Business Communication Starbucks Works With NGOs Collaborating With Activists How Starbucks Works With Ngos Constituencies While This Good

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constituencies. While this “good faith effort” to work with TransFair USA to

meet Global Exchange’s demands did not solve all of Starbucks’ problems, this

decision bought the company more time to assess the consumer demand for Fair

Trade coffee while providing an opportunity to explore how Fair Trade coffee

would fit with its sourcing strategies.

Developments Since the Fair Trade Decision

Global Exchange’s campaign against Starbucks elevated the role of social

responsibility—especially regarding living conditions for coffee farmers—even

higher on Starbucks’ agenda, raising internal awareness and driving the com-

pany’s commitment to rapid progress on the issue. Not only did Starbucks

actively pursue and evaluate the Fair Trade model, but the company also has

continued to expand its social responsibility programs and explored several alter-

natives to Fair Trade in an effort to reach the same goal: improved livelihoods for

the small farmer.

Now the largest roaster and retailer of certified Fair Trade coffee in the

United States, Starbucks has increased Fair Trade purchases from its initial

653,000 pounds in 2001 to 1.1 million pounds in 2003. Yet Starbucks’ customer

demand for Fair Trade coffee has been virtually flat. Broader trends also suggest

were actually sold as Fair Trade.

Starbucks has continued to increase its purchases of Fair Trade coffee, but

the company has found, in keeping with its original concerns, that many Fair

Trade certified co-ops do not have the volume or consistency of quality that

Starbucks requires. Additionally, a number of Starbucks’ large suppliers cannot

become certified Fair Trade coffee producers due to their size. Finally, the cur-

rent Fair Trade system neither provides Starbucks with sufficient economic

transparency nor does it have well-defined environmental criteria or relevant

social standards to help ensure the sustainability of Starbucks suppliers.

While Fair Trade may be the only option available to Global Exchange

or smaller companies, Starbucks’ size and leverage enables it to pursue other

options to address the sustainability of coffee producers. Believing that Fair

Trade was not the most effective way for the company to help farmers,

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CALIFORNIA MANAGEMENT REVIEW VOL. 47, NO. 1 FALL 2004 105

coffee purchases and incentives for producers to grow coffee more sustainably.

Starbucks’ goal is to be able to trace the flow of money to ensure that producers

are earning enough to stay in business and earn a living wage. While certified

Fair Trade coffee may only represent one percent of its total purchases,

Starbucks’ efforts will affect a much broader supplier base.

In addition, the company has continued to receive numerous accolades

and awards for social responsibility, including the first annual Humanitarian

Award by the Coffee Quality Institute (May 2002) and the 2002 World Summit

Business Award for Sustainable Development Partnerships for its collaboration

with Conservation International. Starbucks was included in the 2002-2003 Dow

Despite all of Starbucks’ achievements, however, including expanding

sales of Fair Trade Certified coffee to seventeen countries, Global Exchange,

along with other activists, still do not believe the company is responsible

enough. While Starbuck’s “quasi-capitulation” on the Fair Trade coffee issue

initially removed the company from Global Exchange’s radar, it proved to be a

short-term reprieve. Global Exchange has continued to express its disappoint-

ment in Starbucks, claiming the company “negotiated in bad faith” because it

has not achieved Fair Trade coffee sales of five percent.

In addition, Global

Exchange now demands that Fair Trade coffee be brewed in its domestic stores

once a week instead of once a month, as is the current standard. Global

owned, socially responsible companies.”

Other activists have watched Global Exchange’s campaign unfold with

great interest, many of them piggybacking on its momentum. Organic Consum-

ers Association (OCA), TransFair USA, and Co-op America have continued the

fair trade rally against Starbucks, while other NGOs have raised new complaints

against Starbucks, such as reprimanding the company for purchasing milk that

may or may not contain recombinant Bovine Growth Hormone. At the March

2003, annual shareholders meeting, activists from NGOs, including Global

Exchange, arrived to distribute leaflets, lobby shareholders, and speak out

against the company.

Starbucks is not the only corporation that has been such a perpetual NGO

target. Other corporations, such as The Gap and Shell, have also been subject to

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CALIFORNIA MANAGEMENT REVIEW VOL. 47, NO. 1 FALL 2004106

Collaboration: The Hard-Earned “Win-Win”

While Global Exchange was uncompromising on its Fair Trade coffee

position with Starbucks, not all NGOs take such a hard-line stance. Increasingly,

NGOs and businesses are exploring an alternative approach: collaboration. Many

organizations have found that, through carefully developed partnerships, each

party can move beyond their respective organizational constraints to achieve

results that exceed what each can accomplish individually.

