The Triple Bottom Line Blog

A rather fascinating article from the Financial Times (link via the World Business Council for Sustainable Development website) describing a new program at Vanderbilt University in which students from the MBA program and the divinity school are joining forces to explore how business can help combat global poverty.

Dubbed the Project Pyramid Global Poverty Alleviation program, the course is housed in the Owen Graduate School of Management and was originally proposed by two MBA students, Rehan Choudhry and Bobby Deneen. It's not a fluff course: In March, the students traveled to Hyderabad, India, where they visited the business school, a Microsoft campus, and local villages where they observed how microcredit is affecting the local economy. They will also participate in a business-plan competition, and two of the students have already launched a company that uses the Internet to provide artisans in Uganda with access to a world market.

The Vanderbilt course takes its inspiration largely from two figures: Grameen Bank founder and 2006 Nobel Peace Prize winner Muhammad Yunus (himself a Vanderbilt grad), and C.K. Prahalad, the leading guru of "bottom of the pyramid" business. (Full disclosure: I am currently working on a book with Yunus, which will describe his concept for what he calls "social business," a topic I'll write more about on this blog in the weeks and months to come.)

What's most intriguing to me are the reports that students on both sides of the MBA/divinity school divide say they are learning a lot from one another. The business students are discovering that government and philanthropic programs can play an important and useful role in expanding economic opportunities, while the divinity students are learning that business can be about much more than the rapacious pursuit of profit.

We in business like to talk about "thinking outside the box," but sometimes we behave as if that just means borrowing ideas from whichever management guru happens to be hot this month. The Vanderbilt course is a true experiment in cross-fertilization between widely differing worldviews, something we can certainly use more of in our all-too-compartmentalized world.

Labels: Base of the Pyramid, Muhammad Yunus, Vanderbilt University

Browse the web for any Fortune 500 company followed by the word "watch," and you will find websites devoted to overseeing the company's activities. Use an expletive following the name and sites appear detailing grievances that run from reasonable to far-fetched to demented. (If you haven't already scanned the web for hostile sites aimed at your company, you should try it soon--just be sure to have the antacids within reach before you start.)

Olympic Watch is a recent addition to the watch sites. Dubbed the "Genocide Olympics" by human rights activists who have their eyes on China--for its role in Darfur, not to mention child and slave labor, capital punishment, forced evictions, political repression, and denial of free speech--the site aims to put pressure on Olympic sponsors to speak out against the host country's human rights abuses.

Putting pressure on the authorities directly may be hopeless, but associating big corporate brands with China's denial of basic human rights, might just work. Pressure on business to leave South Africa eventually worked to end apartheid, so why not oppressive practices in China?

The time is right: People in the United States are very upset with China right now, not primarily for human rights violations, but for lead paint on toy trains, poisonous toothpaste, contaminated food and a general concern that China might just grow bigger and faster than us.

So it's a good time to turn up the heat on human rights.

Sponsoring companies will maintain they can't be held responsible for the actions of the Chinese government. But that's like saying that you can’t be held responsible for poisonous toothpaste or child labor simply because you outsourced the manufacture to a third party. If your logo is on the product, it doesn't matter that the culpable party is a separate legal entity, or even a sovereign government. Just ask Nike. Or any of the companies that are under pressure on Darfur.

Corporate managers should be aware that:

1. Your company can be held responsible, and your brand held hostage, for the egregious actions or policies of the government in any country where you do business. This is why, for example, the pressure on Google to fight for free speech in China will continue.

2. You must consider that risk when making any investment in a country with suspect environmental or social policies, or one that is engaged in bad acts, even when your activities in the country have no direct connection to the activities in question.

3. You can't expect a free pass just because the specific operation you're involved in is politically blameless or even has positive connotations like those generally associated with the Olympic movement. Controversy can become attached to any activity under the right (or wrong) circumstances. Fair? Maybe not. But that's reality.

This doesn't mean you shouldn't do business abroad or attach your name to any widely-publicized event. But when you do, do your homework. Research likely areas of controversy; track the vagaries of public opinion constantly; and be prepared to respond honestly and pro-actively to attacks.

