SEATTLE – Starbucks Coffee Company (NASDAQ: SBUX) yesterday announced its Board of Directors intends to establish a new Environmental, Partner and Community Impact (EPCI) Board Committee, as a continued evolution of the overall governance approach for the company.
The move comes as Starbucks refocuses its mission and promises under new CEO Laxman Narasimhan to better serve stakeholders amid a changing operating landscape.
New Committee to Oversee Starbucks’ ESG Commitments
The establishment of the EPCI Board Committee recognizes the shifting regulatory and social environment Starbucks faces and aims to drive accountability across the company’s promises on environment, partners (employees), and community impact.
Specifically, the committee will have oversight duties including:
- Monitoring internal and external reporting related to ESG (environmental, social and governance) goals, such as Starbucks’ annual Global Environment and Social Impact Report
- Assessing initiatives to strengthen Starbucks’ culture and partner engagement
- Tracking Starbucks’ adherence to standards and regulations related to ESG factors
Independent director Beth Ford, currently President and CEO of Land O’Lakes, will serve as chair of the new committee.
The move builds on Starbucks’ legacy of pursuing ambitious sustainability goals and transparent reporting. It also follows growing scrutiny around ESG issues and calls for companies to formalize oversight structures to govern stakeholder issues.
Starbucks Evolving Governance to Align with New Mission
Broaderly, the formation of the EPCI committee exemplifies an evolution in Starbucks’ governance approach to match its recently updated mission and promises.
Upon assuming the CEO role in March 2023, Narasimhan worked with partners and leadership to refound Starbucks’ purpose and better position it for “mutual success” with stakeholders.
The evolved mission now focuses more explicitly on uplifting partners, contributing to communities, ensuring the future of coffee farmers, and improving environmental stewardship.
To uphold the mission shift, Starbucks has contemporized governance policies like forming the new board committee. Such moves intend to embed stakeholder accountability through the company and its oversight structure.
Starbucks Faces Mounting Pressures Around ESG Performance
The plan to heighten governance around ESG issues follows growing attention on Starbucks’ workplace culture and sustainability impact.
Over the past year, Starbucks has faced high-profile unionization drives across hundreds of its stores, sparking tensions with frontline workers. The National Labor Review Board has also filed complaints alleging illegal anti-union tactics by Starbucks management.
Activist investors have pressured the company to address these labor relations concerns more earnestly, seen as a threat to Starbucks’ brand reputation. Creating defined governance infrastructure around partner issues through the EPCI committee works to alleviate these pressures.
At the same time, Starbucks faces criticism around its environmental impact as sustainability becomes more vital for consumer trust and regulatory compliance. Despite having strong baseline programs for recycling and ethical sourcing, activists call on Starbucks to take more aggressive climate action in line with scientific guidelines.
Here too, the new board committee offers a conduit for Starbucks to systematically improve its environmental governance and transparency around carbon emissions, waste diversion, and other metrics.
Broader Corporate Governance Trends
Beyond company-specific pressures, Starbucks’ latest governance shift mirrors larger corporate trends. A recent PwC survey of over 600 public company directors found:
- 69% of boards now oversee ESG issues versus just 28% five years ago
- 50% have an ESG committee today compared to less than 10% in 2017
Key drivers of this governance formalization include desires to:
- Enhance oversight around pressing societal risks like climate change
- Bolster accountability to stakeholders like communities and employees
- Unify existing disjointed ESG efforts for more impact
By establishing the EPIC committee, Starbucks joins the ranks of companies like Microsoft, McDonald’s, and PepsiCo that have installed dedicated ESG oversight in recent years.
Upcoming Disclosure Commitments
Even as it announces the new committee, Starbucks reiterated plans to continue leading in ethical business practices and transparent reporting.
Narasimhan stated, “Starbucks has always set ambitious goals to deliver performance through the lens of humanity. Our new mission reflects the changing global environment and builds on our brand’s legacy of driving human connection and purpose.”
In the coming year, Starbucks intends to disclose:
- Its Fiscal 2023 Human Rights Impact Assessment in Q1 2024
- An independent assessment of adherence to freedom of association and collective bargaining principles in Q1 2024
- Its annual Global Environment and Social Impact Report in Q2 2024
Through moves like these, the company aims to tangibly demonstrate progress towards more accountable, ethical operations for the benefit of partners, customers, shareholders and society-at-large.