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Starbucks - Sustainable Business and Supply Chain Design

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Christina Laing

on 25 February 2015

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Transcript of Starbucks - Sustainable Business and Supply Chain Design

Starbucks is committed to buying and serving high quality, responsibly grown, ethically traded coffee to help create a better future for farmers and a more stable climate for our planet.
A Critical Evaluation of Starbucks' Sustainable Supply Chain
> 60%--
the supplier qualified as a
Preferred supplier
—gain preference in future Starbucks coffee purchases.

> 80%--
the supplier qualified as a
Strategic suppliers
—earn a Sustainability Conversion Premium of $0.05 per pound of coffee for one year.

Additional Sustainability Performance Premium of $0.05 per pound of coffee to suppliers who were able to achieve a 10-point increase above 80% over the course of a year.
: influence; listen to customers: responded promptly to tax avoidance issue

: the C.A.F.E. Practices; Cocoa Practices guidelines; Ethical Tea Partnership

: are motivated; health coverage even for eligible part-time employees

: “open-source” approach, sharing tools, best practices and resources to help all producers make improvements in the long-term sustainability of their farms

Communities and Environment
: Shared Planet (do business in ways that are good for people and the planet); Fair Trade; farmer support centers; Social Responsibility and Environmental Leadership in C.A.F.E Practices

Trust, Accountability,
Integrity, Caring, Loyalty
Brings a sense of humanity,
demonstrates respect and dignity
Mission: To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.

Howard Schultz returned as the CEO of Starbucks in 2008 to help the company restore financial health and return to its core values.

Onward: How Starbucks Fought For Its Life without Losing Its Soul (2011):
Starbucks again achieved profitability and sustainability without sacrificing humanity.

(Laszlo and Zhexembayeva, 2011)

Sustainable Value
Levels of Sustainable Value
A Critical Evaluation of Starbucks' Sustainable Supply Chain


Largest specialty coffee retailer
Founded in 1971, Seattle

Building a sustainable supply chain

Coffee and Farmer Equity (C.A.F.E) Practices

Established in 2004, with Conservation International
Aim: provide social, environmental, economic and guidelines
Support coffee buyers and farmers, ensure high quality coffee and promote equitable relationships with different parties

High reputation, opened more than 20000 stores all over the world
Serves a variety number of food and beverages
Symbol of leisure and quality of life

Starbucks Progress
Pathway to New Markets
Why Sustainable Supply Chain
of low grade coffee
suffer from low, even negative profit, not covering its cost of production, going bankrupt
At the same time
Starbucks experienced rapid growth
Coffee bean is the staring point of Starbucks SCM
Stable supply of high quality coffee beans was essential to support explosive growth of Starbucks Coffee Company
Starbucks corporate performance
Provide a high-quality, diverse range of coffees
Compete to remain the most successful business of its kind

Despite the nature of the C.A.F.E. practices, the main aim for Starbucks is high margins.
High-quality, differentiated products for ultimate customer satisfaction
Known for the environmentally/socially responsible methods of manufacturing
Premium products for a premium price
Value Capture
Value Chain
Starbucks widely manifest their C.A.F.E. practices
Take pride in their green activities
Use them to promote the company

Coffee beans-50% from Latin America, 35% from Paci fic Rim, 15% from East Africa
Farms-Processors-Suppliers-Starbucks-Regional warehouses-Stores
Three modes of supplier chain management:
►Make-to-stock (Starbucks)
►Continuous replenishment
Definition of SSCM

"Refers to the control exerted over all immediate and eventual environmental effects of products and processes associated with converting raw materials into final products"

(Beamon, 2005)

Background and introduction
C.A.F.E practices and Conscious Capitalism
How Starbucks create sustainable value
Bolt-on or embedded sustainability
Upstream downstream

Presentation Outline
C.A.F.E. Practices & Conscious Capitalism
Starbucks has numerous competitors

All compete closely in order to produce superior coffee
A loss to competitors is a gain to Starbucks
Thus a 'win lose' situation
All partners contribute towards sustainable business
"Work together to inspire positive change to the world around us"
However, it is a profit-driven company
C.A.F.E. practices could be viewed as a 'scapegoat' operation for sustainability
Starbucks advertise that it aims to create value and happiness for its stakeholders
Good connectivity and bigger picture thinking
Protect and Enhance the Brand
Business Context - Influencing Industry Standards
"Starbucks continues to strive for even better performance on the ethical sourcing front. We're committed to implementing SSR Standards across our global supply chain and increasing our support to advance social and environmental performance. "
Sustainable Value

