Beyond the cup. - Starbucks

ECONOMIC TRANSPARENCYFor all the coffee Starbucks buys, our goal is to pay premiumprices that help farmers sustain their business. We purchasecoffee from a variety of suppliers, including individual farmsand farmer-run cooperatives, or through exporters who buyfrom farms. Starbucks wants assurance that the farmer receivesa fair and profitable share of our purchase price. This is whywe began inserting economic transparency provisions intoour coffee contracts, essentially requiring that our suppliersprovide credible evidence, usually in the form of receipts, thatindicates how much each party in the coffee supply chainwas paid. In fiscal 2005, 93 percent of our coffee contractsincluded an economic transparency clause requestingdocumentation of payments made to various participants inthe supply chain. In 87 percent of these contracts, economictransparency was required to the producer level. (See pages 16and 17 for economic transparency requirements.)While we are encouraged by the progress our suppliers havemade to provide economic transparency, institutionalizing thisnew practice continues to present enormous challenges. Whencoffee suppliers provide economic transparency, they presentvarious forms of financial documents as evidence. These canrange from a simple receipt for the coffee cherries that thefarmer delivered to the mill, to full purchase agreements thatinclude more levels along the coffee supply chain. Moreover,these documents not only differ in quality, they reflectvariations in currency, units of measure and are prepared inmany different languages.Starbucks goal is to verify the submitted evidence and reacha high level of assurance that farmers received an equitableportion of the purchase price. Given the realities mentionedabove, the complexities of our coffee supply chain and thecircumstances of a producing country, we anticipate thisundertaking to be an ongoing challenge.THE VERIFICATION PROCESS – WHAT WE ARE LEARNINGSuppliers interested in participating in C.A.F.E. Practicesmust agree to an inspection by an independent third-partyverifier. Verifications are usually conducted annually andinvolve field inspections, face-to-face interviews with workers,document reviews and desk audits. Completed reports aresubmitted, reviewed by a Starbucks committee and granteda status.During fiscal 2005, Scientific Certification Systems trained100 individual verifiers representing 14 organizations fromseven countries who can evaluate and score against C.A.F.E.Practices’ comprehensive criteria. We are continually workingto increase the pool of qualified verifiers.Through the verification process, Starbucks has come toappreciate that regional guidance documents are needed toaccommodate local supply chain realities.Rainforest Alliance: Profile of aC.A.F.E. Practices VerifierEverlay Méndez Martínez of Pronatura, an affiliate of the RainforestAlliance, conducts a coffee farm’s independent third-party fieldinspection against C.A.F.E. Practices.The Rainforest Alliance is dedicated to protectingthe earth’s ecosystems and has been a championand catalyst for sustainable agricultural practices.In conjunction with the Sustainable AgricultureNetwork (SAN), a coalition of leading conservationgroups, the Rainforest Alliance developed its ownguidelines for sustainable agriculture and createda certification seal for products, including coffee,which are grown and produced in accordance with itsguidelines.The Rainforest Alliance and some of its SANco-members serve as verifiers for C.A.F.E. Practices.In fiscal 2005, these parties carefully verified 16applications, which included measuring performanceon farms and mills. They used a verification processthat was audited by Scientific Certification Systems(SCS), a standard practice for all newly approvedverifiers. In some cases this past year, suppliers appealedtheir scores to SCS. After a thorough review, SCSdetermined that the Rainforest Alliance and SANverifiers had properly measured performance and thatthe scores were indeed correct.Guillermo Belloso, a verifier on the RainforestAlliance/SAN team in El Salvador, shared hisperspective on C.A.F.E. Practices. “Like any standard,C.A.F.E. Practices is a challenge to implement withconsistency. We need to make sure it is driving real,continuous improvements and that small producershave access to the training and resources they needto comply with the requirements.” Verifiers such asthe Rainforest Alliance are continually providingmeaningful feedback to Starbucks and thus helping tostrengthen C.A.F.E. Practices.21OUR WORLD OF PRODUCTS