CORPORATE SOCIAL RESPONSIBILITY

Annual Report

Fiscal 2002

STARBUCKS MISSION STATEMENT AND GUIDING PRINCIPLES

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 appropriateness of 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.

ABOUT THIS REPORTThe information in this report is for fiscal year
2002 (October 1, 2001 through September 29, 2002)
and primarily covers Starbucks company-operated
retail and distribution operations in North America
and sourcing activities in coffee-origin countries.
Information about Starbucks international
company-operated and licensed retail store markets
and other select operations—Tazo® Tea and Hear
Music™—is also included. Currency is represented
in U.S. dollars throughout the report.
Cover: Blossoms of an arabica coffee tree.

TABLE OF CONTENTS
2

Letter From Starbucks Chairman and CEO

3

The Business Case for Corporate Social Responsibility

3
COMMITMENT TO ORIGINS™

4

5

Coffee—The Importance of Sustainability

6

Coffee Sourcing

10

Investments in Coffee-Origin Countries

11

Tazo Tea Company—Sustainable Initiatives

STORE AND CORPORATE OPERATIONS

12

13

Environmental Impacts of Our Operations

16

Purchasing Policies and Practices

17

Responding to Stakeholders

COMMITMENT TO PARTNERS (EMPLOYEES)

18

19

Listening to Partners

20

Embracing Diversity

21

Starbucks Benefits Package

22Partner Development and Recognition

COMMITMENT TO COMMUNITIES

24

25

Community Support

27

Other Starbucks Community Initiatives

29

International Initiatives

30

The Starbucks Foundation

32

Independent Verification Letter

FROM BEAN TO CUPStarbucks Approach to Sustainability
Starbucks first store, located in the heart of Seattle’s Pike Place Market, opened in 1971. As people discovered
the great flavor of Starbucks high-quality, freshly roasted coffee beans, word quickly spread. Before long ourcoffee was legendary.
What happened since still seems remarkable. Starbucks original concept of selling premium whole beancoffee was refined in 1987 when Starbucks began serving handcrafted beverages and offering a coffee
experience, which is now embraced by more than 20 million customers worldwide every week. While
Starbucks growth may surprise some, we no longer ask ourselves how it happened. We have built ourcompany by maintaining an unwavering commitment to Starbucks mission and guiding principles.
Successful companies take measures to sustain their position. At Starbucks, we have integrated sustainablebusiness practices—which align with our mission and guiding principles—to help ensure our company
continues to thrive. Starbucks sustainability efforts are visible throughout our supply chain, which we term“bean to cup.” This chain connects the people and places where our coffee is grown to the communities
around the world where our more than 6,000 stores are located.
To sustain the prominence of Starbucks brand in the marketplace and build stakeholder trust, we must be
accountable for our actions. As a measure of our accountability, last year we published Starbucks first
Corporate Social Responsibility Annual Report to provide transparency on our business practices, measurements of our performance and benchmarks for future reporting. This year, we’ve taken additional steps toassure our stakeholders that the information in this report is accurate by engaging an independent third party
to verify its contents.
Now we invite you to take the journey with us—from bean to cup—so you can determine for yourself how
well Starbucks is operating our business in a manner worthy of your admiration and trust. We hope theactions reflected in this report help us do that.
Warm regards,

Howard Schultz
chairman and chief global strategist

Orin C. Smith
president and chief executive officer

CSR Fiscal 2002 Annual Report

THE BUSINESS CASE FORCORPORATE SOCIAL RESPONSIBILITY
Starbucks defines corporate social responsibility(CSR) as conducting business in ways that produce
social, environmental and economic benefits for thecommunities in which we operate. Achieving thisrequires a comprehensive set of policies, practices
and programs that are integrated throughout ourbusiness operations.
According to Business for Social Responsibility, anonprofit organization dedicated to advancing leadership in responsible business practices, moreinvestors and consumers today are demanding thatcompanies be accountable for the environmental andsocial impacts of their operations. There is a growing
body of empirical studies demonstrating the positive
impact CSR has on business economic performanceand shareholder value.
We believe conducting our business responsibly
delivers benefits both to Starbucks and to our stakeholders—partners (employees), customers, suppliers, shareholders, community members andothers. We hope our actions also provide guidance
and leadership to the coffee industry as a whole.
We view our CSR initiatives as long-term investments, with real benefits and rewards. Some of theinvestments Starbucks makes include:• Promoting environmental conservation andincreasing economic opportunities for thepeople who produce our coffees.
• Minimizing our environmental impact to help
ensure resources for future generations.
• Creating a workplace that attracts qualified
partners, increases retention, fosters professional growth and development, and rewards
performance.
• Being a good neighbor and contributing to thequality of life in our local communities.

Starbucks purchases some of the finest arabica coffee
beans grown in Latin America,Africa and Indonesia.

COMPANY PROFILE
Fiscal 2002—October 1, 2001 to
September 29, 2002
(Information below represents totalcompany unless noted)• Total net revenues: $3.3 billion• Net earnings: $215.1 million• Earnings per share: $0.54• Total income taxes: $126.3 million• Stock price (high/low): $25.63/$14.56• Number of company-operated locations:
3,496 (North America), 384 (International)• Number of licensed locations:
1,078 (North America), 928 (International)• Number of partners (employees): 62,000

3The arabica coffee bean starts its journey as a cherry ona coffee tree.

The harvested beans are washed and spread out to dry under
the sun.

CSR Fiscal 2002 Annual Report

COMMITMENT TO
ORIGINS ™
• Coffee—The Importance of Sustainability• Coffee Sourcing• Investments in Coffee-Origin Countries• Tazo Tea Company—Sustainable Initiatives

We begin our bean-to-cup journey with coffee farmers, the first link in Starbucks supply chain. We’ve examined many
issues that farmers face,including economic challenges and environmental concerns,which,if not addressed,could impact
their long-term sustainability. As a result, Starbucks is taking important measures to help improve the lives of coffee
farmers and to protect the environment. Our approach is rooted in Starbucks guiding principles and translates into our
Commitment to Origins.
™

COFFEE—THE IMPORTANCE OF SUSTAINABILITY
Grown in 70 tropical countries, coffee is the second most traded commodity in the world after petroleum,with a global value of nearly $5.6 billion in 2000-2001.* By World Bank estimates, more than 25 million
smallholder farmers make their living by producing coffee.
The coffee industry comprises two distinct markets—commodity and specialty:• Commodity-grade coffee, which consists of robusta and commercial quality arabica beans, is traded in ahighly competitive market as an undifferentiated product. During 2002, a global oversupply of more than
two billion pounds (907,200,000 kilograms) of coffee drove New York “C” (the worldwide reference usedby coffee traders for commodity-grade coffee) arabica commodity prices to historic lows of $0.40-0.50 per
pound ($0.88-1.10 per kilogram).
• The specialty coffee market, which currently represents approximately 10%** of total worldwide
unroasted (green) coffee purchases, consists primarily of high-quality arabica beans. Prices for specialty
coffee are determined by the quality and flavor of the beans and are almost always higher than theprevailing price for commodity-grade coffee.
Starbucks purchases only high-quality arabica coffee, and our purchases represent about one percent of theworld’s beans. We know quality comes with a price, and as a result Starbucks pays prices that are substantiallyover and above the prevailing commodity-grade coffee price. Rather than use a New York “C”-based formulafor negotiating prices, Starbucks prefers to negotiate the majority of our contracts based on outright prices,
independent of the commodity market. In fiscal 2002, Starbucks paid an average price of $1.20 per pound($2.64 per kilogram), excluding freight, for green coffee purchased at outright prices.
Coffee farming, like any other business, must be economically feasible to ensure long-term sustainability.
Starbucks believes the prices we pay help farmers cover their production costs and better provide for theirfamilies. In turn, Starbucks gets assurance that the coffee farms we purchase from can meet our future
supply needs. Although our overall purchasing impact may be relatively small, we’ve taken leadership steps
to promote environmental and social stewardship in coffee-origin countries.

* International Trade Centre** Specialty Coffee Association of America

5COFFEE SOURCING
Starbucks recognizes that the continued growth and success of our business depends on a long-term supplyof quality coffee. To help ensure this supply, our coffee sourcing strategies are intended to contribute to thesustainability of coffee growers and help conserve the environment. These strategies include:• Implementing Starbucks Coffee Sourcing Guidelines.
• Purchasing coffee at outright, negotiated prices.
• Building direct relationships with farms and cooperatives.
• Negotiating and securing long-term contracts.
• Making affordable credit available to coffee farmers.
• Purchasing Fair Trade CertifiedSM coffees.
• Purchasing certified organic and conservation coffees.
• Investing in health and educational projects that directly benefit farmers and their communities.
Coffee Sourcing Guidelines
In fiscal 2002, Starbucks introduced a set of Coffee Sourcing Guidelines to support and encourage thesustainable production of high-quality coffee as a pilot program for the 2002 and 2003 crop years. The
guidelines serve as criteria for our Preferred Supplier Program.
Developed with the support of Conservation International’s Center for Environmental Leadership in
Business, the guidelines reward farmers who meet important quality, environmental, social and economic
criteria with financial incentives and preferred supplier status. Suppliers are required to submit an application
to the program documenting their sustainability measures. Applications must be verified by an independent
third party and are subject to audit. Starbucks has been recognized within the coffee industry and by
non-governmental organizations (NGOs) and governments around the world for pioneering such a program.

