Striking A Balance - Starbucks Coffee Company
Striking a BalanceCORPORATE SOCIAL RESPONSIBILITYFiscal 2004 Annual Report
“Is Starbucks responsible? I don’t know.”– Jordan Hoyt, owner of Beartooth CoffeeRoasters in Billings, MontanaC OV E RJosé Manuel Barrientos Alfaro (right) farms coffee on the fertile slopes of the Poás Volcano in CostaRica’s central valley. He’s built a strong working relationship with Carlos Mario Rodriguez (left),the director of agronomy at the Starbucks Farmer Support Center in nearby San José. Carloshas helped guide José on his way to becoming a Starbucks preferred supplier through C.A.F.E.Practices. To read more on this, please see page 20.
Dear Stakeholders,The question posed by Jordan Hoyt – Is Starbucks responsible? – is an important one. While my immediateresponse is yes, I believe this deserves a more thoughtful explanation. I hope this report will help you determinefor yourself whether Starbucks is a responsible company.The theme of our Corporate Social Responsibility Fiscal 2004 Annual Report, “Striking a Balance,” underscoresour approach to conducting business. During the early days of Starbucks, we were determined to create a companywith a heart and conscience – one that would continually deliver shareholder value while touching people’s livesand enriching the human spirit. Our good intentions led us to establish Starbucks Mission Statement and GuidingPrinciples in 1990, the foundation we needed to help us balance our priorities and integrate social responsibilityinto everything we do.The idealism we felt so strongly has not faded with time. The phenomenal success Starbucks has achievedconfirms my belief that a company can do good and do well at the same time. For instance, Starbucks is takingthe lead among major coffee companies through our approach to responsible coffee purchasing. We are continuingto introduce coffee farmers and suppliers to Coffee and Farmer Equity (C.A.F.E.) Practices, a set of sociallyresponsible buying guidelines that have evolved from our two-year pilot project and were further refined by thefeedback we received from coffee growers, sustainability experts and others.We have also recognized that to ensure the sustainable production of high-quality coffee, more is needed. So, inJanuary 2004, we opened our Farmer Support Center in Costa Rica, enabling our team of experts in coffee qualityand sustainability practices to collaborate directly with coffee farmers on measures that will help them sustaintheir farms and surrounding communities.From the very beginning, we have vowed to always treat our partners (employees) with the highest level of respectand dignity. One of the best examples is our ongoing commitment to provide healthcare benefits to eligible fulltime and part-time partners, despite the escalating costs. We have shared our concern with policymakers that allAmericans should have access to affordable healthcare and have supported a campaign to raise awareness of thisimportant issue.While we are proud of our accomplishments, we recognize our challenges. Our effort to revolutionize the coffeeindustry through C.A.F.E. Practices will not happen overnight and will remain an ongoing journey. Our rapidexpansion challenges us to maintain – for our partners, customers and communities – the intimacy that is ahallmark of the Starbucks Experience. And occasionally, we have met resistance from neighborhood groupsconcerned that the presence of a Starbucks will impact the unique character of their communities and locallyowned businesses.We are committed to facing our challenges responsibly, openly and with sensitivity. We believe a responsiblecompany is one that listens to its stakeholders and responds with honesty to their concerns. Throughout thisreport, we have included external comments and responded to questions from various stakeholders as a wayof offering more candor and disclosure to our readers.(continued on page 2)1
This is a year of change for Starbucks. In March 2005, Orin Smith, Starbucks president and ceo, will retire. Orinhas offered unfaltering leadership to the company and in the area of social responsibility. He has set an examplefor all of us. I can assure you that Jim Donald, our incoming president and ceo, will continue to lead Starbuckswith the same commitment to social responsibility that has been demonstrated over the years.So, is Starbucks responsible? There is no end to this journey, but I know this: our ongoing success will always bemeasured by how well we balance our fiscal responsibility with our goal to enhance the lives of those whom weserve and who serve us.Sincerely,Howard Schultzchairman2
