HAPTER 4 Ethics and Social Responsibility in Marketing

VIDEO CASE 4 Starbucks Corporation: Serving More Than Coffee

e up and smell the coffee-Starbucks is every-ere! As the world's number one specialty coffee

tailer, Starbucks serves more than 25 million cus-ers in its stores every week. The concept of Star-ks goes far beyond being a coffeehouse or coffeed. It represents the dream of its founder, Howard

hultz, who wanted to take the experience of an Ital-specifically, Milan-espresso bar to every corner of

ery city block in the world. So, what is the Starbuckserience'l According to the company,

You get more than the finest coffee when you visit Star-bucks. You get great people, first-rate music, a comfort-able and upbeat meeting place, and sound advice onbrewing excellent coffee at home. At home you're partof a family. At work you're part of a company. Andomewhere in between there's a place where you can sit

back and be yourself. That's what a Starbucks store isto many of its customers-a kind of "third place" wherethey can escape, reflect, read, chat, or listen.

But there is more. Starbucks has embraced corporateial responsibility like few other companies. A recent

rarbucks Corporate Social Responsibility Annualeport described the company's views on socialsponsibility:

Starbucks defines corporate social responsibility asonducting our business in ways that produce social,

environmental, and economic benefits to the communi-ties in which we operate. In the end, it means beingresponsible to our stakeholders.

There is a growing recognition of the need for cor-porate accountability. Consumers are demanding morethan "product" from their favourite brands. Employeesare choosing to work for companies with strong values.Shareholders are more inclined to invest in businesswith outstanding corporate reputations. Quite simply,being socially responsible is not only the right thing to

FIGURE 1zarbucks Mission Statement~d Guiding Principles

do; it can distinguish a company from its industrypeers.

Starbucks not only recognizes the central role thatsocial responsibility plays in its business. It also takesconstructive action to be socially responsible.

THE COMPANY

Starbucks is the leading retailer, roaster, and brand ofspecialty coffee in the world, with more than 7500 retaillocations in North America, Latin America, Europe, theMiddle East, and the Pacific Rim. Beginning in 1971with a single retail location in Seattle, Washington,Starbucks became a Fortune 500 company in 2003 withannual sales exceeding $4 billion. In addition, Star-bucks is ranked as one of the "Ten Most Admired Com-panies in America" and one of the "100 BestCompanies to Work For" by Fortune magazine. It hasbeen recognized as one of the "Most Trusted Brands"by Ad Week magazine. Business Ethics magazine placedStarbucks twenty-first in its list of the "100 Best Citi-zens" in 2003. Starbucks' performance can be attributedto a passionate pursuit of its mission and adherence tosix guiding principles. Both appear in Figure 1.

COMMITMENT TO CORPORATE

SOCIAL RESPONSIBILITY

Starbucks continually emphasizes its commitment tocorporate social responsibility. Speaking at the annualshareholders meeting in March 2004, Howard Schultzsaid,

From the beginning, Starbucks has built a company thatbalances profitability with a social conscience. Star-bucks business practices are even more relevant today

Establish Starbucks as the premier purveyor of the finest coffee in theworld while maintaining our uncompromising principles as we grow.

The following six principles will help us measure the appropriateness ofour decisions:

1. Provide a great work environment and treat each other with respect anddignity.

2. Embrace diversity as an essential component in the way we do business.3. Apply the highest standards of excellence to the purchasinq, roasting,

and fresh delivery of our coffee.4. Develop enthusiastically satisfied customers all the time.5. Contribute positively to our communities and our environment.6. Recognize that profitability is essential to our future success.

as consumers take a cultural audit of the goods andservices they use. Starbucks is known not only for serv-ing the highest 'quality coffee, but for enriching thedaily lives of its people, customers, and coffee farmers.This is the key to Starbucks ongoing success and we arepleased to report our positive results to shareholdersand partners (employees).

Each year, Starbucks makes public a comprehensivereport on its corporate social responsibility initiatives.A central feature of this annual report is the alignmentof the company's social responsibility decisions andactions with the Starbucks Mission Statement andGuiding Principles. The Starbucks 2003 CorporateSocial Responsibility Report, titled "Living Our Val-ues," focused on six topical areas: (a) partners, (b)diversity, (c) coffee, (d) customers, (e) community andenvironment, and (g) profitability.

