®

Beyond the cup.
CORPORATE SOCIAL RESPONSIBILITYFISCAL 2005 ANNUAL REPORTStarbucks white cup has come tosymbolize premium coffee.
But Starbucks represents morethan a cup of coffee. We area place where neighbors visit,
an innovative businessand a company that tries tomake a difference in people’s
lives and in the world.
To truly understandStarbucks, don’t just lookinside the container –go beyond the cup.

2
STARBUCKS AND CORPORATE SOCIAL RESPONSIBILITY

Dear Stakeholders,Some of our most rewarding moments have been during visits with farmers who are extremely proud of thesuperb coﬀee they produce. Carlos Francisco Blanco (pictured on the cover) is one of thousands of farmers
around the world who sell their high-quality coﬀee to Starbucks. His coﬀee is sold through Coopronaranjo, a
coﬀee cooperative in Costa Rica where he is a member. Like many farmers, Carlos Francisco depends on getting
an equitable price for his crops and having a consistent buyer year after year. Starbucks strives to understandwhat farmers need to sustain their livelihoods, just as we appreciate how vital they, as our suppliers, are to thesustainability of our business. Our approach to buying coﬀee has taken this into account.
This approach eventually led to the implementation of Coﬀee and Farmer Equity (C.A.F.E.) Practices, which seek
to instill sustainable practices along our coﬀee supply chain. Since its introduction in 2004, C.A.F.E. Practices
caught the attention of our coﬀee suppliers and has been recognized as a comprehensive model by many within
our industry. Pioneering this new endeavor has been as rewarding as it has been challenging. We provide details on
our progress later in this report.
Starbucks iconic white paper cup is also on the cover of this report, something we might not have featured so
prominently in the past because we had yet to identify ways to mitigate the environmental impacts of these cups.
But after pressing for an alternative to traditional hot beverage paper cups made with 100 percent virgin ﬁber, oureﬀorts have begun to pay oﬀ. In 2006 Starbucks will begin using the ﬁrst-ever hot beverage cups comprised of
10 percent post-consumer recycled content. This measure represents a ﬁrst step in our ongoing eﬀorts to explore
innovations that will help reduce the overall environmental impacts related to our cups.
Reﬂecting on 2005, we take much pride in these achievements, and many others. At the same time, we recognizethat corporate social responsibility (CSR) extends beyond groundbreaking initiatives and needs to permeate every
aspect of our business. In this respect, Starbucks must continually strive to ensure that CSR is eﬀectively integrated
within all divisions of our company. This is our highest priority for CSR.
We recently updated the company’s long-range strategic plan and identiﬁed key business objectives. While thecompany is strongly positioned for continued growth, we instinctively know that our future success depends on
deepening our commitment to CSR and then eﬀectively communicating to our stakeholders what we do. ThroughStarbucks Emerging Issues Council (EIC), a number of our senior leaders have helped to ensure that we aremanaging risks, supporting the company’s business objectives and meeting the expectations of our stakeholders aspart of our CSR eﬀorts. Obtaining more transparency and traceability in our global supply chain and addressing
climate change have been identiﬁed by the EIC as two areas of focus.
In broader terms, Starbucks is a place where our partners (employees) work, customers gather and suppliers
engage in business. We truly believe that what makes Starbucks attractive is the company’s abiding commitment
to treat people with respect and dignity, which is the essence of Starbucks culture. To sustain this legacy, we must
continue to meet our partners’ need for health care coverage, maintain our high standards for quality products
and exceptional customer service and conduct our business responsibly. These are basic tenets of Starbucks social
responsibility that are articulated in our Mission Statement and Guiding Principles.
(continued on page 2)

1

Finally, we recognize that Starbucks exists and operates within the global society. Through the process of
producing an annual CSR Report for the past ﬁve years, we have gained a better understanding of ourglobal impacts and the importance of increased transparency. We remain committed to this type of open
communication. We also will continue to engage our key stakeholders on issues material to our business,
as well as participate in civic and global forums that inspire a sense of shared accountability. One such eﬀort
is our participation in the United Nations Global Compact, which is a means to work collaboratively acrosssectors on 10 universal environmental and social principles.
We think you will ﬁnd this report worthy of your time and interest. As always, your feedback is very important
to us and we encourage you to refer to the back page for information on how you can submit your remarks.
In doing so, please accept our deepest appreciation.
Sincerely,

Howard Schultz
chairmanJim Donald
president and chief executive oﬃcer

STARBUCKS MISSION STAT E M E N T A N D G U I D I N G P R I N C I P L E S
To establish Starbucks as the premier purveyor of the ﬁnest coffee in the world
while maintaining our uncompromising principles as we grow.
The following six Guiding Principles will help us measure the appropriatenessof our decisions:• Provide a great work environment and treat each other with respect and dignity• Embrace diversity as an essential component in the way we do business• Apply the highest standards of excellence to the purchasing, roasting and fresh delivery of our coffee• Develop enthusiastically satisﬁed customers all of the time
• Contribute positively to our communities and our environment• Recognize that proﬁtability is essential to our future success

2

ABOUT THIS REPORTContents

PAGE

GLOBAL REPORTING INITIATIVE(GRI) INDICATORS*STARBUCKS AND CORPORATE SOCIAL RESPONSIBILITY

1

Letter to Stakeholders

1

Starbucks Mission Statement and Guiding Principles

2

3.7

About This Report32.11-2.13, 2.20, 2.21

Key Performance Indicators Summary and Highlights for Fiscal 2005

4

EC4, EC10, EN17

Company Proﬁle6

2.1-2.3, 2.8, EC1

Integrating Corporate Social Responsibility (CSR)

7

3.1-3.3, 3.6, 3.8, LA11, SO2

Stakeholder Engagement9

2.9, 3.11

Socially Responsible Investments (SRI)9

OUR WORLD OF PRODUCTS

10

Starbucks Approach to Sustainable Trade13

Our Integrated Approach to Sustainable Coffee Production

16

Paying Premium Prices

17

EC13

18

3.7, 3.16, EC4, EC13, EN27, HR2,
HR3, SO4

Starbucks and Fair Trade23

EC4, EC13, PR6

Certiﬁed Organic and Conservation (Shade Grown) Coffees

25

EN27, EC4

Access to Credit

26

EC13

Social Investments in Coffee Communities

27

EC10, EC13

Starbucks Social Responsibility Standards – Manufactured Goods

27

3.7, 3.16, HR3

Procurement Practices for Sustainable Agriculture

28

3.11, 3.12

Currency
All references to currency are in U.S.
dollars, unless otherwise noted.

Consumer Products

30

PR6

Supplier Diversity

31

SOCIETY

32

Previous CSR Reports
www.starbucks.com/csrannualreport

Being Responsible to Our Communities

35

Starbucks Growth

35

Information Integrity
Starbucks management is
responsible for the preparation andintegrity of the information in thisreport. Through a system of internal
controls, including a comprehensive
veriﬁcation process involving
internal subject matter experts, we
believe this report fairly represents
our CSR activities and results for theﬁscal year ended October 2, 2005.
External veriﬁcation is provided byMoss Adams LLP. See page 72.

Urban Coffee Opportunities

37

Community Investments

38

EC10

Investing in Coffee- and Tea-Growing Communities

40

EC10

Supporting Local Communities in Our International Markets

41

The Starbucks Foundation

44

Being Responsive to Customers

46

Public Policy and Government Affairs

47

SO3

United Nations Global Compact

47

3.14

ENVIRONMENT

48

Environmental Responsibility and Leadership

51

Starbucks Environmental Mission Statement

51

3.7

Understanding Environmental Issues and Sharing Information with Our Partners

52

EN8, EN17

Developing Innovative and Flexible Solutions to Bring About Change

55

Striving to Buy, Sell and Use Environmentally Friendly Products

56

Recognizing That Fiscal Responsibility Is Essential to Our Environmental Future

58

Instilling Environmental Responsibility as a Corporate Value

59

Measuring and Monitoring Our Progress for Each Project

60

WORKPLACE

62

Starbucks Employment Proﬁle – Fiscal 2005

64

Providing a Great Work Environment

65

Workplace Culture

65

LA10, HR4, LA3, HR6, HR10

Fostering Diversity and Inclusion

67

LA11

Caring for Our Partners

68

LA12

Partner Training and Career Development

69

LA9, LA17

Health and Safety

71

LA7

Independent Assurance Report

72

2.21

Feedback and Further Information

73

2.10, 2.22, 3.11, 3.12

ScopeThis report includes information
on Starbucks U.S. and Canada
company-operated retail andglobal supply chain operations, theareas representing the majority ofStarbucks social, environmental
and economic impacts. Starbucks
system for collecting and reporting
reliable social, environmental
and econmic performance data
does not encompass all of ouroperations. Where available,
anecdotal information is included
for international and licensed
store operations. Information on
total coffee purchases is for both
Starbucks Coffee Company andSeattle Coffee Company.
Reporting Year
Starbucks ﬁscal year 2005
(October 4, 2004–October 2, 2005),
unless otherwise noted.

*Global Reporting Initiative
Starbucks was inﬂuenced by the
Global Reporting Initiative (GRI) in
determining relevant content andperformance metrics to include in
our report. While Starbucks has notchosen to report in full accordancewith the GRI, its principles andindicators help to provide a basis forour reporting. Information about GRI
is online at www.globalreporting.org.
GRI indicators key
EC – economic
EN – environmental
LA – labor practices
HR – human rights
SO – society
PR – product responsibility

C.A.F.E. Practices

3

SO1

EC10

EN14

EN2, EN3, EN5EC5S TA R B U C K S C O R P O R AT E S O C I A L R E S P O N S I B I L I T Y

KEY PERFO R M A N C E I N D I C AT O R S
SUMMARY AND HI G H L I G H T S F O R F I S C A L 2 0 0 5
INDICATOR

2004

2005

2006 TARGET

Pounds of coffee purchased from
C.A.F.E. Practices approved suppliers

43.5 million pounds(goal: 30 million pounds)

76.8 million pounds(goal: 75 million pounds)

150 million pounds

Percentage of total coffee purchases

14.5%

24.6%

Pounds of coffee purchased from Fair
Trade Certiﬁed™ cooperatives

4.8 million pounds

11.5 million pounds(goal: 10 million pounds)

Percentage of total coffee purchases

1.6%

3.7%

Total cash and in-kind contributions$14.6 million$30.3 million

Percentage of pre-tax earnings

2.3%

3.8%

Number of hours volunteered by partners
and customers in the U.S. and Canada

214,000

299,000

375,000

Greenhouse gas
emissions

Metric tons of CO2 equivalents

Conducted a baseline
climate inventory of our2003 emissions which
totaled 376,0001 metrictons of CO2 equivalents.

Did not schedule a
climate inventory for
2005.

Purchase renewable energy
certiﬁcates for 20 percent of theenergy for our U.S. and Canada
company-operated stores.

Electricity

Kilowatt hours per square foot ofretail space

6.211

6.40

Target has not been established.

Water

Gallons per square foot of retail space

231

24

Target has not been established.

Paper

Percentage of post-consumer ﬁber
(not including hot cups)

46.5%

49.5%
(goal: 48%)

50%

Percentage of unbleached ﬁber
(not including hot cups)

86.3%

85.9%
(goal: 90%)

86.5%

Partner satisfaction

Percentage of satisﬁed or verysatisﬁed partners

82%2

87%

Our goal is to maintain or improve
our scores on these survey metrics.

Partner engagement

Percentage of engaged partners

73%2

73%

Health and safety

Injury rate per 200,000 hours
worked – retail

7.853

6.68

6.5

U.S. executives (vice presidents
and above)

31%

34%

U.S. workforce

63%

65%

While Starbucks values diversity andinclusion, we do not currently set targets
for representation by race and gender.

U.S. executives (vice presidents
and above)

15%4

14%

U.S. workforce

30%4

30%

Amount spent with certiﬁed minorityand women-owned businesses in U.S.

$114 million(goal: $95 million)$166 million(goal: $140 million)

COFFEE

Coffee and Farmer
Equity (C.A.F.E.)
Practices

Fair Trade Certiﬁed
coffee™

12 million pounds

COMMUNITY

Charitable contributions

Volunteerism(Make Your Mark)Do not currently set targets for futurecharitable contributions.

ENVIRONMENTWORKPLACE

DIVERSITY

Women

People of color

Suppliers

Information has been updated to reﬂect new data.
Results from Starbucks ﬁscal 2003 Partner View Survey. No survey was conducted in ﬁscal 2004.

1
2

4
STARBUCKS AND CORPORATE SOCIAL RESPONSIBILITY$206 million

To measure how well we are doing at upholding our commitment to social responsibility and to our Guiding Principles, Starbucks has
identiﬁed the following key performance indicators as relevant metrics for our business. Each year, we will report our performance relative
to these metrics and any new metrics we may add. We strive to include forward-looking targets for our performance indicators. However, insome cases the information is not available or the company is unable to provide it for other reasons.

MORE
INFORMATION

2005 HIGHLIGHTS• Increased the number of approved coffee suppliers who
participated in C.A.F.E. Practices.

• Created a supplement to make C.A.F.E. Practices relevant forsmall-holder farmers and cooperatives.

• Increased the number of approved and trained
C.A.F.E. Practices veriﬁers.

• Received the World Environment Center’s 2005 Gold Medal
Award in recognition of C.A.F.E. Practices.

• Introduced Café Estima Blend™ – Starbucks new Fair Trade
Certiﬁed™ coffee.

• Increased our Fair Trade Certiﬁed™ coffee offering to ourfoodservice accounts, including colleges and universities.

• Began distributing Fair Trade Certiﬁed™ coffee through Costco
stores in the U.S. and Canada.

• Directed $1.4 million for South Asia tsunami relief efforts,
and committed $5 million toward immediate relief and long-term
rebuilding efforts related to Hurricane Katrina.

• Committed to a multi-year global effort aimed at helping children
and communities gain access to clean drinking water throughsales of Ethos™ water.

Pages 18–22

Pages 23–24

Page 38• Pledged $5 million to launch the China Education Initiative which
will support local educational programs.
• Starbucks supported designated nonproﬁt organizations, where partners and customers volunteered their time, with matching grants
totaling $1.5 million.
• Established a climate change mitigation strategy that includes
purchasing renewable energy.

• Began purchasing renewable energy certiﬁcates for ﬁve percentof the energy needed for our company-operated stores in the U.S.
and Canada.

• Approved Project Green BELT to begin testing energy and water conservation measures in a cross-section of our stores.

• Completed a test of a new paper cup made with 10 percent postconsumer recycled ﬁber and scheduled rollout for ﬁscal 2006.

• Continued to pursue packaging design alternatives that use
fewer materials and more recycled content.

• Increased the percentage of partners who participated in our ﬁscal
2005 Partner View Survey.

• Used feedback from the ﬁscal 2005 Partner View Survey to begin
addressing areas needing improvement, such as our partners’
desire for better communication throughout the company,celebration of our successes, and more effective coaching
and feedback.

• Continued to see a high level of engagement among our partners.
• Launched a slip-resistant shoe program for retail partners.

• Completed a test of new anti-slip mats in our California companyoperated stores and made plans to continue installing the mats in
our company-operated stores in the U.S. and Canada.

• Conducted a 360-degree diversity assessment for Starbucks
top senior leaders to identify their strengths and areas
needing improvement.

• Provided customized support to address the needs of ourdeaf partners.

Pages 52–53

Pages
58, 60–61

Pages
56–57, 61

Page 65

Page 65
Page 71

Page 67• Designed an Executive Diversity Learning Series for vice presidents
and above to help build their diversity competencies and overall
leadership skills.
• Provided training to our key internal stakeholders about Starbucks
goals for, and process related to, supplier diversity.

Page 39• Joined the National Minority Supplier Development Council and the
Women’s Business Enterprise National Council.

Fiscal 2004 information has been retroactively adjusted to reﬂect new claims that were ﬁled after the ﬁscal year ended.
Data has been recast using ﬁscal 2005 methodology.

3
4

5
STARBUCKS AND CORPORATE SOCIAL RESPONSIBILITY

Page 31STARBUCKS COMPANY PROFILE
Starbucks Corporation is the leading retailer, roaster andbrand of specialty coﬀee in the world, with more than
10,000 company-operated and licensed locations in North
America, Latin America, Europe, the Middle East and the
Paciﬁc Rim. Through various licensing arrangements andfoodservice accounts, Starbucks coﬀee and other products are
sold in designated locations within airports, grocery stores,
other prominent retailers, hotels and universities. Starbucks
international licensed retail stores are operated throughlicensing arrangements and joint ventures, primarily withestablished retailers or restaurant operators.

Ethos™ water and Starbucks™ Liqueurs. The Seattle’s BestCoﬀee® and Torrefazione Italia® coﬀee brands enable
Starbucks to appeal to a broader consumer base by oﬀeringa variety of coﬀee ﬂavor proﬁles. Starbucks also sells coﬀeebrewing equipment and other merchandise.
Starbucks Corporation is incorporated in Washington State,in the United States. The Company’s common stock is
traded on the National Market tier of The NASDAQ® Stock
Market, Inc. (“NASDAQ”), under the symbol “SBUX.” Asof December 1, 2005, there were approximately 563,000
registered and beneﬁcial shareholders of record.

Our brand portfolio oﬀers a wide variety of consumer
products including Tazo® teas, Hear Music™ CDs, bottled

Company DataFISCAL YEAR

2003

2004**

2005

Total net revenues$4.1 billion$5.3 billion$6.4 billion

U.S. company-operated retail stores$3.0 billion$3.8 billion$4.5 billion

U.S. specialty (licensing, foodservice and other)$507 million$690 million$795 million

International company-operated stores$484 million$657 million$853 million

International specialty (licensing, foodservice and other)$119 million$146 million$182 million

Net earnings$265 million*$389 million*$494 million

Earnings per common share – diluted$0.33*$0.47*$0.61

Shareholders’ equity$2.1 billion$2.5 billion$2.1 billion

Total income taxes$167 million*$232 million*$302 million

Cash paid for income tax expense$140 million$173 million$228 million

U.S. federal and state$134 million$163 million$219 million

International$6 million$10 million$9 million

Effective tax rate

38.6%*

37.3%*

37.9%

Number of countries where Starbucks stores are located

32

34

37

Total retail stores

7,225

8,569

10,241

U.S. company-operated stores

3,779

4,293

4,867

International company-operated stores

831*

972*

1,133

U.S. licensed stores

1,422

1,839

2,435

International licensed stores

1,193*

1,465*

1,806

Number of partners (employees)

74,00097,000115,000* Numbers have been restated to reﬂect certain business acquisitions occurring in ﬁscal 2005 as well as adjustments for lease accounting, both described in moredetail in our 2005 Annual Report to Shareholders.
** Fiscal 2004 included 53 weeks. For further information about our ﬁnancial performance, please see our 2005 Annual Report to Shareholders, available onlineat www.starbucks.com/aboutus/investor.asp.

®

6
STARBUCKS AND CORPORATE SOCIAL RESPONSIBILITY

Integrating Corporate Social
Responsibility (CSR)

allowed 12 members, nine of whom meet the independence
requirements of NASDAQ®. All three committees of theboard are comprised of independent directors and havespeciﬁc charters: Audit and Compliance, Compensationand Management Development, and Nominating andCorporate Governance.

Howard Schultz, Starbucks chairman, sums
it up best when he says, “Success is not anentitlement. It must be earned every day.” Thisis the prevailing attitude at Starbucks anddeﬁnes the way we approach our relationships
with stakeholders (customers, partners,
suppliers, shareholders, communities andothers) and how we conduct our business.
Our inspiration also emanates from Starbucks
six Guiding Principles, which combine ourcommitment to social responsibility with our
drive to create shareholder value.

There are well-deﬁned criteria for the selection of new board
members, foremost being a clear demonstration of their own
personal integrity and ethics. Board diversity is sought interms of members’ personal and professional backgrounds,
gender, race, ethnicity or other diﬀerentiating characteristics,
enabling a wider range of opinions and perspectives to beconsidered. Of the 12 members of Starbucks board, one is
Latino, two are African American (one of which is female),and one other female also serves on the board.
In 2005, one independent member of the board retired,
two new independent members were elected, and Starbucks
president and ceo Jim Donald assumed the board position
vacated by Orin Smith, Starbucks former president and ceo,
who retired in March 2005.

THE BUSINESS CASE
Starbucks deﬁnes CSR as conducting business in waysthat produce social, environmental and economic beneﬁts
for the communities in which we operate. We believe ourstrong commitment to CSR beneﬁts both Starbucks and our
stakeholders, including shareholders. A few of the tangible
beneﬁts are:For stability and continuity, among other reasons, Starbucks
has historically had a classiﬁed board. However, Starbucks hasquestioned whether a classiﬁed board reduces accountabilityof directors because of the limits it places on shareholders’ability to evaluate and elect the board annually. In 2005,
our board requested that the Nominating and Corporate
Governance Committee once again consider the merits of adeclassiﬁed board. Based on the Nominating and Corporate
Government Committee’s recommendation, the board has
approved an amendment to our Articles of Incorporation,
which will provide for the annual election of all directors.
The board formally recommended that shareholders
approve adoption of this change at the 2006 Annual
Shareholders’ Meeting.

• Attracting and retaining our partners – We believe
Starbucks commitment to CSR leads to higher than usuallevels of satisfaction and engagement among our partners.
• Customer loyalty – Studies have revealed that customers
prefer to do business with a company they believe to besocially responsible, when their other key buying criteria
are met. We believe customer loyalty has been a driving
force behind Starbucks phenomenal growth and longterm success.
• Reducing operating costs – Many environmental measures,such as energy-eﬃcient equipment or lighting, involve
initial investments but deliver long-term environmental
and cost-saving beneﬁts.
• Strengthening our supply chain – To have a sustainablebusiness, we need a reliable and responsible supplier basethat can keep pace with our growth. Starbucks invests inmeasures to ensure our suppliers have the opportunity
to do so.
• License to operate – Having a strong reputation as asocially responsible company makes it more likely we will
be welcomed into a local community.

Committee charters, our governance principles, ourdirector nominations policy (including criteria for board
membership) and proﬁles on each board member are available
at Starbucks.com. In addition, speciﬁc information regarding
declassiﬁcation of the board can be found in Starbucks ﬁscal
2005 proxy statement, also available at Starbucks.com.
CORPORATE ETHICS
Upholding our strong ethical corporate culture is paramountto Starbucks success. Starbucks Business Conduct andCorporate Compliance program provides our partners withethical business conduct guidelines, which are published in
the Standards of Business Conduct. The Standards emphasize
the company’s expectations for conducting business ina manner that is consistent with our Mission Statement
and Guiding Principles and in compliance with laws andgovernment regulations. For several years Starbucks U.S.
and Canadian partners at the director level and above havebeen required to formally acknowledge that they have read,

CORPORATE GOVERNANCE
Starbucks has historically been led by strong ethical andgovernance principles, one of which is to comply withapplicable laws and regulations, including the Sarbanes-Oxley
Act of 2002. Starbucks board of directors holds management
accountable to operate and manage the company according
to our principles. The board currently has the maximum

7
STARBUCKS AND CORPORATE SOCIAL RESPONSIBILITYMANAGING CSR
The day-to-day management of Starbucks corporate social
responsibility initiatives is handled by a team of partners whoreport to the senior vice president of CSR. Some CSR-related
programs and initiatives are managed and implemented at
the business unit, division or department level. Our CSR
organizational chart is below.

understood and agreed to comply with Starbucks Standardsof Business Conduct. In September 2004, Starbucks released
an international version of the Standards of Business Conduct
for partners outside of North America, which continues to be
introduced to partners in company-owned markets.
Some topics in the Standards of Business Conduct include:• Compliance with Laws and Regulations• Conﬂicts of Interest• Gifts and Entertainment• Antitrust and Fair Competition

Currently there is no committee of the Starbucks board
dedicated to CSR, although issues related to CSR are
periodically presented and discussed at the board level.

