Among the CSR responses adopted by multinational corporations (MNCs), codes of conduct have figured prominently. For companies, their business associations, international organisations and NGOs, codes have been important instruments to enhance CSR, although the specificity and stringency of the various stakeholders’ approaches has shown considerable variety (, and ). Often, a dynamic development could be noted, in which the interaction of different stakeholders in the formulation and implementation of codes proved very important in improving corporate codes ().
Starbucks:
Starbucks is an international operating company with more than 15.740 stores either company-operated or licensed in 44 different countries. Starbucks stores offer a choice of regular and decaffeinated coffee beverages, Italian-style espresso beverages, cold blended beverages, a selection of teas and distinctively packaged roasted whole bean coffees. Its stores also offer a selection of fresh pastries and other food items, sodas, juices, coffee-making equipment and accessories, a selection of compact discs, games and seasonal novelty items.
Each Starbucks store varies its product mix depending upon the size of the store and its location. Larger stores carry a broad selection of the company's whole bean coffees in various sizes and types of packaging, as well as an assortment of coffee and espresso-making equipment and accessories such as coffee grinders, coffee makers, espresso machines, coffee filters, storage containers, travel tumblers and mugs.
Starbucks retail stores quietly display brochures that read “Social Responsibility: How is My Starbucks doing its part?”Those little brochures summarize all sorts of compelling figures from the company’s corporate social responsibility (CSR) , touching on improvements in sustainable farming, community involvement, environmental stewardship, and employee equity and diversity.
The company has a long history of doing business in ways that are socially, environmentally, and economically responsible. The company says “It’s deeply valued by our partners (employees) and customers alike, and we believe it also makes great business sense. It hasn’t always been easy; however, we’ve learned from our mistakes and persevered as a pioneer of innovation across the industry”.
According to Starbucks “In 2008 we set bold new goals in the areas where we can have the greatest impact: , , and . Together, we call these priorities Starbucks Shared Planet” (Starbucks.com).
Starbucks™ Shared Planet™ means focusing on the core areas where they have the biggest influence – ethical sourcing, environmental stewardship and community involvement.
Above all, Starbucks believes in engaging, collaborating and openly communicating with their stakeholders. Since 2001, one way they have done this is by producing a Global Responsibility Report that details their efforts to do business responsibly.
Ethical Sourcing:
According to Starbucks CSR report “Starbucks has always believed in buying, roasting, and serving the highest quality coffee in the world. By promoting responsible growing practices, we’re able to serve a great cup of coffee while helping to improve the lives of farmers and protect the environment. We’re also applying the knowledge we’ve gained through our work with coffee farmers to other areas of our supply chain”.
Fair Trade:
Starbucks believes that by implementing a long-term, sustainable strategy we will be able to improve conditions for farmers. We’ve formalized our practices into a holistic approach that is focused on helping farmers earn more, protecting the environment and ensuring Starbucks demand for high-quality coffee continues to be met. Our approach includes the following measures:
• Paying farmers fair prices and offering favorable terms
• Rewarding farmers who adopt Starbucks Coffee Sourcing Guidelines
• Investing in social programs that benefit coffee-producing communities
• Purchasing certified and conservation coffees
• Providing farmers access to affordable credit.
In 2007 Starbucks had a total net revenue of $9,411bn, a demand of more than 136 million kg coffee and paid an average price of $1.42 per pound of green unroasted coffee. The average price includes coffee purchased from approved suppliers through their own set of social and environmental guidelines for producing, processing and buying coffee (C.A.F.E. Practices) and Fair Trade cooperatives. The market price for coffee on the New York Board
of Trade was within a price range of $1.00 to $1.35 per pound. Therefore, Starbucks paid on average a 10% premium to the market price in 2007(International coffee Organization).