Above all, be clear in your own mind why you are choosing to associate yourself with a particular regime and how you intend to have a positive impact on the people whose lives you will be touching. Having a clear, coherent, and believable story to tell can go a long way toward defusing the hostility you may encounter.

Labels: China, Communications and Marketing, Human Rights and Child Labor, Nike, Olympics

In a world where everybody and his sister has a blog, it was only a matter of time before Bjorn Stigson, president of the World Business Council for Sustainable Development, would have his own online platform.

Based on a first perusal, Stigson's blog looks well worth reading. In this week's post, he asks, "On energy and climate issues, is the United States an emerging world leader or a “cacophony of chaos”, as one US Congressman described it?" Stigson then describes what happened when the WBCSD presented its document "Policy Directions to 2050" to an audience of lawmakers and business leaders in Washington D.C. recently, and while Stigson doesn't say it in so many words, the answer seems clearly to be closer to "chaos" than true leadership. But you can read his lively account and judge for yourself.

Labels: Bjorn Stigson, Personal Musings, WBCSD

With a major CSR Summit opening this weekend in Dubai, it's a good time to glance at the fascinating and complex issues surrounding sustainability in the Muslim world, particularly in the Middle East.

Over a year ago, Dow Jones and Sam Group--the people who brought you the Dow Jones Sustainability Indexes--launched the Dow Jones Islamic Market Sustainability Index, a new index that tracks the performance of 105 companies whose operating methods meet both the requirements of Islamic Sharia law and the principles of sustainability. The index excludes producers of alcohol and pork-related products, providers of conventional (i.e., non-Islamic) financial services, tobacco manufacturers, weapons suppliers, and providers of entertainment services (hotels, casinos/gambling, movies, music, and so on). Stocks are also subjected to a series of financial-ratio screens to remove companies characterized by high debt and interest income levels.

As this list of screens suggests, the DJIMSI illustrates how the values implicit in the concept of sustainability are shaped by cultural considerations. Many in the socially responsible investment communities in the United States and Europe would join the DJIMSI in shying away from cigarette makers and arms dealers, but relatively few would consider bacon or pork sausages problematic products (except, perhaps, to the extent that they contribute to obesity--as my wife likes to remind me).

On the other hand, much in Sharia law resonates with concerns embraced by sustainability advocates the world over. Here's how a special report on financial sector responsibility sponsored by Pricewaterhouse Coopers and published in Ethical Corporation magazine put it last November (link via the World Council for Sustainable Business Development):

The Islamic faith creates an entire social order. While private property is defended, individual rights are subject to the rights of others in the community to benefit from environmental resources such as water, forests, air and sunlight. These are held in common by all members of society. If you degrade a resource, you are accountable for its use and liable for its repair.

There is even a process in Islam akin to the assessment of impacts on stakeholders and the resolution of conflicts between them so as to maximise the overall public interest, known as maslahah mursalah. Special care is taken to prioritise the interests of the weak and vulnerable.

Islamic finance is expected to follow suit. More than one commentator has suggested that Islamic banking could establish a model by which modern banking could be re-imbued with ethical norms.

These are elements of Islamic business that everyone from Greenpeace to child labor protestors could admire. Yet at the same time, it's clear that there are major challenges facing Middle Eastern businesses that are eager to embrace sustainability--starting with the fact that the economy of the region is mainly based on the production and marketing of fossil fuels that are deeply implicated in what appears to be the greatest environmental threat in the history of our planet.

By contrast with the problem of global climate change, even the deeply troubling moral, political, and social challenges posed by the ongoing Palestinian-Israeli conflict may one day appear minor.

As forces ranging from Islamic fundamentalism to U.S. military might battle for influence throughout the region, we can hope that the movement toward sustainable economic development will play an increasing role in encouraging modernization, transparency, environmental responsibility, and social liberalization on the part of both governments and businesses in the Middle East. The fact that more and more Muslim-run companies are signing on to the sustainability movement is an encouraging trend.

Meanwhile, the complexity of the issues involved in sustainability Islamic-style means that managers of firms elsewhere in the world that are involved in business in the Middle East need to think long and hard about how they define corporate responsibility so as to ensure that their values are truly in synch with those of their partners in the region.