Reporting Ethical Violations
Partners are urged to report any concerns involving ethics,
legal issues or potential violations of Starbucks Standards ofBusiness Conduct or company policies through the BusinessConduct Helpline, which is handled by an independent
third party. All concerns are taken seriously and information
provided to the Helpline is treated in a conﬁdential manner.
Partners may also choose to remain anonymous.

FUTURE GOAL
In ﬁscal 2006, Starbucks will form a CSR Executive
Committee to set CSR-related policies and provide
guidance for our CSR strategy.

Emerging Issues Council (EIC)In 2005, the EIC, a cross-functional team of 18 Starbucks
executives, helped the company identify and proactively
address several issues, such as our customers’ concerns about
nutrition; our purchasing practices related to cocoa; andStarbucks impact on climate change. The EIC also initiatedseveral stakeholder engagement sessions that allowed us togain feedback on issues of signiﬁcance to the company.

Starbucks does not tolerate retaliation against any partner who
raises concerns or questions regarding any possible violation
he or she reasonably believes to have occurred.
Starbucks also maintains an Auditline for third parties,
such as vendors, investors and customers, to report possible
accounting and/or auditing irregularities.

FU T U R E G O A L
The Business Conduct and Corporate Complianceprogram will focus on three areas in ﬁscal 2006:
developing and providing further job-speciﬁccompliance training; designing and implementing
companywide ethics training; strengthening ourcommunications on ethics and compliance that are
geared for our partners.

Corporate Social Responsibility Governance

The Starbucks Foundation
A separate 501(c)(3) charitable organization

Board of Directors

president andchief executive ofﬁcer

senior vice president
Corporate Social Responsibility

Emerging Issues Council

8
STARBUCKS AND CORPORATE SOCIAL RESPONSIBILITY

Stakeholder Engagement
Socially Responsible
Investments (SRI)

Our stakeholders include customers, partners, suppliers,
shareholders, community members, environmental groups,
activists and many others. We have beneﬁted greatly fromengaging our stakeholders in dialogue, listening to theirconcerns and asking for their feedback.

There are a variety of socially responsible mutual funds
available to investors who choose to invest in companies
that meet speciﬁc criteria in areas covering various social,environmental and economic dimensions. Starbucks
was listed on several SRI indices (mentioned below) andincluded in some socially responsible mutual funds inﬁscal 2005.

Starbucks hosted one such session in Lausanne, Switzerland,
home of the company’s coﬀee buying operations, in June
2005. We invited a cross-section of European policymakers,
nongovernmental organizations (NGOs) and trade groups
representing a multitude of interests and perspectives. Topics
broadly centered on global issues that could have an eﬀect on
the coﬀee industry as a whole, such as industry collaboration,
equity for coﬀee farmers, coﬀee quality and the environment.
Starbucks also shared our current CSR activities andinitiatives and asked for feedback on sustainability issues weshould consider in Europe and within our global operations.

• Calvert Social Index™
• Citizens Index®
• Domini 400 Social Index

SM• Dow Jones Sustainability North America Index (DJSI
North America)

Several examples of our other stakeholder engagement eﬀorts
are highlighted throughout this report.

• Dow Jones Sustainability United States Index (DJSI
United States)• Dow Jones Sustainability World Index (DJSI World)• Ethibel Sustainability Index, Excellence Constituent• FTSE4Good Global Index• FTSE4Good U.S. Index• KLD Broad Market Social Index, KLD BMS• KLD Large Cap Social Index, KLD LCS• KLD NASDAQ Social Index

Corporate Giving

Civic and Community Affairs

Business Practices(Supply Chain)

Environmental Affairs

International CSR

Public Policy andGovernment Affairs

Stakeholder andPartner Engagement

Transparency and Reporting

9
STARBUCKS AND CORPORATE SOCIAL RESPONSIBILITYSMSMOUR WORLD OF PRODUCTS

Starbucks is committed to purchasing
our coffee in an ethical and sustainable
manner, regardless of labels andcertiﬁcations. The Fair Trade
system only certiﬁes cooperativesof small-holder, family-owned
farms, a system that currently
produces about two percent of
the world’s coffee supply. The
majority of the high-quality
coffee Starbucks purchases isgrown by farmers outside thissystem, many of whom aresmall-holders. Fair Trade
CertiﬁedTM coffee is one sourceof supply for our global
coffee purchases.
(More information
begins on page 16.)

Manuel Antonio Barrantes works in his family’s business, a coﬀee farm located in
the Costa Rican province of Alajuela. The 99-acre (40-hectare) farm, the Herbazu
Estate, was named after the family’s patriarch, Hermanos Barrantes Zúñiga.
Herbazu is an approved supplier under C.A.F.E. Practices, Starbucks socially
responsible coﬀee buying guidelines. All 10 of Manuel Antonio’s siblings live, workand raise their families on the estate. Manuel Antonio and his daughter, Hazel
Maria, are pictured here.

11
OUR WORLD OF PRODUCTS

Progress Report on Our Performance – PURCHASING PRACTICES
TOPIC

CoffeeC.A.F.E.
Practices
CoffeeC.A.F.E.
Practices

CoffeeC.A.F.E.
Practices
CoffeeC.A.F.E.
Practices

CoffeeC.A.F.E.
Practices
CoffeeC.A.F.E.
Practices
CoffeeFair Trade

CoffeeFair Trade

Manufactured
goods
Supplier Codeof Conduct
Supplier diversity

Supplier diversity

KEY:

SELFRATINGFOR MORE
INFORMATIONWHAT WE SAID IN 2004

WHAT WE DID IN 2005

Purchase 75 million pounds (34million kilograms) of coffee fromapproved suppliers in ﬁscal 2005.

Purchased 76.8 million pounds (34.8 million kilograms) ofcoffee under C.A.F.E. Practices, representing 24.6 percent of
our total coffee purchases.

Page 18

Continue to provide extensive
C.A.F.E. Practices training forveriﬁers, farmers, suppliers andStarbucks partners.

Increased the number of veriﬁers and farmers in Latin
America trained on C.A.F.E. Practices. Integrated C.A.F.E.
Practices information into barista training materials,
advanced Coffee Education classes and Coffee Masters
program materials for our partners.

Page 21

Seek ongoing feedback fromfarmers and nongovernmentalorganizations (NGOs) on ways we
can improve C.A.F.E. Practices.

Surveyed farmers and veriﬁers on various aspects of C.A.F.E.
Practices. Also shared the C.A.F.E. Practices model withindustry peers and invited their feedback.

Work with Conservation
International (CI) and otherthird parties to develop regional
indicator supplements and smallholder farmer guidelines.

Continued collaborating with CI to create regional guidance
documents for Latin America. Began regionalizing indicators
for C.A.F.E. Practices, a process that will continue in 2006.
Also created a supplement to make C.A.F.E. Practices
relevant for small-holder farmers and cooperatives.

Page 19

Make additional efforts toimplement C.A.F.E. Practices inAfrica and Asia.

Signed a three-year agreement with African Wildlife
Foundation to assist us in East Africa. Began initial efforts
to extend C.A.F.E. Practices to East African coffee farmers
and cooperatives.

Page 22Develop tools and systems tomeasure the ﬁnancial impacts andthe beneﬁts of C.A.F.E. Practices.

Began an initial study with 100 coffee farmers in Costa Rica
to better understand farmers’ costs/beneﬁts of participatingin C.A.F.E. Practices.

Purchase 10 million pounds (4.5
million kilograms) of high-quality
coffee from Fair Trade Certiﬁed™
cooperatives.

Purchased 11.5 million pounds (5.2 million kilograms)of high-quality Fair Trade Certiﬁed™ coffee, representing
3.7 percent of our total coffee purchases.

Increase our channels of
distribution and product offeringsof Fair Trade Certiﬁed™ coffee inthe U.S. and Canada.

Introduced Café Estima Blend™ Fair Trade Certiﬁed™ coffee
in our U.S. and Canada retail stores. Increased our Fair
Trade Certiﬁed™ coffee offerings to our foodservice accounts,
including colleges and universities. Began selling Fair Trade
Certiﬁed™ coffee in Costco stores, a signiﬁcant channel of
distribution for Starbucks.

Page 24

Increase training on Starbucks
Supplier Code of Conduct for
our global procurement teamand our suppliers.

Conducted an internal procurement workshop to review andgain feedback on Starbucks initial efforts of implementing
our Supplier Code of Conduct. Although we did not train
any of our suppliers, we began developing a broader, moresustainable approach to support our procurement practices.

Page 27

Enhance our tools and thetraining provided to our buyers
and business unit managers so
we can increase our total purchasesfrom diverse suppliers.

Initiated a new project to improve tracking of suppliers in our
accounting system, a process that will enable Starbucks toreport our purchases with diverse suppliers in greater detail.

Join national supplier diversity
organizations that enable us to
network and develop relationships
with diverse suppliers.

Joined the National Minority Supplier Development Council
and the Women’s Business Enterprise National Council.

ACHIEVED

MAKING PROGRESS

Page 19

Page 23

Conducted internal presentations on our supplier diversity
process.

DID NOT ACHIEVE

12
OUR WORLD OF PRODUCTS

Page 31OUR WORLD OF PRODUCTS
In the early days of Starbucks, our business
was fairly straightforward. We sold highquality whole bean coffee through a small
network of company-operated retail locationsand via some wholesale accounts. Coffee
continues to be our core product and accounts
for the majority of Starbucks revenues. But
today Starbucks markets, sells and/or licenses
a broader range of products, including Tazo®
tea, Hear Music™ CDs, Ethos™ water, Starbucks™
Liqueurs, various food and dairy items and anarray of brewing equipment and merchandise.

In this section we explain Starbucks approach to sustainable
trade. We report the progress we’re making to implement thisapproach and indicate where improvement is needed. Speciﬁc
topics include:• Our integrated approach to sustainable coﬀee production• Social responsibility standards for manufactured goods• Sustainable practices for agricultural products, including
cocoa and tea• Consumer products – Ethos™ water, Starbucks™ Liqueursand Hear Music™ CDs• Supplier diversity

With every product Starbucks brands, markets and/or sells,
a commitment to quality is upheld. This commitment stems
from our Guiding Principle that compels us to apply thehighest standards of excellence to the purchasing, roasting
and fresh delivery of our coﬀee.

Starbucks Approach to Sustainable Trade

Our products are grown, produced

CODE OF CONDUCT

and/or manufactured by amultitude of suppliers around theworld. As our global supply chain
operations expand and become
increasingly complex, we recognize
the importance of instituting an

Social Responsibility Standards:
Agriculture Products

Social Responsibility Standards:
Manufactured Goods and Services

Coffee:C.A.F.E. Practices

Supplier Certiﬁcation
Program

Other Agriculture Products:(Cocoa & Tea)
Guidelines in Development

Supplier Social
Responsibility Program

overarching framework that ensuresethical trading practices, increases
transparency and continues to build
a sustainable network of suppliers.
Starbucks is working on many levels
to implement such an approach.
Starbucks Supplier Code of Conduct
articulates our core values andthe expectations we have of our
suppliers. The Code includes
social responsibility standards forboth agricultural products andfor manufactured goods.

13
OUR WORLD OF PRODUCTS

OUR WORLD OF PRODUCTS
Starbucks trading relationships span the globe. This map indicates where our coffees, teas, botanicals
and cocoa are grown and where Ethos™ water is sourced.

UNITED STATESMOROCCOMEXICOPUERTO RICO (U.S.)
HONDURASGUATEMALANICARAGUA

EL SALVADORVENEZUELACOSTA RICA
PANAMA

Hawaii(U.S.)

COLOMBIA
IVORY
COAST

ECUADORBRAZILPERU
BOLIVIAKey
CoffeeTea/Botanicals*

CHILE

Cocoa
Water

QUICK FACTS – FISCAL 2005
COFFEETEA/BOTANICALS*• Global production: 15 billion pounds1(7 billion kilograms).

• Global tea production: 7.1 billion pounds2(3.2 billion kilograms).

• Starbucks purchased 312 million pounds(142 million kilograms), which represents two
percent of world production.

• Starbucks purchased 3.2 million pounds(1.4 million kilograms) of teas and botanicals.
• Tazo® teas and botanicals are grown in
25 countries.

• Starbucks coffee was grown in 27 countries,
the majority being Guatemala, Costa Ricaand Indonesia.

See page 29.

See page 16.

* Botanicals are various leaves, ﬂowers, roots, petals, seeds,bark, berries and spices. Tazo incorporates botanicals into
its tea blends.

14
OUR WORLD OF PRODUCTS

GHANA

CROATIA
BULGARIAITALYUZBEKISTANTURKEY
JAPAN

CHINA

ALBANIA

EGYPT

INDIA

TAIWANYEMENNIGERIA
DEMOCRATIC
REP. OFCONGOUGANDATHAILANDVIETNAMETHIOPIA

SRI
LANKA

KENYA

RWANDA
BURUNDI

INDONESIATANZANIAPAPUANEW GUINEAEAST TIMORZAMBIA
ZIMBABWE

MADAGASCAR

AUSTRALIA

SOUTH
AFRICA

COCOA

WATER

• Global production: 7.2 billion pounds3(3.3 billion kilograms).

• In 2005, Ethos™ water was sourced fromtwo U.S. locations – Palomar Mountain
range, California, and Pennsylvania’s Pocono
Mountains.

• Starbucks purchased 12.4 million pounds(5.6 million kilograms).

See page 30.

• The cocoa used in Starbucks products is
produced in eight countries.
See page 28.

15
OUR WORLD OF PRODUCTS

1

October 2004–September 2005, International Coﬀee Organization2

2004 ﬁgures, International Tea Committee Annual Bulletin of
Statistics 2005 provided by Tea Association of the USA, Inc.

3

October 2004–September 2005, LMC International, Ltd.,LMC Cocoa Bulletin

ECONOMIC
TRANSPARENCY*

STARBUCKS COFFEE SUPPLY CHAINFARMERS/PRODUCERSPROCESSORS

C.A.F.E. Practices suppliers are asked to provide a copy of
an invoice or receipt for the coffee delivered to the processor
or exporter. If the farmer represents a large estate, we also
request wage and salary transparency to determine whether
farm workers are receiving fair compensation for their labor.

For C.A.F.E. Practices suppliers, evidence must be furnishedindicating payments up and down the supply chain, including
payments made to farmers, and receipts from exporters.
Documentation is also required indicating the costs of processing.

Estates are medium- to large-scale farms that typically
employ workers to help with harvesting and processing.
Estates usually have their own processing facilities on-site.
Small farms are typically family-run, growing coffee on lessthan 30 acres (12 hectares) along with other food crops.
Small-holder farmers deliver their harvested coffee crops
to a collection point and then sell to an intermediary or
a processor. Farmers are self-employed and might hire
workers as well as rely on their families to help during
the harvest season.

Wet mills buy or receive coffee cherries from farmers and process
them by removing the fruit and drying the beans. They are standalone operations or integrated facilities on large farms or cooperatives.
Some wet mills can handle the dry mill processing on-site. If not,they send the coffee beans to a dry mill for further processing.

Cooperatives
Small-holder farmers often join cooperatives to achieve
economies of scale, obtain bargaining power and collaborate
on production methods. Cooperatives also serve as processors
and sometimes as exporters. Fair Trade Certiﬁed™ coffee isproduced exclusively by cooperatives.

Dry mills buy or receive processed coffee beans directly from farmers
or wet mills. Dry mills conduct the ﬁnal stage when coffee beans arechecked for quality, sorted and graded. Green coffee is then sold to
local buyers or exporters. A dry mill might be integrated into an export
operation or included on a large farm or cooperative.

*The level of transparency varies depending on supply chain realities. For example, some documentation can only be traced to the cooperative level and not to the end-producer (farmer).

Our Integrated Approach to
Sustainable Coffee Production• Paying premium prices to help farmers make proﬁts
and support their families• Encouraging participation in C.A.F.E. (Coﬀee andFarmer Equity) Practices, our social and environmental
guidelines for producing, processing and buying coﬀee• Purchasing conservation (shade grown) and certiﬁed
coﬀees, including organic and Fair Trade Certiﬁed™
• Providing funds for farmers to access credit• Investing in social development projects in coﬀee
producing countries• Collaborating with coﬀee producers globally on coﬀee
quality, production, processing and research throughour team of experts at the Starbucks Coﬀee Agronomy
Company, located in Costa Rica

The world coﬀee market has historically been susceptible
to price ﬂuctuations, which are linked to global supply anddemand. In 2001, green (unroasted) coﬀee prices hit a 30year low, adversely aﬀecting many coﬀee farmers. Regardlessof market ﬂuctuations, Starbucks has always been committed
to purchasing high-quality coﬀee in a socially responsible
manner. But when this most recent and dramatic downturn
occurred, we reviewed our entire approach to buying coﬀee
and adopted a more integrated and sustainable model that isbased on six fundamental principles:

16
OUR WORLD OF PRODUCTS

The value chain that extends from farmer to customer includes coffee growers, farm workers, mill workers, exporters androasters. At every stage our quality standards must be met, as well as our requirement for economic transparency, which helps
to ensure farmers receive equitable prices for their crops.

EXPORTERSSTARBUCKS COFFEE COMPANY

Prices paid to processors and prices charged to importers must
be disclosed.

1

Exporters receive or buy green coffee beans from mills, farmers
and cooperatives. They contract and arrange for shipment of thegreen coffee and sell the coffee to importers or roasters.

Importer2

Roaster

Starbucks buys green(unroasted) coffee fromexporters, farmers andcooperatives, and occasionallyfrom other importers.

Green coffee is thentransported to one of ourplants and roasted toStarbucks ﬂavor proﬁles.

3 Distributor

4

Roasted coffee is packaged anddistributed to Starbucks stores,
grocery stores and foodservice
accounts, such as universities,
hotels and restaurants.

Starbucks sells coffee in morethan 10,000 stores worldwide.

Exporters are either independent agents in the supply chain or, inmany cases, have their own wet and dry mill facilities. And some
farms do it all – grow and process the coffee and serve as exporters.
The exporter can be a local company or part of a large corporation
with importing ofﬁces around the world. Starbucks uses exporters
because they provide value-added services and reduce risk forboth Starbucks and farmers through services such as quality
management, sampling of coffee, providing pre-crop ﬁnancing andpreparing documentation of ﬁnished coffee for export and delivery.

Retailer

Paying Premium Prices
The success of the farmers with whom we do business is
intrinsically linked to the sustainability of our business.
Our commitment to pay premium prices for high-quality
coﬀee underlies all of our relationships with farmers. Paying
premium prices has also helped to stimulate the production ofhigh-quality coﬀee, and helped farmers increase their incomes,
reinvest in their farms and plan for their futures. The visible
impact of paying higher prices is often referred to as the
Starbucks Eﬀect, a phrase coined and used by some of the
farmers and suppliers who sell coﬀee to Starbucks.

In ﬁscal 2005, Starbucks purchased 312 million
pounds (142 million kilograms) of coffee and paid
an average price of $1.28 per pound, which was
23 percent higher than the average New York “C”(the worldwide reference used by coffee traders)market price during the same time frame.

“The Starbucks Eﬀect is clearly being felt in Colombia,” said
Carlo Frigerio, president of Carcafé, the Colombian division of
global coﬀee exporter, Volcafé, “and it is putting tremendous
pressure on others to do something similar.”

17
OUR WORLD OF PRODUCTSC.A.F.E. Practices
In 1998, Starbucks began to integrate conservation principles
in our coﬀee buying practices through our partnershipwith Conservation International (CI). Three years later, we
collaborated with CI to create and pilot Starbucks Preferred
Supplier Program (PSP) that was based on a set of socially andenvironmentally responsible coﬀee buying guidelines.
These early eﬀorts laid the groundwork for what eventuallybecame Coﬀee and Farmer Equity (C.A.F.E.) Practices.
Formally introduced in ﬁscal 2004, C.A.F.E. Practices was
designed to assure high-quality coﬀee is grown and processedwith environmental sensitivity and social equity throughout
our coﬀee supply chain. Program improvements were madein ﬁscal 2005 by Scientiﬁc Certiﬁcation Systems (SCS),a third-party evaluation and certiﬁcation ﬁrm retained byStarbucks for the development, training and auditing of
C.A.F.E. Practices.

THE COFFEE INDUSTRY— AN OVERVIEW —It is believed that coﬀee was ﬁrst consumed asa hot beverage in East Africa during the 11th
century. Today, coﬀee is one of the most popularbeverages, with $70 billion in retail sales wordwide.*
Furthermore, the coﬀee industry provides a livelihood
for an estimated 25 million people* (coﬀee farmers
and their families) in more than 70 tropical coﬀeeproducing countries.
There are two commercially viable species ofcoﬀee – robusta and arabica. High-quality arabica
coﬀee is grown on all kinds of farms that range
from very small, family-run parcels to large-scale
estates located between the Tropics of Cancer andCapricorn, and typically situated at higher elevations.
These elevations provide optimal climatic conditions
needed to grow the type of coﬀee that is considered
specialty grade. When more care is taken in growing,
harvesting and processing the beans, the result ishigher-quality coﬀee. Starbucks only purchases thehighest-quality arabica coﬀee beans. These coﬀees are
sold under the Starbucks®, Seattle’s Best Coﬀee® andTorrefazione Italia® brands.
Arabica coﬀee is traded in two ways:

OUR GUIDELINES FOR C.A.F.E. PRACTICES
C.A.F.E. Practices helps ensure that Starbucks purchases
coﬀee that is grown and processed in a sustainable mannerby evaluating the social, environmental and economic aspectsof coﬀee production. The guidelines include 28 indicators
against which suppliers (farmers, cooperatives, processors
and exporters) are evaluated. With the exception of theindicators for quality and economic transparency, which
are prerequisites, all other indicators have been assigned aminimum and a maximum number of points.

• The majority of arabica coﬀee is traded as acommodity on the highly volatile New York “C”
market. As global supply rises and falls, so do “C”
prices. The average “C” price for a pound of coﬀee
during ﬁscal 2005 was $1.04.

Suppliers need to earn the minimum points in each scoredarea, representing social and environmental criteria. Finalscores are determined by independent, third-party veriﬁers,
a process monitored by SCS. Starbucks looks at the points
earned in each section to decide each supplier’s status.

• Higher-quality arabica beans are sold as specialty
coﬀee, which represents 10 percent** of total
worldwide coﬀee purchases. Prices for specialty
coﬀee are often negotiated at higher prices thanthe “C” oﬀers in order to compensate farmers for
quality. Coﬀee can be purchased from exporters,
brokers, cooperatives and in some cases, farms.

