Starbucks notched another first by bringing together finance, coffee, and sustainability. The coffee giant’s initiatives regarding responsible sourcing and supplier management are getting a fresh injection of funding and press coverage. Starbucks has issued the first U.S. Corporate Sustainability Bond, a $500 million underwriting. While creative and original, the move is not a complete surprise. With interest rates continuing to hover near generational lows, major corporations are grabbing the chance to build cash reserves and fund investment through bond issuance.
Starbucks recognizes its long-term success will be directly tied to how its base resources are managed–one of the the core principals of circular procurement. Starbucks, which purchased 551 million pounds of coffee last year, already verifies that 99% of the beans it sources are verified as ethically produced. The new funding will primarily go towards improving supply chain transparency, local support for farmers, and loans.
Our partner, EcoVadis, had this to say:
“This brings welcome visibility to the full scope and definition of sustainability as encompassing social, ethical as well as environmental factors.”
Additionally, offering funding options for suppliers bodes well for Starbuck’s long-term profitability. Securing traditional bank funding in developing nations–where much coffee is grown–can be cumbersome. Farmers can be forced to borrow from shadow lenders, which have the potential to charge exorbitant interest and aren’t backed by government guarantees. The result–and not only in the coffee industry–is chronic underinvestment.
If a farmer has limited funding, he’s more likely to try to get the most out of his land and crops in the short term, with potentially deleterious effects on long-term profit and the environment. By alleviating this liquidity gap, Starbucks can incentivize environmental stewardship without causing the social harm that diminished profits could have on local communities.
All of these efforts hint at the principals of the circular economy, the next level of sustainability beyond traditional “do less harm” CSR policies. Many companies, Starbucks included, are applying these principles in the business world.
Kudos to Starbucks for their innovative effort and be on the lookout for more global players to embrace this opportunity. To get a copy of the report mentioned above, simply fill out the form below.
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