Report evaluating ethical claims of Starbucks
Starbucks started as a small shop in Seattle but now has over 15,000 shops in more than 50 countries. When a company is at such a level, mistakes are bound to happen, but that isn’t an excuse. The propose of this report is to evaluate some of Starbucks ethical claims and how far they lived up to it. The writer gathered information from a lot of reports and certified websites and news outlets. The writer will evaluate their claims in treatment of customers, sustainability and the environment and tax avoidance by Starbucks.
It is further concluded that Starbucks does not live up to their claims and there are still things to work on and potential for improvements in their methods of working as an ethical business. It is recommended, for Starbucks, to start being more responsible and treat people as well as customers equally. They should start following the law as a duty and not charity or donation. They need to stop taking every opportunity as a way to improve its brand image. Starbucks has to improve their recycling methods and be aware of what products and packaging they are using and selling to their customer.
Coffee isn’t just a beverage anymore, it’s a breakfast staple for most people. Majority of the people irrespective of the fact that they are coffee drinkers or not, around the word are familiar with the multi-billion-dollar company called Starbucks. In the globalized 21st century it is strenuous for a business to maintain high standards while being ethical. According to the Cambridge Dictionary (2020) ethics is defined as the study of what is morally right and wrong, or a set of beliefs about what is morally right and wrong.
The first Starbucks was opened in Seattle on 30th March, 1971 by three people, Gordan Bowker, Jerry Baldwin and Zev Siegl who met at the University of San Francisco while persuading very different degrees (The Guardian (14th May, 2012)). However, they ended up selling the company in 1987 to Howard Schultz who used to work at Starbucks. He then took another step and opened the first Starbucks outside the states. Starbucks started to boom from the year 1990 (CNBC, 2017). The company seemed unstoppable throughout that decade and most of the next, opening on average two new stores every day until 2007. When a company grows mistakes are bound to happen. During the time of growth, decisions are made by the company and it will be held accountable for the mistakes it makes.
This report evaluates the ethics of Starbucks in terms of its treatment of customers, its regard for the environment and tax avoidance.
Ethical claim 1: Treatment of customers
Starbucks on its official website claims to create a culture of warmth and belonging where everyone is welcomed. They claim to inspire and nurture the human spirit — one person, one cup, and one neighborhood at a time (Starbucks, 2020).
Ethical claim 1: criticism
An incident took place in Philadelphia, Pennsylvania, USA on April 12, 2018. Two black men were waiting for their friend at Starbucks, firstly they were refused to use the restroom since they hadn’t bought anything but then were arrested for absolutely no reason. A customer recorded the arrest and posted it on twitter. This created a sense of awareness among people and Starbucks received the repercussions pretty quickly since the video got viral and was viewed more than 11 million times. (Petritsch A., 2019.) In response to this Starbucks closed nearly 8,000 if its stores on 26th May, 2018 and conducted a half-day training. However, is this enough? Two people who were minding their own business were arrested for just waiting for their friend, they weren’t even allowed to use the restroom. The video did commence the employees to come forward and talk about their own experiences and outlooks on racial bias.
The CEO of Starbucks, Kevin Johnson said that this is the first step towards a much-needed discussion. Starbucks gathered a team of experts who analyzed the organization’s racial-bias training initiatives and their effectiveness. Starbucks also partnered with Stanley Nelson, director, writer and producer of documentaries examining African-American history and experiences, to create a documentary focused on the lived experience of unconscious bias. Some people argue that this wasn’t the fault of the company (The Guardian, 2018). Starbucks directly might not be at fault but when an established multi-billion-dollar company has an issue like this, its name maybe not for forever but at least for a long time will be connected to the issue at hand.
Ethical claim 2: Starbucks’ claims in sustainability and the environment
Starbucks says that caring for the environment is just as important as caring for the communities. Starbucks claims on its official website that they are working to solve cup recycling and minimize waste inside and outside their stores. They are building greener stores, preserving water and minimizing their environmental footprint. Water is a crucial ingredient for if not all, most of their beverages. They say they are looking for new ways to be responsible with the water they use, consume and sell (Starbucks, 2020).
