Protecting the natural environment isn’t the whole story: companies must consider their social, economic, and cultural impact as well.
Adam Werbach became the Sierra Club’s youngest president in 1996, at 23. Yet by 2004, he argued in a widely discussed speech that environmentalism had hit a wall because it focused on green issues rather than a larger goal: sustainability. His willingness to help Wal-Mart Stores’ efforts to achieve it made him still more controversial among environmentalists.
Werbach is now CEO of Saatchi & Saatchi S, a consultancy arm of the global advertising firm dedicated to sustainability solutions. This article is adapted from his new book, Strategy for Sustainability: A Business Manifesto. In an accompanying video interview, he explains the ideas that inspired it.
An adaptation from Strategy for Sustainability:
Of the world’s 100 largest economic entities, 63 are corporations, not countries. Great power creates great expectations: society increasingly holds global businesses accountable as the only institutions strong enough to meet the huge long-term challenges facing our planet. Coming to grips with them is more than a corporate responsibility. It’s essential for corporate survival.
Unfortunately, short-term thinking is now endemic to business strategy. By the time of the great petroleum price spike of 2008, for example, America’s Big Three had an advantage over their foreign competitors only in light trucks and SUVs—precisely the cars that consumers didn’t want. The possibility of such a firestorm has been obvious for decades, yet the automakers are only now trying to deal with it. For them and all other organizations, survival isn’t a right. To endure in a changeable world with more limits on resources and less credit, companies must develop and execute a strategy for sustainability. But that doesn’t mean a green strategy. Sustainability is much bigger because it takes into account every dimension of the business environment: social, economic, and cultural, as well as natural.
Until the 1980s, business leaders used the word sustainability to mean a company’s ability to increase its earnings steadily. The term became widely used in its present sense in 1987, after it appeared in a UN report by Norway’s former prime minister Gro Harlem Brundtland, who defined sustainable development as “meeting the needs of the present without compromising the ability of future generations to meet their own needs.” More recently, as Michael Pollan, the author of The Omnivore’s Dilemma, writes, the whole idea has been “in danger of floating away on a sea of inoffensiveness. Everybody, it seems, is for it whatever ‘it’ means.”1 Sustainability even has a dark side: “greenwashing”—that is, focusing more on communicating your green efforts than on the efforts themselves.
For my purposes, a sustainable business means a business that can thrive in the long term. Sustainability is bigger than a PR stunt or a green product line, bigger even than a heartfelt but occasional nod to ongoing efforts to save the planet. Imagined and implemented fully, sustainability drives a bottom-line strategy to save costs, a top-line strategy to reach a new consumer base, and a talent strategy to get, keep, and develop creative employees. True sustainability has four equal components:
- social, to address conditions that affect us all, including poverty, violence, injustice, education, public health, and labor and human rights
- economic, to help people and businesses meet their economic needs—for people: securing food, water, shelter, and creature comforts; for businesses: turning a profit
- environmental, to protect and restore the Earth—for example, by controlling climate change, preserving natural resources, and preventing waste
- cultural, to protect and value the diversity through which communities manifest their identity and cultivate traditions across generations
Although the challenges to sustainability are acute, there has never been a better time than the present for a company to play a critical role in helping to resolve them while building up its business. Many of the social and environmental trends we face are sad, even tragic, but sustainability isn’t about throwing your business down the drain and embracing your inner saint. That’s one reason for looking beyond the green aspects of sustainability and using its social, economic, and cultural sides as tools for building successful companies. Green businesses, green jobs, and emerging green economies will be a central part of the new world now being born, but green alone isn’t a broad enough platform to sustain most businesses for the long haul. Those that take into account broader social issues will be better able to thrive and to lead.
A company that aims to achieve greater sustainability must therefore articulate a “North Star goal”: a strategic direction that embodies a global human challenge larger than any organization. Such a goal should be consistent with the strengths of the company, have a connection to its core business, and elicit the personal contributions and passions of its members. Finally, the goal ought to be optimistic and aspirational but not impossible—achievable, incrementally, within 5 to 15 years. Like a Christopher Columbus, you as the leader must point to a destination, even though at the start of the journey you may have no idea how to reach it. Your people will figure out how to cast off, when to shift sails, and what to do to move the organization forward.
The stories of two companies, method and Seventh Generation, show how these ideas play out in actual organizations.
The household products company method, based in San Francisco, may be the most successful such business using a “cradle to cradle” process to develop its products. That process, pioneered by Michael Braungart and William McDonough, ensures that every ingredient of a product is nontoxic and energy efficient throughout its manufacture, use, and disposal. The company considers the past, the present, and the future of all its products by asking if they came from a sustainable source (past), are nontoxic (present), and will be reusable or recyclable (future).
Founded in 2001 by Adam Lowry and Eric Ryan, method quickly achieved $100 million in sales thanks to wide distribution through retailers such as Target. Its line of products extends from hand soaps to laundry detergents to cleaning sprays. All its products are recyclable, and a large portion of them incorporate recycled content. Yet the company doesn’t describe itself solely as a “green” brand. “Green is one aspect of method,” said Lowry. “There is tremendous pressure on environmentally conscious businesses to make green their primary message,” he added. “But you need to be relevant to a wide audience, and leading with a single green message may exclude new consumers.” A brand needs unique qualities, and green won’t be unique for long. Eventually, competitive pressures, commodity costs, or regulation will make all products nontoxic, energy-efficient, and sustainably packaged, so greenness alone won’t be distinctive. To truly be sustainable, a product needs more than just the environmental aspects of quality.
