Starbucks One Does Not Generally

Starbucks

One does not generally associate capitalism and corporations with the notions of ethics, social responsibility, or global corporate citizenry. Instead, many look at the rise of corporations and other elements of big business as a source of responsibility for many public ills, like the mistreatment of workers, the destruction of the environment, and the exploitation of natural resources. Certainly, unlimited exploitation proved to be the quickest way to turn an incredible profit, but it provided corporations with a long history of problems. Unintentional damage, such as damage to the environment, proved problematic for corporate locations and their workers. Intentional damage, such as Ford's famous decision not to revise a product flaw in the Ford Pinto, which made it overly susceptible to blowing-up if it was in a certain type of collision, proved financially risky for big corporations, because juries were willing to award huge settlements to injured plaintiffs. (Leggett). In addition, the U.S. Tax Code began to give greater and greater benefits to corporations engaging in philanthropy. As a result, some corporations began engaging in more responsible practices. In recent times, this trend has exploded, because corporations have discovered something else; many consumers are willing to spend more on a product that does not have an ethical taint. Some people simply do not want to purchase a product that depends upon the exploitation of people or resources to get to the customer. Other people feel better about spending money on a premium product if they know that some portion of that product's selling cost goes to philanthropic efforts.

As a result, the modern corporate consumer can look at three different aspects to determine whether a corporation's ethical positions align with the customer's own positions: that corporation's business ethics, corporate social responsibility, and global corporate citizenry.

Background and History

Starbucks Coffee Company was originally opened in 1971 in Seattle's Pike's Place Market under the name Starbucks Coffee, Tea and Spices. It was incorporated in Olympia, Washington on November 4, 1985, and went public on June 26, 1992. As of February, 2008, Starbucks had stores in all 50 states in the United States, plus the District of Columbia. It had 7,087 company-operated stores and 4,081licensed stores in the United States. Starbucks also operated stores in 43 countries outside of the United States. These included 1,796 company operated stores and 2,792 joint-venture or licensed stores. (Starbucks, "Company Fact Sheet"). This incredible growth was the result of an idea that Howard Schultz, Starbuck's director of retail operations and marketing, had when he traveled to Italy and noticed how successful espresso bars were in Milan. In 1984, Schultz convinced the founders of Starbucks to try the coffee bar concept in downtown Seattle. (Starbucks, "Timeline").

In 1985, Schultz founded Il Giornale, a coffee bar, which acquired Starbucks' assets in 1987. (Starbucks, "Timeline"). In 1991, Starbucks built a relationship with CARE, an international relief and development organization. (Starbucks, "Timeline"). In 1997, Starbucks formed an "alliance with eight companies to enable the gift of more than 320,000 new books for children through the All Books for Children first annual book drive." (Starbucks, "Timeline"). In 1998, Starbucks formed Urban Coffee Opportunities with Earvin "Magic" Johnson's Johnson Development Corp., "to develop Starbucks Coffee locations in under-served, urban neighborhoods throughout the U.S." And began offering the line of products with proceeds to go to literacy organizations. (Starbucks, "Timeline"). In 1999, Starbucks entered into a literacy partnership with Mark McGwire, and partnered with Conservation International to promote green methods for growing coffee. (Starbucks, "Timeline"). In 2000-2001, Starbucks expanded its commitment to both green growing practices and fair trade in coffee. In 2001, Starbucks granted more than $4.2 million to literacy, schools, and community-based organizations; it also announced a partnership with Jumpstart, to pair college student tutors with Head Start Children. (Starbucks, "Timeline). In 2002, Starbucks awarded more than $5.9 million in grants to literacy, schools, and community-based organizations; organized volunteers and contributed money to the Starbucks' Make Your Mark program. (Starbucks, "Timeline"). In 2003, Starbucks awarded more than $6.5 million in grants to literacy, schools, and community-based organizations; began a three-year commitment to America SCORES; expanded their green and Fair-Trade Certified Coffees; contributed $50,000 to Earth Day Network; encouraged more than $50,000 hours of volunteer time and contributed $500,000 to nonprofit organizations in the Make Your Mark volunteer program. (Starbucks, "Timeline"). In 2004, Starbucks extended its partnership with Conservation International with $2.5 million loan fund to provide coffee farmers with affordable credit; dedicated six weeks to promote environmental awareness in its company-owned U.S. And Canadian stores; presented Jumpstart with $100,000; loaned $1 million to Calvert Community Investments to allow Calvert to support Fair Trade Certified coffee; and joined the United Nations Global Compact. (Starbucks, "Timeline").

