Starbucks Corporation CORPORATE SOCIAL RESPONSIBILITY ...

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C.A.F.E. Practices – The VerificationProcessWhen suppliers apply to C.A.F.E. Practices, they mustundergo an independent third-party evaluation to verifythe degree to which their practices are aligned with the 28criteria. Upon completion of each evaluation, the verifiersubmits a report along with a scorecard to the applicantand to Starbucks for review. The scores given by the verifierdetermine the supplier’s approval status in C.A.F.E. Practices.Evaluations involve field inspections, face-to-face interviewswith workers, document reviews and desk audits. Theconditions of a supplier’s status dictate the terms ofreverification. Reverification is periodically required in orderto measure continuity and sustainability improvements.Since launching C.A.F.E. Practices in 2004, Starbucks hasretained Scientific Certification Systems (SCS), a third-partyevaluation and certification firm, to help develop and overseethe verification system and conduct ongoing verifier trainings.By the end of fiscal 2006, SCS had trained 30 additionalindividual verifiers on how to evaluate and score suppliersagainst C.A.F.E. Practices’ comprehensive set of criteria.Independent verifiers for C.A.F.E. Practices are affiliatedwith 25 different organizations conducting verifications in19 countries.Economic TransparencyTo help assure that the farmer receives an equitable shareof the price paid by Starbucks, a requirement for economictransparency is included in our coffee contracts, includingall of our contracts with suppliers participating in C.A.F.E.Practices. This provision stipulates that our suppliers mustprovide credible evidence of payments, usually in the formof receipts indicating payments made at all levels along thecoffee supply chain, including prices paid to farmers. Infiscal 2006, 98 percent of our coffee contracts included aneconomic transparency clause requesting documentation ofpayments made to various participants in the supply chain.In 95 percent of these contracts, economic transparency wasrequired to the producer level.Requiring coffee suppliers to provide evidence of paymentswas almost inconceivable several years ago, especially giventhe diffused and complex nature of the coffee supply chainand the historical lack of record keeping. However, sinceStarbucks instituted this requirement, a notable change hasstarted to take place in the specialty coffee industry, withmore serious attention now being focused on assuring thatfarmers receive an equitable share of the purchase price. Webelieve this ultimately benefits coffee farmers and other keysuppliers who add value along the supply chain.While we are encouraged by the progress to date,institutionalizing this new requirement has come with certainchallenges. In particular, the coffee industry does not have astandardized mechanism in place that allows all parties acrossthe coffee supply chain to easily submit evidence of paymentin a consistent, uniform manner. At Starbucks, we receivedifferent forms of documentation – from a simple receiptfor the coffee cherries that the farmer delivered to the millto full purchase agreements that include more levels alongthe coffee supply chain. These documents not only differ inquality, they reflect variations in currency, industry standardsand laws, units of measure and are prepared in manydifferent languages.Despite these realities and the unique circumstances of eachproducing country, Starbucks will continue to work towardverifying the submitted evidence in order to assure thatfarmers received an equitable portion of the purchase price.Starbucks and Fair TradeStarbucks and the Fair Trade movement share commongoals: to help ensure that farmers receive a fair price for theircoffee and have improved access to international markets.C.A.F.E. Practices and the Fair Trade system both focuson cultivating long-term, stable relationships with farmers;providing supplemental funding for community projects;and providing farmers with access to affordable credit. Apoint of differentiation is that the Fair Trade coffee modelfocuses on smallholder farmers belonging to cooperativesand associations, while Starbucks purchases from coffeecooperatives, farms and supply networks of all sizes and scale.Starbucks first relationship with a Fair Trade certificationand licensing organization began in April 2000, when weestablished an agreement with TransFair USA that allowedStarbucks to purchase, roast and sell Fair Trade Certifiedcoffee. We are still actively engaged with TransFair USA, aswell as with Fairtrade Labelling Organizations International(FLO) and nine of the 20 other national initiatives aroundthe world that oversee and coordinate Fair Trade licensingand sales promotion in 24 of our international markets.Each Fair Trade national initiative is unique and has its ownrequirements, trademarks and protocols, a reality that hasconstrained our ability to offer Fair Trade Certified coffeeinternationally. Starbucks is committed to working togetherwith FLO and the national initiatives on a streamlinedsolution that will make it easier for multinational companies,like Starbucks, to distribute and sell Fair Trade Certifiedproducts in other countries.P R O D U C T S 23
