ILLY CAFFÈ CEO, MASSIMILIANO POGLIANI TALKS B-CORP CERTIFICATION WITH BARTALKS

[00:00:23.950] – Nick Baskett

Massimilliano Pogliani, welcome to the show. The CEO of Illy Caffè. We’re going to be talking to you today about B Corps certification. I am so happy that you agreed to talk to us about the subject area. I was saying to just a little bit before the show that we were looking for a company who can help explain to us what B Corps meant to them in the coffee industry. And so I think when we wrote an article back in May that you have got your certification, I leapt on the opportunity to reach out to your marketing team and was very pleased that you stepped up and said, now you’ll handle this yourself and you talk yourself about the process and what it means specifically to your business to Illy Caffè.

[00:01:11.300] – Nick Baskett

So I’m sure everybody knows who Illy is. But why don’t you give to five minutes or a couple of minute introduction and tell us a little bit about about yourself and the business?

[00:01:22.700] – Massimiliano Pogliani

All right. Name. So Hi, everybody. And Massimiliano Pogliani the Chief Executive Officer of Illy Caffè. Illy Caffè is an Italian family owned company that was founded in Trieste back in 1933 and on the very first CEO of this company who is not a family member. So I started back in 2016. So we produce a unique 100% Arabica blend where we combine nine of the best varieties available in the world. And our let’s say our dream is to offer the greatest coffee to the world. So we have around 8 billion cups of Illy coffee served in 140 countries around the world.

[00:02:01.060] – Massimiliano Pogliani

Cafes, restaurants, hotel, a single branded cafe, shops. And of course, we have a clear vision which is to delight all our consumers all around the world with the greatest coffee the nature can provide enhanced by the best technology available, sustain practises and a touch of beauty in a little bit, even with the good goodness and beauty is our brand asset. So before getting to the B Corps it’s worth mentioning also the things that 2013 we have continuously being listed in the world ethical companies compiled by  Etisphere that you probably know and is the only Italian company to receive.

[00:02:42.190] – Massimiliano Pogliani

This honour, annually is the only one out of six which are in the food and beverage and agricultural category. Getting to the point well in this year at the beginning this year we were also the first Italian company in the old coffee sector to obtain the international B Corps certification as as a result of our clear commitment to comply with a high standard of the social, environmental governance.

[00:03:11.630] – Nick Baskett

So you mentioned in 2006 you were brought in as an external CEO and it was something I looked up. Actually, it was quite interesting because Illy’s a family company and 2006 the first time they brought in the

[00:03:22.850] – Massimiliano Pogliani

2016, 2016.

[00:03:26.280] – Nick Baskett

Okay, you’re right. You’re right. 2016 you are brought in as an external CEO. First time they went outside the company to put someone in charge of the top position. What do you think was the driver behind it? What was it that made the company want to bring in external and external CEO.

[00:03:45.500] – Massimiliano Pogliani

I think, was the link to the vision of the entrepreneur and the family to ensure that the company keeps on going and evolving and will always be there. So, you know, you know, when the company gets bigger and bigger and bigger, then you need you need the professional people to drive and manage the company and which are able to capture link feel, the inspiration, the vision of entrepreneur translate his vision and his energy, his power into a strategy that strategy to a plan and a planning and execution.

[00:04:27.790] – Massimiliano Pogliani

And this is one of the first steps that we did then the external investor with Ron Capital. So this is going to a work class organisation and a company which is going to stay for the next hundred years.

[00:04:44.980] – Nick Baskett

Perfect. I understand. So I asked because the G in ESG is oftentimes this is the most underrated letter of that acronym and its governance. Right. So I’m going to bring this on to B Corps. Just a second, because B Corp. Is. Well, you’ll explain what B Corp is, but but before an ESG aligned in many ways, it’s a framework and an accreditation. accreditation for evidencing your capabilities in operational elements of ESG, ESG is the term that, of course, the finance markets and everyone uses nowadays to understand in a more holistic way all of those areas.

[00:05:26.860] – Nick Baskett

But governance is really a key part of it. And so I was very interested when I started to look at B Corps and what it meant and started thinking about this interview and how we were going to structure it and talk about it. The question I thought it was important to raise is not just the mechanics of sustainability, but the mechanics of implementing those policies which you can’t do unless you’ve got good governance. And and so this brings me back to, I guess, whether there was a plan at the outset, from the family from Illy to say, okay, we actually need to think long term about how we’re going to make, as you say, a sustainable business, one that meets all of the values and criteria that we’ve got and have put together, maybe a governance structure that included yourself.

[00:06:25.750] – Nick Baskett

I think there’s a number of independent directors as well. Would you just very briefly, because I’m sure this is not necessarily a subject that everybody’s interested in.

