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Starbucks’ Corporate Sustainability Report (Assessment)

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Updated: Jul 7th, 2021

Introduction

Starbucks is an international coffee company based in Seattle Washington, with operations in over 28,000 locations around the world. The company’s outlets serve a variety of hot and cold drinks. Starbucks is a suitable company to be used in the study of corporate sustainability due to its policies and practices on the topic. In 1999, the management started the “Grounds for your Garden” initiative towards environmental sustainability. Since then, the company has grown into a leading champion for socioeconomic and environmental sustainability. Nevertheless, sustainability is a dynamic concept, and thus the company has to keep on looking for opportunities to strengthen its model. This paper analyzes Starbuck’s sustainability model by discussing its economic, environmental, and social dimensions. It also highlights some of the ways that the company can further develop its concept of sustainability.

Sustainability as a Theory

Sustainability is a multifaceted concept that could be understood from different dimensions including environmental, social, and economic. From an environmental perspective, it means engaging in practices that maintain ecological balance without depleting the available natural resources (Portney, 2015). Social sustainability focuses on promoting wellbeing among people working and living in a certain area or organization while at the same time supporting future generations (Ajmal, Khan, Hussain, & Helo, 2018; Ng & Rezaee, 2015). Economic sustainability demands organizations to operate in a way that promotes long-term economic growth while supporting environmental, social, and cultural community aspects. The three dimensions – economic, social, and environment, are merged to form the theory of sustainability, especially in business operations. According to Rezaee (2016), sustainability theory addresses “the integration among various dimensions of sustainability performance, their interactions, their possible tensions and constraints imposed on the main business objective of creating shareholder value” (p. 55). In business, sustainability has five dimensions including economic, governance, social, ethical, and environmental (EGSEE).

Organizations seek to create value for their shareholders, and this goal could be achieved by considering the interests of all involved stakeholders through the utilization of the EGSEE dimensions of sustainability. Initially, business sustainability-focused mainly on social, governance, and environment (Bebbington & Larrinaga, 2014). However, the concept has expanded to cover initiatives that can increase financial performance through deriving revenue growth. Contemporarily, global investors and businesses look beyond an organization’s financial records by including sustainability performance as part of making investment decisions. Therefore, firms should be concerned with sustainability if they are to survive and thrive in the current competitive global market.

Dimensions of Sustainability

The overall objective of any business establishment is to maximize shareholders’ value through financial performance. However, the economic well-being of an organization is dependent on the performance of other non-financial factors such as the environment and social aspects. Therefore, the management has to come up with a model of integrating all the factors that lead to optimum financial performance, which underlines the concept of sustainability. In this context, sustainability seeks to conserve the available resources and optimize production through innovation, which ultimately ensures cost efficiency and effectiveness. The following section discusses the three major dimensions of sustainability – economic, social, and environmental.

Economic dimension

Economic sustainability is the long-term profitability and financial wellbeing of an organization. This variable is measured by evaluating the long-term operational efficiency, productivity, market value, revenue, and return on investment of a firm. According to Jain, Jain, and Rezaee (2016), economic sustainability creates shareholder value through strategic revenue growth strategies. Businesses have to think carefully about where to invest capital for long-term growth.

Social dimension

This aspect of sustainability reflects the extent to which an organization fulfils its social responsibilities. It focuses on delivering quality products or services, ensuring a healthy work environment, and contributing to the wellbeing of communities. In other words, socially responsible companies go beyond common practices, industry standards, and applicable laws to impact society positively (Huang & Watson, 2015). When executed well, corporate social responsibility (CSR) improves an organization’s image and reputation.

Environmental sustainability

This dimension underlines how a firm handles its environmental challenges by operating sustainably without depleting the available resources. Environmental disasters can occur when companies fail to strengthen their mechanisms of how they interact with the environment. Environmental sustainability is measured in terms of “reduction in carbon footprint, the creation of a better work environment, and improvement in the air and water quality of the property and the surrounding community” (Rezaee, 2016, p.62). Environmental sustainability is an important determinant of the overall well-being of an organization.

