PDF- B Request November 2004

PROJECT Development Facility

Request for Approval

Agency’s Project ID: 3083

GEFSEC Project ID: 2371

Country: Brazil, El Salvador, Guatemala, Honduras, Peru[1]

Project Title: Mainstreaming Biodiversity Conservation into Coffee Production and Sales Through Private Sector Sourcing Partnerships

GEF Agency: UNDP

Other Executing Agency(ies):

Duration: 12 Months

GEF Focal Area: Biodiversity

GEF Operational Program: OP3 and OP4

GEF Strategic Priority: BD-2

Estimated Starting Date: November 2004

Estimated WP Entry Date: October 2005

Pipeline Entry Date: October 30, 2003

Record of endorsement on behalf of the Government:

Carlos Eduardo Lampert Costa.
Operational GEF Focal Point. Brasil / September 13, 2004
Hugo Barrera
Minister of Environment and Natural Resources. El Salvador / August 18, 2004
Juan Mario Dary Fuentes
Minister of Environment and Natural Resources. Guatemala / September 14, 2004
Patricia Panting G
Minister. Secretaria de Estado en los Despachos de Recursos Naturales y Ambiente. Honduras / October 22, 2004
Carlos Loret de Mola
Presidente del Consejo Directivo. Consejo Nacional del Ambiente. Peru / September 15, 2005
This proposal has been prepared in accordance with GEF policies and procedures and meets the standards of the GEF Project Review Criteria for approval.

Yannick Glemarec
United Nations Development Programme

Tel. 1-212-906-5143 / Andrew Bovarnick
United Nations Development Programme

Tel. 1-212-906-6998
Date: 22 November 2004
Financing Plan (US$)
GEF Allocation
Project (estimated) / $5,000,000
Project Co-financing (estimated) / $7,000,000
PDF A*
PDF B** / $640,092
PDF C

Sub-Total GEF PDF

/ $640,092
PDF Co-financing (details provided in Part II, Section E – Budget)
GEF Agency
National Contribution
Others / $658,140
Sub-Total PDF Co-financing: / $658,140
Total PDF Project Financing: / $1,298,232
PART II - Project Development Preparation
A - Description of Proposed PDF Activities

The Rainforest Alliance (RA) and its partner members of the Sustainable Agriculture Network (SAN),[2] a coalition of independent, nonprofit, locally-based conservation groups, of which the RA is both a member and the International Secretariat - will work with selected coffee companies across five Latin American countries to transform the way that coffee is sourced. This initiative aims to increase the presence of certified sustainable coffee along the supply chain, promoting production practices that protect biodiversity and improve the economic well-being of coffee farmers and workers in the region. The project will also establish new, environmentally and socially responsible ways of doing business that participating stakeholders can internalize and replicate to other sites across the coffee production landscape.

Over the next five years, the full sized project will (1) support the adoption of practices, technologies, and policies that will advance the sustainable management and certification of coffee production, and improve coffee quality, (2) strengthen the management, technological and marketing conditions that promote the scale-up and replication of certified coffee across coffee producing regions, (3) foster relationships and market linkages between farmers and buyers and retailers through improved communications and contracts, and (4) take steps to increase the volume of RA-certified coffee in the marketplace. At the end of the project period, it is anticipated that the participating companies will purchase 1-5 % of their total coffee supplies from RA-certified producers; this would represent at least triple the volume of current RA-certified coffee and a very significant increase in the total global volume of all certified coffee.

The components of PDF B project planning activities will be executed in three phases, carried out with supply-side and demand-side actors working in the participating countries of Brazil, El Salvador, Guatemala, Honduras, and Peru. In discussions with the governments of Mexico and Colombia it was determined that they would participate in this regional initiative in only an indirect manner, through coordination and participation in global studies and linkages to global supply chains and markets. Hence they will be involved but will not be direct beneficiaries of the PDF resources. Instead, responding to high country interest and their strategic role in the global coffee markets, Peru and Brazil have been added since concept approval.

Regionally, private sector coffee roasters and traders will partner with the project to identify intervention points to strengthen sustainable coffee sourcing and sale, while at a local level, farmers will actively participate in developing technical and organizational strategies to improve farm resource management and produce sustainable coffee.

