Building a Be�er Coffee World Mercon Coffee Group Sustainability Report 19-20
obstacle achieving impressive results despite adversity.
B
uilding a be�er coffee world is rooted deeply in each member of Mercon Coffee Group. Our ac�ons and how we rise to challenges, working as One Group, One Team, is what defines us, allowing us not only to exceed expecta�ons but to do so while crea�ng a circle of prosperity for all. This would not be possible without the commitment of our partners worldwide who contribute to create long-term benefits that reach far beyond the supply chain. Although 19-20 was a challenging year that brought us many hardships, I was touched to experience the power of unity and resilience worldwide. At Mercon, our team proved us that together we can overcome any
We have been focusing on innova�on seeking new ways to do things with the highest quality through our commitment to con�nuous improvement. From improving our client service experience, to strengthening our culture, to expanding sustainable ini�a�ves, our team has worked relentlessly to provide long term value for everyone in our industry. This past year we received the highest score in our customer experience survey! And as a group, we also reached our highest sales record worldwide. Our Specialty division also con�nued to grow both in clients and product innova�on. All of this has been possible thanks to our focus on delivering the best quality of coffee with social, environmental, and agricultural best prac�ces in mind. In our Origins, our unique and holis�c sustainable produc�on program LIFT reached 3,200 producers, who also earned, with no excep�on, sustainable voluntary cer�fica�ons.
Our producers were also impacted posi�vely through more than $30 million dollars in financing. And as part of our commitment to develop the Robusta industry in Nicaragua, we expanded our planta�ons through our fourth farm La Palmira. We are also very proud to have raised the Mercon flag in our new Origin, Ethiopia! People are at the heart of Mercon. Through our Made in Mercon culture, we defined together our essence and worked on ini�a�ves to celebrate our team’s strengths. With more than 40 culture ambassadors worldwide and a dedicated commi�ee, we are ready to launch new engaging experiences for our employees in this 20-21. Our achievements are the result of a long trajectory in which we have grown one step at a �me. One of our proudest moments has been the complete alignment of our strategy with our three sustainability pillars, Prosperity, People and Planet, thus defining a full integrated model.
Under this guideline, we have been able to document our ac�vi�es in this report based on the ten materiality issues that we have defined as priori�es for Mercon.
I am thrilled of the goals that we have been able to reach together, and I reaffirm our commitment to delivering excellence in every step of the way. We thank you once again for allowing us to continue building a better coffee world. Oscar Sevilla CEO
Table of Contents Building a Be�er Coffee World Mercon Coffee Group From Origin to You Mercon Group 19-20 Highlights Booming a New Industry – Robusta Our Sustainability Strategy -Our Stakeholders -Our Material Issues
People 5 7 8 10 14 15 16
18 21 26 35
41 44 45 50
Planet Environmental Management Climate Ac�on
Prosperity Sustainability Risk Management Client Rela�ons Programs and Services with coffee producers Partnerships with Strategic Stakeholders
Our “Made in Mercon” Culture Talent Development Health and Safety Human Rights
57 62
Building a Be�er Coffee World
Mercon Coffee Group Loca�on of our opera�ons
Honduras Export Business
Spain Import Business
Netherlands Headquarters
Guatemala Export Business
Vietnam Export Business
Mercon’s profound dedica�on to sustainability drives a number of ini�a�ves, including our proprietary LIFT program, which focuses on improving quality of life where the company operates, while protec�ng precious natural resources. Addi�onally, Mercon ac�vely supports Seeds for Progress, the nonprofit organiza�on that aims to improve educa�on to help grow the coffee communi�es of tomorrow. Mercon has built an integrated coffee supply chain recognized for its excellence in commercial and specialty coffees, as well as its opera�ons across farming, produc�on, export, logis�cs and risk management. For more informa�on: merconcoffeegroup.com.
USA Import Business Brazil Export Business Nicaragua Export Business
Ethiopia Representa�ve Office
Panama Import Business
Mercon Coffee Group is a global, green coffee supplier that is ver�cally integrated and commi�ed to
consistently delivering the right quality of coffee to clients while crea�ng sustainable livelihoods in coffee-growing communi�es. Founded in 1952 as a coffee export company, Mercon ranks among the top 10 leading coffee suppliers in the world, extending custom made services to clients in more than 40 countries. With headquarters in the Netherlands, offices are located across the Americas, Europe, Africa and Asia.
During the 19-20 harvest, we commenced opera�ons in Ethiopia—the birthplace of Arabica coffee, the fifth largest coffee producer in the world and a key origin for specialty coffees.
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Mercon at a Glance
22 Mills
Origin Opera�ons
4
Owned Farms
+160
Warehouses
......................................
Producers Rela�onships
6
......................................
+9,000
......................................
Permanent Employees
......................................
675
+40
Countries of Sales
+300 Clients
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Mercon USA Mercon Europe
From Origin to You SALES OFFICES
From our origins around
the world, Mercon delivers world class service to our clients. From farm to cup, our team’s knowledge and exper�se in the industry is unmatched. Coffee is our specialty, and we are commi�ed to providing our clients the best customer experience while promo�ng a sustainable coffee supply chain.
AGRICULTURAL DIVISION
SPECIATLY BUSINESS
Mercon Specialty US Mercon Specialty Vietnam
Nursing Business: Transplanta Farming Business: Digranisa
Mercapital
CISA Exportadora- Nicaragua OUR ORIGINS Mercon Honduras Mercon Guatemala Mercon Brazil Mercon Vietnam Mercon Ethiopia (Representa�ve Office)
FINANCING BUSINESS
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Mercon Group 19-20 Highlights
120 customers
20% Increase in Sales
of specialty coffees through Mercon Specialty
+$30M
12%
worldwide
in producers financing
Improvement on customer experience, placing us within the range of excellence
Ethiopia
$20M
3,200
our new origin
invested in developing the Robusta industry in Nicaragua
LIFT producers
100% of LIFT producers
cer�fied by voluntary standards
45
+20
San Carlos Clinic
Culture Ambassadors
na�onali�es make up our team
an addi�onal healthcare alterna�ve for our employees
$125K in COVID protec�on for our employees
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2,500
14,303
producers measuring their carbon footprint
hours of training for our employees
Robusta Dalat Barrel Aged plantations expanded with the Arabica Coffee one of our top-notch specialty coffee products from Vietnam
acquisi�on of La Palmira our fourth coffee farm
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Booming a New Industry - Robusta .........................
We began opera�ons in Nicaragua’s Caribbean region over ten years ago with the produc�on of Robusta coffee. Although the project started as a dream, today it is a thriving reality thanks to the work we have achieved alongside our producers allies. In Nicaragua, our joint efforts have pioneered the produc�on of Robusta coffee, crea�ng a completely new industry that has brought progress to our communi�es.
197 producers are part of the project
2018
.............
..............................
2016
.............
.............
Inaugura�on of the first Robusta Mill in Nicaragua (La Luz)
.............
55 producers are part of the project
2015 .............
CISA starts training farmers in Nicaragua
2010 .............
.............
2005
CISA buys San Antonio farm with an expansion plan of 253 HA
Nursery opera�ons expanded to the Caribbean Region
.............
.............
11.5 HA planted in La Esperancita Farm
Start of second project in La Esperancita and San Jose farm with an expansion plan of 320 HA
Robusta R&D in Colombia ..............................
Our Robusta Story
.............
CISA Exportadora, a member of the Mercon Group, is a Nicaraguan company with seven decades of experience. We are the country’s largest coffee exporter and daily cul�vate rela�onships of trust and loyalty to help build a be�er coffee world.
295 producers are part of the project SUSTAINABILITY REPORT 19-20
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Robusta Investment Overview
The history of Robusta in the Caribbean Region of Nicaragua, is told through the lives of hundreds of producers who, with the comprehensive support of LIFT, were able to be�er their lives by diversifying their produc�on and venturing into the cul�va�on of Robusta coffee.
Some of the incredible benefits for producers in this area, which today is a concrete tes�mony of progress, include technical assistance, financing, forward sales, certifications support, access to market information and community development.
La Luz
$8.5M Total Investment
Seeds for Progress Founda�on $500k Total Investment
$20M
...................................................................
$11M Total Investment
Our Mill
...................................................................
Digranisa
...................................................................