COFFEE SOURCING

Percentage of Total Coffee Purchased

Outright
Prices*80%

DirectRelationships*

Long-term
Contracts*

32%

36%

74%

70%
60%
50%
40%
30%
20%

12%

10%
0%

9%

By the end of fiscal 2002, Starbucks had received
more than 50 applications to the program fromcoffee suppliers who are making sustainability apriority. These suppliers striving for preferredsupplier status are making ongoing investments toenhance sustainability through practices such asconserving natural resources, adding clean watertechnologies, improving social conditions andreducing or eliminating the use of agro-chemicals.
In fiscal 2003, Starbucks plans to take the learningfrom the first year of the pilot phase and improve thePreferred Supplier Program through independent
verification, monitoring performance and continuing
to gather stakeholder feedback from growers,
inspectors and external organizations.

3%

Fiscal 2001
Fiscal 2002
In last year’s report, we projected purchases for fiscal
2002. This graph indicates our actual purchases forthe same period.
*Amounts are not mutually exclusive by category.

Purchasing at Outright Prices
Purchasing coffee at negotiated, outright prices,
independent of the prevailing price for commoditygrade coffee, helps provide stability and predictability
for buyers and sellers. Starbucks purchased the
majority of our green coffee—74% in fiscal 2002—
at outright prices, compared to 12% in fiscal 2001.
The increase is due to a deliberate shift in the way
we purchase coffee.

CSR Fiscal 2002 Annual Report

Building Direct Relationships with Farmers
One of our priorities is to establish more direct
relationships with farms and co-ops we know andtrust. Purchasing directly from farms, with the assistance of a third-party facilitator, delivers more of thepurchase price to the farmers. Through direct relationships, Starbucks gains a greater degree oftransparency on how much farmers receive. Our
long-term goal is to improve transparency for our
non-direct purchases as well. In fiscal 2002, 32% of
our total green coffee supply was purchased throughdirect relationships at negotiated prices, compared
to 9% in fiscal 2001.
Signing Long-Term Contracts
Given the current economic climate, farmers prefer to know they have buyers for future harvests. By
signing long-term contracts with farmers, Starbucks
is able to purchase our future coffee supply at
predictable prices over multiple crop years. We
increased our purchases of coffee negotiated throughlong-term contracts, which average three to five
years, from 3% of our total supply in fiscal 2001 to
36% in fiscal 2002.
Access to Credit
Smallholder coffee farmers frequently experience a
shortage of cash long before the next harvest. Due toa chronic lack of working capital, they often sell
their crops to local buyers who use the scarcity ofcredit and the region’s geographical isolation tosecure coffee from producers at low prices. To help
break this cycle, Starbucks has instituted several
initiatives to provide farmers access to affordable credit.

7

RECOGNITION OF OUR EFFORTS• In May 2002, Starbucks was honored with thefirst annual Humanitarian Award by the Coffee
Quality Institute, a nonprofit education foundation and separate fund of the Specialty Coffee
Association of America.The award recognizes ourcontributions to the quality of life for farmers andtheir families, leadership in protecting the qualityof the environment in coffee agriculture, and ourcommitment to continued improvement of coffee
quality in origin countries.
• Starbucks was named one of the 100 Best Corporate Citizens in the March/April 2002 issue ofBusiness Ethics magazine.The ranking is basedon quantitative measures of corporate service toseven stakeholder groups: shareholders, employees,
customers, the community, the environment, overseas stakeholders, and women and minorities.
• Starbucks was included in the 2002-2003 Dow
Jones Sustainability Index (DJSI), the second
consecutive year the company has been on the list.
This assessment of the 2,500 largest companies inthe DJSI focuses on economic, environmental andsocial performance. Starbucks was one of 300
companies from 23 countries that led theirindustry in sustainability.
• In recognition of our collaboration with
Conservation International (CI) to encouragesustainable coffee farming practices, Starbucks
and CI were recipients of a 2002 World Summit
Business Award for Sustainable Development
Partnerships in Johannesburg, South Africa, inAugust 2002.

In fiscal 2002, Starbucks, through a loan guarantee, helped make $500,000 available through Ecologic
Enterprise Ventures (EEV), a nonprofit organization providing affordable crop financing to smallholder
coffee farmers in Latin America, and Conservation International (CI). This was the second year that
Starbucks assisted Mexican coffee farmers with pre- and post-harvest loans through a loan guarantee.
According to CI, the results of this program in fiscal 2002 were:• 205 farmers received pre-harvest financing, an increase of 25% over last year.
• 691 farmers received post-harvest financing, an increase of 96% over last year.
• 1.25 million pounds (566,990 kilograms) of coffee were financed, an increase of 57% over last year.
Fair Trade CertifiedSM Coffee
In the Fair Trade certification system, smallholder coffee farmers who are organized into democratically runorganizations and registered with the Fairtrade Labelling Organizations International (FLO) can sell theirbeans directly to importers, roasters and retailers at favorable guaranteed prices. To purchase Fair Trade
CertifiedSM coffee, a buyer must pay a minimum of $1.26 per pound ($2.77 per kilogram) for non-organic
green arabica coffee and $1.41 per pound ($3.10 per kilogram) for organic green arabica coffee. According toTransFair USA, an independent nonprofit organization that licenses Starbucks to sell Fair Trade coffee
imported into the U.S., the guaranteed prices help increase earnings for farmers, enabling them to afford basic
health care, education and home improvements.

FAIR TRADE, ORGANIC AND CONSERVATION (SHADE GROWN) COFFEE PURCHASES

Fiscal 2000

Fiscal 2002

Pounds (kilograms) of
Coffee Purchased

1.7 million 1.8 million
1.1 million
874,000
653,000

570,000(259,000)

190,000(86,000)

Totals:Fiscal 2001

(296,000)(396,000)(771,000)(816,000)(499,000)

684,000(310,000)

304,000(138,000)

646,000 lbs (293,000 kg)*

1.8 million lbs (816,000 kg)*

3.4 million lbs (1.5 million kg)*

Fair Trade CertifiedSM Coffee
Certified Organic Coffee (includes Organic Fair Trade and Organic Conservation [Shade Grown] Coffee)Conservation (Shade Grown) Coffee*Coffees may be certified in more than one category.

Since forming an alliance with TransFair USA in April 2000, Starbucks has become one of North America’s
largest roasters and retailers of Fair Trade CertifiedSM coffee. In fiscal 2002, Starbucks purchased 1.1 million
pounds (498,952 kilograms) of Fair Trade CertifiedSM coffee. Starbucks Fair Trade Blend is sold in all of our
U.S. company-operated stores and in some international markets.
Starbucks sold a total of 530,000 pounds (240,404 kilograms) of Fair Trade CertifiedSM coffee through our
retail stores and Business Alliances accounts in fiscal 2002. Business Alliances accounts include colleges
and universities, hotels and other locations licensed to sell Starbucks coffee. In fiscal 2002, Starbucks soldFair Trade CertifiedSM coffee through 332 of our Business Alliances accounts, which included 188 colleges
and universities.
In fiscal 2002, Starbucks signed a Memorandum of Understanding with Fairtrade Labelling Organizations
International, enabling us to offer Fair Trade CertifiedSM coffee in our international markets. At the end of
fiscal 2002, Starbucks was licensed to sell Fair Trade CertifiedSM coffee in Austria, Canada, Germany, Japan,
Switzerland, the U.K. and the U.S.
Working with Fair Trade Farmers
In July 2002, Starbucks, the Ford Foundation and Oxfam America announced a pilot project in collaboration with CEPCO, a large Fair Trade coffee cooperative in Oaxaca, Mexico, with more than 16,000
farmers. The goals of the project are to increase the supply of high-quality Fair Trade CertifiedSM coffee andenable participating farmers to earn premium prices for their crops.
Starbucks and the Ford Foundation, a philanthropic organization that works to reduce poverty and promoteinternational cooperation, each contributed $125,000 for the first year of the pilot project. Oxfam America,an organization dedicated to creating solutions to hunger, poverty and social injustice around the world, will
work directly with farmers of the CEPCO cooperative on improvements to their post-harvest quality control
techniques. By providing farmers with the tools to improve their skills, and thus the quality of their coffee,
we hope to increase their opportunities for self-sufficiency and sustainability.

