By Tristan Baker (Junior, University of Texas at Austin)
What happens when a highly successful, widely known, and socially responsible coffee company closely adheres to one set of CSR standards only to be criticized for not committing to a competing set of even loftier standards? Starbucks found out the hard way.
Starbucks and Competing NGO Standards
Starbucks is a firm born out of the late 20th century that created a distinct role for itself in the global coffee market through the production and sale of high quality, specialty coffee and coffee drinks. Even from its early years, Starbucks has projected itself as a firm that has a commitment to a high quality product, workplace, and worldly impact. While competitors largely ignored CSR initiatives until years later, Starbucks had established a CSR department in the early 1990’s and tasked it with carefully establishing responsible corporate standards in line with sustainability and other increasingly popular public policies.
Starbucks’ rapid growth and dominance in the coffee-service industry meant that it was a major player in setting precedents for the coffee industry and ranging from harvest to the sale of finished product. Starbucks primarily procured its beans from small and medium-size farms and purchased about 1% of the world’s coffee supply at a price substantially higher than the going market rate. ($1.20 per lb compared to market average of $.48 per lb). Of course, its high profile made Starbucks an easy target for NGO and watchdog efforts as in the case of Conservation International (CI).
CI is a non-profit organization focused on the conservation and preservation of biologically diverse regions of Earth. In [YEAR?], it identified coffee as an important commodity affecting biodiversity and launched a Conservation Coffee Program in Mexico on a relatively small scale. Eventually, CI approached Starbucks and the two established core principles for social responsibility in the coffee trade. Starbucks even committed roughly $1,000,000 in funding and additional resources to develop sourcing guides for Mexican coffee farmers. The partnership was successful in providing Starbucks with high-quality coffee while increasing income for many small scale farmers and encouraging shade-grown coffee practices which are less detrimental to the environment. Starbuck’s work with CI highlighted their commitment to CSR initiatives and their ability to be both socially responsible and profitable.
However, new, much more complicated pressure was placed on Starbucks with the dawn of so-called Fair Trade Coffee movement in [YEAR?]. While Starbucks showed willingness to utilize fair trade coffee, problems arose in maintaining the company’s high quality standards and TransFair, the NGO lobbying for the new standards, was unwilling compromise by promoting better quality among fair trade growers. Not surprisingly, loyal Starbucks consumers loved the fair trade practices, but were disappointed by the coffee.
How Starbucks Met the Challenge
Starbuck’s dilemma is emblematic of the inevitable tension between the profit incentive and external pressure for social responsibility. It also highlights the challenges of dealing with aggressive NGO’s and activist groups seeking to exert influence of corporations. It is well-accepted that Howard Schultz founded Starbucks with the admirable goal of being both a successful business as well as an ethically sound place to work. Guided not just by altruism, Schultz realized that consumers favor businesses perceived to be “good corporate citizens,” but he was savvy enough to understand there has to be a balance. Few, if any, companies can survive based purely on social responsibility.
While it is clear that that Starbucks recognizes the value of minimizing adverse environmental impact through activist partnerships. To date, they have avoided blind adherence to third party standards that may threaten core values and branding. The challenge with Conservation International was to work towards correcting negative externalities of coffee production by reducing information asymmetries among coffee growers in South America. Ultimately, Starbucks met this challenge through cooperation with CI. And by so doing, Starbucks garnered valuable PR and an enhanced role as an influential industry leader, particularly in the minds of its consumer base. Of course, CI also benefitted from its collaboration with Starbucks by gaining credibility, funding, and exposure. Together, Starbucks and CI can now point to their successful collaboration as a model for other companies and NGO’s.
In contrast, the relationship between Starbucks and TransFair is demonstrative of the problems that arise when an NGO is unwilling to consider hard corporate realities such as market restraints and the difficult choices that must be made to adhere to corporate policies and mission statements. While Starbucks is willing to listen to activist groups and environmentalists about potential harms caused by suppliers, there are concrete limits to their willingness to dramatically shift course purely for the sake of social good. Undoubtedly, CSR is important to Starbucks, but TransFair and the fair trade coffee movement refused to compromise or allow for a viable Plan B. While CI was willing to collaborate and find the solution that best satisfies the needs of the market and enacts the most social good, TransFair was uncooperative and dogmatic, refusing to accept that the vaunted new standards could prove injurious to the Starbucks brand and, eventually, the bottom line.
Unfortunately for TransFair and the FTC Movement, there seems to be little opportunity for expansion unless there is a fundamental change from within. Antagonism and public derision rarely lead to successful partnerships. It would be a strategic error for Starbucks to jeopardize coffee quality standards (and resulting sales) for the sake of FTC appeasement and this dooms the stated FTC goal of improving social conditions among coffee farmers. If anything, Starbucks may acknowledge FTC in a largely perfunctory manner by purchasing limited quantities of FTC beans in order to avoid negative publicity.
Starbucks has deftly and meaningfully shown its commitment to social responsibility while maintaining its stature and financial success within the coffee industry. Its partnership with Conservation International set the standards for relationships between a for-profit firm and an NGO while trying to solve an important market challenge. Without a doubt, Starbucks will maintain and even expand its partnership with CI with the byproduct of an enhanced corporate brand, especially because the relationship is one of mutual respect and open communication. It has been a slow process to effective change, but the expansion of the key initiative, known as the Shade Grown Coffee Initiative beyond Chiapas, Mexico will not only increase its positive environmental impact, but will also foster access to high quality, environmentally sustainable coffee beans with obvious benefits to suppliers, consumers, and Starbucks. This success allows CI to expand their environmental impact in work with other companies and industries.
And, best of all, it allows Starbucks to keep serving delicious coffee to its customers.