Walmart and Starbucks Sustainability

Sustainability
Literature Review
The Starbucks' Social Responsibility & Sustainability (2017) outlines the company's plan for each on several fronts. These are complex issues, and they receive some complexity in their treatment. Starbucks has four main areas of focus: community, ethical sourcing, environment, and diversity. Roughly, community and diversity would fall into the category of social responsibility, as these cover community service, youth action, the Starbucks Foundation, the Ethos Water Fund, and the company's diversity plan. On the sustainability front, there is the ethics of coffee, tea, cocoa and farmer support and this combines with water, energy, green building and climate change. The company's marketing of its approach contains a lot of high level discussion, but there are opportunities to take a deeper dive into specific initiatives and metrics. A lot of what Starbucks does with its approach focuses on things that matter most to the company (its supply chain, for example) and where it can reduce waste. The social side is somewhat thin, and focuses on things that Starbucks already does pretty well, such as diversity, but there is the community involvement element that distinguishes it from some other large companies.
The Wal-Mart approach to Global Responsibility (2017) focuses a lot on sustainability. For Wal-Mart, this dovetails a lot with their approach on waste. The company has long recognized the importance of waste reduction as a means of cutting costs – this is the basics of lean philosophy – and ties this to sustainability. Its approach is similar to that of Starbucks in that it plays to the company's strengths, and that it focuses on improving existing operations without ever really questioning the need for those operations (true sustainability means not encouraging people to consume things they don't need). The Wal-Mart website does not discuss any of this in particular detail, but there are company publication that outline specific metrics – the approach seems less high-minded and more metrics-driven than Starbucks, which is pretty much how Wal-Mart has always presented itself; efficiency equals sustainability in the Wal-Mart philosophy where Starbucks is more high-minded, good citizen, dreamer stuff that the company must then translate into action. In that sense, Wal-Mart's focus is pretty narrow, relative to that of
Starbucks.
Milton Friedman (1970) responded to the environmental movement of the 1960s and calls for greater levels of corporate social responsibility with the seminal counterpoint to the idea that corporations have particular responsibilities. While much has been written on the pro-responsibility side, there are few impassioned counterpoints, and this is one of them. Most of them touch on this article's concepts. The core concept is that within the framework of the law, corporations have a responsibility to their shareholders to make money. The logic is this. People invest in corporations to earn returns on their investment. Corporate managers serve the shareholders, and therefore they should orient their activities solely towards increasing profit. Friedman is clear that this is within the context of the law, but does not address things like lobbying to have laws changed, or whether the law has reasonable distributive justice in the first place. Thus, while this is a valuable and seminal piece of literature in the field, it is open to significant scrutiny and attack; its arguments are not fully-formed in the way that many pro-responsibility arguments have been vetted over the decades.
McWilliams and Siegel (2000) examine one of the core arguments in favor of CSR, and that is that it is profitable. This is important because both Starbucks and Walmart focus their sustainability efforts on the areas that most benefit them – Starbucks is worried about climate change because of impacts on its supply chain; Walmart focuses on the link between efficiency, profit and sustainability. McWilliams and Siegal find that after correcting for errors in earlier, conflicting studies, that there is neutral impact on profitability of being responsible. This finding is interesting, because it brings back the argument that CSR is more of a choice than an imperative; it counters Friedman's arguments against CSR but also counters the arguments in favor of CSR.
Lindgreen and Swaen (2009) note that there are many reasons why a company chooses to behave as it does. There is certainly a marketing interest in CSR, but if there is no financial interest, that raises interesting questions about agency theory. Differentiation from competitors, however, is a valuable marketing tool. This might inform the efforts of Starbucks, especially since when the company started there was little in the way ethical consideration from the major industrial coffee producers; this is one of many points of differentiation for the company. Even Walmart might be using its CSR report as a means of framing activities in a positive light that it would otherwise do, and might otherwise be accused of doing strictly for profit. So this meta-study contains valuable insight into why these two companies have chosen the approach that they have, by examining the marketing impacts of their respective approaches.
