Copyright 2015. No quotation or citation without attribution.

Brown-Watson Case 15-01

STARBUCKS-NGO PARTNERSHIPSA CORPORATE SOCIAL RESPONSIBILITY
FAÇADE

By: Teresa Cebrián Aranda

WATSON INSTITUTE, BROWN UNIVERSITY
Prepared for Professor Peter Gourevitch
Course on Corporate Accountability
Fall 2015

Copyright 2015. No quotation or citation without attribution.
Going to your local Starbucks is like curling up on your couch and warming up by thefireplace while you listen to your favorite Jazz band or the latest holiday Christmas songs. The
hip and community coffeehouse sells comfort, self-indulgence and a relaxed affluence,1 in
addition to offering specialty coffee from the far-away lands of the Nicaraguan mountains or the
exotic jungles in Sumatra, the Indonesian island. The coffee roaster emphasizes its commitment
to origins and lets the consumers know, through its chalkboard announcements and brochuresthat “every time you purchase Starbucks’ coffee, you’re also making a difference, helping to
improve people’s lives, and encouraging conservation where our coffee is grown.” 2 The
coffeehouse nurtures a romantic environment in which consumers can indulge in a good quality
cup of coffee while thinking they’re also advocating for a good cause. The average Starbucks
consumer looks for convenience, gourmet coffee and an added peace of mind. But are consumers
really spending their money on better wages for farmers and environmentally sustainable
practices? Or are they just recovering the money that Starbucks uses towards its cause-related
marketing and socially responsible claims? In this paper, I argue that Starbucks’ façade ofcorporatesocialresponsibility,

mainlythroughpartnerships

withnon-governmentalorganizations, reflects the company’s concern in maintaining its reputation and branddifferentiation, rather than showing its commitment to farmers’ and workers’ empowerment.
First, I will set the context for the coffee industry and explain how and why sustainable coffeeindustry developed; second, I will explore two different partnerships between Starbucks and a
non-profit organization. Then, I will explore government regulation as a possible pathway topressure corporations and hold them accountable.

1 Ruzich, Constance M. "For The Love Of Joe: The Language Of Starbucks." The Journal of Popular Culture: 428-

42, 2008.
2 “Starbucks. Coffee Company, 2013”

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Up until the 1980s, the ability of the state to promote development was never questioned
and many international agreements regarding the trading of goods were created. With a periodof massive over production by the end of the 1950s, many Latin American countries started
negotiations for price stabilization and the first International Coffee Agreement was signed in
1962, with both Northern and Southern countries as signatories.3 During the ICA regime, acoffee price was set and governments controlled the production process in terms of exporting
decisions. However, the effects of globalization, with liberalization and deregulation, and thetransfer of stocks from public to private agencies, caused the elimination of government services
in the agro-food business. This led to an increasing power of large trading companies in
producing countries and to the increasing oversupply of coffee due to technologicaladvancement. As a result, coffee prices went from US$1.34 per pound in 1988 to US$0.77 perpound in 1994.4 Gary Gereffi defines the new commodity production process as a “buyer-driven”
value chain in which “production networks are controlled by large retailers and trading
companies that respond to consumer needs to increase profit.”5 According to him, as opposed to
producer-driven chains, in which manufacturers hold the power, buyer-driven chains aregoverned by the decisions of large retailers that take control of the production process. In such
system of governance, the designing, manufacturing and selling one of product occurs in
different places. Moreover, producers are under the oversight of retailers and trading companies
that control over the production network.
Today, the coffee industry conserves many of the characteristics of the buyer-driven
chain. Starbucks revitalized interest in coffee consumption as it promoted new ways of both
3 Daviron, Benoit & Ponte, Stefano. The Coffee Paradox: Global Markets, Commodity Trade And The Elusive

Promise Of Development, The World Economy: 1031-032, 2005.
4 Ibid.
5 Ibid.

