A Partnership for Mutual Benefit and Sustainability

Case Study of the Sustainable Coffee Program (SCP) between Nestlé and Yara in Lampung,
Indonesia

MOGI BIAN DARMAWAN

SUPERVISOR
Prof. Jouni Kimmo Alajoutsijärvi, PhD

University of Agder, 2022

Faculty of Business and Law
Department of Management
Preface
I am proud to present my master's thesis titled 'A Partnership for Mutual Benefit and
Sustainability: Case Study of Sustainable Coffee Program between Nestlé and Yara in
Lampung, Indonesia'.

I would like to express my deepest gratitude to my wife, Ainna, and also to my daughter,
Hannah, for their unwavering support and encouragement throughout my studies. Without
their love and compassion, I would not have been able to pursue my dream of studying abroad
and completing this research.

I am also grateful to my previous workplace, Maxima Indonesia, for providing me with the
opportunity to study abroad and for their continued support throughout my studies. I would
also like to thank Yara Indonesia, especially Mr. Roberto Puzzo and Pak Tesha Arrahman for
providing me with the opportunity to intern with their amazing company and learn about
sustainable agriculture practices. The valuable experience and knowledge gained through this
internship have greatly contributed to my research.

I would like to extend my heartfelt thanks to Prof. Jouni Kimmo Alajoutsijärvi, PhD, and Ibu
Arini Wahyu Utami, PhD, for their guidance and support throughout my research. Their
expertise and mentorship have been invaluable in the completion of my research.

I would also like to express my gratitude to Prof. Stein Oluf Kristiansen for always being a
supportive and caring mentor. His guidance and encouragement have been instrumental in
my academic journey. He truly felt like a second father during the program. I would also like
to thank Pak Rocky Adiguna, PhD for his assistance and support throughout my studies. His
help and willingness to go above and beyond were greatly appreciated.

I am truly grateful to all of my mentors for their support and guidance, and I am thankful for
the opportunity to have learned from such knowledgeable and dedicated individuals. I hope
that this research will be beneficial for all stakeholders and contribute to the advancement of
sustainability in Indonesia's agriculture sector. Thank you for your support and for helping me
to achieve my academic goals.

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Abstract
Sustainability is an emerging topic in every sector, including the agribusiness sector. This
condition raises awareness in business that an organization can't solve all problems alone and
needs to work collaboratively. This research discusses how a coffee partnership program can
benefit stakeholders and drive sustainability. To answer this question, stakeholders in the
Sustainable Coffee Program (SCP) are interviewed qualitatively. This study says that the SCP
partnership helps farmers financially, socially, and environmentally. It allows stakeholders to
pool resources and expertise more efficiently. This leads to cost savings and increased
productivity. The program also provides access to markets and opportunities, as well as
stronger relationships and networks within the coffee production sector. The SCP partnership
operates successfully due to high trust and clear roles among partners. The partnership can
be improved by carefully selecting farmer groups and increasing their knowledge on financial
management. Involving government agencies can also help strengthen the partnership.

Keywords: Partnership, sustainability, agribusiness, coffee production

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Contents
Preface i

Abstract iii

Contents iv

List of Figuress vi

List of Tables vi

Abbreviations vii

1. Introduction 1
1.1 Research background 2
1.2 Problem statement and research questions 4
1.3 Importance of the research 5

2. Yara & Indonesia’s Coffee Production 6

2.1 Yara 6
2.1.1 Yara International 6
2.1.2 Yara Indonesia 6
2.1.3 Company 7
2.1.4 Development 7
2.1.4.1 Number of employees 7
2.1.4.2 Current sustainable development 8
2.1.4.3 Market area 8
2.1.5 Current position 8
2.1.6 Industry characteristics 9
2.1.7 Indonesia’s fertilizer industry 12
2.2 Indonesia’s coffee production 14
2.2.1 Challenges in coffee production 16
2.2.1.1 Quality 16
2.2.1.2 Access to finance & credit 18
2.2.1.4 Lack of support 19
2.2.2 Existing partnership in coffee production 21
2.2.2.1 Nucleus-plasma 21
2.2.2.2 Sub-contract 21
2.2.2.3 General trade 22
2.2.2.4 Agribusiness operational cooperation 22
2.2.3 Sustainability of current coffee production in Indonesia 22

3. Theoretical basis 25
3.1 Business partnership 25
3.2 Focal nets theory 27
3.3 Partnership towards sustainability 28
3.3.1 Organization value and partnership objectives 29

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 3.3.2 Trust among stakeholders 30
3.3.3 Satisfaction among stakeholders 30
3.3.4 Perceived sustainability 31
3.3.5 The mutual benefit of the partnership 31

4. Methodology 33
4.1 Research method 33
4.2 Research instrument 33
4.3 Technique of data collection 34
4.4 Data Analysis 35

5. Case study of the Sustainable Coffee Program 36

5.1 Brief of the SCP 36
5.2 The stakeholders 36
5.2.1 Nestlé 36
5.2.1.1 Focus area 36
5.2.1.2 Scope of work in Sustainable Coffee Program 39
5.2.2 Inisiatif Dagang Hijau (IDH) Foundation 39
5.2.2.1 Focus area 40
5.2.2.2 Scope of work in Sustainable Coffee Program 41
5.2.3 Rabo Foundation 41
5.2.3.1 Focus area 41
5.2.3.2 Scope of work in Sustainable Coffee Program 42
5.2.4 Joint Business Group (KUB) 42
5.2.4.1 KUB Robusta Prima 44
5.2.4.2 KUB Mawar 44
5.2.5 The Government of Tanggamus Regency 45
5.2.5.1 Department of Plantation and Animal Husbandry 46
5.2.5.2 Department of Food Security, Food Crops, and Horticulture 46

6. Findings & Analysis 48

6.1 Analysis of the business relationship between Nestlé and Yara Indonesia 48
6.2 Analysis of the focal nets between Nestlé, Yara, and the stakeholders 55
6.3 Analysis of partnership towards sustainability 57
6.3.1 Organization value and partnership objectives 58
6.3.2 Trust among stakeholders 60
6.3.3 Satisfaction among stakeholders 61
6.3.4 Perceived sustainability 63
6.3.5 The mutual benefit of the partnership 64

7. Conclusion 66
7.1 Policy recommendations for building partnership towards sustainability in coffee
production 66
7.2 Limitations 68

References 69

Appendix 76

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List of Figures
Figure 1. 5 largest coffee production based on province in Indonesia (2011-2021) ............. 15
Figure 2. the organization structure of KUB......................................................................... 43
Figure 3. Sustainable Coffee Program mechanism ............................................................. 52
Figure 4. Layout of intercropping coffee plantations made by GIZ’s consultant ................... 54
Figure 5. the business relationship and its focal net in the SCP .......................................... 56
Figure 6. Trust among stakeholders in the SCP .................................................................. 60
Figure 7. Satisfaction among stakeholders in the SCP ........................................................ 62
Figure 8. Stakeholders perception towards sustainability in the SCP .................................. 63

List of Tables
Table 1 Compositions of informants from the sustainable coffee program........................... 34
Table 2. Description of the SCP mechanism ....................................................................... 52
Table 3. Stakeholder value and the partnership objective ................................................... 58
Table 4. Stakeholder perceptions towards mutual benefit in the SCP ................................. 64

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Abbreviations
4C - Common Code for the Coffee Community
CGI - Certification of Geographic Indications
CN - Calcium Nitrate
CEO - Chief Executive Officer
FSA - Financial Support Agreement
GIZ - Gesellschaft für Internationale Zusammenarbeit GmbH
HESQ - Health, Environment, Safety, and Quality
HET - Harga Eceran Tertinggi
HR - Human Resource
ICO - International Coffee Organization
ICS - Internal Control System
IDH - Inisiatif Dagang Hijau
IFAD - International Fund for Agricultural Development
IMS - Internal Monitoring System
KUB - Kelompok Usaha Bersama
MoA - Memorandum of Agreement
MoU - Memorandum of Understanding
NDC - National Determinded Contribution
NPK - Nitrogen (N), Phosphat (P) and Kalium (K)
PT - Perseoran Terbatas
PUSLITKOKA - Pusat Penelitian Kopi dan Kakao
R&D - Research and Development
RF - Rabo Foundation
RUPES - Rewarding Upland Poor for Environmental Services
SCOPI - Sustainable Coffee Platform Indonesia
SCP - Sustainable Coffee Program
SDGs - Sustainable Development Goals
SMEs - Small-Medium Enterprises

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1. Introduction
The production of coffee is a challenging and complex endeavor that requires a combination
of hard work, skill, and knowledge. In Indonesia, coffee production faces a number of unique
challenges, including rugged terrain, diverse climates, and a highly competitive global market.
However, partnerships between farmers and other industry stakeholders can provide
opportunities for overcoming these challenges and improving the sustainability and profitability
of coffee production in the country.

Indonesia has a long history of coffee production, with the first coffee plants being introduced
to the country by Dutch traders in the early 1600s. Today, Indonesia is one of the world's
largest producers of coffee, with a wide range of Arabica and Robusta beans being grown in
different regions across the country. Indonesian coffee is known for its unique flavor and high
quality, and it is sought after by coffee roasters and consumers around the world.

However, the process of growing and harvesting coffee in Indonesia is not without its
challenges. The country's rugged terrain and diverse climate can make it difficult to cultivate
coffee consistently, and small-scale farmers often lack access to the resources and
technologies that could improve their productivity. Additionally, the global market for coffee is
highly competitive, and Indonesian farmers must contend with low prices and fluctuating
demand.

In order to overcome these challenges and improve the sustainability and profitability of coffee
production in Indonesia, partnerships between farmers and other industry stakeholders can
play a key role. For example, partnerships between farmers and coffee roasters or retailers
can provide farmers with access to new markets and a stable source of income. These
partnerships can also help to ensure that farmers are paid fair prices for their coffee, which
can help to improve their livelihoods and support the long-term viability of their farms.

Additionally, partnerships with organizations that support sustainable agriculture can help
Indonesian farmers to improve their production practices and protect the environment. For
example, these partnerships can provide farmers with access to training and resources that
can help them to implement sustainable farming techniques, such as agroforestry and water
conservation. These practices can help to improve soil health and water retention, which can
in turn improve the productivity and quality of coffee crops.

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Overall, partnerships in coffee production have the potential to provide numerous benefits for
Indonesian farmers, including improved sustainability, greater profitability, and increased
access to new markets. By working together, farmers and other industry stakeholders can
overcome the challenges of coffee production in Indonesia and help to ensure the long-term
success of the country's coffee industry. These partnerships can also help to support the
broader goals of sustainable development in Indonesia, by providing economic opportunities
for small-scale farmers and promoting environmentally-friendly agricultural practices.

1.1 Research background

Coffee is one of the most widely consumed beverages in the world, with billions of cups
consumed daily. However, the production of coffee has significant environmental and social
impacts, including deforestation, water pollution, and poor working conditions for laborers. As
a result, there has been a growing effort in the coffee industry to make coffee production more
sustainable.

One major area of focus in the effort to make coffee production more sustainable is the
sourcing of coffee beans. Many coffee producers have adopted sustainable sourcing
practices, such as sourcing beans from small-scale farmers or using organic or fair trade
certifications. Small-scale farmers often have a deeper connection to the land and are more
likely to engage in sustainable farming practices. Similarly, organic and fair trade certifications
ensure that coffee is grown using environmentally friendly methods and that farmers are
treated fairly and paid a fair price for their coffee.

Another area of focus in the effort to make coffee production more sustainable is the use of
water. Water is a crucial resource in coffee production, as coffee plants require a significant
amount of water to grow and thrive. However, coffee production can also have negative
impacts on water resources, such as water pollution and depletion of local water sources. To
address these issues, many coffee producers have implemented sustainable water
management practices, such as using drip irrigation systems, which use less water than
traditional irrigation methods, and recycling and reusing water.

In addition to sourcing and water management, there is also a focus on reducing waste and
greenhouse gas emissions in the coffee industry. Coffee production generates a significant
amount of waste, including coffee husks and other by-products of the processing and roasting
of coffee beans. Many coffee producers have implemented waste reduction and recycling
programs to minimize waste and reduce the environmental impact of coffee production.
Similarly, the transportation of coffee beans and finished coffee products can also contribute

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to greenhouse gas emissions. Some coffee producers are working to reduce the carbon
footprint of their transportation by using more efficient vehicles and shipping methods, and by
sourcing beans from local or regional sources.

The effort to make coffee production more sustainable also includes efforts to improve the
lives and working conditions of coffee farmers and laborers. Many coffee farmers and laborers,
particularly in developing countries, work long hours in difficult conditions for low pay. Some
coffee producers have implemented programs to improve the lives and working conditions of
these individuals, such as providing education and training, as well as fair wages and benefits

Furthermore, the effort to make coffee production more sustainable is a multifaceted and
ongoing process. It involves a range of initiatives, including sustainable sourcing, water
management, waste reduction, greenhouse gas emissions reduction, and improving the lives
and working conditions of coffee farmers and laborers. These efforts are critical to addressing
the environmental and social impacts of coffee production and ensuring that coffee can be
enjoyed for years to come.

The concept of sustainability in business has gained significant attention in recent years, with
a growing emphasis on the need for companies to operate in a manner that is environmentally
and socially responsible. In order to achieve sustainability, businesses must establish and
maintain strong relationships with a variety of stakeholders, including customers, employees,
suppliers, and local communities.

Research has shown that companies with a strong focus on sustainability tend to have better
relationships with these stakeholders, leading to increased customer loyalty, improved
employee morale and retention, and more effective collaboration with suppliers and other
partners. These positive relationships can also help businesses navigate complex regulatory
environments, build trust with consumers and investors, and gain a competitive advantage in
the marketplace.

According to Ruddle (2003), in The Partnership Brokering Framework, there are four stages
of collaboration. The first step is determining the need and potential partners. This entails
determining the necessity of a partnership, locating suitable partners, and determining whether
or not they are compatible and cooperative. The second step is creating the partnership
agreement, which entails negotiating the terms and conditions of the partnership, as well as
the partners' roles and responsibilities, the partnership's aims and objectives, and the
processes for making decisions and resolving disputes. Third, putting the partnership into
action: This entails organizing the partners' efforts, assigning resources, and keeping an eye
on and assessing the partnership's development. Fourth, sustaining the relationship: This

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entails preserving open lines of communication and mutual trust, resolving difficulties and
disputes, and extending or terminating the collaboration.

Additionally, research has demonstrated that sustainable business practices can lead to
improved financial performance, as companies with a strong commitment to sustainability are
often able to reduce costs, generate new revenue streams, and achieve higher levels of
profitability. This suggests that a focus on sustainability can not only benefit the environment
and society, but also drive business success.

Overall, the research on business partnership and sustainability highlights the importance of
building and maintaining strong, mutually beneficial relationships with key stakeholders in
order to achieve long-term sustainability and success.

1.2 Problem statement and research questions

Hypotheses are more general than research questions, which is why research questions are
often better in social science. This research tries to explain the object of the research with
words, so a main problem statement has been chosen. Since this research is on a wide subject
matter, I have chosen three research questions to supplement the problem statement. The
goal of the research questions is to provide deeper insight and understanding rather than to
find answers with multiple underlying causes.

Problem statement How the partnership program in coffee production can provide
benefits to the stakeholders involved and how a partnership initiative
can move towards sustainability.

Research question 1 How has the partnership between Nestlé and Yara developed from
the beginning until now?

Research question 2 How has the partnership been influenced by the focal nets and vice
versa?

Research question 3 What are the results and outcomes of the Sustainable Coffee
Program?

Research Objectives

1. To study the development of partnership in business relationship context

2. Conduct an analysis of the sustainability of the partnership at Sustainable
Coffee Program

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 3. Suggest a strategy to develop partnership scheme for Yara Indonesia’s
business development

1.3 Importance of the research

From a practical, intellectual, and business perspective, business partnerships are crucial for
the survival of Indonesia's coffee industry for a number of reasons. Practically speaking,
collaborations in the coffee sector can increase manufacturing process effectiveness and cut
waste (Coffee Quality Institute, 2018). Partnerships can also facilitate knowledge and skill
sharing, which can raise yields and improve the quality of the coffee produced (Coffee Quality
Institute, 2018). Academic relationships in the coffee business can present beneficial chances
for research and innovation (Coffee Quality Institute, 2018). Collaboration between industry
and academia can result in the creation of novel techniques and procedures that can enhance
sustainability and lessen the environmental effect of the coffee producing process (Coffee
Quality Institute, 2018).

Additionally, from a commercial standpoint, collaborations for sustainability in the coffee sector
can serve to improve a business's reputation and foster client loyalty (Coffee Quality Institute,
2018). Partnerships can assist firms in demonstrating their commitment to social and
environmental responsibility to consumers, who are increasingly seeking out goods and
services from organizations that are devoted to sustainability (Coffee Quality Institute, 2018).
Additionally, partnerships can shield companies from reputational risks and legal liabilities by
assisting them in meeting stakeholders' expectations and regulatory requirements (Coffee
Quality Institute, 2018).

Business partnerships for sustainability in Indonesia's coffee production are crucial from a
practical, academic, and commercial standpoint since they can help to improve efficiency,
decrease waste, expand knowledge and skills, drive innovation, promote reputation, and build
consumer loyalty, and meet regulatory requirements.

