Starbucks: How to Save Our Coffee from Climate Change

Do not ever take your cup of coffee for granted

Coffee Tree is Naive

The coffee tree is notorious for being picky about its climate condition. It is a tropical evergreen that only grows between Tropics of Cancer and Capricorn where the average temperature is 15 to 24ºC, and also requires annual precipitation of 1,500mm to 3,000mm [1]. The increase in average temperature together with unprecedented weather patterns have deteriorated the growing condition, resulted in lower quality coffee, increase in diseases such as the coffee leaf rust, decrease in production yield, and most importantly, shrink in suitable land for coffee cultivation. Globally, it is estimated that 50% of the land currently used to grow coffee will become unsuitable for coffee production by 2050, resulting in drop in quantity and rise in prices [2].

Why Climate Matters to Starbucks

Starbucks is one of the largest global coffee chain that operates over 25,000 stores worldwide, and in 2015 purchased 550 million lbs. of coffee bean, which accounts for approximately 5% of the coffee bean demands in the world [3] [4]. As coffee bean accounts for majority of the ingredients used at Starbucks, impact of climate change on coffee bean production is threatening Starbucks’s supply chain and its business prospects in long term.

Starbucks’s Approach

Knowing the threat is approaching day by day, management of Starbucks has been taking number of actions from different angles to not only alleviate the impact, but also adapt to the climate change.

First, Starbucks has been directly tackling the roots of the climate change – emission of greenhouse gas. The company has recently installed Energy Management Systems in 6,000 stores to optimize heating and cooling system to conserve energy [5]. The company has also been an active purchaser of renewable energy, achieving the goal of purchasing the renewable energy equivalent to the energy used at operating stores worldwide, and subsequently becoming top ten purchaser of renewable energy in the U.S [4]. At the same time, the company also targeting to reduce the energy consumption by 25% in comparison to 2008 by promoting innovation in store and equipment design. As for 2015, the company has only achieved reduction by 4.3%, given increase in number of customers, together with increase in food consumption. [3].

Second, Starbucks has taken adaptation approach to climate change as well. In 2013, the Company purchased a 240-hectare coffee farm in Costa Rica to experiment coffee-growing practices and test coffee tree that survive under warmer temperature [6]. To accelerate the movement, the company started Every Bag Commitment campaign in 2015, not only to plant improved tree in Central America for every bag of coffee bought in the U,S. to combat the widespread coffee leaf rust, but also to provide financial support to farmers impacted by the disease to help them maintain their business [6].

Lastly, Starbucks has not only been passively reacting to climate change, they have been trying to actively change the society’s mindset about climate Change. Along with other consumer-facing companies, the company became the founding member of Business for Innovative Climate and Energy Policy, to encourage the government to take stronger measures and legislative actions to climate change [7]. It also provides the member companies with the knowledge to effectively engage with government on energy policies.

What Should Starbucks Do?

While Starbucks has been taking numerous actions to counter the climate change, there are additional measures the company should take to better manage its global supply chain. First, Starbucks needs to strengthen its tie with government, and educate them to ensure it takes the correct approach towards the climate change. It is clear from President Trump’s decision to withdraw U.S. from Paris Agreement that, the government is neglecting the environment. Starbucks must prevent such legislative actions from occurring in the future.

Starbucks is currently focusing on improving the coffee trees, so it could adapt to the changing climate and temperature. However, over the medium-term, Starbucks should launch a program to conduct research to seek for areas that will newly become suitable for coffee production post climate change. Once such area is spotted, it could initiate the negotiation with local government and farmers to possibly converting the land for coffee use in the future to better accommodate for the climate change.

One concern which Starbucks is facing is how to collaborate with its stakeholders to tackle the climate change together. As the industry leader, Starbucks is taking number of costly actions on its own to alleviate the impact. However, no matter how influential Starbucks is, the social inertia limits its ability. It is impossible for Starbucks to make changes on its own – the company needs support from rest of its supply chain partners, shareholders, consumers, government, and rival coffee chains. What should Starbucks do with each stakeholder to gain their buy-in to combat the climate change together?