CSR Fiscal 2002 Annual Report

Organic Coffee
Organic coffee is grown without the use of synthetic pesticides, herbicides or chemical fertilizers. These
growing practices help maintain a healthy environment and clean ground water. Once harvested, the coffee
beans must be processed in organically certified mills and roasting facilities to be sold as certified organic.
Many of the coffees Starbucks buys are grown using organic methods but are not certified as such. Official
certification requires farms to submit to three years of soil testing, and annual testing thereafter, to verify they areusing accepted organic farming practices. Starbucks has offered certified organic coffee since 2000. In fiscal 2002,
Starbucks purchased 1.7 million pounds (771,107 kilograms) of certified organic coffee and introduced Serena
Organic Blend,™ an exclusive certified organic coffee available in our company-operated stores in North America.
Conservation (Shade Grown) Coffee
Since 1998, Starbucks has partnered with Conservation International (CI), a nonprofit conservation
organization, to promote sustainability in coffee-origin countries. Through CI’s Conservation Coffee™ program,
Starbucks is encouraging the production of coffee using traditional cultivation methods that protect
biodiversity and provide improved economic opportunities for coffee farmers.
Starbucks Shade Grown Mexico coffee, purchased
through CI’s Conservation Coffee™ program, comes
exclusively from farms surrounding the El Triunfo
Biosphere Reserve in Chiapas, Mexico, one of theworld’s most important biodiversity hotspots.
In fiscal 2002, Starbucks invested $200,000 to support this project as part of a three-year commitment
to provide a minimum of $600,000. The results ofthis program, according to CI, in fiscal 2002 include:• Farmers supplying Shade Grown Mexico
received an 87% price premium over local prices
for their coffee.
• Exports of coffee from the Chiapas
Conservation Coffee™ program increased 110%over fiscal 2001.
• More than 1,000 farmers participated in the
program, up from 691 the year before.
• The milling yield for coffee (green coffee beans
resulting from processing raw coffee) increased from
64% to 76%.
• More than 7,400 acres (2,995 hectares) of coffee
fields in Chiapas are currently being managed
using best practices for conservation coffee.
In fiscal 2002, Starbucks purchased 1.8 million pounds(816,466 kilograms) of conservation coffee to meetincreased consumer demand and ensure year-roundavailability, and added Decaf Shade Grown Mexico to
our lineup of conservation coffees.
Starbucks and CI have begun developing similarconservation projects in Colombia and Peru. Futureplans are to expand the program in other areas
where biodiversity is under severe threat, including
Panama and Costa Rica.

SUPPORTING CONSERVATION AND
COFFEE FARMERS
Located only a few kilometers from the core zoneof the El Triunfo Biosphere Reserve in Chiapas,
Mexico, Jose Julio Perez Lopez is a secondgeneration, smallholder coffee farmer cultivatingsome of the highest quality shade grown arabica
coffee. His farm is nestled on a mountainside
near the community of Nueva Colombia, whereconservation coffee production has become vitalto the health of the Reserve’s ecosystem and to
the economy of the local community.
Jose Julio produces organic coffee grown undera natural canopy of shade trees interspersedwith fruit trees and other crops that help feed
his family.As a member of the farmer cooperative CESMACH, Jose Julio has received technicalassistance and training in organic coffee production and processing through CI’s Conservation
Coffee™ program.The investment by CI,
Starbucks and his cooperative helps Jose Julioearn a premium for his high-quality coffee andencourages natural resource conservation.

9

INVESTMENTS IN COFFEE-ORIGIN COUNTRIESAs part of our ongoing commitment to the people and places where Starbucks coffee is grown, we’veestablished partnerships with international nonprofit organizations that share our concerns. We also support
community projects to improve the well-being of families in coffee-farming regions.
CARE
Our 11-year alliance with CARE, an international organization dedicated to fighting global poverty in morethan 60 countries, has given us the opportunity to touch the lives of nearly three million people in coffeeorigin countries. Over the years, Starbucks has contributed or helped raise more than $2 million for CARE
programs, making Starbucks one of CARE’s largest North American corporate donors.
In fiscal 2002, Starbucks worked with CARE to establish the Starbucks Emergency Response Fund to enable
us to respond to natural disasters and crises in countries where Starbucks sources coffee and tea. In 2002,
Starbucks donated $200,000 to this fund.
Social Development Projects
Over the years, some of the relationships Starbucks
has built with farmers have produced far morethan coffee. Starbucks and a number of farms
have collaborated to improve local water
systems, construct coffee mills and support manyother projects that benefit farming families andtheir communities.

Starbucks helped fund several education and healthrelated projects at Finca Dos Marias, a coffee farm in
Guatemala, including this school that provides day
care through middle school classes for children livingon the farm.

The projects are funded in two ways. First, Starbucks
pays an additional premium on top of the purchaseprice for coffee from a specific farm. The added
premiums go toward the project. In turn, thefarm matches Starbucks contribution so they havea vested interest in the project. Many of these
initiatives are ongoing to ensure that once theprojects are developed, they are sustained.

In fiscal 2002, Starbucks contributed more than $85,000 in premiums for these social development projects.
While there are many examples we could provide, here are two that highlight our collaborative efforts:• In Nicaragua, we helped build lavatory facilities and improve water quality at the Modesto Armijo
School, which is attended by 1,200 elementary schoolchildren from San Juan de Rio Coco.
• Starbucks and five Guatemalan coffee farms built and are maintaining health clinics, day care centers andschools that serve 5,000 people in local farming communities.
Coffee Kids™
In fiscal 2002, Starbucks also contributed $25,000 to Coffee Kids,™ a nonprofit organization dedicated to
improving the quality of life for children and families who live in coffee-growing communities. These
funds financed local micro-credit projects in Mexico and Nicaragua, serving more than 2,200 women andtheir families.

CSR Fiscal 2002 Annual Report

TAZO TEA COMPANY—SUSTAINABLE INITIATIVESORGANIC TEA INGREDIENTS PURCHASED

Fiscal 2001

Fiscal 2002

80%

Percentage byVolume

70%
60%
50%

56.7
50.2

TEA SOURCING PRACTICES
Tazo Tea Company, a wholly owned subsidiaryof Starbucks, is committed to supporting
sustainable farming practices and purchasing
certified organic tea whenever it is available
in sufficient quantities that meet Tazo’s
rigorous quality standards.
In addition to tea,Tazo uses a wide variety
of botanicals and spices in many of its
products and is actively sourcing organic
supplies of these materials.Tazo also
contracts with companies that engage incommunity development projects.

40%
30%
20%
10%
0%

In Starbucks fiscal 2001 Corporate Social
Responsibility Annual Report, we reported thepercentage of black and green organic tea
purchased.Tea leaves are only one ingredient of
the raw materials we purchase for Tazo® teas,so to better reflect Tazo’s organic purchases, wechanged the metric this year to include the total
amount of organic raw materials purchased for
Tazo ® teas, including botanicals and spices.
(See graph at left.)

Tazo Tea Company and Mercy Corps
In September 2002, Tazo and Mercy Corps, a relief
agency that operates health and economic development
programs in more than 30 countries, formed a partnership to support tea communities. The project will bebased in the tea-growing region of Darjeeling, India,
where Tazo purchases some of the world’s finest teas.
The project will focus on three key areas: improving thequality of and access to water; supporting regionalsocial, environmental and economic programs; anddeveloping young people’s leadership skills andopportunities for their future. Starbucks, Tazo and its
business partners will invest $600,000 to fund thisthree-year program.

Sumitra Tamang plucks tea in the Paila Kheti
section of Makaibari Tea Estates, a biodynamic
garden in Darjeeling, India, where some ofTazo’s teas are grown.

11After green coffee arrives at Starbucks, it is roasted to bringout a full range of flavors.

While the world’s finest beans are an essential ingredient,
it also takes the skilled hands of a barista to create aStarbucks beverage.
®

CSR Fiscal 2002 Annual Report

STORE AND CORPORATEOPERATIONS• Environmental Impacts of Our Operations• Purchasing Policies and Practices• Responding to Stakeholders

In this section, our bean-to-cup journey highlights sustainable measures Starbucks has taken to minimize theenvironmental impact of our operations, select suppliers who share our values, and respond to stakeholder concerns.
In many of these areas, we’ve established metrics to measure Starbucks performance and provide the feedback needed
to make future improvements.We firmly believe the way we operate our business is not only fundamental to our success,but defines the type of company Starbucks strives to be.
ENVIRONMENTAL IMPACTS OF OUR OPERATIONSStarbucks approach to improving our environmental performance is guided by our environmental mission
statement, which we adopted in 1992. (See sidebar below.)
To bring this mission statement to life, Starbucks develops policies and procedures that are implemented
throughout our stores, roasting plants and support centers. Starbucks examines the success of our current
measures and seeks new opportunities for improvement.
Measuring and Managing Our Environmental
Impacts
As with most things at Starbucks, the way wemeasure and manage our environmental operations begins with coffee. We examine the impacts ofroasting, distribution, store design and operations,and engage our partners (employees), suppliersand customers in our efforts to improve ourenvironmental performance.
Starbucks Environmental Footprint Team, a crossfunctional group of partners representing the
major areas of operations, identifies specificinitiatives and assesses Starbucks annual environmental performance. Using The Natural Step’s
sustainability framework, the Footprint Team
identified three environmental focus areas for thecompany to measure its environmental performance:• Sourcing: coffee, tea and paper.
• Transportation: people and products.
• Store design and operations: energy, water,
recycling and waste reduction.

