Csr And Sustainability Initiatives Of Starbucks Inc 4e2h9
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CSR and Sustainability Initiatives of Starbucks Inc. - A Study
MBAS 850: Leading with Integrity Professor Bill Blake Submitted By: Team 352 Vidyut Banerjee, Ishan Maini, Jeff Moran Will Wang, Mei Young ,Jessica Thanasse CSR and Sustainability Initiatives of Starbucks Inc. - A Study | Team 352
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Table of Contents Introduction................................................................................................................ 3 History........................................................................................................................ 3 Starbucks Culture and Initial CSR Activities................................................................4 Being a Responsible Corporation............................................................................. 4 Contributing to Communities:................................................................................. 4 Contributing to Producing Countries:......................................................................5 From Beginnings to the Present:................................................................................. 6 Sustainability Strategy: Ethical Sourcing....................................................................6 Farmer and Farmer Loans..........................................................................8 Energy/Resource Conservation................................................................................... 8 Green Buildings....................................................................................................... 9 Energy and Water Conservation................................................................................. 9 Renewable Energy...................................................................................................... 9 Recycling.................................................................................................................. 10 Recommendation..................................................................................................... 11 Climate Change........................................................................................................ 11 Community............................................................................................................... 11 Youth Grants.......................................................................................................... 12 Community Stores Program................................................................................... 13 Farming Communities Program.............................................................................13 Other Companies Considered................................................................................... 14 CSR and Sustainability Initiatives of Page 1 of 19 Starbucks Inc. - A Study | Team 352
Reference:................................................................................................................ 15 Appendix:................................................................................................................. 16 ................................................................................................................................. 16 Starbucks Time line (1966-2005).............................................................................. 17
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Introduction “CSR” and “Sustainability” are buzzwords that have gained such a massive momentum in the past twenty years that companies are increasingly feeling pressured, internally as well as externally, to conform to ever increasing benchmarks. Some companies are front runners in setting the standard with respect to CSR and sustainability initiatives while creating shareholder value and maintaining healthy profitability. Over the past few years companies are realizing that CSR and Corporate/Business Strategies can be aligned and are beginning to pursue a “Triple Bottomline”1 consisting of the social, environmental and financial implications of doing business. With a sales of over $15B, operations in over 65 countries and more than 20,500 stores, Starbucks makes an ideal candidate for a CSR study as it has obviously managed to tread the fine line of pursuing the Triple Bottomline. In this study we will go over the history, culture, management and values, and corporate strategy of Starbucks as well as analyzing the CSR and Sustainability strategy.
History “If we are going to build a 100-storie skyscraper, we have to build a foundation strong enough to sustain 100 stories… I believe in the adage: Hire people smarter than you are and get out of their way.” Howard Schultz, CEO, Starbucks, 1994. In 1971, an unlikely trio of two academicians and a writer founded Starbucks Coffee, Tea and Spice in Seattle, Washington. Gordon Bowker, Jerry Baldwin, and Zev Siegl shared many interests, but their main reason for starting the company was their love of coffee and tea. As students, they used to order roasts from Peet’s via mail order which led Bowker to suggest the idea of a beans roasting unit and coffee shop. Baldwin loved the idea as did Bowker’s neighbor Zev Siegl, and Starbucks was born. The company grew slowly and by 1981 had a roasting plant and four retail stores that sold whole bean coffee in Seattle. Howard Schultz, a hot shot general manager at for Swedish drip coffee maker Hammarplast, became curious as to why a Seattle based company was buying such large quantities of raw beans. Schultz met Baldwin and Starbucks ended up hiring Howard Schultz as a marketing manager. Schultz went to Italy in 1983. 1The TBL is an ing framework that incorporates three dimensions of performance: social, environmental and financial. This differs from traditional reporting frameworks as it includes ecological (or environmental) and social measures that can be difficult to assign appropriate means of measurement. The TBL dimensions are also commonly called the three Ps: people, planet and profits. - John Elkington et al, 1990. CSR and Sustainability Initiatives of Starbucks Inc. - A Study | Team 352
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While there, he dreamed of re-creating the magic and romance behind the Italian coffee bar culture by serving espresso by the cup. Schultz wanted to start selling beverages along with coffee beans and this is where he and Baldwin differed. Frustrated, Schultz left Starbucks to start his own coffee bar called the Il Giornale in 1985. By this time, Starbucks had acquired Peet’s coffee. Although Il Giornale only had three stores, Schultz and a group of local investors bought Starbucks for $3.7 million and changed Il Giornale’s name to Starbucks Coffee Company. The next few years brought tremendous changes to Starbucks. Using the original Il Giornale business plan, Schultz promised investors they would open 125 Starbucks stores in the next five years. Starting from a base of 17 stores in 1987, the company quickly expanded into Chicago, Vancouver, and Portland. By 1991, Starbucks had ventured into the mail-order business, airport stores, expanded into California, and had over 100 retail stores. The company went public in 1992. After the IPO, Starbucks continued to grow at a rapid pace both in of store development and new enterprises. Within five years, the number of Starbucks stores grew tenfold, with locations in the US, Japan, and Singapore. In addition to opening and licensing retail locations, Starbucks initiated several successful product and brand extensions, including offering coffee on United Airlines flights, selling teas through its wholly owned subsidiary Tazo Tea Company, developing a cold bottled version of its popular Frappuccino blended beverage with PepsiCo and coffee ice-cream with Dreyers, and distributing whole bean and ground coffee at supermarkets through an agreement with Kraft. Starbucks even sold jazz CDs in its retail stores. What intrigued many was that Starbucks grew its brand into a household name not through advertising, but by word-of-mouth. In fact, up to 1996, Starbucks had spent a total of only $10 million on advertising. By 2002, the once small, regional roaster claimed over $3.3 billion in annual revenues and more than 5,800 locations in 30 countries serving approximately 20 million customers a week.
Starbucks Culture and Initial CSR Activities “My dad was a blue-collar worker. He didn’t have health insurance or benefits, and I saw firsthand the debilitating effect that had on him and on our family. I decided if I was ever in the position to make a contribution to others in that way, I would… The desire to scrimp on these essentials helps reinforce the sense of mediocrity that seems into many companies. Without them, people don’t feel financially or spiritually tied to their jobs… We’re building a national company by creating pride in – and a stake in – the outcome of our labor.” Howard Schultz, CEO, Starbucks, 1993. Much of the culture at Starbucks is directly attributable to the vision, guidance and leadership of Howard Schultz. An avid coffee enthusiast, he was quick in understanding the core values and motivations for the Italian coffee houses which were public meeting places first, also serving the finest coffee. He worked relentlessly to setup the same vigorous ambience in each of the Starbucks store as well as ensured that his vision carried through to each of the employees and partners all over the world. By insisting on wholly owned stores by the company, he ensured that the vision and its implementation remained undiluted. His ion for the highest standards in sourcing coffee beans, servicing clients, training its workforce and serving the community are evident from the company’s Mission statement.2
2 See Appendix 2 – Starbucks Mission Statement 1990. CSR and Sustainability Initiatives of Starbucks Inc. - A Study | Team 352
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In 1990, Starbucks’ senior executive team drafted a mission statement laying out the guiding principles behind the company that put “people first and profits last.” In fact, the number one guiding principle in Starbucks’ mission statement was to “provide a great work environment and treat each other with respect and dignity.” As a result of this continual emphasis, the guiding principles and their underlying values had become the cornerstones of a very strong culture. After buying Starbucks, Howard Schultz had worked to develop a benefits program that would attract top people who were eager to work for the company and committed to excellence. One of Schultz’s key philosophies was to “treat people like family, and they will be loyal and give their all.” Starbucks paid more than the going wage in the restaurant and retail industries, granted stock options to both full and part-time partners in proportion to their level of base pay, and offered health benefits for both full and part-time partners. All of this had fostered a strong culture that employed a predominately young and educated workforce who were extremely proud to work for Starbucks.
Being a Responsible Corporation: It was not only the partners and staff that was well taken care of, Starbucks also ensured a commitment to serve the communities where it operated as well as taking steps to measure its environmental impact. Starbucks had made this commitment not only because it was the right thing to do, but also because its workforce was aware and concerned with global environmental and poverty issues. In addition to sustaining and growing its business, Starbucks ed causes “in both the communities where Starbucks stores were located and the countries where Starbucks coffee was grown.”
Contributing to Communities: Starbucks firmly believed that when it opened a store, the company added immediate value to that community because the store “becomes an instant gathering spot, a Third Place that draws people together.” 3 Store managers had the freedom to raise funds for the causes of their choice. In 1998 Starbucks and Erwin “Magic” Johnson’s company4, Johnson Development Corporation, formed a t partnership and created the Urban Coffee Opportunities. Subsequently, 28 stores opened in urban communities, providing new employment and revitalization opportunities in several US cities.5 Howard Schultz personally believed that literacy had the power to change lives and foster hope for young children who lived in underserved neighborhoods. Accordingly, Schultz used the advance and on-going royalties from his book, Pour Your Heart Into It, to create the Starbucks Foundation6, which provided “opportunity grants” to nonprofit literacy groups, sponsored young writers programs, and partnered with Jumpstart 7.
