Starbucks: Saving Our Coffee from the Threat of Climate Change
Starbucks is leading the way in addressing the impact of climate change on the coffee industry, but will it be enough to save our morning cup o' Joe?
What’s the deal with climate change?
Coffee is a very fussy plant! In fact, the Arabica coffee varietal, which makes up about 70% of global coffee production, flourishes only in areas with a very narrow temperature range—64-70 degrees Fahrenheit to be exact—and prefers an altitude of approximately 3,000 to 6,000 feet above sea level1. As little as one-half degree changes in temperature or changes in rainfall patterns to dramatically decrease harvest yields and overall product quality2. One-to-two degree rises in temperature are even more disastrous as coffee pests, such as coffee rust and coffee borer beetles, will run rampant and further diminish product yields2.
As of today, there are 27 million acres of land across the globe which are tenable for coffee farming; however, recent reports suggest that climate change is expected to cut this area in half by 2050, putting major pressure on global coffee supply2. Further, farmers in these coffee-growing countries lack the resources to adapt to issues caused by climate change on their own. Alarmingly, many are instead choosing to abandon coffee farming completely3.
As a result, many consider global climate change to be the most critical threat for the coffee industry in coming decades. As the global leader in coffee retail sales, Starbucks will be majorly impacted by the effects of climate change on coffee supply.
What’s Starbucks doing about it?
Understanding the gravity of this risk to its business, Starbucks has put together a robust plan to address climate change. Exhibit 1 shows the typical coffee supply chain which consists of three phases: Cultivation/Processing, Roasting/Packaging, and Consumption4. Starbucks has established initiatives across these phases of its supply chain to both mitigate and adapt its business to the climate change challenge.
Exhbit A: Typical Coffee Supply Chain4
In the short-term, Starbucks has introduced measures to mitigate its contributions to climate change by decreasing its carbon footprint, or the total set of greenhouse gas emissions created from the coffee lifecycle. Specifically, Starbucks has chosen to focus on the most carbon-intensive aspect of its supply chain, the Consumption phase, which typically amounts to approximately 46% of the total emissions generated throughout coffee’s lifecycle (see Exhibit B6). Much of the carbon emissions generated in the Consumption phase are attributed to electricity usage associated with brewing coffee5. In response, Starbucks has implemented an initiative to reduce energy usage through the installation of Energy Management Systems in 6,000 of its stores6. Starbucks has also invested in Green-E certified Renewable Energy Certificates to both encourage the continued development of renewable energy sources and to offset 100% of its US and Canadian stores’ fossil-fuel energy usage6.
Exhibit B: Typical Carbon Footprint per kg Coffee5
To address long-term effects of climate change, Starbucks has focused on the Cultivation/Processing phase of its supply chain. Specifically, Starbucks has implemented a supplier relationship management system called Coffee and Farmer Equity (C.A.F.E.) Practices to help its farmers better adapt to issues caused by climate change. This program, in combination with building nine farmer support centers and financing $50 million in farmer loans, provides farmers with the guidance and resources to adapt their farms more proactively in the face of climate change7.
Beyond this, Starbucks has also started to advocate for clean energy policy, becoming a founding member of the Business for Innovative Climate and Energy Policy, with the goal to promote widespread adoption of clean energy usage6. Ultimately, changes that are implemented through clean energy policy adoption will help Starbucks by setting a higher standard for other companies, so other companies share the responsibility and costs associated with driving sustainable practices.
Will Starbucks’s plan be enough?
While Starbucks has done much already to address its risks associated with climate change, it could do more. In the short-term, Starbucks could more aggressively address challenges in the Cultivation/Processing phase of its supply chain through vertical integration. By acquiring and operating its own coffee farms, Starbucks would have more control to implement best practices and would be nimbler to adapt to climate issues as they come. In the long-term, Starbucks could better address challenges associated with the fragile nature of the coffee plant itself. By investing in product innovation, such as creating new varietals of coffee that are less fragile in the face of changing weather conditions and pests, Starbucks could better position its business in the continued challenge of changing weather patterns.
Reflecting on Starbucks’s plan regarding climate change, I wonder about the transportation aspects of Starbucks’s supply chain: should Starbucks look closer at its logistics departments? Exhibit B gives us an idea of how carbon intensive this part of the process can be for the industry in general, but I wonder if Starbucks has opportunity to improve in this aspect of its supply chain through closer examination.
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- James Freeman, et al., The Blue Bottle Craft of Coffee. 2012. 14.
- The Climate Institute, “A Brewing Storm: The climate change risks to coffee,” http://fairtrade.com.au/~/media/fairtrade%20australasia/files/resources%20for%20pages%20-%20reports%20standards%20and%20policies/tci_a_brewing_storm_final_2408 2016_web.pdf. September 2016
- NPR, “Coffee and Climate Change: In Brazil, a Disaster is Brewing,” October 12, 2016.
- Melissa Murphy, et al., “The Coffee Bean: A Value Chain and Sustainability Initiatives Analysis, 2017. https://global.business.uconn.edu/wp-content/uploads/sites/1931/ 2017/01/The-Coffee-Bean.pdf
- Business Association of Latin American Studies, “Carbon Footprint Across the Coffee Supply Chain: The Case of Costa Rican Coffee.” 2012.
- Starbucks, “Greener Energy.” 2017. https://www.starbucks.com/responsibility/ environment/water-and-energy
- Starbucks, “Ethical Sourcing: Coffee.” 2017. https://www.starbucks.com/responsibility/ sourcing/coffee
Thanks for these thoughts! I have to say, when anything threatens my coffee, I get worried.