STARBUCKS ENVIRONMENTAL MISSIONSTATEMENT
Starbucks is committed to a role of environmental leadership in all facets of our business.
We will fulfill this mission by a commitment to:• Understanding environmental issues andsharing information with our partners(employees).
• Developing innovative and flexible solutions
to bring about change.
• Striving to buy, sell and use environmentallyfriendly products.
• Recognizing that fiscal responsibility isessential to our environmental future.
• Instilling environmental responsibility asa corporate value.
• Measuring and monitoring our progressfor each project.
• Encouraging all partners to share in
our mission.

13

In Starbucks fiscal 2001 Corporate Social Responsibility Annual Report, we identified energy and water
consumption as a fourth area of focus. We are now reporting the same information and metrics as part of store
design and operations because the majority of these resources are used in our stores.
Along with our Environmental Footprint Team, our senior management reviews performance in each focus
area, and in fiscal 2002 received training on The Natural Step’s sustainability framework. This backing andsupport of Starbucks leadership is critical to implementing our measures throughout the organization.

PAPER PURCHASED

Percentage Purchased

Fiscal 2000

Fiscal 2001

Fiscal 2002

48.6

48.8

50.3

50%
40%
30%

27.6

27.7

20%
10%
0%

Post-consumer recycled content
Unbleached fiber

28.2

Paper Sourcing
Purchasing paper with higher levels of postconsumer recycled content and unbleached fiber
helps Starbucks minimize our environmental footprint. (See graph at left.) The company sees theopportunity for improvement in this area, so in fiscal
2002 provided specific training for those in our company responsible for purchasing paper supplies.
Transportation
The company has undertaken specific activities toreduce the impact of commuting at Starbucks
Support Center (SSC) in Seattle where approximately 2,300 partners work. Starbucks Transportation Options Program (TOP) provides
subsidies to partners for using public transit andalternatives such as biking and carpooling. In
fiscal 2002, approximately 600 SSC partners, or
26%, participated in TOP, compared to 25% in
fiscal 2001.

In April 2001, Starbucks contracted with Flexcar,™ an innovative car-sharing network that provides vehicles,
including a fuel-efficient Honda Civic gas/electric hybrid, for our SSC partners during the workday so they canleave their cars at home. In fiscal 2002, approximately 150 partners participated in the Flexcar™ program.
Store Design and Operations
The major environmental impacts of our store design and retail operations are energy and water consumption andsolid waste generation. In fiscal 2002, Starbucks created a Green Store Task Force made up of partners to
examine the environmental performance of our store design and operations. The Task Force performed a gap
analysis of our current specifications system against the U.S. Green Building Council Leadership in Energy
and Environmental Design (LEED) scoring system. This analysis identified water and energy consumption
as areas most in need of improvement. We are researching options to improve our performance in these areas
in fiscal 2003.
Also in fiscal 2002, Starbucks collaborated with the U.S. Green Building Council to establish a Retail
Development Committee (RDC) and a scoring system that addresses the needs of the retail sector. Working
with a broad cross-section of retail companies in North America, the committee created a new LEED Retail
Application Guide that the U.S. Green Building Council expects to release as a pilot in 2003.
Energy and Water Conservation
One of the ways we measure the environmental performance of our store design and operations is by theamount of electricity, gas and water consumption per square foot (square meter) of retail space. Data wascollected from a sample of our stores and is reported in the graph on page 15. We will use the findings of theGreen Store Task Force to measure and improve our performance in these areas over time.

CSR Fiscal 2002 Annual Report

Recycling
Starbucks goal is to recycle in all of our company-operated stores. Our recycling metric measures thepercentage of stores participating in programs where we can control solid waste services. In fiscal 2002,
Starbucks managed the waste and recycling of 1,890 stores out of 3,496 company-operated stores in North
America. The graph below indicates that 69% of these 1,890 stores had a recycling program in fiscal 2002.
In fiscal 2002, Starbucks launched two initiatives to improve our recycling rates.
• Working with the Aveda Corporation, we funded the Business for Social Responsibility Retail Recycling
Benchmark report. This report documented the recycling practices of eight major retail companies,
representing more than 10,000 store locations in the U.S. The information will be useful in identifying
recycling opportunities and obstacles for all retailers, not just Starbucks. The report is available online atwww.bsr.org/recyclingbenchmark.
• Our property management group conducted a waste characterization study to better understand thecomposition and scale of the recycling opportunities in our stores. We found five materials dominate
Starbucks retail waste by volume: cardboard, milk jugs, paper cups, pastry boxes and milk cartons. Basedon the findings, we are exploring ways to divert our waste through packaging reduction, reuse and recycling.
STORE DESIGN AND OPERATIONS

Water

Gas

Electricity

42.5
39.17 (161)
(148)
29.11
(110)

5.61 5.41
0.05 0.06

0.05

Percentage of Stores
Recycling

Commuter Mug
Usage

69% 4
5.30 3

60%

65%

2

2.2% 1.9%
Gallons (Liters)
Fiscal 2000
Fiscal 2001
Fiscal 2002

ThermsKilowatt-hours

1.4%

1

based on data from 1,570 stores tracking consumption
based on data from 2,001 stores tracking consumption
3
based on data from 3,500 stores tracking consumption
4
based on 1,890 stores where Starbucks manages waste and recycling
2

Water, gas and electricity consumption is measured per average square foot (square meter*) of retail space. Due to improved
data gathering and normalization methods, we have restated the data that was presented in our fiscal 2001 Corporate Social
Responsibility Annual Report to more accurately reflect consumption.
*1 square meter = 10.764 square feet. To convert square feet to square meters, multiply square feet by .0929.

Waste Reduction and Reuse
Coffee grounds make up the heaviest portion of the waste stream in our stores. Through our Grounds for Your
Garden program, we encourage reuse of coffee grounds by packaging and giving them to customers, parks,
schools and nurseries as a soil amendment. In fiscal 2002, we improved our communications efforts to better
inform our customers and communities of this reuse opportunity.
Another way Starbucks reduces waste is by encouraging customers and partners (employees) to use reusablemugs when enjoying our beverages. We offer a $0.10 beverage discount to customers who bring their own
mugs to our stores. In fiscal 2002, customers used commuter mugs more than 12.7 million times, keeping an
estimated 550,000 pounds (249,476 kilograms) of paper from landfills. While more customers used commutermugs in fiscal 2002 than previous years, as a percentage of total beverages sold, we have seen a decline inusage. To try to reverse this trend, we are employing different strategies, which included a special promotionin April 2002 to increase customer awareness and promote commuter mug usage. We also instituted a newpolicy for all Starbucks partners stating that beverages should be consumed in reusable cups while at work,
whether they work in a store, roasting plant or support center.

15

Involving Partners in Environmental Leadership
Since 1994, Starbucks has relied on our Green Team, a group of store managers across North America, toidentify opportunities and champion initiatives that help improve our environmental performance. In fiscal
2002, Starbucks doubled the number of Green Team members to keep pace with our growth and bettersupport Starbucks environmental commitment.
The Green Team focuses its efforts on waste reduction, recycling and energy and water conservation. The
Green Team also promotes Earth Day activities including in-store promotions and volunteer opportunities to educate partners and customers about the impacts their actions have on the environment.
Starbucks enhanced our 2002 Earth Day efforts by contributing $20,000 to the Earth Day Network(www.earthday.net), a resource for people who want to participate locally and/or learn more about the
impacts their decisions have on the environment.
Expanding Efforts in Our International Operations
By combining Starbucks environmental philosophy with intimate knowledge of their markets, some of ourinternational partners create localized solutions to reduce the impacts of their operations. For example, in
fiscal 2002, Starbucks Coffee Japan, Ltd., earned ISO 14001 certification, the leading international standard
for environmental management systems. Starbucks Japan also formed a Green Team to engage partners inenvironmental stewardship. One initiative the Japan Green Team accomplished in its first year was thepurchase from a local supplier of innovative, environmentally friendly napkins made from 70% post-consumer
recycled milk-carton fiber and 30% bamboo fiber for use in Starbucks Japan stores.

PURCHASING POLICIES AND PRACTICESStarbucks relies on a vast and diverse network of suppliers for everything from the fixtures in our stores
to the cups for our coffee. We seek relationships with suppliers who share our values and operate theirbusinesses accordingly.
Environmental Policies
Our suppliers are encouraged to provide the most energy-efficient products within their category andeliminate excessive packaging as outlined in Starbucks Supplier Handbook, which includes ourEnvironmental Mission Statement and Environmental Purchasing Policy. Internally, Starbucks
Environmental Purchasing Policy is used to guide the decisions of our purchasers.

