Lessons from Mindful Corporations
Legally, corporations are people. Some, like addicts, are mired in destructive behavior. Others are building a healthy new fast lane. Here are some worth following.
This article appeared in our October 2003 issue.
One day Ray Anderson realized with a jolt that he was part of the problem.
It was August 1994, and the CEO and founder of Interface, Inc., the world’s largest commercial carpet manufacturer, understood how much environmental degradation his company caused simply by following perfectly legal, commonly accepted methods of operation.
“We do take a lot of petrol-derived materials from nonrenewable sources — natural gas, oil, coal — and we use a lot of energy that today comes from those same fossil fuels that generate greenhouse gases and contribute to global warming,” he says. And back then, “We weren’t terribly mindful of what was coming out of our smokestacks, either. Or what was coming into our factories.”
Anderson came to his shattering understanding while reading The Ecology of Commerce: A Declaration of Sustainability by Paul Hawken. It had landed on his desk as he was struggling to write a speech for Interface’s newly formed environmental task force. He didn’t know what to say. He had never considered corporate environmental issues beyond complying with the law. Yet the book became “a spear in my chest that remains to this day,” he says. “I was reading passages in bed at night to my wife, and we would weep together.”
Becoming a Restorative Enterprise
Anderson used his epiphany to begin transforming the company he created in 1973. He assigned the task force a Herculean mission: Convert Interface to a restorative enterprise, first by reaching sustainability in its practices and then by becoming truly restorative — a company that returns more to the earth than it takes. In addition to retaining its high ranking as a supplier of commercial carpeting, he later vowed, Interface will be “the first name in industrial ecology worldwide through actions, not words,” by 2020.
How does Interface, headquartered in Atlanta, plan to achieve this lofty goal? By harvesting used carpets, recycling old petrochemicals into new materials, and converting sunlight into energy — much of which will require developing new technology, not to mention educating customers, suppliers, and partners. “There will be zero scrap going into landfills and zero emissions into the biosphere,” Anderson wrote for the corporate website. “Literally, our company will grow by cleaning up the world, not by polluting or degrading it.”
Not a typical corporate strategy. Not at all, unfortunately.
When Corporations Behave Like Addicts
With signs of environmental destruction mounting daily — from species extinction to global warming — why aren’t more companies following Interface’s example? According to Bill Veltrop, self-described “generative change architect” and founder of the International Center for Organization Change in Soquel, California, many large businesses possess addictive characteristics that lead to “collective denial of the negative consequences of what it is they’re addicted to and the myopia that goes along with that.”
If his analogy feels like a stretch, remember: Under the law, corporations are treated as individuals. The law serves to protect living, breathing individuals from personal liability, but it’s fair to ask just how healthy a corporate “individual” has been created.
Veltrop’s list of corporate addictions includes workaholism and downsizing, both of which deplete creativity and awareness, particularly in a time of competitive pressure and economic downturn. These addictions “pretty much disappear their capacity for reflection and creative intention, so that keeps them trapped in the vicious action/reaction cycle,” he explains. “There is less time to step out of the squirrel cage to see beyond next quarter.”
Underlying everything else, however, is the mechanistic worldview held by most corporations. They are designed and expected to function as efficient machines “not built to self-evolve,” says Veltrop. If, instead, corporations were generative — designed to embrace sustainability, evolution, and improvement, along with the messiness such a view entails — they would make “the growing of a collective consciousness a strategic imperative, saying it’s healthy for us to be conscious not only of the choices we have in various levels of the system but also to be more conscious of the consequences of our choices.”
While Ray Anderson exemplifies how a conscious corporate leader can inject an organization with a generative worldview and create long-term, top-down change, a growing number of entrepreneurs are using similar philosophies from the start. Many people are familiar with the names of the pioneers: the Body Shop’s Anita Roddick; Tom and Kate Chappell of Tom’s of Maine; and Ben Cohen and Jerry Greenfield of Ben and Jerry’s Ice Cream. But others are following their example.
Sustainable High Tech
The high-tech professionals who created Rolltronics, in Menlo Park, California, want to bridge the digital divide that separates technology-poor from technology-rich countries by revolutionizing the production of electronic devices. This multimillion-dollar startup will use a roll-to-roll process, similar to the way newspapers are printed, to produce devices such as ultra-high-density memory, ultra-light batteries, and integrated circuits on thin plastic films, including “electronic paper” and wearable computers. This process is less expensive and much friendlier to the environment than traditional electronics production.
