Hot cups of coffee need cold climates
Starbucks actively mitigates climate risk to maintain coffee supply chain
From bean to cup
Every day, about 2 billion cups of coffee are consumed worldwide. Coffee beans are grown in the “bean belt,” spanning about 70 countries along a latitude, including Colombia, Vietnam, Ethiopia, and Indonesia [1]. Coffee is mainly grown by around 25 million small-scale famers. For example, in Colombia, 95% of the half-million coffee-farms span less than 5 hectares. Moreover, a single species of the coffee plant (Coffea arabica) represents about 70% of all coffee produced[2].
Coffee grows best between 64 and 70 degrees F, and temperatures above 73 cause the plant to fruit prematurely, leading to less aromatic and flavorful beans[3]. In addition, the coffee leaf rust (a plant fungus) thrives at higher temperatures and spreads to infect healthy plants, further decreasing crop yield. As small-scale farmers possess little capacity to adapt to climate changes, current estimates indicate that certain regions will be unable to produce any viable coffee beans as early as 2020. Even if viable coffee is produced, changing climate and rainfall patterns have caused road damage and landslides in rural farming areas, causing direct difficulty in transporting crops. At present, Starbucks obtains more than half of its inventory from small scale farmers that travel to deliver their crops.
Starbucks Response
Over the past several years, Starbucks has actively tried to mitigate climate risk to its coffee supply chain via: 1) policy work, 2) reducing its own carbon emissions, 3) developing programs to assist farmers, 4) conducting research efforts, and 5) diversifying their product offerings.
Starbucks was a founding member of BICEP (Business for Innovative Climate and Energy Policy), which is a consortium of US companies that lobby governments for stronger action against climate change[4]. The company has engaged in grass-roots efforts, and has promoted media sources that educate consumers about climate change. For example, Starbucks stores promoted “Arctic Tale,” a documentary about a walrus pup and a polar bear as they navigate life in a changing Arctic climate[5].
Starbucks is also attempting to achieve a carbon-neutral footprint, meaning that any carbon emissions made by their supply chain is offset by carbon-reducing activities[6]. In 2005, the company purchased enough wind energy to power 5% of all its stores in North America (equivalent to removing 3000 cars off the road)[7]. Starbucks has long used its Coffee and Farmer Equity standards (CAFE) to track intermediate exporters and importers and to ensure farmers are paid fair prices, and that farmers are incentivized to practice good soil management[8]. Starbucks piloted a “Todos Sembramos Café” project in Chiapas in 2014, where it gave away over 100,000 rust-fungus resistant coffee plants to farmers. Following this, in 2015-6, the company planted a coffee tree in Central America for every bag of coffee bought in the US[9].
Starbucks purchased a 240-hectare farm in Costa Rica in 2013 to develop plants that grow at warmer temperatures[10]. The company has also been expanding its products to diversify beyond coffee. In the past years, Starbucks has acquired Evolution Fresh juices, La Boulange Café and Bakery, and Teavana; stores now offer options for tea, fresh-pressed juices, and baked goods. Starbucks spent over $750M in acquisitions to make this possible[11].
Avenues for the Future
In the short term, efforts should be made to diversify and use many species of the coffee plant as a source of beans. Wild coffee plants should be protected as they represent genetic diversity that might be needed for cross-fertilization and development of new disease or temperature-resistant strains. In addition, Starbucks should partner with farmers to identify areas more or less vulnerable to changes in climate. In so doing, they can help farmers optimize when to plant, how long to wait before harvest, and in which areas to plant.
Starbucks should also develop robust monitoring platforms to track which of their risk mitigation strategies are proving to be most efficacious. These platforms should also aim both dovetail with and inform local and national government efforts that are also aiming to protect crops and farmers so efforts are not duplicated or wasted.
Open questions remain as to how to incentivize others in the supply chain (ie export partners) to develop ways to reduce their carbon footprint. Another open question regards whether diversification (including expanding into teas and juices) will prove to be a viable strategy for Starbucks as climates continue to change.
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[1] Watts, C (2016). A Brewing Storm: the climate change risks to coffee, The Climate Institute.
[2] Renton, A. Latin America: How climate change will wipe out coffee crops and farmers. The Guardian: Mar 2014.
[3] Watts, C (2016). A Brewing Storm: the climate change risks to coffee, The Climate Institute.
[4] Thorpe J, Fennell S. Climate change risks and supply chain responsibility. Oxfam Discussion Papers: June 2012.
