Reviewing Corporate Social Responsibility of Starbucks

The purpose of this annotated bibliography project is to research and review articles within the last 10 years regarding the corporate social responsibility of the Starbucks Corporation. All the articles I have chosen are relevant, recent, and address the following issues: Starbucks commitment to the environment, Starbucks commitment to the employees, Starbucks commitment to consumers, discussions of ethical and unethical business behavior, and Starbucks commitment and response to shareholders.

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After doing the necessary research, it is obvious that Starbucks and their CEO Howard Shultz are aware of the importance of corporate social responsibility. Every company has problems they can work on and improve in and so does Starbucks. As of recent, Starbucks has done a great job showing their employees how important they are to the company. Along with committing to every employee, they have gone to great lengths to improve the environment for everyone. Ethical and unethical behavior is always a hot topic for the media, and Starbucks has to be careful with the decisions they make and how they affect their public persona.
Commitment to the Environment
The first way Starbucks has shown corporate social responsibility is through their commitment to the environment. In order to improve the environment, with a little push from the NGO, Starbucks first main goal was to provide more Fair Trade Coffee. What this means is that Starbucks will aim to only buy 100 percent responsibly grown and traded coffee. Not only does responsibly grown coffee help the environment, it benefits the farmers as well. Responsibly grown coffee means preserving energy and water at the farms. In turn, this costs more for the company overall, but the environmental improvements are worth it. Starbucks and the environment benefits from this decision because it helps continue to portray a clean image.
Another way to improve the environment directly through their stores is by “going green”. Their first attempt to produce a green store was in Manhattan. Starbucks made that decision to renovate a 15 year old store. This renovation included replacing old equipment with more energy efficient ones. To educate the community, they placed plaques throughout the store explaining their new green elements and how they work. This new Manhattan store now conserves energy, water, materials, and uses recycled/recyclable products. Twelve stores total plan to be renovated and Starbucks has promised to make each new store LEED, meaning a Leader in Energy and Environmental Design. LEED improves performance regarding energy savings, water efficiency, and emission reduction. Many people don’t look into environmentally friendly appliances because the upfront cost is always more. According to Starbucks, going green over time outweighs the upfront cost by a long shot. Hopefully, these new design elements will help the environment and get Starbucks ahead of their market.
Commitment to Consumers
The second way Starbucks has shown corporate social responsibility is through their commitment to consumers. The best way to get the customers what they want is to understand their demographic groups. By doing research on Starbucks consumer demographics, they realized that people with disabilities are very important. The company is trying to turn stores into a more adequate environment for customers with disabilities. A few changes include: lowering counter height to improve easy of ordering for people in wheelchairs, adding at least one handicap accessible entrance, adding disability etiquette to employee handbooks, training employees to educate them on disabilities, and by joining the National Business Disability Council. By joining the National Business Disability Council, Starbucks gains access to resumes of people with disabilities.
Another way Starbucks has shown commitment to the consumers is by cutting costs and retaining loyal customers. For frequent, loyal customers, Starbucks decided to provide a loyalty card. Once a customer has obtained this card, they are given incentives and promotions for continuing to frequent their stores. Promotions include discounted drinks and free flavor shots to repeat visitors. Also, with the economy being at an all time low, Starbucks realized that cheaper prices were a necessity. By simplifying their business practices, they were able to provide lower prices for their customers. For example, they use only one recipe for banana bread, rather than eleven!
It doesn’t end there either! Starbucks recognized that health is part of social responsibility. To promote healthier living, they introduced “skinny” versions of most drinks, while keeping the delicious flavor. For example, the skinny vanilla latte has 90 calories compared to the original with 190 calories. Since Starbucks doesn’t just sell beverages now, they introduced low calorie snacks. Along with the snacks and beverages, nutrition facts were available for each item.
Also one big way to cut costs was outsourcing payroll and Human Resources administration. By creating a global platform for their administration system, Starbucks is able to provide more employees with benefits. Plus, they are able to spend more money on pleasing customers, rather than on a benefits system.
Commitment and Response to Shareholders