3 Howard Schultz, Pour Your Heart Into It, Hyperion: New York, 1997.
4 http://magicjohnson.com/company.php
5 Corporate Social Responsibility FY01 Annual Report,” Starbucks Coffee Company, February 2002. CSR and Sustainability Initiatives of Starbucks Inc. - A Study | Team 352
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Contributing to Producing Countries: In 1991, Starbucks began contributing to CARE8, a worldwide relief and development foundation, as a way to give back to coffee-origin countries. By 1995, Starbucks was CARE’s largest corporate donor pledging more than $100,000 a year and specifying that its go to coffee-producing countries. The company’s donations helped with projects like clean-water systems, health and sanitation training, and literacy efforts. Over the years Starbucks has contributed more than $1.8 million to CARE. In 1998 Starbucks partnered with Conservation International (CI), a non-profit organization than helped promote biodiversity in coffee-growing regions, to producers of shadegrown coffee. Since 1999, Starbucks had funded seasonal promotions of the coffee every year, with the hope of adding it to its lineup of year-round offerings. The results of the partnership with CI had proven positive for both the environment and the Mexican farmers. Since the beginning of the partnership Starbucks made loan guarantees that helped provide over $750,000 in loans to farmers. This financial enabled these farmers to nearly double their income.
Contributing to the Environment: In 1992 Starbucks developed an environmental mission statement to articulate more clearly how the company interacted with its environment, eventually creating an Environmental Affairs team tasked with developing environmentally responsible policies and minimizing the company’s “footprint.” Additionally, Starbucks was active in using environmental purchasing guidelines, reducing waste through recycling and energy conservation, and continually educating partners through the company’s “Green Team” initiatives. In 1994, Starbucks hired Sue Mecklenburg as the first director of environmental affairs. Although Starbucks ed responsible business practices virtually since its inception, as the company had grown, so had the importance of defending its image. It was Mecklenburg who developed the idea of using paper sleeves instead of double cupping. At the end of 1999, Starbucks created a Corporate Social Responsibility department, and Dave Olsen was named the department’s first Senior Vice President. According to Sue Mecklenburg, “Dave really is the heart and soul of the company and is acknowledged by others as a leader. By having Dave be the first Corporate Responsibility SVP, the department had instant credibility within the company.” 9 Between 1994 and 2001, Starbucks’ CSR department had grown from only one person to fourteen.
6 http://www.starbucks.ca/responsibility/community/starbucks-foundation
7 http://www.jstart.org/
8 http://www.care.org/
9 Sue Mecklenburg interview, Starbucks VP Business Practices, July 25, 2002. CSR and Sustainability Initiatives of Starbucks Inc. - A Study | Team 352
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From Beginnings to the Present: With a strong culture of CSR and sustainability firmly embedded in the company and under the able leadership of Howard Schultz, it is easy to see how Starbucks has managed to constantly deliver on its CSR goals. A comparison of their CSR reports from 2001, 2006 and 2013 shows an ever broadening scope of the CSR and sustainability practices. This is inline with the growth that the company had and the corresponding expansion in of geographical extent as well as the communities affected. They have proactively adapted to criticisms by social or environmental watch groups and in the process have managed to not only improve their market credibility and brand value but also set lofty benchmarks for others to follow. Their sustainability roap for the coming years is well defined and they have built in ability into the system by their audit process. Starbucks’ current mission statement- “to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.” is well aligned with the way they have framed their CSR and sustainability initiatives. The CSR and Sustainability thrust of Starbucks can be broadly divided into three parts -the way the products are sourced, the way they invest in the communities, and the way they are trying to minimize their environmental footprint.
Ethical Sourcing “Starbucks spent more than $70 million over market prices for – but let’s put it in context: operating costs totaled more than $5.6 billion last year. At 1.3% of total operating costs – quality comes first. ~ Starbucks stresses to its investors that the increased costs associated with social responsibility are not only morally and socially desirable for a company, but that the business itself will be helped in the future by ensuring a consistent and sustainable product.” Marc Greenberg, analyst, Deutsche Bank, July 2006.
One of Starbuck’s core pillars within their corporate social responsibility platform is their commitment to ethical sourcing. Starbucks has been purchasing Fair Trade Coffee since 2000 and is “committed to buying and serving the highest-quality, responsibly grown, ethically traded coffee to help create a better future for farmers 10”. To define and measure this initiative the company established Coffee and Farmer Equity (C.A.F.E), as a set of guidelines to help their farmers grow coffee that benefits the world at large. C.A.F.E focuses on four pillars: product quality, economic ability, social responsibility and environmental leadership. Together these pillars deliver transparency to the public, promote fair, humane working conditions and manage waste and water quality. The results have been extremely positive, with over 84% of imported coffee received from C.A.F.E approved suppliers.
10 Starbucks, 2015 CSR and Sustainability Initiatives of Starbucks Inc. - A Study | Team 352
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Starbuck’s commitment to ethical sourcing also extends to their tea and coca products. The company established the Community Health Advancement Initiative (CHAI), a t project with Mercy Corps., to provide health services and economic development to communities that produce Starbuck’s Tazo tea ingredients. Over $2.4 million has been contributed to the initiative since 2003 (Starbucks, 2015). Further, Starbucks is part of the Ethical Tea Partnership, which strives to “produce tea in an environmentally and socially responsible way that includes improving the lives of tea workers” (Starbucks, 2015). Similarly, Starbucks actively promotes ethical sourcing of their coca products. In 2007 the company launched a two-year pilot with a set of responsible buying guidelines, Cocoa Practices, which have impacted over 16,000 farmers to date. The company also displays their commitment by collaborating with The World Cocoa Foundation, Gates Foundation and suppliers to drive sustainability and improve working conditions for farmers. Starbuck’s approach to ethical sourcing follows many of the corporate social responsibility best practices discussed in class. According to Porter and Kramer, companies should select issues that intersect with the business, develop clear, measurable goals and track results. Starbucks three initiatives across coffee, tea and cocoa have clear alignment with the company’s day-to-day business and have robust evaluation systems in place. For instance, the C.A.F.E Practices Guidelines Scorecard provides detailed intents and objectives for each of the evaluation criteria. Further, Starbucks aligns with Porter and Kramer’s definition of Strategic CSR. Starbucks transformed their value-chain activities, sourcing coffee, tea, and cocoa, to benefit society by reducing environmental impact and ensuring humane working conditions for farmers. The company’s CSR strategy also leverages their assets and partnerships, such as the Bill and Melinda Gates Fund, to improve ethical sourcing standards, thus setting expectations for competitors in the coffeehouse industry. Starbucks would also be considered an industry leader according to Forbes The Five Elements of the Best CSR Programs. Based on this framework, the best CSR programs include: business based social purpose, clear theory of change, quality and depth of information, concentrated effort, and partnering with experts11. Starbucks’ commitment to ethical sourcing has a clear link to the company’s business purpose, and is ed be a wealth of information about the social issue. Further, Starbucks has been exemplary in their effort to form meaningful and impactful partnerships. Notable partnerships to ethical sourcing include the ECHOES Alliance Project, Cocoa Livelihoods Program in West Africa as well as the Gates Foundation. Starbucks also uses third party verification to measure their impact in ethical sourcing for coffee, tea and cocoa, which elicits credibility and greater transparency to the public. Together, these initiatives demonstrate Starbucks’ concentrated effort to make an improvement in ethical sourcing.
Partnership is at the core of Starbucks’ commitment to ethical sourcing, and is aligned with the company’s values and corporate strategy. The company’s value statement, “with our partners, our coffee and customers at the core, we live these values” demonstrates how integral Starbucks’ network is for achieving profitability, and as outlined above, the success of their CSR engagements. As a nearly $15 billion a year business with approximately 20,000 stores across 60 countries, Starbucks’ recognizes that the company’s success hinges on their relationships within the industry and local communities (Starbucks Global Responsibility Report, 2013). Starbucks 11 http://www.forbes.com/sites/csr/2011/04/26/the-five-elements-of-the-bestcsr-programs/ CSR and Sustainability Initiatives of Starbucks Inc. - A Study | Team 352
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has established over 200,000 partners who share their expertise and improve Starbucks’ efforts to achieve their corporate and CSR goals. As a “network convener”, Starbucks establishes links among stakeholders and builds trusting relationships. Further, by engaging with their suppliers and actively seeking from industry experts and the public Starbucks is well positioned to achieve their corporate objectives.
One opportunity for improvement with regards to ethical sourcing is Starbucks’ goal to source certified organic coffee. Organic growing uses methods that have a lower impact on the environment, and thus would contribute to the company’s goal to be an environmental leader. In 2009 Starbucks purchased 14 million pounds of certified organic coffee, approximately 5% of total coffee purchases, however this has dropped to 4.4 million pounds, or 1% of total purchases, in 2013 (Starbucks Global Responsibility Report, 2013). Recognizing that organic products would have a greater impact to the environment, we believe there is room for improvement to achieve this goal.
