Starbucks Presses Suppliers for Greener Bean
Starbucks Coffee Company is heating up more than your daily Arabian Mocha Java or Yukon Blend -- it's also putting more kick into its procurement philosophy and supplier guidelines. By Kelley Kreitz.
Starbucks Coffee Company is heating up more than your daily Arabian Mocha Java or Yukon Blend -- it's putting more kick into its procurement philosophy and supplier guidelines, which cover post-consumer recycled materials, unbleached fiber content, lead-free ink for paper purchases, energy efficiency, certified forest products, and packaging. But it wouldn't be Starbucks without coffee -- that's why the company is pioneering a "Preferred Supplier Pilot Program" aimed at greening its beans at the source.
Here's how the program works: In 2000, Starbucks launched a two-year incentive pilot program that pays a 10-cent premium per pound of beans against the contracts of "preferred suppliers" -- those that meet criteria for quality, verification, environmental impacts, social conditions, and economic issues. (The cost isn't passed to Starbucks customers -- we asked.) Ultimately, the incentive program helps vendors invest in sustainable harvesting and production, though critics say it remains to be seen whether a voluntary, incentive-based system is any more or less effective than a compulsory supplier code of conduct.
With the pilot program set for an evaluation in November 2002, GreenBiz.com's Kelley Kreitz got an early scoop on the program's progress from Sue Mecklenburg, Starbucks' vice president of business practices, corporate social responsibility; and Peter Torrebiarte, a trader for the company's green coffee department:
Kelley Kreitz: What drove Starbucks, in a partnership with Conservation International's Center for Environmental Leadership in Business, to launch this Preferred Supplier Program?
Sue Mecklenburg: The coffee industry is made up of growers in lots of developing countries; no one is in charge of this industry. Recently, growers have been planting more coffee plants than there is a demand, and it's putting industry farmers at risk. We began our new coffee sourcing guidelines to support the sustainability of the industry and the coffee supply.
KK: Will Starbucks lose or make money by paying premiums to suppliers based on how well they comply with eco standards?
SM: Starbucks currently pays premium prices for coffee. There could be additional costs with this program, but we are committed to purchasing quality coffee. We see sustainability as part of our definition of quality. Also, in light of the current strains on the international coffee market, this is an important way to help sustain the industry. If farmers aren't growing coffee, we can't continue to stay in business. The premiums are meant to help alleviate the costs of becoming sustainable. They are not additional costs; they are investments in our future.
KK: What distinguishes this program from other procurement initiatives and certification programs?
SM: One thing we did not want was to create another certification scheme. We are leaving the process up to our producers. We've said to our suppliers, These are the goal lines. You tell us how you're going to achieve them. We reserve the right to perform audits to verify the claims of our suppliers. In this way, it's possible to meet our guidelines while allowing growers to address local conditions and challenges.
KK: Could Starbucks' guidelines serve as a model for other companies?
Peter Torrebiarte: I think our program could definitely encourage other coffee buyers to implement similar guidelines. We only buy about 1% of world production. In order to impact the industry in a pivotal way, we need our counterparts to adopt related sustainability programs.
SM: Our program has really attracted the attention of other industries as a way to align the goals of companies and their suppliers. It's making people think differently. These sourcing guidelines are based on guidelines developed by Conservation International, Rainforest Alliance, Consumers Choice Council, and the Smithsonian Migratory Bird Center, so other companies could use the same guidelines to develop similar standards.
KK: How are suppliers responding to the pilot program?
PT: We've been really happy. Within a week of launching the program, we got our first application from a supplier. Now we're getting a lot of people calling up and asking questions. We have also received applications from completely new suppliers.
Also, the president and minister of agriculture of Costa Rica have formally pledged to assist their coffee farmers in meeting our criteria. They're working with our guidelines to create a local Costa Rican program.
SM: The premiums we offer will be a key component to the success of the program. Producers compete with each other. There will be strong incentive for our current suppliers to become preferred providers under our new program.
KK: How do you characterize your challenges?
SM: The biggest challenge was to figure out the premium to offer to growers that meet our sustainability guidelines. The premium says to our growers that these sustainability practices will cost money, and we will pay more for them. The truth is that we don't know what the right premium to offer is. Which is why we've introduced the guidelines as a pilot so alterations can be made as appropriate. We have to see what the market requires. So we chose a number, and now we'll have to see.