What is Fair Trade Certified ?The Fair Trade Certified labels are owned by the Fairtrade Labelling Organizations International and Fair Trade national initiativesaround the world. Starbucks pays licensing fees to the national initiatives in order to affix the Fair Trade Certified trademark on ourpackaging. According to the national initiatives, a majority of the fees support various Fair Trade activities to help market the product,and the remaining fees are used to fund the certification process, the development of standards and support for producers.Fair Trade products appeal to socially minded consumers who place a high value on the Fair Trade certification seal. Fairtrade LabellingOrganizations International certifies to consumers through the seal that a minimum price* of $1.24 - $1.26 per pound ($1.39 - $1.41per pound for organic) was paid to the farmer cooperative that produced the coffee. However, factors such as market recognition of FairTrade coffee quality, higher commodity prices, and supply and demand may work in combination to raise the Fair Trade price.Fair Trade certification includes criteria to be met by coffee cooperatives, such as fair labor conditions, freedom of association andcertain environmental standards. To be certified as Fair Trade, the coffee is to be produced only by farmers who belong to farmerowned,democratically run coffee cooperatives and associations listed on the Fair Trade registry. An estimated four percent of globalcoffee production is Fair Trade Certified. * These established prices are set by Fairtrade Labelling Organizations International for the purpose of covering the costs of sustainable production and living.The pricing components include $1.19-$1.21 for the coffee (depending on the region), $0.05 for a social premium and an additional $0.15 premium fororganic. When “C” market prices rise above the Fair Trade minimum price, Fair Trade prices are adjusted accordingly to be at least $0.05 above the “C” price.Our Purchases of Fair Trade Certified CoffeeIn fiscal 2006, Starbucks global purchases totaled morethan 18 million pounds (8 million kilograms) of Fair TradeCertified coffee, representing approximately 14 percent ofglobal Fair Trade Certified coffee imports, and about 30percent imported into the United States.Starbucks remains the largest purchaser, roaster anddistributor of Fair Trade Certified coffee in North America.Pounds(kilograms)5 million(2 million)Fair Trade Certified Coffee11 million(5 million)18 million*(8 million)Fiscal year 2004 2005 2006*Represents 6% of Starbucks total coffee purchases.At the beginning of fiscal 2006, Starbucks set a 12 millionpound (5 million kilogram) purchasing target for Fair TradeCertified coffee, which we exceeded by more than 6 millionpounds (3 million kilograms) because we extended our lineupand broadened distribution of our Fair Trade Certified product offerings. In addition to offering Café Estima Blend in Starbucks stores, strong sales were achieved through therollout of a new Fair Trade Certified coffee product underthe Kirkland Signature brand in Costco stores in the U.S.and Canada.Starbucks will continue to work with various Fair Tradenational initiatives to promote and market our Fair TradeCertified coffee products in our stores around the world.We believe these efforts will help to further increase customerdemand and sales of Starbucks Fair Trade Certified coffees.Purchasing enough Fair Trade Certified coffee to meet thedemand will be essential.Previously, we set arbitrary targets for the amount of FairTrade Certified coffee we planned to purchase annually, anapproach that is no longer practical. Instead, we will beginlinking our purchases of Fair Trade Certified coffee tosales forecasts.Through our purchases of Fair Trade Certified coffee infiscal 2006, we:• Provided more than $900,000 in Fair Trade socialpremiums through the price we paid for Fair TradeCertified coffee. FLO certifies that these funds wereredistributed back to the Fair Trade cooperatives wepurchased from to support local community improvementprojects decided upon by the general assembly ofthe members.• Paid approximately $8 million more to Fair TradeCertified cooperatives than they would have received ifthey sold their coffee at “C” market prices. This is similarto the premiums that Starbucks typically pays above thecommodity price for other high-quality coffees. Accordingto TransFair USA, the average price of Fair TradeCertified coffee during fiscal 2006 was $1.48 per pound,including the social premiums. Approximately 80 percentof the price paid to the Fair Trade registered cooperativesgoes to coffee farmers, and the remaining 20 percent coversco-op overhead, export costs and social investments.• Paid a total of $1.6 million in licensing fees to variousFair Trade organizations, with the majority paid toTransFair USA.P R O D U C T S 24
Page 1 and 2: Starbucks Corporation Corporate SoC
Page 6: CONTENTSPAGEGLOBAL REPORTINGINITIAT
Page 9 and 10: To measure how well we are doing at
Page 11 and 12: Integrating Corporate SocialRespons
Page 13 and 14: Policy Governance CouncilOver the y
Page 15 and 16: External RecognitionSocially Respon
Page 17 and 18: OUR WORLD OF PRODUCTSFor 35 years,
Page 19 and 20: Creating a Sustainable ApproachAfte
Page 21 and 22: The Four Fundamentals ofC.A.F.E. Pr
Page 23: Our priorities are to increase the
Page 27 and 28: Access to CreditDuring the growing
Page 29 and 30: Tropical Storm Stan Relief EffortsI
Page 31 and 32: Procurement Practices for Sustainab
Page 33 and 34: Dairy and Bakery ProductsDairy and
Page 35 and 36: Ethos WaterStarbucks acquired the
Page 37 and 38: Starbucks GrowTH andCommunity Impac
Page 39 and 40: Local Community Case StudiesLa Mesa
Page 41 and 42: Starbucks Community InvestmentsStar
Page 43 and 44: South Asia Tsunami CommunitiesAs pa
Page 45 and 46: Investing in Communities Aroundthe
Page 47 and 48: The Starbucks FoundationStarbucks c
Page 49 and 50: Supporting Youth: Arts and Literacy
Page 51 and 52: Nutrition Information on Starbucks
Page 53 and 54: Marketing to YouthStarbucks custome
Page 55 and 56: Our Commitment toEnvironmental Stew
Page 57 and 58: Energy ConsumptionSaving energy is
Page 59 and 60: These efforts build on ongoing init
Page 61 and 62: Looking to Our Supply ChainBeyond o
Page 63 and 64: Portrait of a Starbucks StoreAt the
Page 65 and 66: Listening to Our PartnersOur workpl
Page 67 and 68: Providing Benefits to Our PartnersS
Page 69 and 70: Focusing on Healthcare and Wellness
Page 71 and 72: Partner Training and CareerDevelopm
Page 73 and 74: Fostering Diversity andInclusionAt
Page 75 and 76:
My Starbucks -The National Braille
Page 77 and 78:
Independent Assurance ReportTo the
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