The Triple Bottom Line Blog

Fairbanks, Alaska, is one of the most isolated cities in the United States--so much so that, until recently, it had no affordable way of recycling paper, plastic, aluminum, and other waste materials. Unlike governments in more southerly Alaskan cities, the Fairbanks municipality can't afford to ship its recyclables to a plant in Washington state for reuse.

Now a big private-sector player has stepped in to offer a solution to the problem. It turns out that the local Wal-Mart is already regularly sending trucks back to Washington--mostly empty, after goods for sale in Fairbanks are unloaded. So now Wal-Mart has started its own recycling program, shipping its waste products to Washington for reuse, and it has offered to include refuse from local people at no cost to the community. A few details:

The store's decision to accept recyclables--in reasonable quantities, as it will fall to the store’s paid employees to handle them--is sure to be a hit with its regular shoppers, who live in a community that lacks a conventional recycling program. It's also likely to create an interesting decision for Wal-Mart critics in Fairbanks who either avoid super-retailers in protest of their significant, indirect impact on locally owned businesses and the labor pool or those who believe Wal-Mart is simply hoping recyclers will be inclined to buy more merchandise from a friendlier company.

Suzy Fenner, a community recycling advocate, said Fairbanks residents are currently left with imperfect options--such as burning gasoline to haul paper and plastic to a willing business, which then burns more energy to ship the products out of state. Fenner applauded Wal-Mart's initiative and suggested it will help nudge public awareness of recycling options closer toward the point of a public program or more private-sector involvement. . . .

Store officials made it clear: They’re not turning into a recycling center. But they also said they can accept some common, everyday recyclables, such as loose paper or old newspapers, empty plastic soda bottles or milk jugs, and empty aluminum cans--during business hours. Managers said anything larger than a heavy armful should be bundled or bagged to help associates manage. Recyclers should also phone ahead with bigger loads and use the company’s back loading dock. They should also separate plastics--Nos. 1 and 2--by type, which is identifiable by the number imprinted on the bottom of products.

Wal-Mart, naturally, is proudly trumpeting this news of its latest "good neighbor" policy. But as is usually the case when private/public lines get blurred, the most appropriate feelings seem to be mixed ones. When cash-strapped governments are unable to provide basic services to their citizens, it's nice that big private companies are willing to fill the gap. (We all remember the spate of stories about Wal-Mart and other firms providing disaster relief after Katrina on a more timely basis than FEMA.)

But let's face it, having private enterprise offer public benefits on a charitable basis is not a sustainable long-term program. What happens when Wal-Mart's trucks get filled with their own recyclables, crowding out public materials? What if the demand for recycling services becomes so great it takes up too much costly time on the part of Wal-Mart employees? At a fundamental level, why should a necessary public good like recycling be provided purely as a "favor" by a self-interested business, rather than as a right funded by taxpayers for the benefit of taxpayers?

After all, unlike rights, favors can always be taken away.

So two cheers to Wal-Mart in this case--but here's hoping the people of Fairbanks won't be willing to settle for this as a long-term answer to their recycling dilemma. It's not one.

Labels: Fairbanks, recycling, Wal-Mart, Waste

Shortly after we wrote this post commending Wal-Mart for moving to all-compact detergents in its stores, our friend Dennis Salazar alerted us to a story he'd recently written about the same phenomenon. After shopping for detergent and buying the new compact bottle, Dennis's take on the change wasn't quite so positive:

The [old] 200-ounce bottle, which sells for $9.99, promised it was good for 64 loads. The new 100-ounce bottle, the one that was double strength so only half the usual amount was now needed, also sells for $9.99--but promised only 52 loads.

The bottom line for my sustainable purchase? A load of laundry which used to cost my family 13.2 cents in detergent now, thanks to the new sustainable design, will cost 15.6 cents per load. That, my co-consumer friends, amounts to a price increase of 18.2 percent--a splendid windfall for the manufacturer by any standard.

Of course, these calculations do not even take into account that we are all creatures of habit. No doubt, the manufacturer realized and even projected that most of their customers would use more than the recommended "half" of their more expensive product, despite the new concentrated formulation and labeling. Hmmm . . . sell the consumer more product at a substantially higher profit margin? You've got to love this sustainability. And incidentally, the big-box store where I shop, the one that took credit publicly for driving the package design change, isn't complaining about the windfall, probably because they are participating in it.

We asked Dennis whether this apparent windfall applied to just one one detergent brand or had affected many brands. He told us that, without doing an exhaustive survey, he noticed that several detergents seemed to exhibit the same kind of unannounced price increase (most smaller than the one he wrote about).