PT: From the coffee-sourcing point of view, there are a lot of diverse coffee-farming practices in many different countries. Biodiversity differs not only from country to country, but also from region to region. We knew that we did not want this to be a certification program; on the other hand, we can't be too flexible with each grower. We're still working on that balance. For now, we've been getting more questions than we really have answers. That's why we implemented this as a pilot program for the first two years.
KK: What advice do you have for companies planning similar initiatives?
SM: I think the important lesson for other companies is that this is a new model for working with suppliers. We're not telling our growers what they have to do; we're telling them what we would like them to do. This is an important difference: instead of being a regulatory constraint, our guidelines become an incentive. And we are all sharing the same goals.
PT: Usually sustainability projects visualize sustainability as a triangle, representing economic, environmental, and social responsibility. We've made it a square by adding quality as the fourth leg. If there's anything that glues sustainability together it's quality. Eventually, there will be other people interested.
Starbucks Green Coffee Purchasing Guidelines
Coffee sourcing guidelines are part of a long-term partnership between Starbucks and Conservation International to promote methods of coffee production that help conserve global biodiversity. The criteria for the sourcing guidelines are based on the Conservation Principles for Coffee Production, which were developed jointly by Consumers Choice Council, Conservation International, the Rainforest Alliance, and the Smithsonian Migratory Bird Center. Starbucks and other industry leaders played an advisory role in the creation of these principles:
By Kelley Kreitz, a GreenBiz.com staff researcher and writer. Copyright 2002 Green Business Network, all rights reserved.
----------------------------
RELATED LINKS:
GreenBiz Essentials: Sustainable Agriculture
GreenBiz How-To: How Supply Chain Management Practices Are Greening Procurement
GreenBiz How-To: Lean and Green Supply Chain
GreenBiz How-To: Ten Keys for Educating and Engaging Employees
Report of the Starbucks Coffee Co./Alliance for Environmental Innovation Joint Task Force
Suppliers’ Perspectives on Greening the Supply Chain
Here's how the program works: In 2000, Starbucks launched a two-year incentive pilot program that pays a 10-cent premium per pound of beans against the contracts of "preferred suppliers" -- those that meet criteria for quality, verification, environmental impacts, social conditions, and economic issues. (The cost isn't passed to Starbucks customers -- we asked.) Ultimately, the incentive program helps vendors invest in sustainable harvesting and production, though critics say it remains to be seen whether a voluntary, incentive-based system is any more or less effective than a compulsory supplier code of conduct.
With the pilot program set for an evaluation in November 2002, GreenBiz.com's Kelley Kreitz got an early scoop on the program's progress from Sue Mecklenburg, Starbucks' vice president of business practices, corporate social responsibility; and Peter Torrebiarte, a trader for the company's green coffee department:
Kelley Kreitz: What drove Starbucks, in a partnership with Conservation International's Center for Environmental Leadership in Business, to launch this Preferred Supplier Program?
Sue Mecklenburg: The coffee industry is made up of growers in lots of developing countries; no one is in charge of this industry. Recently, growers have been planting more coffee plants than there is a demand, and it's putting industry farmers at risk. We began our new coffee sourcing guidelines to support the sustainability of the industry and the coffee supply.
KK: Will Starbucks lose or make money by paying premiums to suppliers based on how well they comply with eco standards?
SM: Starbucks currently pays premium prices for coffee. There could be additional costs with this program, but we are committed to purchasing quality coffee. We see sustainability as part of our definition of quality. Also, in light of the current strains on the international coffee market, this is an important way to help sustain the industry. If farmers aren't growing coffee, we can't continue to stay in business. The premiums are meant to help alleviate the costs of becoming sustainable. They are not additional costs; they are investments in our future.
KK: What distinguishes this program from other procurement initiatives and certification programs?
SM: One thing we did not want was to create another certification scheme. We are leaving the process up to our producers. We've said to our suppliers, These are the goal lines. You tell us how you're going to achieve them. We reserve the right to perform audits to verify the claims of our suppliers. In this way, it's possible to meet our guidelines while allowing growers to address local conditions and challenges.
KK: Could Starbucks' guidelines serve as a model for other companies?
