Specialty Coffee Association Code of Conduct

https://sca.coffee/code-of-conduct 

The link attached is the code of conduct for the Specialty Coffee Association (SCA). The SCA is a membered group of coffee producers, retailers and anyone in between. Their goal is to spread knowledge and raise the standards of every element of the coffee value chain by using a collaborative and progressive approach among its members.  

When reading through the provided code of conduct, we did in fact find what we expected for the organizations’ practices and policies. The code of conduct takes a mixture of an integrity-based and compliance-based approach as it matches with the organizations other stated goals, vision and mission statement. It also highlights that members must share and take part in their core values, including: relevant member value, sustainable coffee industry, community of communities, best people, ethical operation and respect for the individual (Specialty Coffee Association, 2019). Not only do they expect their members to act according to their specific expectations, but they also expect members to follow the law, and urge members to report any incidents if they should occur. Failure for a member to follow this code of conduct and uphold the organization's reputation will result in them losing their membership and lose the ability to participate in the organization in the future.  

As the coffee industry has matured there has been a movement towards sustainable growth, fair trade practices, and the elimination of child labor and poor working conditions. Being that the majority of coffee production is done in Brazil and other developing countries, many producers have needed to utilize unethical production strategies to turn a profit. SCA provides coffee producers with the education and resources to better produce their product and bind their mission with the code of conduct that makes the previous methods unacceptable. Members can raise productivity and practice sustainable growth that will eventually translate into raised income, economic growth, and making previous unethical practices obsolete. By following this code of conduct members are simultaneously acting through Kantian ethics. By taking care of the environment that is used to grow the coffee and the employees who work to produce it, members display respect for humans and the Earth. This code of conduct is an example of how the coffee industry is evolving to a new ethical supply chain as the coffee moves from the ground to your cup.  

Resources  

Specialty Coffee Association. (2019). Code of Conduct. Retrieved November 27, 2019 from https://sca.coffee/code-of-conduct

Connection Between Timeliness and Technology

            The Waltham Watch Company was responsible for helping put the entire world on time back in the mid-1800s. Their pocket watches were known as the highest quality and the most accurate watches at the time. The US Railways relied on the Waltham watches for their operations, and it inspired copycats that couldn’t quite get the same accuracy. Even though it started off as a high socio-economic purchase, the 1860’s American Civil War boosted an affordable Waltham model that was used among the troops, and by the 1940’s, Waltham Watches were held with as high regard as iPhones are today (Laban, 2018).  

            I think that businesses that are built on technology and timeliness have something in common, which is the efficiency of the workflow. Technology is a means in which businesses use in order to get work done in a timelier and efficient manner, but it also has implications with human rights and privacy through the ease of acquiring information. In the Waltham Watch situation, their technological innovation allowed business to become more organized and efficient and they could hold employees more accountable since it was expected that every worker had access to the information of the current time. Even though workers at the time seemed to be happy with such a convenient piece of technology, it had ethical implications in that they had less autonomy in their daily lives. Everyone lived on a strict schedule, and you were expected to be at a certain place at a specific time, overall contributing to an unhappier state for the common worker.

            This wouldn’t be the only time that technology had such an effect on the general population. We are currently in a state where humans around the world are more interconnected than ever, you can search up any question and find the answer within minutes. Watches have become relegated to a symbol of high status or a collector’s item with the advent of smartphones. Even though many people are aware of the risks to their defensive privacy and human rights privacy (credit card information, identity theft), it has become the norm nonetheless, and people are only interacting with technology more and more, losing their rights to privacy in the process.

            Technology also has major implications in the coffee industry, both in the production process and in the methods the coffee is delivered to the consumer. Coffee harvesting and sorting is often considered a low-skill job as evidenced by overseas workers being paid as minimalist as possible, and the same could be said of point-of-sale jobs such as baristas or grocery store cashiers. If organizations get to the point in technology where these lower-skilled jobs can become completely automated for an increase in productivity, would companies choose to do so? Such an idea has a wealth of legal and ethical issues associated with it, but we are already seeing the beginning of cashier-less stores such as Amazon Go. As technology gets more and more advanced, the ease of information and the automation in production methods are going to leave a lot of workers either without a job, or their personal information so readily available that their privacy rights become near meaningless.        