Starbucks, which was pressurised already in 1994 by a coalition of NGOs that focused particularly on labour conditions in Guatemalan coffee production. This resulted, in 1995, in the adoption of a code that aimed to improve the situation of coffee producers. At the time, it was non-binding and without sanctions, instruments the company considered to be as not yet appropriate in view of lack of information about for example wage standards (). As the first coffee company that undertook such specific CSR action, Starbucks continued to be targeted by NGOs which requested stricter compliance and a move towards buying certified fair trade coffee (coffee that guarantees a minimum price to its producers). In 2000, the company announced it would start offering fair trade coffee in 2000 of its shops (), and the amount has increased since then, also outside the US (). Overall, however, its accounts for only 1% to 2% of Starbucks’ total coffee purchases (). Of the approximately 136,000 metric tons (300 million pounds) of coffee Starbucks purchased in 2006, about 6 percent was certified as fair trade.
Starbucks and Fairtrade formed an alliance. Firstly Starbucks began to sale Fairtrade coffee as a weekly special. In 2007 Starbucks has already bought approximately 10% of the worldwide supplied Fairtrade coffee (Starbucks.com). Within that alliance both parties developed a Social Responsible Strategy. The purchase practise of Fairtrade coffee is a very important factor as it enhances the coffee market environment. That is unison with the stakeholder approach, where the development of all people and companies related to the business are considered. Another very important point is the environment, the health as well as work place conditions of the employees and coffee farmers. In terms of significant impact on Starbucks the already mentioned points have a strong influence on the companies’ future strategy. Significant factors such as the availability and protection of resources have an impact as well. Stakeholder engagement, corporate governance, environmental practises and local community engagement are considered further on.
They have become the largest buyer of Certified Fair Trade coffee in North America (10% of the global market). , the only third-party certifier of Fair Trade Certified
coffee in the United States, has noted the impact Starbucks has made in the area of Fair Trade and coffee farmer's lives.
Ethiopia’s coffee sector wanted to trademark their most valuable coffee brands ). Ethiopia is one of the coffee producing countries where several of the best Arabica coffee beans grow worldwide. Starbucks receives a main part of their total coffee supply from Ethiopia because of the high quality and the advertising effect of Ethiopian coffee. Referring to the article “Brand Hypocrisy at Starbucks” by Douglas B. Hold, a professor at Said Business School from the University of Oxford, Starbucks fears a domino effect that not only Ethiopia will trademark their coffee. Countries like Kenya, Indonesia or Costa Rica have comparable coffee rarities and therefore will demand trademarks for their coffees as well.
Instead of offering the farmers a better price and accepting their Intellectual Property Rights, Starbucks’ management worked with its industry lobbyists to pressure the US Patent and
Trademark Office to turn down Ethiopia's trademark applications (). NGO’s (Non Governmental Organisations) such as Oxfam started campaigns against the proceedings of Starbucks. Starbucks totally underestimated this public campaign effect, which lead to a negative reputation as well as decreased sales. In the end, Starbucks received more than 96,000 letters by American customers who called for a public statement (oxfamamerica.org). According to the economist, a growing number of coffee drinkers seem to prefer their “grande skinny latte” without a foul-tasting double-shot of social injustice (economist.com). The case of Starbucks in Ethiopia has shown that the customers are demanding fair traded products. The customers clearly had the bargaining power to force Starbucks to adapt the strategy to the customers’ needs. Reasons for that power are the low switching costs within the coffee industry, as the customer can choose between several substitutes.
It seems that Starbucks specifically prefers some growers over others. :
“The guidelines define what we believe to be the critical social, environmental, economic and quality aspects of growing, processing and selling coffee for Starbucks. To become a C.A.F.E. Practices supplier, coffee farmers, processors and exporters must meet minimum requirements and demonstrate best practices, which are subject to independent verification under the guidelines”.
Recycling & Reducing Waste:
‘‘Starbucks is committed to significantly reducing the waste our stores generate - especially when it comes to recycling’’ (Starbucks.com).