CONTENTSSTARBUCKS ANDCORPORATE SOCIAL RESPONSIBILITY – 4Global Reporting Initiative(GRI) IndicatorsStarbucks Mission Statement and Guiding Principles .4Company Profile .5About This Report .6Performance Summary – Starbucks Key Performance Indicators .7Governance at Starbucks .8Stakeholder Engagement .9Purchasing Responsibly from Suppliers .103.72.1, 2.2, 2.8, EC12.11-2.13, 2.20, 2.21EC4, EN173.1-3.3, 3.5, 3.6, 3.8, LA112.9, 3.11, 3.123.7, 3.16, HR3, HR5, HR7COFFEE FARMERS – 12Sustaining Our Hallmark of High-Quality Coffee .15The World of Coffee .16Our Approach to Sustainable Coffee Production .18Coffee and Farmer Equity (C.A.F.E.) Practices .20Starbucks Farmer Support Center.25Purchasing Conservation and Certified Coffees .26Investing in Social Programs .30Providing Access to Affordable Credit .313.7, 3.12, 3.16, EC13, EN27, HR2, HR3, HR5-7EN6, EN25, EN27, EN28, PR6EC10EC13SOCIETY – 32Building Strong Community Ties.35Starbucks Growth.35Urban Coffee Opportunities .38Investing in Communities .39The Starbucks Foundation – Supporting Youth Education .41Investing in Coffee- and Tea-Growing Communities.43Contributing to Communities Around the World .45Being Responsible to Our Customers .47Our Approach to Public Policy in the United States .48United Nations Global Compact.49EC10EC10EC10EC2PR1, PR8SO33.14ENVIRONMENT – 50Starbucks Environmental Mission Statement.52Environmental Responsibility and Leadership .53Understanding Environmental Issues and Sharing Information with Our Partners .53Developing Innovative and Flexible Solutions to Bring about Change .54Striving to Buy, Sell and Use Environmentally Friendly Products .56Recognizing That Fiscal Responsibility Is Essential to Our Environmental Future.56Instilling Environmental Responsibility as a Corporate Value .57Measuring and Monitoring Our Progress for Each Project .58Encouraging All Partners to Share in Our Mission .60Challenges and Opportunities .613.7EN8EN17EN14SO4EN2, EN3, EN5WORKPLACE – 62Starbucks Employment Profile .64Creating a Great Work Environment .65Partner Benefits .66Fostering Diversity and Inclusion.66Partner Training and Career Development.68Recognizing Our Partners .69Listening to Our Partners .70Health and Safety .71EC5Independent Verifier’s Report .72Feedback and Further Information: Is Starbucks Responsible? .732.212.10, 2.223LA12, LA17LA10, LA11, HR4LA9, LA17HR6, LA3HR10LA7
STARBUCKS MISSION STATEMENT AND GUIDING PRINCIPLESTo establish Starbucks as the premier purveyor of the finest coffee in the world whilemaintaining our uncompromising principles as we grow.The following six Guiding Principles will help us measure the appropriateness ofour decisions: Provide a great work environment and treat each other with respect and dignity. Embrace diversity as an essential component in the way we do business. Apply the highest standards of excellence to the purchasing, roasting and fresh delivery of our coffee. Develop enthusiastically satisfied customers all of the time. Contribute positively to our communities and our environment. Recognize that profitability is essential to our future success.Starbucks Corporate Social ResponsibilityFiscal 2004 Annual Reportis dedicated toORIN C. SMITHStarbucks retiring president and ceoIn 1990, Starbucks leaders went on a retreat tomap out the company’s future. They returned withStarbucks Mission Statement and Guiding Principles,which reflect the personal values of Howard Schultz,Orin Smith and several others, and serve as thefoundation of Starbucks culture. We thank Orin Smith,who is retiring in March 2005, for his uncompromisingcommitment to live these values every day and forinspiring all Starbucks partners to do the same.4
STARBUCKS AND CORPORATE SOCIAL RESPONSIBILITYCompany ProfileIn addition to coffee, Starbucks also produces and sells awide variety of consumer products that includes Tazo’s lineof high-quality teas, CDs from Hear Music, coffee-brewingequipment and other merchandise. Starbucks owns SeattleCoffee Company, which includes the Seattle’s Best Coffee and Torrefazione Italia coffee brands, offering alternativevarieties of coffee flavor profiles.Starbucks Corporation has grown from a single store in1971 to become the leading retailer, roaster and brand ofspecialty coffee in the world, with retail locations in NorthAmerica, Latin America, Europe, the Middle East andAsia Pacific. We believe our growth and success are theresult of our unwavering commitment to offer the highestquality coffee and an exceptional customer experiencewhile conducting our business in ways that produce social,environmental and economic benefits for communities inwhich we do business.Starbucks Corporation is incorporated in Washington State,in the United States. The company is listed on the NasdaqStock Market under the symbol SBUX. As of December 2,2004, there were approximately 434,000 beneficialshareholders of record.Company DataFiscal year200220032004*Total net revenues . 