Memorandum submitted by Starbucks Coffee
Company
1. INTRODUCTION
1.1 Starbucks Coffee Company welcomes the
opportunity to contribute to the International Development Select
Committee's inquiry into Fair Trade and Development.
1.2 Since 1971, Starbucks has committed
itself to doing business in a different way. We want to be a good
neighbour in the areas where we operate and a good partner with
the farmers that grow our coffee. Though we purchase only 2% of
the world's coffee we recognise the importance of a sustainable
supply chain. At Starbucks, we understand that for us to continue
to grow, the farmers who grow our coffee will also need to have
long term success.
1.3 Starbucks has an integrated sustainable
approach to coffee sourcing:
— By paying premium prices we help raise
the incomes of farmers. In fiscal year 2006, the average per pound
price we paid for the coffee we purchased was $1.42, a significant
increase over the $1.28 average per pound we paid in 2005.
— We seek long term relationships
— This gives farmers and their families
economic certainty and predictability.
— We provide access to affordable credit
— We invest in loan funds helping farmers
who may run short of cash during a crop cycle. These loans can
also be used to invest in their farmlands. For example, Starbucks
recently announced that, through its relationship with EcoLogic,
it had increased the loans it provides to East African farmers
by US$1 million, in addition to the US$9.5 million previously
provided.
— We collaborate with farmers to improve
agricultural techniques
— By working directly with farmers to develop
sustainable and responsible practices, we can help raise the quality
and premium of the coffee they grow and process. We currently
have a Farmer Support Centre in Costa Rica to help farmers maintain
and improve the quality of their coffee and recently announced
plans for a Farmer Support Centre in East Africa.
— We encourage participation in Coffee
and Farmer Equity Practices, CAFE Practices
— CAFE Practices is a set of independently
verified, socially responsible coffee buying guidelines that ensure
the sustainable production of high quality coffee by addressing
social equity, environmental sensitivity and economic transparency
throughout the supply chain. In fiscal year 2006, 155 million
pounds (70 million kilograms) were CAFE. Practices certified,
a year-over-year increase of 100%. This represents 53% of the
total coffee purchased by Starbucks. Those farmers that are verified
become preferred suppliers to Starbucks and receive a premium,
thus providing farmers and their families with predictability
and certainty.
— We purchase certified and conservation
coffee
— We are the largest purchaser of Fair
Trade Certified coffee in North America and one of the largest
in the world. We purchased 18 million pounds (eight million kilograms)
of Fair Trade certified coffee which represents 14% of all Fair
Trade coffee imports. We also buy organic and conservation coffee,
in fiscal year 2006 purchased 12 million pounds (five million
kilograms) of certified organic coffee. Specifically, in the UK
Fair Trade Certified coffee is available in all stores, everyday.
— We invest in social development projects
— We work with coffee farmers, suppliers,
governments and non-governmental organisations (NGOs) to help
fund schools, medical clinics, bridges, reservoirs, clean-water
sources, and other projects that benefit coffee growing communities.
For example, we have invested more than $4.2 million in projects
in Africa. We've partnered with groups including CARE, Oxfam,
WaterAid, African Wildlife Foundation, and EcoLogic Finance.
1.4 For over 35 years, we have worked to
source our coffees in an ethical way, building long term relationships
with farmers, offering Fair Trade Certified coffees to our customers,
leading the industry in innovative, ethical buying practices through
CAFE Practices, and making investments into the coffee growing
regions of the world. We are not perfect. There is much more to
do. However, through this integrated approach we believe that
Starbucks is positively contributing to the livelihoods of farmers
in 24 countries around the world—creating sustainability
for coffee farmers and a sustainable business for Starbucks.
2. BACKGROUND
ON STARBUCKS
COFFEE COMPANY
2.1 Whilst not all the issues set out by
the Committee for this inquiry are pertinent to Starbucks, we
have attempted to answer below any specific questions where we
feel we can make a useful contribution to your inquiry. However,
before addressing these specific questions, we thought it would
be useful to first provide the Committee with some background
on Starbucks and how we source our coffee. Further, for clarity
throughout this submission when we refer to Fair Trade we are
referring to Fair Trade Certified coffee and associate organisations.
2.2 Starbucks has been in the specialty
coffee industry for over 35 years, we buy, roast and serve premium
quality Arabica coffee. We operate in 40 countries and employ
over 135,000 "partners" (employees) worldwide. In total,
we purchase approximately 2% of the world's coffee. We opened
our first store in the UK in 1998. Today, we have more than 500
stores in the UK, employing over 8,000 full and part time people.