Partners

Starbucks employs some 74 000 people around theworld. The company considers its employees as part-ners following the creation of Starbucks stock optionplan in 1991, called "Bean Stock." The companybelieves that giving eligible full- and part-time employ-ees an ownership in the company and sharing therewards of Starbucks' financial success has made thesense of partnership real. In addition, the company hasone of the most competitive employee benefits andcompensation packages in the retail industry. Ongoingtraining, career advancement opportunities, partnerrecognition programs, and diligent efforts to ensure ahealthy and safe work environment have all contributedto the fact that Starbucks has one of the lowestemployee turnover rates within the restaurant and fastfood industry.

Diversity

Starbucks strives to mirror the customers and communi-ties it serves. On a quarterly basis, the company moni-tors the demographics of its workforce to determinewhether they reflect the communities in which Star-bucks operates. In 2003, Starbucks' U.S. workforcecomprised 63 percent women and 24 percent visibleminorities. The company also is engaged in a joint ven-ture called Urban Coffee Opportunities (DCO) createdto bring Starbucks stores to diverse neighbourhoods.There were 52 UCO locations employing almost 1000Starbucks partners at the end of 2003.

Supplier diversity is also emphasized. To do businesswith Starbucks as a diverse supplier, that company mustbe 51 percent owned, operated, and managed bywomen, minorities, or socially disadvantaged individu-als and meet Starbucks requirements of quality, service,value, stability, and sound business practice. The

.company spent $80 million with diverse suppliers in2003, $95 million with diverse suppliers in 2004.

Coffee

Starbucks' attention to quality coffee extends to its cof-fee growers located in more than 20 countries. Sustain-able development is emphasized. This means thatStarbucks pays coffee farmers a fair price for the beans:that the coffee is grown in an ecologically sound man-ner; and that Starbucks invests in the farming communi-ties where its coffees are produced.

One longstanding initiative is Starbucks' partnershipwith Conservation International, a nonprofit organiza-tion dedicated to protecting soil, water, energy, and bio-logical diversity worldwide. Starbucks is particularlyfocused on environmental protection and helping localfarmers earn more for their crops. In 2003, Starbucksinvested more than $1 million in social programs,notably health and education projects, that benefitedfarming communities in nine countries, from Columbiato Indonesia.

Customers

Starbucks served customers in 32 countries in 2003.The company and its partners are committed to provid-ing each customer the optimal Starbucks experienceevery time they visit a store. For very loyal Starbuckscustomers, that translates into 18 visits per month onaverage.

Making a connection with customers at each storeand building the relationship a customer has with Star-bucks baristas, or coffee brewers, is important in creat-ing the Starbucks experience. Each barista receives 24hours of training in customer service and basic retailskills, as well as "Coffee Knowledge" and "Brewing thePerfect Cup" classes. Baristas are taught to anticipatethe customers' needs and to make eye contact whilecarefully explaining the various coffee flavours andblends. Starbucks also enhances the customer relation-ship by soliciting feedback and responding to patrons'

Ethics and Social Responsibility in Marketing

periences and concerns. Starbucks Customer Rela-ns reviews and responds to every inquiry or com-

enr, often within 24 hours in the case of telephoneand e-mails.

orts to contribute positively to the communities it-es and the environments in which it operates arephasized in Starbucks' guiding principles. "We

en't in the coffee business, serving people. We are in~ people business, serving coffee," says Howard

ultz. Starbucks and its partners have been recog-ed for volunteer SUppOItand financial contributionsa wide variety of local, national, and internationalial, economic, and environmental initiatives. For

ample, the "Make Your Mark" program rewards part-. gifts of time for volunteer work with charitable

ations from Starbucks. In addition, Starbucks is aporter of CARE International, a nonprofit organiza-dedicated to fighting global poverty.tarbucks is also committed to environmentalonsibility. Starbucks has been a long-time

involvement with Earth Day activities. It has institutedcompanywide energy and water conservation pro-grams and waste reduction, recycling, and reuseinitiatives proposed by partner Green Teams.

Profitability

At Starbucks, profitability is viewed as essential to itsfuture success. When the Starbucks ' guiding principleswere conceived, profitability was included but inten-tionally placed last on the list. This was done notbecause profitability was the least important. Instead, itwas believed that adherence to the five other principleswould ultimately lead to good financial performance. Infact, it has.

QUESTIONS

1 How does Starbucks' approach to social responsibilityrelate to the three concepts of social responsibility describedin the text?2 What role does sustainable development play inStarbucks' approach to social responsibility?