Starbucks Corporation Operational Sustainability

Introduction
Starbucks Corporation was established in 1971 and it is headquartered in Seattle, Washington. The company specializes in roasting, marketing, and retailing specialty coffee all over the world and accounts for about 3% of coffee sourcing globally. Serving 78 unique markets, the company is one of the biggest coffee roasters in the world and serves millions of patrons every day from its 30,000 plus stores around the globe. This article looks at how Starbucks has approached and operationalized the concept of sustainability.
Social Sustainability
In 2016, Starbucks floated a sustainability bond with the goal of financing coffee growing projects in various regions so as to promote environmental sustainability and socio-economic growth. Starbucks Corporation followed the guidelines presented by the Green Bond Principles 2016 in issuing its Starbucks Corporation Sustainability Bond Framework - also referred to simply as the “Framework”. The proceeds of the bond were directed at financing and refinancing existing and future projects put together to promote the advancement of coffee-growing communities socioeconomically and also promote environmental sustainability in the coffee-growing areas as well as the communities around the world that consume Starbucks coffee (Steven Li, 2019).
Given the volume of coffee that Starbucks sources from coffee growers, the company has a lot of pull with farmers. This influence puts the company in a unique position to build a lasting relationship with farmers and build frameworks that can help the industry well into the future. Such frameworks have traditionally focused on ensuring sustainability by discouraging exploitative labor practices such as the use of child labor, promoting good health and safety practices, increasing water efficiencies, reducing deforestation and encouraging agroforestry, and also fighting against soil degradation. Starbucks is aiming to get up to 10,000 farmers compliant with its sustainability provisions and requirements. This push for sustainability does not just apply to farmers only; it applies to the stores as well. Under the Green Stores Framework, the company has put forth six important standards covering design upgrades to waste management practices. To inspire the entire coffee industry, Starbucks has open-sourced this framework and made it available to other industry players (Khalamayzer, 2017).
One of the goals of the Starbucks Corporation is to positively impact the communities it operates in. Towards this end, the corporation has partnered with local nonprofits that work to address the needs of the communities. For every transaction at a Starbucks store, $0.05 to $0.15 goes towards supporting local communities. Further, Starbucks is committed to hiring veterans and has made the pledge to employ at least 10,000 of them. Through the Starbucks Foundation, the corporation provides the youth with opportunities to train to earn various skills that increase their employability in the marketplace (Harnrungchalotorn & Phayonlerd, 2016).
Outside of the United States, Starbucks supports various nonprofits in the communities it operates in by donating funds and opening its doors to host community events. Most of the international philanthropy engagements are done with the help of various partners and often put the interests of these partners first. Nonetheless, the company has been putting more effort into impacting the lives of children through water-related and education-focused initiatives (Juneja, 2018).
Economic Sustainability
There is an increasing number of coffee retailers entering into the markets Starbucks Corporation operates in and this is giving consumers more options and Starbucks more competitors to fend off. Increased competition is pushing prices downward in some markets as coffee retailers strive to compete. The Starbucks Corporation has been able to leverage its consumer’s buying power to offer a more affordable and better product than its competitors while doing so at large volumes globally that have allowed it to benefit from economies of scale. To ensure sustainability as the average consumer goes digital and embraces various technological products, the corporation has partnered with Apple to offer coupons that can be redeemed using iPhones. The company is positioning itself to reap from the benefits of cross-selling and co-branding that are increasingly becoming popular as Smartphone technology advances (Juneja, 2018).
Starbucks Corporation has also put in place financial incentives to reward farmers that are following its Coffee and Farmer Equity standards. Towards this effort, it has set aside $48 million to buy beans from these farmers and another $2.8 million to finance loans at low interest rates. The proceeds from this project are steered towards various sustainability projects run by the company (Khalamayzer, 2017).
To expand its reach, Starbucks entered into a deal with Nestle that will see the beverage company market, distribute, and sell Starbucks products thereby bringing Starbucks annual revenues of $7.15 billion. The deal is focused on sustainability and it will give Nestle the right to trade in Starbucks brands such as Starbucks, Teavana, Starbucks Via, Torrefazione, and Seattle’s Best Coffee (Khalamayzer, 2017).
Environmental Sustainability
The corporation’s focus on environmental conservation has seen it launch several initiatives including a partnership with Closed Loop Partners where the two firms invested $10 million to develop recyclable and compostable cups by 2021. Instead of being dumped in the trash can and never used again, such cups can be recycled to provide utility in other areas. The development of these cups will be a big win for the environment and will greatly impact how its 30,000 global stores operate. Another initiative that the company has launched is its project to replace plastic straws with alternative recyclable or compostable straws. This move would reduce the number of straws used annually by over one billion (Steven Li, 2019).
Because of its various investments in sustainability projects, the company expects to make savings amounting to $50 million and $30 million in utility costs and operation expenses respectively over the next decade. The corporation has been working with LEED for close to 2 decades now and it opened its first LEED-certified store in 2005. Since then, it has opened more than 1,500 such stores all over the United States and in 20 other territories. To make energy savings, the company has rolled out several programs seeking to 100% match its energy utilization and develop solutions that utilize 25% and 30% less energy and water respectively (Khalamayzer, 2017).
