Social and EnvironmentalSocial and Environmental

Purchasing Guidelines Purchasing Guidelines

Antigua, Guatemala, April 5, Antigua, Guatemala, April 5, 20022002

STARBUCKS COFFEE COMPANYSTARBUCKS COFFEE COMPANY

MARY WILLIAMS, SVP, COFFEEMARY WILLIAMS, SVP, COFFEE

What is Sustainability?What is Sustainability?

Starbucks defines sustainability as an Starbucks defines sustainability as an economically viable model that economically viable model that addresses the social and environmental addresses the social and environmental needs of all the participants in the needs of all the participants in the coffee supply chain from producer to coffee supply chain from producer to consumer.consumer.

What Will We Do?What Will We Do?

SOURCING GUIDELINES PILOTSOURCING GUIDELINES PILOT

-- Purchasing GuidelinesPurchasing Guidelines

- Preferred Supplier Program- Preferred Supplier Program

- Pilot Phase Point System- Pilot Phase Point System

- Pricing Incentives- Pricing Incentives

- Verification- Verification

Starbucks Green Coffee Purchasing Starbucks Green Coffee Purchasing GuidelinesGuidelines

QUALITY BASELINESQUALITY BASELINES: All coffee offered by : All coffee offered by producers and suppliers must meet Starbucks producers and suppliers must meet Starbucks quality standards in order to be considered for quality standards in order to be considered for purchase. Maintaining the highest quality is purchase. Maintaining the highest quality is an integral component of sustainability at all an integral component of sustainability at all levels of the coffee supply chain.levels of the coffee supply chain.

Starbucks Green Coffee Purchasing Starbucks Green Coffee Purchasing GuidelinesGuidelines

SOCIAL CONDITIONS:SOCIAL CONDITIONS: The standards for The standards for coffee production should ensure protection coffee production should ensure protection from workplace hazards and conform to from workplace hazards and conform to local laws and applicable international local laws and applicable international conventions related to employee wages and conventions related to employee wages and benefits, occupational health and safety, benefits, occupational health and safety, and labor and human rights.and labor and human rights.

Starbucks Green Coffee Purchasing Starbucks Green Coffee Purchasing GuidelinesGuidelines

ENVIRONMENTAL CONCERNS:ENVIRONMENTAL CONCERNS: Coffee Coffee growing and processing standards will growing and processing standards will contribute to conservation of soil, water and contribute to conservation of soil, water and biological diversity; employ efficient and biological diversity; employ efficient and renewable energy technologies; minimize or renewable energy technologies; minimize or eliminate agrochemical inputs; and manager eliminate agrochemical inputs; and manager waste materials consistent with the waste materials consistent with the principles of reduction, reuse and recycling.principles of reduction, reuse and recycling.

Starbucks Green Coffee Purchasing Starbucks Green Coffee Purchasing GuidelinesGuidelines

ECONOMIC ISSUES:ECONOMIC ISSUES: Coffee production and Coffee production and commercialization should benefit rural commercialization should benefit rural communities by boosting producer communities by boosting producer incomes, expandingincomes, expanding employment and employment and educational opportunities, and enhancing educational opportunities, and enhancing local infrastructure and public services.local infrastructure and public services.

PREFERRED SUPPLIER PILOT PREFERRED SUPPLIER PILOT PROGRAMPROGRAM

Purchasing preference over all other Purchasing preference over all other vendors.vendors.

Awarded for a score of 100 points.Awarded for a score of 100 points.

Reward for constant improvement.Reward for constant improvement.

More points earned, higher level of More points earned, higher level of

purchasing preference.purchasing preference.

THE POINT SYSTEM ENVIRONMENTAL IMPACTS:Soil ManagementWater reductionClean WaterWater Buffer ZoneForest and Biodiversity ConservationUse Of ShadeEnergy UsePest ManagementAccepted AgrochemicalWaste Management

SOCIAL CONDITIONS:Wages and BenefitsHealth and SafetyLiving Conditions

ECONOMIC ISSUES:Transparency/Supplier-Farm Level

Total: 50 Points 5 points5 points5 points5 points5 points5 points5 points5 points5 points5 points

Total: 30 Points10 points10 points10 points

Total: 20 Points 20 points

PRICING INCENTIVESPRICING INCENTIVES

1 cent/lb. for every 10 points earned1 cent/lb. for every 10 points earned

Defray costs associated with transition to Defray costs associated with transition to sustainabilitysustainability

Encourage current suppliers to participateEncourage current suppliers to participate

Reach 100% status within two yearsReach 100% status within two years

* Ultimately all costs should be included* Ultimately all costs should be included

in Cost of Production.in Cost of Production.

Verification Verification

- Affordable- Affordable

Without adding significantly to production Without adding significantly to production costs, costs,

and drawing to the greatest extent possible and drawing to the greatest extent possible onon

existing relevant documentation. existing relevant documentation.

- - FlexibleFlexible

To encourage innovation and diversity in bestTo encourage innovation and diversity in best

practices and methods of documentation.practices and methods of documentation.

- Accessible- Accessible With procedures that are transparent and With procedures that are transparent and

understandable to all participantsunderstandable to all participants

throughout the supply chain.throughout the supply chain.

VERIFICATION ORGANIZATIONSVERIFICATION ORGANIZATIONS

- - Private sector accounting firms, Private sector accounting firms, certification organizations, or consulting certification organizations, or consulting businesses.businesses.

- Non-profit NGOs, academic institutions, or - Non-profit NGOs, academic institutions, or research organizations.research organizations.

- Government agencies with divisions, - Government agencies with divisions, departments or programs relevant to and departments or programs relevant to and compatible with the Starbucks guidelines. compatible with the Starbucks guidelines.