Labels: Dow Jones Islamic Market Sustainability Index, Finance and Investment, Sharia law

There are many people spreading the gospel of sustainability these days, and in many different ways – but perhaps none in such a hip and stylish way as Summer Rayne Oakes.


One of the many hats I wear is Chapter Leader of Net Impact Boston, and two nights ago we put on our biggest event yet – the local launch party for SustainLane.com, a new web directory of sustainable businesses. It was a great opportunity to invite a speaker I’ve wanted to meet for some time now: Summer Rayne Oakes.

An environmental activist since childhood, Oakes has put together her unique basket of skills in a very compelling way – all in an effort to mainstream issues of environmental and social justice.

What are those skills? Well, for one, Oakes is about 5’11 and completely gorgeous, so modeling has always been a career path open to her. She is also artistically inclined, with an eye for fashion and an impressive portfolio of drawings. And she’s smart – she earned a degree from Cornell University and has written some impressive academic papers on very non-fashionable topics like sewage sludge. To top it all off, she’s a genuinely nice person who is easy to like and who cares about doing good in the world.

Put all that together, and what do you get? An amazing career that is going in about twenty useful and exciting directions at once. Here’s a small sample:

• Oakes models for many eco-conscious labels, and also works with major companies like Levi’s to develop new earth-friendly apparel. And it’s not anoraks and Birkenstocks – more often it’s lace or leather. Sometimes even latex.
• She produces and writes a regular feature for the European fashion magazine Lucire, each month going “Behind the Label” to explore environmental, social and ethical issues in the apparel industry.
• Recently Oakes started SRO as a consultancy which “couples the power of research with the pulse of current trends” – advising companies on branding and communication strategies that are aligned with sustainable business practices.
• Always the educator on environmental issues, she’s even come up with a K-12 curriculum called Ecofashion 101.
• She’s about to publish a book that encourages girls to integrate environmentalism into their fashion sense. And yes, she actually did write it herself.
• And if all that weren’t impressive enough, she’s working with the United Nations to develop and co-host an Eco For The World (E4W) “edutainment” series.

Her basic philosophy, as far as I can tell, is that fashion and celebrity, and the underlying force of branding, are powerful ways to spread ideas in our society – and can therefore be an asset to the sustainability movement. It’s a radical departure from the strategy that most activists take, but a great way to connect with mainstream audiences.

One of the ideas that Oakes referenced in her talk last night was the power of tapping into everyday conversations as a way to spread meaningful messages. For example, think of this conversation:

-- Hey, great jeans.
-- Thanks, man.
-- Who made them?
-- Her name is Jasmine.

Jasmine is one of the factory workers featured in an recent film called China Blue. Her story is powerful not so much because it is unique but because it is very common – she works long hours in a factory, so long in fact that she uses clothespins to hold her eyes open so she won’t fall asleep. Jasmine is the personification of the sweatshop issue, a familiar face at the end of the “supply chain.” Making sweatshop issues known, making them personal and memorable, and introducing them into everyday conversations – that’s a very powerful combination that can drive a new movement of consumer activism.

Oakes is a good example of two trends:

1. The new generation of activists, who are savvy about motivating stakeholders to influence corporate agendas, and are becoming increasingly sophisticated in their use of online platforms.
   
2. A push toward the "mainstreaming" of sustainability issues, which are no longer relegated to a small consumer niche.

To learn more about Oakes and her work, and by extension about the direction that young consumers and investors are headed, visit http://www.summerrayne.net/.

Labels: Communications and Marketing, Human Rights and Child Labor, Personal Musings, Sumner Raynes Oakes

An excellent article in today's New York Times by David Leonhardt about the lessons to be learned from the currently unfolding story of dangerous kids' toys coming from China. (Among other experts, it happens to quote Adrian Slywotzky, a business strategy guru with whom I've worked on several books.) The key grafs discuss how HIT Entertainment, owner of the Thomas the Tank Engine franchise, and RC2, the company that makes Thomas toys for HIT, have mismanaged the crisis:

In effect, HIT has outsourced Thomas’s image, one of its most valuable assets, to RC2. And RC2 has offered a case study of how not to deal with a crisis, which is all the more amazing when you consider that the company also makes toys for giants like Disney, Nickelodeon and Sesame Street. . . .

