Starbucks & Moral Capitalism - Made in the USA Week


Photo by Marco Pakoeningrat.

Starbucks has long had a bad rap for so-called troubling the world with its overpriced drinks and ubiquitous presence, making it hard for the little guy to stay afloat. Lately, however, the coffee behemoth has changed its tune. As reported by The New York Times in March of this year, Starbucks chairman and chief executive, Howard Schultz, announced that the chain would approach business with a new perspective – moral capitalism. The idea suggests that treating employees and the community fairly makes every cent of that five dollar frappachino worth it.

Accordingly, Schultz has created a series of programs directly benefiting the coffee fields where Starbucks drinks originate, and launched several new initiatives furthering America’s recovery from the 2008 recession. Identified on the corporation’s website, key areas of responsibility include community, ethical sourcing, and the environment, and the company has also partnered with organizations like the Opportunity Finance Network, International Youth Foundation, and JumpStart to make it all happen.

“Starbucks’ success depends on pleasing its customers; it depends on human capital,” Steve Young, Global Executive Director of Caux Round Table and author of the book Moral Capitalism: Reconciling Private Interest with the Public Good, tells BTR. “Some people cynically would say it’s just good marketing, but [Starbucks] is responding to community values and social values.”

Young described the concept of moral capitalism as an overlapping of two Venn diagrams, one comprising of self and the other of community. Where the circles meet is a position that allows a business to seek profits while also recognizing its duty to employees and society. Because, as the author notes, customers are more willing to shell out the money when they know at least a portion of it serves a benevolent purpose.

“It’s a defensive action in order to prevent a bad reputation and losing customers because they are not giving back to community, or degrading the environment,” Young explains. “But it also has a positive purpose. It’s proving they deserve a higher reputation in your mind. We’re going to sell you coffee higher than market price, but we’re going to funnel money back to growers in a way that people trust.”

He adds, “The basis of moral capitalism is that we’re in this together.”

With a company like Starbucks, the concept fits well. It roams a competitive field and has seen both a rise and fall in profits throughout the years. Furthermore, it’s become more than a coffee chain but a brand enterprise, and by extending its reach and uniting with other ventures, it gains power.

The same cannot be said with all businesses, however. Some have less to lose when skipping out on social remuneration. For example, an organization like the NFL, as Young points out, seems “too big to fail.”

“When self-interest is so big, and in a large group with so much at stake, it’s easy to be selfish,” notes Young. “In the past, people complained about things like railroad charges being too high… and when the companies didn’t change, they turned to politicians.”

Thus, it might require a change in laws and regulations to push such initiatives.

A monopoly doesn’t always have to be morally destructive though, as long as the company keeps its economics in check.

Referencing the NFL, Young remarks, “You are providing, to some extent, a public good in addition to a private good. The idea, then, is don’t take out too much profit. As long as the monopoly is running for community benefit… and operating under some restraint to be responsible, it’s fine.”

Otherwise, bring in the anti-trust patrols.

“Where the argument comes to an end with these companies is, ‘Why should we do this? Why should we be right? Why should we be moral?’” Young observes. “The practical answer is that, in addition to being better a person, it creates a better company.”