Walmart and Starbucks Sustainability Essay

Sustainability

Literature Review

The Starbucks' Social Responsibility & Sustainability (2017) outlines the company's plan for each on several fronts. These are complex issues, and they receive some complexity in their treatment. Starbucks has four main areas of focus: community, ethical sourcing, environment, and diversity. Roughly, community and diversity would fall into the category of social responsibility, as these cover community service, youth action, the Starbucks Foundation, the Ethos Water Fund, and the company's diversity plan. On the sustainability front, there is the ethics of coffee, tea, cocoa and farmer support and this combines with water, energy, green building and climate change. The company's marketing of its approach contains a lot of high level discussion, but there are opportunities to take a deeper dive into specific initiatives and metrics. A lot of what Starbucks does with its approach focuses on things that matter most to the company (its supply chain, for example) and where it can reduce waste. The social side is somewhat thin, and focuses on things that Starbucks already does pretty well, such as diversity, but there is the community involvement element that distinguishes it from some other large companies.

The Wal-Mart approach to Global Responsibility (2017) focuses a lot on sustainability. For Wal-Mart, this dovetails a lot with their approach on waste. The company has long recognized the importance of waste reduction as a means of cutting costs – this is the basics of lean philosophy – and ties this to sustainability. Its approach is similar to that of Starbucks in that it plays to the company's strengths, and that it focuses on improving existing operations without ever really questioning the need for those operations (true sustainability means not encouraging people to consume things they don't need). The Wal-Mart website does not discuss any of this in particular detail, but there are company publication that outline specific metrics – the approach seems less high-minded and more metrics-driven than Starbucks, which is pretty much how Wal-Mart has always presented itself; efficiency equals sustainability in the Wal-Mart philosophy where Starbucks is more high-minded, good citizen, dreamer stuff that the company must then translate into action. In that sense, Wal-Mart's focus is pretty narrow, relative to that of

Starbucks.

Milton Friedman (1970) responded to the environmental movement of the 1960s and calls for greater levels of corporate social responsibility with the seminal counterpoint to the idea that corporations have particular responsibilities. While much has been written on the pro-responsibility side, there are few impassioned counterpoints, and this is one of them. Most of them touch on this article's concepts. The core concept is that within the framework of the law, corporations have a responsibility to their shareholders to make money. The logic is this. People invest in corporations to earn returns on their investment. Corporate managers serve the shareholders, and therefore they should orient their activities solely towards increasing profit. Friedman is clear that this is within the context of the law, but does not address things like lobbying to have laws changed, or whether the law has reasonable distributive justice in the first place. Thus, while this is a valuable and seminal piece of literature in the field, it is open to significant scrutiny and attack; its arguments are not fully-formed in the way that many pro-responsibility arguments have been vetted over the decades.

McWilliams and Siegel (2000) examine one of the core arguments in favor of CSR, and that is that it is profitable. This is important because both Starbucks and Walmart focus their sustainability efforts on the areas that most benefit them – Starbucks is worried about climate change because of impacts on its supply chain; Walmart focuses on the link between efficiency, profit and sustainability. McWilliams and Siegal find that after correcting for errors in earlier, conflicting studies, that there is neutral impact on profitability of being responsible. This finding is interesting, because it brings back the argument that CSR is more of a choice than an imperative; it counters Friedman's arguments against CSR but also counters the arguments in favor of CSR.

Lindgreen and Swaen (2009) note that there are many reasons why a company chooses to behave as it does. There is certainly a marketing interest in CSR, but if there is no financial interest, that raises interesting questions about agency theory. Differentiation from competitors, however, is a valuable marketing tool. This might inform the efforts of Starbucks, especially since when the company started there was little in the way ethical consideration from the major industrial coffee producers; this is one of many points of differentiation for the company. Even Walmart might be using its CSR report as a means of framing activities in a positive light that it would otherwise do, and might otherwise be accused of doing strictly for profit. So this meta-study contains valuable insight into why these two companies have chosen the approach that they have, by examining the marketing impacts of their respective approaches.

Menon and Menon (1997) look at the marketing strategy behind environmental activities of corporations. Their study looks at how corporate environmentalism has emerged as a business strategy. They find that there is a marketing element to this corporate strategic approach, where marketing and public perception start to inform how companies respond to environmental issues. They identify some of the different approach to marketing corporate environmentalism that were being used at the time, and they also look at a model that can help predict what approach a company might take and what the outcomes of that approach might be. This paper is valuable because it illustrates the why behind a lot of corporate environmental efforts. Since the paper is being written based largely on the publicly-available materials of these two large companies, it is important to have a framework for understanding how corporate environmentalism is used by major companies, and this article provides that.

Luo and Bhattacharya (2006) examine the marketing dimension further. They note that if markets are satisfied with a company's CSR efforts, then reasonably there should be a positive impact on the market value of the company, at least if those CSR efforts are superior to those of close substitutes. This study comes to an awfully strange conclusion – that in firms with low innovation capability, CSR reduces customer satisfaction and harms market value. First, they make the leap to market value without evidence. But the bigger issue is that the companies studied have low innovation levels; that alone will harm customer perception and market value. Given that CSR is difficult to quantify and looks different in different companies owing to their being no set definition, the structure of this study looks suspiciously like trolling for a specific finding. When you look at poorly run companies and your conclusions are about customer satisfaction and market value, you can't isolate one factor as being the reason; that's dishonest. Unfortunately, there is some of this literature out there and this is a cautionary tale to be careful of what the literature finds – the study might have been set up to find just that.

Matten and Moon (2008) provide another valuable conceptual piece to assist with our understanding of corporate social responsibility. They outline the difference between implicit and explicit CSR. They looked at how the concept of CSR is applied in different countries, especially between the United States and Europe. They identified a number of significant differences between the two. Both the companies being studied are American, but Starbucks is more international in nature, and has a lot of stores in different European countries. Ultimately, what CSR is and how it is implemented at the corporate level is defined by the differences in local cultural perceptions. This can actually be applied to both Starbucks and to Wal-Mart. While there is significant overlap between customer bases – no surprise for companies this large – there are unique areas that each has a focus in and the other is weak. Further, there is a pretty massive cultural difference between rural Arkansas and downtown Seattle culturally, and one has to suspect that the cultural gap between those areas will also characterize some of the cultural differences between these two large companies.

Campbell (2007) offers an institutional theory of corporate social responsibility to help explain why companies behave is responsible ways. Remembering the Friedman argument, and the reality…