3.3 billion 4.1 billion 5.3 billionU.S. company-operated stores . 2.4 billion 3.0 billion 3.8 billionU.S. specialty (licensing, foodservice, other). 403 million 507 million 690 millionInternational company-operated stores . 368 million 484 million 657 millionInternational specialty (licensing, foodservice, other). 93 million 119 million 146 millionNet earnings . 213 million 268 million 392 millionEarnings per share – diluted . 0.54 0.67 0.95Shareholders’ equity . 1.7 billion 2.1 billion 2.5 billionTotal income taxes . 126 million 168 million 232 millionCash paid for income taxes . 105 million 140 million 173 millionU.S. federal and state . 100 million 134 million 163 millionInternational . 5 million 6 million 10 millionEffective tax rate .37.3%38.5%37.2%Number of countries where Starbucks stores are located .303234Total retail stores .5,8867,2258,569U.S. company-operated stores .3,2093,7794,293International company-operated stores .703802922U.S. licensed stores .1,0331,4221,839International licensed stores .9411,2221,51562,00074,00097,000Number of partners .* Fiscal 2004 included 53 weeks. For further information about our financial performance, please see our Fiscal 2004 Annual Report to shareholders,available online at www.starbucks.com/aboutus/investor.asp. 5
About This ReportGlobal Reporting InitiativeStarbucks was influenced by the Global Reporting Initiative(GRI) guidelines in determining relevant content andperformance metrics to include in our report. Presently, we arenot in full accordance with the GRI, but each year we striveto increase our use of its principles and indicators. The GRIindicators included in this report are referenced in the tableof contents on page 3. In some cases we address only elementsof specific indicators. More information about the GRI isavailable at www.globalreporting.org.ScopeThis report includes information on Starbucks U.S. andCanada company-operated retail and coffee supply-chainoperations, the areas that represent the majority of Starbuckseconomic, environmental and social impacts.Starbucks system for collecting and reporting reliable economic,environmental and social data does not encompass all Starbucksoperations. Where available, anecdotal information is includedin this report on international and licensed store operations.Information on our total coffee purchases is for both StarbucksCoffee Company and Seattle Coffee Company.Information IntegrityStarbucks management is responsible for the preparation andintegrity of the information presented in this report. Througha system of internal controls, including a comprehensiveverification process involving internal subject matter experts,we believe this report fairly represents our CSR activities andresults for the fiscal year ended October 3, 2004.Reporting YearThis report covers activities that occurred during Starbucksfiscal year 2004 (September 29, 2003, through October 3,2004), unless otherwise noted.External verification is provided by Moss Adams LLP. Theverification process includes testing the accuracy of specificdata and content. (See the Moss Adams verification letter onpage 72.)CurrencyAll references to currency are in U.S. dollars.Previous ReportsStarbucks past three Corporate Social Responsibility(CSR) Annual Reports are available online atwww.starbucks.com/csrannualreport.6STARBUCKS AND CORPORATE SOCIAL RESPONSIBILITY
Performance Summary – Starbucks Key Performance IndicatorsTo measure how well we are doing at upholding our commitment to social responsibility and to our Guiding Principles, Starbucks has identified thefollowing key performance indicators as the most relevant metrics for our business. We will report our performance relative to these metrics in thefuture, and may add new metrics as our business continues to evolve.Indicator200320042005 target(where available)MoreinformationPages 20–24COFFEECoffee and FarmerEquity (C.A.F.E.)PracticesFair TradeCertified coffeePounds of coffee purchased frompreferred suppliers13.5 million(goal: 3.5million)43.5 million(goal: 30million)75 millionPercentage of total coffee purchasesNA14.5%NAPounds of coffee purchased fromFair Trade Certified cooperatives2.1 million4.8 million10 millionPercentage of total coffee purchasesNA1.6%NAPages 26, 28–29COMMUNITYCharitablecontributionsTotal cash and in-kind contributions 11.3 million 14.6 million* NA2.6%2.3%NAVolunteerism(Make Your Mark)Percentage of U.S. Starbucks partners 21%who volunteer in