L I V I N G O U R VA L U E S
Corporate Social Responsibility
Fiscal 2003 Annual ReportSTA R BU C K S M I S S I O N S TATEMENT AND GUIDING PRINCIPLES
To establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromisingprinciples 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.

What It Means to Live Our Values at Starbucks
We are very proud to present you with Starbucks third annual Corporate Social Responsibility Report, thisyear titled “Living Our Values.” Throughout our Report, we explain the measures we take to align ourdecisions and actions with Starbucks Mission Statement and Guiding Principles.
The topics presented here relate to our definition of corporate social responsibility. They are subjects we also
believe to be important to our partners (employees), customers, shareholders, suppliers, communities, andothers. As information was gathered for each topic, we stepped back and asked ourselves if we are hitting themark or falling short of our own expectations. In the spirit of transparency, we share our findings with you,the reader.
Maintaining the trust of our stakeholders will never be taken for granted at Starbucks. We know it’ssomething to be earned every day, and happens only if we uphold our core values. We are committed to doing
this – it’s our promise to you.

Howard Schultz

Orin C. Smithchairman andpresident andchief global strategist

chief executive officer

living our values
Table of Contents
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22

Partners | Our Workplace Culture 4 | Being a Starbucks Partner 7 | Creating a Healthy and
Safe Work Environment 12 | Recognition 13 | Going Forward 13

Diversity | Diversity in Our Workplace 16 | Supplier Diversity 18 | Engaging with Diverse
Communities 20 | Recognition 21 | Going Forward 21

Coffee | A Snapshot of the Coffee Industry 24 | Sustaining Coffee Communities 26 |Recognition 36 | Going Forward 37

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48

Customers | Meeting Our Customers’ Expectations 40 | Bringing Starbucks to Our
Customers 41 | Improving Our Communities with Our Customers 43 | Listening to Our
Customers and Stakeholders 44 | Going Forward 47

Community and Environment | Engaging Our Partners 50 | The Starbucks Foundation
Supports Literacy 55 | Contributing to Local Communities 57 | Coffee- and Tea-Growing
Communities 60 | Minimizing Our Environmental Impact 62 | Recognition 68 |Going Forward 69

70

78

Profitability | Starbucks History and Company Profile 72 | Corporate Governance 74 |Expectations of Our Suppliers 75 | Recognition 76 | Going Forward 77

Independent Verification Letter | About This Report 79 | Feedback and Further
Information 80

Cover photo: Care is taken to ensure Starbucks® coffees are roasted to perfection.

Blythe Brock
Starbucks partner

Blythe Brock was devastated when her mother became seriously ill
and her health started to decline rapidly. Realizing that time wasrunning out, Blythe treasured every moment with her mom, serving as
her primary caretaker in every possible way. At the Starbucks store
she supervises in Tucson, Arizona, Blythe cut back her hours, which
drastically reduced her salary and benefits. But the support of her
co-workers kept her strong. They urged her to apply for a financial
assistance grant through Starbucks CUP (Caring Unites Partners)
Fund. It’s a special program that is funded by partners and designed
to help fellow partners, like Blythe, during difficult times.

“I’m so thankful for the CUP Fund grant. It helped me get throughthe time when I was caring for my mom,” Blythe explained. “AtStarbucks, there’s a genuine spirit of people helping people. We’re
more than co-workers here. We’re partners.”
The experience of losing a parent was traumatic for both Blythe andanother Starbucks partner – her brother Josh. He also received a
CUP Fund grant.

Provide a great work environment
and treat each other withrespect and dignity.

Starbucks core business is more thanjust coffee. We are in the peoplebusiness. And we know our successdepends on the people we hire, retain anddevelop. The creation of Starbucks stock
option plan in 1991, Bean Stock, made our
employees our partners. Giving employees
an ownership in the company and sharing
the rewards of our financial success has
strengthened our partnership.
Results from Starbucks 2003 Partner View Survey revealed that our partners havea high level of engagement – meaning they are emotionally and intellectuallycommitted to Starbucks success. Engaged partners are more likely to say goodthings about the company, they often go beyond what is requested of them, andthey indicate a desire to stay with Starbucks longer.
Many things contribute to the great work environment at Starbucks. While
we aren’t perfect, and we realize there are opportunities for improvement, we
definitely see what’s working. For a closer look inside Starbucks workplace,please read on.

Eduardo Bello (left), shift supervisor,and Melanie Bandulin, barista, add
a little laughter to their day atStarbucks.

OU R WOR K P L AC E C U LT U R E

Starbucks Mission Statement and Guiding Principles, which were formalized in 1990,
are the roots of our culture and serve as guideposts for our partners. In fact, 78 %of our partners say our values provide meaningful direction in their jobs at Starbucks.

An entrepreneurial spirit permeates the atmosphere at Starbucks, adding to an environment that values every person’s ideas and talents. It’s customary not to capitalize
partners’ titles at Starbucks, which signals that everyone, regardless of their position,
contributes to the company’s success. There is a significant focus on communication
systems designed to give everyone a voice, including Mission Review and the Standardsof Business Conduct Helpline. Recognition is integral to Starbucks culture as is thenotion of helping each other, which is demonstrated through our internal CUP (Caring
Unites Partners) Fund.

MISSION REVIEWAt Starbucks, being truly committed to our core values means holding one anotheraccountable for our actions. Through Mission Review, partners are encouraged tovoice opinions about whether or not company practices are consistent with our Mission
Statement and Guiding Principles. When our partners send their comments or questions
to our Mission Review team, they are connected to the right person for a response. The
process is monitored, and partners’ concerns are shared with Starbucks leaders.

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THE HELPLINE
Another vehicle our partners use to communicate is the Standards of Business Conduct
Helpline, part of our Corporate Compliance Program. It’s open for calls around the clockso that partners can speak directly with non-company, impartial agents. Information
shared through the Helpline is typically treated in an anonymous and confidential manner,assuring partners they are free from retaliation. Issues that arise are investigated andresolved in a manner consistent with our Mission Statement and Guiding Principles.

ASK ORIN

Bob Shaftoe (left) receives the District
Manager of the Year Award from Jim Alling,
executive vice president of Starbucks U.S.,
at Starbucks 2003 Leadership Conference.

Sometimes partners prefer to share their concerns directly with Starbucks ceo. We
created a channel for non-retail partners to “Ask Orin” via Starbucks intranet. Partners
can submit questions or suggestions directly to Orin Smith, anonymously and confidentially if desired. They can expect a reply within 10 business days. Orin also keeps in touchby hosting a variety of informal gatherings with partners throughout the company.

“If people relate to thecompany they work for, if
they share an emotionaltie to it and buy in to its
dreams, they will pour theirheart into making it better.”

RECOGNIZING OUR PARTNERS— Howard Schultz, Starbucks
chairman and chief global strategist

There are 30-plus recognition programs at Starbucks that are used to highlight theachievements of our partners, whether it’s for “jobs well done,” or to acknowledge theprofound impact certain partners have had on the company. Workplace recognition goesa long way to let partners know they are deeply appreciated and valued.
Beyond our formal programs, we enjoy celebrating our partners’ special occasions –anniversaries, birthdays and other personal or professional milestones. These are thetypes of everyday experiences that strengthen the bonds between our fellow partners, andcreate a better workplace community.

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Starbucks partner Leanne Paluckwent to Alaska to work alongsideresearch scientists and study sea otterson a company-sponsored Earthwatch
Expedition.

EARTHWATCH EXPEDITIONSStarbucks commitment to environmental stewardship has taken on special meaningfor our partners. For the last two years, we have offered our partners the chance foran opportunity of a lifetime – a company-sponsored Earthwatch Expedition. In 2003,
Starbucks sent five partners on two-week expeditions to work with the Earthwatch
Institute’s conservation scientists. This year, we plan to send another five partners.
While it’s not a formal partner recognition program, a great deal of excitement has been
generated among our partners about the possibility of being selected for one of theseincredible journeys.

CARING UNITES PARTNERS – THE CUP FUND
Several years ago, Starbucks partners wanted a way to help their peers who fellon troubled times. Their desire led to the creation of the CUP Fund, an emergency
assistance program available only to Starbucks partners, and funded exclusively bypartners through payroll deductions and special fundraisers.
CUP Fund grants are made to U.S. and Canadian partners throughout the year. Any
partner may apply to receive a CUP Fund grant of up to $1,000 to ease the financial
stress caused by an emergency. In fiscal 2003, the CUP Fund provided financial relief
to 306 partners, totaling $247,000, a 70% increase over grants made last year.

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6B E I NG A S TA R B UC K S PA RT N E R

Starbucks partner Cherie Vinson
works as a shift supervisor. She enjoys
her team of co-workers, acknowledging
that “we care about each other.”Through Starbucks Partner View Survey, we asked the majority of our partners in 2003
what they thought about working for the company. It was the most extensive research
we’ve done with this many partners at one time. We went beyond surveying for satisfaction (attitude) to include engagement (behavior), which has a strong and consistent linkto overall business performance.

Partners rated the following five items as important or very important in their decision
to join Starbucks:
1. The opportunity to work with an enthusiastic team
2. Working in a position where I add value
3. Medical benefits
4. Opportunity to grow and develop skills
5. Growth-oriented company

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In rating overall satisfaction, 82% of our partners stated that they were satisfied or verysatisfied with Starbucks. More important was the overall rating for partner engagement,
which was measured at 73%, placing Starbucks among the best employers in the world
based on engagement studies conducted by an independent consultant of 1,459 companies in 17 countries.
The 2003 Partner View Survey confirmed that Starbucks Mission Statement and Guiding
Principles have a positive impact on partner engagement. We also heard how important
health benefits were to our store partners in their decision to join Starbucks. Althoughsoaring U.S. health care costs have challenged Starbucks and other companies, we arecommitted to designing health plans that ensure our partners have continued access toaffordable health care.

PARTNER BENEFITS

When Eric Yu was attending college
five years ago, he joined Starbucks as
a part-time barista and qualified for
healthcare coverage and other benefits.
“As a college student, the healthcare
benefits were very important to me.
Now that I’m a full-time assistantmanager, the healthcare coverage andother benefits are still important
to me.”The story has been told many times, but it’s worth repeating. When Howard Schultz
became head of Starbucks, he vowed to leave no one behind. The commitment stemmed
from his childhood experiences as the son of a blue-collar worker. An injury kept his
father out of work, and without company-provided health coverage, the family suffered
tough times. This instilled a vision at Starbucks to “treat people like family and they will
be loyal and give their all.”
The importance of treating people like family has never worn off. Today, Starbucks has
one of the most competitive benefits and compensation packages in the retail industry.
Here are a few examples of our Total Pay programs:• In 1987, Starbucks became one of the first retail companies to offer our part-time
partners who work at least 240 hours per calendar quarter the same comprehensive
health benefits that our full-time partners receive. This includes medical, prescription
drug, dental, vision and alternative healthcare coverage.
• Starbucks pays approximately 75% of the costs of healthcare coverage for U.S. partners.
• Starbucks pays 60% of the healthcare coverage cost for our U.S. partners’ dependents,
including their same-sex and opposite-sex domestic companions.
• Bean Stock, Starbucks stock option plan, is offered to all eligible part-time and full-time
partners in the U.S., Canada, the UK, Hong Kong and, for the first time with the fiscal
2003 grant, partners in the Netherlands.
• S.I.P. (Stock Investment Plan) allows all eligible part-time and full-time partners
in the U.S. and Canada to purchase company stock at discounted prices. A similarplan – Starbucks Corporation Share Save Plan – is available to eligible partners in the UK.
• Starbucks 401(k) plan, Future Roast, is a savings program open to all eligible U.S.
partners. Contributions made by partners are matched by Starbucks, and immediately
vested. Based on length of service, Starbucks matches partner contributions – from 25%
to 150% on the first 4% of pay contributed. Canadian partners receive a 25% match on
their contributions to the Registered Retirement Savings Plan (RRSP), which is similar
to the 401(k).

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8BRINGING OUT THE BEST IN OUR PARTNERSFirst, Starbucks attracts and hires great people. Next, our new partners are immersedin Starbucks culture, based on three fundamentals – our Mission Statement and Guiding
Principles; our passion for coffee; and our commitment to provide legendary customer
service. Then throughout their journey as a Starbucks partner, they are offered all kindsof development opportunities to help them achieve job success.

One of our baristas, Angie Martin(left), gets trained by Amanda Cebull,store manager, on how to deliver theperfect Starbucks Experience.

The Learning Journey for Retail Partners
Our baristas and their fellow store partners are the face of Starbucks, engaging with
our valued customers every day. Our goal is to teach our store partners how to become
passionate experts in the preparation and delivery of our core product. So on theirfirst day as Starbucks baristas, and throughout their nine-part orientation, our new
store partners are paired with learning coaches who guide them through the process of
becoming “Certified Starbucks Baristas.”
Training for our baristas doesn’t end there. Their education continues as new products
are introduced and company initiatives are launched. When store partners move into
management roles, additional training is provided so they become strong leaders.

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The Learning Journey for Non-Retail Partners
Our non-retail partners who work at Starbucks Support Center (our global headquarters
in Seattle) contribute greatly to our success. We have created a variety of learning
opportunities designed to enhance their skills and career development. Some examples are:
• New Partner Orientation and Immersion – an extensive program designed to impart
Starbucks core values; build knowledge of our business and retail operations; inspire anappreciation of coffee; create awareness about Starbucks benefits programs and careerdevelopment opportunities; and introduce partners to their key internal stakeholders.
• Managers’ Training Series – provides new supervisors/managers with pertinent
information and the tools to build a strong cross-functional network.
• Diversity Learning Journey – focuses on issues of diversity to help foster an inclusive
environment for partners and customers.

Our non-retail partners have theopportunity to enhance their skills
through a variety of training programs.

• Computer Classes – a series of workshops that teach partners various software
applications, providing skills they can use to be more efficient in their jobs.
• Situational Leadership® – teaches supervising partners how to tailor their leadership stylein certain situations and bring out the best in their teams.
• Coffee Workshops – from Coffee Roasting to the Art of Espresso, our partners are
exposed to the world of coffee to increase their knowledge and passion.
Our goal is to provide every new Starbucks partner with a comprehensive immersion
experience. In fiscal 2003, Starbucks improved our Executive Immersion program,
ensuring that new leaders get the information they need; are connected with their key
cross-functional peers; and are exposed to Starbucks culture beginning with thein-store experience.