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2. Yara and Indonesia’s Coffee Production

2.1 Yara

2.1.1 Yara International

Yara globally was founded in 1905 by Sam Eyde and Kristian Birkeland under the name
Norsk Hydro. During this time, the company is focused on advanced research. From 1920
to 1940, the company developed new fertilizer products, got the license to produce
ammonia, and produced NPK fertilizer. Under the new leadership of John B. Holte, he
started to make the hydro fertilizer market more international. In 1980, the company
became the market leader in Western Europe. Starting in 2000, when the company
celebrated 100 years of existence, Yara became part of the solution by shaping a more
sustainable company. It was proven that Yara won the prestigious Norwegian
environmental award “Glassbjørnen” by reducing greenhouse gas emissions in its
industry. In 2015, Svein Tore Holsethe became the CEO of Yara. Then, from 2017 to now,
Yara is strengthening its production footprint and its distribution in Brazil, building the
world’s first fully electric and autonomous container ship with zero emissions, and also
revising its core strategy to respond to the challenges by providing solutions for our planet,
bringing its vision and mission to life. The current market is across the world, Europe, the
Americas, Asia, Oceania, and Africa.

2.1.2 Yara Indonesia

Yara Indonesia was established in 1990 as PT Yara Fertilizer Indonesia, a joint venture
between Yara International and PT Pupuk Sriwidjaja. The company initially focused on
importing and distributing fertilizers for the Indonesian market. In 1995, Yara Indonesia
expanded its operations by building a urea production plant in Kaltim Prima Coal, East
Kalimantan. This plant became the first fertilizer plant in Indonesia to use coal as a raw
material.

In 2000, Yara Indonesia opened its second urea production plant in Kaltim Prima Coal,
increasing its total urea production capacity to 1.3 million tons per year. In 2010, Yara
Indonesia completed a major expansion project at its Kaltim Prima Coal plant, adding a
new ammonia plant and increasing its urea production capacity to 1.8 million tons per year.

In 2013, Yara Indonesia established a joint venture with PT Pupuk Kaltim to build a new
ammonia and urea production plant in Bontang, East Kalimantan. The plant, which began

6
 operations in 2016, has a production capacity of 1.3 million tons of ammonia and 1.8 million
tons of urea per year.

When entered the Indonesian market, Yara was previously named Norsk Hydro. Yara
entered Indonesia through a sole distributor named PT. Meroke Tetap Jaya in 1990.
Products from Norsk Hydro are known in the Indonesian market under the brand name
NPK Mutiara 16-16-16. In 2017, the partnership between Yara and PT. Meroke Tetap Jaya
ended, and Yara decided to set up PT. Yara Indonesia as its official business in Indonesia.
So, technically, Yara has been operating for 32 years in Indonesia and will continue to
grow. Yara's head office in Indonesia is located in South Jakarta. As of now, Yara's
distribution chain in Indonesia is made up of three warehouses in Medan, Gresik, and
Jakarta. This means that the distribution area is spread out across Sumatra and Java
Island.

2.1.3 Company
Yara Indonesia is a PT (Perseroan Terbatas), a foreign investment limited liability
company, one of the markets of Yara International. Overall, Yara is the world’s leading
crop nutrition company and a provider of environmental and agricultural solutions. The
vision, mission, and values of Yara Indonesia are connected to Yara International. The
mission is to responsibly feed the world and protect the planet. The vision is a
collaborative society; a world without hunger; a planet respected. The Ambition is growing
a nature positive food future. Core values in Yara are ambition: Ability to improve, make
it better, and continue development. Curiosity: Always seeking solutions on how to
improve the agriculture sector. Collaboration: the support system and all departments.
Accountability: Be honest, transparent, and understand ethics and compliance.

2.1.4 Development

2.1.4.1 Number of employees

The number of employees at Yara Indonesia has been growing year by year. Currently,
this company has 75 employees working both in the office and in the fields, consisting
of the Country Manager and several departments such as HR & Business Partner,
Public Affairs and Social Impact, Operations & HESQ, Commercial (Sales and
Marketing), Agronomy, and Finance. Yara Indonesia also builds external stakeholders
relations with MoA, universities, R&D institutes, and digital consultants.

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2.1.4.2 Current sustainable development
Yara Indonesia is committed to creating value for customers, stakeholders, and society
at large. Yara has been leading the way in the development of digital farming tools for
precision agriculture and working with partners to improve agricultural sustainability
and food production. Yara Indonesia not only sells the fertilizer with NPK, CN, and
Micro Foliar based but also implements sustainability goals by providing a solution for
farmers to increase yield and crop quality, also some advice for plant nutrition. Yara
Indonesia uses Dokter Pupuk or Sales of Agronomist as a person in charge to listen
to farmers’ problems regarding their farms, and he or she can give solutions about
plant nutrition, good agricultural practice, sustainable soil, fertilizer program, and many
more.

2.1.4.3 Market area

Currently, Yara Indonesia’s market is focused in the Java and Sumatra areas. There
are area managers, sales agronomists, junior sales agronomists, and agronomists in
charge who communicate directly with stakeholders such as distributors, retailers, and
farmers. And currently, Yara is developing markets and building partnerships with food
companies as part of a business model.

2.1.5 Current position

Yara Indonesia is a leading player in the fertilizer industry in Indonesia. The company
has a strong presence in the Indonesian market with a wide range of fertilizers, plant
nutrition solutions, and digital farming services. According to the company's website,
Yara Indonesia is committed to contributing to the sustainable development of the
agriculture industry in Indonesia. The company works closely with farmers and other
stakeholders to provide high-quality and sustainable solutions that enhance crop
productivity and profitability.

In an interview with The Jakarta Post in 2018, the CEO of Yara International ASA,
Svein Tore Holsether, highlighted the company's focus on promoting sustainable
agriculture in Indonesia. He stated that Yara Indonesia is committed to supporting the
government's efforts to increase food security and improve the livelihoods of farmers
in the country.

Furthermore, Yara Indonesia has been recognized for its contributions to the fertilizer
industry in Indonesia. In 2019, the company received the Best Fertilizer Company
award at the Indonesia Agriculture Awards. This award recognizes companies that

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 have made significant contributions to the agriculture industry in Indonesia through
their innovative products and services.

In conclusion, Yara Indonesia is a leading player in the fertilizer industry in Indonesia.

The company is committed to supporting sustainable agriculture and has been
recognized for its contributions to the industry.

According to data from the Indonesian Fertilizer Association, Yara Indonesia held a
market share of around 20% in the Indonesian fertilizer industry in 2019. This placed
it as the second-largest player in the market, behind the state-owned PT Pupuk
Indonesia which held a market share of around 30%.

In terms of specific fertilizer products, Yara Indonesia was the market leader in the
import and distribution of urea, with a market share of around 25% in 2019. It also had
a significant presence in the phosphates and specialty fertilizers segments, with market
shares of around 15% and 10%, respectively.

2.1.6 Industry characteristics

The fertilizer industry in Indonesia is characterized by a high level of government

intervention and regulation, as well as a strong presence of state-owned enterprises.
The industry is dominated by a few large companies, with PT Pupuk Indonesia and PT
Pupuk Kaltim being the two largest players. Indonesia is a net importer of fertilizers, with
most of its imports coming from China and India. The country has significant natural
resources, including phosphate and potash deposits, but its domestic production is
limited due to a lack of infrastructure and technology. In recent years, the Indonesian
government has implemented policies aimed at increasing domestic fertilizer production
and reducing reliance on imports. This includes initiatives such as the National Fertilizer
Policy and the National Fertilizer Strategic Plan. Additionally, the Indonesian government
has introduced measures to control the pricing and distribution of fertilizers, in order to
ensure their availability and affordability for farmers.

Overall, the fertilizer industry in Indonesia is heavily influenced by government policies

and the presence of state-owned enterprises, and is facing challenges in terms of
domestic production and imports.

The chemical composition of numerous vital minerals and elements that are intended for
the regular as well as accelerated growth and feeding of all plants is referred to as
fertilizer. Fertilizer can also be thought of as an umbrella term for all types of plant food.

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 As a result of the fact that these fertilizers have always been used to promote and boost
the production of commercial crops, we refer to them as agricultural fertilizers. The use
of fertilizers can increase the fertility of the soil and provide the essential elements that
it lacks. In addition to improving the soil itself, the use of fertilizers boosts the overall
production of the crops. The soil works as a conduit between the crops and the fertilizers,
while fertilizers are the nutrient-rich sources that provide the plants with needed nutrients
(Bokhtiar et al., 2005). A substance, such as manure or a specialized chemical, that is
mixed into soil in order to encourage the growth of plants.

In light of the fact that fertilizers are made up of one or more than one chemical
compound or nutrient, it has been determined that agricultural fertilizers can be broken
down into the following groups according to the constituent chemicals and the process
by which nutrients are released:

A. Organic agricultural fertilizer. To clarify, organic fertilizers are fertilizers that are
produced using organic chemicals that are biodegradable. In other words, organic
fertilizers are fertilizers and nutrient enhancers that are naturally existing in the soil
(Bokhtiar et al., 2005). Therefore, any item that exists naturally and can be broken
down easily is considered organic. If this organic material makes the soil richer, we
refer to it as organic fertilizer. A wide variety of microbes are responsible for the
further breakdown of these organic molecules, which results in the creation of
particles that are both smaller and more soluble. These fertilizers are absorbed by
the roots of the plant after first being converted into compounds that are soluble and
simpler. Among the naturally occurring forms of fertilizer are guano, manure, slurry,
worm castings, peat, seaweed, and sewage. Organic fertilizers that are made
include things like green manure and compost, blood meal and bone meal, and
seaweed extracts, among other things. In addition to this, crops are planted in order
to contribute nutrients to the land. Today, what every farmer is looking forward to is
a proper solution to the issues that exist in the agricultural sector that does not
reduce the amount of crop produced. Organic fertilization techniques are generally
regarded to be better for the environment and to produce outcomes that are more
gradual but more reliable. This is a well-known fact. How, in this day and age, when
the world is advancing so quickly in every facet, is it ever possible to neglect the
lives that it supports? The application of fertilizers is often regarded as one of the
most significant developments that the agricultural revolution brought about.
B. Inorganic agricultural fertilizer.Inorganic agricultural fertilizers are any fertilizers that
are made up of inorganic chemical compounds. Examples of inorganic agricultural
fertilizers are granular triple superphosphate, potassium chloride, urea, and

10
 anhydrous ammonia, amongst others. The majority of the time, these fertilizers are
not biodegradable. And these are further subdivided into a variety of categories
based on the components that they are comprised of and the ways that they are
prepared. Because they are made in factories utilizing the most recent technologies,
these fertilizers are also referred to as artificial or synthesized fertilizers. These
fertilizers have a gritty texture as a result of the artificial manufacturing procedures
that produce them, which also contribute to their sturdiness and high level of
performance (Liu et al., 2007).
C. Advantages of chemical inorganic fertilizer based on (Madani et al., 2011; Chen,
2006):
1. Easily available: being the most prevalent type, it can be discovered just about
anywhere.
2. Formula variation: it is simple for chemical companies to change the
components in order to generate blends that are suitable for individual plants
and for the various seasons.
3. Quick to respond. If the formula that was employed was adequate for the
season, you should typically notice results within one to two weeks.
4. Usually inexpensive, with the exception of higher quality blends that feature
controlled release pellets.
5. Application simplicity achieved through the use of fertilizer spreaders. In most
cases, the rates and settings will be computed and presented on the bag.
6. Multiple delivery methods are offered, including prills, pellets, granules, liquid,
tablets, spikes, and slow-release formulations, so as to accommodate a wide
range of preferences.
7. They have a very high nutritional content; nonetheless, only a relatively little
amount is necessary for plant growth (Madani et al., 2011; Chen, 2006).

To get good yields and harvest quality, it is necessary to apply fertilizer to the soil. The
purpose of adding fertilizer aims to improve the properties of the soil, both physical,
chemical and biological properties. As a medium for growth, soil requires a good intake
of both organic and inorganic substances for optimal plant growth. The intake of organic
matter comes from the absorption of carbon dioxide and water vapor by the leaves. While
inorganic intake is obtained from the absorption of nutrients in the form of ions from the
soil carried out by the plant roots.

The definition of fertilizer in Indonesian Government Regulation (PP) No. 8 of 2001

Chapter 1 Article 1 stated that fertilizers are chemicals or organisms that play a role in
providing nutrients for plant needs, directly or indirectly. Meanwhile, inorganic fertilizers

11
 are produced by chemical, physical, and/or biological engineering processes, and are
the result of an industry or fertilizer manufacturing factory. Meanwhile, the natural
fertilizers are formed through natural processes with the help of microorganisms in the
soil that can improve the naturalness of the soil, such as its mineral and nutrient content.

Artificial fertilizers are categorized into two types, which are single fertilizers containing
only one essential nutrient and compound fertilizers containing several essential
elements. Yara is the world's largest producer of ammonia, nitrates, calcium nitrate, and
NPK. With access to phosphate mines, the company is also expanding its phosphate
portfolio. Its production base includes over 20 production plants around the world,
including ammonia plants and other facilities producing urea, nitric acid, nitrates, NPK,
and phosphate. The international company's research centers, global offices, and
production facilities are located in America, Europe, Africa, and Asia. In 2018, the
company marketed 28.5 million tons of fertilizers. Sales of products for industry
amounted to 7.7 million tons, and trade in ammonia reached 2.5 million tons.

2.1.7 Indonesia’s fertilizer industry

The fact that Indonesia has its own fertilizer industry is a key part of the country's plan to
grow its economy. Nationally, the existence of the fertilizer industry is able to contribute
significantly not only to the development of the agricultural sector, especially food crops,
but also to developments in the plantation sector, the chemical industry, and other service
sectors. Domestic fertilizer needs have gone up by about 4.6% per year, which is in line
with the government's massive intensification program and plans to make food crops more
productive. To keep the domestic fertilizer supply going, there needs to be more fertilizer
made and changes made to how fertilizer is traded.

Changes in government policies have a big effect on how much fertilizer is sold and how
much it costs on farms. Up until 1998, the government controlled all production and imports
of fertilizer through a group of fertilizer factories that were all owned by the government.
The government also gives urea fertilizer subsidies by setting the highest ceiling price
(HET) and offering subsidized credit, which can be used to buy fertilizer. On the one hand,
the controlled market policy is considered capable of ensuring the availability of fertilizers
at the farmer level, but on the other hand, it tends to lead to inefficiencies both at the farmer
level and at the distribution level, as well as increasing the burden on the government
budget.

12
 Indonesia is also a major player in the global fertilizer industry, with the country's agriculture
sector playing a vital role in its economy (Indonesia Investment, 2021). In recent years, the
government has invested heavily in the sector to increase domestic production and reduce
the country's reliance on imports (Indonesia Investment, 2021). The demand for fertilizers
in Indonesia is driven by the increasing need for food due to the country's growing
population, with the use of these inputs being an important aspect of modern agriculture
(Indonesia Investment, 2021).

There are several types of fertilizers used in Indonesia, including nitrogen, phosphorus, and
potassium (NPK) fertilizers, as well as organic fertilizers (Indonesia Investment, 2021).
Nitrogen fertilizers are the most commonly used in the country, as they are essential for the
growth of crops and help to improve soil fertility (Indonesia Investment, 2021). Phosphorus
fertilizers are also widely used in Indonesia, as they help to promote root growth and
improve the overall health of plants (Indonesia Investment, 2021). Potassium fertilizers are
used to improve the quality of crops, including increasing their resistance to diseases and
pests (Indonesia Investment, 2021).

The fertilizer industry in Indonesia is dominated by a few large players, such as PT Pupuk
Indonesia, PT Pupuk Sriwidjaja, and PT Pupuk Kaltim (Indonesia Investment, 2021). These
companies have significant market share and are responsible for the majority of fertilizer
production in the country (Indonesia Investment, 2021). In addition to these large players,
there are also several smaller companies operating in the sector, including PT Sarana Multi
Infrastruktur, PT Pupuk Iskandar Muda, and PT Pupuk Kujang (Indonesia Investment,
2021).

Despite the growth of the fertilizer industry in Indonesia, the country still faces some
challenges (Indonesia Investment, 2021). One of the main challenges is the high cost of
production, which is due to the expensive raw materials and energy required to
manufacture fertilizers (Indonesia Investment, 2021). In addition, there is limited access to
financing for small and medium-sized enterprises (SMEs) in the sector, which limits their
ability to expand and modernize their operations (Indonesia Investment, 2021).

To address these challenges, the Indonesian government has implemented various

policies and programs to support the growth of the fertilizer industry (Indonesia Investment,
2021). These include tax incentives for local producers, subsidies for research and
development, and access to financing for SMEs (Indonesia Investment, 2021). The
government has also established the Indonesia Fertilizer Association (IFA) to promote the

13
 development of the sector and advocate for the interests of local producers (Indonesia
Investment, 2021).

2.2 Indonesia’s coffee production

In recent times, Indonesia became the third major coffee producer after Vietnam and Brazil
with a coffee plantation area in the territory of Indonesia, namely 1,292,965 ha with a
production of around 633,991 tons. Approximately 96% of coffee plantations in Indonesia are
people's businesses on a small scale. The types of coffee plants cultivated by Indonesian
farmers are Arabica coffee and Robusta coffee (Coffee Quality Institute, 2018).

