Amazon, Best Buy and the free rider problem

Pedestrians pass in front of a Best Buy Co. store in this photo taken with a tilt-shift lens in New York, U.S., on Sunday, June 12, 2011. Best Buy Co., the world's largest consumer electronics retailer, is scheduled to announce quarterly earnings on June 14 before the opening of U.S. financial markets. Photographer: Chris Goodney/Bloomberg via Getty Images

Gap, Nike and Walmart can police their global supply chains to outlaw child labor but what about discount retailers and no-name brands?

McDonald’s can become a leader around animal health and welfare but other fast-food chains need not follow.

IKEA plans to power itself with 100 percent renewable energy while rivals who buy cheaper, coal-fired electricity can gain a competitive edge.

These examples point to a couple of obvious problems with voluntary corporate-responsibility initiatives. First, there’s no assurance that such initiatives are going to solve whatever problem it is that they are targeting; in fact, they won’t unless they are universally adopted or codified into law. Second, unless and until those companies that lead the way are rewarded by consumers (unlikely) or their workers (more probable), the leading companies can find themselves at a disadvantage.

This week at Guardian Sustainable Business, I look at the contrast between Best Buy, a corporate-responsibility leader, particularly around recycling, and Amazon.com, which until recently has been a CSR laggard.

Here’s how the story begins:

When my wife’s printer recently went on the fritz, she ordered a new one from Amazon, which arrived two days later. I took the broken printer to Best Buy, which offers free and easy recycling of electronics.

Is this a problem for Best Buy, I wondered? Collecting and recycling electronics costs money, and Best Buy’s program is open to anyone with electronic waste, from any manufacturer. No purchase necessary.

By contrast, Amazon, a key competitor – and the seller of both our old and new printers – offers little in the way of recycling and more broadly has been a laggard when it comes to corporate responsibility.

The Seattle-based online retail giant says on its website that it “recognizes, as do many of our customers, the importance of recycling electronic equipment at the end of its useful life”. But the company offers only a mail-in take-back programlimited to its own products, like the Kindle e-reader.

“It’s not quite break-even,” said Alexis Ludwig-Vogen, Best Buy’s director of corporate responsibility, of the program. This means, to put it bluntly, that Best Buy is collecting trash generated by Amazon, Walmart and other competitors.

The dynamic between Best Buy and its competitors is analogous to what economists call a free rider problem. Best Buy is providing what could be considered public goods, free recycling, at its own expense, and Amazon, Walmart and, for that matter, all the rest of us benefit. Electronics make up the fastest-growing waste stream on the planet, and recycling preserves metals and plastics, and reduces pressures on landfills. Efforts like Best Buy’s also help fend off regulation, which could benefit other companies.

You can read the rest of the story here.

Edelman’s climate problem

magnifying-glass-valuesLast summer, the big PR company Edelman faced a problem that no amount of spin could resolve. Kert Davies, the former head of research for Greenpeace who now leads the Climate Investigations Center, had surveyed big public relations companies to see where they stood on the issue of climate change.

Edelman waffled. The company published a position on climate change that raised as many questions as it answered. Last August, I wrote a story about the issue for the Guardian that began like this:

A 1930s union song, popularized by the late great Pete Seeger, asks pointedly: “Which side are you on, boys? Which side are you on?”

Since then, an insider told me, “a struggle for the soul” of Edelman as been unfolding inside the firm,which has more than 5,500 employees and reported worldwide revenues of $768m in FY2014. Some of those employees work for fossil-fuel clients who oppose efforts to curb greenhouse gas emissions and want to extract as much oil and gas from the ground as they can. Others work for companies like Unilever, Starbucks and The North Face that have lobbied for meaningful climate regulation.

Yesterday, I revisited the story and reported in the Guardian that Edelman has lost four valued staff members, all of them leaders of Edelman’s “Business and Social Purpose Practice,” and two influential clients, the We Mean Business coalition and Nike, at least in part because of its refusal to take a stand on climate change.