RESPECTING OUR PARTNERS’ RIGHTS
When people are treated with respect, they feel respected. Creating a great work environment where our partners are respected has been and will always be our goal. To us, thismeans continually finding new ways to nurture and strengthen the bond we have with ourpartners. In essence, this is our “labor policy.”
Starbucks recognizes our partners’ right to unionize. Trade unions represented less than
one-fifth of 1% of our partners in fiscal 2003. Most union-represented partners are in
Canada, and a few of our roasting plant partners in the U.S. are represented.
Starbucks follows all laws regarding the employment of minors. The current minimum
age of employment at Starbucks is 16, but may be higher in some locations.

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10I N T E G R AT I N G O UR N E W S E AT T L E C O F F E E C O M PA N Y
PA R T N E R S
In July 2003, Starbucks acquired Seattle Coffee Company (SCC) and its wholly owned
subsidiaries, Seattle’s Best Coffee (SBC) and Torrefazione Italia (TI). Acquiring thesebrands allows Starbucks to reach new customers and cultivate new business accounts
that have not previously been served by Starbucks. Once the deal closed, a Starbucks
integration team quickly went to work to ensure SCC, SBC and TI employees (nowpartners) were treated with the utmost sensitivity, respect and dignity.

Cheree Best (left) and Steph Morrison
work at Seattle’s Best Coffee, a wholly
owned subsidiary of Seattle Coffee
Company. After Starbucks acquired
Seattle Coffee Company, its employees
became our partners.

The Starbucks/SCC integration team is continuing to review the operations of SCC andits subsidiaries. As business decisions are made, Starbucks will ensure SCC, SBC and TI
partners are informed regarding the potential impact to their employment.
Some SCC partners have been displaced as a result of the acquisition. Starbucks has
provided those partners with transition assistance, including an in-placement process
to identify other opportunities at Starbucks. SCC partners who do not find otheropportunities with Starbucks will be provided with financial transition assistance.

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C R E AT I NG A H E A LT H Y A N D SA F E
WOR K EN V I RONM EN T

S

tarbucks wants to ensure a healthy and safe environment for our partners andcustomers. We combine industry best practices and regulatory requirements to create
retail and roasting plant safety programs to prevent workplace injuries and comply withapplicable regulatory standards. Our retail and plant safety programs have been designed
to meet or exceed the workplace safety standards required by the most stringent jurisdictions in which we do business – California (Cal-OSHA), Washington (WISHA) and British
Columbia (WCB-BC). All of these jurisdictions have standards more rigorous than the U.S.
Occupational Safety and Health Administration (OSHA) or Canadian national standards.

Partner safety is a primary consideration in the ongoing development, design and selection of equipment and work procedures at Starbucks. We continually evaluate our injury
experience to determine where partner injuries originate, and then address those causes
of injury to prevent future hazards. If an occupational injury occurs, Starbucks partners
are trained to follow our published procedures. This includes calling 911 to seek medical
attention if necessary, investigating how the injury occurred, and reporting the incident
to Starbucks Risk Management by telephone and through a written incident report.
Our corporate culture supports partner safety and concern for one another. At a minimum,
every store is required to devote time each month to discuss safety and security issues withall partners. We believe our culture and workplace safety practices compare favorably withothers in the retail and food service industry. (See performance record above.)

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12R ECOGNITION• For the fifth time, Starbucks was listed among FORTUNE’s “100 Best Companies toWork For.” In 2003, Starbucks received its highest ranking of 47 on the list – up from58 in 2002.
• Starbucks received the 2003 Workforce Optimas Award in the Quality of Life category.
Workforce magazine bestowed the award to recognize Starbucks for providing a great
workplace environment and offering excellent benefits to partners, which has earned
Starbucks a reputation for having one of the lowest turnover rates within the restaurantand fast food industry.
• Tazo Tea Company, a wholly owned subsidiary of Starbucks, was named to the Oregon
Governor’s 2002 Honor Roll for Employers of Persons with Disabilities. The honor
recognized Tazo as one of six Oregon companies making outstanding achievements inimproving employment opportunities for persons with disabilities.

G O I N G F O RWA R D

Starbucks remains committed to providing a positive and supportive work environmentthat maintains our position as one of America’s best places to work. With the help of
our Partner View Survey process, we will continuously monitor the overall health of ourorganization and take the actions required to address areas of opportunities. In 2004, we
will focus our efforts to achieve the following:• Expand our training and development offerings to improve the skills and management
capabilities of our partners as well as to deepen their overall coffee knowledge.
• Develop processes and systems that allow our partners to be more actively involved intheir own personal development and career movement. This includes offering tuition
reimbursement for the first time.
• Redefine the way we work with our partners to get them more actively involved in ourefforts to maintain comprehensive healthcare benefits while controlling costs.
• Introduce new tools and vehicles for increasing the level of two-way communications
with our partners both within and across all departments.
• Continue to maintain both formal and informal recognition processes as a criticalelement of how we express our appreciation for the efforts of our partners.
• Measure the progress of our efforts and identify new opportunities through theadministration of another Partner View Survey in October 2004.

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Kirandeep Shergill (left) andSharon Barr, Starbucks partners

irandeep Shergill starts her day doing something she loves. She
goes to work. Just putting on her green Starbucks apron bringsa smile to her face. Most of all, Kirandeep senses how much she’s
appreciated by her fellow partners.

K

Northwest Center’s Individual Employment Program. Northwest
Center provides job training to people with developmental disabilities
and helps place their clients in suitable positions where they have an
opportunity to contribute.

“Kirandeep has been a great addition to our team and has added
tremendous value,” remarked Sharon Barr, the store’s manager. “In
fact, Kirandeep has helped my entire staff bond as a team.”

Scheduled to work during the store’s busiest hours, Kirandeep focuseson keeping the customer areas neat and tidy, and the condiment bar
fully stocked. Her efforts are definitely noticed, especially by her
fellow partners. They know when Kirandeep is there, the store shines
a little brighter.

With the support of her family and Northwest Center, Kirandeep
has achieved many of her goals. She recently completed highschool through a transitional outreach program and then enteredEmbrace diversity as an
essential component in the way
we do business.

Starbucks does business all over theworld. We source coffee from morethan 20 countries, and our storesare located in 32 countries – places all richwith their own cultures, languages andcustoms. To operate successfully in the
global marketplace, we believe embracing
diversity in every aspect of our business isabsolutely essential.
Our commitment to diversity begins with the inclusive work environment
we’ve created at Starbucks, where we strive to make our partners feel valued andrespected. Starbucks has launched a number of diversity initiatives that help to
guide our hiring and workplace practices. But more than this, embracing diversity
at Starbucks is a deeply held value – a Guiding Principle – that is integral to ourcompany’s long-term viability and success.
In this section, we explain how Starbucks has created an inclusive environment in
our workplace and in our stores. We also share what we are doing to build a morediverse supplier base and to engage with diverse communities.

May Snowden joined Starbucks in2003 as our vice president of global
diversity.

DI V E R SI T Y I N OU R WOR K PL ACE

S

tarbucks commitment to diversity begins with our goal of attracting and retaining a
dynamic and diverse work team. We strive to mirror the customers and communities
we serve, creating a store environment where all of our customers and partners feel
comfortable and welcome.

To attract a diverse representation of qualified candidates, Starbucks links with a numberof local and national community-based organizations. We participate in career fairs andannual conferences, such as those sponsored by the National Black MBA and National
Hispanic MBA associations and Women in Foodservice Forum. Our goal is to have diverse representation in all positions of our company, from our baristas to the boardroom.
On a quarterly basis, Starbucks monitors the demographics of our workforce todetermine whether we reflect the communities in which we operate. We also look atrepresentation within specific positions and evaluate whether there are pathways tohigher-level positions.
Based on available data we have from partners who voluntarily disclose their race andgender, at the end of fiscal 2003:• Starbucks U.S. workforce is comprised of 63% women and 24% people of color.
• Of Starbucks executive team – vice presidents and above – 32% are women and 9% arepeople of color.

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DIVERSITY TRAINING
Diversity content is woven through Starbucks general training and development modules,
as well as management training courses. Our goal is to foster a climate of inclusiveness,cooperation and productive relationships between our partners and with our suppliers,
business partners and customers.

Starbucks partners Terri Johnson (left),
Gay Niven (center) and Tamara
Robertson worked together to ensure
diversity content is woven throughout
our partner training modules.

Diversity courses are also offered at Starbucks to address our partners’ relevant businessneeds. These include:• Diversity Learning Journey, a course with separate modules that can be conducted as
individual workshops.
• Bias-free Interviewing Workshops, which prepare our managers and recruiters for thehiring process.

POLICIES AND PROTECTION
After joining Starbucks, our partners are oriented about Starbucks core values, includingthat all people be treated with respect and dignity. Anything less is intolerable. They
learn about Starbucks antiharassment and antidiscrimination policies and procedures forprotecting partners against gender, ethnicity, age, sexual orientation, religion and otherforms of discrimination.

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Spending With Diverse Suppliers
fiscal year�����������
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SUPPLIER DIVERSITYW

hen doing business with suppliers in the U.S., Starbucks has made a strong commitment to diversity. We select companies that share our core values and meet our key
requirements of quality, service, value, stability and sound business practices.

We have an established Supplier Diversity Policy that speaks to our efforts to increase
the amount of spending we do with diverse suppliers. To do business with Starbucks as
a diverse supplier, the company must be 51% owned, operated and managed by women,
minorities, or socially disadvantaged individuals. We request that diverse suppliers
provide proof of their status in the form of certification or verification from a third-party
entity. Information about certification can be found online at Starbucks.com. Certified
diverse suppliers can create a company profile on our website that gives our buyers
visibility to their businesses.
Building a viable diverse supplier base is an ongoing process. Starbucks exceeded our
fiscal 2003 goal of achieving $75 million in spending with diverse suppliers. (For resultsof the past three years, see graph above.)
The fact that Starbucks is increasingly spending more with diverse suppliers can be
attributed to the strong commitment of Starbucks leaders, and our active affiliation
with the Northwest Minority Business Council (NMBC). Our involvement with the NMBC
during fiscal 2003 included:• A representative from Starbucks serving as the chairman of the board of directors.
• Consulting on the upgrade of the NMBC website so corporate members can easily findcertified suppliers.
• Co-instructing NMBC’s Supplier Diversity Training Workshop for buyers.
• Orin Smith, Starbucks president and ceo, serving as the keynote speaker at NMBC’s
Annual Trade Show in October 2002.

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BARTLETT DAIRY DELIVERS ON ITS PROMISETommy Malave and his four brothers are second-generation Americans, raised byparents who emphasized strong work ethics and values. Together, they run their familyowned distribution business, Bartlett Dairy, in the tri-state area (New York, New Jersey
and Connecticut).

One of Starbucks suppliers is Bartlett
Dairy, a Brooklyn, New York–based
business owned and operated by a Hispanic
family – the Malaves. (From left) Kenny,
Tommy, Jimmy, Donald and Michael
Malave. Bartlett Dairy is a certified
diverse supplier.

When the Malaves say they’re customer-focused, they are not kidding. Starbucks canvouch for this, given our ten-year relationship with Bartlett. This commitment to service
is one reason we’ve remained their loyal customer. We also like Bartlett’s attitude – theylisten to our needs and invest in solutions.
As we have continually opened more Starbucks stores in the tri-state region, Bartlett
has managed to keep pace by widening its distribution area and expanding the menu ofproducts it delivers. What impresses us even more is that Bartlett will go the extra mile
to serve its customers.
In the chaotic wake of September 11th, Bartlett kept our stores up and running by
delivering products, including some they typically don’t distribute. Because of this, theSpirit of Starbucks award was presented to Bartlett Dairy, one of the only times it has been
given to someone outside the company.
Bartlett Dairy is one of the many certified diverse suppliers with whom Starbucks
does business. We are committed to expanding our supplier diversity program bybuilding on our existing relationships and establishing new ties with other minorityand women-owned suppliers.

19

DIVERSITY

CSR 2003

E NG AG I NG W I T H DI V E R S E C OM M U N I T I E S

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. At the endof fiscal 2003, there were 52 UCO locations in the U.S.

Starbucks UCO stores offer communities an inviting, comfortable place for neighbors togather and relax. While customers are assured a consistent Starbucks Experience at our
UCO stores, they may find the music is tailored to local tastes, subtle differences in thefood offerings, and mural art that is unique to these stores.
A UCO store can be a catalyst for creating jobs and encouraging business developmentin the communities where these stores are located. At the end of fiscal 2003, our UCO
locations employed 971 Starbucks partners. When hiring for our UCO stores, we attend
community job fairs and seek applicants from the local neighborhoods.

Customers relax while sipping theirfavorite beverages at this UCO
location.

PROVIDING SUPPORT TO DIVERSE COMMUNITIES
Through The Starbucks Foundation and Starbucks community and giving programs, we
provide support to nonprofit organizations that serve diverse communities. We also
partner with various community organizations to provide employment opportunities
to their constituents. A full description of our community efforts can be found in theCommunity and Environment section of this report, beginning on page 48.
Here are just a few highlights of how Starbucks supported diverse communities in 2003:“When I go to our UCO
stores and see our customers
and partners, I see how
we have changed thecommunity, provided hopeand provided opportunities.
I’m very proud of what
we’ve been able to do.”— Howard Schultz, Starbucks
chairman and chief global strategist

CSR 2003

DIVERSITY• Starbucks sponsored the New York and Los Angeles 2003 Gay & Lesbian Alliance
Against Defamation (GLAAD) Media Awards. We were one of the first corporate
sponsors of GLAAD’s Digital Initiative Capital Campaign.
• The Seattle Jewish Film Festival, organized by the American Jewish Committee, received
sponsorship support from Starbucks.
• We taught barista skills to inner city youth through partnerships with FareStart andYouthcare, Seattle-based organizations that provide job training and placement services
to homeless and disadvantaged individuals.
• Starbucks recruited partners through the Project Opportunity Program of United
Cerebral Palsy of Golden Gate, the local chapter based in Oakland, California. The
program provides employment services to people with disabilities, enabling them to havethe same opportunities as nondisabled people for work and independence.
• A $50,000 contribution from Starbucks helped the Earth Day Network promote
environmental stewardship in Hispanic and other diverse communities.

20

R ECOGNITION• Starbucks was named the Northwest Minority Business Council’s 2003 Regional
Corporation of the Year.
• In Oakland, California, United Cerebral Palsy of the Golden Gate recognizedStarbucks as the April 2003 Employer of the Month for our participation in their Project
Opportunity Program.
• Starbucks was ranked 15th on PlanetOut Partners’ list of “20 Best Companies to WorkFor” in 2003. The PlanetOut list and Corporate Pride Directory contain information forjob seekers, investors and consumers, helping them make more informed decisions about
how well companies treat the gay, lesbian, bisexual and transgender communities.

