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36 Pages·2003·5.48 MB·English

CORPORATE SOCIAL RESPONSIBILITY
A R
nnual eport
F
iscal 2002
STARBUCKS MISSION STATEMENT AND GUIDING PRINCIPLES
To establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining
our uncompromising principles as we grow.
The following six guiding principles will help us measure the appropriateness of our 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.
ABOUT THIS REPORT
The information in this report is for fiscal year
2002 (October 1, 2001 through September 29, 2002)
and primarily covers Starbucks company-operated
retail and distribution operations in North America
and sourcing activities in coffee-origin countries.
Information about Starbucks international
company-operated and licensed retail store markets
and other select operations—Tazo® Tea and Hear
Music™—is also included. Currency is represented
in U.S. dollars throughout the report.
Cover: Blossoms of an arabica coffee tree.
TABLE OF CONTENTS
2 Letter From Starbucks Chairman and CEO
3 The Business Case for Corporate Social Responsibility
3
COMMITMENT TO ORIGINS™
5 Coffee—The Importance of Sustainability
6 Coffee Sourcing
10 Investments in Coffee-Origin Countries
4
11 Tazo Tea Company—Sustainable Initiatives
STORE AND CORPORATE OPERATIONS
13 Environmental Impacts of Our Operations
16 Purchasing Policies and Practices
17 Responding to Stakeholders
12
COMMITMENT TO PARTNERS (EMPLOYEES)
19 Listening to Partners
20 Embracing Diversity
21 Starbucks Benefits Package
18
22 Partner Development and Recognition
COMMITMENT TO COMMUNITIES
25 Community Support
27 Other Starbucks Community Initiatives
29 International Initiatives
24
30 The Starbucks Foundation
32 Independent Verification Letter
FROM BEAN TO CUP
Starbucks Approach to Sustainability
Starbucks first store, located in the heart of Seattle’s Pike Place Market, opened in 1971. As people discovered
the great flavor of Starbucks high-quality, freshly roasted coffee beans, word quickly spread. Before long our
coffee was legendary.
What happened since still seems remarkable. Starbucks original concept of selling premium whole bean
coffee was refined in 1987 when Starbucks began serving handcrafted beverages and offering a coffee
experience, which is now embraced by more than 20 million customers worldwide every week. While
Starbucks growth may surprise some, we no longer ask ourselves how it happened. We have built our
company by maintaining an unwavering commitment to Starbucks mission and guiding principles.
Successful companies take measures to sustain their position. At Starbucks, we have integrated sustainable
business practices—which align with our mission and guiding principles—to help ensure our company
continues to thrive. Starbucks sustainability efforts are visible throughout our supply chain, which we term
“bean to cup.” This chain connects the people and places where our coffee is grown to the communities
around the world where our more than 6,000 stores are located.
To sustain the prominence of Starbucks brand in the marketplace and build stakeholder trust, we must be
accountable for our actions. As a measure of our accountability, last year we published Starbucks first
Corporate Social Responsibility Annual Report to provide transparency on our business practices, measure-
ments of our performance and benchmarks for future reporting. This year, we’ve taken additional steps to
assure our stakeholders that the information in this report is accurate by engaging an independent third party
to verify its contents.
Now we invite you to take the journey with us—from bean to cup—so you can determine for yourself how
well Starbucks is operating our business in a manner worthy of your admiration and trust. We hope the
actions reflected in this report help us do that.
Warm regards,
Howard Schultz Orin C. Smith
chairman and chief global strategist president and chief executive officer
CSR Fiscal 2002 Annual Report 3
THE BUSINESS CASE FOR
CORPORATE SOCIAL RESPONSIBILITY
Starbucks defines corporate social responsibility
(CSR) as conducting business in ways that produce
social, environmental and economic benefits for the
communities in which we operate. Achieving this
requires a comprehensive set of policies, practices
and programs that are integrated throughout our
business operations.
According to Business for Social Responsibility, a
nonprofit organization dedicated to advancing lead-
ership in responsible business practices, more
investors and consumers today are demanding that
companies be accountable for the environmental and
social impacts of their operations. There is a growing
body of empirical studies demonstrating the positive
impact CSR has on business economic performance
and shareholder value.
Starbucks purchases some of the finest arabicacoffee
beans grown in Latin America,Africa and Indonesia.