Beneath the business plan lies an even more revolutionary vision: a spiritual commitment shared by the principals in the company, according to president and CEO Michael Sauvante. Arising from their personal beliefs, it is a generative model based in Eastern philosophy. “It includes a belief in the idea that the entire universe is a living, evolving mechanism and that our responsibility is to endeavor to relate in a constructive, positive sense to all that is around us,” says Sauvante.
Accordingly, Rolltronics extends the definition of its stakeholders beyond stockholders to the whole world, including employees, investors, and the larger society “that supports the myriad aspects for us to live and function,” says Sauvante. “Each of these groups contributes in different ways. All should be considered and should benefit from our actions. This, we feel, is a balanced approach for truly sustainable enterprise.”
Minding the Three P's
The company uses Triple Bottom Line (TBL) reporting, devised in 1994 by Sustain Ability, a London think tank. The idea behind the TBL is that “companies that want to be successful in the long term should be able to meet society’s needs for goods and services without destroying natural and social capital.” Or, in other words, in addition to financial profit, TBL reporting also measures corporate impacts on people and the planet.
While use of the TBL is growing, it is not yet common, especially in the high-tech sector. Sauvante admits that using it has created “difficulties with certain mentalities that don’t recognize what we consider to be the smarter business approach here.”
Many others, even in the investment community, consider Rolltronics’ approach to be “common sense,” he says. “More and more people are saying enough is enough, especially in these post-Enron days, and [our] value proposition is really rising to the surface.” Indeed, studies show that companies paying attention to society and the environment in addition to profit are realizing better bottom lines than companies that don’t. “When price and quality are comparable,” says Corinne McLaughlin, co-founder and executive director of the Center for Visionary Leadership, “people would rather buy from companies that live by higher values.”
She says many shareholders are also beginning to hold companies accountable, questioning employee treatment and impacts on the environment, for example. “They’re making a lot of noise,” she says. “And that’s where the leverage is.”
Attending to social and environmental issues need not be at odds with nurturing the financial bottom line, says Carolyn Woo, the Martin J. Gillen Dean and Ray and Milann Siegfried Professor of Management at Mendoza College of Business, University of Notre Dame, “particularly when financial performance and attention to the needs of stakeholders come from good, solid management. When companies are founded with a social mission, and it’s incorporated into the business model, it can work. And there’s no pressure from investors because they invested based on the mission.”
Tea and Social Responsibility
Although he’s only 36, Seth Goldman has a long history of social activism in business. His parents, both academics, are longtime activists. At Yale, he was on the board of the local chapter of Students for Responsible Business. He was later employed by Calvert Group, a leading socially responsible investment firm, reaching the position of vice president of the Calvert Social Investment Fund. His current position follows the same path, although with a very different vehicle. He’s president and “Tea-EO” of Honest Tea, a Bethesda, Maryland, producer of organic bottled tea and tea bags. Founded in 1998, Honest Tea has experienced a 110 percent growth each year, with $4.7 million in sales in 2002 and expected sales of $7-8 million in 2003. Naturally sweetened and brewed in spring water, the products quickly became the best-selling tea in the natural foods industry and recently became the first organic product sold at 7-Eleven stores.
Its business model sets Honest Tea apart from most other beverage makers. The company establishes partnerships with economically disadvantaged communities that supply tea ingredients and not only pays the workers fairly, but pays royalties on sales of beverages and teabags. Among its partners are the Crow Nation of Montana, which supplies the mint for First Nation Organic Peppermint Herbal Tea, and farmers in Haarlem, South Africa, who grow the honeybush for Haarlem Honeybush, one of the company’s newer flavors.
Honest Tea has also established a strong relationship with Pittsburgh, a city that has suffered since the collapse of the steel industry there. Along with two other companies, it purchased a defunct bottling plant at a bank auction and refurbished it. All its teas are now brewed, bottled, and shipped there.
One factor essential to Goldman’s participation is offering the world a new way of doing business. “If we can create this alternative model to be successful, I hope this can be something that can be inspiring to others,” he says. “When I wake up every morning, it’s not about how am I going to be able to sell more bottles of tea. It’s what makes this a more robust model that others can follow.”
Beware the Greenwash
Goldman believes that the company’s social and environmental efforts are a huge factor in customers’ loyalty to the brand. To abandon or falsify those efforts would destroy the goodwill the company has established with customers who, through buying its teas, continue the chain of doing good.
