Starbucks: the future isn’t brew-tiful

Coffee is under attack. Can Starbucks save the day?

Why does Starbucks care about climate change?

Climate change is not a looming threat; it is already affecting coffee crops across the globe. Tanzania, has already seen production decline by roughly 137 KG per hectare for every degree-Celsius increase in temperature. The result is a 50% drop in production since the 1960s [2].

Rising temperatures and shifting rainfall patterns have also triggered breakouts of pests and disease: in 2012, coffee leaf rust (a fungus), damaged 50% of Central America’s coffee [2].

Whilst these climate change effects are common to many crops, coffee is especially vulnerable since it’s gene pool has little depth. Currently only two types of coffee are grown for human consumption: arabica and robusta. Since farmers have typically not selected for diversity when breeding these species, crops have not evolved to exist in either warmer or wetter conditions. This lack of diversity also exacerbates the effects of pests and disease [3].

What is Starbucks doing about it?

Starbucks has responded to the challenge by working with farmers to develop their ability to grow coffee in warmer climates and by reducing its own environmental footprint.

At the farm level, Starbucks has built a set of standards for their farmers to follow. These include shade and tree conservation to protect crops and reduce the risk of disease and pests [1]. Starbucks has also worked directly with farmers to experiment with new growing techniques: in 2014 they were able to commercialize a new strain of fungal-resistant coffee which they developed with a Costa Rican cooperative [1]. Starbucks has typically been generous with its findings, operating Farmer Support Centers in many of its coffee producing regions. These centers offer farmers free access to information and training on agronomical advances [4].

With respect to its environmental footprint, Starbucks has focused on renewable energy and energy conservation [5]. In 2016 Starbucks was named one of the top 10 purchasers of renewable energy in the US [6]. Through purchasing Renewable Energy Certificates (RECs) equivalent to 100% of its store energy utilization, Starbucks has been able to support the development of cleaner energy sources. REC purchases provide additional revenue to wind-farm owners, which allows them to offer electricity at prices that are competitive with fossil fuel and power plants [6]. Additionally, since 2008, Starbucks has sought to gain global green building accreditation through integrating green building design into all its stores. Recently, Starbucks has also installed Energy Management Systems in roughly 6000 of its stores [7]. These systems optimize heating and cooling [5].

Finally, Starbucks is a key lobbyer for progressive climate change policy: Starbucks helped found the advocacy group BICEP (Business for Innovative Climate and Energy Policy) which enables it to work with other companies to advocate for new policies [5].

Is Starbucks doing enough?

Though Starbucks has shown positive steps forward in combating climate change, its journey has been challenging and laden with conflicts.

One of the conflicts that Starbucks has had to reconcile is that its efforts to reduce its carbon footprint is offset by its desire to grow into different sectors [5]. One example is the addition of hot food to its menu: this required more refrigeration and ovens and therefore more energy [1]. The results of this can be seen in Exhibit A.

Exhibit A [5]

Another is that the producing the raw materials it requires such as wood and palm-oil drives deforestation; recently Starbucks scored a 10 out of 100 for its minimal procurement of the more expensive deforestation-free palm oil [8].

In addition to challenging themselves to prioritize their environmental efforts when such conflicts arise, something else I would like to see is an extension of their energy savings focus to include transportation as well as stores.  Though transporting coffee materials accounts for up to 30% of Starbucks’ overall Green House Gas footprint, no initiatives have been taken by the company to minimize this [9]. I would like to see them extend their REC purchases to cover 100% of all their emissions (not just those generated from store operations) and since they don’t own their own fleet, I would also like to see them extend their lobbying activity to promote improvements in the energy efficiency of trucks. A loftier goal, but arguably more effective, would be to move partly from road to rail: trains are much more efficient [10]!

Is any of this enough?

Starbucks can’t change the world alone. No matter what they achieve in isolation, the impact on the industry can only be meaningful if Starbucks brings companies along with them on this journey. I would therefore encourage Starbucks to capitalize on the good work it has already done by promoting the leaps forward it has taken and  the benefits it has seen them yield.

Word Count: 792

References

[1] Nanette Byrnes, “Starbucks Responds to Climate Change, with Mixed Results,” MIT Technology Report, (May 2016), accessed November 2017, https://www.technologyreview.com/s/601404/starbucks-responds-to-climate-change-with-mixed-results/.

[2] Michael Slezak, “Climate change predicted to halve coffee-growing area that supports 120m people,” The Guardian, (August 2016), accessed November 2017, https://www.theguardian.com/environment/ 2016/aug/29/climate-change-predicted-to-halve-coffee-growing-area-that-supports-120m-people.