One of the top commodities with the potential to boost Indonesia's foreign exchange is coffee.
Due to its exceptional quality and specialty coffee, which has a distinctive aroma and flavor,
Indonesia is recognized as the world's leading producer of this type of coffee (Coffee Quality
Institute, 2018). Due to its distinctive flavor and aroma compared to other coffees, specialty
coffee from Indonesia already enjoys a sizable market share in the United States and Europe.
The increased demand for coffee on the global market also suggests that specialty coffee is
highly competitive.

Report on Indonesia's Macroeconomic Indicators Data from the Central Statistics Agency
(BPS) shows that Indonesia's coffee production will reach 774.6 thousand tons in 2021. This
number has increased by 2.75% from the previous year, which amounted to 753.9 thousand
tons. In addition, last year's Indonesian coffee production was the highest in the last decade.
Meanwhile, the International Coffee Organization (ICO) noted that Indonesia's coffee
production was 12.1 million bags weighing 60 kilograms (kg) in 2020. This number also
increased by 5.83% compared to the previous year, which amounted to 11.43 million bags
weighing 60 kg. Indonesia's coffee production is the fourth largest in the world. Indonesia's
position is only one order below that of Colombia, which has earned the nickname "coffee
country," with a production of 14.3 million bags weighing 60 kg.

In Indonesia, approximately 96.19% of the coffee plants are owned and cultivated by
smallholder farmers. Smallholder coffee farms are characterized by the restricted use of
cultivation and postharvest technology, which means that they do not adhere to the principles
of sustainable agriculture. This is one of the qualities that sets them apart. Arabica and
Robusta coffee are the varieties that are frequently grown on smallholder plantations. Robusta
and Arabica coffee are propagated differently; Robusta coffee is vegetatively propagated
using plant material in the form of clones, whilst Arabica coffee is typically propagated by seed,
making variations the preferred planting material. The Minister of Agriculture has made

14
materials for planting Arabica coffee (AB3, USDA762, and S795) available. While the high-
quality Robusta coffee clones BP 534, BP 936, SA 237, BP 358, BP 42, and BP 409 (Ibnu et
al., 2019).

Figure 1. 5 largest coffee production based on province in Indonesia (2011-2021)

This chart shows the trend of coffee production in Indonesia in several provinces in Indonesia
for the last decade. In 2011 Lampung had the highest production capacity, almost 150
thousand tons, followed by South Sumatera around 130 thousand tons. But in 2012 to 2014,
coffee production in Lampung province kept decreasing from around 140 thousand tons to
just 90 thousand tons. The trend was almost the same for South Sumatera province, even
though it had increased once in 2012 (140 thousand tons), but then continued to decrease
until 2015 (110 thousand tons). Since then, coffee production has been in Lampung, always
below South Sumatera. Even the production started to rise from 2014 (90 thousand tons) to
2016 (120 thousand tons) but it cannot beat the South Sumatera Coffee Production. On the
contrary, coffee production in South Sumatera was constantly rising from 2016 (120 thousand
tons) to 2021 which reached 200 thousand tons.

The majority of the Bukit Barisan Selatan (BBS) National Park's neighboring districts,
Tanggamus and West Lampung, are where Lampung coffee is produced (Martauli, 2018). In
2006, Tanggamus' coffee area was 49,300 ha (30% of Lampung's total area), and it produced
24,100 tons of Robusta coffee (17% of Lampung's overall production). With a contribution of
around 34% of the district's total coffee area, Pulau Panggung Subdistrict is Tanggamus' top
producer of coffee. 1,851 acres of coffee-growing land in West Lampung produced 113 tons

15
of Robusta coffee. With a contribution of roughly 24 percent to the district's overall coffee area,
the Sumberjaya sub district is one of the main producers of coffee in West Lampung (Arifin,
2011).

Based on Arifin (2011) Coffee farmers in Lampung typically have strong bonds with collector
traders, who frequently provide them cash during the production process without the lengthy
formalities of money loans. These farmers must, in exchange, sell their goods to these
collection traders, giving the smallholders few options for marketing avenues. At the village
level, this develops an interlocking trading structure. It's interesting that these traders push
farmers to harvest coffee with good quality; as a result, the collector traders gain from the
value added. Because of the great reliance they have on collection traders for money-lending,
coffee growers are in a highly precarious negotiating position. As a result of collection traders'
monopsonistic activity, which distorts pricing transparency, the market structure of the village-
level coffee marketing system is relatively unfair. Coffee farmers frequently consult collector
dealers about decisions that affect not only their financial well-being but also their degree of
trust, socio psychological variables, and other aspects of the coffee economy's social capital.
These are the focus of a more thorough research in the context of the micro-institutional
environment and a critical examination of the functions of non-state regulation.

2.2.1 Challenges in coffee production

2.2.1.1 Quality

Coffee is a plant that requires special handling at the planting place's height and the ideal
temperature for its growth. The optimal height of the place with the ideal temperature, will
make maximum coffee productivity with quality that can compete in the market. Appropriate
rainfall and irrigation play an equally important role because coffee requires adequate
irrigation. Coffee cherries production can be increased by fertilizing.

Engineering for manufacturing technologies and procedures. Coffee plants have a lifespan of
five to twenty years (Coffee Quality Institute, 2018). However, the quantity and quality of coffee
beans used in coffee production must be taken into consideration. With careful care and the
application of some plant fertilizers, the quality of coffee can be improved (Wahyudi et al.,
2020). Additionally, coffee pests hinder productivity. These impeding factors may be present
in plant ailments, plant-insect interactions, or weeds that sprout in trees. By monitoring
pesticide use to promote environmental sustainability, pesticides can be used as appropriate
remedies to control pests and plant diseases like these.

16
When the coffee cherries are deemed mature, harvesting starts. Each type of coffee has a
distinct age from planting to harvest. When the coffee is harvested, the cherries that protect
the coffee beans are still there on the tree. The processing of the coffee cherries also includes
sorting and separating the cherries from the coffee beans.

Post-harvest is the term for the procedure, which varies by nation or plantation. There are
three forms of post-harvest treatment, the wet method, the semi-dry method, and the dry
method. Because the pulp is removed using water before the coffee is dried in the sun, the
wet method is also known as the "coffee washing procedure." While the cherries were merely
dried using the dry process without being washed first. Both of them are combined in the semi-
dry approach. This technique is expanded into new techniques that produce distinctive
personalities and flavors. This procedure seeks to finally prepare the seeds, often known as
green beans, for roasting. The procedure of packing the coffee beans for market sale follows
drying them. Additionally, farmers or businesses can make money and profits from the sale of
their coffee (Coffee Quality Institute, 2018).

Processing expenses and coffee market prices are two issues that can lower post-harvest
profitability. As the production of coffee cherries rises, processing expenses will rise as well.
Additionally, the income of those involved in coffee production, particularly for coffee of export
quality, is impacted by global coffee prices. With increased coffee production for both the
domestic and international markets, earnings will rise as well. For both short- and long-term
investments in variables that could have a beneficial impact, this profit forecast can be used.

The production of Arabica coffee (Coffea arabica), the primary source of premium coffee,
would be significantly impacted by climate change, which is another issue that farmers must
deal with. The impact on farmer lives could be significant given that this crop is the primary
source of income for numerous smallholder farmers in tropical mountain regions. Increases in
temperature are likely to coincide with both rising and decreasing rainfall on many islands. By
2050, it is anticipated that these changes will significantly lower Indonesia's total area of
climatically acceptable coffee-growing land (Schroth et al., 2015).

Over the next few decades, there is expected to be a substantial shift in the climate of the
Indonesian islands, which will have an impact on the size and location of regions with a climate
conducive to the production of Arabica coffee. The projected changes in rainfall vary between
the larger islands further to the north (Sumatra and Sulawesi), which will become wetter by 5-
14%, and the smaller islands further to the south (Java, Bali, and Flores), which will become
slightly drier. Average temperatures are expected to rise by about 1.7 °C in all current

17
production areas (Martauli, 2018). As a result, it is anticipated that climatic variances
throughout the nation's coffee-producing regions would increase.

Based on Schroth et al., (2015) research, climate change will have a significant impact on the
majority of existing Arabica coffee farmers throughout the Indonesian islands, particularly in
North Sumatra, Aceh, and Flores but also in Sulawesi and Bali. In fact, Flores may stop
producing Arabica coffee in the upcoming decades. A major portion of the territory that is
currently planted with coffee will transition to climates that are not currently employed for the
production of high-quality coffee as a result of rising temperatures and a shift in the climatically
acceptable zones for Arabica coffee cultivation. According to projections, 84% of the present
coffee production zones will be impacted. Although the climate would be sufficiently different
from the cli- mates currently utilized for producing Arabica coffee in the nation, this does not
indicate that coffee could not be produced there again. Instead, it means that considerable
effects on productivity and quality could be expected. Due to the sensitivity of coffee quality to
temperature, both the overall rise in temperature and the decrease in rainfall on the southern
islands may lead to lower yields. On the other side, a further rise in rainfall may also have a
negative impact on harvests in the northern islands' heavily rain-forested regions.

2.2.1.2 Access to finance & credit

Access to finance is a major challenge for many smallholder coffee farmers in Indonesia.
Despite the important role that coffee plays in the country's economy, smallholder farmers
often struggle to access the financial resources they need to improve their production practices
and increase their income.

One of the main challenges is the lack of access to formal financial institutions, such as banks
and credit unions. Many smallholder coffee farmers in Indonesia do not have the necessary
collateral or credit history to qualify for loans from these institutions, which can make it difficult
for them to obtain the financing they need to invest in their farms (World Bank, 2018).

Another challenge is the lack of information and knowledge about financial products and
services that are available to smallholder coffee farmers. Many farmers may not be aware of
the various options that are available to them, or may not understand how to access these
resources (World Bank, 2018).

In addition to these challenges, smallholder coffee farmers in Indonesia also face a number of
other constraints that can impact their access to finance. These include limited access to
markets, low levels of education, and a lack of secure land tenure (World Bank, 2018).

18
Overall, access to finance is a significant challenge for smallholder coffee farmers in
Indonesia, and addressing this issue is crucial for improving the livelihoods of these farmers
and the sustainability of the coffee sector in the country.

2.2.1.3 Access to market

Access to markets is a significant challenge for many smallholder coffee farmers in Indonesia.
Despite being a major producer of coffee, smallholder farmers in the country often face
barriers to selling their coffee at competitive prices, which can make it difficult for them to earn
a sustainable income from their farms.

One of the main challenges is the lack of access to formal market channels. Many smallholder
coffee farmers in Indonesia sell their coffee to intermediaries or brokers, who may not offer
fair prices for their products (World Bank, 2018). This can result in smallholder farmers
receiving a low price for their coffee, which can make it difficult for them to cover their
production costs and invest in their farms.

Another challenge is the lack of information and knowledge about market trends and prices.
Many smallholder coffee farmers in Indonesia may not have access to reliable information
about the prices that their coffee can fetch in different markets, which can make it difficult for
them to negotiate fair prices for their products (World Bank, 2018).

In addition to these challenges, smallholder coffee farmers in Indonesia also face a number of
other constraints that can impact their access to markets. These include limited infrastructure,
such as roads and storage facilities, as well as low levels of education and a lack of access to
credit (World Bank, 2018).

Overall, access to markets is a significant challenge for smallholder coffee farmers in

Indonesia, and addressing this issue is crucial for improving the livelihoods of these farmers
and the sustainability of the coffee sector in the country.

2.2.1.4 Lack of support

Next challenge faced by the coffee farmers is lack of support from the local government. The
local government frequently displays a passive attitude toward national requirements and/or
regulations, which will probably make it more difficult to implement ISCoffee. The lack of action
may be caused by the perception that there will be few financial gains from the implementation
of national policies or mandates. The local government is required to actively promote the
implementation of the certification of geographic indications (CGI), for instance. The national
government created the CGI to formally guarantee that specific agricultural products, like

19
Robusta coffee from Lampung province, come from specific locations. The Geographical
Indication Protection Society, not the local government, is the organization in possession of
the CGI certificate (Wahyudi & Jati, 2012). As a result, not all municipal governments take on
the required responsibilities.

The government only has a small number of local level employees who are knowledgeable
and skilled in implementing strategic projects. The interviews with a regency office
representative reveal that many government employees lack the capacity to implement
programs since they are frequently included in ad hoc teams for a brief length of time, leaving
them with little time to develop capacities.

According to Ibnu et al., 2019), there are two key reasons why government employees,
particularly those at the local level, lack the necessary knowledge and expertise for the
manufacturing of coffee. First off, the hiring procedures need some improvement. Second, we
saw that the current staff is overworked with a variety of responsibilities including not just
coffee but also other agricultural products, and they spend the majority of their time doing
routines, processing data, or gathering information for reports to their superiors. The inference
is that the majority of government employees prefer to increase their administrative abilities
over their management ones.

According to Ibnu et al., (2019) research, representatives of the Ministry of Agriculture's

Directorate General of Plantations explained in more detail that the budget is clearly a
challenge for managing government programs because only 5% of the state budget is
allocated to the agriculture and plantation sectors, which must also be shared by many
commodities. Without supporting infrastructure, such as seed infrastructures, agricultural
initiatives cannot function effectively. The current lack of reliable seed retailers, however, may
mean that certified seed is not always available in dispersed places.

Farmers frequently draw on the wisdom and experience gained from their parents as well as
their own experiences when operating their coffee plantation. However, it's possible that not
all of the standards of excellent agricultural practices are fully covered by the knowledge and
expertise. Therefore, farmers need to increase their technical and organizational knowledge
and expertise. The government can promote knowledge enhancement by offering agricultural
extension services. The issue is that the coffee industry has very few government extension
services. In addition to a paucity of manpower, extension personnel tend to focus on the
production of staple foods rather than the organization and production of coffee. Ibnu et al.,
(2019) also discovered that a plantation officer in Lampung Province revealed that it is
uncommon for extension officers to specialize in coffee or organization. Most of the knowledge

20
and experience that extension agents have is in the cultivation of paddy, maize, and other
staple foods.

2.2.2 Existing partnership in coffee production

The partnership program policy is one of the government's primary small and medium-sized
business growth strategies. The rules of the game, the rights and responsibilities of the core
and plasma companies, the pattern of synergistic relationships between the core and plasma
enterprises, and the government's role as coach, facilitator, and funder of partnership program
money are outlined in this policy.

It is intended that the policies provided in the form of government rules will be able to increase
investment in economic development by involving small and medium-sized businesses in
order to create new employment opportunities, increase income, and redistribute money
among the population. This initiative is an attempt to empower farmers and narrow the
economic gap between giant agro-industrial corporations and small farmers from the
standpoint of agriculture sector growth from a political standpoint (Zakaria, 2014).

For farmers, the partnership program is an opportunity to enhance their commercial operations
and revenue, as well as improve their standard of living, whereas for core enterprises, it is a
chance to build their business under conditions of restricted land and capital.

Based on Zakaria (2014), there are several types of partnership that already exist in
agribusiness sector; nucleus-plasma, sub-contract, general trade, and agribusiness
operational cooperation.

2.2.2.1 Nucleus-plasma
Nucleus-plasma is a partnership type which partner provides land, production facilities,
technical guidance, management, processing and marketing. The farmer is responsible for
meeting the partner's requirements. The advantages of the nucleus-plasma system include
creating interdependence and mutual benefits, increasing business, and being able to
encourage economic development. Apart from having advantages, the plasma core
partnership pattern also has its advantages; partner commitment is weak, the position of
farmers is weak, and there is no partnership contract yet.

2.2.2.2 Sub-contract
Second partnership type is sub-contract. The farmer group produces the components required
by the partner for its production (raw materials) according to a joint contract agreement for

21
volume, price, quality, and time. These are the advantages of this form of partnership: for the
partner group, product marketing is extremely efficient, and there is a transfer of technology
and expertise from the partner to the farmer group.

However, for the partner group, this sort of cooperation has a number of disadvantages,
including; establishing subcontracting relationships over time further isolates small producers
and leads to monopoly or monopsony, particularly in the supply of raw materials as well as in
terms of marketing and reduced partnership values for both parties, for example, product
quality that is extremely stringent but not balanced with the right payment system.

2.2.2.3 General trade

The general trade is a partnership in which the farmer group serves as a provider for the
partner company's needs. In the meanwhile, the partner companies market their respective
products to consumers. This clause is advantageous to the farmer group because it exempts
them from selling their products to consumers. In actuality, the price and quantity of the product
are frequently established unilaterally by the partner, to the disadvantage of the farmer. In
addition, this pattern of trade systems frequently generates consignment paperwork.

2.2.2.4 Agribusiness operational cooperation

Pattern of agribusiness operational cooperation in which the partner supplies capital and/or
cultivation facilities. The benefits of this configuration are identical to those of the Nucleus-
Plasma system. Profit sharing is a regular occurrence in rural areas between small businesses
in the village and household enterprises.

The profit made by partner companies that handle marketing and product management is
excessively high, causing small business partner groups to feel mistreated. Partner companies
tend to be monopolistic, which reduces the profits obtained by small partner companies. There
is no third party that plays an effective role in resolving the issue.