The U.S. granted the first-ever approval to use recycled content in for Starbucks coffee cups. In 2005 Starbucks received the National Recycling Coalition Recycling Works Award (Starbucks.com)
Consumers are taking notice of the foodservice industry’s growing inconvenient truth, pushing for more green alternatives to traditional packaging. The solution seems easy: Prevent the cups from going into landfills and cut back green house emissions equivalent to removing about half a million cars from the road.
But the solution is anything but easy, Starbucks is finding. In an attempt to divert its cups from landfills and perhaps save the planet along the way, Starbucks, which pumps about three billion cups into the global consumer stream each year, is recruiting the recycling and packaging industries to help make 100 percent of its cups recyclable by 2012.
According to Starbucks“What you’ve seen in the past is somebody will call a product recyclable based on the materiality of that product and not necessarily whether or not it’s actually able to get recycled”. “So for our cups, for us to actually call our cups recyclable, they have to be recyclable in the communities where we operate our stores.”
There have been efforts to make cups more recyclable and eco-friendly before within the company. In 2006, Starbucks introduced a paper cup that contained 10 percent post-consumer recycled fibre, and last year it switched from the standard PET cold cups to polypropylene cold cups, which use significantly less plastic and reduce greenhouse gas emissions during manufacturing by 45 percent. But today Starbucks is thinking even bigger. The new initiative to make its cups recyclable goes beyond just what the cup is made of; it takes into account the entire life of the cup.
In 2009, Starbucks hosted a Cup Summit in Seattle, bringing together all facets of their paper and plastic cup value chain to find agreement on criteria for a comprehensive recyclable cup solution (Starbucks.com). They gathered experts from every facet of the cup supply chain, including raw material providers, cup manufacturers, cup converters, environmental NGOs, waste management companies, Starbucks’ peer companies, academics, and municipalities.
The overall aim for Starbucks, is to get all retailers, including Starbucks’ competitors, using similarly designed, completely recyclable products. In addition, it’s looking to create an infrastructure that can deliver those products successfully to recycling facilities.
After the Cup Summit, Starbuks released a plan for a protocol to certify paper food packaging as recyclable with corrugated cardboard, If food packaging like Starbucks’ cups can be recycled into corrugated cardboard, it can essentially get a free ride to the recycle mill and be a cost-neutral program. “Corrugated cardboard is the most recycled material in the U.S.
The majority Starbucks stores do not have recycling bins; only 1/3 of company-owned stores recycled any materials in 2007, however recent improvements have been made and recycling bins are popping up in more stores (the only thing hindering Starbucks' ability to have bins in
every store is the lack of facilties for storage and collection of recycling in certain areas.) Allen Hershkowitz of the says that Starbucks claimed they were using only 10% recycled material partly because the recycled material costs more.
Starbucks gives customers a 10-cent discount when they bring their own reusable cup, and it now uses corrugated cup sleeves made from 60 percent post-consumer recycled fiber.
Water Conservation:
In October 2008, newspaper reported that Starbucks was wasting 23.4 million litres of water a day by leaving a tap constantly running for rinsing utensils in a 'dipper well' in each of its stores, but this is often required by governmental (BBC.com)
:
Starbucks demonstrates its commitment to Social Responsibility through its community engagement by offering following services:
, a brand of bottled water acquired by Starbucks in 2005, features prominent labelling stating "helping children get clean water", referring to the fact. Ethos's goal is to raise $10 million by 2010 for water projects in Africa, Asia and Latin America by donating 10 cents from the sale of every bottle. Critics have argued that the claim on the label misleads consumers into thinking that Ethos is primarily a charitable organization, when it is actually a for-profit brand and the vast majority of the sale price (97.2%) does not support clean-water projects (now magazine). The founders of Ethos have stated that the brand is intended to raise awareness of third-world clean water issues and provide socially responsible consumers with an opportunity to support the cause by choosing Ethos over other brands. Starbucks has since redesigned the American version of the Ethos water bottles, stating the amount of money donated per bottle in the description. The bottles are recyclable, but in the U.S. more than 1.5 million barrels of oil are burned every year to produce plastic for water bottles. The ecological kick in the head: many of those bottles still end up in landfill (now magazine).