I would be against creating a genetically-modified varietal of coffee that can withstand warmer temperature for two reasons. First, it would be equivalent to admitting that the war against climate change is lost and that we are now in the phase where we must make sure we’re able to sustain our profitability despite temperature levels which are detrimental to the planet. Second, coffee is a bit like wine in the sense that it has a long tradition of being natural and cultivated in ways which take advantage of its natural advantages. I’m worried about the impact on quality that modifying the Arabica’s genome could have.
Perhaps one thing Starbucks could do would be to select its growers based on stringent sustainability criteria, much like IKEA and it’s wood suppliers?
The problem that Starbuck’s faces here seems like a classic “tragedy of the commons.” Their manufacturing and supply chain will be greatly disrupted by the effects of global warming, and yet there isn’t much that Starbucks alone can do to change what will happen. Although they have some initiatives to make an impact as an individual company, they will not be effective without cooperation of other companies, and other companies have far less incentive to make a change (i.e. companies that don’t have the same brand connection to sustainability or the same public image as Starbucks) are unlikely to do as much as Starbucks.
Interesting read. Could Starbucks increase its impact by reducing the waste products? I wonder how much waste is produced in the production of each batch. Since a large amount of water is used in coffee production, I hope they are reusing the wastewater in particular. They could also invest in infrastructure to use less water to begin with, but that would of course be a lot less cost effective.
Thanks for sharing Caroline! Obviously Starbucks is a highly valuable social brand so it makes sense not only from an economic standpoint but from a branding perspective to take a lead in preventing global climate change. I think that, as you mentioned, transportation will be of increasing importance in evaluating their footprint. Given the particular nature of coffee farming, I think climate change will force them to re-think a lot of their current farming areas and possible move their bean sources throughout the world. These challenges will further complicate their supply chain. Interesting dilemmas for sure!
Really good article!
Borrowing from what we learned from Indigo, I wonder if they can raise coffee plants that are not subject to climate change? After all, Starbucks is only a small player in CO2 emission and even if they cut 100%, it is uncertain how much we can deter the gradual climate change. I think it is also worth Starbucks to test if there are breeds of coffee that are more robust.
In addition, with an eye for long-term, they can also develop places that are farther from the equator and see if there are good soil to grow coffee.
This is such an interesting topic. Thanks for sharing! Given the rise of economically efficient cars, I believe that Starbucks transportation system will evolve with the broader market. As someone mentioned above, Starbuck’s brand is intrinsically linked to sustainability. I appreciate its commitment to lessen its impact on the world. Although I agree that vertical integration of its supply chain will allow greater flexibility and control, I hesitate to adopt this solution. Is Starbucks positioned to manage farms and could it do so in a manner that is more efficient than other firms?
Oh, Starbucks. What a delightful company.
Nestle/Blue Bottle can certainly learn a thing or two from Starbucks and how they have grown with integrity and a commitment to achieving a squeaky clean and efficient supply chain. Starbucks as the market leader has the privilege of setting expectations. Could they be doing much, much more? Additonally (and similar to the question that I posed in my musings on Blue Bottle) how does the firm make decisions when financial performance is directly odds with their environmental and sustainability standards?
I am excited to see how Starbucks continues to operate as a socially responsible business and set the pace for the coffee industry.
Thanks for this interesting read. I wonder however why there had been no push to challenge consumer behavior and attempt the creation of a smaller product mix, which could allow for greater supply efficiencies as well as better ability in managing wastes through there production processes. Although I would agree that acquiring its own land could allow Starbucks to better manage its supply chain, it still has control over customers and can direct their preferences in directions that might actually be more effective.
“Reflecting on Starbucks’s plan regarding climate change, I wonder about the transportation aspects of Starbucks’s supply chain: should Starbucks look closer at its logistics departments? Exhibit B gives us an idea of how carbon intensive this part of the process can be for the industry in general, but I wonder if Starbucks has opportunity to improve in this aspect of its supply chain through closer examination.”
It is not surprising that Starbucks, as a massive global brand, is attempting to be proactive in response to climate change. The steps you mentioned, including increasing energy efficiency and adopting better farming practices, are reasonable for bringing about incremental improvement. Perhaps these high-level concepts can be adopted to improve logistics and transportation as well. In addition to decreasing energy use in the “consumption” phase, Starbucks could consider the same improvements in the “cultivation/processing” and “roasting/packaging” phases as well. Drawing from the IKEA case on sustainability, I wonder also whether Starbucks has considered vertical integration to various extents, and whether having more direct control over elements of the supply chain would enable more standardized practices in sustainability. Ultimately, I do believe an industry-wide shift towards sustainability practices is needed; while Starbucks does represent a large share of the market, it cannot alone move the needle without support of competitors, industry associations, and regulators.
Thanks for sharing your insights on Starbucks and the implications that climate change will have on its business! Regarding your suggestion for product innovation and creating new varietals of coffee in the future, I do think that this is a valid strategy that Starbucks should pursue, but I do worry about the implications it will have on the company’s brand (given that many consumers are still in the process of becoming comfortable with genetically modified foods). It does look like Starbucks has started to innovate in this area, though, and I am curious to see how they will go to market with successful variant strains of coffee beans in the future [1]. Another key issue I find with Starbuck’s strategy relates to its own carbon footprint (exhibit B). As Starbucks aims to reduce its energy consumption at its stores to lower greenhouse emissions, it has simultaneously increased its number of menu items that require more electricity for refrigeration and heating. Although coffee still makes up the bulk of the electricity use, I think it’s still a classic example of how business goals/objectives can clash somewhat with sustainability efforts. Given Starbuck’s early initiative in climate, however, I do have faith that they will be able to reconcile their strategies differences and meet their aggressive energy and climate change goals.
[1] https://www.technologyreview.com/s/601404/starbucks-responds-to-climate-change-with-mixed-results/