[3] Caitlin Dewey, “Science could save coffee from climate change,” The Times, (October 2017), accessed November 2017, http://www.timesonline.com/business/20171022/science-could-save-coffee-from-climate-change.

[4] Starbucks, “On the ground support for Farming Communities,” accessed November 2017, https:/ /www.starbucks.com/responsibility/community/farmer-support/farmer-support-centers.

[5] Starbucks, “Climate Change,” accessed November 2017, https://www.starbucks.com/responsibility/ environment/climate-change.

[6] Starbucks, “Greener Energy,” accessed November 2017, https://www.starbucks.com/responsibility/ environment/water-and-energy

[7] Starbucks, “Greener Stores,” accessed November 2017,  https://www.starbucks.com/responsibility/ environment/leed-certified-stores

[8] Union of Concerned Scientists, “Palm Oil Scorecard 2015: Fries, Face Wash, Forests,” accessed November 2017, http://www.ucsusa.org/global-warming/stop-deforestation/palm-oil-scorecard-2015.

[9] Forbes, (July 2007), Accessed November 2017, https://www.forbes.com/2007/07/02/starbucks-emissions-environment-biz-cz_sn_0703green_carbon.html#154f30b52681

[10] https://www.washingtonpost.com/national/health-science/lets-make-an-effort-to-move-more-freight-by-rail-and-less-by-road-trains-are-more-efficient/2014/03/03/d1947278-9d90-11e3-9ba6-800d1192d08b_story.html?utm_term=.15adcbf216d2

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12 thoughts on “Starbucks: the future isn’t brew-tiful

  1. I agree with your suggestions on what Starbucks should be doing about its environmental impact, but I’m really interested in this climate-change induced coffee production decline and the impact of pests like leaf rust. My hunch was that a lot more R&D is going to be needed to develop coffee plants that are resistant to both of these harmful effects. After looking at that Starbucks initiative you mentioned, it looks like it was a fairly small pilot, so I checked out some other places. Unfortunately it looks like some of these attempts have not gone so well (https://worldcoffeeresearch.org/news/coffee-leaf-rust-resistant-coffee-variety-overcome-honduras/). This article talks about how Lempira, a coffee variety that was once resistant to leaf rust, seems to have lost its resistance. This one (https://worldcoffeeresearch.org/news/starmaya-future-coffee/) talks about some other initiatives to improve coffee production through breeding and biotechnology.

    If these kinds of things don’t pay off, I worry that the next resort in battling these types of diseases is increasing use of fungicides or other chemical treatments that could have secondary effects on health or the environment. As you mentioned, the economic impact of these coffee diseases can be massive. But in addition to the obvious effect on our access to coffee and coffee prices if production drops off, I’m especially concerned about the impacts on the communities that depend on coffee production for their livelihood. This is definitely an area where some serious research is needed ASAP.

  2. I’m inspired by a lot of what Starbucks is doing to minimize their environmental impact, even though it looks like there is a lot more they should/could be doing. If climate change is or soon will be impacting their access to coffee beans because of decrease crop yields, they need to do more now. They may need to partner with companies like Indigo Agriculture to develop more fungus and heat resistant beans.

    Investors may be skeptical of Starbucks spending millions of dollars to fund R&D to help secure their supply of beans. The PR messaging of such investments will be critical to ensure that their stock does not suffer as a result of such investments. If done the right way, such investments can enhance Starbucks brand as environmentally-conscious and continue to drive sales from consumers who want to support environmentally conscious companies.

  3. This article was eye-opening with regards to some very real impacts climate change is having on the supply of coffee beans. While it may seem unclear what actions Starbucks needs to take, it appears that Starbucks is indeed focused on trying a variety of strategies out. For example, one strategy Starbucks seems to be employing is creating a gene bank; this would maintain the biodiversity of the specific coffee . Furthermore, Starbucks is cataloging information on specific beans’ yields, pest resistance and other related factors. This will allow them to track data and be more adaptive when choosing which beans to grow and in which markets (https://www.nytimes.com/2016/09/23/science/climate-change-threatens-worlds-coffee-supply-report-says.html). Ultimately, the problem that Starbucks is facing is one that all major food and beverage suppliers that rely on basic commodities as primary inputs have to deal with. It will be interesting to see what methods they can employ in order to avoid selling inferior or more expensive coffee, due to a challenged supply chain.

