Illycaffè CEO Massimiliano Pogliani on making history as the roaster’s first external CEO, steps to becoming carbon neutral, and why sustainability is an investment everyone needs to make.
When illycaffè became the first Italian coffee company to obtain B Corp status in April 2021, CEO Massimiliano Pogliani was proud, given that only 3 per cent of the 100,000 companies that applied met the criteria for excellence. Rather than shout the news from the rooftop, Pogliani says the certification, established by B Lab, the international certifying entity for companies that meet the highest standards of social and environmental performance, is simply validation of the sustainable practices the company has applied since it was founded in 1933.
“We don’t see it as kind of a prize, an ‘Oscar’, or a championship win, we see it as confirmation our business model is solid, which is based on creating value for all stakeholders, not only for the shareholder,” Pogliani tells Global Coffee Report. “Having strong sustainable and ethical values is part of the DNA of the company, so to see us officially certified from an external party gives us a sense of pride, but it’s not the end of the road, it’s just the beginning.”
Illycaffè’s application for B Corp status was made through the 2020 global pandemic, with the roaster’s national and international behaviour and practices put under the microscope. This included the way it interacts and impacts the communities it’s involved with: coffee producers, suppliers, subsidiaries, customers, and factory workers. Illycaffè’s workplace environment at origin and its Trieste-based factory were also considered, as was its ability to transfer knowledge, add value, and uphold gender diversity and inclusion.
The ultimate goal, Pogliani says, is for illycaffè to reduce its carbon footprint and have a carbon neutral supply chain by 2033, the year illycaffè celebrates its 100th birthday.
Pogliani says it’s thanks to new innovations and technology that weren’t available 10, even five years ago, that are helping reach this target. At illycaffè’s production facility, 100 per cent of its electrical energy comes from renewable sources. It has upgraded its factory with new roasting technology that uses 40 per cent less energy. Methane gas consumption is reduced by using recovered energy – 89 per cent from roasting and 10 per cent for heating and hot water production – which decreases CO2 emissions by around 380 tonnes per year.
Illycaffè’s green bean warehouse ceiling is fitted with solar panels, which Pogliani describes as “one of the biggest installations in the Friuli Venezia Giulia region”. And at origin, illycaffè constantly promotes best practices towards water consumption reduction. It supported the implementation of wastewater treatment systems in Nicaragua and Honduras that reduced water consumption by 35 per cent.
“We have a responsibility to pave the way and show what it means to respect future generations and the planet – the only one that we have,” Pogliani says. “For me, sustainability is not a cost it’s an investment everyone needs to make. Perfecting our business and environmental strategies is a never-ending story. We are not perfect, but we are committed to a continuous improvement pattern.”
Pre-COVID, illycaffè also started using disposable materials and changed its single-use cups to PEFC (Programme for the Endorsement of Forest Certification) materials from sustainably-managed forests, helping rescue 175 tonnes of plastic annually.
“The B Corp status held us accountable to be transparent in everything we do, and I believe it’s important the consumer judges us not only on the quality of our product but the quality of our standards. We want to make it very clear to our customers that this is the way we think every company should behave in the future. There is no contradiction in pursuing business and revenue goals with social and environmental goals, you can reach both together in a harmonious way,” Pogliani says.
He adds that, in days gone by, managements systems would push “just for profit and growth”, but today, it’s about “growing in a profitable way” by having a positive social and environmental impact.
“You don’t need to be a charity to do good in this world. You can be a growing company, making profit, provided that in your actions you consider all communities and strive to make a positive impact on people and the planet. It’s not easy to do both, but it can be done,” Pogliani says.
“As a manager, you have to make decisions that focus on the here and now, and allow you to reach your annual KPIs and goals. But when you’re a stakeholder company like illycaffè, you also have to consider that the decisions you make will impact people in 10, 20, 30 years’ time, and beyond. By then, I probably won’t be CEO, possibly retired, happy living in Bondi Beach, but for now, I invest my time, the company’s money, and its resources, in projects I believe will help produce a great product with an even greater positive impact.”
Of all the United Nations’ Sustainable Development Goals, the one that Pogliani is most passionate about is encouraging collaboration between the public and private sectors. For him, this is not about competition, but cooperation.
“For sure, we compete with other roasters for the preference of the consumer, but when it comes to the health of the planet, we need to be at one with our competitors,” he says.
Already, illycaffè collaborated with Lavazza on the Coffea arabica genome sequencing project to understand how plantations can be more climate resistant and productive. Pogliani says all study findings are shared with World Coffee Research to benefit more people in developing climate-resistant varietals. It has also signed a new capsule recycling program with TerraCycle that will be implemented in many countries, and a new agreement with Nestlé to pilot an innovation recycling project in the Friuli Venezia Giulia region. If successful, the project will be applied throughout Italy.