Does this mean that the fossil-fuel crowd inside Edelman has won? It sure looks that way, but it’s hard to know. Edelman executives declined to be interviewed for my story. No one was willing to explain what the climate position means if, indeed, it means anything at all. 

Richard Edelman, in Davos
Richard Edelman, in Davos

This surprised me, not because Edelman execs are obligated to talk to reporters (they’re not), but because I took at face value the company’s platitudes about trust, values, corporate responsibility and openness. Company president Richard Edelman: “Transparency is not optional.” And: “We strongly urge business to take the chance to redefine value as being also about values.”

As a reporter, I’ve dealt with the Edelman firm for more than a decade; my relationships with people there have been excellent, until this climate issue came along. Shortly after I was laid off by FORTUNE in 2008, I did some writing and consulting for Edelman. I soon learned I wasn’t cut out for PR, but again, my experience with the firm was good. Call me naive, but I thought Edelman was a different kind of PR firm.

Now I can’t help but conclude that they are no different from their peers, as yesterday’s story indicates:

Some clues about where Edelman is headed can be gleaned from a new set of values and a statement of purpose published last month. The statement makes explicit the company’s willingness to work on both sides of controversial issues, including climate change:

We believe that independently held, opposing views deserve to be heard in the court of public opinion and we assert our role as a firm to being advocates for our clients.

Doing so doesn’t condone every action every client takes or imply implicit support for every position a client may adopt, but does reflect our absolute commitment and support of their right to exercise their freedom of expression.

It also grants each employee the “right to elect not to work on a piece of business that does not align with his or her personal beliefs.”

In a recent video to employees about the new statement of purpose, Matt Harrington, Edelman’s global chief operating officer, said simply: “We exist to be advocates for our clients.”

Which is OK, I guess, and wouldn’t even be a story if Edelman hadn’t tried to have it both ways on climate.

The upshot is that Edelman has lost some talented people and a couple of clients.

We’ll never know what would have happened had the company taken a different path. Instead of mumbo-jumbo about how “marketing communications” has to become “communications marketing,” Edelman could have adopted a bold, values-based position on climate change. It could have worked with its more forward-thinking fossil-fuel clients, like Shell, to bring them along on the issue. It could have positioned itself as the go-to PR shop for companies and NGOs that take sustainability seriously.

It could have walked the walk as well as talked the talk.

That’s a story I would have liked to write.

Sustainability advocates who deserve thanks

cc738434-9e37-457d-8aba-00f196d0b7a3-2060x1236

I ran into Hunter Lovins last week at a meeting of business leaders at the UN. She’s wearing a black hat but she’s one of the good people. Author, activist, sustainability consultant, force of nature — Hunter always has plenty to say, and she says it bluntly and passionate.

At the UN gathering of executives from companies that are part of the UN Global Compact LEAD group, Hunter got into a friendly debate with Joel Bakan, a law professor and corporate critic, whose 2004 documentary, The Corporation, likened corporations to psychopaths.

Hunter argued that business, not government, is more likely to lead us to a sustainable future. Joel took the opposite view. I wrote about the debate here, in a story for Guardian Sustainable Business.

“We’re in a horse race with catastrophe,” Hunter told me afterwards. “Can corporations move fast enough? Government cannot. It will not. Corporations might. Will they? I don’t know. On that turns the future of the world.”

Not a bad summary of where things stand today. Hunter’s not just a good talker but a do-er, working with a variety of companies — her future and past clients include Walmart, Unilever, Patagonia, Clif Bar, Interface –to help them become not just sustainable but, ideally, regenerative.

With Thanksgiving approaching, this is a good time to thank people like Hunter–those who, as insiders or advisers, are working in the trenches of corporate America, trying to persuade their companies to become part of the solution to big social and environmental problems.

It can be a tough slog, but it’s important work. That’s while this fall in Guardian Sustainable Business, we’ve been running a series of brief q-and-a’s that showcase sustainability executives. Some are with people who I know well, and others I hardly know at all. But I persuaded my colleagues to run the series because they don’t get enough credit for the work they do.

