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Is Starbucks Sustainable?

SustainAbility invests a fair amount of time in education and in helping students. Here John answers questions posed by Nina Wulff, a Danish student at the Copenhagen Business School, where he lectured in October 2003.

Nina Wulff is a 27-year-old Dane currently enrolled at Copenhagen Business School (CBS) in the International Business Communications program. She is working on her thesis on how to brand sustainable businesses. Nina is also a recent MBA graduate (2003) from the Monterey Institute of International Studies, California, where she has lived and studied for the past two years. In October 2003 she posed the following questions as part of her research at CBS.

1 Which five trends do you currently see as the most important in sustainable development?

JE: To a degree, it depends on the day, but my sense is that we are now headed into the third great downwave in terms of societal pressures on business. That isn’t bad; much of the really useful work on new laws, standards and systems tends to get down during downwaves. But, at the same time, the corporate responsibility and sustainable development agendas have to fight harder for air time. That said, my current Top 5 would be as follows:

Globalisation: How far, how fast, controlled by whom? It’s interesting to see that the anti-globalisation groups, or at least some of them, are now talking not about stopping globalisation but about alternative, more responsible forms of globalisation.

Governance: This agenda item has stormed up the priority list in recent years, involving issues around both global (if not the UN, what?) and corporate governance - the latter expanded from traditional financial integrity issues to an expanding triple bottom line agenda of economic, social and environmental value added, or destroyed.

Security: We know what the Bush Administration understands by security, post 9/11, but this is a cartoon version of the security agenda of the 21st century. It needs to be expanded from understandable concerns about terrorism, weapons of mass destruction and the invasion of ‘rogue states’ to a truly global (not single nation) consideration of what it will mean - and take - to achieve a secure, resilient world of 8-9 billion people.

Demographics: Again, it’s not just a question of population numbers, but of underlying structural trends, ageing in the rich world, huge populations of young people in the less developed world. Through history, every time you have seen large concentrations of young people, particularly young men, you have also had the potential for massive social and political change, not all of it helpful. Think of the French or Iranian Revolutions. The concept of intergenerational justice is now surfacing with a vengeance in such areas as public health care provision and the pensions sector.

Market re-engineering: The previous four challenges are tough enough, but if capitalism is to survive, markets will need to be re-engineered, a role for governments. So how do we ensure markets reward business and others for doing the right thing? New experiments like the Chicago Climate Exchange are pointing the way, but this is an area where we have scarcely even scratched the surface of what needs to be done.

2 Do you think sustainability and the triple bottom line will change the way companies brand themselves?

JE: Yes, but not necessarily in the way you might expect. Personally, I don’t expect successful branded companies to talk to consumers about the triple bottom line as such. It isn’t sexy. Instead, the relevant thinking and performance will have to be integrated into what we call the ‘4Bs’: Balance Sheets (accountability, accounting, reporting, assurance), Boards (e.g. corporate governance), Brands (e.g. ongoing conversations with consumers, customers and investors) and Business Models (e.g. the DNA of a company, the ways in which it creates or destroys value). I expect to see a progression in the CSR and SD movements from Balance Sheets to Boards, then to Brands and (in the future) to Business Models.

3 Do you think companies will start using their sustainability efforts more extensively in their branding than currently?

JE: Only if they can come up with inspired, inspirational ways of doing so. A huge amount of work still needs to be done with the branding, marketing and advertising industries. We have just completed a project for the European advertising industry which gives some ideas on how this might be done, but it was something of an uphill struggle. The report is called Opportunity Space.

4 Do you think that companies such as tobacco companies - which are producing products that are considered a danger to health - will benefit from branding themselves as being social corporate leaders?

JE: To a degree. There is no question that companies like Philip Morris or McDonald’s are getting more sophisticated in terms of countering their critics, whether in terms of lung cancer or obesity. But every time they launch CSR initiatives, or advertising campaigns lauding their own achievements, the risk is that campaigns or legal judgements on long-term liabilities and other problems will massively dilute the intended effects in terms of improved reputation. When BAT published its first social report, for example, the anti-smoking group ASH reverse engineered the report to extract performance indicators like number of deaths from cancer for every thousands pounds earned by BAT. Obviously quite what the company had in mind when publishing the report.

5 Do you look upon Starbucks as being a corporate social leader?

JE: Oh dear, this is a complicated one. Some people do, including at least one of my colleagues - who has worked for them in the past. They like what the company is doing in terms of fair trade or shade-grown coffee, for example. But I still worry that they have a business model rather like Wal-Mart’s, which involves surrounding and then crushing competitors. Too Darwinian for my taste!

6 What do you think about Starbucks current strategy exposing (some) of their efforts in sustainable development?

JE: I’m really not sure. I don’t know the company, the sector or the supply chains well enough. But we are doing a presentation to the April 2004 conference organized by the Specialty Coffee Association of America, so this is an issue we will be looking at.

7 What do you think Starbucks branding strategy could look like in the future?

JE: It’s clear that they see caring (for the environment, for fair trade issues and so on) as a central part of their message. If they were to continue to expand and to build more such issues into their branding, I suspect they would need to undergo something of an internal convulsion to be really credible and trusted in tomorrow’s markets. Whether such companies like it or not, the central mechanism for many campaigners these days is to target major brands linked to key emerging issues. In that sense, the more successful Starbucks is commercially the more it sets itself up to be a fulcrum for campaign groups wanting to leverage change.

On the positive side, the October issue of the Royal Society of Arts Journal carries a feature on the role of London’s coffee houses in catalysing the birth of what would now be called ‘civil society’. And Starbucks are sponsoring the RSA’s ‘Coffee House Challenge’, which aims to re-invigorate the role of coffee houses as venues for debate and discussion (www.theRSA.org/newprojects). Who knows what will be cooked up in the process?

8 What do you see as future trends in sustainable development? - and who do you see as being social corporate leaders?

JE: That’s a huge question. Apart from the answers above, take a look at the analysis contained in SustainAbility’s various reports and on our website (www.sustainability.com), where the latest issue of our newsletter Radar looks at the collision between competing languages and communities of interest in this area. I think it’s inevitable that there will be a shakeout in this area. There always is after booms, even CSR booms. But the agenda as a whole should be strengthened by the process.

In terms of CSR leaders, three companies I would list would be BT (British Telecom), Novo Nordisk and Unilever. At which point I should declare an interest: all three are SustainAbility clients! It would be worth asking the same question of groups like Business for Social Responsibility (BSR), CSR Europe, Forum for the Future, Utopies, the World Business Council for Sustainable Development (WBCSD) and the World Resources Institute (WRI).