A communique with Marc Gunther of Fortune Magazine regarding his article, “How UPS, Starbucks, Disney Do Good,” which praises Starbucks as an uber-socially conscious company.
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Dear Marc Gunther,

While I agree with your contention that any list of America’s most socially responsible companies is subjective, I’m still disappointed and disheartened to see how little research you actually did before writing your article “How UPS, Starbucks, Disney Do Good.”

As an advocate for ethical consumerism involved in the fair trade movement, I was more than surprised to see Starbucks make your list of socially responsible companies. Not only does fair trade certified coffee make up only 3.7% of Starbucks’ coffee purchases (according to Starbucks’ own annual report, avaliable on its website), most of that percentage comes as a result of Costco’s request to have all of the Kirkland brand coffee (roasted by Starbucks) fair trade certified — NOT due to any Starbucks-initiated attempt to be more socially responsible. And while Starbucks claims that it pays high prices — higher than minimum fair trade certified coffee prices — for all of its coffee, the bulk of the money that Starbucks pays for its coffee goes to middlemen, not the coffee farmers.

Moreover, in regards to your statement that Starbucks “broke the mold” by offering admirable healthcare benefits and stock options, I’d like to point you to the recent Wall Street Journal article that reported only 42% of Starbucks’ employees receive health benefits, compared to 46% for Wal-Mart.

My research centers mostly about coffee, so I’m less certain about the accuracy of your reporting for other companies — though at this point, I’m inclined to believe that almost all of what you wrote came straight off of company press releases. Many Americans rely on news sources such as Fortune for accurate, unbiased information about corporations. I’m saddened to discover that Fortune’s full-time journalists put less time and effort into researching and writing their articles than I do into my short, pithy blog posts.

Siel
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Thanks for your email.

We’ll have to disagree.

I spent lots of time researching Starbucks for my book on CSR. I looked into the issue of Fair Trade in some detail. I’ll spare you all the details, but Starbucks often pays prices for coffee that are higher than the Fair Trade prices, as you say. (I don’t know why you think the bulk of that money goes to middlemen.) There are limits to the Fair Trade supply, as I understand it, and other restrictions (cooperative structure). I interviewed the head of Transfair USA (if I remember the name of that NGO correctly) for the book and he told me he thought it was a mistake to target Starbucks.

On the health insurance issue, your comparison of Starbucks to Wal-Mart doesn’t seem apt to me. Many Starbucks workers are part-timers with limited hours. Students, etc. I haven’t looked at the number but a more apt comparison would be Starbucks to McDonald’s or other fast food companies.

Of course, Starbucks like any big company has issues and it could and should be doing more. But I believe and many others who have looked agree that they are a CSR leader. If not Starbucks, who? Please don’t tell me Green Mountain Coffee. Much as I would love to see our economy move to smaller scale operations, we are for now so dependent on big public companies that we need to encourage those who are moving in the right direction.

cheers,
Marc Gunther

My book, Faith and Fortune: How Compassionate Capitalism is Transforming American Business, has been published in paperback. For more, see www.marcgunther.com
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Dear Marc Gunther,

Starbucks is quite open about the fact that it purchases the bulk of its coffee through middlemen, which is why the company started requiring transparancy clauses in its coffee contracts. In 2004, 59% of their contracts had transparancy clauses; In 2005, 84% of Starbucks’ contracts had economic transparency to the producer level. While this percentage increase is to be commended, this simply means that Starbucks now knows the price most of its farmers are receiving — NOT that Starbucks has ensured its farmers are receiving fair prices.

Despite your assertion that you looked into fair trade “in some detail,” I get the sense that you’re unfamiliar with what fair trade actually is. In terms of coffee, fair trade attempts to address the fact that farmers with limited access to transportation and other resources are often ripped off by middlemen. Thus, fair trade attempts to take middlemen out of the coffee chain so that farmers can get a fair price for their product. To say that Starbucks pays “higher than fair trade prices” to middlemen makes little sense, when a “fair trade price” stands for the price guaranteed to FARMERS, not to middlemen.

Again, I really don’t think you’ve done much research into fair trade beyond the press releases Starbucks has given you. Yes, Starbucks is eager to tell consumers that fair trade certified coffee makes up just a small percentage of the coffee in the world. What Starbucks DOESN’T tell you is that the majority of even that small percentage is still sold at “conventional” prices because large companies like Starbucks buy little of it. While Starbucks implies it would purchase more fair trade coffee if more of it was avaliable, the fact is that there’s already plenty of fair trade certified coffee Starbucks could purchase. And because so much fair trade coffee isn’t being bought right now, it’s difficult to bring more co-op farms into the fair trade movement, much less to expand the movement to include non-co-op farms.

I’m aware that TransFair USA always says nice things about Starbucks — You might note that Starbucks’ certification fees paid to TransFair USA makes up about 14% of its operating budget. It’s not in TransFair USA’s interest to get on Starbucks’ bad side, despite the fact that the company’s really dragging its heels. The influence of large, multinational companies using the fair trade certification to greenwash their corporate image rather than to promote better corporate practices is an issue of current heated debate in the fair trade movement.

That said, I’ll concede that perhaps my comparison of Starbucks to Wal-Mart may not be a fair one, considering that the two companies, as you pointed out, hire different types of employees. Of course, you’ve made it abundantly clear that you did not bother to compare Starbucks’ record with those of other, more comparable companies — you mentioned McDonalds — before lauding Starbucks’ policies in your article.

And speaking of McDonalds — Despite the fact that you pooh-poohed the contributions of companies like Green Mountain Coffee to CSR, you may have heard that the McDonald’s restaurants in New England and Albany, NY, have switched to Green Mountain Coffee. Now, northeasterners can get high-quality,100% fair trade organic coffee at their local McDonald’s for about half the price of Starbucks. What company’s really making a difference, both for business and for consumers?

Yes, I agree that we need to encourage companies that are moving in the right direction. But I fear that articles like yours encourage companies — not to become more socially responsible — but to devote additional money and resources into beefing up public relations and marketing efforts.

Siel

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