Phase One - Three Months

The first phase of the planning activities sets up the management and technical support structure and mechanisms through which the subsequent planning activities will be conducted. Also, during Phase One, sites will be selected to target supply-side actors for inclusion into the full project, locating opportunities for full project interventions in proximity to internationally and nationally recognized protected areas and biodiversity conservation regions, and characterizing the ecological and socioeconomic context within which the project will be developed, monitored and evaluated. Because sourcing coffee fluctuates based on changing conditions in the market, quality and availability of supply, selection and prioritization of project sites will be made in continual consultation with partnering companies (although in keeping with areas of global importance from a biodiversity context), throughout the life of the project. Therefore, during the PDF B phase, sites in biologically diverse areas will be selected based on established private sector relationships to growers as well as targeted expansion sites. Hectares included in the GEF project will expand as new sites are added and a replication strategy will be developed to incorporate monitoring and evaluation into new sites during and beyond the life of the project.

This first phase of the PDF B is projected to be completed within three months.

Phase One Activities

1. Establish PDF B Project Team and Technical Assistance Consultancies

1.1.  Select and hire a Coffee Project Manager and a Coffee Technical Coordinator with experience in the coffee sector, project management, business administration, and possibly microfinance and policy reform to be responsible for 1) coordination and oversight of PDF B activities, 2) development of PDF B project implementation mechanisms, 3) coordination and supervision of the implementation schedule for supporting consultancies and technical assistance, and 4) consultation and collaboration with country-specific and private sector partners, and site-based stakeholders to

1.1.1.  Define the nature and commitment of partner involvement, and ensure coordination with their existing projects that are complementary.

1.1.2.  Assess the feasibility, efficacy and availability of resources toward implementation of project objectives.

1.1.3.  Finalize the full project design and implementation.

1.2.  Select and hire full-time PDF B Country Specific Coordinators, one per country, to support the Coffee Project Manager and Coffee Technical Coordinator in the fulfillment of country-specific site selection, stakeholder consultation, and coordination with supporting consultants.

1.3.  Recruit, select and contract six supporting Technical Assistance Consultants in marketing, product certification, GIS, microfinance, sustainability and institutionalization, and monitoring and evaluation to execute identified PDF B activities toward the design and finalization of the full project brief.

1.4.  Work closely with relevant government ministries and solicit the participation of SAN members, private sector, and major co-financers in a PDF Advisory Group to provide guidance and facilitate cross-sector coordination during PDF B activities.

1.5.  Conduct a preliminary project design workshop with key planning actors to develop the draft project logical framework with objectives, outcomes and indicators, identify gaps in knowledge and data critical to project planning and execution, and conduct stakeholder analyses. The results of this workshop will further identify data collection needs and baseline studies to be conducted during Phase Two.

2.  Select Project Sites and Engage Project Stakeholders

2.1.  Identify and demarcate regional sites to be initially included in the GEF full project design based on the selection process and criteria described below in activities 2.1.1 – 2.1.3.

2.1.1.  The Coffee Project Manager with support from the Coffee Technical Coordinator will consult and demarcate with public authorities (all levels of government through invitation to an in-country consultation workshop), roasters and traders, the demand-side priority areas within participating countries and delineate potential replication sites based on commercial interests. These regions will meet roaster and trader sourcing interests such as; types of coffee in demand, volume of certified coffee production, established working relationships with a number of farms or associations in the region, and adequate coffee quality.

2.1.2.  PDF B/Country Specific Coordinators will identify and map targeted farms and cooperatives - as identified by partner roasters and traders - within the ecological landscape of the selected coffee production regions to prioritize sites based on proximity and connection to protected areas and biodiversity conservation regions of national and international importance.

2.1.3.  The PDF B Team will compile existing socio-economic, land tenure and biodiversity data of one site per country, assessing risks to biodiversity, and identifying the opportunities and constraints to reducing biodiversity threats and meeting project objectives. This activity will be limited to one site per country since each site will be a large area.

2.1.4.  The PDF B Team will further identify existing sustainable coffee initiatives in relation to proposed project sites using existing data and consultations with government and donor representatives in order to assess opportunities for building incrementality and complementarity into project activities, and to avoid duplication of effort. A direct and regular communication system will be created with the World Bank, USAID and other donors, their projects, and their respective task managers.

