[Solution]Starbucks CSR Strategy

Executive Summary Starbucks is a multinational coffee and tea chain that is based in Seattle, USA. It is considered to be one of the most…

Executive Summary
Starbucks is a multinational coffee and tea chain that is based in Seattle, USA. It is considered to be one of the most valuable brands in the world. With over 24,000 stores in 70 countries, it is safe to say that Starbucks’s presence and impact can be felt internationally.
With CSR’s rose to prominence in today’s globalised market, businesses are expected toincorporate CSR into their strategies, meaning to consider and value the wider stakeholders’ needs and interests in addition to their stakeholders. And big companies such as Starbucks are held to an even higher standard in regards to behaving socially and ethically. Therefore, Starbucks must integrate CSR into its core strategy, meaning to embrace the six core characteristics of CSR.
Starbucks noted in its most recent Global Responsibility Report that its CSR strategy focuses on “building a future with farmers, pioneering green retail on a global scale, and creating pathways to opportunity for young people” (Starbucks 2014), and this strategy is the foundation of all of Starbucks’s CSR approaches.
Starbucks’s CSR strategy shows an adaptation of both “substitute and supplement” public responsibility strategies (Valente and Crane 2010). Substitute means that Starbucks uses its core operations to deliver public services (e.g. C.A.R.E practices and LEED-certified stores), while supplement means that it engages in corporate citizenship programs that may not have anythingto do with its core operations (e.g. veterans hiring and employee tuition).
Starbucks’s CSR successes thus far are testaments to its success in implementing its CSR strategy. However, its strategy could be improved to include the “stimulate” element of public responsibility strategy, meaning to use its core operations to stimulate development of political/economic infrastructure and/or implementations of new policies. Forexample, Starbucks could push for regulation change regarding the use of plastic coffee cups by charging extra for plastic cups (like government 5p plastic bag charge), hence encouraging the use of re-usable cups/tumblers that will decrease plastic cup’s negative ecological impact.

Table of Contents
EXECUTIVE SUMMARY 2
Table of Content 3
1.0 Introduction 4
2.0 Importance of CSR 4
3.0 Starbucks’s CSR Strategy 7
4.0 Starbucks’s CSR Approach 9
4.1 Ecological Approach 9
4.2 Social Welfare Approach 11
4.3 Employee Retention Approach 12
5.0 Conclusion and Recommendation 14
6.0 References 17
 

Introduction

Starbucks is a multinational coffee and tea chain that is based in Seattle, USA. Boasting revenue of $19.2 billion in its most recent annual statement (Starbucks 1016), it is one of the largest companies in the world and the world’s most famous coffee brand, with Forbes ranking its market value as the 90th biggest in the world, and its brand as the world’s 45th most valuable brand (Forbes 2016; Badenhausen 2016). With its global outreach boasting more than 24,000 stores in 70 countries, Starbucks’s presence can be felt throughout the world.
 
Being one of the biggest companies in the world and having its brand known worldwide, Starbucks needs to be prudent in its actions, as people understandably holds it to a higher accountability. This is especially true in the Corporate Social Responsibility (CSR) aspect. With CSR’s rose to prominence, major companies like Starbucks will certainly be the ones people scrutinise to spearhead the CSR movement and set examples for smaller companies.
 
This report will examine the importance of CSR in today’s world, Starbucks’s CSR strategy and approaches, as well as providing recommendations on what changes Starbucks need to make or new approaches that could be incorporated into its CSR strategy.
 

Importance of CSR

Nowadays, CSR has become an integral part of a business’s strategy. Arguably, businesses have moved from the perspective of strictly satisfying shareholders (Friedman 1982) to considering the interests of its stakeholders (Freeman 1984), e.g. consumers, employees, environment. This is because much more is expected of business today, as Crane et al. (2014) argued that “with the growing recognition of the failure of governments to solve many social problems and […] the diminished scope of government (at least in the U.S. and Europe), the private sector is increasingly called upon to address social problems and, accordingly, shoulder greater social responsibilities in addition to righting the wrongs for which it is more directly responsible, such as pollutions or inadequate product safety.” This argument builds on Carroll’s (1979 cited by Crane et al. 2014) view that businesses have social responsibilities that encompass the economic, legal and ethical aspects, as shown in Schwartz and Carroll’s (2003) three-domain model of CSR below.
Crane et al. (2014) also believed that there are virtually “no industry, market, or business type that has not experienced increasing demands to legitimate its practices to society at large.” The increasing and constant demands for businesses to focus on its social responsibilities mean that rather than finding ways to avoid CSR, businesses should incorporate CSR strategically in a way that satisfies the stakeholders while simultaneously help achieve their goals. In other words, creating what is proposed by Porter and Kramer (2010) as “shared value” that is to create economic value while simultaneously benefitting other stakeholders involved.
 
