Starbucks and Rwanda

Check out this press release from Starbucks: Starbucks Coffee Company and Rwandan Government Discuss ongoing Partnership

Today during his third visit to Rwanda, Starbucks Coffee Company (NASDAQ:SBUX) chairman, president and ceo, Howard Schultz, met with Rwanda’s President Paul Kagame to discuss and build on the investments Starbucks has made in East Africa over the past five as well as future opportunities. Additionally, Schultz will participate in the upcoming grand opening of the Starbucks Farmer Support Center in Kigali.

“Through our commitment to, and partnership with, the Rwandan government, local NGOs and coffee farmers throughout East Africa, Starbucks hopes to participate in a market ecosystem that benefits all partners involved,” Schultz said.

Some questions worth pondering:

  • Starbucks has, over the last 5 years, given “More than US$6.4 million to help East African coffee farmers and communities through grants focused on education, health services and capacity building.” If such spending helps stabilize Starbucks’ access to a good source of coffee beans, does that justify the spending as a good investment, rob the spending of its value as a social contribution, or both, or neither?
  • In general, is a big, efficient organization like Starbucks likely to treat farmers, and the environment, better or worse than a few dozen smaller/independent buyers of coffee?
  • Is it reason for concern that Rwanda’s nominal Gross Domestic Product (US$4.459 billion) is considerably less than Starbucks’ operating Revenue (US$9.411 billion)?

(Thanks to Kim for the story.)

2 comments so far

  1. Shel Horowitz, author, Principled Profit on

    “If such spending helps stabilize Starbucks’ access to a good source of coffee beans, does that justify the spending as a good investment, rob the spending of its value as a social contribution, or both, or neither?”

    It justifies the spending. Smart businesses will use their charitable contributions not only to accomplish social good, but also to further corporate goals that are compatible with the good works.

    “Is it reason for concern that Rwanda’s nominal Gross Domestic Product (US$4.459 billion) is considerably less than Starbucks’ operating Revenue (US$9.411 billion)?”

    Yes. When a company has that much leverage in an unequal partnership, there is always cause for concern and potential for abuse.

    Shel Horowitz, award-winning author of Principled Profit: Marketing That Puts People First and founder of the international Business Ethics Pledge.

  2. Sang-gye on

    Good morning, I am new at this (blogging and the formal discussion of business ethics), so please forgive should I get my foot into my mouth.

    I am thinking:
    a) The spending is justifiable from Starbuck’s point of view. Although one could argue that as long as there is no direct contract between the growers’ communities and SB to utilize the funds in the way that would match SB’s intentions the word investment was not appropriately used. Yet, that might depend on the degree of risk-adverseness of the individual investor, or whether or not he/she attributes a high value to the business concept of ‘fair trade’ as a fundamental of their investment into Starbuck’s. In the light of asset value: what does such financial engagement (investment) do to the value of the company? Is this the right time and the right way to achieve their goal of stable supply? Maybe (if for instance the political situation in East Africa was unstable or SB’s funds could be used to support undemocratic structures, it might be better to invest in technical research and figure out how to grow coffee in places where engagement would not have any side effects.)

    b) The fact that the spending aims at stabilizing SB’s access to resources smells a little fishy. Is it SB’s access? Or general access? Or who determines who has access? (which would fire back on the discussions that SB would have to have with its shareholders.) Does SB let go of the results or do they claim, its their ‘stuff’? I would think that the conditions under which these grants are given would count in evaluation of the social value.

    How involved are the receivers? Forgive me for not having researched SB’s grant program structure, but they would have to somehow administer the funds. Would they employ local government? Risk of corruption!, Do they administer it themselves?(through 3rd party agents) Risk of manipulating the social framework outside of democratic structures! To have value as a social contribution, the society involved has to have THE say what they consider a worthy goal (not Starbuck’s). Maybe they would like to do something different with the money. In the light of the stated program focus (education, health services, and capacity building) I admit that that sounds fair and appropriate, though.

    sang-gye


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