How Starbucks Can Help Small Palm Oil Farmers, September 24, 2015

US coffee chain Starbucks has recently come under pressure from US activist group SumofUs, who want it to commit to higher environmental standards in its procurement policy.

This is a remarkable amount of pressure on what is a relatively small – but high-profile – purchaser of palm oil.  Why remarkable? Starbucks is a relative newcomer to the world of palm oil activism. It joined RSPO last year and made a commitment to purchasing 100 per cent certified palm oil.

Coffee purchasers are no stranger to Starbucks' track record in handling activists - in the past it has been excellent. The reason for this is simple: they accept the activists' claims that there might be a problem, but then they investigate the problem themselves and come up with a solution that assists the parties involved – not just giving in to the activists' demands. 

One of the best examples of this was in the late 1990s and early 2000s when Starbucks came under fire from social and environmental activists because, according to the activists, they weren't making enough of a commitment to 'fair trade' coffee.

Starbucks did two things. First, it began to offer Fair Trade coffee as an option in-store, instantly making it the largest supplier of Fair Trade coffee.
What it didn't do was make Fair Trade the norm for Starbucks, which is what the activists were after. Why? Because Starbucks wasn't convinced that simply buying more Fair Trade coffee would actually improve the lives of their coffee suppliers, the environment, their own operations or the experience of their customers.

So, the second thing the company did was undertake a broad investigation into its own supply chain, then developed and implemented its own standard: CAFÉ (Coffee and Farmer Equity) Practices. This is a third-party audited standard that is still in place today. 

CAFÉ Practices introduced two elements that made Fair Trade seem disorganised, political and inherently disinterested in genuine grower concerns.

The first was that it addressed the specific needs of the farmers in existing supply chains. So, instead of taking the cue from the activists and taking coffee from farmers who were already certified, it increased its support for its existing suppliers, through environmental, labour, agricultural and financial management.

The second was that it paid its suppliers over and above the market price for coffee. In 2006, for example, it paid 23 per cent above the benchmark price to its farmers.

It's arguable that by caving to activist demands around Fair Trade coffee that Starbucks would have done little to improve the lives of farmers, and certainly not improved the taste of their coffee – and therefore the experience of their customers. 

But what's particularly notable about the Starbucks approach is that it was the company and its suppliers – not the activists – that were able to develop a policy that generated the better outcome. The role of the 'activist as middleman' was basically neutered completely. And rather than serving activist interests, it served the interests of suppliers, buyers and customers.

We would therefore hope that Starbucks keeps this lesson in mind when looking at how they will approach palm oil in the future.

Starbucks has already committed to RSPO certification, which is arguably the gold standard for suppliers around the world, and many Malaysian smallholders are accredited to RSPO standards. It is third-party audited and has a transparent decision-making process.

But if Starbucks keeps getting asked to commit to something bigger – as it is being asked to do right now – that isn't necessarily transparent, isn't third-party audited, and in which the benefits aren't readily apparent for its suppliers (especially smallholders), we suggest they look into the matter themselves.

And we extend an open invitation to Starbucks to speak with us, to consult with us, and speak to our members and the communities that we work with and are a part of to get a better picture of how they can actually improve the lives of palm oil suppliers in Malaysia and potentially around the world.