This assignment will describe in its main-part what main activities regarding acting (social) responsible are being implemented by Starbucks, emphasizing firstly on the second-biggest city in Indonesia, Surabaya. It will also depict some controversies around Starbucks. Beforehand, the paper will briefly explain the beginning of CSR and where it does stand now, as well as give a short history of Starbucks. At the end, the findings will be summarized, and a forecast will be made.
Corporate social responsibility (CSR) has become a topic of great interest for companies all around the world. 93 % of the 250 biggest companies worldwide are stating a CSR report and since the EU-directive 2014/95/EU is implemented in national law, became easier to hold the companies responsible for their activities. Starbucks has been an early adapter of the strategy to concentrate on economic, social and environmental issues and combining them to an overall corporate strategy and is now the second most valuable fast food company on the globe.
Table of content
1. Introduction
2. Starbucks and their CSR activities
2.1. Corporate Social Responsibility
2.2. Starbucks
2.3. Starbucks and CSR
2.4. Controversies around Starbucks
3. Conclusion
4. References
1. Introduction
Corporate social responsibility (CSR) has become a topic of great interest for companies all around the world. 93 % of the 250 biggest companies worldwide are stating a CSR report and since the EU-directive 2014/95/EU is implemented in national law, became easier to hold the companies responsible for their activities (cf. European Parliament, 2014; KPMG International, 2017, p. 9). Starbucks has been an early adapter of the strategy to concentrate on economic, social and environmental issues and combining them to an overall corporate strategy and is now the second most valuable fast food company on the globe (cf. Mainwar- ing, 2021).
This written assignment will describe in its main-part what main activities regarding acting (social) responsible are being implemented by Starbucks, emphasizing firstly on the second biggest city in Indonesia, Surabaya. It will also depict some controversies around Starbucks. Beforehand, the paper will briefly explain the beginning of CSR and where it does stand now as well as give a short history of Starbucks. At the end, the findings will be summarized and a forecast will be made.
2. Starbucks and their CSR activities
2.1. Corporate Social Responsibility
The first definition of corporate social responsibility (CSR) delivered Bowen (1953). He mentioned that businessmen should make policies and decisions which are in line with the desires and values of the society (cf. Bowen, 1953, p. 6). Davis (1960) and Walton (1967) came up with a similar definition and said that it could be monetarily profitable for entrepreneurs to act responsible (cf. Davis, 1960, p. 70) and that social responsibility is depicting the very intimate relationship between customers and businesses and that each entrepreneur should be aware of this fact when making decisions (cf. Walton, 1967, p. 18). Social responsibility goes beyond acting in accordance to the law, since every citizen should endure this in their actions (cf. Davis, 1973, p. 313). It means that a “CSR firm should strive to make a profit, obey the law, be ethical, and be a good corporate citizen” (Carroll, 1991, p. 43). Nowadays, scholars have widely agreed to a three-dimensional CSR term which covers the economic, social and environmental parts of responsible behaviours within corporations - the triple bottom line (cf. Elkington, 2007; Panapanaan et al., 2003).
2.2. Starbucks
Starbucks was founded in 1971 in Seattle and is named after the first mate in Herman Melville's “Moby Dick” (cf. Starbucks, 2021c). At the beginning a retailer for coffee beans, the company started to transform after Howard Schultz' entry in 1982. He was the one who made Starbucks to what it is now - a multi-national coffee house with 32,000 + shops in over 80 countries (as of 5th of July 2021) and a net worth of 135.35 B US-Dollars (cf. Macrotrends, 2021; Starbucks, 2021c, 2021f). When Starbucks stock price and revenue dropped in 2008 Howard Schultz, who has been already retired, returned to Starbucks and implemented their new mission: “To inspire and nurture the human spirit -one person, one cup and one neighborhood [sic!] at a time” (Starbucks, 2021c). Starbucks sees itself as a “third place” (Starbucks, 2021b) between home and work, which gives time to contemplate and relax. They also wanted to be “a different kind of company” (Starbucks, 2021b).