Analysis
Starbucks Corporation faces significant political concerns over its processes and methods for sourcing raw materials. Most of the political action targeted at its sourcing policies emanate from Western countries and the major countries it imports raw materials from. These political concerns have been some of the factors that have inspired the corporation to work towards complying with environmental and social norms and also to “Fair Trade” practices that bind global corporations as well as governments. Starbucks appreciates the role political activism will have on its business practices going forward especially as developing countries become more active on political matters as access to information gets better with technological advancement (Juneja, 2018).
Because of the interconnectivity that technology has given people and businesses, the social structures that companies operate in today are very closely bonded. Organizations in several industries are becoming more dependent on each other in practically all organizational environments. Further, organizations have to deal with unrelenting pressure from various players such as political activists and socially aware consumers. Because of this reality, Starbucks Corporation appreciates that it has to strive to adhere to external expectations and standards on performance and organizational ethos. One of the ways the corporation is striving to close this gap is by having CSR efforts that are community-focused and that give the public a voice in its operations (Bruhn-Hansen, 2012).
Starbucks’ efforts to ensure sustainability can be analyzed through ethical, legal, and economic lenses as proposed by the Three Domain model. The economic efforts are actions by Starbucks to impact the company’s bottom line. These include indirect efforts whose impacts cannot be easily evaluated such as activities to improve the image of Starbucks in the minds of the general public. They also include efforts made by Starbucks to improve the welfare of its coffee suppliers, especially in the developing world. The legal efforts cover activities by Starbucks to comply with laws and regulations in the jurisdictions it operates in. Since Starbucks operates in tens of jurisdictions, the legal requirements it has to meet vary and it can be a complex process optimizing its operations to be compliant with all the regulatory requirements in these territories. Most laws and regulatory requirements usually cover areas such as product quality, working conditions, wage minimums, health and safety, packaging, supply chain, and more. The ethical domain covers Starbucks’ moral responsibility to its workers, consumers, suppliers, and the general public (Bruhn-Hansen, 2012).
Future Sustainability Plans for Starbucks
There are more than one million coffee growers around the world from who Starbucks sources coffee beans. Starbucks is committed to efforts aimed at making these farmers more prosperous. It plans to do this by increasing investment in coffee farming education, providing technical capacity, and leading research activities to unearth more productive coffee farming and supply chain solutions. Starbucks has established Farmer Support Centers in various communities to offer financial support to its suppliers. Such investments in farmers and supply chains are in line with Starbucks’ goal of building a sustainable agricultural product (Sustainalytics, 2019).
The Green Stores Framework has been a big driver of Starbucks’ environmental and energy sustainability objectives. Looking into the future, the company has open-sourced the framework to allow other organizations to take advantage of the green solutions it has developed and continues to develop. The resultant developments made by other companies because of this will be good for both the environment and Starbucks as a major company operating within this environment. Further, the company is looking to increase its investments in solar energy to make all their stores green. Other plans the company has developed include reducing waste, having a sustainable supply chain, and increasing community engagement. The company has a goal of ensuring that 100% of the coffee it sells is sourced ethically. To help farmers share in this path to sustainability, Starbucks has plans to provide farmers with 100 million coffee trees by 2025 (Sustainalytics, 2019).
Conclusion
Starbucks’ efforts so far show that it is committed to building a sustainable organization. Its written mission and vision should change to reflect this reality. As a recommendation, Starbucks’ mission and vision should communicate its commitment to ensuring economic, environmental, and social sustainability by caring for the local communities it operates in, the general environment, its shareholders, and the suppliers who include more than one million coffee farmers.
The corporation has been pretty successful in operationalizing its sustainability programs. Nonetheless, improvements can still be made by increasing engagement from community members and leaders who are impacted by these programs. The resulting goodwill can go a long way in shortening execution timelines and allowing various stakeholders to better understand the objectives the company is aiming to achieve. Further, the HR department should get all employees invested in these projects so that there is enough buy-in from the company for the projects to run smoothly without internal company politics harming or stalling progress.
References
Bruhn-Hansen, S. (2012). Corporate Social Responsibility–A case study of Starbucks’ CSR: communication through its corporate website. Unpublished master’s thesis, Illinois State University. Retrieved from http://pure. au. dk/portal/files/45282206/ba_thesis. pdf.
Harnrungchalotorn, S., & Phayonlerd, Y. (2016). Starbucks with Corporate Social Responsibility (CSR):“How Starbucks succeeds in a business world with CSR” (Doctoral dissertation, Master Thesis. Faculty Board of Economic Sciences, Communication and IT Business Administration).
Juneja, P. (2018). PESTLE Analysis of Starbucks. Retrieved November 21, 2019, from https://www.managementstudyguide.com/swot-analysis-of-unilever.htm.
Khalamayzer, A. (2017, November 16). How Starbucks brewed a stronger sustainability bond. Retrieved November 21, 2019, from https://www.greenbiz.com/article/how-starbucks-brewed-stronger-sustainability-bond.
Steven Li. (2019, July 5). Is Starbucks actually serious about environmental sustainability? Retrieved November 21, 2019, from https://therising.co/2019/07/05/is-starbucks-actually-serious-about-environmental-sustainability/.
Sustainalytics. (2019). Second-Party Opinion Starbucks Sustainability Bond. Sustainalytics Second-Party Opinion Review.