A number of factors have caused both businesses and NGOs to consider

collaboration. Companies recognize the importance that many of their

constituents place on social responsibility and the importance of being better

citizens in the communities in which the company operates. More and more,

corporations are focusing on the “triple bottom line” (financial, social, and envi-

ronmental) and recognizing that profits and principles need not be mutually

As SustainAbility’s report, The 21st Century NGO, states, “Markets are

becoming legitimate channels for social change.”

NGOs are recognizing that

harnessing the power of the market, rather than constantly fighting it, can actu-

ally lead to positive results. At the same time, businesses should consider that

they may reap tangible economic and competitive benefits from sound social

and environmental practices. In “Misery Loves Companies: Whither Social

Initiatives by Business?” Joshua Margolis of Harvard University and James

Walsh of the University of Michigan review the literature researching the link

between corporate social performance (CSP) and corporate financial perform-

ance (CFP).

Margolis and Walsh reviewed 95 empirical studies conducted

between 1972 and 2000, finding that the majority indicated a positive relation-

ship between CSP and CFP. The authors question the validity of the data due

Dealing with Differences and Managing Risks

The path of converging interests, however, is not without its bumps.

Much mutual learning still needs to take place between businesses and NGOs.

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CALIFORNIA MANAGEMENT REVIEW VOL. 47, NO. 1 FALL 2004 107

As Paul Gilding, a former executive director of Greenpeace International and

now a consultant to businesses, explained, “When it comes to market transfor-

mation, the problem is that NGOs are almost completely ignorant [of] how mar-

kets and business work, while business is largely ignorant of how to work with

NGOs.”

Inherent tensions exist whenever NGOs and corporations collaborate,

partly due to sharply different organizational mindsets and cultures. Corpora-

tions need to balance their efforts carefully so that profits do not become a casu-

alty of responsible business practices: rather, they need to find ways to “do well

by doing good.”

Collaborative relationships between businesses and NGOs also carry risks

that both parties need to understand and manage carefully. NGOs risk reputa-

tional damage due to the perception that they are “selling out” by working with

business, especially when entering into a financially based relationship. Busi-

Historically, NGOs have employed more antagonistic tactics to move

business further in the direction of social and environmental change. These

approaches have yielded results: as companies either capitulated to their

demands or preempted them by crafting their own agenda of social responsibil-

ity, they have arguably become more responsible global citizens. Perhaps the

next wave of business-NGO relations can capture the best of both worlds by

other’s differences and work with them and against them simultaneously.”

Collaboration in Action:

Starbucks, Oxfam America, CEPCO, and the Ford Foundation

Because Starbucks’ primary concerns about Fair Trade coffee related to

the company’s ability to maintain quality and consistent sources of coffee, the

company sought out ways to find coffee that met its needs while providing

farmers with a fair price. To that end, in July of 2002, Starbucks developed

a two-year pilot program with a diverse set of partners—Oxfam America, the

Oaxacan State Coffee Producers Network (CEPCO), and the Ford Foundation.

Oxfam America, a member of Oxfam International, is an NGO dedicated to

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CALIFORNIA MANAGEMENT REVIEW VOL. 47, NO. 1 FALL 2004108

injustice, international cooperation, and human achievement. Starbucks and the

Ford Foundation provide financial support for the partnership, each committing

$125,000 per year for the two-year pilot project for a total of $500,000.

This collaboration has four overarching goals:

increase the supply of high-quality Certified Fair Trade coffee for the

United States specialty coffee market from small-farmer cooperatives;

improve the skills of small-scale coffee farmers by providing resources and

The partners knew they faced several risks as they began working

together. The Ford Foundation wished to avoid the perception that it was pro-

viding financial support to a corporation, which is expressly forbidden in its

bylaws. Oxfam had never partnered with a corporation and was worried that

the NGO community would think it was “selling out” by working with Star-

bucks. CEPCO was apprehensive about what its participation might imply about

the quality of its coffee. Starbucks had initiated the partnership and had prior

experience working in partnership with NGOs, but it still had concerns about

making the project successful given the number of organizations involved.

While the organizations’ shared concern for the farmers of Oaxaca

ultimately prevailed over their fears, even after agreeing to collaborate, they

continued to face obstacles with regard to both logistics and mindset. Physical

preparation for the program and communications among its partners were often

difficult due to the number of partners, the physical distance between them, and

the need to communicate both in Spanish and English. The members of the

them of supporting Starbucks’ efforts at “greenwashing.”