2.3 Starbucks and CSR
After a bad year regarding revenue and stock market price in 2008 (cf. Macrotrends, 2021) Starbucks, respectively Howard Schultz, shifted to a different approach of doing business which has been new for such a big player in the business world (cf. Hongdiyanto, 2016, p. 1). They started to focus more on giving back to people and to the communities they operate in and on the environment (cf. Hongdiyanto, 2016, p. 1).
In Indonesia, for example, Starbucks is partnering with Flink Magazine and Square Team to grant wishes to children all over Indonesia with its initiative “Drop of Hope”. Until now they gave over 2,000 school supplies to organizations in Indonesia (cf. Drop of Hope, 2021). Another example is, that Starbucks is teaching children with special needs through a local NGO in English and computer skills. They are also running a library bus and are helping other companies with its recycling issues (cf. Hongdiyanto, 2016, p. 3). They also helped coffee farmers in North Sumatra by giving a coffee growing training and building a coffee nursery, even though the coffee farmers did not supply to Starbucks (cf. Starbucks Indonesia, 2021).
Starbucks is carrying out most of its CSR activities regarding social issues through their Starbucks foundation which was founded in 1997. In the fiscal year 2020 they helped NGOs in communities they operate in, granted disaster relief due to the Australian bushfires, the Beirut explosion and the hurricanes and wildfires in the United States. They are also empowering women in coffee and tea growing communities to get better access to education and sanitation as well as promoting leadership and create opportunities for women and girls (cf. Starbucks, 2021d, p. 5, 2021e).
But Starbucks itself as a company is trying a lot to ensure the well-being of their employees (which are called partners) by granting health-insurance (U.S.), regular wage increases, trainings and the possibility to get a tuition-free college degree. They are also a very diverse employer - 47 % of the staff are Black and Indigenous people of colour, 69 % are female and the number of veterans and refugees as employees is increasing (cf. Starbucks, 2021d, pp. 8-10).
Regarding environmental issues Starbucks' most ambitious goal is to be climate positive by 2030. To achieve this goal Starbucks is planning to shift to a plant-based menu, reducing single-use cups, reforestation in the coffee and tea growing communities and trying to encourage their whole supply chain to more sustainability (cf. Starbucks, 2021d, p. 15). An interesting fact is that Starbucks had good reduction numbers regarding carbon emissions, water use and waste, but they are mentioning honestly in their report, that these numbers are due to “reduced business activity in FY20 as a result of COVID-19; it is not likely to be typical going forward” (Starbucks, 2021d, p. 15).
Starbucks coffee, its “black gold” (cf. Mainwaring, 2021), is by far the most important resource for Starbucks - 252 million tons in 2015 (cf. Starbucks, 2015, p. 5). Starbucks coffee was from 2015 - 2019 up to 99 % ethically sourced, in 2020 the rate was a bit lower at 98.6 % (cf. Starbucks, 2021d, p. 20). Cocoa and tea was even at a higher rate at 100 %, respectively 99.7 % (cf. Starbucks, 2021d, p. 21). Starbucks accomplishes this high numbers of ethically sourced resources by creating their own coffee producing standards and using existing standards like one from the Rainforest Alliance (cf. Starbucks, 2021d, p. 21). Their own standardization for coffee is called Coffee and Farmer Equity (C.A.F.E) practices and is designed in cooperation with SCS Global Services and Conservation International. The created scorecards contain more than 200 social, environmental and economic indicators, which include the whole supply chain and are available for free in six languages (cf. SCS Global Services, 2021). They did create these guideline to “guide coffee farmers, processors and suppliers toward more sustainable coffee production , as well as provide the assistance and incentives to do so” (Starbucks Coffee Company, 2007, p. 2). Another initiative which Starbucks, respectively the Starbucks Foundation has started in cooperation with tea origin communities in India and Guatemala, among others, is the Community, Health and Advancement Initiative (CHAI), which helps improving access to water and sanitation. Also it is granting micro-loans to build micro-business and scholarships to children and adolescents (cf. Starbucks, 2021a).