2.1.5.  Following soon after the preliminary project design workshop, conduct an in-country workshop or roundtable in each country with government representatives from several ministries, state and municipalities, producers, cooperatives, coffee associations, private sector partners, and representatives of other initiatives to present the project and get input and involvement from these stakeholders.

Phase Two – Five Months

Phase Two of PDF B activities will analyze the financial, market and technical barriers to scaling-up certified coffee within project sites and on a regional basis. The financial and market analyses indirectly work toward the GEF Forests Operational Program “to identify the driving forces determining the trends and status of components of biological diversity.” Component 7 addresses this concern, directly, by developing site based monitoring and evaluation plans based on key indicators of ecosystem structure and function and sustainable use through certification audits and landscape level monitoring.

One of the first analytical activities to be developed during the PDF B will be to extract lessons learned from the wealth of experience of the sustainable coffee initiatives within the region, specific to initiatives addressing sustainable coffee sourcing and sale along the supply chain.

During Phase Two, we will consult with supply and demand side actors to research and analyze the financial, technical, and market-based barriers that inhibit scaling-up of certified coffee, and develop strategies with project stakeholders that advance the goal of mainstreaming certified coffee. A mix of multinational and independent coffee roasters and traders who already have working relationships with Rainforest Alliance will be engaged in this consultation process. The PDF B team will start consulting with a core group of companies, building on initial dialogue and partnerships already established with the Rainforest Alliance. The Rainforest Alliance will involve UNDP in these further consultations and work with private sector partners to develop the outputs associated with the PDF B project. Targeted companies include Neumann Group, Volcafe, Itochu Corp., Ecom Group, Kanematsu Corp., DR Wakefield, Balzac Brothers, Proctor & Gamble/Millstone, Kraft, UCC Ushima, Diedrich’s, Green Mountain Coffee Roasters, Boyd’s, Royal Cup, Gavinia, Timothys, Gala, Java City, and Illy however, the option will be left open for consultation with roasters and traders new to Rainforest Alliance and the SAN.

Phase Two will also contract a monitoring and evaluation (M&E) consultant to develop landscape level monitoring and evaluation indicators at selected sites to be developed and measured during the full GEF project. The research and analysis conducted during Phase Two will result in preliminary studies evaluating the threat reduction and biodiversity protection impact of the certification standards. These plans will focus on adaptive management of the standards and provide important feedback for future revisions. The M&E consultant will develop plans that will propose strategies during full project implementation to address data deficiency challenges and opportunities to expand the M&E. Phase Two components and activities are outlined below.

This second phase of the PDF B is projected to be completed within five months.

Phase Two Activities

3.  Analyze Market to Mainstreaming Certified Coffee and Determine Project Interventions

3.1.  Synthesize and document lessons learned from current and past regional sustainable coffee initiatives implemented by SAN partners and relevant multilateral and national projects in order to integrate lessons learned and recommendations into the design of the proposed Block B GEF project. The lessons learned document will focus on critical project design questions, including:

·  What market-related barriers have these initiatives encountered, per country? How have these barriers been addressed?

·  How have these projects addressed building capacity for production and created an enabling policy environment?

·  To what extent have these initiatives linked coffee production to biodiversity conservation and been able to use coffee farms as biological corridors?

·  How have previous initiatives sustained certification costs beyond the life of the project? What group certification models are currently working successfully?

·  How can certified producers organize themselves to increase their marketing leverage? (Special attention will be paid to lessons learned during the earlier GEF coffee project in El Salvador).

·  To what extent does farm diversification and promotion of non-coffee products, in addition to income improvements for certified coffee, need to be supported to achieve economic viability and sustainability for coffee farms?

·  What factors are critical to project success?

4.  Analyze and Prepare to Address The Financial Barriers to Production of Certified Sustainable Coffee

4.1.  Contract a consultant to identify on a country-specific and regional basis the appropriate financial institutions or mechanisms that are prepared and committed to servicing sustainable coffee producers for their existing financial service needs (cashflow, savings, insurance etc) and for their longer term or higher cost changes needed to become certified. Where necessary, recommendations for strengthening these institutions to improve delivery services will be made and partners found to assist with this during project implementation. This may also include possible financial mechanisms for the costs of certification audits as well, in complement to activities 4.2 and 4.3 to lower certification costs overall for producers.