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producing and consuming coffee.6 The company is vertically integrated and controls its coffee
sourcing, roasting and retail sales around the world—according to Howard Schultz, it is vertical
integration “to the extreme.”7 The company is subject to the increasing demand of consumers
and to market transactions between traders, growers, and themselves, which requires a strong
coordination along the chain. This mode of chain governance, in which producers are at the endof the chain and do not participate in the decision making processes, has been challenged byregulatory systems, certifications and corporate voluntary codes of conduct that strive to inducechanges in the way the chain is governed. In an effort to live up to consumers’ expectations—
who want to know how they’re coffee is produced—Starbucks tries to appear as an ethicalroaster, leading the way towards sustainable sourcing practices. Sustainable food movements
such as Fair Trade, or Organic, and sustainable specialty roasters like Starbucks “generate amovement towards a mode of governance closer to the producer-driven typology because they
may improve growers’ positions with traders and roasters.”8 According to Shultz, Starbucks is“real and sustainable. [Its] foundations are stronger because they are built with the strength of thehuman spirit, not an ad campaign.”9 However, although Starbucks’ model has improved farmer’s
wages (by assuring them a price higher than the international market price for coffee) and has
contributed to ethical sourcing practices, the company still adopts mainstream capitalist andcorporate strategies hidden behind sustainability concepts, which fool the consumer.
Starbucks’ partnerships with non-profit organizations reflect the company’s willingness
to set standards for good social and environmental performance, but there are often only a façade
6 Ibid.
7 Favaro, Ken. “Vertical Integration 2.0: An Old Strategy Makes a Comeback,” Strategy+Business, May 2015.
8 Daviron, Benoit and Ponte, Stefano. The Coffee Paradox: Global Markets, Commodity Trade And The Elusive

Promise Of Development.
9 Schultz, Howard, and Dori Jones Yang. Pour Your Heart into It: How Starbucks Built a Company One Cup at aTime. New York, NY: Hyperion, 1997.

Copyright 2015. No quotation or citation without attribution.
for its profit-making goals.10 Partnerships are defined as collaborative arrangements between
actors from different sectors that recognize the “need for businesses to make a positive
contribution to international developed and poverty alleviation given their key position in the
global chain.11 Starbucks partnerships with both TransFair USA (now Fair Trade USA) andenvironmental non-profit Conservation International (CI) exemplify this relationship, as theroaster strived to portray itself as a socially committed company. Although Professor PerezAleman from McGill University argues that CI’s partnership was more beneficial to farmer’sliving conditions than that of TransFair’s, I will show below how both failed in empowering
farmers in Chiapas, Guatemala and Nicaragua. Instead, they are just mechanisms to establish
trust with the consumer, even if that trust is based on counterfeit concepts of sustainability.
Starbucks takes pride in supporting the Fair Trade movement and in selling Fair Tradecoffee both in-store and online. On the company’s website, the retailer shows its commitment tofair trade by claiming that it is one of the largest retailer buyers of Fair Trade coffee in theworld.12 However, the relationship between Fair Trade USA and Starbucks, and the outcome
emanating from it, undermines this claim as a strategy for Starbucks to hide behind Fair Trade’svalues and confuse its consumers. As Bitzer et al. argue, whereas for NGOs, partnerships present
an opportunity “to attain potential benefits for smallholder producers, private sector actors were
motivated by the opportunity to secure supply and to exploit the market opportunity for specialty
coffee while demonstrating ethical behavior.”13

10 Muradian, Roldan, and Pelupessy, Wim. "Governing The Coffee Chain: The Role Of Voluntary Regulatory

Systems." World Development: 2029-044, 2005.
11 Bitzer, Verena, Pieter Glasbergen, and Bas Arts. "Exploring the Potential of Intersectoral Partnerships to Improve
the Position of Farmers in Global Agrifood Chains: Findings from the Coffee Sector in Peru." Agric Hum Values
Agriculture and Human Values, 2012, 5-20.
12 Starbucks Company, 2015.
13 Bitzer, Verena et al. "Exploring the Potential of Intersectoral Partnerships to Improve the Position of Farmers in
Global Agrifood Chains: Findings from the Coffee Sector in Peru."Copyright 2015. No quotation or citation without attribution.
San Francisco non-profit organization, Global Exchange, was a leader, amongst other
Alternative Trade Organizations (ATO’s), in establishing the Fair Trade movement, which
emerged as an alternative approach to conventional coffee trade in order to better the livelihoods
and well-being of small producers by improving their market access, strengthening theirorganizations, paying them a fair price with a fixed minimum, and providing continuity in theirtrading relationships.14 Fair Trade works mainly with small cooperatives and offers them a pricepremium for their sustainably sourced coffee, which often goes to democratic cooperatives that
allocate the money to different community projects. According to Fair Trade USA, this is a“democratic movement in which each community decides how the funds are used.”15 Not only
the movement has improved the economic situation of Southern countries’ farmers but it has also
led to their empowerment and autonomy. The ultimate goal of Fair Trade, altogether, is tochange the new fashion in Northern societies, by which consumers are completely separated
from the production process of the commodities they buy on the daily basis. Not only the Fair
Trade movement started as a way to increase economic support for the struggles of small
producers in Southern countries, but it also emerged as a way of changing the thought behind the
production process and engraining labor conditions and injustices into the consumer
consciousness.
In order to gain more power in the movement, and to increase support, Fair Trade USA
partnered with many of the big agro-food retailers, such as McDonald’s, Nestlé, and, lastly,
Starbucks. This NGO-corporate relationship was created out of the antagonism between theorganization Equal Exchange and the coffee roaster. The campaign that Equal Exchange waived
against Starbucks represents one of the mechanisms by which corporations can be held
14 Daviron, Benoit and Ponte, Stefano.
15 Fair Trade USA (http://fairtradeusa.org/what-is-fair-trade/impact), accessed December 2015.