ENVIRONMENTAL EFFORTS IN OUR
ROASTING PLANTS
Starbucks roasting plants in York, Pennsylvania,
and Kent,Washington, use state-of-the-art emissions
control technology to control the flow of smoke andodors. Our roasting plants recycle, among otherthings, the burlap bags used to transport green
coffee. In fiscal 2002, Starbucks recycled more than
1.35 million pounds (612,360 kilograms) of coffee
bags for use in the agricultural, furniture and carpet
pad manufacturing industries.
York Roasting Plant partners, pictured above, participated in the York County 2002 “March for Parks”
event. More than 50 partners volunteered or attended the event, while other partners provided support
through donations and fundraising. In all, the York Roasting Plant presented a check for $10,000 to theYork County Parks System for improvements on the Heritage Rail Trail. Partners at our Kent Roasting
Plant are involved in Washington State’s Adopt-a-Highway program. Every three months, partners andtheir families volunteer their Saturdays to pick up trash along a two-mile stretch of road.

CSR Fiscal 2002 Annual Report

Supplier Code of Conduct
In fiscal 2002, Starbucks developed a Code of Conduct for our suppliers of non-coffee products. The Codeof Conduct addresses standards for social responsibility, including labor and human rights, working
conditions and health and safety. Targeted for company-wide implementation in fiscal 2003, the Code of
Conduct will contain provisions for supplier selection, social compliance auditing, managing corrective actionplans and monitoring by internal and/or independent organizations.

Starbucks is actively involved in the Northwest
Minority Business Council, with representation on its
board. Our service and involvement with this organization led to our winning their 2001 Regional
Corporation of the Year Award.

SPENDING WITH DIVERSE SUPPLIERS

Fiscal 2000

Millions Spent

Supplier Diversity
Since 1996, Starbucks has actively engaged in efforts
to build a broad, efficient supplier network of minority- and women-owned businesses. Purchases fromthese businesses increased to more than $69 million
in fiscal 2002, a 38% increase over the previous year.

Fiscal 2001

Fiscal 2002
$69

$50
$38

Starbucks Supplier Diversity Training Program wasdeveloped in collaboration with the Council and has
become a model program in the Northwest for training purchasing decision-makers on the benefits ofsupplier diversity. All Starbucks buyers are required
to attend this workshop.

RESPONDING TO STAKEHOLDERS
Genetically Modified Ingredients
In our fiscal 2001 Corporate Social Responsibility Annual Report, we provided information about geneticallymodified (GM) ingredients in the products Starbucks sells. Since that time, we have taken the following
measures regarding GM materials:• Although there are no labeling requirements for genetically modified foods in the U.S., Starbucks has
adopted the Food Standards Australia/New Zealand (formerly ANZFA) guidelines, currently the moststringent food labeling regulations in the world. These regulations require labeling for all geneticallyengineered materials, except for highly refined minor ingredients, such as cornstarch, that may be derived
from genetically engineered material but contain no protein matter. If these regulations were in effect in
the U.S., none of Starbucks beverage products would require labeling.
• We confirmed that our coffees and teas are not genetically modified. Furthermore, we do not support
research that would lead to genetically engineered coffees and teas.
• We reviewed the non-coffee/tea beverages we serve. All were found to be free of genetically engineered material except for one beverage ingredient. We have since reformulated the ingredient to eliminate that material.
We will continue to monitor our products against the Food Standards Australia/New Zealand guidelines andtrack developments in this area.
rBST Milk and Organic Alternatives
Dairies in the U.S. are permitted to use rBST (recombinant bovine somatotropin) to increase milk
production. U.S. labeling requirements, however, do not require milk producers to disclose their use of thehormone. Despite low consumer demand, Starbucks continues to offer certified organic milk, which isguaranteed to be rBST-free, as a dairy alternative in our U.S. company-operated stores. We also offer organic
soy milk for consumers who prefer a soy alternative. In fiscal 2002, we began offering organic yogurt andsingle-serve organic flavored milk in most of our U.S. company-operated stores.

17

At the opening of the Starbucks in Madrid, Spain,
María Paz Blanco García handcrafts a Caramel
Macchiato for a customer.

Omollo Gaya works as a taster in Starbucks Coffee Department,
which samples more than 150,000 cups of coffee each year.

CSR Fiscal 2002 Annual Report

COMMITMENT TO PARTNERS• Listening to Partners• Embracing Diversity• Starbucks Benefits Package• Partner Development and Recognition

Our journey continues with a look at Starbucks workplace practices and the company’s more than 60,000 partners(employees) who are involved in every aspect of operations,from bean to cup. With every customer contact,partners can createa satisfying experience and engender long-term loyalty. But first, Starbucks wants partners to feel appreciated, valued andrespected—an important part of our guiding principles.Starbucks workplace culture is one that inspires passion and attracts
talent, and is something we feel distinguishes Starbucks from other companies. The strength of our culture contributes
significantly to our success, but much of the credit goes to Starbucks partners who are the company’s most valuable asset.
LISTENING TO PARTNERS

Partners rated Starbucks favorably as a workplacecompared to other companies. Ratings for overallsatisfaction were also high. But when we discoveredthat partners rated the benefits package only
average, we made changes to our Future Roast
401(k) plan. Starbucks increased our match ofpartner contributions for those who have been withthe company for more than three years, and thematch is now immediately vested.

Percentage of Respondents

Partner View Satisfaction Surveys
In previous years, Starbucks conducted surveys ofour retail partners to gauge satisfaction at the store
level. In fiscal 2002, we conducted a Partner View
survey at Starbucks Support Center, our global
headquarters in Seattle, to gather feedback andmeasure job satisfaction. Overall, partners told usthat Starbucks has created a company with strong
values and is a great place to work.

2002 PARTNER VIEW SURVEY RESULTS

17%

Starbucks Workplace Compared to Others
Better
Same
Worse

16%
12%
72%

Starbucks Partner Job Satisfaction
Satisfied
NeutralDissatisfied
Survey Sample—1,400 partners

In fiscal 2003, we plan to conduct Partner View
surveys with retail, field and international partners.

4%

79%

Percentage of Respondents

Letting people know that their opinions are
considered helps them feel respected and valued.
Recognizing this, Starbucks has created opportunities for partners to share their concerns and feedback
about our company through Partner View surveys,
Mission Review and the Standards of BusinessConduct Helpline. Listening to our partners is adefining element of Starbucks workplace culture anda reflection of our guiding principles.

19

Mission Review
Through Mission Review, Starbucks partners voice
their opinions or question how Starbucks businesspractices align with our guiding principles. Every
submission to Mission Review is researched andreceives a response. All Mission Review correspondence is shared with executives and managers tomake them aware of partner satisfaction, concernsand suggestions.

MAKING AN IMPACT IN PARTNERS’ LIVES
Marina Thea Keenan is a Starbucks Partner
Resources coordinator working in Chicago.
Originally from Belgrade,Yugoslavia, Marina
had dreamed of becoming a U.S. citizen sinceemigrating in 1993.
Marina’s first job in her adopted country was asa Starbucks barista. Over time, she was promoted
to store manager and then regional coordinator
before moving into her current position with thecompany. Early on in her Starbucks career, she
enrolled in S.I.P. (Stock Investment Plan) andheld on to her Bean Stock grants. In 2002,
Marina cashed in some of those options to fundthe application for her citizenship, which was
granted later that year.
“Starbucks has had a great impact on my life, somuch so that I decided to make the U.S. my permanent home,” Marina says. She used her stock options
and S.I.P. shares to help pay for her wedding,honeymoon and the down payment on a new home.

Standards of Business Conduct Helpline
Partners use the Standards of Business Conduct
Helpline to provide feedback and raise questions or concerns they have about our businessconduct, or to report any matter they are not
comfortable raising through other channels ofcommunication. The Helpline, which is part of
our Corporate Compliance Program, is available
24 hours a day for partners to speak candidly (andanonymously, if they wish) with non-company
personnel. A confidential report is forwarded
to the company for investigation and resolution.
Information reported through the Helpline istreated in a confidential manner, and no one canbe retaliated against for raising issues throughthe Helpline.

EMBRACING DIVERSITYAt the core of Starbucks culture is an appreciation
for the individual differences each partner brings to
the workplace. Embracing diversity is an essential
component in the way we do business and it’s oneof our guiding principles. We firmly believe thatdiversity strengthens our work environment and our
position in the marketplace.

To foster diversity, Starbucks offers a series of eight Diversity Learning workshops to partners. Eachinteractive module encourages participants to learn, honor and support the cultural differences anduniqueness of their fellow partners and customers. Our goal is to attract and retain a workforce that reflects
our communities and to develop policies and practices that fully utilize our partners’ potential.
Starbucks tries to be responsive to our partners’ special needs in the workplace. One example of this was
the retrofitting of point-of-purchase registers in some of Starbucks stores to provide captioning for deaf or
hard-of-hearing partners.

“As the world becomes more and more complex, having a diverse work team helps us be more adaptive as acompany.This is especially critical as we expand internationally. Diversity helps us make better decisions.
It is definitely part of our value system, and it’s good for business.”–Orin C. Smith
Starbucks president and ceo

CSR Fiscal 2002 Annual Report

To ensure a diverse candidate pool, Starbucks
recruits from nationally recognized associations andevents dedicated to women, people with disabilities
and minorities, such as the National Black MBA andNational Hispanic MBA conferences.
Based on the available data we have from Starbucks
partners who have voluntarily disclosed their raceand gender, as of June 1, 2002:• Women and/or minorities comprise more than
62% of our total workforce.
• More than 34% of Starbucks officers (vice president level or higher) are women and/or minorities.