(Starbucks)RED:
Starbucks is designed to help eliminate AIDS in Africa. It’s their contribution to the Global Fund to help people living with HIV in Africa. They generated contributions equaling more than 14,000,000 days of medicine (Starbucks.com).
New Orleans, Sparkhope are the programmes through which the company is trying to focus on it charity work.
Labour disputes:
According to Starbucks Business Ethics and Compliance policy:
“Starbucks is committed to full compliance with the laws, rules and regulations of the countries in which it operates. You must comply with all applicable laws, rules and regulations when performing your duties. When you think a conflict exists between the Standards and an applicable law, rule or regulation, or if you have a question concerning the legality of your or other partners’ conduct, you should consult with your manager.”
coffee giant has a history of being anti-barista, anti-union, and thus anti- (seattletimes).The National Labor Relations Board has of illegally terminating, harassing, intimidating, and discriminating against employees attempting to unionize. Starbucks has settled five labor disputes in the last few years in New York, Minnesota, and Michigan, spending millions on legal fees to avoid exposing their anti-worker ways. And Starbucks has led the charge on a so-called Employee Free Choice Act "compromise," which would require 70 percent of workers to sign union authorization cards instead of the much more manageable 50 percent initially proposed by this legislation.
Starbucks billionaire CEO Howard Schultz stands on unions. Schultz who once said that if workers "had faith in me and my motives, they wouldn’t need a union." While Starbucks pretends to be pro-barista, claiming to offer workers decent wages and health insurance, these "progressive" policies are less substantive than the company's frothy milk-based beverages. Less than 42 percent of Starbucks' 127,000 baristas in the U.S. are insured by the company, to make matters worse, Starbucks offers its workers wages but does not guarantee workers set hours. Instead, the company follows an Optimal Scheduling policy that requires baristas to make themselves available 70 percent of open store hours just to work full time in any given week. This means that low-wage earning baristas do not have time to take a second job. Moreover, it precludes tens of thousands of Starbucks employees from working the 240 hours per quarter needed to qualify for the company's health insurance (seattletimes).
The Industrial Workers of the World (IWW) initiated the complaints that led to the settlement and, according to a news release, considers it a victory.
It's Starbucks' sixth labor settlement in three years and its second in Minneapolis. In December, the Seattle coffee chain lost a battle in administrative-law court when a judge determined Starbucks had unfairly imposed work rules on employees who supported the IWW.
"Starbucks chose to settle the one remaining charge," the statement said. The company called the settlement "the latest in the IWW's 'kitchen sink' approach to criticizing all things Starbucks. ... We strongly believe we would have prevailed had the one remaining case gone to trial, but the time and expense required to do so was not justifiable."
The company admitted no wrongdoing but agreed to pay the employee $125,000 and to offer jobs and make $5,000 payments to each of eight applicants who had earlier been turned down, allegedly because they had union backgrounds (seattletimes).
Compliance with Laws and Regulations (Opening without planning permission:
According to Starbucks Business Ethics and Compliance policy:
“Starbucks policy is to deal honestly and fairly with government authorities and to comply with valid governmental requests and processes. Partners must be truthful and straightforward in their dealings with the government and may not direct or encourage another partner or anyone else to provide false or misleading information to any government official or representative. Partners must not direct or encourage anyone to destroy records relevant to an investigation.”
But in actual case is quite different, in Dec 2008 BBC reported “A coffee shop which opened in Brighton without planning permission has been ordered to stop operating as a cafe.”
Starbucks has been accused by local authorities of opening several stores in the United Kingdom in retail premises, without the for a change of use to a restaurant. Starbucks has argued that "Under current planning law, there is no official classification of coffee shops. The company said it was currently considering the options.
"We believe that our coffee houses make positive contributions to their local areas and, in particular, Starbucks store on St James's Street has helped its community by creating around 14 new jobs and by providing a relaxing and safe environment for customers to enjoy great tasting coffee," a statement said.
