To Be Or Not To Be Ethical In Business
Social responsibility has become a big part of organizations. This is done as a way of rewarding the community for their efforts in ensuring the organization is able to achieve its goals and also to make profits. Social responsibility is considered as one of the ethical issues that an organization must face as it is deemed necessary for an organization to give back to the community therefore raising the matter of ethics. In this research on social responsibility and ethical issues, Starbucks Company will be focused on.
Starbucks a global coffee company which since 1971 has been involved in social responsibility roles which vary from community services to environmental works such as energy conservation and recycling. Through the Fairtrade organization, the company has been able to ethically source its products from the different farmers which are of great quality and responsibly grown. This has enabled Starbucks to invest in the farmers’ life program by offering farmers with loans and education.
Furthermore, through their program the Starbucks Shared Planet, they have been able to connect with communities and worldwide consumers who are concerned with social development therefore extending its roles on social responsibility across borders. The Shared Planet aims to be purchasing responsibly grown and ethically traded coffee by 2015 and also is planning to reduce energy consumption by 25% and purchasing renewable energy which will cut the electricity consumption by 50%.
Through these programs, the company has been seen to be making large profits and these has raised issues, especially ethical issues if it is right for the organization to use its social programs to make more profits as some claim to be the case with Starbucks.
1. What is social responsibility and ethical business?
To understand a company’s social responsibility, we shall use the four part taxonomy of CSR according to Archie Carroll which has widely been used by different organizations and it indicates that a firm should conduct its business in a manner that meets its economic, legal, ethical, and philanthropy expectations respectively. The levels are explained as follows;
Level I: Economic- the first and foremost social responsibility of a firm is its economics. The firm must survive by producing goods and services at a profit to enable it to run as profits will ensure more investments and expenses covered.
Level II: Legal- society expects firms to operate their business within the legal framework and such information helps an organization to deal with legal issues that arise.
Level III: Ethical- these responsibilities are those over and above the ones codified in laws and are in line with societal norms and customs; they are expected, though not mandatory, by the society even though they may be ill-defined. This could include things such as environmental ethics, community ethics etc.
Level IV: Philanthropy – it is the act by which a corporate gives to the community which is done mainly through foundations and sponsorships. Contribution is discretionary, although increasingly desired by stakeholder communities to give publicly.
Corporate Social Responsibility arises from the aspect of making decisions based on communicating with the affected parties which in turn balances the interests of all those who are involved. For such to occur in the organization, it should make social awareness an integral part of its corporate culture and in addition, it should focus on making ethical considerations central in its decision process as this will ensure the firm makes profits while still engaging in activities beneficial to society.
Although social responsibility is costly to all firms, the firms have recognized its importance in adding value to the code of conduct or ethics, a commitment to local communities, interest in health and education, environmental awareness and recognition of social issues such as diversity and social fairness. In addition, it establishes the stakeholders’ confidence in the management team boosts the firm’s reputation and also gives the people a sense of ownership of the firm. Such a perception can result in the firm increasing its sales ensuring increased profits.
Social responsibility and ethical issues are dynamic in nature and as a result, they can be interfered with. Some of the factors that affect social responsibility and ethical issues include business environment; some firms operate on a strenuous budgets and therefore making them opt to not be involved in social activities. Organization; the mode of operating varies from one firm to another for instance a mining firm and a food firm will have different takes on social responsibility and ethical issues. Culture; it deals with the firm’s corporate culture and that of its location. Some firms do not have the culture of giving which may affect its operations as people may demand that the firm be involved in social responsibility. Finance; earning money is the basic responsibility for a company, so if the financial position of the company is not good enough, to be involved in social activities will be challenging. Social environment; a company should understand the social circumstances of the society around as this will enable the firm to make better decisions regarding its social activities. Politics; it plays an important role in the stability of the company especially multinationals. A weak political system may result in closure of the business and therefore this may cause a firm not to be involved in social activities as it focuses on protecting its investments. Other factors include religion and geography.