2.2.3 Sustainability of current coffee production in Indonesia

The problem that is encountered in agriculture, and particularly in the production of coffee, is
figuring out how to keep things sustainable. Intensification and rehabilitation of coffee plants,
selection of superior seeds, enhancement of farmer education, expansion of land, provision
of production facilities and infrastructure, price stabilization of coffee, and pest control are
some of the various strategies that are implemented (Wijaya et al., 2017). The adoption of
integrated fertility management practices, the raising of farmers' awareness of sustainable

22
practices, and the introduction of policies to encourage agricultural diversification are some of
the options available to increase the profitability of coffee farming while simultaneously
ensuring environmentally friendly crop management practices, according to another finding
(Ibnu et al., 2019). There have been many different approaches identified, but now they need
to be modeled and mapped out in order for Indonesia's coffee production and productivity to
be considerably boosted.

In the coffee industry, global sustainability standards have been formed mostly through
voluntary initiatives, involving the collective conceptualization of a number of parties outside
of the government bureaucracy. These groups share interests in certain agendas, such as
consumer awareness of public health, fertilizer and pesticide contamination, organic
perspectives, and the protection of endangered species, biodiversity, and other natural
environment functions (Ibnu et al., 2019).

In the literature, important global initiatives in the coffee sector dealing with sustainability
standards and environmental governance have been synthesized (Giovannucci & Ponte,
2005). Based on the context of governance, there are at least four major categories of
regulatory systems: (1) first party, (2) second party, (3) third party, and (4) "voluntary" fourth
party regulatory systems.

First party frequently makes reference to the "Coffee-Sourcing Guidelines" set forth by
Starbucks, which specify standards for social and environmental responsibility. Later, the
ideas became Coffee and Farmer Equity (CAFE) Practices, which are a component of
Starbucks' preferred supplier program. Farmers must pay the costs associated with adhering
to this criterion, though third parties carry out the CAFE Practices monitoring procedure.
Farmers should receive reasonable price premiums in return.

the Sustainable Agriculture Information (SAI) Platform, a second-party regulation mechanism.

It comprises advice for sustainable agriculture along the supply chain that is product-specific.
The monitoring would be done by the third party.

Third-party certification, as the term implies, entails the establishment of standards and
oversight of the sustainability criteria of the coffee industry by business sectors or non-
governmental organizations. Today, the world's coffee business is regulated by at least four
key third-party certifications: Utz Kapeh, Organic, Fair Trade, and Shade-grown (monitored by
Smithsonian Migratory Bird Center [SMBC] and the Rainforest Alliance). Similar goals and
ambitions to improve the socioeconomic and environmental conditions of coffee production
and trade are shared by these certifications.

23
Utz Kapeh has developed a set of requirements for third-party coffee certification that are
technically equivalent to EurepGAP, a system of certification for the origin of fruits and
vegetables backed by European retailers (Giovannucci & Ponte, 2005)While organic
certifications typically have the following prerequisites: (1) no synthetic agro-chemicals must
be used to grow coffee for three years prior to certification; (2) farmers and processors must
maintain meticulous records of the methods and materials used in coffee production and
management plans; and (3) a third-party certifier must inspect all methods and materials on
an annual basis (Giovannucci & Ponte, 2005).

Additionally, the Alternative Trade Organizations (ATOs) Twin Trading, Oxfam Trading, and
Equal Exchange worked together with coffee producers to create the groundwork for Fair
Trade accreditation. Other certifications exist, such as "bird-friendly coffee," which is coffee
that has been cultivated in shadow since the shade trees planted on coffee farms offer a
fantastic ecosystem for migratory birds. These certificates therefore enhance biodiversity. The
SMBC has developed a certification program for the cultivation, processing, and marketing of
organic shade-grown coffee promoted as "bird-friendly." The Rainforest Alliance, on the other
hand, develops a label for "Rainforest Alliance-Certified" coffee, which often incorporates
social and environmental requirements. The need for sustainability in this location encourages
coffee growers to adhere to local laws and embrace sound environmental practices.

Fourth party certification refers to the actions taken by the multi-stakeholder voluntary system,
which has been referred to as the Common Code for the Coffee Community in the introduction
(4C). Significant figures from the coffee industry make up the steering group for this initiative,
which is run by the German Development Cooperation Agency (GTZ) and German Coffee
Association (DKV). The 4C regulations also place a strong emphasis on social and ethical
ideals, such as paying workers the legal minimum wage, forbidding the use of children as
slaves, allowing union membership, and abiding by international environmental standards
regarding the use of pesticides and the contamination of groundwater. The coffee farmers are
expected to cover the costs associated with this accreditation, while unbiased organizations
handle the monitoring and audits.

A simple mapping of each governance system is made using the seven key frameworks for
global sustainability regulation on the coffee business. These include: (1) the focus on
environmentally sound governance; (2) the manner in which farmers, traders, and roasters
coordinate; (3) the capacity for risk management and foresight; (4) the target market of coffee
farmers (growers); (5) market access and networking; (6) the expectation of a price premium;
and (7) compatibility with environmental services.

24
To highlight the situations of sustainability regulation, coffee supply networks, and
environmental issues in Lampung coffee, data from three studies completed over the previous
seven years is used. The first study was funded by the United Nations Development Program
(UNDP) from 2001 to 2003, followed by the Rewarding Upland Poor for Environmental
Services (RUPES) study from the International Fund for Agricultural Development (IFAD) from
2004 to 2005, and the Broadening Access and Strengthening Input System (BASIS) study
from the United States Agency for International Development (USAID) (2006- 2007). The
PLED program was commissioned by the National Planning and Development Agency, whilst
the RUPES and BASIS programs were ordered by the World Agroforestry Center (ICRAF),
Southeast Asia (Bappenas) (Sustain Coffee, 2020).

3. Theoretical basis
The researcher needs a number of conceptual tools to look at how a business partnership
affects its focal nets and how it affects the business partnership itself. Initially, a conceptual
structure illustrating the fundamental concepts used to describe both the partnership and its
focal net is developed. Researchers pay particular attention to the following issues: the
definition of the immediate business network of a partnership, how to identify and capture
issues affecting the focal net and the business partnership, and how to delineate the impact
of partnership development on its focal net and macroenvironment. The researcher then
outlines how to examine the business partnership from the standpoint of long-term
development.

3.1 Business partnership

Businesses are being asked to make greater contributions than ever before in order to address
societal and environmental issues. As a consequence of this, an increasing number of the
world's most successful businesses are beginning to take the issue of sustainability seriously.
They do this not only to lessen their negative impact on the environment and enhance their
reputations; rather, they do it also to enhance their business operations and their financial
performance (Nelson, 2017).

There are many problems that can't be solved by a single company or even an entire industry
that affect ecosystems. Instead, they require changes that have an effect on the system as a
whole. In situations like these, the most effective strategy for a company may be to form
strategic alliances with other businesses, as well as with governments, investors,
communities, and non-governmental organizations (NGOs). Consider each of these

25
partnerships to be a unique and intricate joint venture, which frequently involves a number of
different parties.

Over the course of the previous two decades, there has been a rise in the number of
partnerships. They are extremely diverse in terms of the areas they cover, the people who
take part in them, the governance models they use, the reasons they exist, and the levels of
activity they engage in. The majority are still in the beginning stages of development, which
makes sense given how much time is required to establish partnerships and modify existing
systems. It is still early in the process, but useful lessons and best practices are starting to
emerge as a result of the rigorous analysis of their impact and what works.

According to (Nelson, 2017), the following five types of collaboration have the most potential
to increase the speed at which businesses participate in sustainable development:

1. Cooperation with business partners along value chains

The vast majority of large corporations collaborate with thousands of other commercial
businesses across their value chains. They consist of investors, distributers, retailers, clients,
investors, and investees in addition to joint venture partners and suppliers. Companies can
have substantial leverage in driving change along their own value chains toward more
responsible, inclusive, and sustainable growth if they establish standards, create incentives,
and provide financing and capacity building opportunities for their business partners.

2. Project-level, financing and implementation partnerships

In most cases, this will involve one or a few companies forming partnerships with NGOs,
government entities, research organizations, or even each other, with the goal of sharing risks
or costs and/or catalyzing resources in order to develop new technologies, products, services,
or business models. They can take the form of joint community investments and humanitarian
partnerships, as well as larger-scale infrastructure projects that cost multiple billions of dollars,
inclusive business models that aim to include low-income producers and consumers in
corporate value chains, and more.

3. Industry-level, precompetitive business alliances

These involve a number of companies working together on a precompetitive basis, either

within an industry or across industries, in order to drive changes that affect the entire sector.
This can mean doing things such as publishing responsible industry standards, scaling up and
copying successful innovations and models, conducting joint research, or advocating for public
policy. The fact that some of these alliances are already members of trade and industry groups

26
demonstrates the potential for additional groups to be brought together to collaborate on
sustainable development. Over the course of the past few years, smaller groups of business
leaders have banded together to form corporate responsibility coalitions. These coalitions
work to spread responsible business practices and to achieve sustainability goals.

4. Multi-stakeholder institutions, platforms and networks

To achieve transformational change, these involve collaboration between groups of

companies along with other actors such as governments and/or civil society organizations in
an effort to overcome systemic market failures or governance gaps. They consist of
autonomous institutional arrangements and funds, each of which possesses their very own
formal governance and accountability structures. They also include networks that are less
formal and more dynamic, as well as open collaboration platforms that are enabled by
technology.

5. Coordination between different levels and types of partnership to drive systemic

change

There are linkages that are mutually reinforcing between the various levels and types of
partnership that were discussed earlier in this paragraph in almost every instance of
successful scaling. Individual businesses are becoming an increasingly important component
of an ecosystem of sustainable development partnerships. Some of these partnerships are
led by the private sector, while others are spearheaded by governments or civil society. The
leaders of businesses need to have a better understanding of this ecosystem and the
relationship it has to their own corporate strategies, cultures, and performance in order to
become more actively involved in shaping it.

3.2 Focal nets theory

Focal network theory is a sociological concept that focuses on the ways in which individuals
within a group or community use their social connections to influence others and achieve their
goals. The theory posits that individuals have varying levels of influence within their social
networks, and that those with more influence are more likely to be successful in achieving their
goals (Alajoutsijärvi et al., 1995).

One of the key tenets of focal network theory is the idea of a "focal point" or "focal actor" within
a network. This is an individual who has a high level of influence and is able to persuade others
to follow their lead or adopt their ideas. These individuals may have a natural ability to

27
influence others, or they may have gained their influence through their position within the
network.

Additionally, focal network theory suggests that individuals who are embedded within multiple
networks are more likely to be successful in achieving their goals than those who are isolated
within a single network. This is because individuals who are connected to multiple networks
are able to access a wider range of resources and information, as well as a greater number of
potential allies and supporters. In a business context, this could mean that individuals with
strong connections to multiple industry networks or social networks may be more effective at
achieving their goals, such as increasing sales or gaining market share.

According to the theory, the presence of a focal actor can have a significant impact on the
outcome of group decision-making and the success of group goals. For example, in a study
by Granovetter in Alajoutsijärvi et al., (1995), it was found that the presence of a focal actor
within a network of individuals who were trying to make a collective decision was associated
with a higher likelihood of reaching a consensus.

Overall, focal network theory provides a useful framework for understanding the ways in which
social networks influence individuals and groups, and has important implications for
businesses and organizations. It highlights the importance of social connections and the role
of influential individuals in achieving collective goals, and can help businesses identify key
influencers and leverage their networks to drive business success.

A focal business net consists of actors with which the focal dyad firms have direct or indirect
relationships (Aldrich and Whetten 1981, Anderson et al. 1994 in Alajoutsijärvi et al., 1995).
These relationships build and reveal a company's position and function within the business
network (e.g., Hkansson and Snehota 1989, Havila 1996, Mattsson 1985 in (Alajoutsijärvi et
al., 1995).

3.3 Partnership towards sustainability

According to the United Nations Global Compact (2015), a sustainable partnership is a

"collaborative relationship between two or more organizations that is based on shared values,
goals, and a commitment to sustainability, and that seeks to create value for all stakeholders."
These partnerships involve a mutual exchange of resources and knowledge and are designed
to achieve mutually beneficial outcomes that are socially, environmentally, and economically
sustainable.

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Sustainable partnerships can take many forms, including partnerships between businesses
and NGOs, governments and civil society organizations, and academic institutions and private
sector companies. They can involve a range of activities, such as joint research and
development projects, capacity building and training programs, and collaborative efforts to
address global challenges and opportunities. The key elements of a sustainable partnership
include:
● Shared values and goals: Partnerships should be based on a common set of values
and goals that reflect a commitment to sustainability.
● Collaborative relationship: Partnerships should involve a mutual exchange of
resources and knowledge, and should be based on open communication, trust, and
mutual respect.
● Value creation: Partnerships should seek to create value for all stakeholders, including
the environment, local communities, and businesses.
● Mutual benefit: Partnerships should be designed to achieve mutually beneficial
outcomes that are socially, environmentally, and economically sustainable.

United Nations Global Compact also stated, to measure the effectiveness of partnerships,
various metrics can be used, such as:

● Partnership satisfaction: This can be measured through surveys or interviews, where

partners are asked to rate their satisfaction with the partnership on various dimensions,
such as communication, trust, and mutual benefit.
● Partnership performance: This can be measured through indicators such as the
number of projects completed, the amount of funding raised, or the impact of the
partnership on the target population.
● Partnership sustainability: This can be measured through indicators such as the
duration of the partnership, the extent of institutional support, and the likelihood of
renewal or expansion of the partnership.

3.3.1 Organization value and partnership objectives

Some of the challenges faced by partnerships are linked to the diverse goals of the partners,
their potentially conflicting views and the lack of collaborative experience (Babiak & Thibault,
2019), all issues that can lead to fail partnerships thus it is very important to have a same
vision and shared value to reach the common goal.

Partnerships for sustainability are formed by organizations for tactical reasons. The
performance of the partnering organizations, who want to get precise and measurable benefits

29
and to achieve joint advantages that they could not achieve alone, determines the success or
failure of a partnership (Glasbergen, 2007). From a social standpoint, companies form
partnerships to be more socially and ecologically conscious, to address socio-environmental
problems, or to increase community sustainability (Ordonez-Ponce et al., 2020). This
distinction is not entirely clear-cut, though, as some sustainability issues have also been
viewed as strategic (Baumgartner and Ebner, 2010; Fiksel et al., 2014; Wassmer et al., 2017),
such as the use of vital natural resources that, if not properly managed, could endanger a
company's very existence.

3.3.2 Trust among stakeholders

Interorganizational trust is characterized as an organization's confidence that other

organizations would take profitable measures on its behalf. By lowering the risk of
opportunistic conduct and uncertainty, trust strengthens relationships. Partners who have
established trust can rely on one another to carry out certain tasks and behave in their mutual
interests. Interorganizational satisfaction rises in direct proportion to interorganizational trust.
Because it helps in resolving disagreements and ambiguities between participants in an
interorganizational relationship, trust plays a part in raising satisfaction. Trust improves
satisfaction in the relationship between manufacturers and suppliers, according to (Mungra &
Yadav, 2020).

The partnership between the Sustainable Coffee Program has not yet precisely defined the
relationship between trust and satisfaction. According to studies of interorganizational
relationships that have already been conducted, satisfaction with the partnership should be
positively correlated with trust.

3.3.3 Satisfaction among stakeholders

Stakeholder satisfaction is an important factor to consider in any partnership, as it can have a

significant impact on the success and sustainability of the partnership. Stakeholder satisfaction
can help to build trust and confidence in the partnership. If stakeholders feel that their needs
and concerns are being addressed, they are more likely to trust the partnership and support
its goals and activities. This can help to strengthen the partnership and make it more resilient
over time (Nelson, 2017).

Stakeholder satisfaction can help to improve the performance of the partnership. If

stakeholders are satisfied with the partnership, they are more likely to be motivated and
engaged, which can lead to better outcomes and results. Further, this also can ensure the

30
long-term viability of the partnership. If stakeholders are not satisfied with the partnership, they
may choose to withdraw their support or even actively oppose it, which can undermine the
partnership's ability to achieve its goals.

There are many ways to measure stakeholder satisfaction, including through surveys, focus
groups, and other forms of feedback. It is important for partnerships to regularly assess
stakeholder satisfaction and take steps to address any issues or concerns that are identified.

3.3.4 Perceived sustainability

Perception towards sustainability in a partnership refers to how stakeholders view and

understand the sustainability efforts of the partnership. This can include the extent to which
stakeholders believe that the partnership is working to address environmental, social, and
economic sustainability issues, as well as their overall level of support for these efforts.

Communication is the way in which the partnership communicates about its sustainability
efforts can have a significant impact on stakeholder perception (Nelson, 2017). Clear,
transparent communication can help to build trust and support for the partnership's
sustainability efforts, while poor communication or a lack of transparency can erode trust and
lead to skepticism or even opposition.

Performance is the extent to which the partnership is able to demonstrate tangible results and
impact in terms of sustainability can also influence stakeholder perception. If stakeholders see
that the partnership is making progress towards sustainability goals, they are more likely to be
supportive and positive about the partnership's efforts.

