Assessing Natural Capital costs in coffee operations

How do you differentiate between the environmental impacts of organizations across different geographies, local conditions, products, local regulations etc.?

For several years, ofi has been working towards assessing the true value (cost or benefits) of some of our operations on the ground. Our latest case study on Natural Capital Valuation: Assessing Natural Capital costs in coffee operations, delves into year-on-year monetary impact of our select coffee growing operations in five origins.


Globally, an estimated 12.5 million to 25 million smallholder farmers depend on the coffee industry for their livelihoods, according to figures from Fairtrade1 and the FAO2. However, the majority of these farmers face significant challenges including limited access to formal agronomy training, inadequate resources, small farm sizes and insecure land tenure. These factors often hinder the adoption of sustainable agricultural practices, which are crucial for preserving Natural Capital over the medium and long term. As a result, coffee production often imposes a cost on nature in the form of GHG emissions, degradation of soil structure and fertility, depletion of ground and surface water, and loss of natural ecosystem services critical to agricultural production.


To address these challenges, we employ Natural Capital valuation techniques, which leverage environmental economics to assign a monetary value (US$) to our impacts and dependencies, encompassing carbon emissions, water usage and ecosystem services. Quantifying Natural Capital in this way enables us to assess and mitigate risks while fostering investments that promote a positive impact on landscapes and ecosystem.


We evaluated twenty AtSource+ coffee farmer groups sourced from five different origins3 to assess their GHG emissions and water use related Natural Capital Costs (NCC). Reporting on the NCC is based on each metric tonne of product which makes the cost intensities very sensitive/ dependent on farm level yields. Thus, understanding the underlying yield dynamics is also crucial for interpreting these NCC footprints effectively.

As a part of our coffee sustainability strategy, we aim to save 1.5 million m3 of water annually by 2030. Through externalities valuation we can guide teams to prioritize locations which have higher water externalities cost. The case study underscores the critical importance of investing in farmer training programmes to effectively manage the social cost of carbon, given the regular challenges such as optimizing fertilizer application, crop residue management. It also highlights the growing correlation between agri related issues such as vulnerability to ill-timed rainfall, pests, heat etc. and productivity.



3. From these twenty selected FGs, we purchased 43% of their total production of GBE volumes. Out of the 20 selected FGs, six FGs are from Peru, five each FGs are from Mexico and Colombia, three from India, and one from Honduras. 19 FGs produce Arabica and one produces Robusta.


Ria Bakshi |

Global Head of Sustainability Accounting, Reporting & Impact