Peter Torrebiarte: I think our program could definitely encourage other coffee buyers to implement similar guidelines. We only buy about 1% of world production. In order to impact the industry in a pivotal way, we need our counterparts to adopt related sustainability programs.
SM: Our program has really attracted the attention of other industries as a way to align the goals of companies and their suppliers. It's making people think differently. These sourcing guidelines are based on guidelines developed by Conservation International, Rainforest Alliance, Consumers Choice Council, and the Smithsonian Migratory Bird Center, so other companies could use the same guidelines to develop similar standards.
KK: How are suppliers responding to the pilot program?
PT: We've been really happy. Within a week of launching the program, we got our first application from a supplier. Now we're getting a lot of people calling up and asking questions. We have also received applications from completely new suppliers.
Also, the president and minister of agriculture of Costa Rica have formally pledged to assist their coffee farmers in meeting our criteria. They're working with our guidelines to create a local Costa Rican program.
SM: The premiums we offer will be a key component to the success of the program. Producers compete with each other. There will be strong incentive for our current suppliers to become preferred providers under our new program.
KK: How do you characterize your challenges?
SM: The biggest challenge was to figure out the premium to offer to growers that meet our sustainability guidelines. The premium says to our growers that these sustainability practices will cost money, and we will pay more for them. The truth is that we don't know what the right premium to offer is. Which is why we've introduced the guidelines as a pilot so alterations can be made as appropriate. We have to see what the market requires. So we chose a number, and now we'll have to see.
PT: From the coffee-sourcing point of view, there are a lot of diverse coffee-farming practices in many different countries. Biodiversity differs not only from country to country, but also from region to region. We knew that we did not want this to be a certification program; on the other hand, we can't be too flexible with each grower. We're still working on that balance. For now, we've been getting more questions than we really have answers. That's why we implemented this as a pilot program for the first two years.
KK: What advice do you have for companies planning similar initiatives?
SM: I think the important lesson for other companies is that this is a new model for working with suppliers. We're not telling our growers what they have to do; we're telling them what we would like them to do. This is an important difference: instead of being a regulatory constraint, our guidelines become an incentive. And we are all sharing the same goals.
PT: Usually sustainability projects visualize sustainability as a triangle, representing economic, environmental, and social responsibility. We've made it a square by adding quality as the fourth leg. If there's anything that glues sustainability together it's quality. Eventually, there will be other people interested.
Starbucks Green Coffee Purchasing Guidelines
Coffee sourcing guidelines are part of a long-term partnership between Starbucks and Conservation International to promote methods of coffee production that help conserve global biodiversity. The criteria for the sourcing guidelines are based on the Conservation Principles for Coffee Production, which were developed jointly by Consumers Choice Council, Conservation International, the Rainforest Alliance, and the Smithsonian Migratory Bird Center. Starbucks and other industry leaders played an advisory role in the creation of these principles:
- Quality. Every coffee offered must meet Starbucks quality standards in order to be considered for purchase. High quality is an integral component of sustainability at all levels of the coffee supply chain.
- Environmental impacts. Coffee growing and processing systems should contribute to conservation of soil, water and biological diversity; employ efficient and renewable energy technologies; minimize or eliminate agrochemical inputs; and manage waste materials consistent with the principles of reduction, reuse and recycling.
- Social conditions. Coffee production systems should ensure protection from workplace hazards and conform to local laws, as well as to applicable international conventions related to employee wages and benefits, occupational health and safety, and labor and human rights.
- Economic issues. Coffee production systems and commercialization should benefit rural communities by boosting producer incomes, expanding employment and educational opportunities, and enhancing local infrastructure and public services. In order for coffee production to be sustainable, it must be economically viable at all levels of the supply chain, from seed to cup.
By Kelley Kreitz, a GreenBiz.com staff researcher and writer. Copyright 2002 Green Business Network, all rights reserved.
----------------------------
RELATED LINKS:
GreenBiz Essentials: Sustainable Agriculture
GreenBiz How-To: How Supply Chain Management Practices Are Greening Procurement
GreenBiz How-To: Lean and Green Supply Chain
GreenBiz How-To: Ten Keys for Educating and Engaging Employees
Report of the Starbucks Coffee Co./Alliance for Environmental Innovation Joint Task Force
Suppliers’ Perspectives on Greening the Supply Chain