Starbucks is considered one of the world’s most ethical companies (Smith, 2012). Starbucks makes conscious efforts to be a responsible company and conduct business in an ethical manner. It prides itself in the ethical way it does business, through community, sourcing, environment, diversity and wellness. It strives to live out its mission statement and values everyday. Starbucks openly displays its commitment to being socially responsible and wants its customers to know exactly how Starbucks is doing so. It plasters its mission statement and values on the walls of many of the stores, it prints facts onto its coffee cups, it dedicates countless pages on the company website to its responsibility, and Starbucks even compiles an annual report dedicated to its corporate social responsibility. By examining Starbucks and its commitment to social responsibility, I am going to argue that a company can achieve profitable growth and enhanced shareholder value by conducting business in an ethical manner. Customers are more willing to pay a higher price and utilize a company’s products if they know that they are supporting a company that is socially responsible. I use the theories of ethicists Thomas Donaldson and Edwin Hartman to help determine whether a company is acting ethically.
Starbucks Corporation is an American global coffee company and Italian-styled coffeehouse chain, based in Seattle, Washington. It is the world’s largest coffeehouse chain, and is considered one of the world’s best-liked and best-known consumer brands- with 19,972 stores in 60 countries. There are 12,937 stores in the United States, 1,273 in Canada, 971 in Japan, 790 in Great Britain, 657 in China, 453 in South Korea, 356 in Mexico, 276 in Taiwan, 200 in the Philippines, 158 in Thailand and 1 in India. Twenty five million people patronize Starbucks everyday, and customers who consider themselves “loyal customers” visit an average of 18 times a month. Over the past 10 years, Starbucks stock (SBUX) has increased in price by 2,200%. Starbucks has made the list of Most Admired Companies in the U.S., the list of 100 Best Companies to Work For, the list of 100 Best Corporate Citizens, the list of the World’s 50 Most Innovative Companies, and the list of the World’s Most Ethical Companies. According to CEO Howard Schultz, Starbucks’ commitment to social responsibility has played a significant role in producing this phenomenal growth.
Business analysts agree that Starbucks is a widely respected company because of its commitment to social responsibility. Starbucks has earned this reputation through its actions in all phases of its business and live out this commitment through both its mission statement and values. The Starbucks website states that, “Our mission: to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time”. Starbucks even has a separate mission statement dedicated to the environment, which states, “Starbucks is committed to a role of environmental leadership in all facets of our business.” Starbucks makes conscious efforts to fulfill its company’s missions. The Starbucks website lists the following as ways it is fulfilling its social responsibility:
- “ It has always been, and will always be, about quality. We’re passionate about ethically sourcing the finest coffee beans, roasting them with great care and improving the lives of people who grow them. We care deeply about all of this; our work is never done.”
- “We’re called partners, because it’s not just a job, it’s our passion. Together, we embrace diversity to create a place where each of us can be ourselves. We always treat each other with respect and dignity. And we hold each other to that standard.”
- “When we are fully engaged, we connect with, laugh with and uplift the lives of our customers – even if just for a few moments. Sure, it starts with the promise of a perfectly made beverage, but our work goes far beyond that. It’s really about human connection.”
- When our customers feel this sense of belonging, our stores become a haven, a break from the worries outside, a place where you can meet with friends. It’s about enjoyment at the speed of life – sometimes slow and savored, sometimes faster. Always full of humanity.”
- “Every store is part of a community, and we take our responsibility to be good neighbors seriously. We want to be invited in wherever we do business. We can be a force for positive action – bringing together our partners, customers and the community to contribute every day. Now we see that our responsibility – and our potential for good – is even larger. The world is looking to Starbucks to set the new standard, yet again. We will lead.”
- “We know that as we deliver in each of these areas, we enjoy the kind of success that rewards our shareholders. We are fully accountable to get each of these elements right so that Starbucks – and everyone it touches – can endure and thrive.”
On its website, Starbucks professes to fulfill its environmental mission statement as well by understanding environmental issues and sharing information with its partners; developing innovative and flexible solutions to bring about change; striving to buy, sell and use environmentally friendly products; recognizing that financial responsibility is essential to the environmental future; instilling environmental responsibility as a corporate value; measuring and monitoring progress for each project; and encouraging all partners to share in the mission. This is a very ambitious mission, which in large part, Starbucks appears to be achieving. In addition, the company’s values are highly publicized, and adorn the walls of stores across the globe, as well as in press releases and annual reports. Below are the company values:
- Ethical Sourcing
- Customer Wellness
Starbucks demonstrates its values in a number of ways. For example, Starbucks is the only major food and beverage chain to provide health benefits for both full-time and part-time employees. Many employers in the fast food industry do not provide health benefits to part-time employees. Also, each store’s employees are allowed to select which local charities they wish to promote through volunteer hours, products, and cash contributions. For example, in April of 2012, Starbucks contributed 230,000 hours of community service. The company also supports literacy programs and international relief efforts. “Partners” are even eligible for company stock options. Concerned about rising unemployment in the United States, Starbucks opened up a factory in Georgia, which created 200 manufacturing jobs. Starbucks helps sustain coffee communities around the globe through its loan program. In 2011, Starbucks loaned a total of $14 million to 45,000 farmers in seven countries around the globe. On a larger scale, Starbucks not only helps the communities where the stores are located, but also helps to improve the lives of its suppliers. Starbucks Supplier Diversity Program actively seeks out and contracts with suppliers that are either female or minority-owned. Starbucks contributes to the health of the environment in a number of ways, including using recycled paper and plastic, and in 2011 Starbucks achieved a 50% reduction of wastewater in 1000 of its stores by installing a new filtration system. Also, Starbucks provides wellness for its customers through quality products that contain no more than 500 calories and are free from unnecessary ingredients like high fructose corn syrup, artificial flavors, dyes, and artificial trans fats.
