Corporate Philanthropy Will Not Save the Coffee Industry

Coffee companies love charitable projects. Projects to build hospitals and schools, to regenerate land, to provide “technical assistance” to farmers. These initiatives all sound good, and look even better in press releases and annual reports. They fit snugly into the Corporate Social Responsibility ethos that most modern-day companies embrace.

And it’s true that they can make a difference. For those who gain access to clean water or education, who can send their children to school or have medical problems looked at before they become debilitating, such projects can be genuinely life-changing.

But charitable giving and corporate philanthropy have long been used as a way for companies to avoid scrutiny of their business dealings, to divert attention from their extractive operations, and—in the case of the coffee industry—to continue underpaying and exploiting their suppliers.

I have written before about how the largest coffee companies, their shareholders, and their executives hoard most of the many billions that the industry generates. Corporate philanthropy is the shield that such companies use to deflect criticism and avoid regulation, all while perpetuating practices that are directly harmful to the workers they claim to act in support of.

In the end, these companies’ hyperfocused, small-scale projects, mostly concentrated in producing countries, might bring some benefit to a tiny minority of the millions who rely on coffee for their livelihoods. But taken together, they have a more malign aim: legitimising corporate benevolence over regulation, individualism over collaboration, and inertia over reform.

Private Self-Regulation

The origins of modern-day corporate philanthropy date to the industrial titans of the 19th century, according to a paper published in the Systemic Justice Journal. “In the wake of the industrial revolution, America’s wealthy found themselves called to a new mission — to leave their mark on the world by helping the public,” the unnamed author writes. 

An early proponent of the practice was steel magnate Andrew Carnegie, who, in ‘The Gospel of Wealth’, argued that the wealthy should “administer their funds to the benefit of the general public”, and who gave money to libraries, universities, and other institutions. However, as the author notes, Carnegie also depended on his workers living gruelling lives, and crushed unionising efforts with pay cuts, longer hours, scab labour, and violence.

Following this template, the concept of Corporate Social Responsibility (CSR) was further expanded and codified in the 20th century. In 1953, economist Howard R. Bowen described the practice in his book, the ‘Social Responsibilities of the Businessman’, as “the obligations of businessmen to pursue those policies, to make those decisions, or to follow those lines of action which are desirable in terms of the objectives and values of our society”. More recently, in 2014, law professor Benedict Sheehy defined CSR as “a form of international private self-regulation focused on the reduction and mitigation of industrial harms and provision of public good”.

Today, the majority of big companies practise some form of CSR or corporate philanthropy. In 2015, 92% of the world’s largest companies produced a CSR report, while Fortune Global 500 firms spend $20 billion each year on CSR-linked activities. Last year, U.S.-based firms donated more than $36 billion to (tax-deductible) charitable causes, and for good reason: The majority of consumers and investors report that they take such activities into account before doing business with a company.

How each corporation approaches philanthropy varies widely. Many give to charity, either directly or via a foundation; invest in employee welfare; focus on infrastructure projects within their supply chain; or work to reduce their carbon emissions or resource intensity. Most do all of the above in some form. 

Starbucks’ Do-Gooderism

That’s certainly true of the coffee industry’s biggest players. Take Starbucks, which buys coffee from 450,000 farmers in more than 30 countries, and purchases a staggering 3% of the world’s total volume of coffee every year. According to its slick Stories website, Starbucks is doing a lot to help those producers, from setting up Farmer Support Centres to building schools and financing loans.

The company is very proud of these philanthropic practices. Its website is full of earnest pieces explaining just how much good it is doing: “Starbucks [sic] future is directly linked to the livelihoods of farmers, their families and their communities, so we take seriously our responsibility to care for the people who are part of the coffee journey”, one such article reads.

And it’s not just self-congratulation: Starbucks is widely lauded for its approach to CSR, regularly appearing on lists of the most socially progressive companies. It has also gained a lot of positive news coverage for its good works. In 2017, the New York Times celebrated the company’s efforts, noting that “Starbucks has stood out over the years in its efforts on behalf of social do-gooderism”.

