Culture wars at Starbucks: Racism — Out, Disposable cups — (still) In

Image credit: Simon Hayhurst

By Raz Godelnik

On May 29th Starbucks closed its stores in the U.S. to provide 175,000 employees with 4 hours of anti-bias training, “designed to make people more aware of unconscious discrimination.” This step according to the New York Times “is at the core of a well-choreographed effort by Starbucks to improve its corporate image after a backlash over the arrests of two African-American men in a Starbucks in Philadelphia last month.”

The 4-hour training received a lot of public and media attention, especially with regards to its effectiveness, its potential impact on the brand, how Wall-Street looks at it (“not big of a deal”), and what it means in the context of “the third-place notion Starbucks has long promoted in its stores.”

I want to bring up another question I find as important in this context: When will Starbucks start taking responsibility for the 6 billion disposable cups it uses annually similarly to the way it does on racism in its stores?

I’d like to raise this question in view of what happened only two months earlier. On March 20th Starbucks announced on a $10 million NextGen Cup Challenge initiative in partnership with Closed Loop Partners “to develop recyclable, compostable cup solution.” This announcement followed a campaign ‘Starbucks: ‘Break Free From Plastic’ that was launched by a number of environmental organizations “demanding that Starbucks take accountability for its contribution to the growing plastic pollution crisis.” The campaign was supporting another effort — a shareholder resolution by As You Sow asking Starbucks “to phase out use of plastic straws and develop aggressive plans to meet packaging reuse and recycling goals.”

While contrasting Starbucks’ response to these two issues may look like comparing apples to oranges, I think it may actually provide a useful insight about the company and perhaps even on a broader level.

The point I’d like to make is the following: In both cases it looks like Starbucks can do much more to effectively address the issue. However, when it comes to racism in its stores it does take far more responsibility on the issue than it does the case of the disposable cups it uses. So what’s going on here? I believe that the difference in the company’s approach to these issues stems from its leader’s (Howard Schultz) worldview, the environment in which the company operates and the organizational culture of Starbucks that is the result of the dynamics between these two elements.

Taking responsibility — racism in stores vs. disposable cups

First, I’d like to show the difference I see in how Starbucks takes responsibility on these two issues. Here’s what Starbucks CEO Kevin Johnson said following the incident in Philadelphia:

“I’ve spent the last few days in Philadelphia with my leadership team listening to the community, learning what we did wrong and the steps we need to take to fix it. While this is not limited to Starbucks, we’re committed to being a part of the solution. Closing our stores for racial bias training is just one step in a journey that requires dedication from every level of our company and partnerships in our local communities.”

Here’s another quote from Starbucks founder and Chairman, Howard Schultz, who joined Johnson and other senior Starbucks leaders in Philadelphia:

“The company’s founding values are based on humanity and inclusion. We will learn from our mistakes and reaffirm our commitment to creating a safe and welcoming environment for every customer.”

Let me be clear — I don’t think the 4-hour training on its own is sufficient to make a difference. As Alexandra Feldberg and Tami Kim point out: “if they truly want to transform the way they serve customers, companies need to make structural changes.” Nevertheless, it is clear to me from the company’s responses that it views racism in its stores as a real threat on Schultz’ vision of Starbucks stores as a third place that feels safe and welcome to everyone. To some extent Schultz may see it as a failure of the company and in any case he takes it very personally. Just watch the video he shared as part of the anti-bias training, where he says the following:

“..and the question was could we create our own third place around Starbucks coffee and the theatre and the romance, but do it our way first by building a company that would achieve the balance between profit and social impact. Now, let me be clear I never thought the third place was a physical environment, although it’s defined by the four walls of our store. This third place is a feeling, it’s an emotion, it’s an aspiration where people come together and are uplifted as a result of the sense of belonging.

Now we have to also face the fact that there are systemic social problems that we have to deal with, that we have to face. I think this is a moment in time, a critical moment, where we reaffirm our mission, our values, our guiding principles, and what we stand for. And what I know in my heart, which dates back not only to 1983, but my own life experience how personal this is for me and how personal it is for everyone who wears the green apron.”

Now, let’s take a look at some of the language Starbucks and its executives use around its $10 million challenge to “develop recyclable, compostable cup solution”:

“Our store partners proudly pour sustainably sourced coffee in our 28,000 locations around the world, but everyone wants to take our ability to serve it sustainably to the next level. No one is satisfied with the incremental industry progress made to date, it’s just not moving fast enough. So today, we are declaring a moon shot for sustainability to work together as an industry to bring a fully recyclable and compostable cup to the market, with a three-year ambition.” — Colleen Chapman, VP of global social impact overseeing sustainability.