  4. Even though I drink coffee every day, I knew little about the magnitude of the environmental issue facing Starbucks’ in terms of the shift and overall decrease in land available to grow coffee crops. What makes the problem even bigger is that even a small increase in temperature in areas where coffee is grown can dramatically affect the taste of coffee [1] and Starbucks doesn’t have full control over each field where coffee is grown to ensure environmental friendly practices are always followed by growers. What I would be curious to see is how what it looks like increasing investments to develop pest- and temperature-resilient beans will translate into prices to consumers and how much will Starbucks absorb from this spend. A grande mocha latte for $4.25 is already quite pricey 🙂

    [1] http://www.cnn.com/2017/06/21/world/coffee-climate-change-trnd/index.html

  5. As I read this, I couldn’t help but think of the case on the sustainability efforts at IKEA. My lasting takeaway from that case was that IKEA was putting in lots of effort, but it was debatable as to what overall effect they were having, especially with a goal that was focused on growth and extending into emerging market. It would appear that Starbucks is in the same boat, so to speak. It’s great that Starbucks is buying RECs and helping to fund renewable energy efforts, but as you mentioned, they are also expanding their business to include more foods that require refrigeration and that is increasing their greenhouse gas footprint. Similar to IKEA, if the bottom line is to expand the business, you will be consuming more resources by default. It’s great that these companies want to help offset the negative effects they are having on the environment, but it doesn’t appear that they can get past having a net negative impact so long as they are focused on growth.
    I also thought it was interesting that Starbucks is enforcing stricter standards on the farmers who supply coffee beans, but it wasn’t clear as to who was paying for these new requirements. If Starbucks is passing the costs off on the farmers, then this is actually a negative in my opinion. If Starbucks is paying for the additional requirements then this is commendable. Either way, the effects of sustainability on the bottom line cannot be ignored when talking about a for profit, publicly traded company. It was mentioned that Starbucks could potentially raise prices to cover this extra cost, but that’s hard to do when they already charge a premium for their product. An article from Huffington Post in 2016 says that Starbucks actually sold nearly $500M in the form of a bond, to help raise capital to fund these sustainability efforts. (https://www.huffingtonpost.com/entry/starbucks-sustainability-bonds_us_5735e64fe4b077d4d6f2d612) It will be interesting to see what impact Starbucks is able to have and how this situation develops.

  6. I’m encouraged by the way Starbucks has been addressing sustainability not just as a CSR/reputation/greenwashing play but as a core business concern. From my work in social impact consulting, I’ve seen too many companies settle for the former and overlook the latter. Reading about the many measurable risks across Starbucks’ supply chain convinces me that they have no choice but to act. The biggest question for me, though, is how. While they seem to be addressing this issue from multiple angles (e.g., crop resilience, renewable energy, policy change), I think they could do more. Criticism about its coffee cup waste, for example, should prompt Starbucks to consider expanding bring-your-own-mug initiatives and introducing bio-based materials (http://www.sustainablebrands.com/news_and_views/behavior_change/hannah_furlong/criticism_over_coffee_cup_waste_leads_starbucks_discou). Coffee also has a very high water footprint (https://www.greenbiz.com/blog/2009/06/10/starbucks-coffee-green-or-greenwashed), but Starbucks doesn’t seem to be addressing water availability in any meaningful way. Perhaps most of all, Starbucks could be doing more to leverage its brand and move other multinational companies towards prioritizing sustainability as a core business concern. Starbucks has a significant opportunity to help corporations see environmental stewardship as a way to create “shared value” in their supply chains.

  7. Our secretive author, Coffeeislife, has investigated two fascinating facts about the world’s favorite coffee chain that are germane to the future of the company and those who love coffee. The first is the effect of Starbucks’ end-to-end coffee ecosystem. Starbucks is working very hard to reduce the effects of climate change on coffee, but has taken no steps to reduce their contribution to the greenhouse gas output of the coffee transport network. Additionally, the issue of the ancillary food items on the menu is probably the most overlooked aspect of the climate change problem from Starbucks’ perspective. Their customer promise requires that they offer such items, but as the author points out those items are massive contributors to carbon outputs across their production chain. Moreover, the author has done a fantastic job of tying the poor management habits of the past to future risk–specifically the lack of biodiversity across the coffee plant population. A truly well done article with excellent insights into the difficulties of being a coffee grower/sourcer who also operates a retail front-end.

  8. First off, I think coffee is a great way to approach the climate change discussion. People are often quick to disregard this topic since it is hard for many to feel directly connected to. When you use something like coffee that so many people enjoy each day, it really enforces how climate change is personal. It makes the topic tangible, relatable, and real. We can all imagine a life without coffee, and it’s not a good existence.