[00:06:33.560] – Massimiliano Pogliani

But is a key, as you mentioned, probably undervalued the importance of these. topic by it’s key, is crucial for us. It wasn’t kind of natural, but almost because, you know, for Illy Caffè, I have not intent the sustainability in the cafe. I just have to embrace this and bringing forward to the next level and keep on improving because, you know, the part to sustainability in general, or were we talking economical, environmental and social and ability is a continuous improvement. But so you never stop, you know, so things, ethics and sustanability as rule has been been part of our DNA as a company.

[00:07:15.840] – Massimiliano Pogliani

It was kind of natural to continue on this path and also to embark on the B Corps journey. But you know, when you get to the B Corp. Certification is not the end of the journey is just the beginning of the journey and the kind of, I would say the trigger and the driver of this continuous improvement process. So aim of generating a positive impact on the society, on the planet, on the people and also you get to belong. You get together with a growing natural likeminded companies, you know, the B Corps companies are more and more auto feel very difficult to obtain the B Corps certification.

[00:07:57.190] – Massimiliano Pogliani

You know, that only only 3% of all the company that applies for file for B Corps to certification and then you don’t get it forever because when you get this certification, then after the four or, you know, B impact assessment, you need every year to check in every 3 year to re do the whole assessment. So in order to make this come through, but also to make sure that you continue, you have to really integrate sustainability into the company plan, strategy and everywhere and also in the governor. So you know that we are not listed company, but we have a board with independent directors and we have the board level, the sustainability committee that no money you only find in listed company.

[00:08:44.420] – Massimiliano Pogliani

We also add a risk committee and to the risk committee, we make the analysis of the risk related to the environmental and social. So this means that we really take this thing seriously is not about greenwashging doing because it’s fashionable to do so. And we also are very clear and transparent in what we do, not only in our annual statement we have at the end the report where we say what we have done this year and what our commitment for the next year that we publish annually the sustainable value reports.

[00:09:19.910] – Massimiliano Pogliani

So here we illustrate and communicate really this integration of economic, social, environmental, sustainability in the company processes, strategies, governance, business model so that we can show to all stakeholders not only the shareholders, which all our activities, and if this activity are mentioned with their expectations so important, if you’re serious about it to us to think about the governance part.

[00:09:48.200] – Nick Baskett

The governance part is critical. And I say that because I kind of earn my money actually advising companies on governance. So I naturally would say that. But I do see those companies with good governance with mature, which is very difficult to do. It’s not just the case of ticking a few boxes and making a couple of appointments. It goes all the way through the culture of the business from top to bottom, assigning areas of responsibility, training people, making sure they’ve got time to train, making sure they got time to do this along with their day job dealing with the fact that sometimes people leave and if you’ve got a business with high churn rate becomes impossible to implement the good governance framework.

[00:10:25.340] – Nick Baskett

But do you know what I’m getting ahead of myself? Let’s go back to B Corps. What is B Corps?

[00:10:31.960] – Massimiliano Pogliani

Well, B Corps is a kind of as I say, the certification that is given to those companies that meet this is standard for social environmental performance, transparency and responsibility. When you are a B Corps, it means that you are honestly putting together objecting which are business objecting with doing good for the people in the plan. So there is no contradiction between the two things. You know, normally you say, oh you go for good, you go for profit. No, you can do both, provided that you always consider in what you do the whole stakeholder, not just the shareholder, you know.

[00:11:14.560] – Massimiliano Pogliani

And this is what we do is we are a stakeholder company. So we have our shareholder who has to be happy as well. But we also have the communities with which we interact with the has also do to be happy and take a part of the value that we that we create. So this is the key things of being a B Corps, to be a force of good in the world and always keep on working to optimise this positive impact that we have on all the communities and to the environment.

[00:11:45.120] – Massimiliano Pogliani

And as I was mentioned at the beginning, since sustainability ethics has been part of our DNA. So for me, becoming a B Corps is a kind of confirmation of the solidity of this business model. And so it’s just a confirmation and a push to continue to do more of this.

[00:12:08.700] – Nick Baskett

You know, you said it better than I planned on trying to describe it. I tried to describe to a couple of people and I think you just summed up a lot better than I had done in the past, but I’ve also seen it’s a number of websites. When I was doing my research on getting it getting it wrong. Some people referred to B Corps as nonprofits. That’s not the case.

[00:12:30.760] – Massimiliano Pogliani

It’s nothing to do with it being a charity. You can do good and you can do profit and provided that you share the value I create with everybody and not keep it on it for yourself. Exactly that you consider that everything you do has an impact as a company, even as a consumer, which is this is also something that we witness today. Not only companies are considering the impact consumers are considering the impact of their behaviours or their consumption of it in terms of sustainability and so on. So this match will do more and more companies toward considered sustainability as a kind of baseline.

[00:13:16.070] – Massimiliano Pogliani

A kind of agend factor like today is also digital. So digital sustainability, for me, has to become a kind of agent factoring in company strategy.

