Starbucks Ethical Practices
The Starbucks CorporationStarbucks Corporation is the largest coffee and chain coffee house company in the world (Hilten, 2009). The Seattle based coffee company is involved with the roasting of Arabica coffee. Starbucks coffee company began roasting coffee in 1971. The company has around 11,000 coffee houses globally with 500 of these in UK and Ireland.
The company attributes its phenomenal growth to its application of ethics both in sourcing coffee and relationship with people. The company’s main products are espresso- based drinks and brewed coffee. However, there are a number of different products including the recently introduced mineral water. Starbucks has an entertainment division that is involved in the sale of books film and music (Hilten, 2009). The company has been successful and is renown in good marketing strategies especially through the adoption of fair trade. The company has set out six principles that guide the sourcing of its coffee beans these are;Paying premiums to coffee farmers: This involves buying produce from farmers at a premium price (Hilten, 2009).
The premium price is usually above the market price. This is the best price that the farmers can be able to sell at. The farmers in turn pay their workers decent wages. These workers are involved in the picking of the Arabica coffee. The premium price has not been scrutinized effectively to determine whether it is economically viable because it acts in a different way than the market forces of demand and supply (Hilten, 2009).
Establishing the farmer support centre which works in collaboration with the coffee growers. The farmer support centre is a central place whereby farmers are advised on the best farming practises (Hilten, 2009). They are also provided with subsidized farm inputs to ensure that the quality of the Arabica coffee is maintained at desirable standards. The farmers support centre also provides extension services as well as training on the best production practises. The idea has been welcomed in producer countries because it helps increase coffee production.Making profits and supporting the farmer’s profits, Starbucks is a business entity and has a primary goal of making profits from the sale of its products (Hilten, 2009).
This is tantamount to every business. However, Starbucks also acknowledges the fact that the farmers should not face exploitation from the first world countries. The profits made from the sale of coffee should be able to trickle down to the farmer in order to boost development. This practise has been promoted by paying the farmers decently and through investing in social development projects in the coffee producing countries. Starbucks has also contributed in community projects that aim to improve the welfare of the community (Hilten, 2009). These projects which solve imminent problems within the society are geared towards improving the capacity of the individual community members.
The community in turn provides labour and maintains safe environmental practises. These projects range from building of schools and hospitals for the society to provision of necessities during unfavourable seasons.Purchasing conservation certified organic and fair-trade certified coffee. This has been central to the policies of the company. Farmers are encouraged to grow coffee through environmental friendly practises. They in turn receive decent payments which enable them to improve their standard of living.
The idea from far looks like a very noble one, but further scrutiny reveals that it may not be economically viable. This could happen in cases whereby farmers switch from growing other crops to the farming of Arabic coffee. This would mean that the countries food production would decrease due to the cultivation of cash crops at the expense of food crops (Hilten, 2009). This would lead to increased importation of these food crops in order to solve the shortage anomaly. With recent increase in Starbucks global outlets that sell fair-trade coffee, it is very likely that farmers will embark more in expanding and increasing their levels of production.
Starbucks achievementsThe company’s strategy which has integrated the application of business ethics has resulted in international recognition the company has won several awards and prizes due to its innovative contribution to fair trade.The company won the gold medal award from the world environmental centre which recognised the company’s leadership in the development of C.AF.E. This was a positive sign that the world was recognising these efforts and in the same year the company was voted as UK’s 34th best place to work in.
The company was further awarded the Bis Tick by businesses in the community for the drafting of community programmes in the year 2006 (Hilten, 2009).Starbucks was also voted as the most ethical company on October 2009 by the coffee research experts Allegra strategies (Hilten, 2009). This was soon after being nominated by leading industry figures. On top of this the company won France’s most admired coffee chain. The company was nominated by 300 industry peere who were in the Allegra European coffee leader survey in the period between August and September 2009.
Respondents involved in the survey included key members from major coffee shops throughout Europe as well as key suppliers and industry associations (Hilten, 2009). In the same year star bucks received an award for the most innovative new product of the year for one of its products named ready brew. The company in September 2009 announced that its stores in UK and Ireland will be involved in the sale of fair trade espresso coffee which means that this will promote purchase of fair trade tea (Hilten, 2009). This will also expand the availability of fair trade coffee as well as promote its purchase from thousands of farmers.Starbucks shared planet has developed avenues to ethically source coffee from farmers as well as acting as good stewards in the environment, as a policy the company has also been involved in community programmes. The managing director Allegra “Starbucks have made great strides across Europe in representing the ethical commitment of our industry.
