Starbucks sets goals for 2025 to increase diversity within the company. These goals will be tied to executive pay and target both the corporate and retail level. We explore how the company’s goals relate to the Citigroup report on racial discrimination and its negative effect on economic growth.
Late last week Starbucks (SBUX) made commitments to increase diversity within their organization. Goals included raising BIPOC (Black, Indigenous and People of Color) employees in the corporate ranks by 30%, and by 40% in retail and manufacturing. Starbucks aims to achieve these goals by 2025 and will tie diversity goals to executive pay. CEO Kevin Johnson expressed his desire for change in a letter to employees last week. Diversity goals and financial commitments that go towards addressing the wealth gap in America, have been rolling out in the banking industry over the past few months by names such as Wells Fargo, Citigroup, Bank of America, and Morgan Stanley. Many companies have made financial commitments in recent months but few are addressing issues of diversity in their workforce the way Starbucks is, particularly by tying executive pay to the fulfillment of these objectives.
We take a macro view at the Starbucks news to see how the market is discussing similar announcements with our Amenity Safeguard ESG impact tracker. Our Key Insights this week concerning our event type: Diversity and Inclusion, reveal that the top mentioned phrase was “inclusive growth” followed by “empower women” and “improve diversity”.
Inclusive growth in the economy requires a workforce that is reflective of the community in which it exists with equal opportunity for advancement, development, and ownership. Exclusive growth in the economy has widened the wealth gap, pushed racial tension, and exacerbated a problem that is not specific to any single company. Exclusive growth is endemic to the American business landscape and had severe consequences in limiting the growth of the national economy.
Discrimination in the American economy today is the product of centuries of racial injustice that has led to a divide in wealth and opportunity. Discriminatory practices are not only morally wrong, but detrimental to the economy as a whole. In a report published by Citigroup in September, they attach a cost of $16 trillion in GDP lost since 2000 due to discrimination against African Americans. Strikingly, this does not include other groups who are marginalized in the economy indicating that the true cost is much higher. Citigroup estimates that the GDP could grow by an additional $5 trillion in the next five years if discriminatory practices in the economy were properly addressed.
Among the top four areas of discrimination in the report with the greatest economic impact is lost income due to wage disparities in the workplace. The other three areas pertained to discriminatory lending, discrimination towards black owned businesses, and limited access to higher education. Addressing these issues will not only lead to higher and more equitable incomes now, but will go towards long term wealth creation like home and business ownership that can be passed down from generation-to-generation. Creating an inclusive economy benefits all Americans and it starts with corporations like Starbucks making commitments towards getting everyone involved.
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This communication does not represent investment advice. Transcript text provided by FACTSET and S&P Global Market Intelligence.
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