[00:13:24.720] – Nick Baskett

I saw your interview at Oracle World. Describe yourself as a digital CEO. And I just wanted to ask, this is a very rude question. It’s completely off topic. But was Larry Ellison there and did he wait in line because you said there’s a long queue for Illy coffee? I just wanted to know I wanted to spill the beans. Did Larry Ellison at the front the queue

[00:13:46.390] – Massimiliano Pogliani

If I can wait in line for my coffee, he can wait in line for his coffee

[00:13:50.560] – Nick Baskett

you pull him up? Larry, get to the back of the queue. All right.

[00:13:54.840] – Massimiliano Pogliani

It was insisted also to open the Oracle a conference with by showing a video about Illy Caffè as we really like. So I’m happy about that.

[00:14:07.200] – Nick Baskett

Oh fantastic score is a for profit business in the accounting world that they call a double materiality. The materiality in for accountant means an event that has an impact on the business. So profits going up and down is a material event, et cetera. And the double materiality means okay. We’ve got the things that affect the profit and the numbers of the business, and we count those like every business does. But in addition, we also count the social and environmental impact that we’re making. I think that’s actually a fantastic concept.

[00:14:46.200] – Nick Baskett

It’s one that I guess is still a little bit new. I was looking at how many companies are be caught certified about 7500, which seems like a decent number. But then you think about it. And hold on a  second in the UK alone, there’s 2 million businesses right now. It’s interesting what you said about how hard it is, because that was the second thing I looked at is this give me is this a marketing gimmick? Right? So it’s not is it it’s tough.

[00:15:15.980] – Massimiliano Pogliani

I can tell you a not at all

[00:15:18.590] – Nick Baskett

Tell us a little bit about the process going, though, because I have heard that it’s tough together.

[00:15:22.660] – Massimiliano Pogliani

I’m very, very open and transparent is not at all a marketing gimmick. I mention becasue we believe in because we are really believe in ethics. And we put this in everything to do. So we believe that it would have been for us an easy thing. You know what I mean to do so is okay. In six months we’re gonna get it. And we made a first assessment, et cetera. But then the certification looks at a company everywhere. So every subsiduary, every operation you have. So it’s not only limited to in the head quarter, making some interviews, etc.

[00:16:01.390] – Massimiliano Pogliani

So it’s really putting the company under the kind of magnifying glass. So it took us longer. But for me, I was happy because it was a confirm may of further confirmation. That is a serious plan. You know, if you get it just because you ask it or you pay a consultant, just another thing for me, the fact that for us that we consider, you know, Modest a company which is doing their job well, well, it also for me, a confirmation that is really something very serious.

[00:16:40.740] – Massimiliano Pogliani

And I’m happy about that, that now this becomes like in his driving our GPS that is helping us to consider everything we do. Also, considering this perspective, we need to to what you call B impact assessment. So that is evaluating not only what you do as a company, but how you interact with employees, customers or the communities, the environment. And there are also some legal requirements you need to consider there because you need to integrate this commitment in the company by lows, you have to show the governance structure.

[00:17:25.140] – Massimiliano Pogliani

You have to document the things that you do. And then there are specific requirements. And there are a link to where you are depending on the country you are. For example, in Italy, you have to first transform your company what is called which is the benefit, and then you make the step of becoming a B Corps thing out. This B Corps  certification is being applied in the different countries.

[00:17:51.040] – Nick Baskett

You know, it was interesting you brought up the legal thing because I was gobsmacked when I read that I’m like in the UK, you have to change your articles of Association. I if I had more time, I was going to look up to see just how legal obviously it is legal. But I’m almost surprised because we’ve got called company law over here in the UK and company laws’s very specific. It States that you have an obligation to your shareholders. Right? And unless you’re trading insolvent, in which case you immediately as a director to have an obligation to the creditors and what this does, it kind of sneak in there.

[00:18:26.500] – Nick Baskett

I’m going to change it around a little bit, you know, and now you’ve also got an obligation. You’ve got an obligation on the sustainability to the environment to basically that the commitments that you’ve made.

[00:18:41.150] – Massimiliano Pogliani

And as I mentioned the beginning, you have to declare this and report this. Also in your one report at the end of is a part that says ok. These were the objectives that you’ve given yourself or 2020 what you have done? Yes, no or watch. Why? And then what are the objectives you give yourself for the year after. So this is very transparent and this is available to everybody. I mean, is not an internal document, its reported public.

[00:19:10.080] – Nick Baskett

Massimiliano, I’m going to confess you what I my pet hate when I’m reading annual reports and I read a lot of annual reports, I’m probably one of the only Journal South that does this, but I read them. I try to understand them. I read the risk sections. I read the director reports and I look obviously at the numbers and I look at and say the annual reports from and this is going because, you know, we covered the cocoa and the coffee industry. So this actually often applies more on the cocoa side of things, but where there are more a lot of times more Labour issues and environmental issues.

[00:19:45.940] – Nick Baskett

But when I’m looking at annual reports, the biggest bugbear there I have is an inconsistency year from year in the numbers. In other words, they say you look at a report last year and it gives you a range of achievements they’ve made in their annual report and you look at this and you say, Well, I wonder what progress they’ve made, but you can’t tell you can’t tell because they use different numbers. My question to you, I’m sorry to put you on the spot. You it is.