G O I N G F O RWA R D

We have made progress in our diversity efforts during 2003, including the hiring of avice president of global diversity. We also improved diversity within the executive
levels of our company and on our board of directors. Starbucks spent more with diverse
suppliers compared to last year. And UCO opened 17 stores in diverse communities.

Despite these advances, we still have opportunities for improvement. Here are some ofour plans for 2004.
• Implement a global strategic diversity plan that will effectively increase diversity at alllevels within the company, including an emphasis on succession planning.
• Increase the number of UCO stores in diverse neighborhoods.
• Create a stronger business and communications strategy for Supplier Diversity toincrease the amount of business Starbucks does with diverse suppliers.
• Increase the amount we spend with diverse suppliers to $95 million by identifying newcertified diverse suppliers for future business with Starbucks, as well as encourage moreof our existing diverse suppliers to become certified.
• Create a new position at Starbucks to oversee the Supplier Diversity Program.
• Develop strategic alliances with national organizations that serve diverse constituents,
such as the National Association for the Advancement of Colored People (NAACP) andthe National Council of La Raza.

21

DIVERSITY

CSR 2003

Village residents
Bensa Ware, Ethiopia

Bensa Ware, a small coffee-farming village in southern Ethiopia,
is home to about 8,000 villagers. This is also the place wheresome of the world’s finest coffee is grown, including Starbucks®
Ethiopia Sidamo. Until recently the only water source available wasa river that was subject to periodic pollution. Some time ago, thegovernment started building a well for the community, but abandoned
the project due to a lack of funds. Starbucks UK heard about thissituation and decided to take action. They mounted a campaign in
our UK stores to raise customer awareness and committed to pay forcompletion of the well, the construction of a reservoir and a series ofwater points throughout Bensa Ware. Today, the residents of Bensa
Ware have a healthy and reliable source of fresh water for drinking,cooking and washing.

Apply the highest standards of
excellence to the purchasing,roasting and fresh delivery of
our coffee.

O

ur customers expect the bestfrom Starbucks. They want
exceptional service, convenient

locations, pleasant surroundings and supreme
quality coffee.
But there’s more to the story. Our customers expect us to conduct our business
responsibly. While enjoying their favorite Starbucks ® coffee beverage, theywant to know that we paid the farmers a fair price for the beans; that the coffee
was grown in an ecologically sound manner; and that we invested something
meaningful in the farming communities where our coffees are produced.
These, too, are our expectations and we strive to meet them on all fronts.
Our actions are guided by Starbucks Guiding Principles, and in particular thethird – applying the highest standards to the purchasing of our coffee. It signals theenormous emphasis we place on quality, and calls upon us to embrace a socially,
economically and environmentally responsible approach to sourcing the finest
coffees in the world.

The World of Coffee
Located between the Tropics ofCancer and Capricorn are the lands����������������

where coffee trees thrive – also
known as the bean belt. Our coffee

HAWAIIbuyers travel to the higher elevations

HONDURASMEXICOPUERTO RICOGUATEMALA
EL SALVADOR

where the climate and soil provide

NICARAGUACOSTA RICA

perfect growing conditions. These

PANAMAare the places where they find the

COLOMBIA

finest arabica beans in the world.
PERU

Most of our coffees come fromBRAZILCentral America, while others
are found in Africa, Indonesia and

BOLIVIASouth America.

�������������������������
��������������������������A SNAPSHOT OF THE COFFEEI N DUST RY

Coffee is consumed all over the globe, making it one of the most valuable primary
products in world trade. It is an important source of income for an estimated 25
million people living in more than 70 tropical coffee-producing countries. As an export, itis crucial to the economies and politics of many developing countries, and in some cases
accounts for 80%* of their foreign exchange earnings.

There are two commercially important species of coffee – robusta and arabica. About 75%of the world’s production is arabica coffee, which flourishes in higher altitudes and has
a more refined flavor compared to the robusta varieties, which grow in lower elevations.
Starbucks only purchases arabica coffee beans.

CSR 2003

COFFEE24* International Coffee Organization

THAILANDYEMENETHIOPIAKENYA
INDONESIATANZANIAPAPUA NEW GUINEAEAST TIMOR

ZIMBABWE�������������������

Arabica coffee is sold in two distinct markets – the commodity and specialty markets:• Commercial-grade arabica coffee is traded as a commodity in a highly competitive market
on the New York “C” (the worldwide reference used by coffee traders for commercialgrade coffee). During 2003, “C” prices for commercial-grade arabica coffee were as low
as $0.55 per pound ($1.21 per kilogram).
• Higher-quality arabica beans are sold to the specialty coffee market, which represents
10%** of total worldwide coffee purchases. Specialty coffee is produced mostly onsmall-holder farms and can command much higher prices than commercial-grade arabica.
In recent years, a variety of factors have stimulated a rise in global coffee production,
while consumption has remained relatively static. The result is a coffee surplus that has
driven prices down to levels not seen in 30 years. This has been devastating for manycoffee farmers who produce commercial-grade coffee. They are not earning enough tocover their costs of production or make a profit.
One encouraging sign is the rise in consumer demand for high-quality specialty coffee.
Since the early 1990s, this segment of the market has grown dramatically, as consumers
have demonstrated their willingness to pay more for gourmet coffee. As a result, farmers
who produce high-quality coffee can command better prices for their crops from
Starbucks and other coffee companies that buy only premium beans.

** Specialty Coffee Association of America

25

COFFEECSR 2003

When our coffee buyers visited theThai hill tribe that grows coffee
used in Starbucks Muan Jai Blend,™
they shared a coffee break with Ler
Kankheaw, a member of the tribe.

Connecting with Farmers in
ThailandFive years after we opened stores in

S U STA I N I NG C OF F E E C OM M U N I T I E S

Starbucks believes that by implementing a long-term, sustainable strategy we will beable to improve conditions for farmers. We’ve formalized our practices into a holistic
approach that is focused on helping farmers earn more, protecting the environment andensuring Starbucks demand for high-quality coffee continues to be met. Our approach
includes the following measures:

Thailand, Starbucks introduced Thai
customers to Muan Jai Blend.™ Muan
Jai means “wholehearted happiness”• Paying farmers fair prices and offering favorable terms

in the Kum-Muang Thai language. For• Rewarding farmers who adopt Starbucks Coffee Sourcing Guidelines

this blend we searched the northern• Investing in social programs that benefit coffee-producing communities

mountainous districts of Chiang Mai
and Mae Hong Sorn, where local
hill tribe farmers grow high-quality
arabica coffee under the canopy of• Purchasing certified and conservation coffees• Providing farmers access to affordable credit

shade trees. The farmers are membersof a Fair Trade cooperative andreceive a Fair Trade Certified™ price.
Currently, Muan Jai Blend™ coffee isbeing sold exclusively in Thailand. Our
hope is to expand the distribution ofthis wonderful coffee so Starbucks
customers around the world can enjoy
it, too.

CSR 2003

COFFEE

26

Coffee Sourcing
���

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PAYING FAIR PRICES AND OFFERING FAVORABLE
TERMS
A fair price to a Guatemalan coffee farmer living in a small, remote village may bedifferent than that of a farmer living in Kenya. But in the end, both farmers mustearn enough to cover their costs of production and adequately support their families.
Otherwise, they may stop growing coffee.
That’s why for the vast majority of our purchases we negotiate prices outright. This way
our suppliers know in advance that they will be paid a fair price for their high-quality
coffee regardless of any downturn in the market.
In fiscal 2003, when prices of commercial-grade arabica coffee ranged from $0.55–$0.70 per pound ($1.21–$1.54 per kilogram), Starbucks paid an average price of $1.20
per pound ($2.64 per kilogram) for our green (unroasted) coffee, excluding freight.
Indeed, prices are paramount to farmers, but contract terms are also important. Farmers
want the security of knowing they have buyers for future crops, an advantage of longterm contracts. And they prefer to trade more directly with their buyers, modifying thebrokers’ role and potentially earning themselves a larger share of the purchase price. So
while Starbucks focused on purchasing most of our coffee in 2003 at outright prices,
we also purchased from farmers with whom we had previously established long-term
contracts and maintained the direct relationships we already had in place. (For information about outright, direct and long-term contracts, see graph above.)During the harvest season last
February, this coffee farmer from atown near Chiapas, Mexico, tracked
the amount of shade-grown coffee
being delivered to the wet mill forprocessing.

In 2003, Starbucks paid anaverage price of $1.20 per
pound for our coffee.

27

COFFEECSR 2003

While in Mexico, Starbucks partner
Peter Torrebiarte (right) met with
Alfredo Gomez Velazco, a coffee
farmer interested in learning more
about Starbucks Coffee Sourcing
Guidelines. Alfredo is a participating
farmer in CI’s Conservation Coffee™
project in Chiapas, Mexico.

STARBUCKS COFFEE SOURCING GUIDELINES –PREFERRED SUPPLIER PROGRAM
The economic challenges facing farmers, environmental impacts of growing coffee,
and poor social conditions in coffee communities have given rise to a world debate on
sustainable solutions. In partnership with Conservation International (CI), Starbucks
took a giant step two years ago by creating our Coffee Sourcing Guidelines, which
encourage a sustainable approach to high-quality coffee production. The guidelines
contain quality, economic, environmental and social criteria that farmers are asked toadopt. As they meet specific criteria and submit to independent verification, they canearn up to 100 points. The more points a farmer earns, the higher their status as a
Starbucks Preferred Supplier. We buy from our preferred suppliers first, paying themhigher prices and offering better contract terms. Our criteria are as follows:• Coffee Quality (prerequisite): All coffee must meet our high quality standards in order tobe considered for purchase.
• Economic Accountability: We expect suppliers to provide transparency on how much
ultimately gets paid to farmers.
• Environmental Impacts: Farmers are rewarded for coffee growing and processing
practices that contribute positively to the conservation of soil, water, energy andbiological diversity, and have minimal impact on the environment.
• Social Conditions: Workers’ wages should meet or exceed the minimum requirements
under local and national laws. Effective measures should be taken to ensure workers’
health and safety and to provide them with adequate living conditions.

CSR 2003

COFFEE

28

Preferred Supplier Program Progress Reportfiscal year
NUMBER OF APPLICATIONS RECEIVED

2003
166

Includes applications from Guatemala, Mexico, Honduras, El Salvador, Nicaragua,
Costa Rica, Panama, Colombia, Brazil, Indonesia, Kenya and Tanzania.
AMOUNT OF COFFEE PURCHASED THROUGH PREFERRED SUPPLIER PROGRAM

13.5 million pounds(6 million kilograms)

This volume represents 60 conditionally approved applications covering
an estimated 52,000 acres (21,043 hectares).

During our second year of the program, we visited Guatemala and Costa Rica and met
with producers, importers, nongovernmental organizations (NGOs) and government
representatives to get feedback on the effectiveness of our Coffee Sourcing Guidelines.
The dialogue helped us identify regional best practices in order to make neededadjustments. So far, we’re making progress at getting producers to adopt our guidelines.
Others in the coffee industry are now developing sustainability models inspired byStarbucks Coffee Sourcing Guidelines. Unique to our program is that we require ourcoffee suppliers to verify how much farmers actually receive of the purchase price.
This is extremely challenging because of the sheer number of farmers who contributeto Starbucks supply chain. Moreover, many small-holder farmers sell their crops to
local mills or trade through cooperatives where formal records are not always kept.
Nevertheless, we are determined to gain transparency to ensure that a significant portionof the purchase price ends up in the hands of those who grow our beans. (See Preferred
Supplier Program progress report graph above.)

Verifiers Ensure Compliance andLend Credibility to Preferred
Supplier Program
Starbucks Preferred Suppliers musthave a third party verify that they areadhering to our Coffee Sourcing Guidelines. Dr. Robert Hrubes, senior vicepresident of Scientific Certification
Systems, believes independent, thirdparty verification is the cornerstone ofa credible Corporate Social Responsibility program. “By establishing apreferred coffee suppliers program thatincorporates independent verification
against rigorous standards, Starbucks
is demonstrating to its stakeholders acommitment to social responsibility andtransparency,” he stated.
So far, our coffee suppliers haveengaged the following organic certifiers,
public agencies, and other certification entities to provide the verification
we require to be assured Starbucks
Coffee Sourcing Guidelines are being
implemented:• Rainforest Alliance• MayaCert• British Standards Institute• Icafe/CICAFE (Costa Rica only)• Eco-Logica• Naturland

29

COFFEECSR 2003

Coming Together to Build a School
When one of Starbucks coffee
suppliers, Mr. Marcos Chavarria,
donated a parcel of land, theNicaraguan community of La
Reforma came together for acommon purpose – to build a school.
Cash was needed for the project,
so Starbucks contributed nearly$25,000. Parents offered their time

INVESTING IN SOCIAL PROGRAMS IN COFFEEPRODUCING COMMUNITIESIt doesn’t always take a large amount of money to make a significant difference in small
coffee farming villages. When a few thousand dollars is invested by Starbucks, and afarm owner makes a contribution, it’s amazing what happens. In fiscal 2003, Starbucks
invested more than $1 million in social programs that benefited farming communities
in nine countries – from Colombia to Indonesia. Recognizing the challenges farmers
and their families face, we focused our investments in two critical areas – health andeducation. More information about Starbucks support of coffee communities begins on
page 60.

to clean and prepare the lot for
construction. And when the school
was completed, the Nicaraguan
Ministry of Education provided afull-time teacher. Today, the Las
Marias School can accommodate

PURCHASING CERTIFIED AND CONSERVATION
COFFEES

120 school-aged children and 100
adult students, serving the residentsof this small community located 35
kilometers northwest of Jinotega.
Approximately 2.3 million pounds(1.04 million kilograms) of excellent

Starbucks purchases some coffees that have been certified or verified by independent
third parties. Included in this category – Commitment to Origins,™ as it is known at
Starbucks – are certified coffees (organic and Fair Trade), and Conservation (shadegrown) coffees. (See graph on next page for details about Starbucks purchases ofthese coffees.)

coffee are produced annually onsmall to medium-sized farms in
La Reforma.