Yet as the collaboration progressed, the organizations developed a greater

understanding of each other and their respective motivations. In February 2003,

Starbucks met with CEPCO in Oaxaca. At this meeting, the two organizations

made significant progress in their relationship, getting to know each other and

learning about each other’s organizations and aspirations. After the meeting in

Oaxaca, Starbucks invited CEPCO leadership to Seattle for a tour of Starbucks

roasting plants to learn about the roasting and packaging processes and how

exacting Starbucks is with regard to the quality of its coffee. In the roasting facil-

ity, CEPCO representatives met two long-time Starbucks partners (employees)—

a married couple originally from Mexico who spoke at length about their job

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CALIFORNIA MANAGEMENT REVIEW VOL. 47, NO. 1 FALL 2004 109

satisfaction, the stock options they had through Starbucks, and the two homes

they owned in Seattle and Mexico. The CEPCO representatives were surprised

factory workers could be so successful and happy with their jobs. This interac-

tion, while completely unplanned, went a long way toward convincing CEPCO

that Starbucks stood behind its claims of treating employees well.

CEPCO representatives have also been pleased with the educational

process through which they have been learning more about how to meet Star-

bucks’ strict quality standards. “It is very interesting to be able to share and to

see firsthand what an American (coffee) company is looking for, “said Jaime

From Starbucks’ perspective, the process of relationship building has been

one of the most difficult parts of the partnership, but also the most critical to its

success. Through hard work on both sides, Starbucks and Oxfam America have

developed greater mutual respect for one another, and Starbucks believes that

Oxfam America has a deeper understanding of the corporate perspective and the

barriers to change that a corporation like Starbucks can face. At the same time,

Oxfam has shared with Starbucks its broader view of human rights.

Starbucks hopes that its new partnership, by demonstrating that NGOs

can maintain their integrity and independence while working closely with a

corporation, will serve as an example for NGOs that have resisted collaboration

Seven Lessons from the Starbucks Case

Based on our research on this case, we offer the following lessons to man-

agers engaged in activities with NGOs, no matter what the issue or industry:

Lesson 1: Realize that socially responsible companies are likely targets

but also attractive candidates for collaboration.

While it may seem counterintuitive, truly socially responsible companies

are actually more likely to be attacked by activist NGOs than those that are not,

for a variety of reasons. Some NGOs will use a socially responsible company as a

platform for its own message. Activists may also hold a company to a higher

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CALIFORNIA MANAGEMENT REVIEW VOL. 47, NO. 1 FALL 2004110

suggested that Starbucks was a better target for the fair trade issue because of

its emphasis on social responsibility, as opposed to a larger company without a

socially responsible bent.

Companies focused on social responsibility should think about which

NGOs are most likely to attack and what issues make them most vulnerable.

Business should seek out those organizations more interested in collaboration

and be proactive in building coalitions and strategic alliances. By closely studying

Lesson 2: Don’t wait for a crisis to collaborate.

Companies often wait for a crisis to develop before seeking opportunities

to collaborate. The opportunity for companies is much greater if they operate

from a position of strength rather than in reaction to pressure from a vocal NGO.

Companies can identify opportunities to collaborate before the issue becomes

part of a public debate. Such an approach gives companies an opportunity to

shape the agenda before they are put on the defensive and before an adversarial

relationship develops with potential partners.

Starbucks responded to Global Exchange after a crisis of sorts—the very

public display at a shareholders meeting. The company then thought carefully

Lesson 3: Think strategically about relationships with NGOs.

As a company thinks about collaborating with NGOs, its leadership

should determine which ones offer the best opportunities for the company to

enhance its social responsibility positioning with key constituents. Which NGO

has the most credibility in different areas of focus and with whom?

Starbucks’ decision to listen to the concerns of Global Exchange and take

actions to address them bolstered the company’s credibility with its partners

(employees), who tend to be young and liberal in orientation. It also fended off

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CALIFORNIA MANAGEMENT REVIEW VOL. 47, NO. 1 FALL 2004 111

packaging similarly allowed the company to increase its credibility on environ-

mental issues with consumers.

Lesson 4: Recognize that collaboration involves some compromise.

Companies working together with NGOs must understand that compro-

mise will be a necessary part of the relationship. Starbucks made the decision to

address Global Exchange’s concerns realizing that it would have to change some

of its business practices in the process. However, the tradeoff was worth it, as the

company was able to avoid becoming the “poster child” for irresponsible prac-

tices in the coffee industry in the same way that Arthur Andersen became the

pariah for irresponsible practices in the accounting industry. Finding a middle

At the same time, companies must be willing to admit their mistakes.