Dennis also told us he'd written his article with two lessons in mind:

1. For the businessman--to help dispel the misconception that green always costs more. The fact is that going green usually reduces costs and re-sizing is a marvelous opportunity to re-price your product.

2. For the consumer--Don't take everything at face value. Do the homework it takes to determine the best value.

Both are good lessons, of course. But the first lesson makes us a little nervous. If clever business people start regularly using green initiatives as an opportunity to reap windfall profits through "re-pricing," the already significant cynicism many people feel about green propaganda will surely get a lot worse.

One more point. Wal-Mart's own original blog post about the switch to compact detergents drew a number of comments, some of which raised the issue of price. The most substantive of these, by "Sunny," read as follows:

There are two reasons why the cost [of detergent] isn't going to go down, and neither of them really have much to do with the cost of oil.

First, believe it or not, smaller containers are quite a lot more expensive to product than the bigger ones, because the ratio of empty space per unit of plastic is much lower in a smaller bottle. In other words, it doesn't take four times as much plastic to make a one-gallon bottle as it does to make a one-quart bottle. The cost difference isn't as drastic with cardboard cartons, but it exists--and small boxes aren't cheaper per bottle inside than big boxes.

Second, the only thing being taken out of the formulation is water--for which the manufacturers' cost is negligible. It's the surfactants and cleaners and other things that make up the cost--so eliminating the water doesn't change the price enough to be able to mark it down.

So . . . it will take less packaging (but not as a direct ratio to the smaller package size)--and less cardboard--less space on the shelf--less effort to stock the shelves (and carry it home!)--and will allow the manufacturers to load more in a single truck--and the empties will be easier to recycle or will take less space in a landfill.

So--the tangible benefits are many, but the cost savings directly to the consumer really won't change that much.

Realistically, we all know that prices tend to rise, and it's no great shock when the unit cost of an item creeps upward at the same time that a new package, new product formula, or other change is introduced.

But we hope manufacturers and retailers who are trying to earn "green cred" will be very careful about how they handle those increases. The last thing they want to do is besmirch the concept of sustainability and inspire a consumer backlash against it.

Labels: compact detergents, Dennis Salazar, Packaging, Wal-Mart

It's a hopeful sign when eco-friendly initiatives by business are becoming so numerous that it's possible for a relatively important one to come in under the radar, producing social and economic benefits without a lot of fanfare. That seems to be the case with the shift to compact detergents. As reported by the WBCSD, compact detergents save water, energy, space (in shipping containers and on store shelves), and even significant amounts of petroleum (since smaller packages require less plastic).

Now Wal-Mart has announced it will be selling only compact detergents in the future. It's noteworthy, as most policy shifts by Wal-Mart are, because of the company's sheer size. Anything Wal-Mart does is, by definition, mainstream. And it's encouraging to note that Wal-Mart is evidently doing a good job of training its employees to explain the benefits of compact detergents to customers (see the reader comment to this effect on the company blog we linked to). That's important because, in the absence of such explanation, it would be easy for customers to get the wrong idea: "I'm paying the same amount for a smaller package?! What is this, some kind of rip-off?"

Labels: compact detergents, Packaging, Procter and Gamble, Wal-Mart, Waste

By now, you've probably heard about the newsworthy speeches recently delivered by Lee Scott, the president of Wal-Mart, and Bill Gates, chairman of Microsoft. Scott was speaking at his company's annual start-of-the-year meeting, delivering what amounts to his "state of the company" address and setting corporate goals for the coming year. Gates was addressing the world's richest and most powerful business and political leaders at Davos. You can find the complete text of Scott's remarks here, Gates's comments here.

The speeches have gotten a lot of press because each, in its own way, offered a challenge to traditional views of capitalism and a call for a new direction, one that makes human, environmental, and social needs a corporate priority alongside profit.

Scott emphasized the leadership role that Wal-Mart can play in the world because of its vast size and influence:

It is important for all of us to understand that there are a number of issues facing the world that will profoundly affect our lives and our company. I am talking to you about issues like international trade, climate change, water shortages, social and economic inequities, infrastructure and foreign oil.

You may be wondering: "What can Wal-Mart do about issues as big as these? What can I do?" I will tell you that people have always looked at Wal-Mart as a problem solver. Over the course of nearly a half-century, we have helped hundreds of millions of people stretch their monthly budgets and make ends meet. But now people are looking at your company in a brand new light. They are seeing a retailer take on tough challenges and make a difference.

