Starbucks: Growing Sustainability One Cup at a Time
Starbucks implements proactive climate change strategy both as contributor to and sufferer of global warming.
Contributor & Victim
With over 24,000 stores serving 4 million cups of coffee daily, Starbucks is a major contributor to — and victim of — climate change [1]. Its global footprint contributes upwards of 1.4 metric tons of carbon dioxide annually, 80% of which are attributable to critical operations of its retail stores and supply chain [2]. With continued store growth, increasing shipping needs, and expansion into new product lines (e.g., hot food items that require refrigeration and oven), this trend is likely to worsen despite current efforts towards energy conservation.
These carbon emissions directly lead to higher temperatures and lower precipitation, both of which significantly reduce the area of land suitable for coffee growing. Ethiopia, for example, is expected to lose up to 60% of its coffee-growing land by the end of the century [3]. Brazil, the largest coffee-producing nation and major supplier for Starbucks, has already experienced production declines of 30% in 2016 [4]. To ensure the long-term sustainability of its business, Starbucks must proactively tackle climate change — from both an energy consumption as well as a crop sourcing perspective.
Planning for Sustainable Growth
Starbucks has already begun to take proactive measures in addressing climate change given its uniquely challenging and influential position. Tackling the issue from both the store and farm level, its strategy is twofold: 1) reduce the environmental footprint from retail and supply chain operations, and 2) engage in climate-smart agricultural practices as part of their ethical coffee sourcing process.
- Reducing environmental footprint. To reduce energy consumption, Starbucks is heavily investing in the measurement and reduction of carbon emissions, as well as innovative technologies that allow its supply chain to tap into renewable energy sources [2]. With these efforts, the company aims to reduce emissions from its own operations in the short term, across manufacturing plants, retail stores, and transportation vehicles. In the medium term, it will focus on the purchase of renewable energy to fuel the remainder of its electricity needs.
- Investing in climate-smart agricultural practices. Integral to its environmentally conscious strategy, Starbucks has been continuously working on aligning their supply chain to their Coffee and Farmer Equity Practices — guidelines set by the company for sustainable coffee farming. In May 2016, Starbucks issued $500 million in 10-year senior notes, the first US Corporate Sustainability Bond [5]. The debt would finance its medium term goal and provide resources for farmer support centers around the world [6]. In the long run, these centers will be instrumental in educating and implementing climate-smart agricultural techniques, such as sustainable crop growing and harvesting.
With these two initiatives, Starbucks is proactively making progress towards reducing its environmental footprint to ensure the supply of high-quality coffee that its customers can rely on.
High Quality Coffee for the Future
In addition to its current efforts, I believe Starbucks could leverage its position as an influential global trade partner to drive sustainable behavior through two chief avenues:
- Government programs. Climate change and sustainability are top-of-mind for leaders across the world. Starbucks should explore working with governments of larger coffee producing countries to develop economic incentives for farmers to produce coffee in a sustainable manner. This can be achieved through rebates, tax savings, or other subsidies and incentives [7]. Suppliers who participate in the program will both strengthen their partnership with Starbucks and receive economic benefits through the government program. Countries participating in such a program will be better positioned to maintain its arable farmland.
- Sustainability coalition. The widespread impact of rising temperatures will reach far beyond the coffee ecosystem. Starbucks should work with other stakeholders, particularly food-related companies that have suppliers affected in regions with meaningful coffee production, to come together and jointly support sustainable farming initiatives. The group can collectively pool resources towards research and development for sustainable practices, work together to drive policy, or jointly negotiate government incentive programs. Building a coalition of aligned stakeholders should drive action that will be benefit all ecosystem constituents in the medium and long term.
Additional Considerations
While Starbucks is one of the largest corporations in the world, tackling climate change is a monumental obstacle for any one company. By taking the lead as the only company investing resources towards these important longer term initiatives, is Starbucks hurting its position against competitors who are near-term focused and not investing resources for this purpose?
Furthermore, there may be dozens of factors that influence emissions in Starbucks’ crucial supplier geographies, many of which are out of Starbucks’ control. How does Starbucks mitigate risks associated with these other factors to ensure favorable results if its sustainability efforts are successful?