We recognise the relationship between our success and the strength
and vitality of the communities we touch, be that around our stores
or in the communities where our coffee is grown.
3. WHAT HAS
BEEN THE
IMPACT OF
DONOR FUNDING
FOR FAIR
TRADE?
3.1 Our core purpose is to provide a high
quality cup of coffee. We are committed to doing this in an ethical
and sustainable way and as such we contribute funds and resources,
however, we do not define ourselves as a donor funder.
3.2 Starbucks makes a considerable contribution
in the developing countries where we purchase coffee through our
ethical and sustainable approach. We have a shared goal with the
Fair Trade movement to help ensure that farmers receive a fair
price for their coffee and have improved access to international
markets.
3.3 Starbucks has many long standing relationships
with coffee cooperatives, farms and supply networks of all sizes
and scale, whilst the Fair Trade coffee model focuses on smallholder
farmers belonging to cooperatives and associations. Many of our
relationships pre-date the Fair Trade movement and are excluded
from this Fair Trade system. Despite this, Starbucks is the largest
purchaser of Fair Trade CertifiedTM coffee in North America and
one of the largest in the world.
3.4 In fiscal year 2006, Starbucks' global
purchases totaled more than 18 million pounds (eight million kilograms)
of Fair Trade CertifiedTM coffee, representing approximately 14%
of global Fair Trade CertifiedTM coffee imports and about 30%
imported into the United States. In the same fiscal year, Starbucks
provided more than US$900,000 in Fair Trade social premiums through
the price we paid for Fair Trade CertifiedTM coffee. These funds
were redistributed back to the Fair Trade cooperatives we purchased
from to support the local community projects decided upon by a
general assembly of members.
3.5 Starbucks will continue to work with
various Fair Trade national initiatives to promote and market
Fair Trade CertifiedTM coffee products in our stores around the
world. We believe these efforts will help to further increase
customer demand and sales of Starbucks Fair Trade CertifiedTM
coffees.
3.6 We also invest in a number of social
development projects in the countries where we purchase coffee.
In Africa, for example, to date, we have invested more than $4.2
million in projects to help improve African coffee communities,
which in turn, helps farmers do business better. Some of our specific
work in Africa includes:
— Starbucks and the African Wildlife
Foundation collaboratively launched the African Heartland Coffee
Project in January 2005. The three-year project is focused on
helping farmers improve the quality and quantity of Kenya coffee,
introducing sustainable growing and processing best practices
as well as supporting the protection of wildlife and biodiversity
conservation. The project was made possible by a $600,000 commitment
from Starbucks, which included a contribution of $187,000 to AWF
in fiscal 2006. This has resulted in Starbucks purchasing the
first container of high quality coffee at a premium price.
— The Starbucks Foundation has committed
$1.12 million over three years beginning in 2005 to support Water
Aid's plans to provide all 22 villages in Menge Woreda in Ethiopia
with access to safe water, effective sanitation, and the hygiene
education necessary to make the best use of these facilities.
Located in northwestern Ethiopia near the Sudan border, Menge
Woreda is a remote and marginalised region of one of the poorest
countries in the world.
— Starbucks has supported CARE, an
international humanitarian and development organisation, for 15
years with grants totaling more than $3 million to coffee growing
regions including Costa Rica, Guatemala, Indonesia and Ethiopia.
In fiscal 2007, Starbucks committed more than $500,000 to CARE,
to fund a three-year programme that will improve economic and
educational prospects for more than 6,000 people in rural Ethiopia's
coffee growing regions.
— Starbucks works with several social
investment organisations to make loans available to coffee sourcing
communities. In 2005, EcoLogic Finance provided the Sidamo Coffee
Farmers Cooperative Union in Ethiopia a $400,000 loan. Starbucks
provided the capital funds that EcoLogic used to finance the loan.
The loan is enabling the cooperative to provide services to its
members, including marketing assistance in developing producer/buyer
linkages; direct export of members' specialty coffee; coordination
of warehousing services, processing, and transport; promotion
of high-quality coffee production; field-based training and education
programmes; and access to savings and credit services. In fiscal
2006, we increased our overall loan commitment by $1 million to
EcoLogic, bringing Starbucks total commitment to micro-financing
in global coffee-growing regions to $6 million. We also continued
our $1 million loan commitment to Calvert Foundation and $2.5
million loan commitment to Verde Ventures, a loan programme managed
by Conservation International.