STARBUCKS BENEFITS PACKAGE
From the beginning, Starbucks chairman and chief
global strategist Howard Schultz wanted Starbucks tobe the kind of company that, above all, valued our partners and offered them good health benefits and a greatplace to work. His vision inspired many things at
Starbucks, including a benefits package that is one of themost competitive in our industry. It’s called Total Pay
because it combines compensation, benefits and stock.
What makes Starbucks benefits package notable isthat it is offered to both full- and part-time partners
who work at least 240 hours per calendar quarterand meet other eligibility requirements. Benefits
include medical, dental and vision coverage, including coverage for alternative health services. This
coverage is extended to Starbucks partners’ dependents and their domestic partners as well. Some ofStarbucks other benefits are described below.

THE REWARDS OF STARBUCKS BENEFITSPROGRAM“I enrolled in the 401(k) plan as soon as I
became eligible,” says Beth Wood of ourCarnation,Washington, store.“I’ve worked at
Starbucks for seven years as a part-time barista
and the 401(k) plan just feels like free money.”
Based on the number of years Beth has worked
for Starbucks, she receives a 75-cent match forevery dollar she contributes to her 401(k) account,up to 4% of her pay.
“It’s fantastic,” she says about working at
Starbucks.“I can work part-time, close to home,
get paid well, have healthcare benefits, stock
options, and I have more time to spend with myfamily.”Bean Stock
Starbucks believes partners should share in the company’s success. Bean Stock, our stock option plan, has been
rewarding eligible U.S. partners for their contributions since 1991. Since that time, Starbucks expanded theBean Stock program outside of the U.S., making it available to our Canadian and U.K. partners. In fiscal 2002,
Hong Kong partners became eligible for the program.
S.I.P. (Stock Investment Plan)
Another way Starbucks partners benefit from our success is through S.I.P. This plan enables eligible Starbucks
partners to buy shares of Starbucks common stock each quarter at a discounted price through regular payroll
deductions. Starbucks offers a similar plan to partners in the U.K.—Starbucks Share Save Plan.
Future Roast 401(k)Starbucks Future Roast 401(k) provides partners an opportunity to save for their future through payroll deductions.
In fiscal 2002, we improved Future Roast based on feedback from partners. Starbucks increased our match of partner
contributions for those who have been with the company for more than three years. As a partner’s length of service
increases, so does the company’s match—from 25% to 150% of the first 4% of pay contributed by the partner.
Furthermore, Starbucks matching contributions are no longer subject to vesting. In fiscal 2003, the company plansto review the match for Canadian partners participating in our RRSP plan, the Canadian equivalent of 401(k).

21CUP (Caring Unites Partners) FundThe spirit of helping others can be seen every day at Starbucks through the CUP Fund, a program dedicatedto supporting fellow partners in need. Funded by partners through voluntary payroll deductions andfundraisers, the CUP Fund provides financial relief to partners facing emergency situations such as fire, theft,flood and illness. During fiscal 2002, nearly 15,000 partners contributed to the CUP Fund, and 185 grants
totaling more than $145,000 were made to North American partners.

PARTNER DEVELOPMENT AND
RECOGNITION
Partner Development
Partners need tools and learning programs tobecome vital contributors to our success. Starbucks
offers innovative training programs designed tomaximize our partners’ talents and skills and givethem the background needed to fulfill Starbucks
mission. Here are a few examples:

PARTNER GOES ON EARTHWATCH
EXPEDITION
In 2002, Starbucks launched a program with the
Earthwatch Institute to enable our partners towork alongside environmental research scientists
while receiving their regular wages. In June 2002,
Julia Mackay of British Columbia participated ina two-week Earthwatch expedition to the Gulf ofCalifornia.
There, she assisted a research crew in theirefforts to learn about critical environmental
issues affecting sea turtles. Julia worked with the
project scientists to monitor, tag and document
the movements of the turtles in this area.
In Julia’s words,“Not only were these two
weeks educational, learning about an endangered species, but they also provided a greater
perspective of a different region of the world
and its people.”• In fiscal 2002, Starbucks rolled out an updated
training program that teaches our retailpartners—from the novice barista to the veteran
district manager—how to make our beverages
and provide legendary customer service. It also
introduces new partners to the culture andvalues of Starbucks. Every barista receives
24 hours of training in his or her first 80 hoursof employment.
• Corporate partners get immersed in the store
experience so they know what it’s like to bebehind the espresso bar. Shortly after they are
hired, they don the green apron and spend a day
to several weeks working in a retail store.
• International partners responsible for opening
a new market spend three months in Seattle
learning about coffee, Starbucks culture andvalues, and the way we do business. Upon
returning to their countries, they share theirtraining with local partners.
• Starbucks encourages continuing education forour partners. All Starbucks support centers,
both in the U.S. and internationally, offer
partners opportunities for ongoing personal andprofessional development programs.

CSR Fiscal 2002 Annual Report

Partner Recognition
Starbucks believes our partners are special people
doing remarkable things. In appreciation for all thatour partners contribute, we’ve developed more than
30 recognition programs, including:• Moves of Uncommon Greatness (M.U.G.)
Award—recognizing partners who go out of
their way to help get work done.
• BRAVO! Award—to recognize achievements incustomer or community service.
• Spirit of Starbucks Award—recognizing asingle, exceptional achievement by a partner
or team.
• Manager of the Quarter and Manager of theYear Awards—recognizing store managers
who have made significant contributions inStarbucks retail operations.
• Leader of the Quarter and Leader of theYear Awards—recognizing non-retail supervisors, managers, project or team leaders who
demonstrate outstanding leadership.
• The President’s Award—our highest honor goesto partners who exceed expectations in making
a profound impact on partners, customers andthe financial success of the company.

A GREAT PLACE TO WORKIn recognition of the workplace Starbucks hascreated, FORTUNE magazine named thecompany as one of the 100 Best Companies toWork For in 2002. In making this prestigious
annual list for the fourth time, Starbucks was
specifically noted for the health benefits weprovide to full- and part-time partners, andfor our support of aid workers in New York,
Washington, D.C., and Pennsylvania following
the September 11, 2001, attacks.
Proud San Francisco Bay Area partners, pictured
above, delivered Starbucks “100 Best Companies
to Work For” application in a giant coffee mug.

23

Around the globe, Starbucks coffeehouses provide
a third place beyond home and work for customers
to relax and reflect.

Throughout the year, Starbucks partners participate incommunity activities outside their stores, including volunteering
for local, non-profit organizations, Earth Day activities and,here, painting a map of the U.S. at a schoolyard during
September Make Your Mark.

CSR Fiscal 2002 Annual Report

COMMITMENT TO COMMUNITIES• Community Support• Other Starbucks Community Initiatives• International Initiatives• The Starbucks Foundation

Throughout this report we’ve shared examples to illustrate Starbucks comprehensive bean-to-cup approach to social
responsibility—from our involvement with coffee-growing communities to our commitment to our partners (employees).
In this final chapter of our bean-to-cup journey, we come to where our partners and customers meet—in neighborhood
Starbucks coffeehouses around the world. Starbucks believes our partners can make a positive impact in theircommunities, especially when they are encouraged, inspired and supported to do so. Starbucks fifth guiding principle—
to contribute positively to our communities and our environment—is fulfilled jointly with our partners to support theirlocal neighborhoods, schools and charitable organizations. While a Starbucks store can enrich local community life byserving as a place to gather and enjoy a cup of coffee, it’s really people who make a neighborhood.
COMMUNITY SUPPORTStarbucks encourages our partners to be involved
and make a difference in their local communities.
Whether partners work at Starbucks for a relatively
short time or for years, we hope that our emphasison community participation leaves a lasting imprint.
This section describes the ways in which Starbucks
and our partners invest in the communities where
we do business. Starbucks may be a global company,
but our sense of community is locally based.
Total Community Contributions in Fiscal 2002
In fiscal 2002, Starbucks gave $3.8 million in corporate cash contributions to nonprofit organizations
and provided an additional $1.7 million to
The Starbucks Foundation. Product donations andin-kind support totaled $2.8 million.

STARBUCKS COMMUNITY SUPPORT IN 2002

20%

Percentage Donated

At the broadest level, Starbucks views support
for local communities as an investment. The dividends are shared by everyone in the community,
including Starbucks partners and customers. The
more people invest their time and resources, thegreater the rewards.

34%
46%

Total Giving $8.3 million
Corporate giving*
Starbucks Cares ($1 million)
Starbucks contribution to The Starbucks Foundation
Product and In-kind donations* Includes matching contributions through Make YourMark and Choose to Give!