Engagement is the level of engagement and participation of stakeholders in the partnership's

sustainability efforts can also influence perception. If stakeholders feel that they have a
meaningful role to play in the partnership and that their input is valued and taken into account,
they are more likely to be supportive and positive about the partnership's sustainability efforts.

According to Nelson (2017) it is important for partnerships to consider perception towards

sustainability and take steps to ensure that stakeholders have a positive and supportive view
of the partnership's efforts to address sustainability issues. This can help to ensure the long-
term viability and success of the partnership.

3.3.5 The mutual benefit of the partnership

Mutual benefit is an important aspect of any partnership, including those that are focused on
sustainability. Mutual benefit can help to build trust and commitment in the partnership. If

31
stakeholders feel that they are receiving tangible benefits from the partnership, they are more
likely to be committed to the partnership and to support its goals and activities. This can help
to strengthen the partnership and make it more resilient over time (Nelson, 2017).

It can help to ensure the long-term viability of the partnership. If stakeholders do not feel that
they are receiving any benefits from the partnership, they may choose to withdraw their
support or even actively oppose it. This can undermine the partnership's ability to achieve its
goals and can threaten its long-term viability. It could also help to drive innovation and
creativity in the partnership. They are more likely to bring new ideas and approaches to the
table, which can help to drive innovation and creativity within the partnership.

Nelson (2017) also stated, it is important for partnerships to consider mutual benefit and
ensure that all stakeholders are receiving tangible benefits from the partnership. This can help
to ensure the long-term viability and success of the partnership, as well as its impact on
sustainability.

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4. Methodology

4.1 Research method

This research uses a method called "descriptive," which focuses on gathering facts and
figuring out data by describing the subject of the research based on facts found in the field.
This study takes a qualitative approach by multiplying the information gathered, looking for
connections, comparing them, and finding patterns based on the original data. After looking at
the data, the situation or condition that was being studied was told in the form of a story. The
method used in this research is a case study, which is an in-depth, detailed, intensive, all-
encompassing, and systematic way to collect information and data about people, events,
social settings, or groups that work or function differently depending on the context (Yin, 2018).

One reference that supports the use of case study research in thesis research is "Case Study
Research: Design and Methods" by Robert K. Yin. In this book, Yin discusses the advantages
of using case study research, including its ability to provide a rich and detailed understanding
of the phenomenon under study, its ability to capture the complexity of real-life situations, and
its ability to generate hypotheses for future research. Overall, case study research can provide
valuable insights and contribute to the advancement of knowledge in a particular field of study.

The subjects of this research are stakeholders who were partners in the Sustainable Coffee
Program. Techniques for analyzing qualitative data are done in a way that is interactive and
continues until the job is done, so that the data is saturated. Activities in data analysis are data
reduction, data display, and conclusion data drawing/verification.

4.2 Research instrument

One possible research instrument for a case study could be a structured interview guide
(Kvale, 1996). In this research, researcher used a partnership assessment questionnaire from
the International Labour Organization (ILO). This tool is a questionnaire to assess the state of
existing partnership in several projects including but not limited to business partnership. This
questionnaire allows the researcher to ask specific, standardized questions to the participants
in the case study in order to gather in-depth data on the topic being studied.

The questionnaire covers 10 aspects of the partnership. Partnership rationale; value;

partnership purposes and objective; trust, commitment and ownership; roles and
responsibilities; partnership strategy/implementation; contribution and incentives;

33
communication; reporting; and termination. However, during the process, there are several
adjustments to this questionnaire due to some circumstances. Researcher add some
questions regarding satisfaction; perceived sustainability; and government involvement.

The questionnaire has 49 qualitative questions. Interviewee will be asked all of the questions
during the interview session. There is no right or wrong answer, all of the answers will be
based on the interviewee's perception about the questions.

4.3 Technique of data collection

The current study used a qualitative research approach to better understand the focal nets
and sustainable partnerships that may be used to encourage more sustainable robusta coffee
production at the producer level. Two primary research methodologies were used.

First, semi-structured interviews were performed to get a full understanding of the actors in
the sustainable coffee program. Purposive sampling was used to select the informants. We
started by communicating with the program's creator from Nestlé and Yara Indonesia. They
referred us to the partnership's key informants, who were then contacted by snowball sampling
in accordance with the demand for data in the area.

Table 1 Compositions of informants from the sustainable coffee program

No. Institutions Number of Informant(s)

1. Nestlé Indonesia 2
2. Yara Indonesia 2
3. Inisiatif Dagang Hijau Foundation 1
4. Rabo Foundation 1
5. KUB (Joint Business Group) 3
6. Farmers 2
7. Dept. of Plantation & Husbandry, Tanggamus 3
8. Dept. of Horticulture & food resilience, Tanggamus 2
Total 16

Second, we examined documentation pertaining to the sustainable coffee program from

relevant stakeholders, such as the program's Memorandum of Understanding (MoU), public
reports of the program's implementation, and the sustainability report from the parties
involved. In order to acquire information about the changes brought about by the sustainable
coffee program, we also examined statistics data for coffee production, productivity, land area,
and coffee pricing.

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Before finalizing the research methodology, researcher conducted preliminary research
beginning in early August 2022 at the Yara Indonesia headquarters in Jakarta to have a better
understanding of the sustainable coffee program.

Then, from the end of October and the middle of November 2022, researcher completed the
data collection in Ulubelu, Tekad, and Sumberejo Village in Tanggamus Regency, Lampung
Province, Indonesia.

4.4 Data Analysis

The case study method comprises a wide range of data collection tools. Triangulation is a
strength of case studies, which is made possible by the fact that empirical data can be
gathered from multiple sources. Case studies may provide both qualitative and quantitative
data for analysis and interpretation, however, this research primarily focuses on analyzing
qualitative data (Yin, 2018).

Steps for triangulating data in a case study.

1. Identify the research question and objectives of the case study.
2. Select multiple sources of data, such as interviews, surveys, observations, and
documents, that can provide information relevant to the research question.
3. Collect data from each source using appropriate methods, such as structured
interviews, standardized surveys, and systematic observations.
4. Analyze the data from each source independently, using appropriate techniques such
as coding and categorization for qualitative data, and descriptive and inferential
statistics for quantitative data.
5. Compare and contrast the findings from each source, looking for discrepancies,
inconsistencies, and complementary information.
6. Integrate the findings from the different sources, triangulating the data to create a more
complete and nuanced understanding of the research question.
7. Use the triangulated data to provide evidence-based conclusions and
recommendations for the case study.

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5. Case study of the Sustainable Coffee Program

5.1 Brief of the SCP

The Sustainable Coffee Program (SCP) in Tanggamus Regency, Lampung Province, is a

multi-stakeholder initiative involving PT Yara Indonesia as a provider of input supplies and the
assistance of the farmers, PT Nestlé Indonesia as an off-taker, the Joint Business Group
(KUB) Robusta Prima & Mawar as a farmer group, IDH as a financial advisor for KUBs, and
the Rabo Foundation as a provider of financial access for farmers through financing schemes.
The SCP is intended to run for a period of three years, beginning on October 1, 2015 and
concluding on June 30, 2018.

The stakeholders intend to empower coffee farming communities in Lampung by providing a

fair and affordable microfinance scheme from the Rabo Foundation to coffee farmers who are
members of KUB. At the same time, KUB needs partners to strengthen and develop the
capabilities of members of the coffee farming community, with the goal of increasing crop
yields and achieving high productivity and quality in a sustainable manner.

5.2 The stakeholders

5.2.1 Nestlé

Nestlé is a multi-national company engaged in the production, import, and distribution of a

variety of food and beverage products in Indonesia, including coffee-based beverages. As a
consequence, the Sustainable Coffee Program requires high-quality coffee beans for
production purposes.

5.2.1.1 Focus area

Nestlé began its coffee production in Indonesia in 1979. It began producing Nescafé coffee at
the Panjang Factory in Lampung, Indonesia. Lampung is chosen because Nestlé desires to
be close to its coffee suppliers and because it is one of Indonesia's largest producers of green
coffee.

For the production of its high-quality Nescafé products, Nestlé seeks high-quality coffee beans
from the coffee farmers of Lampung. Nestlé 's Head of Agriservice in Lampung, Junda Aulia,
stated, "Our requirements for selecting beans for Nescafé are highly stringent, and our farmers

36
are aware of this. They are aware that we accept only the highest-quality flavored coffee beans
for our product.”

When picking locally grown coffee beans, flavor is the most important factor. Nestlé 's coffee
experts taste samples from growers and choose beans with the best flavor and quality based
on how well they taste. But farmers back then grew their coffee plants in a very traditional way,
which made it hard to find beans with the best taste and quality.

To educate local coffee traders on the significance of taste in coffee production, Nestlé 's
Panjang Factory Team has initiated Coffee Tasting training sessions. Usually, inadequate
harvest management of the coffee beans is to blame for the failure to attain optimal flavor.

Nestlé Indonesia opted to engage directly with farmers in the villages of Lampung to cultivate
the highest-quality coffee beans and ensure the product's superior flavor, in light of this
circumstance and the desire to secure a sustainable future of high-quality coffee sourcing. In
order to drive this project, Nestlé Indonesia established the AgriService Department at
Panjang Factory in 1994. This is a dedicated staff with knowledge of agriculture and coffee
management. They will work with farmers to teach them the best ways to grow, harvest, and
manage coffee after it has been picked. Nestlé chose Ngarip Village as the trial area for its
AgriService professionals to begin working directly with coffee farmers for this initiative. The
Nestlé AgriService team went to Ngarip often to hold meetings and train the farmers' group.
They also helped the farmers put the techniques into practice and provided ongoing advice
and monitoring of the field's use.

These strategic efforts are provided free of charge to farmers. There is no contract or
requirement requiring farmers to sell their high-quality coffee beans to Nestlé. Farmers are
free to sell their harvested coffee beans wherever they choose. They can either sell it to Nestlé
or to coffee merchants. The price at which Nestlé purchases coffee from farmers is dependent
on the international price of Robusta coffee in London.

Many farmers were aware of the success story in Ngarip Village, and they enthusiastically
adopted these techniques because they enabled them to double their yield per acre. The way
they took care of the coffee beans after harvesting them made a big difference in the "cup
flavor profile." The Nestlé AgriService team taught a lot of farmer groups how to judge the
quality of their coffee products. The higher the quality of their goods, the higher the price they
will get for them. This means that if they sell premium coffee, they will make more money.

Nestlé's Panjang Factory now receives more than 80% of its coffee beans directly from farmer
organizations. Since the 1990s, Nestlé has had a comprehensive understanding of the entire

37
process of coffee bean cultivation in Lampung. So, their AgriService Department will continue
to give coffee farmers in Lampung advice and help.

The most recent help that Nestlé has given to coffee farmers in Lampung is the Nescafé Plan.
Through the Nescafé Plan, Nestlé Indonesia aims to improve the living standards of coffee
farmers, increase the quality and quantity of the coffee they produce, ensure Common Code
for Coffee Community (4C) verification, promote responsible farming production, supply, and
consumption of coffee, and empower women and youth to become leaders in the coffee
industry.

Nestlé Indonesia uses 100 percent of Lampung's coffee beans, purchased directly from local
farmers, as raw materials to produce Nescafé at Nestlé 's factory in Panjang, Lampung. Also,
coffee beans grown by farmers in Lampung are shipped to other countries and used in Nestlé
factories there.

One of the ways Nestlé helps coffee farmers is by giving them access to global markets. Nestlé
Indonesia has worked with local coffee farmers since 1994, when it set up an AgriService team
to help smallholders improve the quantity and quality of their coffee beans.

Nestlé Indonesia also set up the first Joint Business Group (KUB) in Ngarip Village, Lampung,
with the help of the AgriService team. Farmers can sell the coffee beans they grow directly to
Nestlé factories because of KUB. The AgriService team also offers different trainings on how
to grow coffee in a way that is healthy and sustainable. Nestlé's partner farmers in Lampung
have benefited from these efforts because they have helped farmers increase their yields so
that they are above the national average for coffee farmers.

In 2012, Nestlé started the global Nescafé Plan program in Indonesia. This shows that Nestlé
is committed to supporting responsible coffee production and making sure that coffee farming
will be around for a long time. Through this program, hundreds of field schools (Sekolah
Lapang) have been set up so that thousands of coffee farmers can get training and advice.

Nestlé has worked with about 20,000 coffee farmers in Lampung so far. More than 18,000 of
them have been validated by the 4C (Common Code for the Coffee Community) through
mentoring and other trainings. This means that more than 18,000 coffee farmers in Lampung
have done everything they can to grow coffee in a way that is good for the environment.

Nestlé thinks that the best way to make a positive impact is to work with the right people.
Nestlé works with the Coffee and Cocoa Research Center (PUSLITKOKA) in Jember,
Indonesia, to find and choose the best coffee seeds. Then, these coffee seeds are given to
farmers to help bring old coffee plantations back to life and make them more productive again.

38
In addition, to help coffee farmers better manage their income, Nestlé is also opening up
access to banking and funding for farmers through collaboration with several financial
institutions. Through this service, farmers can get connected financial products and a range
of low-cost financial services, such as loans, to help them be more productive.

Nestlé and coffee farmers work together as partners because Nestlé believes that the
company's long-term success depends on a steady supply of high-quality raw materials and
that, for Nestlé to be successful in the long run, the communities where it does business must
also do well.

5.2.1.2 Scope of work in Sustainable Coffee Program

Nestlé conducts the preliminary selection of the coffee farmers who are members of the
Nescafé Plan Farmers to be recommended to join the financing program and provides
assistance to the farmers to ensure the improvement of their productivity as a result of the
application of general agricultural principles and high-quality inputs.

5.2.2 Inisiatif Dagang Hijau (IDH) Foundation

IDH or known as Inisiatif Dagang Hijau (Green Trade Initiative) Foundation is a non-profit
institution that supports green growth plans in Indonesia in order to expand access to
Indonesian commodity markets internationally through sustainable agricultural, trade, and
management practices. This green growth plan is built through public, private, and community
partnerships with a sustainable landscape and commodity approach that is in line with the UN
Sustainable Development Goals (SDGs) and Indonesia's commitment to the Paris
Agreement's Nationally Determined Contribution (NDC).

IDH Foundation in Indonesia is afiliated with the Sustainable Trade Initiative (IDH) foundation
that was set up and is legal under Dutch law. It is located at Nieuwekade 9 (3511 NV), Utrecht,
the Netherlands. IDH is a foundation whose primary goal is to improve sustainability in sector
value chains through initiatives such as the Sustainable Coffee Program. This is in line with
the Millennium Goals 1 (eliminating extreme poverty and hunger), 7 (making sure the
environment is sustainable), and 8 (creating a global partnership for development).

Currently, the IDH Foundation is contributing to the development of green growth plans in
Aceh, South Sumatra, Jambi, West Kalimantan, Papua, and West Papua by implementing a
landscape investment design prototype with sustainable commodities such as palm oil, coffee,
cocoa, pulp and paper, rubber, and aquaculture.

39
5.2.2.1 Focus area

IDH Indonesia runs 8 different sector programs and 3 landscape programs. The Pulp & Paper,
Palm Oil and Tropical Timber programs were recently integrated into the landscape program.
Other programs will continue their sector-level efforts but are also playing an active role in
different focus landscapes.

The most important highlights and key achievements per program were:
● Palm Oil: a solid pipeline of projects was built, covering about 20,000 farmers on
40,000 ha. The first projects started implementation. Strategic partnerships with private
companies and governments were built for the development of sustainable supply
sheds in Aceh and South Sumatra.
● Pulp & Paper: a project for protecting and conserving 41,480 ha of peatland and
mangrove forest started implementation; baseline studies and management plans for
new forest management projects were completed; and agreements were made with
APP and APRIL to work on landscape and fire management, integration of the HCS
approach and clean manufacturing.
● Tropical Timber: 185,330 hectares of tropical forest concessions were certified by the
end of 2015 and a significant pipeline was built for certification in 2016.
● Coffee: The Sustainable Coffee Platform Indonesia (SCOPI) was established and
developed a national curriculum for training farmers on sustainable agricultural
practices. In 5 field level projects, more than 29,000 farmers were trained.
● Cocoa: 5,906 cocoa farmers received training and 9,035 obtained certification; the
Cocoa Sustainability Partnership (CSP) expanded its membership and activities; a
taskforce on Agri-Finance was established.
● Spices: Three pilot projects supported farmers to achieve certification, and improve
productivity and quality of their products. More than 4,000 farmers were trained, and
almost 10,000 ha of spices fields were under sustainable management practices.
● Aquaculture: at the end of 2015, the program reached up to 11,500 farmers and
workers, accounting for the responsible production of 46,000 MT shrimp ; supports for
Aceh Aquaculture Initiative has led to the transformation of the cooperative in which it
is now receives direct support, partly, from a commercial financial institution.

IDH foundation is a non-profit organization that generates income through a variety of sources,
including grants, donations, and investment from foundations, governments, and other
institutions. IDH also generates income through the sale of products and services related to
its work, such as consulting and capacity building services, as well as through the sale of
sustainably produced commodities.

40
IDH uses this income to fund its operations and programs, which are focused on promoting
sustainability in emerging markets. The organization works with a range of partners, including
governments, civil society organizations, and the private sector, to achieve its goals.