Here are some of the people I’ve talked to, in no particular order:

Tim Mohin of AMD, about an electronics industry coalition that is seeking to improve factory conditions in the developing world.

Frank O’Brien-Bernini of Owens-Corning, about the need to be rigorous when dealing with environmental issues.

Kathrin Winkler of EMC, about electronic waste.

Rhonda Clark of UPS, about carbon emissions reductions.

Adam Mott of North Face, on the responsible cycling of down.

Vince Digneo of Adobe, about green teams.

Paulette Frank of Johnson & Johnson, about recycling.

Amy Hargroves of Sprint, about the importance of standards.

Marcus Chung of The Children’s Place, about the need to go beyond factory auditing.

If you’d like to nominate someone (or yourself) for this series, let me know. Meantime, thanks to all for participating–and for all the good work you do.

More than a bean counter: Starbucks’ Howard Schultz

Starbucks chairman Howard Schultz said the company's 'open-carry' policy had been hijackedHere in the US, who are the big, bold corporate leaders when it comes to corporate responsibility? It’s not a long list. CVS’s decision to stop selling tobacco was a big deal, but I’ll bet you don’t know the name of the company’s CEO.* I’m a big fan of David Crane of NRG Energy, who has been outspoken on the climate issue, but NRG burns a lot of coal. GE’s Jeff Immelt, who talk a lot about energy and climate in the late 2000s, has quieted down, and he now backs the Keystone XL pipeline. Most interestingly, perhaps, Tim Cook of Apple has been speaking out about climate change and gay rights, and the company is doing good work on renewable energy and labor rights in its supply chain. But there aren’t a lot of CEOs in corporate America who are using their influence on behalf of the common good.

Then there’s Howard Schultz. One of corporate America’s longest-running CEOs — he has led Starbucks as either its CEO or chairman since 1987 — Schultz built not only a global economic powerhouse (Sbux has more than 20,000 stores in 65 countries) but also a company that stands for something. This week, the company sponsored The Concert for Valor, a moving tribute to American’s veterans on the National Mall.

I’ve paid close attention to Starbucks since the early 2000s, when I devoted a chapter to the company in my 2004 book, Faith and FortuneThis week, Guardian Sustainable Business launched a new “hub” on leadership, so it seemed like a good time to write about Schultz, and why he matters.

Here’s how my story begins:

“Why are there aren’t more Paul Polmans?”

Joel Makower, the writer and founder of GreenBiz Group, put that question to Unilever CEO Paul Polman at last week’s Net Impact conference in Minneapolis, Minnesota.

“There are 5,000 in the audience here,” Polman replied deftly, playing to a crowd of students and young professionals, who aim to use their business skills to change the world for the better.

It’s a good question, though. Why, indeed, aren’t there more CEOs willing to put society’s social and environmental needs at the core of their business, particularly here in the US?

Yvon Chouinard, the rock climber and environmentalist who started Patagonia, is one example, but he no longer runs his company – and in any event, it’s privately-held, which allowed him more room to maneuver.

A slew of business executives founded or led smaller, crunchy-granola firms with impressive environmental records – including George Siemon of Organic Valley, Jeffrey Hollender of Seventh Generation, Gary Hirshberg of Stonyfield Yogurt, and Drew and Myra Goodman of Earthbound Farms – but their influence is, or was, limited. It’s no wonder Polman sometimes seems to tower over the crowd of global CEOS.

Then there’s Howard Schultz, the CEO of Starbucks.

Schultz in the news this week, which is why his named occurred to me when I thought about Joel’s question. But for the past two decades, he has built a company that revolutionised the fast-food industry: providing ownership and healthcare coverage to its workers, investing in the environmental practices and wellbeing of coffee growers, supporting marriage equality, promoting job-creation during the last recession and, now, honouring America’s veterans.

You can read the rest here.

Feel free in the comments to name other leaders in corporate America who are using their power to help solve social and environmental problems.

*It’s Larry Merlo.