In ﬁscal 2005, Starbucks purchased 76.8 million pounds(34.8 million kilograms) of coﬀee from C.A.F.E. Practices
suppliers in seven countries. There are three status levels for
C.A.F.E. Practices suppliers: Strategic, Preferred, and Veriﬁed.
Starbucks buys on a preferential basis from C.A.F.E. Practices
approved suppliers.
Of the C.A.F.E. Practices coﬀee we purchased in 2005, thepercentage from each supplier group is as follows:• Strategic (score of 80% and higher in social andenvironmental areas): 27%• Preferred (score of 60% and higher in social andenvironmental areas): 11%• Veriﬁed (score of less than 60% in social andenvironmental areas): 62%* International Coﬀee Organization** Specialty Coﬀee Association of America

18
OUR WORLD OF PRODUCTSC.A.F.E. PRACTICES TIMELINE
Evolution of Starbucks socially responsible coffee buying guidelines
1998–2000

Conservation Principles for Coffee Production
Developed through multistakeholder collaboration between nongovernmental organizations(NGOs) and industry associations in response to declining coffee prices. These principles
inﬂuenced Starbucks coffee buying guidelines.

2001

Starbucks Preferred Supplier Program (PSP)Created in collaboration with Conservation International to ensure the sustainable productionof high-quality coffee. The program was based on a set of quality, social, environmental andeconomic guidelines.

2002–2003

2004

Conducted a two-year pilot of the program with coffee farmers, processors and exporters.
Feedback was solicited and used to improve the program, including the introduction of more
relevant and speciﬁc guidelines and a third-party veriﬁcation process.

C.A.F.E. Practices
PSP program was enhanced with guidance from Scientiﬁc Certiﬁcations Systems andrenamed Coffee and Farmer Equity (C.A.F.E.) Practices.
Economic transparency became a prerequisite and deﬁning component of C.A.F.E. Practices.
Opened Starbucks Coffee Agronomy Company (Farmer Support Center) in Costa Rica to work
more closely with farmers and suppliers worldwide who are implementing the guidelines for
C.A.F.E. Practices.

2005

Continued to improve guidelines based on feedback from farmers, cooperatives, suppliers
and NGOs.
Created a supplement to the guidelines for small-holder farmers and cooperatives.
Increased the number of veriﬁers and farmers trained on C.A.F.E. Practices in Latin America.

2006
AND
BEYOND

Explore opening a Farmer Support Center in Asia and begin introducing C.A.F.E. Practices toour local suppliers.
Work with African Wildlife Foundation to develop regional guidance documents so C.A.F.E.
Practices can be extended to East African coffee farmers and cooperatives.
Plan to work with farmers and suppliers to provide the evidence we request for economictransparency.

C.A.F.E. PRACTICES
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*Represents 24.6% of Starbucks total coﬀee purchases.

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**Coﬀee purchased under Preferred Supplier Program guidelines.

19
OUR WORLD OF PRODUCTS����COMPARING C.A.F.E. PRACTICES TO COFFEECERTIFICATION SYSTEMS
Starbucks admires the eﬀorts other organizations aremaking to address the inequities coﬀee farmers face and toprotect the environment that sustains them. Over the years,
many of these organizations have developed certiﬁcation
systems for coﬀee producers, with a range of objectives,
each focused on a speciﬁc area of sustainability. For example,
Fair Trade Certiﬁed™ coﬀee guarantees small producers indemocratically organized cooperatives a minimum price for
their product. Rainforest Alliance’s Sustainable Agriculture
Network (SAN) and the Smithsonian Migratory Bird
Center’s “Bird Friendly®” Coﬀee Program emphasize
environmental stewardship.

Conservation Principles for Coﬀee Production – upon which
C.A.F.E. Practices is based. C.A.F.E. Practices includes manyof these focus areas and ensures that suppliers to Starbucks
are addressing a range of sustainability issues. C.A.F.E.
Practices’ comprehensive sustainability criteria include aspects
ranging from coﬀee quality to social, environmental andeconomic responsibility.
A number of industry-developed initiatives have also beenlaunched to address certain aspects important to theirbusiness or to include producers from speciﬁc countries or
farm types. For example, Utz Kapeh certiﬁcation has been
adopted by several multinational brands. We believe theseeﬀorts contribute to the promotion of a sustainable coﬀee
industry and we appreciate the beneﬁts that each has brought
to coﬀee-producing communities. A comparison between
several established certiﬁcation systems and C.A.F.E. Practices
is available in the table below.

Starbucks has drawn from the experience of many of thesesystems in the development of C.A.F.E. Practices,
including the work of organizations that contributed to the

Coffee Certiﬁcation Systems Compared to C.A.F.E. Practices
PROGRAMFOR MORE
INFORMATIONMISSION

FOCUS AREAS

Sustainable development of disadvantaged
small-holder farmers of democratically organizedcooperatives.

Minimum price,social premium, laborand environmental
standards

Rainforest
Alliance

Integrate productive agriculture, biodiversity
conservation and human development.

Sustainable farmmanagement,
including social, laborand environmental
responsibility, andcontinual improvementswww.rainforest-alliance.org

Smithsonian
Bird Friendly®

Conduct research and education around issues of
neo-tropical migratory bird populations, promoting
certiﬁed shade coffee as a viable supplemental
habitat for birds and other organisms.

Shade grown coffeewww.si.edu/smbc

Organic

Produce organic food by farmers who emphasize
the use of renewable resources and theconservation of soil and water to enhanceenvironmental quality for future generations.
Organic food is produced without using mostconventional pesticides; fertilizers madewith synthetic ingredients or sewage sludge;
bioengineering; or ionizing radiation.

Soil healthwww.ams.usda.gov/nop

Utz Kapeh

Implement a worldwide baseline standard forsocially and environmentally responsible coffee
production and sourcing.

Environmental andsocial responsibility,
good agricultural
practices, traceability
and basic food safetyissueswww.utzkapeh.org

C.A.F.E.
Practices

Ensure the sustainable production of high-quality
coffee by addressing social, environmental andeconomic responsibility throughout the coffee
supply chain.

Coffee quality, social,environmental andeconomic responsibility

www.scscertiﬁed.com/
csrpurchasing/starbucks.html

Fair Trade20
OUR WORLD OF PRODUCTS

LABEL

www.fairtrade.net®

ECONOMIC TRANSPARENCY
For all the coﬀee Starbucks buys, our goal is to pay premium
prices that help farmers sustain their business. We purchasecoﬀee from a variety of suppliers, including individual farms
and farmer-run cooperatives, or through exporters who buy
from farms. Starbucks wants assurance that the farmer receives
a fair and proﬁtable share of our purchase price. This is why
we began inserting economic transparency provisions into
our coﬀee contracts, essentially requiring that our suppliers
provide credible evidence, usually in the form of receipts, thatindicates how much each party in the coﬀee supply chain
was paid. In ﬁscal 2005, 93 percent of our coﬀee contracts
included an economic transparency clause requesting
documentation of payments made to various participants inthe supply chain. In 87 percent of these contracts, economictransparency was required to the producer level. (See pages 16
and 17 for economic transparency requirements.)

Rainforest Alliance: Proﬁle of a
C.A.F.E. Practices Veriﬁer

While we are encouraged by the progress our suppliers havemade to provide economic transparency, institutionalizing thisnew practice continues to present enormous challenges. Whencoﬀee suppliers provide economic transparency, they present
various forms of ﬁnancial documents as evidence. These canrange from a simple receipt for the coﬀee cherries that thefarmer delivered to the mill, to full purchase agreements that
include more levels along the coﬀee supply chain. Moreover,these documents not only diﬀer in quality, they reﬂect
variations in currency, units of measure and are prepared inmany diﬀerent languages.

Everlay Méndez Martínez of Pronatura, an afﬁliate of the Rainforest
Alliance, conducts a coffee farm’s independent third-party ﬁeld
inspection against C.A.F.E. Practices.

The Rainforest Alliance is dedicated to protecting
the earth’s ecosystems and has been a champion
and catalyst for sustainable agricultural practices.
In conjunction with the Sustainable Agriculture
Network (SAN), a coalition of leading conservationgroups, the Rainforest Alliance developed its own
guidelines for sustainable agriculture and createda certiﬁcation seal for products, including coﬀee,
which are grown and produced in accordance with its
guidelines.

Starbucks goal is to verify the submitted evidence and reacha high level of assurance that farmers received an equitable
portion of the purchase price. Given the realities mentioned
above, the complexities of our coﬀee supply chain and thecircumstances of a producing country, we anticipate thisundertaking to be an ongoing challenge.

The Rainforest Alliance and some of its SAN
co-members serve as veriﬁers for C.A.F.E. Practices.
In ﬁscal 2005, these parties carefully veriﬁed 16
applications, which included measuring performanceon farms and mills. They used a veriﬁcation processthat was audited by Scientiﬁc Certiﬁcation Systems(SCS), a standard practice for all newly approved
veriﬁers. In some cases this past year, suppliers appealed
their scores to SCS. After a thorough review, SCS
determined that the Rainforest Alliance and SAN
veriﬁers had properly measured performance and thatthe scores were indeed correct.

THE VERIFICATION PROCESS – WHAT WE ARE LEARNING
Suppliers interested in participating in C.A.F.E. Practices
must agree to an inspection by an independent third-party
veriﬁer. Veriﬁcations are usually conducted annually andinvolve ﬁeld inspections, face-to-face interviews with workers,
document reviews and desk audits. Completed reports are
submitted, reviewed by a Starbucks committee and granted
a status.

Guillermo Belloso, a veriﬁer on the Rainforest
Alliance/SAN team in El Salvador, shared his
perspective on C.A.F.E. Practices. “Like any standard,
C.A.F.E. Practices is a challenge to implement withconsistency. We need to make sure it is driving real,continuous improvements and that small producers
have access to the training and resources they needto comply with the requirements.” Veriﬁers such as
the Rainforest Alliance are continually providing
meaningful feedback to Starbucks and thus helping tostrengthen C.A.F.E. Practices.

During ﬁscal 2005, Scientiﬁc Certiﬁcation Systems trained
100 individual veriﬁers representing 14 organizations fromseven countries who can evaluate and score against C.A.F.E.
Practices’ comprehensive criteria. We are continually working
to increase the pool of qualiﬁed veriﬁers.
Through the veriﬁcation process, Starbucks has come toappreciate that regional guidance documents are needed toaccommodate local supply chain realities.

21
OUR WORLD OF PRODUCTS

STARBUCKS RECOGNIZED FOR
C.A.F.E. PRACTICES BY THE
WORLD ENVIRONMENT CENTER
The 2005 Gold Medal Award
from the World Environment Center
was presented to Starbucks,
recognizing the company’s leadershipin the development of C.A.F.E. Practices.
President Oscar Berger of Guatemalapresented the prestigious award to
Howard Schultz, Starbucks chairman,
in Washington, D.C., in May 2005.

Peter Torrebiarte (right), general manager of Starbucks Coffee Agronomy Company
in Costa Rica, recently visited the Santa Eduviges farm, an approved C.A.F.E.
Practices supplier, and met with its foreman, Porﬁrio Obregon Ruiz.

GOING FORWARD
While much progress has been made implementing C.A.F.E.
Practices, instituting such a pioneering eﬀort is not easy. For
instance, obtaining credible economic transparency for all of
our coﬀee contracts may take years.

Q: Why should I invest in C.A.F.E.
Practices now that coffee prices
have gone up and I am alreadyearning more for my crops?

Given the volatility of world coﬀee prices, some suppliers
may question whether it makes sense to invest in the typeof sustainable measures required to participate in C.A.F.E.
Practices. We encourage farmers to consider the beneﬁts ofbuilding long-term relationships with Starbucks through their
participation in C.A.F.E. Practices, and to focus on improving
the quality and sustainability of their coﬀee. By doing so, we
believe they are better protected from ﬂuctuating prices.

– Hugo Davila, Las Carmelitas Farm, Nicaragua

A: Market prices for coffee have always beenvolatile, rewarding farmers during the good times
but hurting them when prices fall. To address
the need for stability and to ensure a sustainablesupply of high-quality coffee for Starbucks, wedeveloped C.A.F.E. Practices. Starbucks gives
preference to C.A.F.E. Practices suppliers bypaying premium prices that help farmers sustain
their businesses and by potentially signing longterm contracts. In other words, approved C.A.F.E.
Practices suppliers have more security because
they know that they have a buyer for their future
crops – and that long-term buyer is Starbucks.

Starbucks has set aggressive goals for C.A.F.E. Practices,reﬂected in the amount of coﬀee we plan to purchase fromparticipating suppliers. (See page 19.) To meet this particulargoal, we need a larger base of approved suppliers and moretrained veriﬁers.
Our motivation for opening Starbucks Coﬀee Agronomy
Company (Farmer Support Center) in Costa Rica twoyears ago was to work more closely with coﬀee farmers andsuppliers from all over the world, implement the guidelines
for C.A.F.E. Practices and help farmers maintain and improve
the quality of their coﬀee. Having a presence there has also
allowed us to have closer relationships with suppliers andgain greater insight into the production of high-quality,
sustainable coﬀee.
We will continue to extend C.A.F.E. Practices to East Africancoﬀee farmers and cooperatives. Additionally, Starbucks
recently aligned with the African Wildlife Foundation to work
jointly with coﬀee cooperatives in Kenya to provide coﬀee
quality training and encourage the adoption of sustainablecoﬀee practices.
More information on C.A.F.E. Practices, including theguidelines and scoring system, can be found online atwww.scscertiﬁed.com/csrpurchasing/starbucks.html.

22
OUR WORLD OF PRODUCTS

Starbucks and Fair Trade
What Is Fair Trade Certiﬁed™ Coffee?

Starbucks and the Fair Trade movement share a common
goal: to help ensure that farmers receive a fair price for theircoﬀee and strengthen their farms for the future. We also focus
on cultivating long-term, stable relationships with farmers,
providing supplemental funding through social premiums,
and providing them access to aﬀordable credit.

Fair Trade certiﬁcation guarantees that a minimum
price* of $1.26 per pound ($1.41 per pound fororganic) was paid to the farmer cooperative that
produced the coffee. Certiﬁcation also requires
criteria be met by coffee cooperatives, including fairlabor conditions, freedom of association and certain
environmental standards. To be certiﬁed as Fair Trade,the coffee can only be grown by small-holder farmers
who belong to farmer-owned, democratically run
coffee cooperatives listed on the Fair Trade registry. An
estimated three percent of the world’s coffee farmers
participate in the Fair Trade system.

In ﬁscal 2005, Starbucks exceeded the 10 million pound(4.5 million kilogram) goal we had previously set withpurchases of 11.5 millions pounds (5.2 million kilograms) of
Fair Trade Certiﬁed™ coﬀee. This represents approximately
10 percent of global Fair Trade Certiﬁed™ coﬀee imports.
Twenty-one percent of the Fair Trade Certiﬁed™ coﬀee
imported into the U.S. in ﬁscal 2005 was purchased byStarbucks, making us the largest purchaser of Fair Trade
Certiﬁed™ coﬀee in North America.

* These established prices set by the Fairtrade Labelling Organizations
International include $1.19–$1.21 for the coﬀee (depending on the region),$0.05 for a social premium and an additional $0.15 premium for organic.
When “C” market prices rise, Fair Trade prices are adjusted accordingly
to be at least $0.05 above the “C” price. According to TransFair USA,approximately 70 percent of the price paid to the Fair Trade registeredcooperatives goes to coﬀee farmers, and the rest goes to operational andoverhead costs.

FUTURE GOAL
In ﬁscal 2006, Starbucks plans to increase sales of
our newly introduced Fair Trade product offerings andpurchase 12 million pounds (5.4 million kilograms) of
Fair Trade Certiﬁed™ coffee.

EXPANDING OUR COMMITMENT TO FAIR TRADE
CERTIFIED™ COFFEE
Our ﬁrst relationship with a Fair Trade licensing organization
began in April 2000, when we established an agreement withTransFair USA that allowed Starbucks to purchase, roastand sell Fair Trade Certiﬁed™ coﬀee. Every year since, wehave increased our purchases of Fair Trade Certiﬁed™ coﬀee
and worked to strengthen our relationships with Fair Trade
producers and licensing organizations around the world.

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When Starbucks purchases Fair Trade Certiﬁed™ coﬀee, we
are assured by the Fair Trade organizations that it was grownby small-holder coﬀee farmers, purchased for a set price via
registered Fair Trade cooperatives, and that certain social andenvironmental standards were upheld. The price we pay for
Fair Trade Certiﬁed™ coﬀee includes a social premium, which
totaled approximately $575,000 in ﬁscal 2005. The Fair Tradeco-ops we purchased from used these funds for community
improvements, such as local schools and health clinics.

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We have also helped to empower Fair Trade producers
by providing them with technical assistance needed to
improve the quality of their coﬀee; sharing best practices onsustainability and business operations; and funding several
nonproﬁt organizations that provide Fair Trade registeredcooperatives with pre-harvest ﬁnancing credit. (See page 26.)

23
OUR WORLD OF PRODUCTS

CASE STUDY: EMPOWERING FARMERS IN EAST TIMOR
On the tiny island of East Timor, coﬀee provides a
livelihood for more than 25 percent of the population. Overthe past decade, farmer-owned Cooperativa Café Timor(CCT) has virtually reinvented Timor’s coﬀee industry,earning farmers ﬁve times more than before. Where CCT’s
17,600 members once hand-processed inferior, overfermented beans for meager-paying local buyers, they now
produce specialty grades for international markets throughthe co-op’s centralized mills and drying ﬁelds.

to sustain the co-op’s future. He is therefore interested
in C.A.F.E. Practices, Starbucks coﬀee buying guidelinesthat reward sustainability with premium prices and thepossibility of long-term contracts. “Starbucks is more
central to how we’ll grow in the future than foreign aid,
Fair Trade or anything else,” he says.

Since 1995, Starbucks has consistently bought half ormore of CCT’s coﬀee and paid at least 30 percent above
prevailing market rates, even before CCT was admitted
to the Fair Trade registry a few years back. Through direct
grants and Fair Trade premiums, Starbucks has also helped
fund community development initiatives, such as a rural
water system and a network of primary health clinics.
These centers provide local residents with a defense against
extreme levels of infant and maternal childbirth deaths.
Initially backed by U.S. government funding, CCT
pursued organic and later Fair Trade certiﬁcations to protect
members against ﬂuctuating markets. But Director Sam
Filiaci doubts whether these steps alone will be enoughAt the Cooperativa Café Timor in Dili, East Timor, workers rake wet coffee beans
across the drying ﬁeld.
More proﬁles from the farmers’ perspective are available online atwww.starbucks.com/farmerstories.

GOING FORWARD
Starbucks is committed to purchasing Fair Trade Certiﬁed™
coﬀee as a way of supporting the network of Fair Traderegistered coﬀee cooperatives. In addition, Starbucks plans to:

These steps have helped to stimulate a steady supply of quality
Fair Trade Certiﬁed™ coﬀee, which has enabled Starbucks
to create additional Fair Trade Certiﬁed™ products, develop
new distribution channels, and locally promote Fair Trade
Certiﬁed™ coﬀees to our customers around the world.

• Promote our Fair Trade Certiﬁed™ coﬀee blends to increasecustomer demand and sales of these products.

As a result of our eﬀorts, in ﬁscal 2005, we:• Introduced Café Estima Blend,™ our new Fair Trade
Certiﬁed™ oﬀering, in our U.S. and Canada companyoperated and licensed stores as both whole bean coﬀee and“Coﬀee of the Week” every other month.

• Continue to work with regional Fair Trade organizations
to introduce additional Fair Trade Certiﬁed™ coﬀee
products globally.
• Urge TransFair USA to be a stronger advocate forfarmer equity by helping to institutionalize economictransparency within the coﬀee industry.

• Provided three Fair Trade Certiﬁed™ coﬀee blends tocollege and university accounts.
• Worked with Costco to oﬀer Fair Trade Certiﬁed™ coﬀee
blends under its well-established Kirkland Signature brand,which is sold through Costco stores. This has the potentialof becoming one of the largest global distribution channels
for Fair Trade Certiﬁed™ coﬀee.

• Continue to encourage Fair Trade producers to embrace
C.A.F.E. Practices as another means toward ensuring thesustainability of their businesses.
• Strengthen our internal systems so we can ensure Fair
Trade Certiﬁed™ coﬀee is consistently available in ourstores to meet our customers’ requests.

• Continued to oﬀer four Fair Trade Certiﬁed™ coﬀee blends
through our Seattle’s Best Coﬀee® brand.
• Continued to be the only company licensed to sell Fair
Trade Certiﬁed™ coﬀee in 23 countries.

24
OUR WORLD OF PRODUCTS

Certiﬁed Organic andConservation (Shade Grown)
Coffees
Starbucks purchases certiﬁed organic and conservation (shadegrown) coﬀees. These purchases support the company’s larger
eﬀort to preserve the natural environment and/or promoteeconomic stability. (See graphs below for amounts purchased.)
Starbucks purchased considerably more certiﬁed organic
coﬀee in ﬁscal 2005 than in the previous year. Starbucks oﬀers
two types of certiﬁed organic coﬀee, and Seattle’s Best Coﬀee
sells seven varieties.
Our shade grown coﬀee is purchased through Conservation
International’s (CI) Conservation Coﬀee program, arelationship that began in 1998. Starbucks and CI
formed an alliance to encourage farmers to use ecologicallysound growing practices that help protect biodiversity inenvironmentally sensitive areas and stimulate the production
and sale of high-quality coﬀee grown under the canopyof bird-friendly shade trees.
SM

Santiago Arguello (left), formerly of Conservation International, and Roberto Silvino
Hernández of the Comon Yaj Nop Tic coffee cooperative in Chiapas, Mexico, examine
the quality of these shade grown coffee beans. This is the area where Starbucks
Organic Shade Grown Mexico coffee is produced.

Recently, CI realigned its priorities, focusing more of its
resources on its core mission of protecting biodiversity
and strengthening local partnerships in countries with
Conservation Coﬀee projects. CI reports that farmers
participating in the program increasingly recognize theenvironmental value of incorporating Conservation Coﬀee
Best Practices, and that through local partnerships they areable to sell coﬀee to other buyers beyond Starbucks. This isespecially important when Starbucks is unable to purchase allof the coﬀee produced through this program. Such was thecase in ﬁscal 2005, when Starbucks received less shade growncoﬀee through this channel.

CI and Starbucks have continued to develop tools and resources
for C.A.F.E. Practices, including the Small-holder Supplement,
and collaborated to engage the broader coﬀee industry aroundsustainability eﬀorts through CI’s Center for Environmental
Leadership in Business. A progress update on our joint
endeavors is available on www.starbucks.com/csrannualreport.

SM

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Note: Coﬀees may be certiﬁed in more than one category.

25
OUR WORLD OF PRODUCTS

Access to Credit

selling their crops until the price is favorable. In ﬁscal 2004,
Starbucks committed $1 million to Calvert Foundation,$2.5 million to Verde Ventures, managed by Conservation
International, and $2.5 million to EcoLogic Finance forloans to coﬀee farmers. An additional $2.5 million wasprovided to EcoLogic Finance in ﬁscal 2005, not only toextend loans to coﬀee farmers but also to cocoa farmers.
Information on the impact of these loans is available atwww.starbucks.com/csrannualreport.