One way Starbucks has demonstrated their commitment and response to shareholder needs is by giving them large portions. By large portions, Starbucks is implying that they plan pay dividends equal to 35% or higher of net income to. For the shareholders, paying high dividends means certainty about the company’s financial well-being. Along with that, they plan to purchase 15 million more shares of stock, and hopefully this will attract investors who focus on stocks with good results.
Starbucks made their commitment to shareholders obvious by speaking directly to the media about it. In 2004, Starbucks won a great tax break, but unfortunately the media saw them as “money grubbing”. Their CEO, Howard Shultz, made the decision to get into politics and speak to Washington about expanding health care and the importance of this to the company. Not only does he want his shareholders to see his commitment, but he wants all of America to be able to reap this benefits.
In order to compete with McDonalds and keeping payout to their shareholders high, Starbucks needed a serious turnaround. They did decide to halt growth in North America but not in Japan. Shultz found that drinking coffee is becoming extremely popular for the Japanese. To show shareholders there is a silver lining, he announced they plan to open “thousands of stores” in Japan and Vietnamese markets.
Commitment to Employees
The first and biggest way Starbucks shows their commitment to employees is by just taking care of their workers. For example, they know how important health care, stock options, and compensation are to people in this economy. The Starbucks policy states that as long as you work 20 hours a week you get benefits and stock options. These benefits include health insurance and contributions to employee’s 401k plan. Starbucks doesn’t exclude part time workers, because they feel they are just as valuable as full time workers. Since Starbucks doesn’t have typical business hours like an office job, the part time workers help working the odd shifts.
Another way Starbucks shows their commitment to employees is by treating them like individuals, not just number 500 out of 26,000 employees. Howard Shultz, CEO, always tries to keep humanity and compassion in mind. When he first started at Starbucks, he remembered how much he liked it that people cared about him, so he decided to continue this consideration for employees. Shultz feels that a first impression is very important. On an employee’s first day, he lets each new employee know how happy he is to have them as part of their business, whether it is in person or through a video. His theory is that making a good first impression on a new hire is similar to teaching a child good values. Through their growth, he feels each employee will keep in mind that the company does care about them. Shultz wants people to know what he and the company stand for, and what they are trying to accomplish.
Ethical/Unethical Business Behavior
The last way Starbucks demonstrates corporate social responsibility is through ethical behavior and the occasional unethical behavior. The first ethically positive thing Starbucks involves them self in is the NGO and Fair Trade coffee. Even though purchasing mostly Fair Trade coffee seriously affected their profits, Starbucks knew it was the right thing to do. They also knew that if they did it the right way, everyone would benefit, from farmers, to the environment, to their public image.
In the fall of 2010, Starbucks chose to team up with Jumpstart, a program that gives children a head start on their education. By donating to literacy organizations and volunteering with Jumpstart, Starbucks has made an impact on the children in America, in a very positive way.
Of course there are negatives that come along with the positives. Starbucks isn’t the “perfect” company like it may seem. In 2008, Starbucks made the decision to close 616 stores because they were not performing very well. In order for Starbucks to close this many stores in one year, they had to battle many landlords due to the chain breaking lease agreements. Starbucks tried pushing for rent cuts but some stores did have to break their agreements. On top of breaching lease agreements, Starbucks was not able to grow as much as planned, resulting their future landlords were hurting as well. To fix these problems, tenants typically will offer a buyout or find a replacement tenant, but landlords are in no way forced to go with any of these options. These efforts became extremely time consuming and costly, causing Starbucks to give up on many lease agreements.
As for Starbucks ethical behavior is a different story when forced into the media light. In 2008, a big media uproar arose due to them wanting to rerelease their old logo for their 35th anniversary. The old coffee cup logo was basically a topless mermaid, which in Starbucks’ opinion is just a mythological creature, not a sex symbol. Media critics fought that someone needed to protect the creature’s modesty. Starbucks found this outrageous. In order to end the drama and please the critics, they chose to make the image more modest by lengthening her hair to cover her body and soften her facial expression. Rather than ignoring the media concerns, Starbucks met in the middle to celebrate their 35th anniversary.
Subject Area 1: Commitment to the Environment
 
Non-government organizations are concerned with the concept of Fair Trade. NGO hoped Starbucks would buy into Fair Trade Coffee. This posed problems for Starbucks. Knowing that NGO has quite a bit of media pull, they knew they had to do something to please the NGO. In order to keep their clean image, Starbucks had to compromise with the NGO and introduce Fair Trade Coffee for a period of time. Since it wasn’t going to be forever, this benefited Starbucks and helped out the farmers.
 