From the local community involvement of its stores and partners to its global targets for ethical sourcing and sustainability the company has fulfilled its commitments across Europe. It is no surprise that Starbucks has been recognized by the industry.”-Managing director Allegra studies (Hilten, 2009) Starbucks has achieved this through partnering with Conservation international (CI), African Wildlife foundation (AWF) and the Fair trade labeling organization International (FLO) in improving its commitment to ethical sourcing (Hilten, 2009) . These partners set out the following objectives.Increased purchase of fair trade coffee, this also entails working with farmers to ensure that the coffee quality and productivity through the improvement of agricultural and environmental practices. This entails working with farmers in order to increase the level of productivity and profitability (Hilten, 2009) .
This also entails the encouragement and recruitment of new farmers into growing fair trade coffee.Developing and contributing to sustainable development for communities as well as the marginalized workers and their communities (Hilten, 2009). Fair-trade also contributes to developing sustainable and viable changes in trade through empowering the farmers.In the same light, Starbucks has developed programs that provide farmers with credit. These programs include, use of root capital, and covered ventures.
Starbucks has shown commitment by adopting sustainable business avenues that are friendly to the environment. This has been incorporated in the procurement avenues as well as through the use of environmental friendly practices. The criterion used in the sourcing of coffee involves use of environmental friendly and transparent economic and social strategies. The Starbucks ethical sourcing principles were developed in the year 2004 in collaboration with conservation international (CI). In order to promote quality and transparency these sourcing principles are evaluated by scientific certification systems (SCS) which is a third party organization.
Starbucks has developed an employee handbook where they support global ethics and report for questionable behavior. The most ethical companies are those that look for innovative ideas to improve and expand the public well being, as well as adopting environmental friendly practices. However, Starbucks has also been criticized for issues regarding their practices especially on fair trade labor relations, political and perceived practices regarding competition (Hilten, 2009).Role of ethics in businessThe public usually assume that the core target of businesses is to make profit with no or little regard to professional or personal ethics (Jones, Parker and Rene, 2005). However, in most cases this is contrary to the reality.
In real situations when managers make decisions, they are influenced by moral pressures which could be internal or external. Most businesses normally assume a moral background. If customers believe that a business is not based on moral foundations, then they will not buy their products (Jones, Parker and Rene, 2005). Therefore, any particular breakdown in trust is detrimental to the company’s sales. Being ethical may result to losses in the short run especially where one has to recall products.
Business ethics usually promises more than it can deliver. This is because the ethics are structured in a narrow and uncritical way. We must therefore broaden our expanded business ethics (Malachowski 2001). Organisations need to realise the problems barriers to business ethics. These barriers can be explained through several dimensions (Malachowski 2001).
Individualism should be separated from business ethics. This means that placing blame on individual for their wrongdoings may not help solve the problem (Malachowski 2001). Individuals usually act in relation to the social structure as well as the organisation structuring (Jones, Parker and Rene, 2005). These may have influence on the action of an individual. This does not relieve the individual from responsibility for his wrong doings. It simply implies that the structuring of the organisation can have a profound effect on the character of the individual.
On the other hand people have narrowed the meaning of ethics to include only the serious known ethical issues such as bribery. Due to this some ethical issues may be treated either implicitly or explicitly (Jones, Parker and Rene, 2005). Therefore some issues may be overlooked. For example business ethics in a way fails to recognize the role of politics. However, politics in a big way influence the policies being implemented.
Business ethics should expose us to difference leading to the generation of new ideas that may help us solve the current problems.Starbucks ethical criticisms and controversies The introduction and the review done above give the impression that Starbucks is an international company without flaws. However this is not the case as Starbucks has been involved in various controversies such as the row with Ethiopia over copyright issues in October 2006.In 2OO5 Ethiopian farmers decided to copyright its most famous coffee brands. However, Starbucks blocked this attempt.
This was seen to be a hypocritical act because Starbucks claimed that it was out to help the Ethiopians improve their welfare. This is not ethically right because the brand names were Ethiopian and the product originated from the same country. Starbucks eventually won the case after claiming that these product names were generic. For a company that upholds business ethics this was a backward step because it did not sound morally right. Starbucks impressive market performance is due to the fact that the customers recognize and support the idea of fair trade and application of business ethics. This is to say that first and foremost the farmer gets what is legally his.