IDH's business model, in general is based on the generation of income through several
sources to fund its work promoting sustainability in emerging economies. This would be done
with the goal of keeping the organization intact. The organization is dedicated to making the
most of its available resources to create the greatest possible impact and realize its objectives
of fostering environmentally responsible commerce and economic growth.

5.2.2.2 Scope of work in Sustainable Coffee Program

IDH provides funding to KUB for a consultant to be hired by KUB to provide training on the
KUB accounting system and to install software for the KUB accounting and loan management
system. KUB and IDH will agree to the specific terms of this funding in a separate agreement.

5.2.3 Rabo Foundation

Rabo Foundation is the philanthropic arm of Rabobank Group, a financial services company
based in the Netherlands. Rabo Foundation also helps small farmers get access to financing,
knowledge, and markets through savings and credit cooperatives and farmer organizations. It
does this by giving money to these groups so that they can run in a way that allows them to
be self-sufficient and improve their social and economic goals.

The Rabo Foundation is a global organization that distributes impact funding with the goal of
bringing about continual good change on three fronts: the economic, social, and ecological
fronts. Every day, the Rabo Foundation moves closer to realizing its vision of an equitable and
environmentally responsible society in which genuine participation is possible for all.

5.2.3.1 Focus area

The Rabo Foundation invests in the self-sufficiency of farmer organizations in 22 countries in
Africa, Asia, and Latin America. The Rabo Foundation facilitates access to finance,
knowledge, networks, and cutting-edge technological developments. Based on their website,
the Rabo Foundation focuses on supporting initiatives that contribute to a sustainable and
inclusive society. It has a particular focus on supporting the following areas:
● Food and agriculture: Rabo Foundation supports initiatives that aim to create a more
sustainable and resilient food system, including initiatives that promote sustainable
agriculture and improve access to food for underserved communities.

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 ● Entrepreneurship: Rabo Foundation supports initiatives that promote entrepreneurship
and help small businesses grow and thrive. This includes providing access to finance,
business skills training, and other resources to help entrepreneurs succeed.
● Education: Rabo Foundation supports initiatives that promote education and lifelong
learning, with a focus on providing access to quality education for disadvantaged and
underserved communities.
● Community development: Rabo Foundation supports initiatives that promote social
cohesion and improve the quality of life in local communities. This includes initiatives
that focus on improving access to healthcare, housing, and other essential services.

Overall, the Rabo Foundation's focus is on supporting initiatives that contribute to a more
sustainable and inclusive society, with a particular focus on initiatives that promote food
security, entrepreneurship, education, and community development.

5.2.3.2 Scope of work in Sustainable Coffee Program

The Rabo Foundation is committed to providing coffee farmers with financing through the
Financing Program. KUB and the Rabo Foundation will agree to the specific terms of this
Financing Program in a separate Financial Support Agreement (FSA). Furthermore, the Rabo
Foundation will oversee the implementation of the IDH-funded accounting and loan
management system. Training on and implementation of such a system shall be carried out
by an appointed consultant, as agreed by the parties.

5.2.4 Joint Business Group (KUB)

Joint Business Group (KUB) first established by Nestlé Indonesia at Ngarip Village, Ulubelu,
Tanggamus District, Lampung Province, Indonesia back in 1995. The group was created to
focus on improving the sustainability and efficiency of Nestlé's operations in Indonesia. KUB
has since grown to include over 100 smallholder farmers and has played a crucial role in
supporting the development of the local agriculture industry. (Sustainability Report, Nestlé
Indonesia, 2018).

The aim of this initiative is to improve the quality of life in the community through increased
income and business opportunities for local farmers. At first, KUB Nestlé consists of farmers
who are members of farmer groups fostered by Nestlé. These farmers will be given training
and assistance from Nestlé to improve the quality of their agricultural products, so they can
meet the quality standards set by Nestlé.

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In addition, Nestlé will also provide business capital and technical assistance to help farmers
develop their businesses. Thus, farmers will get better income from their crops. Nestlé's KUB
program also invites farmers to participate in environmental activities, such as tree planting
and waste management. Thus, this program not only increases farmers' income, but also
helps preserve the environment.

For more than 20 years of operation, KUB Nestlé has succeeded in improving people's quality
of life and developing agricultural businesses in various regions in Indonesia. This program
has also received awards from various national and international institutions.

When KUB was first formed, Nestlé provided training to selected farmers to become an
Internal Control System (ICS) within the KUB structure. The training provided involved
university lecturers and researchers from PUSLITKOKA. ICS was given training in the form of
training of trainers which contained cultivation techniques, maintenance, fertilization, post-
harvest handling, to coffee agribusiness. This program is fully funded by Nestlé.

The ICS training was carried out by Nestlé with the hope that ICS can train coffee farmers who
are within the scope of KUB, so that coffee production can increase along with the quality.
Currently, ICS is no longer funded by Nestlé, but KUB provides similar training to its ICS by
funding it independently. This is done by KUB because they feel the benefits of the training
process.

In general, the KUB within the Tanggamus Regency has the following organizational structure
(figure).

Figure 2. the organization structure of KUB

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KUB is chaired by the founder of KUB so that KUB in the Tanggamus Regency are generally
managed as a family business. If the previous chairman has retired or passed away, the
position of the KUB chairman is passed on to the child or close relative of the KUB chairman.
Within its structure, KUB has an Internal Monitoring System (IMS) which plays a role in
administrative functions such as treasurer and secretary. This position is open to anyone who
meets the qualifications and is appointed by the chairman of KUB.

Under the chairman of the KUB there are several Internal Control Systems (ICS) whose main
function is to guide farmers, but currently their functions are developing such as becoming
divisions of marketing, capital, cooperation and so on. The ICS generally foster 20 to 30 groups
of coffee farmers. The number of each group of coffee farmers are various, starting from 10
people to the largest, 40 people in one group. In Tanggamus district, coffee farmers manage
an average of 1 hectare of land.

Tanggamus Regency has several KUBs that are still active, but in this study, researchers only
focused on two KUBs that are part of the Sustainable Coffee Program partnership in 2015-
2018, which are KUB Robusta Prima and KUB Mawar.

5.2.4.1 KUB Robusta Prima

KUB Robusta Prima is a joint business group made up of people who work together in
agriculture in general and coffee plantations in particular. KUB Robusta Prima was established
on November 10, 2010 in Pekon Tekad, Pulaupanggung District, Tanggamus Regency,
Lampung Province. The number of farmers who are members of KUB Robusta Prima was
about 1,000 farmers in 2017.

The objectives of the establishment of KUB Robusta Prima are:

1. Bringing together the farmers of Tanggamus Regency, especially in Tekad Village,
Pulaupanggung District, in order to contribute energy and thoughts to realize
prosperity, community peace for the sake of regional economic development.
2. Exploring, developing and fostering and caring natural resources, community
resources and other potentials that have been patterned or not.

KUB Robusta Prima has a secretariat address in Jalan Raya Tekad Block I Tekad, Kacan
Village, Pulaupanggung, Tanggamus Regency, Lampung Province, Postal Code 35379.

5.2.4.2 KUB Mawar

KUB Mawar was founded in 1999. Currently, the number of farmers assisted by KUB Mawar
ranges from 2500-3000 farmers. KUB Mawar has been working with Nestlé since 2012, with

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the condition that the coffee products produced meet the 4C (Common Code for the Coffee
Community) certification, which means that all farmers must attend training to implement
sustainable robusta coffee cultivation while taking economic, social, and environmental factors
into account. Sustainability Development Services (SDS) will also audit farmer certification on
an annual basis.

Coffee farmers under the supervision of KUB Mawar have an average land area of 1 - 5 ha,
with a production yield of 1 ton/ha in the form of random green coffee beans. KUB Mawar can
sell 5,000 tons of green beans to Nestlé in one season, and total sales can reach 8,000 tons
(4C and non-4C) per harvest season.

Additionally, KUB Mawar conducts direct business with a number of companies that specialize
in the export of coffee, including PT Olam Indonesia, PT Asia Makmur, and PT Nedcoffee
Indonesia Makmur Jaya. In the beginning, PT Nestlé provided assistance to the farmers in
Ngarip; however, not all of the harvest was purchased by PT Nestlé at that time. Farmers
continue to follow the guidelines established by Nestlé in order to ensure that coffee products
produced in KUB Mawar are eligible for export. The vast majority of this group's coffee is
shipped off to a number of countries in both Europe and the United States.

KUB Mawar has a buying station in Jalan Raya Pekon Ngarip, Ulubelu, Tanggamus Regency,
Lampung Province, Indonesia.

5.2.5 The Government of Tanggamus Regency

The Tanggamus Regency Government is a government agency under the Lampung Province.
The Tanggamus Regency Government has several agencies tasked with providing services
to the people of Tanggamus Regency, starting from the aspects of education, health,
community welfare, agriculture, and maritime affairs.

The Tanggamus District Government was not directly involved in the Sustainable Coffee
Program in 2015–2018, but all stakeholders involved in the Sustainable Coffee Program
expressed the importance of the involvement of government institutions. This prompted
researchers to conduct a mapping of government institutions related to coffee production in
Tanggamus District.

Based on researchers' observations of the stakeholders involved in the Sustainable Coffee

Program, the Department of Plantation and Animal Husbandry is the most relevant
government agency for coffee plantations in Tanggamus District. The Department of Food
Security, Food Crops, and Horticulture is another government organization that has some

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connection to coffee plantations. This is because coffee farmers often plant food and
horticultural crops as "intercrops" to bring in extra money.

5.2.5.1 Department of Plantation and Animal Husbandry

The Department of Plantation and Animal Husbandry in Tanggamus District, Lampung
Province plays a crucial role in the coffee production industry in the region. Some of the
specific responsibilities of this department include:
1. Providing technical assistance and guidance to coffee farmers: The department may
offer training and support to farmers on best practices for coffee production, including
issues related to soil management, pest control, and water management.
2. Promoting sustainable coffee production: The department may work with farmers to
implement sustainable farming practices that help to protect the environment and
improve the long-term viability of the coffee industry in the region.
3. Facilitating market access for coffee farmers: The department may work with local and
national organizations to help coffee farmers access markets for their products,
including exporting to international buyers.
4. Providing financial assistance to coffee farmers: The department may offer financial
support to coffee farmers through subsidies or other programs to help them invest in
the necessary inputs for coffee production.

Tanggamus District's Department of Plantation and Animal Husbandry plays an important role
in supporting and promoting the coffee production industry, with the goal of improving the
sustainability and viability of this important sector.

5.2.5.2 Department of Food Security, Food Crops, and Horticulture

The Department of Food Security, Food Crops, and Horticulture in Tanggamus Regency is a
government agency in charge of managing and developing the food security, food crop, and
horticulture sectors in Tanggamus Regency. Following are some of the main functions of the
agency:
1. Managing and developing the food security sector: The food security office is
responsible for managing and developing the food security sector in Tanggamus
District, including managing the production, distribution and storage of adequate food
to meet the needs of the people in the area.
2. Managing and developing the food crop sector: The food crop agency is responsible
for managing and developing the food crop sector in Tanggamus District, including
managing the production, distribution and storage of adequate food crops to meet the
needs of the people in the area.

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 3. Manage and develop the horticulture sector: The Horticulture Agency is responsible
for managing and developing the horticulture sector in Tanggamus Regency, including
managing the production, distribution and storage of adequate horticultural crops to
meet the needs of the people in the area.

Overall, the department of food security, food crops, and horticulture in Tanggamus Regency
plays an important role in managing and developing the food security, food crop, and
horticulture sectors in the region to meet the needs of the community and improve their quality
of life.

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6. Findings & Analysis

6.1 Analysis of the business relationship between Nestlé and

Yara Indonesia
Nestlé and Yara International have a longstanding partnership that dates back to the 1980s.
In the 1980s, Nestlé began working with Yara to improve the productivity of its coffee farms in
Latin America. Nestlé wanted to increase the yield of its coffee farms while also reducing their
environmental impact. Yara helped Nestlé achieve these goals by providing high-quality
fertilizers and crop nutrition solutions.

Over the years, Nestlé and Yara have continued to work together on various projects related
to sustainable agriculture and environmental conservation. For example, in 2020, the two
companies announced a partnership to promote the use of precision farming technologies in
the coffee sector. Precision farming is a farming method that uses advanced technologies,
such as sensors and GPS, to optimize the use of resources and improve the productivity of
crops.

In 2021, Nestlé and Yara also announced a partnership to promote the use of renewable
energy in the coffee sector. The two companies will work together to develop and implement
renewable energy solutions for Nestlé's coffee farms in Latin America.

Through the available literature, there are some partnerships between Yara and Nestlé in a
coffee commodity outside Indonesia.

In 2018, Yara and Nestlé announced a collaboration to support coffee farmers in Brazil using
precision agriculture techniques (Yara International, 2018). The partnership aims to help
farmers improve the efficiency and sustainability of their operations, while also increasing crop
yields and quality.

In 2019, Yara and Nestlé launched a pilot project in Vietnam to promote sustainable coffee
production (Yara International, 2019). The project aims to help farmers adopt sustainable
farming practices, including the use of sustainable fertilizers and pest management
techniques, to improve the environmental and social impact of coffee production in the region.

In 2020, Yara and Nestlé announced a partnership to support coffee farmers in East Africa
with sustainable fertilizers and other agronomic solutions (Yara International, 2020). The

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partnership aims to help farmers improve the efficiency and sustainability of their operations,
while also increasing crop yields and quality.

In the next section, researchers will explore the Indonesian context and be more specific about
the partnerships carried out by Yara and Nestlé in Indonesia.

Period 1 - A beginning of relationship

2014

In 2014, Yara Indonesia was still collaborating with PT. Meroke Tetap Jaya for product
distribution. In that year, Yara developed a trial fertilizer formulation that would be applied to
coffee commodities. The place chosen was Tanggamus Regency, Lampung. The purpose of
this trial or demonstration plot was to make fertilization recommendations for coffee
commodities.

Yara selects farmers to conduct coffee demo plots based on three criteria: the availability of
productive plants, the level of influence of the farmers on their surroundings, and farmers who
are consistent with long-term cooperation. Those criteria are necessary for Yara to strengthen
its portfolio in the coffee commodity.

In the demo plot program, it turns out that the farmers who work with Yara are also Nestlé-
assisted farmers. However, at that time, Yara Indonesia and Nestlé Indonesia did not have a
direct business relationship. So, there was a coincidence where Nestlé's management finally
saw the results of Yara's demonstration plot on the coffee commodity in Tanggamus Regency,
and Nestlé was interested in exploring further collaboration.

From this trial, the Yara Indonesia team also began to understand the supply chain for coffee
commodities in the Tanggamus Regency, where most of the farmers sell their products directly
to Nestlé Indonesia. Tanggamus farmers are familiar with Yara products; however, farmers
usually use Yara fertilizer for horticultural commodities, not plantation crops like coffee
plantations. With this demonstration plot, Tanggamus coffee farmers see that the right
fertilization program has optimal results for their coffee plants.

2015

In 2015, Nestlé, through Mr. Wisman Djaja (Sustainable Agriculture Development and
Procurement Director), contacted Yara Indonesia to discuss further about Yara's coffee
fertilization program on demonstration plots in Tanggamus Regency. Yara Indonesia sent a
National Sales Manager to directly discuss Yara's fertilization program for coffee plantations.

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At the meeting, representatives from IDH and the Rabo Foundation were also there, which
eventually turned into a partnership initiative called the Sustainable Coffee Program (SCP).
SCP is a partnership where coffee farmers are given various facilities, such as discounted
fertilizers and assistance from Yara, financial literacy training from IDH Foundation, capital
loans from the Rabo Foundation, and a coffee price guarantee from Nestlé Indonesia.

Yara, Nestlé, Rabo Foundation, and IDH are together in PISAgro. The Partnership for
Indonesia Sustainable Agriculture (PISAgro) is a partnership forum between the Indonesian
government, the industrial sector, and the general public that seeks to assist the Indonesian
government in increasing sustainable agricultural productivity as part of Indonesia's food
security development. PISAgro was founded in June 2011 during the World Economic Forum
on East Asia gathering in Jakarta, and it began operations in 2012. The government of
Indonesia, represented by the Coordinating Ministry for the Economy, the Ministry of
Agriculture, and the Ministry of Trade, fully supports this collaboration.

There are several working groups in PISAgro that the partner can be involved with. Yara joined
the coffee, maize, palm oil, horticulture, and rice working groups. Nestlé joined the coffee and
soybean working groups. Meanwhile, Rabo Foundation and IDH joined the agri-finance
working group.

One of the benefits of Yara joining PISAgro is building good relations between the decision
makers of each organization. The collaboration between Yara and Nestlé is the result of a
business relationship with the same vision and a combination of competent field teams, so
that each party can advocate for the next collaboration.

Period 2 - Development of business partnership

During this period, Nestlé and Yara began to build an intensive relationship, starting with
collaboration on the Sustainable Coffee Program in 2015–2018 and the Coffee Plus Project
in 2019–2020.

The relationship between Yara and Nestlé is categorized as a partnership because each party
isn’t necessarily doing business as usual, but they provide extra effort. For example, Yara
Indonesia not only sells the fertilizer, but they also provide dedicated agronomists for this
partnership and give a discounted price for the fertilizer.

