Starbucks recently announced the purchase of an approximately 600-acre coffee farm in Costa Rica. The coffee farm is located on the slopes of the Poas Volcano in the central highlands about an hour to the west of San Jose, the capital of Costa Rica. To properly evaluate potential environmental concerns in a foreign country, Starbucks retained Terracon to support the due diligence process. Terracon conducted a Phase I Environmental Site Assessment (ESA) and other ancillary studies prior to the purchase. As I procured the required information to properly assess environmental conditions, I faced a series of challenges.
The first challenge was to try and gather as much information as possible concerning the land. There are no databases or other information research providers for companies in Costa Rica, posing a challenge in assessing environmental conditions at the site. Topographic maps, soil, and other geologic information are available online in Spanish, but it requires extensive research. To address this situation, I visited government offices and trade organizations, and what was lacking from database research companies and other readily available information providers was obtained through these visits. Having lived and worked in Latin America, the language barrier wasn’t an issue for me; however, it took a lot of interviews to obtain the information. While in Costa Rica, I also spoke with various regulatory agencies, including the Ministry of Agriculture, as well as the Director of the Coffee Institute of Costa Rica (Instituto de Cafe de Costa Rica – ICAFE). This provided me a rich environment to learn about the history and environmental concerns in the area, applicable governmental regulations, and best practices in the coffee-producing industry.
During the field visit, I descended into steep ravines where rivers with tall waterfalls flow through parts of the habitat conservation zones. Over a five-day period, I tried to inspect the entire site, but the vegetation in some areas was so dense that it was impenetrable, and the sun was totally blocked out.
In addition to impassible terrain and the lack of databases, I needed to gather as much information as possible while on the ground, and speak with individuals who have lived and worked on the hacienda their entire lives. Former practices regarding trash disposal, fuel storage, use of fertilizers, and other agricultural chemicals were some of the items discussed. Conserving natural resources and biodiversity was a common theme and source of pride for the area residents. Coffee tourism is a big industry, and visitors from all over the world provide a significant source of revenue to the local economy.
While procuring the data had its own sets of challenges, Starbucks was able to move forward with the purchase of the coffee farm based in part by the results from Terracon’s assessment of the farm. Starbucks CEO, Howard Schultz, stated in a video news report that part of the operations at the farm would be used to produce limited harvest micro-lots of rare, high-quality, but not genetically modified, Arabica and other varieties of coffee beans. Starbucks announced that it will share its findings with other coffee producers, and hopes the results can be used to introduce new farming methods that will be more protective of the environment.
Whether or not a Phase I ESA is required, it is always a great practice to call on a consultant to assist in the environmental due diligence process because the risk, that there may be a significant environmental condition that could affect the value of the investment, is simply too great.