2.4. Controversies around Starbucks
Starbucks was involved in controversies and conflicts the bigger they got. One of them was based on an Oxfam press release from 2006 which claimed that Starbucks (3.6 billion dollar profit in 2005) opposed to the Ethiopian government's trade mark plan which would have led to around 88 million more dollars for the Ethiopian coffee sector (cf. Oxfam, 2006). Starbucks and the Ethiopian government reached a deal one year later (cf. Oxfam, 2007).
Another dispute were the UK tax avoidance claims of 2012 published by Reuters. In the report Bergin (2012) described how Starbucks reported no taxable income even though they generated profit in the UK. Furthermore, he depicted the intercompany entanglements and the location of affiliates of Starbucks (cf. Bergin, 2012). The discussions about big companies paying their fair share was not new, but Starbucks, which were advocating corporate social responsibility, were seen as hypocrites since paying taxes was (and is) acknowledged widely as acting responsible (cf. Campbell & Helleloid, 2016). The controversy even reached the European Commission which ruled that Starbucks' (and Fiat's) “selective tax advantages are illegal under EU state aid rules” (European Commission, 2015).
The most recent incident was the arrest of two black men in a Starbucks in Philadelphia who were accused of trespassing - in reality they were waiting for a friend but did not order anything (cf. Ortiz, 2018). This led to many protests against Starbucks which apologized quickly and closed 8,000 stores across the U.S. for one day to hold an anti-bias training for their employees (cf. Starbucks, 2018).
Starbucks is also being criticised for its single-use cups, which are difficult to recycle. Even though they are teaming up with competitors and researchers to reduce the plastic and paper waste (banning plastic straws by 2020, price reductions if the customer brings his/her reusable cup, etc), they have not succeeded in banning disposable cups worldwide or in developing a truly recyclable one-way cup (cf. Wiener-Bronner, 2019).
3. Conclusion
Starbucks' overall corporate strategy has formed due to the rock-bottom stock market value and revenue. Since then, Starbucks is highly involved to ensure the well-being of their employees and suppliers down to the last farmer as well as gaining and retaining a sustainable and long relationship with them. They are also concerned about the communities they operate in, since people in these communities are potential customers and Starbucks is also seen by them as a community servant who is “doing good” and “avoiding bad” and thereby actively preventing Corporate Social Irresponsibility (cf. Lin-Hi & Müller, 2013). Especially in Surabaya, it is quite noticeable because of their work with children, which is the most important CSR activity there. Starbucks will be remembered in the children's head as the company who helped them gaining computer skills, English skills and having books at their disposal. They are investing in their potential customers and (probably more important) their potential new employees. This is a very sustainable, effective and low-priced method to ensure their stand in the Indonesian market and beyond.
The corporate culture of Starbucks including all stakeholders in their decision-making-processes and focusing on them and not on the profit and stock market price is the essence of their whole corporate strategy (cf. Leinwand & Davidson, 2016). Starbucks understood quite early that trust and dedication from and to everyone within the supply chain are crucial for good revenue and profit. Therefore, irresponsible activities by Starbucks or any company are mostly perceived much worse than all the good things they do (cf. Lin-Hi & Blumberg, 2018).
The written assignment has shown, that although Starbucks has not yet fully exhausted their CSR-driven activities and it always can be done more, they do really do a lot by helping their employees, caring about their communities and neighbourhoods and trying to conserve the environment. Some may say that the high pricing of their products is unethical since low- income groups mostly cannot afford a Starbucks coffee, but they are not the main target group. Entrepreneurs, managers, employees on Wall Street and in the Silicon Valley, in Central London, Berlin - Mitte and the 6th arrondissement in Paris are, amongst similar others, the main consumers of Starbucks coffee. Overall, Starbucks is doing a good job regarding CSR and is seen by many as an example for doing good to their stakeholders and bringing profit to their shareholders.
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- Quote paper
- Maximilian Sidorowicz (Author), 2021, Starbucks and their CSR activities, Munich, GRIN Verlag, https://www.grin.com/document/1322216
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