References

Laban, L. (November 27, 2018). The Massachusetts City that sold time to the world. BBC. Retrieved from http://www.bbc.com/travel/story/20181126-the-massachusetts-city-that-sold-time-to-the-world

Globalization

An increase of firms trading and investing in the coffee industry means that producers had to adapt to the processes of deregulation, privatization, and liberalization (Cleland, 2010). All these processes have negative implications on the producers. For example, liberalization allows corporations to gain a greater share of coffee’s global export revenues which implies less profit and power for producers (Cleland, 2010). These changes to the market have social and political impacts on the producers. On the extreme side of the scale, some producers change their way of life whether it be abandoning their crops, exporting other crops or working at plantations as a means to get a larger wage. Further, the increase in firms politically influenced producers. In Brazil, the change to a liberalized market meant that the government cut taxes on exports as well as subsidies and research and development programs (Cleland, 2010). These reductions meant that Brazilian producers were no longer provided any safeguards to give them a competitive advantage and lost control over the production in their country. This lack of control means that the producers are subject to the inequality gap (Cleland, 2010).

However, an increase of firms has different social and political impacts in their headquartered region. Competitors such as Starbucks and Nescafe have taken on a modern role. Being introduced to new technologies such as Information and Communications Technology allows corporations to become disconnected with producers as they are more focused on meeting the demands of the consumers, being efficient and having economies of scale (Venkatachalam, n.d). Further, headquartered regions are politically impacted by the increase in firms as they face risk with meeting supply demands. For example, during the coffee crisis in 1989 most producers could not meet their quotas, which lead to the price of coffee decreasing (Cleland, 2010). Previous to the crisis there was a trade agreement, the International Coffee Agreement which had the goal of stabilizing 99 percent of the coffee market through quotas and price controls. The failing of this agreement because of the coffee crisis demonstrates the risk suppliers are subject to a lack of supply (Cleland, 2010).

Images (Venkatachalam, n.d).

News article on the current coffee crisis in Brazil: https://www.bbc.com/news/world-us-canada-48631129

References

Cleland, D. (2010). The impacts of coffee production on local producers. Retrieved from https://digitalcommons.calpoly.edu/cgi/viewcontent.cgi?article=1013&context=socssp

Venkatachalam, L. (n.d.). Perspectives on sustainability and globalization and challenges for the coffee sector. Retrieved from http://www.ico.org/event_pdfs/wcc2/presentations/venkatachalam.pdf

The Role Fairtrade Plays as a Union for Coffee Growers

It is a commonly known fact that the working environment for coffee bean farmers is less than optimal. There are many risks that are associated with the profession. Things like child labour, small wages, long working hours as well as a variety of physical hazards such as hearing impairment from machinery, long working hours, stress, health issues from pesticide exposure, etc., are common (“International…”, 2004). The majority of these risks can be attributed to the poverty of the coffee growers. Like other commodities, coffee beans are subject to great flux in price in the world market and this flux in price has a serious effect on the growers and their financial wellbeing (“International…”, 2004). A down turn in the prices of coffee beans can lead to widespread poverty for the growers and a decrease in the quality of working conditions for all those that work for them, including the firing of regular employees to hire women and children who will accept a lower wage (“International…”, 2004). Among others, the rights to a safe workplace and the rights to a fair wage are addressed when discussing the coffee grower’s work environment.

The role of a union is filled by the fairtrade organization for many coffee growers. Fairtrade ensures that even when market prices for coffee beans are down, growers will receive the fairtrade minimum price (“Coffee farmers”, n.d.). This guaranteed price helps growers avoid poverty and the nasty side effects that come with it. “They have also enabled them to increase sales and revenue every year since becoming Fairtrade – in 2011 net revenue was increased by 84%.” (“Oromia Coffee Farmers”, n.d.). Fairtrade also provides communities and coffee businesses with loans to invest in better infrastructure. This investment can lead to things like education for children, better equipment for employees, development of health clinics, etc. (“Oromia Coffee Farmers”, n.d.).

Though, at first glance, there doesn’t seem to be any issues with fairtrade, it is far from a perfect system. One flaw is that in order for fairtrade to work, consumers must be willing to purchase the higher priced fair-trade coffee. Without the consumer’s willing participation, there will be no benefits for the growers. Fairtrade also only represents coffee growers that pay to be a member and so leaves the vast majority of producers to only their local unions or no unions at all (Wydick, 2016). In addition, fairtrade only looks at the benefits for the growers and not at all the employees that are hired by the growers, and the rights that they deserve.

Fair-trade is not perfect but it is a start to improving the welfare of the coffee growers and the environments that they work in. In order for the coffee grower’s situation’s to improve, organizations like fairtrade must continue to bring awareness of the situation to the consumers so that they might buy products that will more benefit the producers. The development of unions in the various countries where the coffee beans are grown will also help the situation. Minimum amounts to pay seasonal employees, minimum ages to hire employees, etc. are all things that the local unions could work to improve in their own countries or communities. With some work and time, the coffee industry may reach a point where it’s unions represent and protect all of the rights of the coffee growers. For an interesting video showing an example of a coffee grower who works with fairtrade, see http://www.fairtrade.org.uk/Farmers-and-Workers/Coffee.

