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Starbucks says hold the milk to reduce carbon footprint

Eric Pfanner
Bloomberg

To cut your morning coffee’s carbon footprint, skip the Frappuccino and take a plain black espresso.

Adding whipped cream to millions of Starbucks Corp. drinks emits 50 times as much greenhouse gas as the company’s private jet. Overall, dairy products are the biggest source of carbon dioxide emissions across the coffee giant’s operations and supply chain.

Adding whipped cream to millions of Starbucks Corp. drinks emits 50 times as much greenhouse gas as the company’s private jet.

Those are just two findings from Starbucks’s most sweeping environmental assessment, unveiled Tuesday as the company announced ambitious goals for reducing its impact. By 2030, the cafe chain is targeting 50% reductions in carbon emissions, water withdrawal and waste sent to landfills.

The task is immense: Starbucks in 2018 was responsible for emitting 16 million metric tons of greenhouse gases, using 1 billion cubic meters of water and dumping 868 metric kilotons – more than twice the weight of the Empire State Building – of coffee cups and other waste. The audit was conducted with sustainability consultant Quantis and the World Wildlife Fund.

“We know this journey will be challenging, we know we can’t do this alone, and we know this will require others to join us,” Chief Executive Officer Kevin Johnson said in an interview.

Starbucks shares fell as much as 1.1% to $92.62 on Tuesday in New York trading. The stock has advanced about 6% so far in 2020, double the advance of the S&P 500 Index.

The company, which has more than 31,000 outlets in more than 80 markets, joins a parade of companies announcing green initiatives as the World Economic Forum in Davos gets underway with a redoubled focus on climate change. This year’s gathering in the Swiss ski resort features Swedish activist Greta Thunberg, while Chief Executive Officer Larry Fink of BlackRock Inc. set the tone by warning that the asset manager will address the issue in its investments.

The coffee chain’s moves follow investor pressure, with a resolution calling on the company to step up the use of sustainable packaging receiving support from almost half of shareholders at its annual general meeting last year.

“While Starbucks has a long road ahead to achieve these goals, we’re encouraged that its priorities are rooted in transparent data and will be supplemented by first-of-its-kind market research,” said Allan Pearce, shareholder advocate at Trillium Asset Management.

Under founder and former CEO Howard Schultz, Starbucks focused on sustainability by purchasing renewable energy, investing in climate-resistant coffee trees and giving discounts to customers who brought their own tumblers. Johnson, who took the helm in 2017, sold $1 billion of bonds to help fund the green and ethical sourcing initiatives. The company has named its first chief sustainability officer, Michael Kobori, who is joining from Levi Strauss & Co.

Resource Positive

At an unspecified point beyond 2030, Johnson said, the company aims to become “resource positive” by storing more carbon than it emits, eliminating waste and providing more fresh water than it uses.

The moves come as governments around the world step up action on the environment with measures such as a pending European Union ban on some single-use plastics.

Other chains are acting too. McDonald’s Corp. has said it aims to cut restaurant and office emissions by 36% from 2015 levels through 2030. KFC and Taco Bell owner Yum! Brands Inc. is seeking a 10% average reduction per store by the end of 2025.

The fast-food chains start from a higher base. Each outlet was responsible for more than four times the level of carbon dioxide emissions as Starbucks stores in 2017, according to Bloomberg Intelligence. Cooking and selling a broader range of menu items, including carbon-intensive meat, makes cutting emissions tougher.

Starbucks has switched to wind power in some of its cafes, but meeting its carbon-reduction goals will require bigger changes. Johnson said he’ll push consumers to choose milk made from almond, coconuts, soy or oats, whose production is environmentally friendlier than dairy. In North America, 15% to 20% of Starbucks customers already choose such options.

Alternative Milk

“Alternative milks will be a big part of the solution,” Johnson said. “The consumer-demand curve is already shifting.”

The Seattle-based company is testing new drinks made with plant-based ingredients and seeking ways to make whipped cream without emitting nitrous oxide, a greenhouse gas. Starbucks also aims to lower the cost of dairy alternatives by helping suppliers boost output, he said.

Tackling another form of pollution – the food and drink containers that litter city streets, clog landfills and often end up in the world’s oceans – has been equally challenging. Starbucks says it’s responsible for about 1% of the estimated 600 billion disposable cups used globally every year.Around March of this year, the company plans to begin testing a paper cup it’s been developing with partners seeking a more widely recyclable and compostable hot-drink container. Existing ones generally contain a plastic layer that makes them difficult to process. Costa Coffee, a U.K.-based chain owned by Coca-Cola Co., two years ago announced plans to pay waste collectors a supplement to handle them, boosting its recycling efforts.

Starbucks previously reined back a goal set in 2008, which was to serve 25% of coffee in personal travel mugs. Only about 5% of U.K. customers use reusable containers even though the company offers a 25-pence (33-cent) discount for them, while charging a 5-pence fee for paper cups.

Lost Sales

A smaller U.K. chain, Boston Tea Party Cafes, has eliminated single-use cups entirely, but that cost it 25% of takeaway coffee sales in the first year after the initiative went into effect.

Johnson said he’s counting on Generation Z to lead adoption of environmentally friendlier practices, saying this will make it financially rewarding for companies to respond. Starbucks will stick to its long-term target of double-digit growth in earnings per share despite the cost of its green goals, he said.

“It won’t be a linear journey,” Johnson said. “We’ll have positive steps and then we’ll try something else that works. There’s no silver bullet.”

– With assistance from Leslie Patton and Emily Chasan.