2015

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The Head of Agreement for the Sustainable Coffee Program was signed by 5 parties, Nestlé
Indonesia, IDH, Rabo Foundation, Yara Indonesia, and coffee farmers who are in the KUB
Robusta Prima & KUB Mawar.

A total of 2.9 billion IDR worth of soft loans were given to KUBs by the Rabo Foundation. The
loan was utilized by 300 KUB Robusta Prima & KUB Mawar farmers who had been selected
by Nestlé and Rabo Foundation. The criteria used by Nestlé in selecting farmers are the level
of performance, the size of the coffee plantation, and the activeness of the farmers in activities
carried out by Nestlé.

With the money given to farmers, they can buy fertilizer from Yara Indonesia at a discount.
Aside from that, Yara Indonesia also put a dedicated agronomist in charge of educating
farmers during the growing process to help them get the best results. When it came time to
give out fertilizer, the Yara Indonesia team had trouble because the farmers' gardens were far
apart, which meant they had to work harder to get it to everyone.

The Sustainable Coffee Program ended in 2018, and the program did not continue because
Rabo Foundation stopped distributing its loans to coffee farmers. However, the result of this
partnership is very good for being a practical benchmark for another partnership scheme.

Both Nestlé and the consumer in general get the mutual benefit of this partnership. As a
corporation, Nestlé gains the benefit of its proximity to coffee suppliers which can fulfill its high
standard of quality requirement. Nestlé can also start cutting the layer of coffee buying process
until the minimum layers, no more unnecessary traders or coffee collectors, but individual
farmers or group of farmers can deal directly with Nestlé. This is a good deal both for farmers
and Nestlé where high cost of supply chain can be eliminated, due to leaner layers of coffee
purchasing steps/supply chain. The direct connection between farmers and Nestlé will also
maintain a strong relationship with coffee communities.

This partnership Yara benefits in the form of direct interaction with 200 coffee farmers who are
members of KUB Robusta Prima and with 400 coffee farmers who are members of KUB
Mawar. In terms of economic benefits, Yara managed to record sales of more than 500 tons
of YaraMila which were used by farmers to fertilize their coffee plants. Yara also gives coffee
farmers more information about how to fertilize properly, how much fertilizer to use, how to
grow coffee in a way that is good for the environment, and discounts on fertilizer prices.

Nestlé is satisfied with Yara's performance in this partnership because Yara can provide
agronomists who help Nestlé's AgriService train farmers and also provide inputs that help
farmers increase crop yields and crop quality. At the same time, Yara is also satisfied with

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Nestlé being able to orchestrate this partnership well and giving Yara the opportunity to
interact directly with coffee and horticultural farmers in Tanggamus Regency.

To get a better understanding of the Sustainable Coffee Program, please see the figure below:

Figure 3. Sustainable Coffee Program mechanism

Table 2. Description of the SCP mechanism

No. Description
1 Rabo Foundation (RF) disbursed loan to KUBs.
2&3 KUBs purchases fertilizer from Yara at a discounted price.
4 The farmer receives money as loan for farm maintenance and purchases fertilizer
at discounted price from KUB.
5 Farmer delivers the coffee harvest to KUB.
6 KUB sells coffee to Nestlé.
7 Nestlé provides payment to KUB.
8 KUB fulfills its loan obligation to RF.
9 At the same time, Nestlé provides agronomic training to coffee farmers, Yara
provides advice for fertilizer utilization and IDH (through external consultant)
provides training on the KUB accounting system and loan management system.

This partnership seeks to create a close loop scheme, where economic turnover can occur
within the stakeholders who are in the partnership and minimize the role of external
stakeholders in order to create efficiency in coffee production.

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2018

Nestlé obtained a matching fund program from the Deutsche Gesellschaft für Internationale
Zusammenarbeit GmbH, often shortened to simply GIZ for the Coffee Plus program. The
purpose of this program is to rejuvenate coffee plants that are getting on in years and may
benefit from some new trees. Plant rejuvenation is typically something that farmers avoid doing
because, after being replanted, the plants do not produce fruit and, consequently, the farmers
won’t be able to make any money from the coffee plantation. Farmers participate in this
program called "coffee plus" to gain the knowledge and skills necessary to intercrop coffee
trees with other commodities like chili, pepper, and avocado.

The Coffee+ project enables develop the capacity of smallholder coffee farmers by providing
them with an entrepreneurial mindset, knowledge, and skills through a learning tool developed
by GIZ called "Farmer Business School (FBS)" that is packed with interventions on the most
effective farming practices and a diversified income with an inter/multi-cropping system. The
project helps to establish local ownership and learning alliances, as well as strengthens the
structures that are already in place for farmer and group organizations. In accordance with
Indonesia's coffee policy, the information and educational resources that have been
developed through collaborative efforts will be disseminated widely and made accessible in
order to ensure the long-term viability of the measures. Additionally, a farming system and
supply chain that is sustainable to produce Robusta coffee are in the process of being
established.

The Yara Indonesia team was once again a part of this program because they are experts in
how to grow chilies and what fertilizer to use for other plants. Nestlé agreed to use Yara's
fertilization solution on this demonstration plot.

This Coffee Plus Project was initiated by GIZ, Nestlé, and Yara. There are 3 objectives of the
project,
1. To installed 50 intercropping demos on farmers who were appointed and willing to
replant their old coffee trees.
2. To test the intercropping crops concept, will farmers have extra income, while waiting
for their coffee to produce?
3. To attract other coffee farmers to adopt the intercropping method in Tanggamus
district, Lampung, so the coffee production will increase in the upcoming years.

Each demo plot is 0.5 hectares and consists of 500–600 trees of robusta coffee, 1000 plants
of chili, 45–50 trees of avocado, and 150–180 plants of black pepper/vanilla. See the layout

53
in the picture below. The layout was created by GIZ’s consultant, and agreed upon by Nestlé
and Yara.

Figure 4. Layout of intercropping coffee plantations made by GIZ’s consultant

As a result, the calculation of the chili crop commodity, the application package from Yara
increased yield by 4.250 kg/ha above the standard farmer, based on a report from Yara to
Nestlé. In the chili crops, for every IDR 1 spent on a Yara package, the farmer will get IDR 8.

At the end of the project, 53 intercropping demo plots have been installed for coffee plants
with chili, avocado, black pepper/vanilla. First results (2018-2019) showed optimum growth
results in most of the plants and a 50% yield increase with Yara package on the first chili
production (1:12 cost-benefit ratio) based on Nestlé & Yara internal project report in 2020.

Through these partnerships, Nestlé's trust in Yara is well established. This is reinforced by a
statement from Junda Aulia, Head of AgriService Nestlé, "We are delighted to partner with
Yara, which not only sells fertilizer but also shares our commitment to sustainability in the
coffee industry."

Period 3 - Reforming relationships

2019-2022

In this year's span, Nestlé Indonesia and Yara Indonesia have not continued their
collaboration, one of the contributing factors is the COVID-19 pandemic, which has made

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many adjustments in the businesses of the two companies. Nestlé Indonesia will start to ask
Yara Indonesia and other partners to continue the SCP in the coming months, but talks are
still going on now.

At the moment, Nestlé is increasing the standards set in their supply chain in order to achieve
their net zero target, one of which is by trying to reduce the carbon footprint. This is directly
related to Yara, so Yara was asked to provide a carbon footprint study of Yara products that
will be used by Nestlé and its farmers on the field. Yara Indonesia's management is currently
preparing the study; however, there has been no decision from Nestlé regarding the next
partnership.

6.2 Analysis of the focal nets between Nestlé, Yara, and the
stakeholders
Nestlé and Yara have had a long-standing partnership focused on promoting sustainability
and improving the efficiency and effectiveness of agriculture and food production around the
world. Based on this evidence, it can be said that Nestlé and Yara are important actors in the
coffee industry. The existence of these two multinational companies can also affect the coffee
industry as a whole. Therefore, Yara and Nestlé fall into the category of focal actors in the
coffee production focal network.

A focal network is a group of individuals or organizations that are connected through a shared
focus or goal. Focal networks often center around a specific topic or issue, and members of
the network may collaborate and share resources to advance their shared objectives. Focal
networks can be informal or formal in nature, and may involve various types of stakeholders,
including government agencies, NGOs, businesses, and community groups. Focal networks
can be effective in promoting change and advancing specific causes, as they allow members
to leverage their collective expertise and resources to achieve their shared goals. Focal
network is in a large network, meanwhile focal nets is a smaller net within the larger network.

Nestlé, Yara, IDH, the Rabo Foundation, and KUB (Robusta Prima & Mawar) were the five
organizations that participated in this partnership and signed a formal joint partnership
agreement. This partnership came about as a result of a relationship between decision-makers
at Nestlé, Yara, IDH, and the Rabo Foundation, all of whom are members of PISAgro. Each
partner committed to carrying out the SCP in the Tanggamus Regency, after which they
selected KUB Robusta Prima as a new partner in 2015 and expanded to KUB Mawar the
following year.

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Due to the fact that Nestlé and Yara are members of the same working group at PISAgro,
communication between the two companies is streamlined. The history of the relationship that
has existed between Nestlé and Yara has an influence on form of the SCP partnership.

Figure 5. the business relationship and its focal net in the SCP

Open communication between different stakeholders is established and encouraged through

the SCP.

"I don't feel any hesitation to communicate with Nestlé, Yara, Rabo (Foundation), and also
IDH. Communication in this partnership is very open and equal." Danuri – ICS KUB RBP

Over the period of the three years that the SCP partnership is in place, representatives from
Yara and Nestlé are on-site to provide direct assistance to participating farmers. While other
collaborators like IDH and the Rabo Foundation carry out periodic monitoring on a monthly to
quarterly basis. At each KUB, stakeholders gather once a month for meetings to carry out
structured monitoring to ensure the program is being implemented as planned.

All partners here play a vital role in making this relationship work. Farmers who are KUB
members are eligible for funding programs through the Rabo Foundation, training in loan
management systems is provided by IDH, Yara provides training in fertilization and plant care
programs, Nestlé offers assistance and will purchase coffee from KUB, and KUB facilitates
the organization of farmer groups.

“Each partner has a specific role and has an expertise in a specific area. So there is a transfer
of knowledge to each partner. We are not only give something, but we also learn from each
other.” Junda – Head of AgriService Nestlé

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There is mutual respect and trust among the parties involved, regular check-ins on progress,
and clear channels of communication, so the partnership is progressing well. The absence of
government agencies, particularly the plantation service, is a downside in this partnership.

"What is missing, at that time we did not feel the government's presence in this partnership,
(especially) in Ulubelu (a region in Tanggamus district). I hope the government agencies could
help us register in the Ministry of Agriculture database." Malik – ICS KUB Mawar

The points made by Mr. Malik are also in line with the points made by Ms. Bea (Yara
Indonesia's ex-marketing manager),

“...(The government) can follow the example of the Ministry of Tourism which endorses the
tourism potentials of each region, so that the public is more aware of Indonesian tourism. In
the agricultural context, the government can help endorse local agricultural products. Many of
us didn’t know that Nestlé sources 100% coffee products from Indonesia, or Indofood uses
100% potatoes from Indonesia. Initially, Indofood imported its potatoes, but eventually they
were able to develop local potatoes according to their needs in Indonesia. Things like this
need support from the government, so that Indonesia's agricultural ecosystem can develop
better.”

In this partnership, the Department of Agriculture and Animal Husbandry of Tanggamus

Regency is not directly involved, however, coffee farmers in Tanggamus need farmer
registration certificates managed by the Department of Agriculture and Animal Husbandry of
Tanggamus Regency to be able to access aid or subsidized fertilizer from the government.

If managed better, government agencies can work with partnerships such as the SCP to
collect farmer data in a more reliable and up to date manner. Farmers will also get additional
benefits in the form of farmer registration numbers at the ministry of agriculture/relevant
agency.

6.3 Analysis of partnership towards sustainability

The Sustainable Coffee Program is designed to develop and improve the quality of coffee
beans and high productivity rate in a sustainable way. The important aspects that the
researchers explored more deeply related to this partnership are how the organizational
values are aligned with the goals of the partnership; how is the trust formed between
stakeholders; how is the satisfaction of each stakeholder towards the partnership and other
stakeholders; stakeholder perceptions of the sustainability aspect in this partnership; and how
the mutual benefits obtained by each stakeholder in this partnership.

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6.3.1 Organization value and partnership objectives

One of the efforts to achieve goals in a partnership relationship is the similarity value of the
collaborating stakeholders. From a social standpoint, companies form partnerships to be more
socially and ecologically conscious, to address socio-environmental problems, or to increase
community sustainability (Ordonez-Ponce et al., 2020). In this section, researchers will
analyze the alignment between organizational values and objective partnerships for each
stakeholder. These are summarized in the following table 3:
Table 3. Stakeholder value and the partnership objective

Stake-
Organizational Value Partnership Objective Mark
holder
•Increase of coffee volume
Advancing regenerative food product
Nestlé Aligned
system at scale •Increase quality of coffee
•Increase number of farmers

Growing a nature-positive •Number of farmers

Yara Aligned
food future •Number of sales

To offer people in a
Rabo vulnerable position a chance
•Number of bankable farmers
Founda at a better future. By seizing Aligned
•0% Non Performing Loan
tion opportunities where others
only see risks.
Convenes, co-creates, and
co-finances inclusive and
sustainable solutions that •Create ecosystem for sustainable
IDH enable people in business, coffee production Aligned
investment, and government •Number of partners involved
to create value for people and
the planet
Bringing together the coffee
farmers in Tanggamus. Bring
•Improvement of organization
prosperity, community peace (institutional) capability
KUB •Improvement of farmers skill on Aligned
for the sake of regional
coffee production
economic development. Live
in harmony with nature.

58
Nestlé as one of the initiators of the sustainable coffee program has value for advancing
regenerative food systems at scale. In the partnership objective there are three things to be
achieved, namely an increase of coffee product, an increase in the quality of coffee and an
increase in the number of farmers. According to the researchers, values and objectives are
very much in line because improving the food system means increasing the quantity as well
as the quality, which in this case is the coffee commodity. In this program, Nestlé plays its role
well, by inviting farmers to participate in the SCP through KUB.

Yara is also the initiator partner of Nestlé which has value growing a positive nature for food
future. Yara has two objective partnerships, namely number of farmers and number of sales.
Researchers consider that these values and objectives are very much in line, because the
increasing number of farmers and increased sales of coffee products will have a positive
impact on the food future. Not just focusing on numbers, Yara and Nestlé also provide capacity
building for farmers in the process of fertilization, maintenance and post-harvest treatment so
the farmers can get a better-quality green beans.

Rabo Foundation as a financial provider to this program has a value to offer people in a
vulnerable position by chance at a better future. By seizing opportunities where others only
see risks. The Rabo Foundation provides financial access for farmers who are not bankable
because they do not have goods to pledge as collateral so they can have fresh money in
managing their coffee plantations. The objective of the Rabo Foundation from this partnership
is to increase the number of farmers so that more farmers have access to finance and also
increase the number of sales so that the money circulation provides benefits for the
beneficiaries. Researchers consider that the values and objectives of the Rabo Foundation
are very much in line.

IDH as an implementer partner who provides education about financial management to

farmers who are members of KUB. IDH has value to convenes, co-creates, and co-finances
inclusive and sustainable solutions that enable people in business, investment, and
government to create value for people and the planet. In SCP, IDH has 2 objectives, namely,
to create an ecosystem for sustainable coffee production and the number of partners involved.
The researcher assesses that the values and objectives are quite consistent because the
creation of an inclusive ecosystem is much needed in programs such as SCP. Ecosystems
can be formed more optimally when more partners are involved in this program, thus IDH
succeeds in implementing this program.

KUB as an organization that houses farmers, has the value “Bringing together the coffee
farmers in Tanggamus. Bring prosperity, community peace for the sake of regional economic

59
development. Live in harmony with nature.” KUB as an implementing partner has 2 objectives,
namely improvement of organizational (institutional) capability and improvement of farmers'
skills on coffee production. Researchers consider that KUB's values are in line with the
objectives to be achieved in SCP because KUB has an orientation towards increasing the
capacity of KUB itself as well as farmers.

Those 4 organizations had different values and objectives, yet they shared the same vision to
enhance sustainability in coffee production in Tanggamus District, Lampung. Having the same
goals is different from deciding on a shared vision. Discovering a shared vision is the means
through which these individual goals can be accomplished. Partners' motivations for what their
organizations want to achieve through partnering may differ (for example, one may desire
credibility, while the other, cash generation). But finding a common vision is the means through
which each of these personal objectives might be accomplished (Gray & Stites, 2020).

6.3.2 Trust among stakeholders

The dynamics of trust between SCP stakeholders are immensely interesting, as there are
differences between partners who work directly on the field and those who intervene and
monitor on a regular basis. Following is a summary of trust derived from in-depth interviews
with stakeholders and data collection.

Figure 6. Trust among stakeholders in the SCP

According to figure 6, Nestlé, Yara, and KUB have a great deal of trust in other partners. This
is due to the intense interaction between the three parties involved. The three stakeholders
work collaboratively with farmers on a daily basis in the field, nurturing mutual trust. Based on
Anderson, et al., (1990) in Hwang et al., (2022) interorganizational trust is characterized as an

60
organization's confidence that other organizations would take profitable measures on its
behalf. By lowering the risk of opportunistic conduct and uncertainty, trust strengthens
relationships. Partners who have established trust can rely on one another to carry out certain
tasks and behave in their mutual interests.