According to Richardson, he developed a moral guideline which would help the organizations to cope with the complexity of business ethics which he observed to be a challenge to most businesses. He established the following guidelines that businesses should; ensure not to inflict any damage intentionally or directly, produce more good than bad for the host country, pay their fare share of taxes, contribute to host’s country’s development, cooperate with the government to develop and enforce background institutions, respect the human rights of their employees by ensuring they pay their workers well and ensure that the working environment is friendly and finally respect local cultural beliefs that do not violate the moral norms of the society.
It is therefore important for businesses to understand the importance of social responsibility and ethical issues as it has become an integral part in business. Starbucks has been involved majorly in social responsibilities over the past 40 years and this has seen its development and establishment as a major player in the coffee industry. It has taken to buying coffee from different farmers all around the world and this has been seen to improve the lives of those farmers. Their major social responsibility involves community services such as offering health services and providing the youths with employment opportunities. Also, it has taken a role in environmental issues such as global warming, energy conservation, and recycling and water conservation. Other social involvements have been through contribution to foundations which cater for education mainly and also for farmers majorly coffee farmers which enables them to buy equipment, fertilizers and also to educate them more on farming practices (Starbucks, 2008, 13). With its focus on social responsibility, the Starbucks has established its social activities mainly through the Fairtrade organization and the Starbucks Shared Planet.
2. The Starbucks and the Fairtrade
Coffee, as we all know, is one of the world’s most popular beverages, with over 501 billion cups consumed every year. However, there are many small coffee farmers who are not able to get good income from selling their coffee to the different markets to cater for their cost of production which has resulted in the farmers opting for other agricultural produce (Starbucks, 2011, 14). To try to solve the farmers’ problems, since 1971 the Starbucks Coffee Company has been committed to ethically sourcing and roasting the highest quality Arabica coffee in the world from different farmers within different regions. Today, with stores around the globe, the company is the premier roaster and retailer of specialty coffee in the world.
Due to the human rights in most countries around the world rising sharply as a result of improving life conditions, Fairtrade, which was shaped in Europe in 1960s, is trying to help producers, farmers in developing countries to be able to earn more from their produce and promote the concept of sustainability.
In addition, the Fairtrade Foundation is an independent certification body which licenses the use of the Fairtrade mark on products which meet international Fairtrade standards. This independent consumer label appears on products as a guarantee that the disadvantaged producers are getting a better deal from the sale of their produce. Today, more than 7 million people – farmers, workers and their families – across 59 developing countries benefit from the international Fairtrade system. And as being one of the biggest coffee company, Starbucks, plays an important role in the Fairtrade coffee. Starbucks is already the world’s biggest purchaser of Fairtrade coffee, buying forty million pounds in 2009.
According Transfair, the doubling of its purchases of Fairtrade Certified coffee globally helped by directly improving the lives of more than 100,000 farming families in developing countries across Latin America, Asia-Pacific and Africa and support programs and projects like educational scholarships, medical clinics, basic infrastructure enhancements and quality improvement initiatives.
3. About Starbucks Shared Planet
Starbucks established Share Planet Commitment for to implement Fairtrade and other green activities’ success. They are committed to working with the clients, communities and partners and farmers to assist in developing a better future for the world. Starbucks Shared Planed refers to a type of means that they involve with their clients and communities to carryout business sensibly and develop a better future for the globe. Starbucks Shared Planet is based on three obligations including serving as good stewards of the atmosphere, sourcing the coffee morally and being engaged in our communities actively.
It is committed to moral sourcing; working to make sure that every cup they serve is produced using high quality standards and responsible growing practices. Coffee which carries mark of Starbucks Shared Planet guarantees that it has been produced in means that are environmentally, economically and socially responsible. They are also dedicated on minimizing their effect on the planet, and motivating others to do similarly. They are dedicated to being good neighbor and a means for change- bringing together their workers- partners-, clients and the community to contribute positively daily.
Reasons as to why Starbucks implements fair-trade include:
- Develop a good status- Fairtrade is a public concept. Starbucks therefore wants to attract attention from presses and consumers. And, it is their hope that their Fairtrade promotion on the media like radios and TV can be covered by the press. Hence, this is a free advertisement chance for Starbucks.