CSR 2003

COFFEE

30

Certified and Conservation Coffees
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Certified Coffees
Certification by independent third parties assures consumers that the coffee theypurchase meets certain criteria. For instance, certified organic coffee is grown without
the use of synthetic pesticides, herbicides or chemical fertilizers, which helps maintainhealthy ground water. The coffee beans must also be processed in organically certified
mills and roasting facilities to be sold as certified organic. The certified organic coffees
offered by Starbucks are Serena Organic Blend™ and Organic Shade Grown Mexico.
Many of Starbucks other coffees are grown organically, but not certified as such.
Starbucks shares the interests of the Fair Trade movement in ensuring farmers receive
fair prices for their crops, enabling farmers and their families to have a better qualityof life. The Fair Trade system includes about 670,000 participating small-holder family
farmers, out of an estimated 25 million coffee farmers around the world, who belong
to democratic, farmer-owned cooperatives that are listed on the Fair Trade Registry.
Buyers must pay producers a guaranteed minimum price, $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. These prices have been established by the Fairtrade Labelling Organizations
International.
Since establishing an alliance in April 2000 with TransFair USA,™ the sole licensor of Fair
Trade products in the U.S., Starbucks has become one of the largest purchasers of Fair
Trade Certified™ coffee in the U.S. Additionally, Starbucks is licensed to sell Fair Trade
Certified™ coffee in 20 countries.

31

COFFEECSR 2003

Jamie Hernandez (left) and Librado
Pascual, both from CEPCO, visited
Starbucks Support Center in Seattle
to meet with Starbucks coffee experts,
Oxfam and the Ford Foundation.
Here, they are learning about our
coffee quality standards through theprocess of cupping and tasting.

Helping Fair Trade Farmers Improve Coffee Quality
Quality determines how much buyers are willing to pay for coffee, whether or not it’scertified as Fair Trade. In order to increase the amount of high-quality Fair Trade coffee,
Starbucks has invested in a program that provides Fair Trade farmers in Mexico thetechnical knowledge to improve the quality of their coffees, thus making their coffees
more marketable.
In 2002, Starbucks launched a multi-year project in Oaxaca, Mexico, to help Fair Tradefarmers produce higher-quality coffee. Four parties are collaborating on this project –Starbucks, the Ford Foundation, Oxfam America, and CEPCO, a 16,000-member Fair
Trade coffee cooperative. Starbucks and the Ford Foundation each contributed $250,000
over two years to the project, and Oxfam America is working directly with CEPCO
farmers on post-harvest quality control techniques.
After one year, we are pleased that many of our objectives were accomplished, including
the construction of two cupping labs, one in Oaxaca and the other in Ixtapec. Farmer
representatives are being trained so they, in turn, can teach other farmers. Their training
includes cupping – or tasting – as a means to discern quality. Starbucks also helped
CEPCO purchase and install an electronic sorter that quickly sifts coffee beans before
processing, removing defective beans and any extraneous elements.
According to Faustino Garcia, CEPCO’s board president, “The sorting machine andtasting room equipment that Starbucks helped us purchase are improving the selection,
preparation and quality of our exportable coffee. As a result, we are better able tosatisfy the quality standards of our clients.”

CSR 2003

COFFEE32

Conservation Coffee ™ Program Report
PROJECTSITE

FARMERSACTIVELYPARTICIPATINGIN PROJECTNUMBER OF
PEOPLE
LIVING IN

LAND USING CI’SCONSERVATION
COFFEE™ BESTTHESE

PRACTICESWILDLIFE
BENEFITINGFROM PROJECTFARMINGAMOUNT OF
COFFEESTARBUCKSPREMIUM PAID
TO FARMERSOVER LOCAL

PURCHASED IN
FISCAL 2003

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Conservation (Shade-Grown) Coffee
Imagine an area where a tropical forest once stood, now cleared to make way for tightrows of coffee trees that are grown in full sun. Once seen as an effective way to control
crop pests, this transition has caused a ripple effect that left migratory birds and native
wildlife without a habitat, and damaged local watersheds. Starbucks recognizes that
serious conservation efforts are needed to protect biodiversity in the world’s mostsensitive areas – many of which are coffee-growing regions – and we are taking action.
In 1998, Starbucks aligned with CI, a nonprofit organization dedicated to protecting
global biodiversity. One of our goals has been to establish project sites in environmentallysensitive coffee communities where biodiversity is severely threatened. We are
specifically focused on two outcomes – environmental protection and helping local
farmers earn more for their crops.
To date, we’ve initiated projects managed by CI’s Conservation Coffee™ program in
Mexico, Colombia and Peru. The project sites have been the source of several highquality Starbucks® coffees. We are presently developing similar projects in Costa Rica
and Panama. (See chart above for the performance record of our projects with CI,
including the markets in which the coffees are sold.)“I consider the Conservation
Coffee™ program to be agreat benefit to the region,
especially for coffee producers,
as CI is teaching us the bestpractices for conservation
coffee. Furthermore, Starbucks
knows the effort we aremaking in our fields, andoffers us a better price that
directly benefits us.”
— Roberto Silvino Hernandez Lievano,
Chiapas, Mexico

33

COFFEECSR 2003

Luis Ovidio Parra and Maria Eucaris
Ramirez pick coffee cherries at CI’s
Conservation Coffee site in Colombia.

Colombian Coffee Growers
Produce Conservation Coffee
Colombian coffee growers arereviving traditional farming practices
that will help protect a conservation
corridor between the Serrania deParaguas nature reserve and Tatama

STARBUCKS SUPPORT OF
CONSERVATION INTERNATIONAL (CI)Over the past five years, the alliance between Starbucks and CI has grown stronger as
we’ve accomplished many of our intended goals and witnessed the positive impact ourefforts have had on local farmers, their communities and the environment. Starbucks
has provided significant financial support to CI, including a contribution of $200,000
in 2003.
Several Starbucks leaders are personally involved with CI, serving on various committees
and councils. Starbucks president and ceo Orin Smith is an active member of CI’s boardof directors. He also chaired CI’s annual fundraiser in November 2002, which raised$1.8 million, the largest amount raised in CI’s history at a fundraising event.

National Park, home to the Emerald
Toucanet and many other endangered
species. The joint project between
Starbucks and CI was initiated in2000 and resulted in Starbucks
selling Conservation Colombia coffee
produced by farmers participatingin the conservation project, earningthem almost 60% above local prices
for their crops in 2003.

CSR 2003

COFFEE34

PROVIDING FARMERS ACCESS TO CREDIT
During the growing cycle, farmers often need an infusion of capital to cover essential
expenses so their crops can be prepared for harvest. Poor farmers may turn to local
money-lenders who often charge exorbitant interest rates that put farmers further in
debt. Recognizing the need farmers have for affordable credit, Starbucks has supported
a number of loan programs since 2000.
In October 2003, Starbucks agreed to loan $2.5 million to Verde Ventures, an investment
fund managed by CI. These funds will help provide access to credit for coffee producers
who are participating in the Starbucks-CI conservation projects, or to farmers striving tomeet the criteria for our Preferred Supplier Program.

Inside these freshly picked coffee
cherries are the beans that are now
ready to be processed and roasted toperfection.

“Since Starbucks andConservation Internationalbegan working together in
1998, our collaboration has
produced significant benefits
for habitat conservation in
biodiversity hotspots as well
as for farmer livelihoods.”— Peter Seligmann, chairman and ceo,
Conservation International

35

COFFEECSR 2003

R ECOGNITION• Starbucks was awarded the Colombian Order of The Grand Cross Medal, the highest
honor given by the State of Nariño. For years Starbucks has contributed to the economyof the State of Narino through our purchases of high-quality coffee at premium
prices. Starbucks also invested in a housing improvement project that benefits 500
farming families. It is the first time this honor has been given to a coffee company or a
nonpolitical organization.
• The Rainforest Alliance presented its 2003 Individual Green Globe Award to Mary
Williams, Starbucks retired senior vice president of Coffee. The Individual Green GlobeAward celebrates people who demonstrate dedication, innovation and a commitment
to the global environment. The Rainforest Alliance honored Mary for her lifelongcommitment to merging the definitions of quality and sustainability in the specialty
coffee industry.

About Mary Williams
As one of the few women in thegreen coffee business, and an
exceptionally skilled coffee buyer and• Mary Williams received the 2003 Lifetime Achievement Award from the Specialty Coffee
Association of America (SCAA). This award recognized Mary for a career of excellencein providing inspiration, direction and leadership.
• The National Coffee Congress presented the Costa Rica Coffee Merit Medal to Mary
Williams. The award recognized her instrumental role in developing and supporting the
Costa Rica specialty coffee industry. The recognition marks the first time a non–Costa
Rican resident and woman received the honorable distinction.

taster, Mary Williams’ 30 years ofexperience has made her a legend.
She spent the last ten years with
Starbucks, first as vice president,
Green Coffee, and then senior vicepresident, Coffee. In 2002, Williams
was named chairwoman of Starbucks
Coffee Trading Company, Lausanne,
Switzerland. She retired as senior
vice president in 2003 and remains
an advisor to the company.

CSR 2003

COFFEE36

G O I N G F O RWA R D

Starbucks is wholeheartedly committed to making a positive difference in the lives of
farmers and their communities by promoting the sustainability of coffee production.
In pursuing this goal, our focus in 2004 will be on the following:• Increase the amount of independently verified sustainable coffee we purchase fromsuppliers who successfully adopt Starbucks Coffee Sourcing Guidelines by 100% overfiscal year 2003 (see chart below) including a 15% increase in conservation (shadegrown) and certified organic coffees that meet the guidelines.
• Open a field office in Costa Rica that enables us to reach out and work directly with
farmers, helping them improve their production of high-quality, sustainable coffee.
• Invest in more social development projects that benefit coffee-growing communities
around the world, including projects in Latin America, Africa and Indonesia.
• Provide $1.5 million over three years, including $300,000 in fiscal 2004, to support the
expansion of the Conservation International coffee program in Central America, Peru
and Colombia. Demonstrate leadership of the Conservation Coffee Alliance by signinga three-way memorandum of understanding between Starbucks, CI and USAID for a$1.2 million project to expand the Conservation Coffee™ program in Mexico, Costa Rica
and Panama.
• Maintain our commitment to purchasing Fair Trade Certified™ coffee, and increase thenumber of places where Fair Trade Certified™ coffee is available and the countries where
we have licensing agreements in order to meet consumer demand.

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37

COFFEECSR 2003

Shata Stephenson
Starbucks customerTucked away in the corner, Shata Stephenson sinks into his
favorite comfy chair, sips his coffee and hits the books. This is
his ritual – something he’s been doing for months. Shata is a Seattle
firefighter and is studying hard in hopes of becoming a lieutenant.
The relaxing, quiet atmosphere at Starbucks is exactly what Shataseeks – a refuge away from distractions that can interfere withhis concentration. Shata’s favorite Starbucks is an Urban Coffee
Opportunities (UCO) store on Seattle’s Rainier Avenue – a result of

the joint venture between Starbucks and Earvin “Magic” Johnson’s
company, Johnson Development Corporation, which brings Starbucks
stores to diverse communities. At this particular Starbucks, Shatafeels completely at home. “This store has lots of regular customers
and a very friendly staff. The baristas are from the local neighborhoodand they relate well to their customers,” Shata says. “There’s achoice in coffee shops around here, but I choose Starbucks.”

Develop enthusiasticallysatisfied customers all of
the time.

I

t’s not just the coffee that brings morethan 25 million customers through ourdoors every week. It’s the coffeehouse

experience – a third place between work andhome – that connects customers to coffee in
an inviting, enriching environment that is
comfortable and accessible. We call it the
Starbucks Experience.
From the beginning, we have upheld our principle of developing enthusiasticallysatisfied customers by assuming that everything matters, especially the quality of
our coffee and customer service. After every visit, our customers depart with amemory of their experience. Our most loyal customers visit Starbucks 18 times amonth on average. Therefore, our success depends on consistently providing ourcustomers the optimal Starbucks Experience every time they visit.
But it takes more to gain the trust of consumers these days. Most prefer to dobusiness with companies that demonstrate strong values and act responsibly. In thisregard, we want our customers to know what Starbucks stands for and to hold us
accountable if our actions appear out of line with our Guiding Principles.

MEETING OUR CUSTOMERS’E X PECTAT IONS

Starbucks customers are discerning. They want high-quality products and excellent
service. We know this from conducting ongoing consumer research and getting feedback
from our customers. We believe the reasons we appeal to millions of customers arebecause of our great products, our focus on customer service, and the pleasing ambianceand convenience of our locations.
What we have learned from our customers is that Starbucks greatest strength is also ourbiggest challenge – providing a consistent Starbucks Experience and high-quality products
everywhere Starbucks is served and sold around the globe. Our customers expect every
Starbucks Experience to be of the same quality that they receive in their “home store.”
When we miss the mark, our customers let us know. We take their feedback seriously,
and dedicate ourselves to improve in the areas in which we have fallen short of ourcustomers’ expectations. At all times, we are focused on being and offering the best, andempowering our partners so they can provide each customer with a personalized, uplifting and consistent Starbucks Experience. These are our goals, day in and day out.

CSR 2003

CUSTOMERS

40

BR I NGI NG STA R BUCK S TO OU R
CUSTOMERSC

onvenience is very important to our customers. For this reason, Starbucks stores are
typically located in areas where our customers live and work, and are designed for
great service and convenience. This also explains why, in some cases, a Starbucks store
may be situated near another Starbucks.

STARBUCKS IN NORTH AMERICA
Competition in the marketplace offers consumers choices. Instead of lessening competition, Starbucks has been credited with increasing the overall market for specialty coffee.
Nationwide, more than half of all coffeehouses are independently owned, according toresearch conducted in 2003 by Mintel Consumer Intelligence, a Chicago market-researchfirm. Moreover, industry experts indicate that the majority of independents opened within
the last decade have survived.
Occasionally, a community group will oppose our plans to expand in their neighborhood.
Locally owned businesses, independent coffeehouses, or activist groups are often those
who voice their concerns about the addition of a new Starbucks store. Experience hastaught us that open dialogue and community outreach can help to reduce tensions andpromote understanding.

“When I heard Starbucks
was opening a new store
across the street from myhometown coffee shop,
I immediately bristledwith anger. I was 100%
determined not to give
Starbucks my business.
But Jodi Jaccund (store
manager) won me over withher passionate commitment
to her customers. Now I
visit this Starbucks and buy
products every single day.”— Nick Ford, Ohio41

CUSTOMERSCSR 2003

In the Insa-dong district of Seoul,
South Korea, Starbucks displays
a non-English, Korean-alphabet
signboard. The store’s interior isdecorated with traditional Koreanmasks and fans.