Own Farms
Mercapital
Producer Financing
$1.4M in short term loans $730K in long term loans
Total financing $2.1M
TOTAL INVESTMENT
Currently, in this area, CISA Exportadora manages four coffee farms, commercial offices that serve more than 650 farmers and La Luz mill—the first Robusta coffee processing plant in the country. Addi�onally, we support five schools in partnership with Seeds for Progress Founda�on.
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Robusta Coffee Operation Figures for 19-20 Harvest Total volume:
80K bags 60 kg
LIFT: represents
81%
of the volume
+3,700 HA planted 1k HA on our farms and 2.7K HA with producers
30 HA with organic
produc�on at our Farms
51% yield increase due to improvements in gene�c material (from 49 to 74 bags per HA)
56% of total sales as premium Robusta
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As part of this project’s success story, a number of different actors, including the Interna�onal Finance Corpora�on (IFC), the Dutch Development Bank (FMO) and the World Bank, have joined in our efforts to con�nue bringing progress to the region. Within this context and in partnership with Wageningen University and FMO , we are conduc�ng a socio-economic and environmental impact analysis resulting from the introduction of Robusta coffee to the Caribbean Region of Nicaragua. The first phase of this study analyzed three variables:
During the 19-20 harvest, more than 1,100 jobs were directly created at our farms and La Luz mill and
many others were created indirectly through coffee promo�on with our farmers thus genera�ng a local cycle of prosperity. In terms of posi�ve environmental impact, there is clear poten�al through reduced emissions and improved soil quality. The results of this study provide a baseline for comparison with the second phase of the analysis that will validate the impact caused by introducing this crop.
● Farmer livelihoods ● Worker livelihoods ● Socio-economic and environmental impact on the region The preliminary results show that Mercon's deployment of Robusta coffee has led to the diversifica�on of land use in the area, causing a rise in income that was not possible before our project started. Another aspect that demonstrates the progress in this region is the growth of employment opportuni�es.
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Our Sustainability Strategy Sustainability is at the heart of what we do. We are
commi�ed to posi�vely impac�ng coffee producing communi�es to create a circle of prosperity in the industry. By providing a wide variety of key services to producers around the world, we are improving their produc�vity and overall well-being. Addi�onally, through our unyielding support for high-quality educa�on provided to the children in these communi�es, Mercon’s contribu�ons create long-term benefits that reach far beyond the supply chain. The result of our impact leads to an inclusive sector that supports sustained supply of coffee and the conserva�on of nature and its resources for genera�ons to come. This commitment is clearly ar�culated in our sustainability policy. Since the very beginning, our purpose of “building a be�er coffee world” has been deeply rooted in our values and is founda�onal to our strategy. As such, incorpora�ng sustainability into our business model has been a natural process and the result of our maturity and integra�on with global trends.
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As part of this process, we iden�fied the relevant stakeholders for each of the group’s opera�ons using a par�cipa�ve approach and considering each business’s characteris�cs and the context within which it operates. As a result of this exercise, we iden�fied ten key stakeholders for the Mercon Group:
1.Employees
5.Financial sector
2.Coffee producers
6.Industry associa�ons
9.Cri�cal goods and services providers
3.Clients
4.Communi�es
7.Shareholders
Building a be�er COFFEE WORLD
PROSPERITY Preferred partner for sustainable growth
8.Media
10.Government ins�tu�ons and civil society
We also defined our material issues using three sources of informa�on: internal perspec�ve, dialogue with stakeholders (358 interviews) and sector and context informa�on, including interna�onal sustainability standards.
PEOPLE
PLANET
Social development
Environmental impact
1. Sustainability risk management
5. Our Made in Mercon culture
9. Environmental Management
2. Clients rela�onship
6. Talent development
10. Climate ac�on
3. Programs and service with coffee producers 4. Partnership with strategic stakeholders
7. Health and Safety 8. Human Rights
The final product is the ar�cula�on of ten material issues, each with its defini�on and clear scope, and all aligned under the three fundamental pillars of sustainability: Prosperity, People and Planet.
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1. By becoming the preferred partner while promo�ng a sustainable coffee supply chain
.......
.........
.......
.......
PEOPLE
Material issues
Building a be�er COFFEE WORLD
PROSPERITY
Material issues
2. Grow by diversifying across the coffee supply chain to strengthen our value proposi�on to our stakeholders
......................
.
4. Drive the Mercon essence to engage our talent to achieve sustainable growth
........... ..
that, under our purpose of “building a be�er coffee world,” connects our three pillars of sustainability with our four strategic objec�ves. Within this context, our Corporate Responsibility & Sustainability Commi�ee ensures con�nued alignment between our material issues and our strategy.
......
Material issues
defining a
........
fully integrated sustainability model
........
During the 19-20 harvest, through a holis�c understanding of our material issues, we refined these defini�ons to express them in terms of our strategic objec�ves, thus
PLANET 3. Maximize our compe��ve advantage by optimizing our resources efficiencies, business processes and enviromental impact Our sustainability report is intended to communicate and share the results of each of our material issues. SUSTAINABILITY REPORT 19-20
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Prosperity
1.Sustainability risk management
Corporate Governance
Manage and control economic, environmental and social risks to ensure business continuity and compliance with regulatory standards.
In 2014, we established Mercon B.V. in the Netherlands as the group’s holding and main opera�ng company for its coffee business. Board of Directors Our group is managed by a Board of Directors comprised of five non-execu�ve members with ample experience both in and outside the commodi�es sector. The Board of Directors appoints a CEO who is responsible for execu�ng the strategy and ensuring the group’s opera�ons, and who works alongside the different commi�ees to review specific topics.
Steering Committees • Standing and Risk Commi�ee • Capital and Investments • Internal Audit and Control
• Talent and Development • Corporate Responsibility and Sustainability
Ethics and Transparency Our decisions are guided by the highest principles of honesty and integrity, as prescribed in our Code of Ethics. This Code guides our behavior and the rela�onships we cul�vate with each other and with our stakeholders regarding: ● Ethical behavior ● Human rights ● Conflict of interest and business integrity ● Supplier and contractor rela�onships ● Management and use of informa�on ● Staff recruitment ● Use of company assets We act in such a way as to ensure that all employees are familiar with, understand and apply our Code of Ethics. While upholding the same ethical principles, during the 20-21 harvest, we will ini�ate a process to update our Code of Ethics, which will allow us to be�er align it with our strategy. SUSTAINABILITY REPORT 19-20
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Ethics and Compliance System
Anti-corruption
To ensure we always act with the highest standards of ethics, we have different safeguards in place across our opera�ons, such as:
Con�nuing with our focus on opera�ng with the highest ethical standards, we reaffirm our commitment to comba�ng corrup�on. During the 19-20 harvest, we
held 11 training
sessions on corporate Code of Ethics and Code of Conduct
My Voice
Ethics and Compliance Commi�ees for each opera�on
governance, regulatory compliance, upda�ng regulatory frameworks, audi�ng and money laundering, and terrorist financing preven�on with the objec�ve of reducing the associated risks. Addi�onally, we frequently monitor and iden�fy any possible situa�on that could result in a conflict of interest. During the same period, with a par�cipa�on of 96% of our employees, 7.9% reported ma�ers that could affect decision-making as a result of a conflict of interest. In light of the above, specific ac�ons were taken to reduce the associated risks.
Cybersecurity In terms of cybersecurity and data protec�on, the privacy and security of both our own data and that of our stakeholders is a premise for ac�on. In this respect, our Informa�on and Technology (IT) team is developing specialized strategies to prevent and block security incidents in our systems. In addi�on, the
team implements campaigns and training sessions annually to raise awareness about our network security and how to protect our business informa�on. To date, no claims of data leaks or incidents have been reported.
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Tradi�onal Risk Management Our corporate governance model dictates our approach to risk management. The Risk Commi�ee and respec�ve policy set the parameters for managing both the tradi�onal and non-tradi�onal corporate risks inherent to our business. Tradi�onal risks refer to financial, market, liquidity and opera�onal risks. We have vast experience and the systems and technologies available to iden�fy, monitor and manage these risks effec�vely.
To this end, we have several ini�a�ves in place, including:
Sustainability Risk Management
Sustainability risk management is a priority for us and we have made significant progress in recent years. Sustainability or non-tradi�onal risks refer mainly to those associated with social and environmental aspects. These fall under the responsibility of the Board of Directors’ Corporate Responsibility and Sustainability commi�ee and their management is outlined in such policy, as well as in underlying protocols.
