{"id":9467,"date":"2016-11-03T21:44:50","date_gmt":"2016-11-04T01:44:50","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/starbucks-the-arabica-challenge\/"},"modified":"2016-11-03T21:44:50","modified_gmt":"2016-11-04T01:44:50","slug":"starbucks-the-arabica-challenge","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/starbucks-the-arabica-challenge\/","title":{"rendered":"Starbucks: the Arabica challenge"},"content":{"rendered":"

\u2018Farmers are seeing the effects of a changing climate, with severe hurricanes and more resistant bugs reducing crop yields. The company is now preparing for the possibility of a serious threat to global supplies<\/em>.\u2019 \u2013 Jim Hanna, Starbucks Sustainability Director, 2011 [1]<\/p>\n

The Climate Change context<\/u><\/strong><\/p>\n

By 2016, CO2<\/sup> levels in the atmosphere were 404.07ppm, the highest in 400,000 years, up approximately 7% since 2007 [2] . According to the IPCC [3], if no additional efforts are taken to mitigate the effects of climate change, CO2<\/sup> concentrations may increase to 450ppm by 2030, significantly increasing global temperatures (See Exhibit 1<\/em>) [3]. Such changes will have material impact for Starbucks as weather patterns and, consequently, global coffee plantation yields will be negatively affected. As the Earth warms, the interplay of shrinking glaciers, reduced snowpack, and increasingly erratic rainfall raises fears over rain shortages, severe hurricanes, mudslides and soil erosion, particularly in the core Starbucks coffee-growing areas of South and Central America [4]. In addition, warmer weather allows pests and parasites to thrive in plantations, damaging harvests [5].<\/p>\n

\"1\"<\/a><\/p>\n

Exhibit 1: Forecasted global mean temperatures [6]<\/em><\/p>\n

 <\/p>\n

What is the threat?<\/u><\/strong><\/p>\n

While some of Starbucks\u2019s coffee supply comes from Brazil, the specialised beans from Central America\u2019s diverse microclimates produce the blends for which Starbucks customers pay upwards of $4 [9]. If global temperatures increase as predicted, 80% of the coffee-growing land in Brazil and Central America used to grow Starbucks\u2019s most popular type of coffee, Arabica, will become unsuitable for crop growing by 2050, and a 50% decline in coffee yield will be observed [7]. This decrease in yield may cause coffee prices to skyrocket for Starbucks, resulting in costly supply chain complications and margin erosion of products.<\/p>\n

 <\/p>\n

Is Starbucks successfully addressing the threat?<\/u><\/strong><\/p>\n

\u2018Addressing climate change is a big priority for Starbucks. We believe now is the time to increase our investments in solutions and strategies that address this crisis. The steps we’re taking not only address our environmental footprint \u2013 they help to ensure the supply of high-quality coffee that our customers expect from us into the future<\/em>.\u2019 \u2013 Starbucks Climate Change Responsibility, 2016 [8]<\/p>\n

It is with mixed success that Starbucks has responded to the threat of climate change. The approach has been threefold:<\/p>\n

(1) Starbucks successfully works with farmers to improve the ability to grow coffee in a warming climate through guidance and provision of disease-resistant beans<\/strong>. Starbucks helps farmers succeed in an increasingly difficult climate by offering financial support and guidance to improve the productivity of land through fertilisation, trimming trees and replacing trees [7]. Moreover, in 2013, Starbucks bought a Costa Rican coffee farm and turned it into a laboratory for testing innovative coffee-growing practices and developing disease-resistant coffee beans capable of thriving in warmer temperatures [9]. In 2014, after farmers in Chiapas, Mexico, lost 60% of their coffee production to leaf rust (See Exhibit 2),<\/em> following increasing temperature and rain, Starbucks began to distribute innovative coffee plant seedlings that were rust-resistant. By 2015, Starbucks had donated 20 million of the seedlings to farmers. Despite resistance to leaf rust, the innovative seedlings had two downfalls \u2013 they were slower-growing and lower-yielding than usual beans.<\/p>\n

\"2\"<\/a><\/p>\n

Exhibit 2: Leaf rust [9]<\/em><\/p>\n

(2) Starbucks has created more eco-conscious stores through the LEED\u00ae (Leadership in Energy and Environment Design) Initiative. <\/strong>Starbucks has over 1000 LEED\u00ae-certified stores in 20 countries\u2014more than any other retailer in the world. These stores include recycled coffee grounds in table tops, low greenhouse gas emitting materials for adhesives, paints, coatings and flooring, 10% of materials extracted within 500 miles, and 45% power savings via efficient LED fixtures [8].<\/p>\n