their communities14%NAPage 40Percentage of pre-tax earningsPage 39CUSTOMERSHighly satisfied customers52%55%NAPage 47Customers who think Starbucks contributes tolocal communities46%49%NAPage 38ENVIRONMENTGreenhouse gasemmissionsMetric tons of CO2 equivalents254,000NASet CO2 emmissionsreduction target;purchase 5%renewable energyPages 53–54ElectricityKilowatt hours per square foot ofretail space5.846.62NAPages 58–59WaterGallons per square foot of retail space 20.327.1NAPaperPercentage of post-consumer fiber(not including hot cups)48.1%46.5%48%Percentage of unbleached fiber(not including hot cups)88.9%86.3%90%Percentage of satisfied partners82%NANAPartner engagement Percentage of engaged partners73%NANAHealth and safetyInjury rate per 200,000 hoursworked – retail8.02**7.567.25Page 71WomenU.S. workforce63%63%NAPages 66–67People of colorU.S. workforce24%24%NASuppliersAmount spent with certifiedminority- and women-ownedbusinesses 80 million 114 million(goal: 95 million) 140 millionWORKPLACEPartner satisfactionPage 70DIVERSITYNA Not Available* Previously, we reported separately the amount invested by Starbucks in social projects in coffee-growing communities.We are now including these investments as part of our total global contributions.** Fiscal 2003 information has been retroactively adjusted to reflect new claims that were filed after the fiscal year ended.7STARBUCKS AND CORPORATE SOCIAL RESPONSIBILITYPage 11
Governance at StarbucksStarbucks AuditlineExternal stakeholders (non-partners) may call StarbucksAuditline with concerns regarding accounting controls orauditing matters and they may refer communications to theBoard of Directors, to the committees of the board and toindividual directors.Eleven members serve on the Starbucks Board of Directors,including eight who meet the definition of independenceaccording to the National Association of Securities Dealers(NASD). Individual board members are up for electionevery three years and are nominated based on specific criteriaintended to strengthen the overall quality and depth of theboard. For instance, each candidate should demonstrateintegrity and ethics in his/her personal and professional life.In addition, each candidate should contribute to the board’soverall diversity – in terms of background, gender, race,ethnicity or other differentiating characteristics – to add tothe variety of opinions and perspectives.Emerging Issues CouncilTo assess potential risks and opportunities to the company,Starbucks created an Emerging Issues Council (EIC) in2004. The EIC is a cross-functional team of Starbucksexecutives led by our vice president of CSR.Two issues the EIC will address in fiscal 2005 pertain tococoa purchasing and climate change:There are three committees of the board: Audit andCompliance, Compensation and Management Development,and Nominating and Corporate Governance. All three arecomposed of independent directors. Cocoa purchasing – Starbucks purchases processedcocoa and chocolate through suppliers that sourcefrom several tropical countries, including the IvoryCoast, West Africa. In 2001, allegations arose about theuse of forced child labor on cocoa farms in the IvoryCoast. Starbucks has shared our concerns about theseallegations with our suppliers, who have assured us thatthey are taking measures to ensure that their purchasingpractices promote sustainable and responsible cocoafarming. However, the EIC will continue to monitorthis issue and, if necessary, adopt new policies andmeasures related to our cocoa purchases.Board DiversityThe members of Starbucks board have professionalexperiences in various industries, such as technology,financial investment, consumer products, retail, and thegovernment and nonprofit sectors. Of the 11 members,one is female and one is African American.Executive Compensation Climate change – The potential threat that climatechange poses to the environment and to coffee-growingcommunities has led the EIC to prioritize this issue.In 2004, Starbucks conducted a climate inventory ofour greenhouse gas emissions. The EIC will evaluatean emissions reduction strategy and determine whetherother measures are needed for Starbucks to proactivelyand responsibly address the issue of climate change in aleadership capacity.To determine compensation for Starbucks chairman,president and ceo, and other certain executives, theCompensation and Management Development Committeefirst examines the compensation levels at peer groupcompanies and strongly considers the company’s short-termand long-term performances. All independent directorsvote on the committee’s specific recommendations for theexecutive compensation package, which consists of threecomponents: annual base salary, incentive bonuses and stockoption awards.More information, including our fiscal 2004 Proxy Statementthat discusses executive compensation and our CorporateGovernance Principles and Board Committee Charters, isavailable online at www.starbucks.com/aboutus/investor.asp.Corporate Social Responsibility (CSR)At present, there is not a committee of the board dedicatedto CSR. However, Starbucks senior vice president of CSRreports directly to the company’s president and ceo, andhas access to present CSR-related matters at the company’sboard meetings.8STARBUCKS AND CORPORATE SOCIAL RESPONSIBILITY
