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Starbucks Buys Wind Power to Reduce Climate Impact - Case Study

Starbucks Coffee Company committed recently to purchase wind power to offset a portion of the energy used in its operations. The commitment puts the company in the top 25 U.S. purchasers of renewable energy. Mitigating climate change is the driver behind Starbucks' decision to buy renewable energy certificates, which allow any size company to support renewable energy.

A global enterprise has committed to purchase wind power to offset a portion of the energy it uses. The US$5.3 billion company is involved in agriculture, transportation, equipment sales, music distribution, and brand licensing, with locations in 36 countries worldwide. But this company is better known to most of us as the coffee shop on the corner -- Starbucks Coffee Company.

Starbucks' renewable energy purchase represents five percent of the kilowatt hours used in 6,376 company-owned stores in North America . The commitment puts the company in the EPA's top 25 U.S. purchasers of renewable energy.

Renewable energy certificates
Starbucks purchases wind power through renewable energy certificates, or RECs, also known as green tags.

RECs are created when a facility produces electricity from a renewable resource. With RECs, the "soft" benefits -- in particular, the avoided pollution -- are sold separately from the energy itself. So buyers of the certificates financially support the production of renewable energy, though don’t necessarily use the energy produced. For example, Starbucks accrues the soft benefits of the wind energy they buy, but not the electricity, so they still must buy power.

RECs are not the only way to get renewable power. Some businesses install renewable energy equipment and capitalize on incentive programs; for others, the local utility might offer renewable power purchase options.

But Starbucks was faced with the challenge of purchasing green power for thousands of individual locations, many of which are leased. RECs provide Starbucks with a vehicle for buying wind power for its stores nationwide from one source.

"RECs provide an interesting model for us to get into the market without incurring huge transaction costs," says Ben Packard, Starbucks Director of Environmental Affairs. "Third-party certifications provide assurance that what you are buying is actually renewable."

RECs are traded, like stocks, through brokers. Starbucks selected 3 Phases Energy.

Why buy wind power
Starbucks has a strong ethic of environmental and social responsibility. With its dependence on agricultural production, Starbucks is especially concerned about the effects of global warming.

"The purchase of renewable energy is the cornerstone of addressing our own contribution to climate change," says Packard. "We have concerns about the long-term implications of climate change on our core business, which is coffee."

In an effort to better understand its own contribution to climate change, Starbucks took an inventory of its greenhouse gas emissions in 2004. An emissions inventory evaluates such factors as the energy used, its sources, and the emissions caused by generating it. The result is an emissions figure measured in metric tons of carbon and other types of pollutants. Starbucks engaged CH2M HILL for the inventory effort, and applied standards established by World Resource Institute.

Deciding how much to buy
Starbucks then committed to setting targets for reducing the emissions caused by energy consumption throughout the organization by October, 2005. Company-owned stores in North America represent about half of the company's total greenhouse gas emissions, with the remainder divided among transportation, roasting, and other operations. Thus, Starbucks stores were a strong place to start reducing the company's environmental footprint.

Buying renewable energy to offset five percent of a company's energy use might not seem like much, but in a company this size it makes a difference. Starbucks says the commitment is comparable to removing 3,200 cars from the road; the wind energy would power 2,500 homes.

When utilities offer voluntary green power purchase programs, the suggested amounts typically range from five to ten percent of the customer's total consumption. Energy Priorities' publisher buys green power equivalent to ten percent of its offices' energy needs from its utility, Puget Sound Energy.

Another example: 100% renewable
Some companies use RECs to go beyond the limitations of their utilities' offerings. Alterra Coffee Roasters, for example, buys 100 percent green power for all of its retail locations in Milwaukee, Wisconsin.

Alterra actively promotes wind power and, along with its green power provider, works to expand awareness of green power in its stores and through presentations at local events. Outreach efforts offer another benefit of green power: building the stewardship attributes of Alterra's brand. Marketing value is often touted as a primary benefit of RECs.

Corporate responsibility
Starbucks says its commitment to renewable energy was not a marketing decision. Starbucks has had a robust social responsibility program for many years. The company takes pride in a long list of environmental awards, and is included in two dozen socially-responsible investment funds.

While Starbucks does not actively publicize its REC purchases, it quietly supports other organizations that are spreading the word about renewable energy -- an acknowledgement that Starbucks can't change the world alone. The company considers itself a leader in this arena, and thus feels a responsibility to share its practices and to support others who are increasing the awareness of climate change.

"We could take care of our entire climate footprint and still not mitigate the long-term risk of climate change to the company," Packard explains, referring again to the potential negative impact of global warming on coffee harvests.

Starbucks has joined the World Resources Institute’s Green Power Market Development Group and the Climate Group. Starbucks has also announced a two-year commitment of cash and in-kind contributions to Global Green USA.


Supply and Demand
Buying wind energy is one way Starbucks works to reduce the total greenhouse gas emissions for which it is responsible. For Starbucks, environmental stewardship is a component of its business performance.

The company continually looks for innovations that can help minimize the environmental impact of its entire operations, including reducing its demand for energy and embracing green building, water conservation and waste reduction in retail stores and facilities.

Starbucks also works to improve coffee farming practices and environmental initiatives in local communities.

Getting started with RECs
Starbucks has employees like Packard who are dedicated to staying informed about renewable energy and climate change. But for most companies, learning about climate change is the first step toward understanding the company's environmental impact and taking action.

Fortunately, there are many informative resources available. Packard suggests starting with these:

Climate Solutions
World Resource Institute Green Power Market Development Group
EPA Climate Leaders
EPA Green Power Partnership
Climate Group
GreenBiz

The next step is to take action. Starbucks set targets for reducing its emissions and defined a renewable energy initiative to reach its targets. For assistance, some non-profit organizations will consult with companies about buying renewable energy.

Executive buy-in
Getting top executives behind a renewable energy program is essential. Starbucks' management clearly has embraced the concept of environmental stewardship. Justifying the wind energy purchase was simple -- supporters explained to management that this action is consistent with the company's mission and values.

For executives who are not yet on board, Packard advises first conveying that energy is a financial resource that must be managed carefully. He admits that communicating the concept of climate change to the uninitiated is somewhat more problematic, but not impossible.

Justifying participation
Aggressive action on the part of U.S. businesses is important, if the most serious effects of climate change are to be averted, says World Resources Institute president Jonathan Lash. "A successful climate future is simply not possible without immediate participation," he says. "Starbucks is to be congratulated for taking a leadership stance on climate change."

"It's not as difficult as it may seem to justify renewables," says Starbucks' Ben Packard. "Even small steps would make a significant difference."

Traded companies:
Starbucks Coffee Company (NASDAQ: SBUX)
Puget Sound Energy is a subsidiary of Puget Energy (NYSE: PSD),

Comments

wow, this is great PR for starbucks after the coffee bean fiasco!

I don't get it. You buy green (5%) but you are not green. The temperature of your store at R Street and Connecticut Ave in DC is set really low. You sell water in plastic bottles that you do not recycle. You have removed all recycle containers from your DC stores. The waste you generate in terms of cups and covers is astronomical. I am convinced that you only pay lip service to green. Sorry, I don't believe you.