The Triple Bottom Line Blog

As the debate over what is or is not greenwashing continues (our contribution to the discussion can be found here), Scot Case of TerraChoice points out this thought-provoking post by Bob Langert on the McDonalds corporate blog:

I agree there are dangers associated with environmental marketing, but I actually think many companies are reluctant to talk about their environmental efforts because they are concerned they will only be met with criticism. After all, true progress is hard to define, and achieving perfection on the environmental front is impossible, because there will always be ways to improve.

But not talking about environmental efforts, or "greenmuting", can be a sin as well.

Langert goes on to provide his own list of the "Six Sins of Greenmuting," which basically involve companies' reluctance to publicly engage environmental issues at all out of fears they will get burned. As Langert, in effect, points out, as pressures to be socially and environmentally responsible continue to mount, you are likely to get burned sooner or later, one way or another; but if you get out in front of the issue and communicate freely about your honest efforts to do the right thing, the burns you suffer will almost surely be less severe and faster-healing (to push the "burning" metaphor perhaps one step too far).

An interesting case in point comes from the blog of hotelier Bill Marriott, which I discovered while writing this post. Marriott recently wrote about his company's efforts to make their corporate headquarters greener, involving recycling, energy conservation, and other initiatives.

What's interesting is that Marriott's post has drawn a few dozen comments--some of them thanking Marriott for his company's environmental efforts, but others offering criticisms from every possible direction. Some complain that the headquarters building is just the tip of the corporate iceberg ("How about the thousands of hotel rooms that leave lights on! As a Platinum client (over 100 nights a year . . . mostly Toronto Airport) I found out that all lights and music in your suites are put on at 2pm!!"); others say that customers ought to receive some of the financial benefits from environmental cost-saving ("Please put your money where your mouth is--if you want your customers to save water, than show them some green!"); others worry that worthy issues such as comfort may be getting short shrift ("Look at the way the poor soul in the picture is sitting. Can someone please find him a keyboard tray, with a proper mouse surface. Why not green and healthy--that's the ticket!"); and still others disdain the whole concept ("the efforts to reduce greenhouse gases is misguided and ill informed. The latest research does not point to man as the cause of a changing climate, the Intergovernmental Panel for Climate Change and Mr. Gore's film notwithstanding").

If I were Bill Marriott, my reaction to this barrage of often-contradictory advice might well be to throw up my hands and wonder, "If this is what I get for trying to do the right thing, why do I bother?"

But of course that would be a short-sighted and counter-productive reaction--though perfectly human and understandable. And to Marriott's credit, I see no sign that he or his company are in fact responding that way.

I think they recognize this as one of the perennial truths of business (and of life): Anything good you do quickly gets taken for granted, and the conversation is always about "What's the next good thing you are going to do for us?" The only way to avoid criticism--well-founded or not--is to do nothing at all. And where's the fun in that?

Labels: Bob Langert, Communications and Marketing, Greenwashing, Marriott, McDonalds, Reporting and Transparency, Scot Case, TerraChoice

I enjoyed this article in the Washington Post by Robert F. Bruner, dean of the Darden School of Business at the University of Virginia. Inspired by a chance remark overheard at an Edward Hopper art exhibit, Bruner distinguishes between "painters" and "artists" in business.

In Bruner's formulation, "painters" are the technicians of business: accountants, engineers, financial analysts, logistics experts, and others who know how to get things done with efficiency and accuracy. They are essential to the success of any business. But much more rare--and perhaps even more important--are the "artists," whom Bruner describes this way:

Labels: Ian Schrager, Jonathan Tisch, Marriott, Personal Musings, Robert F. Bruner

Just opened my latest issue of Harvard Business Review (Jan 2008) and there on page 19 is a brief article headed, "Social Responsibility: Do Well by Doing Good? Don't Count on It" (no link because not yet online). The article, by Joshua D. Margolis of Harvard and Hillary Anger Elfenbein of Berkeley, describes a "meta-study" they did which analyzed 167 studies that attempted to measure a possible link between corporate social responsibility and profitability. This is, of course, a link that CSR advocates (including Andy and I) have been positing for years.

The headline of the HBR piece is, I think, a bit misleading in that it puts a negative spin on the author's findings--as if their research had debunked the notion that CSR and profitability go together. That, of course, would be welcome news to doctrinaire supporters of pure laissez-faire economics, who believe that companies have no reason to consider social impacts when making business decisions. But the article itself suggests conclusions that are rather different from what the headline implies.

First of all, the authors say they found no conflict between doing business responsibly and achieving strong financial results. "Doing good," they say, "is unlikely to cost shareholders." Although the story downplays this finding, it is actually significant news. The assumption of most CSR skeptics--including, for example, Robert Reich, whose take on the topic I discussed here--is that there is an unavoidable conflict between profit maximization and social responsibility.

