Sustainability Practices- Walmart vs. Starbucks

The purpose of this work is to analyze the mission, values, and core competencies relating to sustainability and the Triple Bottom Line of the corporations Wal-Mart and Starbucks. By analyzing the key differences not only in their values, but the application of their stated values, they can then be judged as to the superiority of their systemic approaches to sustainability. In the case of these two companies, ethics are the most notable difference, which causes Wal-Mart to experience a myriad of dilemmas that Starbucks doesn’t. This key difference is important because “nearly any dilemma an organization faces can be distilled down to simple ethical questions” (Eckmann and Frauenzimmer).

Analysis

After analyzing both Starbucks’ and Wal-Mart’s mission, values, and core competencies relating to sustainability and the Triple Bottom Line, key differences are noted, not just in their stated values, but with their real-world adherence to their values. Wal-Mart for example repeatedly mentions the cost of their products in their mission statement and values, whereas Starbucks’ primary goals are a positive experience for their customers. There is also a large degree of dissonance between what Wal-Mart claims is important to them, versus what they do. Starbucks however adheres to their stated values. These differences warrant a closer look.

First and foremost, Wal-Mart and Starbucks’ mission statements are entirely at odds. Wal-Mart champions “We save people money so they can live better” (WalMart.com), while Starbucks believes their ultimate mission is “to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time” (Starbucks.com). It is clear that Wal-Mart’s main concern is on the low price of their products, whereas Starbucks’ primary goal is to provide a positive experience, not just for their customers, but for their employees and community as well. This key difference can be seen when their core competencies are examined. Wal-Mart’s core competency is getting products onto store shelves as cheaply as possible and passing those savings onto their customers. Starbucks’ core competencies are nearly a polar opposite as Wal-Mart’s, as they focus on providing a consistently high-quality product in an atmosphere that is friendly and inviting. It’s interesting to note however that despite operating in vastly different markets, and with vastly different business practices; both companies have similar stated values when it comes to the ethical treatment of employees and sustainable environmental practices.

Despite having similar values related to green environmental policies and fair treatment of employees, there is a large gulf between what Wal-Mart claims is important to them, verses their actions. Wal-Mart for example claims to want to achieve 100% renewable energy use (WalMart.com). They haven’t however set so much as a timeline for how long this goal might take. In reality, they use less than 2% renewable energy, despite the fact that there are other industry leaders in the grocery market that have already achieved this goal, so it is entirely possible for Wal-Mart to have already done so as well (Mitchell 2011). Starbucks on the other hand sets concrete reduction targets and updates the public on their progress. They have even gone so far as to voluntarily conduct and then publicly release a report on the inventory of its greenhouse gas emissions (Timm 2005). They too seek to operate with 100% renewable energy, and currently over 50% of Starbucks’ energy consumption is derived from renewable energy sources (McDermott 2012). Primarily however, Wal-Mart is most noted for neglecting the “people” portion of the Triple Bottom Line concept, as they are notorious for maltreatment of workers. In opposition to these practices, Starbucks adheres to their values of respecting their employees, and is consistently voted by Fortune magazine as one of the top-100 best places to work for (Fortune Magazine 2012).

Perhaps the most telling of the core differences between Wal-Mart and Starbucks’ sustainability agendas relates to their motivation for sustainability measures to begin with. Wal-Mart seems to pursue sustainability measures for purely selfish reasons, utilizing sustainability measures more as a tool for their Public Relations department than out of any real attempt at social responsibility. Starbucks however shows by the company’s actions that they are in fact genuinely concerned with operating sustainably. Starbucks makes realistic sustainability goals, then actively strives to meet them, publicly reporting on their progress annually (Timm 2005).

After analyzing both Wal-Mart and Starbucks’ sustainability strategies, it’s clear that Starbucks’ business model is superior to Wal-Mart’s for several key reasons. First and foremost, because Starbucks adheres to their policies relating to sustainability, they are infused with Goodwill. Though an intangible asset, this Goodwill was estimated at valuing close to half a billion dollars in 2011 alone (YahooFinance 2012). This public perception is important. The Harris Interactive survey for example found that shoppers consider a company’s labor practices above all other social responsibility issues (Temple 2008). It should be no surprise then, given Wal-Mart’s spotty record relating to the treatment of their workforce, that the Reputation Institute ranked Wal-Mart as being one of the least trusted and esteemed companies in the U.S., ranking 136th out of 150 of the U.S.’s largest companies, being overshadowed primarily by oil companies and defense contractors (Temple 2008). According to the same article, “Wal-Mart’s reputation remains the biggest obstacle to the company’s long-term growth potential” (Temple 2008).

In addition to having a much higher overall perception, Starbucks’ sustainability, specifically to the “people” portion of the Triple Bottom Line equation, is greatly more effective than Wal-Mart’s. This can be seen in the low turnover rates Starbucks enjoys, verses the astronomically high turnover rates Wal-Mart is burdened with. Starbucks for example enjoys a turnover rate that is less than a fifth of those in similar industries (CNBCMagazine 2011). This not only results in a more satisfied workforce, it is sound fiscal policy as well; Starbucks estimates the cost of replacing and retraining a barista at $3,000 each (CNBCMagazine 2011). Because of their ethical treatment of employees, “Starbucks has far lower turnover than the industry average by offering good compensation packages, work environments, and career paths” (Rein 2012). Wal-Mart conversely has a turnover rate of approximately 70% which not only indicates the severity of worker dissatisfaction, but surely costs the company untold amounts of money, not simply with regards to the cost of hiring and training new employees, but also in lost income from negative perceptions result from such a high turnover rate (PBS.org).

One final, though less tangible, facet that indicates Starbucks’ sustainability business practices are superior to Wal-Mart’s are the immeasurable negative effects of operating a company in a socially unethical way. Though nearly impossible to quantify, there are surely any number of negative effects that permeate a company that encourages management to find reasons to terminate employees with longevity and replace them with younger, healthier workers willing to accept less pay (Albright 2005). Though cost saving measures such as this may work in the short term, Wal-Mart likely experiences a number of negative side-effects, from lower worker productivity, to significantly reduced appeal for managers and innovators who would not consider working for Wal-Mart as a result of their business practices.

Conclusion

Though the sustainability business models for Starbucks and Wal-Mart share many cosmetic similarities, the primary differences between the two are the level of effort they each put into converting their stated values into reality. Starbucks focuses on quality products, respecting their workforce and their customers, and operating as environmentally sustainable as practical. Wal-Mart however “operates their stores to get maximum work out of the minimum number of employees they can” (Robinson 2010) and seem to primarily promote sustainability to counter the negative perception they garner from their treatment of employees and disregard for their communities. Though these practices have served Wal-Mart well, in today’s changing world, sustainability is going to have an increasing importance on even the monetary bottom line. Because of this, Starbucks’ sustainability practices are superior to Wal-Mart’s, which experiences negative public perception, costly high turnover rates, and ill-will as a result of their frequent socially unethical practices.

References

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Eckmann, Helen and Sarah Frauenzimmer. The Development, Refinement, and Use of Universal Symbols in the Teaching and Application of Ethics and Leadership in the Global Marketplace. Retrieved on July 6th, 2012 from: https://brandman.blackboard.com/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2fwebapps%2fblackboard%2fexecute%2flauncher%3ftype%3dCourse%26id%3d_71749_1%26url%3d.

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