Thesis Statement

Starbucks has proven that a company can be a financial success while adhering to high standards of business ethics, corporate social responsibility, and global corporate citizenry. Starbucks has promoted efforts to treat coffee farmers ethically and to provide community development to the traditionally poor regions where coffee and tea are grown. Starbucks has also made tremendous efforts to increase urban quality-of-life in America, by promoting various community service programs, with a specific emphasis on literacy programs.

Starbucks' as an Ethical Business

Starbucks has engaged in a number of practices that make it stand out as an ethical business. Ethisphere Magazine ranked the world's most ethical business for 2008. They considered a business's environmental practices, legal interactions, conditions of supplier factories, and product liability issues to help determine the most ethical businesses. Ethisphere also recognizes that "no business is perfect. Every large corporation gets sued or experiences a crisis. The World's Most Ethical Companies are the businesses that respond not with a PR campaign, but with real action, such as complete transparency for the public and significant effort given to fixing the core problem." (Ethisphere Magazine). Using those criteria, they determined that Starbucks was one of the most ethical businesses for 2008. In fact, they cite Starbucks as being synonymous with outstanding CSR practices. Interviewing David Landau, Starbucks' chief compliance officer about Starbucks' history of ethical leadership, he explained that Starbucks was founded on the principle that people be treated with respect and dignity, and that the company works to instill those beliefs in all employees. (Ethisphere Magazine). The result has been a company whose everyday practices reflect ethical corporate practices.

Starbucks' commitment to providing health insurance benefits to its workers is one area where it stands out from many of its competitors. The reality is that most part-time food-industry workers do not have access to employee- sponsored health insurance programs. While there is an undeniable benefit to companies who do provide such employee benefits, because healthier employees are more productive employees, the reality is that it has still proven far less expensive for companies to accept high turnover rates and employee dissatisfaction rather than providing health benefits for part time employees. However, Starbucks has been committed to providing all of its employees with access to health care benefits since the company's beginning.

In addition, Starbucks has taken a very active role in community enhancement. Starbucks has long been involved in literacy campaigns, and has donated both money and employee time to the success of such campaigns. Starbucks has also been involved in programs to stamp out poverty and for community enrichment. Though the idea of the coffee bar may seem firmly middle class, Starbucks has expanded into urban poor areas, with the idea that such expansion can provide cultural opportunities for members of those communities. Starbucks has worked with various charities to endorse good causes, such as the RED campaign to end global AIDS.

However, the most pressing ethical issue facing any purveyor of coffee may be the growing conditions of the coffee. It would not be an exaggeration to compare many modern coffee plantations to the slave plantations of the old South. Though slavery itself may not longer be legal, the reality is that many workers are treated like chattel and are not aware that they have other options. Even those who do not work on big coffee plantations often work in conditions akin to those of Reconstruction-era sharecroppers, and find themselves more in debt at the end of the coffee growing season than they were when they planted their crops. Therefore, a huge part of Starbucks' ethical reputation rests on its relationship with coffee growers. Starbucks is the world's largest purchaser of Fair Trade Certified coffee and hopes to be able to only provide its customers with Fair Trade Certified coffee within the next decade. Fair Trade Certified coffee means that "an importer must meet stringent international criteria; paying a minimum price per pound of $1.26, providing much needed credit to farmers, and providing technical assistance such as help transitioning to organic farming. Fair Trade for coffee farmers means community development, health, education, and environmental stewardship." (Global Exchange.)

Business Ethics

Until recent times, few businesses had ethical responsibilities. In fact, the idea of the ethical business was limited to those businesses that had a fiduciary duty to their clients, like attorneys, or to those engaged in traditional helping professions, like doctors. However, the growth of the corporation introduced the concept of a fiduciary duty between stockholders and board members, in both open and closed corporations. (Stevenson, p.1144). Put succinctly, the board of directors has a duty to its shareholders to increase profits, and majority shareholders may have a duty to the corporation to vote in a way that increases profits. As a result, business ethics can actually conflict with both corporate social responsibility and global corporate responsibility; because business ethics may indicate a less ethical means of practice if it would increase profits. As a result, many corporations have included responsible practices in their corporate mandate, thereby making it clear to any and all potential stockholders that one of the goals of the company is to engage in responsible and morally ethical behavior. Starbucks appears to be one such company.