If Margolis and Elfenbein are right, the fact that no such conflict exists immediately eliminates most or all of the cited rationale behind resisting calls for social responsibility. It shifts the burden of proof from CSR advocates to their opponents: After all, if CSR is (in effect) cost-free, why not make an effort to do the right thing? What is the upside to behaving ruthlessly if it is not even rewarded in the marketplace?

Second, the authors recognize at least a modest connection between responsible business practices and strong financial performance. They note, "we found only a very small correlation between corporate behavior and good financial results." The fact that Margolis and Elfenbein do confirm such a correlation is, of course, welcome to CSR advocates. And without having access to the original study (which doesn't yet appear to be available online), it's impossible to know whether specific factors might explain why the correlation is only a small one.

For example, time may be a factor, since some of the positive effects of CSR, such as the enhancement of a company's reputation in the marketplace, would be slow to take hold. Maybe the favorable impact of CSR on profitability can only be fully observed over a period of five years or more--a factor that may or may not have been taken into account in the many studies the professors analyzed.

Third, the authors have chosen to deliberately exclude one significant element of CSR from the effects they studied. After saying that the correlation between social responsibility and profitability appears small, the authors add the following caveat: "(the exception being public misdeeds, which had a discernible negative impact)."

It's not clear to me why the authors chose to treat this as an irrelevant "exception." Isn't avoiding "public misdeeds" a major goal of CSR? If so, why shouldn't CSR "get some of the credit" for the business benefits enjoyed by companies that avoid such misdeeds, rather than having those benefits deliberately eliminated from consideration?

The authors might argue that no one, including CSR skeptics, is actually in favor of "public misdeeds," which means that the CSR movement shouldn't be credited for any positive impact from avoiding them. I'd challenge that logic. If companies that espouse CSR do a better job of avoiding scandalous behavior, that's not a mere coincidence. It's a natural outgrowth of the CSR mentality. It reflects the difference between an organization where it is understood that close ethical calls should be resolved in favor of the company and where aggressive close-to-the-line behavior is countenanced or even rewarded, and an organization where the culture dictates that close calls should be resolved in favor of customers and other stakeholders, and where actions that blur the lines between right and wrong are frowned upon or punished.

For this reason, I think the avoidance of "public misdeeds" is really part and parcel of the CSR philosophy, and should be factored into the results tallied by Margolis and Elfenbein. If this were done, it would increase the measured correlation between social responsibility and profitability, and demand a very different headline in HBR--perhaps something like, "Do Well by Doing Good? Yes, You Can."

Labels: Finance and Investment, Hillary Anger Elfenbein, Joshua D. Margolis

Check out this fine article by Amy Westervelt in Sustainable Industries magazine. Titled "How (Not) To Sell Out," it's a thoughtful look at the complexities of trying to protect a company's sustainability focus even after partial or total control has been ceded to a mainstream corporate investor.

In the article, Westervelt talks to green business pioneers who felt betrayed by the corporations they sold out to (such as Greg Steltenpohl and Paul Hawken), to others who chose to back away from potential buyouts in order to stay true to their long-term mission (such as Gary Erickson), and to still others who believe they've found a comfortable niche as in-house green business advocates after selling their firms to larger corporations (Gary Hirshberg, Frederick Schilling).

The key to the successful outcomes enjoyed by the last two entrepreneurs (CEOs of Stonyfield Farms yogurt and Dagoba Organic Chocolate, respectively) would seem to be due diligence--not just about the financial status of the proposed acquirer, but about its business history, demonstrated values, and industry role.

In the case of Schilling's Dagoba, which sold out to Hershey, the structure of the overall chocolate business is what made the crucial difference. In Westervelt's article, Schilling says, "Ninety-eight percent of cacao is grown by millions of small, independent family farms, and on small farms the model is always multicropping. In itself, as a commodity and industry, cacao is really a sustainable crop, and in terms of the environmental aspects of our product, Hershey would keep that up simply because of the nature of the supply chain and cacao as a commodity."

In the case of Hirshberg's Stonyfield Farms, the acquiring firm, international giant Danone, had a long-standing commitment to corporate social responsibility, dating back to the time of former CEO Antoine Riboud, father of the current CEO Franck Riboud. (For example, Danone collaborated with Grameen Bank founder Muhammad Yunus in creating Grameen Danone, a sustainable "social business" designed to provide low-cost, nutritious yogurt for poor families in Bangladesh. This story is one of the central themes of the new book Creating a World Without Poverty that I collaborated on with Yunus.)

Although Westervelt doesn't delve into this company history, it must have been an important factor in helping to convince Hirshberg that Danone would be the right kind of corporation for him to collaborate with in bringing Stonyfield Farms to next level of growth and expansion.

All in all, a very well-done article--one that gets beyond generalizations to examine the nitty-gritty issues involved in one of the most difficult decisions any entrepreneur has to make.

Labels: Amy Westervelt, Dagoba, Danone, Frederick Schilling, Gary Hirshberg, Hershey, Small Business, Stonyfield Farms