April 15, 2004
Oekom Rates Food and Beverages Industry Average in Sustainability Performance
by William Baue
The example of Starbucks illustrates how Oekom Research rates food and beverage companies as
average performers in social and environmental sustainability.
The global food and beverages industry has merely average performance on social and environmental
sustainability, according to the latest corporate responsibility industry report released by Oekom Research, a Munich-based
sustainability rating firm. The 16 companies that qualified for comprehensive "Inside" Ratings (16
other companies with inadequate transparency or sustainability performance received more cursory
"Outside" Ratings) earned an average grade of C, on a scale from A+ to D-.
which earned the top ranking, was the sole company to break above the C range, squeaking a B-.
Bottom-rankers PepsiCo (PEP) and Sara Lee (SLE) were the only
companies to break below the C range with D+ grades.
"One of the major challenges
of the industry is the proper management of its supply chain, especially with regards to human
rights and labor rights," writes Isabelle Reinery, an Oekom analyst, in the report she authored.
"Even though none of the companies has found a comprehensive solution to this supply chain problem,
most of them have at least accepted their responsibility and taken the first steps toward improving
"For example, in 2002, Starbucks sold 240 tons of coffee carrying a Fair Trade label;
however, according to Starbucks, this made up less than 0.1 percent of total sales," added Ms.
Reinery, who rated Starbucks (SBUX) with a C-, ranking it 12th of the 16 Inside Ratings. Fair
Trade is a certification program that guarantees farmers in coffee cooperatives a sustainable price
of $1.26 per pound for green (or unroasted) coffee, about twice the going rate.
Ironically, The Green Life, a
nonprofit that promotes sustainability, highlighted this very example, citing it in naming
one of the ten worst greenwashers of 2003. (Greenwashing refers to representing environmental
practices as more responsible than they are in reality.) Its Don't Be Fooled report chides Starbucks "for
failing to adhere to its Environmental Mission Statement by
slipping from industry leader to laggard on Fair Trade, and for adopting a patchwork approach to
sustainability . . . ."
Starbucks rebuts this characterization.
"Our fiscal 2003 Corporate Social
Responsibility Annual Report indicates that we bought 2.1 million pounds of Fair Trade coffee
last year--double the amount from the previous year," said Megan Behrbaum, Starbucks
However, Ms. Behrbaum declined to reveal how this compares to overall
sales or the company's targets for future Fair Trade commitment.
"Starbucks does not
publish sales figures for any coffee or products sold in our stores as a percentage of our total
sales," Ms. Behrbaum told SocialFunds.com. "We have not set targets for our future Fair Trade
purchases, but continually seek new sources of high quality Fair Trade coffee to offer to our
customers and business partners."
Ms. Behrbaum explained one potential reason for
Starbucks' poor showing.
"Unfortunately, due to the timing of Oekom's survey review
period, Starbucks was not able to participate--the information in this report was compiled
independently by Oekom," Ms. Behrbaum told SocialFunds.com. "We believe this negatively impacted
our overall rating."
However, Oekom lists Starbucks amongst the companies that "provided
comments/additional information," and the report specifies that Inside Ratings offer two
opportunities for feedback and comments.
The report also downgrades Starbucks for "not
provid[ing] any information on freedom of association," though it does note that "10 of the
company's stores and a group of 11 maintenance mechanics and technicians at one roasting plant were
represented by unions."
Ms. Behrbaum points to the company's CAFE (Coffee and Farmer Equity)
Practices program, developed in collaboration with Scientific Certification Systems (SCS), a third-party evaluation and
certification firm. Indicator SR-HP2 addresses freedom of association and collective bargaining.
report applauds Starbucks for using the Natural Step sustainability framework, a set of scientific
and economic principles that promote sustainability, but notes that "there is no information on
certification and/or coverage."
Posted on the Natural Step website is a case study
of Starbucks' program.
"Just today, we trained a group of employees on the Natural Step
who are interesting in playing a role in our company's efforts," said Ms. Behrbaum. "Tomorrow, a
larger cross-functional group is holding a mid-year check-in to review our performance on these