Coffee Market Systems Development to Protect Watersheds in Honduras

This article is cross-posted from Agrilinks.

What does protecting watersheds have to do with the coffee market system? Surprisingly, a lot! 

Since 2014, Catholic Relief Services’ (CRS) Blue Harvest Program has worked with local partners in Honduras, El Salvador and Nicaragua to restore water resources and transform coffee livelihoods. The mountainous, coffee-producing areas of Central America provide drinking water for millions of people. As land degradation and climate change threaten coffee production and contribute to growing water scarcity, the link between the coffee market system and natural resource management has never been more important.

Watersheds are areas that capture rainwater that then drains into streams, lakes, wetlands and groundwater aquifers. These freshwater resources supply drinking water, water for agriculture, manufacturing and recreational activities, as well as provide habitats for plants and animals. Unfortunately, deforestation and different forms of pollution interfere with the health of watersheds.

The initial Blue Harvest Program, with foundational funding from Keurig Dr. Pepper and later the Inter-American Development Bank, sought to protect watersheds through an integrated water management or systems approach that addressed the environmental, social and political dimensions of water use and protection. Local communities helped CRS recognize that coffee production was a critical component in this system because coffee is an important source of livelihoods for smallholder farmers, as well as a leading source of surface water contamination in coffee-growing watersheds. Coffee processing, which uses water to remove the outer pulp and skin of the coffee fruit, creates wastewater and organic by-products that frequently end up in streams and waterways. To protect watersheds in any sustainable way, CRS needed to engage coffee farmers and examine the entire coffee production system.

It soon became clear that to improve water resource management in Honduras and the other countries, CRS would need to take a comprehensive market systems approach that bridged both the water ecosystem and the coffee market system to:

• Influence local policy, ordinances and regulations governing watershed protection.
• Promote water-smart farming practices that improve soil and water management while increasing productivity, an important incentive for farmers.
• Promote water-efficient coffee milling practices and technologies.
• Improve coffee quality so farmers may access higher-value coffee markets.
• Improve wet milling systems to ensure that only clean water is returned to nearby streams.
• Promote the transformation of coffee cherry “waste” to organic fertilizer products.

In Honduras, the Blue Harvest Project helped 2,395 farmers and restored 4,280 hectares of land, impacting 14 watersheds. However, the true point of impact was the multifaceted coordination and facilitation approach taken by the Blue Harvest team.

Through CRS’s facilitation and coordination role in Blue Harvest, we were able to play a part in systems-level problem-solving. For example, as is the case in many countries, before Blue Harvest, agriculture input providers would sell a standard package of fertilizers to all farmers regardless of the characteristics of the farmer’s soil. In many cases, it was a waste of money for the farmers and could even be counter-productive, depending on the soil. This standard approach applied to government-subsidized programs too and, therefore, was detrimental to both soil fertility and productivity as well as water quality in areas where excess fertilizer flowed into the surface water resources. Having identified this problem, CRS worked across all stakeholders involved in the agriculture input supply chain, including farmers, soil scientists, local government, the private sector and banks, to come up with a solution.

As a result, input providers now adapt their fertilizer formulas to the soil analysis for the specific area. The Blue Harvest project never provided funding for the agricultural inputs, but acted as a convener to overcome technical and market challenges to production and soil quality. This required collaboration between the Instituto Hondureño del Café (the Honduran Coffee Institute), the farmers and the municipality, all of whom are sharing the cost of the soil analysis. The banks then finance inputs prior to harvest, and the input providers now tailor their products and doses appropriately for their customers, who now get a better return on their production investments in fertilizer. This collaborative effort is a major shift that improves both soil health and the quality of the coffee produced, solving both a market problem and an environmental problem. Additionally, coffee buyers recognized that Blue Harvest was using sustainable practices, generating greater demand for Blue Harvest coffee beans.

CRS also tackled similar systems issues related to access to the export market using their facilitation and coordination role. “Previously, it was impossible for anyone with less than $40,000 in capital to obtain an export license,” said Blue Harvest’s senior program manager. Now, after five years of working collaboratively with government actors, private sector companies and farmer cooperatives, the export license is less expensive. As a result, many more small organizations can export. This change opened up greater access to the benefits of the coffee market for more smallholder farmers, thus scaling up their engagement in the coffee value chain.

Everyone depends on water, so through Blue Harvest’s collaborative efforts and the increased recognition of the value of soil and water protection on the part of the government and private sectors, the national system is increasingly supporting sustainable production practices that protect watersheds at scale.

By convening and training local government, farmers, water committees and other community stakeholders, the Blue Harvest team was able to bring the necessary actors together to develop key governance measures for sustainable watershed protection, including:

• Declaring watersheds as protected areas, which legalized watershed administration with community participation.

• Regulating and enforcing management of wastewater, also known as “honey water,” which is produced during the coffee fermentation and washing process and is a major source of surface water contamination.

• Developing watershed management plans to regulate forest exploitation. Management plans were approved by the Honduran Forestry Institute, municipalities and communities.

• Developing municipal regulations to eliminate burning in protected areas.

This way of working was a paradigm shift. In the case of Blue Harvest, CRS was no longer a service provider or project implementer, but worked instead to connect and convene actors to overcome obstacles to sustainable and environmentally friendly coffee production. Furthermore, the Blue Harvest team identified key factors for transformational change from their experience that can be used to scale this method throughout the region and for use in the future in other market systems contexts:

• Economic incentives: CRS must understand the economic incentives driving all actors for CRS to play a convening role.

• Social connection: Community buy-in is critical to influencing change and the voice of local actors can have more influence than CRS.

• Technical expertise: The technical expertise that CRS brings is important for gaining credibility with the various actors involved and in making sure the CRS is useful in the process.

In January 2022, CRS launched the five-year Blue Harvest regenerative project in Honduras and Nicaragua, supported by Keurig Dr. Pepper,Green Mountain Coffee Roasters, Shockwave Foundation, Jessica and Alejandro Foung, USAID/Honduras Root Capital. This phase will scale the impact of Blue Harvest practices to reach more than 18,000 coffee farmers and protect over 100,000 hectares (ha) of land by 2026. In El Salvador, Blue Harvest currently reaches 725 coffee farmers and 1,029 ha of land around critical watersheds, within a broader water-smart agriculture and landscapes restoration program funded by the Howard G. Buffett Foundation. Blue Harvest continues to welcome new partners in hopes of scaling impact across all of Central America in the coming years.