Well-intentioned companies take on the mantle of environmentalism, social responsibility, and general do-goodism. It's a heavy cloak to wear.Ray Anderson is a businessman who admits he never thought much about environmental sustainability or corporate responsibility. As CEO and chairman of Interface, a mid-size manufacturer of carpeting and floor tiles, Anderson, for years, simply focused on growing his
company. Then, one day in 1994, that all changed.
A group of Interface employees asked Anderson to make a presentation on the company’s “worldwide environmental vision.” After accepting the invitation, however, Anderson quickly lost heart. “I didn’t want to make the speech, because I didn’t really have any vision,” he says now. “The only thing we did as a company was follow the law — comply.”
About that time, a friend handed Anderson a book written by environmentalist Paul Hawken, titled The Ecology of Commerce. One night, as Anderson read through the book’s vivid descriptions of destruction wrought by industrial activity, he began to weep. “It struck me like a spear in my chest,” he says. By next morning, Anderson’s sense of mission had changed radically, after 20 years of running the company. Even though he had no idea how his proposals would affect the business — or even what exactly he would propose — Anderson decided that his company had a moral duty to transform itself into an ecologically sustainable operation.
While obviously not all CEOs feel the same moral imperative, there is something deeply attractive about the idea that some companies are green while others are polluters, that some employers are enlightened while others exploit their workers, that some companies are essentially “good” while others are “bad.” Research shows that people want their dollars to support companies that at least try to do well in the world. Many will go out of their way and spend a little more to feel their purchases have not supported sweatshop labor or damaged the environment too much.
Conversely, people will steer away from companies they believe are tainted, often for years after any real problems may have been corrected. Exxon has never quite emerged from the stain of the
oil spill in Prince William Sound 12 years ago.
Nike has become the villain of many a global morality play because of reported abuses in the company’s Vietnamese assembly factories. Texaco vaulted into this club of outcasts when reporters discovered recordings of racist banter among top managers.
Wal-Mart was emerging from the Kathie Lee Gifford brand sweatshop scandal, when the company was hit by evidence of similar problems with suppliers in the Far East.
Of course, some consumers are more tolerant of environmental and social abuses than others are. Your average Wal- Mart shopper is probably more interested in a company’s prices than in its practices, but certain subgroups’ insist- ence on organic, nongenetically modified, environmentally friendly, and sweatshop-free products is almost cliché.
One might postulate that the outdoorsy types and the Birkenstock-and-ponytail-wearing crowd would give their suppliers of choice a real boost in the fight to be compassionate about the earth and its workers. But like so many assumptions in this area, it often falls apart in the real world.
Take Vancouver-based Mountain Equipment Co-op. The company sells its Brio Crag backpacks and Farmer Jane Wetsuits through five stores across
Canada, as well as via catalogs online and off. Not exactly a vast empire, yet MEC reported $150 million in sales last year, and nearly 1.5 million Canadian adults are members. Its top officers — including chief financial officer and “senior manager of sustainability” Rick Kohn — lack no enthusiasm for the challenge of acting green and treating employees well.
And on the surface, MEC certainly appears to embody the ideal of the responsible corporation. The company actively promotes the resale and recycling of its products, and it has worked hard to cut down on product packaging and
energy use at its stores. Over the last 14 years, MEC has funneled more than $2 million to conservation proj-ects across Canada, ranging from the Tomifobia Nature Trail in
Quebec to the Caribou Commons Project in the
Yukon. The company Web site even enables visitors to test their personal “Ecological Footprint,” based on such factors as how many miles they drive each day.
But Kohn admits that Mountain Equipment Co-op has just begun its journey. The company only began to work actively to become a leader in social and environmental responsibility in 1997. It’s one thing to enable people to eat trail mix above the treeline in Jasper. It’s another altogether to understand the real environmental and labor effects of how your suppliers manufacture your products in countries like
China and
Vietnam. Kohn admits that MEC has not yet developed any foolproof way to measure perform-ance at such far-flung facilities, though the company does try to inspect those factories.