Farmer and Farmer Loans “I believe very strongly that the success of our company has been achieved because of the relationship with our people… ” Howard Schultz, CEO, Starbucks, 2003 It is evident from Starbucks Global Responsibility Report that they understand the importance of ing their farmers. Farmers form the backbone of their business and they want to ensure that their endeavours are to assist them and their families to have a better livelihood. Starbuck has managed to constructively work in part of East and West Africa, China and parts of Latin America. Through farmer centres in these areas they intend at assisting the farmers in producing better quality and volumes of the harvest through efficient and new growing practises. Aligned with their goal as mentioned above, Starbucks undertook a major effort in 2013 by purchasing a 240-hectare farm for the purpose of Research and Development. Their aim is to assist coffee farming communities globally manage the impact of Climate Change and focus on long term crop stability. These efforts are a massive indicator how focused Starbucks is in order to giving back to their farmers by finding unique ways to improve their livelihood. They have a goal to ethically source 100% of their coffee by 2015 and the purchase of a Research and Development centre is part of their commitment to this goal. Starbucks as an organization is constantly looking at innovating. They established a vision where they want to transform the way they approach CSR. Aligned with their aim at improving farmers’ livelihood they began a farmer’s loan fund in 2012 and successfully raised USD 16 mil versus their target of USD 8-12 mil. With an aim of raising USD 20mil by 2015, they are on track even though they suffered a setback from one of their loan partners in 2013. Providing this credit on affordable will help strengthen their farmers, the base of their supply chain. The creation of this fund shows they are aligned with their corporate strategy. As one of the largest coffeehouse chains globally Starbucks has realised that they can use their scale for the betterment community improvement and have exercised it by inviting private wealthy and institutional investors.
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Some of Starbucks guiding principles is that “Profitability is essential to our future success” and “Contribute Positively to Our communities and Environment”. Opening farmer centres and the creation of a farmer’s loan fund, aimed at improving their best practices and yield, demonstrates their ability to be aligned with their principles.
Energy/Resource Conservation This is a major focus of Starbucks CSR and is definitely in line with their overall corporate strategy. This is evident as one of Starbucks’s 6 uncompromising principles is to contribute positively to the environment and community. Even though this is a major focus and Starbucks has an accomplished a lot in this area, this area has a lot of room to be developed further. Whether it from setting unrealistic goals, complexity of regulations or change in business model Starbucks hasn’t hid the fact that they are behind in their goals in this area. Starbucks focuses on 3 areas building green stores, energy and water conservation and investing it renewable energy.
Green Buildings One major focus of Starbucks CSR is building more green buildings, Starbucks has set a goal to have all new company stores built to the US Green Building Counsel LEED® certificate standards. “LEED or Leadership in Energy & Environmental Design, is a green building certification program that recognizes best-in-class building strategies and practices To receive LEED certification, building projects satisfy prerequisites and earn points to achieve different levels of certification” http://www.usgbc.org/leed#rating This certification is so important to Starbucks that they took a leadership role and collaborated with the US Green Building Counsel to develop the LEED for retail program. Starbucks has set a goal to have all new buildings to be built to be LEED certified however only achieved 65% of this goal in 2013 which is down from 69% in 2012. Starbucks sites they main difficulty they have is been expanding to areas where the program is not established.
Energy and Water Conservation In 2008 Starbucks set a goal to cut energy consumption by 25% by 2015, however as of 2013 they have only seen a 7.1% decrease (Starbucks CSR report). The main contributing factor to this is the expansion of Starbucks product line, more specifically the introduction of hot food. This change has created an increase to energy usage through ovens and increased refrigeration. The positive out of this is that even though Starbucks is failing to reach its’ goal they have had annual decreases for their energy usage. A better story is Starbucks progress with water conservation; since the majority of Starbucks product offering circle around water based drinks, this is something that is both important and prevalent to Starbucks operations. Starbucks has had a goal to decrease water usage by 25% by 2015 compared to their 2008 baseline. As of 2013 Starbucks has been able to reduce their consumption to 21.1%. In 2013 Starbucks has achieved this not only through installation of water efficient fixtures and equipment but also through installations of new reverse osmosis water filtration which averaged a 20% decrease in water.
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Renewable Energy Starbucks had a goal in 2008 of purchase renewable energy equivalent to their 50% energy used in their US and Canada company-operated stores by 2015. This was achieved in 2010 and as a result Starbucks re-adjusted the goal to 100% of electricity used globally. This is yet another very lofty goal for Starbucks as they have only increased their purchases to the equivalent of 54.9% by 2013. While there is no doubt you can see Starbucks puts a strong emphasis on energy conservation as part of the corporate social responsibility as well as their business operations; highlighted by its’ inclusion in the unwavering principles. The main concern of their CSR plan is that the goals could be seen and unrealistic and therefore discredit some of the efforts and work Starbucks put into this area. Whether it is having 100% LEED® certified properties when they are expanding into areas where that certification is not possible or if it is continuing with the same energy reduction plan after they have significantly changed their environment. It is important to make sure goals push you to a new bench mark but it is equally important for a goal to be achievable. If the goal is not attainable it will be important to re-examine the goals. One further area to look into would be the LEED certification of the buildings. While 100% LEED certified buildings look good on paper and make for a good talking point, it would be important to that being LEED certified is the lowest level of the certification that can be achieved, the higher levels being Silver, Gold and Platinum which are awarded post an energy audit based on the number of points scored on various parameters. Are LEED® certified is the lowest of the 4 certification levels (others being silver, gold and platinum) with One area Starbucks can in improve in in this area is http://www.usgbc.org/certification
Recycling Starbucks is committed to be a responsible company by continuing their efforts in recycling their cups and other food packages. As stated in their 2013 Global Responsibility Report, “Ultimately we want our cups to be recyclable in both material and practice, so that our customers have access to recycling services wherever they choose to dispose of their cups (report). One of the main challenges Starbucks faces is that different regions have different recycling infrastructure. Some communities do not have capacity and policy in placed to handle recycle of used cups. Because majority of the customers purchase drinks to go, it’s difficult for Starbucks to implement effective recycling strategy. One of Starbucks’ recycling goals is to implement 100 percent front-of-store recycling in their U.S. and Canada company-operated stores by 2015 (report). From the 2013 Global responsibility Report, 39 percent of U.S. and Canada company-operated stores offer front-of-store recycling in 2013, increased from 24 percent in 2012. From our personal experience with Starbucks, lots of their stores don’t have recycles bins. In the stores that have recycle bins, they don’t seem to be properly used. Customers don’t know what should be recycled. Some customers throw trashes in recycle containers. Another goal Starbucks has is to reduce waste by serving 5 percent of beverages made in our stores in personal tumblers by 2015 (report). Starbucks offer small discount to customers who CSR and Sustainability Initiatives of Starbucks Inc. - A Study | Team 352
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bring their own personal tumblers. They also offer $1 reusable cup in the U.S. and Canada. Despite offering a low-cost reusable cup and discount for personal tumblers, Starbucks have been challenged to reach their 5% goal. 1.5 percent and 1.9 percent drinks were served in personal tumblers in 2012 and 2013 respectively (report). From our previous discussion, Starbucks’s corporate strategy includes maximizing market penetration and providing a relaxing and attractive social atmosphere. By continuing innovating in recycling, Starbucks builds goodwill among customers and increases customer loyalties, which will help expanding its market share. By implementing front-of-store recycling and using recyclable material, Starbucks will create a more appealing atmosphere to its customers. In this case, Starbucks’s corporate social responsible (CSR) strategy in recycling is aligned with its corporate strategy. Because Starbucks has operations around the world and a large customer base, it can implement its CSR strategy and impact the society not only in North America, but also across the world.
Recommendation As we discussed earlier, some challenges arise when Starbucks implements its CSR. We made some recommendations regarding how Starbucks can improve its CSR. We think that Starbucks should take the goal of implementing 100 percent front-of-store recycling to a next step. Simply placing recycle bins is not good enough. Starbucks can improve recycling by putting specific instructions in its stores to educate people what should be recycled and where to put them. For the goal of serving 5% drinks in personal tumblers, Starbucks currently offers small discount to customers who bring in their own mugs. However, the discount is not significant enough to influence people’s decision. For people who go to Starbucks regularly, it is obviously inconvenient to bring in their own tumblers. We believe that good incentives, for example a larger discount, will overcome the inconvenience. Besides of offering a larger discount, Starbucks can implement a recognition system. If a customer use his or her own container for ten times, he or she get a small drink or similar products. We believe with different ways of encouragement, people will start recognize the benefit of using their own tumblers.
Climate Change Climate change will have a huge effect on coffee bean farmers. Starbucks recognizes this potential effect and address this issue as one of its CSR strategy. Starbucks’s goal is to improve farmers’ access to carbon markets, helping them generate additional income while protecting the environment, (report). To address the concern, Starbucks worked with Conservation International (CI) and farmers in three unique coffee-producing communities, Chiapas, Mexico, Minas Gerais, Brazil, and Sumatra, Indonesia. They helped farmers to plant or save 250,000 shade trees in Indonesia, worked with farmers in 23 communities in Mexico and participated in distributing 200,000 native tree seedlings in Brazil, (report). By helping farmers and protecting environment, Starbucks mitigate the risk of climate changing. This strategy is also aligned with its corporate strategy. By making efforts to ensure its coffee CSR and Sustainability Initiatives of Starbucks Inc. - A Study | Team 352
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supplies and moving towards sustainability, Starbucks have the opportunity to improve its operation and become a more responsible company. Starbucks also leverage its competence to improve the CSR strategy. In 2014, Starbucks bought its first farm. The farm is used to run an R&D division to experiment new farming practices and research on coffee plants (Source). By doing so, Starbucks the small farmers who don’t have the resources and access to new farming practices. Again, this strategy helps Starbucks to become more responsible and make a positive impact in communities.