 

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Sources

[1] “Where Coffee Grows”, Coffee and Health from the Institute for Scientific Information of Coffee (2017),

http://www.coffeeandhealth.org/all-about-coffee/where-coffee-grows/

[2] Byrnes, N., “Starbucks Responds to Climate Change, with Mixed Results”, MIT Technology Review (May 9, 2016),

https://www.technologyreview.com/s/601404/starbucks-responds-to-climate-change-with-mixed-results/

[3] “Global Responsibility Report 2015”, Starbucks (May 24, 2016),

https://globalassets.starbucks.com/assets/ee8121c1a6554399b554d126228d52ed.pdf

[4] “Historical Data on the Global Coffee Trade”, International Coffee Organization (2017),

http://www.ico.org/new_historical.asp

[5] “Water and Energy”, Starbucks (2017),

https://www.starbucks.com/responsibility/environment/water-and-energy

[6] “Starbucks Expands $70 Million Ethical Sourcing Program With New Global Agronomy Center”, Business Wire (March 18, 2013),

http://www.businesswire.com/news/home/20130318006738/en/Starbucks-Expands-70-Million-Ethical-Sourcing-Program

[7] “Climate Change”, Starbucks (2017),

https://www.starbucks.com/responsibility/environment/climate-change

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4 thoughts on “Starbucks: How to Save Our Coffee from Climate Change

  1. I absolutely agree with this article. I do believe though that there are additional measures that Starbucks can take to fight climate change. firstly, Starbucks could impose rules and regulations on suppliers, rather than buying lands, of coffee beans in terms of how these beans are planted and harvested. secondly, a joint effort between Starbucks and microbial technology companies (such as Indigo and Monsanto) can help increase the footprint of cropland.

  2. Thank you for your analysis of this important effect on my chemical romance.

    I tried to import Arabica coffee beans from Central America when coffee planters were struggling with whether to plant their tropical evergreens in local forests among other local flora and fauna or continue to clear local forests to plant coffee bean trees. Interesting that Starbucks has the ability to address climate change on multiple fronts, including direct support of farmers from whom they source. While wheat leaf rust may be due to the effects of global warming and climate change in part, these effects have been compounded by land use strategies that have been in place for many centuries. Perhaps Starbucks can use this opportunity to not only restore damages done to farmers but to promote better farming practices for others and sourcing practices themselves. Experimentation with their own 240 hectare farm will be essential for proof of concept. While sourcing from new areas coffee-producing areas less affected by climate change may help Starbucks’ business, its commitment to best practices of sustainability and climate change mitigation will do more to prevent further damage by acting as an industry leader.

  3. Coffee Lover, thank you for a great article! I really enjoyed the read. Undoubtedly coffee producers need to address the issue of coffee beans production being negatively affected by climate change. After it is their #1 raw material cost. However, reading this article triggered a couple of questions. Will Starbucks be most negatively affected by this widespread phenomenon affecting the entire coffee industry? In some ways, Starbucks can leverage its huge volume, steady demand, and relationship with coffee beans suppliers to maintain consistent coffee beans supply. However, small coffee producers (e.g., local coffee shop, small coffee shop) may not have the scale and position to do so. This might mean that small / fragmented coffee producers, not Starbucks, could be the first “victims” of this climate change impact. As such, if the impact on Starbucks is relatively lower than the impact on other smaller coffee producers (potentially competitors), doesn’t it create misaligned incentives for Starbucks to combat the impact of climate change on coffee beans? I believe Starbucks, as an industry giant, has the corporate social responsibility to take actions against climate change, but how do we make sure we align incentives to make sure that Starbucks is willing and eager to take this leadership role in the industry?

  4. Coffee lover – great post! I think that Amia’s point is both concerning and valid. The issue here though is that Starbucks’ corporate responsibility may be in direct conflict with its corporate objectives. For example, if Starbucks supports more localized coffee producers, Starbucks may be cannibalizing its own market share. In addition, since Starbucks is a public company and its primary duty is to shareholders, Starbucks may not be able to choose to invest fully in sustainability practices. Given the size of Starbucks and prevalence of Activist shareholders, I can imagine a situation where the company is criticized for investing in seemingly “unprofitable” corporate responsibility (CSR) or climate change investments. I am not sure what the solution to this problem is, except communicating clearly to shareholders and continuing to find “win-win” CSR projects that investors cannot refute.

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