Kohn isn’t fretting the details that remain undone — yet. “We always knew we needed to walk before we could run,” he says. Still, the lesson is clear. Even a cooperative business — one that takes in a cool $150 million per year yet proudly forswears profits, that dominates its home market, that serves a progressive clientele — still finds it very difficult even to define what signifies doing good as a company, let alone how a “good” company should act.
In the midst of such confusion, it’s little wonder that companies spend billions of dollars to trumpet what successful programs they do have. Since the late 1980s, the expense of building a good and green corporate image has become an increasingly important part of companies’ public relations budgets. “Some companies actually spend more to advertise what they do than on actually developing and implementing progressive policies,” says Thea Lee, the assistant director of public policy for the AFL-CIO.
And, obviously, not all corporate claims about walking lightly upon the surface of the earth are true, at least not completely. Take British Petroleum and Royal Dutch/Shell. The two companies have made plenty of seemingly sincere statements — and booked some very expensive advertisements — touting their desire to move their business models beyond the mere extraction and refining of petroleum. BP especially has taken real steps by tying executive bonuses to environmental performance. Yet both companies number among the basic pillars of humankind’s fossil-fuel-dependent energy system.
Much the same is true of Ford Motor Co. The company made headlines by publicly accepting the concept that burning fossil fuels may bring on a perhaps disastrous warming of the earth’s climate. And at the behest of chairman William Clay Ford, Jr., the company board approved plans for a vast new plant to test cleaner ways of building cleaner cars. Yet Ford’s fundamental goal is still to make billions of dollars by selling internal combustion vehicles, and the company has been especially aggressive at marketing gas-swilling SUVs.
Among mainstream environmentalist and labor professionals, however, skepticism about such PR efforts is less than might be expected. While their general philosophy is that no company is truly “good,” they increasingly accept that some companies do act better — often much better — than their competitors. Most corporations are so big, and their operations so complex, that they produce a very complex mixture of positive actions and bad practices, says Rebecca Eaton, the senior program advisor for global threats at the World Wildlife Fund’s U.S. headquarters. “A company can be the worst polluter on one end, and have tops-in-class environmental systems on the other end.”
The goal of many labor and environmental professionals, therefore, is to spread the knowledge of what works and to reward companies for good practices when possible. A grudging admiration has grown for the efforts of, say, British Petroleum and Ford. Though far from perfect, these companies have taken risks — and incurred costs — that others have not. Speaking of Royal Dutch/Shell’s support for the Kyoto Treaty to reduce greenhouse emissions, one long-time promoter of socially
responsible business, Wouter Van Dieren, who runs an international consultancy in
the Netherlands, put it this way: “To have a corporate giant like Shell take the lead on this issue is truly astounding.”
Just as the truth at most companies is more complex than a simple, black-and-white label of “good” or “bad,” so the process of remaking an old-line manufacturing company has proven extremely complex for Anderson and Interface. Their efforts, however, have led to clear results. Interface redesigned its factories and its production processes, and it launched massive efforts to cut its use of energy and raw materials. The company’s R&D team is working with scientists at Cargill/Dow to replace petroleum-based supplies with vegetable- based substitutes.
Perhaps most important, Anderson says, Interface developed a way to track its progress along the road to sustainability. “We do it by measuring the total amount of stuff extracted from the earth, including by all our suppliers and including all the energy we use, in order to produce a dollar’s worth of revenue,” Anderson says. Over the past five years, he says, Interface “has cut the total from 1.59 pounds per dollar of revenue to 1.21 pounds per dollar, or roughly a 24 percent reduction.” The goal is to get the number down to zero. A truly sustainable operation, Anderson adds, should leave “zero footprints on the earth.”
And although the transformation of Interface may have sprung first from
a personal vision by its CEO, Anderson is first to admit that the evolution continues only because it is good business. “The goodwill that has been engendered in the marketplace has just amazed us,” he says. “I had no idea that day in ’94 that it was anything more than the right thing to do.” Best of all, Anderson says, Interface’s success in selling its more environmentally friendly products to architects and designers has “in turn moved our competitors” in the flooring products industry to do the same.