Menon and Menon (1997) look at the marketing strategy behind environmental activities of corporations. Their study looks at how corporate environmentalism has emerged as a business strategy. They find that there is a marketing element to this corporate strategic approach, where marketing and public perception start to inform how companies respond to environmental issues. They identify some of the different approach to marketing corporate environmentalism that were being used at the time, and they also look at a model that can help predict what approach a company might take and what the outcomes of that approach might be. This paper is valuable because it illustrates the why behind a lot of corporate environmental efforts. Since the paper is being written based largely on the publicly-available materials of these two large companies, it is important to have a framework for understanding how corporate environmentalism is used by major companies, and this article provides that.
Luo and Bhattacharya (2006) examine the marketing dimension further. They note that if markets are satisfied with a company's CSR efforts, then reasonably there should be a positive impact on the market value of the company, at least if those CSR efforts are superior to those of close substitutes. This study comes to an awfully strange conclusion – that in firms with low innovation capability, CSR reduces customer satisfaction and harms market value. First, they make the leap to market value without evidence. But the bigger issue is that the companies studied have low innovation levels; that alone will harm customer perception and market value. Given that CSR is difficult to quantify and looks different in different companies owing to their being no set definition, the structure of this study looks suspiciously like trolling for a specific finding. When you look at poorly run companies and your conclusions are about customer satisfaction and market value, you can't isolate one factor as being the reason; that's dishonest. Unfortunately, there is some of this literature out there and this is a cautionary tale to be careful of what the literature finds – the study might have been set up to find just that.
Matten and Moon (2008) provide another valuable conceptual piece to assist with our understanding of corporate social responsibility. They outline the difference between implicit and explicit CSR. They looked at how the concept of CSR is applied in different countries, especially between the United States and Europe. They identified a number of significant differences between the two. Both the companies being studied are American, but Starbucks is more international in nature, and has a lot of stores in different European countries. Ultimately, what CSR is and how it is implemented at the corporate level is defined by the differences in local cultural perceptions. This can actually be applied to both Starbucks and to Wal-Mart. While there is significant overlap between customer bases – no surprise for companies this large – there are unique areas that each has a focus in and the other is weak. Further, there is a pretty massive cultural difference between rural Arkansas and downtown Seattle culturally, and one has to suspect that the cultural gap between those areas will also characterize some of the cultural differences between these two large companies.
Campbell (2007) offers an institutional theory of corporate social responsibility to help explain why companies behave is responsible ways. Remembering the Friedman argument, and the reality that CSR ends up being financially neutral. He posits that there are several institution mediators governing whether an organization would behave responsibly: public and private regulation, the presence of nongovernmental and other independent organizations that monitor behavior, institutionalized norms, associative behavior among corporations, and organized dialogues between corporations and their stakeholders. This study therefore presents CSR motivation as being highly-complex. There are cultural dimensions, he accepts, but also presents the strong role that outside influence also plays, be it in the form of government regulation and the presence of outside stakeholders to monitor. In other words, the degree to which a company is likely to be held to account if it does not behave responsibly is a factor. Applied to Starbucks, one can see the audience of the company wants particular behaviors – there was an issue with organic and fair trade coffee years ago –while Walmart consumers may care less, but the company will come under scrutiny from outside groups because of its dominance.
Banerjee (2008) presents a critical view of CSR. He argues that for the most part the discourse around CSR is focused on "narrow business interests and serve to curtail interests of external stakeholders" and there is definitely a case to be made here, for each of these companies but especially Wal-Mart. The element of talking about things you were already going to do, or things that have a clear benefit to your company, is not without merit, but the lack of altruism or broader view is present in particular in the Wal-Mart approach. One could argue that the Starbucks approach is not that much better, and still serves many of its critical interests. But Banerjee's discussion definitely fits within the juxtaposition of the two companies, and their approaches, and can prove informative in understanding the base concepts of the approaches and in particular the points of difference between them.