Battening down the hatches might very well work if this were a scandal about sweatshop conditions. Fairly or not, Americans have a limited attention span when it comes to human rights problems on the other side of the world. But the prospect of lead paint in your child’s nervous system tends to focus the mind.

The fact that the executives at HIT and RC2 haven't grasped the difference shows how out of date the corporate script on outsourcing has become. In many businesses, outsourcing has simply grown too big to stay behind the curtain. What happens in Chinese factories determines how good--how reliable and how safe--many products are. So there is no way for executives to distance themselves from China without also distancing themselves from their own product.

Business people only need to look at the dismal approval ratings of the Bush administration to realize the severe limitations of a policy of "plausible deniability." Such a policy may have worked at one time--in politics and in business. No more. A corporation can no more disclaim responsibility for what happens up and down its supply chain than the White House can disclaim responsibility for the results of its Iraq policies.

Labels: China, David Leonhart, Supply Chain

Our esteemed host Andy Savitz talks about "the sweet spot" of sustainable business (and no, it has nothing to do with any sexual technique) in this very interesting podcast now available on the website of Ethical Corporation magazine. Well worth your time, as is the entire magazine (whose site is always available via the blogroll at the bottom of this page). Enjoy.

Labels: Personal Musings, the sweet spot

Almost three months ago, SEC chairman Christopher Cox gave a little-noticed speech about the evolving state of play in the world of shareholder rights. Among other topics, Cox discussed how the SEC is urging public companies to use electronic technology to accelerate and broaden public disclosure of crucial company data:

From the forms issuers file to the accounting standards they use, the SEC is waging an all-out war on complexity. And in this effort we're tapping the power of technology to bring higher-quality information to investors more quickly and more easily than ever before. Our new e-proxy rules will soon make it possible for investors to realize the full potential of interactive data. And in a related area, our ongoing conceptual work to update the proxy rules could pave the way for an Electronic Shareholder Forum in which investors could securely and anonymously share information about their company. That cutting-edge thinking is already spurring private firms to invest in creative new ways for shareholders to use the Internet to communicate with one another.

But of course the world of the Internet is one in which power is decentralized and the ability to drive the agenda can be centered anywhere--not just in a federal agency in Washington or even in a corporate office. As today's New York Times reports, independent groups are already driving the creation of online shareholder forums, where the focus will be determined not by corporate executives but by institutional investors, shareholder activists, and outside watchdogs:

Examining insider stock transactions has always helped investors gauge managers’ confidence in their own company’s prospects. Shareholders who hear an executive boast of a grand strategic plan while dumping piles of his own stock have a right to be dubious. Actions speak louder than words, after all.

Now, a group of investors is arguing that an analysis of a company’s pay practices can provide similar insights into managerial confidence, and they have established a shareholder forum to demonstrate how such an assessment might be made. The forum, set up last week, will use Verizon Communications as a test case. . . .

"No analyst or investor is going to understand the market conditions associated with achieving objectives as well as a manager does," said Gary Lutin, an investment banker at Lutin & Company, who is chairman of the shareholder forum. "So the key is to find out whether the manager is betting his pay on reaching those objectives."

Perhaps understandably, Verizon is hedging its bets as to whether and how it will participate in the online forum:

Robert A. Varettoni, a Verizon spokesman, said that the company was evaluating the invitation to communicate with shareholders in the forum, but that it would wait until the Securities and Exchange Commission has issued guidance about online exchanges before it partakes.

"The S.E.C. has explored many aspects of shareholder communications, including online discussions," Mr. Varettoni said. "The S.E.C. has indicated that it will issue proposed rules on this topic in the coming months, addressing some of the questions raised, including selective disclosure of nonpublic information and a company’s liability for content posted in a forum by third parties."

But Mr. Lutin said that forum programs he had run in the past had no unusual online aspects and had simply followed old-fashioned meeting processes for which S.E.C. rules are well established.