During the growing and harvest cycles, coﬀee farmers relyon their modest reserves to pay their expenses. It isn’t until
their crops are ﬁnally shipped that payment is received, which
may take months. It’s common for farmers to experience acash shortage, which can lead them to sell their crops early
to exploitative individuals called coyotes, who charge highinterest rates and pay low prices. This inevitably cuts into
farmers’ proﬁts and sets up a similar scenario for the next year.
Starbucks works with several organizations to make credit
available to coﬀee growers, which enables them to postpone

Rogelia Figueroa Guevara is a member of the Central de Cooperativas Agrarias Cafetaleras de Cuzco (COCLA),a Fair Trade CertiﬁedTM coffee cooperative in Peru.

CASE STUDY: SUPPORTING COFFEE FARMERS THROUGH
AFFORDABLE CREDIT
Rogelia Figueroa Guevara (pictured above) cultivates shadegrown coﬀee in the highland jungles of the Peruvian Andes.
She is one of 8,500 members of the Central de Cooperativas
Agrarias Cafetaleras de Cuzco, known as COCLA, a Fair Trade
Certiﬁed™ cooperative that applied to C.A.F.E. Practices in2005 and is providing Starbucks with high-quality coﬀee.

Known as “pre-shipment trade credit,” the ﬁnancing helps
COCLA cover expenses during the six-month “cash gap”
between the harvest and their receipt of payment for the crop.
In the four years since COCLA began receiving ﬁnancing
from EcoLogic Finance, membership has increased 60 percent
and coﬀee production has expanded 30 percent. More than90 percent of its production is now certiﬁed (i.e., Fair Trade,
organic, Rainforest Alliance, or Utz Kapeh certiﬁed). Certiﬁed
coﬀee price premiums enable COCLA to provide training tofarmers, oﬀer a microcredit program, set aside forestland for
habitat preservation, and provide a viable alternative to growing
coca, the basis for cocaine.

Starbucks works with EcoLogic Finance, a nonproﬁt lenderto sustainable businesses in environmentally sensitive areas,
to provide the ﬁnancing needed for COCLA to purchasecoﬀee from cooperative members like Rogelia. Through its
multifaceted network, which includes extensive support
from USAID, EcoLogic Finance bundled resources fromthe Calvert Social Investment Foundation and the Rudolf
Steiner Foundation (RSF) to extend $1 million in credit to
COCLA in 2005.

“We all want to improve the quality of our coﬀee, but before
we lacked the economic means because of low coﬀee prices or
not having a good market for our coﬀee,” Rogelia said. “Now
we have buyers who will give us a better price so we have an
incentive to keep improving the quality of our coﬀee.”**from RSF Quarterly, September 30, 2005

26
OUR WORLD OF PRODUCTS

Social Investments in
Coffee Communities
The majority of high-quality coﬀee is grown in remotecommunities located in developing countries. These areas havehistorically faced a devastating range of social, environmental
and economic challenges. We work with coﬀee farmers,
cooperatives, mills, exporters and local communities to build
schools, health clinics and other projects that strengthen thesocial infrastructure and beneﬁt nearby residents.
Social investments are not only made through ourphilanthropic contributions, but they are also funded in
two other ways:

In ﬁscal 2005, Starbucks contributed $10,000 toward the construction of the Centro
Escolar Caserio La Joya school in Tacuba, El Salvador. Our coffee exporter andthe local community provided additional funds. Starbucks plans to provide more
funding in 2006 through a social premium added to our coffee contract to help withcompletion of the school. The new school will serve up to 90 local children.

• Social premiums that are included in coﬀee contracts toprovide additional funds for community projects.

In ﬁscal 2005, Starbucks invested $1.5 million in 40 social
projects that ranged from education programs in Nicaragua
to a hospital renovation in Papua New Guinea. (Moreinformation on Starbucks investments in coﬀee-growing
communities is on page 40.)

• Financial awards given to farmers who produce a speciﬁc
coﬀee that is selected as part of Starbucks Black Apron
Exclusives™ program. In these cases, $15,000 is awarded toeach farm and earmarked for a community project.

Starbucks Social Responsibility
Standards – Manufactured Goods

In 2005 we reviewed our internal procurement practices
and identiﬁed the countries of origin for our branded
manufactured goods. We contracted with Sustainability
Management Group to conduct an assessment of our global
supply base in order to guide the decisions of our buyers.

While Starbucks core business is coﬀee, a segment of ourrevenues comes from manufactured products and merchandisethat range from mugs to coﬀee brewing machines. We alsopurchase supplies, equipment and furniture for our stores.

Starbucks goal is to have a procurement program that adds
value and helps sustain the company’s growth while ensuringthat relationships with our suppliers, and with the workers
who actually produce our manufactured goods and materials,
are in keeping with the company’s values. We recently createdan internal Sustainable Procurement Steering Committee andworking groups to begin implementing the concept phaseof this initiative. The group conducted an initial workshop
in July 2005 with the assistance and support of Verité, an
independent, nonproﬁt training, social auditing and researchorganization that will help guide the process.

Starbucks Supplier Code of Conduct was introduced in2003 along with Starbucks Social Responsibility Standards
for Manufactured Goods and Services. The Code andStandards include provisions for social conditions,
treatment of workers and environmental responsibility.
Since then the company has communicated our Codeand Standards to our suppliers and conducted a series ofinternal brieﬁngs to our buyers and others.
For the past two years, Starbucks has been exploring ways
to ensure our suppliers are complying with the company’s
expectations. By benchmarking and dialoguing withother companies, we now realize that strictly policing andmonitoring suppliers’ compliance to a respective Code of
Conduct does not necessarily lead to sustained changes inbehavior. This awareness has led us to question some of ourearlier assumptions and consider a much broader approach.

FUTURE GOAL
In 2006, Starbucks will implement a policy
and structure for Starbucks Sustainable
Procurement Program.

In ﬁscal 2005, Starbucks developed the initial concept andobjectives for a Sustainable Procurement Program that seeks toMore information about Starbucks Code of Conduct isavailable online at www.starbucks.com/csr.

• ensure supply chain transparency;• support sound procurement decisions through an
infrastructure for supplier screening and development; and• focus on creating supplier performance improvementthat can be aligned with Starbucks values, and sustained
over time.

27
OUR WORLD OF PRODUCTS

Procurement Practices for
Sustainable Agriculture
In addition to C.A.F.E. Practices for coﬀee, guidelines are indevelopment for other agricultural products, including cocoa
and tea.
COCOA
Chocolate is an important ingredient in Starbucks products.
Cocoa is used in some of our coﬀee beverages and bakery
items, and the chocolate bars sold in our stores.

Worldwide cocoa production for the 2004/2005 crop year
was 7.2 billion pounds* (3.3 billion kilograms), of whichapproximately 40 percent was produced in the Ivory Coast,West Africa. In ﬁscal 2005, Starbucks purchased 12.4 million
pounds (5.6 million kilograms) of processed cocoa fromour suppliers.
Over the past year, Starbucks Emerging Issues Council
determined that we needed to address the lack of transparency
related to our cocoa purchasing. Reports of human rights
violations in some African cocoa-producing regions further
highlighted a critical need for information and expertise inthis area. As a result, Starbucks engaged external stakeholders
to expand our knowledge of cocoa-related issues and to get
feedback on our future direction. Several signiﬁcant steps were
subsequently taken to develop our Socially Responsible Cocoa
Sourcing Program.

Local cocoa farmers in Africa’s Ivory Coast sort through their harvest of cocoa
bean pods.

and determine their ability to address social issues in the
supply chain, including forced child labor, and to outline
a plan for price transparency to the farmer. A scoring
matrix was used to evaluate and rate vendors on social,environmental and economic criteria.

Stakeholder Engagement
In December 2004, Starbucks hosted a gathering ofinternational NGOs, industry experts and USAID (U.S.
Agency for International Development) to exchange
information and engage openly about the social,environmental and economic issues related to the cocoa
industry and its supply chain. The session was facilitated byBusiness for Social Responsibility (BSR), an independent
organization that consults with companies on corporatesocial responsibility.

Starbucks selected two companies to work with, including ourexisting supplier. Both suppliers are now working together
through established cocoa cooperatives in the Ivory Coast toensure that the cocoa used in Starbucks products is cultivated,
harvested and processed without the use of forced child labor,
and that veriﬁable price transparency can be traced back to
cocoa farmers.
In 2006, Starbucks will begin developing cocoa buying
guidelines, building on our experience with C.A.F.E.
Practices. Our goal is to ensure that the cocoa used in
our various products is purchased under the guidelines ofStarbucks Socially Responsible Cocoa Sourcing Program.
We will share our progress in subsequent CSR Reports.

Since then, Starbucks has been updating forum attendees
on our progress and inviting their additional feedback as wework to strengthen our business practices in this area. A fullreport on this stakeholder discussion, including a list of theparticipants, is online at www.starbucks.com/cocoa.
Socially Responsible Cocoa Sourcing Program
Starbucks assembled an internal cross-functional team to
reﬁne our approach for purchasing processed cocoa. In
May 2005, Starbucks issued a Cocoa Sourcing Request
for Information to six companies, including our existing
supplier. Our objectives were to screen potential suppliers*October 2004–September 2005, LMC International Ltd.,LMC Cocoa Bulletin

28
OUR WORLD OF PRODUCTS

TEATazo Tea is one of several brands within Starbucks
Corporation’s portfolio. Its teas are comprised of fresh singleestate teas, the ﬁnest botanicals and ﬂavorful spices, blendedin small batches at Tazo’s headquarters in Portland, Oregon.

DAIRY AND BAKERY PRODUCTS
For all our food and beverage products, Starbucks upholds
our standards for high quality and ensures our products aresafe for consumption. In our U.S. stores a small percentage ofcustomers request organic and/or rBST-free dairy products.
(rBST is a growth hormone given to dairy cows to increasemilk production.) In 2005, Starbucks continued to oﬀer
organic milk as an option for our customers upon request.

When Starbucks assessed our environmental footprint in
2000, we included a metric to track our purchases of certiﬁedorganic tea ingredients. While our purchases of certiﬁedorganic tea ingredients rose signiﬁcantly in ﬁscal 2005, muchof this increase was inﬂuenced by our purchases of certiﬁedorganic sugar cane that is used in our liquid tea products. A
reformulation of several of our tea liquid products is currently
underway and will eventually lead to the removal of organic
sugar cane from Tazo’s products. (See graph below for organic
tea ingredients purchased.)In 2004, Starbucks surveyed our dairy and bakery suppliers todetermine their current sustainability practices and whether
they could comply with more stringent standards, should they
be imposed. We gleaned more from the responses our dairy
suppliers provided than what we learned from our bakery
suppliers. Some ﬁndings from our dairy supplier survey were:• Dairy cooperatives supply most of the raw milk
used to produce the dairy products we purchase.
The involvement of these co-ops will be key to thesuccess of any future initiatives.

Tazo believes the purchase of certiﬁed organic tea ingredientsis only one measure of sustainability. Therefore, Tazo is in theprocess of developing a broader strategy to more closely alignour tea purchasing practices with the company’s commitment
to sustainability. This holistic approach will build on the social
investment strategy that Tazo has established for tea-growing
communities through a partnership with Mercy Corps. (Moreon page 40.)

• Very few co-ops can assure that their dairy products wererBST-free because milk is co-mingled from a variety
of dairies. Moreover, cooperatives vary in their policies
regarding rBST.
• The only way to absolutely ensure rBST-free is to purchasecertiﬁed organic dairy products. The cost of using only
certiﬁed organic milk would be signiﬁcant and lead tohigher prices for our customers.

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Stakeholder Engagement
In August 2005, Starbucks met with representatives fromAs You Sow, a nonproﬁt organization that promotes corporate
accountability, and Trillium Asset Management Corporation,a socially responsible investment ﬁrm. We shared the results ofour dairy survey and explained the lack of customer demand
for the certiﬁed organic dairy products that are currently
oﬀered in our stores. Starbucks agreed to continue to raise theissue of genetic modiﬁcation with our suppliers; update our
website with more information about genetic modiﬁcation;and contact two of the company’s joint venture partners, thePepsi-Cola Company and Dreyers Grand Ice Cream, Inc.,
regarding usage of genetically modiﬁed ingredients. Starbucks
is in the process of meeting these commitments.

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OUR WORLD OF PRODUCTS

Consumer Products

STARBUCKS HEAR MUSICFounded in 1990, and acquired by Starbucks in 1999, Hear
Music is the Sound of Starbucks. Hear Music is dedicatedto creating a new and convenient way for consumers to
discover, experience and acquire all genres of great music
through its unique curatorial voice, CD compilations, musicprogramming for Starbucks retail stores worldwide and its
innovative collaborations with artists and music labels to
produce, market and distribute great music.

ETHOS™ WATERIn April 2005, Starbucks acquired the Ethos Water brandfrom a privately held bottled-water company. Ethos wasfounded in 2002 by two entrepreneurs, Jonathan Greenblattand Peter Thum, to help children around theworld get clean water. The two former businessschool classmates were inspired to start a
company to raise awareness of the global watercrisis and enable consumers to make an impact
in solving this problem. Thus, Ethos oﬀered a
premium bottled water that linked consumption
and cause. Based on their sales, the company
made donations to help children in need getclean water.

Hear Music has a history of collaborating with artists and themusic industry to give back to communities through causerelated marketing eﬀorts. For example, in response to thetremendous devastation caused by Hurricane Katrina, Hear
Music and two record labels,Work Song and Rhino Records,
who earlier teamed up to release the I Believe to My Soul CD,
turned the venture into a beneﬁt
for recovery eﬀorts. The threeparties committed to donate to
the Red Cross $10 of the purchaseprice of every I Believe to My Soul
CD sold in Starbucks companyoperated stores in the U.S. andCanada. In other retail channels,$3 of the purchase price of every
CD sold will be donated to these eﬀorts.
(For more information about how Starbucks responded
to the hurricanes, see pages 38 and 70.)

Starbucks acquired Ethos Water because of its
unique social mission and the brand synergies.
Ethos™ water is currently sold in Starbucks company-operated
stores in the U.S. and through other premium retail outlets.
For each bottle sold, Starbucks contributes ﬁve cents toward
integrated and sustainable programs that bring clean water tochildren and their communities around the world. We aspire
to raise at least $10 million over the next ﬁve years to invest
in this eﬀort. (For more information about the Ethos Water
Fund, see page 45.)

Jonathan Greenblatt (second from left) and Peter Thum (far right), co-founders ofEthos Water, visited Cholusnate, a village of about 150 residents in Honduras. The
village is beneﬁting from the installation of a new gravity-fed water system, which
was partially funded by Ethos. Also pictured are village residents Noel David Lopez(far left) and Nelson Portillo (center).

30
OUR WORLD OF PRODUCTS

continued working with organizations such as The Century
Council (TCC) to help prevent underage drinking. In 2005,
Starbucks provided underwriting for the distribution of
TCC’s ask. listen. learn. kids and alcohol don’t mix., a programthat provides information to help parents talk to kids about
the dangers of underage drinking.

STARBUCKS™ LIQUEURS
Starbucks™ Coﬀee Liqueur was introduced for U.S.
distribution in February 2005, the result of adevelopment and distribution agreement
between Starbucks and Jim Beam Brands.
Eight months later we introduced
another product, Starbucks™ Cream
Liqueur. These products are not soldin Starbucks retail locations and are
only available in locations licensed
to sell distilled spirits.

We will continue to look for ways to integrate responsible
practices into the Starbucks® Liqueurs business, including
incorporating recycled paper into our packaging andexploring the possible use of recyclable bottles.
Socially Responsible Investment Funds
In ﬁscal 2005, Starbucks™ Coﬀee Liqueur represented lessthan one percent of Starbucks total revenues. We reported thisinformation to several socially responsible investment (SRI)
funds that wanted to know what percentage of the company’s
revenues was attributed to liqueur sales. While some SRI
funds have standards disallowing them from investing incompanies that derive any revenue from alcohol, other SRI
funds have thresholds as a percentage of revenue. Pax World
Funds, an investment advisor, has a policy that it will notinvest in companies that derive any revenue from alcohol,
and therefore divested itself of Starbucks stock after the
introduction of Starbucks™ Coﬀee Liqueur. This amounted toapproximately 0.09 percent of Starbucks outstanding shares.

Responsible Marketing
Starbucks and Jim Beam are committed to the responsible
marketing of our liqueurs. The products’ pricing, branding,packaging and marketing have all been speciﬁcally designed
to target mature consumers. Furthermore, Starbucks partners(employees) who manage our liqueur brand have been
trained on the Distilled Spirits Council of the United States(DISCUS) Code of Responsible Practices for Beverage
Alcohol Advertising and Marketing.

Prior to the initial product launch, Starbucks reached out toseveral advocacy groups to assure them of our commitment
not to market our liqueur to consumers who are younger thanthe legal purchase age (21 and older in the U.S.). We have

Supplier Diversity

The commitment we’ve made to supplier diversity is not only
intended to provide opportunities for diverse businesses, butalso to create a positive and sustained economic impact on thelocal communities where these businesses are based. In ﬁscal
2005, Starbucks did $166 million in business with ﬁrst tier*women- and minority-owned businesses, a 19 percent increaseover the goal we previously set for 2005.

To operate and grow our business, Starbucks depends on abroad network of suppliers that range in size and scope. As we
expand to more ethnically diverse markets, it’s essential that we
continue to grow the segment of our supplier base comprised ofwomen- and minority-owned businesses. Starbucks instituteda Supplier Diversity program several years ago to ensure that
qualiﬁed and certiﬁed diverse U.S. businesses have equal
opportunities to provide our goods and services.

FUTURE GOALS

A diverse supplier is deﬁned by Starbucks as a business thatis certiﬁed by an independent third party to be at least 51
percent owned, operated and managed by women, minorities,
or individuals who are socially or economically disadvantaged.

Our goals for ﬁscal 2006 include:• Spending $206 million on purchases fromcertiﬁed diverse suppliers• Exposing Starbucks buyers and procurement
directors to more opportunities for doing businesswith diverse suppliers������������

• Increasing our level of participation inorganizations such as the National Minority
Supplier Development Council and Women’s
Business Enterprise National Council������������

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More information about Starbucks Supplier Diversity
program is available online at www.starbucks.com/csr.
* First tier suppliers are paid directly or relationships are managed directly byStarbucks for their products and services. Only ﬁrst tier suppliers are counted
in our diverse supplier spend.

�����������������������������������31
OUR WORLD OF PRODUCTS

SOCIETYStarbucks doesn’t rely on a“one size ﬁts all” mold for ourstores. When opening a new
Starbucks store, we are respectfulof a neighborhood’s desire topreserve its look and feel, its
historic buildings and/or
its unique architectural
attributes. Starbucks goal is
to create local gathering
places that appeal to
our customers andcontribute to the vitality of
an individual community.
(More information
begins on page 36.)

Shanghai’s beautiful and historic Yu Yuan Garden area is the location of one of
the ﬁrst Starbucks in China, which opened in October 2000. This area is where
Shanghai’s international and modern society of today intersects with the culturaland architectural traditions of China’s past.

33
SOCIETY

Progress Report on Our Performance – SOCIETY
TOPIC

WHAT WE SAID IN 2004

WHAT WE DID IN 2005

Building
relationships
with local
communities

Engage with local community
groups before we open new
stores to discover how Starbucks
can best contribute to theirneighborhoods.

Expanded our civic and community affairs team andconcentrated more of our efforts on building andstrengthening local relationships. Joined U.S. Conferenceof Mayors to better understand local municipal issues
and how Starbucks can add to the economic vitality of aparticular community.

Store closing
in the Hamilton
Heights sectionof Harlem,
New York

Identify a more suitable location in
Hamilton Heights that will enable
us to serve the community and run
an economically sustainable store.

Pursued several possible sites, but have yet to ﬁnd one thatis completely suitable and meets our need. We will continue
to explore potential new sites.

The Starbucks
Foundation’s
mission

Review The Foundation’s current
mission and determine its
future direction and focus.

Completed the review and launched a global effort to improveaccess to clean water. Also introduced Giving Voice, a new
local grants program.

Nutrition andwellbeing

Continue to introduce new foodand beverage products thatmeet the wide variety of ourcustomers’ needs.

Introduced new food and beverage items and brought backsome favorites to accommodate our customers’ desire formore menu options considered to be better for you.

Stakeholder
engagement –nutrition

Host a nutrition and wellness
stakeholder engagement session
in ﬁscal 2005.

In October 2005, Starbucks hosted a Health and Nutrition
stakeholder engagement session, facilitated by Business forSocial Responsibility (BSR), to get feedback on important
health and nutrition issues and future concerns.

Marketing toyouth

Commit to not sell our products inschools for grades K-12.

Developed a formal policy on marketing to youth to ensure ourmarketing and communications are not speciﬁcally aimed atyoung consumers.
Veriﬁed that our national distribution partners are not selling
Starbucks products in K-12 schools.

Advocating
for healthcare
reformEngage federal policymakers on theissue of healthcare reform.

Starbucks chairman Howard Schultz and otherStarbucks executives reached out to federal legislators
and advocated the need for a meaningful solution to
the U.S. healthcare crisis.
Howard Schultz also participated on a healthcare reform
panel as part of CNBC’s annual Washington, D.C., summit
in September 2005.

KEY:

ACHIEVED

MAKING PROGRESSDID NOT ACHIEVE

34
SOCIETYSELFRATINGFOR MORE
INFORMATION

Page 36

Page 45

Page 46

Marketing toYouth policy
is online at
Starbucks.com.

Pages 47, 69

BEING RESPONSIBLE TO OUR COMMUNITIESStarbucks Growth

Starbucks success in new and establishedmarkets hinges on our ability to cultivate
meaningful relationships with our customers,
local community leaders and neighbors –relationships that are built on trust. We know
trust is earned when we keep our promises anduphold our commitment to contribute positively
to our communities and our environment, aGuiding Principle of the company.

Starbucks established a retail presence for the ﬁrst time in
the Bahamas, Ireland and Jordan in ﬁscal 2005 and ended
the year with nearly 10,250 stores globally. Over the next few
years, we plan to continue opening stores at an accelerated
pace, adding locations for the ﬁrst time in Egypt, Russia,
Brazil and eventually in India. We will continue to focus on
expanding our existing store base across current markets, witha particular focus on China.
In the U.S., Starbucks growth strategy is primarily focusedon opening stores in smaller markets, creating more drivethru and oﬀ-highway locations and bringing the Starbucks
Experience to diverse communities through Urban Coﬀee
Opportunities, LLC (UCO). For information about UCO,
see page 37.

In this section we provide an update on some of thecompany’s initiatives to be a responsible neighbor, to serve
our customers and to be a respected global corporate citizen.
Speciﬁc topics include:• The impact of our growth• Investing in our communities• Meeting our customers’ needs• Participating in public policy and global aﬀairs

Over the past 15 years, Starbucks has
introduced millions of consumers to thepleasures of specialty coffee by bringing thecoffeehouse experience – or the “third place” –to many communities. As we have grown our
network of Starbucks stores, thousands of
independent coffeehouses have also sprung
up. With more than 21,000 coffeehousesin the U.S., of which about one-third are
Starbucks, consumers can choose from awide variety. “The great thing about coffee isthat individual entrepreneurs can certainlycompete with the larger chains because people
relish having ‘their’ coffee bar, someplace
that’s special to them,” said Bruce Milletto,
president of the consulting ﬁrm Bellissimo
Coffee InfoGroup Inc.

