Are your customers this loyal?

My father once explained to me why the Grateful Dead was so successful. “The Dead would take their money and pump it right back into their shows. When other bands were comfortable with house sound systems, the Grateful Dead spent a fortune developing a monstrous Wall of Sound that could be heard from a quarter mile away. Phil Lesh’s bass lines were so deep and loud that you didn’t just hear them - you felt them. The Grateful Dead weren’t selfish, they never focused solely on profit, and they cared about their fans and the music community. That’s why Deadheads are so loyal”.

Businesses often talk about customer loyalty. Yet it’s rare for a business to see the type of loyalty that was developed by the Dead. Pepsi-heads? McDonaldites? I think not.

However, some progressive organizations are beginning to take lessons from the jam band, and it’s beginning to show. Peace Coffee, a Minnesota based coffee company, is growing at an annual rate of 20%. This is a great rate during good times… but an absolute miracle considering today’s financial environment. For perspective, China’s growth rate in 2008 was around 10%.  Starbucks saw annual growth rates of 27% during the dot-com decade.  How is Peace Coffee able to seem unaffected by the financial storm in which we find ourselves? It’s hard to say without being the company accountant, but I have a hunch it’s from a business philosophy that considers a triple bottom line.

The term “triple bottom line” was coined in 1994, but the idea is older than that. Conceptually, a triple bottom line refers to a business practice of measuring and basing decisions on financial performance, ecological impact from company operations, and social effects on workers and their communities. At its reduction, the triple bottom line means caring about people, planet, and profit.

Peace Coffee applies the triple bottom line theory throughout a multitude of business aspects. Regional deliveries are done through bio-diesel vans or by bicycle. The coffee beans are grown by small coffee farmers and cooperatives and certified as fair trade. Peace Coffee’s recently installed coffee roaster is also equipped with a catalytic oxidizer - which burns away hydrocarbons to limit emissions. And these are just the tip of the iceberg. A full enumeration can be found at the Peace Coffee website, here.

The idealists in all of us love stories such as these. But the selfish cynics in the back of our minds are wondering “What’s in it for the business?”. Of course, the immediate effect of Peace Coffee’s triple bottom line will be beneficial to its surrounding environment and communities. The benefits even spread to small fair trade farmers and help pump money into eco-sound businesses, such as bio diesel companies. But the practice also develops long-lasting customer loyalty and relationships. Today’s customers are demanding that businesses be more personal, and more socially and environmentally conscious. Every time Peace Coffee delivers a product by bicycle, their meeting that specific consumer demand. And just like the Grateful Dead, Peace Coffee is cultivating a community and developing a loyalty that can weather a financial storm.

Of course, the pendulum can swing both ways. Metallica, the guitar-slinging antithesis to the Grateful Dead - learned this lesson a decade ago. Metal-heads all remember when Metallica prioritized profits over its fans by suing Napster for enabling music piracy in 2000. The legal action created an exodus of hard rock fans, some of whom had been fanatically loyal since the band’s early days. Years later, people are still bitter and CD sales have never recovered. In 2007, Metallica was named #17 on Blender’s list of “biggest wusses in rock”, citing its lawsuit against Napster. And the 1990’s remain Metallica’s glory decade, with the band’s 2003 release selling only 2 million copies (compared with 14 million for 1991’s “Black Album”).

“Selling Out” can hit business just as bluntly as a hard rock band. Nike’s choice to prioritize profits over social responsibilities by using sweatshop labor caused an uproar in 1997 among consumers. Social justice groups sprang up to protest Nike and demand boycotts. Even my alma mater experienced protests and many student groups demanded that the university athletic programs refrain from outfitting teams with Nike products. The negative publicity was a nightmare for Nike’s PR department, and the company’s reputation has remained stained ever since.

In the end, it truly depends on consumer demands. Consumers are evolving. We’re placing demands to businesses that are more complex than “cheaper and better”. Customers have become more engaged in many aspects of business. We want to see Company Social Responsibility Reports, we want to know carbon footprints, and we want to know that our money isn’t having a negative impact somewhere in the world. So do the other bottom lines truly count in the business world? For Peace Coffee and others, the answer should be a deafening YES.

Peace Coffee riders stay sustainable with reusable coffee mugs

Sustainability Is Sexy Plug:

Our online store is once again having a discount sale.   Order any T-shirt, tank top, or canvas grocery bag by February 11th and receive a 14% discount.  If you’re looking for a Sustainability Is Sexy reusable coffee mug, email support@sustainabilityissexy.com.

Tags: 3BL, bike delivery, business community, business strategy, coffee, coffee roasting, company, consumer, CSR, cups, customer loyalty, disposable, eco, environment, finance, growth, Peace Coffee, people planet profit, responsibility, SIS, social, sustainability is sexy, TBL, triple bottom line, waste

If you had the chance to sit down with the Starbucks’ Director of Environmental Impact, what would you ask him? This thought was racing through my mind as I turned into the parking lot of Seattle’s world famous coffee company. The opportunity to meet with Starbuck’s Director Jim Hanna had come with a turn of luck. An SIS blog post titled “Investigating Recycling and Starbucks” had made its way into the coffee giant’s headquarters, and Jim had emailed me a response. Now, I was getting ready for a face-to-face interview to talk about the environment, paper cups, coffee, and Starbucks.