Starbucks has made several goals to improve the community and the environment. They have attempted to double the purchases of Fair Trade and conserve water in the last 2 years. While they are still continuing these goals, Starbucks is hoping to reach a long-term goal of only buying 100 percent responsibly grown and traded coffee. Also in 2009, the progressed towards more energy efficient farming to reduce energy use by 25 percent. By 2015, all of their paper products will be reusable or recyclable. Collaboration with the NGO and recyclers will make this possible.
 
To help draw in new customers and to please the already loyal ones, Starbucks completely renovated their 15 year old store in Manhattan. A more intimate, modern feel was created to draw in on their rich heritage. This Manhattan store is just one of the twelve stores worldwide that are going green. Each of the twelve stores conserves energy, water, materials, and recycles. To show customers and employees how it works, they have places plaques that explain green elements throughout the store. Starbucks has done this in hopes that people will see what they have done for the environment and follow their lead. Many people think going green is expensive, but Starbucks claims over time the enormous savings outweigh the upfront costs.
 
Starbucks has realized its unique market position. They recently pledged that each new store built will be Leadership in Energy and Environmental Design (LEED) and are expanding into ready brew coffee, which is essentially instant. LEED uses recycled and reused materials to build and create each store. They hope to get ahead of the market with their innovative products and environmentally friendly designed stores. To continue to grow and become even more successful, commitment to consumers and the environment has shown to be important to the Starbucks Corporation.
Subject Area 2: Commitment to Consumers
 
Starbucks has been struggling to keep their “romance and theatre” imagine, yet compete with the world’s largest fast-food chain McDonalds. In the last 2 years, Starbucks has had trouble keeping their share-price up. Many analysts feel this is due to too much expansion in America and all-time high prices. Resulting from this, customers are choosing quicker coffee stops such as McDonalds and Dunkin’ Donuts. Just when Starbucks thought it couldn’t get worse, McDonalds introduced Starbucks-style coffee bars to many restaurants. Starbucks has had to “water down” their image in order to compete with this type of market. To loyal customers, this appeared as if Starbucks was losing their passion for coffee.
 
Starbucks has grown between 1995 and 2005 faster than any McDonald’s growth period in history. Unfortunately, with the downturn in the economy, Starbucks has been facing many challenges. Sales have been at a low and they will have to make some improvements to get back to where they were 5 years ago. Starbucks plans to increase marketing and sell packaged coffee at a more competitive price. Even with the tough competition from McDonald’s and other fast-food businesses, Starbucks is said to return good as new in a few years.
 
In 2008, Starbucks decided to place an emphasis on cutting costs and retaining a customer base. In order to retain customers, Starbucks chose to implement a loyalty card that provided customers with promotions that lead to cheaper drinks and keeps customers from frequenting other coffee sellers. To cut costs, they did decide to close several stores. Simplifying the business also helped cut costs. For example, Starbucks is now using one recipe for their banana bread, rather than eleven. Fortunately, they have realized that McDonald’s isn’t cutting into their sales as much as predicted, which is a good sign for the company.
 
Starbucks is aiming to understand demographic groups better. They have realized that people with disabilities have become an important group. Starbucks is attempting to enhance ethical leadership throughout the company by making Michelle Penman, a 36 year old woman with cerebral palsy, a literal model employee. The company is trying to make stores more adequate for customers and employees with disabilities. Counter height has been lowered at many stores for an easy reach by customers and workers in wheelchairs. Each store has also added at least one handicap accessible entrance. Shortly after, disability etiquette had been added into employee training. This training mostly consists of day-to-day matters people with disabilities deal with. In addition, when recruiting new workers, Starbucks as joined the National Business Disability Council to access resumes of people with disabilities. Since by law employees are not required to record disability information on an application, it is hard to measure the progress. Starbucks wants the best talent, no matter who it is.
 
