The Future of Responsible Retailing: A Strategic Balance Between Profit and Purpose

Samuel Fung, former VP Product and Marketing at Starbucks Asia-Pacific

Introduction

Last week, I had the honour to interview Samuel Fung, former VP Product & Marketing at Starbucks Asia Pacific as well as alumnus from SBE and pick his brain on the topic of responsible retailing. Insights were shared on Starbuck’s “giving more than we take” approach to it and we discussed how major retailers navigate the balance between purpose and profit, measure responsibility, and address key challenges in embedding responsibility within their business models.

Responsible Retailing as a Driver of Brand Equity

According to the Starbucks executive, responsible retailing is primarily viewed as an investment in brand equity rather than a direct contributor to financial performance. Sustainability initiatives, such as the adoption of recyclable materials and ethical sourcing, incur additional costs but are expected to strengthen customer loyalty. "We believe that when we are doing that, it will be elevating the brand equity. That means that you will gain your trust and credibility with the customers," the executive explained.

Despite the difficulty in quantifying the immediate financial impact, Starbucks conducts an annual brand equity study to measure, amongst other things, customer perception of commitment to sustainability. One of the key brand pillars in this study is perceived commitment to environmental, social, and governance (ESG) initiatives. Higher ratings in these areas are correlated with stronger brand affinity, which, in turn, fosters repeat customer engagement and long-term business growth.

Measuring Responsibility: Beyond Financial Metrics

The challenge of measuring responsibility in business extends beyond traditional financial key performance indicators (KPIs). Starbucks implements a multifaceted approach that includes:

• Brand Equity Studies: Assessing customer perception of corporate commitment to ESG values.

• Carbon Footprint Measurement: Tracking emissions throughout the supply chain, independent of regulatory requirements.

• Greener Store Certification: Ensuring stores meet sustainability criteria set by industry bodies.

• Waste Reduction Programs: Quantifying waste disposal in the stores and implementing IoT solutions to optimize sustainability practices.

Mr. Fung emphasized that although initiatives in responsible retailing may initially increase operational costs, economies of scale eventually help mitigate these expenses. "At the end of the day, we would be able to mitigate that cost because we do have a scale," they noted, highlighting Starbucks’ ability to absorb responsibility-related costs over time.  For instance, Starbucks has published that there is an annual operating cost of $60M saved through Greener Store initiatives (https://about.starbucks.com/sustainability/)

Challenges in Implementing Responsible Retail Practices

Despite the benefits, several hurdles prevent companies from fully committing to responsible retailing. The interview highlighted three primary obstacles:

1. Short-Term Financial Focus: Many publicly traded companies prioritize quarterly earnings, making it difficult to justify long-term sustainability investments. "Not many companies have a long-term view," the executive observed.

2. Fragmented Leadership: Accountability for responsible retailing is often led by supply chain teams rather than being championed at the executive level. In contrast, Starbucks has established a Chief Sustainability Officer role to lead and orchestrate a cross-functional approach at the enterprise level.

3. Lack of Internal Advocacy: Successful implementation requires internal buy-in before you apply it externally. Starbucks has created employee networks focused on sustainability, social impact, and gender equity to embed these values within the organizational culture. "It’s not doing it superficially; it’s real and authentic," the executive stated.

   
   

The Role of Industry Collaboration and Regulation

For responsible retailing to gain momentum, the executive stressed the need for greater industry collaboration. "I haven’t really seen the industry leaders sitting together and discussing responsible retailing," they noted. By fostering a collective approach, companies can share best practices and create industry-wide standards.

Moreover, government regulations and industry associations play a crucial role in raising awareness and encouraging responsible practices, particularly for new firms that do not have this top of mind in the beginning. The influence from more developed markets such as Europe on other regions could accelerate the adoption of responsible retailing globally.

Conclusion

The future of responsible retailing depends on a combination of strategic vision, industry collaboration, and regulatory influence. Companies like Starbucks demonstrate that responsibility and profitability can coexist, provided that responsible practices are embedded into the core business strategy. And of course, while enjoying our time at the business school staff lounge, we could not end the interview without discussing the importance of education in teaching future business leaders to develop a mindset that prioritizes long-term responsibility alongside profitability.

Author: Anne ter Braak