The Effects of Climate Change in the Coffee Business
According to a recent report by World Coffee Research, global coffee demand will double by 2050, while suitable production area will decline by 50%. Rapid increases in temperature and decreases in rainfall have had permanent negative effects on farmland, forcing coffee farmers upslope to avoid the effects of extreme weather changes and resulting in lower quality harvests.
Temperature also directly affects coffee’s flavor. Beans ripen more slowly in cooler temperatures, leading to more complex flavor elements. In higher temperatures, coffee ripens too quickly, reducing its flavor profile. Major players in the coffee industry such as Nestle, Mondelez International and Kraft foods must find ways to improve coffee quality and yield in order to ensure the industry’s sustainability. Nestle plays a particularly critical role: as the world’s largest food and beverage company, it has a central role in developing environmentally sustainable innovations.
Exhibit 1: Effects of Climate change on coffee farms.
Nestle’s Response to Climate Change
Nestle has established a long-term goal to strive for zero environmental impact in its operations by 2030. In order to achieve zero impact, the company has short-term goals for reducing greenhouse gas emissions which it hopes to achieve by 2020.  It uses a framework called Life-cycle assessment (LCA) to assess and minimize the impact of global warming on the various stages of their supply chain.
The Company has been making strides towards achieving its sustainability goals. As of 2016, Nestle has reduced greenhouse gas emissions by 39% per tonne of product since 2006.  Additionally, Nestle was one of only 114 companies recognized by the CDP (formerly the Carbon Disclosure Project) as one of the world’s leading businesses on environmental performance in 2017.
Raw Materials – In 2010, Nestle implemented “The Nescafe Plan” in 13 of its major coffee-producing areas. The initiative helps train local farmers in sustainable farming practices. Nestle also invests in research and development in plant science to help find ways to help farmers improve the quality and yield of their coffee trees.
Transport and distribution – In 2011, the Company stopped using road, and started using rail and sea shipping in order to reduce its emission of carbon dioxide (CO2).
Exhibit 2: Nestle’s Life Cycle Assessment
What more can Nestle do?
Nestle has made a lot of strides in reducing the environmental impact of its operations. However, going forward, the company needs to increase focus on the first and most important stage of its supply chain – production. The future of the entire coffee industry is at stake and focusing primarily on reducing Nestle’s gas emissions, while a worthwhile venture, will not be enough to save it. Nestle must invest more in research and development, to help improve the quality of coffee bean production. There are opportunities to partner with other food and beverage companies, or with organizations such as World Coffee Research which conducts research to develop new genetic varieties of coffee that will be more resilient to extreme temperatures. 
The company may also need to consider opportunities to help coffee farmers earn more revenue on their harvests. New competitors entering the market are willing to pay farmers more, and Nestle may lose some suppliers to companies such as Thrive which essentially eliminates the middle man in the supply chain (distributors, wholesalers and retailers) by buying directly from the farmers and selling directly to consumers.
According to estimates from Rabobank international, 2017 is gearing up to be the fourth consecutive year of coffee deficit. The price of green coffee continues to stay relatively low despite increasing costs to produce and depleting supply. Can Nestle afford these increasing costs to make coffee available to consumers? Will Nestle be forced to increase the price of their coffee, and how will that affect demand?
Many coffee farmers have begun diversifying their farmland to ensure that they can make stable income to offset the loss of income due to decreased yield as a result of global warming. How will that affect already dwindling supply and what role can Nestle play in mitigating this?
 World Coffee Research “The Future of Coffee – Annual Report” 2016 https://worldcoffeeresearch.org/media/documents/2016_Annual_Report.pdf, accessed November 2017
 The Climate Institute “ A Brewing Storm: the Climate Change Risks to Coffee” http://www.climateinstitute.org.au/verve/_resources/TCI_A_Brewing_Storm_FINAL_WEB270916.pdf, accessed November 2017
 Nestle http://www.nestle.com/csv/planet, accessed November 2017
 Nestle http://www.nestle.com/csv/planet/climate-change, accessed November 2017
 CDP “The A List” https://www.cdp.net/en/scores-2017, accessed November 2017
 Nestle “Product Life Cycle” http://www.nestle.com/csv/planet/product-life-cycle
 World Coffee Research “Breeding for the future” https://worldcoffeeresearch.org/work/breeding-future/, accessed November 2017
 Www.wired.com “The next big thing you missed: Saving the coffee industry by running it like silicon valley” https://www.wired.com/2014/07/the-next-big-thing-you-missed-saving-the-worlds-coffee-supply-by-acting-like-a-tech-company/ , accessed November 2017
 Bloomberg “The Scientists Fighting to Save Us From a World Without Coffee” https://www.bloomberg.com/news/articles/2017-04-28/the-scientists-fighting-to-save-us-from-a-world-without-coffee, accessed November 2017
 Perfect Daily Grind “Diversification in Specialty Coffee Farming: The Agricultural & Economic Case” https://www.perfectdailygrind.com/2016/02/diversification-in-speciality-coffee-farming-the-agricultural-economic-case/, accessed November 2017