3.7 We also opened a Starbucks Coffee Agronomy
Company (Farmer Support Centre) in Costa Rica two years ago to
work more closely with coffee farmers and suppliers from Latin
America, implement the guidelines for CAFE Practices and help
farmers maintain and improve the quality of their coffee. Having
a presence there has also allowed us to have closer relationships
with suppliers and gain greater insight into the production of
high-quality, sustainable coffee. We recently announced plans
for a Farmer Support Centre in East Africa and we also intend
to double our current sourcing from East Africa in the next two
years.
4. HOW BEST
CAN DONORS
HELP TO
DEVELOP FAIR
TRADE CONSUMER
MARKETS?
4.1 We believe there is a role for companies
like Starbucks to promote ethically sourced and fair trade goods.
Starbucks will continue to work with various Fair Trade national
initiatives to promote and market Fair Trade CertifiedTM coffee
products in our stores around the world. We believe these efforts
will help to further increase customer demand for Fair Trade CertifiedTM
coffees.
4.2 We believe our stores are a great vehicle
for communicating to about one million customer visits a week
in the UK about good coffee sourcing and we have a strong tradition
of doing this. We were a key supporter of Africa 05 and this February
we held "Good Coffee Day" which focused on sharing our
coffee sourcing approach with our customers. Further, we have
a long history of using our stores as a vehicle for raising the
profile of Fair Trade Fortnight. Currently, we are promoting awareness
of Fair Trade Certified coffees through posters and leaflets broadcasting
our Fair Trade offerings and partners will be undertaking coffee
tastings of Café Estima Blend Fair Trade certified coffee.
4.3 As we grow, we will continue to use
our stores to promote the coffee growing regions we buy from,
and the ethically sourced coffees we provide our customers.
5. HOW CAN
AID BE
MORE EFFECTIVELY
MOBILISED TO
HELP PRODUCERS
IMPROVE THE
QUALITY OF
THEIR PRODUCE?
5.1 Starbucks is committed to a comprehensive
approach to coffee buying that allows coffee producers to plan,
develop and grow their business. We have a history of relationships
engaging in public-private partnerships involving NGOs and the
US donor agency, USAID focused on quality and social investment.
For example, in 2001, in partnership with Conservation International,
Starbucks developed CAFE Practices (Coffee and Farmer Equity Practices),
a set of socially responsible guidelines that help ensure coffee
quality and promote equitable relationships with farmers, workers
and communities while helping to protect the environment.
5.2 Under CAFE Practices, Starbucks buys
on a preferential basis from farmers who:
— Meet prerequisites for high-quality
coffee and commit to and demonstrate economic transparency. For
example, a coffee exporter has to document and show exactly how
much he or she paid to the farmers and wet mill owners.
— Meet prerequisites for economic accountability
to ensure the farmer is fairly compensated for the cost of producing
high quality coffee.
— Implement the social and environmental
guidelines of CAFE Practices which include social responsibility
around worker conditions, such as housing and fair wages; coffee
growing and environmental leadership, such as reducing the use
of chemical fertilizers and pesticides; and coffee processing,
such a reducing the use of water and energy.
5.3 In addition, the entire programme is
independently verified. CAFE Practices uses independent third
party organisers to verify farmers' practices and Scientific Certification
Systems, an independent certification firm, to train and audit
verifiers. Those farmers that are verified become preferred suppliers
to Starbucks and receive a premium, thus providing farmers and
their families with predictability and certainty.
6. IS THERE
A ROLE
FOR DONORS
IN HELPING
TO DEVELOP
THE INTERESTS
OF PRODUCER
COMMUNITIES IN
DEVELOPING COUNTRIES?
6.1 As outlined above we have a responsibility
to the land and the farmers who produce our coffee and we are
committed to ensuring the success of African coffee farmers because
our success is linked to theirs. In short, this includes paying
premium prices for our coffee, also investing in loan funds, and
encouraging participation from coffee farms of all sizes in CAFE
Practices (Coffee and Farmer Equity Practices). Finally, we purchase
conservation (shade grown) and certified coffees, including organic
and Fair Trade CertifiedTM.