[00:20:17.020] – Nick Baskett

Does he does B Corps prescribe anything a bit like the accountability framework or anything? Does it prescribe any kind of lexicon or way in which you should report?

[00:20:28.000] – Massimiliano Pogliani

Well, of course, since you know, is a process that you need to provide all the documentaion supporting this, and this is all assessed yet. I mean, that is not a specific prescribed or word, but you cannot just say, okay, we do it. O, show me the documentation. So how you come communicate this to the people when you say we have a commitment, we have also to show how do you train your people about sustainability, how many hours of training have you done? Is this available on the Internet?

[00:21:06.750] – Massimiliano Pogliani

They can everybody download this and read things that you need to prove and then, well, I don’t want to comment to what other companies are doing. I can only comment by inviting you to download or we can send you a PDF or I’m a report of the last two years and you can read them and find a spot. If we use that technique or not, I don’t think you will find that. What the difference you will find from one  year to another is that we keep on trying to improve it’s.

[00:21:41.550] – Massimiliano Pogliani

Not that we as we have done something that we say. Okay, I’ve done because you never stop, especially if you talk about. For example, we mentioned briefly your digital. Digital is  something that is continuously changing. So you are project every year and technology keeps on improving and you need to update. But this also is valid for what you do as a company. You know, there were technology than we are using today that were not available five or ten years ago that allow us to reduce our impact.

[00:22:13.520] – Massimiliano Pogliani

And as we are using this, for example, I don’t know. Every time we change our roasting machines, we now change our roasting machine, which is a 40% less energy consumption. That the previous one that was not available before now is available. We improve and we changed. We changed that so always have been changes are not bad per se. If you change things to cover up things, then there’s another story. But again, this is not happening here. At least that I know, but I don’t think is since our annuyal Report is also certified, et cetera.

[00:22:48.240] – Massimiliano Pogliani

So I can really invite it to read it, because we also treat the first part where we really explain beyond the pure numbers which are there what we do. The key project of the company of evolution per month, etcetera. So it’s a kind of nice summary of what we do every year.

[00:23:06.460] – Nick Baskett

Fantastic. I love philosophy. And years ago, years ago, when I was probably I had to say it’s pretty 25 years ago I read a book very unpopular book by Ayn Rand, who was 1950s philosopher in the US very sort of capitalist, very much out of fashion nowadays. I mean, she would be the really anti B Corps and everything else. But she said she wrote this one book to her least popular book, which is called The Virtue of Selfishness and is based around one primary tenant, which is that everything anyone does is selfish but selfish as got a bad rap.

[00:23:43.960] – Nick Baskett

And that is to say that we all do things for a reason. Nobody does things without a reason. If we’re not necessarily conscious of the reason, we all do this for a reason and everything that we do, we do at some level to benefit ourselves, even if it looks altruistic on the outside. We do it because it benefits ourselves. And I give an example would be I give money to charity. I give many charity great for the charity. What do I get out of it?

[00:24:06.090] – Nick Baskett

I feel good about myself. So that would be the benefit. That would be my selfish benefit. And it was very interesting. The thing that she said, which was struck with me, which was that the best. The best projects are the ones where the altruism is matched by a benefit to yourself. In other words, if you can align doing something that’s altruistic and you benefit, it’s not a case of it’s not a zero sum game where one has to win and one has to lose. But actually you can do something that benefits you and that it is also beneficial to somebody else or make a positive impact.

[00:24:43.080] – Nick Baskett

I’m not saying that to be. I actually truly believe that I’m happy in a pub to argue that my question just just for you, as in a business. And the B Corps is there an angle where you say, look, this is good for the environment, good for everything else. But we’re also we’re doing this because we’re going to benefit out of it. We’re going to get it because there do you approach this in a way you say that this is a net win for both the environment and for Illy as a company

[00:25:14.850] – Massimiliano Pogliani

I believe that it’s quite interesting angle to see this way of being selfish. You know, if all the people in the world will be selfish like this, so doing things for themselves and doing good for some same or something else where we’re gonna be probably in a better, much better place, probably is the same a different angle or doing what we normally do also as people. I mean, for example, I’ve always been lucky and blessed to do jobs that I really love. So for me, I got a job, I got a salary, but I don’t work because I enjoy.

[00:25:56.780] – Massimiliano Pogliani

So this is selfish. At the same time I’m doing things like that long and I get paid for that. So what’s the best? So there is always an angle where you can see both. And I think if you think about B Corps we keep on doing this. But doing what we do, we also it doesn’t cost us more. It’s even a benefit. And I will come back to that. So why not? So why you should only think of yourself and also how much benefit money, things you want to acccumulate.

[00:26:34.510] – Massimiliano Pogliani

I mean, once you are happy, I read another book and it was also filmed that say at the end the very end of this fantastic he was happiness is not real. It is not shared into the wild was the film.

