Q&A: “With coffee, the only climate adaptation option for the Nordic region is to support producing countries”

Typically, climate risks that affect the Nordic region, but happen outside of the countries such as trade-related risks are overlooked in climate risk assessments. This insight comes from looking specifically at climate risk in trade by using diverse and more sophisticated data than previous sources to better understand dependencies and risk for Nordic countries.

Customs data that are normally used come with severe limitations. When goods come into the Nordic countries, they are logged as coming in from the last port of entry. Quite often in Europe, that would be the Netherlands because the Port of Rotterdam is such a large trading hub. The data would then suggest the imported goods come with climate risks associated with the Netherlands. It is enough of a phenomenon in Europe that it is called the “Rotterdam effect”

The data could also merely reflect where the goods were last processed. For example, it looks at first glance as if coffee consumed in Iceland comes from the Netherlands and UK. However, neither the Netherlands nor the UK are coffee-producing countries and the climate risk that Icelandic coffee consumers are exposed to is associated more with where the coffee was grown and less with where it was processed.

When we want to understand climate risk in trade, we need to look at where the goods are produced: where are the fields where the food is grown and how is that area affected by climate change? In order to answer the second question, we can look at footprint data: for example, how much water is used in the country of origin to produce what we consume in the Nordic region and how much land is used?

There is another dimension to add in: how high is the climate risk for the product that is embedded into the traded product? Perhaps the pig processed into a Polish pork sausage sold in Sweden was fed with soy from Brazil. We say that Brazilian soy is ”embedded” in the pork sausage and that means that the climate risk associated with Brazilian soy is also embedded in the Polish sausage that is consumed in Sweden or Denmark. Climate risk can be tracked all the way through that supply chain to understand Nordic exposure to these risks.

We calculated a risk-to-opportunity ratio to determine how much risk versus how much opportunity there is in the supply chain for these crops. One important caveat however is that the long-term projections do not take into account extreme weather events such as droughts and floods.

That is quite a big caveat because we know that extreme weather events become both more frequent and more severe as a result of climate change, and because we have seen in the past how such events can upset markets. One such example was the severe drought and forest fires in Russia in 2010, that destroyed millions of hectares of wheat and led Russia to ban exports. And as a result of the drought and fires in the Nordics in 2018, the Nordic countries – that are quite big wheat producers themselves – became net-wheat importers for the first time in recorded history.

But if we put that limitation aside, it is quite clear that wheat is the only commodity where climate change appears to be entailing higher opportunities than risks for the Nordic countries. The highest climate risk for all Nordic countries on the other hand is in the supply of maize, followed by sugarcane.

With regard to maize the Nordic countries rely heavily on crops grown elsewhere. Denmark is the only Nordic country that produces any maize domestically, but only 5 percent of the maize consumed is grown in Denmark. However, sourcing patterns are quite diverse and spread geographically, meaning there is a chance that the market can deal with some of the risk.

Sugarcane is a very different commodity from wheat because it is highly embedded into other products and part of global and complex food production systems. While sourcing patterns in the Nordics differ, yields are predicted to decline between 30-80 percent for the major Nordic trading partners. If you combine these different pieces of information, it becomes quite clear that climate impacts in the sugarcane supply chain will result in a whole basket of products becoming more expensive for Nordic consumers. But the most dismal picture emerges with regard to coffee.

No, indeed, coffee is a luxury good. But nevertheless it is a good that is culturally very important for Nordic countries that are home to the biggest coffee consumers in the world, per capita. Coffee is something that gets rationed in times of war, and that gives you an idea of how attached people and society are to coffee, how important it is to them. If you live in the Nordics, imagining getting up out of bed mid-winter, trying to have productive day at work without that morning coffee. Most of us would not manage well, I think.

But for the Nordic countries, there is no opportunity in the coffee market at all: It is out of the question that we could start producing coffee ourselves. Coffee is very specific in the conditions it needs to grow: a certain altitude, a certain temperature, certain rain patterns, and so on. So coffee can only be grown in some quite specific areas in South America, Africa and Asia.

Diversification is also not an option because all coffee-growing regions across the globe are projected to be adversely affected by climate change in the future. Up to half of the world’s coffee-growing areas may become unproductive in just 30 years. Even if Nordic countries decided to buy less coffee from Brazil, they would face similar climate risks from importing coffee from Ethiopia.

There is a very clear lesson in this: The only option Nordic countries have in adapting to the impacts of climate change on their coffee supply is to support predominantly small-scale coffee farmers in producing regions to adapt to climate change.

The Nordic countries are already very engaged in climate action, development cooperation and in exporting climate-smart techniques. They are also ahead when it comes to climate adaptation within their own borders. What would be new would be to consider an explicit connection between building resilience in markets with high climate risk , and securing future production and supply. This could be done through enabling private-public partnerships and strengthening relationships across borders and well as exporting novel technologies and know-how or targeting development cooperation with multi-benefits. The Nordic countries would also benefit from a more ambitious international global adaptation agenda. The Global Goal on Adaptation will be discussed during the upcoming COP27 in Egypt. This would be a place to start engaging in these matters in earnest.

There is also a lot the private sector can do. Coffee retailers are already investing in climate adaptation projects such as within their corporate social responsibility efforts. Unfortunately, these efforts are currently most often disconnected to business interests, such as securing future supplies. For example, a Nordic coffee retailer I spoke to for this report supports adaptation in Africa, but it sources its coffee from Brazil. This is not wrong in itself, but its ambitions could be larger and these sort of activities could be better integrated into corporate strategic risk management. If the spending was motivated from business as well as from environmental and social interests there would be more funding available for these sorts of activities, benefitting all.

I do not think that that would result in the best results. For one thing, companies work on rather short time frames in their business considerations: often five years at best. Climate change projections work with much longer time frames, such as until the end of the century. Information along such timescales is very hard for businesses to process and they require support to help them understand how to relate to the risks that become apparent on these longer scales. This was quite clearly expressed from the Nordic companies we interviewed for the report.

One of the first ways climate risks will be felt by consumers is through price hikes. We are already seeing soaring food prices in the Nordic region right now due to a mix of inflation, extreme weather events such as heat waves, droughts and floods affecting food production, the Ukraine crisis and lingering effects of the Covid-19 pandemic. Climate change is a risk multiplier where these types of interacting and compound risks will be even more frequent as the planet warms. For Nordic residents and governments, this means that if left unattended, inequalities within societies will widen and only the very rich will be able afford to eat tomatoes and cheese or drink coffee and everyone else is left with cabbage and onions. Governments should have an interest in both limiting these risks though adaptation and also in regulating markets in order to avoid rising inequalities.

The whole question of how the Nordic region adapts to climate risks in trade also transcends the discussion on market dynamics and the private sector because it ends in very big questions about how we want to be as societies in the future. Let’s just assume that the Nordic region continues to be richer than other countries: do we want to be the ones that outcompete poorer countries for crops?

It is important to note that this assumption may be proven wrong. Already during the 2010 drought, when Russian wheat production decreased and there was an export ban, Nordic stakeholders actually had a very hard time on the market – not because they could not pay, but because they were too small to compete as buyers on the global market. The bulk they wanted to buy was much smaller than what Egypt, a major wheat importer, bought and no one wanted to sell.

All of this show that for many reasons, the Nordic countries should not simply sit there with a vague assumption that we can buy their way out of whatever messes climate change causes with our trade dynamics and market access. Nordic countries need to adapt and they need to do so in ways and dimensions that they have not thoroughly considered so far.