Copyright 2015. No quotation or citation without attribution.
accountable to their wrongful actions: “the NGO threat.”16 Pressure from Equal Exchange started
when members of the organization appeared at Starbucks’ annual shareholder meetings to
demand that Starbucks bought more Fair Trade certified coffee, at a time where the coffee crisisand the fall in prices led farmers to experience increased poverty and created environmental
problems in coffee producing regions. Particularly, the NGO reacted to a study published by San
Francisco ABC TV, exposing child labor and low wages in Guatemalan farms that sold coffee toStarbucks. The San-Francisco-based NGO demonstrated in front of Starbucks’ local stores, andwrote an open letter petitioning fair wages and fair trade coffee, signed by students and social
justice organizations.17
Starbucks was compelled by the campaign to ameliorate social and environmental
problems in high regions where it sources coffee but its response to Equal Exchange’s threatshows how its relationship with Fair Trade USA was—and is—a way for Starbucks to engage in“fair-washing” and a corporate social responsibility strategy to boost its brand image andcredibility in the face of consumers, who are misled by Starbucks’ claims of commitment to fairtrade. In fact, days after Equal Exchange protests in the year 2000, the roaster started selling Fair
Trade certified coffee from Guatemala and Nicaragua in whole-bean bags. However, only 1% ofStarbucks’ total coffee was Fair Trade. Today, the company still advertises its coffee as 100%
ethically sourced and sells Fair Trade both online and in-store, but only 8% of its coffee is Fair
Trade certified.18 These low percentages show Starbucks’ minimum commitment to fairly traded16 Argenti Paul. "Collaborating with Activists: How Starbucks Works With NGOs." California Management

Review: 91-116, 2005.
17 Global Exchange, “Starbucks Campaign,” (http://www.globalexchange.org/fairtrade/coffee/starbucks), accessed
December 2015.
18 Timmerman Kelsey, “Follow your labels: Starbucks Coffee farmers who never heard of Starbucks”, The
Christian Science Monitor, July 2013.

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coffee and announce its cooptation of the fair trade label as a way of “reaping substantial image
benefits.”19
In fact, consumers’ reaction to Starbucks’ small commitment to Fair Trade seems to be
more positive than negative. According to Sophie, an ethical consumer, “Starbucks don’t get
everything fair trade, but my view is that as long as they are making a start…Obviously it would
be wonderful if they did get everything fair trade, but until they make the decision to switch
everything, I don’t have a problem with them having some of it and I know some people aresaying “well, they don’t’ have everything, but they are trying. I don’t know a massive amountabout the Starbucks’ brand, but I’m not […] adverse to them.”20 However, even though thecompany has succeeded in appearing as committed to ameliorate the supply chain in coffee
production, its relationship with Fair Trade USA remains controversial. Firms like Starbucks
make a large contribution to Fair trade USA through licensing fees. In 2008, Transfair USA’slicensing fees accounted for 67% of its total revenues, with Starbucks accounting for a “17% of
the certifier’s operating budget.”21 There is no data on the current contribution that Starbucks
makes to Fair Trade USA but the organization’s annual report indicates that in 2013, its service
fees account for 83% of its total net assets22—to which Starbucks is certainly contributing. This
complicates the partnership between Fair Trade and Starbucks and weakens Starbucks’
dedication to social responsibility. As Daniel Jaffee argues, this partnership “blurs the lines

19 Jaffee, Daniel. "Fair Trade Standards, Corporate Participation, and Social Movement Responses in the UnitedStates." Journal of Business Ethics: 267-85, 2010.
20 Lekakis, Eleftheria J. "Coffee Activism and the Politics of Fair Trade and Ethical Consumption in the Global
North." 2013.
21 Jaffee, Daniel. "Fair Trade Standards, Corporate Participation, and Social Movement Responses in the UnitedStates."22 Fair Trade USA, Consolidated Financial Statements