Therefore the move to block the Ethiopian farmers from acquiring copyrights was not ethical in the first place.The Ethiopian farmers sought to copyright for their famous coffee bean brands. Had they succeeded in owning the copyrights the countries coffee revenue would have increased by 47 million ? per year. Copyrighting these brands would have given Ethiopian farmers a bigger share in the retail prices. This would have increased the coffee export earnings by 25%. Ethiopia sought to copyright Yrgacheffe, sidamo and Harar brands which were already being used across the globe.
For a third world country this amount of money is significant to the economy and to the welfare of the farmers.Despite being an avid supporter of environmental health and sustainability Starbucks was trapped in yet another dispute regarding water wastage. Environmental campaigners revealed that Starbucks was involved in the wastage water contrary to its policy on environmental management (Balakrishan, 2008). Environmentalists discovered that Starbucks allows nonstop flow of water at its coffee shops resulting to wastage of 23.4 million liters of water every day. This technology was referred to as “Dripper well” which was used to wash spoons and utensils (Balakrishan, 2008).
This water was estimated to be enough for two million people a day. Each Starbucks outlet had a cold tap running all through the day. Activist and water companies criticized the company for wasting this vital resource (Balakrishan, 2008). On its defense Starbucks claimed that the practice was necessary for hygiene purposes (Dando, 2010). This then attracted experts who claimed that the argument behind the concept was flawed. Starbucks later on agreed to develop different measures to allow for the balanced water conservation.
This involved the change of technology from a dipper well system to the push button metered faucet in order to reduce water wastage (Dando, 2010). Starbucks formed the shared planet to enable it reform issues such as water wastage and reusable packaging. This had a profound effect on the reputation of a company which had claimed to be environmental friendly (Dando, 2010) .Controversy with regard to fair tradeFair trade refers to situation whereby the coffee traders secure offer farmers an attractive premium for their coffee beans. This premium payment is usually higher than the market price. In return the farmers receive decent wages to their workers who have the right to form unions.
The growers then have to follow guidelines on environmental management.However’ an investigation as to whether these fair-trade guidelines were followed revealed shocking results. The perceived fair trade was not really taking place. The coffee workers who were mainly involved in picking coffee were not paid as per the agreed terms indicated in the fair trade agreement. The investigation revealed that the workers were paid a mere 3$ a day. The research further reviewed that the environmental regulations were breached by farming coffee on a 20 acres piece of land within an area designated as a national park.
It had been reported that the farmers especially in Guatemala were receiving poor payments. This led to the debate as to whether Starbucks was really committed to fair trade. This is because Starbucks was making triple the earnings per gram of coffee beans while the farmer was receiving poor payments.Critics argued that even if the fair trade standards were fully implemented it would not alleviate the financial difficulties among growers and workers. The critics further argued that fair trade was a company strategy to garner high sales from sale of fair trade coffee.
This is because customers prefer to purchase from companies that uphold ethics.Starbucks was also charged with the violation of labor laws in 2007 when a union formed by workers revealed that Starbuck was exploiting its workers on issues regarding to labor (Brosh, 2007). The accusations included the firing of workers without any particular investigations into the alleged issues (Brosh, 2007). The company was also accused of establishing oppressive conditions for its workers. 30 unfair practices were found indeed relevant which prompted the national labor relations board to file a case (Brosh, 2007).
The company was responsible for pinning down any union activities which confirmed the oppressive aspect. After being faced with the threat of a imminent public hearing, Starbucks agreed to settle the dispute out of court. After consenting to the claims, Starbucks agreed to remedy the violations through;Reinstatement of the dismissed IWW union members who had been relieved of their duties with an aim to suppress the union activities.To banish the Starbucks national policy that restrained workers from engaging in union activities such as sharing written union material or joining the union within the company’s premises.Invalidating the no-pin policy which prohibited workers from wearing IWW pins.
Previously such workers were relieved off their duties without any hearing.Development of an agreement by Starbucks to cease giving threats, bribes, intimidating or carrying out surveillance on the union members.In addition to this the company was fined two thousand dollars which was actually reduced charge on the damages caused.Marketing strategyStarbucks marketing strategy has been criticized by the public and economists for using unethical marketing strategies in order to dominate the market. This includes purchasing leases from competitors so that the market is not saturated. The company also was involved in intentionally lowering the company’s profits and in some cases operating at a loss in order to edge out its competitors.