[5] Green scene: Starbucks to promote arctic tale. (2007, Jun 28). FinancialWireRetrieved from http://search.proquest.com.ezp-prod1.hul.harvard.edu/docview/467450666?accountid=11311
[6] Climate Change and the Coffee Industry. (2010). International Trade Forum, (1), 26.
[7] Hilowitz, A. (2005). Starbucks to Buy Wind Energy to Address Climate Change. Business & The Environment With ISO 14000 Updates, 16(6), 8.
[8] Starbucks strengthens global specialty coffee supply: Openly shares more than a decade of research, verifies 99% of coffee ethically sourced. (2015, Apr 09). Business Wire Retrieved from http://search.proquest.com.ezp-prod1.hul.harvard.edu/docview/1671199916?accountid=11311
[9] Starbucks distributes one million coffee trees to farmers; will plant another tree for every bag of coffee purchased through 2016. (2015, Sep 28). Business WireRetrieved from http://search.proquest.com.ezp-prod1.hul.harvard.edu/docview/1716891136?accountid=11311
[10] Starbucks expands $70 million ethical sourcing program with new global agronomy center. (2013, Mar 19). Business Wire Retrieved from http://search.proquest.com.ezp-prod1.hul.harvard.edu/docview/1317603400?accountid=11311
[11] Storm, S. Starbucks aims to move beyond beans. The New York Times: Oct 2013.
As an avid coffee consumer, this is a great example of how climate change could impact me directly, something that I feel is often missing from the discussion. I think Starbucks has a unique position because of their scale to drive change and research in the industry and I’m happy to see they are not taking a hands-off approach. I am particularly hopeful for their R&D and education efforts in the space. However the diversification effort concerns me as I don’t believe it actually reduces the risk. You mention other items like Tea as an alternative but recent research[1] is pointing towards climate change also having a significantly negative impact on long-term tea production as well. However, given Starbucks core value proposition I don’t see how they can diversify their supply chain away from a climate change risk and that’s why I feel the R&D effort is critical to their long-term success.
[1] Brian Kahn, “Climate Change Poses a Brewing Problem for Tea,” Climate Central, June 4, 2015, http://www.climatecentral.org/news/climate-change-altering-tea-industry-19071, accessed November 2017.
interesting article!
I think there are additional measure that Starbucks could take to reduce its carbon foot print, one is promoting CO2 reduction by favoring coffee bean suppliers that are most innovative in their approach of farming (less carbon footprint) secondly, forming partnerships with microbial technology companies to increase the cropland.
Thanks for the interesting read! This article reminded me a lot of the Sustainability at IKEA case that we did in class, and in particular, I am confused as to why Starbucks doesn’t own more farms. We talked about how vertical integration of the supply chain would allow IKEA to preserve forest/lumber, which is as much a profit-driving reason as it is an environmental consciousness reason. You mentioned that Starbucks purchased its Costa Rica farm in 2013, but my understanding is that the farm is primarily used for research purposes to figure out if there are more weather and fungus resistant strains of coffee that can be developed, in essence, it serves as a research laboratory [1]. My question is why they don’t just purchase farms to own the upstream? This would decrease Starbucks’ susceptibility to influx in coffee bean yields, and allow them to have greater control over the whole supply chain from plant to drink. I would imagine they are spending just as much in educating and getting their partner farms to change their practices.
[1] https://www.reuters.com/article/us-starbucks-coffee-costarica/starbucks-buys-first-coffee-farm-will-research-devastating-leaf-rust-idUSBRE92I14A20130319
Excellent article! Reading this article, I was concerned that increasing the diversity of coffee beans would actually have a negative impact on Starbucks’ carbon emissions. It seems that having small farmers all across the world has a positive impact on the lives of many farmers, but could significantly increase the logistics costs and complexity for Starbucks worldwide. Do they require beans from many regions (whole-bean bags) because they wish to provide variety or because the demand is too high to produce in a few places? My understanding is that that coffee grows best in the mountainous, very wet regions in the tropics, at least that’s what we say in Puerto Rico. According to an article on The Guardian, this method of farming leads to inefficiencies, and some growers have resorted to “sun cultivation” to increase yield, but having a negative impact on the environment through the need of chemical fertilizers and the clearing of millions of rainforest acres. I don’t know what solution can solve this conundrum of reducing the supply chain complexities without sacrificing rainforest or relying on chemicals, but I could imagine agricultors producing coffee in the far future in controlled, greenhouse-like environments without needing to sacrifice quality.
[1]https://www.theguardian.com/environment/2011/oct/04/green-coffee