PR firm Edelman has more than a PR problem

640px-Edelman_Logo_ColorI’m an admirer of Edelman, one of the world’s biggest and most respected PR firms, and I’m friendly with a number of people who work there. The firm has been ahead of the curve on corporate-responsibility issues, managing effective campaigns for the likes of GE and Walmart. Richard Edelman, who runs the place,  approached me about coming to work for Edelman after I was laid off from Fortune at the end of 2008 and, while I had some great conversations with their senior execs in New York, I ultimately decided to stick with journalism.  (Disclosure: I did a very limited amount of consulting work with Edelman in 2009. It didn’t suit me well.)

Part of the problem with big PR firms — the same goes for big law firms and accounting firms — is that, for the most part, they need to take whatever work comes in the door if they want to keep their door open and keep their people employed. (Edelman, which is privately held, has more than 5,000 employees in 65 offices around the world. This need to grow is even more intense at the publicly-owned PR shops.) Some of the work that comes in will be unseemly. Lately, this has become a problem for Edelman, and for its reputation–as I wrote today for Guardian Sustainable Business.

Here’s how my story begins:

A 1930s union song, popularized by the late great Pete Seeger, asks pointedly: “Which side are you on, boys? Which side are you on?”

On the issue of climate change, that question now confronts Edelman, one of the world’s largest and most admired public relations companies.

In the wake of a survey of the top 25 global PR firms by the Guardian and the Climate Investigations Center, released 4 August, [Edelman said:]

Edelman fully recognizes the reality of, and science behind, climate change, and believes it represents one of the most important global challenges facing society, business and government today. To be clear, we do not accept client assignments that aim to deny climate change.

Beyond that, for nearly a decade, Edelman has built a reputation as the go-to PR firm for corporate sustainability by managing campaigns for the likes of GE (“Ecomagination”), Walmart and Unilever. Richard Edelman, the firm’s high-profile president and CEO, blogs about having dinner at the home of Jeffrey Sachs, his Harvard classmate and a noted climate hawk, and quotes Sachs as saying that “the world is on a very dangerous path.”

And yet.

The Edelman firm works for the American Petroleum Institute, the Washington-based trade association for the oil and gas industry, which opposed the 2009 Waxman-Markey climate change bill favored by some energy companies and utilities, supports the Keystone XL pipeline and exploration of the Canadian tar sands and says, in limp language on its website, that burning fossil fuels “may be helping to warm our planet.”

Until recently, Edelman worked for the Alliance for Northwest Jobs and Exports, a coalition of coal, mining and railroad interests that promotes coal-export terminals in the Pacific Northwest that are strongly opposed by environmental groups. Another Edelman client is said to be ALEC, a conservative lobbying group that opposes regulations on carbon pollution. GE, Walmart and Unilever are among about 70 companies that have reportedly cut their ties with ALEC, although not over the climate issue.

So … which side are you on, boys?

Elsewhere in the press, including in The Times the other day, this has been covered as a PR “faux pas” for the big PR firm. That’s accurate: Edelman bungled its initial reply to the Guardian survey, after which Richard Edelman made matters worse by calling a reporter and saying that a senior exec at the company had been fired as a result. Embarrassing? Sure, but we all make mistakes.

The harder and more important challenge for Edelman and others will be to navigate the climate controversy going forward. The firm cannot be seen as a “thought leader” (ugh, hate that phrase) on corporate sustainability and work on behalf of coal exports or the American Petroleum Institute, which has opposed regulation of greenhouse gases.

Will Edelman have to give up its fossil fuel clients, in a Bill McKibben-style divestment? I think not. Just about all of us depend on fossil fuels to get us around and heat our homes, so we’re not about to give up fossil fuels. But I do think that Edelman (and others) may  have to make distinctions between those fossil-fuel companies that are willing to be part of a constructive solution to the climate crisis–Shell, say, or BP in its better days–and those companies or trade associations that want only to obstruct. That’s not an easy distinction to make, but so it goes.