Sustainability at Starbucks

Starbucks has been releasing annual responsibility reports, and in 2009, it expanded its scope to cover sustainability. After a change of business model in 2008, Starbucks revised its core values to include the environment, community, and ethical sourcing. The following section discusses sustainability at Starbucks by focusing on environmental, social, and economic dimensions.

Environmental Sustainability at Starbucks

The senior management at Starbucks has created robust and dynamic mechanisms to ensure environmental sustainability. The first step was to adopt greener cups and packaging. Under this strategy, the company focuses on recycling, re-use, and cup innovation. According to Starbucks (2019a), the company seeks to double the recycled content by 2022. The management has come up with different initiatives to encourage its customers to recycle cups after use. The company has also partnered with the National League of Cities to create awareness of recycling. Re-usable cups have been part of the company’s environmental sustainability campaign since 1985. Customers are awarded when they take cups or tumblers back to the firm.

Additionally, Starbucks is creating eco-conscious stores in its different locations around the world. In 2001, the company partnered with the U.S. Green Building Council (USGBC) to develop the Leadership in Energy and Environmental Design (LEED), which is a construction design to ensure greener stores (Starbucks, 2019a). Moreover, the company has adopted the use of green energy to power its stores through renewable energy as a way of reducing the impacts of its operations on the environment. Through this initiative, the company has reduced its carbon footprint significantly. For instance, in 2015, the firm achieved its goal of powering its global-company operated stores with 100 per cent renewable energy (Starbucks, 2019a). Starbucks continues to invest in wind and solar energy as part of its efforts to address climate change concerns.

Social Sustainability

Starbucks believes that as a for-profit public company, it is obligated to have positive social impacts on the communities where it operates. Commonly sourced products include coffee, tea, cocoa, and manufactured goods. The first approach to social sustainability is through sourcing its raw materials ethically and sustainably. For instance, the company partnered with Conservation International to launch its Coffee and Farmer Equity (C.A.F.E) program, which supports farmers in coffee production through loans, grants, and forest carbon projects among other initiatives to ensure sustainability (Starbucks, 2019b). At the community level, the firm has invested in different initiatives to create opportunity for people in the neighbourhoods where its stores are located around the world. For example, Starbucks Foundation trains youths for skills needed in the rapidly changing global economy.

In addition, through its community stores, it partners with nonprofit organizations to create opportunities for the local people. Moreover, the Starbucks RED initiative promotes health and education in different locations through the Global Fund (Starbucks, 2019b). The company also offers veterans and military support by employing military spouses as part of its future leadership strategy. Currently, Starbucks employs over 10,000 military spouses as part of its ever-growing workforce (Starbucks, 2019b). The highlighted initiatives are part of the company’s vision to operate sustainably through its robust corporate social responsibility framework.

Economic Sustainability

The company’s economic sustainability is a function of aggregating all other aspects including social and environmental dimensions. As of September 30, 2018, the company’s total net revenue was 24,719.5 million USD, which was a major improvement as compared to 2016 when the figure was 16,447.8 million USD (Starbucks Fiscal 2018 Annual Report, 2018). The management uses strategic planning to accomplish its year-by-year growth in revenue. One of the particular approaches to economic wellbeing is the issuance of sustainability bonds. In May 2016, the company “issued a $495.6 million sustainability bond” (Khalamayzer, 2017, para. 2), as part of its strategic planning and financing. The money raised through these bonds is invested in supporting farmers and the environment to ensure the long-term sustainable development of the company. In March 2017, the company issued a similar bond in Japan worth 85 billion Japanese yen, and the money went to promote ethical sourcing programs and sustainability efforts (Khalamayzer, 2017). From these examples, it is clear that Starbucks is committed to engaging in sustainable practices in all its operations.