Starbucks therefore encounters the difficult scenario whereby local authorities interpret the guidance in different ways. In May 2008 (bbc.com), a branch of Starbucks was completed on St. James's Street in , , despite having been refused permission by the local planning authority, Brighton and Hove City Council, who claimed there were too many coffee shops already present on the street. Starbucks appealed the decision by claiming it was a retail store selling bags of coffee, mugs and sandwiches, gaining a six month extension, but the council ordered Starbucks to remove all tables and chairs from the premises by 20 February 2009, to comply with planning regulations for a retail shop (The Argus).
More than 2,000 residents signed the petition and presented to the council. In response council's planning committee, said: “We are responding to local concerns and making it clear we will not tolerate planning regulations being flouted in this way” (bbc.com).
These are the clear examples that Strabucks is not complying with Gov; Laws and regulations.
Corporate Governance:
The definition of CG differs depending on one's view of the world. define CG as the system of laws, rules, and factors that control operations at a company. Irrespective of the particular definition used, researchers often view CG mechanisms as falling into one of two groups: those internal to firms and those external to firms. Of course, firms are more than just boards, managers, shareholders, and debt holders. Following figure provides a comprehensive perspective of the firm and it’s CG. This also depicts other participants in the corporate structure, including employees, suppliers, and customers.
By incorporating the community in which firms operate, the political environment, laws and regulations, and more generally the markets in which firms are involved, and also reflects a stakeholder perspective on the firm ().
Starbucks board of directors holds management accountable to operate and manage the company according to strong ethical and governance principles. The board currently has 11
members, eight of whom meet the independence requirements of NASDAQ. All three committees of the board are comprised of independent directors and have specific charters:
Audit and Compliance; Compensation and Management Development; and Nominating and Corporate Governance.
There are well-defined criteria for the selection of new board members, foremost being a clear demonstration of their own personal integrity and ethics. Board diversity is sought in
terms of members’ personal and professional backgrounds, gender, race, ethnicity or other differentiating characteristics, enabling a wider range of opinions and perspectives to be
considered.
Conclusion:
Sustainability and corporate social responsibility will continue to play important roles in the near future. The way this is realized will be varied. The role of the consumer as a driver, while definitely present, should not be overestimated. Certainly, the logos of the well-known sustainability initiatives will continue to appeal to the more dedicated consumers and purchasers, including government institutions. A significant group of consumers, however, will simply expect the supplier, be it of a branded product or a private label, ‘to do the right thing’. Whatever the driver, Corporate Social Responsibility will increasingly become a ‘license to operate.” On average, and even without being very articulate on the topic, consumers will simply not buy from suppliers seen to be performing inadequately
In the coffee industry, sustainability in the broader sense is not just a marketing strategy; it is an imperative for industry to thrive. Farming practices must be environmentally sustainable, and the production of specialty coffees must support a reasonable quality of life, otherwise the land, ingenuity and hard work now dedicated to growing coffee will be used for other purposes. Fortunately, consumers continue to show more interest in the impact that their purchasing and consumption habits have on the planet. Those roasters and retailers that are good citizens of the planet, support and invest in sustainable farming and manufacturing practices, lower their emissions and environmental impact and pursue values that benefit everyone in the supply chain will continue to be rewarded with better sales in the coming year. Although younger consumers moving into the category today are certainly leading this trend, there is a growing interest in sustainability in most demographics.”
Sustainable practices are the key. Companies are also heading more rapidly in the Corporate Social Responsibility sector as a strategy.
I will add that from my perspective Starbucks are doing good stuff. Their three overarching focus areas of ethical sourcing, community involvement and environmental stewardship are important and Starbucks is making focussed progress and doing some really exciting things, such as the . However, Sustainability reporting and transparency should be more comprehensive. Starbucks has had its share of criticisms levelled at its retail practices, supply chain issues, union busting, wasting water in stores, low wages, etc and it would be of interest to see how this Company is behaving in all areas of impact.
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