Martinko, K. (2018, October 11). Fairtrade is sadly losing appeal for UK buyers. Retrieved November 5, 2019, from https://www.treehugger.com/culture/fairtrade-losing-some-its-appeal-uk-buyers.html. 

References

Coffee farmers. (n.d.). Retrieved November 5, 2019, from http://www.fairtrade.org.uk/Farmers-and-Workers/Coffee.

International Programme on the Elimination of Child Labour Safety and Health Fact Sheet Hazardous Child Labour in Agriculture Coffee. (2004, March). Retrieved November 5, 2019, from file:///C:/Users/Taryn/AppData/Local/Packages/Microsoft.MicrosoftEdge_8wekyb3d8bbwe/TempState/Downloads/Safety%20and%20health_fact%20sheet_coffee_2004%2003%20(1).pdf.

Oromia Coffee Farmers. (n.d.). Retrieved November 5, 2019, from https://www.fairtrade.org.uk/Farmers-and-Workers/Coffee/Oromia-Coffee-Farmers.

Wydick, B. (2016, January 28). 10 Reasons Fair-Trade Coffee Doesn't Work. Retrieved November 5, 2019, from https://www.huffpost.com/entry/10-reasons-fair-trade-coffee-doesnt-work_b_5651663.

The triple bottom line within the Coffee Industry

Corporate social responsibility is taking on a bigger role within the coffee industry. Consumers are finding it more important that these coffee companies act ethically and limit the negative impact on the environment. Firms that follow the triple bottom line of economic, social, and environmental goals gain a competitive advantage throughout the industry. Most companies have implemented corporate procedures that heavily involve social responsibility into their missions, and have set out strategic goals that align with both their business plans and the environment, therefore the companies who have not are falling behind. Consumers want a company that promises to help our world as well as a company that takes action in regard to a healthier planet. These actions could include making donations to charities, reducing pollution or waste in their business processes, or offering benefits that will help those in need. Every company faces an issue of how to implement corporate social responsibility. The better the company is to the consumers and communities, the happier and more loyal customers will become. 

The first and foremost principle of the bottom line firms attempt to maximize is profit. Some companies believe that attempting to implement corporate social responsibility is more costly than beneficial. Offering positive qualities to the customers and the environment will reel in more consumers leading to more profit. However, profit goals need to be attained to offer environmental and social promises. Economic success is the primary focus and goal, overall coffee has become much more popular in recent years and the industry is booming with caffeine advocates rising globally. Therefore, economic and profit goals are not the most difficult principle in the triple bottom line to focus on when creating a well-rounded coffee business.  

The social aspect is enormous in terms of creating a versatile company. Socially the coffee industry is attempting to become more than a business that just sells coffee. Most companies are offering benefits for students such as paid tuition, Starbucks has taken a massive leap in the social facet by providing more work to youth employees. Employees have been given the ability to earn up to $1,000 in tuition reimbursement annually for their studies while working part-time or full-time for the company (Starbucks, 2019). Providing benefits such as this not only inclines more people to apply for your organization, but it also gives an excellent image for the social aspect of the company influencing more sales from customers.

Environmentally is where the coffee industry struggles. The industry has been known to create a variety of problems for the environment, starting at the point of creating coffee from scratch to the point of sale. These issues include deforestation, water pollution and contamination, and waste. This gives a poor public perception for the industry, but as time passes the industry has taken major steps into reducing the environmental harms. They now offer a different method to cultivate coffee that leaves a much less destructive footprint on our environment. Shade-grown coffee is the new fad for cultivating coffee, as coffee plants are interspersed beneath local forest trees mimicking the way coffee grows naturally in these regions (Moore, 2019). Following this method reduces the harms to bird habitats and other fauna in Latin America. This is a small step in the right direction, the waste issue is exponentially increasing as more plastic cups are being used. Although some companies have implemented paper straws to decrease the waste footprint, this again is a positive step, but the waste problem needs much more focus to solve a monstrous environmental issue.