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*The NPD Group/ReCount®

35
SOCIETY

OPENING NEW STORESFor nearly all of the 574 U.S. company-operated storesStarbucks opened in ﬁscal 2005, we received a warm andpositive reception from customers, neighborhood businesses
and the communities. In several instances, a less thanwelcoming atmosphere ensued around the opening of a new
Starbucks store. Our community aﬀairs team approaches thesesituations as opportunities to reach out to the community andengage in dialogue. In nearly all instances, common ground
was achieved, by which the interests of the community andStarbucks customers will both be served. However, in someinstances we respectfully withdrew plans to open new stores
because we questioned whether Starbucks was a good ﬁt for
the locale.

Traci Moriarty (left), store manager of the Durango, Colorado, Starbucks and store partner Jenny Aponowicz create each coffee
beverage according to their customers’ preferences.

CASE STUDY: STARBUCKS – DURANGO, COLORADO
Durango has 15,000 residents and is a destination foroutdoor enthusiasts. The local community has taken steps
to preserve Durango’s charm and sustain its vitality as awonderful place to live and great place to visit.

Starbucks seeks to contribute positively to every community
in which we operate. Most often, our store partners are
local residents. We encourage them to engage locally, which
they did in Durango. In 2005, our Durango store partners
volunteered for several local organizations and developed
a special relationship with Community Connections, anorganization that trains physically and mentally challenged
individuals and places them in jobs. One of our Durango
partners was hired through Community Connections.

Prior to opening in April 2005, we heard that someresidents were not supportive of Starbucks locating on
Durango’s Main Street. After opening, the store wasprotested and later vandalized. Local press coverage captured
the deep divide between those who worried that Durango’s
local appeal was threatened and those who saw Starbucks asa symbol of economic vitality. As the vandalism picked up,
many community residents and local businesses condemned
the acts and expressed support for Starbucks. They argued
that if someone doesn’t like Starbucks, they could patronize
another local coﬀeehouse.

By the end of ﬁscal 2005, things had settled down in
Durango. Business was brisk over the summer and thestore cultivated many new regular customers. Given what
happened, our local store manager, Traci Moriarty, has been
most surprised by the ﬂood of résumés she receives. “It was
hard not to take things personally in the beginning,”
Traci said. “But now I’m thrilled that so many people
think of Starbucks as a place they would want to work.”

The experience in Durango was not typical. However, it
revealed the intense emotions some people feel toward
corporate retailers. Starbucks is cognizant of this andworks hard to demonstrate our sincere respect for every
community and its local residents.

36
SOCIETY

STARBUCKS URBAN COFFEE OPPORTUNITIES STORESINDIANAWASHINGTONNEW YORKMICHIGANILLINOISOHIO

WISCONSIN
3

4

1
5

6

1

1

5
4

4

47

2

MARYLANDWASHINGTON, D.C.

GEORGIA

2

CALIFORNIA

2

FLORIDACOLORADOTEXAS

Indicates number of Urban Coffee Opportunities store locations

Urban Coffee Opportunities

of local suppliers, our support for community-basedorganizations, and by attracting other retailers to the area.
The collective economic impact that our UCO stores
generated in ﬁscal 2005 included:

In 1998, Starbucks formed a joint venture with Johnson
Development Corporation (JDC), which is owned by
Earvin “Magic” Johnson. Together we created Urban
Coﬀee Opportunities, LLC (UCO), bringing Starbucks
stores to diverse communities. We opened 14 new UCO
stores in ﬁscal 2005 and ended the year with a total of 87.
(See map above.) Over the long term, we plan to establish
125 UCO stores in the U.S.

• Providing more than 1,500 jobs in 87 UCO stores• Paying an estimated $24 million in salaries/wages
and beneﬁts to UCO partners• Providing healthcare beneﬁts to eligible andparticipating part- and full-time store partners,
their spouses, domestic partners and eligible
dependent children

When scouting for new UCO locations, Starbucks
and JDC consider the economic vitality and long-term
potential of a given market. In some communities,
the arrival of Starbucks has helped to serve as an
economic stimulus with the creation of new jobs, use

37
SOCIETY

Community Investments

Emergency Relief Efforts
Starbucks responded in a signiﬁcant way to last year’s massive
earthquake and tsunami that struck South Asia, and eightmonths later to Hurricanes Katrina and Rita that devastatedthe U.S. Gulf Coast region. In both cases, our ﬁrst step wasto ensure the safety of our partners in the aﬀected areas andto help address their need for basic necessities.

Whether it’s helping to improve a local neighborhood parkor supporting relief eﬀorts after a natural disaster, Starbucks
strives to contribute to our communities in a positive way.
We do this through several channels:• Cash contributions made at the corporate, regional andlocal levelTo support tsunami relief eﬀorts, Starbucks companyoperated stores worldwide contributed $2 (or local currency
equivalent) for every pound of whole bean Sumatra coﬀee
sold during January 2005. We also leveraged our U.S
and Canadian retail presence by making it easy for ourpartners and customers to donate funds at our stores.
Our international business units participated in their own
fundraising programs as well. These combined endeavors
resulted in $1.4 million being raised for recovery andrebuilding eﬀorts, and were directed to a number oforganizations including CARE International.

• In-kind donations of Starbucks products and resources• Partner volunteer and gift-matching programs• Contributing funds to The Starbucks Foundation for its
grant-making eﬀorts• Adding premiums to some of our coﬀee contracts to fundsocial projects• Facilitating and encouraging customer charitable donations
In ﬁscal 2005, Starbucks cash and in-kind contributions werevalued at $30.3 million, or 3.8 percent of the company’s
earnings before income tax. (See pie chart below.) Our giving,whether it’s directed to a local program or global initiative,is always intended to be locally relevant and aligned with thestrategic direction of our business. During ﬁscal 2005, we
focused most of our giving in four areas:

Following Hurricane Katrina, Starbucks committed$5 million over ﬁve years to support both the immediate
relief and long-term rebuilding eﬀorts in the aﬀected areas.
In addition, Starbucks donated ground coﬀee, bottles ofEthos™ water and bottled Tazo® drinks to support relief
workers. Starbucks stores were again used as sites for partners
and customers to make charitable gifts to the American Red
Cross. And many of our partners volunteered to deliver
brewed coﬀee, pastries, bottled water and ground coﬀee
to rescue workers. (See page 70 for information on how
Starbucks assisted our partners.)• Contributing to the local nonproﬁts that our partners
personally support with their contributions of timeand money• Contributing directly to The Starbucks Foundation• Improving the quality of life in coﬀee- andtea-growing communities

Shortly after the hurricanes hit the Gulf Coast region,
Tropical Storm Stan wreaked havoc on parts of Mexico,
Guatemala and El Salvador, including some regions where
coﬀee is grown. Starbucks responded immediately to assist
with relief eﬀorts, and then began exploring ways to help withthe long-term rebuilding of the aﬀected communities.

• Providing assistance for emergency relief eﬀorts following
natural disasters���������
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* This chart represents grants and product donations paid by Starbucks Coﬀee
Company during ﬁscal 2005. These numbers diﬀer from grant expenses
recorded in our consolidated ﬁnancial statements, which are shown on
an accrual basis as required by generally accepted accounting principles(GAAP) in the United States.
** Represents the total amount Starbucks paid through some coﬀee contracts tofund various social development projects.

38
SOCIETY

Supporting Our Partners’ Community Efforts
From Seattle to Shanghai, our partners have demonstrated
their strong desire to engage in their local communities
through volunteerism. Starbucks volunteer program in
the U.S. and Canada – Make Your Mark (MYM) – wasintroduced ﬁve years ago as a way to encourage and support
our partners’ volunteer eﬀorts. Through MYM, Starbucks
matches our partners’ volunteer eﬀorts by donating $10
for every hour volunteered to the designated nonproﬁtorganization, up to $1,000 per project. If our partners enlist
the help of customers, Starbucks matches their volunteer
hours, too. Since its inception, MYM has inspired our U.S.
and Canadian partners and customers to volunteer morethan 792,000 hours for thousands of local community
organizations. That’s equivalent to about 380 people working
full-time for one year. (See graphs below.)

Starbucks also encourages our U.S. and Canadian partners
to make their own charitable gifts with support from thecompany’s gift-matching program, Choose to Give! Starbucks
matches our partners’ charitable gifts, dollar for dollar, up
to $1,000 annually. In ﬁscal 2005, 2,196 of our partners’charitable contributions were matched with $532,000
from Starbucks.

The nonproﬁt organization Keep Houston Beautiful not only received cash support
from Starbucks in 2005, it also got help from some Starbucks partners in Houston
who volunteered on Earth Day, including Maggie Suarez (left) and Mary Voorhies.

Make Your Mark����������

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* Includes 110,000 hours and $697,000 for September Make Your Mark, a unique volunteer program that took place in 2003.

39
SOCIETY

Investing in Coffee- and TeaGrowing Communities
Starbucks recognizes the positive impact our trading
relationships and our commitment to environmental
stewardship have on coﬀee- and tea-growing communities.
We also invest in these communities by providing the tools
and resources that strengthen local capacity and enablecommunity residents to pursue their ambitions.
In ﬁscal 2005, Starbucks continued to support the work ofConservation International, African Wildlife Foundation,
CARE International and Coﬀee Kids in the areas of
biodiversity preservation, wildlife conservation, poverty
alleviation and micro-lending, respectively. We also developed
a new collaboration with Save the Children and deepened ourrelationship with Mercy Corps.

Villagers from Kotidhura, India, after the opening ceremony of the community hallbuilt by the CHAI Project.

Mercy Corps and Tazo Tea
Tazo Tea began collaborating in 2002 with Mercy Corps, anonproﬁt international relief and development agency, on a
project called CHAI (Community Health and Advancement
Initiatives). The CHAI Project, through local partners, isproactively addressing community development needs inthe Darjeeling tea-growing region of India and working to
improve the quality of life for more than 12,000 people livingin 24 rural communities.

Projects have included constructing more than 400 latrines,
creating water supply systems, building roads, improving
footpaths and constructing community halls.
Funding comes from Tazo, its tea suppliers – tea growers,
traders and brokers – and Starbucks. Since 2003, $970,000 has
been contributed to the CHAI Project, including donations
in ﬁscal 2005 of $274,000 from Tazo and its suppliers, and$128,000 from Starbucks. Local residents and tea management
have volunteered labor, fed workers, transported goods andcontributed to the cost of materials and resources. This
collaborative approach has been a key success factor.

Four-year-old Maria studies her native Mayan and Spanish languages in a
Guatemalan school supported by Save the Children.

Save the Children
In developing countries, educating girls is one of the mostimpactful ways to improve the quality of life. In 2005,
Starbucks committed $1.5 million over four years to bringbilingual education to 20 Mayan communities in therural highlands of Guatemala. Starbucks selected Save theChildren USA, a leading international relief and development
organization, to lead our Guatemala Education Initiative.

In 2005, a similar project was piloted in four remote
Guatemalan communities that produce cardamom, a key
ingredient in Tazo® teas. Early results indicate that the projectis having a positive impact on the health and quality of life ofan estimated 850 people from these communities. For more
information, visit www.mercycorps.org.

The program is designed to revive existing schools andprovide quality preschool, primary and secondary education
to rural indigenous children, with special emphasis on girls.
Save the Children works within local school systems tointroduce an eﬀective intercultural bilingual methodology
based on Mayan culture. To ensure long-term success,parents and communities are encouraged to participate intheir children’s education.

FUTURE GOAL
Over the next two years, Tazo and Mercy Corps plan
to expand the CHAI Project to Assam, India, and nine
Guatemalan villages.

40
SOCIETY

Supporting Local Communities
in Our International Markets
In our international markets, there are countless examples
of how Starbucks supports local communities throughphilanthropy, partner engagement and by opening our doors
for community events.
Helping to improve the lives of children is a common themein nearly all of our international community eﬀorts. Here aresome examples that represent our activities in ﬁscal 2005.
ASIA PACIFIC• China – Our business partners funded programs that serve
AIDS-aﬀected children through the sale of special bracelets
available in some of our local stores. The proceeds included
the sale of nearly 20,000 bracelets in our north and east
China stores.

Located on the shore of China’s Yangtze River in Shanghai, this Starbucks offers
customers plenty of seating both in the store and on the outside terrace.

• Japan – Nearly 90 Starbucks Japan partners volunteered
for the Special Olympics, competitive games geared forchildren with disabilities. In addition, Starbucks Japan
donated 5 million yen ($46,000) to the Special Olympics.

Expanding in China
Since 1999, Starbucks has opened 209 stores in China
through a combination of licensed and joint venturebusiness partnerships and company-owned operations.
We are leveraging our existing relationships while also creating
new opportunities to signiﬁcantly increase our presence inthis high-growth market, believing China will become oneof Starbucks largest markets, second only to the U.S.

• Singapore – Our partners formed a relationship with
Pathlight, a school for autistic children. They participatedin the school’s fundraising events and provided valuable inkind support for Café @ Pathlight, a program that builds
employable skills among the students.
• The Philippines – A partnership between Starbucks
Philippines and UNICEF led to the creation of
SparkHope, an initiative to address the pressing needfor improved early childhood education, especially inthe outlying barangays (villages). Starbucks stores haveadopted various barangays and run in-store campaigns toheighten awareness and raise funds.

Starbucks continued expansion in China will create new jobs
for local residents. Our employment practices in China include
conducting periodic evaluations to ensure that Starbucks
is a best place to work. To improve partner safety, we arecommitted to maintaining a minimum two-person team in
our stores.
Starbucks commitment to contribute positively to China’s
local communities began at the time we opened our ﬁrst
stores. Starbucks has reaﬃrmed our commitment by pledging$5 million (approximately 40 million renminbi) to launch
the Starbucks China Education Project, which will support
educational programs in China. The project, which wasannounced in September 2005, will be overseen by a steeringcommittee comprising Starbucks executives, representativesof the Chinese Ministry of Education, the Soong Ching Ling
Foundation, the All China Women’s Federation and local
community organizations.a

Supporting Aboriginal Children in Taiwan
Since 1999, when there were just 25 Starbucks stores in
Taiwan, we decided to support education programs foraboriginal children, a population considered to be among thiscountry’s neediest residents. Starbucks Taiwan joined forces
with World Vision Taiwan after a devastating earthquake in
1999. Taiwan’s aboriginal people were particularly hard hit,losing their homes and their sources of income.

Starbucks Taiwan launched an initial campaign in 1999,
which has since become an annual summer fund raiser that
includes collecting customer donations and selling mugs
and penholders that are imprinted with the ﬁgure “ANAI”
representing aboriginal children. All the funds raised havebeen directed to World Vision Taiwan and mostly used to pay
for tuition and school supplies for aboriginal children and to
fund improvements to their schools. After six years, Starbucks
Taiwan has raised more than $500,000 and helped thousandsof children have the opportunity to attend school.

41
SOCIETY

EUROPE/MIDDLE EAST/AFRICA (EMEA)• The UK – Starbucks Partners in Education program
promoted the beneﬁts of libraries and reading to an
estimated 2,200 children and parents; conductedcampaigns to collect 28,000 books for children; andhelped prepare 300 local youth for real-life employment
situations. UK customers are also very keen on Fair
Trade Certiﬁed™ coﬀee, so it’s available in our UK stores
every day.

• Germany – Encouraging children to read was the focus
of our activities. To celebrate a nationwide Read Out Day,
Starbucks stores hosted children for a day of reading andhot chocolate. The plan is to participate in Read Out
Day again in partnership with Stiftung Lesen, a German
foundation focused on literacy.
• Jordan – Starbucks Jordan provided support to one of
Jordan’s primary orphanages, Mabarrat Um El Hussein,
and the Arab Fund Society for Child Care. Bothorganizations are dedicated to improving child welfare.
• Greece – We have built strong ties to the SOS Children’s
Villages, a safe refuge for orphaned or abandoned children.
In addition to charitable support for the organization, eachtime we open a new store, our partners adopt a child thatthey plan outings with and also organize birthday parties
for. Funds are also donated speciﬁcally for each child’s
school supplies, athletic gear and clothes.

Students at Kewena Gata High School in Daye, Ethiopia, now have access to new
textbooks as a result of ﬁnancial support provided by Starbucks UK.

CANADAIn major cities across Canada, free summer writing camps
were oﬀered to students from inner-city schools throughStarbucks support provided to Frontier College, a national
volunteer-based literacy organization. In January 2005,
our Canadian stores hosted “Lattes for Literacy Day” anddonated a portion of the sales to Frontier College for thesummer program. This eﬀort is part of our ongoing focus
to improve literacy in Canada.

Starbucks UK Offers Support to Ethiopian
Coffee Community
Since 2003, Starbucks UK has directly supported coﬀeegrowing communities in the Sidamo region of Ethiopia with
grants for health and education. In Bensa Ware, waterborne
illness has been noticeably reduced since the introduction ofa freshwater distribution system, and primary students now
have access to new textbooks. The results are encouraging –Bensa’s local academic ranking improved from last to second
place in a single year. In nearby Daye, grants from Starbucks
UK provided new books for the high school and a new
library building.

42
SOCIETY

Working Together in Mexico to Improve Education
Starbucks Latin America and Starbucks Mexico havealigned with the coﬀee cooperative Comon Yaj Nop Tic
in Chiapas, Mexico, to build the ﬁrst regional school forsecondary education. Members of the cooperative are smallholder farmers who produce some of Starbucks® Organic
Shade Grown Mexico coﬀee. The cooperative provided aparcel of land for the school site and will contribute laborfor the project. Starbucks Mexico donated initial funds
for construction materials and will oﬀer ongoing support.
Construction on the school began in July 2005. Tecnológico
de Monterrey®, a private university, and SEDESOL,a Mexican education agency, will provide teachers,
infrastructure and equipment to the school.

Roberto Silvino Hernández, Comon Yaj Nop Tic Leader
Representative, views the school as a great opportunity for his
community. “It’s going to be a public school for everyone so
we can see our children get an education. To give them thisis the greatest source of pride, the greatest hope that all of us
have here,” Hernández said.

Laying the ﬁrst stone for a school in Chiapas are, from left to right, Arturo
Pascacio and Fernanda Torres Pino of Starbucks Mexico, Pablo Arizmendi ofStarbucks Latin America and Roberto Silvino Hernández of Comon Yaj Nop Tic.

LATIN AMERICA*• The Bahamas – The premier cultural Bahamian festivalof Junkanoo provided an opportunity for us to support
local youth through the Junior Junkanoo program, whichis administered by the country’s Ministry of Youth, Sports
and Culture. The program engages Bahamian youth inafter-school activities, including art, music and dance. Our
local partners collaborated with Junkanoo group leaders
to determine the best use of the funding provided byStarbucks Bahamas.

*Starbucks Latin America region includes Mexico, Central America, SouthAmerica and the Caribbean.

43
SOCIETY

T H E S TA R B U C K S F O U N D AT I O NStarbucks founder and chairman
Howard Schultz established

The Starbucks Foundation in 1997 witha mission to create hope, discovery
and opportunity in communities where
Starbucks retail stores are located. Since
that time, The Foundation has provided
more than $11 million to approximately
700 organizations primarily in the areas ofliteracy and youth education in underserved
communities in the U.S. and Canada.

The Starbucks Foundation, a 501(c)(3) charitable organization, receives the majority of its funding
from Starbucks Corporation as well as some private donations. The Foundation, a separate entity from
Starbucks Corporation, is governed by a board of directors comprised of 14 Starbucks senior executives
and is chaired by Orin Smith, retired Starbucks president and ceo. In ﬁscal 2005, The Foundation made97 grants to nonproﬁt organizations totaling $1.7 million. (Note: This amount represents grants paid
in ﬁscal 2005 and therefore is diﬀerent than the grant expenses recorded in The Foundation’s ﬁnancial
statements, which are shown on an acrual basis as required by generally accepted accounting principles(GAAP) in the U.S.)COMMUNITY~WORD PROJECTThe Starbucks Foundation’s support has enabled
Community~Word Project (CWP) to broaden its
reach and eﬀectively engage more youth in its arts-ineducation program.
Last year, Starbucks stores in New York hosted student
performances, and publicly displayed their art murals sothat people could see and hear what these students areexperiencing and expressing.
Starbucks partners also devoted their time and energy tocoordinate and attend performances, work with students
on art projects and assist students with their writing in
CWP residency classrooms. The Starbucks Foundation has
supported the Community~Word Project’s arts-in-education
program since 2002 with grants totaling $45,000. For more
information, visit www.communitywordproject.org.

44
SOCIETY

Children from Community~Word Project
participate in an art project.

Broadening The Starbucks
Foundation’s Impact
In ﬁscal 2005, The Foundation’s staﬀ and board thoroughly
evaluated its mission, giving strategy and focus areas todetermine whether its contributions are aligned with
the increasingly global nature of Starbucks business.
The board also considered how to support the Millennium
Development Goals (MDGs), developed by the United
Nations to improve the quality of life for people aroundthe world. One focus of the MDGs is to increase
people’s access to sustainable sources of clean water.
After thoughtful evaluation, The Foundation has broadened
its focus to include global water issues and environmental
literacy while maintaining a commitment to its core
mission and partnerships with key organizations.

The Starbucks Foundation’s newly established Ethos Water Fundsupports projects that improve access to clean drinking water incommunities where the need is great, such as this project in the
Honduran village of Cholusnate.

ETHOS WATER FUND

Access to clean water is one of the most critical global
issues of our time. According to the World HealthOrganization, 1.1 billion people worldwide lack accessto safe drinking water.
Through the acquisition of the Ethos Water brand in April
2005, Starbucks embarked on a multi-year eﬀort to ﬁght
the world water crisis and to help children and communities
around the world get access to clean drinking water. For
each bottle of Ethos™ water sold, ﬁve cents is donatedtoward Starbucks goal of contributing at least $10 million
over the next ﬁve years to help alleviate the world watercrisis. The newly created Ethos Water Fund will be housed

within and directed by The Starbucks Foundation to support
nonproﬁt and nongovernmental organizations working tobring clean water to those in need around the world.
Prior to being acquired by Starbucks, Ethos had alreadyestablished relationships with organizations involved inthis work, such as UNICEF, CARE, WaterAid and Water
Partners International. Funding priority will be given to
integrated and sustainable water projects that positively
impact the lives of children and their communities. For
more information about Ethos Water, see page 30.
SUPPORTING YOUTH:
ARTS AND LITERACY, ENVIRONMENTAL LITERACY

Building on its history of supporting literacy organizations,
The Starbucks Foundation launched an expanded regional
grant program in 2005. The new program called Giving
Voice focuses on literacy for the 21st century, beginningwith the mastery of basic skills for the purpose of personaland civic transformation. This regional program funds
organizations that serve youth, ages 6–18, throughprogramming that integrates literacy with personal and civic
action in the communities where they live. As part of thisexpansion, The Foundation added a focus on environmental
literacy and began funding organizations that help addressenvironmental literacy and empower youth to be local
champions for a sustainable environment. Giving Voice
grants, ranging from $5,000–$20,000, will be awarded
biannually to organizations in the U.S. and Canada. Morethan $1 million in grants will be awarded in the program’s
ﬁrst round of funding.
KEY PARTNERSHIPSIn addition to The Foundation’s continued support of
two North American youth organizations – Jumpstartand America SCORES – in 2005 the Giving Voice grant
program introduced a new partnership with Earth Day
Network, an environmental education organization. EarthDay Network’s mission is to broaden the environmental
movement worldwide and to educate and mobilize people,
governments and corporations to take responsibility forprotecting our planet. The Foundation’s partnership focuseson Earth Day Network’s new Civic Education Project thatteaches and promotes civic engagement in the classroom byhighlighting local environmental issues and concerns.
More information about The Foundation, including the new
grant guidelines and a listing of grant recipients, is available
online at www.starbucks.com/foundation.

