Circular Economic Models And Digitalization In Coffee Industry

Vietnamese Coffee Exporter

Circular Economic Models And Digitalization In Coffee Industry has been aiming for sustainable development at each stage of the supply chain. Reducing waste consumption and switching to biodegradable packaging are top priorities.

Most importantly, however, is delivering lasting impacts by implementing sustainable cyclical models and outnumbering key industry processes.

Learn more about the circular economy model, some examples of its adoption, and how it drives digitalization.

What is the course economic model?

To understand a circular economy model, we need to look at the linear economic model’s alternative model.

Linear model

This model turns resources into waste, leading to resource depletion and environmental pollution.

Let’s take cell phone manufacturing as an example: A company takes raw materials to build a mobile phone. Then they sell it. After being put to use for some time, the phone breaks or becomes obsolete; the phone owner throws it away.

This linear model focuses on resource consumption, and as a result, it leads to unsustainable conditions. That is highly wasteful, especially at the end, since the product is wholly discarded and often not recycled.

Circulatory model

The cyclical model is based on self-renewal. It is a cycle rather than a series of processes with a beginning and an end. Instead of discarding an obsolete product or by-product, the circular economy model is about recycling, repairing, refurbishing or even reinventing.

In the coffee industry, several companies in the operation process are looking for ways to reduce waste. The coffee stalks are pruned and used as raw material for the coffee kilns at the farm level. Coffee grounds are used as fertilizer or to produce cascara tea. Some companies are even developing compostable or reusable coffee bags or cups from used coffee grounds or coffee pods.

Benefits for farmers

By implementing a circular economy model, we can improve sustainability throughout the supply chain. In this way, it is possible to provide farmers with the ability to invest and develop the farm.

As farms grow and improve yield and quality, producers can purchase in increasing quantities. This helps farmers have more income and cover costs to invest and operate the circular model.

The circular economic model in east Africa

Today, millions of coffee producers in East Africa are in dire straits. This results from several problems, including low productivity, lack of access to credit, difficulty in accessing markets, weak infrastructure, low coffee prices and many others.

Safina is a leading sustainable coffee roaster based in Switzerland. The Company operates throughout East Africa, Latin America and Asia. To support East African farmers, Sucafina created the Farmers Center Initiative.

The Farmers Initiative Center is designed as a circular, sustainable model that gives farmers better access to resources and commodities. How it is done, and works vary from country to country based on the culture and situation.

I spoke with Justin Archer, COO of Sucafina for East Africa & Sustainable Governance, to understand how the initiative works. “We work in a loop with farmers,” he said. We buy coffee from farmers and provide necessary services and goods at favourable prices to the community. That’s the cyclical form we mean with this model.”

This cyclical model also empowers producers to use their assets throughout the year. That way, farmers generate and release more income to cover costs more efficiently. This creates a more sustainable cycle.

Darshit Shah is the Head of Strategic Projects at RWACOF, a Rwandan coffee exporter under the Sucafina Group. “Our operations in each East African country are tailored to the diverse supply chain dynamics of each country,” he said.

“Therefore, meeting the needs of farmers and our approach in each of these countries is highly specialized. However, the overall theme of the Farmer Hub initiatives is to make a positive impact on the livelihoods of coffee growers.”

The Farmers Center Initiative was developed to support coffee-producing countries in East Africa, including Rwanda, Kenya and Burundi.

The general store in wet processing stations in Burundi

Burundi is home to about 600,000 small-scale coffee farms.

I spoke with Luis Garcia, Country Manager for the Sucafina Group in Burundi. BUGESTAL, the Burundi branch of Sucafina’s coffee wet processing station, works with a local partner who also privately owns the washing stations in rural Burundi.

“Through the Sucafina East Africa Farmers Center initiative, our project in Burundi revolves around providing basic commodities at wholesale prices to farming communities,” says Luis.

“Farmers in the uplands of Burundi are very vulnerable to changes in commodity prices. On top of that, intermediaries along the entire supply chain for those commodities make substantial profits, increasing the final price for the farmer.”

To solve this problem, BUGESTAL has partnered with local communities to form a retail chain called “Akacu”, which means “Ours”. Akau stores provide wholesale products to the local community and promote local entrepreneurship. They are run like a franchise, which means that the profits they make remain in the community.

“We give entrepreneurs the branding and operating procedures, equip them with the basic furniture and IT systems to run their stores, and most importantly, we use our scale to bargain competitive prices for the goods they sell”. As part of the Sucafina Group, BUGESTAL also purchases goods at lower prices and passes this discount on to farmers.