Furthermore, companies could view CSR as means to increase their competitive advantage(Husted and Allen 2000, cited by Garriga and Mele 2004), as CSR has proven to be beneficial to companies in many ways. For example, Liu et al.’s (2014) research shows that “customers’ brand preference can be enhanced by CSR performance” through building its brand equity by creating better brand image, while Turker’s (2009) study shows that “employees prefer to work in socially responsible organisations and their organisational commitment level is positively affected by CSR to society, natural environment, next generations, non-governmental organisations, employees, and customers.” Hence, from a business standpoint, there are many benefits both externally (e.g. stronger brand equity) and internally (e.g. employee retention) for companies to incorporate CSR into its long-term strategy. In that regards, companies must avoid doing CSR just for the sake of doing it, as this might not add any value for the company. Therefore to successfully incorporate CSR into its strategy to achieve the aforementioned benefits, companies must understand the six core characteristics of CSR (Crane et al.’s 2014),as shown below.
This model reiterates the previous discussion, such as considering multiple stakeholders and generating economic benefit from CSR activities, while also gives more dimension to what companies need to do when engaging in CSR. According to the authors, proper CSR dictates that companies voluntarily act beyond what is prescribed by the law; this include managing the externalities (positive or negative) caused by their operations. The authors also argued that CSR is not just being philanthropic but how the business impacts society. This means that companies cannot create values through CSR by just simple initiatives, but how to create CSR values that underpin these practices and incorporate them to the business culture (Crane et al. 2014).
 
Crane et al. (2014) also believed that the perspective of CSR differs based on the organisational context (private, public, civil society) and the national context (developed, developing, emerging/transnational). Examples for the former include larger firms’ likelihood of being held to a higher standard than smaller firms in acting socially due to their visibility, or public sectors such as government organisations facing greater repercussions should they fail to act ethically, as people would expect them to value social responsibility more than profit. As for an example of the latter, companies’ social responsibilities may differ if they are located in developing countries as opposed to developed countries. Companies must understand both their organisational and national contexts in order to effectively design value-generating CSR strategies.
 

Starbucks’s CSR Strategy

As previously mentioned, Starbucks is one of the most valuable brands in the world. With its global impact, Starbucks has shown that it is able to live up to the high degree of social and ethical expectations. This is evident by its recognition as one of the world’s most ethical companies for 9 years running (Starbucks 2015). Regarding its CSR strategy, Howard Schultz, Starbucks’s CEO, has identified in its most recent Global Responsibility Report that Starbucks’s CSR efforts will focus on 3 areas that are“building a future with farmers, pioneering green retail on a global scale, and creating pathways to opportunity for young people” (Starbucks 2014). This strategy reflects Starbucks’s vision of a great company that is “being performance-driven through the lens of humanity” (Starbucks 2016). Starbucks’s strategy shows that it recognises the importance of taking care of its stakeholdersas much as its shareholders, reflecting the view of Freeman (1984). For example, Starbucks’s collaboration with farmers through open-source agronomy has “[improved] coffee quality and farm productivity, and reduce production costs,” while also raised farmers’ living standards. This exemplifies what Porter and Kramer (2011) meant by shared value that is defined as “policies and operating practices that enhances the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates.” Starbucks’s also shows an application of Schwartz and Carroll’s (2003) three-domain model where its CSR strategy arguably is beneficial economically through cost reduction and better brand image, ethical in that it considers the stakeholders’ welfare, and could help satisfy legal compliances (e.g. fair trade requirements). Furthermore, Starbucks shows clear commitment in its CSR strategy through publishing annual Global Responsibility Report where it highlights goals and objectives while also disclosing the progress made.
 