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Reference
[1] Starbucks Company Profile. (n.d.). Retrieved November 14, 2017, from https://www.starbucks.com/about-us/company-information/starbucks-company-profile
[2] Tackling Climate Change. (n.d.). Retrieved November 14, 2017, from https://www.starbucks.com/responsibility/environment/climate-change
[3] Columbus, C. (2017, June 19). Ethiopia’s Coffee Farmers Are ‘On The Front Lines Of Climate Change’. Retrieved November 14, 2017, from https://www.npr.org/sections/thesalt/2017/06/19/533538555/ethiopias-coffee-farmers-are-on-the-front-lines-of-climate-change
[4] Garcia-Navarro, L. (2016, October 12). Coffee And Climate Change: In Brazil, A Disaster Is Brewing. Retrieved November 14, 2017, from https://www.npr.org/sections/thesalt/2016/10/12/497578413/coffee-and-climate-change-in-brazil-a-disaster-is-brewing
[5] Starbucks Issues the First Corporate Sustainability Bond. (2017, June 20). Retrieved November 14, 2017, from https://news.starbucks.com/press-releases/starbucks-issues-the-first-u.s.-corporate-sustainability-bond
[6] Clancy, H. (2016, July 28). Why Starbucks issued its first ‘sustainability’ bond. Retrieved November 14, 2017, from https://www.greenbiz.com/article/why-starbucks-issued-its-first-sustainability-bond
[7] USAID Climate Change Strategy. (n.d.). Retrieved November 15, 2017, from https://www.usaid.gov/climate/strategy
Thank you, Aileen! This is a really interesting topic, and it’s shocking to me when I saw that Ethiopia is expected to lose up to 60% of its coffee-growing land by the end of the century. Starbucks seems to be the trailblazer in the private sector, and I’m curious about the efficacy of their “US Corporate Sustainability Bond”, which can potentially strike a good balance between commercial interest and social responsibilities. In addition, given the rigorous requirement for coffee plantation, have you seen any data showing a potential shift of the coffee farms from existing countries/areas to others? Will such shift, if any, cause additional geopolitical disputes and troubles? What could Starbucks do, again as a private company, to preempt the new production sites and at the same time optimize the global supply chain in a more sustainable way?
I think you’ve nailed it on the head considering Starbuck’s massive scale. Your article reminded me of our IKEA sustainability case and would be interested in your take on whether you believe in the intention of their environmental objectives. I think that Starbucks largely uses sustainability as a marketing tool but your article presents a strong argument that these initiatives will be key for the actual continuation as a business in the long term.
Thanks for an interesting read Aileen! As an avid consumer of coffee and Starbucks, I admire their efforts to tackle this megatrend. While it is admirable that Starbucks is proactively working to mitigate the effects of climate change, I’d like to consider the devil’s advocate that the risks of climate change may not be that threatening to Starbucks and may not warrant these changes in the nearterm. To weigh that consideration, I’d like to understand how does Starbucks’ global footprint of 1.4 metric tons of CO2 compare relative to those of other global brands and can there be alternative sources of suppliers for its coffee beans, should Brazil and Ethiopian suppliers experience meaningful declines?
It’s interesting to think about Starbucks as both a contributor and a victim of climate change. As a key player in the industry, it seems that they hold a high responsibility to do their sourcing responsibly, and help coffee growers to fight climate change. It makes me wonder whether Starbucks could vertically integrate their supply chain and have a bigger impact from the development of the coffee bean to how it is grown, to establish more sustainable practices. It seems that collaborating with other players in the industry, as you suggest potentially the government, could be another way to establish better regulations around the topic.I also wonder whether they are doing enough at the store level – how are they managing waste? Are their in-store practices eco-friendly?
Thanks for the interesting read!
Aileen, thank you for sharing your report on Starbucks’s sustainability initiatives. Like Bill, I found Starbucks’ approach to funding its green initiatives through a bond offering interesting. As we touched on in the Ikea case, measuring the impact of sustainable investments can be challenging and in the case of Starbucks, demonstrating return on investment to investors even harder.
As for your open question regarding the impact of sustainable business practice investment of Starbucks’s market competitiveness, I think in the long term, these efforts will add to Starbuck’s competitive advantage over smaller players. As the leader in the industry, Starbucks has the opportunity to set industry standards for responsible business practices. In the near term, Starbucks could focus on making their customers aware of their high environmental standards, and as a result, add to the brand’s value and enhance customer loyalty.
For those interested, The World Research Institutes, published a series of articles and podcasts on how public companies have funded their sustainable business practices here: http://www.wri.org/blog/2013/03/finding-money-how-businesses-can-fund-environmental-sustainability-projects