Starbucks’ First Coffee Farm: Ethics or Expansion?
Photo courtesy of Starbucks Coffee Company
To a business, customers are one of the most valuable assets. Investors go in only if they know that there is a market demand for the product. Still, in an increasingly competitive business environment, is high profits alone enough to drive business value?
Milton Friedman’s answer is yes. My answer is yes…and no. Take Starbucks as an example. The largest coffeehouse company recently purchased a farm in Costa Rica. For one thing, the 240-hectare farm will “support growers and their families” and allow Starbucks to ethically source its coffee. At the same time, such grower-support program is giving Starbucks access to one of the world’s premium coffee.
The conventional wisdom is business ethics exist for the reason of corporate image. It is true that ethical sourcing sets out companies like Starbucks from its competitors. It is also true, however, that without developing innovative programs, farmers may not be committed to the long-term supply of high-quality coffee beans.
What did I miss when reading the article on Bloomberg? Business ethics justified within Starbucks’ own self-interest.
If you search news online, there are numerous businesses embracing social responsibility. We need to recognize that when consumers purchase a cup of Starbucks coffee, they search for incentives – be it exquisite coffee from Costa Rica or the way coffee beans are sourced.
The key is not to debate the doctrine of “social responsibility”, but to pay more attention to the interconnection within stakeholder interests. That interconnection is shaping how businesses operate in light of generating long-term sustainable growth. As Edward Freeman said, “you can’t look at any one of those stakeholders in isolation – their interests has to go together.”
Here’s an insightful HBR blog post on the release of Apple Pay. Yes, the iPhone 6 is impressive. But the Apple Pay, featuring contactless payment with a single touch presents a breakthrough for payment technology. It is the perfect example of industry collaboration – the new payment technology and the marketing of iPhone 6 altogether creates innovative change for the financial industry.
I found your article to be very insightful. It is definitely true that investors only go if they know that there is a demand for the said product; in this case, Starbucks. Starbucks, being such a large corporation, will obtain a lot of media attention, therefore, their social responsibilities are frequently monitored. I thought what you said about Starbucks embracing social responsibility can be wrong in a sense that most people who walk in to Starbucks could care less of where/how the coffee came to be. However, the purchase of the Costa Farmland although has some affect on Starbucks social standing, is not extremely prominent. If Starbucks were to buy a plot of land where they used children labour, would they lose a large customer base or only a mere percentage of their coffee consumers?
Jonathan, I agree that not everyone who visits a Starbucks store is aware of where or how the coffee came to be. With regards to how important the purchase of the farm in Costa Rica, I believe the purchase is important, especially if the decision is viewed holistically. Yes, it is important to increase sales and create demand. And maybe employing children labor will drive up sales. But today, customers are increasingly aware of social responsibility; hence, in the situation you presented, I think it is likely that Starbucks would lose a significant number of customers. The question to ask here is – how will the implications on investors and customers affect the value of Starbucks – both in the stock market and in the eyes of the public? As much as profits matters, I believe engaging in ethical business practices is equally important.