I had a couple of interesting reactions today to my Guardian story, both on background. This came in via email from a former Edelman employee:

I’ve personally struggled with this a lot….I worked really hard on sustainability for Walmart, GE and others while at Edelman and truly believed in our work. At the time the support was top-down from people like Richard Edelman and Leslie Dach, but once Leslie left, the DC office took on API and dove into the “energy” space. I’ve been very uncomfortable with the DC office’s transformation and am personally glad to see their hypocrisy being exposed. You can’t work both sides of the issue.

Actually, many PR firms, law firms and accountants do work both sides of the issue, on the grounds that everyone is entitled to a flack/lawyer/accountant. The trouble with that is their companies then don’t stand for anything beyond providing service to whoever pays the bills.

I asked an Edelman friend/colleague for a reaction, and got this reply:

 I am glad to work at one of a very few large PR companies who have exclusions that include climate change denial in addition to the “usual” easy targets of tobacco and guns. But the tough part comes in when it deals with how we implement that exclusion. And that is the positive from all of this – we are now having a really robust and tough internal discussion on this.

 I actually do think that Edelman is one of the few large agencies or service companies where we can develop a true leadership position on this. It is very much a values driven company and if we can’t get it right here then I don’t have much hope for public companies.

What an interesting test of a company’s values.

Has success spoiled Green Mountain Coffee?

image“Doing well by doing good” has become a cliche on the corporate-responsibility circuit. And for good reason–smart companies that serve their customers, provide opportunity to their workers and connect with their communities are likely to deliver superior shareholder returns.

But doing well can complicate the desire to do good. That’s been the challenge lately for the company formerly known as Green Mountain Coffee Roasters and now called Keurig Green Mountain Coffee.  Thanks to the sales of Keurig coffee machines and literally billions of single-serve coffee pods — which cannot be recycled — the Vermont-based firm has been on a tear, rapidly growing its revenues and stock price, while generating enormous amounts of waste. And to what end?

My story about Green Mountain was posted today at Guardian  Sustainable Business.  With apologies for my formatting problems today (I’m working on an iPad) here is a link that you can copy into a browser –  http://flip.it/sSCuG  – and here is how the story begins:

Not long ago, Green Mountain Coffee and it’s chief  executive, Bob Stiller,  were hailed as corporate responsibility pioneers. Green Mountain was the world’s largest buyer of Fair Trade coffee. The company offset the carbon emissions of its energy use and won a “green power” award from EPA. Twice, it topped CR Magazine’s list of the 100 best corporate citizens.

Today, Keurig Green Mountain (KGM), as it is now known, remains a corporate-responsibility standout. But the Vermont-based firm has a dark stain on its reputation. Since acquiring Keurig, the inventor of a single-serve coffee machine and its patented K-Cups, the company has become the driving force behind what critics say is an environmental scourge – the throwaway coffee pods made of plastic and aluminum foil that waste energy and materials, and are all but impossible to recycle.

Meanwhile, Stiller, an ex-hippie who briefly became a billionaire, was forced out of KGM after going on a spending spree with borrowed money, acquiring a 164-foot yacht, a $10m, 7,500-square-foot Palm Beach mansion and a $17.5m Manhattan condo formerly owned by New England Patriots quarterback Tom Brady. Green living, that’s not.

What went wrong with Green Mountain? In a word, success. Its story challenges easy pieties about doing well by doing good. This is a company that has done very well – but only by setting aside, at least for now, the environmental values it once held dear.

Green Mountain shareholders certainly aren’t complaining. Shares of Keurig Green Mountain (NASDAQ:GMCR) have grown 50% in the last year and 548% in five years. Sales have skyrocketed to $4.4bn last year from $492n in 2008. Those Keurig machines and the little plastic cylinders that pop into them have driven that growth, accounting for more than 90% of revenues.

Keurig Brewing Systems are now used in 16m US homes, about one in six, the company estimates. In 2013, KGM says it sold roughly 8.3bn “portion packs”.