Community Starbucks views the coffeehouse as a place that brings people together. Community engagement and assistance has thus become a natural part of Starbucks’ corporate social responsibility efforts. The community program provides new opportunities in all neighborhoods the business touches. These programs build an atmosphere of belonging and warmth as well as creates opportunities for innovation. The main goal of the community program is to “contribute 1 million hours of community service per year by 2015” (sbux csr 2013). In their 2013 global responsibility report, Starbucks believes they are on track at 630,912 hours, approximately 450,000 community service hour increase from 2009. The three main community efforts including in this report is Starbuck’s youth related grants program, community stores program and farming communities program.
Youth Grants Starbucks has focused many of their corporate responsibility efforts in youth programs. They believe that investing in young people around ages 15 to 24 will have a greater impact in shaping the future. As leaders in the coffee industry and as a company who continually strives to be innovative leaders, Starbucks has placed many efforts in partnering with youth organization that focuses on training youth to become leaders of tomorrow. By developing the youth and leveraging their core competencies of training and leadership, Starbucks is engaging the neighborhoods and building a loyal community. In each of the youth engagement activities discussed in this section, we will show how they align with Starbucks’ corporate strategy, values and/or core competency. Some of the programs we will tackle on include the Youth Leadership Grant, partnership with YouthBuild USA and newly founded LeadersUp organization. As we have mentioned, Starbucks believes in investing in youth training to engage and develop leaders of tomorrow. As a result, Starbucks has created the Youth Leadership Grants. These grants focus on educating youths aged 15 to 24 to become business savvy, socially responsible and/or become collaborative communicators. In 2013, they reported awarding 100 Youth Leadership Grants in 16 countries who have impacted almost 50,000 young people. Through these accomplishments and efforts, we can see the Starbucks is working towards a global reach which is aligned with their strategy of expanding global presence. CSR and Sustainability Initiatives of Starbucks Inc. - A Study | Team 352
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Known for their excellent customer service and employee training, Starbucks partnered with YouthBuild USA and the Schultz Family foundation to provide training for young people with disadvantaged backgrounds; selected young people receive both classroom and on-the-job training in one of Starbucks’ café. By giving this opportunity, these educated youth can then use this skill and background to enter into the retail and customer service background including Starbucks. Starbucks has strategically developed this program to leverage their core competencies. Further, Starbucks continues to innovative in helping out the youth and has recently invested $1 million dollars to a first-of-its-kind initiative called LeadersUp. LeadersUp is a non-profit organization founded by Starbucks that provides youth out of school and out of a job with the opportunity to learn new skills in order to be employable. In addition to all the efforts above, Starbucks has partnered with many youth organizations to diversify their reach as well as leverage the expertise of these organizations. Starbucks does this to make sure they are able to have a broad reach and rather by doing it themselves, they have strategically work with already established organizations. Starbucks programs are irable but we feel they are extremely widespread. As a large organization who has a global reach, I would recommend that Starbucks focus their efforts. A possible direction could be placing resources more focused on leveraging their core competency of customer service and training. That said, we feel that the initiative with YouthBuild USA and Schulz Family Foundation is aligned with our recommendation and also with Starbucks overall corporate strategy. The program is advantageous for both parties as it develops loyal staff, engages the community, attracts customers by showing their efforts and increases the number of the working class who can afford their purchase their coffee.
Community Stores Program Community stores program works hand in hand with Starbucks’ youth efforts. This program focuses on health, education, housing and employment in the neighborhood. Community stores works with other organizations in the neighborhood to revitalize the area. The efforts have been successful not only financially, but also increased skills and leadership development, positively impacted youth engagement and created a central location for the neighborhood to have conversations and boost dialogues. By working with the community that their business touches globally, Starbucks is able to engage the surrounding neighborhoods, create lasting connections and learn from the community; all these leads to a better focused effort on their expanding and improvement strategies. Starbucks has opened their first international community store in Thailand and plans to have more than 50 community stores across the globe where they do business. CSR and Sustainability Initiatives of Starbucks Inc. - A Study | Team 352
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Farming Communities Program As a coffee company, farmers are an essential to Starbucks’ circle of life. The farmers are the main supplier of coffee, tea, cocoa and other agricultural products. Aligned with their education and training efforts, Starbucks has established several farmer centers that are housed with experts and resources to enable farmers in key coffee-growing regions to “improve coffee quality and increase the yield of coffees” (farmer communities sbux website). Starbucks has established these centers for soil management training, field-crop production and milling process all geared towards lowering cost of production and increase quality and quantity of the harvest. The location of farmer centers are show in Appendix x. and education for farmers producing products for Starbucks is an important corporate social responsibility goal for the company. By partnering farmers with expertise, there are many opportunities for innovation in the coffee crop and process of producing coffee. Also, any increase in quality and quantity of the harvest leads to an increase of profit for Starbucks. This program also builds a great community of farmers and experts as well as creates dialogue within the community. The farmers are happier and will continue to be loyal to Starbucks with their system in place. These efforts leverages the company’s knowledge in training and expertise in coffee. Overall, Starbuck’s community engagement has been irable as they impact all neighborhoods their business touches. These programs work towards creating a larger loyal community for Starbucks that in turn leads to market penetration and higher profitability. In each of their efforts, they make sure that they push for innovation, same strategy in their business model, either through funding program or creating partnerships with experts.
Other Companies Considered For the purpose of the paper, individual team came up with recommendations for their choice of companies. These were then evaluated on a number of parameters including but not restricted to scope and scale of operations, breadth and depth of CSR strategies, impact on local communities, brand image and reputation as well as the amount of information that the company made available for its CSR initiatives. Consensus on the final choice was achieved by a two-step weighted voting method. The following companies were in the final selections: 1. 2. 3. 4.
Ben and Jerry’s Proctor and Gamble Coca cola Boeing
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Starbucks was chosen due to its large scale of operations, truly multinational presence, multiple levels of stakeholder impact and engagement and its commitment to continually improve its CSR and sustainability practices as evidenced in its externally audited yearly CSR reports that go as far back as 1991.
Reference: http://www.fastcoexist.com/3034411/the-future-of-coffee-looks-bitter-and-pricey-courtesy-ofclimate-change Starbucks Global Responsibility Report. Retrieved from http://globalassets.starbucks.com/assets/98e5a8e6c7b1435ab67f2368b1c7447a.pdf Starbucks, corporate website. Retrieved from http://www.starbucks.ca/responsibility Starbucks Global Responsibility Report. Retrieved from http://globalassets.starbucks.com/assets/98e5a8e6c7b1435ab67f2368b1c7447a.pdf Forbes. Retrieved from CSR and Sustainability Initiatives of Starbucks Inc. - A Study | Team 352
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http://www.forbes.com/sites/csr/2011/04/26/the-five-elements-of-the-best-csr-programs/
Appendix 1: Triple Bottomline
Triple Bottomline:
Appendix 2: Starbucks Mission Statement 2008. “Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining uncompromising principles while growing” CSR and Sustainability Initiatives of Starbucks Inc. - A Study | Team 352
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The six uncompromising principles are: 1. Provide a great work environment and treat each other with respect and dignity. 2. Embrace diversity as an essential component in the way we do business. 3. Apply the highest standards of excellence to the purchasing, roasting and fresh delivery of our coffee. 4. Develop enthusiastically satisfied customers all of the time 5. Contribute positively to our communities and our environment 6. Recognize that profitability is essential to our future success.
