Social Innovation: A Design Tool to (Intentionally) Create Value
So many of the words and concepts we use in the coffee sector when it comes to sustainability and sustainable approaches are a little bit nebulous.
In the third in a series of features on sustainability frameworks and their relationship to the SCA’s sustainability agenda of equitable value distribution, SCA Sustainability Director ANDRÉS MONTENEGRO explores the concept of “social innovation.”
“Sustainability” is a hard-to-define concept because it encompasses everything and is timeless per its definition.[1] “Innovation” is equally mysterious, but like sustainability, the challenge in defining it succinctly lies in its potential to blend diverse and even contradictory concepts, taking something that was previously unknown (or below our awareness radar) and making it tangible. Having examples of “innovation” as a reference point (either in practice or empirically) can help us to better understand it, creating clearer connections that resonate with our mental models and mindsets.
“Social innovation,” as a concept, is another idea that might be easier to define once we either experience it or have examples of it “in the field” as reference points. But beyond specific practices—which are dissimilar, as social innovation is content-dependent—social innovation must posses at least three characteristics to be defined as such: first, it must be a novel solution for its particular context; second, it must solve a social problem; third, a review of its impact once its been implemented must show evidence of improving the social element it was seeking to solve (i.e., it is more effective, efficient, just, and/or sustainable than current solutions in place).[2] In a nutshell, any novel solution that improves our current status could be labeled as a social innovation.
But not all social innovations are created equal, so we need also to consider the impact of each solution, and beyond that, the deep rationale behind the intervention or innovation. The Organisation for Economic Co-operation and Development (OCED), an international research organization that works to build better policies for better lives, defines “social innovation” as new solutions which “ultimately aim to improve the welfare and wellbeing of individuals and communities.”[3] Less explicit is the role of innovation as a tool for value creation: a way to evolve, adapt, and improve a coffee company or organization, innovation is doing something better to satisfy human needs—this process creates social value for the coffee market and society.[4] But taking it one step further and making the implicit explicit, if we wanted to describe or define “a sustainable social innovation,” it would be a social innovation which also considers how value is created, accrued, and distributed among those involved, directly or indirectly, in the value creation process or outcome. This also comes with the caveat that this definition recognizes value creation as a collective endeavour.[5] The market share of specialty coffee today reflects a consolidated innovation pathway: over the last 20 years, the estimated percentage of US population consuming specialty coffee has grown from 9% in 1994 to 34% in 2014, with the last market research report developed jointly by the SCA and the NCA placing this number at more than 50% as of 2023.[6]
This is why social innovation is important for the specialty coffee sector: its connection to value, and specifically the coffee sector’s value! “It’s the way we are evolving the [sector] and becoming faster, simpler, more inventive, [more sustainable!],” says the betselling author and professor Vijay Govindarajan.[7] A thriving specialty coffee sector must innovate in order to create value while nurturing a community where all supply chain actors could thrive in tandem, satisfying the increasing consumer needs and preferences for new coffee experiences. Innovation allows coffee companies and organizations to dynamically adapt their operations for navigate market systems successfully. Social innovation helps us to understand the purpose[8] of the innovation, shifting the conversation to make visible that those new solutions or innovations that imply conceptual, process, products, and organizational change can also aim to improve the welfare and wellbeing of all involved in the innovation.
So, what does this mean in practical terms? Our industry has generally reached a consensus that we face innumerable challenges to our future, vast and diverse—and this has prompted some action, but it doesn't seem to make the desired impact. Why do we keep generating results that nobody wants? Our best intentions to make coffee better seem to be fettered, lacking inventive solutions to address the root causes of our problems. Social innovation, by its very nature, requires us to find news ways of operating, offering the opportunity for a mind-set shift where value is created with purpose, enabling incentives for fair and equitable value creation and distribution. Social innovation coulb be a process for designing and developing effective solutions to socio-environmental issues, shaping markets in support of social progress.[9] Framing it in coffee business terms, social innovation has the potential to generate business models or sourcing operation that create value because of sustainability, not despite it, financial gain or profit through purpose. If we lack focus, sustainable performance suffers.[10]
Social innovation differs from conventional innovation in its focus in that it asks us to weigh tradeoffs and make decisions with a longer view: innovation is sometimes more about short-term performance improvements or gratification, wherease social innovation requires an intrinsic motivation and vision to create a longer-lasting impact that regenerates people and planet while profitable. Sustainability truly requires this lens of social innovation, a permanent shift in the underlying architecture of how value is generated and distributed, a reinvention at the level of organizational purpose and structure.
