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Starbucks approaches recycling goal with systems-based approach

Consumer misconceptions, misguided legislative policies, and overzealous marketers make Starbucks’ struggle to find a recycling solution for its cup a challenging process.

At the Sustainable Packaging Symposium 2011 held last March in Chicago, Jim Hanna, director of Environmental Impact for Starbucks Coffee Co., gave a presentation on some of the unintended consequences that are surfacing in the move toward more sustainable packaging. Hanna used Starbucks’ own experiences to illustrate some of the pitfalls. Following is a transcript of Hanna’s presentation, edited for clarity:

Jim_Hanna.jpgIf anyone is not familiar with Starbucks, about 60 million customers a week walk through our doors. I share that with you because for me that is of strategic importance to the company. I have 60 million opportunities to influence our customers around sustainability and around everything that is important to me, on a weekly basis. We have about an 8% return rate from our customers, which means that 8% of our customers are repeat customers on a daily basis. So we have a captive audience from that perspective.

We have about 16,000 retail stores around the country—I mention that here because not all Starbucks stores are actually free-standing company stores. We call our employees partners. We have about 155,000 partners around the world, and we operate in 54 countries, soon to be 55 when we start in India this fall.

I share a mission as a company not just for platitudes, and not just to create a touchy-feely environment, but for Starbucks, passion is what drives our company. Passion is what is so important to our brand. And we have very passionate customers.

Everyone has an opinion about Starbucks, one way or another and not all good, but generally, mostly good. But they are passionate about this brand. We need to nurture that passion; we need to inspire that passion to remain as a company on the leading edge, because frankly folks, we are just selling coffee. We need to move beyond selling coffee to selling an experience.

One of my jobs is to maintain the reputation of our brand. This is really key to us because the demographic of our customers demands that we operate in a responsible fashion. It demands that we operate as an ethical company.

For our company, sustainability is really all about climate mitigation because we are a company that relies specifically and exclusively on this fragile, agricultural product called the Arabica coffee bean. We are already seeing evidence that climate change is impacting the Arabica coffee bean harvest through increased pest infestation, increased erosion, changing weather events, changing temperatures, and changing rain patterns. Basically, the seasons are changing, and the coffee farmers are telling us that this is a problem. So as we project 10, 20, 30 years out into the future, for us climate change isn’t just about altruism and doing the right thing, it’s really about the survival of our company to be viable supplier for coffee into the future.

In one positive sense, this really gives me the podium within our company to talk about why we need to be tackling this issue head-on and why it’s not just about doing the right thing, but it’s really about doing everything we can to mitigate climate changes. It’s an exciting place to be, but it’s a dangerous place to be at the same time.

When it comes to our company’s carbon footprint, Scope 2 emissions represent 75% of our footprint and come from purchased energy for our stores (electricity and natural gas, where applicable). Scope 1 emissions represent 25% of our footprint and are a combination of our five roasting plants, refrigerants, company aircraft, and nitrous oxide. Do you know where the nitrous oxide comes from? Whipped cream! And because nitrous oxide is such a potent greenhouse gas—250 times more potent than CO2—it actually represents a larger contributor to Starbucks’ greenhouse gas footprint than all of our roasting plants combined.

The reason I share this with you is not to get you to change your drink recipe because I know you love it, but to point out how these hidden unintended consequences of not thoroughly doing your carbon footprint, not thoroughly measuring your emissions, have serious ramifications to a company’s total environmental footprint and to a company’s operations. Until two years ago, we had no focus on nitrous oxide, and now we are really focusing on changing the way we provide that great-tasting whipped cream in a way that doesn’t impact the climate.

A license to operate
My job is to also meet the internal business case for our company for corporate social responsibility. We all talk about reduced operating costs—it’s a no-brainer. We also talk about increased customer loyalty. Again, for us, the demographic customer demands this behavior from our company. We want these kids coming out of college to be Starbucks customers for life. The expectation of the generation below us is that they want to spend their dollar on a company that they feel good about. We need to take advantage of that by being an ethical company.

I want to focus a bit on this concept of having a license to operate. That is really the permission a community gives us to operate within the community as a partner, not as an adversary. For us, a license to operate is really about having good public perception as a responsible company. And even though packaging is a tiny, tiny percentage of our overall footprint, for our customers, the number-one environmental complaint about Starbucks is, “Why can’t I recycle this damn cup?” That’s it! What this really does is it creates a situation for us where cup recycling and us solving cup recycling is really a point of entry for us to talk about all the other great things we are doing as a company to differentiate ourselves.