Copyright 2015. No quotation or citation without attribution.
between regulator and regulated even further, and raises questions about the certifier’s ability toremain independent and rigorous.”23
Accordingly, Starbucks’ effort to escape monitoring is revealed by its other, more
consolidated, partnership with the environmental organization Conservation International (CI).
Rather than emerging from an antagonist pressure—like that of Equal Exchange—thispartnership was created out of collaboration between the two actors. Established in 1987 CI’s
mission is to protect biodiversity and preserve the Earth’s natural resources. Due to conventionalmodes of production in the late nineties, the non-profit established the Coffee Initiative Project inthe “Triunfo Biosphere Reserve,” Chiapas, Mexico, where it started to promote shade-growncoffee.24 This program was meant to provide technical assistance to improve the growing ofcoffee crops as well as the cooperatives’ marketing in order to increase their presence in thecoffee network. In an attempt to promote better coffee sourcing practices in the North, CI
reached out to specialty coffee roaster, Starbucks, to open a market for sustainable coffee in the
United States.
Out of this collaboration, which was consolidated by the year 2000, Starbucks issued its
Coffee and Farmer Equity Practices (C.A.F.E.) in 2004 with CI’s support. The C.A.F.E.
Practices were an effort to create voluntary private standards to include small producers in thecoffee supply chain, assure fair wages, and develop a sustainable coffee production chain. Bothactors developed a series of guidelines by which small producers in Chiapas needed to abide inorder to become C.A.F.E. certified. Under the program, one hundred points can be awarded toeach producer in order to become a preferred supplier for Starbucks. The company allocates fifty

23 Jaffee, Daniel, 2010.
24 Shade-grown coffee is a mode of coffee production by which the beans are grown under the shade of canopy

trees. This method is believed to be more environmentally friendly.

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points for environmental impact, thirty points for social requirements, and ten points for
economic transparency. For every ten points accumulated, producers can gain a $0.01 pricepremium per pound, above Starbucks’ regular price, which was $1.72 per pound in 2014—
compared to Fair Trade’s US$1.40 per pound and to the regular price of coffee in the market of
US$1.15.25 Starbucks bought more than 400 million pounds of C.A.F.E certified coffee aroundthe world in 2014 and prides of selling ten million cups of shade-grown coffee from Chiapas in
Mexico, every year. But, however much the company is proud of its program in Chiapas
Starbucks’ C.A.F.E. practices are far from being as beneficial as they claim them to be.
First, although studies show that producers engaging in the Starbucks-CI program earned
20 per cent more per hectare,26 C.A.F.E. practices are not an effective way of empowering smallscale producers and do not live up to consumers’ expectations who think that they are helping
farmers thrive in Chiapas when they buy a Grande Café Latte at US$3.65. Contrary to what
Perez-Aleman thinks, Starbucks and Conservation International’s development of C.A.F.E
practices, provides a pathway for the company to have powerful control over its entire coffee
supply chain. In Chiapas, Starbucks started working with the cooperative Campesinos
Ecológicos de la Sierra Madre de Chiapas (CESMACH), which sprang up in the middle of the
1990s as a way of protesting against major Mexican traders and ‘coyotes’27 such as AMSA.
Producers of El Triunfo had previously organized in order to avoid selling their coffee beans tothese “coyotes” and avoid low prices. However, when Starbucks and CI became prominent in theregion, the roaster indicated that CESMACH had to sell its coffee through AMSA in order to bea part of Starbucks’ C.A.F.E. program. Starbucks designated AMSA as its preferred supplier of
25 International Coffee Organization, Daily Coffee Prices, November 2015
26 Perez-Aleman, Paola and Sandilands, Marion. "Building Value at the Top and the Bottom of the Global Supply

Chain: MNC-NGO Partnerships." California Management Review: 24-49, 2008.
27 In English, ‘coyotes’ means intermediaries of the supply chain.