This is powerful for all of us. We live in a time when people are losing confidence in the ability of government to solve problems. But at Wal-Mart, we don't see the sidelines that politicians see. And we do not wait for someone else to solve problems that might hurt our business or affect our customers in a negative way. We have a culture of teamwork, a culture of innovation, and above all, a culture of action.

In the years ahead, we might not be able do everything that everyone wants us to do. But we will do things that need to be done and that you and your company can do. Wal-Mart can take a leadership role, get out in front of the future, and make a difference that is good for our business and the world.

Scott then went on to list a number of specific initiatives he was launching to help Wal-Mart fill this leadership role--by providing more affordable health care for its associates and customers, promoting energy-efficient appliances and fixtures, and improving control over its supply chain to ensure humane and sustainable production practices.

Gates's speech was more abstract and theoretical:

As I see it, there are two great forces of human nature: self-interest, and caring for others. Capitalism harnesses self-interest in a helpful and sustainable way, but only on behalf of those who can pay. Government aid and philanthropy channel our caring for those who can't pay. But to provide rapid improvement for the poor we need a system that draws in innovators and businesses in a far better way than we do today.
Such a system would have a twin mission: making profits and also improving lives of those who don't fully benefit from today's market forces. For sustainability we need to use profit incentives wherever we can. At the same time, profits are not always possible when business tries to serve the very poor. In such cases there needs to be another incentive, and that incentive is recognition. Recognition enhances a company's reputation and appeals to customers; above all, it attracts good people to an organization. As such, recognition triggers a market-based reward for good behavior. In markets where profits are not possible, recognition is a proxy; where profits are possible, recognition is an added incentive. . . .

I like to call this idea creative capitalism, an approach where governments, businesses, and nonprofits work together to stretch the reach of market forces so that more people can make a profit, or gain recognition, doing work that eases the world's inequities.

It's pretty remarkable that these two major business leaders are offering such similar, compatible messages at the same moment in history--a bellwether of changing attitudes that history may find significant.

And equally significant, I think, has been the reaction to the two speeches. Based on my scanning of the world's media, it is both overwhelmingly positive and surprisingly matter-of-fact. Few commentators are responding with shock or even surprise; a more common reaction is, "Of course, this makes sense, let's get on with it." It doesn't appear as though Scott and Gates are out in front of public opinion or even corporate opinion on this issue; rather, they are basically in tune with it and responding to it (which is of course exactly where smart leaders want to be).

Surprisingly few dissenting voices have been heard. In the Washington Times, unreconstructured free-marketeer Larry Kudlow offered a grouchy complaint about Gates's speech:

Bill Gates, bloviating at the World Economic Forum in Davos, Switzerland, is issuing a clarion call for a "kinder capitalism" to aid the world's poor. Mr. Gates says he has grown impatient with the shortcomings of capitalism. He thinks it's failing much of the world.

This, of course, from a guy who's worth around $35 billion (give or take a billion). Don't you just love it? A guy without a college degree who invented a new technology process in his garage that literally changed the entire world, a guy who took advantage of all the great opportunities that a free and capitalist society has to offer and got filthy rich in the process, is now trashing capitalism and telling us it doesn't work. What chutzpah.

Of course, one could easily turn the logic of Kudlow's column back on itself. Who better to offer a reasoned, informed critique of capitalism than the likes of Bill Gates and Lee Scott, two of its most successful practitioners? If these men, having both conquered and benefited from the world of traditional business, believe that a new frontier for capitalism offers even greater potential, who is Larry Kudlow to dismiss their insights as "bloviating"?

(And by the way, isn't it amusing to see someone like Kudlow, the arch-defender of capitalism, denouncing Gates for his wealth and his supposed hypocrisy with all the gusto of an old-time Marxist? I guess Kudlow admires successful entrepreneurs only so long as they agree with Kudlow about how the system is supposed to work.)

In fact, both speeches indirectly expose the self-contradictory nature of much free-market fundamentalism. Dogmatic defenders of laissez-faire, like Kudlow, insist that the only legitimate goal of business is profit maximization. They also insist that the best government is minimal government, which interferes with individual initiative as little as possible, keeps taxes to a bare-bones minimum, and leaves people in need either to fend for themselves or to rely on charity.

The problem with this philosophy is that, in effect, it provides no pathway by which society can pursue broader human, social, and environmental goals--feeding the poor, protecting the environment, educating and housing the needy, making health care universally affordable, and so on. Free-market dogma forbids businesses from pursuing these goals, and it forbids governments from pursuing them as well. Which leaves--who? The Salvation Army? The Red Cross? If groups like these were capable of solving the problems facing the world, and especially its bottom billion, those problems would have been solved by now.