All things considered, corporate social responsibility requires long term commitment from the companies. More organizations are starting to implement these practices creating a more complete business. It looks excellent for the company financially, as it produces less risk within the business creating more respect from financial markets. Large companies such as Starbucks and Dunkin Donuts are improving their coffee offered by purchasing higher-priced certified coffee. Coffee is the second most tradable commodity in the world pulling billions of dollars into the industry (Moore, 2019). Profit is definitely important in running an organization, but without a positive social aspect and an environmentally friendly business, the company will fail to become one of the best in the industry. To sum up, the coffee industry has made large leaps in becoming more responsible not only for providing a service, but also to provide coffee that serves a social purpose and follows environmental practices.

Wisconsin. (2019). A Simple Explanation of the Triple Bottom Line: University of Wisconsin. Retrieved from https://sustain.wisconsin.edu/sustainability/triple-bottom-line/.

References

Moore, V. (2019, September 1). Environmental Impact of the Coffee Production - Facts and Figures. Retrieved from https://www.sustainablebusinesstoolkit.com/environmental-impact-coffee-trade/.

Starbucks. (2019). Benefits and Perks. Retrieved from https://www.starbucks.ca/careers/working-at-starbucks/benefits-and-perks.

Financial Reports on Starbucks

For this blog, we will be focusing solely on the company Starbucks. Looking over the company’s past and current financial reports we can get a better idea of the company’s overall health. The company posts quarterly reports and annual reports for each year, these reports all follow under Non-GAAP rules and list under the IFRS. At the end of the 2018 Fiscal year on September 30th, 2018 the company had a total net revenue of $24,719.5 million in comparison to their report on October 1, 2017 of $22,386.8 million total net revenue (Starbucks, 2017). These numbers show how much money Starbucks is making through sales after direct expenses, over the past five years the company’s proclaimed net revenue has been constantly increasing meaning they are increasing their sales every year or reducing their expenses. This shows the company is growing exponentially each report following a healthy trend, as they have also opened 2,066 stores in the span of a year from 2017 to 2018 worldwide. In 2014 Starbucks declared cash dividends of 0.55 per share while in 2018 the company vastly increased its cash dividends per share to a whopping 1.32. This increase shows the company is much healthier than it was four years ago and means the shareholders are getting much more value resulting in more shares being bought because of their success. 

Accountants and Auditors are the most responsible parties in regards to issuing these financial reports, although Starbucks claims these financial reports are done by the company as a whole. The company has its accountants create income statements, balance sheets, statement of cash flows, and statements of equity. Howard Schultz is the owner of Starbucks and has done an exceptional job of operating the business; leading to great success and an array of milestones identifying his business genius. His leadership skills and traits have led this company to become one of the biggest and most recognizable in the world “Starbucks has been named the fifth most admired company in the world by Fortune magazine”(Newsroom, 2018) and the company is only increasing their value. This shows the leadership from Schultz has worked out for the company, resulting in excellent financial reports that are increasing in their ratios, revenues, assets, and net income.

In Starbucks third-quarter report they reached new highs, but not in every category across the financial statement: “While Starbucks reported record revenue and earnings per share in the third quarter of fiscal 2018, its EPS growth was driven entirely by share buybacks and a lower tax rate” (Levine-Weinber, 2018). The lower tax rate helped significantly in the fact they were losing much less money on their sales globally. However, the company's fourth-quarter report showed much progress “Fortunately, the recovery continued last quarter, as Starbucks saw a marked improvement in comp sales in its two largest markets. On Thursday, the coffee giant reported 4% comp sales growth in the U.S. and 1% comp sales growth in China for the fourth quarter, beating expectations” (Levine-Weinber, 2018). These comp sales lead to higher revenues and higher-earnings per share for the company’s shareholders. With Starbucks still steadily increasing its value each quarter report, outsiders are becoming more positive about the public perception of the company through the release of their reports. This inclines and influences outsiders to buy more shares from the consistent success and increases of earnings per share. The only negative aspect of Starbucks is the footprint they leave on our planet. Their suppliers and constant product needs leads to deforestation and unsustainable process, which leaves outsiders questioning their ethics and power. 

The company’s reports are complete as they claim to go under Non-GAAP earnings and follow under the International Financial Reporting Standards. By following these policies, Starbucks has been able to remain a very ethical organization in comparison to other companies throughout the coffee industry. Not only is Starbucks ethical throughout their financial reports, “According to CEO Howard Schultz, Starbucks’ commitment to social responsibility has played a significant role in producing this phenomenal growth” (Mellamocallejon, 2012) they are also immensely ethical by acting socially responsible over their operations globally. Overall, Starbucks has been impressive over many years with how proper and precise their financial reports have been, leaving consumers with no negative feelings towards the firm. The remarkable numbers and the positive brand view from the public are the main pillars of success for Starbucks, and their increasing quarterly numbers since 1971 show how much those things have benefited the company financially.