[00:26:48.800] – Nick Baskett

You remember, I love that movie. My wife Lily.

[00:26:51.860] – Massimiliano Pogliani

So leave everything credit card. I live in the month blah blah blah. At the beginning is you’re happy but then I mean being happy, you have truly selfishly happy so only yourself. And the nature at the end was not worthwhile and said, well, he died. Why?

[00:27:09.200] – Nick Baskett

He died Yeah, very hungry in an Alaska

[00:27:12.120] – Massimiliano Pogliani

are really happy or what you do. Why? I mean, the best thing is to share this this happines, make someone else happy. And this is and why, for example, an example they can give you. For example, we have, you know, a big warehouse where we store our green coffee store in the coffee there for us is essential for the quality of the coffee because bring coffee needs to be preserved at a certain rate of humidity temperature which is not available, of course in the producing counters, but at the same time we have our benefits.

[00:27:49.670] – Massimiliano Pogliani

So keeping the highest quality possible. But the same time the growers once they have the crop is done when they have the coffee, but they want to sell it as soon as possible. They don’t want to store it there where was waiting for someone. So they want to take the money immediately and then reinvest. So stay. So by doing that immediately we have our goal match their goal of getting paid immediately. And of course, as you know, since we have a certain requirement for quality etc. We are willing to pay more for that quality in order to is also positive

[00:28:26.980]

Its not only paying the cost, which is no more, I should know because sometimes I still situation where they even don’t get the money to pay the cost and then they should make a fair profit so that they can invest in their business so that they can continue to produce the quality we want. So it’s selfish for us, but it’s good for them. And then of course, sustain their families. So in everything you do you can find is aspect. If I mind interpret this book, I think its correct but I think this is the other see, I think so.

[00:29:05.160] – Nick Baskett

I think it’s a higher level of thinking. I think to think about this way is a high level of thinking and only really the people who are in it for the short term would go in and pay the lowest price and run away. Maybe they make a bit more profit, but where they’re going to go back to next month. So it is a high level of thinking. Just pick up on the so yo’re B Corps certified. It’s the beginning of a journey. You got the certification, I guess about five months ago, a little bit more.

[00:29:39.850] – Nick Baskett

So you got the certification then. And as you know, I did a lot of hard work. You’ve got it. There was no doubt a party. I wasn’t invited. That’s okay. But

[00:29:50.460] – Massimiliano Pogliani

we don’t have any party. We were there’s no party yet. It is probably difficult. We are.

[00:29:57.500] – Massimiliano Pogliani

We communicate that because you do it. I described when I join Illy, the company of the best kept secret or when you know it’s important for me, story doing is more important, the storytelling. But when you have a lot of story doing, not doing the selling is also a mistake, because a lot of people that don’t even know what you’re doing. So we did communicate that B Corps certification, but trying to explain why we did that and trying to show our consumer that was part of our way of doing things and not just a prize that we want to win, to show to everybody that we are we are better than others.

[00:30:41.730] – Massimiliano Pogliani

So it’s just it’s just and this was very much also felt inside the company. All the employees were where happy about his achievement because you are as well. You don’t only work for a company, but you also a consumer yourself. So you see what the other companies are doing, what your friends are doing, so working for a company that as these values and you and embrace in yourself you embrace also, these values is also rewarding and motivating beyond the traditional remuneration salary, benefits, etc.

[00:31:17.960] – Nick Baskett

You know, this really important again, it goes back to the governance thing where I know I’ve got first hand experience of working with companies that have a very high turnover rate of staff and you can never get a mature life’s governance put in there because you train somebody up next month, they’re gone, you train up the next person, they’re gone. And so you’ve always got people in there who don’t actually know what’s going on and you can never have quality. So I think what you just said about making people inside the company proud to work there actually is going to be more and more important, especially with the millennials coming in.

[00:31:50.580] – Nick Baskett

They’re much more picky about who they work for. They look at this as one of the metrics where they identify a company that they choose to work for. And so if you want to get the best people, you’re going to have to be a desirable place to work. And so I think achieving this is going to be a good step forward for Illy, just from that angle, what I guess I’d like to know is back in March, you’ve got the accreditation and you started the especially in some respects, just started the journey.

[00:32:20.480] – Nick Baskett

Now, two questions for you on what was the hardest part of that certification. You have to be honest as well on that answer. And the second question after that is is there is going to be the next challenge in growing your sustainable maturity.

[00:32:40.100] – Massimiliano Pogliani

Let’s say the hardest challenge was for us. You remember, I very honestly mentioned that I thought it would have taken less time to do it. It was that since we are very much focused on doing things we were not worried about also in certain areas, clearly documenting in a very precise way. What were we were doing that? But, you know, if you do it, you can trust me. But I want to see okay, how could you prove that it is true? So we cannot just believe you, even if we know you’re not lying.