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Shade Grown Coffee in Mexico.28 Producers in the Chiapas region vehemently contested thisdecision, as they saw themselves truncated from the production process. To the producers, theStarbucks-CI partnership represents a type of “trade imperialism” or “yankee coyotism”29 as
Sixto Cruz from Triunfo Verde, another Chiapas cooperative, suggested.
In order to control the quality of its beans and assure the monitoring of cooperatives
against C.A.F.E. requirements, Starbucks added a third-party verifier, the Scientific Certification
System (SCS). The auditing system, however, also represents a burden for producers. The
company charges Chiapas farmers for its quality monitoring and verification of their green crops.
To CESMACH and Triunfo Verde, multinational corporations like Starbucks just represent an
imposition of demands in order to take ownership of their coffee without even mentioning theirname on the package. Starbucks sells whole been shade-grown coffee in its store (contained in agreen package, hinting to its green coffee sourcing practices), with Conservational
International’s name on it and Starbucks’ logo, which representing the C.A.F.E label. Althoughon its website the company indicates the origin of the coffee, it never mentions from which
cooperatives the coffee comes from. The consumer is not only manipulated into thinking that thecoffee comes out of a successful and ethical partnership between CI and Starbucks, but he is also
unaware of the structural injustices that govern the roaster’s supply chain. As Sociology
Professor Marie-Christine Renard argues, although C.A.F.E practices offered Chiapas’ producers
a secure market, the “conditions [and requirements of the program] led to their total dependency
and undermining of their own organizations.”30
28 Renard, Marie-Christine. "In the Name of Conservation: CAFE Practices and Fair Trade in Mexico." Journal ofBusiness Ethics: 287-99, 2010.
29 Castillo, Rosalva, Aida Hernandez, and Nigh, Ronald. "Global Processes and Local Identity among Mayan
Coffee Growers in Chiapas, Mexico." American Anthropologist: 136-47.
30 Renard, Marie-Christine. "In the Name of Conservation: CAFE Practices and Fair Trade in Mexico."Copyright 2015. No quotation or citation without attribution.
In Guatemala, Starbucks’ program is met with equal discontent. The company buys
coffee from CAFCOM, one of the country’s biggest exporters, to which the roaster maintains
very close ties. In fact, Starbucks’ supply chain in Guatemala is still full of ‘coyotes’, just like in
Chiapas, who buy and sell coffee to Starbucks. Ueli, president of Fedecocagua cooperative, saysthat the production process is governed by a “little circle [in which] the company sets the quotas
and the rules.”31 While the company maintains tight knits with the exporters, which compromises
the transparency in the supply chain, its relationship with producers is weak. With nogovernment oversight, Starbucks has become the symbol of “economic dominance of the global
north […] by which wealthy blancos make the rules that the native population must follow.”32 In
fact, the lack of strong governmental institutions in Latin America is what enables Starbucks tohave such a powerful control over the supply chain in Guatemala.
This model is replicated in Nicaragua, where there are no strong governmental
institutions to provide the famers’ with social and economic services, and to demand that
Starbucks follows local regulations and labor rights. Fair Trade USA in Nicaragua has strived tofill this gap between the State and producers, in which coffee farmers are exposed to theinjustices of the market, often with very bad infrastructures and poor access to health oreducation. In absence of a government that could protect the wellbeing of marginalized
producers and control labor regulation, Fair Trade USA has enabled the provision of financial
support and administrative assistance for capacity building in producer cooperatives.33 Throughsupporting Nicaragua coffee cooperatives such as Cafenica or Soppexca, Fair Trade USA has
enabled small producers to perform collective governance functions that the State fails to
31 Fellner, Kim. Wrestling with Starbucks Conscience, Capital, Cappuccino. New Brunswick, NJ: Rutgers

University Press, 2008.
32 Ibid.
33 Macdonald, Kate. "Globalising Justice Within Coffee Supply Chains? Fair Trade, Starbucks And The
Transformation Of Supply Chain Governance." Third World Quarterly: 793-812, 2007.

Copyright 2015. No quotation or citation without attribution.
perform. Through Fair Trade assistance, Soppexca was able to build health and education
facilities in its community. As opposed to this model, Starbucks doesn’t provide assistance to thecooperatives it works with, and engenders a model of dependence, in which producers cannot
work autonomously and have no freedom of association. Starbucks provides very little support,
and when social infrastructures are absent in one community, producers will lose points towards
their C.A.F.E. certification. Rather than providing assistance to reconstruct farming
communities, Starbucks puts the burden of responsibility on the producers themselves, leading totheir “structural disempowerment.”34 In fact, Starbucks and CI’s initiative is corporate-driven andadvances business interests. As one SCS verifier in Nicaragua declared: “It is a corporate
sourcing program for a corporation to reflect Starbuck’s values […] They are not publicstandard, but rather are buying requirements for a corporate client, and they reflect theirvalues.”35
This can also be shown by the way in which SCS and Starbucks created a verification
system based on social, economic and environmental indicators.