Starbucks’s CSR strategy shows a proper application of the six core characteristics of CSR (Crane et al. 2014). As it can be seen later on when its approaches are analysed, many of Starbucks’s CSR initiatives are voluntary and much more than strictly philanthropy. Its CSR initiatives also show that it acknowledged the multiple stakeholders the business has (e.g. relationship with its farmers and employees) and the possible externalities it could cause (e.g. green retailing). Starbucks is also able to achieve balance between engaging in social activities and generating economic benefits. And perhaps most importantly, Starbucks does not only practice CSR, but it develops a culture for social responsibility towards people and environment, stemming from its leader, Howard Schultz’s own ethical values, with Schultz recognised as setting the standard for ethical leadership (ECI 2014).
 
Analysing Starbucks’s CSR strategy, it can be said that Starbucks adopts a mixture of “substitute and supplement” public responsibility strategies (Valente and Crane 2010). Starbucks’s objectives of “building a future with farmers, pioneering green retail on a global scale” show the use of substitute strategy, where Starbucks uses its core operations to deliver public services (e.g. C.A.R.E practices and LEED-certified stores), while its “creating pathways to opportunity for young people” objective is a good example of using supplement strategy, where it engages in corporate citizenship programs that may not have anything to do with its core operations (e.g. veterans hiring and employee tuition).
 
Starbucks’s CSR strategy is a prime example of how to incorporate CSR and sustainability into a business’ strategy to achieve competitive advantage (Husted and Allen 2000, cited by Garriga and Mele 2004). Having said that, Starbucks should consider incorporating “stimulate strategy” into its CSR strategy, meaning using its core operations to “drive new models of social provision, through the development of political or economic infrastructure that addresses gaps in public welfare” (Valente and Crane 2010). Given its size and impact, Starbucks will definitely be able to stimulate policy changes wherever it is operating in, for example push for policy change on use of plastic cups to reduce plastic waste. Further changes and improvements can also be made on Starbucks’s CSR approaches,as they will beanalysed in the next section.
 

Starbucks’s CSR Approach

In response to its CSR strategy, Starbucks has done many CSR initiatives and practices. These approaches and their impacts will be analysed from 3 perspectives, ecological, social welfare, and employee retention.
 

Ecological Approach

Environmentally, Starbucks has done multiple initiatives to minimise its environmental footprint. Starbucks’s Coffee and Farmer Equity (C.A.F.E.) initiative, launched in 2004, was “one of the coffee industry’s first sets of comprehensive sustainability standards, verified by third-party experts” (Starbucks 2015). The result of this initiative is Starbucks managing to ethically source 99% of its coffee by 2015, with the goal to chase the final 1% (Craves 2015).
 
Moreover, as a response to its objective of “pioneering green retail,” Starbucks currently has 750+ LEED-certified stores (Leadership in Energy and Environmental Design), more than any other retailers in the world. Additionally, Starbucks has nearly achieved its goal of reducing water consumption by 25% by 2015, with already 23% decrease by 2014 (Starbucks 2015). Overall, Starbucks’s CSR approaches have been impacting the environment positively.
 
With that said, there is one aspect that Starbucks could and should improve, re-usable cups. Starbucks identified that is goal regarding re-usable cups is to “serve 5% of beverages made in our stores in personal tumblers by 2015“ (Starbucks 2015), however, this number was reduced from the previous goal of 25% set in 2009 (Aston 2012). Starbucks identified that changing customers’ behaviour to change to re-usable personal tumblers have been difficult, with promotions failing to leave major impact on the customers’ purchasing behaviour (Starbucks 2015). Since the promotion methods to entice customers to use personal tumblers are not effective, Starbucks should instead consider charging for plastic cups, similar to government 5p charge for plastic bags (GOV 2015). This method of charging additional for plastic cups may slowly but surely deter customers from using plastic cups and instead use either personal tumblers or ceramic cups to be used in-store. Economically, it would be hard to believe that a very miniscule increase in price can discourage consumers from continuing to purchase Starbucks’s products. With Starbucks being an industry leader, introducing a policy such as this would encourage other competitors to do the same, hence making it possible to reduce the waste from coffee cups, with “fewer than one in 400 [coffee cups] is being recycled” in the UK (Cocozza 2016).
 
Furthermore, Starbucks should increase its green retail focus to places where it is more needed, meaning focusing on developing LEED-certified stores in its stores in developing countries, since developing countries tend to have “various features that can offer considerable scope for the exercise of CSR,” e.g. environmental protection (Crane et al. 2014).
 