Yet method hardly ignores the environment. Within the walls of the company’s headquarters, near San Francisco’s Chinatown, visitors can easily see why it describes itself as deep green on the inside. Lowry’s job title is chief greenskeeper, and his role is to form and maintain the principles that govern the company. One of them is that it shouldn’t use any product that hasn’t been proved safe. Lowry maintains a list of “dirty” chemicals (such as ammonia, bleach, and phthalates) that method won’t use in any of its products. Because it has yet to find what it considers a nonhazardous antimicrobial agent, for example, it doesn’t make antimicrobial products, such as antibacterial hand wash. The company also has a “clean list” of ingredients safe for people and the environment. Small teams of “green chefs” use these ingredients to create products.
An organization so focused on saving resources faces an ongoing challenge to reconcile design, efficacy, and environmental considerations. Method, for example, could reduce the amount of plastic in some of its bottles by 5 percent, but the company believes that a bottle’s design is important for the brand and that occasionally it takes 5 percent more plastic to make a beautiful bottle. Sustainability isn’t the only goal of the company’s design ethos—aesthetics also plays an important role—but method ensures that, so far as possible, the plastic it uses is recyclable and recycled.
The use of plastics involves another hard choice. Most products have dyes, which green consumer circles condemn as evil. Method, however, looks at the dyes and the product as a whole—the dyes on the bottle and those in the liquid. Life cycle analysis of dyes, in Lowry’s view, shows that it’s much better to put them in liquids than in bottles. Take, for example, method’s all-purpose cleaner, sold in a clear container made of 100 percent recycled polyethylene terephthalate (PET). The liquid inside is colored with 0.007 percent of a synthetic purple dye. But Lowry argues that “it’s completely degradable and nontoxic. It’s a good dye.”
A white PET bottle, by contrast, may never get recycled. When white PET gets sorted in municipal-recycling programs, the operators frequently think it’s high-density polyethylene (HDPE), the stuff used to make laundry bottles, and send it to the HDPE reprocessor. There it gets punted out as an impurity and sent to landfill. “If you’re going to want to tint a PET bottle white, you’ll use a thousand times as much dye to dye the bottle and you’re going to make it less recyclable,” Lowry said. “We want a plastic bottle that will be recycled—not just capable of being recycled.”
People have a strong, intimate connection to the household products they use. Perhaps that’s why I’m fascinated by the way companies such as Clorox, method, and P&G are riding the new wave of consumer interest in sustainable products. But unlike these relative newcomers, Seventh Generation, a company based in Vermont, started producing them long before they became trendy.
Seventh Generation got its name from the teachings of the Native American Iroquois confederacy: “In our every deliberation, we must consider the impact of our decisions on the next seven generations.” The company, founded in 1988 by Jeffrey Hollender, its “chief inspired protagonist,” is widely respected as a leading sustainable producer of household products. For more than a decade before new entrants began to compete in this space, Seventh Generation built a loyal following among consumers who want to make a difference through the products they buy.
The company’s global imperatives—North Star goals, to use my terminology—connect the operations of the business with the aspirations expressed in its name. These imperatives answer a basic question that all executives should ask themselves: what can my company do that the world most needs? Seventh Generation’s imperatives hold that all businesses should help everyone who works for them develop as people and approach everything they do from a systems perspective: a world that is endlessly interconnected, in which everything we do affects everything else. The imperatives also commit the company to ensuring that natural resources are used at a rate that is always below their rate of depletion. The core of Seventh Generation’s ethos is the belief that the company can change society and the way other companies work by succeeding in its own business. Forty years of organizational-development research shows that this simple idea attracts high-performance employees and permanently infatuated customers.
Of course, Hollender isn’t your typical executive. He plans to transfer his company to its employees over time. He gives away corporate secrets by actively blogging. He made one decision that might have cost the company millions of dollars: until Wal-Mart Stores started its sustainability initiative, he refused to sell products to the giant retailer, because he didn’t want to be involved with an institution that wasn’t actively working to improve its social and environmental performance. When Wal-Mart embraced sustainability, he spent many long hours in the company’s headquarters, in Bentonville, Arkansas, sharing his experience with its leaders.
As a pioneer in the category and a person disposed to generosity, Hollender has reacted in a very interesting way as nearly every major consumer-packaged-goods company started to claim an interest in sustainability. For the most part, he is thrilled, pointing to these other companies as proof that his dream of changing the world is coming true. He worries, though, about greenwashing and the possibility that it will make consumers doubt all products, including Seventh Generation’s. “A company that proclaims its commitment to social and environmental responsibility in a clumsy or inauthentic way quickly breeds cynicism and distrust—and invites the inevitable backlash,” he said.
Hollender has seen many fellow entrepreneurs sell their companies to larger conglomerates. “Massive buyouts, minimal buy-in,” is how he described such transactions, which, he adds, “often act as a fig leaf for large corporations hoping to appropriate the virtues of the ethical company so as to rehabilitate their image.” He remains hopeful, however. Meanwhile, he enjoys driving his business from the fringe to the center.
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