Despite their radical posturing and often-adversarial tactics, NGOs usually exist

to foster positive change in society. Companies, despite their best efforts to do

the right thing, may find themselves in compromising situations due to a variety

of factors. For example, many of the most publicized cases of inhumane working

conditions in sweatshops were more the result of mistakes by on-site managers

rather than an all-pervasive policy at the corporate level. As Sydney Finkelstein,

author of Why Smart Executives Fail asserts: “In fact, it is often ambitious man-

agers trying to impress senior executives that are the cause of major corporate

blunders.”

Tobacco companies took decades to admit their responsibility for health

problems associated with smoking, which led to countless lawsuits, attacks from

Lesson 5: Appreciate the value of the NGOs’ independence.

More radical organizations will see the NGO partner’s collaboration with

a corporation as a sign of “selling out’ rather than an earnest attempt to effect

change. This can lead to a loss of credibility for the NGO, which may, in turn,

affect the credibility of the relationship between the two organizations. As with

many strategic alliances, it is easy to lose objectivity if the NGO does not main-

tain some distance from the organization. “NGOs and the Private Sector,” a pol-

icy briefing from INTRAC (the International NGO Training and Research

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Centre), suggests that NGOs in partnership with corporations manage the

independence issue by drawing the line at endorsing a company.

Starbucks did not have to worry about this particular problem since

Global Exchange maintained its distance and its challenging posture even after

establishing a relationship with Starbucks. In contrast, because of its collabora-

tive relationship with Starbucks, Oxfam’s credibility has been questioned by

other NGOs.

Lesson 6: Understand that building relationships with NGOs

takes time and effort.

NGOs—particularly those with a more radical orientation—expect quick

results, but many companies also believe that they will see results from alliances

soon after the relationship has started. The mutual understanding and trust

required for productive collaboration takes time to develop. Most NGOs are ini-

tially skeptical of their newfound partners because they tend to have a negative

view of business and distrust those who work for the companies they have his-

torically seen as the enemy.

Starbucks initially chose to think about the relationship with Global

Exchange as being a one-year time frame—to see if there was actually a market

for Fair Trade coffee, to determine if this was the correct approach to dealing

with farmers, and to see what would come of a relationship with the organiza-

Lesson 7: Think more like an NGO by using communication strategically.

NGOs are able to act as category killers in their single-minded focus on

an issue and their simple, direct, and powerful communication campaigns. First,

companies should try to set up a team dedicated to focusing on issues of mutual

concern from the NGO’s perspective and should use communication in an

equally strategic manner. While companies need to think strategically about

communications in general, they need to do so especially when involved in the

potentially risky relationships that often characterize business-NGO relations.

Companies need to discuss their interest in and activities around social responsi-

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Conclusion

NGOs are having an increasing influence on society and corporations

must work in collaboration with these powerful organizations to effect change,

meet social responsibility goals, and enhance their organizations’ reputations

while also meeting their business objectives. Furthermore, NGOs are also seek-

ing out new ways to work with, rather than against, corporations in the ongoing

desire of both to do what is best for society.

Notes

1. The author has had no current or prior relationship with Starbucks other than as a

researcher first on the development of a case followed by further research on this article.

Starbucks did not try to influence the outcome of this article but did provide invaluable

assistance in terms of the development of the research and editing of this article.

2. Paul A. Argenti, Corporate Communication, 3rd ed. (New York, NY: McGraw-Hill, 2003),

pp. 2-3.

3. International Foundation for the Conservation of Natural Resources Fisheries Committee,

“IFCNR Special Report: How NGOs Became So Powerful,” February 20, 2002.

4. Edwin R. Stafford, Cathy L. Hartman “NGOs Engaging with Business: A World of Difference

and a Difference to the World [book review],” Journal of the Academy of Marketing Science, 29/4

(Fall 2001): 418-419.

9. Interview with Peter Verrengia, Regional President and Senior Partner, Fleishman-Hillard

International Communications, August 15, 2003.

10. Michael Yaziji, “Turning Gadflies into Allies,” Harvard Business Review, 82/2 (February 2004):

111.

11. Stephen J. Arnold and Jay M. Handelman, “The Role of Marketing Actions with a Social

Dimension: Appeals to the Institutional Environment,” Journal of Marketing, 63/3 (July

1999): 33-48.

12. Christopher Deri and Jonathan Wootliff, Stakeholder Strategies, Edelman Worldwide,

“NGOs: The New Super Brands,” Corporate Reputation Review, 4/2 (2001): 158-164.