STARBUCKS AROUND THE WORLDIn seven short years, Starbucks has introduced our brand around the world, and operates
in 32 countries. The enthusiasm for our brand among international consumers, as wellas the interest expressed by our joint-venture partners to expand into more territories,
validates the significant opportunities for Starbucks in the international marketplace. As
we realize our potential for future growth, we are also committed to making a positive
contribution wherever we go.
In fiscal 2003, Starbucks opened stores in three new countries:• The first Starbucks store in Turkey, a country recognized for its rich history of coffee,
opened in April 2003. We offer traditional Turkish coffee along with our otherStarbucks® beverages.
• Starbucks opened in Peru last summer, a country where some of the world’s finest coffee
is grown. Exclusive to this market, Starbucks offers a single-origin Peruvian coffee thatis sourced from a local Conservation International Conservation Coffee™ project site.
This coffee is grown using methods that protect local biodiversity and provide economic
and social benefits for local coffee farmers.
• Last August we brought the Starbucks Experience to Chile, a marketplace that is quickly
becoming recognized for its excellent economic and social climate and its increasingly
cosmopolitan and educated consumer base.
We respect the customs and culture of every country and region in which we operate.
While we strive for consistency at every Starbucks location, we also reflect the uniquecharacteristics of a specific market.
• When Starbucks built a new store in Thailand, we incorporated an existing 100-year-old
teak home, maintaining the traditional Thai “gothic” style.
• Starbucks caters to local tastes in China, Taiwan, Malaysia and Singapore by serving
specialties such as moon cakes.

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42

I M PROV I NG OU R COM M U N I T I ES W I T H
OUR CUSTOMERS

S

tarbucks strives to make a positive impact in our communities and on the environment
through a variety of ways. Some of our efforts extend beyond us at Starbucks, andpresent opportunities for our customers to get involved as well. For instance:• Starbucks Make Your Mark program was designed to support the volunteer efforts ofour partners. When a partner volunteers in the community, Starbucks matches theirefforts with a cash donation to the designated nonprofit, based on the number of hours
volunteered. Often, a partner will organize a team of volunteers that may include theirfellow partners, family members, friends and Starbucks customers. Starbucks matches
the volunteer hours of everyone on the team, including customers.
• Reducing waste is a priority for us. Our customers help in this effort through Grounds forYour Garden, a program that offers spent coffee grounds to our customers who garden.
This is especially popular during the spring when gardens are being prepared for planting.
These initiatives and Starbucks other community programs are discussed in more detail
beginning on page 48.

Customers who enjoy their Starbucks®
beverages in their own mugs receive a$0.10 discount and help keep unnecessary
waste from going to landfills.

“Your store in Bowie is oneof the best representativesof what Starbucks is allabout. When I ordered large
carafes of coffee for an earlymorning community event,
your store partners came inearly to get my order ready.
When I arrived, the coffee
and all the extras wereready to go. Your partners
even carried my order out
to my car. I call this good
customer service.”— Patricia M. Clunies, Maryland

43

CUSTOMERSCSR 2003

LISTENING TO OUR CUSTOMERS AND
STA K E HOL DE R S

Starbucks invites our customers and other stakeholders – including investors, media,
suppliers and activists – to contact us with their questions, concerns or compliments
through a variety of channels. If their needs cannot be addressed at the store, our customers
can complete and mail in a comment card, which can be found in all stores. Or stakeholders
can call our toll-free Customer Relations line (1-800-23-LATTE), which is open for calls
daily. Feedback can also be submitted in writing or through our website at Starbucks.com.
Regardless of how it is received, Starbucks Customer Relations team reviews and responds toevery inquiry, often within 24 hours for calls and emails, when appropriate contact information has been provided.

CUSTOMER CONTACTS
In fiscal 2003, Starbucks received nearly one million customer and stakeholder contacts.
Starbucks tracks customer comments to identify areas needing attention and to keep
abreast of emerging issues. On a monthly basis, Starbucks sends customer comment
reports to key internal contacts and senior managers. Most contacts pertain to customer
service in our stores, rather than broader issues. Last year, however, we received
numerous requests from customers for nutrition information about our products as well
as a few questions regarding genetically modified ingredients in foods and rBST milk. We
were also asked about Starbucks cocoa sourcing practices.

CSR 2003

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44

NUTRITION INFORMATION
Starbucks offers a range of beverage and food options that cater to our customers’
individual preferences. To assist our customers in their selections, Starbucks provides
nutrition information for our beverages and some fresh food items on our website atStarbucks.com. The nutrition information presented for beverages is based on thestandard preparation for the size of beverage selected. Calories can be reduced in somebeverages by requesting nonfat milk or eliminating the whipped cream.

The nutrition information for atall Starbucks® Latte, like the one
pictured above, is available online at
Starbucks.com.

Our suppliers have provided the nutrition information for those bakery products that fall under
our national bakery product program. Although not all of our stores stock these products,
many of them do, and they are representative of the products found in most of our markets.

G E N E T I C A L LY M O D I F I E D I N G R E D I E N T S
Crops that have been genetically modified (GM) are ones that utilize biotechnology to
speed up the process of traditional plant breeding. Biotechnology has become a very
prevalent practice in U.S. agriculture, used widely to produce corn and soy crops, which
are converted to ingredients used in many products.
Two years ago, Starbucks received a number of inquiries regarding GM ingredients in our
products. At that time, Starbucks determined and has consistently reaffirmed that our
coffees and teas are not genetically modified. Moreover, the majority of our beverage andfood products are also free of ingredients from GM sources. Currently, the U.S. does not
require specific labeling of GM ingredients, making identification difficult for businesses
that sell ready-made foods.

45

CUSTOMERSCSR 2003

In 2001, Starbucks adopted the stringent Food Standards Australia/New Zealand (FSANZ)
regulations as an internal guideline to evaluate and monitor our products in the U.S.
According to the FSANZ definition, which requires labeling for all genetically engineeredmaterial, except for highly refined minor ingredients, we estimate that less than 1% ofStarbucks food and beverage products would require labeling as containing GM ingredients. When highly refined minor ingredients are used in our products, we verify that they
are free of GM protein.
The European Union took action in 2003 requiring the traceability of GM organisms
throughout the food chain – from farm to table – and the labeling of all food and feed
consisting of, containing, or produced from a GM organism. For our European stores,
Starbucks plans to source GM-free products from local suppliers.

DAIRY
According to U.S. labeling requirements, dairy producers do not need to disclose whether
their supply has been produced by cows injected with the growth hormone, rBST (recombinant bovine somatotropin). Starbucks appreciates the concerns some of our customers
have about rBST. Therefore, in all of our U.S. company-operated stores, organic milk
and soy alternatives, which are guaranteed to be rBST-free, are available upon request.

Unprocessed cocoa beans.

COCOA SOURCINGThe processed cocoa and chocolate Starbucks uses in our products is sourced from several
tropical countries, including Côte d’Ivoire, West Africa. In 2001, reports appeared in the
media that have raised concerns over the alleged use of forced child labor associated withcocoa production in Côte d’Ivoire.

CSR 2003

CUSTOMERS

46

We have relayed these concerns to our cocoa suppliers and asked them to addressthese issues in West Africa through the Joint Protocol, which was signed by chocolate
manufacturers and related organizations in the cocoa industry, and witnessed bymembers of the U.S. Congress, International Labor Organization (ILO), and several
nongovernmental organizations.
What we’ve learned from a comprehensive survey, conducted by the International
Institute of Tropical Agriculture, of labor and other practices on 3,000 West Africancocoa farms is that 96.7% of the children working on farms in Côte d’Ivoire were related
to the farmers. This is a typical occurrence on small family farms where everyone in thefamily helps during the harvest season.
To help ensure economic sustainability of cocoa farming, our suppliers are committed
to paying a fair price to farmers for their cocoa. According to the International Cocoa
Organization (ICCO), commodity prices for cocoa are currently at their highest levelin years.
Beyond what we’ve asked of our suppliers, Starbucks actively supports the World Cocoa
Foundation (WCF), an organization that includes leaders in the cocoa industry and nonindustry partners. Through its targeted educational and scientific programs, the WCF is
successfully encouraging sustainable and responsible cocoa farming in Africa, Asia andLatin America.

G O I N G F O RWA R DAs we increase the number of Starbucks stores and hire more partners, we recognize
the challenge of consistently meeting the expectations of our customers for theultimate Starbucks Experience, as well as the expectations of our communities. But
challenges always present opportunities for improvement. So to ensure we maintain ourcommitment to develop enthusiastically satisfied customers all of the time, we will focus
on the following initiatives in 2004:• Improve our interviewing techniques used during the hiring process to help us select new
partners who demonstrate customer-focused attributes and behaviors.
• Enhance partner training to emphasize Starbucks customer-focused culture, andhighlight the behaviors and actions that will make a positive difference to our customers.
• Continue to monitor developments in the debate about genetic modification and be
guided by regulatory authorities and concerns expressed by our consumers.
• Continue to provide support to the World Cocoa Foundation.

47

CUSTOMERSCSR 2003

Beth Jamison
Starbucks partner and Green Team action leaderFor the past seven years, Starbucks partners have taken a special
interest in Morningside Park, a 29-acre parcel of nature thatconnects the Morningside Heights and Harlem neighborhoods
in New York City. They have created an Earth Day tradition thatinvolves gathering as many New York partners, friends, families andcustomers as possible and heading to the park for a day of clean-up

and spruce-up. On one particular day in April 2003, 730 volunteers
showed up, including Beth Jamison and more than 300 of her fellow
Starbucks partners – a record! With all of these volunteers on
hand, 7,000 shrubs, trees and ground covers were planted, leaves
were raked, wood chips were spread and the park’s handball courts
were repainted.

Contribute positively to ourcommunities and ourenvironment.

W

hen Starbucks first opened,customers came in searchof great coffee. As theirvisits became more frequent, many became
regulars, dropping in for a cup of coffee
or just a hello. Relationships formed and,more notably, our coffeehouses evolved
into community gathering places.
As Starbucks started to expand, we hoped the neighborhood atmospherethat invigorated our first coffeehouses would flourish in our new locations.
Fortunately, it has. Today, our coffeehouses are places where friends andneighbors routinely gather and catch up, relax and enjoy a delicious beverage.
People are passionate about their communities. As a neighbor, Starbucks isdedicated to making a positive difference. Our community investments arefocused on engaging our partners to be active participants; addressing literacy;
contributing to the local communities where we operate, including coffeegrowing communities; and minimizing our environmental impact.

More than 30 Starbucks partners
joined president and ceo Orin Smith(center) to volunteer for a Palo Alto,
California, literacy organization, YES
Reading. Volunteers cleaned the garden,
planted flowers, painted flower boxes
and read to the children enrolled in the
YES Reading program.

E NG AG I NG O U R PA RT N E R S

Our partners are at the heart of Starbucks community and giving programs. Better
yet, we follow their hearts. Our partners help determine how Starbucks can makethe greatest impact in their local areas. Some partners volunteer, and others makecharitable donations to nonprofit organizations. Many do both. In any case, Starbucks
supports their efforts along the way through our Make Your Mark and Choose to Give!
programs. (The chart below reflects Starbucks community support in 2003.)

Star buc ks Community Support in 20 03
Total contributions in fiscal 2003
were $11.3 million.

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CSR 2003

COMMUNITY

50

Make Your M ar k���������

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fiscal year�������

2003
2002
TOTAL VOLUNTEER HOURSSTARBUCKS CORPORATE MATCH

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MAKE YOUR MARK

Making Our Mark in September

Since its inception, Make Your Mark (MYM) has been a favorite program of our partners,
including Starbucks president and ceo Orin Smith. It’s a matching program that rewards
our partners’ gifts of time with charitable donations from Starbucks. When our partners
volunteer, they apply to Starbucks for a MYM grant, and we make contributions tocommunity organizations on behalf of their volunteer efforts. Whether it’s a team orindividual project, Starbucks matches our partners’ volunteerism with $10 for every hour,
up to $1,000 per project. More important, MYM is not limited to just partners. The
match is extended to customers, friends and family who participate in partner-driven
MYM projects. It’s obvious that our partners like this program because every year we see
dramatically higher levels of involvement. (See results in the graph above.)

Here are examples of what went on incommunities across North America for
September Make Your Mark:In Kittery, Maine, 91 volunteers joined
together to make improvements at Saco
Bay Trails. The project supervisor at thepark noted that it would have taken ayear to accomplish what the Starbucks
volunteer team completed in one day.
The volunteers constructed a boardwalk
and bridge that day, which undoubtedly
will have a lasting impact.

SEPTEMBER MAKE YOUR MARKOn the West Coast, partners and

For the past two years, Starbucks has highlighted Make Your Mark (MYM) during themonth of September. We went all-out to promote volunteerism in September 2002, andone year later we enthusiastically appealed to our partners again. A goal of 50,000
volunteer hours was established, which is equivalent to one person working full-time formore than 24 years. Amazingly, September MYM inspired 27,000 Starbucks partners
and customers to contribute more than 110,000 volunteer hours, exceeding all expectations. In support of the volunteers, Starbucks donated more than $697,000 in financial
contributions to nonprofit organizations across North America.

customers volunteered 170 hours andraised $1,700 for Northwest Harvest.
They packaged nearly 30,000 poundsof fresh vegetables that were distributed
at local food banks throughout the stateof Washington.
As long-time supporters of the fightagainst HIV/AIDS, our Canadian partners once again demonstrated how muchthey care. Teams of partners, friends,

EXECUTIVE COMMUNITY LEADERSHIP PROGRAM

family and customers participated in 11
AIDS Walks across the country during
September 2003, raising $31,000 for

The importance of community involvement is felt strongly by our partners, including
our executives. Our partners take notice when an executive lends their leadership to acommunity organization, through board involvement or hands-on efforts. During

51

the cause. At the Toronto AIDS Walk,
more than 700 walkers formed Team
Starbucks.

COMMUNITY

CSR 2003

Christine Day (right), Starbucks
senior vice president, celebrates the
opening of the new school with Josie
Howell, a member of the First Placeadvisory board.

Christine Day Makes First Placea Priority
The demands of being a Starbucks
executive haven’t deterred ChristineDay from assuming another role inher busy life. For the past six years,
Christine was a board memberof First Place, a Seattle school
created for the children of families
in crisis. “What I loved most about
being involved were the kids, andseeing how the school made such a
positive difference in their lives,”
Christine noted.

fiscal 2003, more than 35 Starbucks leaders (vice presidents and above) were actively
engaged as board members of nonprofits. And in the spirit of Make Your Mark,Starbucks often contributes to these organizations as a way to support our executives’
involvement.