Aguilera et al (2005) look to the social dimension. Much of the literature on CSR tends to focus on the environmental, but at least Starbucks has in its plan a number a different social elements. They look at the micro level, the meso level and the macro level to analyze the issue of social responsibility, a reflection of their (correct) interpretation that there are many different actors driving these efforts, and that these actors ultimately influence different mechanisms. Understanding the different dynamics at play in social responsibility is critical to understanding, for example, the different trade-offs that these companies make when they set their policy. An example would be on wages – on one hand, Starbucks has fair trade coffee within its program, but on the other hand many of its staff do not make a living wage. Walmart makes no pretences of providing a living wage, but ultimately if a competitor like Costco can, then that means Walmart has made a deliberate trade-off with respect to this aspect of social responsibility.
Brammer, Jackson and Matten (2012) look at the contributions of institutional theory to understanding CSR as a mode of governance. They note that when CSR is more closely linked to issues like stakeholder participation or state intervention, there is more likelihood of stronger CSR programs. The latter point about state intervention is supported in other literature, absolutely, and is reasonable in logic as well. The point about stakeholder involvement raises an interesting issue that is relevant in the context of social responsibility in particular, and in the Starbucks-Walmart juxtaposition. In Friedman's theory, the only stakeholder is the shareholder, but modern stakeholder theory goes far beyond the view. The more that other stakeholders are engaged, the more than managers will seek out a wide range of different behaviors – not just the pursuit of profit. This leads to one of the important managerial strategies that comes from CSR – the balanced scorecard. The fundamental idea is that when there is alignment between the different elements of the scorecard – that is to say between the interests of multiple different stakeholders – then there is greater likelihood of profit. Even the study that showed that CSR was essentially profit neutral did not take into account adequately the fact that different companies have succeeded to different degrees in the conceptualization and execution of their CSR plans. In many cases, a company might not gain from CSR, but only because they did not think it through properly, had poor alignment between stakeholder interests, or simply executed the plan poorly. A cynic who thinks that companies only pursue areas of CSR where they can win might be right, but mostly because the company wants to see those wins as a springboard to tackling bigger challenges. The reality is that with no one definition of CSR, there is no one pathway to success, and there will be differences in execution that deliver different impacts to the organization.
Hemingway and Maclagan (2004) look at the implementation level – individual managers. Both Starbucks and Walmart have cultures that were highly influenced by their respective founders, so this is worth considering. Individual managers, more or less, are asked to buy into a broader corporate vision, and indeed skilled employees will often self-select to companies that share their values. Their study is based on the underlying assumption that "commercial imperative is not the sole driver of CSR decision-making", something that is fairly well-supported in other literature. A corporation, after all, is nothing on its own. It is the collective decisions of its managers, so managerial preference must be taken into account. The authors theorize that individuals can and do make a difference, especially influential managers with the ability to change, massage or tweak the existing CSR approaches of the firm.
Outline
Introduction
Overview of CSR as a concept
Overview of the Starbucks approach to CSR
Key highlights of the corporate plan
Overview of the Walmart approach to CSR
Key highlights of the corporate plan
Section 1: Theoretical Frameworks
Rise of Environmentalism
Brief overview of the dawn of CSR and its core ideas
Response of Friedman
Introduction to the narrow social role of corporations
Stakeholder Theory
The interests of all stakeholders matter
Prioritization of stakeholder interests
Finding alignment between interests
How stakeholder theory influences SBUX and WMT
Agency Theory
The manager as agent of the shareholders
Manager as agent of other stakeholders
Aguilera and the corporation as agent of different managers
Do shareholders only want profit – the rise of ethical investing
Environmental Aspects of CSR
We are all stakeholders
The role of government
The role of external interest groups
The unique case of climate change
Culture as Mediator
The role of national culture
The role of regional culture (Seattle vs. Arkansas)
The role of managerial culture (Howard Schultz vs. Sam Walton)
The role of market culture (SBUX customers vs WMT customers)
Marketing CSR & the Profit Motive
Evolution of CSR as a marketing tactic
Lack of common definition; CSR is whatever you want it to be
The role of public perception in shaping CSR
Is CSR profitable?