Corporate Social Responsibility

It is difficult to define the notion of corporate social responsibility because different sources seem to suggest different definitions. However, it is clear that corporate social responsibility means that corporations have to take an interest in more than profits, and must consider how their actions impact their various stakeholders including: customers, employees, shareholders, and suppliers. In addition, corporate social responsibility involves an awareness of a company's impact on the environment. Corporate social responsibility is never discussed in the context of what a corporation has to do- those discussions involve regulation- but about the steps that a corporation takes to go beyond its minimum ethical requirements. Furthermore, corporate social responsibility is about more than a company's philanthropic efforts. According to Harvard University's Corporate Social Responsibility Initiative, corporate social responsibility "encompasses not only what companies do with their profits, but also how they make them. It goes beyond philanthropy and compliance and addresses how companies manage their economic, social, and environmental impacts, as well as their relationships in all key spheres of influence: the workplace, the marketplace, the supply chain, the community, and the public policy realm."

Global Corporate Responsibility

Like corporate social responsibility, there is no single definition of global corporate responsibility, perhaps because corporations face different global dilemmas, based on the type of business involved and many other factors. However, global corporate responsibility has several key elements. As identified by the Ethics & Policy Integration Centre (EPIC), global corporate responsibility needs to look at the following factors: compliance, workplace, marketplace, human rights, environment, public sector, community relations, management systems standards, corporate governance, and reporting standards. (EPIC). Compliance refers to the corporation's compliance with government standards, industry standards, and stakeholder expectations. Workplace refers to how the corporation treats its workers and includes issues ranging from salary to employee safety. Marketplace refers to how the corporation interacts in the market, including how it treats its customers, but also how it treats its competitors. Human rights refer to how a corporation handles human rights issues with regard to its various stakeholders. The environment deals with how a corporation handles the environment. The public sector refers to how a corporation interacts with governments, and whether it deals with them in an honest and ethical manner. Community relations refer to how a corporation interacts with community, and includes cultural sensitivity, social interactions, and civilization. Corporate governance refers to the relationships between company management, the board, the shareholders, and other stakeholders. Reporting refers to any reports that a corporation may file outside of its mandatory financial reports.

Management systems standards refer to how the corporation's internal structure is set up to ensure its compliance with other areas of global corporate responsibility. (EPIC).

Impact on the Stakeholders

Starbucks has several stakeholders to consider when determining the ethics of its business decisions. Those stakeholders include, but are not limited to: customers, suppliers, employees, shareholders, neighbors, and citizens. One need only look at the journey involved in a single cup of coffee to understand the truly global nature of Starbucks' coffee. The coffee begins as beans picked in an area, probably in South America. The people picking those beans could be akin to modern-day slaves or they could be independent Free Trade farmers. The land where the coffee is grown could be land that has destroyed the local environment, or the coffee could be shade grown, which preserves as much of the local environment as possible. The coffee is then shipped to the roasting plants, which involves interactions with more supplier-employees and the method of shipment helps determine the environmental impact of that coffee cup. Once at the roasting facility, how the employees at the facility are treated is essential, as is how the company deals with waste, the consumption of energy, and other environmental factors, such as noise production. From there, the beans go to the local Starbucks. There the company must deal not only with how it treats its employees and customers, but also how the Starbucks location is impacting the neighborhood. Overseeing this coffee cup's journey is a board of directors that has to make profit for the company's shareholders. This example merely provides a broad overview of the journey of each cup of coffee, but it demonstrates that there are literally thousands, if not millions, of people impacted by the sale of each cup of coffee. For some people, like the customers, this impact may be fairly negligible, while the ethical impact can be tremendous on coffee growers. When one factors in the idea that Starbucks engages in global philanthropy with its profits, it is not an exaggeration to suggest that any person in the world is a potential stakeholder, albeit a small stakeholder, in the sale of each cup of coffee from Starbucks.