We believe conducting our business responsibly
delivers benefits both to Starbucks and to our stake-
holders—partners (employees), customers, sup-
pliers, shareholders, community members and
others. We hope our actions also provide guidance COMPANY PROFILE
and leadership to the coffee industry as a whole. Fiscal 2002—October 1,2001 to
September 29,2002
We view our CSR initiatives as long-term invest-
ments, with real benefits and rewards. Some of the (Information below represents total
company unless noted)
investments Starbucks makes include:
• Total net revenues:$3.3 billion
• Promoting environmental conservation and
increasing economic opportunities for the • Net earnings:$215.1 million
people who produce our coffees.
• Earnings per share:$0.54
• Minimizing our environmental impact to help
• Total income taxes:$126.3 million
ensure resources for future generations.
• Stock price (high/low):$25.63/$14.56
• Creating a workplace that attracts qualified
partners, increases retention, fosters profes- • Number of company-operated locations:
3,496 (North America),384 (International)
sional growth and development, and rewards
performance. • Number of licensed locations:
1,078 (North America),928 (International)
• Being a good neighbor and contributing to the
quality of life in our local communities. • Number of partners (employees):62,000
The arabicacoffee bean starts its journey as a cherry on
a coffee tree.
The harvested beans are washed and spread out to dry under
the sun.
CSR Fiscal 2002 Annual Report 5
COMMITMENT TO
ORIGINS™
• Coffee—The Importance of Sustainability
• Coffee Sourcing
• Investments in Coffee-Origin Countries
•Tazo Tea Company—Sustainable Initiatives
We begin our bean-to-cup journey with coffee farmers,the first link in Starbucks supply chain.We’ve examined many
issues that farmers face,including economic challenges and environmental concerns,which,if not addressed,could impact
their long-term sustainability.As a result,Starbucks is taking important measures to help improve the lives of coffee
farmers and to protect the environment.Our approach is rooted in Starbucks guiding principles and translates into our
Commitment to Origins.™
COFFEE—THE IMPORTANCE OF SUSTAINABILITY
Grown in 70 tropical countries, coffee is the second most traded commodity in the world after petroleum,
with a global value of nearly $5.6 billion in 2000-2001*. By World Bank estimates, more than 25 million
smallholder farmers make their living by producing coffee.
The coffee industry comprises two distinct markets—commodity and specialty:
• Commodity-grade coffee, which consists of robusta and commercial quality arabica beans, is traded in a
highly competitive market as an undifferentiated product. During 2002, a global oversupply of more than
two billion pounds (907,200,000 kilograms) of coffee drove New York “C” (the worldwide reference used
by coffee traders for commodity-grade coffee) arabicacommodity prices to historic lows of $0.40-0.50 per
pound ($0.88-1.10 per kilogram).
• The specialty coffee market, which currently represents approximately 10%** of total worldwide
unroasted (green) coffee purchases, consists primarily of high-quality arabica beans. Prices for specialty
coffee are determined by the quality and flavor of the beans and are almost always higher than the
prevailing price for commodity-grade coffee.
Starbucks purchases only high-quality arabica coffee, and our purchases represent about one percent of the
world’s beans. We know quality comes with a price, and as a result Starbucks pays prices that are substantially
over and above the prevailing commodity-grade coffee price. Rather than use a New York “C”-based formula
for negotiating prices, Starbucks prefers to negotiate the majority of our contracts based on outright prices,
independent of the commodity market. In fiscal 2002, Starbucks paid an average price of $1.20 per pound
($2.64 per kilogram), excluding freight, for green coffee purchased at outright prices.
Coffee farming, like any other business, must be economically feasible to ensure long-term sustainability.
Starbucks believes the prices we pay help farmers cover their production costs and better provide for their
families. In turn, Starbucks gets assurance that the coffee farms we purchase from can meet our future
supply needs. Although our overall purchasing impact may be relatively small, we’ve taken leadership steps
to promote environmental and social stewardship in coffee-origin countries.
*International Trade Centre
**Specialty Coffee Association of America
COFFEE SOURCING
Starbucks recognizes that the continued growth and success of our business depends on a long-term supply
of quality coffee. To help ensure this supply, our coffee sourcing strategies are intended to contribute to the
sustainability of coffee growers and help conserve the environment. These strategies include:
• Implementing Starbucks Coffee Sourcing Guidelines.
• Purchasing coffee at outright, negotiated prices.
• Building direct relationships with farms and cooperatives.
• Negotiating and securing long-term contracts.
• Making affordable credit available to coffee farmers.
• Purchasing Fair Trade CertifiedSMcoffees.
• Purchasing certified organic and conservation coffees.
• Investing in health and educational projects that directly benefit farmers and their communities.