Destiny awaits
Pogliani joined illycaffè in 2016 as the first non-Illy family member in management. Prior to his appointment, Pogliani says the Italian icon had always played a role in his life. His passion for coffee began while working part-time at coffee vending machine company Saeco while studying at university. Years later, he decided to pursue his passion further by undertaking an illycaffè coffee tasting and training diploma, followed by a teaching diploma, run by the late illycaffè Chairman Ernesto Illy.
“I was infected by his passion for coffee. He is someone I still vividly remember as nothing but exceptional. Everything I learned about coffee was from him. When I finally received my teaching diploma from him, it was like receiving something from the Pope,” Pogliani recalls.
He pursued work in other sectors but eventually, when hired by machine manufacturer Saeco Gaggia, Pogliani’s knowledge and passion for coffee returned. He later joined Nestlé and Nespresso, but still, illycaffè was a source of inspiration in terms of quality espresso.
“I have been connected with this company, in my soul, for a long time, so you can imagine that when I was asked to join illycaffè all those years later, it was like closing the circle on this dream. I would never ever have imagined I would be the CEO of this fantastic company. It wasn’t even a choice. It was my destiny,” Pogliani says.
“This change away from a family-owned, led, and managed company has brought an additional dimension to the business. It’s synergising with the entrepreneurial spirit of the family, and I’m happy to be in my second mandate.”
Testing times
Pogliani’s second term was tested when COVID-19 hit northern Italy “like a bad storm” in 2020. Rather than trying to control what it couldn’t, Pogliani says the company focused on what it could. Thankfully, pre-pandemic, illycaffè had already enacted a ‘smart working program’ to give employees the flexibility to work from home and in the office. All travel was halted, factory workers were divided into split shifts to minimise contact, and not once did production stop nor was a COVID-19 case detected on-site.
For a company that usually sees a 60-40 split for the Ho.Re.Ca and home consumption markets, respectively, lockdown saw that reverse. To keep up with demand for at-home products, the roaster even installed a new capsule production line.
“We saw online orders grow five times the average, with 39 per cent ecommerce sales growth in 2020 compared to 2019. Not only is that exceptional growth but we grew more than the market average for coffee categories,” Pogliani says.
According to iIlycaffè’s 2020 Annual Report, it achieved a revenue of €446.5 million (about US$546.1 million) in 2020, a decrease of only 14 per cent compared to the prior year. Illycaffè grew its online sales by 49 per cent in France, 39 per cent in Italy, 70 per cent in the United States, 69 per cent in Austria, 259 per cent in the United Kingdom, and 300 per cent in Brazil. Fifty per cent of online sales came from first-time customers. It was a growth illycaffè was ready to capture thanks to its digital transformation program that started in 2018. Pogliani says digital has become more than just a transaction channel but a platform for customer interaction, and an enabler across all departments.
“COVID brought us so many bad things, but it also brought us the democratisation of digital operations that are not only utilised by millennials but by the whole population. It’s one of the positive things to come out of the situation because it allows us to communicate efficiently, be more transparent, tell stories, and remain accountable,” he says.
Pogliani predicts a rebalancing of the home and out-of-home channels to a 50-50 split, and a permanent redistribution of populated coffee bars to suburban areas once Italy’s lockdown has ended and the vaccination rollout is complete by end of 2021, early 2022.
Through the pandemic, illycaffè supported its customers with extended payment options and training in preparation for business to return. It even donated coffee to medical workers in its region, and funded an Intensive Care Unit for COVID-19 patients at its local Cattinara Hospital.
“We haven’t stopped investing in the company, our people, and our community. We believe that if you start reducing your investments, laying off people just because of the immediate situation, then when the economy bounces back you won’t have the structure, the system, or the people to support your recovery,” Pogliani says.
“Companies per se do not have values. People have values. Values are not written on the wall or on a PowerPoint presentation, they need to be embedded in the company DNA and embraced by its people. It would be a problem for me to work in a company that does not behave for the good of its people and planet, but I believe everyone working in illycaffè shares this same vision.”
Despite the hardship of 2020, Pogliani says it was a “special and significant year” with global private equity firm Rhone Capital becoming illycaffè’s first external investor, taking a 20 per cent stake to support its expansion to foreign markets, particularly the US.
With the same goal and mission to grow the company’s legacy for quality coffee with upheld ethical and social standards, Pogliani is excited to begin illycaffè’s new journey in the post-pandemic era.
“I am happy my personal and professional dreams for the company’s sustainable future are coming true,” he says. “We are ready for whatever comes next, and we will move forward with the same goals, values, and mission that has been anchored deep into our roots from the very beginning.”
For more information, visit www.illy.com
This article appeared in the July/August 2021 edition of Global Coffee Report, read more HERE.