Developing Sustainability throughout Starbucks

Despite its elaborate sustainability programs and practices, Starbucks faces numerous challenges in its operations. Therefore, there is room for improvement to develop its sustainability endeavours for a better future. One of the areas of concern is that some of the company’s stores serve coffee and other drinks in plastic cups and straws. According to MacKerron (2018), the majority of Starbuck’s 4 billion cups and 2 billion plastic straws go to landfills every year. The company’s use of reusable cups is at 2 per cent out of the 25 per cent target. Therefore, the management should invest in biodegradable, recyclable, and reusable materials to be used in all its outlets in different countries around the world.

The company has also been accused of malpractices including tax avoidance in Europe. According to Sikka (2018), Starbucks has been involved in business malpractices, specifically in the UK and other locations across Europe. Such corporate malpractices are likely to affect the firm’s image and reputation negatively leading to losses, costly lawsuits, and penalties. Therefore, the company should strengthen its corporate governance to ensure that it operates ethically and legally as part of its sustainability efforts. Similarly, Starbucks has been accused of other poor business practices recently. For instance, in 2016, it was sued for allegedly underfilling customers’ lattes to avoid high milk costs (Fryer, 2016). Failure to observe business ethics and customer satisfaction can easily topple any corporation, and thus Starbucks should improve on this area. The company should ensure that it delivers what it promises to its customers. This aspect will create a strong and loyal customer base for the posterity of the organization.

Starbucks should also focus on licensing local firms that support its environmental and social sustainability vision. In Thailand, the company partnered with Maxim’s – a firm that has been accused of promoting the consumption of shark fins, even though this fish species is endangered (Woodring, 2018). This aspect raises the question of whether Starbucks is committed to conservation. Therefore, the company should review its licensing policies to avoid being drawn into environmental wars by partnering with local firms that cannot sustain its sustainability models. Finally, Starbucks could extend its sustainability efforts and social responsibility to address the refugee crisis. The company should strengthen its refugee hiring initiative to mirror the veterans and military support program, which has been successful since 2015. Such an initiative would promote the company’s CSR efforts and improve its reputation and public image.

Conclusion

The concept of business sustainability focuses on operating in a way that creates value for shareholders while at the same time conserving the environment and benefiting communities. The three main dimensions of sustainability include social, environmental, and economic practices. Starbucks acknowledges the need for sustainability in its operations, which explains why the management has come up with numerous initiatives to achieve this goal. Initiatives, such as greener stores and renewable energy, play an important part in Starbucks’ sustainable development efforts. The company can develop its sustainability models further by focusing on ethical corporate governance and engaging in fair business practices. Strengthening its refugee-hiring program would go a long way in alleviating this global social problem and improving its public image and reputation.

References

Ajmal, M. M., Khan, M., Hussain, M., & Helo, P. (2018) Conceptualizing and incorporating social sustainability in the business world. International Journal of Sustainable Development & World Ecology, 25(4), 327-339.

Bebbington, J. & Larrinaga, C. (2014). Accounting and sustainable development: An exploration. Accounting, Organizations and Society, 39, 395-413.

Fryer, J. (2016). Daily Mail. Web.

Huang, X. B. & Watson, L. (2015). Corporate social responsibility research in accounting. Journal of Accounting Literature. 34, 1-16.

Jain, P.K., Jain, A., and Rezaee, Z. (2016). Value-relevance of corporate social performance: Evidence from Short Selling. Journal of Management Accounting Research, 28(2), 29-52.

Khalamayzer, A. (2017). Web.

MacKerron, C. (2018). Web.

Ng, A. C., & Rezaee, Z. (2015). Business sustainability performance and cost of equity capital. Journal of Corporate Finance, 34, 128-149.

Portney, K. E. (2015). Sustainability. Cambridge, MA: MIT Press.

Rezaee, Z. (2016). Business sustainability research: A theoretical and integrated perspective. Journal of Accounting Literature, 36, 48-64.

Sikka, P. (2018) Combating corporate tax avoidance by requiring large companies to file their tax returns. Journal of Capital Markets Studies, 2(1), 9-20.

(2018). Web.

Starbucks. (2019a). Environment: Pioneering sustainable solutions. Web.

Starbucks. (2019b). Web.

Woodring, D. (2018). Web.

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