In complex and blurry supply networks, like coffee, social innovation also provides a reference framework. It is difficult for coffee businesses to observe the impacts of their actions and management decisions, a classic systems thinking challenge: the primary consequences of our actions are in the distant future or in a distant part of the larger coffee system in which we operate. All of us, every company and organization, has a limited “learning horizon,” a breadth of vision in time and space within which we assess our effectiveness.[11] When sourcing decisions have consequences beyond our learning horizon, our direct experience is limited, and we tend to focus on narrow metrics and priorities. Social innovation provides architectures that could serve business purposes but aligned with serving the needs of a thriving coffee industry for all. A hypothetical (but conspicuous) example of this vision in action could be better understood when comparing a commodity sourcing network with an “ethical sourcing network.” In a conventional, commodity sourcing network, the focus of innovations would be on reducing operational cost and purchasing prices in every step of the network. We already know that this structure creates a race to the bottom that hurts quality and, often, the wellbeing of producing communities. However, an ethical sourcing network might focus their innovations around transparent and lasting interactions that create positive feedbacks loops (which, in turn, generate positive impacts, according to some studies).
With this in mind, it’s easier to see that social innovation is already happening in the coffee sector! Here are a few sips of hope, some of them SCA Sustainability Awards Winners, highlighting progressive work being implemented throughout the coffee system[12]:
Purpose. The purpose of a business (in this context) referes to the fundamental reason why it exists, and it is better reflected in its culture and operations. Union-Hand Roasted Coffee, created to make coffee better to every one and ethical sourcing pioneer is a clear example of a business aimed at sourcing extraordinary coffee, and paying fair prices and committed to sustainability and long-term relationships.
Networks. Coffee companies are embedded and create complex networks for their successful operation. Long-term commitments to support this networks, particularly at the base of the supply chain, is a key highlight of sustainable business. RGC Coffee, exemplifies how sustainability could be a critical business strategy, with long-term and patient investment in suppliers and coffee-growing communities.
Governance. The governance structure of a business shapes how decisions are made and the quality of sustainability impacts. For more than twenty years, Coop Coffees has fostered fair and equitable trading practices leveraged by the cooperative model, with active relationship with 28 direct and fair trade cooperatives in 13 coffee producing countries. These cooperatives are local and governed by farmers, creating a shared mission accros the supply network that nurture producing communities and sustainable impacts.
Ownership. Who owns the business matters and affects power dynamics and value distribution approaches. Pachamama[13] coffee, a farmer owned coffee business, represents one of the most unique and innovative business models in the coffee sector. The ownership structure, with five founding sister-cooperatives, changes the game for maximizing the efficiency of the supply chain and the value distribution potential to farmers members of these organizations. Impact driven business model through ownership innovation.
Finance. The way financial parameters are shaped to enable transformative ideas (and help them flourish) is of paramount importance if we want to build a more equitable coffee sector. Origin Coffe Lab is championing agricultural and financial techniques to enable lasting change in the coffeelands of Peru. Grace Farms is also a relevant social-innovation for a coffee and tea brand that re-invests 100% of its profits to address labor issues.