 

Social Welfare Approach

Besides ecological, Starbucks’s CSR approaches have positively impacted people’s social welfare. For example, Starbucks identified that its C.A.F.E practices have “positively [impacted] millions of workers, and improved the long-term environmental and social conditions on thousands of participating farms around the world” (Starbucks 2015). Additionally, Starbucks provides credits for farmers at reasonable terms. Starbucks’s already invested $16.3miillion in farmer loans with the goal of $20million by 2015.
 
Starbucks also engages in corporate philanthropy in the form of Starbucks Foundation, where it “gave $13.1 million in 2014, making 144 grants to non-profit organisations. Grants included $3.37 million for Starbucks Youth Leadership Grants and $4.2 million in social development grants in coffee-growing communities” (Starbucks 2015). These donations not only benefit the social welfare, but it also serves as a way to enhance Starbucks’s competitiveness, since the donations may directly impact Starbucks positively in the future. Hence, Starbucks is able to achieve what Porter and Kramer (2002) believe as strategic philanthropy.
 
Besides donation, Starbucks encourages people to volunteer and join in its community service projects (Starbucks 2016). Starbucks enables people to sign-up online to find and volunteer for community service projects that encompass areas of interests such as arts and culture, environment, education, health, etc. Up to this day, Starbucks’s community services have completed nearly 15,000 projects, with 87,000+ volunteers and 111,000+ hours logged in. This approach enables Starbucks to fulfill the social contract (Donaldson 1982, cited by Garriga and Mele 2004) it has to the society, while also build relationship with its customers through voluntary engagements.
 
Although Starbucks has done many commendable practices to increase the social welfare of the society, arguably, Starbucks has not increased the social welfare of all its stakeholders. Going back to the national context of CSR (Crane et al. 2014), Starbucks should consider the social welfare of people in developing country. Arguably Starbucks has done this through its C.A.F.E practices, however critics might argue that Starbucks can do much more to increase the social welfare of people in developing/least developed countries. This means that Starbucks should consider engaging in corporate philanthropy that does not solely focus on what benefits it might reap in the future, e.g. similar to Bill and Melinda Gates foundation in Africa (Bill and Melinda Gates Foundation 2016). Starbucks could, for example, set up donation targeted to tackle health issues or sponsor child education in countries where it sources its coffee from, e.g. Ethiopia, which is among the 10 countries with the worst literacy rate (Care2 2013).
 
Starbucks should also extend the community services projects to other countries it operates in besides the US and Canada, for example in Asia, Europe and Africa. This could increase the social welfare for the people in these countries, and encourage people to care more about their community, while also build relationship with its customers. This way, Starbucks could practice corporate citizenship (Garriga and Mele 2004) wherever it operates.
 

Employee Retention Approach

Starbucks’s CSR approaches also could help in employee retentions. As mentioned earlier, Turker’s (2009) study shows that CSR could positively affect employees’ organisational commitment. Starbucks’s recent initiative of hiring “10,000 veterans
and military spouses by 2018” is a clear evidence (Starbucks 2015). The rationale behind this initiative is that “honoring our veterans and military spouses requires more than saying ‘Thank you.’ It’s about building meaningful relationships, staying connected, and providing opportunities for veterans and their families. These men and women are making [Starbucks] better,” and as of today, Starbucks has hired more than 6500+ veterans (Starbucks 2016).
Furthermore, in 2015, Starbucks partnered with Arizona State University to launch a program where it will sponsor its employees to get a college degree for free. About 100,000 of its 150,000 US workers were eligible for the benefit, and Starbucks pledged to “spend at least $250 million to help 25,000 employees graduate by 2025” (Lobosco 2015). Although the employees were not required to stay with the company after graduating, this initiative would strengthen the emotional bond between Starbucks and its employees, which will positively affect employee retention.
 
The successes Starbucks achieved through these two initiatives should be replicated into other feasible countries where Starbucks operate in, e.g. UK. These practices fall under the “ethical/economical” category of Schwartz and Carroll’s (2003) three-domain model, whereby even though there are no direct short-term positive economic implications,Starbucks’s ethical genuineness could prove to be “an effective social marketing strategy” for the long-term.
 