To manage these risks, during the 19-20 harvest, we conducted the following: • Corporate diagnosis of occupa�onal safety: We conducted a diagnosis of our origin opera�ons in Nicaragua, Honduras, Guatemala and Vietnam, and presented a detailed risk analysis for cri�cal works and legal compliance. This will allow us to establish a corporate occupa�onal safety management system that is aligned with the highest interna�onal standards. • Macro assessment of social and environmental risks of the primary coffee supply chain in Honduras, Guatemala, Nicaragua, Colombia, Peru, Brazil, Ethiopia, Laos and Vietnam: Prepared by the Interna�onal Center for Tropical Agriculture (CIAT) with the support of FMO and in coordina�on with IFC. This assessment focused on three risk areas:
• Risk Management Policy: The policy’s objec�ve is to set the parameters for managing the corporate risks inherent to the business, including market, liquidity and opera�onal. • Operational Risk Management Handbook and Pyramid: The handbook focuses on iden�fying, assessing and mi�ga�ng the opera�onal risks associated with asset security.
(Non-Traditional)
Labor rights: Child labor and forced labor.
Human rights: Abuse of human rights.
Environment: Ecosystem services and loss of biodiversity.
This diagnosis will allow us to mi�gate associated risks through the execu�on of a specific ac�on plan.
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2.Client relations
Our Evolution
Our Clients
Strengthen client relationships by offering innovative and diversified products, services and solutions while providing the right quality and the best customer experience.
Our goal is to foster strong rela�onships with our clients to create long-term value and benefits for everyone along the supply chain, with sustainability as the main focus of our business.
We work hand in hand with producers and roasters worldwide to promote sustainable produc�on allowing to con�nue building a be�er coffee world together.
Customer Service Over the years, we have created grower-to-roaster solu�ons built on our knowledge of coffee, experience and commitment to ge�ng it right. Our company is con�nuously innova�ng, ensuring greater efficiency across our supply chain.
Sales Evolu�on
20% 18%
Crop 17-18
Crop 18-19
Crop 19-20
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As part of our commitment, we offer our clients:
Access to market informa�on: We offer permanent access to up-to-date market and coffee ac�vity informa�on from a number of origins, including harvest status, climate, grain quality, etc.
Innova�on and opera�onal excellence: We are pioneers in the development of business applica�ons and pla�orms that provide real-�me informa�on for agile decision-making.
Closer to origins: We organize visits to encourage a close rela�onship between our clients and producers, providing the opportunity to create �es with the source of their coffee.
Right quality for their needs: We understand the characteris�cs required by our clients to provide a product that meets their expecta�ons.
Ver�cally integrated: Thanks to our global presence, we can serve the same client in mul�ple des�na�ons and offer coffees from a variety of origins while guaranteeing the best customer
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Origin and Destination of our sales Our global access to the coffee supply chain enables us to offer the best customer service experience.
Europe 49%
37%
22%
Honduras
5% 17% 6%
America Guatemala
2%
Colombia Others
Nicaragua
4% 6%
42%
Asia
7%
Vietnam
1%
By Des�na�on
2% Ethiopia
By Origin
Brazil
Africa
Australia SUSTAINABILITY REPORT 19-20
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Customer Satisfaction At Mercon, not only are we focused on providing the best customer service experience, but also on con�nually improving our customer sa�sfac�on levels. With this in mind, year a�er year we have measured our customers’ sa�sfac�on and have noted considerable improvement.
For the 19-20 harvest we achieved a 12% increase on customer experience - placing us within the range of excellence with loyal clients.
At Mercon, providing the best customer experience is at the core of everything we do. We work constantly to collect, measure and evolve based on feedback from our clients. The excellent result of our customer service resultsunderscores the quality of our service – Oscar Sevilla, CEO
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Joint Initiatives The long-term rela�onships of trust that we foster with our clients enable us to develop joint ini�a�ves that focus on genera�ng value for the supply chain:
3 Plant dona�on
2
1
4 Support for COVID-19 and social causes
5
Sustainable water consump�on ini�a�ves Support for LIFT our holis�c and unique sustainable program for coffee producers
Cost monitoring applica�on in Nicaragua
6
9
Support for LIFT Quality Award
Reforesta�on ini�a�ves Price risk management training
7
Demonstra�on plots
8 SUSTAINABILITY REPORT 19-20
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3.Programs and Services LIFT with Coffee Producers Our holistic and unique sustainable Increase coffee producer’s welfare by strengthening their business processes through approach improved quality and productivity, while promoting good agricultural practices and protecting the environment.
We are commi�ed to posi�vely impac�ng coffee-growing communi�es to create a cycle of prosperity in the industry. LIFT is our holis�c and unique sustainable approach that enables coffee growers to improve not only their produc�on process, but also their quality of life. The objective is to ensure that producers have profitable production levels by using resources efficiently through the adop�on of environmentally friendly and socially responsible agricultural prac�ces. The adop�on of these prac�ces also provides access to different cer�fica�on seals in order to sell their coffee in differen�ated markets. LIFT also seeks to ensure that producers have access to short- and long-term financing with compe��ve condi�ons, are able to acquire plants of the best quality to renew their crops and stabilize their income stream through access to forward sales.
Through LIFT, we bring to life our commitment to the sustainability of the coffee industry and generate value in the supply chain.
Technical assistance
Financing
Forward sales
by Mercon
Growth Environment Social Development
Crop renewal
Certifications support
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Technical assistance At LIFT, we work hand-in-hand with our producers based on their specific needs and condi�ons. Training and technical assistance are provided through a team of highly qualified agronomists. Our team conducts personalized visits in order to implement, monitor and measure best agricultural prac�ces. The program is based on a three-pillar structure: Growth, Social Development and Environment, which, in turn, are fully aligned with our sustainability structure: Prosperity, People and Planet.
Growth We promote best agricultural prac�ces that have a direct impact on produc�vity and quality through technical assistance and other value-added services.
Social Development We encourage socially responsible prac�ces to improve the social welfare of our producers, their families and the community by emphasizing in child labor preven�on and li�ing occupa�onal health and safety and working condi�ons standards.
Environment We raise awareness about environmental impacts by providing prac�cal tools to help protect water sources and biodiversity, conserve soils, mi�gate climate change, manage solid waste and wastewater and use of agrochemicals responsibly.
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Top results from the 19-20 harvest:
3,200
producers
370,044 60kg
LIFT bags as a produc�on
100% of our farms monitored using the LIFT app
16,884
technical assistance visits
3
graduated genera�ons for a total of 1,167 producers
70
highly skilled agronomists
19
training topics
LIFT is also a bridge for our producers to par�cipate in joint ini�a�ves with organiza�ons dedicated to promo�ng sustainability in the coffee supply chain. During the 19-20 harvest, for example, in partnership with TechnoServe through the Maximizing Opportuni�es in Coffee and Cacao in the Americas Program (MOCCA), we provided direct technical assistance through group trainings and personal visits to 4,100 coffee producers.
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LIFT Index The LIFT Index calculates performance on the prac�ces promoted by the program based on its three pillars: Growth (45%), Environment (30%) and Social Development (25%). Each pillar contains a series of prac�ces, which are given a weighted score and in the aggregate make up 100%.
Annual Impact 19-20 Environment
Social Development
+7.7%
+23.8%
Practices performance from 69.2% to 76.9%
Practices performance from 62.1% to 85.9%
Growth
10%
Practices performance from 56.3% to 66.3%
LIFT Index
+12%
from 62% to 74.%
Female producers improved 16%, from 61% to 77%
On average, during the 19-20 harvest in Nicaragua, we obtained a score of 78.5, with 80 and above considered op�mal. The volume and impact of the LIFT program is verified by third par�es.
LIFT Evolution In recent years, the LIFT program has grown and evolved. Since its incep�on, we have grown from 582 producers on the 15-16 crop to 3,200 on the 19-20 period which represents an increment of 450% during a 5 year term. We have adapted the program to suit the coffee-growing condi�ons of each of our origin countries.
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LIFT expansion and evolution by Mercon
STARTED
NICARAGUA
GUATEMALA
HONDURAS
VIETNAM
15-16
16-17
17-18
17-18
In Central America, LIFT's emphasis is on increasing produc�vity through the promo�on of environmentally friendly and socially responsible prac�ces. FOCUS
Addi�onally, in Nicaragua, we have adapted the LIFT program to the Robusta coffee variety by adjus�ng the technical topics and curriculum. Most importantly, we have tailored the program to the producers’ profile, who have different experience and trajectories.