“We want to make sure this technology is available to everyone because it’s the right thing to do. The idea of environmental sustainability in packaging is not just a Starbucks issue. It’s a global issue. Anything that gets us closer to that goal is not something we want to keep to ourselves.” — Andy Corlett, director of packaging R&D

Three thoughts come to mind as I read the press release these quotes are taken from:

(1) This is supposed to be an important milestone for Starbucks in its efforts to finally find how to make its cups significantly more sustainable and yet, neither Chairman Schultz nor CEO Johnson contribute any quote to the press release.

(2) It seems like Starbucks is not satisfied with the unsustainable status quo and is interested in finding better solutions, but I don’t get the sense that the company considers it to be a clear threat to its raison d’être and its future.

(3) Starbucks seems to try framing this issue as a group effort that the company is part of for better or worse (“No one is satisfied with the incremental industry progress made to date”, “The idea of environmental sustainability in packaging is not just a Starbucks issue. It’s a global issue”).

Solution is hard, BUT is dissolution really harder?

I want to try to connect the dots between these three points/thoughts, starting with the third point. In my point of view no one is responsible for the 6 billion cups used by Starbucks other than the company itself. If the company decides that tomorrow it won’t be selling coffee in disposable cups, then the problem is solved. Period. Not only that but I believe Starbucks has been playing a role in normalizing a disposable culture in America and therefore its responsibility probably goes far beyond the 6 billion single-use cups it sells.

The option for Starbucks to solve the 6-billion cup problem on its own is grounded in Russell Ackoff ‘s concept of ‘dissolution’ — “redesign the system or its environment in such a way that it eliminates the problem or the conditions that caused it.” However, dissolution is hard, requiring a redesign of Starbucks’ business model, which is perhaps why the company prefers to pursue a different path, one Ackoff describes as a ‘solution’: “discover or create behavior that yields the best, or approximately the best, possible outcome.”

The ‘solution’ pathway is not easy as well, which explains perhaps why Starbucks has failed in it so far. Just a reminder: In 2008 Starbucks pledged to make 100% of its cups reusable or recyclable by 2015 and serve 25% of beverages made in its stores in reusable cups, a goal that was later reduced to 5%. However, as Fast Company reported last March most of Starbucks’ paper cups still go to landfills, and “only 1.4% of drinks are served in reusable containers now.” Another pledge Starbucks made in 2008 was “that all owned North American stores would have cup recycling by 2015, but only 60% have some form of front of house recycling.” In addition, Starbucks, according to As You Sow uses “an estimated 2 billion non-recyclable green plastic straws” every year.

Starbucks’ cups currently contain 10% post-consumer fiber, which it introduced back in 2006. “The fact is that creating a plant-based cup that is both environmentally sustainable and commercially viable is no easy task, but we believe a solution is out there,” Hannah Changi, a Starbucks spokesperson explains.

Starbucks’ suggestion that “managing the environmental impacts of our business requires collaboration, innovation, and ongoing improvements” is not unreasonable. It reflects after all the fact that we are looking here at a systematic problem that requires collaboration across the value chain. As Starbucks VP of global social impact, Colleen Chapman told Fast Company:

“You could have an extremely environmentally friendly cup, but at the end of the day, if it’s not taken in by a recycling infrastructure or a composting infrastructure, you’re not doing your job.”

Image credit: Liana Jackson

So, does the fact that this is both an innovation challenge and a complex problem requiring collaboration of many different actors explain why Starbucks didn’t succeed so much in “reducing the waste associated with our business, increasing recycling and promoting reusable cups”? This is probably what Starbucks wants you to believe — dissolution is hard, but so is finding a solution to such a complex problem.

Organizations that are more critical of the company don’t buy into this narrative, suggesting that Starbucks just doesn’t do enough — in its latest shareholder resolution, As You Sow made the case that “to get back on track, the company should develop a more aggressive, targeted, and comprehensive plan to realize its original goals. Senior management should prioritize this effort and motivate associates to implement it.” Starbucks, by the way, opposed this resolution, which asked the company “to phase out use of plastic straws and develop aggressive plans to meet packaging reuse and recycling goals.” The resolution received eventually support of 29% of the shareholders.

I would suggest a third option, which connects with the first and second points I’ve shared earlier regarding the $10 million press release — the lack of leadership involvement and the sense that the disposable cup issue does not pose a threat on Starbucks’ future.

