The ethics of the coffee shop chains have been under the spotlight of late, with Starbucks and Caffè Nero both being publicly shamed over their tax avoidance. Yet they are not the only coffee chains with murky tax affairs.
Maybe we have all become hooked on Frappuccino lattes, or maybe we’re just desperate for somewhere to get out of the cold. Either way, recession or no recession, the UK coffee shop market is booming. It has grown continually for 15 years and increased in size by more than 10% in 2014 alone.
The independent sector has grown slightly, but it is the big branded chains like Costa and Starbucks that have really exploded in number. Ten years ago the branded market was about half the size of the independent sector. Today it is very similar to it in size.
In this guide we look at these big chains, especially focusing on their tax affairs, and the ethical sourcing claims that they make – or don’t make – about their coffee. We also look into the recent discussion that has taken place around ethical certification schemes for coffee, including Fairtrade.
Nearly all the coffee shops score very badly on environmental reporting. Few of them were able to provide much material on their environmental policies, and when they did, it was poor, without meaningful targets.
Only Soho Coffee Company got awarded our best rating in this category because it is a small company that we felt had an implicit environmental policy, if not an explicit one.
All of the coffee shops sell products likely to contain palm oil such as biscuits and cakes. Yet not a single one had an effective palm oil procurement policy, and so they all lost half a mark on Climate Change, Habitats & Resources, and Human Rights. The other marks lost in the human rights category were lost because of operations in oppressive regimes.
A few of the companies were awarded Product Sustainability marks on the basis that all of their coffee was Fairtrade, Organic or Rainforest Alliance certified.
The shaming of Starbucks
In 2012 Starbucks’ chief financial officer told the Parliamentary Public Accounts Committee that Starbucks made no money in the UK. That was why it paid almost no tax, he said – it simply made no profit. It kept operating over 700 coffee shops year after year in the hope that one day, one happy day, it would start to make some money from it. But somehow, that day never came.
The committee was not impressed. The chair, Margaret Hodge, pointed out that Starbucks’ failure to turn a profit in the UK might have something to do with its buying things at extortionate prices from other Starbucks divisions in tax havens like Amsterdam and Switzerland, so that they could make the profit on its behalf.
She said that it was immoral, even if it wasn’t illegal, and urged people to boycott the company. Meanwhile UK Uncut had already long been picketing Starbucks’ branches and attempting to turn them into helpful things like women’s refuges, crèches and libraries. After a drop in sales, Starbucks backed down a bit and offered to pay a token ‘voluntary donation’ of £20 million over two years.
Starbucks isn’t the only coffee shop chain that’s attracted attention for avoiding tax. In 2014 it was widely publicised that Caffè Nero wasn’t paying anything much either.