BRAZIL
18-19
Focus on maintaining high produc�on levels through prac�ces that promote good quality and caring for the environment.
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To ensure LIFT’s con�nuous improvement, we conduct research in partnership with NGOs, private organiza�ons and academic ins�tu�ons. This research focuses on topics such as nutri�onal plans, new varie�es, soil and water conserva�on, as well as carbon and water footprint, among others.
Financing
For the 19-20 harvest, our more
Within our comprehensive services offering to producers and based on their needs, we offer both short- and long-term financing services.
$25 million por�olio served over 3,200 producers.
In Nicaragua, we provide the best interest rates on the market and rapid response �mes through Mercapital, the Group’s dedicated financial services company. During the 19-20 harvest, based on our innova�on and opera�onal excellence strategic pillar, we made a series of improvements to the process, enabling us to reduce the loan approval �me to 9 days—an 82% service increase.
In Brazil, our financing strategy is based on a tripar�te rela�onship, in which, through partnerships with third par�es, we provide our producers access to financing for agrochemicals. For the 19-20 harvest, we managed $6.2 million, equivalent to 56,150 60kg bags from 154 coopera�ves and farmers.
In Honduras and Guatemala, we provide financing op�ons at a lower scale than in Nicaragua, but we are in the process of increasing our offering to con�nue strengthening our rela�onships and services with local producers.
than
Access to financing at compe��ve rates allows producers to obtain the necessary working capital to ensure the execu�on of good agricultural prac�ces and technical recommenda�ons, which result in their increased produc�vity and income and, ul�mately, an improved quality of life.
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Cer�fica�on Support Cer�fica�ons demonstrate compliance with voluntary standards that specify prac�ces which must be implemented to ensure a sustainable produc�on that is responsible towards the environment, workers and communi�es. For producers, cer�fica�on is important because it implies greater access to differen�ated markets and, ul�mately, a be�er quality of life. Within our range of services, we also offer support and accompaniment through the cer�fica�on process, providing adequate follow-up so that our producers can comply with the established requirements. In addi�on, our LIFT producers have access to these cer�fica�ons by virtue of simply belonging to the program. By being aligned with the leading seals, LIFT ensures implicit compliance with the requirements established by the cer�fica�ons. 100%
of our LIFT producers are cer�fied by voluntary standards.
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4,736 cer�fied producers with
We have the main standards:
Organic Coffee As part of our resolve to offer the best customer experience, we are pilo�ng an organic produc�on strategy in our Nicaraguan opera�ons for both, Arabica and Robusta.
Within the framework of our partnership with TechnoServe and the Maximizing Opportuni�es in Coffee and Cacao in the Americas Program (MOCCA), we worked to improve access to differen�ated markets and supported cer�fica�on processes so that 100% of the program’s producers could be cer�fied by Rain Forest Alliance (RFA) and C.A.F.E. Prac�ces standards. In 2020, the new Rainforest Alliance Sustainable Agriculture Standard was published and, despite being a much more demanding standard, we were the first in the world to implement it and obtain certification for both our producers and the chain of custody at our mills. In addi�on, we have gone from 60 to over 2,000 farmers cer�fied under this standards.
During the 19-20 harvest, we made progress in the organiza�on and planning necessary for the produc�on of organic Arabica coffee. Specifically, we created two groups of 50 farmers, trained our technicians in organic produc�on, held mee�ngs with suppliers to assess their products and defined the agricultural guidelines that will serve as the basis for developing the pilot program. Our strategic approach also includes providing a subsidy to support these producers financially during their transi�on to organic coffee.
Once we have a proven capacity, we can implement organic agriculture ini�a�ves with our producers
During the 19-20 harvest, we obtained certification to supply and sell organic coffee within the European Union (EU).
In terms of Robusta, in collabora�on with Nespresso, we are transi�oning 15 hectares of our farm opera�ons in Nicaragua to organic management. We are also sowing another 15 hectares with organic management since the establishment of the planta�on. Our goal is to develop the necessary knowledge of organic agricultural prac�ces to obtain the best yields and op�mal costs. SUSTAINABILITY REPORT 19-20
33
Crop Renewal
Forward Sales
Our service offering to producers also include providing Arabica and Robusta coffee plants of the highest quality to renew their crops. This ensures greater produc�vity and resistance to pests and diseases. We have specialized technology for gra�ing, transplan�ng and cloning and are the first large-scale nursery in Nicaragua (Transplanta).
On the 19-20 harvest: 5,610,290 plants sold including Robusta and Arabica coffee, vegetables and more
Forward coffee sales is yet another permanent service offered by the group that enables producers to stabilize their income. A�er a series of nego�a�ons, an agreement is reached on the percentage of the harvest to be set up in the forward sale transac�on, where the producers agree to on a�rac�ve price, thereby reducing the risk and uncertainty generated by price vola�lity on the stock market. For the 19-20 period, more than 3,500 producers used this service.
Renewal of approximately 282 hectares of coffee equivalent to $1.4 million
Addi�onally, we offer producers annual training to be�er understand the forward sales scenarios at both the na�onal and interna�onal levels.
During the 19-20 harvest, with the support of the FMO, we appointed the Frankfurt School of Finance to study a price protec�on mechanism for small producers in Nicaragua, which will be tested during the 20-21 crop. SUSTAINABILITY REPORT 19-20
34
4.Partnerships with strategic stakeholders Par�cipate in a collabora�ve network to cul�vate transparent and construc�ve dialogue with our stakeholders and contribute to the development of future genera�ons in coffee communi�es.
We love what we do. Our close network of clients, employees, and partners is passionate about delivering excellence in everything we perform. It is our pleasure to do what it takes to keep the coffee flowing, from supplying the right quality of coffee, to providing reliable, consistent service, while also adhering to the highest ethical standards. Our
Within this framework, our material issues are the roadmap that guides our sustainability management. In collabora�on with our allies, we work together to drive true strategic transforma�ons in our three pillars.
purpose of “building a be�er
coffee world” would not be possible
without the support and collabora�on of our partners and allies with whom we share the vision and commitment to create value across the coffee supply chain and confront the challenges facing the coffee industry.
Prosperity
Planet
People SUSTAINABILITY REPORT 19-20
35
Prosperity Wageningen University: Study to assess the socio-environmental impacts of Robusta coffee produc�on in Nicaragua.
Interna�onal Center for Tropical Agriculture (CIAT): Macro and micro assessment of social and environmental risks of the primary coffee supply chain in Honduras, Guatemala, Nicaragua, Colombia, Peru, Brazil, Ethiopia, Laos and Vietnam.
World Coffee Research (WCR): 12 on-farm technology trial plots (OFTT) to validate improvement programs to grow, protect and improve the supply of quality coffee while improving the livelihoods of the families that produce it.
TechnoServe - Maximizing Opportuni�es in Coffee and Cocoa in the Americas Project (MOCCA): Individual and group technical assistance for producers and cer�fica�on support processes.
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36
Planet TechnoServe - Maximizing Opportuni�es in Coffee and Cocoa in the Americas Project (MOCCA): Improvements to wet mills and wastewater treatment systems as well as expansion of meteorological sta�on network and reinforcement of an early waring system. Wageningen University: Calcula�on of greenhouse gas emissions associated with our opera�ons in order to define our corporate carbon footprint. Conserva�on Interna�onal : Integrate climate solu�ons and reduce greenhouse gas emissions on coffee farms, iden�fying the carbon footprint of LIFT farmers in partnership with IDB.
CIRAD Agricultural Research Center: Ten-company consor�um to develop the ECOFFEE Project (Ecological Coffee) that advocates a transi�on to zero pes�cides over the next ten years by promo�ng regenera�ve agriculture. La�n American Solidarity Founda�on/Illy: Pilot program in Nicaragua, Guatemala and Honduras to promote the climate-smart agriculture project, moving towards a carbon-neutral coffee model by training our technical team on climate change and how to measure the carbon footprint of farms. We started with 2,500 small farmers in Nicaragua and will later extend to 200 farmers in Honduras and 400 farmers in Guatemala. Neumann Founda�on: Development of pilot plots on which to implement the prac�ces that obtained the best results based on experience for projects in the coffee value chain, especially related to climate change. Con�nuous training for both the en�re Central American team and farmers to mi�gate the impact of climate change in the area. Nicaraguan Associa�on of Formulators and Distributors of Agrochemicals (ANIFODA): Alliance with suppliers to collect empty containers and take them to collec�on centers, as well as training for farmers on responsible handling. SUSTAINABILITY REPORT 19-20
37
People Seeds for Progress Founda�on: Promo�on of access to quality educa�on—a fundamental human right that allows us to contribute to social development and sustainable economic growth.