Part of social responsibility is keeping people healthy. Healthy food and drink, plus dieting are at an all time high. Starbucks chose to introduce “skinny” versions of their most popular drink choices. For example, the skinny vanilla latte has only 90 calories compared to the regular version with 190 calories. Along with the skinny beverages, they introduced low calorie Panini sandwiches and snacks for their health conscious customers. In order to education consumers, they also distributed brochures with all the nutrition facts for their products.
 
A recent study found that Starbucks customers would prefer lower prices over new menu items. 65% of customers said if prices were lower, they would return to frequenting Starbucks stores. Along with lower prices, customers would like to see more reward programs, so Starbucks launched a program that offered free flavor shots to repeat visitors. Fortunately for Starbucks, even though McDonalds offers lower prices the quality of coffee doesn’t compare to Starbucks. The survey revealed that Starbucks customers aren’t going to McDonalds instead, meaning they do have loyal customers.
 
For Starbucks, Corporate Social Responsibility serves two roles. They first make sure that social responsibility awareness is at the top of their list when decision making. The second role was to make sure they carry out what they said they were going to do. An annual report follows up with results and progress. Starbucks runs their system as an important supporting action.
Subject Area 3: Commitment and Response to Shareholders
 
In 2004, the Starbucks Corporation won a tax break. Unfortunately, the media saw this as a “money-grubbing” move. Starbucks then decided to hire a lobbying firm. The CEO chose to speak to Washington about expanding health insurance coverage to more workers. He explained his commitment to shareholders and value of employees and how important providing decent health care is to the company. He described how he hoped that this commitment should extend to all of America.
 
Starbucks realized that customers and shareholders like big portions, whether it is of coffee or dividends. This giant serving went to the shareholders. The corporation announced its planning to pay dividends equal to 35% or higher of net income. On top of that, Starbucks plans to purchase 15 million more shares. They plan to attract investors who focus on stocks with a good yield.
 
According to Wall Street, Starbucks was forecasted to have shares at 70 cents each. By the end of 2009, they proved him wrong with shares at 75 cents each. Starbucks began benefitting from their advertisements, becoming the most popular brand on Facebook. With the serious competition fast food chains have imposed, this national marketing campaign had no room for failure.
 
Starbucks is in need of a serious turnaround like McDonalds pulled off in the past. Unfortunately for Starbucks, it is going to be a bit more difficult because it is less in the control of the Starbucks Corporation; this is because they have expanded their customer base further than upper-income customers. Since they are closing 600 locations, Starbucks CEO hopes customers will migrate to other locations, not competitors. This will be tough to avoid since McDonalds and other fast food chains are beginning to offer similar products.
Sanchanta, M.  (2010, April 14). Starbucks plans big expansion in China — Chief executive says coffee giant has turned its fortunes around, is eager to crack markets in India and Vietnam. Wall Street Journal  (Eastern Edition),  p. B.10. 
 
Starbucks CEO Howard Shultz announced that the corporation plans to expand into Japan. This large expansion would make Japan the country with the second most Starbucks stores, first being North America. According to Shultz, they plan to open “thousands of stores” in Japan and possibly more into Indian and Vietnamese markets. Drinking coffee has become popular for the Japanese making this an easier area to grown into. As for growth in China, Shultz claims a more tactical growth strategy. Over time, he sees China with thousands of stores as well. A good method may be to target the younger generation who are consumed by the internet.
Subject Area 4: Commitment to Employees
 
Starbucks aims to constantly be mindful of the public’s view on them. In order to do this, Howard Schultz must keep a sense of humanity and compassion in mind. He knows how important health care, stock options, and compensation are for many employees. As long as employees work 20 hours a week, they are given benefits and stock options. Schultz does not ignore health care reform either; instead, he speaks publically about it. He explains to his customers and employees that he wishes to “remain small even as it gets big”, meaning that he will continue to treat his employees as individuals. Corporate Social Responsibility has always been near the top of his list. Shultz hopes to continue keeping Starbucks as the perfect place between the consumer’s home and work.
 