There is still a long way to go, Anderson says, both in Interface’s own operations and in the industrial system as a whole. What few gains have been made in the corporate world remain fragile, and the threats to progressive companies are many. Increasingly fierce global competition can exert huge pressure, especially within labor-intensive industries. The clothing manufacturer Levi’s enjoyed one of the best reputations among labor activists of any U.S. employer only five years ago. Since then, competition from low-wage producers abroad has forced the company to close most of its U.S. factories. Similarly, global consolidation within many industries threatens funding for social responsibility programs, especially in sectors that are in decline.
Yet Anderson remains cautiously optimistic that the world’s business leaders are slowly waking up not only to the ecological threats of unfettered industrialism, but also to the many tools now available to help executives change their own companies. The movement, he says, extends far beyond the giant corporations and the governments of the rich nations of the world: “Every person, and every company, no matter how small, can make great advances.”
YOU CAN FOOL SOME OF THE PEOPLE...Consumers may not notice, but fund managers will.Few companies spend much time thinking about how their activities damage the environment or harm their employees. Too many other things get in the way, such as basic survival, maximizing profits, buying other companies, fending off unwanted suitors, introducing new products, figuring out how to apply the latest software — to name a few.
And while companies with high-profile brands do have to pay attention to their public images, the great mass of the world’s businesses can do just about anything without running afoul of the public, as long as they stay within the often capacious confines of the law.
It is, however, one thing to fool the public, and another thing entirely to fool the manager of an investment fund. And thanks to the rise of what is often called “social investing,” as much as $2.1 trillion is now parked in investment funds that actively promote certain types of business activities, estimates Steve Schueth, the former president of the Social Investment Forum. Between 1995 and 1999, adds Schueth, who serves as president of the First Affirmative Financial Network, such funds grew three times as fast as the broader universe of all professionally managed investment portfolios. “This has become a lot more mainstream than a lot of people think,” agrees Robert Brady, managing director of a pioneering socially responsible investment fund for Salomon Smith Barney.
Efforts to use investment funds to reward socially responsible business date back to the 1980s. In the early days, however, the restrictions on where money was invested were relatively crude — limited to avoiding tobacco stocks and,perhaps, petroleum companies. Now these funds are more sophisticated, and fund managers actively seek out companies that have racially diverse workforces, or that make extra efforts to protect the environment, or that actively try to protect their overseas workers. “Investors over the long term are interested in strategic differentiation,” says Brady, who spent more than a quarter century on
Wall Street before he launched the
Salomon Smith Barney fund in 1987. “In the new world we operate in, these are increasingly strategic business issues.”
The desire to support progressive companies comes from both individuals and increasingly from the managers of the giant pension funds. “We are having literally hundreds of discussions and interactions about socially responsible investing on a scale we’ve never seen before,” says Timothy Smith, director of socially responsive investing for Walden Asset Management, a division of
United States Trust Company of Boston.
While fund managers admit that many still doubt they make good investments, most will readily assert that their products perform at least as well as the average fund. “The market has always paid for good strategic management,” Brady says, “and a lot of these issues are indicative of good strategic management.” —
WHAT'S A COMPANY TO DO?
It’s easy to announce intentions to operate a company in more environmentally and socially sensitive ways. But, as many executives are discovering, delivering on that promise can prove to be the most confounding mission a company ever undertakes. A good place to call is Business for Social Responsibility, essentially a trade organization where executives come together to discuss how to conduct socially responsible business.
But don’t think BSR is the place to learn the latest in fig leaf fashions for use by the PR department. Rather, the organization is supported by executives deeply committed to going beyond the letter of the law in cutting waste and in doing well by their employees.
BSR is far from alone. There are dozens of non-governmental groups ready to help businesses improve both process and policy. The
World Wildlife Fund has made great progress in changing how some of the world’s biggest corporations buy their raw materials. The giant conglomerate
Unilever, in partnership with the Marine Stewardship Council, has begun to reform how it buys fish and other seafood products. The
Home Depot, meanwhile, has introduced a line of wood products grown through sustainable forestry practices.
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