Coffee Sourcing Guidelines
In fiscal 2002, Starbucks introduced a set of Coffee Sourcing Guidelines to support and encourage the
sustainable production of high-quality coffee as a pilot program for the 2002 and 2003 crop years. The
guidelines serve as criteria for our Preferred Supplier Program.
Developed with the support of Conservation International’s Center for Environmental Leadership in
Business, the guidelines reward farmers who meet important quality, environmental, social and economic
criteria with financial incentives and preferred supplier status. Suppliers are required to submit an application
to the program documenting their sustainability measures. Applications must be verified by an independent
third party and are subject to audit. Starbucks has been recognized within the coffee industry and by
non-governmental organizations (NGOs) and governments around the world for pioneering such a program.
By the end of fiscal 2002, Starbucks had received
more than 50 applications to the program from
coffee suppliers who are making sustainability a
COFFEE SOURCING
priority. These suppliers striving for preferred
Outright Direct Long-term
supplier status are making ongoing investments to
Prices* Relationships* Contracts*
enhance sustainability through practices such as
d 80%
ase 74% conserving natural resources, adding clean water
ch 70% technologies, improving social conditions and
r
u
P 60% reducing or eliminating the use of agro-chemicals.
e
e
off 50%
C In fiscal 2003, Starbucks plans to take the learning
Total 40% 3 2 % 36% fPrroemfe rthreed fi rSstu ypepalire or f Pthreo gprialomt pthharsoeu agnhd i inmdpeproevned ethnet
of 30%
e verification, monitoring performance and continuing
g
a 20%
nt 12% to gather stakeholder feedback from growers,
rce 10% 9% inspectors and external organizations.
Pe
3%
0%
Purchasing at Outright Prices
Purchasing coffee at negotiated, outright prices,
Fiscal 2001
independent of the prevailing price for commodity-
Fiscal 2002
grade coffee, helps provide stability and predictability
In last year’s report, we projected purchases for fiscal
for buyers and sellers. Starbucks purchased the
2002. This graph indicates our actual purchases for
the same period. majority of our green coffee—74% in fiscal 2002—
*Amounts are not mutually exclusive by category. at outright prices, compared to 12% in fiscal 2001.
The increase is due to a deliberate shift in the way
we purchase coffee.
CSR Fiscal 2002 Annual Report 7
Building Direct Relationships with Farmers
One of our priorities is to establish more direct
RECOGNITION OF OUR EFFORTS
relationships with farms and co-ops we know and
• In May 2002,Starbucks was honored with the
trust. Purchasing directly from farms, with the assis-
first annual Humanitarian Award by the Coffee
tance of a third-party facilitator, delivers more of the
Quality Institute,a nonprofit education founda-
purchase price to the farmers. Through direct rela-
tion and separate fund of the Specialty Coffee
tionships, Starbucks gains a greater degree of Association of America.The award recognizes our
transparency on how much farmers receive. Our contributions to the quality of life for farmers and
long-term goal is to improve transparency for our their families,leadership in protecting the quality
non-direct purchases as well. In fiscal 2002, 32% of of the environment in coffee agriculture,and our
commitment to continued improvement ofcoffee
our total green coffee supply was purchased through
quality in origin countries.
direct relationships at negotiated prices, compared
to 9%in fiscal 2001. • Starbucks was named one of the 100 Best Corpor-
ate Citizens in the March/April 2002 issue of
Signing Long-Term Contracts Business Ethicsmagazine.The ranking is based
on quantitative measures of corporate service to
Given the current economic climate, farmers pre-
seven stakeholder groups:shareholders,employees,
ferto know they have buyers for future harvests. By
customers,the community,the environment,over-
signing long-term contracts with farmers, Starbucks
seas stakeholders,and women and minorities.
is able to purchase our future coffee supply at
• Starbucks was included in the 2002-2003 Dow
predictable prices over multiple crop years. We
Jones Sustainability Index (DJSI),the second
increased our purchases of coffee negotiated through
consecutive year the company has been on the list.
long-term contracts, which average three to five
This assessment of the 2,500 largest companies in
years, from 3% of our total supply in fiscal 2001 to the DJSI focuses on economic,environmental and
36%in fiscal 2002. social performance.Starbucks was one of 300
companies from 23 countries that led their
Access to Credit industry in sustainability.
Smallholder coffee farmers frequently experience a • In recognition of our collaboration with
shortage of cash long before the next harvest. Due to Conservation International (CI) to encourage
a chronic lack of working capital, they often sell sustainable coffee farming practices,Starbucks
their crops to local buyers who use the scarcity of and CI were recipients of a 2002 World Summit
Business Award for Sustainable Development
credit and the region’s geographical isolation to
Partnerships in Johannesburg,South Africa,in
secure coffee from producers at low prices. To help
August 2002.
break this cycle, Starbucks has instituted several
initiatives to provide farmers access to affordable credit.