During her tenure on the board,
Christine served as president andhelped First Place complete its$6 million capital campaign used tobuild a new school. “The opening
ceremony for the new school was
clearly a highlight for me,” Christine
said. “One loyal teacher couldn’t
believe her own eyes that ‘everything,just everything the teachers dreamedof was here.’ In that one moment,
all the long hours of planning andfundraising had been worth it.”

CHOOSE TO GIVE!
Community organizations thrive on volunteer support as well as financial contributions.
Because giving is such a personal decision, Starbucks designed a flexible workplacegiving program that provides a dollar-for-dollar match of our partners’ donations to thecharities of their choice, up to $1,000 annually. As a result, our North American partners
have steadily increased their giving over time. Starbucks believes our Choose to Give!
program is an important community investment because it provides financial support tolocal nonprofits, and it also reinforces the importance of philanthropy to our partners.
(The chart below shows Choose to Give! results for 2001–2003.)

C h oo se to Give!
fiscal year

2001

2002*

2003

NUMBER OF PARTNERS PARTICIPATING

515

637

1,260

STARBUCKS CONTRIBUTION$170,000$132,000$252,000* Choose to Give! was suspended for several months at the beginningof 2002 so improvements could be made to the program. These figuresreflect giving from March to September 2002.

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52

EARTH DAY
Celebrating Earth Day each April is a Starbucks tradition that has grown significantly
over the years. For many Starbucks partners, Earth Day is an opportunity to volunteer
in our communities. But it also serves as a platform for building awareness among ourpartners and customers about the responsibility we all share for the environment.

Starbucks partners from Peru cameto Seattle for their immersion training.
During their stay, they took time tovolunteer on Earth Day, teaming withlocal store partners and the Seattle Parks
Department to clean up Volunteer Park.

For the second year, Starbucks supported the Earth Day Network (EDN), a resource forpeople wanting to participate locally and/or learn more about the impacts their daily
actions have on the environment. In 2003, Starbucks provided funding to support EDN’s
outreach efforts to Hispanic and other minority communities. For a month last spring,
EDN was featured on Starbucks hot cup sleeves, which drove more than one million
people to visit www.earthday.net.
Here are a couple of highlights of our efforts to support Earth Day in 2003:• Hewlett-Packard, Best Buy and Starbucks “Teamed Up to Clean Up” in Seattle and New
York City. Together, we provided an opportunity for consumers to recycle used computer
hardware and other electronics in an environmentally safe and responsible manner, freeof charge. The events recycled 120,000 pounds of materials that might have otherwise
ended up in landfills.
• In Japan, more than 2,000 partners volunteered at clean-up events throughout thecountry as part of Earth Day.

“Starbucks support
has helped the EarthDay Network to deliverenvironmental informationand capacity-building tools
to the communities thatneed it most – low income,urban communities.”— Kathleen Rogers, president,
Earth Day Network

53

COMMUNITY

CSR 2003

(photo above, left) In Amsterdam,
Starbucks partners in our regional
office and at our roasting plant havesupported Emma Children’s Hospitalby donating computer hardware
and making financial contributions
through special fundraising initiatives.
Four-year-old Zoe, pictured here, is apatient at Emma Children’s Hospital.
(photo above, right) On National TreeDay in Australia, an estimated 170
Starbucks partners planted 10,000
trees as part of Starbucks Australia’s
Giving Back Program. Starbucks
supported this event by purchasing
seedlings, printing brochures andposters, providing coffee to volunteers
at tree-planting sites and paying
wages to store partners while theyplanted trees.

MAKING A DIFFERENCE IN COMMUNITIES AROUND
THE WORLD
Our international partners have shared their accounts of how Starbucks is contributing tolocal communities. Here are a few examples:• Make Your Mark was unveiled outside of North America in 2003, introducing Starbucks
popular volunteer program to partners in 14 Asia Pacific markets. Immediately after the
debut, partners volunteered to clean up a beach and walk 100 km for Oxfam Hong Kong.
• Our joint-venture partner in the Philippines, Rustan Coffee Corporation, recently
launched their own volunteer program – Hours to Give. Local Starbucks stores offer
their partners at least two paid hours a month to volunteer in the community to help
educate school-age children.
• A workplace-giving program was recently introduced in Starbucks UK – Give As You Earn.
Partners have the option of payroll deduction for making their charitable donations.
• Autistic children in Bahrain have found some new friends at the local Starbucks. The
children enrolled in the Bahrain Rehabilitation Institute of Autism’s daycare programoften visit Starbucks during their field trips. Our partners take joy in spending quality
time with the kids and giving them personalized tours of the store.
• Starbucks and Conservation International recently teamed up in Indonesia to collaborate
on an education program aimed at teaching school children about the importance of
biodiversity conservation.

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COMMUNITY54

T H E STA R BUCK S FOU N DAT ION
SU PPORTS L I T E R ACY

I

n 1997, Starbucks chairman Howard Schultz founded The Starbucks Foundation
for the purpose of creating hope, discovery and opportunity in our communities.
Determined to have an impact, we chose to focus on literacy because studies have shownthat children who read for fun, or are read to, do better in school. Most important,knowing how to read is an essential prerequisite for success in today’s world.

The Starbucks Foundation has supported literacy programs in North America ever since.
We have partnerships with two national nonprofits, Jumpstart and America SCORES,
which both receive significant grants. And we make Foundation grants to literacy
programs that emphasize youth leadership and foster an appreciation for diversity.
Outside the U.S. and Canada, The Starbucks Foundation has provided some seed grants
to initiate community projects.
The Starbucks Foundation is a registered 501(c) (3) private foundation and a separate
entity from Starbucks Coffee Company.

Shunsuke Baba, who had his dreamof swimming with dolphins fulfilledby the Make-A-Wish Foundation ofJapan, created special artwork for thiscommemorative mug.

Starbucks and Make-A-Wish
Foundation of Japan
Starbucks Coffee Japan wanted tomake dreams come true for children
suffering from life-threatening
illnesses. In 2003, they formed apartnership with Make-A-Wish
Foundation of Japan and set out
to raise money from the sales of alimited edition Starbucks Card and acommemorative mug.
Our customers in Japan responded
by purchasing Starbucks cards andmugs, which enabled 2% of theproceeds to be donated to Make-AWish Foundation of Japan. Seattle
Mariners baseball great Ichiro Suzuki,
who had granted wishes to children
from Make-A-Wish Foundation ofJapan in the past, participated, too.
He and his wife added $25,000.
The Tateuchi Foundation, which has
funded many philanthropic initiatives
in Seattle and Japan, and The
Starbucks Foundation added more.
The total raised was $120,000.

55

COMMUNITY

CSR 2003

Joe Read, a NY SCORES
participant, reads his poem to an
audience gathered at Starbucks.

In Manhattan, Starbucks
Showcases Work of Young Poets
Rising above the ambient soundsof a bustling coffeehouse were thevoices of 12 slightly nervous students
who wanted to share something
special with the crowd at Starbucks –their poems. Taking turns, eachapproached the microphone, as the

NATIONAL PARTNERSHIPS
Jumpstart currently reaches more than 6,000 preschool children from low-income
families and pairs them with highly trained college students for intensive one-to-one
attention. As a result, children gain language, literacy, social and initiative skills,
providing a foundation for future academic and social success. In 2001, The Starbucks
Foundation pledged $1 million over four years to help Jumpstart expand to new cities,
and provide more children with the skills they need to succeed.
America SCORES provides children a safe, structured after-school environment by combining soccer programs with creative writing workshops to inspire teamwork and bring out thebest in each student. The Starbucks Foundation made an initial grant in 1997, and sincethen the relationship between America SCORES and The Starbucks Foundation has grown.
The program has steadily expanded over the years to serve more students in a variety of
U.S. cities. In 2003, The Foundation contributed $210,000 to America SCORES.

audience hushed, and read a piece
they had written as part of theirinvolvement with NY SCORES, an
America SCORES affiliate. For most

REGIONAL FOUNDATION GRANTS

of the students, this performance wasprobably a first. But the experience
undoubtedly gave all the students
some newfound confidence as
their poems were enthusiasticallyreceived.

The Starbucks Foundation makes grants through its Youth Leadership Grant Program,supporting organizations that are aligned with our literacy mission and are those inwhich Starbucks partners are involved as volunteers. Emphasis is given to programs thatserve low-income, at-risk youth, embrace cultural diversity and involve families, schools
and/or neighborhood organizations. Grants typically range from $5,000 to $20,000. In
fiscal 2003, The Starbucks Foundation expanded the focus of our grants program, which
includes the following:
Power of Literacy – The Foundation favors programs that stimulate personal development and encourage commitment to social equity, justice and environmental awarenessthrough writing, literacy and the promotion of the voices of youth in public forums. Hereare two examples of grants made in fiscal 2003:

CSR 2003

COMMUNITY

56

• The Community~Word Project in New York City received a $15,000 grant from The
Starbucks Foundation to support a growing arts-in-education program. The arts areused to develop the reading and writing skills of youth, while building community among
at-risk students from New York City public schools.
• Environmental Education Alliance of Georgia in Gainesville was granted $20,000 for
the “River of Words” project, an environment-based education program that combines
experiential activities in natural habitats with creative writing and poetry to encourage
students to express their commitment to environmental issues.
Leaders in Diversity – The Foundation supports programs that teach the value ofsocietal diversity, with an emphasis on the development of leadership skills to build
bridges of understanding between individuals, groups and communities. Below are two
examples of grants made in fiscal 2003:• City at Peace in Los Angeles received $7,500 from The Starbucks Foundation to
support its performing arts program. The project’s goal is to engage diverse groups ofyouth, through theatre and music, so they are empowered to transform their lives andcommunities through understanding of peaceful conflict resolution.
• National Conference for Community and Justice in Nashville was awarded a $10,000
grant for its “Building Bridges” program. Participating youth are empowered to produce
multicultural appreciation and anti-prejudice and anti-violence programs in schools,
helping other students to overcome prejudices, discrimination and violence.

CONT R I BU TI NG TO LOCA L COM MU N ITI ES

W

ith locations spread throughout 32 countries, we are part of a lot of communities.
And in all of them, we try to have a positive impact. The best approach we’ve comeup with to share Starbucks charitable contributions with our local communities is tosupport our partners’ community involvement. Thus, our focus on our volunteer program,
Make Your Mark, and our workplace giving program, Choose to Give!

Beyond our focus on partners, Starbucks finds other ways to support local communities.
Some are large-scale efforts in all North American communities where Starbucks storesare located, while other initiatives are unique to a specific community.

HOLIDAY ANGELS
During the past several holiday seasons, the Starbucks Holiday Angels Toy Drive
has brought joy to children suffering from serious illness. In fiscal 2003, Starbucks
customers and partners donated more than 276,000 toys to be given to sick children
through the Starlight Children’s Foundation, an international nonprofit organization.

57

COMMUNITY

CSR 2003

This artwork was designed for
Starbucks and captures our spirit ofcommunity and environment.

ALL BOOKS FOR CHILDREN
Last spring, Starbucks customers and partners continued a six-year tradition by donating
more than 490,000 new or slightly used children’s books through a Starbucks-sponsoredbook drive – All Books for Children. Nearly 300 Safeway licensed Starbucks storesparticipated for the first time, adding 2,800 books to our collection efforts. The books
were distributed to more than 140 local literacy organizations.
In the UK, Starbucks supports All Books for Children with a different approach. Rather
than an actual book drive, Starbucks UK has contributed funds to the National Literacy
Trust for three years. The funds have been used to purchase more than 12,000 books,
which have been given to more than 4,000 children in library events across the UK.
Starbucks UK partners regularly volunteer at these events.

PRODUCT AND IN-KIND DONATIONSStarbucks stores are frequently approached by local organizations seeking donatedcoffee for community events, or products that can be sold at charity auctions. Whilerequests of this nature are often very worthy, only some can be fulfilled. Our local storesand regional markets determine these donations.
Most of our stores and roasting plants have established ties with local charities – suchas shelters or food banks – to receive in-kind donations of the store’s unsold pastries
and coffee.
In fiscal 2003, the value of our product and in-kind donations was $5.3 million.
Tazo Tea Company also donated products in fiscal 2003 to support community
organizations. These donations were valued at $83,500.

CSR 2003

COMMUNITY58

LOCAL ACTION
Starbucks supports some larger initiatives in local communities. For example, we
contribute $75,000 annually to the Starbucks Memorial Fund, a special program that
honors the memory of three young Starbucks partners who, in 1997, tragically lost theirlives in our Georgetown store in Washington, D.C. The Fund provides support to local
area organizations working to prevent violence and assist victims.
Here are examples of what Starbucks is doing in other communities:• Organizations in the San Francisco Bay Area and Sacramento have received
contributions from Starbucks through our local program, Grants for Giving. Since
introducing the program three years ago, Starbucks has donated more than $1 million,
funding a variety of local projects. In 2003, Starbucks Grants for Giving madecontributions to 10 organizations, including the North Bay Children’s Center for its
Health and Nutrition Program, and San Francisco’s Holy Family Day Home for its Family
Literacy Project.
• In the Seattle area, Starbucks contributes $100,000 annually through our Neighborhood
Park Grants Program to grassroots volunteer organizations that work to create safe andwelcoming gathering places for all members of the community. In fiscal 2003, Starbucks
made 10 Neighborhood Park Grants of $10,000 each.

New York State Senator Owen
Johnson (left) and Marty Annese,
Starbucks senior vice president, readwith children at the opening of thelibrary at Wyandanch Daycare Center
on Long Island.

Starbucks Helps Build New
Libraries
Starbucks joined forces with theliteracy group, Books for Kids
Foundation, to help create 10 new
libraries for children in the New
York metro area. The libraries arebeing established within existing
community-based organizations andschools. The first library opened in
March 2003, at Yonkers Children’sPlace. A second library was built in
the Wyandanch Daycare Center onLong Island. A team of architects,
designers, store developers andcommunity liaisons – all Starbucks
partners – helped renovate andcreate an inviting space where kids
would feel comfortable.

59

COMMUNITY

CSR 2003

This small tea-growing village in the
Darjeeling region of India is one of
the communities benefiting from Tazo’s
CHAI project.

