Ethical Consumer, a consumer advocacy organization, gave coffee giant Starbucks its "worst Ethical Consumer" rating for its supply chain management, echoing concerns expressed by vendors and employees for years.
According to the report from Ethical Consumer, Starbucks faces multiple ethical challenges, including poor supply chain management, workers' rights violations, and controversial political activities. Key issues involve child labor on supplier farms, tax avoidance practices, and a partnership with Nestlé which was linked to environmental and human rights concerns.
Despite some positive environmental initiatives, the company has been criticized for its poor palm oil sourcing transparency and use of factory-farmed animal products.
In 2022, Balmuccino LLC, one of Starbucks' supply chain partners, filed a lawsuit against them, alleging that Starbucks stole confidential information about a coffee-flavored lip balm in order to create its S'Mores Frappuccino lip-gloss kit. The lawsuit, filed in Seattle federal court, claims Starbucks misused trade secrets shared during a 2017 meeting and breached an implied non-disclosure agreement.
According to the lawsuit, Balmuccino employees met with Starbucks' head of product development Mesh Gelman in 2017 about a potential partnership where they shared Gelman prototypes of lip balms, supplier information, research results and other confidential details. Starbucks reached out to one of Balmuccino's suppliers in 2018 to request prototypes for its own lip balms using the same specifications Balmuccino gave Gelman. Starbucks launched its limited-edition "S'Mores Frappucino Sip Kit" of four coffee-flavored lip glosses to celebrate the return of the drink to its menu in 2019.
Harvard Business Review reported that Starbucks was involved in a high-profile breach of contract dispute with Kraft Foods in 2010 over the distribution of its bagged coffee. The conflict, which led to a court ordering Starbucks to pay $2 billion, also resulted in shareholders suing Starbucks, claiming the company misrepresented the financial impact of the breach in its SEC filings
In 2013, YahooFinance reported that Mondelez International, the parent company of Nabisco, took legal action against Starbucks for breaching an agreement regarding the sale and distribution of packaged snacks. Mondelez claimed Starbucks did not uphold its end of the bargain, leading to substantial losses.
Simon Property Group sued Starbucks in 2017 after Starbucks announced plans to close all 379 Teavana stores, including 77 located in Simon malls, according to a report in Fox Business. The Indianapolis-based real-estate investment trust filed a lawsuit to prevent Starbucks from closing stores in its properties, claiming doing so would violate lease agreements signed by Starbucks, saying it would cause irreparable harm to the company.
According to their website, EthicalConsumer.org is an independent, not-for-profit organization that promotes ethical shopping and living. They provide guides and ratings for over 40,000 brands and products, and offer data and case studies on how businesses can align with ethical standards.