Starbucks Time line (1966-2005) 1966 Dutch immigrant Alfred Peet opens a European-style coffee store in Berkeley California 1971 Jerry Baldwin, Zev Siegel & Gordon Bowker opened Starbucks store in Seattle, WA selling coffee beans – after having been students at U.C. Berkeley and buying coffee at Peet's; coffee comes from Peet’s for first year 1982 Four Starbucks stores in Seattle, selling beans & coffee makers 1982 Howard Schultz hired as Marketing Manager from coffee packaging & equipment company Hammarplast 1984 Baldwin and others purchase Peet’s Coffee (now 5 stores 1984 Schultz inspired after a visit to Italy – the sixth store opens with an espresso bar 1986 Schultz frustrated with Starbucks leaves and opens Il Giornale an Italian espresso bar 1987 Il Giornale acquires Starbucks for $3.8m (but not Peet’s) from Baldwin & others. Starbucks Corporation is formed with Howard Schultz as president and CEO – all stores rebranded with new logo and called Starbucks 1988 Develops a mail order catalogue 1987 Entered Chicago followed by Portland, Oregon CSR and Sustainability Initiatives of Starbucks Inc. - A Study | Team 352
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1991 Entered California 1991 Started employee stock options 1992 Starbucks goes public with IPO – with 165 stores 1994 Entered into agreement with Pepsi Co to distribute shelf-stable coffeeflavored beverages in bottles and cans 1996 First Starbucks outside North America in Tokyo, Japan 1998 Entered into supermarkets 1998 Entered New Zealand 2000 Entered Australia 2001 Entered Switzerland – the first Continental European store 2003 Starbucks purchases Seattle's Best Coffee and Torrefazione Italia from AFC Enterprises 2003 Starbucks has over 6,400 stores worldwide 2005 James (Jim) Donald takes over as new Starbucks CEO; Starbucks has 10,241 stores worldwide
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MBAS 850: Leading with Integrity Professor Bill Blake Submitted By: Team 352 Vidyut Banerjee, Ishan Maini, Jeff Moran Will Wang, Mei Young ,Jessica Thanasse CSR and Sustainability Initiatives of Starbucks Inc. - A Study | Team 352
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Table of Contents Introduction................................................................................................................ 3 History........................................................................................................................ 3 Starbucks Culture and Initial CSR Activities................................................................4 Being a Responsible Corporation............................................................................. 4 Contributing to Communities:................................................................................. 4 Contributing to Producing Countries:......................................................................5 From Beginnings to the Present:................................................................................. 6 Sustainability Strategy: Ethical Sourcing....................................................................6 Farmer and Farmer Loans..........................................................................8 Energy/Resource Conservation................................................................................... 8 Green Buildings....................................................................................................... 9 Energy and Water Conservation................................................................................. 9 Renewable Energy...................................................................................................... 9 Recycling.................................................................................................................. 10 Recommendation..................................................................................................... 11 Climate Change........................................................................................................ 11 Community............................................................................................................... 11 Youth Grants.......................................................................................................... 12 Community Stores Program................................................................................... 13 Farming Communities Program.............................................................................13 Other Companies Considered................................................................................... 14 CSR and Sustainability Initiatives of Page 1 of 19 Starbucks Inc. - A Study | Team 352
Reference:................................................................................................................ 15 Appendix:................................................................................................................. 16 ................................................................................................................................. 16 Starbucks Time line (1966-2005).............................................................................. 17
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Introduction “CSR” and “Sustainability” are buzzwords that have gained such a massive momentum in the past twenty years that companies are increasingly feeling pressured, internally as well as externally, to conform to ever increasing benchmarks. Some companies are front runners in setting the standard with respect to CSR and sustainability initiatives while creating shareholder value and maintaining healthy profitability. Over the past few years companies are realizing that CSR and Corporate/Business Strategies can be aligned and are beginning to pursue a “Triple Bottomline”1 consisting of the social, environmental and financial implications of doing business. With a sales of over $15B, operations in over 65 countries and more than 20,500 stores, Starbucks makes an ideal candidate for a CSR study as it has obviously managed to tread the fine line of pursuing the Triple Bottomline. In this study we will go over the history, culture, management and values, and corporate strategy of Starbucks as well as analyzing the CSR and Sustainability strategy.
History “If we are going to build a 100-storie skyscraper, we have to build a foundation strong enough to sustain 100 stories… I believe in the adage: Hire people smarter than you are and get out of their way.” Howard Schultz, CEO, Starbucks, 1994. In 1971, an unlikely trio of two academicians and a writer founded Starbucks Coffee, Tea and Spice in Seattle, Washington. Gordon Bowker, Jerry Baldwin, and Zev Siegl shared many interests, but their main reason for starting the company was their love of coffee and tea. As students, they used to order roasts from Peet’s via mail order which led Bowker to suggest the idea of a beans roasting unit and coffee shop. Baldwin loved the idea as did Bowker’s neighbor Zev Siegl, and Starbucks was born. The company grew slowly and by 1981 had a roasting plant and four retail stores that sold whole bean coffee in Seattle. Howard Schultz, a hot shot general manager at for Swedish drip coffee maker Hammarplast, became curious as to why a Seattle based company was buying such large quantities of raw beans. Schultz met Baldwin and Starbucks ended up hiring Howard Schultz as a marketing manager. Schultz went to Italy in 1983. 1The TBL is an ing framework that incorporates three dimensions of performance: social, environmental and financial. This differs from traditional reporting frameworks as it includes ecological (or environmental) and social measures that can be difficult to assign appropriate means of measurement. The TBL dimensions are also commonly called the three Ps: people, planet and profits. - John Elkington et al, 1990. CSR and Sustainability Initiatives of Starbucks Inc. - A Study | Team 352
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While there, he dreamed of re-creating the magic and romance behind the Italian coffee bar culture by serving espresso by the cup. Schultz wanted to start selling beverages along with coffee beans and this is where he and Baldwin differed. Frustrated, Schultz left Starbucks to start his own coffee bar called the Il Giornale in 1985. By this time, Starbucks had acquired Peet’s coffee. Although Il Giornale only had three stores, Schultz and a group of local investors bought Starbucks for $3.7 million and changed Il Giornale’s name to Starbucks Coffee Company. The next few years brought tremendous changes to Starbucks. Using the original Il Giornale business plan, Schultz promised investors they would open 125 Starbucks stores in the next five years. Starting from a base of 17 stores in 1987, the company quickly expanded into Chicago, Vancouver, and Portland. By 1991, Starbucks had ventured into the mail-order business, airport stores, expanded into California, and had over 100 retail stores. The company went public in 1992. After the IPO, Starbucks continued to grow at a rapid pace both in of store development and new enterprises. Within five years, the number of Starbucks stores grew tenfold, with locations in the US, Japan, and Singapore. In addition to opening and licensing retail locations, Starbucks initiated several successful product and brand extensions, including offering coffee on United Airlines flights, selling teas through its wholly owned subsidiary Tazo Tea Company, developing a cold bottled version of its popular Frappuccino blended beverage with PepsiCo and coffee ice-cream with Dreyers, and distributing whole bean and ground coffee at supermarkets through an agreement with Kraft. Starbucks even sold jazz CDs in its retail stores. What intrigued many was that Starbucks grew its brand into a household name not through advertising, but by word-of-mouth. In fact, up to 1996, Starbucks had spent a total of only $10 million on advertising. By 2002, the once small, regional roaster claimed over $3.3 billion in annual revenues and more than 5,800 locations in 30 countries serving approximately 20 million customers a week.
Starbucks Culture and Initial CSR Activities “My dad was a blue-collar worker. He didn’t have health insurance or benefits, and I saw firsthand the debilitating effect that had on him and on our family. I decided if I was ever in the position to make a contribution to others in that way, I would… The desire to scrimp on these essentials helps reinforce the sense of mediocrity that seems into many companies. Without them, people don’t feel financially or spiritually tied to their jobs… We’re building a national company by creating pride in – and a stake in – the outcome of our labor.” Howard Schultz, CEO, Starbucks, 1993. Much of the culture at Starbucks is directly attributable to the vision, guidance and leadership of Howard Schultz. An avid coffee enthusiast, he was quick in understanding the core values and motivations for the Italian coffee houses which were public meeting places first, also serving the finest coffee. He worked relentlessly to setup the same vigorous ambience in each of the Starbucks store as well as ensured that his vision carried through to each of the employees and partners all over the world. By insisting on wholly owned stores by the company, he ensured that the vision and its implementation remained undiluted. His ion for the highest standards in sourcing coffee beans, servicing clients, training its workforce and serving the community are evident from the company’s Mission statement.2
2 See Appendix 2 – Starbucks Mission Statement 1990. CSR and Sustainability Initiatives of Starbucks Inc. - A Study | Team 352
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In 1990, Starbucks’ senior executive team drafted a mission statement laying out the guiding principles behind the company that put “people first and profits last.” In fact, the number one guiding principle in Starbucks’ mission statement was to “provide a great work environment and treat each other with respect and dignity.” As a result of this continual emphasis, the guiding principles and their underlying values had become the cornerstones of a very strong culture. After buying Starbucks, Howard Schultz had worked to develop a benefits program that would attract top people who were eager to work for the company and committed to excellence. One of Schultz’s key philosophies was to “treat people like family, and they will be loyal and give their all.” Starbucks paid more than the going wage in the restaurant and retail industries, granted stock options to both full and part-time partners in proportion to their level of base pay, and offered health benefits for both full and part-time partners. All of this had fostered a strong culture that employed a predominately young and educated workforce who were extremely proud to work for Starbucks.
Being a Responsible Corporation: It was not only the partners and staff that was well taken care of, Starbucks also ensured a commitment to serve the communities where it operated as well as taking steps to measure its environmental impact. Starbucks had made this commitment not only because it was the right thing to do, but also because its workforce was aware and concerned with global environmental and poverty issues. In addition to sustaining and growing its business, Starbucks ed causes “in both the communities where Starbucks stores were located and the countries where Starbucks coffee was grown.”
Contributing to Communities: Starbucks firmly believed that when it opened a store, the company added immediate value to that community because the store “becomes an instant gathering spot, a Third Place that draws people together.” 3 Store managers had the freedom to raise funds for the causes of their choice. In 1998 Starbucks and Erwin “Magic” Johnson’s company4, Johnson Development Corporation, formed a t partnership and created the Urban Coffee Opportunities. Subsequently, 28 stores opened in urban communities, providing new employment and revitalization opportunities in several US cities.5 Howard Schultz personally believed that literacy had the power to change lives and foster hope for young children who lived in underserved neighborhoods. Accordingly, Schultz used the advance and on-going royalties from his book, Pour Your Heart Into It, to create the Starbucks Foundation6, which provided “opportunity grants” to nonprofit literacy groups, sponsored young writers programs, and partnered with Jumpstart 7.