- Distinguishing marketing- one of the Starbucks’ marketing strategies is fair-trade products. It is its hope that their products can be dissimilar with competitors and raise their market share.
- Sustainable supply chins of coffee bean- Starbucks ask farmers to follow its own standard system including the Coffee and Farmer Equity Practices (CAFE) program when it support the farmers. It sustains its support from farmers through this standard.
Consequently, 2nd, September, 2009 all Espresso Roast sold in the United Kingdom and Ireland is 100% Fairtrade. This implies that coffee in all Cappuccinos, Mochas, Lattes, Americanos, among others are brewed with 100% Fairtrade Espresso. Farir-Trade Certified coffee market set to raise by 18% in the UK an Ireland in the year 2009.
4. The good model that Starbucks use now
Starbucks has worked out a series of process and programs these years including Starbucks™ Shared Planet™ so as to attain the objective of being a responsible company. They can be grouped in those parts; community, environment, ethical sourcing, wellness and diversity.
The ethical sourcing and diversity are the two good models in my own opinion for other organizations to study in those two programs.
Firstly, ethical sourcing, which is crucial for an organization’s life on coffee beans, is ways to purchasing and serving the highest-quality, sensibly grown, ethically traded coffee to assist in developing a better future for farmers.
In Costa Rica and Rwanda, Starbucks and has established Farmer Support Centers to offer local farmers with resources and expertise to assist in lowering production costs, decrease infection of fungus, facilitate quality of coffee and raise production of premium coffee. Many coffee farmers dip into their modest reserves to cover expenses until they can sell their produce in the course of planting and harvesting cycle. Some farmers may even encounter a cash shortage, punctual them to sell their produce early- and for less- to local buyers.
And also, Starbucks provides funding to organizations that make loans to coffee growers, which will help them sell their crops at the best time to get the right price. According to Lynn (2003, 114), the loans also help farmers to invest in their farms and make capital improvements. Over the years, they have committed over $15 million to a variety of farmer loan funds. And according to their progress, the investment will be double to $20 million by 2015.
Secondly, the diversity, it is aiming to make a business out of human connections, community involvement and the celebration of cultures.
The company–wide diversity strategy focuses on four areas: partners, customers, suppliers and communities:
Partners (those employees)–They seek out and engage partners who are as diverse as the communities we serve.
Customers–They extend the Starbucks Experience to all customers, recognizing and responding to their unique preferences and needs. The aim is to provide an exceptional customer experience by connecting with customers in a culturally relevant way. Communities–They support and invest in local neighborhoods and global communities through strategic partnerships and economic development opportunities that deepen their ties in the communities where they do business.
According to Richardson, suppliers- it is a trusted and welcoming company for suppliers. Through their supplier diversity program, we work to increase our business relationships with minority- and women-owned suppliers.
Starbucks is dedicated to creating a workplace that values and respects people from diverse backgrounds, and enables its employees to do their best work. They honor the unique combination of talents, experiences and perspectives of each partner, making Starbucks success possible.
To conclude, Starbucks has done much in the origin of their products—farmers, which make their highly reputation and also sustainable product sources. Those programs can actually be helpful for those farmers to be more knowledgeable on technology and also more loyalty to Starbucks. And additionally, the consumers who are really concern about farmers` live will be encouraged to buy Starbucks coffees as well as collect Starbucks cups. It is beyond all doubt that such a successful marketing strategy especially in this competitive world. Tastes connected with social reputation leads to highly profits and loyalty.
5. The potential trouble for Starbucks
Starbucks stipulate that there are at least 60,000 clients internationally who have contacted Starbucks with expressions of concerns as Starbucks emerges as a responsible farm. Those who are aware of company’s concept are buying Starbucks as a type of support to Fairtrade. Clients are hoping to do real to those farmers and clients. Nevertheless, consumers can get information everywhere easily and they will found out the truth which is Starbucks import only a small part of coffee from these poor farmers due to development of internet.