Things to be improved

Due to the fact that the Rabo Foundation provides loans to previously unbankable farmers,
there is a risk that these farmers will be unable to repay their loans. In anticipation of this, the
Rabo Foundation has created a financing scheme in which the debtor is a KUB farmer group
and not an individual. This is intended to reduce the risk of farmers borrower defaults on their
Rabo Foundation loans.

As Retno revealed, however, there was a void in the KUB that led to errors in budgetary
control: "There was an internal problem at KUB Robusta Prima that led to a change in the
chairman of the KUB in the middle of the program. Consequently, KUB Robusta Prima has
not yet repaid the Rabo Foundation loan of 30%."

KUB Mawar, unlike KUB Robusta Prima, was able to repay Rabobank's entire loan at the end
of the program. However, this reduces the trust of Rabo Foundation in KUB's credibility. Rabo
Foundation requires an independent audit of KUB at the conclusion of this program if KUB
wishes to work with Rabo Foundation again, but KUB has not yet agreed to this requirement.

On the other hand, IDH provides stakeholders involved in the SCP with critical arguments
while this partnership is not fully committed to sustainable development.

"This partnership will work well if Nestlé as an off-taker is committed to only buy sustainable
products and does not take products (coffee) that are unclear.” Fitrian - Country Director IDH

This raises an interesting discussion because IDH seeks to bring this partnership into a more
sustainable. However, IDH's aspirations should also take into account the general condition
of farmers in Tanggamus Regency, because a Nestlé retreat from "unclear" products seems
to have the potential to disrupt the coffee ecosystem in Tanggamus Regency. IDH's
aspirations can be met if the SCP program is expanded to the national level and all coffee
farmers in Lampung Province are included.

6.3.3 Satisfaction among stakeholders

Stakeholder satisfaction can help to improve the performance of the partnership. If

stakeholders are satisfied with the partnership, they are more likely to be motivated and

61
engaged, which can lead to better outcomes and results. Further, this also can ensure the
long-term viability of the partnership. If stakeholders are not satisfied with the partnership, they
may choose to withdraw their support or even actively oppose it, which can undermine the
partnership's ability to achieve its goals.

Figure 7. Satisfaction among stakeholders in the SCP

Figure x shows that Yara, Nestle, and KUB are satisfied with each stakeholder. Several
interesting things were conveyed by the stakeholders through the data from the interviews,
one of which was that the three parties benefited from the existence of all stakeholders.

The intriguing thing is that IDH provides a medium level of satisfaction because IDH hopes
that the SCP partnership will be continued or expanded to other regions.

I'm relatively satisfied with this business model/partnership. But we have to see if this can be
scaled up. We also have to be humble, a model that works in one place may not necessarily
fit in another place.” Fitrian – IDH Country Director

The thing that is most highlighted in this aspect is the satisfaction of the Rabo Foundation,
where they feel very disappointed with KUB's performance, especially KUB Robusta Prima,
which until the process of this research interview, KUB Robusta Prima still has debts to the
Rabo Foundation. The management of KUB which does not have a track record in this kind of
partnership is considered to be the cause of underperforming KUB.

"The readiness of the organization is very important, this is the first experience and there is
no track record yet. Professionalism (KUB) is also lacking because it is managed as a family
business." Retno – Rabobank Foundation Program Manager

62
6.3.4 Perceived sustainability

According to Nelson (2017) it is important for partnerships to consider perception towards

sustainability and take steps to ensure that stakeholders have a positive and supportive view
of the partnership's efforts to address sustainability issues. This can help to ensure the long-
term viability and success of the partnership.

Figure 8. Stakeholders perception towards sustainability in the SCP

In general, the perception of all stakeholders in the SCP partnership on the financial and social
aspects is positive. Positive perceived sustainability on the financial aspect can be caused by
a variety of factors. Some findings on this partnership are:

Efficient resource use; in this partnership, the stakeholders working together to effectively
manage and optimize their use of resources, such as energy, water, high quality input, and
waste management, may be perceived as more sustainable from a financial standpoint. This
can help reduce costs and improve profitability.

The availability of loans for the farmers from the Rabo Foundation. With more capital, farmers
can afford to buy high quality fertilizers and another input supply. This led to an increase in
the quality and quantity of the coffee production.

However, there are several things that need to be improved,

“From an environmental standpoint, I think it's still lacking because we use (chemical)
fertilizer.” Retno – Rabobank Foundation Program Manager

“I feel the environmental aspect is very prominent. Because Nestlé and Yara taught us to use
rorak (method to make compost) and coffee bean husks as compost, so that we have
alternative fertilizers and reduce our waste.” Diono – Coffee farmer

63
This intriguing discourse on environmental aspects is an interesting finding: farmers have a
high environmental perception, but some other stakeholders have a medium perception of this
aspect. This is possible when farmers' understanding of environmental sustainability still
needs to be improved.

In this partnership, the emphasis on environmental aspects is not the main focus, because the
main attraction of this partnership is the availability of capital loans from the Rabo Foundation
and fertilizer from Yara Indonesia. However, coffee farmers who are members of KUB Robusta
Prima and KUB Mawar have received training on 4C from Nestlé, which means the farmers
already aware about environmental aspects of sustainable coffee production.

6.3.5 The mutual benefit of the partnership

According to Nelson (2017), it is important for partnerships to consider mutual benefit and
ensure that all stakeholders are receiving tangible benefits from the partnership. This can help
to ensure the long-term viability and success of the partnership, as well as its impact on
sustainability. This table shows three aspects of partnership’s benefit that has been
accomplished by the stakeholders.

Table 4. Stakeholder perceptions towards mutual benefit in the SCP

Stakeholder Financial Social Environmental

•Fulfillment of supply •Strengthened

Nestlé •Lowering carbon
of good quality stakeholders in the
(off-taker) emission
coffee beans coffee supply chain
•Sales of 500 tons of •Positive respond from
Yara
Yara fertilizer farmers •Effective distribution
(input
•Potential market in •Gain farmers trust for channel
provider)
Tanggamus the Yara’s product
Rabo
Foundation •Disburse loan to •Positive response from
•Not mentioned
(loan farmers farmers & stakeholders
provider)
IDH
•Positive response from
(financial •Not mentioned •Keeping biodiversity
stakeholders
literacy)

64
 •Get loan with low
•Knowledge about good
KUB interest (worth 2.9 •Strengthened institution
agricultural practices
(farmer billion IDR) •Gain higher trust from
which conserve water
group) •Higher income on farmers
and the soil
coffee bean

As the product’s off taker, Nestlé benefits because it gets a supply of quality coffee because
of the SCP. On the social aspect, Nestlé can also strengthen their relationships with several
stakeholders in the coffee supply chain which has an impact on Nestle's credibility in the eyes
of stakeholders. Also, environmentally the SCP program is successful for lowering carbon
emissions because the supply chain from farmers to Nestle is shorter.

Yara as the input provider also benefited financially because Yara fertilizer sales increased by
up to 500 tons during the SCP implementation. Also, networking with the farmers in
Tanggamus has made Yara Fertilizer even more recognized by the farmers in Tanggamus.
On the social aspect, Yara, which also provided capacity building to farmers regarding the
process of growing coffee, received a positive response and increased farmers' trust in Yara
Fertilizer. This also has an impact on environmental aspects because it streamlines channel
distribution because Yara gets a new distributor in the Tanggamus area.

Rabo Foundation as a loan provider which aims to provide loans to those who are not
accessible by banks, also gets benefits financially, namely disburse loans to the farmers.
Socially, Rabo bank also received a positive response from the farmers because finally they
can have a more secure cash flow when participating in the SCP. However, the Rabo
foundation does not mention the environmental benefits obtained from this SCP.

IDH as a party that provides financial literacy to farmers, also gets social and environmental
benefits. Socially, IDH received a positive response from the farmers. Environmentally, with
this program IDH can keep biodiversity as one of IDH's values. But financially, IDH did not
mention the benefits of this partnership.

The last, KUB as a farmer group that becomes a partner that oversees the beneficiaries gets
financial benefits, namely getting loans with low interest (worth 2.9 billion IDR) which benefit
farmers, the majority of whom are smallholders. Socially KUB is also getting stronger
organizationally and gaining the trust of its members because KUB is not just an association
but provides real benefits to them. Environmentally, KUB also gains increased knowledge
about good agricultural practices and sustainability, so that it can increase the selling power
of coffee from KUB members.

65
7. Conclusion
The researcher worked on this thesis with the goal of presenting important facts and providing
useful insights into coffee production partnerships in Indonesia, as well as the surrounding
elements that affect and are affected by these partnerships. The goal is to explore the
partnership's current state and provide more elaboration of its impact on sustainability
concerns. Furthermore, the researcher wanted to share insight into what researcher believe
are the critical steps forward toward building sustainable partnerships that may benefit both
the environment and multiple stakeholders.

Researchers found that the partnership that developed between Nestlé and Yara was a
combination of several factors, including; there had been global collaboration between the two
companies in other countries. There is a relationship at the decision-making level that meets
on a partnership platform. And also, there is strong evidence from both Yara and Nestlé field
team experts working on the coffee commodity.

The SCP partnership program benefits farmers through financial, social, and environmental
support. It enables the stakeholders to pool resources and expertise to achieve a common
goal more efficiently. This leads to cost savings and increased productivity. The program also
provides access to markets and opportunities, as well as stronger relationships and networks
within the coffee production sector.

The SCP partnership operates successfully due to high trust and clear roles among partners.
The partnership can be improved by carefully selecting farmer groups and increasing their
knowledge on financial management. Involving government agencies can also help
strengthen the partnership.

7.1 Policy recommendations for building partnership towards

sustainability in coffee production

Building an effective partnership, particularly between different sectors, involves individuals

implementing new mindsets and obtaining new skill sets, while institutions need to develop
new capabilities and be incentivized to do so. In today's day and age of short attention spans,
rapidly accelerating and disruptive change, and short-term performance pressures on
businesses and governments alike, it requires patience, perseverance, and a long-term
commitment to be successful.

66
Based on the results of this research, there are three main components for the stakeholders
to build more effective partnerships in the coffee production industry:

1. Shared purpose and understanding of the ecosystem and its stakeholders

● A compelling agenda for change to be led by strong champions who are executives in
their own organizations and can make decisions, allocate resources, motivate and
mobilize others, and support a long-term commitment is required.
● public commitments that have been jointly agreed upon, as well as a strategic plan for
fulfilling those commitments, which is founded on extensive engagement and pertinent
baseline evidence, with roles and responsibilities for each stakeholder being clearly
defined.
● A comprehension of the entire value chain or ecosystem that must exist for
transformation to take effect, as well as the capability to either holistically coordinate
actions or stakeholders throughout this system or target specific interventions that
mutually reinforce those of others.
2. Rigorous process and operational alignment
● Effective implementation capability is provided by devoted and well-resourced
"backbone support," dedicated practitioners from the stakeholder who have the
required authority and abilities to engage, and effective communication and conflict
resolution systems that enable regular and rigorous discussion and feedback.
● Strong alignment with the key strengths and interests of partners and the ability to use
them.
3. Good governance and mutual accountability for progress
● Create metrics and governance mechanisms that have been mutually agreed upon to
measure performance, as well as ensure rigorous oversight and accountability, both
internally within the partnership itself as well as externally with relevant stakeholders,
including beneficiaries and vulnerable groups where applicable.
● Create methods to participatory monitoring and independent assessment, in addition
to ensuring transparency and accountability, allow shared learning and lead to
improved decision-making are desirable.
● The ability to "course correct" and adjust quickly in response to changing conditions,
disruptive events, unsuccessful attempts, input from stakeholders, and previous
experiences.

67
7.2 Limitations

Qualitative case study research is a valuable research method that can provide in-depth
insights into complex phenomena or issues (Yin, 2018). However, there are also limitations to
this research. Some limitations of this research include:

Generalizability: It is difficult to generalize findings from a qualitative case study to a larger

population or context. In this thesis, the research is focused on a specific case of the
Sustainable Coffee Program, and it may not be possible to apply the findings to other situations
or contexts.

Subjectivity: Qualitative case studies often rely on the subjective experiences and
perspectives of the participants or informants, which can introduce bias and subjectivity into
the findings. For example, in this research, the initiator has a tendency to create a positive
impression of this partnership.

Ethical considerations: This research is collecting sensitive or personal data from participants,
which can raise ethical concerns. Researchers need to be aware of these issues and take
steps to ensure that the rights and privacy of participants are protected.

Overall, this research has provided valuable insights into complex phenomena on the
Sustainable Coffee Program, it is important for researchers to be aware of the limitations of
this approach and to consider these limitations when designing and conducting their further
research.

68
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Appendix
Questionnaire

Partnership Rationale

1. What process did we use to select the partner for this project?

2. Is this a new partnership or have we already experienced some significant

achievements through this partnership?

3. Do we have a clear understanding of areas where we are dependent on the partnership

to achieve our goals, and areas where we can achieve them better by working
independently?

4. What are the risks to either organization in this partnership?

Values

5. Have we shared our individual organizational values, purposes, and priorities with each
other? Are they complementary and compatible?

6. How does this partnership fit with our respective organizational missions and long-term
goals?

7. How does the partnership benefit our prospective beneficiaries?

Partnership Purpose and Objectives

8. What is the purpose of the partnership? Do we have a common goal?

9. Define the specific joint aims and objectives of the partnership. Are these realistic and
measurable?

10. What form does this partnership have? Is it a network, a strategic alliance, a joint
venture, a partner-agent contract, or some other form of collaboration?

11. Define success for this partnership. Do we have the same expectations of where early
success in this partnership is most likely?

Trust, Commitment, and Ownership

12. What is the current level of trust between our organizations? What specific experiences
in the past have influenced feelings of trust or distrust?

13. Is the level of trust high enough to encourage risk-taking?

14. Are the purposes, vision, aims and objectives of the partnership fully shared by all levels
of senior and operational management and are they firmly committed to them?

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15. From the scale 1-10, how much do you trust? Why?

o Yara

o Nestlé

o IDH

o RaboBank

o KUB Robusta Prima

Satisfaction

16. What makes you satisfied from this partnership?

17. What do you think needs to be improved in this partnership?

18. From the scale 1-10, how satisfied are you with each partner involved in this
partnership? Why?

a. Yara

b. Nestlé

c. IDH

d. RaboBank

e. KUB Robusta Prima

Roles and Responsibilities

19. Clearly and jointly define and agree on the roles and responsibilities of each
organization in the partnership, ensuring all critical activities are covered.

20. Decide the frequency of monitoring of the partnership to ensure accountability of each
partner.

21. When will you need to modify projects and programs in response to actual experience?

22. Jointly define the protocol used to identify when changes are necessary and ensure that
modifications are adopted.

Partnership Strategy/implementation

23. Who provides leadership for the project?

24. How will we work as partners on a practical level? Do we have the same understanding
about the frequency, level and nature of the work?

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25. Do we have a clear awareness of any geographical or regional differences in the scope
or operations of each partner and how this may affect the partnership? (For example, one
partner may be a local organization and the other a multi-national).

26. Have we defined clear service outcomes for each partner to other stakeholders?

27. How will the key roles or functions of the partnership be filled to ensure it is successful?

28. Are there clear lines of accountability for the performance of the partnership?

29. Do we have similar views about the need to modify projects and programs in response
to actual experience? What protocol will we use to identify when changes are necessary and
ensure that modifications are adopted?

Contributions and Incentives

30. What is the financial participation/contribution of each partner?

31. What are the financial incentives or rewards offered to each partner?

32. How is the risk and return of the project shared?

33. What are the non-financial contributions of each partner?

34. What are the technical skills or assets used in the partnership that each organization
brings to ensure success?

Communication

35. Do we feel able to communicate well with each other? Do we share a common
vocabulary?

36. Do we respect each other's differences and try to find mutually acceptable way to adapt
to our differences?

37. Do all project members, including all levels of management, participate in all critical
decisions made in the partnership?

38. Have we incorporated agreed forms of decision-making that are used to guide
discussions?

39. How do we communicate and publicize our partnership successes outside the
partnership?

Reporting

40. Clearly define the process and frequency of assessment and reporting for the project
and partnership. What systems will we use for monitoring and evaluation of the program?

41. How regularly will we schedule meetings to discuss the partnership activities?

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42. Do we share all monitoring and evaluation reports relevant to our partnership activities?
Do we provide each other with open access to data, documents, programmatic reports,
donor communications and other partnership records?

43. Do we report to each other on all occasional and planned communications with external
entities?

Termination

44. What circumstances will lead to termination of the partnership?

45. What is the process for termination?

Perceived Sustainability

46. In your opinion, does this partnership support the achievement of

sustainability/sustainable development? Why?

47. What are the most prominent aspects of efforts to achieve sustainability/sustainable
development? Why?

48. What are the least prominent aspects of efforts to achieve sustainability/Sustainable
development? Why?

Government Involvement

49. In your opinion, is the government's role needed in this type of partnership? Why?

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