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Starbucks Makes a Deeper Commitment to Going Green

Daniel B. Kline, The Motley Fool

Going green takes some green. It's expensive to transition to sustainable systems and products that don't harm the Earth. Starbucks (NASDAQ: SBUX) has an aggressive plan to make sure it uses ethically sourced coffee and reduce its global environmental footprint.

It plans to fund those efforts with the proceeds of a $1 billion sustainability bond. That just-issued bond, the largest the company has ever offered, follows the successful issuance of two previous sustainability bonds in 2016 and 2017.

"We are very pleased to see that our new sustainability bond attracted significant investor interest and was oversubscribed," said Starbucks CFO Patrick Grismer in a press release. "The bond demonstrates Starbucks' commitment to meaningful, continual progress toward our aspiration of sustainable coffee, served sustainably. It also illustrates a trend toward heavier interest from investors in our socially and environmentally focused projects -- in this case supporting coffee farmers and leading in green retail."

A farmer works on planting a tree.

Starbucks is supporting sustainable farming. Image source: Starbucks.

What is Starbucks doing?

A sustainability bond is one in which the proceeds "will be exclusively applied to eligible environmental and/or social projects," according to a definition provided by the International Capital Market Association. Using them allows Starbucks to have investors participate in its sustainability efforts.

The coffee chain plans to use the proceeds of the bond to fund a number of programs. Some of these efforts are continuations of earlier programs, while others are new:

  • Ethically sourced coffee: Starbucks' efforts include making sure that all the coffee it buys is verified by Coffee and Farmer Equity (CAFE) Practices. Bond funds will also support "the continued development and operation of Farmer Support Centers and agronomy research and development centers in coffee-growing regions around the world," as well as new and refinanced loans to coffee farmers via the company's Global Farmers Fund.
  • A partnership with responsAbility: This will be a $20 million "equity investment to provide financing to coffee communities in Latin America, Africa, and Asia." This will offer loans to replace older coffee trees with newer ones and buy new equipment.
  • Greener retail commitments: Starbucks plans to design, build, and operate 10,000 Greener Stores globally by 2025. "The open-source Starbucks Greener Store Framework, which Starbucks developed in partnership with World Wildlife Fund (WWF) and SCS Global Services, focuses on commitments to energy efficiency, renewable energy, water stewardship, waste reduction, and more," according to the company.

Along with the greener stores, Starbucks is also making efforts to offer greener cups and packaging in all its locations. This includes rolling out strawless lids globally and working to find or create recyclable and/or compostable cups.

Why is Starbucks doing this?

When you're the largest coffee cafe company in the world, it's important to make sure you protect your supply of coffee. Starbucks needs to protect the world's coffee crops. That's good for coffee farmers, and it helps the company know that its principal product will continue to be available.

Starbucks' overall commitment to going green fits with how it wishes to be perceived. It also keeps the company ahead of any criticism over the amount of waste its stores produce. That's important at a time when there has been increased scrutiny over the use of plastic straws and disposable cups that can't be easily recycled.

This is a company acting for the greater good and out of self-interest. Starbucks needs the world's coffee supply to be healthy and consistent. It also benefits from public sentiment as it spends big to demonstrate its commitment to leaving the planet in a better place.

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Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Starbucks. The Motley Fool has a disclosure policy.