On leadership and organizational culture

Leaders shape their organization’s culture. In his seminal book ‘Organizational Culture and Leadership ’ Edgar Schein writes:

“..it can be argued that the only thing of real importance that leaders do is to create and manage culture; that the one unique talent of leaders is their ability to understand and work with culture; and that it is an ultimate act of leadership to destroy culture when it is viewed as dysfunctional” (p.11).

Schein offers a framework showing how the founder/leader of a company shapes its culture, which then shapes its business strategy:

I believe that the case of Starbucks is no different and its culture indeed was shaped by Howard Schultz’s worldview. The general process Schein describes in the following paragraph seems to be pretty much the story of Starbucks:

“The individual founder…will have certain personal visions, goals, beliefs, values and assumptions about how things should be. He or she will initially impose these on the group and/or select members on the basis of their similarity of thoughts and values…Only if the resulting behavior leads to “success” — in the sense that the group accomplishes its task and the members feel good about their relationships to each other — will the founder’s beliefs and values be confirmed and reinforced, and most important, come to be recognized as shared.

What was originally the founder’s individual view of the word leads to shared action, which if successful leads to a shared recognition that the founder “had it right.” The group will then act again on these beliefs and values and if continues to be successful will eventually conclude that it now has the “correct” way to think, feel and act…With continued reinforcement, the group will become less and less conscious of these beliefs and values, and it will begin to treat them more and more nonnegotiable assumptions.” (pp. 15–16).

Of all the points Schein is making, I find two very relevant to our topic — ‘success’ and ‘nonnegotiable assumptions.’ First, the success of Starbucks as a business had confirmed and reinforced Schultz’s values and beliefs, leading them to be shared by every employee in Starbucks. In Schultz’s and others’ mind his ideas about a third place that welcomes everyone have become nonnegotiable values, or assumptions that are taken for granted, and as importantly are an important part of the company’s secret sauce.

I suspect that the incident in Philadelphia made Schultz worried because a) he cares about the issue of race (remember the ‘Race Together’ campaign?), b) he sees racism in the stores as a threat on his vision of Starbucks as ‘a third place’ and a space that is “about human connection and a sense of community inside our stores”, and c) he is afraid that it can damage the brand’s image that he meticulously built, which is about creating a delicate balance between profit and social impact.

In other words, Schultz was worried that if his belief that there is no room for racism in Starbucks’ stores is not taken for granted by employees and thus stops being an assumption, it may jeopardize decades of work on reinforcing and codifying a certain set of beliefs and values as the company’s culture and can eventually pose a real risk to its future. This may explain not only the company’s immediate response, but also why it was very clear about taking responsibility on this issue — not doing so could have disastrous consquences for the company’s cultural DNA, as well as Schultz’s vision of Starbucks overall.

However, when it comes to single-use cups it is a very different story — I suspect that while Schultz probably cares about the environment, the question of what the cups are made of and what’s their environmental impact has not been an integral part of the ‘third place’ vision and thus had never been codified into the company’s culture. The result is that Starbucks’ underlying assumption is not ‘we cannot use disposable cups’, but more likely something like ‘disposable cups are a short-term necessary evil’. A clue for what is part of the company’s cultural DNA and what isn’t can be found in Starbucks’ values, which are strongly connected to social elements — for example: “Creating a culture of warmth and belonging, where everyone is welcome” or “We are performance driven, through the lens of humanity.” At the same time you won’t find in Starbucks’ list of values any direct or clear reference to the company’s responsibility to the environment.

But it’s not just about the leader. In my point of view there is another important component shaping the culture of company — its environment. Here’s how I see it:

The framework I present here suggests that it is not only the leader’s worldview shaping the company’s culture, but a shared mindset that is the result of the relationships between the leader and the environment. This approach takes into consideration not only the leader’s “personal visions, goals, beliefs, values and assumptions about how things should be,” but also the environment in which the company operates.

This environment includes key stakeholders such as investors, NGOs, regulators, communities, or social media that can have influential role in shaping the organizational culture. They may be supportive of the leader and the worldview they have, but they can also have a very different idea on how this culture should look like. The ongoing relationships between the leader and the key stakeholders create a shared mindset that shapes the organizational culture in a way similar to what Schein describes above. If you wonder who has more influence on the shared mindset — the leader or the environment — the answer is that it depends on the power of balance between these two forces. Sometimes the CEO may have the upper hand and sometimes it is the environment that will be more influential.