3 Howard Schultz, Pour Your Heart Into It, Hyperion: New York, 1997.
4 http://magicjohnson.com/company.php
5 Corporate Social Responsibility FY01 Annual Report,” Starbucks Coffee Company, February 2002. CSR and Sustainability Initiatives of Starbucks Inc. - A Study | Team 352
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Contributing to Producing Countries: In 1991, Starbucks began contributing to CARE8, a worldwide relief and development foundation, as a way to give back to coffee-origin countries. By 1995, Starbucks was CARE’s largest corporate donor pledging more than $100,000 a year and specifying that its go to coffee-producing countries. The company’s donations helped with projects like clean-water systems, health and sanitation training, and literacy efforts. Over the years Starbucks has contributed more than $1.8 million to CARE. In 1998 Starbucks partnered with Conservation International (CI), a non-profit organization than helped promote biodiversity in coffee-growing regions, to producers of shadegrown coffee. Since 1999, Starbucks had funded seasonal promotions of the coffee every year, with the hope of adding it to its lineup of year-round offerings. The results of the partnership with CI had proven positive for both the environment and the Mexican farmers. Since the beginning of the partnership Starbucks made loan guarantees that helped provide over $750,000 in loans to farmers. This financial enabled these farmers to nearly double their income.
Contributing to the Environment: In 1992 Starbucks developed an environmental mission statement to articulate more clearly how the company interacted with its environment, eventually creating an Environmental Affairs team tasked with developing environmentally responsible policies and minimizing the company’s “footprint.” Additionally, Starbucks was active in using environmental purchasing guidelines, reducing waste through recycling and energy conservation, and continually educating partners through the company’s “Green Team” initiatives. In 1994, Starbucks hired Sue Mecklenburg as the first director of environmental affairs. Although Starbucks ed responsible business practices virtually since its inception, as the company had grown, so had the importance of defending its image. It was Mecklenburg who developed the idea of using paper sleeves instead of double cupping. At the end of 1999, Starbucks created a Corporate Social Responsibility department, and Dave Olsen was named the department’s first Senior Vice President. According to Sue Mecklenburg, “Dave really is the heart and soul of the company and is acknowledged by others as a leader. By having Dave be the first Corporate Responsibility SVP, the department had instant credibility within the company.” 9 Between 1994 and 2001, Starbucks’ CSR department had grown from only one person to fourteen.
6 http://www.starbucks.ca/responsibility/community/starbucks-foundation
7 http://www.jstart.org/
8 http://www.care.org/
9 Sue Mecklenburg interview, Starbucks VP Business Practices, July 25, 2002. CSR and Sustainability Initiatives of Starbucks Inc. - A Study | Team 352
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From Beginnings to the Present: With a strong culture of CSR and sustainability firmly embedded in the company and under the able leadership of Howard Schultz, it is easy to see how Starbucks has managed to constantly deliver on its CSR goals. A comparison of their CSR reports from 2001, 2006 and 2013 shows an ever broadening scope of the CSR and sustainability practices. This is inline with the growth that the company had and the corresponding expansion in of geographical extent as well as the communities affected. They have proactively adapted to criticisms by social or environmental watch groups and in the process have managed to not only improve their market credibility and brand value but also set lofty benchmarks for others to follow. Their sustainability roap for the coming years is well defined and they have built in ability into the system by their audit process. Starbucks’ current mission statement- “to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.” is well aligned with the way they have framed their CSR and sustainability initiatives. The CSR and Sustainability thrust of Starbucks can be broadly divided into three parts -the way the products are sourced, the way they invest in the communities, and the way they are trying to minimize their environmental footprint.
Ethical Sourcing “Starbucks spent more than $70 million over market prices for – but let’s put it in context: operating costs totaled more than $5.6 billion last year. At 1.3% of total operating costs – quality comes first. ~ Starbucks stresses to its investors that the increased costs associated with social responsibility are not only morally and socially desirable for a company, but that the business itself will be helped in the future by ensuring a consistent and sustainable product.” Marc Greenberg, analyst, Deutsche Bank, July 2006.
One of Starbuck’s core pillars within their corporate social responsibility platform is their commitment to ethical sourcing. Starbucks has been purchasing Fair Trade Coffee since 2000 and is “committed to buying and serving the highest-quality, responsibly grown, ethically traded coffee to help create a better future for farmers 10”. To define and measure this initiative the company established Coffee and Farmer Equity (C.A.F.E), as a set of guidelines to help their farmers grow coffee that benefits the world at large. C.A.F.E focuses on four pillars: product quality, economic ability, social responsibility and environmental leadership. Together these pillars deliver transparency to the public, promote fair, humane working conditions and manage waste and water quality. The results have been extremely positive, with over 84% of imported coffee received from C.A.F.E approved suppliers.
10 Starbucks, 2015 CSR and Sustainability Initiatives of Starbucks Inc. - A Study | Team 352
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Starbuck’s commitment to ethical sourcing also extends to their tea and coca products. The company established the Community Health Advancement Initiative (CHAI), a t project with Mercy Corps., to provide health services and economic development to communities that produce Starbuck’s Tazo tea ingredients. Over $2.4 million has been contributed to the initiative since 2003 (Starbucks, 2015). Further, Starbucks is part of the Ethical Tea Partnership, which strives to “produce tea in an environmentally and socially responsible way that includes improving the lives of tea workers” (Starbucks, 2015). Similarly, Starbucks actively promotes ethical sourcing of their coca products. In 2007 the company launched a two-year pilot with a set of responsible buying guidelines, Cocoa Practices, which have impacted over 16,000 farmers to date. The company also displays their commitment by collaborating with The World Cocoa Foundation, Gates Foundation and suppliers to drive sustainability and improve working conditions for farmers. Starbuck’s approach to ethical sourcing follows many of the corporate social responsibility best practices discussed in class. According to Porter and Kramer, companies should select issues that intersect with the business, develop clear, measurable goals and track results. Starbucks three initiatives across coffee, tea and cocoa have clear alignment with the company’s day-to-day business and have robust evaluation systems in place. For instance, the C.A.F.E Practices Guidelines Scorecard provides detailed intents and objectives for each of the evaluation criteria. Further, Starbucks aligns with Porter and Kramer’s definition of Strategic CSR. Starbucks transformed their value-chain activities, sourcing coffee, tea, and cocoa, to benefit society by reducing environmental impact and ensuring humane working conditions for farmers. The company’s CSR strategy also leverages their assets and partnerships, such as the Bill and Melinda Gates Fund, to improve ethical sourcing standards, thus setting expectations for competitors in the coffeehouse industry. Starbucks would also be considered an industry leader according to Forbes The Five Elements of the Best CSR Programs. Based on this framework, the best CSR programs include: business based social purpose, clear theory of change, quality and depth of information, concentrated effort, and partnering with experts11. Starbucks’ commitment to ethical sourcing has a clear link to the company’s business purpose, and is ed be a wealth of information about the social issue. Further, Starbucks has been exemplary in their effort to form meaningful and impactful partnerships. Notable partnerships to ethical sourcing include the ECHOES Alliance Project, Cocoa Livelihoods Program in West Africa as well as the Gates Foundation. Starbucks also uses third party verification to measure their impact in ethical sourcing for coffee, tea and cocoa, which elicits credibility and greater transparency to the public. Together, these initiatives demonstrate Starbucks’ concentrated effort to make an improvement in ethical sourcing.
Partnership is at the core of Starbucks’ commitment to ethical sourcing, and is aligned with the company’s values and corporate strategy. The company’s value statement, “with our partners, our coffee and customers at the core, we live these values” demonstrates how integral Starbucks’ network is for achieving profitability, and as outlined above, the success of their CSR engagements. As a nearly $15 billion a year business with approximately 20,000 stores across 60 countries, Starbucks’ recognizes that the company’s success hinges on their relationships within the industry and local communities (Starbucks Global Responsibility Report, 2013). Starbucks 11 http://www.forbes.com/sites/csr/2011/04/26/the-five-elements-of-the-bestcsr-programs/ CSR and Sustainability Initiatives of Starbucks Inc. - A Study | Team 352
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has established over 200,000 partners who share their expertise and improve Starbucks’ efforts to achieve their corporate and CSR goals. As a “network convener”, Starbucks establishes links among stakeholders and builds trusting relationships. Further, by engaging with their suppliers and actively seeking from industry experts and the public Starbucks is well positioned to achieve their corporate objectives.
One opportunity for improvement with regards to ethical sourcing is Starbucks’ goal to source certified organic coffee. Organic growing uses methods that have a lower impact on the environment, and thus would contribute to the company’s goal to be an environmental leader. In 2009 Starbucks purchased 14 million pounds of certified organic coffee, approximately 5% of total coffee purchases, however this has dropped to 4.4 million pounds, or 1% of total purchases, in 2013 (Starbucks Global Responsibility Report, 2013). Recognizing that organic products would have a greater impact to the environment, we believe there is room for improvement to achieve this goal.