To be fair, Keurig Green Mountain recognizes that the waste created by its coffee pods is a problem and promises to reduce it. Monique Oxender, the company’s senior director of corporate responsibility, told me: “Recycling is one of those areas where we have a lot of work to do, and we know that.”

This isn’t a simple story.  Keurig Green Mountain says it intends to make 100% of K-Cup packs recyclable. And the company argues that the single serve machines save resources in the the coffee-growing supply chain because the machines waste less coffee than traditional brewing methods.

But Keurig also has announced alliances with Coca Cola and Campbell Soup to develop single serve machines for cold drinks and soups. In the company’s latest annual report, CEO Brian Kelly writes: “Our mission is to have a Keurig® System on every counter and a beverage for every occasion.” That sounds like a recipe for a whole lot more waste.

By now, we should know better. As author and activist Amy Larkin told me:  “We now understand waste, water usage, manufacturing, mining, freight transport and packaging and their impact on the world. It seems madness to develop a product line that increases all of the above.

That said, Green Mountain remains a sustainability leader in other arenas, particularly as a strong support of the Fair Trade movement. I’m told that its coffee buying team is one of the most progressive and creative in the industry.

In other words, it’s complicated–a lot more complicated than “doing well by doing good. ”

 

The art and science of systems change

pdfnewThe corporate sustainability movement, such as it is, has made enormous progress in the last decade. Just not enough. Despite the well-intentioned efforts of forward-thinking companies, greenhouse gas emissions are rising, species are dying, forests are shrinking, etc. Smart companies have come to understand that acting alone, they can’t bring about the change we need.

This is why companies are collaborating to drive what’s being called systems change — that is, efforts to remake complex systems such as supply chains or marine fisheries. Recently, I heard a consultant named Joe Hsueh (it’s pronounced Shway) talk about systems change at an event sponsored by Guardian Sustainable Business and Forum for the Future.

Joe has a PhD from the Sloan school at MIT, so he understands the science of how systems work and knows how to deploy tools like systems maps (like the one above). Perhaps more important, though, he spent a year volunteering with Buddhist nuns in Taiwan, his native land, so he has practiced listening and empathy.

I wrote about Joe this week in the Guardian. Here’s how my story begins:

Until recently, the momentum driving US businesses toward greater sustainability came from big, influential companies: GE with itsecomagination campaign, Walmart with its bold environmental goals, Google with more than $1bn in renewable energy investments and Nike with its pioneering design work, among others.

Lately, though, much of the most exciting work in sustainable business has focused on systems change – sometimes within an industry, sometimes up and down corporate supply chains and sometimes across industries and geographies. Systems-change initiatives like the The Sustainability Consortium, the Sustainable Apparel Coalition and ZHDC, which stands for Zero Discharge of Hazardous Chemicals, differ in their approach and structure, but they are all tackling problems too sprawling and too complicated for even the biggest companies to solve on their own.

The process of changing large-scale systems is a mix of art and science, and its practitioners can be found inside companies, in consulting firms and in academia. The consulting firm BluSkye helped the dairy industry reduce its carbon emissions and was hired by Alcoa to try to give US recycling rates a big boost. Starbucks engaged MIT professor Peter Senge to take a systems-based approach to the challenge of recycling the billions of cups the food service industry uses every year to hold hot liquids. Nonprofit WWF has dived into system-change efforts such as theRoundtable on Sustainable Palm Oil, a standard-setting group that brings together producers, processors, traders, brands, retailers and NGOs.

To grow systems change, a group of individuals and organizations formed the Academy for Systemic Change in 2012. Joe Hsueh, one of its founding members, recently sat down with me to talk about systems change, how it works and why it matters.

You can read the rest here.