Interesting article regarding the future of Starbucks:

https://seekingalpha.com/article/4287335-starbucks-facing-headwinds-2020

Willis, G. (2004, March 4). 5 Tips: Understanding a shareholder report. Retrieved from https://money.cnn.com/2004/03/03/pf/saving/willis_tips/.

• Knowing Starbucks performs in an ethical manner, does this influence your view of Starbucks?

  References

Levine-Weinberg, A. (2018, November 4). Starbucks Comes Roaring Back With Solid Q4 Results. Retrieved from https://www.fool.com/investing/2018/11/04/starbucks-comes-roaring-back-with-solid-q4-results.aspx.

Mellamocallejon, tombomb4592. (2012, November 24). Starbucks: How Ethical Behavior Can Boost Business. Retrieved from https://bizgovsoc4.wordpress.com/2012/11/11/starbucks-how-ethical-behavior-can-boost-business/.

Newsroom, S. (2018, January 19). Starbucks named fifth most admired company worldwide. Retrieved from https://stories.starbucks.com/stories/2018/starbucks-fortune-most-admired-company-in-the-world/.

Starbucks. (2017). Financial Data. Retrieved from https://investor.starbucks.com/financial-data/annual-reports/default.aspx.

Sustainability

The coffee industry’s production process is not a sustainable model. Within the production process, there are four major parts: cultivation, processing, roasting, and consumption. These four parts negatively affect people, the planet, governance and profits which make the process unsustainable (Dowding & Murphy, n.d.).

         Cultivating and processing is part of the process that is taken on in the producing country. The producing countries such as Latin America, Africa, and Asia do not provide suitable working conditions, living conditions and are often subject to discrimination against women workers and child labour (Dowding & Murphy, n.d.). These conditions are unsustainable because if working conditions are poor the overall health of the worker declines and leaves the producer with fewer workers. If this trend continues the producers could eventually have no workers.

The planet suffers from the cultivation through deforestation, habitat destruction, and pesticide pollution. Also, processing the coffee relies on using large amounts of water and can contribute to water pollution (Dowding & Murphy, n.d.). Once these resources have been used up, they cannot be replaced. The coffee industry cannot continue to produce through such processes because they are not infinite. 

The producing countries’ profits are not as high as they once were due overproduction which has caused the prices of coffee to drop (Dowding & Murphy, n.d.). As well, the low profits are also due to the free market system being in effect, where the consumer controls the prices (Dowding & Murphy, n.d.).  If overproduction and this governance continue, the coffee producers will not be profitable, in which they will be unable to justify the negative effects of their production. 

Roasting and consuming are completed by consuming countries. Roasting leads to air pollution which leads to negative health effects for the public and the planet (Dowding & Murphy, n.d.). It is difficult to monitor these emissions because the Environmental Protection Agency standards vary and are not easily accessible (Dowding & Murphy, n.d.).  Therefore, producers are unable to monitor and reduce emissions and will continue to produce negative effects associated with emissions such as climate change. 

In the consumption process, there are millions of one time use disposable paper cups that are not recyclable. As well, coffee grounds are not recyclable (Dowding & Murphy, n.d.). With these products not being recyclable, the planet endures more waste which contributes to pollution and further decreases the sustainability of life. Also, there are strict FDA regulations for considering which materials are recyclable (Dowding & Murphy, n.d.). These strict guidelines are difficult to sustain and implement, as the regulations are concerned with the mixing of the food and drink with paper (Dowding & Murphy, n.d.).  

Consuming countries have the freedom of “take it or leave it” pricing due to the overproduction of coffee (Dowding & Murphy, n.d.). This selling method leads to profits, however, negatively affects sustainability because once overproduction is gone, consumers may not be inclined to purchase at higher prices.

Environmental impacts in the stages of ground coffee production (Giraldi-Diaz, De Medina-Salas, Castillo-Gonzalez, Leon-Lira, 2018)

Interesting video link: https://www.youtube.com/watch?v=99UuWy4mXbo

References

Dowding, T., Murphy, M.  (n.d.). The Coffee Bean: A Value Chain and Sustainability Initiative Analysis [PDF File]. Retrieved from https://global.business.uconn.edu/wp-content/uploads/sites/1931/2017/01/The-Coffee-Bean.pdf

Giraldi-Diaz, M.R., De Medina-Salas, L., Castillo- Gonzalez, E., Leon-Lira, R. (2018). Environmental Impact Associated with the Supply Chain and Production of Grounding and Roasting Coffee through Life Cycle Analysis. Sustainability, 10(12), 4589. https://doi.org/10.3390/su10124598