Realizing that coffee

production is heterogeneous and depends on the size of cooperatives and farms, they havecreated two different cards, The Generic Scorecard, and the Smallholder scorecard. While thissays something in favor of Starbucks, as they realize that smallholders may have difficulties infulfill the program’s requirements, it can also raise some controversy. For social andenvironmental standards, Starbucks specifies that, “if a farm does not provide worker housing, orif the farm does not contain water bodies, the corresponding indicators regarding access tohabitable housing (SR-WC1.1 and CG-WR1.9-11 respectively) would be evaluated as Not

34 Ibid.
35 Ibid.

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Applicable (CAFÉ Practices, Verifier and Inspector Operations Manual).36 Starbucks should take
into consideration this and improve those conditions in the farms it works with in order to makeits claims on sustainability more credible. Additionally, the “Freedom of Association orCollective Bargaining” checkbox is not included in the Smallholder Scorecard, while it is present
in the Generic Scorecard. This system of auditing and verification emphasizes the imbalances
explained above in the Nicaragua case and reiterates that Starbucks doesn’t promote democratic
structures in farming cooperatives. Another characteristic of the SCS verification system is theway in which Starbucks oversees whether the money goes to the farmers or not. In order toverify economic transparency, Starbucks asks the suppliers to present invoices related to the
trading of coffee, both up and down the supply chain.37 However, the level of transparency
depends on the supply chain, so all trade related documents may not be available at all times,
which often prevents Starbucks from tracing the price premium all the way to the coffee farmer.
In the supply chain models presented above, in Chiapas, Guatemala, and Nicaragua, middlemen
are always part of the picture, which increases the possibility of trickling the price all the way tothe producer.
As seen by the examples above, rather than strengthening the coffee supply chain
Starbucks “washes the market in claims of […] ethical sourcing and labor codes.”38 This is also
justified by criticism of Conversation International, which has undermined its mission ofprotecting the environment through unethical behavior and a controversial administrative
structure— it is sponsored by the most environmentally destructive companies, such as

36 Starbucks Coffee Company, C.A.F.E. Generic Score Card, V3.4, November 201537 SCS Global Services, Starbucks Coffee Company, C.A.F.E. Practices Verifier and Inspector Operations Manual,

V5.2, January 201438 Fridell, M., Hudson Ian, and Hudson, Mark. "With Friends Like These: The Corporate Response To Fair Trade
Coffee." Review of Radical Political Economics: 8-34, 2005.

Copyright 2015. No quotation or citation without attribution.
McDonald’s or Chiquita 39 , which questions its credibility as a promoter of sustainability.
Conservation International is primarily focused on ensuring a “healthy, productive planet foreveryone. Because people need nature to thrive.” 40 Hence, C.A.F.E. guidelines are
disproportionately focused on environmental principles and do not highlight enough theimportance of social standards. In fact, in analyzing the Generic Score Card, only one criteria
needs to be met to prove economic accountability, eight indicators have to be marked in order toprove social responsibility, and twenty-one to show environmental leadership. In addition,
Conservation International has also been criticized for its ties to both the Mexican and American
government. When the NGO started its Coffee Conservation Program at the end of the 1990s, it
was condemned for “forging links with Grupo Pulsar, a Mexican agribusiness corporation that
promotes destructive monoculture in Chiapas”41 and for claiming that indigenous communities
threatened the environment. Those claims were used by the Mexican Government in order toappease Zapatista protests and evict their supporters from the rain forests. In fact, CI’s andStarbucks’ project in Chiapas was also funded by United States Agency for International
Development (USAID). This raises dubious claims about the American government’s role incontaining Zapatistas’ uprisings and imposing structural adjustment in Mexico.
Thus, the development of Starbucks’ C.A.F.E. practices, in collaboration with
Conservation International, was an effort to strengthen the company’s corporate social
responsibility (CSR) rather than an influential symbol of the company’s commitment toenvironmental and social issues. Even more so, C.A.F.E. standards represent a way of

39 Renard, Marie-Christine. "In the Name of Conservation: CAFE Practices and Fair Trade in Mexico," 2010.
40 Conservation International website, accessed December 2015.
41 Industrial Worker, “Stripping the mask off Starbucks; Britain: IWW and Zapatistas support Chiapas farmers andManhattan baristas,” 2005.