In fiscal 2002, Starbucks, through a loan guarantee, helped make $500,000 available through Ecologic
Enterprise Ventures (EEV), a nonprofit organization providing affordable crop financing to smallholder
coffee farmers in Latin America, and Conservation International (CI). This was the second year that
Starbucks assisted Mexican coffee farmers with pre- and post-harvest loans through a loan guarantee.
According to CI, the results of this program in fiscal 2002 were:
• 205 farmers received pre-harvest financing, an increase of 25%over last year.
• 691 farmers received post-harvest financing, an increase of 96%over last year.
• 1.25 million pounds (566,990 kilograms) of coffee were financed, an increase of 57%over last year.
Fair Trade CertifiedSM Coffee
In the Fair Trade certification system, smallholder coffee farmers who are organized into democratically run
organizations and registered with the Fairtrade Labelling Organizations International (FLO) can sell their
beans directly to importers, roasters and retailers at favorable guaranteed prices. To purchase Fair Trade
CertifiedSM coffee, a buyer must pay a minimum of $1.26 per pound ($2.77 per kilogram) for non-organic
green arabicacoffee and $1.41 per pound ($3.10 per kilogram) for organic green arabicacoffee. According to
TransFair USA, an independent nonprofit organization that licenses Starbucks to sell Fair Trade coffee
imported into the U.S., the guaranteed prices help increase earnings for farmers, enabling them to afford basic
health care, education and home improvements.
FAIR TRADE, ORGANIC AND CONSERVATION (SHADE GROWN) COFFEE PURCHASES
Fiscal 2000 Fiscal 2001 Fiscal 2002
1.7 million 1.8 million
nds (kilograms) ofoffee Purchased 570,000 (625936,,000000) 8(37946,,000000) 6(38140,,000000) 1(.14 9m9i,0ll0io0n) (771,000) (816,000)
PouC (259,000) 304,000
190,000
(138,000)
(86,000)
Totals: 646,000 lbs (293,000 kg)* 1.8 million lbs (816,000 kg)* 3.4 million lbs (1.5 million kg)*
Fair Trade CertifiedSM Coffee
Certified Organic Coffee (includes Organic Fair Trade and Organic Conservation [Shade Grown] Coffee)
Conservation (Shade Grown) Coffee
*Coffees may be certified in more than one category.
Since forming an alliance with TransFair USA in April 2000, Starbucks has become one of North America’s
largest roasters and retailers of Fair Trade CertifiedSMcoffee. In fiscal 2002, Starbucks purchased 1.1 million
pounds (498,952 kilograms) of Fair Trade CertifiedSMcoffee. Starbucks Fair Trade Blend is sold in all of our
U.S. company-operated stores and in some international markets.
Starbucks sold a total of 530,000 pounds (240,404 kilograms) of Fair Trade CertifiedSM coffee through our
retail stores and Business Alliances accounts in fiscal 2002. Business Alliances accounts include colleges
and universities, hotels and other locations licensed to sell Starbucks coffee. In fiscal 2002, Starbucks sold
Fair Trade CertifiedSM coffee through 332 of our Business Alliances accounts, which included 188 colleges
anduniversities.
In fiscal 2002, Starbucks signed a Memorandum of Understanding with Fairtrade Labelling Organizations
International, enabling us to offer Fair Trade CertifiedSM coffee in our international markets. At the end of
fiscal 2002, Starbucks was licensed to sell Fair Trade CertifiedSMcoffee in Austria, Canada, Germany, Japan,
Switzerland, the U.K. and the U.S.
Working with Fair Trade Farmers
In July 2002, Starbucks, the Ford Foundation and Oxfam America announced a pilot project in collabora-
tion with CEPCO, a large Fair Trade coffee cooperative in Oaxaca, Mexico, with more than 16,000
farmers. The goals of the project are to increase the supply of high-quality Fair Trade CertifiedSM coffee and
enable participating farmers to earn premium prices for their crops.
Starbucks and the Ford Foundation, a philanthropic organization that works to reduce poverty and promote
international cooperation, each contributed $125,000 for the first year of the pilot project. Oxfam America,
an organization dedicated to creating solutions to hunger, poverty and social injustice around the world, will
work directly with farmers of the CEPCO cooperative on improvements to their post-harvest quality control
techniques. By providing farmers with the tools to improve their skills, and thus the quality of their coffee,
we hope to increase their opportunities for self-sufficiency and sustainability.