7. STARBUCKS
COMMITMENT TO
AFRICA
7.1 Starbucks is firmly committed to Africa
and African coffees are very popular with our customers.
7.2 As mentioned above, to date, we've invested
more than $4.2 million in projects to help improve African coffee
communities, which in turn, helps farmers do business better.
Our social and economic partnerships in Africa have included programmes
with CARE, Oxfam, WaterAid, African Wildlife Foundation, and EcoLogic.
7.3 We recently announced that we would
double our purchases from East Africa. Starbucks will also provide
technical support and capacity building to farmers through a Farmer
Support Centre that will open in East Africa, similar to the one
currently in operation in Latin America. The Farmer Support Centre
will be staffed with agronomists who will work with farmers to
improve quality, yields and prices received. Starbucks will also
expand its micro-credit facilities in East Africa to help farmers
invest in their farms.
7.4 Specifically, with respect to Ethiopia,
between 2002 and 2006 Starbucks increased its Ethiopian coffee
purchases by nearly 400% which translates into incomes and jobs
for farmers and their families. Recently the Government of the
Federal Democratic Republic of Ethiopia and Starbucks recognised
their shared interests and responsibility in the sustainability
and growth of the Ethiopian coffee sector.
7.5 The Government of Ethiopia and Starbucks
have agreed to work together in their shared vision to increase
Ethiopian farmer incomes and enhance the sustainable production
of fine coffee. Both the Government of Ethiopia and Starbucks
recognise that there may be differences in approach to achieving
this shared vision. Starbucks respects the right and choice of
the Government of Ethiopia to trademark its coffee brands and
create a network of licensed distributors. Starbucks will not
oppose Ethiopia's efforts to obtain trademarks for its specialty
coffees—Sidamo, Harar/Harrar and Yirgacheffe—and its
efforts to create a network of licensed distributors.
7.6 Both the Government of Ethiopia and
Starbucks will continue to strengthen their partnership and engage
in consultations on strategies to improve the lives of Ethiopian
coffee farmers and their families. Strong partnerships between
the Government, coffee companies, donors and other stakeholders
are critical to the growth of the sector.
8. DO EXISTING
GOVERNMENT GUIDELINES
ON PROCUREMENT
OF ETHICAL
AND FAIR
TRADE PRODUCTS
PROVIDE AN
ENABLING ENVIRONMENT
FOR THE
DEVELOPMENT OF
THIS MARKET
AND THE
OPPORTUNITIES FOR
PRODUCERS?
8.1 It is important that there is a commonality
of approach between governments and companies. From our own experience,
we believe the most effective way of providing an enabling environment
for the development of this market and improving the opportunities
for producers is by helping to ensure that farmers and their families
have long term success.
9. WHAT IS
THE ROLE
OF SUPERMARKETS,
RETAILERS AND
BUSINESSES IN
SUPPORTING ETHICAL
AND FAIR
TRADE PRODUCTION?
9.1 We believe we have a key role to play
in supporting ethical and fair trade production through sustainable
coffee purchasing such as CAFE Practices. We are keen for others
to adopt similar sourcing policies as evidenced by our commitment
to work with the Fair Trade movement to communicate key findings
and support a multi-pronged approach to ethical, sustainable coffee
purchasing. As previously referenced in the UK, we are key supporters
of Fair Trade Fortnight.
9.2 We will continue to play a role in fair
trade organisations, share our learnings around CAFE Practices
and communicate our approach to coffee sourcing to our customers.
10. IN AN
INCREASINGLY CROWDED
ETHICAL MARKETPLACE
HOW CAN
CONSUMERS BE
SUPPORTED TO
DISTINGUISH BETWEEN
DIFFERENT FAIR
TRADE BRANDS,
LABELS AND
CODES?
10.1 We recognise that there are many different
sustainable programmes; Fair Trade, CAFE Practices, shade grown
just to name a few. However, we believe today, that in order to
support the breadth, diversity and complexity of farming growing
communities and farming methods throughout the world, this combination
of approaches is necessary. It is incumbent upon retailers, such
as ourselves, to always seek not only to purchase in a sustainable
fashion but importantly clearly communicate this approach to our
customers.
11. CORPORATE
SOCIAL RESPONSIBILITY
REPORT
11.1 For your reference, we have also included
an advance copy of our 2006 Corporate Social Responsibility Report,
which further outlines our activities to operate in an ethical
and sustainable way. This report will be released in March 2007.
February 2007
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