About six months ago we announced that every store we build in the world is going to be LEED-certified. Each store will use 25% less energy, use 25% less water, and use low-resource salvaged materials. No one is hearing that. That’s a point of differentiation from our competitors that no one else can touch. No one can come even close to making that sort of statement. We also, I feel, have the most ethically sourced coffee in the world. We put in some very systematic ways to quantify the social impact of our coffee production and the environmental impact of our coffee production. Our customers aren’t hearing that message because they have these blinders on about our cups.

This point can be applied to a lot of different businesses. We’ve got that one pain point. If you’ve got that one Starbucks cup, you might call it, it really prevents you from communicating better about the amazing ways you are differentiating yourselves else wise. So you have to solve this one thing, even if the total impact on your environment is small. You’ve got to solve this first so you can have these other communications opportunities.

Consumer perceptions on recycling
We generate 4 billion cups per year as a company globally. It sounds like a big number but that’s really in a world of 500 billion single-serve cups produced every year globally. From a volume perspective, we are a relatively small player in the system. Looking at it from a brand perspective, we have taken on the opinion that if we don’t solve this [recycling issue], no one else is going to. So we are going to take the lead and try to see what we can do to create a recycling solution for our cups.

Our goal is that this [Hanna shows a picture of a garbage can overflowing with Starbucks cups] ends by 2015. This is a problem for the company. Because cups are so tangible, touchable, and really part of the ethos, our customers feel partially responsible for those cups when they choose to dispose of them. If this is their only option—an overflowing garbage can on the street—they are going to hold Starbucks partially responsible too. The consequence is that we’ve got to solve these issues to be able to address the other major wins that we have on our environmental and sustainability front.

One of the tactics that we are going to use to meet this goal: Increase personal mugs to 250 million transactions per year. So when you bring in your own mug, you get a 10-cent discount at Starbucks, and we have been doing that basically since the beginning of time. We want to increase the number of people who are actually bringing their own mugs into the stores. We are trying to find ways to actually motivate customers to do that because frankly a 10-cent discount is not a driver for behavior change. No one is actually bringing in their own mug to the store in order to get 10 cents off on their multi-dollar drinks. So we need to find a better way of doing that.

We are also engaging some marketers to default to ceramic cups in the stores. If you go to a Starbucks in the U.S., we have about 80% of people walking out the door with their beverage. In other countries, it’s the exact opposite, where only about 20% of our customers are actually leaving with a beverage. The other 80% are staying in the store and enjoying in their beverage in the store, using a ceramic mug. So this is a very U.S.-specific problem we have as a company.

Then the third goal, which has been taking up a lot of my time, is ensuring that our cups are really recyclable or compostable in form and in practice.

Let’s talk about media perceptions and public perceptions. We announced an initiative in 2009 that by 2015 all our cups are going to be recyclable. We publicly announced that we are going to take the world on this journey to try to see how we can accomplish this. Here is an initial reaction from the public: “Starbucks has promised to make cups recyclable by 2015. Why do they think it will take five years to do what any kindergartener around the world can already do every day?”

This is a problem of perception, in that people think that if they can already recycle something in their Blue Bin, why shouldn’t they be able to do it at Starbucks? Why can’t they do it in the public space? The perception is that recycling should be a very easy solve, and we just need to do it, just put the bins in front of our stores and solve this. Why is it going to take five years to solve this issue? That’s a perception we really had to deal with when we announced this long stretch going five, six years out. Most companies don’t even think in those terms.

People are holding this against us that we are not solving this initiative. An unintended consequence of the public perception is that we are put into a bind when we say this is a long-term goal that is going to take a long time to solve. When we talk about perception versus reality, we come down to the basic definition of what is recyclable, what is compostable, what is sustainable packaging—which I am not going to attempt to answer. But the Federal Trade Commission’s reality is that recyclability means a significant majority of people actually have access to recycling services, and this is a definition that we are going to use to eventually define our cups as recyclable. We are not going to take the easy way out, which unfortunately a lot of companies have done and basically say, “This is 100% recyclable or 100% compostable,” knowing full well that their customers actually have no access to those services in the places they dispose of their cups.

