Nespresso Made First Payments to Colombian Farmers’ Pilot Retirement Savings Plan

Dec 7, 2015 10:00 AM ET

A remote coffee-growing community

Like many of Colombia’s greatest coffee-producing regions, Caldas is situated high up in the mountains where the unique micro-climate protects the production of the finest quality coffee. The farmers that live and work there operate small farms of around 2-3 hectares, on average. And the landscape is challenging; at such high altitudes and with scarce road infrastructures, people often have to rely on the use of donkeys to climb to their farms, transport their goods and get around.

As a result, farmers are not always protected and are increasingly vulnerable to a range of external factors.

A focus on improving social security

The Nespresso AAA Sustainable Quality™ Program has been successful in improving the productivity and profitability of farmers supplying the company with coffee that meets the quality and aroma profiles required for its Grand Crus range since 2003. But the company wanted to extend the scope of the program to focus on improving the social security of farmers in the region.

“We wanted to find out what the farmers wanted and needed most,” says Jérôme Perez, Head of Sustainability at Nestlé Nespresso. “Was it straightforward savings accounts, or crop insurance they needed? What about insurance that might improve their dental health?”

With the Colombian government already providing basic healthcare to 99% of farmers, the Caldas farming community told Nespresso they wanted access to a retirement savings plan, especially given the average age of farmers being 53 years old and the next generation leaving in search for jobs in the city. “So, that’s what we set out to do – to safeguard their futures and encourage young people to stay and produce coffee.”

A unique collaboration

Last year, Nespresso, in partnership with the Colombian Ministry of Labour, the Aguadas Coffee Growers Cooperative in Caldas, Expocafé and Fairtrade International entered into a public-private-partnership (PPP) to create a retirement savings plan for AAA coffee farmers in the region. The Farmer Future Program was born.

Not wanting to reinvent the wheel and ensuring collaboration with the government, the program makes use of Colombia’s existing, government-subsidized Beneficios Económicos Periódicos (BEPS), for workers whose income does not allow them to contribute to a pension in their old age.

“Coffee farmers work very hard their whole lives, yet they don’t have the means to support themselves when they reach old age,” says Harriet Lamb, CEO of Fairtrade International. “This innovative public-private partnership will start to address this urgent need and could be a really exciting step forward. Our hope is that this will also help the younger generation see coffee farming as a viable career, so preserving this essential part of the Colombian economy and heritage.”

First payments made

One year on, 850 farmers have signed up to the program, with Nespresso paying 300,000 pesos (CHF106) to each farmer. And the first payments have now been made into their dedicated savings accounts, which are blocked until retirement age, with the Colombian Government matching 20% over what the farmers save themselves in the future. And 164 participating farmers have already decided to save additional money into the fund on their own.

Meanwhile, the collaboration with Fairtrade International means that farmers will benefit even further thanks to its deep experience in building strong farmer organisations and driving community impact – helping farmers, for the first time, make the best investment decisions.

It is a situation Jérôme Pérez, Nespresso’s Head of Sustainability, describes as a “win-win”. By securing the future of farmers in Caldas, Nespresso is helping to mitigate future risks of instability in the coffee-growing sector it is so reliant upon - especially in Colombia, deemed to be one of the most important sources of green coffee for the company.

For the Colombian government, Nespresso’s introduction of welfare provisions that benefit farmers and their families in Caldas is enabling more widespread social transformation. As Labour Minister Rafael Pardo says, the partnership with Nespresso “will allow us to leverage the relationships they have built with farmers in Aguadas over the last ten years”.

Empowering farmers

The Farmer Future Program is also empowering farmers who, rather than dreading their old-age, are feeling positive about what the future holds for the industry and their families. As Cesar Julio Diaz, a member of the Aguadas Coffee Cooperative says, “the program will motivate young people to stay in the area and engage in coffee production”. For Delio Gonzalez, a AAA coffee farmer, “it gives us hope to be able to reach our retirement age; we can rest and enjoy our old age quietly.” Some 150 farmers have also become part of the farming cooperative in order to benefit from the program.

Developing and implementing this pilot retirement savings plan has been a complex process for Nespresso, demanding a unique approach to collaboration and strong partnerships to make things happen on the ground. But as a tool to protect the future welfare of smallholder farmers - and to guard against factors contributing to instability in Colombia’s coffee sector - it has been a positive first 12 months.

And Jérôme Pérez concludes, “Thanks to our close relationship with farmers supplying coffee to Nespresso, we were in the unique position to listen to farmers to find out what it is they want and need most.”

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