Farmer and Farmer Loans “I believe very strongly that the success of our company has been achieved because of the relationship with our people… ” Howard Schultz, CEO, Starbucks, 2003 It is evident from Starbucks Global Responsibility Report that they understand the importance of ing their farmers. Farmers form the backbone of their business and they want to ensure that their endeavours are to assist them and their families to have a better livelihood. Starbuck has managed to constructively work in part of East and West Africa, China and parts of Latin America. Through farmer centres in these areas they intend at assisting the farmers in producing better quality and volumes of the harvest through efficient and new growing practises. Aligned with their goal as mentioned above, Starbucks undertook a major effort in 2013 by purchasing a 240-hectare farm for the purpose of Research and Development. Their aim is to assist coffee farming communities globally manage the impact of Climate Change and focus on long term crop stability. These efforts are a massive indicator how focused Starbucks is in order to giving back to their farmers by finding unique ways to improve their livelihood. They have a goal to ethically source 100% of their coffee by 2015 and the purchase of a Research and Development centre is part of their commitment to this goal. Starbucks as an organization is constantly looking at innovating. They established a vision where they want to transform the way they approach CSR. Aligned with their aim at improving farmers’ livelihood they began a farmer’s loan fund in 2012 and successfully raised USD 16 mil versus their target of USD 8-12 mil. With an aim of raising USD 20mil by 2015, they are on track even though they suffered a setback from one of their loan partners in 2013. Providing this credit on affordable will help strengthen their farmers, the base of their supply chain. The creation of this fund shows they are aligned with their corporate strategy. As one of the largest coffeehouse chains globally Starbucks has realised that they can use their scale for the betterment community improvement and have exercised it by inviting private wealthy and institutional investors.
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Some of Starbucks guiding principles is that “Profitability is essential to our future success” and “Contribute Positively to Our communities and Environment”. Opening farmer centres and the creation of a farmer’s loan fund, aimed at improving their best practices and yield, demonstrates their ability to be aligned with their principles.
Energy/Resource Conservation This is a major focus of Starbucks CSR and is definitely in line with their overall corporate strategy. This is evident as one of Starbucks’s 6 uncompromising principles is to contribute positively to the environment and community. Even though this is a major focus and Starbucks has an accomplished a lot in this area, this area has a lot of room to be developed further. Whether it from setting unrealistic goals, complexity of regulations or change in business model Starbucks hasn’t hid the fact that they are behind in their goals in this area. Starbucks focuses on 3 areas building green stores, energy and water conservation and investing it renewable energy.
Green Buildings One major focus of Starbucks CSR is building more green buildings, Starbucks has set a goal to have all new company stores built to the US Green Building Counsel LEED® certificate standards. “LEED or Leadership in Energy & Environmental Design, is a green building certification program that recognizes best-in-class building strategies and practices To receive LEED certification, building projects satisfy prerequisites and earn points to achieve different levels of certification” http://www.usgbc.org/leed#rating This certification is so important to Starbucks that they took a leadership role and collaborated with the US Green Building Counsel to develop the LEED for retail program. Starbucks has set a goal to have all new buildings to be built to be LEED certified however only achieved 65% of this goal in 2013 which is down from 69% in 2012. Starbucks sites they main difficulty they have is been expanding to areas where the program is not established.
Energy and Water Conservation In 2008 Starbucks set a goal to cut energy consumption by 25% by 2015, however as of 2013 they have only seen a 7.1% decrease (Starbucks CSR report). The main contributing factor to this is the expansion of Starbucks product line, more specifically the introduction of hot food. This change has created an increase to energy usage through ovens and increased refrigeration. The positive out of this is that even though Starbucks is failing to reach its’ goal they have had annual decreases for their energy usage. A better story is Starbucks progress with water conservation; since the majority of Starbucks product offering circle around water based drinks, this is something that is both important and prevalent to Starbucks operations. Starbucks has had a goal to decrease water usage by 25% by 2015 compared to their 2008 baseline. As of 2013 Starbucks has been able to reduce their consumption to 21.1%. In 2013 Starbucks has achieved this not only through installation of water efficient fixtures and equipment but also through installations of new reverse osmosis water filtration which averaged a 20% decrease in water.
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Renewable Energy Starbucks had a goal in 2008 of purchase renewable energy equivalent to their 50% energy used in their US and Canada company-operated stores by 2015. This was achieved in 2010 and as a result Starbucks re-adjusted the goal to 100% of electricity used globally. This is yet another very lofty goal for Starbucks as they have only increased their purchases to the equivalent of 54.9% by 2013. While there is no doubt you can see Starbucks puts a strong emphasis on energy conservation as part of the corporate social responsibility as well as their business operations; highlighted by its’ inclusion in the unwavering principles. The main concern of their CSR plan is that the goals could be seen and unrealistic and therefore discredit some of the efforts and work Starbucks put into this area. Whether it is having 100% LEED® certified properties when they are expanding into areas where that certification is not possible or if it is continuing with the same energy reduction plan after they have significantly changed their environment. It is important to make sure goals push you to a new bench mark but it is equally important for a goal to be achievable. If the goal is not attainable it will be important to re-examine the goals. One further area to look into would be the LEED certification of the buildings. While 100% LEED certified buildings look good on paper and make for a good talking point, it would be important to that being LEED certified is the lowest level of the certification that can be achieved, the higher levels being Silver, Gold and Platinum which are awarded post an energy audit based on the number of points scored on various parameters. Are LEED® certified is the lowest of the 4 certification levels (others being silver, gold and platinum) with One area Starbucks can in improve in in this area is http://www.usgbc.org/certification
Recycling Starbucks is committed to be a responsible company by continuing their efforts in recycling their cups and other food packages. As stated in their 2013 Global Responsibility Report, “Ultimately we want our cups to be recyclable in both material and practice, so that our customers have access to recycling services wherever they choose to dispose of their cups (report). One of the main challenges Starbucks faces is that different regions have different recycling infrastructure. Some communities do not have capacity and policy in placed to handle recycle of used cups. Because majority of the customers purchase drinks to go, it’s difficult for Starbucks to implement effective recycling strategy. One of Starbucks’ recycling goals is to implement 100 percent front-of-store recycling in their U.S. and Canada company-operated stores by 2015 (report). From the 2013 Global responsibility Report, 39 percent of U.S. and Canada company-operated stores offer front-of-store recycling in 2013, increased from 24 percent in 2012. From our personal experience with Starbucks, lots of their stores don’t have recycles bins. In the stores that have recycle bins, they don’t seem to be properly used. Customers don’t know what should be recycled. Some customers throw trashes in recycle containers. Another goal Starbucks has is to reduce waste by serving 5 percent of beverages made in our stores in personal tumblers by 2015 (report). Starbucks offer small discount to customers who CSR and Sustainability Initiatives of Starbucks Inc. - A Study | Team 352
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bring their own personal tumblers. They also offer $1 reusable cup in the U.S. and Canada. Despite offering a low-cost reusable cup and discount for personal tumblers, Starbucks have been challenged to reach their 5% goal. 1.5 percent and 1.9 percent drinks were served in personal tumblers in 2012 and 2013 respectively (report). From our previous discussion, Starbucks’s corporate strategy includes maximizing market penetration and providing a relaxing and attractive social atmosphere. By continuing innovating in recycling, Starbucks builds goodwill among customers and increases customer loyalties, which will help expanding its market share. By implementing front-of-store recycling and using recyclable material, Starbucks will create a more appealing atmosphere to its customers. In this case, Starbucks’s corporate social responsible (CSR) strategy in recycling is aligned with its corporate strategy. Because Starbucks has operations around the world and a large customer base, it can implement its CSR strategy and impact the society not only in North America, but also across the world.
Recommendation As we discussed earlier, some challenges arise when Starbucks implements its CSR. We made some recommendations regarding how Starbucks can improve its CSR. We think that Starbucks should take the goal of implementing 100 percent front-of-store recycling to a next step. Simply placing recycle bins is not good enough. Starbucks can improve recycling by putting specific instructions in its stores to educate people what should be recycled and where to put them. For the goal of serving 5% drinks in personal tumblers, Starbucks currently offers small discount to customers who bring in their own mugs. However, the discount is not significant enough to influence people’s decision. For people who go to Starbucks regularly, it is obviously inconvenient to bring in their own tumblers. We believe that good incentives, for example a larger discount, will overcome the inconvenience. Besides of offering a larger discount, Starbucks can implement a recognition system. If a customer use his or her own container for ten times, he or she get a small drink or similar products. We believe with different ways of encouragement, people will start recognize the benefit of using their own tumblers.
Climate Change Climate change will have a huge effect on coffee bean farmers. Starbucks recognizes this potential effect and address this issue as one of its CSR strategy. Starbucks’s goal is to improve farmers’ access to carbon markets, helping them generate additional income while protecting the environment, (report). To address the concern, Starbucks worked with Conservation International (CI) and farmers in three unique coffee-producing communities, Chiapas, Mexico, Minas Gerais, Brazil, and Sumatra, Indonesia. They helped farmers to plant or save 250,000 shade trees in Indonesia, worked with farmers in 23 communities in Mexico and participated in distributing 200,000 native tree seedlings in Brazil, (report). By helping farmers and protecting environment, Starbucks mitigate the risk of climate changing. This strategy is also aligned with its corporate strategy. By making efforts to ensure its coffee CSR and Sustainability Initiatives of Starbucks Inc. - A Study | Team 352
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supplies and moving towards sustainability, Starbucks have the opportunity to improve its operation and become a more responsible company. Starbucks also leverage its competence to improve the CSR strategy. In 2014, Starbucks bought its first farm. The farm is used to run an R&D division to experiment new farming practices and research on coffee plants (Source). By doing so, Starbucks the small farmers who don’t have the resources and access to new farming practices. Again, this strategy helps Starbucks to become more responsible and make a positive impact in communities.