[00:33:15.560] – Massimiliano Pogliani

So we realise that some of the practises we were applying were not really good document. So that’s why for us, the B Corps was an improvement process to say, okay with a minute is stupid if you do things right, not also to have the formalities right so that this can be opposed to anybody can be shown certified. So that was the hardest part because come on, we everything and beyond, much more than a lot of bigger and famous, much bigger and famous company. Why? Well, it was a learning for all the management.

[00:33:51.790] – Massimiliano Pogliani

And of course, because I’ve not done this alone. All that the management team was involved in the departments for all those people, it was a learning say, okay, you do these things. Try to make this part of the not only the company culture the way we do things, but all the company processes procedures so that everyone can be engaged. And this is the culture that remains also with the company beyond, also the people that might change. And this was the hardest part, then sorry. The second question.

[00:34:29.000] – Nick Baskett

So as you are at some stage of a maturity cycle.

[00:34:33.520] – Massimiliano Pogliani

You mean what’s next? What’s next yeah, in is a beginning of a journey. We tied it in with all other initiatives that we do. First of all, we try to, of course, a behave as a company but also trying to involve our consumers and everything we do because we launch an initiative, which is called one makes a difference that says, OK, not only we as a company, we have a responsibility, but you as an individual in your consumption, and in your behaviours, you have a responsibility because even simple things like if I give you and I think which is perfectly this possible recycle.

[00:35:21.160] – Massimiliano Pogliani

But if you don’t, you put it in the right place, then it’s worthless what we do. So you need also to kind of educate consumers or raise the attention. or this is certain topics, and also we tried also going back to the point of communicating what we do, but not for the sake of showing how good we are at, but for the sake of showing hey, these things can be done yourself or other companies to do the same, having this positive impact, social activities to waste water treatment systems, opening kindergartens in the plantations, etc.

[00:36:06.080] – Massimiliano Pogliani

Etc. But all this was under the umbrella one make the difference so that everybody can read and say and share share the world the world about this. We have to consider also that today our wellbeing is also threatened by another threat, which is the climate change. And this is also very much linked to the impact of your operation as a company. So if we want to go towards a more and more sustainable world, we have to work all together and we as a company we set ourself on an ambitous target is to become carbon neutral by 2033.

[00:36:54.360] – Massimiliano Pogliani

So when we will celebrate 100 anniversary which was on 1933 and you know, if you really want to achieve a net zero economy is the process is a long term process because you have to act not only as a lot of company do on scope one scope two, but also scope three, which is the most difficult one to achieve. And so we really want to get there then we really want get there by using at least as possible compensation method, although you have to have that as well.

[00:37:29.160] – Massimiliano Pogliani

So that looking at all the technology that we use or the raw material, the production processes and then establishing that we have in the plan which has been recently approved by the board in July, the stability roadmap and the plan towards a 2023 where we have the initiative from today and 2033 to reach these ambitious target.

[00:37:58.760] – Nick Baskett

So I’m very happy that you just said something. I want to pick you up on it because I was going to raise it and I was a bit worried about raising it. But you said something very important, which was that I’m using as little I don’t really exacltly at the but little buying as possible carbon offset right now. I have a problem with carbon offsets and the problem I have generally speaking, is that people who just who is their sole strategy is to say I’ve got to fix a problem.

[00:38:33.930] – Nick Baskett

I’ll write a cheque for carbon offset is lazy. It doesn’t solve any problems. There’s a lot of problems in the carbon offset market. Generally speaking, with offsets that aren’t very valuable. There’s a lot of well, I won’t  use word fraud, but a lot of it’s an unregulated market. I actually find enough. The old bank of England Mark Carney is pushing for a regulated industry there as our others. But to give you one example of fund manager was talking about getting calls on a weekly basis from companies who say I’ve got 500 million I want to buy.

[00:39:10.100] – Nick Baskett

I want to offset 500 million, he said on a weekly basis, I get called wanting to offset 500 million and those sorts of numbers. And so you said we want to do it as much to activities, to changing activities to reduce your net carbon footprint, as opposed to just write a cheque.

[00:39:29.900] – Massimiliano Pogliani

That’s our goal, because I think so. There is nothing wrong provided, as you mentioned, that you really go to certify things because, you know, there are a lot of also grey areas there. So there is nothing wrong in say, I don’t know. I want to contribute in a refer station in an area of my planting trees, which is good, but this should not be okay. I write this cheque. I do this and I continue to do business as usual. So this is green. Washing is the same as well.

[00:40:01.790] – Massimiliano Pogliani

So you need to look at your operations. You need to look at everything your product et cetera, and try to do the best that you can, knowing that, also there is a continuous improvement because technologies are changing. So today there are things that we could do. But for example, it’s impossible because it’s completely out of price to do that. Then I cannot be sustainable existing company because yeah, I need to I’m gonna be here tomorrow to be growth and doing good and not doing good, but then destroying the company, which is then doing bad for the people not only working for the company, right.