\"3\"<\/a><\/p>\n

Exhibit 3: Starbucks LEED\u00ae certified store [8]<\/em><\/p>\n

(3) Starbucks has less successfully endeavoured to reduce greenhouse gas footprint. <\/strong><\/b>Starbucks has been attempting to reduce greenhouse gas emissions by 25% in stores through doubling down on renewable energy, energy conservation, and climate adaptation and mitigation efforts [9,8,7]. However, in practice the introduction of heated food to Starbucks\u2019s menu, which requires more refrigeration and ovens, has hampered long-term environmental goals (See Exhibit 4)<\/em>.<\/p>\n

\"4\"<\/a><\/p>\n

Exhibit 4: Starbucks Greenhouse Gas Footprint 2013-2015 [8]<\/em><\/p>\n

What additional steps could Starbucks take?<\/u><\/strong><\/p>\n

    \n
  1. Mitigate supply risk by diversifying the global portfolio of farmers<\/strong> to include a greater proportion from outside South and Central America (Exhibit 5 displays the global volume of coffee growing)<\/em>. Suitable additions could be Ethiopia and Kenya. This would hedge against supply shocks across the distribution network, such as a disease outbreak in one specific location, allowing Starbucks to fulfil order demands and customer obligations.<\/li>\n
  2. Drive further product innovation through R&D<\/strong> of both disease-resistant and temperature-resistant coffee beans in global Starbucks laboratories.<\/li>\n
  3. Reduce greenhouse gas emissions by increasing efficiency in-store<\/strong> via training and incentivising baristas to adopt \u2018greener\u2019 brewing tactics that will improve machine utilisation. Similarly,\u00a0reduce in-store-level emissions through greater conversion of LEED\u00ae certified stores and usage of renewable energy sources.<\/li>\n<\/ol>\n

    \"5\"<\/a><\/p>\n

    Exhibit 5: Global Coffee Volumes [9]<\/em><\/p>\n

    [788 words excluding exhibits]<\/p>\n

     <\/p>\n

    References:<\/u><\/p>\n

    [1] \u201cStarbucks concerned world coffee supply is threatened by climate change\u201d, The Guardian, 2011 https:\/\/www.theguardian.com\/business\/2011\/oct\/13\/starbucks-coffee-climate-change-threat<\/a><\/p>\n

     <\/p>\n

    [2] NOAA, \u201cCarbon Dioxide,\u201d NASA website, http:\/\/climate.nasa.gov\/vital-signs\/carbon-dioxide\/, accessed October 2016.<\/p>\n

     <\/p>\n

    [3] 28 Summary for Policymakers, In: Climate Change 2014, Mitigation of Climate Change,\u201d Intergovernmental Panel on Climate<\/p>\n

    Change, 2014, p. 9, https:\/\/www.ipcc.ch\/pdf\/assessment-report\/ar5\/wg3\/ipcc_wg3_ar5_summary-for-policymakers.pdf, accessed August 201<\/p>\n

     <\/p>\n

    [4] \u201cWater and Food Security,\u201d Food and Agriculture Organization of the United Nations, http:\/\/www.fao.org\/docrep\/x0262e\/x0262e01.htm, accessed October 2016<\/p>\n

     <\/p>\n

    [5] 72 \u201cAgriculture and Food Supply,\u201d accessed October 2016<\/p>\n

     <\/p>\n

    [6] \u201cClimate Change 2014: Impacts, Adaptation, and Vulnerability Top-Level Findings,\u201d Intergovernmental Panel on Climate Change, 2014, pp. 3, http:\/\/www.ipcc.ch\/report\/ar5\/wg2\/docs\/WGIIAR5_SPM_Top_Level_Findings.pdf,<\/p>\n

    Accessed October 2016<\/p>\n

     <\/p>\n

    [7] \u201cStarbucks Responds to Climate Change, with Mixed Results\u201d, Technology Review, 2016 https:\/\/www.technologyreview.com\/s\/601404\/starbucks-responds-to-climate-change-with-mixed-results\/<\/a><\/p>\n

     <\/p>\n

    [8] http:\/\/www.starbucks.ph\/responsibility\/environment\/climate-change<\/a><\/p>\n

     <\/p>\n

    [9] \u201cTo Stop the Coffee Apocalypse, Starbucks Buys a Farm\u201d, Bloomberg, 2014<\/p>\n

    http:\/\/www.bloomberg.com\/news\/articles\/2014-02-13\/to-stop-the-coffee-apocalypse-starbucks-buys-a-farm<\/p>\n","protected":false},"excerpt":{"rendered":"

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