45
SOCIETY

Being Responsive to Customers

Menu Choices and Nutrition Information
We appreciate our customers’ desire to make well-informed
food and beverage choices. In 2005, Starbucks hired anutritionist as part of a larger eﬀort to address the need for abroader range of menu options and nutrition information on
Starbucks food and beverage products.

We will never take our customers for granted. To remain
relevant to our customers and to continue to earn their trust,
we must abide by our commitment to our Guiding Principlethat calls on us to “develop enthusiastically satisﬁed customers
all of the time.”

Starbucks recently reintroduced several reduced-fat coﬀee
cakes and began oﬀering low-fat and reduced-fat breakfast
sandwiches. Our regional menus often include some sugarfree, organic, soy and low-fat food oﬀerings. And theadvantage of Starbucks customized beverages is that ourcustomers can request non-fat, organic and soy milk.

At the end of ﬁscal 2005, we were serving approximately
35 million people weekly around the world. We not only
strive to meet their expectations, we constantly look for ways
to exceed them.
LISTENING TO OUR CUSTOMERS
We welcome the valuable feedback we receive from ourcustomers, which is shared with store partners, management
and others as appropriate. Several channels are available
for our customers to provide their feedback. They can call
Starbucks customer relations at a toll-free number, ﬁll
out in-store comment cards or submit comments online
at Starbucks.com. As always, we strive to respond in atimely manner.

In ﬁscal 2005, Starbucks received nearly one million customer
contacts including a large number that pertained to thefollowing topics:• Military Donations – After hearing a rumor that Starbucks
does not support the military, many customers asked if it
was true. The rumor is untrue.*• The Way I See It – To stimulate coﬀeehouse conversation,
Starbucks invited some notable ﬁgures to express theirown thoughts and opinions which we printed on ourwhite paper cups. Some of these expressions have inspired
our customers to respond about “the way they see it.” Weappreciate the interchange.

In ﬁscal 2005, 2.3 million customers visited Starbucks.com
for nutrition information on our food and beverage products.
Starbucks will continue to provide nutrition information on
our beverages via an in-store brochure and online. Becauseof the geographic nature of our food oﬀerings, we opted to
expand the nutrition information for our food products on
our website rather than through an in-store brochure. Our
website will include speciﬁc data for bakery products oﬀeredin each region, and will be available as of February 2006.

• Nutrition Information – Many customers requested
nutrition information for Starbucks beverages and foods(see right for more information).
Customer Satisfaction
Customer satisfaction surveys oﬀer another mechanism for
Starbucks to receive feedback. In 2005 we evaluated oursurvey methods and metrics and decided to redesign ourstudies. Therefore, we did not measure customer satisfaction
in ﬁscal 2005, but plan to survey in 2006 and we will report
the results.

FUTURE GOAL
In 2006, Starbucks plans to begin labeling trans fatsfor our packaged food products and reporting trans fat
information for our beverages and non-packaged foods(including our pastries) on our website.

* An e-mail containing misinformation about Starbucks and our support of themilitary has been circulating on the Internet. Starbucks was able to locate theauthor, a Marine sergeant. He was very grateful that we contacted him andhe apologized for any misunderstanding. Subsequently he sent an e-mail tohis original distribution list correcting his mistake. Starbucks has continuallyassured our customers that we have the deepest admiration and respect for
U.S. military personnel and are grateful to the men and women who servestateside and overseas. For speciﬁc information on our ongoing supportof military personnel through the American Red Cross, please visit
www.starbucks.com/csr.

46
SOCIETY

Public Policy andGovernment Affairs• Tax Policy – Sound tax policy will continue to play a keyrole in the competitiveness of U.S.-based companies.
Starbucks closely monitors tax policy developments andhas advocated for a tax structure that maintains incentives
for increased productivity.

As a growing and increasingly more complex global
business, Starbucks participates in the public policy arena,
which includes direct and indirect lobbying at the local, stateand federal level in the U.S. In all of our eﬀorts, we strive tocomply with all applicable laws and regulations, and work
fairly and honestly with government oﬃcials and others in ourcommunities. Starbucks policy forbids partners from oﬀeringor making payments or gifts on behalf of the company inorder to inﬂuence a government oﬃcial, or from representing
their personal views as those of the company.

• Trade Policy – Starbucks supports bilateral and multilateral
trade agreements that help to create opportunities forinvestment in emerging markets. We provide input to U.S.
and foreign governments on speciﬁc trade agreements that
help to reduce barriers to U.S. exports, provide safeguards
for intellectual property and trademarks and promotetransparency on both sides of the trading relationship.
• Healthcare – Providing healthcare beneﬁts to our eligible
full- and part-time partners is a commitment Starbucks
stands by. However, we are greatly concerned about the
impact rising healthcare costs will have on our long-term
ability to sustain these beneﬁts. We are strongly advocating
for policy solutions in the U.S. (More information isavailable on page 69.)

Starbucks did not make any political contributions inﬁscal 2005.
Focus Areas
Starbucks has a responsibility to maximize and protect thecompany’s value for our partners and shareholders. Our eﬀorts
are focused on the following:

United Nations Global Compact

UN Global Compact “Communications on Progress” Report

In June 2004, Starbucks joined the UN Global Compact,
a voluntary international network of corporations, UN
agencies, trade unions and nongovernmental organizations
that support 10 universal principles. These principles are
based on the Universal Declaration of Human Rights;
the International Labour Organisation’s Declaration of
the Fundamental Principles and Rights at Work; andthe Rio Declaration on Environment and Development.
We consider these principles to be a natural extension ofStarbucks Guiding Principles, which deﬁne the company’scommitment to social and environmental responsibility.

PRINCIPLESPAGEHUMAN RIGHTS
1. Business should support and respect the protection ofinternationally proclaimed human rights

18, 27,66, 71

2. Business should ensure that they are not complicit in humanrights abuses

18, 27, 66

LABOR STANDARDS

Through our participation in the Global Compact, we arelearning where the company can continue to strengthen
our practices. For instance, in the coming year we plan toformalize Starbucks human rights policy, an important
step as we continue to expand to areas of the world where
human rights protections are not consistently upheld.

3. Business should uphold the freedom of association and theeffective recognition of the right to collective bargaining

66

4. Business should support the elimination of all forms offorced and compulsory labor18, 27, 28

5. Business should support the effective abolition of child labor18, 27,28, 66

6. Business should support the elimination of discrimination of
employment and occupation

31, 66, 67

ENVIRONMENTThe table at right features the Global Compact’s 10
principles and references to sections in this reportthat speak to how our priorities are aligned with eachprinciple. We plan to report our progress annually.

7. Business should support a precautionary approach toenvironmental challenges

18, 52,55, 57

8. Business should undertake initiatives to promote greater
environmental responsibility

48–61

9. Business should encourage the development and diffusion ofenvironmentally friendly technologies

52, 56, 60

CORRUPTION
10. Business should work against corruption in all its forms,
including extortion and bribery

47
SOCIETY

7, 8

ENVIRONMENTRecycling is as important toStarbucks as it is to our customers.
In many of our company-operated
stores, our baristas separate
recyclable materials and placethem in designated behindthe-counter containers not
visible from the customer area.
While our paper cups are notrecyclable, we do recycle
cardboard, plastics and othermaterials whenever possible.
(See page 55 for more
information.)

The necessary plastic coating that makes our paper cups usable for hot beverages
also makes these cups nonrecyclable. However we are taking steps to reduce theenvironmental impact related to our paper cups. Beginning in 2006, Starbucks
paper cups will be made with 10 percent post-consumer recycled paper ﬁber, thus
reducing the use of virgin tree ﬁber.

49
ENVIRONMENT

Progress Report on Our Performance – ENVIRONMENTSELFRATINGFOR MORE
INFORMATIONTOPIC

WHAT WE SAID IN 2004

WHAT WE DID IN 2005

Climate change

Establish an emissions reduction
strategy and target, and begin
purchasing ﬁve percent renewableenergy annually for our retail stores.

Developed a climate change mitigation strategy, which
includes purchasing renewable energy certiﬁcates to match
ﬁve percent of energy needed for company-operated stores inNorth America. An absolute emissions reduction target has
not been established.

Page 52

Energyconservation

Continue to focus on conservation
measures in our retail stores.

Identiﬁed several markets and some stores with abnormallyhigh energy usage.

Page 53

Transportation
impacts

Work with Business for Social
Responsibility’s (BSR) Clean Cargo
Working Group on developing
environmental guidelines for oceantransportation that can then be
shared with our freight vendors.

Collaborated on BSR’s Clean Cargo Working Group, which
resulted in the development of an Environmental Performance
Survey for ocean carriers. We used it to assess theperformance of our ocean transporters.

Roasting plant
operations

Determine measures for reducing
emissions and conserving energy at
our roasting plants.

Began retroﬁtting emission control equipment in our roasting
plants with more energy-efﬁcient technology.

Environmental
leadership

Join the UK-based Climate Group.

Joined The Climate Group in April 2005.

Environmental
training

Develop an environmental training
module and incorporate it into all
new partner training.

Added an environmental component to orientation for
new partners at Starbucks Support Center in Seattle, ouradministrative headquarters. Began amending our barista
and district manager training to include information about
Starbucks commitment to environmental responsibility. These
new modules will be rolled out in 2006.

Sustainable
packaging

Explore the feasible application ofsustainable packaging principles inthe development of new packaging
materials.

Increased the amount of recycled, reclaimed and postconsumer ﬁber materials in our packaging.

Paper cups

Test a new hot beverage cup madewith 10 percent post-consumer
ﬁber, and then roll out the new cups
in our U.S. company-operated andlicensed stores by the end of 2005.

Completed test and scheduled rollout for ﬁscal 2006.

Evaluate the feasibility of
distributing operational retail
communications electronicallyinstead of mailing hard copies.

Transitioned to biweekly mailings to retail stores rather
than weekly. Introduced electronic delivery for some retail
communications.

Electronic
distributionof operational
communications
KEY:

ACHIEVED

MAKING PROGRESS

www.bsr.org

Page 60

Page 53

Page 59

Page 56

Page 57

DID NOT ACHIEVE50ENVIRONMENTENVIRONMENTAL RESPONSIBILITY AND LEADERSHIP
Starbucks commitment to contribute positively
to the environment is a Guiding Principle ofour company. We expressed this commitment
further when we established Starbucks
Environmental Mission Statement in 1992.
Since then, we have continually evolved ourdeﬁnition of what environmental responsibility
means within the context of our business.

In this section we link our Environmental Mission Statement
to the initiatives we have undertaken. We also report on our
progress and achievements, and reﬂect on the areas we need to
improve. Some of the topics we cover include:

Today, the scope of Starbucks business is considerably larger
and more complex than it was in 1992. And at present theworld faces some critical environmental issues, including
the implications of climate change. For these reasons, we’ve
broadened our vision and approach to environmental
responsibility while continuing to pursue some of ourearlier initiatives.

• Measuring our environmental performance• Starbucks strategy for addressing climate change• Recycling and waste reduction measures• Sustainable store design and construction• Environmental improvements to our paper cups

STARBUCKS ENVIRONMENTAL MISSION STATEMENTStarbucks is committed to a role of environmental leadership in all facets ofour business. We will fulﬁll this mission by a commitment to:• Understanding environmental issues and sharing information with our partners (employees)• Developing innovative and ﬂexible solutions to bring about change• Striving to buy, sell and use environmentally friendly products• Recognizing that ﬁscal responsibility is essential to our environmental future• Instilling environmental responsibility as a corporate value• Measuring and monitoring our progress for each project• Encouraging all partners to share in our mission

51
ENVIRONMENTUnderstanding Environmental
Issues and Sharing Information
with Our Partners

Developing a Climate Change Strategy
Conducting an inventory of our 2003 greenhouse gas (GHG)
emissions in 2004 was our ﬁrst step toward developing andimplementing an emissions reduction strategy. Since theissuance of last year’s CSR Report, new information about
our baseline emissions has come to light that has signiﬁcantly
changed our 2003 climate inventory. The original results
which included Scope 1, 2 and 3 emissions (as deﬁned by theWorld Resources Institute Greenhouse Gas Protocol*) havebeen revised and reported below (ﬁgure 1).

Starbucks core business is coﬀee, an agricultural productthat is grown in tropical regions around the globe. Climaticconditions strongly inﬂuence the yield and quality of annual
coﬀee crops. Therefore, we are working to better understandthe risks and implications that climate change may have on
our business, as well as identify how we can minimize ourcontribution to climate change.

Going forward, we have decided to focus our eﬀorts only on
Scope 1 and 2 emissions since these represent the areas that we
can directly control and manage. The Scope 1 and 2 baseline
results from 2003 are also restated below (ﬁgure 2).

UNDERSTANDING CLIMATE CHANGE
According to the World Resources Institute, “Changes in
the composition of the earth’s atmosphere have increased theaverage global surface temperature by one degree Fahrenheit(0.6 degrees Celsius) over the past 100 years.” The warming
trend is linked to the increase in emissions of carbon dioxide(CO2) and other greenhouse gases (GHG), the result ofburning fossil fuels, speciﬁcally petroleum, coal and naturalgas, which are energy sources used for transportation, heatingand electricity.

Although we have not set an absolute emissions reduction
target, we have developed a three-year mitigation strategy
which includes the following steps to reduce our Scope 1 and2 emissions:• Purchasing renewable energy certiﬁcates• Focusing on energy conservation measures• Advocating the need for collaborative action

We believe that meaningful action must be taken to reduce
GHG emissions. The risks associated with climate change
include rising sea levels, changes in precipitation patterns,
droughts and ﬂoods, loss of biodiversity, and potential publichealth issues. To learn more about climate change, visit thewebsite of World Resources Institute – www.wri.org.

GREENHOUSE GAS EMISSIONS
Figure 1

Figure 2������
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��������
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����������������������������������������������������������

Total emissions: 376,000 tons of CO2 equivalents

Total emissions: 295,000 tons of CO2 equivalents

Results from our 2003 baseline greenhouse gas emissions inventory have been updated to reﬂect new data. We have also decided tofocus our eﬀorts on Scope 1 and 2 emissions (ﬁgure 2).
* Starbucks used the World Resources Institute Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard, Revised Edition to assess our baseline
greenhouse gas emissions. According to the Protocol, Scope 1 includes direct GHG emissions from sources that are owned or controlled by the company. For Starbucks
these include coﬀee roasting and natural gas, and company-owned vehicles and aircraft. Scope 2 includes indirect GHG emissions from the generation of purchased
electricity consumed by the company. Scope 3 is an optional reporting category that includes all other indirect emissions that are a consequence of the activities of thecompany, but occur from sources not owned or controlled by the company. For Starbucks, these activities include product transportation, employee (partner) businesstravel and solid waste. For complete information on the Protocol, visit www.ghgprotocol.com.

52
ENVIRONMENTEnergy Conservation
We view energy conservation as an important part of ourclimate change strategy. Measures we are taking include
retroﬁtting emission control equipment in our coﬀee roasting
plants with more energy-eﬃcient technology, replacingsome lighting ﬁxtures and store equipment with productsthat use less energy, and in-store testing of a more eﬃcient
HVAC system. Upgrading to energy-eﬃcient systems will
be an ongoing process as our old equipment and ﬁxtures are
replaced over time.

Renewable Energy
Because the energy used to operate our retail storescontributes the largest portion of our total GHG emissions,
we believe investing in renewable energy is our mosteﬀective means to oﬀset our emissions. An energy resourceis considered renewable if it can be naturally replenished.

Advocating Through Collaboration
Starbucks believes that the global challenge of climate change
can best be addressed through a uniﬁed and collaborative
approach. In ﬁscal 2005, Starbucks engaged with several
organizations to learn more about what our company caneﬀectively do and how to encourage others to do the same.
For instance, Starbucks:

In 2005, Starbucks began purchasing renewable windenergy (using Green-e certiﬁed renewable energy certiﬁcates)
to match ﬁve percent of the energy needed to power ourcompany-operated stores in the U.S. and Canada. Thistranslates to an emissions oﬀset of 34.2 million pounds(15.5 kilograms) of CO2.

• Joined World Resources Institute’s Green Power Market
Development Group to increase our purchases of renewableenergy certiﬁcates and to learn from other companies.
• Joined The Climate Group, an international organization
dedicated to advancing business and government
leadership on climate change. We also participated in abusiness panel on climate change that was convened by
The Climate Group at the United Nations 2005 World
Environment Day.

The Environmental Protection Agency’s (EPA) Green PowerPartnership tracks the largest purchasers of green power in
the U.S., and ranked Starbucks as 22nd on the list as of June
2005. According to Kurt Johnson, director of the EPA’s
Green Power Partnership, “Starbucks purchase (of renewableenergy certiﬁcates) is strengthening the green power market
and will help to support clean technologies that reduce theenvironmental impact of electricity generation.”• Committed to support Global Green USA, a nonproﬁtorganization founded by former Soviet President Mikhail
Gorbachev, that brings individuals, businesses, government
and nongovernmental organizations together to take action
on climate change.

Information about renewable energy certiﬁcates is available atwww.green-e.org.

• Participated in the Carbon Disclosure Project, a voluntaryquestionnaire aimed at increasing transparency on what
corporations are doing to address climate change andreduce GHG emissions. Our responses to the survey are
online at www.cdproject.net.

FUTURE GOAL
In ﬁscal 2006, Starbucks plans to strengthen ourcommitment to emissions reduction by purchasing
renewable energy certiﬁcates to offset 20 percent of
the energy used in our U.S. and Canada companyoperated stores.

Q: “Now that Starbucks has committed
to purchasing renewable energy
certiﬁcates to match ﬁve percent of
the energy used for its U.S. companyoperated stores, how will GHG issues
be addressed in the other half ofStarbucks retail operations (i.e.,international and licensed stores)?”

A: As a ﬁrst step, Starbucks is focusing on
addressing the emissions generated by ourcompany-operated stores in the U.S. and Canada
because of our direct control over these operations
and the fact that these stores contribute thelargest portion of Starbucks GHG emissions.
We are also looking at ways our licensed andinternational business partners can help to reduce
Starbucks GHG emissions globally.

– Sue McGeachie, Innovest Strategic Value Advisors

53
ENVIRONMENTSHARING INFORMATION WITH OUR PARTNERS
It’s absolutely essential that our partners are informed ofStarbucks environmental initiatives and understand how
their actions contribute to our environmental performance.
In 2005, we ran a three-part series in our internal newsletterto inform our partners about what Starbucks is doing
about climate change and what they can do to reduce theenvironmental impacts of their daily activities. We regularly
share environmental information with our partners throughour internal communications vehicles.

In the past, we saw the value of taking a grassroots approachin the form of Starbucks Green Team, a representative groupof store managers that had been charged with identifying,communicating and implementing environmental measuresin our retail operations. Given the company’s growth in recent
years, we felt that the Green Team structure was no longer thebest strategy for improving the environmental performanceof our stores. We decided to disband the Green Team in 2005
and are moving toward integrating environmental practices
into our retail operations standards.

Tim Nuse, a Starbucks partner and strong environmental advocate, helps
to clean up a local Seattle park on Earth Day 2005.

Bringing Passion to My WorkBy Tim Nuse, Starbucks utility analyst

Taking environmental courses in college foreverchanged my perspective. It was then that I ﬁrst
learned about climate change and how human activity
contributes to global warming. Later, I became a
student organizer, which involved mobilizing support
for environmental causes. I felt then that corporations
were partly to blame for our environmental problems.
Now I’m convinced that corporations can and mustbe part of the solution.

FUTURE GOAL
In ﬁscal 2006, we plan to integrate speciﬁc
environmental practices into our retail operational
standards, ensuring that environmental stewardshipbecomes “business as usual.” These new practices
will focus on improving accountability at the store
level for energy and water conservation, recycling andwaste reduction.

I joined Starbucks in 2001, ﬁrst as a barista and lateras an environmental aﬀairs coordinator. While someof my friends questioned me for joining Starbucks,
I believed that I could do more by working within acompany than trying to provoke change from outside.
I recently became a utility analyst at Starbucks, which
entails reviewing and processing energy and water
bills for thousands of U.S. Starbucks stores. As I siftthrough invoices, I occasionally notice irregularities
in a store’s energy or water usage. When I see a spikein usage for no apparent reason, I phone the store
manager to ﬁnd out why. Sometimes it’s as simple
as discovering that a leaky pipe needs repairing.
Whatever the outcome is, I’m always glad I madethe call.
My favorite quote is a Native American proverb:“We do not inherit the earth from our ancestors, weborrow it from our children.” If my eﬀorts successfully
lead to greater energy and water conservation, thenI will feel better about leaving the earth to the next
generation. That’s the way I see it.

54
ENVIRONMENTDeveloping Innovative andFlexible Solutions to Bring
About Change

customers in places such as the UK, China and Australia.
In Japan, a special task force has been initiated to introduce
reusable ceramic mugs to help reduce waste and comply withnew regulations.

The same innovative spirit that has been a driving force forour business success is also applied to our environmental
practices. Described below are some of the creative solutions
we’ve adopted to address one of our perennial challenges,
waste reduction. We also report on our eﬀorts to design andbuild a prototype of Starbucks sustainable store of the future.

Reducing Coffee Grounds Waste
We continue to promote Grounds for Your Garden, a programthat oﬀers complimentary ﬁve-pound (2.27-kilogram) bagsof used coﬀee grounds to customers and local parks to add totheir soil. This program has been popular with our customers
around the world, including in France, Spain, the UK,
the Philippines, Greece, Cyprus, China, New Zealand andHawaii. Because coﬀee grounds account for approximately
one-third of Starbucks solid waste by weight, we plan to keep
this initiative.

RECYCLING AND WASTE REDUCTION
Whether it’s our eﬀorts to recycle materials, compost
biodegradable matter, or reuse products, it all helps to reducethe volume of solid waste that we generate.

To better understand the composition and scale of the waste
generated from our retail stores, we conducted another waste
audit in 2005, three years after the ﬁrst audit. In the latest
audit we found that cardboard, plastic and soiled compostable
paper make up the greatest volume of store waste. Here aresome ways we are reducing waste in our stores.

Reducing Food Waste
In Japan, the government is mandating a 20 percent
reduction in food waste, which becomes eﬀective in April
2006. Starbucks Japan has created a special task force tostrategize ways to reduce food waste and comply with thisnew requirement. In doing so, we hope this will expose newmeasures we can adopt in our North American stores andother international locations.

Recycling
Throughout our North American operations, store managers
are expected to participate in local recycling programs. We
track the number of our U.S. and Canada company-operated
stores that have recycling programs. While recycling is not
feasible at every location, we have recently overcome somebarriers to make it easier for more of our stores to participate.

