The journey of coffee: CFC support to Mercon’s innovative LIFT sustainability platform
From the fast hands of the barista at your favourite local café, to the knowledgeable farmer who grew and harvested the coffee beans, the journey of coffee is a long and fascinating one. It is a journey of people and places, of nourishment and growth.
Since its beginnings in Nicaragua in 1952, Mercon Coffee Group, a global green coffee supplier, has built valuable relationships with coffee farmers, helping them manage their farms more effectively to become better producers.
As early as 2005, Mercon had services in place for farmers to benefit from, such as micro-financial services, technical assistance, certification support, and even an educational program to support schools in rural farming areas. The more the Group grew, the more it became clear that a structured platform was needed – not only to continue to provide farmers with services, but also to expand Mercon’s potential impact.
Thus, LIFT was established; a turning point for Mercon. LIFT is an innovative, sustainable production platform that provides tools, training and services to coffee farmers and communities to raise their quality of life by helping them improve their productivity in a socially and environmentally conscious way.
“We are evolving as an organization, and as the world faces new challenges, we continue to add opportunities,” says Giacomo Celi, Mercon’s Sustainability Director. “The focus was always the wellbeing of farmers, but now we know that the support we can give goes way beyond that.”
What is particularly innovative about LIFT is that it is making impact measurable and, therefore, can assign accountability. The programme has 18 practices which were developed based on three pillars: productivity, environment, and social development. Each farmer has their work measured against those 18 common practices and is eventually assigned a score. Three of the practices are mandatory: no child labour, no discrimination, and fair and equitable payment. Other practices are evaluated with different weights. Through the training and educational services offered by LIFT, Mercon aims for farmers to reach at least 80% in the LIFT Index within the first three years of program participation. There are currently more than 3,000 farmers in LIFT from five different countries (Nicaragua, Honduras, Guatemala, Brazil, and Vietnam) and Mercon expects to reach nearly 6,000 participants by 2023.
Mercon is also the first green coffee supplier to have a sustainability-linked revolving credit facility. The innovative aspect of this loan is that it links the impact performance of LIFT with the interest rate of the facility. This means that if Mercon continues to train farmers though the LIFT program and achieves its key performances indicators (KPIs), an interest margin reduction is applied on the loan interest rate. If, on the other hand, no KPI s achieved, an interest margin addition is applied to its loans. Mercon’s KPIs are verified by an external auditing company, making the process even more transparent.
At the beginning of 2021, the Common Fund for Commodities (CFC) joined Mercon’s credit facility, both because of the innovative nature of this system and because of the desire to support a model that will (hopefully) be adopted by more companies and suppliers in the sector. The CFC’s loan of USD 5 million, currently the biggest project for the organization, will add to Mercon’s ability to fund short-term advances to growers.
“The coffee sector is fragmented,” explains Celi. “There are initiatives, but it has been challenging to create an organised movement that can really push the sector forward in terms of social and environmental sustainability. Innovation is led by a few companies, and we wish Mercon to lead the way, but it’s only through mutual collaboration that we can achieve real change on a global scale.”
“At a time when the CFC is encouraging people to pause and think why our farmers are so poorly paid, we are encouraged by Mercon’s innovative programs, designed to increase revenue for the farmers. We wish to continue this shared journey to make the value chain simplistic, minimal, and intuitive so farmers get what is rightfully theirs, and consumers are happy with what they get as well,” says Ambassador Sheikh Mohammed Belal, the CFC’s Managing Director.
The CFC hopes to be part of that journey by inspiring other companies to follow Mercon’s example. With our long experience with impact investing, the CFC proves that values and profits need no longer to be in competition. This type of investing signals commitment as a responsible investor without sacrificing returns. Coffee farmers deserve to be treated with dignity; we thank Mercon for their sincere efforts to make these positive, long-term changes.