Community Starbucks views the coffeehouse as a place that brings people together. Community engagement and assistance has thus become a natural part of Starbucks’ corporate social responsibility efforts. The community program provides new opportunities in all neighborhoods the business touches. These programs build an atmosphere of belonging and warmth as well as creates opportunities for innovation. The main goal of the community program is to “contribute 1 million hours of community service per year by 2015” (sbux csr 2013). In their 2013 global responsibility report, Starbucks believes they are on track at 630,912 hours, approximately 450,000 community service hour increase from 2009. The three main community efforts including in this report is Starbuck’s youth related grants program, community stores program and farming communities program.
Youth Grants Starbucks has focused many of their corporate responsibility efforts in youth programs. They believe that investing in young people around ages 15 to 24 will have a greater impact in shaping the future. As leaders in the coffee industry and as a company who continually strives to be innovative leaders, Starbucks has placed many efforts in partnering with youth organization that focuses on training youth to become leaders of tomorrow. By developing the youth and leveraging their core competencies of training and leadership, Starbucks is engaging the neighborhoods and building a loyal community. In each of the youth engagement activities discussed in this section, we will show how they align with Starbucks’ corporate strategy, values and/or core competency. Some of the programs we will tackle on include the Youth Leadership Grant, partnership with YouthBuild USA and newly founded LeadersUp organization. As we have mentioned, Starbucks believes in investing in youth training to engage and develop leaders of tomorrow. As a result, Starbucks has created the Youth Leadership Grants. These grants focus on educating youths aged 15 to 24 to become business savvy, socially responsible and/or become collaborative communicators. In 2013, they reported awarding 100 Youth Leadership Grants in 16 countries who have impacted almost 50,000 young people. Through these accomplishments and efforts, we can see the Starbucks is working towards a global reach which is aligned with their strategy of expanding global presence. CSR and Sustainability Initiatives of Starbucks Inc. - A Study | Team 352
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Known for their excellent customer service and employee training, Starbucks partnered with YouthBuild USA and the Schultz Family foundation to provide training for young people with disadvantaged backgrounds; selected young people receive both classroom and on-the-job training in one of Starbucks’ café. By giving this opportunity, these educated youth can then use this skill and background to enter into the retail and customer service background including Starbucks. Starbucks has strategically developed this program to leverage their core competencies. Further, Starbucks continues to innovative in helping out the youth and has recently invested $1 million dollars to a first-of-its-kind initiative called LeadersUp. LeadersUp is a non-profit organization founded by Starbucks that provides youth out of school and out of a job with the opportunity to learn new skills in order to be employable. In addition to all the efforts above, Starbucks has partnered with many youth organizations to diversify their reach as well as leverage the expertise of these organizations. Starbucks does this to make sure they are able to have a broad reach and rather by doing it themselves, they have strategically work with already established organizations. Starbucks programs are irable but we feel they are extremely widespread. As a large organization who has a global reach, I would recommend that Starbucks focus their efforts. A possible direction could be placing resources more focused on leveraging their core competency of customer service and training. That said, we feel that the initiative with YouthBuild USA and Schulz Family Foundation is aligned with our recommendation and also with Starbucks overall corporate strategy. The program is advantageous for both parties as it develops loyal staff, engages the community, attracts customers by showing their efforts and increases the number of the working class who can afford their purchase their coffee.
Community Stores Program Community stores program works hand in hand with Starbucks’ youth efforts. This program focuses on health, education, housing and employment in the neighborhood. Community stores works with other organizations in the neighborhood to revitalize the area. The efforts have been successful not only financially, but also increased skills and leadership development, positively impacted youth engagement and created a central location for the neighborhood to have conversations and boost dialogues. By working with the community that their business touches globally, Starbucks is able to engage the surrounding neighborhoods, create lasting connections and learn from the community; all these leads to a better focused effort on their expanding and improvement strategies. Starbucks has opened their first international community store in Thailand and plans to have more than 50 community stores across the globe where they do business. CSR and Sustainability Initiatives of Starbucks Inc. - A Study | Team 352
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Farming Communities Program As a coffee company, farmers are an essential to Starbucks’ circle of life. The farmers are the main supplier of coffee, tea, cocoa and other agricultural products. Aligned with their education and training efforts, Starbucks has established several farmer centers that are housed with experts and resources to enable farmers in key coffee-growing regions to “improve coffee quality and increase the yield of coffees” (farmer communities sbux website). Starbucks has established these centers for soil management training, field-crop production and milling process all geared towards lowering cost of production and increase quality and quantity of the harvest. The location of farmer centers are show in Appendix x. and education for farmers producing products for Starbucks is an important corporate social responsibility goal for the company. By partnering farmers with expertise, there are many opportunities for innovation in the coffee crop and process of producing coffee. Also, any increase in quality and quantity of the harvest leads to an increase of profit for Starbucks. This program also builds a great community of farmers and experts as well as creates dialogue within the community. The farmers are happier and will continue to be loyal to Starbucks with their system in place. These efforts leverages the company’s knowledge in training and expertise in coffee. Overall, Starbuck’s community engagement has been irable as they impact all neighborhoods their business touches. These programs work towards creating a larger loyal community for Starbucks that in turn leads to market penetration and higher profitability. In each of their efforts, they make sure that they push for innovation, same strategy in their business model, either through funding program or creating partnerships with experts.
Other Companies Considered For the purpose of the paper, individual team came up with recommendations for their choice of companies. These were then evaluated on a number of parameters including but not restricted to scope and scale of operations, breadth and depth of CSR strategies, impact on local communities, brand image and reputation as well as the amount of information that the company made available for its CSR initiatives. Consensus on the final choice was achieved by a two-step weighted voting method. The following companies were in the final selections: 1. 2. 3. 4.
Ben and Jerry’s Proctor and Gamble Coca cola Boeing
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Starbucks was chosen due to its large scale of operations, truly multinational presence, multiple levels of stakeholder impact and engagement and its commitment to continually improve its CSR and sustainability practices as evidenced in its externally audited yearly CSR reports that go as far back as 1991.
Reference: http://www.fastcoexist.com/3034411/the-future-of-coffee-looks-bitter-and-pricey-courtesy-ofclimate-change Starbucks Global Responsibility Report. Retrieved from http://globalassets.starbucks.com/assets/98e5a8e6c7b1435ab67f2368b1c7447a.pdf Starbucks, corporate website. Retrieved from http://www.starbucks.ca/responsibility Starbucks Global Responsibility Report. Retrieved from http://globalassets.starbucks.com/assets/98e5a8e6c7b1435ab67f2368b1c7447a.pdf Forbes. Retrieved from CSR and Sustainability Initiatives of Starbucks Inc. - A Study | Team 352
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http://www.forbes.com/sites/csr/2011/04/26/the-five-elements-of-the-best-csr-programs/
Appendix 1: Triple Bottomline
Triple Bottomline:
Appendix 2: Starbucks Mission Statement 2008. “Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining uncompromising principles while growing” CSR and Sustainability Initiatives of Starbucks Inc. - A Study | Team 352
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The six uncompromising principles are: 1. Provide a great work environment and treat each other with respect and dignity. 2. Embrace diversity as an essential component in the way we do business. 3. Apply the highest standards of excellence to the purchasing, roasting and fresh delivery of our coffee. 4. Develop enthusiastically satisfied customers all of the time 5. Contribute positively to our communities and our environment 6. Recognize that profitability is essential to our future success.
Starbucks Time line (1966-2005) 1966 Dutch immigrant Alfred Peet opens a European-style coffee store in Berkeley California 1971 Jerry Baldwin, Zev Siegel & Gordon Bowker opened Starbucks store in Seattle, WA selling coffee beans – after having been students at U.C. Berkeley and buying coffee at Peet's; coffee comes from Peet’s for first year 1982 Four Starbucks stores in Seattle, selling beans & coffee makers 1982 Howard Schultz hired as Marketing Manager from coffee packaging & equipment company Hammarplast 1984 Baldwin and others purchase Peet’s Coffee (now 5 stores 1984 Schultz inspired after a visit to Italy – the sixth store opens with an espresso bar 1986 Schultz frustrated with Starbucks leaves and opens Il Giornale an Italian espresso bar 1987 Il Giornale acquires Starbucks for $3.8m (but not Peet’s) from Baldwin & others. Starbucks Corporation is formed with Howard Schultz as president and CEO – all stores rebranded with new logo and called Starbucks 1988 Develops a mail order catalogue 1987 Entered Chicago followed by Portland, Oregon CSR and Sustainability Initiatives of Starbucks Inc. - A Study | Team 352
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1991 Entered California 1991 Started employee stock options 1992 Starbucks goes public with IPO – with 165 stores 1994 Entered into agreement with Pepsi Co to distribute shelf-stable coffeeflavored beverages in bottles and cans 1996 First Starbucks outside North America in Tokyo, Japan 1998 Entered into supermarkets 1998 Entered New Zealand 2000 Entered Australia 2001 Entered Switzerland – the first Continental European store 2003 Starbucks purchases Seattle's Best Coffee and Torrefazione Italia from AFC Enterprises 2003 Starbucks has over 6,400 stores worldwide 2005 James (Jim) Donald takes over as new Starbucks CEO; Starbucks has 10,241 stores worldwide
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