Starbucks is unique in that it produces an annual Global Responsibility Goals and Progress Report. The report tracts the company’s progress towards achieving its social responsibility goals. According to the 2011 report, Starbucks is doing an excellent job at achieving its goals (See reports below).
All large global corporations face a whirlwind of criticisms from many directions. Although I believe Starbucks to be an ethical company, I know there are others who have a contrary view. During my research I came across blogs and articles critical of Starbucks because it is so dominant in the market place and because of its adverse impact on smaller competitors. While Starbucks’ phenomenal growth may pose an economic threat to its competitors, it doesn’t make Starbucks unethical. According to business ethicist Thomas Donaldson, a corporation has the following corporate duties:
1. The duty to avoid depriving people of their rights
2. The duty to help protect people from such deprivation
3. The duty to aid those who are deprived
Business ethicist Edwin Hartman also adds one more category to Donaldson’s, which states that a corporation has a duty to avoid helping to deprive. If a corporation can afford to fulfill these duties and can fairly accept responsibility of these duties, than these duties are in fact obligations. Now the question is, does Starbucks fulfill these duties? It certainly seems to fulfill these duties with regards to Starbucks’ employees and customers. Starbucks provides its employees generous benefits and an environment that respects their rights as individuals, regardless of their race, sex, color, or sexual orientation. As for its customers, Starbucks provides quality products and healthy choices. Its community outreach programs and loans to farmers are ways in which Starbucks strives to protect the community from economic hardship. Starbucks works with its vendors to ensure that the rights of people are being protected, and in cases where those rights are not being protected, Starbucks seizes to do business with them. For example, in 2011 Starbucks assessed 129 factories and found 38 factories failed their zero-tolerance standards. As a result they discontinued 26 factories as Starbucks suppliers for standards issues. Starbucks was later able to begin business with 14 of those previously dropped factories due to improved performance and thus was able to fulfill its duty to aid those who were being deprived.
By all accounts Starbucks certainly is an ethical company that meets its stated social responsibilities. A case can be made that this enhances the value of its “brand” in the market place and ultimately enhances shareholder value. As a public company, its brand image in the market place is in the same league as premier public companies such as Ford, Microsoft, and PepsiCo. These are companies that people want to be associated with, whether as a customer or a supplier, everyone wants to work with these companies. To the extent that this was an accident or a marketing ploy to justify higher prices is unclear. In its early years, Starbucks did not appear to promote itself as a company with defined goals of social responsibility as it does today. Starbucks marketed itself as a fun, funky place to get a great cup of coffee served to you from friendly employees. A cynic could allege that Starbucks developed its social conscious as a clever way to justify higher prices for its products. Customers won’t feel bad about paying more for a cup of coffee if they feel they are serving just causes at the same time. But I would argue their point is irrelevant. At the end of the day, Starbucks has demonstrated that a company can grow profitably while acting ethically and serving social responsibilities at the same time. What does it matter whether the awareness of the social conscious occurred early or later in the business cycle? The point is that the goals are not mutually exclusive and in fact may produce a symbiotic relationship from which everyone benefits.
CSRNYC. (2007). Starbucks store, oxford, uk. [Print Photo]. Retrieved from http://www.csrnyc.com/home/currentnews.html
Hartman, E. (1991). Donaldson on rights and corporate obligations. (pp. ages 163-172). Retrieved from http://secure.pdcnet.org/ruffinoup/content/ruffinoup_1991_0003_0000_0163_01 2?file_type=pdf
Johnson, C. (2006). Ethics in the workplace: Tools and tactics for organizational transformation. SAGE. Retrieved from http://books.google.com/books?id=oJN5MTcrh6IC&pg=PT300&dq=starbucks ethics&hl=en&sa=X&ei=V_aaUPvWGujV0gHauYGgDw&ved=0CDwQ6AEwBA
Schultz, H. (2012, 6 30). Interview by J Nocera [Web Based Recording]. Can corporate values drive shareholder value? (with starbucks ceo howard schultz) Aspen Ideas Festival, Retrieved from http://www.aspenideas.org/session/can-corporate-values-drive-shareholder-value-starbucks-ceo-howard-schultz
Smith, J. (2012, 3 12). The world’s most ethical companies. Retrieved from http://www.forbes.com/fdc/welcome_mjx.shtml
Starbucks Corporation. (2012). Retrieved from http://www.starbucks.com/