[00:40:42.420] – Massimiliano Pogliani

The whole value chain, so we need to be realistic here, but, you know, but also very concentrated every time something is possible to do you do it. So for example, we roast the coffee and twhene technology was available to transform the heat on energy. We immediately apply that technology. And so we use that energy out of the roasting to produce energy electricityt to use in our plans. And now we also a technology which is in summer time is converting calories in cooling system to cool down some part of our offices or the plan.

[00:41:26.180] – Massimiliano Pogliani

So this is I mentioned before that we have a very big warehouse because we need to have all the coffee available every year because, you know, we have one plan so we cannot just switch from one to another. We always have to have consistent quality all along the here. So we need to have a lot of stock available of green coffee. So we have a big warehouse in a big surface. So we did we cover that surface with solar panel which is one of the biggest installation in the region at this is another step.

[00:41:58.760] – Massimiliano Pogliani

We use electricity, but since already many years, we only buy electricity for renawable sources. At the beginning was costing much more. Now the prices are going down is still costing a little bit more. But there’s an investment as you make. And if we all do this, the price difference will not be a price difference in the future. So that’s for me, the key things. You know, if you think about the sustainable development goals, you know, for me, the most important one in seven things is talking about the cooperation between public and product sector, etc.

[00:42:35.730] – Massimiliano Pogliani

Because cooperating even for competitors is key. When it comes to wellbeing and to sustainably, then you compete for the preference of the consumer. But when you talk about the planet and the people and well being, you don’t have to compete, you have to cooperate. And then initially like that we push others to do the same. And as I mentioned before, consumer will push company to do this. And if we all do this things that today are not available or scarcly available, they have a high price.

[00:43:07.960] – Massimiliano Pogliani

They will reduce their price because simply nobody will go to suppliers that do not have sustainable practises or sustainable product. So it’s a kind of viruous circle. And I also hope and believe that very soon, five to ten years time that will be no unsustainable companies in the world, simply because there will be no consumer available to buy from those companies. And this is a this is a dream. And probably I hope that thi will come true.

[00:43:41.260] – Nick Baskett

I hope so, too. I think there’s going to be a lot of disruption between now and then, because there’s a lot of new laws coming in. There’s a lot of ways that we have to we have to put a lot of things into place in terms of how we communicate. One of the most difficult things is the auditing element of it. I mean, let’s touch on that for a second, because there’s a couple of other they’re not competing. They’re different frameworks. But you got, like, FairTrade and Rainforest Alliance et ce.

[00:44:07.980] – Nick Baskett

Certification. And I just don’t know how I feel about things like fairtrade. I hope I never have to do an interview with them because I have to be very honest and I sort of want to love them. And I sort of do. But I also think that they promote themselves an awful lot. But then I also understand why that’s necessary in terms of brand recognition. I really don’t know. I don’t have the answer. But what I do know is that there is a problem with the fact that that certification relies on an audit.

[00:44:40.270] – Nick Baskett

Audits are expensive, and therefore they’re not done that often. How does it work in B Corps? Is it sort of a self assessment or how do you evidence, I guess. How does it compare to and what are the differences to that kind of mechanism and to say, a fairtrade?

[00:44:58.860] – Massimiliano Pogliani

No. I mean, you need to work as a company. It implies a lot of work from the company, the management team, and you work with B Lab, the do this assessment, either you can do it alone, all alone. But this is possible on you at a small correction, in fact, out of who the thousand of because a lot of very small companies, which is, I would say, is a little bit easier to reach. That because you know the scale and the  scope and is much easier to manage in the beginning.

[00:45:34.800] – Massimiliano Pogliani

So the more you grow, the more it is difficult to do this assessments by yourself. Then you do it with the company which just specialised in guiding you through all the questions and the things. And we have done that, of course, because, I mean, we have a larger scale operation and multi site multi product, multi channel different communities, 20 accounts where we sold the coffee. This is key for me. The difference is that the certification of what we do with the growers, for example, is something that we have, and it’s part of this B Corps.

[00:46:13.600] – Massimiliano Pogliani

So is one of the aspects. So what else when you talk about the others is only related to that aspect. So the B Corps  is considering this and all the rest. So do you do good with your growers? Fine. But do you mistreat your workers, your employees in the office? So this is not so if you are Rainforest certified doesn’t mean that.

[00:46:40.020] – Nick Baskett

It’S very it’s a lot more narrow.

[00:46:42.700] – Massimiliano Pogliani

Exactly a little bit broader and wider as a certification that includes all these things that needs to be proven with documentation, in fact. And they check this.

[00:46:59.060] – Nick Baskett

Of course, B Corps I very much, actually, I guess from what I it sounds like you have to adopt a culture in the business. And so unlike, maybe with another certification mechanism, they’re saying certify, your supply chain is transparent here. Actually, what you’re certifying is that the culture of the business, the governance of the business, that everything that you think about the way that you act in unity is all considering that second materiality that we talked about. That second bottom line.

[00:47:29.050] – Massimiliano Pogliani

You know, without getting into, you know, because I don’t like to talk about others and make.

