One of the great virtues of market capitalism is that power is widely dispersed–among consumers, corporate executives, investors and regulators. Lots of people get lots of votes that collectively shape business, and that’s good. But decentralization creates a daunting problem for anyone who cares about corporate sustainability: It’s hard to get things done.
In conversations today at the GreenBiz Forum in New York, people who could be described as powerful—executives with big titles (vice chairman, vice president, CEO) at big institutions (NASDAQ, McDonald’s and Ingram Barge, America’s biggest barge company)–all lamented the limits on their influence over what their companies do, let along how industries can change.
This is why sustainability has to be a team sport. Very few people–or companies–can do much on their own.
Take Bob Langert, vice president for corporate responsibility at McDonald’s, who is one of the most respected sustainability executives in the US. He’s got credibility inside the company and with NGO partners. But to get anything done, he’s got to win over thousands of owner-operators of McDonald’s stores, as well as a a diverse set of suppliers and, in some instances, the tens of millions of people who eat at Mickey D’s every day.
“We are the world’s largest small business,” Langert said. The overwhelming majority of McDonald’s outlets are “owned and operated by independent business people. They have a lot of power in our system. That means we can’t dictate from on high. I challenge people to show me a company that’s more democratic than McDonald’s.”
So Langert functions as a salesman for sustainability within the McDonald’s empire, an inside agitator, if you will. Last year his CEO gave him something valuable—a full afternoon to make the case for sustainability to the company’s top execs. He brought in executives from other companies, including Unilever and Coca-Cola, and business-friendly NGOs. They impressed top execs with the importance of environmental issues to the company.
One question the outsiders were asked: If you were in charge at McDonald’s and could do one thing, what would it be? “Use your size and leverage to make beef more sustainable” emerged as the answer. So McDonald’s has begun to dig into its beef supply chain, to better understand its environmental impact, which is itself no easy task.
“We buy beef from people who make patties,” Bob explained. “They buy it from the slaughter house. They buy it from the feedlots. They buy it from a broker. They buy it from the calf producers.” That’s not an excuse. Dealing with the beef supply chain is “our No. 1 priority,” he said.
Skeptics–and you can count me among them, for now–will ask: Will McDonald’s push hard to reduce the environmental footprint of beef? Can it even be done? [See my story at YaleEnvironment360, Should Environmentalist Just Say No to Eating Beef?]
Bob’s track record at McDonald’s provides reasons for optimism. The company has enough buying power to change industries, once it puts its mind to it. As Mark Bittman, who is no fan of the chain, wrote last year:
When, in 1999, McDonald’s requested that its suppliers give caged hens 72 square inches of space instead of 48 (72 is still smaller than a piece of 8×10 paper), not a single factory-farmed hen in the country was being raised with 72 inches of space. Yet the entire supply chain was converted in just 18 months, and 72 square inches is now effectively the industry standard.
Last year, McDonald’s required its pork suppliers to phase out gestation crates for sows. Smithfield and others responded. Long ago, it set animal welfare standards for beef. A decade or so ago, McDonald’s committed to buying all of its fish from fisheries certified by the Marine Stewardship Council.
Now Bob would like to do more to win sup consumers. “We’re not going to have a successful sustainability effort unless the consumer is engaged,” he said. To that end, McDonald’s has just rolled out a Marine Stewardship Council eco-label that it is attaching to its Filet O Fish sandwiches. It’s the first national restaurant chain to do so, and the hope is that consumers will reward the company by driving up fish sales. We’ll see.
In an entirely different industry, Meyer Frucher, vice chairman of the NASDAQ stock exchange, affirmed the idea that an institution like the NASDAQ can’t get much done without partners. Environmental advocates would like the stock exchanges to required listed companies to report on their environmental footprint. Should NASDAQ try to impose new rules on its companies, Frucher said, those companies might opt to list with competing exchanges, like the New York Stock Exchange, that make fewer demands.
“Their salespeople would be out saying, those guys want to overburden you with regulation,” Frucher said. “Unless it’s universal, we’ll lose listings.”
So what needs to be done to bring about universal sustainability metrics? It would help, Frucher said, if the various groups seeking metrics could agree on which metrics matter most.
Besides that, he said, sustainability advocates in the investment world need to vote with their dollars. Like other exchanges, NASDAQ has a sustainability index, but “virtually no one trades these indexes,” Frucher said. “I hear a lot of talk. I’d like to see some walk.” [One problem may be the index itself. See Chevron’s shocking sustainability news at GreenBiz.]
Earlier, in a conversation with GreenBiz’s Joel Makower, Craig Philip, the CEO of Ingram Barge Co., which owns 5,000 barges that transport commodities on the nation’s inland waterways, talked about the risks posed by extreme weather to his business. 2011 brought some of the worst floods ever to the Mississippi River system. 2012 brought some of the worst drought.
“Since the hurricanes of Katrina and Rita in 2005, we’ve seen a significant disruption in every year,” he said. “Systemically, these problems are chronic. They are likely to stay chronic.”
Farmers, power plants, recreational users, shippers like Ingram–all of them place demands on the river systems, and depend on its waters. Some have come together with The Nature Conservancy and the U.S. Army Corps of Engineers in a collaborative effort called America’s Watershed Initiative, to try to sort out the conflicting demands.
Joel’s reaction: “The complexities of what you are dealing with are astounding.”
Protecting the Mississippi? Adapting to climate impacts? Demanding transparency? Fixing beef? This is why sustainability has to be a team sport.