COFFE E - A N D TEA - GROW ING
COMMUNITIESS

tarbucks has a deep commitment to the people and places where our coffees andteas are produced. Much of this is shared in the coffee quality section of this report(pages 22-37), including the social projects we support and our partnership with
Conservation International.

CARE
Starbucks has maintained a 12-year relationship with CARE International, a nonprofit
organization dedicated to fighting global poverty. CARE has provided many opportunities over the years for Starbucks to help meet the needs of developing communities forbasic health and education services. From fiscal 2002 to 2003, Starbucks contributed a
total of $300,000 to CARE for a special emergency response fund to be used for coffee
communities. Starbucks and CARE are working together to determine how these funds
should best be deployed to meet the most pressing needs in developing countries.

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COMMUNITY60

TAZO AND MERCY CORPS
Tazo Tea Company, a wholly owned subsidiary of Starbucks, forged a partnership in
2002 with Mercy Corps, an international humanitarian aid organization. Together, theycreated a project called CHAI – Collaboration for Hope and Advancement in India. The
project supports community development in the tea-growing district of Darjeeling, India,
the origin of some of the finest teas available in the world and home to many of Tazo’s
suppliers.

A Mercy Corps staff member (center)meets with local villagers in the
Darjeeling region of India to discuss
the goals of Tazo’s CHAI project.

Under Mercy Corps’ direction, CHAI is focused on three areas: health (access to waterand improved waste management), youth development and vocational training, andlocal community development through self-governing bodies. In fiscal 2003, the project
established a field office in the region, hired and trained local staff, conducted needs
assessments and launched health and vocational projects in 12 remote communities.
Constructing latrines and other water infrastructure, building roads and footpaths, andreforestation activities will begin next year in 24 villages.
A total minimum pledge of $600,000, payable over three years, was made by Tazo, its
suppliers (including tea growers, traders and brokers) and Starbucks. In fiscal 2003, theamount contributed to CHAI by all the parties totaled $240,000, which included $100,000
from Starbucks.

COFFEE KIDS
For the third consecutive year, Starbucks supported Coffee Kids, an international
nonprofit organization dedicated to improving the quality of life of coffee-farming
families, with a contribution of $25,000. These funds helped provide micro-credit loans
to 4,460 women and their families in Veracruz, Mexico, and Matagalpa, Nicaragua.

“The generous andcommitted support ofStarbucks has helped
thousands of families help
themselves.”— Bill Fishbein, founder and executive
director, Coffee Kids

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COMMUNITY

CSR 2003

Starbucks Environmental Mission
Statement
Starbucks is committed to a role

M I N I M IZI NG OU R E N V I RONM E N TA LI M PAC T

of environmental leadership in all
facets of our business. We will fulfill
this mission by a commitment to:• Understanding environmental issues
and sharing information with ourpartners.
• Developing innovative and flexibleC

onsider how fundamental fresh water and clean air are to our quality of life. A
commitment to effective environmental management is necessary to protect theseand the earth’s other natural resources. Starbucks believes environmental stewardshipis an essential component of our community responsibility. Our mantra has become tominimize our environmental footprint on the planet and help to ensure a healthy environment for future generations.

solutions to bring about change.
• Striving to buy, sell and use
environmentally friendly products.
• Recognizing that fiscal responsibility
is essential to our environmental

In the following pages, we provide a performance report on Starbucks environmental
initiatives. In some areas, we are making good progress. And in others, there areopportunities for improvement. In either case, we realize that reducing the size of ourfootprint requires a steadfast commitment and the acknowledgement that it’s an ongoingprocess – a journey with no end point.

future.
• Instilling environmental responsibility
as a corporate value.

ENVIRONMENTAL FOOTPRINT• Measuring and monitoring ourprogress for each project.
• Encouraging all partners to share in
our mission.

Our environmental mission statement is the foundation of Starbucks commitment toenvironmental responsibility. We took this to heart in 2000 when we evaluated Starbucks
impacts using The Natural Step’s sustainability framework, and embarked on a course to
reduce our footprint on the planet. This involved adopting specific measures to decrease
waste and our use of energy and water, among others. We involved a strong crossfunctional team of partners to determine the best approach.
Starbucks Environmental Footprint Team identified three high-impact areas that we are
now addressing:• Sourcing: coffee, tea and paper.
• Transportation: people and products.
• Store design and operations: energy, water, waste reduction and recycling.
We have established environmental performance metrics in all three areas, enabling us tomeasure our progress.

CSR 2003

ENVIRONMENT

62

Tea and Pape r S ourc i ng

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COFFEE, TEA AND PAPER
One of our greatest environmental impacts includes coffee growing, which is addressed inan earlier section of this report, beginning on page 22. As we have reported, Starbucks istaking significant measures to encourage the sustainable production of coffee.
Tea
Like coffee, tea is an agricultural product. Tazo Tea Company, a wholly owned subsidiaryof Starbucks, sources a variety of raw materials used in Tazo’s tea blends, including tea
leaves, botanicals and spices. Tazo is committed to purchasing certified organic materials
for its tea blends whenever feasible, appreciating that organic farming practices haveenvironmental benefits because of the limited reliance on chemical fertilizers, herbicides
and pesticides. (See tea sourcing graph, above left.)
Paper
Starbucks uses large quantities of paper – from the cups, napkins and shopping bags
used in our stores, to the shipping cartons used in our operations. In an effort to reduce
our environmental footprint, Starbucks strives to purchase paper with high levels of
post-consumer fiber (PCF) and unbleached fiber. We believe our efforts will contribute toforest conservation and help to reduce waste.
We measure our performance in this area as the percentage of PCF content and,separately, unbleached fiber that is contained in all the paper we purchase. In fiscal 2003,
the overall percentage of PCF content exceeded our goal of 20%, but compared to fiscal
2002, our performance wasn’t as strong. Over half of the paper we purchase is used in
our hot cups. We are researching ways to incorporate PCF in our cups. Additionally, weare confident in our ability to raise the PCF content in future non-cup purchases, andhave targeted 30% PCF content. (See paper sourcing graphs, above right.)

63

ENVIRONMENTCSR 2003

Transportation
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Our partners at Starbucks Support
Center in Seattle have access to a
Flexcar™ for work-related travel
during the day, which allows them toleave their cars at home.

TRANSPORTATION
A growing concern about global warming has led to more scrutiny of the causes, including the impacts of transportation. Most vehicles burn fossil fuels, which contribute torising levels of carbon dioxide (CO2), a greenhouse gas. We accept the opinion of mostscientists that the increased accumulation of greenhouse gas emissions in the atmosphereis influencing changes in the planet’s temperature. These changes could lead to harmful
effects, such as rising sea levels and shifts in weather and global hydrological patterns.
Our Footprint Team determined that our initial efforts should focus on our partners’commute to and from Starbucks Support Center, our global headquarters in Seattle. This
is Starbucks largest workplace facility and the site where, on average, 2,320 partners
worked in fiscal 2003.
Starbucks “Transportation Options Program,” or TOP, offers commuting alternatives
to partners. The program includes subsidized transit passes; free shuttle buses for local
commutes; and perks for carpoolers, walkers and bike riders. Our Partner Fleet Car
Program is operated in conjunction with Flexcar,™ providing vehicles to partners to use
for business trips during the day so they can leave their vehicles at home. And whenneeded, Starbucks will provide our commuting partners a ride home. (See graph above.)
Our transportation impacts also include the distribution of our products around the world.
Starbucks is working with transport providers to reduce this impact by:• Piloting a measure to consolidate store deliveries and reduce the number of daily trips
supply trucks are making to our stores. It’s too early for results, but we are hopeful thismeasure will reduce Starbucks fuel consumption as well as costs.
• Participating in the Business for Social Responsibility (BSR) Clean Cargo Group, aworldwide committee of multinational corporations, to develop environmental guidelines
for ocean transportation geared for shippers and freight carriers.

CSR 2003

ENVIRONMENT

64

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STORE DESIGN AND OPERATIONS
Collectively, Starbucks stores in North America use considerable amounts of energy
and water, and generate a great deal of waste. Our environmental retail initiatives arefocused on reducing energy and water consumption, and minimizing waste by reusing andrecycling. We also examine ways to improve the environmental performance of our storesthrough better design specifications and equipment purchases.
Energy Conservation
There are easy and cost-effective measures that can reduce energy usage and decrease
greenhouse gas emissions, Starbucks has found. For example, our stores use a bestpractice Energy Checklist that includes practical conservation measures. Moreover, lastyear Starbucks undertook a number of conservation projects in our North American
stores. These included replacing inefficient bulbs and fixtures in more than 2,700 existing
stores, and resetting thermostats to increase heating and cooling efficiency.
Despite these initiatives, our energy usage in fiscal 2003 increased, based on data wecollected from a sample of stores. In an effort to improve our performance in this area, in2004 we will launch an “Energy Test Bed,” over two years in a sample of our stores, tomonitor all energy usage, including equipment, and test new energy conservation initiatives.
Water Conservation
Sometimes simple solutions can have a big impact. This was true of our water conservation measures last year. Starbucks installed low flow toilets in some of our locations. We
also adjusted the flow on a specialized faucet located in our espresso bars. More than
3,000 stores were installed with water-efficient rinsers which clean the pitchers used to
mix our Frappuccino® blended beverages. (See store design and operations graphs above.)

65

ENVIRONMENTCSR 2003

International Grounds

Waste Reduction and Reuse

Outside the U.S., some Starbucks

Our store partners are very innovative when it comes to reducing waste. An example ofthis happened eight years ago when a team of store partners discovered how Starbucks
could reuse coffee grounds, the heaviest portion of our waste stream. It evolved into a
program, Grounds for Your Garden, which involves packaging up five-pound bags of coffee
grounds and offering them to our customers, local parks, schools and nurseries as a soil
amendment for gardens.

stores have discovered how to reusecoffee grounds. In Japan, a teamof Starbucks partners realized thatcoffee grounds could be used as aningredient to make paper. A local
printing company used this paper toprint “Starbucks Press,” the official
Starbucks Japan newsletter.
Starbucks partnered with theComposting Council of Canada topromote recycling, waste reductionand environmental awareness. Our
Canadian stores offered complimentary spent coffee grounds, hosted
in-store composting seminars withWe also reduce waste in our stores by encouraging our customers to use their own
commuter mugs when purchasing a beverage. Customers receive a discount of $0.10 ifthey do. The good news is that customers used commuter mugs more than 13.5 million
times in fiscal 2003, keeping 586,800 pounds of paper and plastic waste from landfills.
Although the overall percentage of commuter mug usage is higher this year compared to2002, it is still below usage levels from 2001. (See graph on previous page.)Starbucks also reduces paper waste by serving beverages, upon request, in reusable
ceramic coffee mugs to our customers who plan to enjoy their beverages in our stores. In
addition, Starbucks adopted a policy in 2002 stating that all Starbucks partners should
use reusable mugs for the beverages they consume while at work.

master gardeners, and distributed
useful information on composting.
In Bahrain, the local Starbucks dries
coffee grounds in the sun, packages
them, and gives the grounds tocustomers as fertilizer for house plants.
And on Environmental Day in South
Korea, our stores gave their customers
flower pots that contained a bag ofreused coffee grounds for fertilizer,
topped with some planting seeds.
(See photo above, left.)

CSR 2003

ENVIRONMENT

Recycling
There are so many compelling reasons to recycle, from saving natural resources andenergy to reducing the need for new landfills and incinerators. Starbucks is committed
to increasing the amount of recycling in all our company-operated stores, but it comeswith certain challenges. For one, we don’t oversee waste management in all of ourcompany-operated stores and must rely on our various landlords to place a high priority
on recycling, as well as track their efforts. In addition, some of our stores are located incommunities where commercial recycling facilities are not available.
Our performance for recycling is reported as the number of company-operated stores
where waste management is controlled by Starbucks, and that have recycling programs.
(See graph on previous page.)

66

EFFICIENT LIGHTS THAT
USE LESS ENERGYDESIGN STORES TO CAPTUREAVAILABLE NATURAL DAYLIGHT

PAINTS WITH LOWERAMOUNTS OF VOLATILEORGANIC CHEMICALSREDUCED-FLOW FIXTURES
THAT CONSERVE WATERCABINETRY MADE FROM 90%
POST-INDUSTRIAL MATERIAL, WITHNO ADDED FORMALDEHYDE

WOOD FLOORING MADE FROMFSC-CERTIFIED PRODUCTS

Environmental Measures in Our Store Design
Starbucks is modifying our construction specifications to improve the environmental
performance in our new stores. While it’s a work in progress, some specifications havealready been altered, including standards for purchasing wood products that are certified
through the Forest Stewardship Council (FSC). In fiscal 2003, we purchased:

The above illustration identifies somemeasures we are incorporating in
the design and construction of ourstores. These measures are aimed atconserving resources and improving
our environmental performance.

• Certified wood fiber, with no added formaldehyde, to build the display cases in 535 newstores. This material accounted for 99.5% of our casework.
• FSC-certified hardwood for flooring in 133 new stores. This material accounted for 95%
of the hardwood flooring used by Starbucks.
For the last two years, Starbucks has played a leading role on the Retail Development
Committee of the U.S. Green Building Council (USGBC). Our involvement has been
focused on developing a scorecard for retailers, based on USGBC’s Leadership in Energy
and Environmental Design (LEED) standards. Originally intended to pilot in 2003, theproject is now expected to be introduced in 2004.

67

ENVIRONMENTCSR 2003

(photo above, left) Paula Boggs,
Starbucks executive vice president,
general counsel and secretary,
encourages her team to be active
contributors in the community throughpro bono work and other activities.
(photo above, right) Attendees at
Starbucks Green Team Action Leaders
Conference in Seattle.

G E T T I N G PA R T N E R S I N V O LV E D
Since 1994, a group of store managers across North America have served on Starbucks
Green Team. Over the years, they have identified some worthy environmental measures forour stores, many of which have had a lasting impact. Their enthusiasm is infectious, inspiring our store partners to do their part to conserve energy and water, and reduce waste.
In 2003, Starbucks hosted 39 Green Team action leaders, including partners from North
America, Japan and Australia, in Seattle for a three-day conference to brainstorm
solutions on improving the environmental performance in our stores.

R ECOGNITION• The King County Bar Association selected Starbucks in-house legal team as the Pro BonoFirm of the Year. The award recognizes the legal services Starbucks partners have provided
to the Housing Justice Project, which represents low-income tenants in the Seattle area.
• The Washington Chapter of the Association of Fundraising Professionals named
Starbucks the 2003 Outstanding Philanthropic Corporation. Starbucks was nominated by
the Seattle Public Library Foundation.
• Seattle’s King County Library Association honored The Starbucks Foundation with its
2003 Literary Lions Award for excellence in promoting literacy.
• Starbucks received the 2003 Energy Conservation Award from the Business and Industry
Resource Venture, a division of Seattle Chamber of Commerce.

