’s costs and margins is a vulnerable thing to do as a business, but is one of many crucial steps in ensuring supply stream equity. Just like any business, identifying a farm’s cost of production is a valuable metric for business success. Production costs are measurable business data that explain a farm’s true minimum before making profit, and this metric can serve as a base for contract prices. These prices, along with other cost of goods (e.g., labor costs, utilities, etc.) can inform the roaster’s price for their roasted coffee, which can simultaneously help provide the context for the “paying more for coffee” conversation with coffee consumers. Cost of production, and margin on those costs, is something we can measure, trace, and find meaning in.

Once you pull on the thread of transparency, there’s the realization that transparency can permeate the rest of your business. In addition to our sourcing transparency, we choose to share company financials and pay structures with staff, we share company goals and expectations, and make space for staff to discuss their career goals. We will share more as we work on knowing more.

Stay tuned for Part 2 and Part 3, which will explore our company’s other two core values!

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