We will not call our cups recyclable until in our stores, in public spaces, and people’s homes and in their businesses, they actually have the opportunity to recycle cups. Again, that’s a tough distinction to make, to separate ourselves from our competitors out there who are saying they have already solved this issue.

Again this public perception of a simple answer—we all speak of this long journey of sustainability here at these conferences, and then our marketing teams go out and say, “Problem solved!” That’s a problem because it doesn’t allow us to take the time to understand the complexity of this issue, whether it be cup recycling or anything else around sustainability. These are not simple issues. These are issues that are very complex in nature. They require a lot of chemical engineering to solve, and frankly when we have companies going out and saying, “We solved this issue, don’t worry about it,” the public gets the wrong perception. It doesn’t give other companies permission to take a long-term tough approach to these challenges. So, another one of those unintended consequences is really bringing the public into the picture.

Some of the consequences of thinking in silos include misguided decisions in product development and in public policy, which we are all dealing with every day—purchasing decisions that are not necessarily driven by the right business metrics. Frankly, it’s poor investment: The recyclers often don’t know what direction to head when it comes to investing in technology to separate materials because of all these exotic materials coming through the pipeline. They just don’t know how to handle those. It really behooves us, as the buyers and manufacturers of those products to make it little bit easier for the recycling community to actually accept these products into their systems in a financially creative way. So when we do things like label our packaging 100% recyclable or 100% compostable, and make claims based on certification without regard to access to infrastructure, these notions of a silver bullet cause the confusion.

As brand owners that’s our fault for doing that and shame on us for doing that. We need to step away from these simple, quick, market hits and really take a deeper look at these initiatives. Frankly, in the end, we are all going to be better off for doing it. The hyper-transparent model of a company is the way to go, and we are seeing leadership companies out there really talking about transparency of the tough issues they face.

Local regulations stifle solutions
Local packaging bans: This is something a lot of us are dealing with on a day-to-day basis. The problem with local packaging bans is when they basically say, “This or that type of packaging is banned in my city. Come up with an alternative.” What we are really talking about is a loss of scale that impacts recycling markets. If City X and City Y are next door to each other and have completely different legislation on package recycling, that impacts the recycling system’s ability to move forward and invest in new infrastructure.

When we talk about stifling innovation, manufacturers don’t know what direction to go in when cities in California are passing one thing, provinces in Ontario are passing another thing, and they are completely different regulations. This lack of communication across value chains is stifling us. A lot of these policies are often executed without thinking about the life-cycle impacts, without thinking about the real impacts of these decisions.

We are a company that has not gotten into compostable packaging because frankly we don’t believe from a life-cycle perspective that composting rigid packaging is a smart environmental choice. We lost a lot of customers because of that because frankly they didn’t understand the full life-cycle impact of their packaging decisions, and we weren’t willing to say, “Alright, we will just do what you want us to (in order) to maintain this business.” So there is a lack of understanding of full life-cycle impacts, which we need to address.

And I’ll point a finger right at ourselves, at Starbucks too. When we first started this recyclable cup initiative we basically said, “Why can’t we go out and turn our cups into liner board?” You know, turn them into cardboard boxes. We ran a test with a mill, Pratt Industries in Manhattan, and it didn’t work. But the message that we were really pushing was we already have cardboard recycling in our stores, let’s just turn our cups into cardboard and let’s solve this, without really taking into account the impacts of that on the system and understanding that sometimes polycoated paper doesn’t necessarily fit into uncoated liner board systems. We actually stifled a bit of progress around our initiative by doing that because it really made it tough for us to penetrate and have those deeper conversations with the industry because we started off on the wrong foot.

A systems-based approach
We all talk about systems in solving any recycling solution. It really requires us to escape from our silos. What’s really important to Starbucks is how we engage our entire value system and how we pull those levers, because one of the things that we discovered along the way is that there are people at every one of those lever points, and they are not necessarily making decisions around the science-based facts, not necessarily using the right metrics, but they are still making decisions that impact that value chain up and down. So rather than us focusing on the technology, we have really been focusing on the levers within the materials flow of our cups to see where we can impact the people associated with that. So the Starbucks cup project is specifically focusing on the levers. We definitely didn’t come up with this ourselves; we had help from Peter Senge and we really had a big team from MIT. They really helped us think about this from a broader systems perspective.