Dutch Development Bank (FMO) /Seeds for Progress Founda�on: Relief fund to mi�gate the impact of COVID-19 in the most vulnerable coffee-growing regions of Nicaragua. RFA Consor�um on Child Labor in Guatemala and Honduras (ini�al stage): Consor�um Members ac�ve in both Origin countries.
And many others with whom we are building together a better coffee world.
Seeds for Progress Founda�on/Starbucks/Lavazza: Dona�on for personal protec�ve equipment for 1,330 physicians and healthcare personnel across 58 hospitals, centers and healthcare posts in coffee-growing areas in Nicaragua.
We also want to give special thanks to IFC, FMO, Rabobank and ING for being an outstanding partner suppor�ng Mercon to achive our sustainability strategic agenda
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38
We are also proud members of… Interna�onal Coffee Organiza�on We are one of 12 signatories to the London Declara�on to work at the industry level to solve the problem of market price vola�lity, thereby mi�ga�ng the price risk for producers. We are members of the CEO and Global Leaders Forum and par�cipate in the working groups on farmer income, sector coordina�on, market transparency, sustainable produc�on and responsible sourcing. Na�onal Coffee Associa�on (NCA) Specialty Coffee Associa�on German coffee associa�on
European Coffee Federa�on Co-chair the Sustainability Commi�ee alongside with Tchibo. We are working on mapping ini�a�ves to find out what organiza�ons are doing in each part of the world. We are also making progress on the prepara�on of a “Posi�on Paper on Sustainability”.
World Coffee Research Member of the Board of Directors, Research Advisory Commi�ee and Nomina�ng Commi�ee. Sustainable Coffee Challenge Members of the Advisory Council for next period. UN Global Compact Member of the Dutch network. Nicaraguan Coffee Exporters Associa�on (EXCAN) President of the Associa�on. Honduran Coffee Exporters Associa�on (ADECAFEH) Member and Secretary of the Board of Directors. Guatemalan Coffee Exporters Associa�on (ADEC) Member and Secretary of the Board of Directors. SUSTAINABILITY REPORT 19-20
39
People
We believe in ethical stands, honoring our commitments, developing meaningful rela�onships, and being a key contributor in our coffee-growing communi�es.
ence
Integrity
Excell
At Mercon, our culture is a top priority and is based on the values we have been developing as a family for seven decades. These values unite us to make our organiza�on the best place to work.
Our values:
rep re shi neur p
Foster a solid culture by engaging our talent to achieve sustained growth while promoting an ethical and fair environment in which the equality and diversity of opportunities are ensured.
Mercon Values, the basis of Our Culture
Ent
5.Our Made in Mercon culture
Teamwork
We believe there is always room for improvement. We hold ourselves accountable and aim not only to meet customer expecta�ons and to exceed them. We make the most of what we have, and our main focus is on being the best. We invest in great ideas and if something needs to get done, we roll up our sleeves and get to work. We are passionate, driven, imagina�ve, flexible, always, open to new ideas, and constantly seeking opportuni�es for growth. We believe in an open, collabora�ve, and posi�ve work environment. We use our individual strengths to contribute to our team’s weaknesses – because teamwork makes our dreams a reality. SUSTAINABILITY REPORT 19-20
41
Made in Mercon defines our essence as a team. It encompasses all the a�ributes of our culture that determine who we are as an organiza�on.
Recogni�on Recogni�on boosts our drive to reach for the stars. The sense of apprecia�on for a job well done mo�vates us to give our best every day.
Communica�on Communica�on creates meaningful connec�ons that bring us closer. We thrive when we share our ideas and listen to others.
Caring Caring for others comes naturally to us. Our clear vision and purpose of doing well by doing good is how we create a circle of prosperity for all.
Honesty Honesty guides our ac�ons and strengthens our rela�onships. By honoring our commitments, we build long-las�ng alliances based on trust and respect.
Teamwork Teamwork brings out the best in us. Our collabora�ve spirit makes us unstoppable, there is nothing we cannot achieve together.
Integra�on Integra�on allows us to break down barriers, connec�ng as one community in an inclusive and open environment.
During the 19-20 period, through Made in Mercon, we iden�fied the essence of our culture: who we are,
what characterizes us and what makes us unique.
At Mercon, hearing the voice of our employees—what they think and feel—is essen�al. Through an exercise with all our leaders and focus groups that involved 77 employees from 8 countries, we iden�fied the six main a�ributes that make us who we are:
During the 19-20 harvest, a mul�disciplinary team representa�ve of the en�re group developed a holis�c program to con�nue promo�ng and living our Made in Mercon culture. These initiatives will be launched during the 20-21 harvest.
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Culture of Recognition
Mul�culturalism, Diversity and Inclusion
Our Made in Mercon essence drives our employees to strive for greatness which is why we firmly believe in acknowledging it. We recognize and reward the commitment that our team puts forth every day as part of our culture. Over the years, our focus on recogni�on has grown stronger and has become a fundamental element of talent management. We are convinced that recognizing the posi�ve, the good, the extra mile makes a difference.
Our philosophy is simple: we work as One Group, One Team. At Mercon, multiculturalism characterizes us. Our group is represented by 21 na�onali�es from around the world, demonstra�ng that the element we have in common is our culture. Because of this, we reaffirm our commitment to diversity, equity and inclusion.
To con�nue fostering our culture of recogni�on, we have ins�tu�onalized Thank you Day. On this day, we thank and acknowledge everyone’s good work together. In the 19-20 harvest, we held our very first Virtual Thank you Day during which, despite the difficulties imposed by the COVID-19 pandemic, we were all able to connect and give special recognition to our colleagues. SUSTAINABILITY REPORT 19-20
43
Managing by competencies allows us to align our people and our strategy, thereby achieving the expected success. Our model was developed by selec�ng the competencies that we consider are most important to ensure the individual success of our employees and, in turn, the fulfillment of our strategy. As managing competencies appropriately requires a process of con�nuous improvement, during the 19-20 harvest, a mul�disciplinary team consolidated the model into a more prac�cal, easy-to-implement system.
6.Talent Development Attract and retain talent by enhancing competencies and knowledge, while managing a competitive compensation system.
Our Team We have an efficient, highly reliable team commi�ed to con�nuous improvement. Permanent Workforce Distribu�on
Our Talent At Mercon, we have no doubt that the main reason for our success is our people; together we are building a be�er coffee world every day. For this reason, we are focused on contribu�ng to their development and overall welfare. Our philosophy is to work as one group, one team. Our talent strategy is based on a competency model, which, in turn, is the founda�on of a solid and integrated management of all human capital processes. This model ensures perfect alignment between our recruitment and selec�on, evalua�on and talent development processes.
447
228
Total:
675
(66%)
(34%)
Because talent development is key to achieving our objec�ves, we have a Training Assessment Needs (TAN) methodology in place that enables us to align and priori�ze training needs based on the group's strategy. During the 19-20 harvest, we delivered
14,303 hours of training to 1,237 employees in a total of 86 sessions
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44
7.Health and Safety Promote a safe and healthy work environment by fostering a culture of risk prevention and zero tolerance for unsafe conditions.
Occupa�onal Health and Safety Policy Excellence in Safety At Mercon, we are commi�ed to providing a safe and healthy workplace for all our employees, contractors, service providers and visitors across our opera�ons (planta�ons, mills, warehouses/collec�on centers and offices). We demonstrate this commitment through a culture of safety, preven�on, risk assessment and the implementa�on of safe work prac�ces with zero tolerance for unsafe condi�ons.
Within this framework, we are developing and implemen�ng a comprehensive management system, consistent with ISO 45001, to con�nually improve our performance.
Our sense of responsibility in regard to safety prompted us to redefine the ac�ons we had been taking and to propose a more solid and interrelated strategy across our origins opera�ons. During the 19-20 harvest, we made progress in defining and implemen�ng a Roadmap for Excellence in Safety that proposes four fundamental stages:
2 1
4 3
Measurement and review for con�nuous improvement
Implementa�on
Redefini�on of standard opera�ng procedures, performance indicators, training plans and culture-building plans
During the 19-20 harvest, we worked on phases 1 and 2, while the implementa�on process is scheduled to begin during the 20-21 crop.