CSR 2003

ENVIRONMENT68G O I N G F O RWA R D

Starbucks went from 272 retail stores in 1993, to more than 7,000 locations ten
years later. Our expansion to new parts of the world has elevated our need to develop
a global philanthropic strategy and to assess our environmental stewardship aroundthe globe.

As proud as we are of our accomplishments in 2003, Starbucks recognizes that we canreach further, try harder and make improvements. Here’s what we plan to achieve in2004 and beyond:• Increase the percentage of partners participating in Make Your Mark and Choose
to Give!
• Increase the percentage of Starbucks senior executives who serve on the boards ofcommunity organizations.
• Loan a Starbucks executive to CARE for one year to assist CARE in developing bestpractices for corporate alliances.
• Renew The Starbucks Foundation’s national partnerships with Jumpstart andAmerica SCORES and continue to increase Starbucks partner involvement with bothorganizations.
• Increase Tazo’s commitment to Mercy Corps for the CHAI project to $800,000, payable
over three years. With the additional funds, provide health care to critically ill villagers.
• Use the World Business Council on Sustainable Development/World Resource InstituteGreenhouse Gas Protocol to conduct a climate inventory to better understand ourgreenhouse gas emissions.
• Increase the number of Starbucks stores in the U.S. that participate in a recycling
program by 10%.
• Increase our purchases of in-store furniture made from wood certified by the Forest
Stewardship Council.
• Participate with the Paper Working Group, led by Metafore, to encourage the increased
use of environmentally preferable paper. Metafore is a nonprofit organization thatcollaborates with leaders in business and society to create innovative, market-based
approaches that support thriving forests and communities.
• Together with other industry leaders, pursue economically and environmentally
sustainable packaging solutions through participation in the Sustainable Packaging
Coalition, a project of GreenBlue, that Starbucks helped establish.

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ENVIRONMENTCSR 2003

Domingo and Mariana Olvera
Starbucks partners

Domingo Olvera never imagined that one day he’d own 75 acresof agricultural land and have a three-bedroom house built in
his homeland of Jalisco, Mexico. But that’s exactly what he and his
wife, Mariana, managed to do after cashing in some of Domingo’s
Bean Stock grants that he accrued by packaging coffee at Starbucks
roasting plant in Kent, Washington. The house is “a nice place; not sobig, but nice,” describes Domingo of the home where his family stays
when they return to Jalisco for vacations. “Next, I’ll use my Bean
Stock to expand the house,” Domingo explains. “This has been realgood for me. I value all the benefits that Starbucks provides for me –the stock options, the 401(k) and S.I.P. (stock investment plan).”
Domingo isn’t the only Starbucks partner in the family. Mariana also
works at the roasting plant and so does Domingo’s brother, Juan. In
fact, Mariana has used her Bean Stock to create her own retirement
nest egg, and Juan used his to purchase a parcel of land that neighbors
Domingo’s property in Jalisco.

Recognize that profitability isessential to our future success.

W

hen

Starbucks

Guiding

Principles were conceived,
profitability was included

as a core value, but intentionally placed
last on the list. This was done not because
profitability is least important. Instead, we
believed that adhering to our strong values,
and our commitment to good sustainability
performance, would ultimately lead to goodfinancial performance.
As we reflect on the reasons for Starbucks financial success, we believe our
responsible business conduct has been a strong factor. But it comes down to thecommitment our partners make to operate in a manner consistent with our values.
So it’s fitting that the rewards of Starbucks performance benefit all shareholders,
including our partners.
The concluding section of this report provides a brief history of Starbucks, acompany profile, a description of the corporate governance changes Starbucks
adopted in 2003, and information about our newly launched Starbucks Supplier
Code of Conduct.

Our very first store in Seattle’s Pike
Place Market.

S TA R B UC K S H I S T ORY A N D C OM PA N Y
PROFI L E

S

tarbucks opened for business in 1971 with a small shop in Seattle’s Pike PlaceMarket. Sixteen years later, two events occurred that signaled things to come.
A group of investors, led by Starbucks chairman and chief global strategist, Howard
Schultz, acquired the company in August 1987, at a time when there were six Starbucks
stores. And Starbucks expanded for the first time outside the Seattle area, opening
stores in Vancouver, B.C., and Chicago.

In 1992, Starbucks became a publicly traded company, with common stock being tradedon the Nasdaq National Market under the trading symbol, SBUX. Stores were opened in
San Francisco, Southern California and Denver, bringing the total of Starbucks stores to
165 at the end of fiscal 1992.
Four years later, Starbucks expanded to Japan and Singapore, our first international
ventures outside North America. That same year we introduced the bottled version ofStarbucks Frappuccino® coffee drink in North America.
Over the next seven years, Starbucks steadily added locations, introduced new products,
launched ventures and formed strategic partnerships. Starbucks ended fiscal 2003
with 7,225 company-operated and licensed operations in 32 countries, including all
50 U.S. states plus the District of Columbia. This year, retail operations accounted for
85% of Starbucks revenues, while remaining revenues were from specialty operations.*(See Company Profile chart on the next page.)* Sales of coffee and tea products that occur through other channels of distribution outside the companyoperated retail store environment are collectively referred to as “specialty operations.”

CSR 2003

PROFITABILITY

76

Com pany P rof i lefiscal year

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“One of the reasons
I joined the board ofStarbucks was because of
the social conscience thecompany demonstrates.”— Senator Bill Bradley,
Starbucks director

Photo: Tom Reese, The Seattle Times

A meeting of Starbucks boardof directors.

COR POR AT E GOV E R NA NC ET

he avalanche of recent corporate accounting scandals has cast a shadow of distrust
over publicly held corporations. Out of this climate came the Sarbanes-Oxley Act,sweeping legislation that requires improved internal controls and procedures for corporate financial reporting. Companies have also been called upon to help restore investor
confidence by voluntarily shoring up their practices, especially within their boardrooms.

In 2003, Starbucks undertook numerous corporate governance initiatives designed tomake the board stronger, more independent and better informed.
Here are a few examples of the changes Starbucks adopted last year:• Appointed Senator Bill Bradley, Olden Lee and Mike Ullman as new board members,
which improved board diversity and ensured 3/4ths of the directors met the Securities
and Exchange Commission and Nasdaq definition of independence.
• Updated charters for the board’s three independent committees – Audit and Compliance,
Compensation and Management Development, and Nominating and Corporate
Governance.
• Ensured all Audit and Compliance Committee members met stringent independence tests.
• Enhanced whistle-blower procedures to protect those who raise concerns.
• Limited the number of boards on which Starbucks directors may serve, so their attention
will be more focused on Starbucks business.
More information, including our Corporate Governance Principles and Board Committee
Charters, is available online at www.starbucks.com/aboutus/investor.asp.

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E X PECTAT IONS OF OU R SU PPL I E R S

Starbucks is committed to treating all individuals with respect and dignity, andprotecting the environment. As part of Starbucks corporate social responsibility,
we believe these principles should be reflected throughout our supply chain, andembraced by Starbucks suppliers. This was the motivation for creating Starbucks
Supplier Code of Conduct.

Already in place were specific standards for Starbucks coffee suppliers as part ofStarbucks Coffee Sourcing Guidelines. Our coffee suppliers are required to adopt thesestandards to become a Starbucks preferred supplier. More information about our Coffee
Sourcing Guidelines is available on page 28 of this report.

SUPPLIER CODE OF CONDUCTStarbucks Supplier Code of Conduct expands on our purchasing philosophy and expectations previously communicated to suppliers in our Supplier Handbook. In addition,
Starbucks Social Responsibility Standards: Manufactured Goods and Services supports
the overarching Code and was specifically developed for suppliers in this category.
The Code was introduced in September 2003. Suppliers are required to have an officer orowner of the company sign an acknowledgement that they agree to comply with our Codeand standards, which include:• Demonstrating a commitment to the welfare, economic improvement and sustainability ofthe people and places that produce our products and services.
• Adherence to local laws and international standards regarding human rights, workplacesafety, and worker compensation and treatment.
• Meeting or exceeding national laws and international standards for environmental
protection, and minimizing negative environmental impacts of suppliers’ operations.
• Commitment to measuring, monitoring, reporting and verifying of compliance to this Code.
• Pursuing continuous improvement of these social and environmental principles.
New suppliers will receive the Code as part of our revised Supplier Handbook and are
required to comply as a condition of doing business with Starbucks. Starbucks may
choose to verify a supplier’s compliance, utilizing an independent auditor in some cases.
In addition, random audits will be conducted throughout our supply base.
The Supplier Code of Conduct was just recently implemented, making it too early toreport on performance. We will provide an assessment of our suppliers’ performance insubsequent issues of our Corporate Social Responsibility Annual Report. Information
about our Code of Conduct is available online at Starbucks.com.

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R ECOGN ITION• Starbucks was added to FORTUNE’s 2003 list of the “Ten Most Admired Companies
in America.”• Business Ethics magazine ranked Starbucks 21st on its list of the 100 Best Corporate
Citizens in 2003.
• For the first time, Starbucks became a Fortune 500 company in 2003.

SOCIAL INDEX FUNDS

Green Bean Award
Maybe it was Ron Weber’s
ingenuity, or simply great common
sense. Whichever, Ron’s decision topurchase thinner and lighter plastic
garbage bags for Starbucks stores
was the right move. Not only did
the bags cost less, saving Starbucks
an estimated $500,000 a year, but
the new bags eliminated close to750,000 pounds of solid waste on
an annual basis. It was definitely awin-win for the company and theenvironment. Starbucks respectfully
honored Ron Weber with thecompany’s Green Bean Award.
Ron is a partner in Starbucks
procurement department. He wasone of six recipients of the 2003
Green Bean Award, which recognized
their positive contributions to theenvironment. Recipients receive
cash awards, plus Starbucks makes
donations to the environmentalorganizations of the recipients’ choice.

Starbucks appreciates the many invitations we receive for inclusion on various social
index funds throughout the year. To be included, companies are asked to complete
extensive applications that are unique to each fund. Inclusion is based on meeting thefund’s specific social, environmental and financial criteria. Starbucks completed applications for several social index funds in 2003, all of which were accepted. Starbucks is
included in the following:• Calvert Social Index• Dow Jones Sustainability Index• KLD’s Domini Social Index (DS 400)

G O I N G F O RWA R DAs a publicly traded company, Starbucks is accountable to its shareholders. Investors
measure a company by its ability to deliver strong financial results both short- andlong-term, as well as by its commitment to a sustainable business strategy. So far,Starbucks has managed to do both. In doing so, we carefully balance our financial goals
with our Guiding Principles and commitment to sustainability to ensure Starbucks haslasting value.
While Starbucks accomplishments in recent years have created a great deal of optimism
about the company’s future, we don’t rest on our laurels. Improvements can and will
always be made. Here are a couple of initiatives Starbucks will tackle in the year ahead:• Complete training for Starbucks global procurement team on the Supplier Code of
Conduct and Supplier Social Responsibility.
• Select an independent third-party auditor and begin conducting Supplier Code of
Conduct compliance audits.

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I N DE PE N DE N T V E R I F IC AT ION L E T T E R

To the Stakeholders of Starbucks Coffee Company:
Starbucks Coffee Company (Starbucks) engaged Moss Adams, LLP, a certified public
accounting firm, to provide external assurance and verify the contents of its Corporate
Social Responsibility Annual Report (Report) for the fiscal year ended September 28,
2003. As the independent verifier, we have maintained objectivity in our review of theReport in accordance with the Code of Professional Conduct of the American Instituteof Certified Public Accountants. Those standards require us to maintain an independent
position; one that is not affected by influences and is free from conflicts of interest.
Starbucks’ management and personnel prepared the Report, compiled the underlying
data and is responsible for its content. Our responsibility was to review the Report andobtain reasonable assurance about whether Starbucks corporate social responsibility
policies as stated therein have been implemented; and that statements, assertions andthe 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 United States of America or internationally that relate to the preparation,
presentation and verification of corporate social responsibility reports. Therefore, wedeveloped an approach to verify the contents based on emerging practices, the guidelinesof the Global Reporting Initiative, and our own professional expertise and experience.
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 forreview; testing select data to support assertions; and confirming with external parties
certain statements, assertions and data disclosed in the Report. We planned and carriedout 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 reasonablebasis for our conclusion.
Based on the external verification process performed, we verify 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 28, 2003.
• 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
January 20, 2004

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A BOUT THIS R EPORT

S

tarbucks 2003 Corporate Social Responsibility Annual Report contains highlights ofcompany initiatives, programs and activities that demonstrate how Starbucks provides
social, environmental and economic benefits to the communities in which we operate.
Information presented in this Report is for fiscal 2003 (September 30, 2002, toSeptember 28, 2003), and focuses mostly on Starbucks North American and coffee
supply chain operations. This Report also includes some information pertaining toStarbucks international operations, licensed stores, Tazo Tea Company and Seattle
Coffee Company. All references to currency are expressed in U.S. dollars.
Starbucks values the efforts of the Global Reporting Initiative (GRI) to develop globally
applicable guidelines for sustainability reporting. When preparing our 2003 Report,
Starbucks was mindful of the GRI guidelines in determining relevant content andperformance metrics to include. More information about GRI is available online atwww.globalreporting.org.
This publication is Starbucks third annual Corporate Social Responsibility Report.

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ABOUT REPORTCSR 2003

F E E DBAC K A N D F U RT H E R I N FOR M AT ION

Your feedback is very important to us. Please complete our online survey atwww.starbucks.com/csrsurvey.
For questions about this report or to obtain a copy, contact us at:
Starbucks Coffee Company
Customer Relations
P.O. Box 3717
Seattle, WA 98124-8891
Phone: 1-800-23-LATTE (1-800-235-2883)
Fax: 1-800-782-7286
Email: info@starbucks.com
The report is available online at www.starbucks.com/csr.

This report was prepared by Starbucks Corporate Social Responsibility department, with much input frommany partners throughout the company, and designed by Starbucks Creative Group.
Sandra Taylor, senior vice president, Corporate Social Responsibility
For additional information about Starbucks, please visit Starbucks.com.

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© 2004 Starbucks Coffee Company. All rights reserved. Printed in the USA.
This report is printed on 100% post-consumer recycled paper.