The Starbucks Foundation, a Section 501(c)(3) charitable organisation that receives funding primarily from Starbucks Corporation, has financed many different projects, including $25 million in initiatives within the farming communities it sources from and $20 million in neighbourhood grants. The foundation has built schools in Sulawesi, Indonesia; provided clean water to communities in the Philippines; and partnered with various nonprofits to “positively impact 1 million women and girls in coffee-, tea- and cocoa-growing communities by 2030 as part of Starbucks [sic, again] people positive ambitions”.

During the last coffee price crisis in 2018, the commodity futures price dropped below $1 per pound and caused, among many other impacts, mass abandonment of coffee farms. (At the time, the Specialty Coffee Association estimated that the “threshold for profitability” for coffee producers was $2.50 per pound.) In response, Starbucks launched an Emergency Farmer Fund with $20 million committed to support farmers in Nicaragua, Guatemala, Mexico, and El Salvador. 

But as Zac Cadwalader wrote in Sprudge at the time, the company is extremely guarded about how much it pays for coffee in the first place. “Starbucks keeps their pricing pretty close to the vest, but one report shows their average yearly prices for 2012, 2013, and 2014 being $2.56, $1.92, and $1.72, respectively”, Cadwalader wrote. “For context, the average yearly C-market prices for 2011 (when many of the Starbucks contracts would have been signed) through 2014 are $2.53, $1.75, and $1.26. Yes, that is technically above the C market, but it hews awfully close to it”.

All its worthy individual initiatives contrast with how Starbuck goes about its business, and the sheer scale of its income. In 2018, Starbucks brought in $24.7 billion in revenue, and paid out $8.9 billion to shareholders in dividends and share buybacks. Then-CEO Kevin Johnson made more than $13 million in the same year. That $20 million the company pledged to the emergency fund? It comes out to 0.08% of its 2018 revenue and, according to Sprudge, added up to an extra three cents per pound for the coffee it bought in 2018.

Was that $20 million needed and appreciated by the people who received it? Undoubtedly. Should Starbucks have done more? For a company that purchases a good chunk of all the world’s coffee, and which brings in tens of billions of dollars each year, $20 million is less than a drop in the ocean. 

‘Government by the Wealthy’

I’m using Starbucks as an example because it’s a very easy target, but I could do the same with pretty much any big coffee company.

In fact, I have: I’ve written extensively about Nespresso’s coffeewashing, using projects like Reviving Origins—in which it committed $10 million over five years to restore coffee farming to areas where it is under threat—to boost its image as a sustainable coffee company. (Nespresso’s revenue in 2021 alone was $6.7 billion.)

My point is not that the projects Starbucks or Nespresso run are inherently bad—it’s that they’re absolutely miniscule relative to the companies’ size and income. But because the numbers involved sound big on their own—$10 million over five years is a lot of money to most people—and there are clear benefits to those who receive the funding, it’s easy to dismiss any criticism. At least these companies are spending something, right?

This is the problem with philanthropy, both corporate and personal: Because it appears generous and is ostensibly given with good intentions, it is hard to condemn. But as Sally Haslanger argued in the New Statesman in 2020, “Large-scale philanthropy is an exercise of power that is fundamentally undemocratic”. It allows the rich to direct their money where they see fit, not where is best for the general public, and offers them tax benefits at the same time.

“The structure of philanthropy around the world is increasingly a manifestation of plutocracy – government by the wealthy”, Haslanger continued. “Rewarding large-scale philanthropy through tax relief and other subsidies gives the rich even more power than their wealth already provides to create a society that furthers their interests at the expense of others”.

Moreover, as the unnamed author writes in the Systemic Justice Journal paper, “today’s corporations are similarly acquiring wealth through socially harmful means while simultaneously being legitimated as socially beneficial actors through their corporate giving. In fact many corporations today are levering their good acts as a way to increase profit”. 

Their scale and power give Starbucks, Nespresso, and the world’s other biggest coffee companies the ability to decide which projects get funding and which countries or regions or communities benefit, rather than letting the people or governments of those countries decide for themselves. Using only a tiny fraction of their wealth, these companies’ philanthropic projects raise their profits and profiles, all while drawing attention away from the true cause of such inequities: their own exploitative treatment of farmers, suppliers, and workers.