What we are doing with our cup initiative is creating the market conditions so that paper mills will demand polycoated paper, polycoated cup stock, which is what our cups are made of. Starbucks_1.jpgTraditionally there have been a lot of perceived barriers to recycling that material, and frankly no one was accepting it into their systems because they didn’t think it was recyclable. They were worried about food contamination; they were worried about the coating not separating. They were worrying about all these different technical aspects that frankly turned out to be just perceptions because what we have been doing is bringing those stakeholders together at our Cup Summits, and everyone thinks big. Then we are also doing a number of tests around the country, both in stores and in paper mills, and just sending a whole lot of used cups to paper mills and saying, “Try this stuff out. Play with this, and see if it works.”

What we are discovering is that all those barriers were just perceived. There are definitely good end points for polycoated paper cups within the existing infrastructure. Our goal is not to reinvent the system, but to create market conditions so that paper mills will talk to recyclers and say, “Sure we will buy this stuff from you all day long, and we will pay you ‘x’ dollars per ton for it.” Hopefully that ‘x’ dollars per ton is more than the cost of mixed waste paper so the recyclers will actually have an incentive to put in the technology to separate it out and sell it to the paper mills.

We have done a really exciting test with Mississippi River Pulp, which actually is the only paper company in the country FDA-certified to make food-contact post-consumer fiber. They make all the recycled content for our cups. We ran a test at their mill a couple of months ago. We sent them about six tons of used cups, ran it through their system, and turned it right back into brand new Starbucks cups very successfully.

For the trial, we shipped those cups from Toronto down to Mississippi—so that’s not a sustainable operation for the long term. But what it did tell us was that functionally and technologically, we have the opportunity to turn our old cups right back into our new cups, which is a damn good story to tell your customers when they think about closing the loop on recycling.

We will be doing the same thing in Chicago in a couple of months. Right here in the city, all of our stores are going to begin collecting cups. We will send those up to a Georgia-Pacific mill in Green Bay [WI], which makes all our napkins in North America. We will turn our cups into napkins.

The day I can put right on my napkins, “Made from old Starbucks cups,” and put right on my cups, “Made from old Starbucks cups,” that’s when Starbucks_2.jpgwe will create that level of public engagement on this initiative. That’s when will become a lot more than just a cerebral act of communication for the public. We are really excited, but what we are discovering is that we have to solve this city-by-city and work directly with local city officials to solve this.

There really are no silver bullets here; this really is about rolling up our sleeves and getting to work. So keep your marketers in check, because we haven’t solved these issues yet. This is much bigger than Starbucks paper cups. You can use this analogy for many, many different things within your systems, within your companies, about the need to address systems thinking and the need to reach out to your competitors.

One of the exciting parts of our cup initiative is at these cup summits, Tim Hortons is there, Dunkin’ Donuts is there, Green Mountain is there, McDonald’s is there, and basically all of our competitors are in the room telling our suppliers, “You have to help us fix this problem.”

It is definitely a pre-competitive atmosphere, where we say that this is something that we ought to solve together and not attempt to differentiate ourselves based on these initiatives. Everyone needs to realize that you need to work with your competitors at certain times.

Consumer dollars will make the business case for sustainability
Again, I need to personally solve these company initiatives, so I can talk about green building, so that I can talk about the carbon benefits of ethically sourced coffee and all these big, heavy issues that are really important and that frankly have a much greater impact on the environment than whether we learn to recycle our cups.

What I want to see eventually and what we all want to see is that consumers will say, “I choose to spend this dollar at a company whose values I share. If I don’t see that company sharing my values, then I will go to another business.” That really is the key for us to solve for our customers because they are already making those demands. We need to have ways to start sending those market signals so that more and more consumers are driving their spend based on companies that they feel good about and companies they can relate to. Then we’ll start to see the market signals come into play, then we’ll start to see the opportunities for people to say, there is a business case for this besides just climate change.

Editor's Note: Starbucks, along with International Paper, Georgia-Pacific, and Mississippi River Pulp were awarded a Beyond the Package Award in the 2011 Greener Package Awards for their successful partnership in piloting cup-to-cup (and cup-to-napkin) recycling processes for single-serve, coated hot cups.

* indicates an article that was submitted directly to this Web site by the supplier, and was not handled by the Greener Package editorial staff.

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