Biz Stone: A good guy who’s doing very well

Biz Stone, co-founder of Twitter, speaks at the Charles Schwab IMPACT 2010 conference in BostonI’m a big fan of Twitter. It’s how I keep up with  the news that I need to know, so I follow Jo Confino, Heidi MooreJoel Makower,  Andy RevkinBryan WalshTom PhilpottDavid Biello, Marcus Chung and Aman Singh. It’s also how way I keep up with the news that I want to know, so I follow Adam Kilgore, Buster Olney, Keith Law, Sam Miller@GioGonzalez47 and @ThisisDSpan. I follow colleagues at Fortune like Adam Lashinsky, economists who write for the public (thanks, @EconTalker!)Twitter has become what the newspaper industry once wanted to create on the Internet, a product informally dubbed “the daily me” that gave each reader news tailored to his or her interests.

imgres

So when I heard that Biz Stone, the co-founder of Twitter, and author of a new book about values and business was coming to Washington, I decided to hear what he had to say. I wasn’t disappointed. I wrote about Biz’s talk and his new book, Things a Little Bird Told Metoday in the Guardian Sustainable Business.

Even if you have little interest in Twitter, the book is worth reading. Here is how my Guardian story begins:

How should we define success in business? Biz Stone, the co-founder of Twitter, says that to be judged successful, a company needs to make money, make the world a better place and bring joy to the people who work there.

“It’s a ridiculously high bar,” he says. “But if you don’t set the bar high, you’re never going to get there.”

Stone has written a new book called Things a Little Bird Told Me: Confessions of the Creative Mind. The book is less about the mind than the heart, less about creativity than values and less about Twitter (and that little bird) than about Stone, an unabashed idealist and, it would appear, a genuinely nice guy. This is the rare Silicon Valley story with little to say about technology, venture capitalists, monetizing users and IPOs but a lot to say about how listening, empathy and generosity can help build a sustainable business and change the world.

“It may sound like a lofty goal,” Stone writes,”but I want to redefine capitalism.”

You can read the rest of the story here. You also might want to check out Biz’s new venture, Jelly, whose ultimate aim is to “build worthwhile empathy.”

Paul Polman: A radical CEO

Paul-Polman-chief-executi-005“We’re the world’s biggest NGO,” Paul Polman, the chief executive of Unilever, sometimes likes to joke.

Literally, he is correct: “We’re a non government organization. The only difference is, we’re making money so we are sustainable.”

Lots of money, in fact. As one of the world’s biggest consumer products companies, with such brands as Dove, Hellman’s, Axe and Ben & Jerry’s, Unilever generated about $67 billion in revenues and $7.2 billion in profits last year.

But while Polman has led a turnaround at Unilever since becoming CEO in 2009, he is best known because he is outspoken about his belief  that “business should serve society.” He sounds more like the leader of an NGO like Oxfam or Greenpeace than your typical CEO. He’d rather blather on  about the Millenium Development Goals than boast about his company’s earnings.

More important, Polman’s Unilever uses its global to work for change, around a set of big issues, ranging from curbing climate change to eradicating poverty to deforestation.

That’s why the Center for Global Development, a DC think tank, honored Polman the other night with its “Commitment to Development: Ideas in Action” award. Previous winners include Global Witness, the One Campaign and Oxfam. Polman is the first business guy to get the award, as best as I can tell.

One reason: Unilever’s strong commitment to reducing deforestation, which helped drive the decision late last year by Wilmar, the world’s largest palm oil producer, to sign a “no deforestation” pledge. Wilmar’s commitment has the potential “to create a global revolution in how we grow food,” Scott Poynton, executive director of The Forest Trust, wrote last month in Guardian Sustainable Business. Palm oil is used in a variety of foods, as well as personal care products, like soap.

At the awards dinner, Nancy Birdsall, president of the Center for Global Development, said of Polman:  “He is surely the most outspoken and effective advocate for reducing the amount of deforestation that takes places to produce consumer goods.”

I went to the award ceremony not because I hadn’t heard Polman before — we spent time together last year when I profiled him in Fortune, under the headline Unilever’s CEO has a green thumb — but because he is such an outlier in the business world and I wanted to hear what was on his mind.

He didn’t disappoint. Some highlights from his remarks:

On the need for government policy to curb climate change: “We need to have the business community in the US speak up more, and then the Republicans will have to listen.”

