Starbucks has taken heat for failing to offer recycling at many of its stores. As noted by Bloomberg View’s Adam Minter, the chain is far behind its goal of offering recycling at all of its company-owned stores by 2015, with the option only available in 39% as of the company’s 2013 Global Responsibility Report.
In fact, Starbucks is way behind on many stated environmental goals. The company reduced energy consumption in its company-operated stores by only 7.1% between 2008 and 2013, far from its goal of 25% reduction by 2015. The company’s 2013 report further noted that it was behind track in purchasing renewable energy to offset its electricity use. As of 2013, Starbucks also only sold 1.8% of beverages in personal tumblers compared to a goal of 5% by 2015.
While these missed goals may suggest the coffee behemoth is an environmental failure, the truth is starkly different.
In fact, Starbucks is better than most industry peers when it comes to environmental impact, according to corporate watchdog GMI Ratings.
“Starbucks Corporation’s environmental ratings is around the 90th percentile when compared to U.S., Global, and Industry Peers,” GMI senior research analyst Greg Ruel wrote in an email citing data provided by Trucost plc. “The company’s carbon emissions, water use, and supply chain impact are all favourable compared to peers of a similar market cap, like Chipotle Mexican Grill and the Yum! Brand chain. Waste disposal, normalized for revenue, is average when compared to Chipotle, Yum! Brands and McDonald’s.”
“[E]ven HAVING the kinds of aims that are listed in its Global Responsibility Report is not just unusual, it’s exemplary,” former GMI CCO and senior research analyst Paul Hodgson wrote in 2012.
John Kelly, Starbucks’ senior vice president for global responsibility and public policy, was quick to point this out in a recent conference call with Business Insider.
“The purpose in originating these goals was to be very aspirational. We are more interested in being aspirational, innovating, listening to our partners, listening to our customers than in what it looks like if we fall short,” Kelly said, noting also that company leaders “certainly set out to achieve the goals.”
Caveats aside, it’s interesting to see why Starbucks is struggling to hit some goals.
When it comes to recycling, as Minter discussed, the company has found it hard to establish an efficient system in many markets, a problem it blames on local politics.
Reducing energy has proven hard given Starbucks’ expanded product offerings.
“Starbucks’s business has changed very significantly,” Jim Hanna, Starbucks director of environmental impact, said during the same conference call. “If you look at the acquisitions we’ve made as a company, purchasing La Boulange, the bakery company, purchasing Evolution Fresh, and really incorporating those new businesses and the new platforms into our stores, what we’ve seen frankly is a lot more warm pastry sales and a lot more warm food sales, increasing refrigeration needs within the stores, and frankly just more business going into the square footage of the stores.”
While increasing sales in reusable cups has proven difficult, the company has gotten “a good lift” from offering cheaper containers and from redesigning stores to promote ceramic mugs for in-store consumption.
The company has had more success in other areas. Here’s the scorecard from Starbucks’ 2013 report:
We also asked about Starbucks’ controversial failure to hit its 2010 goal to raise and donate $US10 million to alleviate the world water crisis through sales of Ethos Water, which it purchased in 2005. The company went on to raise only $US6.2 million by 2010 and blamed the economic crisis among other things.
It turns out the company has now belatedly hit its target, setting aside $US12.3 million for water donations. It does not have a new target.
While Starbucks is doing relatively well when it comes to the environment, GMI says the company has bigger problems in another area that the corporate watchdog tracks: social impact.
As noted by Ruel:
Social Ratings for Starbucks Corporation are in the bottom five per cent when compared to all peers in the U.S. and globally. Our key areas on concern when monitoring restaurants are community relations, labour practices, and discriminatory employment practices. Over the past three years, the company has been party to a number of investigations and settlements according to filings and news reports. Issues with product concerns, labour practices, tax evasion, stakeholder abuse, and discriminatory business practices have significantly hampered the company’s ESG [environmental, social, and governance] Rating.
Most recently, the company has conducted three separate product recalls in 2014. In November 2013, Starbucks stated that it would restate fourth-quarter results to show an operating loss of $US2.12 billion to reflect damages related to its dispute with Kraft Foods. Just prior in July 2013, a lawsuit was filed against New York Starbucks claiming repeated discrimination against deaf customers. In 2012, international issues included a claim by UK lawmakers that executives weren’t paying their share of taxes and Chile’s labour department blacklisted Starbucks local units over labour practices, preventing them from bidding to supply local government offices for two years.
In the area of workplace safety, Starbucks has not yet implemented OHSAS 18001 as its occupational health and safety management system, nor does it actively disclose its workplace safety record in its annual report or other reporting vehicle. Starbucks poses a much greater social risk than industry peers, issues which have the potential to hamper long-term sustainability.
You win some, you use lose some, Howard Schultz.
We’ve asked Starbucks for comment on GMI’s social analysis and will add any that we receive.
Disclosure: I worked as a Starbucks barista in 2009.
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