Stakeholder EngagementOur stakeholders include partners (employees), customers, coffee farmers, suppliers, community members, environmental groups, activists,shareholders and many others. Starbucks believes we have a responsibility to our stakeholders that begins by building relationships andfostering two-way communication. We’re working on being good listeners to our supporters and to our critics. Below are several examples ofhow Starbucks listened to and engaged with our stakeholders in fiscal 2004. Throughout our report, we include comments and questionsfrom various stakeholders and provide responses when appropriate.SubjectStakeholdergroupsIssues and outcomesC.A.F.E. Practices –coffee buyingguidelines focused onthe sustainability ofhigh-quality coffeeproductionCoffee farmers,processors and suppliers;non-governmentalorganizations (NGOs);coffee industryrepresentatives;academics; StarbuckspartnersStarbucks hosted a feedback session on our preferred supplier program and coffee buying guidelinesin February 2004. The input helped us improve the guidelines, which are the foundation of Coffeeand Farmer Equity (C.A.F.E.) Practices. Details on the feedback session can be found online l.Starbucks growth andstore locationsLocal neighborhoodgroups and smallbusiness communityA small number of local neighborhood preservation groups have opposed Starbucks plans to open stores intheir communities. These experiences have reminded us how important it is to build trusting relationshipswith our future neighbors and to gain a deep appreciation for what each individual community values. Priorto opening a store in the Fillmore district of San Francisco in 2004, we engaged with local residents anddiscovered how Starbucks could fit in with their community and make a positive contribution.Skyrocketinghealthcare costsin the United StatesGovernmentpolicymakersHoward Schultz, Starbucks chairman, met with federal policymakers to share the company’s concern aboutthe impacts that rising healthcare costs are having on all Americans and many employers. Starbucks helpedsponsor a Robert Wood Johnson Foundation campaign – Cover the Uninsured Week – to focus attention onthis critical issue.Starbucks partnersOur partners have indicated their concerns related to higher healthcare costs. Starbucks responded to theirneeds by providing better resources to help them manage their personal health.Sustainable dairy andfood productsStarbucks dairy andbakery suppliers,socially responsibleinvestors (SRI),shareholders andcustomersIn 2004, Starbucks surveyed our dairy and bakery suppliers to determine their current sustainability practicesand the feasibility of having them adopt more stringent measures to produce sustainable products.Specifically, we are determining whether our suppliers could potentially deliver rBST-free dairy products andbakery ingredients grown under environmentally friendly conditions. We also met with representatives fromSRI groups to gather and exchange information on possible alternatives to use in developing our sustainabledairy and food program. In 2005, Starbucks will review all the feedback previously received and develop ournext steps and future strategies.Responsible marketingof Starbucks CoffeeLiqueurAdvocacy groups,university studentorganizations, electedofficials, localbusinessesPrior to announcing Starbucks Coffee Liqueur with Jim Beam Brands Co. in April 2004, Starbucksproactively engaged with several advocacy groups, including Mothers Against Drunk Driving, and otherinterested parties in Colorado and Texas – the test markets for the product. We assured them of our intentnot to market our new product to underage consumers and of our commitment to promote responsibledrinking through our product marketing and advertising. This product will not be sold in Starbucks stores.Transparency anddisclosure on Starbucksbusiness practicesSocially responsibleinvestors (SRI)At the request of various SRI fund managers, Starbucks responded to extensive surveys that included detailedinformation on our social and environmental