Like any other global company, Starbucks has fallen under scrutiny when it comes to its environmental impact. And like other global companies, they have pushed back with environmental initiatives and programs. Was Starbucks guilty of green-washing, or did the company truly care about the impact it had on our environment?

Environmentalism is essential to our core business, Jim explained while sipping a Tazo tea. At its heart, Starbucks is an agriculture business. Its success relies on a steady supply of coffee beans from around the world. The beans which Starbucks buy must meet certain quality and price considerations. Coffee farmers depend on highly specific climates and growing practices to meet those standards. Eco-harming pesticides can ruin the coffee flavor. And climate change could drastically alter the price we coffee lovers pay for a latte. For Starbucks, being green is akin to long-term survival.

Environmentalism is more than just coffee beans for Starbucks. “What about the eco-impact of disposable paper coffee cups?” I asked over my sandwich. After all, the 16 billion paper coffee cups used in the US every year add up to a lot of landfill garbage and consumed natural resources. Jim pointed out that Starbucks was the first company to offer paper coffee cups partially made from recycled content. The cups, 10% of which is post-consumer recycled fiber (PCF), is estimated to save tens of thousands of trees, a half million gallons of wastewater, and several million pounds of garbage from being trucked to landfills.

“Why only a 10% PCF cup?” I ventured. “Wouldn’t a 100% cup be 10 times better?” Jim explained that the technology to make a higher PCF content cup just isn’t viable today. The main problem stems from differences in the fibers of recycled paper. Recycled paper fibers are shorter than those in non-recycled paper. This means that a coffee cup made using recycled fibers requires more paper pulp. And as more recycled content is added – more paper is used – economists call this the law of diminishing returns. We may one day see a cup made completely of recycled paper - but the technology needs to catch up first.

The sugar coating is that the new cup technology is not patent protected. Coffee chains, local coffee stands, and even college campuses can now purchase disposable cups made of 10% recycled paper. Jim hopes that more companies will begin using the 10% PFC cup – leading to a domino effect of environmental benefits.

Of course, the post-consumer recycled cup isn’t the only solution. The “Ecotainer”, a compostable corn-based cup, was debuted in 2007 by Tully’s Coffee and International Paper. Since its introduction, the cup has been well received. Did Starbucks choose the wrong cup?

Jim pointed to some major issues with corn-based cups that didn’t fit well with Starbucks. Firstly, the compostable cup shifts the eco-responsibility from the company to the coffee-drinker. For a corn-based cup to have an effect, the consumer needs to throw the used cup into a compost bin. No compost bins around? Uh oh, then that compost cup is destined for a landfill.

For Tully’s and other local coffee shops this wasn’t a big issue – composting is a growing movement throughout Seattle and the Pacific Northwest. But Starbucks is a global company that needs global ideas, and composting just isn’t being done on a global scale …yet. That’s not to say Starbucks is anti-composting. My lunch from Starbucks Headquarters was wrapped in compost-friendly packaging. And judging by the overflowing compost bin – and the nearly empty garbage can next to it – it seemed the compost idea is a hit with corporate employees.

Jim also noted that corn-based products can have other unforeseen consequences. Mexican citizens staged riots in 2007 because of high tortilla prices brought on by high corn prices. Many blamed the high prices on a soaring demand for corn to provide for the US with biofuels. Even in the US, consumers have seen food prices increase dramatically. Considering that Starbucks serves up 2.3 billion coffee cups a year, perhaps we should all be glad for the pass on compostable cups.

By choosing a disposable cup with recycled materials, Starbucks avoids both of those problems. According to Jim, Starbucks’ 10% PFC cup helps “close the demand loop” for recycled materials and will ultimately help stimulate the recycling business – a worthy cause in my book. The recycled content hot cup also guarantees a better eco-impact than standard cups, regardless of compost bin convenience.

In the near future, Jim hopes to see even bigger environmental policies enacted at Starbucks. Over the next year, Starbucks will reestablish ceramic cups as their standard for serving coffee, and pursue strategies to offer recycling throughout their stores. The company also participates in a variety of environmental coalitions to find solutions to sustainable packaging, supply chain sustainability, and creating the ultimate “to-go” cup – one that can be fully recycled.

And for customers who bring their own cups? Jim hopes to increase the number of BYOC customers by tenfold by 2010. He wasn’t ready to share the company’s strategy to make this happen, but who knows? Maybe a Sustainability Is Sexy campaign is just what an eco-friendly Starbucks needs.

Tags: climate change, coffee, compost, compostable, consumer, content, corn, corn-based, Corportate Social Responsibility, cup, disposable, eco, eco-impact, eco-responsibility, ecotainer, effects, Environmental Director, Environmentalism, fibers, garbage, green-wash, Jim Hanna, paper, Paper Cups, post, prices, reycled, Starbucks, sustainability is sexy, to-go, wastewater