To improve employee retention, diversity cannot be excluded from the conversation. Starbucks has generally done well in the diversity area, where “40% of [its] U.S. partners are minorities; 65% are women” (Starbucks 2015).
However, Starbucks has recently been on the “unfamiliar side of social activism” where an online petition that has been gaining traction (over 7000 signed in a day) demanded that Starbucks “terminate any and all leases it holds on properties owned by Donald Trump“ (Rainey 2016). The petition demanded that a company that preaches diversity like Starbucks must disassociate itself with a “a man who has called Mexicans rapists, stereotyped the Muslim community as terrorists, and disgraces women” (Rainey 2016). In response to this petition, Starbucks should strongly consider agreeing to this demand as a way to show its support for diversity and not tolerating bigotry. Arguably, this is a way for Starbucks to manage its externalities, as it did not intend to support Trump’s view when it opened in Trump’s properties. Hence, responding public’s demand and closing down its location in Trump’s properties would be a way to mitigate the unintended public negative outcry. Additionally, for a company of sheer magnitude such as Starbucks to stand up for morality and ethical diversity will definitely cause a ripple effect (positive and negative) that could encourage major companies to also show stronger intolerance towards discrimination.
 

Conclusions and Recommendations

By analysing its CSR strategy and approaches, it can be seen that Starbucks has managed to successfully incorporate CSR into its business strategy, advocating for sustainability in business. Starbucks clearly reflects the six core characteristics of CSR in its sustainability strategy in that many of its initiatives were voluntary but not strictly philanthropic, with considerations of externalities (e.g. environment), multiple stakeholders (e.g. customers, employees, suppliers), and underpinned by strong social responsibility values. Starbucks were also able to align CSR goals with economic benefits.
Granting all this, there are some improvements that Starbucks can make to its CSR strategy and approaches.
 
Regarding its overall strategy, Starbucks should not change its current strategy that adopts a mixture of substitute and supplement, but instead improve it by adding elements to reflect a stimulate public responsibility strategy. This means that instead of only focusing on the aforementioned 3 areas of focus, Starbucks should add another area where it focuses on how it can use its core operations to stimulate development of political/economic infrastructure and/or implementations of new policies.
 
Asides from the positive approaches it has been doing, these are the additional improvements Starbucks should consider implementing in regards to its CSR approaches:
 
 

Actions
Rationale and Underlying Theories

Reduce waste from cups by shifting customers’ purchasing behaviour to personal tumbler (takeaway) or ceramic cups (drink-in) through charging additional for plastic cups
·         Deter customers from using plastic cups and encourage re-usable cups, much like government 5- plastic bags
·         Applying “Stimulate” public responsibility strategy where Starbucks should use its core operations to stimulate change in economic/environmental policies (Valente and Crane 2010)
·         Manage environmental externalities (Crane et al. 2014)

Prioritise developing LEED-certified stores in its stores in developing countries
·         Developing countries are more in need for environmental friendly business (Crane et al. 2014)
·         Applying “Substitute” public responsibility strategy where Starbucks provides public services for people in place of the government (Valente and Crane 2010)

Set up a Starbucks foundation to tackle health issues or sponsor child education in countries where it sources its coffee from, e.g. Ethiopia
·         Corporate philanthropy and corporate citizenship where company benefits are not prioritised, but is based on purely ethical motives (Schwartz and Carroll 2003; Garriga and Mele 2004)
·         Applying “Supplement” public responsibility strategy where Starbucks should engage in corporate citizenship programs that may not have anything to do with its core operations (Valente and Crane 2010)

Extend the voluntary community service projects to other countries in Europe, Asia, and Africa
·         Multiple stakeholders orientation (Crane et al. 2014; Freeman 1984)
·         Possibility to create shared value (Porter and Kramer 2010)

Replicate either the Veterans Hiring or Employee Tuition initiatives to other feasible countries of operation, e.g. UK.
·         Fulfill the social contract Starbucks has with its stakeholders (Donaldson 1982, cited by Garriga and Mele 2004)
·         Extending the already used “supplement” public responsibility strategy to benefit more stakeholders (Valente and Crane 2010)
·         Build brand equity through better brand image (Liu et al. 2014)

Show intolerance towards discrimination by disassociating itself from Donald Trump by terminating lease in Trump’s properties, hence promoting itself as a proponent of diversity
·         Manage unintended externalities (Crane et al. 2014)
·         Standing with diversity could increase employee retentions and employees’ organisational commitment (Turker 2009)

 
 
 

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