25

Make Your MarkStarbucks created the Make Your Mark program to encourage and support our partners’ volunteerism.
The program is flexible enough to include partners’ families and friends, as well as Starbucks customers.
Partners are encouraged to gather a team of at least two other partner volunteers—and perhaps invite a few
non-partners too—to make their mark at a nonprofit organization that’s important to them. After completing
their volunteer project, partners submit a report to Starbucks so the company can make a charitable
contribution to the nonprofit where the project was done. It’s essentially a matched gift—$10 donated forevery volunteer hour team members put in—up to $1,000.
Make Your Mark was enhanced last year by adding an individual component, recognizing that many partners
volunteer by themselves. In fiscal 2002, Starbucks promoted a couple of company-wide Make Your Markinitiatives that inspired partners to perform thousands of volunteer hours for Earth Day and during
September 2002, in honor of those impacted by the tragic events of September 11, 2001.
Earth Day
When Starbucks promotes volunteering on EarthDay, there’s typically a large turnout. For example,
more than 800 partners, customers and their friends
joined the California Parks Foundation to clean up 17
sites throughout the state of California on Earth Day
2002. Projects ranged from beach and river bed
clean-ups to construction of a butterfly habitat. These
were some of many Earth Day projects that took
place in communities where Starbucks is located.

• California Coastal Cleanup: More than 270
partners and customers combed beaches from San
Francisco to San Diego as part of the California
Coastal Cleanup, organized by the California
Coastal Commission.They cleaned up local beaches
and collected garbage and recyclable waste.
• Franklin Park and the Franklin Park Zoo:
Franklin Park (Boston’s largest green space,with more than 600 acres) and the Franklin
Park Zoo were in need of some help after municipal budget cuts. More than 700 partners,
customers and other supporters cleared debris
from playgrounds, moved rocks inside the giraffeexhibit, painted the interior of the zoo hospital,
and mulched the bamboo grove.

TOTAL SUM OF MAKE YOUR MARK

Fiscal 2001

Total Hours andDollars Matched

SEPTEMBER MAKE YOUR MARK
• Will Stikkel Silver Jacket Memorial Walk:
After Will Stikkel, a Starbucks barista in
Cheektowaga, NewYork, passed away fromthalassemia, a rare genetic blood disorder,
partners organized a 5K walk in his honor.
Seventy-six ofWill’s fellow partners, customers,family members and friends participated andhelped raise money for Cooley’s Anemia Foundation to support research and patient services
for those with thalassemia. (See photo above.)

September Make Your MarkAs the one-year anniversary of September 11th
approached, Starbucks encouraged partners andcustomers to volunteer in their local communities.
Our goal was to generate 25,000 volunteer hours
during the month of September. At the end of
September, volunteer hours totaled more than
40,000 for nearly 200 projects. In support of these
efforts, Starbucks contributed $250,000 to nonprofit
organizations across North America.

Fiscal 2002
68,000*$433,000

12,700$70,000

Volunteer hours
Starbucks corporate match*Includes 40,000 hours for September MakeYour Mark.

CSR Fiscal 2002 Annual Report

Choose to Give!
Partners are encouraged to support nonprofit organizations that are important to them. Whether they do, or
what organizations they decide to support, is their personal choice. Starbucks has developed our workplacegiving program to respect the personal nature of an individual’s philanthropy. During fiscal 2002, Starbucks
modified our workplace-giving program—Choose to Give!—adding more flexibility and making it year-longrather than a discrete campaign.
Choose to Give! matches each partner’s charitable contributions, of $20 or greater, up to $1,000 annually.
Moreover, Starbucks absorbs transaction fees and the cost of administering the program, ensuring that 100%of the donations go directly to designated charities.
In 2001, more than 500 partners gave $395,000 to charities—donations that were matched by Starbucks
with $170,000. In the early part of 2002, the program was suspended as enhancements were made, andreintroduced in March 2002. From March to September 2002, more than 600 partners made $325,000 incharitable gifts. Starbucks match for these gifts totaled $132,000. Partner contributions under the newprogram suggest that the changes made to Choose to Give! are being well received by partners and will resultin increased charitable giving.

OTHER STARBUCKS COMMUNITY INITIATIVES
Our partners inspire most of Starbucks support for local communities because we value what they care about,and they know the needs of their community. That’s why we place so much emphasis on Make Your Markand Choose to Give!
Beyond supporting our partners’ efforts, Starbucks invests in other locally based initiatives to help strengthencommunity life. Here are several examples:
Starbucks Cares
In the aftermath of the September 11th terrorist attacks, Starbucks partners and customers expressed their
desire to help those affected by this tragedy. This led to the creation of Starbucks Cares, a special campaign
to raise money for victims and their families. Starbucks provided $1 million in seed money and an additional$1.6 million was contributed by our North American and international partners (employees),customers and business partners worldwide. The contributions were distributed to The September 11th
Fund, established by the New York Community Trust and United Way of New York, to meet the long-term
needs of victims, families and communities. Starbucks also contributed coffee and essential products to
support the rescue and relief efforts in New York, Washington, D.C., and Pennsylvania in the weeks andmonths following the attacks.
Starbucks Memorial Fund—Washington, D.C.
Starbucks has an ongoing commitment to honor the three young Starbucks partners who, in 1997, tragicallylost their lives in our Georgetown store in Washington, D.C. During 2002, Starbucks provided $75,000
through the Starbucks Memorial Fund to help nonprofit organizations in the Capital Region prevent andadvocate against violence, and assist victims of violence.
Urban Coffee Opportunities
Urban Coffee Opportunities, LLC (UCO), is a joint venture partnership formed in 1998 by Starbucks
Coffee Company and Earvin “Magic” Johnson’s company, Johnson Development Corporation. UCO iscommitted to enhancing the development of Starbucks retail stores in ethnically diverse neighborhoods.
UCO embraces community by providing local jobs and strives to serve as a business stimulus to prompt
economic growth. At the end of fiscal 2002, there were 35 UCO stores operating in ten states in the U.S.

27

Calvert Community Investments
Starbucks launched a three-year partnership with
Calvert Community Investments in fiscal 2001 witha $150,000 investment that is being used to financeaffordable housing and nonprofit/small-businessfacilities in low-income communities across North
America. In fiscal 2002, our investments throughCalvert helped support The Low Income Housing
Fund in San Francisco, The Corporation for OpenLand in Illinois, and ACCION New York, Inc.

HEAR MUSIC™ SUPPORTS GROUNDWORK
In fiscal 2002, Starbucks music division,
Hear Music,™ featured a compilation CD ofsongs donated by recording artists to benefit
Groundwork. Groundwork is a project that builds
awareness about solutions to fighting hunger, andraises funds for the United Nations Food andAgriculture Organization (FAO), an organization
working to alleviate hunger worldwide. Starbucks
was the exclusive retailer of the CD, sales ofwhich raised money for FAO.

Holiday Angels
During the holiday season each year, Starbucks
organizes the Holiday Angels toy drive in ourcompany-operated North America stores andsupport centers. In fiscal 2002, customers andpartners responded generously with more than132,000 toys donated for seriously ill children andtheir families. The toys were distributed by theStarlight Children’s Foundation® to approximately
1,000 local hospitals in North America.
Product Donations and In-Kind Support
One of the most tangible ways Starbucks provides
support is by donating our products to local nonprofit organizations for their fundraising events. The
recipients are often determined by retail store
partners, and in fiscal 2002 product donations
were valued at $500,000.
Starbucks also encourages our stores to makein-kind donations of unsold baked goods and perishable whole bean coffee to local charities. On alarger scale, Starbucks donates overstocks ofperishable and non-perishable goods to local andnational organizations that, in turn, provide theseproducts to community groups. The total value of
in-kind donations in fiscal 2002 is estimated at$2.3 million (based on Starbucks fiscal 2001 actuals).

CSR Fiscal 2002 Annual Report

INTERNATIONAL INITIATIVES
Starbucks growth around the globe has depended
on selecting business partners who share our
mission and values. As we continue to expand
internationally, we understand the importanceof connecting in meaningful ways with localorganizations.
From country to country, the breadth of our community and environmental involvement varies,
depending on the length of time Starbucks has been
established there.
In many countries, Starbucks international business
partners have recognized the importance of ongoing,
comprehensive community support by combining two
or more of the following components: financial contributions, product donations, partner volunteerism andin-store visibility. Here are some examples:• Australia—Children’s Hospital at Westmead
and Planet Ark• Hong Kong—Hope, serving needy seniors• Japan—Kobe-Seattle SEAFAIR Ambassadors
student exchange program• New Zealand—Women’s Refuge and Youthline• Singapore—Singapore Association for the Deaf
• U.K.—National Literacy Trust

Representatives from President Coffee Corporation,
Starbucks business partner in Taiwan, and World
Vision Taiwan invited customers to donate to the2002 campaign to help build an educational center
for aboriginal children in the remote village of the
Punun tribe in Taiwan. Starbucks Taiwan’s four-year
partnership with WorldVision Taiwan has raised morethan $110,000. Pictured from left to right are:Chun-Huang Huang, general manager of President
Integrate Health World; Lien Hwa Chow, chairmanof the board,WorldVision Taiwan; John Hsu,
president of President Coffee Corporation; andPaul Chung, operation support team director,
President Coffee Corporation.