Copyright 2015. No quotation or citation without attribution.
preempting Fair Trade’s power,42 differentiate the Starbucks brand and avoid competition. Why
didn’t Starbucks simply buy Fair Trade coffee if it wanted to establish itself as responsible
roaster? In fact, C.A.F.E. practices guidelines are similar to those of Fair Trade, which points outthat Starbucks had intrinsic mysterious reasons to develop its own codes of conduct. Fair Tradeprinciples include “economic development,” “social responsibility,” and “environmental
stewardship,” which echo the Score Card’s requirements presented above. The one difference isthat instead of adopting Fair Trade’s “Empowerment principle,” Starbucks included a “Productquality” requirement, which states that all coffee should meet the company’s standards for
quality. This emphasizes the main difference between C.A.F.E. and Fair Trade, and provides an
explanation for Starbucks’ deviation from the Fair Trade movement.
Although Starbucks has argued that it didn’t want to buy a larger amount of Fair Tradecoffee because it wasn’t as good quality, this statement is only a mask to hide the company’s
devious intentions to destroy the Fair Trade model. As Fridell et al. argue, “fair tradedifferentiates its coffee on the basis of production process […] while Starbucks is interested indifferentiating on the basis of quality or consumer lifestyle […] arguing that the price premiumof high quality coffee will trickle down to producers.”43 Indeed, as I have previously shown, in
the Fair Trade model cooperatives control the production process, whereas Starbucks relies on acapitalist system of control, through a vertically integrated chain in which producers have noinfluence on the decision-making. In an attempt to increase the movement’s power, Fair Trade
advocates turned to corporations like Starbucks to insert more Fair trade products in themainstream northern market. Starbucks’ response—through buying only a minimum share of fairtrade coffee—underlines how the Fair Trade movement has opened itself to a “public relations
42 Fridell et al., "With Friends Like These: The Corporate Response To Fair Trade Coffee," 2005.
43 Ibid.

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coup by corporate free riders” that have used the label only as a CSR, money-driven tactic.44
Indeed, in its advertising boards, Starbucks still advocates that, “We’ve been crazy about coffee.
Now we’re certified”, and includes the Fair Trade logo underneath the statement. Thisappropriation of Fair Trade practices ‘dilutes’ the mission-driven label in the name of capitalism
and represents Starbuck’s “corporate countermovement,”45 followed by the development of its
own voluntary codes.
This dilemma is analyzed in Akerlof’s theory of the ‘market for lemons’, in which heformulates the relationship between product quality and consumer uncertainty. Using theautomobile market, he explains that there is an asymmetry of information between the seller andthe consumer. He concludes that the presence of inferior goods will outnumber better quality
goods in the absence of a “bond” that establishes credibility.46 In the coffee industry, those bonds
are the Fair Trade and Starbucks’ respective labels which are supposed to break with theasymmetry of information and tell the consumer under what conditions the coffee has beensourced. The problem is, however, that it is always difficult to know the quality of ‘credence’goods47 like coffee because consumers cannot always know the truth behind the label. Starbucks’
logo (representing it’s C.A.F.E. Practices label), strives to be a bond that establishes credibility
between the brand and the consumer, but doesn’t solve the asymmetry problem. Rather, it only
competes with the Fair Trade label in order to secure a larger share of the market, and creates
confusion amongst consumers who are constantly blinded by the amount of labels in the coffeeindustry. The lack of information behind the label prevents consumers from distinguishing the

44 Jaffe, Daniel 2010.
45 Fridell et al., "With Friends Like These: The Corporate Response To Fair Trade Coffee," 2005.
46 Akerlof, G. "The Market for “Lemons”: Quality Uncertainty and the Market Mechanism." Essential Readings in

Economics: 175-88. 1970.
47 Credence goods are those whose qualities and values cannot be observed by the consumer at the time of purchase.

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trustworthy label from the bad label, and thus triggers a turn to Starbucks, which has better
marketing and branding techniques based on lifestyle associations48 with advertisement headlines
like “here’s to the best part of your day” that appeal to consumers. According to this, Starbucks,
distinguishes itself from the Fair Trade label for purely economic reasons, which highlights its
capitalist supply chain model, in which “production is none of the working public’s business but
is instead the sole purview of owners; [in which] the site of production is an inner sanctum of
utopian meritocracy that must be safeguarded from the pollution of collective action; and [inwhich] the economy is driven by great business leaders”49 such as Howard Schultz.
To continue, Starbucks branding and ethical claims reveal its marketing practices as aguarantee of quality, rather than a reassurance of farmers’ wellbeing. In an effort to gain
credibility and prominence in the specialty coffee market, Starbucks has redefined quality not
only as “intrinsic food characteristics […] and taste, but also to cultural and ethical qualities”50
although it doesn’t live up to the latter. When the consumer enters his local Starbucks store, hecan sip on a good tasting cup of coffee and associates its excellent taste and aroma to the
production process. In fact, the consumer only considers production differences from a narrow
point of view and believes that the coffee process contributes to the product quality.51 The
company makes print advertisements such as “only one of these coffees is handcrafted all theway from the farm to you” and the consumer associates “hand-crafted” with the quality of the
product. Other claims such as “the best coffee, for the best you” induce the consumer to thinkthat he/her is making a change in the way coffee is sourced, but there is really no evidence
behind those assumptions. This shows how Starbucks is interested, first and foremost, in
48 Fridell et al., 2010.
49 Ibid.
50 Renard, Marie-Christine. "In the Name of Conservation: CAFE Practices and Fair Trade in Mexico," 2010.
51 Fridell et al, 2010.