They also claim to have collaborated with Conservation International and the Business for Innovative Climate and Energy Policy (BICEP) to reduce their footprints. They also claim to be members of the Paper Cup Recovery and Recycling Group (PCRRG) and promote recycling. They have mentioned on their official website to have more LEED certified (Leadership in Energy and Environmental Design) than any global brand. They currently have LEED-certified stores in 20 countries worldwide (Starbucks, 2020).
Ethical Claim 2: Criticism
In spite of receiving these certificates, Starbucks still has a lot to do. If one looks closely the number of LEED-certified countries is 20, but Starbucks has its stores in more than 50 countries. This indicates that not even half of the countries they have stores in are LEED- certified. Moreover, they also don’t say if all the stores in these 20 countries are LEED-certified. They haven’t mentioned the number of stores. In a single country it could be one store, or a few or maybe all. The fact they haven’t mentioned how many stores are actually certified seems skeptical.
The increasing acceptance regarding coffee capsules — i.e. single-use containers made of metal or plastics — is creating heaps of waste (Niemuth et al., 2014). Starbucks is making efforts to improve the recycling of hot (poly-coated paper) and cold (plastic) take-away beverage cups (Gail E., 2010). Surely these coffee capsules aren’t the focus of the company but when it is a part of such a big chain and in the bigger picture the waste generated because of these cups is massive. Starbucks is just an example, there are other big chain companies who practice the same things. The packaging waste and garbage generated by them that may not be ready for recycling or reuse. Bearing in mind all these facts, Starbucks isn’t as sustainable as it claims to be (Niemuth et al., 2014).
Ethical claim 3: Tax avoidance in the UK
Starbucks on its official website declares that it pays taxes in the UK and delivered its third straight year of profit in 2016 and paid £6.7 million in tax. Starbucks also denies using tax havens to avoid paying tax in the UK and Europe. As stated by Starbuck’s managing director on 17th of October of 2012, the company was not yet profitable enough in the country to pay a substantial corporate tax amount. (Starbucks, 2012)
Ethical claim 3: Criticism
Despite the claims made by Starbucks from the year 2001 to 2016 the company has just paid taxes once. Using a combination of legal tax avoidance practices (e.g., transfer prices, royalty payments, interest expense), Starbucks UK had effectively shifted taxable income to other Starbucks subsidiaries where it would be taxed at lower rates. In 2012 when tax avoidance practices were extremely common among multinational companies, Starbucks was busy painting the image of how socially responsible of a company they were. (Campbell K., 2016)
However, by December of 2012, Starbucks was ready to pay more than the required amount of the taxes. This just made Starbucks more mistrustful. How come they suddenly had so much profit that they can pay more than the required amount when they were not making profits until a couple of months ago? When Starbucks revealed the amount of tax they pay in the UK, it caused more outrage. People went as far as to boycott Starbucks (BBC News, 2012). Starbucks paid £8.6m in corporation tax in 2012 for the first time in the last three years regardless of the fact that it made sales of approximately £400m in 2011. The firm told investors its European businesses made a $40m (£25m) profit in 2011, but filed accounts that showed a $60m loss. Starbucks tax avoidance controversy came into light when other multinational companies like Google and Amazon were being called out on similar tax avoidance tricks (The Guardian, 2012). As media attention grew, and Starbucks’ UK tax avoidance was criticized by its customers, politicians, UK competitors and other UK businesses that paid the UK corporate tax on income. People weren’t satisfied with the response of Starbucks of paying £8.6m in corporation tax. There was a lot of resentment among people because of these multinational companies getting away with not paying taxes (UK Uncut, 2012).
Stephen Williams, a Treasury spokesman for the Liberal Democrats also expressed his anger towards the tax avoidance payments by Starbucks. He was very vocal about his opinion and mentioned how people joke that multinational companies think tax payments are voluntary and Starbucks is proving to be a live example of the joke. Paying taxes is a legal obligation and a company should abide by the laws of the country they are running their business in. Paying taxes, it is the duty of a company and not charity to gain brad value (BBC News, 2012).
