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 by Marc Gunther
Last Updated: March 21, 2008: 6:43 AM EDT
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Starbucks sows carbon farmers

The coffee giant wants to help farmers tap into the fast-growing $70 billion carbon credit business.

By Marc Gunther, senior writer

NEW YORK (Fortune) -- Ever heard of 'ecosystem services'? It's one of the most exciting concepts kicking around the corporate-environmental world these days.

The idea is that nature produces valuable products and services that we often take for granted, such as clean water, timber, medicines from plants, habitats for fisheries, pollination and carbon storage. The question is, how do we repay nature so we can continue to enjoy these benefits?

Some Fortune 500 companies are seeking answers. Coca-Cola (KO, Fortune 500), for example, has an expansive, expensive global program to protect and generate fresh water, sometimes in unorthodox ways: Coke and a bottler pay farmers in the highlands of Guatemala to use more ecologically-sound farming methods to protect watersheds which feed the MesoAmerican reef. They're even supplying the villagers with more-efficient wood stoves, so they don't have to cut down as many trees.

Is this charity? Or smart business, since Coke needs fresh water to deliver its products?

I've heard too that Marriott (MAR, Fortune 500) is contemplating a program that would help preserve forests in the Amazon. They haven't disclosed details, but the Marriott people know that forests sequester carbon, which helps prevent global warming. The travel industry, of all businesses, has a compelling interest in protecting nature's beauty since it's provided "free" of charge to tourist destinations around the world.

Now comes Starbucks. On Wednesday, the coffee giant ventured into the world of ecosystem services with its longtime partner, Conservation International. For years, Starbucks (SBUX, Fortune 500) and Conservation International have worked together to develop what are called CAFÉ standards for Starbucks' growers, which reward those coffee farmers (with higher prices) who adhere to best environmental and social practices. Now Starbucks and Conservation International want to help protect the land surrounding places where coffee is grown. (Here's the press release.)

The new project is intended to help the farmers get a piece of the fast-growing $70 billion carbon finance business. "They can become carbon farmers as well as coffee farmers," says Glenn Prickett, a senior vice president with Conservation International. "By protecting and restoring forests, Starbucks and the coffee farms will do their part to mitigate climate change."

Here's how the project would work: Starbucks will finance Conservation International's efforts to work with local partners and coffee growers to protect the landscapes around the coffee growing areas. The growers, on their own or in partnership with local governments, would agree to preserve forests as they are or to replant trees. They would then become eligible, in today's world, to seek carbon credits from companies that are voluntarily offsetting their emissions. (Many companies now do so, among them Yahoo (YHOO, Fortune 500), Google (GOOG, Fortune 500) and News Corp. (NWS, Fortune 500))

Many people believe that such forestry projects will become part of climate-change legislation when it is enacted by the United States as well as part of the Kyoto framework when new rules are written for the post-2012 period. That would mean the farmers would be generating carbon credits that are even more valuable because they could be used by companies that are required by law to reduce their emissions.

The plan now is to get started at sites in Sumatra, Indonesia, and Chiapas, Mexico. If all goes well, the program will spread to coffee-growing regions elsewhere in Latin America, Asia and Africa. It will be good for the economic livelihood of the coffee farmers, good for the local environment, good for their crops, good for the planet and good for Starbucks, which can tout the project to its customers and workers.

Howard Schultz, newly re-installed atop Starbucks, got this project rolling a few months ago when he called Peter Seligmann, the chairman and CEO of Conservation International. Both men live in Seattle, so they know one another. The former CEO of Starbucks, Orin Smith sits on Conservation International's board.

A final word on ecosystem services, this from a group called the Ecological Society of America:

Have you ever considered that the cereal you eat is brought to you each morning by the wind, or that the glass of clear, cold, clean water drawn from your faucet may have been purified for you by a wetland or perhaps the root system of an entire forest? Trees in your front yard work to trap dust, dirt, and harmful gases from the air you breathe. The bright fire of oak logs you light to keep warm on cold nights and the medicine you take to ease the pain of an ailment come to you from Nature's warehouse of services. Natural ecosystems perform fundamental life-support services upon which human civilization depends.
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