At the end of ﬁscal 2005, 77 percent of our U.S. and Canada
company-operated stores where Starbucks controls waste andrecycling had recycling programs, compared to 70 percent theprevious year. (See page 61.)
In many of our international markets there is also strong
interest in recycling. For instance, Starbucks partners inGermany separate plastic, paper, glass and biodegradable
waste for recycling purposes. In France, our new store designs
are incorporating space for recycling bins. Starbucks UK
piloted recycling programs in 90 local stores last summer andplans to include more locations in 2006. In Greece, Starbucks
and the Hellenic Children’s Museum hosted seminars that
introduced children to recycling and reusing.
Reusable Mugs
Two ways our customers can help cut down on waste are bybringing in their own commuter mugs, which earns thema 10-cent discount, and by requesting that their beverages
be served in ceramic mugs when it’s a “for-here” order.
Starbucks U.S. customers used commuter mugs more than
13 million times in ﬁscal 2005. (See page 61.) Although we
don’t currently track commuter mug usage outside the U.S.
and Canada, this measure is gaining popularity among our

Starbucks partner Hilary Andersen gladly gives her customers a 10-cent discountwhenever they use their own commuter mugs, a measure that helps to conserve theuse of paper cups.

55
ENVIRONMENTSUSTAINABLE STORE DESIGN

For several years, Starbucks has been working with the
U.S. Green Building Council (USGBC) to develop LEED
(Leadership in Energy and Environmental Design) standards
and a scoring system speciﬁcally for the retail sector. Our
vision is that the retail-speciﬁc scoring system can be used
to LEED-certify a prototype of a Starbucks store, and that a“volume-build” criteria will also be developed. This will allow
us to build future stores consistent with the prototype moduleand the LEED criteria.
In the meantime, in 2005 we designed and built our ﬁrst store
in accordance with LEED Commercial Interior standards.
The store is located in the Civic Center in Hillsboro, Oregon.
We applied for LEED Gold* certiﬁcation from the USGBC
in 2006. At the time of this printing, we had not received
ﬁnal certiﬁcation from the USGBC.
Although this will be Starbucks ﬁrst LEED-certiﬁed store,
the components that make up this store are very similar
to the company’s existing stores. This reﬂects our ongoingcommitment to incorporate the use of energy-eﬃcient
lighting, paints with reduced toxic chemicals andsustainable wood products that are Forest StewardshipCouncil (FSC) certiﬁed.

Starbucks Hillsboro, Oregon store was built in accordance with LEED Commercial
Interior standards.

Environmental Measures in Our Store Design* Diﬀerent levels of green building certiﬁcation (certiﬁed, silver, gold,
platinum) are awarded based on the total credits earned in each of
several categories: site, energy, material and resources, indoor
environmental quality and water.

Striving to Buy, Selland Use Environmentally
Friendly Products

1

Cabinetry made from 90 percent post-industrial material,with no added formaldehyde

2

Efﬁcient lights that use less energy

3

Paints with lower amounts of volatile organic chemicals

4

Eco-Terr® ﬂooring tiles made from 70 percent post-consumer
recycled content, 10 percent post-industrial content

5Store designed to capture available natural daylightbuyers evaluate the environmental performance of paper(beyond recycled and unbleached content). Over the lastyear, Starbucks solicited feedback from major paper ﬁber
suppliers about the tool, and participated in two ENGO
(environmental nongovernmental organization) stakeholder
summits. In 2006, we plan to pilot the evaluation tool with afew major ﬁber suppliers.

In 2001, Starbucks developed coﬀee buying guidelines (whichhave evolved into C.A.F.E. Practices) that changed ourpurchasing practices by giving higher priority to suppliers who
produce coﬀee in a sustainable manner. (See pages 18-22) But
our commitment to buy, sell and use environmentally friendly
products extends well beyond our coﬀee. For example, we
are making environmental improvements to our paper cups,
designing more sustainable packaging and engaging withother paper buyers to develop guidelines for paper purchasing.

Sustainable Packaging Design
Our involvement with the Sustainable Packaging Coalition
has given us the opportunity to learn from and share ideas
with other businesses and packaging suppliers. It has inspireda more sustainable approach to our packaging design process,such as minimizing the use of materials and incorporating
recycled content, whenever possible. We are also working
to minimize the use of petroleum-based polyvinyl chloride(PVC) in our packaging, as well as exploring the feasibilityof using an alternative coating that could some day make ourhot beverage cups recyclable.

Paper Working GroupIn 2005, Starbucks continued to participate in the Paper
Working Group (PWG), a group of 11 large paper buyers
led by the nonproﬁt organization Metafore. As a founding
participant of the PWG, Starbucks is working collaboratively
to develop and implement a procurement tool to help paper

56
ENVIRONMENT

Hot Beverage Paper Cups
In 2005, Starbucks purchased 1.9 billion hot beverage cupsthat were comprised of approximately 61.3 million pounds(27.8 million kilograms) of virgin tree ﬁber. To lessen theenvironmental impact associated with our paper cups, wetested a newly developed hot beverage paper cup that contains
10 percent post-consumer recycled paper ﬁber and, as a result,uses less virgin tree ﬁber. The test was conducted following
four years of collaboration with our suppliers, and after the
U.S. Food and Drug Administration reviewed and accepted
a new process developed by our paper ﬁber supplier. The
process incorporates post-consumer recycled content in the
packaging materials that come into direct contact with food.
As a result, Starbucks is introducing the ﬁrst-ever paper cup
containing 10 percent post-consumer paper ﬁber.

Q: “Adding 10 percent recycledcontent to your cups is a start, but
it’s a pretty miniscule amount. Why
isn’t Starbucks doing more?”–Dr. Allen Hershkowitz,
Natural Resources Defense Council

A: We recognize that adding 10 percent postconsumer recycled material is a conservative ﬁrst
step, but we believe it is an important one for us
and the food packaging industry. Increasing therecycled ﬁber in any paper product for environmental
reasons must be balanced with product durability
and safety considerations. In the future, we will
look for ways to increase the percentage of postconsumer recycled ﬁber contained in our cups, but
ﬁrst we want to be assured of the quality, safetyand durability of these new cups. In the meantime,
we are actively exploring additional innovations to
reduce the environmental impacts of our paper
cups and other packaging.

Beginning in 2006, we will introduce the new paper cups inall U.S. company-operated and licensed Starbucks stores, amove that will reduce our need for an estimated ﬁve million
pounds (2.27 million kilograms) of virgin tree ﬁber annually.
Although we do not have immediate plans to distributethe new cups outside North America, we are committed toworking with our international business units in hopes ofﬁnding similar opportunities to reduce our consumption ofvirgin tree ﬁber.

JOURNEY OF A STARBUCKS PAPER CUPRECYCLED PAPER PULP MILL

1

High-grade ofﬁce paper iscollected (and inspected).

PAPER MILL

7

5

Recycled pulp is combinedwith virgin tree ﬁber to create
the “cup stock” (with 10 percent
recycled material).

3

Rolls are cut into appropriate
sizes (for printing).

82Paper baled and sent
to a pulper.

CUP MANUFACTURER

6

Cut sheets are printed.

Cup stock is made intorolls and shipped to the
manufacturing facility.

Paper is broken down
into a slurry.

9

Sheets are formed into the
new Starbucks cup.

4

Recycled pulp is baled andsent to the paper mill.

57
ENVIRONMENT

Recognizing That Fiscal
Responsibility Is Essential to
Our Environmental Future

In ﬁscal 2005, the plans were laid to launch an enterprisewide, holistic approach to conservation. We are in theprocess of identifying 20 Starbucks stores, a representative
cross-section of our retail operations, which will serve as thelong-term test bed for collecting data on new equipment andoperational processes. We will monitor electrical, natural gas
and water usage, and determine the best opportunities for
maximizing eﬃciencies and lowering costs.

Before we take action, we get informed. This is our approachto business, and similarly to our environmental practices.
As we look to adopt new environmental measures, we ﬁrst
review the options, consider the environmental impacts
and costs and then determine the methods for testing. We
believe the process leads to better results. Project Green BELT
(Beneﬁcial Energy Limiting Technology) is a good example
of our approach.

FUTURE GOAL

Project Green BELT
Three years ago our store development team planned to set
up an Energy Test Bed in our retail stores. We alluded to thiseﬀort in our past CSR Reports, but the initiative didn’t get oﬀ
the ground until recently. It has since been renamed ProjectGreen BELT.

We will begin testing for Project Green BELT in
ﬁscal 2006.

Our stores rely on electricity, natural gas and water to operate the equipment andmachines needed to provide the Starbucks Experience for our customers throughout
the day and into the evening. In ﬁscal 2006, Starbucks plans to launch ProjectGreen BELT which will help us identify conservation opportunities in our stores.

58
ENVIRONMENTInstilling Environmental
Responsibility As a
Corporate Value
Starbucks environmental commitment is demonstrated byour decisions and actions. For instance, Starbucks seniorleadership has taken a stance on addressing climate change bypledging to purchase renewable energy certiﬁcates.
To ensure environmental responsibility is embraced at alllevels of the company, we developed and piloted a newleadership training course to foster a better understanding ofStarbucks strategy for social and environmental responsibility.
In 2006, we will oﬀer the social and environmental leadershipcourse to vice presidents and above. In addition, we will
amend the training that store partners and district managers
receive to better communicate Starbucks commitment tooperate in a sustainable and responsible manner.
Earth Day

For the past four years Starbucks has supported andworked together with the Earth Day Network (EDN), an
organization that was founded by the organizers of Earth Day
to encourage environmental citizenship year-round. In 2005,
our collaboration included featuring environmental messages
on Starbucks cup sleeves during the month of April. The
messages encourage environmental protection and suggest
simple choices we can make to create a more sustainable
world. The Starbucks Foundation also provided ﬁnancial
support to EDN. (See page 45.)

Dr. Karen Holl (left) of the Earthwatch Institute led participants, including
Starbucks customers, on an Earthwatch Expedition to help restore the Costa Rican
rain forest in ﬁscal 2005.

Earthwatch Expeditions
Starbucks has been working with the Earthwatch Institutesince 2002 to promote environmental responsibility to
our partners and customers. During June and July 2005,
Starbucks sponsored Earthwatch Expeditions that sent
seven partners and 20 customers to a coﬀee-farming
region in Costa Rica where participants spent 12 days
helping to restore a rain forest. Starbucks chose a team ofstore and oﬃce partners from the U.S., Canada and theUK. From their entries on Starbucks.com, customers wererandomly selected to participate in the expedition by athird-party contest administrator.

Additionally, in recognition of Earth Day 2005, Starbucks
provided ﬁnancial support to 42 environmental organizations
across North America. Approximately 12,000 partners andcustomers, including nearly 900 partners in Japan, got
involved in Earth Day–related volunteer projects.

Starbucks Japan partners help clean up a local park on Earth Day 2005.

59
ENVIRONMENTFROM FARMERTO CUSTOMERStarbucks
Environmental
Efforts Along
Our Value Chain

12

Farmers: Conservation

Roasting: Environmental
Management

Through C.A.F.E. Practices and ourpartnership with Conservation International,
Starbucks is encouraging farmers to use
environmentally sound growing practices tohelp protect biodiversity.

Measuring and Monitoring Our
Progress for Each Project

Emissions control technology is used to control
the smoke and odors from coffee roasting at
our plants. When new plants are opened, thebest available technology is employed. Other
efforts to minimize our roasting plant impacts
include retroﬁtting our stacks with catalytic
burners, recycling light bulbs to prevent
mercury halide from reaching landﬁlls, andcomposting coffee chaff, stretch wrap andcorrugated cardboard.

OUR CHALLENGE OF MEASURING UTILITY CONSUMPTION
Our ability to accurately track the total amount of energy
and water used to operate our stores depends on whether
Starbucks pays the utility bills directly, or whether ourlandlords assume responsibility for the utilities. When
Starbucks directly manages the utilities, we receive an
accounting of our utility usage, whereby we can track our
performance over time. Often landlords assess their tenants
for utilities based on leased square footage, recapturing theircosts as part of the tenant’s rent. In these situations, we don’t
receive detailed statements for utility usage. Similarly, ourlicensees are not required to report their operating expenses orutility consumption to Starbucks.

Starbucks conducted an environmental footprint assessment
in 2000 to help identify a number of focus areas that we
considered to be high impact. We remain committed tothese priorities. Metrics were established for each focus area,
enabling us to track and report on our performance. A brief
description of our focus areas as well as the results of ourperformance follows.
• Coﬀee – The amount of sustainably produced and organic
coﬀee purchased. (See pages 19, 23 and 25 for thisinformation.)• Tea – The amount of certiﬁed organic ingredientspurchased. (See page 29 for this information.)

These challenges not only impact our capacity to track ourutility consumption globally, they also impede our ability
to fully identify the drivers of our energy and water usage.
We are hopeful that Project Green BELT (described on page58) will help us better understand utility consumption in
our stores so that we can resolve these issues and improve
our performance.

• Paper – The percentage of post-consumer ﬁber andunbleached paper ﬁber contained in our annual
paper purchases.
• Transportation of people – The percentage of partners
using alternative commuting options at Starbucks Support
Center (administrative headquarters).
• Waste reduction – The percentage of U.S. customers
using commuter mugs, which reduces the number ofdisposable paper cups that are used and discarded.
• Recycling – The percentage of our U.S. and Canada
stores, where Starbucks controls waste and recycling, thatparticipate in recycling programs.
• Energy consumption – The amount of electricity andnatural gas used per square foot in our U.S. and Canada
company-operated stores.
• Water consumption – The amount of water used
per square foot in our U.S. and Canada companyoperated stores.

60
ENVIRONMENT

3

4

5

Support: Packaging andPaper Purchases

Retail Stores: Design
and Operations

Customers: Reusing
and Recycling

Starbucks considers recyclability, reusability
and recycled content in our purchasing
decisions. We strive to reduce unnecessary
packaging and target a minimum of 30
percent post-consumer ﬁber in all paper
purchases, excluding our paper cups. In
2006, we will begin using paper cups that
contain 10 percent post-consumer ﬁber in
our U.S. stores.

Starbucks incorporates environmentallyfriendly measures in the design andconstruction of our stores, including the useof sustainable wood products, energy-efﬁcient
lighting and reduced-ﬂow water ﬁxtures. We
also purchase renewable energy certiﬁcatesto offset the emissions associated with energy
used for our U.S. and Canada companyoperated stores. Where commercial recycling
collection services exist, we recycle milk jugs,
cardboard boxes and other waste products.

Starbucks offers a 10-cent discount tocustomers who bring in their own commutermugs. We also provide complimentary ﬁvepound (2.27-kilogram) bags of used coffee
grounds to customers, parks, schools andnurseries as a nitrogen-rich garden nutrient.

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61
ENVIRONMENT�����������

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†Based on data from 4,231 stores.

Fiscal 2005 utilities usage is being
reported for North American companyoperated stores that were opened before
October 1, 2004, and have a full 12months of consumption information.
Our previously reported results were
skewed because we included storesthat had been opened less than a fullyear as well as stores with incomplete
information.Therefore, we are restating
our electricity, gas and water usage datafor ﬁscal years 2003 and 2004.

WORKPLACEIn the event of a natural disaster,Starbucks ﬁrst ensures the safety
and well-being of our partners
who have been affected. Wethen seek to provide a helping
hand – from ﬁnancial vouchers
and access to the company’s
employee assistance plan to
cash grants from our partnersupported CUP (Caring Unites
Partners) Fund. Starbucks
was there for our partners
during the 2004 South Asia
tsunami and for our U.S.
partners during the2005 hurricane season.
(More information
on page 70.)

Lawrence Duncan (center, above) evacuated from New Orleans before Hurricane
Katrina but didn’t imagine that he would be unable to return home. Instead
he ended up across the country in Tacoma, Washington, working once again forStarbucks after hearing that local stores were oﬀering positions to displaced partners.
Lawrence was greeted at the airport by Gretchen Coker (left, above), a partner
resources manager, and invited to stay at the home of Jeﬀ Backman (right, above)
a Starbucks barista who is now Lawrence’s co-worker.

63
WORKPLACE

Progress Report on Our Performance – WORKPLACESELFRATINGFOR MORE
INFORMATIONTOPIC

WHAT WE SAID IN 2004

WHAT WE DID IN 2005

Partner beneﬁts –tuition reimbursement

Extend our tuition reimbursement
program to partners in Canada andexplore whether similar programs canbe established outside North America.

Tuition reimbursement became effective in Canada
on January 1, 2005. It is also offered in Hong Kong,
Thailand and Japan. We are currently sharing thedesign of this program with our UK colleagues.

Page 68

Partner View Survey

Conduct a comprehensive partner
survey in October 2004.

Partner View Survey was conducted as planned.
Results were shared with our partners and areincluded in this report.

Page 65

Test a companywide diversity andinclusion scorecard that will help us
develop metrics and establish longterm goals.

Finished developing the scorecard, but it didn’t
launch in ﬁscal 2005. It’s currently scheduled forrollout in 2006.

Make diversity training an integrated
element of our overall executive
development process.

Launched Executive Diversity Learning Series
with an initial web seminar titled “Do You Hear
What I Hear?” and a Diversity Communication
Guide to help strengthen our executives’ diversity
and leadership competencies. Approximately
30 percent of vice presidents and above havevoluntarily participated so far.

Page 67

Focus some of our diversity
training so that partners can better
understand multicultural customers
and customers with disabilities.

Speciﬁc content that focused on disability
etiquette and deaf culture was added to existing
training modules for our baristas and ﬁeld
managers.

Page 67

Install anti-slip mats in our U.S.
company-operated stores.

Installed new anti-slip mats in our California
stores and tested for effectiveness before
complete rollout. Results were good so installationof anti-slip mats will continue and old mats will
be recycled.

Page 71

Workplace diversity

Workplace diversity

Workplace diversity

Health and safety

KEY:

ACHIEVED

MAKING PROGRESS

Page 67

DID NOT ACHIEVE

Starbucks Employment Proﬁle – Fiscal 2005
Number of partners globally

115,000

U.S. partners – retail

91,200U.S. partners – nonretail

6,300

International partners* – retail

16,800International partners* – nonretail700

Net jobs created (Starbucks partners) in ﬁscal 2005

15,900Total wages and beneﬁts paid to U.S. partners**$1.9 billion* Includes partners in Canada, UK, Republic of Ireland, Australia, Germany, Thailand, China, and Singapore and regional support partners in Europe and Asia Paciﬁc** Includes salaries, bonuses, vacation, payroll taxes, healthcare beneﬁts, workers’ compensation, 401(k) match and weekly pound of coﬀee

64
WORKPLACEPROVIDING A GREAT WORK ENVIRONMENT
At Starbucks, our partners (employees) are
the key to our success. To attract and retain
the caliber of partners that drive Starbucks
success, we strive to create a workplace thatboth values and recognizes each person’scontribution. Our Guiding Principle says it
best: “Provide a great work environment andtreat each other with respect and dignity.”

Partner View Surveys
Approximately every 18 months, Starbucks conducts acomprehensive survey to give partners a voice in shaping theirpartner experience. The survey also measures overall satisfaction
and more important, partner engagement – the degree to which
partners are connected to the company. Starbucks partners in the
U.S. and Canada, at our international regional support centersin Europe/Middle East/Africa (EMEA), Asia Paciﬁc and Latin
America, at Starbucks Coﬀee Trading Company in Switzerland,at Starbucks Coﬀee Agronomy Company in Costa Rica, and at
our coﬀee roasting plant/warehouse in Amsterdam were invited
to participate in our ﬁscal 2005 survey.

In this section we describe what Starbucks is doing to fulﬁll
our commitment to this Guiding Principle, and in particularwhat we are doing to:• Promote a respectful workplace culture

Partner View Survey Results• Foster diversity and inclusion

Fiscal 2003

Fiscal 2005

Survey Response Rate
% of partners who responded to survey

46%

64%

Partner Satisfaction% of satisﬁed or very satisﬁed partners

82%

87%

Partner Engagement% of engaged partners

73%

73%

• Care for our partners’ well-being• Provide opportunities for training and career growth• Ensure a safe workplace

Workplace Culture
To create a great work environment, we believe there needs
to be an emphasis on recognition, a support network inplace, and most important, two-way communication
channels available for partners to provide their feedback.
Starbucks encourages our partners to utilize any of several
available options to tell us when something is troublingthem or when they have praise to share.

Overall, the ﬁscal 2005 survey revealed that Starbucks Mission
Statement and Guiding Principles continue to provide
meaningful direction in how our partners do their jobs. The
survey also revealed that taking action on our ﬁscal 2003 survey
results made a big diﬀerence. In general, scores for areas where
we made improvements increased – areas like coﬀee knowledge
and opportunities to develop skills. In addition, partners told
us they:• Know what is expected of them at work
• Believe someone at work cares about them
• Work for managers who promote work/life balance
The Partner View Survey also uncovered areas needing
improvement. Speciﬁcally, partners pointed out that
Starbucks should:• Celebrate our successes more
• Provide more eﬀective coaching and feedback• Improve our communication with partners
Starbucks began addressing some of these issues in ﬁscal
2005 with the launch of some new initiatives, including “onthe-spot” recognition cards that celebrate partner and teamsuccesses. To help people managers become better at coachingand providing feedback, new and revised training courses wereintroduced. And Starbucks began an internal communications
audit, inviting randomly selected partners to provide feedback
that can help the company identify more eﬀective ways tocommunicate. Starbucks Broadcast News, an internal video
newsletter, was one of our initial endeavors.

Starbucks partners at one of our stores in Portland, Oregon, from left - Tara
Jordan, Sunny Burden, Robert Hastings and Andrea Streedain, enjoy working withan enthusiastic team.

65
WORKPLACE

Mission Review
Mission Review was established in 1991 to allow partners away to voice concerns when they believe the company is
not operating in a manner consistent with Starbucks
Guiding Principles. When partners submit comments orquestions directly to the Mission Review team, they are
assured of a personal follow-up in a timely manner. In ﬁscal
2005, our Mission Review team recorded more than 4,200
contacts from North America partners on topics that ranged
from the company’s sick time policy to environmental
responsibility. Some of our international business units havealso embraced this concept and provide similar forums totheir partners. However, we do not currently track Mission
Review submissions for our international markets.

Workplace Policies and Respecting Partner Rights
Starbucks has workplace policies to provide for equal
employment opportunities and strictly prohibit discriminationor harassment on the basis of age, race, gender, color, national
origin, religion, sexual orientation, physical or mental
disability, as well as any other basis prohibited by federal,state, local or provincial laws. We follow all laws regarding
the employment of minors. The current minimum age of
employment at Starbucks is 16, and it may be higher in somelocations as required by local regulations.

Starbucks also recognizes our partners’ right to unionize.
We have always taken the approach of being pro-partner
by focusing on providing a great workplace environment
and a comprehensive Total Pay package. (See page 68 for
information about Total Pay.) At the end of ﬁscal 2005, 123
Canadian partners were the only Starbucks partners formallyrepresented by a union.

Business Conduct Helpline
As part of our Business Conduct and Corporate Complianceprogram, the Helpline provides Starbucks partners with accessto a non-company, third-party agent who is available for theircalls 24 hours a day. Partners are protected from retaliation,
yet they may still choose to remain anonymous when callingthe Helpline. In all cases, information is treated conﬁdentially.
The concerns reported are investigated and resolved in amanner consistent with Starbucks Mission Statement andGuiding Principles. Starbucks Helpline has been in place foryears, well before the federal Sarbanes-Oxley Act of 2002
mandated it as part of corporate compliance.