13. Speech by Jonathan Wootliff, “NGO’s and Global Corporate Citizenship,” March 13, 2001,

p. 21.

14. SustainAbility, Global Compact, and United National Environment Programme, “The 21st

Century NGO: In the Market for Change,” report, June 2003, p. 37.

15. International Foundation for the Conservation of Natural Resources Fisheries Committee,

op. cit.

16. Deri and Wootliff, op. cit., p. 159.

17. SustainAbility et al., op. cit., pp. 27-35.

18. Ibid., p. 8.

19. Ibid., p. 29.

20. Ibid., p. 30.

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CALIFORNIA MANAGEMENT REVIEW VOL. 47, NO. 1 FALL 2004114

26. This percentage varies depending on how large small-scale farms are described. In one

source, small-scale farms are less than 5 acres (50 percent), in another, less than 10 acres

(70 percent).

27. Dicum and Luttinger, op. cit., pp. 44-47.

28. Ibid., pp. 58-65.

29. Greg Richards, “The Coffee Crisis,” Java Jives (Winter/Spring 2002).

30. Composite prices are calculated using the four groups of coffee—namely, Columbian Mild

Arabicas, Other Mild Arabicas, Brazilian, and Other Natural Arabicas and Robustas—traded

in the three main markets (New York, Germany, and France). International Coffee Organi-

zation, Green Coffee Trade Statistic 1996 to 2001 No. 7, July 1, 2002, p. 47

31. “Bitter Coffee: How the Poor are Paying for the Slump in Coffee Prices,” Oxfam, May 16,

2002, p. 5.

32. Ibid.

40. Pendergrast, op. cit., p. 375.

41. “CSR FY01 Annual Report,” p. 5.

42. Ben Packard, “Sustainability Practices Presentation,” National Recycling Coalition Confer-

ence, January 16, 2001.

43. “CSR FY01 Annual Report,” p. 8.

44. Michael Massing, “From Protest to Program,” American Prospect, July 2, 2001, p. 5.

45. Chris O’Brien, “2002 Report on Fair Trade Trends in the U.S. and Canada,” Co-op America

Business Network (April 2002), p. 4.

46. David C. Zehner, “An Economic Assessment of ‘Fair Trade’ in Coffee,” Chazen Web Journal of

International Business (Fall 2002), p. 8, at <www-

1.gsb.columbia.edu/chazenjournal/article.cfm?pub=92>.

47. Interview with Valerie Orth, Fair Trade Organizer, Global Exchange, August 1, 2003.

48. Interview with Ronnie Cummins, Executive Director Organic Consumer Association, July

16, 2002.

49. Interview with Deborah James, Fair Trade Director, Global Exchange July 23, 2002.

50. Ibid.

51. Interview with Sue Mecklenburg, Vice President for Business Practices, Starbucks Coffee

Company, August 8, 2003.

52. Interview with Paul Rice, Executive Director, TransFair USA, August 9, 2002.

53. Interview with James, op. cit.

54. Ibid.

55. Ibid.

56. Deborah L. Spar and Lane T. La Mure, “The Power of Activism: Assessing the Impact of

NGOs on Global Business,” California Management Review, 45/3 (Spring 2003): 78-101.

57. Interview with Tom Elhers, Vice President Whole Bean, Starbucks Coffee Company July 25,

2002.

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CALIFORNIA MANAGEMENT REVIEW VOL. 47, NO. 1 FALL 2004 115

67. Joshua D. Margolis and James P. Walsh, “Misery Loves Companies: Whither Social

Initiatives by Business?” discussion paper presented June 21, 2001, accessed at <www.

aspeninstitute.org/AspenInstitute/files/CCLIBRARYFILES/FILENAME/0000000133/

miserylovescompanies.pdf> on February 24, 2004.

68. SustainAbility et al., op. cit., p. 8.

69. David F. Murphy, “Business and NGOs in the Global Partnership Process,” accessed at

<www.globalpolicy.org/socecon/un/unctad16.htm> on August 7, 2003.

70. Organic Consumers Association Web site <www.organicconsumers.org/Starbucks/

0805_starbucks_greenwashing.htm>.

71. J.H. Newcomb, “Small Coffee Farmers Learn from Giant Starbucks” Seattle Times, June 10,

2003.

72. Livesey, op. cit.

73. Interview with Sydney Finkelstein, Steven Roth Professor of Management, Tuck School of

Business, August 22, 2003.

Collaborating with Activists: How Starbucks Works With NGOs