Diagnosis and ac�on plan defini�on SUSTAINABILITY REPORT 19-20 45
Risk Diagnosis and Analysis We reaffirm our commitment to iden�fy, assess and manage health and safety hazards and risks associated with our opera�ons by adop�ng a systema�c workplace risk assessment. As a result of this process, we have completed a diagnosis for Nicaragua, Honduras, Guatemala and Vietnam that presents a detailed risk analysis for cri�cal works and legal compliance. Based on these results, we defined an ac�on plan. We have also made progress in the following aspects: - Planning the training program for leaders, employees and contractors. - Redefining the reference framework for Standard Opera�ng Procedures (SOP) to ensure greater alignment with best global prac�ces, as well as for performance indicators. - Preparing internal audit plans. - Designing an awareness and communica�on campaign for cultural transforma�on. - Forming a global safety commi�ee to define and monitor policies, guidelines and key performance indicators across our origins opera�ons.
The global safety commi�ee is supported by subcommi�ees from each business unit, which will allow us to bolster the ac�ve engagement of our leaders and ensure a successful implementa�on.
Priori�zing Occupa�onal Health and Safety Occupa�onal health and safety is one of our top strategic priori�es, driving us to develop policies, procedures and indicators, while also placing greater emphasis on measuring those indicators for achieving opera�onal excellence in opera�ons management.
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46
In Nicaragua, the group's largest coffee processing opera�on, we obtained the following results: Hazard Preven�on and Control Index
Accident Rate
1.32% 1.70% 1.71% 17-18
18-19
19-20
Global Safety Index
7.74% 5.20% 2.57% 17-18
18-19
17-18
99% 18-19
17-18
86%
18-19
19-20
114 11 45 2 103
90% 19-20
84%
No. of accident by severity
19-20
Inves�gated Accidents
99%
85%
43 16-17
17-18
41 8
42 3
33
39
18-19
19-20
Mild Severe
SUSTAINABILITY REPORT 19-20
47
Our efforts are not only focused on measuring how we manage occupa�onal health and safety, but also on con�nuous training to ensure we consolidate our knowledge on the subject and create a sense of awareness in our stakeholders. During the 19-20 harvest, we delivered 1,780 hours of safety training to 1,780 employees, focusing on safe li�ing loads, emergency crews, cri�cal work permits, accident inves�ga�on and more. Based on the diagnoses conducted at the different origins, in 20-21 we will unify the occupa�onal health and safety performance indicators in order to standardize opera�ons across the board. San Carlos Clinic - Nicaragua The COVID-19 pandemic accelerated some of the ini�a�ves we had been developing based on our priori�es, such as the construc�on of the clinic at the San Carlos mill in Nicaragua, which includes hiring and training of a medical team.
The clinic’s objec�ve is to offer an addi�onal healthcare alterna�ve for our permanent and temporary employees. During the 20-21 crop, we expect to consolidate the structure and re-define key performance indicators. Promo�on of Health and Safety in the Supply Chain Our producers are the backbone of our business. Building solid, las�ng rela�onships has been part of the group’s philosophy for seven decades. In view of that commitment, through our LIFT program’s Social Development pillar, we train our producers on topics related to Occupa�onal Health and Safety, such as the use of personal protec�ve equipment (PPE) and the safe handling of agrochemicals.
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48
Preven�on and Protec�on from COVID-19
Being there for our team when they need us most is part of our DNA, and the COVID-19 crisis is no excep�on. As part of our �mely, agile response, in recent months we have innovated on the go to minimize the effects of the pandemic. Our response to this unexpected situa�on has resulted in:
Defining and implemen�ng a communica�ons campaign to raise awareness about preven�ve measures to combat the pandemic.
Preparing protocols for the different processes based on the World Health Organiza�on’s guidelines and recommenda�ons.
Holding mo�va�onal talks to be�er deal with the pandemic. In 11 talks with more than 780 par�cipants, we discussed topics like work-life balance, managing emo�ons and virtual teamwork.
Implemen�ng remote and flexible work op�ons for our employees.
Providing “COVID Kits" to protect our employees.
Holding different virtual events to help us feel closer regardless of the distance and barriers, including physical condi�oning classes, cra� lessons, monthly virtual birthday celebra�ons and more.
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49
Our investment in COVID-19 protec�on and preven�on processes across our opera�ons totaled US$125,000 and we have budgeted the same amount for the 20-21 harvest.
Our response to the pandemic was also visible across the supply chain. To mi�gate the impact of COVID-19 in the most vulnerable coffee-growing regions of Nicaragua, we joined forces with the Seeds for Progress Founda�on and, thanks to the relief fund allocated to us by the Dutch Development Bank (FMO) in the amount of €112,000 we were able to directly impact 4,000 coffee producers and their families by providing preven�on kits and working on communica�on, awareness and educa�on campaigns. Similarly, through an internal campaign and with the support of our clients Starbucks and Lavazza, we were able to raise US$105,000 to acquire personal protec�ve equipment for more than 1,330 doctors and healthcare personnel working in over 58 hospitals, healthcare centers and posts in Nicaragua’s coffee-growing areas.
8.Human Rights Actively engage in anti-child labor activities and protect human rights across the value chain.
We naturally, con�nuously and integrally protect, promote and respect our stakeholders’ human rights. Some key aspects of our management include caring for our employees, protec�ng their health and safety, offering services to our producers, suppor�ng the community and conserving the environment, among others.
Commitment to Human Rights At Mercon, we are commi�ed to promo�ng and respec�ng the basic human rights of each individual, including the right to life, liberty, security, privacy, work and educa�on, among others. Our culture is the best reflec�on of our respect for human rights, as all of our policies, decisions and ac�ons are related to protec�ng and promo�ng them. SUSTAINABILITY REPORT 19-20
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Educa�on and Community Development Seeds for Progress Foundation Developing the communi�es in which we operate is a priority and we believe that educa�on is fundamental to achieving this. Within this framework, we have partnered with the Seeds for Progress Founda�on, a non-profit organiza�on that promotes access to quality educa�on—a fundamental human right that allows us to contribute to social development and sustainable economic growth. Through the Founda�on’s programs, we are able to create opportuni�es to improve the quality of life of students, teachers and families living in rural communi�es in the coffee-growing regions of Nicaragua and Guatemala.
Over the past 20 years, the Seeds for Progress Founda�on has worked to develop and implement various programs that promote a comprehensive educa�on from preschool to voca�onal training. These programs help prepare students to integrate into their community with a sense of empowerment that enables them to combine their poten�al with that of others, thereby promo�ng the development of their families and communi�es.
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51
Programs:
Seeds to Grow
Seeds to Learn
Seeds to Lead
Seeds to LIFT
Cul�va�ng Educa�on
Seeds to Grow is a program that focuses on early childhood development for preschoolers through the Montessori methodology adapted to the rural context, including the development of emo�onal, physical, social, and cogni�ve skills. This program is full of mul�sensory s�muli, adequate physicality, and above all, especially trained teachers.
Seeds to Learn is a program that uses strategies from Informa�on and Communica�on Technologies to strengthen reading and wri�ng skills for children in the first three grades of primary educa�on. These pedagogical tools lay the founda�on for learning, as well as help develop other skills necessary for educa�onal success.
The Seeds to Lead program focuses on developing personal, family, social, and work-related skills. Partnering with organiza�ons linked to the coffee industry of rural communi�es, children from the fourth to eleventh grade are taught basic educa�onal principles with the “New Ac�ve School” methodology and encouraged to par�cipate in entrepreneurship ini�a�ves to prepare them for life.
The Seeds to Li� program help young adults that live in rural areas achieve technical and professional training goals through the establishment of local and interna�onal alliances. The objec�ve of this program is to provide young people in the communi�es a technical educa�on that gives them the necessary skills to become be�er coffee producers and community leaders.
Cul�va�ng Educa�on is a program that was created for children of families in the coffee harvest that live in or migrate to rural communi�es. The program aims to mi�gate child labor by crea�ng safe spaces that facilitate educa�onal development from a young age. Children also have access to specialized care ranging from early s�mula�on to developmental skills.
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52
Developed and adapted the program’s content and methodology based on the needs of coffee-growing areas and Nicaragua’s Ministry of Educa�on.