Executives at public companies will want to follow this unfolding story closely. With the old model of top-down corporate communications crumbling, companies' ability to control the conversation about shareholder rights is a thing of the past. They'll need to move quickly and flexibly if they expect to remain a credible part of the discussion in the months and years to come.

Labels: Christopher Cox, Finance and Investment, SEC, Verizon

One thing I learned when writing The Triple Bottom Line and speaking to audiences about its message is that you can't tell people something and expect it to stick. You have to show them. A gripping story is much more powerful than a lecture.

Sustainability is the worst of buzz-words, and I am always looking for ways to make it come alive. What does it really mean to meet the needs of today without hosing future generations?

Climate change seems the obvious example: Unless we take steps now, painful and expensive as they may be, our children and grandchildren will experience much greater pain and be forced to spend much more of their GDP dealing with the problem than we will.

But that's telling . . .

Here's showing: The town of Newtok, Alaska is in danger of being washed away due to rising sea levels and melting permafrost, according to the New York Times. Eventually the 315 residents will need to be evacuated at a cost of $130 million, or almost $413,000 per person, says the Army Corps of Engineers.

Thirty or fifty years from now, when our kids are in charge, if they have to move three million people away from the coasts, it will cost them a staggering $1.2 trillion, a number which could be much larger for two reasons. First, the costs per person could be higher when you consider the roads, sewers and the like that would have to be replaced (fully loaded Katrina-related costs are estimated at $200 billion). Second, because 150 million of us live within 50 miles of the coast today, including everyone in Manhattan and California, the number of people needing to be moved thirty years hence could be much, much higher.

No wonder insurance companies are lobbying Congress for relief and sponsoring boardroom seminars on how to deal with climate-related risk. But it will be my children and yours that will be left holding the bag, not AIG.

A billion spent on prevention today could save trillions tomorrow.

Labels: Alaska, Climate and Carbon, Newtok, Water

If you're a business executive with any doubts about how quickly your company's reputation can be transformed in today's superheated, interconnected, four-news-cycles-a-day environment, consider JetBlue. More specifically, consider the fact that, at least in some circles, the company's name has now morphed from a proper noun into a verb--one with a decidedly pejorative meaning.

I learned about this phenomenon while browsing the latest issue of GQ in my dentist's office and just saw it confirmed on The Urban Dictionary website:

JetBlued: Euphemistic way of expressing someone got screwed or ripped off.

Etymology: Originated shortly after the February 2007 series of mistakes that lefts countless JetBlue customers stuck in airplanes and airport terminals for many hours.

Jack: Check out this amazing diamond ring I bought for my wife on the internet.
Steve: Bro, that's clearly a fake ring.
Jack: You're kidding right?
Steve: Nah, man. You got JetBlued.

What makes this all the more amazing is the fact that the exact same verb was being used not so long ago with a very different definition, as indicated by this item on Fast Company magazine's blog posted in March, 2004:

I had lunch today with a former editor who was talking about a recent trip he'd made to the West Coast. "So I 'JetBlued' out to California . . . ," he said nonchalantly, with little notice of the verb he'd just created. Like "Googled," which implies not only the search tool used, but the better search experience, "JetBlued" says he'd done a lot more than fly on the booming low-fare airline. Rather, he'd flown while eating his choice of snacks, watching TV in a comfy leather seat--and spending much less.

So which meaning of "JetBlued" will end up sticking? That depends, in large measure, on whether new CEO David Barger can restore the company's once-uniquely-positive connection with customers (while turning around its recently lackluster financial performance).

For now, the customer-driven "re-branding" of JetBlue is an object lesson in how even a single misstep--in this case, one horrendous day of performance driven by terrible weather and a few very bad, very costly on-the-ground decisions by a handful of overstressed managers--can do huge damage to a great reputation built painstakingly over decades.

Today's customers aren't inclined to cut you a lot of slack, no matter how much you may have done for them yesterday. So being a "corporate good guy" is not just an essential part of twenty-first-century leadership--it's also an incredibly demanding, 365-day, 24-hour job.

