I regularly find myself in discussions with partners on “overhead” when planning sustainability coffee projects. It’s an important conversation, but it often starts with a fundamental mistake—we assume projects with low overhead are “efficient.” But, in the words of Warren Buffett “Price is what you pay. Value is what you get.” We have to stop confusing low overhead (price) with meaningful impact (value).
The sustainability sector’s allergy to “overhead” is, from my perspective, counterproductive (and I am not alone – visit the Charity Defense Council). We are tasked with solving the sector’s most pressing issues, so we need to be able to invest in what works and attract the greatest talents. Rather than being so focused on cost, let’s first ensure that our work is actually protecting the future of coffee, then we can root out the waste.
But what is overhead, really?
Overhead is one of those things that’s hard to define, but you know it when you see it. It’s technicians who earn a decent salary because they have deep expertise, projects that take years to come to fruition, and work in communities where farmers need more help but will ultimately show much more progress.
But wait. Look again, and ask yourself these questions:
- Is hiring a team of expert agronomists high overhead? Or is it an acknowledgement that this is complex work that is worth getting right?
- Are monitoring, evaluation and data analysis worth the cost? Aren’t photos of happy farmers enough to know the project worked?
- Is 2 years too long to wait for a project to show real results? Is 5 years too long? To ask the question differently, do we believe that the toughest challenges are worth solving, or should we only solve the ones that we can deal with on a short timeline?
- If a farmer is not ready, today, to implement new techniques, should we still include him or her? If not, have we simply decided that that farmer will never have access to the innovations that are transforming our sector?
Each of these is an example where, if your only goal is to reduce overhead you are simultaneously choosing to reduce your impact.
This isn’t just an academic argument, though, and here’s why:
- Roughly a third of coffee farmers globally are in pretty good shape—they’re already using the latest techniques to maximize yields – look at Vietnam, Brazil and in many parts Colombia. These farmers can be reached with minimal overhead, but there isn’t much profound to be improved. And it’s easy to trumpet your work with them—just list the number of farmers reached and the number of trainings held. This leaves you with low overhead, but impact of effectively nothing.
- Within the sustainability sector, NGOs and companies can and should be collaborating, but in an integrated sector, there are countless opportunities for gaming the numbers. For example, when exporters integrate sustainability work into their operational costs, it may make the program overhead look better, but it will put commercial and short term interests ahead of solving long term sector issues. The trader is paid a bonus for selling coffee, not for achieving impact!
- This is a time for the sector to be investing into expertise beyond the supply chain, even if that boosts our overhead rates. Coffee drinkers are paying attention to where their beans come from and whether or not farmers earn a decent living. People understand the urgency of climate change. Organizations who pursue these opportunities should be called “forward-thinking,” not “wasteful.”
To be clear, we should absolutely strive to be efficient, and to maximize ROI. But if we’re thinking like a business (and NGOs are asked to do so, constantly), then we should think about overhead as the investment, and small investments generally yield small returns. And, if an investor asked the CEO of a private company, “how little can I invest?” then the CEO would rightly assume the investor was not serious about the project.
As a sector, let’s resolve to select strategies based on impact, be farmer focused and then find reasonable ways to keep costs down. Let’s eat a good a lunch, even if it costs a bit more. At least down the line, no one will say that we ignored value to focus on cost.
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