The consequences go beyond just serving corporate interests above the people such projects are supposed to assist. “When corporations seem as if they are addressing social problems, calls for corporate regulation are dampened even if that regulation would result in greater social good”, the paper’s author notes. “So, it is not just the size of the donation, but the larger effect of the donation, that is the problem”.

Building Human and Social Capital

For smaller and independent specialty coffee companies, focusing on charitable projects makes more sense. Funding a specific initiative in one of your long-standing supplier’s communities is a relatively simple way to make a difference, and there is much more chance of collaboration with said community when the project is small and relatively personal.

Data is scarce, but I would venture that the majority of small coffee companies have funded these kinds of initiatives at one time or another. They could be literacy programs, or clean water projects, or solar panel installations—the options are essentially endless, and the best are community-instigated projects that the coffee company merely helps to fundraise for.

However, even on the more independent side of the industry, I do think these sorts of projects can be another example of coffee’s power asymmetries, albeit on a smaller scale. Such initiatives raise questions: How much collaboration and consultation took place before the project was greenlit? Is it really what the community needs or wants? Are the local people executing the project themselves, or is it an outside contractor? And would the money spent on the project be better utilised elsewhere?

There are plenty of alternatives to individual charitable projects, from the easy (paying more for coffee) to the more difficult (tighter governmental regulation and higher taxes). The now-collapsed International Coffee Agreement, as I discussed in my previous article on corporate wealth capture, played a big role in the comparatively more equitable industry of the mid-20th century. This, according to the sociologist John M. Talbot, was “due in part to the collective actions of coffee-producing states, which led to the imposition of a regulatory regime involving export quotas, creating rents for the producing countries”.

Increasing the price paid for coffee is often touted as a simple solution, and while certainly one key step, it isn’t enough on its own. There is already plenty of money in the supply chain—just look at all those corporate dividends—but it is not being distributed evenly or effectively. Finding a way to properly regulate and tax the runaway profits of coffee companies, and redistributing them to the people most in need, is key.

Many coffee farmers struggle with cash flow during the year, and despite the wider industry’s good intentions, the majority still live in poverty. One potential remedy is the use of simple, no-strings cash transfers: Multiple studies have shown that they can make a huge difference to the lives of recipients, while removing the top-down control from those in power. 

A 2023 study by Ruerd Ruben from Wageningen University in the Netherlands summarises research on the subject, finding that “by providing a steady and predictable source of income, cash transfers build human and social capital, improve food security, and strengthen households’ ability to cope with [external] shocks”.

Despite the potential for political pushback, Ruben argues that such transfers should be funded by profit-sharing with, and increased taxes on, international coffee companies. “Cash transfers – funded by private sector profit sharing and from public tax revenues – are certainly far more efficient than the wide range of separate efforts for increasing yields or improving prices”.

Controllable, Marketable, and Affordable

The coffee industry loves to think of itself as inherently ethical. This is especially apparent on large companies’ sustainability webpages and in their impact reports, which tout all the good things they do for the world.

Starbucks “has always been a different kind of company”, according to its 2023 Global Impact Report, and is “on a journey to unleash the limitless possibilities of human connection”. Nespresso is “using coffee as a force for good to shape lives and landscapes for the better”. Even on the (admittedly corporate-backed) specialty side, La Colombe is “brewing a better world”, and Blue Bottle Coffee “works to put more good into the world than it takes”.

The companies quoted above all have various ongoing philanthropic projects, from La Colombe donating to the National Park Foundation to Nespresso’s retirement fund for farmers. At the same time, La Colombe and Blue Bottle have both retaliated against their unionising workers, while Starbucks has been found to buy coffee from farms using child labour, and Nestlé, well, you know.

Coffee companies love charitable projects because they’re controllable, marketable, and affordable. While they might also benefit the communities in which they are carried out, that’s not really the point. The way the coffee industry is currently organised, profits stay in the Global North, while philanthropic projects are a way to control where the tiny amount of money that’s allowed to trickle down is allocated. 

Ultimately, until we figure out how to better regulate coffee corporations and share resources more equitably within the industry, these good works amount to little more than good PR.