Labels: Communications and Marketing, JetBlue

An interesting article from a New York Times series on business and "The Energy Challenge" about how some companies are rethinking their packaging practices to reduce waste, cut shipping costs, and improve recyclability. There is certainly plenty of room for consumer companies to do a better job of making their packaging eco-friendly. But one key issue that is sometimes overlooked is the competitive marketing aspects of packaging.

Suppose you are selling an item that will end up on the health care or cosmetics or housewares shelf in your local discount store. And suppose the product itself is quite small--for example, a tube of something that is two by five inches in size. It may seem like a no-brainer to re-design the tube using stronger, more rigid materials that enable you to get rid of the bulky cardboard box surrounding the tube. It's certainly a wise environmental move.

But what if none of the competing companies follows suit? The result could be that your product ends up looking a lot smaller, taking up less space on the store shelf, and therefore attracting less attention from customers. Unconsciously, customers may even think, "Package A looks bigger than Package B, yet they cost the same--so Package A must be a better bargain." And the fact that the fine print discloses that the tube in both cases contains the same 3 ounces of product may not register with busy, harried shoppers.

Thus, an individual company's well-intentioned move toward more sustainable packaging may end up hurting its own business--not a desirable outcome, to say the least.

(In a funny way, I've seen this phenomenon at work in the industry I happen to know best, book publishing. During my years as a publisher, I had a number of marketing and sales managers who told me, "Please don't publish any books that are just 150 pages long. They look skimpy and get lost on bookstore shelves, especially when they're displayed spine-out." The result is that publishers ask authors to expand manuscripts so as to get the books up to 250 pages or more and thereby make them more noticeable--and saleable. Which helps to explain why so many books read like "glorified magazine articles" that someone has padded with fluff: They are.)

These competitive pressures are why a crucial role is played by the Wal-Marts of the world, as discussed in the Times article. By creating and enforcing across-the-board packaging standards for their suppliers, the big retail chains can encourage companies to move toward more responsible packaging without fearing they will be losers in the shelf-space wars. It's a great example of how supply-chain interconnections are one key to reshaping the world of business along more sustainable lines.

Labels: Packaging, Supply Chain, Wal-Mart, Waste

Advocates of environmental and labor protections worry--with good reason--that globalization may drive a "race to the bottom" in which government regulations get watered down in the competition for world markets. But as this article in today's New York Times suggests, the process can sometimes operate in reverse. The story deals with the fallout from the recent stories of tainted foodstuffs and toothpaste being exported from China and the resulting loss of confidence on the part of foreign consumers. Key grafs:

While Beijing has strongly defended the quality and safety of its food and drug exports, and even denied that the toothpaste it exported was unsafe, government regulators at the same time have stepped up safety inspections and shut down companies accused of producing unsafe food or counterfeit drugs.

But with pressure growing from regulators in the United States, Europe and other parts of the world, and international food companies expressing concern about the risks of importing Chinese-made food and feed ingredients, Beijing is pushing for a more forceful response to the crisis.

In its announcement on Tuesday, which was posted on a government Web site, China said that the State Council had approved a new food and drug safety guarantee system on April 17 and that an outline of the program was being distributed to government agencies nationwide.

The government said in its announcement that it planned by 2010 to place new controls on food and drug imports and exports and to step up random testing on medicines. It also said that it would have information on inspections of 90 percent of all food products, although it was unclear how that would work.

There seems to be little doubt that Chinese food and drug safety standards have always been lax. But as long as only Chinese consumers were affected, the government had little incentive to act. (That's the sort of attitude that having dictatorial powers tends to encourage.) Nosy, noisy, demanding Westerners are another matter. Economic pressure from disgruntled Americans and Europeans may be having an impact on Chinese practices that domestic dissatisfaction never could.

This doesn't mean that globalization automatically leads to good results. That happens only when people care, are informed, and have mechanisms through which to act. Companies in the United States and elsewhere that are partnering with firms in China or using Chinese suppliers need to encourage these conditions. The sooner firms in China (and the rest of the developing world) can be prodded or pushed into applying world-class standards of product safety and quality, the better it'll be for the future of global trade.

Labels: China, Food and Agriculture, globalization