Without a doubt, it is burdensome for a business to be completely ethical and somehow not cause some sort of discomfort for the people. Someone, somewhere out there will always have a problem no matter how laboriously a company is trying. Nevertheless, this isn’t an excuse for Starbucks. Knowingly or unknowingly the company has done a lot of damage. Starbucks being called out on the shameful incident of 2018 was important because a lot of times incidents like these aren’t even reported. Starting with respecting all customers equally Starbucks has a lot of room for improvement.
Starbucks has a long way to go regarding the environmental impact it has had and will continue to have unless they actually do something about it. Starbucks has been affiliated with various groups promoting and practicing sustainability and recycling. Starbucks when paid an exceeding amount of corporate tax, more than what was supposed to be paid this was not taken as a sign of something good. They assumed it would make people if not sympathize at least make people believe that they are paying more as a compensation. This is not how the people actually reacted. There was a lot of criticism from the media, protest groups and politicians.
Firstly, Starbucks should organize more and better training programs for the people it hires. It is very difficult to change the mind of a person but by teaching and showing them through training programs Starbucks can make people realize the effect of certain wrong actions.
Secondly, Starbucks should not just talk but actually work on improving its packaging and being more sustainable. They should improve their recycling methods and be more careful on what type of Packaging they are using and selling to their customers while keeping them informed about it.
Finally, they should worry a bit less about their brand image and more about abiding by the law. A business is appreciated and valued more when they follow the law. They should also be more up-to-date with their tax payments.
· BBC News (6th December, 2012) Starbucks agrees to pay more corporation tax http://www.bbc.com/news/business-20624857 (2012) (Accessed on 28th of February).
· CNBC (4th October, 2017) When a competitor tried to buy Starbucks, Howard Schultz was rescued by Bill Gates Sr.
https://www.cnbc.com/2017/10/04/bill-gates-sr-helped-howard-schultz-buy-starbucks.html (Accessed on 28th February ,2020)
· Campbell K., Helleloid D., 2016. (Journal of accounting, Volume 37, Pages 38 to 60) https://www-sciencedirect-com.ezproxy.herts.ac.uk/science/article/pii/S0748575115300130?via%3Dihub (Accessed on 2nd of March).
· Gail E., Czaika (2010) Starbucks cups: trash or treasure? an example of facilitated systems thinking assisting stakeholders in designing their own system to recycle take-away (Publisher: Massachusetts Institute of Technology cups)
https://dspace.mit.edu/handle/1721.1/59229 (Accessed on3rd of March).
· Niemuth S., Hamann L., Luschnat K., Smolarz P., and Golombek S. (2014)
CSR in the Coffee Industry: Sustainability Issues at Nestlé-Nespresso and Starbucks
http://188.8.131.52/index.php/Jempas/article/view/43 (Accessed on 4th of March).
· Petritsch A. , Starbucks’ Racial-Bias Crisis: Toward a Rhetoric of Renewal. (Pages 215–227) (Published online: 30 Sep 2019) https://www-tandfonline-com.ezproxy.herts.ac.uk/doi/full/10.1080/23736992.2019.1673757
(Accessed on 5th March,2020)
· Starbucks, 2020. (official website of Starbucks)
https://www.starbucks.co.uk/ (Accessed on 28th of February).
· The Guardian (14th May, 2012) The first Starbucks coffee shop, Seattle — a history of cities in 50 buildings, day 36. https://www.theguardian.com/cities/2015/may/14/the-first-starbucks-coffee-shop-seattle-a-history-of-cities-in-50-buildings-day-36 (Accessed on 6th March,2020)
· The Guardian (29th May, 2018) Starbucks closes more than 8,000 US cafes for racial bias training
https://www.theguardian.com/business/2018/may/29/starbucks-coffee-shops-racial-bias-training (Accessed on 9th March,2020)
· The Guardian (1st November, 2012) Starbucks dismisses tax avoidance claims
https://www.theguardian.com/business/2012/nov/01/starbucks-dismisses-tax-avoidance-claims (Accessed on 11th March, 2020)
· Thompson C. and Arsel Z., The Starbucks Brandscape and Consumers’ (Anticorporate) Experiences of Glocalization. Author Notes Journal of Consumer Research, Volume 31, Issue 3, December 2004, Pages 631–642. https://doi.org/10.1086/425098 (Accessed on 9th March,2020)