Thirteen partners at our Kent, Washington, roasting plant had
previously been represented by the International Union of
Operating Engineers Local 286. In ﬁscal 2004, these partners
notiﬁed the union that they were no longer interested inbeing represented. The union withdrew its representation inJune 2005.
We reported in our 2004 CSR Report that a small numberof our partners working in one Starbucks store in New York
City notiﬁed the National Labor Relations Board (NLRB)
that they were interested in being represented by a union. On
the day before the scheduled election, the union voluntarily
withdrew its petition to the NLRB. Following the withdrawal,
the union ﬁled several unfair labor practices charges against
Starbucks. As of the end of ﬁscal 2005, the NLRB had not
ruled on the allegations.

Recognizing Our Partners
Starbucks success reﬂects the quality, imagination andinitiative of our partners. We developed the Starbucks Partner
Recognition Program to recognize our partners’ contributions.
Currently there are 18 formal recognition programs thatpartners can use as tools to incent, reward and inspire
one another. They range from company awards to special
acknowledgements given by co-workers.

Starbucks is committed to following any and all labor laws
in a fair and consistent manner. We do not take action orretaliate against partners who express their views about unions
or who take part in union activity.

Honoring the Legacy ofOrin C. Smith
In recognition of Starbucks former president andceo who retired in 2005, we established the Orin C.
Smith Scholarship at the University of Washington(UW) in Seattle, where Starbucks headquarters is
located. Each year for the next 10 years, two $25,000
scholarships will be awarded to UW undergraduates
who are sons or daughters of Starbucks partners. We
also renamed our President’s Award to be the Orin
Smith Award to recognize Starbucks partners who far
exceed expectations and make profound impacts onpartners, customers and the ﬁnancial success of thecompany. Award recipients receive $5,000.

66
WORKPLACE

Fostering Diversity and Inclusion

Currently we track and report the percentage of women andpeople of color in our total U.S. workforce and among our
vice presidents and above, who voluntarily disclose their raceand gender. For the ﬁrst time this year, we are reporting thepercentages of women and people of color holding senioroﬃcer positions at Starbucks.

At Starbucks, our diverse workforce includes men andwomen of various ages, races, national origin, religiousaﬃliations, sexual orientation, physical and mental attributes,
and diﬀering levels of education, skills and experiences.
Our partners also come with their own ideas, opinions
and communication styles. As Starbucks continues to hire
thousands of new partners annually and expand globally, wemust uphold our Guiding Principle to “embrace diversity as
an essential component in the way we do business.”

Although we improved in most categories in 2005, our ability
to continually recruit and develop qualiﬁed diverse candidates
at a pace on par with the company’s rapid expansion presents aformidable challenge. It is one we are committed to meeting.

Diversity and Inclusion Initiatives
The success of any diversity or inclusion strategy begins with ademonstrated commitment from senior leadership. Starbucks
Global Diversity Leadership Team exists to ensure thatdiversity is embraced at all levels of the company, especiallyamong our leadership team.

���

In ﬁscal 2005, our new ceo Jim Donald, along with 12 senior
executives, took part in a 360-degree diversity competency
assessment to identify their strengths and speciﬁc areas
needing improvement. As a follow-up, individual action plans
have been created for each executive.

���

An Executive Diversity Learning Series was designed in ﬁscal
2005 for vice presidents and above with the goal of building
their diversity competencies and thus broadening their overall
leadership skills. As a next step, a full-day diversity immersion
will be launched in 2006 that will enhance our executives’learning so they become more eﬀective at leading a diverse,
global workforce.

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Another advancement we made in ﬁscal 2005 was addressing
the needs of deaf partners. We instituted web cams as astandard tool; provided tuition reimbursement for American
Sign Language courses; made our enterprise help desk
accessible for deaf partners; and added closed captioning for
Starbucks Broadcast News, our new video newsletter.

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Measuring Performance
On a companywide basis, Starbucks took steps to create
a diversity and inclusion scorecard, although we fell shortof our plans to test it in 2005. The scorecard includes key
metrics for diversity that will allow us to gather baseline datain the ﬁrst year and track performance in subsequent years.
Over time, it will provide the type of quantitative feedback
needed to establish meaningful goals related to workforce
representation, leadership strengths and weaknesses andworkplace environment.

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**Data has been re-cast using our ﬁscal 2005 methodology.

Starbucks Senior Ofﬁcers*

FUTURE GOAL

Fiscal 2005

In ﬁscal 2006, we plan to roll out our diversity
and inclusion scorecard to our ceo and seniorleadership team.

Women

32%

People of color

26%*Senior vice presidents and above

67
WORKPLACE

Caring for Our Partners
One of the best demonstrations of how we care for our partners is through Starbucks Total Pay package, which includes competitive
base pay, bonuses, a comprehensive health plan, paid time-oﬀ plans, stock options, a savings program and partner perks. In ﬁscal
2005, adoption beneﬁts were enhanced to include paid time oﬀ for new adoptive parents and up to $4,000 in reimbursement for
qualiﬁed adoption expenses. Also, our tuition reimbursement beneﬁt was extended to partners in Canada.
The chart below summarizes the core beneﬁts our eligible part- and full-time partners receive.

Starbucks Beneﬁts
PARTNER BENEFITSPROGRAM DESCRIPTIONSAND COVERAGE

ELIGIBILITY

Comprehensive healthcare beneﬁts(U.S. and Canada)

Beneﬁts include medical, dental, vision,prescription drugs and alternative healthcoverage. In the U.S., Starbucks paid 75 percentof health coverage costs for partners and 56
percent for dependents. In Canada, 74 percent ofcosts were paid for partners and 46 percent for
dependents.

Once initially eligible, full- and part-time partners
who are paid a minimum of 240 hours per calendar
quarter and their eligible dependents, including
spouses, domestic partners and children. In ﬁscal
2005, 67 percent of U.S. partners and 62 percent of
Canadian partners were eligible for these beneﬁts.

Bean Stock – Starbucks stock option plan(eligible partners in the U.S., Canada,
UK, Hong Kong, Netherlands, Switzerland,
Germany, Australia, Costa Rica)

The board of directors determines annual stock
option grants based on company performance
up to 14 percent of our partners’ eligible basewages. Every partner through the director level
receives the same percentage of his or her
ﬁscal-year wages. For ﬁscal 2005 performance,
the basis for stock option grants was 14 percent.

Full- and part-time partners up through director level
who have been employed by Starbucks since April 1
and have been paid for at least 500 hours from theﬁrst of the ﬁscal year through March 31 or from April
1 through the end of the ﬁscal year. More than 57,000
partners qualiﬁed for Bean Stock for ﬁscal 2005
performance.

S.I.P. – Stock Investment Plan (U.S. andCanada), Share Incentive Plan (UK)Partners can purchase company stock at
discounted prices on a quarterly basis (U.S.
and Canada) or a semiannual basis (UK).

Partners who have worked as a regular partner at
least 90 days for Starbucks and have been paid for an
average of 20 hours a week during the three months
preceding the offering. No hours requirement in the
UK. In ﬁscal 2005, 32 percent of eligible U.S. andCanadian partners participated in S.I.P.

Future Roast – Starbucks 401(k) Plan
(U.S.), RRSP – Registered Retirement
Savings Plan (Canada)

Starbucks matches between 25 percent and 150
percent (based on the length of service frommost recent date of hire) on the ﬁrst four percent
of pay that partners contribute to the U.S. 401(k)Plan. Eligible Canadian partners receive a 25
percent match on the ﬁrst four percent of paythat they contribute to the RRSP.

Full- and part-time partners with one year of service
are eligible. In the U.S., partners age 30 or older may
participate immediately.

Partner Beneﬁts – Internationally
While speciﬁc beneﬁts diﬀer between regions and countries,
all of our international business partners share Starbucks Total
Pay philosophy. Below are several representative examples of
beneﬁts received by Starbucks partners outside North America.

• New Zealand partners have access to a registered workplace
training program, which is free of charge and enables themto gain nationally recognized qualiﬁcations.
• Our business partner in Turkey provides partners withtransportation subsidies and access to a company doctor
who treats partners free of charge.

• Some of the partner beneﬁts in China include healthcare
insurance, sick leave and maternity/paternity leave, and insome areas tuition reimbursement is provided for partners
and their children.
• In Malaysia and Thailand, partners are given advanced
training opportunities to further their careers, in addition
to health insurance, paid vacation, sick leave andother beneﬁts.

68
WORKPLACEFOCUSING ON HEALTHCARE AND WELLNESS
Since the company’s early days, Starbucks has been committed
to providing our eligible part- and full-time partners withhealthcare beneﬁts. These beneﬁts are an expense the company
has been willing to shoulder because of the deep and abiding
responsibility we feel toward our partners. This stems from thevow Howard Schultz made when he acquired Starbucks – tocreate a company that would treat people like family and in
turn, they would be loyal and give their all.

Starbucks healthcare program is self-insured, which means
healthcare providers are paid with Starbucks funds which
includes money our partners contribute toward their coverage.
Because each partner’s health aﬀects the entire company, we
launched Starbucks Thrive Wellness Initiative in late 2004
to promote health and wellness as well as a sense of shared
responsibility between our partners and the company.
Thrive Wellness Initiative
The Thrive Wellness Initiative combines education,communication and participation to help our partners live
healthy lives. One component of the initiative provides
interactive online tools to encourage and support partner
wellness, including the WebMD® Health Risk Assessment(HRA). After partners complete their individual HRA,WebMD® creates a personal “health map” for each partner
and then provides them access to a variety of programs, tools
and information that are aimed at promoting healthy lives.
Starbucks also arranged for discounted fees for our partners at
contracted ﬁtness facilities.

Starbucks launched an internal campaign to promote our Thrive Wellness Initiative,
an effort that encourages our partners to live healthy lives. This poster features
Judy Carlson, a Starbucks partner in Seattle.

Partner Training andCareer Development
Starbucks continually invests in our training programs andcareer development initiatives, which help our partners
advance their careers at Starbucks.

Advocating for Healthcare Reform
Given the challenges Starbucks and other U.S. companies
are facing to sustain healthcare beneﬁts for their employees,
Howard Schultz and other Starbucks oﬃcers engaged U.S.
national policymakers in an eﬀort to raise awareness andbegin the discussion about policies that will make America’s
healthcare system more eﬃcient, reliable, transparent andaﬀordable while also improving quality.

All of our partners receive comprehensive training, including
our baristas, who receive 23 hours of initial training tobecome experts in the preparation and delivery of our
products. When a barista moves into another retail position,
he or she receives an additional 29 hours of training as ashift supervisor, 112 hours as an assistant store manager, 320
hours as a store manager and 200 hours as a district manager
trainee. In total, our retail partners received an estimated 2.9
million hours of training in ﬁscal 2005.

Part of Starbucks advocacy eﬀorts included Howard Schultz’s
participation in the CNBC 2005 Washington Summit HealthCare Panel. The forum brought together other corporate
CEOs and several elected oﬃcials to discuss the rising costs ofhealthcare coverage and to explore what options are available
for businesses and government to work together.

Partners interested in advancing their careers with Starbucks
do so in two ways: promotions and transfers. In ﬁscal 2005,
19 percent of our partners were promoted to new positions
and 29 percent of our partners transferred to new positions.

69
WORKPLACE

The CUP Fund
Since 1999, the CUP (Caring Unites Partners) Fund has
assisted partners with ﬁnancial support as a result of an
unexpected event such as an illness, ﬁre or natural disaster.
Starbucks partners support the CUP Fund with personal
contributions. This past year the CUP Fund responded toan unprecedented number of partners in need as a resultof the devastating eﬀects of Hurricanes Katrina and Rita in
the U.S. Gulf Coast region. More than 300 partners along
the Gulf Coast received assistance from the CUP Fund,
totaling more than $225,000. In total, the CUP Fund
provided more than $1 million in direct ﬁnancial assistanceto more than 1,000 partners in ﬁscal 2005.

Dear Mr. Schultz,
My name is Gail Bickham and I am a Starbucks partner. I wasin New Orleans during Hurricane Katrina and experienced
the massive chaos. I made a personal decision to stay behind in
New Orleans with my extended family and “ride out the storm.”
Nobody seems to understand that decision.
My mother, who has Parkinson’s disease and heart trouble,
was with me. So were my sister and her two daughters, one aparaplegic in a wheelchair, and my own 14-year-old daughter.
As the water started to rise in my sister’s ﬁrst-ﬂoor apartment,
we managed to get to higher ground, leaving everything we had,
except a little food, under water. My family and I spent three days
without power and had no contact with the outside world. It wasvery traumatic for us all.

Gail Bickham, a Starbucks partner from New Orleans, endured a traumatic
experience during and after Hurricane Katrina. She wrote Starbucks chairman
Howard Schultz a personal letter (reprinted here) expressing her gratitude for the
support she received from Starbucks.

On the third day, we were rescued by boat and brought to safety –or so we thought. We were put on the I-10 in the evening heat andbasically left to die. We were a few people amongst hundreds on
the Interstate – hot, hungry, and some had already died. I swear,
it felt like a third-world country. I could not imagine it – mymother, my niece, all of us, were dying in this way.

Starbucks Response to
Hurricane Katrina
Starbucks support of partners was fully tested in 2005.
In the aftermath of Hurricane Katrina, we were determined
to locate every partner in the area and oﬀer assistance tothose who had been aﬀected by the storm. With the help of
our store managers, district managers and the Internet, we
had accounted for everyone – except Ronald Oliver, a newpartner who had just completed his ﬁrst shift. Finding Ronald
proved to be a formidable challenge, so Starbucks turned toa local vendor that does civil recovery work. After a short
investigation, we made contact with Ronald’s mother andfound out that he was safe in Georgia.

After several hours, we were told to move further down theInterstate, which we somehow did, wheelchair and all. By thegrace of God, at 1:00 A.M. my niece Tiﬀany found her strengthand stood in front of an approaching bus to make it stop.
She begged the state trooper to let us on, but he refused, notsympathetic at all. Then the bus driver got out and insisted that
we be allowed on the bus along with about 15 other people. The
driver’s name was David, and he was a gift from God.
I used the remaining power in my cell phone battery to calla Starbucks district manager. Hearing that I was en route to
Houston, Starbucks met us at the Astrodome and immediately
housed us in a hotel. I honestly don’t know where we would
be otherwise.

Many of the partners hit hardest by the storm received
immediate assistance from the CUP Fund. Starbucks also
extended pay to partners for a period of time, ensuring
they were paid even if their stores were closed, and madeavailable other emergency assistance. Since many banks
remained closed, Starbucks worked with Winn-Dixie Storesso partners had a place to cash both CUP Fund grant checks
and paychecks. In addition, Starbucks helped partners ﬁndalternative positions in our stores outside the aﬀected areas.

I have always known that Starbucks is the #1 best company towork for in the world, and this conﬁrms it even more.
I cannot express my gratitude enough, but please understand thatwithout Starbucks, I don’t think I would have made it out of thehorrors of Katrina alive.
Update: As of December 2, 2005, Gail is back at work at a
Starbucks store in New Orleans.

Starbucks extended a helping hand to partners in a very
personal way. After things stabilized, one of our partners,
Gail Bickham, wrote the following letter about her hurricanerelated experience.

For more information about Starbucks emergency relief
eﬀorts, see page 38.

70
WORKPLACEHealth and Safety

9.00
8.14

Starbucks is committed to creating a safe environment for ourpartners and customers by reducing the risk of injuries. Safety
programs for Starbucks stores and roasting plants are designed
to meet or exceed the most stringent regulatory standards inthe jurisdictions where we do business.

7.85

6.68

7.00

In ﬁscal 2005, a major focus was the prevention of slips andfalls that result in injuries to our store partners. We launcheda slip-resistant shoe program for retail partners and completed
a test of new anti-slip ﬂoor mats in our California companyoperated stores. The program resulted in reductions in boththe numbers of mat-related injury claims and the severityof those related injuries compared to the previous year.
Consequently, we plan to continue installing the mats in all
U.S. and Canada company-operated stores.

5.00

Fiscal year

2003**

2004**

2005

Injury Rate Per 200,000 Hours Worked – Starbucks Retail Stores** Injury rate per 200,000 hours worked is an average for all U.S. full- andpart-time store partners, the majority of whom are baristas.
** Data have been retroactively adjusted to reﬂect new claims that were ﬁled
after the ﬁscal years ended.

After introducing new digital brewing equipment andautomated espresso machines, the number of brewer-relatedburn claims by partners decreased by 85 percent in ﬁscal 2005
over the previous year.
We are continuing to address other workplace safety issues,
including injuries caused by lifting. We recently invested inhigher quality ladders and stepstools that are stronger andoﬀer more stability. The new ladders and stepstools will bestandard in all new stores going forward. Existing stores will
receive the new ladders when current ladders are replaced.

0.01

0.80

0.60

0.59
0.51

0.50

2004

2005

0.40

FUTURE GOAL
0.20

In ﬁscal 2006, we plan to complete the rollout ofanti-slip mats to our North America company-operated
stores; require slip-resistant shoes as part of our retaildress code; introduce a safer box knife to help prevent
cuts; and develop a more comprehensive plan aimed
at reducing lifting-related injuries.

0.10
Fiscal year

2003

Interstate Experience Modiﬁcation Factor**The Interstate Experience Modiﬁcation Factor is an assigned rate thatcompares the number and cost of a company’s workers’ compensation claims
with those of peer companies in their industry. A rating of 1.0 represents
average performance for the industry. Starbucks ratings are less than 1.0 andtherefore better than the industry average.

FORTUNE 100 BEST COMPANIES TO WORK FOR
Starbucks was named one of the “100Best Companies to Work For” in 2005 by
FORTUNE – the seventh time Starbucks
has received this prestigious recognition.
In 2005, Starbucks was ranked 11.

71
WORKPLACE

Independent Assurance Report
To the Stakeholders of Starbucks Coﬀee Company:
We have been engaged to provide assurance on the Corporate Social Responsibility (“CSR”) Fiscal 2005 Annual
Report (the “Report”) of Starbucks Coﬀee Company (“Starbucks”), for the ﬁscal year ended October 2, 2005.
We have performed evidence-gathering procedures on the following subject matter:• Key Performance Indicators Summary and Fiscal 2005 Highlights;• Information and data provided in each area of focus of the Report (World of Products, Society, Environment,
and Workplace); and• The management and reporting for the preparation of this information and data.
We have considered the subject matter against the following evaluation criteria:• The procedures by which the CSR information and data were prepared, collated and compiled internally; and• The control environment over the quality of the information and data.
Our statement should be considered in conjunction with the inherent limitations of accuracy and completenessfor CSR data, as well as in connection with Starbucks internal reporting guidelines.
The Board of Directors of Starbucks is responsible for both the subject matter and the evaluation criteria.
Our responsibility is to report on the internal reporting processes, information and data for CSR based on ourevidence-gathering procedures. Currently there are no statutory requirements or generally accepted veriﬁcation
standards in the United States of America that relate to the preparation, presentation, and veriﬁcation of CSR
reports. There are international standards for the CSR reports that were approved by the International Auditing
and Assurances Standards Board (IAASB) in January 2005. Using the IAASB approved standards as a guideline,
we planned and performed evidence-gathering procedures to provide a basis for our conclusion. However, wehave not performed an audit in accordance with the International Standards on Auditing. Accordingly, we do not
express such an opinion.
Our evidence-gathering procedures included, among other activities, the following:• Testing the eﬀectiveness of the internal reporting system used to collect and compile information on each areaof focus in the Report;• Performing speciﬁc procedures, on a sample basis, to validate the CSR data;• Visiting Starbucks coﬀee buying operations in Switzerland;• Visiting Starbucks corporate headquarters in Seattle, Washington;• Interviewing partners responsible for data collection and reporting;• Interviewing partners at retail locations;• Assessing the information gathering and compiling process of each area of focus in the Report;• Reviewing relevant documentation, including corporate policies, management and reporting structures; and• Performing tests, on a sample basis, of documentation and systems used to collect, analyze and compile
reported CSR information and data.
In our opinion, based on our work described in this report, the CSR information contained in the Report
gives a fair representation of CSR performance and activities of Starbucks Coﬀee Company for the ﬁscal year
ended October 2, 2005. Statements, assertions and data disclosed in the Report are reasonably supported bydocumentation, internal processes and activities, and information provided by external parties.

Moss Adams LLP
Seattle, Washington
January 27, 2006

72
WORKPLACE

Your Feedback Matters

CREDITSIn preparing Starbucks Fiscal 2005 CSR Annual Report, we provided a copyof our previous year’s report to a broad cross-section of stakeholders and asked
for their candid feedback and advice on the ways in which we could improvetransparency. We also received a great deal of feedback from readers of lastyear’s report via an online survey, something we are doing again. This collective
input provided some excellent suggestions that we incorporated into thisyear’s report, such as including a fuller description and self-assessment of thecompany’s performance through various user-friendly tables. It also conﬁrmedthat information regarding our coﬀee buying practices is what our stakeholders
regard as most material and worthy of inclusion in our report.

Report preparation: Starbucks Corporate Social
Responsibility Department

We invite our readers to help us improve our future reporting by providing
feedback on Starbucks ﬁscal 2005 CSR Annual Report. This can be done via
an online survey at www.starbucks.com/csrsurvey. Please be assured that all
feedback will be thoughtfully considered and greatly appreciated.
For more information:
Starbucks Coﬀee Company
Customer Relations
PO Box 3717
Seattle, WA 98124-8891 USA
Phone: 800-23-LATTE (800-235-2883)
Email: info@starbucks.com
To receive a printed copy of this report, please call the number listed above.
The report is also available online at www.starbucks.com/csr.

Design: Starbucks Creative Group
Editor: Liz Gorman Communications
Executive sponsor: Sandra Taylor, senior vicepresident, Corporate Social Responsibility
Photography Credits: Alan Abramowitz, Marco A.
Batres, Kevin Carothers, COCLA, Martin Coles,
Peter Dressel, Ashley Frowick, Stanley Hainsworth,
Muriel Hastings, Remy Haynes, Keith Hutjens,
Christopher Jordan, Barbara Kinney, Shojiro
Kodama, Jonathan Levine, Dennis Macray, Sandy
Nelson, OnRequest Images, Matt Peloza, Mike
Penney, Alan Richardson, Save the Children, Fred
Stewart, Lara Swimmer, Martin Thiel, Paulina
Garcia-Vallejo Urquiza, Julie Williams, World
Cocoa Foundation

VERIFICATION
External veriﬁcation of the data and statements
made in Starbucks CSR Annual Reports began in
2002, when the company retained Seattle-based
Moss Adams LLP, the 12th largest accounting andconsulting ﬁrm in the U.S. The selection of Moss
Adams met Starbucks criteria for a high-quality ﬁrm
that had not worked with the company previously,
and a ﬁrm that could develop a customized
approach for verifying CSR-related data andcontent. (See page 72.)
ABOUT THE PAPER USED FOR THIS REPORT
It takes a lot of paper to print a report like thisfor our many stakeholders. To minimize theenvironmental impact, this report was printed on
100 percent post-consumer recycled ﬁber that iscertiﬁed by the Forest Stewardship Council.
The choice to use this paper will:– use 114,399 fewer pounds of wood from trees– consume 168,211 fewer gallons of water– generate 17,846 fewer pounds of solid waste– produce 1143.46 fewer pounds ofwaterborne waste– save 277,304,000 BTUs of energy– emit 34,610 fewer pounds of greenhouse gases– result in 61.05 fewer pounds of volatileorganic chemicals
This data is based on calculations developed by theEnvironmental Defense Fund and other members of
the Paper Task Force.

73
WORKPLACE© 2006 Starbucks Coffee Company. All rights reserved. Printed in the USA. CSR-171