Since the economy has been at an all time low in the last few years, companies have had to cut costs anywhere and everywhere possible. In 2008, Starbucks had to inform their employees that they have the right to decide whether they want to contribute to their 401k plan. With this extra cash, Starbucks feels they are able to provide more employees with benefits. Using the utilitarian method, they plan to provide greatest good for the greatest number of employees. Fortunately for Starbucks employees, this cut back was as a last resort to cut costs. Many companies cut benefits altogether.
 
Starbucks aims to make a lasting first impression on an employee’s first day of work, in a good way of course. Howard Shultz remembers how important it was to him that people cared. He know show new hires how much he cares, by telling employees how happy he is to have them aboard, even if it is by video. Shultz doesn’t discriminate based on full time or part time workers, even though part time workers are notorious for high turnover. The theory at Starbucks is making a good impression to a new worker is like teaching a child good values. They want people to know what they stand for and what they are trying to accomplish, and there is no better time than an employee’s first day.
 
Starbucks plans to outsource payroll and Human Resources administration for US and Canadian employee benefits. In turn, this outsourcing deal will help create a global platform for their HR. Administrative HR systems are extremely costly and companies prefer to spend their money on customers not a benefits system. This type of outsourcing will not only save them money but it will help avoid future increasing costs. Fortunately for HR employees, the ones that stay behind will still have a job and can focus on the bigger picture.
Subject Area 5: Ethical/Unethical Business Behavior
 
Johnson & Johnson, The Timberland Company, Michael Mayo, Maiden Mills, SC Johnson, and Starbucks all devote a significant amount of effort to ensure corporate social responsibility. In order for Starbucks to keep their turnover rate low, they have realized that awareness of social responsibility is a big help. They give part time and full time employees or “partners” benefits and stock options. Not only does Starbucks help out their employees, but they do volunteering as well. They provide grants for nonprofit organizations when employees volunteer. Literacy is very important to their CEO, so he donated to nonprofit literacy organizations across America. In addition, he teamed up with Jumpstart, which is a program that gives preschool children an educational head start.
 
To please nongovernment organizations, Starbucks had to implement Fair Trade coffee. To give small famers an income sufficient enough to live off of, Starbucks chose to work off the standards they set for themselves and sell Fair Trade Coffee as much as possible. The NGO still wasn’t satisfied because they wanted ALL coffee to be Fair Trade. Starbucks knew that this would seriously affect their profit. In this economy, it wasn’t possible for them to do right away; this lead to confrontation between Starbucks and the NGO.
 
In 2008, Starbucks announced that they planned to close 616 stores that weren’t performing up to par. Starbucks was then forced to battle many landlords due to the chain looking to break leases. Many tenants similar to Starbucks have found offering a buyout or finding replacement tenants as a settlement offering. Unfortunately, these efforts can become costly and time consuming, which Starbucks didn’t have. Since they have to close so many current stores, Starbucks will also have to hold off on scheduled new store openings.
 
Starbucks, like many other coffee shops, provides books and magazines to buy and read while you enjoy your favorite cup of coffee. The William Morris Agency (WMA) scouts books for Starbucks to put on their shelves. One of their most popular sellers is For One More Day by Mitch Albom. William Morris represents Starbucks and authors simultaneously and many agents feel this is a conflict of interest for the Starbucks Corporation. Starbucks admits asking for a special two-week exclusive but no special discounts and everything William Morris does for them has had approval from the coffee
 
Starbucks 35th anniversary took place in 2008, and the corporation planned to use their old logo for the cups to celebrate. Unfortunately, the media went crazy over their topless mermaid, which is a mythological creature. Critics claim that they need to protect siren’s modesty. The mermaid was not depicted nude, but it was obvious that she was topless with hair covering her breasts. To make the image more modest, they chose to lengthen her hair and soften her expression, which make it a more appropriate design. Instead of ignoring people’s concerns, Starbucks met in the middle for their 35th anniversary.
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