performance so each fund could determine whether Starbucksis worthy of inclusion on their specific index. In 2004, Starbucks was listed on the Dow Jones SustainabilityIndex, FTSE4Good Index Series, KLD’s Domini Social Indices (DS 400, BMS, LCS, CV 400, SS), CalvertSocial Index and Zürcher Kantonalbank.Starbucks partners andcustomers, businessleaders, NGOrepresentatives,academics, activistsStarbucks invited candid feedback from a wide array of stakeholders on the credibility and merit of ourCorporate Social Responsibility Fiscal 2003 Annual Report. We incorporated stakeholders’ feedback toaddress weaknesses in last year’s report in an effort to improve the report for 2004. For example, stakeholdersnoted that last year’s report lacked information about our challenges, especially with regard to our coffeebuying practices and the impact of our growth on local communities. As a result, we have included a morein-depth look at these topics in this report.We invite feedback on this report through an online survey at www.starbucks.com/csrsurvey.9STARBUCKS AND CORPORATE SOCIAL RESPONSIBILITY
Progress Report on 2004 Goals – Code of Conduct and Supplier DiversityGoalsTo complete training for Starbucks global procurement team on the Supplier Code of Conduct and suppliersocial responsibility.To select an independent third-party auditor and begin conducting Supplier Code of Conduct compliance audits.To create a stronger business and communications strategy for the Supplier Diversity program.To create a new position at Starbucks to oversee the Supplier Diversity program.To increase the amount we spend with diverse suppliers to 95 million.key:achievedmaking progres
the lead among major coffee companies through our approach to responsible coffee purchasing. We are continuing to introduce coffee farmers and suppliers to Coffee and Farmer Equity (C.A.F.E.) Practices, a set of socially responsible buying guidelines that have evolved from our two-year pilot project and were further refi ned by the
U.S.A. Starbucks Coffee Company P.O. Box 34067 Seattle, WA 98124-1067 206-318-1575 Starbucks Coffee Company 2401 Utah Ave. S., Suite 800 Seattle, WA 98134 206-318-1575 EMEA Starbucks Coffee EMEA BV P.O. Box 58081 1040 HJ Amsterdam 31-20-4076500 Starbucks Coffee EMEA BV - Starbucks Coffee Company
Starbucks has a well-developed supply chain for coffee beans. Starbucks has its Dark Roast Coffee. By roasting the coffee bean dark, Starbucks chooses quality rather than saving raw material cost. For People who serve coffee, Starbucks has its standard coffee making and customer serving principle. Each employee in Starbuck is a well-trained .
2021 Starbucks Coffee Company 11 Starbucks Food Donation Guide HOW WE GOT HERE Starbucks Partners (employees) who live the Starbucks Mission and Values daily in our stores expressed concern about the food that was being thrown away each night. Driven by this concern, Starbucks teamed up with Feeding America in 2016 to develop the
Starbucks' UK unit pays roughly 2 million in interest that is tax deductible a year, lowering its tax bill. For McDonald's UK units, that bill is around 1 million. 942 2,657 Starbucks' tax reduction techniques Starbucks' tax reduction techniques Starbucks' tax reduction techniques In 2009, Starbucks UK told investors it was .
Doraisamy, former Starbucks vice president, investor relations1; Dinah Scherwin, Starbucks project manager associate, investor relations; and Lea Gariando, Starbucks investor relations advisor. Ms. Scherwin and Ms. Gariando do not work in the legal department of Starbucks and are non-lawyer members of the Starbucks team.
six different frameworks, namely, SWOT, PESTLE, VRIO, Customer Analysis, MECE, and Criteria Grid. 3.1 Starbucks' Internal and External Environments Analysis 3.1.1 SWOT of Starbucks Starbucks has a huge market in the coffee industry, and Starbucks stores can be seen in most countries. Among many countries, China is one of Starbucks' larger .
Starbucks purchased in fiscal 2001 and the contracts that Starbucks has negotiated for coffee purchases in fiscal 2002, Starbucks pays an average price of 1.20 per pound, excluding freight, for green coffee purchased in these ways. Outright Prices Coffee prices can be negotiated either at outright prices or in relationship to the
Starbucks Corporation Fiscal 2007 Corporate Social Responsibility Annual Report 2 SOCIETY 44 Starbucks Community & Growth Impacts 49 Starbucks Community Investments 54 Our Contributions to Communities Around the World 57 The Starbucks Foundation 61 Starbucks Commitment to Health and Wellness 65 Being Responsive to Our Customers 66 Public Policy and Government Affairs
