Starbucks is a business known for their specialty coffees, baked goods, and uniquely named cup sizes.  It is the poster child of the American café experience, and now it is becoming the same for business sustainability.

Recently, the American-based coffee company began to issue sustainability bonds to expand their plan on sustainably produced coffee.  This development poses some questions – What exactly is a sustainability bond?  What does it have to do with Starbucks? What does it mean for business?

So, take a seat and enjoy your Double Ristretto Venti Half-Soy Nonfat Decaf Organic Chocolate Brownie Iced Vanilla Double-Shot Gingerbread Frappuccino Extra Hot With Foam Whipped Cream Upside Down Double Blended, One Sweet’N Low and One NutraSweet, and Ice (yup, that’s a real drink), it’s time to understand Starbucks’ bond with sustainability.

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What is a sustainability bond?

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A bond is a loan agreement made by an investor to a business for a period longer than a year.  The seller of the bond uses the money given by the investor for their project with the agreement to pay the principle by the end of that period.  A sustainability bond is a type of bond where the funds collected in sales are used specifically for social and sustainable programs.  Since 2012, twenty-one bonds have been issued globally by banks.

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What is Starbucks doing?

Coffee Spoon

For some time, Starbucks has been aiming to make their coffee sources more sustainable.  They have had some success with their Coffee and Farmer Equity (C. A. F. E.) Practices program, which outlines the required standards for how the coffee is farmed, payment of farmers, and environmental protection.

To expand these efforts, Starbucks has introduced their sustainability bonds to attract investors who share their belief in sustainability.  The $500 million raised from the sale of these bonds will go toward several programs in the next ten years such as setting up a program to assist farmers with crop rotation, a support system for farmers in major coffee supplier countries, a continuation of sustainable farming, and development of more resilient coffee plants.

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What does it mean?

Coffee Cup

Starbucks is an example of companies moving toward a more sustainable way of conducting business.  While its competitors may just be buying coffee, Starbucks is looking at the bigger picture.  To them, coffee doesn’t start from opening a bag of beans and grinding them to make a hot beverage.

It starts with a plant that requires resources on farms that need support in making sure their commodity is produced in a way that causes the least harm to the surrounding environment.

In an interview, Starbucks’ chief financial officer Scott Maw explained that the choice of using sustainable bonds was because Starbucks doesn’t see sustainability as an “addition, but an integral part of Starbucks.”  With this mentality, Starbucks can not only show that they are environmentally aware as a company but also show customers and fellow competitors that there is a way to produce coffee while being environmentally sustainable.

You could say sustainability is Starbucks’ cup of tea.

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Sources

Chasan, Emily. “Starbucks Raises $500 Million With Its First Sustainability Bond.” Bloomberg. May 16, 2016. http://www.bloomberg.com/news/articles/2016-05-16/starbucks-raises-500-million-with-its-first-sustainability-bond. Accessed May 17, 2016.

Farlex. “Bond.” The Free Dictionary. http://financial-dictionary.thefreedictionary.com/bond. Accessed May 17, 2016.

FMO. “Sustainability Bonds.” FMO. https://www.fmo.nl/susbonds. Accessed May 17, 2016.

Investing.com. “Starbucks issues the first-ever U.S. Corporate Sustainability Bond.” Investing.com. May 16, 2016. http://www.investing.com/news/stock-market-news/starbucks-issues-the-first-ever-u.s.-corporate-sustainability-bond-402381. Accessed May 18, 2016.

Starbucks Coffee Company. “Responsibly Grown Coffee.” http://www.starbucks.ca/responsibility/sourcing/coffee. Accessed May 17, 2016.

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