"We do..."
Large element of risk in the development of the C.A.F.E. practices
Meet the majority value creation requrements
Forced due to new sociably and environmental orientated notions
Sustainable supply chain benefits a number of environmental and social aspects
- An effectively managed operation - full control
- However, main drivers are profitability and competitive advantage
Thus, firm manages its own activities
Large focus on risk mitigation
Improvement of efficiency
Argued that sustainable supply chain developed for benefit of the firm
C.A.F.E. practices changed the way they do business with suppliers

Argued that practices developed to make company look responsible

Particularly successful regarding environment

Evidence that the company may not be socially responsible - Tax avoidance for first 15 years of business
Well designed and structured sustainable supply chain
Showing appreciation to the sources used
Evidence of embedded sustainability in the supply chain

However, major focus planning for future success and maintenance of market leadership
Argued sustainable supply chain designed to make firm look sustainable and benefit profitability.
$100 million in compensation for unfair distribution of tips
Creating Sustainable Value: Evaluating Organisational System "Impacts"
Environmental Impact:
Social Impact:
Community Involvement
Economic Impact:
Environmental Impact:
Climate Change
Social Impact:
Community Integration
Economic Impact:
Tax Base
Green Building
Customer Health & Safety:
Exposure to Toxics
Social Innovations:
Sustainability is
in the supply chain and
bolted on
to the organisation
Although Starbucks do
create sustainable value
, they are far from reaching their goals
An example of an attempt at
Conscious Capitalism
Group Opinion: Sustainability efforts are
often found to be empty
Thank you for listening.
We will be happy to take any questions!
New Opportunities
Result of consumer demand for sustainability
Reduced harmful impact
Enhanced corporate reputation
Perceived as above average
Radical Innovation
Drive deep innovation
Encourage Lean thinking and creative solutions
Beamon, B. (2005). Environmental and sustainability ethics in supply chain management. Science and Engineering Ethics. 11 (22), p.221-234.

Conscious Capitalism (2015)
An Introduction to Conscious Capitalism.
Available: http://www.consciouscapitalism.org/node/3998 Last accessed: 15/02/2015

Laszlo, C. and Zhexembayeva, N (2011). Embedded Sustainability The Next Big Competititve Advantage. California: Greenleaf Publishing Ltd. p.61-67.

Laszlo, C. and Zhexembayeva, N (2011). Embedded Sustainability The Next Big Competititve Advantage. California: Greenleaf Publishing Ltd. p.42.

Starbucks Coffee Company (2007) C.A.F.E. Practices Generic Evaluation Guidelines 2.0. Available: http://www.scscertified.com/retail/docs/CAFE_GUI_EvaluationGuidelines_V2.0_093009.pdf Last accessed: 15/02/2015

Starbucks Coffee Company (2013) Starbucks Global Responsibility Report, Goals and Progress 2013. Available: http://news.starbucks.com/uploads/documents/Responsibility_Report_2013.pdf Last accessed: 15/02/2015

Starbucks Coffee Company (2015) Mission Statement. Available: http://www.starbucks.co.uk/about-us/company-information/mission-statement. Last accessed: 15/02/2015

Sunil, C. Peter, M. (2015) Supply Chain Management: Strategy, Planning, and Operation. New York: Pearson Education Ltd. p.50

Taylor, B. (2013). Global Responsibility Report Goals & Progress 2013. Available: http://www.starbucks.com/responsibility/global-report. Last accessed 24/02/2015.

YouTube (2009) Starbucks Coffee You are Shared Planet. Available: Last accessed: 15/02/2015

YouTube (2009) What Goes into Making a Starbucks Coffee? Available: Last accessed: 15/02/2015
(Conscious Capitalism, 2015)
Support centres and loan guarantees for farmers
Benefits and opportunities for employees
6 roasting plants followed by delivery
Fangyu Lin 40181151
Xinran Yang 40129407
Christina Laing 40052954
Max Wilson 40058214
Cameron Anderson 40052285
Full transcript