After a generation of conservative ascendancy in government and business, the social void is too big to ignore. That's why business leaders like Gates and Scott are explicitly pointing to the failures of government and proposing that business step up to fill the gap.

Pace the Larry Kudlows, most people want to live in a world where basic human needs are met, the environment is protected, and extreme poverty and needless suffering are minimized. Gates and Scott are proposing that business can help us attain these objectives, and can do so by harnessing the creativity of the free market.

This belief, once on the fringe of corporate thinking, is now in the mainstream--and that simple, remarkable fact is the true significance of the Gates and Scott speeches.

Labels: Bill Gates, Lawrence Kudlow, Lee Scott, Microsoft, Role of Government, Wal-Mart

In the aftermath of a conference on sustainable packaging, a group of us were presented with this question:

While Wal-Mart stil obviously lurks as a key driver of many sustainability goals, I'm wondering whether companies have progressed beyond Wal-Mart's directives. In other words, if Wal-Mart were to abandon its Scorecard tomorrow, would brand owners and packaging suppliers continue to move forward with their sustainability goals or would they jump off that bandwagon?

One of my fellow observers commented:

If Wal-Mart were to abandon its Scorecard tomorrow (which it won't), it would have little impact on the sustainability movement overall because manufacturers--large and small--are coming to realize that the principal driver of sustainability is economic.

I agree--with the following proviso. While there's a powerful economic logic behind less-wasteful, sustainable packaging, it is obviously the case that Wal-Mart's packaging edict has dramatically increased the interest in it and accelerated the progress being made on this front.

If Wal-Mart abandoned its initiative, or went in a different direction, it would have a huge impact on packaging simply due to its direct economic clout with its suppliers. When Wal-Mart sneezes, 60,000 suppliers catch cold.

Wal-Mart's packaging guidelines are like a private regulation, the issuance of which has something like the effect of law. It's one thing to acknowledge that pollution equals financial waste, but very few companies would move forward (at least to the degree they have) without the pressure exerted by regulation.

What's interesting to me about Wal-Mart's guidelines, and about the sustainable packaging movement in general, is that they require the active cooperation of the entire value chain, more so than most sustainability issues I have encountered. Wal-Mart is very far down the chain which, in addition to its size and clout, is why its action has the potential to be game-changing, not just for its direct suppliers, but for theirs and theirs and theirs.

Now if the Sustainable Packaging Coalition could figure out how to get Wal-Mart one step further down the chain--to consumers--that would truly change the game. The retailer has just announced that it reached its goal of selling 100 million low impact fluorescent bulbs, and ahead of schedule at that. Imagine if they could figure out how to get customers into the stores around recycling!

Labels: Packaging, Supply Chain, Wal-Mart

Some observers are still wondering whether Wal-Mart is really serious about going green. But lots of people and businesses in and around the megaretailer's hometown of Bentonville, Arkansas, think so. In fact, they are betting their livelihoods on it, according to this story from today's Washington Post. Here's a key graf from the story, posted from nearby Fayetteville:

A wave of start-ups developing the technology to help suppliers prove their green credentials has swept into this sleepy college town, half an hour from the company's headquarters in Bentonville. [Eco-entrepreneur Daniel] Sanker is looking at ways to improve fuel efficiency in shipping. Others are developing agricultural-based alternatives to petroleum or studying how electronics can function at higher temperatures, thereby cutting energy use. The University of Arkansas has established the Applied Sustainability Center at the campus here using a $1.5 million grant from Wal-Mart.

The story goes on to say that space in a local research park that caters to green companies is already fully leased--and that the town has hired its first "sustainability director," whose salary is paid out of the energy savings his innovations produce.

Call me a latte-drinking New Yorker (actually I prefer a plain old java from Dunkin Donuts), but I was surprised a couple of weeks ago when the latest polls showed Hillary Clinton with big double-digit leads over every Republican rival in Arkansas, which is evidently the red state that Clinton has the best hope of carrying in next year's presidential race.

Maybe Clinton's years as the state's first lady aren't the only reason for the state's leftward drift. If the WaPo story is correct, Battleship Wal-Mart may be changing course surprisingly swiftly--and leading an entire flotilla of businesses in a new, more progressive direction. The long-term implications for the corporate and political culture of this corner of the American South will be interesting to watch.