Does anybody care of CSR is profitable?
Starbucks vs Walmart
Similarities between approaches (i.e. low-hanging fruit, strategic interest)
Differences in approaches (i.e. SBUX more social, WMT strictly about efficiency)
Influences of perceptions (people expect a lot from SBUX, not much from WMT, but will criticize both)
Is each company using the approach appropriate to its business?
Which Approach is Better?
Is there a better?
Which approach would I choose to adopt in my company?
Why would I do that?
What outcomes would I hope to achieve
If this is about altruism, does that have any place in CSR (circle back to Friedman)
Conclusion
References
Aguilera, R, Rupp, D., Williams, C. & Ganapathi, J. (2005) Putting the S back in corporate social responsibility: A multi-level theory of social change in organizations. Academy of Management Review. (2005). Retrieved November 4, 2017 from https://www.ideals.illinois.edu/bitstream/handle/2142/1768/TS_Aguilera.pdf?sequence=2&isAllowed=y
Banerjee, S. (2008) Corporate social responsibility: the good, bad and the ugly. Critical Sociology. Vol. 34 (1)
Blowfield, M., Frynas, J. (2005) Editorial setting new agendas: Critical perspectives on corporate social responsibility in the developing world. International Affairs. Vol. 81 (3) 499-513.
Brammer, S., Jackson, G. & Matten, D. (2012). Corporate social responsibility and institutional theory: New perspectives on private governance. Socio-Economic Review. Vol. 10 (2012) 3-28.
Campbell, J. (2007) Why would corporations behave in socially responsible ways? An institutional theory of corporate social responsibility The Academy of Management Review. Vol. 32 (3) 946-967.
Epstein, E. (1987) The corporate social policy process: Beyond business ethics, corporate social responsibility, and corporate social responsiveness. California Management Review. Vol. 29 (3) 99.
Friedman, M. (1970) The social responsibility of business is to increase its profits. New York Times Magazine. Retrieved November 4, 2017 from https://www.colorado.edu/studentgroups/libertarians/issues/friedman-soc-resp-business.html
Heningway, C. & Maclagan, P. (2004) Managers' personal values as drivers of corporate social responsibility. Journal of Business Ethics. Vol. 50 (1) 33-44.
Lindgreen, A. & Swaen, V. (2009) Corporate social responsibility. International Journal of Management Review. Vol. 12 (1) 1-7.
Luo, X. & Bhattarachya, C. (2006) Corporate social responsibility: Customer satisfaction and market value. Journal of Marketing. Vol. 70 (4) 1-18.
Matten, D. & Moon, J. (2008) Implicit and explicit CSR: A conceptual framework for a comparative understanding of corporate social responsibility. Academy of Management Review. Vol. 33 (2) 404-424.
McWilliams, A. & Siegel, J. (2000) Corporate social responsibility and financial performance: Correlation or misspecification? Strategic Management Journal. Vol. 21 (5) 603-609
Menon, A & Menon, A. (1997) Environmental marketing strategy: The emergence of corporate environmentalism as marketing strategy. Journal of Marketing. Vol. 61 (1) 51-67
Starbucks Social responsibility & sustainability. Starbucks.com. Retrieved November 4, 2017 from https://www.starbucks.ca/responsibility
Wal-Mart (2017) Global responsibility. Walmart.com. Retrieved November 4, 2017 from https://corporate.walmart.com/global-responsibility/sustainability/