Evaluating a company's impact (the case of Starbucks)

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You are reading Green Digest Impact, a weekly newsletter that provides in-depth analyses of companies’ environmental and social impact.

OUR APPROACH

Central to our narrative is the principle of double-materiality, which recognizes that a company's impact is twofold: it affects both the environment and society at large, and in turn, these external factors influence the company's financial and operational performance.

While traditional ESG assessments focus on the latter, we aim to examine companies' direct impacts on these factors. In pursuit of this, we introduce a unique scoring system that quantifies a company's impact.

The insights and analyses presented in Green Digest Impact are brought to you by a partnership between Green Digest and Impaakt, a Swiss-based impact data provider. Contact Impaakt here to explore how they can assist you.

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THIS WEEK’S COMPANY

Starbucks

This week we dive deep into Starbucks’ environmental and social impact.

Starbucks is the world's largest coffeehouse chain, operating over 38,000 stores worldwide.

Some interesting facts:

• Starbucks originally sold only coffee beans and equipment, not brewed coffee. The first store, opened in 1971 in Seattle, focused on selling high-quality coffee beans. It wasn’t until Howard Schultz joined in 1982 and later reimagined the brand that Starbucks evolved into the coffeehouse chain we know today.

• Starbucks was named after “Starbuck,” the ship's chief mate in Herman Melville’s famous novel Moby-Dick. The founders wanted the company’s name to suggest a sense of adventure, a connection to the Northwest, and a link to the seafaring tradition of the early coffee traders.

COMPANY’S IMPACT

Starbucks’ overall impact score

Starbucks has a general impact score of -0.75 (on a scale from -5 to +5). Its impact is spread across 11 UN Sustainable Development Goals (SDGs) and 11 topics, split between positive and negative analyses.

In the socio-economic sphere,

Starbucks serves nearly 100 million customers per week across 86 markets worldwide, offering more than 170,000 ways to customize beverages to suit individual tastes. Starbucks has played a key role in the rising popularity of coffee shops over the last decades. The company’s stores provide the perfect meeting place for customers, offering spaces for individuals to work, unwind, and socialize, thus enhancing social interactions and stimulating nearby businesses. The company’s supply chain also supports over 400,000 jobs, thus boosting the economy and reducing poverty. Directly, Starbucks employs around 381,000 people and also contributes billions of dollars in taxes each year. When it comes to gender equality, the company has achieved gender parity as per ILO standards at all levels, except for its board of directors.

However, examining Starbucks’ menu and its nutritional contents, of the cold and hot coffee products offered, 91% are classified as unhealthy due to at least one component exceeding healthy standards. Additionally, 83% are considered non-nutritious, with low protein content, while only 9% meet healthy nutritional thresholds. The company’s own certified farms have also faced multiple forced labor allegations over the years. For example, some farms in Brazil were found to be using slave labor, with workers enduring long-hour shifts and poor living conditions. In Guatemala, children were found to be working in dangerous conditions for very low wages.

Environmentally,

Starbucks emits over 14.5 million tonnes of CO₂ equivalent annually, equal to the emissions of over 2.8 million homes’ electricity use for a year. The company also withdraws more than 5.1 billion m³ of water annually, 29% in medium-high, high, or extremely high water-stressed areas. Additionally, it generates approximately 400,000 tonnes of paper and packaging waste and over 330,000 tonnes of food waste, enough to feed millions of people.

_{*The impact score is current as of October 2024 and may be subject to changes as it is continuously updated.
**You can find details about the scoring methodology here and the information sources here.}

ESG VS IMPACT SCORE

What is Starbucks’ ESG rating?

For comparison, Starbucks has an A rating in MSCI's ESG evaluation.

However, ESG Ratings from MSCI ESG Research are designed to measure a company’s resilience to financially material ESG risks and they provide a window into one facet of risk to financial performance. They measure how effectively companies manage ESG risks, not their impact on these factors.

SCORES BY SDG

Starbucks’ impact scores by SDG

Positively (and by weight), the company scores the highest in the Zero Hunger SDG (+3.41), followed by No Poverty (+3.60), and Partnership for the Goals (+2.50).

Negatively, the company scores the worst in the Responsible Consumption and Production SDG (-2.79), followed by Good Health and Well-being (-3.45), and Life on Land (-2.91).

*the analysis takes into account the weight of the SDGs

CONCLUSION

Materiality Map & Final Words

So, Starbucks’ key social and environmental impact lies in …

its profound influence on modern coffee culture, serving nearly 100 million customers weekly across 86 markets. Starbucks has not only popularized coffee shops but has also created social spaces that foster connection and support local businesses. Through its supply chain, Starbucks supports over 400,000 jobs globally, significantly contributing to economic growth and poverty reduction. With around 381,000 direct employees and billions paid in taxes, the company also makes a notable economic impact.

However, a large majority of the company’s beverages are considered unhealthy or non-nutritious, raising concerns about the nutritional value of its offerings. The company has also been implicated in labor rights violations, including forced and child labor on its certified farms in Brazil and Guatemala, where workers endure harsh conditions. Environmentally, Starbucks is a major emitter of CO₂, and its water consumption is substantial, with a portion drawn from high-stress areas. The company also generates significant amounts of packaging and food waste, further contributing to environmental damage.

With an overall impact score of -0.75, Starbucks’ impact score underscores the tension between its valuable contributions to coffee culture and economy and the serious socio-environmental concerns it must address.

If you’d like to delve deeper into Starbucks’ impact, you can explore it here.

If you'd like to learn more about the scoring methodology, you can do so here.

Do you have a specific company you'd like us to cover? Send your suggestions to [email protected]