Akau stores are currently located exclusively at nine stations owned by BUGESTAL and 13 stations by partners. The goal is to open 28 more stores outside the stations to reach a broader range of rural customers by 2020, with another 150 by the end of 2021.

“Our intention here, from a sustainability standpoint, is to try to reduce the cost of living for farmers,” Justin said. If they can buy food products at a discount, then this has some impact on the local economy.” In theory, this economic growth should then lead to increased productivity levels.

Differential plant and digital bank in Rwanda

As one of the fastest-growing economies in Africa, Rwanda is home to around 400,000 small-scale coffee farmers.

Like Burundi, several retail businesses are located at all Rwandan stations to increase access to essential goods. Farmers can also directly exchange coffee berries for other products at these stores.

However, these stores don’t just accept farmers’ coffee. Justin told me that many coffee farmers in Rwanda also produce corn. This maintains their financial stability during the off-season coffee crop and efficiently uses available equipment.

Corn is dried on the same high bed used to dry coffee. This means that the beds are used to their total capacity year-round, rather than being left empty for months at a time during the off-season.

Farming infrastructure is being used to the maximum, helping farmers have more income. As a result, operating costs are reduced for everyone, including farmers and Safina. Everyone saves money, and everyone benefits.

According to Darshit, “most corn farmers in Rwanda harvest, dry, and sell the husks and through cooperatives.” By offering to buy corn in retail businesses, Sucafina diversifies income and support more stable producers.

The farmers ‘ new online banking platform is another service being tested in Rwanda through the Farmer Hub. About 75 to 80% of the total population in Rwanda use mobile phones, but many farmers are still unable to use electronic banking. Most of them live in remote, rural areas, while banks are located hundreds of miles away in the country’s cities.

“In Rwanda, we converted laundry stations into correspondent banks,” says Justin. RWACOF has partnered with Joint Stock Bank to facilitate correspondent banking at these stations through the Farmer Hub initiative.

That means farmers can go to processing stations, open bank accounts, deposit savings, deposit money into other accounts and withdraw money. It also allows farmers to access credit and payor repay debt using eggplants.

Justin told me they have opened about 14,000 bank accounts for Rwandan farmers since the project started.

“The next step and the big aspiration is for growers to be able to access loans to cover their farm and balance the costs of cash needs during the off-season, like tuition fees, insurance,” says Darshit. Medical, footwear, etc.

“By sharing data and securing underwriting, we are finally making progress in facilitating these loans.”

Digital land analysis in Kenya

Coffee in Kenya is produced by both small farms (about 700,000) and estates. While agriculture in the country has developed steadily, there are still some ways to improve. An example is the correct application of fertilizers. Good fertilization will enhance the yield and improve the profitability of the farm.

Mette-Marie Hansen is the Managing Director of Kenyacof, part of the Sucafina Group. “We know that most smallholder farmers don’t know the quality of the soil and the nutrients in it,” she said. Improper fertilization often wastes money and is not effective in improving soil quality.”

She explains that Kenyacof can recommend suitable fertilizers to ensure optimal nutrient absorption by the plants by testing the soil. This results in more fertile soil and higher and more sustainable crop yields.

Mette-Marie explains that Kenyacof has also launched an initiative to use young people (of legal working age) from the communities they represent to conduct soil testing. She said the plan is to turn it into a full-time job that includes coffee farms and other crops and feed. “The target number of farmers in 2020 is 5,000 people,” she said. The aim is to retest the same soil over the next 12 months to assess the results.

“An app (Kahawa Soil App) connects to the scanner and provides a soil condition report. The soil condition report is available on the dealer’s smartphone within 10 minutes. It shows the total nitrogen (N), total phosphorus (P) and exchangeable potassium (K) levels in the soil, as well as the pH, organic carbon, soil temperature and cation exchange capacity”.

Since all data is stored in the cloud, their agronomy department can follow up with the same farmers. By assisting farmers in analysis, soil quality is improved markedly, ivy yield is increased and benefits both exporters and farmers.

In addition, the application’s soil analysis capabilities are not limited to coffee only. It can be used for other agricultural fields and different crops altogether. Since the app can be used for several different crops, it is valuable to producers. This makes the opportunity cost of using the application much lower.

All three of these projects across Kenya, Burundi and Rwanda are part of a broader initiative with a simple end goal: improved utilization and efficiency for coffee producers.

Justin said: “We started a year ago, and the stores have been bustling. We are buying a lot of corn and opening many bank accounts.

“By directing resources back to farmers and back to communities, we are unlocking endless potential; new and more sustainable supply chains for both sides and access to resources that improve the well-being of families.”

Digitization improves accessibility for farmers, while circular economy models positively impact everyone. When both are done, they benefit the entire supply chain.

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