The company also was accused of crowding small geographical regions with several outlets in order to choke its competitors. A phenomenon example is the buyout of the Seattle coffee company in U.K upon its initial entry. This was unfair because the small established companies had worked hard to establish themselves in a competitive area. The edging out of competitors in order to dominate the market is against company ethics. Starbucks being a big fish should consider adopting various other viable options in order to win the customers.
Limits of ethical leadershipThere are challenges that arise from pursuing ethical leadership. Companies are held accountable for actions far beyond their own. The public will hold companies responsible for activities that are far beyond their own. In 1994 the Seattle based coffee company enjoyed good sales for the sale of fair trade coffee which was based on the ethics of sourcing coffee. However a Chicago based Guatemala labor education project cited Starbucks for unethical practices for the sale of fair trade coffee.
The claim was that Starbucks was selling coffee beans at 8 per pound while the laborers at Guatemala earned just a mere two cents per pound this later forced the company to adopt a code of conduct.The concept of fair-tradeThe concept of fair trade was developed as an alternative to trade unions with an aim to purchase a limited quality of goods under the fair trade system. Whereas under fair trade, economic gains have been realized from the sales growth that this transformation has brought in. Little evaluation on the political and economic impact has been done. Most of the evaluation conducted basically focused on the alleviation and community development. The ultimate goal of fair trade organizations as is explained is not just to enhance the capabilities of southern producers to survive within the existing order, but to enhance their abilities to confront and change it(Ten bos 2005).
Therefore it is important that an analysis is carried out to evaluate the short, mid and long term gains of fair trade among the local people and regionThere are several pit falls to the use of fair trade. The perspectives relating to fair trade include the shaped advantage perspective which explains fair trade as helping the poor participate in the neo liberal globalization. The alternative globalization alternative which views evaluates fair trade as a neo liberal paradigm and the decommodification perspectives which shows fair trade an alternative challenge to the commodification of goods under capitalism.The ethical evaluation of Starbucks CorporationThe company has done a commendable job with regard to improving business ethics. For this reason the company has won global admiration on the attempts to participate in fair-trade.
The company has also received awards for being innovative in generating innovative ethical principles in the recent years. Through this we can see that establishing ethical principles requires much more than just setting out the documented policies. The company has been on the wrong side of the law in several instances especially through the violation of the labor laws which eventually led to the formation of trade unions. Starbucks ironically suppressed the formation of unions for its USA workers yet it advocated for the same in the third world countries. The violation of labor laws in some way affects human rights. It is unethical for the company to act in an ambiguous way when it comes to application of basic laws.
This explains is a perfect example that ethics should not be narrowed down to specific crimes. The company clearly acted immorally by bribing people within the work premises. This is a clear sign of failure in its organization structure. The company regarded to its workers as partner but by the look of things this was satirical. Partners are treated in a more respectable way.
The application of policies within the coopporation as a whole is selective.Having a global precenses the company benefits from enjoying the popularity which should boost its sales. However we see the company adopting marketing strategies that are unethical. The strangling of smaller companies in order to gain a market advantage is immoral. These companies struggle to secure outlets in highly competitive regions and attract a good number of customers.
Acts such as buy outs work against development of the country. The level of sales achieved by Starbucks is attributed to the public belief that they are consuming products from an ethically upright company. So these issues should in no way be overlooked because they are necessary for the corporations’ performance. Whereas the company has performed in marketing ethics it is important to note that ethics should be viewed from a wide perspective.Starbucks has performed well by partnering with various known organizations in pursuing the company’s goals and objectives. However, partnering alone with prestigious organizations will not solve problems arising from poor ethics.
The company should constantly evaluate its ethical performance on the public scene. The corporation should ensure that its separate global branches perform in a structured and streamlined way. Breach of ethics from any of its branches may spoil the company’s global image depending on the magnitude of the issue. Starbucks France is the most prestigious coffee house in France. This shows that there is a lot to be borrowed from the same branch.
The corporation should also encourage more audits with regard to its fair trade, environmental protection and other issues related to its goals. This is because the world is evolving with discovery of new and better technologies. Technology and emerging innovations are always welcome, however these come with new challenges it is therefore important that the organization evaluates its performance to determine whether the corporation is headed to the right direction. For example the substitution of the dipper well with the push button metered faucets should have been done prior to the public outcry. The company’s unethical stratergy of chocking up small and emerging competitors should be abolished. Better marketing strategies which are morally acceptable should be adopted.
Accusations regarding to the failure of fair trade should be addressed. This should be done by first carrying out an audit on the impact of fair trade on communities before implementing mitigation measures.