Starbucks: Ethics and Social Responsibility

Local Image vs Global Actions

Starbucks Coffee has an enormous number of locations that span the globe, a success due in part to a commitment to social responsibility and corporate ethics. Since the company's founding in 1971, Starbucks boasts strong ethical marketing and solid corporate citizenship policies. Despite this ethical focus and mission, Starbucks made controversial business decisions contradicting the company's ethics. This problem maintaining ethics reveals when comparing Starbucks' local ethical image with the corporation's global actions in the coffee trade.

When one enters their local Starbucks, the commitment to corporate citizenship is readily seen in advertising and branding efforts. One does not have to look far within the store to find pictures and ads of foreign coffee growers and how Starbucks pays increased amounts of money to be a responsible purchaser of coffee. Starbucks has often lived up to this responsibility. Starbucks pays more money than any other coffee purchaser to ensure ethical supply chain management (Starbucks, 2012).

Conversely, Starbucks also drives down prices in developing countries where the bulk of its coffee is purchased. This arguably unethical business practice occurs when Starbucks using its vast monetary resources to block patent and legal rights of local coffee companies in the countries that produce coffee.

According to Oxfam, Starbucks…had a hand in the Ethiopian government's recently failed attempt to trademark two of the nation's coffee bean names, Harar and Sidamo. The government believes that trademarking those names could help the country's coffee industry take home an extra $88 million a year. Oxfam International, on behalf of the Ethiopian government, has accused Starbucks of blocking Addis Abbaba's trademark applications with the U.S. Patent and Trademark Office (Crane, 2006).

Starbucks used legal power and financial resources to block the trademarking efforts to protect purchasing prices for coffee. For example, when one buys Sumatra Coffee at Starbucks, the name Sumatra has no trademark, which the Sumatra coffee growers attempted to pass through patent application. Despite the fact that Ethiopia or Sumatra is written on a bag of Starbucks coffee, the names do not belong to the growers in these countries. Ultimately, this action allows Starbucks to maintain price control over coffee. Starbucks claims that its higher than industry average coffee goes to maintaining an ethical supply chain but this point is arguable (Starbucks, 2012). According to Oxfam,

Seth Petchers, the coffee lead for Oxfam's Make Trade Fair campaign, admits Starbucks has made some progress in its supply-chain practices, but it should do more to help its suppliers who come from the poorest of poor countries. "This [trademarking plan] isn't about Ethiopia trying to strengthen its grip on these coffees and impose pricing requirements," he says. "It is about looking to control and protect the way these brands are built up in the market and make sure what Ethiopians get reflects [the country's] true value in the marketplace (Crane, 2006)."

Starbucks decision to brand itself as a "good corporate citizen" creates a situation, which can be construed as hypocritical due to the obvious contradictions between the company's actions and ethics strategies such as maintaining sustainable supply lines. In the most simplest terms, Starbucks is a multi-billion dollar operation buying in countries such as Ethiopia where 40–50% of export income is derived from coffee (Oxfam, 2006). The majority of the growers workers (15 million Ethiopians) are dependent on this trade which only allows them to live on less than $1 a day (Oxfam, 2006). The question that arises in this situation is whether Starbucks is actually being an ethical and responsible corporate citizen? Whatever the answer a larger concern arises from the fundamental need of companies to protect investments, which questions the wisdom of ethical branding at the local level for Starbucks.

Implications for Branding Decision

The effort to brand itself as a socially responsible company has deep implications for Starbucks. When this marketing approach is taken this creates a situation where the company is now judged against its own policies and actions. As long as the appearance of being socially responsible is maintained, the branding can be seen as successful. The problem is that there is a line when it comes to profiting that the company must maintain. This line becomes blurred when Starbucks takes actions such as blocking patents and price controlling. While it has not happened, there is a risk that Starbucks may do harm to its image by acting in a manner that can be perceived as contrary to its established ethics and social responsibility. One of the most important elements that has deep implications for the company is the subjective concept of fairness. Starbucks is considered by most people to be a fair marketing company due to its commitments to ethical supply management. This image is problematic and Starbucks goes to great effort to maintain it. For instance, in response to Oxfam, Starbucks resorted to media rather than discussing the issue in an attempt to maintain its image in the US market:

The coffee company has shot back with its own battery of press releases and a full-page ad in The New York Times on Nov. 5 that highlighted Starbucks' CAFE Practices, which include paying above-market prices for its coffee (Crane, 2006).

This red herring strategy allowed Starbucks to deflect the problem of blocking patents by toting itself as a good corporate citizen due to its spending on ethical supply management. Starbucks appears to be engaging in deceptive marketing practices, presenting a PR issue if brought to light. As such, Starbucks relies on a risky branding strategy, which at any time could backfire and harm the company by offending clientele willing to pay higher prices for products from an ethically and socially responsible company.

Critical Thinking

Starbucks branding did not occur overnight, growing with the company and leadership and likely never endured critical examination. The complexity of global markets and trade create many factors needing consideration when setting corporate and social responsibility goals. For example, Starbucks demands foreign suppliers adhere to pay and labor standards that creates a situation where farmers are often forced to sell coffee below production costs (USDA, 2009). Starbucks earns billions of dollars marketing the brand value of being a fair trader while simultaneously advancing poverty in foreign countries. A critical analysis of the company's trade decision and branding reveals that Starbucks causes issues in developing countries rather than solving them. Though this outcome is likely unintentional, the result is the same. If Starbucks were to critically examine policies and branding decisions, the current decision to brand the company as socially responsible might be rethought or improved as current practices show precarious positions to maintain that may eventually damage the brand.

References

Crane, M. (2006, November 28). When is being good not good enough? . Retrieved from http://www.forbes.com/2006/11/28/leadership-starbucks-charity-lead-citizen- cx_mc_1128companies.html

Oxfam. (2006, November 3). Oxfam calls on starbucks to stop bullying the poor. Retrieved from http://www.oxfam.org/en/news/pressreleases2006/pr061103_starbucks

Starbucks. (2011). Business ethics and compliance standards of business conduct. Retrieved from http://globalassets.starbucks.com/assets/eecd184d6d2141d58966319744393d1f.pdf

Starbucks. (2012). let's make our communities thrive. Retrieved from http://community.starbucks.com/index.jspa

USDA. (2009). The Coffee value chain . Retrieved from (USDA, 2009) https://www.bing.com/search?q=The+Coffee+value+chain++USDA&form=APMCS 1&PC=APMC

Article Updated: 11/01/2021