In the coffee industry, since genera�onal replacement is a latent risk for crop sustainability, the Seeds for Progress Founda�on has developed programs with the primary goal of minimizing this issue’s long-term impact. During the 19-20 harvest, our partnership with the Founda�on focused on the Seeds to Lead program. In associa�on with the Na�onal Federa�on of Coffee Growers of Colombia, we developed a fourth- to eleventh-grade complementary educa�on program with teaching modules aimed at developing knowledge and skills to create a sense of belonging to coffee cul�va�on, its families and, ul�mately, its communi�es. These ac�ons are our small contribu�on to promo�ng and encouraging genera�onal splice. Through this ini�a�ve we have:
Developed the educa�onal materials (8 books) to support the program development with an investment of over $100,000.
Implemented a pilot project in five rural schools in Nicaragua.
Cer�fied 90 teachers in the methodology with 150 training hours and 97% a�endance
To date, our partnership with the Seeds for Progress Founda�on has benefited 28 schools in Nicaragua and Guatemala, thus reaching more than 6,000 students from 145 coffee-growing communi�es.
Commitment Against Child Labor in the Supply Chain At Mercon, we are commi�ed to preven�ng child labor, which is an outright viola�on of human rights. We have a declara�on that affirms our commitment to promo�ng children's rights and dignified condi�ons, which we encourage across the supply chain.
We adhere to principles that establish the protec�on of children’s health, safety and morale and prohibit work that may hinder their educa�on or deprive them of their development, thereby nega�vely affec�ng their recrea�on and welfare.
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53
To protect children against child labor, we have developed several ini�a�ves: • LIFT as a promoter of eradica�ng child labor: Through LIFT’s Social Development pillar, we provide training to producers on fundamental topics like child labor, addressing the main risks and consequences for children in terms of quality of life. We encourage farmers to be mindful and to break with exis�ng prac�ces, promo�ng the development of new genera�ons. We also require our LIFT producers to commit, through both policies and prac�ces, to eradica�ng child labor.
We implemented the program on 2 coffee regions
We opened the first community center
● Prepara�on for Cer�fica�ons: The cer�fica�ons sought by our producers require implemen�ng prac�ces to demonstrate that there are no children working on their farms. Our cer�fica�on support services consider these to be determining factors in complying with the requirements established by the various seals. ● Cul�va�ng Educa�on Program: In partnership with the Seeds for Progress Founda�on, we offer comprehensive childcare to families who par�cipate in ac�vi�es related to coffee harves�ng, thus contribu�ng directly to the preven�on of child labor and offering op�ons for families and their children. In 19-20 harvest:
We delivered 114 hours of training to educators on implemen�ng the program’s methodology
We provided full-day childcare to more than 200 children between the ages of 0 and 14 from Monday to Saturday during the coffee harvest SUSTAINABILITY REPORT 19-20
54
Grievance Mechanism We have an open-door policy to foster trust at all levels of the organiza�on because we have no doubt that communica�on brings us closer. Likewise, we promote mechanisms that encourage communica�on and dialogue with our stakeholders, fostering their right to express themselves freely regarding the group’s decisions and ac�ons.
"My Voice” Communica�ons Channel My Voice is a communica�ons channel that provides a safe and confiden�al environment for making sugges�ons, complaints or simply sharing ideas on Mercon-related issues. Our system, operated by an independent third party and expert in claims handling and repor�ng, is available to all our employees and stakeholders.
We are commi�ed to the highest standards of ethical conduct and to manage our business in full compliance with our policies and procedures. This commitment strengthens and promotes fair and ethical dealings and prac�ces for all members of our organiza�on and for those with whom we do business. As part of our culture and values, over the years we have promoted open and transparent communica�on through our “My Voice” channel.
The re-implementa�on of “My Voice” will enable us to follow-up with and provide solu�ons to the problems raised, as well as to establish indicators for decision-making. Framework
During the 19-20 harvest, driven by our focus on con�nuous improvement, we migrated to a more robust pla�orm.
With the aim to improve our grievence mechanism, we have developed a series of policies and procedures that ensure the ques�ons, opinions, reports, complaints and other ma�ers raised by our employees and stakeholders are handled in accordance with principles of trust, confiden�ality and respect. Over the course of 152 hours, we formed and trained a solid Ethics Commi�ee to support the complaint inves�ga�on and resolu�on process, and we announced our mechanism to our various stakeholders.
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55
Planet
REPORTE DE SOSTINIBILIDAD 19-20
42
Mercon Group Environmental Policy In line with our purpose of building a be�er coffee world, we defined the group's environmental policy in which we commit to addressing associated risks and impacts of our opera�ons by implemen�ng a management system aligned with ISO 14001 and applicable environmental guidelines.
9.Environmental Management Operate in an environmentally responsible manner by efficiently managing our water and energy consumption and reducing, reusing and recycling waste.
The results of this diagnosis will enable us to strengthen our environmental management system. By iden�fying opportuni�es for improvement, defining plans to close the gaps and standardizing key performance indicators, we will be able to manage the significant aspects and impacts of our opera�ons more efficiently. Our environmental management system also incorporates the development and reinforcement of a culture that creates awareness about the impacts we generate.
Environmental Management in Our Operations Reinforcing our environmental management system to improve the efficient use of our resources is a priority within our opera�onal excellence objec�ve. As such, during the 19-20 harvest, we defined the criteria and structure for an analysis that would incorporate cleaner produc�on ac�ons within our environmental strategy.
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57
Energy Efficiency Our direct coffee processing opera�ons consume the most energy at a rate of 7,062,162.6 kWh annually. Of these, Nicaragua, our largest processing center, represents 72%. Addi�onally, we use non-renewable fuels such as diesel and gasoline to operate machinery. Our diesel consump�on during the 19-20 period totaled 125,515 gallons, of which 39% was used at our Digranisa opera�on, 25% in Vietnam and 24% at CISA Nicaragua.
In terms of offices, our total energy consump�on in Nicaragua, Brazil and Guatemala was 260,138 kWh of which 80% was consumed by our offices in Nicaragua. Our consump�on decreased as compared to the previous year given the con�ngency generated by the COVID-19 pandemic, as a result of home office modality. Ini�a�ves to reduce energy consump�on Using energy more efficiently is essen�al. For this reason, we have implemented several ini�a�ves aimed at reducing our consump�on, including:
Solar module system at San Carlos Mill in Nicaragua: An investment project was presented and approved to install a solar panel system that will generate up to 448.7 mWh per year. Reduc�on of kWh consump�on in sor�ng process: As a result of our Entrepreneurial Spirit contest, this ini�a�ve was presented and implemented by our employees to reduce kWh consump�on by 3%. Motors with frequency converters: The installa�on of frequency converters in some of our coffee processing machines in Nicaragua allowed us to regulate them based on its electrical and speed requirements which helps to reduce energy usage and lower opera�onal costs.
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During the 18-19 harvest, we discharged a total volume of 5,817 m3, while during the 19-20 harvest, that number was 3,900 m3. This 33% reduction is due primarily to improved water consump�on through the installa�on of recircula�on tanks and water flow regula�on.
Water Conservation Water is an essen�al resource and requires a comprehensive commitment to conserva�on and efficient use. The water for our opera�ons comes primarily from underground sources, municipal supplies or other public or private water services. During the 19-20 harvest, we consumed 18,104 m3 of groundwater.
The water consumed by our produc�on processes is mainly concentrated in the wet mill’s pulping process, which we carry out at El Carmen Mill in Nicaragua. During that process 100% of the water used during the first coffee wash cycle is reused during the second one. Addi�onally all the water that cannot be reused is sent to stabiliza�on ponds, ensuring we do not discharge directly into effluents or bodies of water.
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Waste Type
19-20
12,214,339
15,457,630
1,329
2,138
Reuse
Bags cords
0
100.00
Landfill
LDPE plas�c
12,609
15,071
Reuse
-
1,082
Recycling
3,177,173
2,365,504
Discarded bags
We are con�nuously analyzing and monitoring chemical agents (NO2), (CO), (O3) and (SO2) and suspended par�culate ma�er at our mills in Nicaragua. During the 19-20 harvest, the air Quality Assessment Report concluded that the results showed no significant impact given that the measured values were below the permissible limits established by Nicaragua’s Mandatory Technical Standard (NTON) for air quality.
Waste management We only generate tradi�onal waste, which is subject to different disposal methods—primarily recycling and reuse.