A useful framing that can help explain the role of the environment is ‘nested systems’, which integrates systems thinking into our understanding of the organizational culture. Martin Reeves, Simon Levin and Daichi Udea explain this concept in their HBR article ‘The Biology of Corporate Survival’:

“Complex adaptive systems are often nested in broader systems. A population is a CAS nested in a natural ecosystem, which itself is nested in the broader biological environment. A company is a CAS nested in a business ecosystem, which is nested in the broad societal environment… Complexity therefore exists at multiple levels, not just within organizational boundaries; and at each level there is tension between what is good for an individual agent and what is good for the larger system.

…Local interactions among agents in a complex adaptive system reshape the overall system in a process called emergence. Feedback and selection then affect the agents, resulting in further changes to the system. When systems are nested, these interactions cascade from one system to another. Thus business leaders must consider the complex interactions of systems at many levels beyond their own.”

What does it mean in the context of Starbucks? When it comes to racism in the stores, we can see how the incident in Philadelphia has shifted the power of balance, putting more pressure on Schultz and the company’s leadership to take an action and fix whatever is broken in the cultural DNA of the company. In other words, this is not only Schultz worried about the application of his third place vision, but also a strong public reaction that drives the company to take responsibility and look for the right course of action. Looking forward, if and when Starbucks will do more than just the 4-hour training, it will probably have to do more with pressure coming from key stakeholders (media, communities, regulators, employees) that will reshape the shared mindset determining the organizational culture of the company.

Again, the picture is quite different when it comes to using disposable cups. Here, not only that we don’t see much of the tension between key stakeholders and the company about it, but we also have pressure from the business ecosystem that Starbucks is nested within to consider mainly profit and growth and pay less attention (for now) to its environmental impact. The result is that Schultz’ approach has been for most part supported by the environment, confirming that it is OK to use single-use cups, given that it is an important building block of Starbucks’ business success. There are of course those stakeholders who oppose it and fight Starbucks over it, but for now their impact is relatively limited and they don’t have much influence on shaping Starbucks’ shared mindset.

So how will change happen at Starbucks?

Going back to my initial question — When will Starbucks start taking responsibility for the 6 billion disposable cups it uses annually similarly to the way it does on racism in its stores? — I see two plausible scenarios in which Starbucks will start doing so:

1) Change in the environment — change in the environment can take place in many forms –from an event, similar to the incident in Philadelphia that will trigger strong public reaction, to a movement working effectively to change social norms about the use of disposable cups, to regulation on global, national or local level aiming to tax or ban disposable cups. These changes may make it very difficult for Starbucks to ignore the need to act bolder and quicker about its single-use cups.

2) Change in leadership — Post-Schultz Starbucks can be a very different company. Schultz’s departure from his role as executive chairman by the end of the month is an opportunity for a new chapter in the company’s life, one that can possibly be shaped through the lens of someone else’s worldview. A new leader may feel differently about disposable cups, viewing it (as well as other wasteful practices like the use of plastic straws) as a clear and present danger on the company’s future, given indications that the current assumptions under which companies operate are about to change very soon.

A new leader may want to take a different course of action even without the type of environment change described in the first option, following Schein’s advice:

“But if the group’s survival is threatened because elements of its culture have become maladapted, it is ultimately the function of leadership at all levels of the organization to recognize and do something about this situation.” (p. 4)

Now, each one of the first two options may occur independently, but it’s more likely that they will impact one another, i.e. a change in the environment may lead to a change in leadership (consider for example Uber and the events that led to the departure of Travis Kalanick) and a change in leadership may change the environment in which the company operates (Unilever CEO Paul Polman is a good example). A time lag between the two will probably cause tensions, putting the company in a state of imbalance, until a new ‘shared mindset’ will be shaped, leading eventually to changes in the company’s culture.

If you’re wondering why I didn’t include Starbucks customers in any of these scenarios, the reason is very simple — I don’t believe they can trigger a real change in the company’s culture and practices, not because they don’t want to, but because changing habits is hard, especially when “we’re so used to this disposable culture,” as Conrad MacKerron of As You Sow suggests. A couple of years ago Mike Barry of Marks & Spencer pointed out that “consumers won’t lead us to the promised land.” Sadly I agree with him.

I don’t know about you, but I’m very curious and hopeful about the future of Starbucks, as it can provide us with important insights on the overall direction companies will be taking and the chances we have to design a more desirable life, one where coffee drinking and sustainability can go hand in hand.

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