On the urgency of dealing with global problems: “First and foremost, I am a businessman. I like to get to action. This worldis very long on words and very short on action.”

On the importance of sustainable development: “It is desperately needed that we build a new economic world order where we live within planetary boundaries.”

On global inequality: “The top 1.2 billion people consume 75 percent of the world’s resources. That is a system that is not in equilibrium.”

On the exploitation of garment workers in Bangladesh, who are paid 11 cents an hour“That’s as close as you can get to modern-day slavery.”

On the opportunity to have an impact: “In the next 15 years, we as a generation have the opportunity to be the people who eradicate poverty in a meaningful and sustainable way.”

On the need for business to step up to deal with social and environmental issues: “If you don’t make a positive contribution, you will be rejected…I  don’t understand why more CEOs don’t see this.”

Costco, Trader Joe’s, QuikTrip and the “good jobs strategy”

zton_book-257x300As the issue of income inequality takes center stage in Washington, creating risks to the reputations of some of America’s biggest employers, such as Walmart and McDonald’s, Zeynep Ton’s new book, The Good Jobs Strategy, could not be more timely.

Ton, who teaches at MIT’s business school, argues that smart companies invest in their employees, who provide superior service to customers, who become loyal, thus generating profits and shareholder returns. What’s more, she says, this strategy works in the brutally competitive, low margin retail industry, at such companies as Costco, Trader Joe’s, QuikTrip and the big Spanish retailer Mercadona.

I met Zeynep Ton last week at the Hitachi Foundation in Washington, and wrote about her book, and her ideas, today in Guardian Sustainable Business.

Here’s how my story begins:

About 46 million Americans, or 15% of the population, live below the poverty line, and about 10.4 million of them are the working poor. They bag groceries at Walmart or Target, take your order at McDonald’s or Burger King, care for the sick, the elderly or the young.

Conventional wisdom says that’s unavoidable: to stay competitive, keep prices low and maximize profits, companies, particularly in the retail and service industries, need to squeeze their workers. But in a provocative new book, The Good Jobs Strategy, author and teacher Zeynep Ton argues that the conventional wisdom is wrong. Instead, she says, smart companies invest in their employees, and they do so to lower costs and increase profits.

Of course, the idea that companies need to properly reward their key employees is hardly radical. That’s how business works on Wall Street and in Silicon Valley, where the competition for talent is fierce. But Ton, who teaches at the MIT Sloan School of Management, says that a good jobs strategy can also work in retail. In fact, she makes her case after a close study of four mass-market retailers who invest in their employees, keep costs low and deliver superior shareholder returns.

“It’s not the case that success comes from cutting labor costs,” Ton says. “Success can come from investing in people.” What’s more, she says, executives need to understand that that treating workers well “does not depend on charging customers more”.

You can read the rest here.

Regular readers will not be surprised to hear that I’m inclined to agree with Ton. Ten years ago, in my own book, Faith and Fortune, I reported on companies like Southwest Airlines, Starbucks and UPS that pursue their own version of a “good jobs strategy.” To her credit, Ton has shown that the strategy works in retail, and that it can actually help drive prices lower–a potentially valuable lesson for companies like Walmart and McDonald’s.

Zeynep Ton
Zeynep Ton

That said, her book raises a question that is hard, at least for me, to answer: If the good jobs strategy is so good, why don’t more companies embrace it? For that matter, why haven’t those companies that treat their employees well trounced their competitors? In theory, the companies that practice a “good jobs strategy” should be able to attract the best people, deliver the best customer service and force their rivals to copy them or suffer. That’s the way markets are supposed to work.

I put this question to Ton and she offered two answers. First, markets are imperfect. Second, the “good jobs strategy” is hard to execute because it requires redesigning workplaces, providing lots of training, finding the right balance between standardizing tasks and empowering employees, and so forth. Maybe. But I suspect there are other reasons why the “good jobs strategy” has not swept across America. Your thoughts are most welcome.