Fairtrade plays a crucial role in Starbucks’ business plan besides those clients. Balancing the income of those countries and farmers who live on the coffee products is one of its objective hence they chose Starbucks as one of their honored member due to Starbucks’ promise. It is certain that the situation of Fairtrade will be embraced; though the truth is that Starbucks is only aimed at taking advantage of the organization to make more profit is known across the world.
And for Starbucks its own, with the progress of its Shared Planet Plan, there will be more customers joining in their business campaign and enlarge their brand without excess advertisement efforts. At the same time, with the development of farmers` loan commitments, Starbucks has built a resource area of itself which makes it superior of other coffee companies. As the result of these progresses, Starbucks may achieve a new level of its coffee “empire” which makes the balance of responsibility and profit. But there also exists another possibility. As the author has mentioned above, when customers are no more believe Starbucks` behavior, there will mean a huge brand’s risk for the company. And the society will come together to against their products and also Fairtrade should have a new consideration on the continued cooperation with Starbucks. So it is really the time to alarm the managers of Starbucks.
And it is easy to imagine their reaction when they are informed that there are only a small part of there coffee are from Fair-trade. At that time, consumers will not trust Starbucks anymore. As a result, a Starbucks coffee will be no different with another brand’s coffee.
As indicated above by the author, such behaviors are likely to push Starbucks into below scenarios:
- Sale drop down
It is clear that if customers develop a negative attitude towards Starbucks, then they are not likely to purchase good or coffee like they used to buy previously. This therefore gives us the reason why the sales of Starbucks are likely to go down or drop. This also is likely to cause various stores to be closed down in the long run.
- Share price decrease
If at all the consumers realizes that Starbucks is not likely to help the poor farmers, that company’s internal management are also likely to develop some problems. Furthermore, it will therefore become clear that not only the customer will loose interest with the company but also the investors who would be willing to invest in the company.
- Advantage competitor
Advantage to competitors will be created since most of the customers do not want to hear any negative news concerning a company that they want to cooperate with. This will in turn give other competitors advantage and may begin to attack Starbucks and also try to occupy their market share and thus making a lot of profit out of it. Conversely, customers will also opt to buy from other shops rather than buying coffee from Starbucks and this will be quite detrimental to this company.
It is therefore vital for the management staff of Starbucks to try as much as they can to ensure that they stay away from further risks. Some of the activities that Starbucks needs to put in place are listed below:
- The company must stop misguide its customers, but rather tell the consumers the truth.
- They should invest on other sales promotion services such as advertisement since this will aid in recreating the company’s reputation.
- Starbucks should invest more in services that are likely to improve on its services such as fair trade tasks.
It appears that, the most appropriate action that can help them build on their reputation is generation of a proper action plan. This is likely to help Starbucks in reaching a hundred percent fair trade tasks.
To summarize, it is evident that Starbucks have really tried offering better services to its clientele as an effort of showing commitment to their social responsibility, as the slogan indicates; “Your Starbucks, Your Community”. The idea of incorporating fare trade in their market has really yielded so much to the company, and this can be a good example. This shows other competitive companies to understand how consociation can help organizations to earn enumerations through a nationwide social community. With more organization joining fare trade, consumers are also in the frontline to know their responsibilities in developing socially within the organization. Moreover, most farmers and workers also acquire the needed information and support that is needed in developing the financially.
Additionally, in the current business environment, it is also vital to incorporate some ethical behaviors within the organization so as to be successful. If ethical behaviors are not considered vital, then the organization is likely incur loses and that will not be healthy to the organization.
Therefore the organization is obligated to pay much attention to business ethics besides just concentrating on ways of making a lot of profit. In this regard, Starbucks is likely to become a role model that other companies will likely follow. Conversely, the consumers will also be capable of to try and do their best to ensure that ethical behaviors are promoted within the organization thus promoting social development. The clients will also develop financially and generally, this is an important area of study. It is therefore important that the Starbuck realizes that there is certainly a long and tough way to go in order to achieve a lasting social harmony.