    Starbucks has shown awareness of the problem, but exhibit A shows a lack of commitment to solving the bigger issue. It is great that they are investing in new growing techniques and fungal-resistant coffee strains, but these solutions do not impact climate change. They simply help Starbucks manage their coffee supply. The use of more GHGs for electricity adds to the problem. There is a straight-forward way to increase electricity consumption while using less GHG emissions, simply use green forms of energy. I think it would be wise for Starbucks to invest in green energy initiatives. Since they have locations nearly everywhere, this certainly won’t be possible across the board, but there may very well be low hanging fruit where they can invest and switch over. Perhaps an internal task force could perform research of their stores and set realistic future targets for GHG emissions. A GHG reduction plan would show Starbucks is serious in doing their part to solve our climate change issue.

    Starbucks Global Social Impact Report has a short “Greener Power” section, I found the statement below to be interesting. I wonder if they are talking about every retail location globally? And if so, I wonder how and if this is feasible?
    “Greener Power
    Invest in 100% renewable energy to power operations globally by 2020”
    https://www.starbucks.com/responsibility/global-report

  9. Thank you for an interesting read. I think Starbucks’ current actions are very interesting and represent a rational corporate response from a profit-maximizing point of view. Securing the company’s global supply chain is an existential challenge and one that the company should devote considerable time and attention to.

    Your recommendations for further actions by Starbucks raise, in my mind, a broader philosophical point about corporate responsibility and accountability vis-a-vis climate change. Many of the additional actions Starbucks could take to combat climate change (e.g., sourcing more expensive palm oil) would unambiguously raise costs for Starbucks as a company vs. the status quo. The question of whether they should take these actions anyways – which would result in lower margins, higher prices for consumers, or both – reminds me of some recent conversations our class has had around corporate sustainability efforts (e.g., IKEA) and the social responsibility of companies (e.d., Kerr-McGee).

    I don’t think there is an objectively correct answer here – some may argue that our model of capitalism ought to evolve and encourage corporations to assist in solving broader societal problems, while others may maintain that this is the proper role of government and corporations should remain tools designed solely to maximize total return to shareholders. I am sure this debate will continue for some years to come.

  10. It is clear that Starbucks genuinely needs to plan for climate change to ensure the future of their coffee supply, but I am skeptical about how much they are focusing on just making good publicity for themselves. For example, while the experimental coffee grown in Costa Rica was able to show signs of resistance to fungus, it also only yielded 170 bags (from footnote [1]). Furthermore, although they publicly announced plans in 2008 to reduce energy consumption by 25%, in the span of 2010-2012 their carbon emissions actually increased by 25% (further down in article [1]). However, if you go to the Starbucks website on climate change today, they still highlight their greenhouse emission from 2010! (https://www.starbucks.com/responsibility/environment/climate-change/greenhouse-gas-emissions)

    Starbucks is definitely making progress on reducing the effects of climate change, as they logically need to, but I hope they are able to do more for the world than just ensure a stable supply of coffee beans.

  11. First of all, props on a very well-written essay and apt username – coffee really is life (at least here in business school)! I think your points on Starbuck’s efforts to increase sustainability are very interesting, and I appreciate that you highlighted both the efforts made so far as well as the challenges that the company has encountered. It’s heartening to see all of the positive changes they have made to date. On the flip side, though, you alluded to the palm oil issue, which I want to push on a little further. Starbucks has a financial incentive to buy the lower cost, less-sustainable palm oil. Going with the more sustainable option produces positive externalities, but will that be enough to overrule pressures exerted by investors and other stakeholders? Where does the balance between sustainability and financial prudence lie?
    Your question “is any of this enough?” is so profound and thought-provoking. How can Starbucks bring other companies and organizations along in its journey toward sustainability? You mentioned that it is pushing progressive climate change policy by founding BICEP; that is a start. But from an economic perspective, my opinion is that other organizations will need more financial incentive to front the fixed costs needed to source new materials, kick off additional initiatives, etc. How can they be motivated to do so?

  12. Well presented – I learned about the effects climate change, particularly the warming of the earth, and how that has affected coffee beans, the core of Starbuck’s business. You advocate for Starbucks to concentrate more on transportation, but I’m curious if you think their efforts, particularly around purchasing renewable energy in the US, is from an intrinsic desire to improve the world or to improve their bottom line? The shift to railways might be an expensive endeavor, although good for the environment. Is it really believable that Starbucks would increase their costs if it doesn’t impact their bottom line directly?

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