[00:47:38.000] – Nick Baskett

But I know I can

[00:47:39.310] – Massimiliano Pogliani

because you mentioned rain forest.

[00:47:42.170] – Massimiliano Pogliani

If you if you take only one aspect of that certification. For me, the key one of the key problems is related to the fact that being a Rainforest Alliance certified, let’s talk about Fairtrade. Fairtrade fantastic is not, but it’s nothing to do with the quality of coffee you buy, so you can be fairly traded, but very bad quality. What does it mean that you have a lot of production of a lot of Fairtrade coffee, but then the consumers, they don’t like this coffee and they don’t buy this coffee.

[00:48:21.980] – Massimiliano Pogliani

So then you have the growers, they have done all the process and they paid to get the certification, etc. They find themselves with over production because they cannot sell this this coffee and guess what? They have to sell this coffee underpriced so they got certified, but they sell under price because there is too much stock for me is much more again balance to have this. What you to mention your philosopher, the selfish approach to say. Okay, I want a total sustainability of my operation, but I also want absolute quality so that I can match the two things.

[00:49:00.580] – Massimiliano Pogliani

In a sense, this was something that Nestle did many, many years ago. You really understood the but there is not such a thing. You can call quality if this quality is not also sustainable, which ties up with what you were mentioning before. People are looking at the company what they’re doing. So yes, you do a good product but are you a good company as well, because good product. We all like a good quality product. But if you to do that then you behave in a bad way, then he could consumer that will not buy your product, do not have to buy your product because this is a shortcut.

[00:49:40.630] – Massimiliano Pogliani

This is selfish but really selfish, which is only one way and not only the other way.

[00:49:47.120] – Nick Baskett

I’ve noticed that we’re over time and I just wanted to end I was going to end on is flown by and I wanted to end on a question I wanted to ask which this is a selfish question, but I want to know I know a lot a fair amount about Illy, but I want you to tell me something that I don’t know. Tell me something about Illy that maybe a lot of people don’t know.

[00:50:20.380] – Massimiliano Pogliani

Since I’m working in the last five years really to get the best secret down. I struggled to find a secret. Now let me but

[00:50:30.320] – Nick Baskett

you can always come back.

[00:50:31.110] – Nick Baskett

You will have to have you back on another show because I do want to talk about some other topics as well. If you’ll have me back on the show to go and talk about that, let’s send on one final thing. And that is really about the brand value of B Corps. And do you see because it has been less known compared to maybe some of the other framework, etc out there, but it’s really being talked about a lot nowadays and I think part of that is because ESG as a whole, the conversation is becoming much larger.

[00:51:08.340] – Nick Baskett

Do you see a real business advantage with consumers by having that B Corps certification and are you going to take advantage of that?

[00:51:18.900] – Massimiliano Pogliani

Yeah, for sure. This is really for sure, because we know out of all the market research that we have statistics, etc. That more and more consumers are looking at this aspect and choosing also products and companies based on their ability approaches, broad stability apps not only gain in terms of raw material sourcing but also behaviour in terms of company etc. Etc. So interaction with all the community, not only with employees, but with the suppliers, etc. Etc. So this is for sure something that is beneficial because again, is not something that we self proclaim.

[00:52:05.340] – Massimiliano Pogliani

Ourself. A good company is an independent and very serious organisation that is saying that so it’s a good thing and the consumer can trust this. And, you know, they can also see that this movement is growing and there are other B Corps companies that are now joining forces wiht other B Corps companies. And so they are inspired by this behaviour because, you know, consumer sooner later, once they are no more teenagers, they started, you know.

[00:52:43.880] – Nick Baskett

Starting and then they start working.

[00:52:45.220] – Massimiliano Pogliani

And so in the way they work, the future manager of the company, the company they choose, but also, the impact, as manager, they are when they are in those companies is also contributing to this growing movement because we are I belong to the category of managers which are in between the two. I was born and when digital was not there and etc. But in five to ten years time CEOs will all be born native, digital, native, sustainable, etc. Etc. And these are also consumers and and people working.

[00:53:24.170] – Massimiliano Pogliani

So I believe that is really the setting, the example thing that is important and inspiring people and other companies at the same time to consider that everything you do has an impact, you can continue to do what you want, provided that you consider this impact on others and on the planet.

[00:53:50.700] – Nick Baskett

That’s a wonderful place to end Massimiliano. That has been such a pleasure. I feel like we should have had this conversation at a coffee bar with an espresso. Yeah,

[00:54:00.580] – Massimiliano Pogliani

there’s a nice espresso there

[00:54:01.580] – Nick Baskett

I keep looking at that the whole time. So maybe another time when we pass this pandemic, we can meet up in Italy somewhere at the home of Espresso. But if not, I’d love to be back on the show at some point when you’re a little bit further along on your journey and we can touch base, see how it’s going.

[00:54:23.740] – Nick Baskett

We can have another cup of coffee, another conversation and thank you so much once more.

[00:54:27.940] – Massimiliano Pogliani

Thank you. Thank.

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