Labels: Arkansas, Personal Musings, Wal-Mart

When I'm asked, during a speech or an interview, to name some companies that are leading or lagging on sustainability, I invariably start talking about global corporations--companies like DuPont, General Electric, Unilever, Citibank, or PepsiCo who are racing to get to the top of the Dow Jones Sustainability Index, or companies like Exxon who appear either to not get it or to not care.

I often forget to mention small business, which is a serious mistake. Small business is the engine that drives economic growth, creates jobs, and provides many people with their initial view of how companies operate. Unless sustainability takes hold in businesses of three, twenty, or one hundred employees, it will not take hold at all.

If you help to run a small business, you need to be thinking about sustainability issues--and especially if one of the following five descriptions applies to you:

1. You provide goods or services to a large business. More and more large companies are “greening their supply chains” by making environmental and/or social performance a condition of sale. Wal-Mart, for example, has just imposed packaging reduction requirements on its 60,000 suppliers, many of whom are small businesses. McDonald’s has a strict supplier code of conduct that encompasses everything from the treatment of animals to the use of pesticides to child labor. You should look at some of the codes and requirements now being applied by big companies to the small firms they do business with; similar requirements may be coming your way in the near future.

2. You can benefit by being seen as part of your local economy. Many consumers are now making a conscious effort to “buy local” as a way of supporting the communities in which they reside. Locally-grown produce has long been considered fresher and of higher quality than food shipped in from parts unknown. Now concern over climate change is making people more aware of the environmental consequences of shipping food and bottled water long distances. Lots of people are shopping at local, independent stores rather than chain outlets because they feel there is more accountability. As a small business manager, you can look for ways to participate in--and benefit from--the buy-local movement.

3. You see a way to increase your profits by helping to solve environmental or social problems. Many companies whose business mission is to help solve environmental or social problems are booming. In my home state of Massachusetts, the clean-tech sector, composed primarily of small businesses, is growing at a strong clip, from solar power to biotech. Small companies like Waltham, MA-based Recycline are making successful businesses out of helping consumers and society reduce waste.

4. You see a way to reduce your costs by being more environmentally or socially conscious. Of course, small busineses, like large ones, can save money and help the planet by reducing waste and by saving water or energy, especially with the cost of fuel and waste disposal rising in many places. And because your business is relatively small and simple (compared to a global giant like GE), identifying and implementing opportunities to "green" your processes is likely to be easier for you than for a Fortune 500 company.

5. You see a way to build your business by linking it to a social or environmental cause. Many consumers like to do business with companies that share their values and are putting their money where their mouth is by supporting causes they believe in. There are all kinds of examples, involving businesses both large and small--for example, The Dancing Deer Bakery in Boston's Roxbury district donates a percentage of profits to local environmental and social causes, especially to helping the homeless.

Small businesses have many built-in advantages in the pursuit of sustainability. There are far fewer internal barriers (read: bureaucracy) to creating triple bottom line initiatives and tracking their progress in a small organization, and spreading the word among managers and employees is also easier when workers are numbered in the teens rather than the thousands.

Finding the time and the resources to get going may be the biggest challenge, but if you start by identifying a solid business case--that is, a clear and compelling argument for the profit-boosting potential of an environmental or social project--the resources can usually be found.

Labels: Dancing Deer, McDonalds, Recycline, Small Business, Supply Chain, Wal-Mart

Here is a not-to-be-missed cover story from the current issue of Fast Company magazine--a profile of Adam Werbach, the former president of the Sierra Club who is now working as a sustainability consultant for one of the world's most powerful (and notorious) companies: Wal-Mart.

Writer Danielle Sacks does a great job of vividly depicting the personal sides of this story--the mixed motivations behind the controversial career move by the complex Werbach; the emotional price he is paying in terms of broken friendships and even veiled threats from former environmentalist friends; and the struggles Werbach is living through as he strives to introduce meaningful change to a huge organization that employs one percent of the American workforce.

She also captures well the important issues raised by the Werbach/Wal-Mart partnership: Is a company famed for its ultra-low prices really serious about getting customers to pay more for green products? Will employees struggling under Wal-Mart's famously tight-fisted labor practices take the company's new commitment to ethical management to heart? How will the "personal sustainability projects" Werbach's team is introducing at individual stores translate in corporate-wide change--or will it?

If you're at all interested in the real-world pressures and conflicts involved in bringing the sustainability movement mainstream--and no business in America defines mainstream like Wal-Mart--you don't want to miss this story.

Labels: Adam Werbach, Danielle Sacks, Management and Organization, Wal-Mart

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