Fazenda Diamantina ESG Dilemmas in a Brazilian Coffee Farm Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Fazenda Diamantina ESG Dilemmas in a Brazilian Coffee Farm Case Study Solution

Introduction

The case is all about the coffee farm that was established in 2015 known as Fazenda Diamantina where the farm initially manufacture coffee without fulfilling the ESG standards cost 22 million R$ and over the following two years required crop formation and equipment investments of almost twelve million R$. This investment resulted in some 2 million R$ more than what would have been required in similar but non-ESG-compliant farms and Bruna& Heitor were working in the firm at that time the coffee industry was growing.

Globally various markets have been expanded and grown consistently and the Coffee market is one of the leading markets that has been expanded annually the overall consumption of coffee is increasing annually due to which the market has become one of the most efficient markets in the world. According to the recent market evaluation, the coffee market grows more efficiently hence in 2022 the estimated value of the coffee market is around $470 billion. However, the annual consumption of Coffee is recorded as around 2 billion Coffee cups has been consumed every day across the globe and the annual intake of coffee is over 500 billion.

The growth in the market of the Coffee reflects that in the upcoming five years the Coffee market will grow much more efficiently and is expected to grow over 7-8%. (Rhiney, 2021)

The consumption of Coffee is increasing day by day across the globe and Finland is the most coffee-consuming country hence it is known as the biggest coffee consumer as compared to other countries. According to market research on a personal basis, it is the biggest coffee consumer and the average fin drinks around 4 cups of coffee every day hence the consumption of coffee in Finland is recorded as 12kg/26lbs.

The consumption of coffee is a diverse lot, with states like Norway and Finland as the per capita consumption is around 20lb/year while in Italy and the United States coffee consumption is medium as compared to Finland as the approximate consumption in the USA and Italy is around 12 to 15 lbs per year. In addition to this, In entire consumption, though, the United States was the biggest consumer 27 annual million CB2, tailed by Germany, Japan, France, and Italy with 9, 7.5, 6.2, and 5.7 million CB, respectively.

Problem Statement

Bruna & Heitor resignedfrom their jobs and bought anaverage size coffee farmIn 2016, and they were attracted by the standard of living and by anunaffected desire to make a difference in sustainability terms.From the beginning, they implemented strict ESG standards investing more than what a non-ESG coffee farm would have and in 2018they harvested the first crop.

However, the financial results were very volatile, the business had many risks, and the job was very hard so, after a good crop in 2022, they decided to take stock and review their ESG commitment. However, they are facing issues and challenges regarding the implementation of ESG standards because the implementation of ESG standards is costly due to which they have financial challenges hence the firm needs to deal with the issue.

Analysis

The industry of Coffee efficiently grown and the market of the industry is growing more efficiently than the other industries. Irrespective of the depressed attitude and the inflationary strains accredited to the confrontation in the EU, hence Bruna & Heitor estimated that 2023 will be a worthy year if the prices of coffee, as well as the R$/US$ exchange rate, were similar to those in currently.

Alternatives

Bruna and Heitor have three main alternatives based on which they can stabilize their firm financial situation or the economic health of the firm. However, they were determined, to increase the farms' ́s economic situation hence Bruna and Heitor had to use the assets accrued in virtuous years in wicked ones, and when it was not sufficient, and they had to agree to take detrimental capital growths.(Gerlicz, 2019)

Contrariwise, generating and sustaining a key sector corporate with great ESG principles had been Bruna & Heitor’s vision, and deserting it now could come to be forthcoming remorse. However, the three alternatives that Bruna & Heitor had are as under:

Selling the farm altogether
Selling a farm ́s major stake to a financial fund
Keep investing in ESG until attaining sustainable profitability..................

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