Handling Method
18-19
Coffee husk
Chemical agents and particulate matter
Weight (kg)
Scrap Coffee pulp
Recycling
Reuse
The reduc�on, reuse and recycling of waste is a fundamental element of our management reason why we have implemented: Reuse of coffee husks:
Reuse of coffee bags:
Reuse of plas�c boxes:
Coffee husks is a significant byproduct from our processes generated by the hulling process and reused in the mechanical drying process as fuel for the furnaces.
Coffee bags are another product that we reuse. During the 19-20 harvest, in our main opera�on, we used 3,809,132 bags of which 61% were reused.
In our nursery opera�on, we use plas�c boxes to transport plants, which deteriorate and were changed periodically. During the 19-20 harvest, as part of our focus on reducing waste, we repaired 25,000 boxes for reuse, which represents approximately 60% of the inventory.
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Environmental Management across our Supply Chain As part of our environmental management agenda, we are also developing ini�a�ves to reduce our environmental impact across the supply chain:
LIFT an environmental management enabler across our supply chain
Through LIFT’s environmental pillar, we emphasize in guarding natural resources by encouraging prac�ces that ensure the conserva�on and protec�on of water resources, reforesta�on and forest conserva�on. Each farm’s baseline is recorded upon entering the program and is monitored annually to verify compliance with these prac�ces. In this way, we have conserved 6,337.7 hectares
of forest and protected 6,230 water sources.
We have implemented a new design for the treatment system of wastewater from wet processing on 20 farms across different produc�on areas. With this significant impact on caring for water resources is being made by reducing the level of honey water contamination by 98%, thereby
Wastewater treatment systems
Regenera�ve agriculture
achieving optimal levels that prevent contamination.
Along these lines and in partnership with TechnoServe through the Maximizing Opportuni�es in Coffee and Cocoa in the Americas Program (MOCCA), we are also driving improvement in wet mills and wastewater treatment systems. By inves�ng in this we are elimina�ng the risk of water source contamina�on on model farms.
With the support of CIRAD Agricultural Research Center, we are working alongside a consor�um of ten companies to develop the ECOFFEE (Ecological Coffee) project that focuses on transi�oning coffee farms to zero pes�cides over the next ten years through regenera�ve agriculture. Mercon is par�cipa�ng in the global research agenda and is coordina�ng field ac�vi�es in Nicaragua in conjunc�on with the Nicafrance Founda�on.
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Our Opera�ons’ Carbon Footprint
10.Climate action Maximize our positive impact on climate by mitigating carbon emissions in our operations and integrated supply chains.
Climate Change Commitment Recognizing that climate change poses a threat to coffee cul�va�on, we have focused our efforts and resources on implemen�ng ini�a�ves to mi�gate and adapt to climate change.
Our priority is to reduce not only the emissions from our own opera�ons, but also those generated across the coffee supply chain. We are aware of our environmental impact and have aligned our ini�a�ves with those of our strategic clients to reduce or neutralize our carbon footprint together. Reducing our carbon footprint is a fundamental indicator within our opera�onal excellence objec�ve and one of the pillars of our corporate strategy.
In coordina�on with Wageningen University and Research Center, we developed a study to calculate the greenhouse gas emissions associated with our direct opera�ons. Our measuring process was based on the general rules of Product Environmental Footprint (PEF) and reference standards such as: ISO 14067, 14040 and 14044 Carbon Footprint Product Category Rules (CFP-PCR) for green coffee, among others. Our greenhouse gas (GHG) emissions were measured for each of the methodology’s three scopes: • Scope 1: direct emissions at sites where Mercon's ac�vi�es are conducted • Scope 2: indirect emissions from electrical and heat-genera�on plants •Scope 3: indirect emissions from the raw materials supply chain and waste treatment (the emissions from growing and processing parchment coffee and land use change are reported separately)
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Total GHG emissions according to scope (tons) Ac�vity
Scope1
Tree seedling
26
Coffee farm
3,279
Processing (excl. purchased
Corporate Carbon Footprint overview Scope2 45
Scope3
Scope3 LUC
TOTAL
Annual Total: 20,352 tons de CO2-eq
116
44 1,877
-2,970
2,185
173
1,103
2,911
0
4,187
3,656
0
1,506
0
5,162
0.32%
0.35%
0.57%
10.74%
parchment beans) Transport (Mercon) Transport (non-FOB) Air travel Office Total (excl. purchased parchment beans)
7,134
8,565
8,565
66
66
36
35
1
72
1,184
15,003
-2,969
20,352
Emissions associated with processing purchased parchment bean (Scope 3) is the largest contributor to our total carbon footprint. In our opera�ons, transporta�on is the primary source of direct greenhouse gas emissions (Scope 1).
42.08%
20.57%
25.36%
Tree seedling Coffee farm Processing (excl. purchased parchment beans) Transport (land) Transport (non-FOB) Air travel Office
The study allowed us to iden�fy the main greenhouse gas (GHG) emission sources in each of our opera�ons to determine the necessary ac�ons and goals to reduce our carbon footprint. During the 20-21 harvest, we will prepare a roadmap to manage the ac�ons necessary to reduce our direct emissions and will promote coordinated work to reduce Scope 2 and 3 emissions. SUSTAINABILITY REPORT 19-20
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Supply Chain’s Carbon Footprint Reducing the carbon footprint associated with coffee produc�on is a concern that affects all actors across the supply chain. It is impera�ve to promote ini�a�ves that help iden�fy emission sources and to measure, manage and develop concrete ac�ons to reduce them. Within this framework, we are developing different ini�a�ves with the sector’s actors and are making progress in caring for the environment.
LIFT and climate change: Through our sustainability program's Environmental pillar, we provide training and technical assistance to producers to raise awareness about the environmental impacts of coffee produc�on. Within the program, we reinforce agricultural prac�ces related to water resource protec�on, wastewater treatment, forest conserva�on and use of coffee pulp to encourage farmers to adapt their produc�ve systems to climate change.
In our LIFT Program, producers’ performance on the environmental pillar improved by 7.7% during the 19-20 harvest, increasing from 69.2% to 76.9%.
Social and environmental risk assessment of the supply chain: Within the macro assessment of social and environmental risks of the primary coffee supply chain in Honduras, Guatemala, Nicaragua, Colombia, Peru, Brazil, Ethiopia, Laos and Vietnam, we iden�fied the risks to ecosystems and biodiversity. Within this framework, we evaluated to what extent coffee is accelera�ng climate change in origin countries through deforesta�on, landscape simplifica�on or increased water extrac�on for irriga�on. During the 20-21 harvest, we will enhance the ac�on plans and roadmap to combat the risks iden�fied.
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Uptake of natural climate solu�ons (NCS) on LIFT coffee farms: In partnership with Conserva�on Interna�onal and with support of the Inter-American Development Bank, we are working to integrate natural climate solu�ons into the LIFT program, to reduce greenhouse gas emissions and promote efforts to store more carbon on coffee farms. The objec�ve is to iden�fy needs and opportuni�es to improve tree-cover and to reduce greenhouse gas emissions without affec�ng produc�vity. Climate-smart agriculture: In partnership with the La�n American Solidaridad Founda�on, we are working on a pilot project to promote the Climate-Smart Agriculture prac�ces, moving towards a carbon-neutral coffee model, by training our technical team on climate change topics and measuring the different farms’ carbon footprints. We started with 2,500 small producers in Nicaragua and will later extend the project to 200 farmers in Honduras and 400 in Guatemala. We have also gained significant experience in using the Cool Farm Tool, which enables us to measure the carbon footprint on farms and monitor the impact of adop�ng climate-smart produc�on prac�ces. Moreover, a pilot program with the FarmTrace tool is underway, which generates smart reports to measure carbon sequestra�on in coffee agroforestry systems.
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Weather sta�ons and early warning system: Thanks to a team of agronomists trained to collect and analyze climate data and the instala�on of weather sta�on we are making progress in crea�ng an early warning system for coffee. In Nicaragua, 16 weather sta�ons—eight in partnership with TechnoServe—have been installed at strategic points to collect real-�me climate data that will be cross-referenced with data on produc�ve events, pests, diseases, soil and more. The goal is to monitor produc�on and create predic�ve models that translate into technical recommenda�ons to ensure the proper management of coffee planta�ons and, ul�mately, op�mal produc�vity, quality and profitability levels.
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THANK YOU FOR ALLOWING US TO CONTINUE BUILDING A BETTER COFFEE WORLD TOGETHER