These examples emphasize the natural overlaps of different types of innovation—shifting the focus on any of these examples would yield a different understanding of how each innovation works (or what it is meant to achieve). Our challenge now is to understand how new solutions emerge and why we still lack the speed and scale required to address our industry’s persistent challenges. Unfortunately, we still don’t have a thorough and systematic approach to understand the impact of sustainability initiatives in the coffee sector: beyond good intentions, market-led social-innovation need to close the gap of supply and demand contraints simultaneously, which seems to be a key driver for a sustainable impact of these interventions in producing regions. These “bundled” strategies seem to be effective in improving quality, yields, and profits for farmers, but still require further study to understand if they offer good value for money.[14]
As Maria Manzucatto mentioned in her bestselling book, Mission Economy, “we need to resurrect ambition and vision, creating inspirational purpose” in order to catalyze social innovation across multiple sectors and actors.[15] Asking “what kind of future do we want?” is a better question than “what problem [in coffee] needs to be fixed?” Social innovation could be the design tool for creating solutions that can dig deep into the very core of business models and market systems, purposefully shaping change in sustainability efforts. Interventions
At the SCA we are committed to make coffee better, for all, focusing our efforts on equitable value distribution. We need to acknowledge that no coffee business or company is wholly sustainable yet. We all have a journey still to complete on how to be sustainable, learning together, and ensuring that no producing nation, farmer, or farmworker are left behind. As Sir David Attenborough attested at the COP 26, “our motivation should not be fear, but hope.” Hope for an energized world that wakes up every morning with a sip of coffee, spawning those creative possibilities from social-innovation into sustainable realities.
ANDRÉS MONTENEGRO is the Specialty Coffee Association’s Sustainability Director.
[1] The UN-Bruntland Comission defines sustainability as “meeting the needs of the present without compromising the ability of future generations to meet their own needs,” which implies that sustainability involves a certain level of awareness, a time lag, between short-term benefits for me/us and the long-term benefit for “others.” This represents the broadest sense of sustainability, the ability to mantain or support a process continuously over time (at infinitum).
[2] James A. Phills, et al. “Rediscovering Social Innovation.” Stanford Social Innovation Review, Fall 2008.
[3] https://www.oecd.org/regional/leed/social-innovation.htm
[4] Govindarajan, Vijay. “The Three Box Solution.” Harvard Business Review Press, 2016.
[5] Marianna Mazzucato. “The value of everything: making & taking in the global economy.” PublicAffairs, 2020.
[6] National Coffee Association – Specialty Coffee Association. National Coffee Data Trends – Specialty Coffee. Spring Report, 2023.
[7] Govindarajan, Vijay. “The Three Box Solution.” Harvard Business Review Press, 2016.
[8] Purpose: It is a clearly defined and long term strategy that affects every part of the business, from innovation to product development to consumer experience to marketing. More details on this topic could be found in Jeff Fromm, “The Purpose Advantage: how to unlock new ways of doing business.” Vicara Publishing, 2020.
[9] Sarah A. Soule, et al. Defining Social Innovation. Stanford Graduate School of Business. Available at: https://www.gsb.stanford.edu/experience/about/centers-institutes/csi/defining-social-innovation
[10] Polman, Paul; Winston, Andrew. “Net Positive: How courageous companies thrive by giving more than they take.” Harvard Business Review Press, 2021.
[11] Senge, Peter. “The fifth discipline: The art and practice of the learning organization.” Currency (updated version), 2010.
[12] The examples use the patterns described by Marjorie Kelly, and adapted in a two-part seminar hosted at Re:co Symposium 2023 in Portland, Oregon: Designing Coffee Sustainability, Leadership for a Regenerative and Distributive Coffee Value Chain.
[13] Pachamama is a Quechua word (and extensively used/adopted in the Andes region of South America), meaning Madre Tierra (Mother Earth) and associated with the creative power of nature. In a deep sense also represents the connection of everything (unity).
[14] Del Prete, Davide; Giuliano, Peter; Macchiavelo, Rocco. An assessment of experimental evidence in the coffee sector. SCA Expo Lecture. Portland, Oregon, 2023.
[15] Mazzucato, Mariana. “Mission Economy: A moonshot guide to changing capitalism.” Harper Business, 2021.