Copyright 2015. No quotation or citation without attribution.
maintaining brand recognition. As seen by the examples of Equal Exchange and NGO, consumer
boycotts and NGOs’ pressure can push a corporation to back up from its wrongdoings, but the
restructuring and transparency of the supply chain lie in the hands of consumers. In order to stopthe ‘race to the bottom’ and prevent corporations from controlling the production process, there
needs to be a change in consumers’ mind to demand quality in terms of sustainable production
conditions rather than in terms of fashionable coffee.
The problem of supply chains, ultimately, can be regulated by the State. In the post ICA
regime, where no government regulation is necessary to the functioning of value chains,
corporations like Starbucks have extensive leeway to control the sourcing and production ofcoffee at its own expense. However, Starbucks’ presence in Costa Rica, a country with strong
institutions that regulate the agro-food business, displays how government pressure andregulation can solve the problem of corrupted value chains. In Costa Rica, “all mills areregistered, and safeguards prevent certain egregious forms of price gouging, making it easier totrace coffee from point of origin to export.”52 In this context, the Starbucks’-CI partnership has“added the benefit of a personal story line that can be sold to the consumer along with thebeans”53 but it hasn’t replaced political empowerment. If the Nicaraguan government had thepower to protect labor regulation and provide social services as well as promote wider economic
policies, Starbucks would not be able to operate freely without being held accountable. To thecontrary, in Nicaragua, regional offices have very little resources, which explains the country’s
dependence from corporations and vulnerability towards liberalization policies. State-capacity
needs to be strengthened in order to solve these problems. If obstacles of ineffective institutions

52 Fellner, Kim. Wrestling with Starbucks Conscience, Capital, Cappuccino, 2008.
53 Bitzer et al, 2012.

Copyright 2015. No quotation or citation without attribution.
and incompetent or authoritative political systems are not overcome, farmers will never be
empowered or enabled to rise from the confinement of social injustices. For this, strengthened
state capacity to enforce labor standards and laws is crucial to achieve change in the global
coffee supply chain, controlled by specialty coffee roasters.
This paper has shown how the relationships that Starbucks has built throughout the years,
through partnerships with NGOs Fair Trade USA and Conservation International are part of thecompany’s corporate social responsibility tactic, in order to engage consumers, maintain its
credibility and increase its market share. Although scholars argue that the success of the
Starbucks-CI partnership lies in that both actors started a collaborative process rather than an
antagonistic relationship like the one with Equal Exchange, I showed how neither of thosepartnerships justified the high prices imposed on consumers. Although Starbucks contends that it
spends more money on training than on marketing practices, consumers are paying for thecompany’s CSR mechanism because the company doesn’t live up to its social responsibility
claims. NGO pressure on corporations, with naming and shaming techniques, like the one Equal
Exchange exerted on Starbucks, is a widely used strategy to push back on corporations’mistakes. Confrontational campaigns rely on the public scandalizing of brands’ negative
conducts, and boycotts are a way by which consumers can pressure brands as they refrain to buy
the products of firms that do not meet social, labor or environmental regulations. However, as
explained by the Starbucks’ example, such campaigns can lead corporations to develop voluntary
codes of conduct that reflect its weak responsibility to social issues but do note always achieve tosolve structural injustices in farming communities. Although Starbucks hides behind its CSR
model, the company keeps generating imbalances throughout the supply chain that aren’t widely
known by consumers, given the CSR façade. For this, government regulation needs to step in andCopyright 2015. No quotation or citation without attribution.
put end to our new system of world governance in which private corporations have replaced
State power. In Starbucks’ business model, “building political power is not part of the picture[nor the brand].”54 This is why, as consumers, we don’t only need to publicize corporations’scandals, but also push for stronger democratic institutions and unions that will keep
corporations from operating freely at citizens’ expense.

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