Starbucks international business partners have recently launched community programs in the following areas:
Financial Contributions• Austria—Stiftund Kindertraum, an organization that fulfills wishes of sick and disabled children• Lebanon—Red Cross and ANTA AKHI, providing educational activities for handicapped children• South Korea—Seoul National University Children’s Hospital
Product Donations• Bahrain—Institute for Autism and Related Communication Disorders• Indonesia—In-store fund raising for children in Posyandu, the Indonesian national health program
Partner Volunteerism• Saudi Arabia—Highway clean-up• Switzerland—Pigna, a home for the disabled• Qatar—Providing in-store art activities for kids, and product donations
Starbucks business partners in these international markets are in the process of creating community programs
to support the following:• Thailand—Supporting hill tribe farmers of Thai arabica coffee• Spain—Supporting Save the Children with in-store visibility• Greece—Supporting Athens Municipality and Foundation of the SOS Children Villages

29

THE STARBUCKS FOUNDATION
Starbucks chairman and chief global strategist Howard Schultz had a vision when he established
The Starbucks Foundation in 1997. He believed that one of the most important factors determining successin our society is the ability to read. The Starbucks Foundation is dedicated to funding literacy programs
across North America.
While funding is critical to improving literacy, volunteers are also needed. So The Starbucks Foundation
includes in its funding criteria an important link to partner volunteerism. As a result, special priority is given
to the literacy organizations where Starbucks partners are engaged as volunteers. The combination of funds
and volunteerism is intended to fulfill The Starbucks Foundation’s mission of creating hope, discovery andopportunity in communities where Starbucks partners live and work.
The Starbucks Foundation is a registered 501(c)(3) private foundation and a separate entity from Starbucks
Coffee Company. In fiscal 2002, The Starbucks Foundation gave $1.7 million to local programs and national
literacy organizations, including Jumpstart and America SCORES. Since 1997, The Starbucks Foundation
has made more than 625 grants in excess of $6 million.

Examples of organizations The Foundation andStarbucks partners supported in fiscal 2002 include:• Jane Addams Center/Hull House, Chicago, Illinois• Oregon Children’s Foundation, Portland, Oregon• Harlem Children’s Zone, New York, New York• Richard Hugo House, Seattle,Washington• The Lower Eastside Girls Club of New York, New York• PUENTE Learning Center, Los Angeles, California• Centre for Family Literacy, Edmonton,Alberta, Canada• Hands On Miami, Miami, Florida• Looking Glass Theatre, Providence, Rhode Island• Community Word Project, New York, New YorkWRITERS IN THE SCHOOLS
Through its literacy grants,The Starbucks
Foundation supports organizations where
Starbucks partners are actively involved.As an
example,The Foundation has made grants toWriters in the Schools programs in Seattle
through Seattle Arts and Lectures and in
Houston, totaling $79,000 and $51,000, respectively.Writers in the Schools places professional
writers in the classroom to work with teachers
through year-long residencies. Starbucks
Houston store manager Carla Everett (above
center) participates in a reading activity with
Guadalupe Martinez, a student at Davila
Elementary School, and Miah Arnold, senior
writer for Writers in the Schools.

• Cleveland READS, Cleveland, Ohio
• Volunteer Memphis, Memphis,Tennessee• Fort Worth Public Library, Fort Worth,Texas• Boys and Girls Club of Henderson, Henderson, Nevada• Minneapolis American Indian Center,
Minneapolis, Minnesota
For a list of the most recent grants, please visit
Starbucks.com.

CSR Fiscal 2002 Annual Report

Literacy Grants
The Starbucks Foundation makes grants to local,
nonprofit literacy organizations that serve lowincome, at-risk youth. Literacy grants help fundinnovative programs, particularly those in traditionally underserved communities, that utilize
significant volunteer resources and demonstrate an
established relationship with a Starbucks store or
partners. Grants range from $5,000 to $20,000.
National Partnerships
The Starbucks Foundation also provides funding toJumpstart and America SCORES, two nationalorganizations that serve various communities
through local chapters. In both cases, the relationship began because of the local involvement ofStarbucks partners and has grown from there.
Jumpstart
Jumpstart is a national organization with locations in 30 communities across the U.S., ten ofwhich were opened in fiscal 2002 with support fromThe Starbucks Foundation. The program provides
one-on-one attention to preschool children from
low-income communities. Jumpstart Corps members are college students from 50 different
universities. They work to build children’s earlylanguage and literacy, social, and initiative skills;
help families support their children’s learning; andreceive training from their Jumpstart experience
to become future teachers and leaders in earlychildhood education.

A grant from The Starbucks Foundation helped
fund an after-school program at Skyway Tutoringin Seattle. Melody Grieves, a partner in Starbucks
Design Group, helps Pharez Keyes research online
sources for a geography assignment, while Ronita
Prasad (foreground) uses software geared to
specific subjects and learning levels.
“Starbucks always gets a round of applause at
our year-end parties,” says Melody.“I’m proudthat we support programs like this. It really does
make a difference.”

The Starbucks Foundation’s four-year, $1 million pledge is helping Jumpstart meet its goal of working
toward the day every child enters school prepared to succeed. Starbucks partners have demonstrated theirsupport by volunteering with Jumpstart Corps members on local activities, including Jumpstart-for-a-Day,a community festival for parents and children.
America SCORESThe Starbucks Foundation formed a three-year partnership with America SCORES in fiscal 2002,
committing $225,000 to strengthen the organization’s capacity for expansion across the country. America
SCORES uses soccer and creative writing to inspire teamwork among at-risk children in urban publicschools. Once on the soccer team, children meet with a literacy coach who empowers them through poetry
to be better writers and community leaders.
Founded in 1994 in Washington, D.C., by a public school teacher and part-time Starbucks barista, America
SCORES provides thousands of children a safe, structured after-school environment. With the support of
The Starbucks Foundation and the commitment of local Starbucks partners, America SCORES has now
expanded to Boston, Chicago, Denver, Los Angeles, New York, San Francisco and Seattle.

31

INDEPENDENT VERIFICATION LETTER
To the Stakeholders of Starbucks Coffee Company:
Moss Adams LLP, a certified public accounting firm, was engaged by Starbucks Coffee Company(Starbucks) to verify the contents of Starbucks Corporate Social Responsibility Annual Report (Report) for
the fiscal year ended September 29, 2002.
Starbucks management and personnel prepared the Report’s content and compiled the underlying data. The
responsibility of Moss Adams LLP was to review the Report and obtain reasonable assurance about whether
Starbucks corporate social responsibility policies as stated therein have been implemented; and thatstatements, assertions and the data reported is supported by documentation, internal processes or information
provided by third parties.
Currently, there are no statutory requirements or generally accepted verification standards in the UnitedStates of America or internationally that relate to the preparation, presentation and verification of corporate
environmental and social responsibility reports. Therefore, Moss Adams LLP developed an approach toverify the contents. Our approach included conducting interviews with Starbucks executives and managers;
performing on-site reviews to determine how the corporate social responsibility policies have been
implemented and reported upon; selecting internally prepared documents for review; and confirming withexternal parties certain statements, assertions and data disclosed in the Report. We planned and carried out
our work to obtain reasonable, rather than absolute, assurance on the reliability of the information stated in
the Report. We believe our methodology provides a reasonable basis for our conclusion.
Based on the procedures performed, Moss Adams LLP verifies the following:• The corporate social responsibility policies and activities of Starbucks as described in the Report are
fairly presented and are consistent with the actual policies implemented and acted upon by Starbucks
management and personnel during the fiscal year ended September 29, 2002.
• Statements, assertions and data disclosed in the Report are supported by documentation, internal
processes and activities, and information provided by external parties.

Moss Adams LLP
Seattle, Washington
February 6, 2003

To obtain a copy of this report:
This report is available online at www.starbucks.com/csr.To request a printed copy of the report,
call 1-800-STARBUC (1-800-782-7282) or fax your request to 1-800-782-7286.
For questions about this report:
Starbucks Coffee Company
Customer Relations
P.O. Box 3717
Seattle, WA 98124-8891
Fax: 1-800-782-7286
Email: info@starbucks.com
Please provide your feedback:Complete our online survey at www.starbucks.com/csrsurvey
Helpful Resources
For more information about organizations referenced in this report, please visit their websites:
America Scores:

www.americascores.org

Business for Social Responsibility:

www.bsr.org

CARE:

www.care.org

Conservation International:
Earth Day Network:
Earthwatch:
Fairtrade Labelling Organizations International:
Food Standards Australia/New Zealand:International Trade Centre:
Jumpstart:

www.conservation.org
www.earthday.net
www.earthwatch.org
www.fairtrade.net
www.foodstandards.gov.au
www.intracen.org
www.jstart.org

Mercy Corps:

www.mercycorps.org

The Natural Step:

www.naturalstep.org

Oxfam America:

www.oxfamamerica.org

Specialty Coffee Association of America:
Transfair USA:
U.S. Green Building Council:

www.scaa.org
www.transfairusa.org
www.usgbc.org

For additional information about Starbucks, please visit Starbucks.com.

This report is printed on 100% recycled fiber, 100% post-consumer material.
J108642 SKU 182940© 2003 Starbucks Coffee Company. All rights reserved. Printed in the USA.