By Doug Woodring, founder and director, Ocean Recovery Alliance
How Brand Licensees Can Impact Your Value
It is time for companies to show responsibility to the communities they serve. While Starbucks does not directly sell shark fin at their restaurants, they benefit from the business that Maxim’s, its licensee, brings to the brand as the de facto representative of Starbucks in Hong Kong and Macau.
For those in the world of corporate social responsibility (CSR) and environmental and social governance reporting (ESG), there is an interesting dynamic at play in Hong Kong, with a large multinational brand being drawn into the domestic “dirty” laundry of its licensee. The question is whether or not that local partner and flag-bearer of that brand is able to find solutions which will not pull the value of the international brand down with its own domestic reputation. The popular Maxim’s, licensee of Starbucks in Hong Kong and Macau, with over 180 stores and the largest restaurant chain in Hong Kong, continues to serve shark fin on its menus. There are no proven sustainable shark fin fisheries, and most laws to protect endangered species are woefully late in coming to the rescue. That’s because it takes so long for science in the ocean to be undertaken, and for the global consensus of peer groups to finally approve “endangered status.” In the meantime, sharks, and the entire health of the ocean (as sharks are a main balancing factor in the ocean ecosystem), have been put at serious risk. This is all in the name of culture, a so-called tradition for serving shark fin soup, which was mainly commercialized in the 1970’s as a money-making opportunity. Instead, it is simply used as a status of wealth at the dining table. The illegal wildlife trade is also often related to the trans-national crime syndicates that traffic dangerous drugs, weapons and humans.
It is time for companies to show responsibility to the communities they serve. While Starbucks does not sell shark fin at their restaurants, they benefit from the business that Maxim’s, its licensee, brings to the brand as the de facto representative of Starbucks in Hong Kong and Macau. It is unconscionable to think that Starbucks would buy coffee from suppliers or partners who also engage in human trafficking. Their brand would be quickly implicated. The case of shark fins is exactly the same, however, with the implication coming from its partner which continues to undertake this cruel, unsustainable business practice with a murky supply chain, often linked to illegal, unreported and unregulated (IUU) fishing. The direct revenues from shark fin soup sales are also less than 0.1% of the chain’s total revenue. Maxim’s however, seems unwilling to drop shark fin from the menu for fear of losing face, or maybe a few customers. On the contrary, it can be easily argued that they would actually gain customers if they stopped selling shark fin permanently, and rode on the good press that this decision would bring.
This is an expensive brand maneuver and risky for any company, particularly with what such a hot environmental topic as shark fin represents and the visibility that social media provides. In fact, this story is now global in the environmental community, and shows how multinational brands should exercise caution in who they work with, or license to, just as they would with supply-chain transparency and ESG requirements for those partners. “The unethical actions of Maxim’s undermine Starbucks’ admirable contribution to the United Nations Sustainable Development Goals (SDG), especially SDG14 which sets out to “conserve and sustainably use the oceans, seas and marine resources for sustainable development,” says Alex Hofford, Wildlife Campaigner with WildAid in Hong Kong. It should be stated that the Hong Kong and Chinese governments have already banned shark fin from the menu at all official functions.
The implied liability is now one that sits squarely on Starbuck’s doorstep. It is an issue that is easy to solve: simply stopping the sale of all shark fins via their partner Maxim’s. Such a solution would bring great publicity for both companies involved. To the contrary, failure to act on this topic in an engaged way can bring negative publicity, exposing a brand liability that no one seemed to expect just two weeks ago. This is where investors such as Larry Fink, the CEO of BlackRock, or Goldman Sachs, with their new environmental investment policies, will begin to make a difference in who they chose to invest in. It is not worth their time, or investor’s money, to be caught out on a limb on such a large-scale hot topic that has the potential to ignite, regardless of what tradition says along the way.
editors note: follow WildAid Hong Kong on Twitter @WildAidHK. This advocacy group is putting continual pressure on Starbucks to cut ties with popular Hong Kong restaurant chain Maxim’s Caterers Limited over its offering of dishes containing shark fin. And follow WildAid right here on Medium.
Doug Woodring is founder and managing director of Ocean Recovery Alliance