That kind of falsification, or corporate touting of environmental or social practices that are nothing more than P.R. ploys, is called “greenwash.” It’s guaranteed to attract scorn and drive away business when discovered. Admittedly, it’s a lesser offense than many recently revealed corporate debacles, but it’s clear that any kind of corporate lying is becoming intolerable.
In light of these scandals, perhaps more companies will follow the example of Interface, Rolltronics, and Honest Tea. Perhaps employees, investors, shareholders, clients, suppliers — all the stakeholders — will demand that business, now the de facto leader of the world, embrace the move toward a restored environment and a healthier society. If this happens, “doing well by doing good” could become the new corporate watchword — and perhaps it’s the only thing that can save us.
Want Your Company to Be Part of the Solution? Try This
Contrary to popular belief, thousands of investors want to see social and environmental dividends as well as financial returns on their investments. Susan Davis created Capital Missions Company in 1990 as a way for networks of investors to do just that. One of its most innovative strategies was to create the "Triple Bottom Line Simulation" for institutional treasurers who want to practice social investing without risk. CMC has developed a unique set of operating principles that can be used or adapted by any business that wants to be socially responsible:
- Tell the truth.
- A deal is a good deal when it's good for all concerned.
- Generosity comes back tenfold to the bottom line.
- Socially responsible companies are more productive and profitable than others.
- Water doesn't rise any higher than its source.
- Treasure teamwork; share the wealth.
- The best call a company can get is a call of complaint because it helps it to improve, so when you get a complaint call, start by saying,"Thank you!”
- Love the discipline of the numbers.
- Never make decisions out of fear.
- Trust the universe.
Original Intent? How Corporations Became "People"
Corporations were created as an extension of the government, chartered by the monarch (and later the state) to "promote the general welfare." They were given privileges such as limited liability because their sole purpose was to improve civic life through such enterprises as building highways and postal service.
So how did we end up with Enron and Global Crossing, examples of epidemic corporate lying, cheating, and stealing? And how did we end up with the notion that corporations exist to maximize profit for the few, rather than promote benefits for the many?
Over time, corporations changed from temporary creations beholden to the state to permanent businesses with a vested interest in serving private capital, according to Ralph Estes, professor emeritus of business administration at American University and co-founder of the Center for the Advancement of Public Policy in Washington, D.C.
As corporations ballooned in size and number, profitability became a priority and accountability evaporated. Stockholder interests — providing the largest possible financial return — were elevated above all others, including those of the general public. The "tyranny of the bottom line" was born.
Not only was the corporation's original purpose abandoned, but the constraints that once operated on these entities were forsaken as well when they won "human rights" in a Supreme Court ruling in 1886. This ruling has had tremendous consequences for American democracy, argues Thom Hartmann in his new book, Unequal Protection: The Rise of Corporate Dominance and the Theft of Human Rights (Rodale, 2002).
Corporations are legal fictions that exist for the sole purpose of building wealth, explains Hartmann. They can live forever, change identity in a day when it suits them, live without a real home, own others, cut off parts of themselves, and grow new parts. Should they have the rights of the individual if they do not behave like individuals? asks Hartmann. His answer is no.
Since the Supreme Court ruling, corporations have assumed the Bill of Rights for themselves, Hartmann maintains. Corporations have pushed in court for the right to free speech, allowing them to contribute money to politicians and political parties and effectively buy votes and rewrite laws for their benefit. They have won the right to privacy, which allows them to deny government agencies access to their papers and properties and, he says, hide crimes in the process. They have also secured the Fifth Amendment right against self-incrimination and the Fourteenth Amendment right of equal protection, allowing them to exist even in a community that objects to their presence on the grounds that they destroy small businesses.
Since corporations have subverted their original purpose and thrown off their original constraints, can they be controlled? Hartmann says no, not until the laws are amended and some constraints reintroduced.
"Constitutional mechanisms that were designed to protect humans got turned inside out, so today they do a much better job of protecting corporations, even when the result is harm to humans and other forms of life," Hartmann writes. "Democracy is the story of government of, by, and for the people; something, it turns out, that is very difficult to have function well in the same realm as corporate personhood."
— Louise Danielle Palmer
The New Spirit in Big Business
At the height of the fitness boom in the eighties, the perception of physical fitness changed dramatically when major corporations discovered it. Suddenly there were expensive worldwide conferences led by executives from firms such as American Express, who realized that physical fitness gave them a competitive advantage. Since then, fitness centers and personal trainers have become regular perks for corporate elites.
What's fascinating now is best exemplified by the second annual Spirit In Business World Conference at the Palace Hotel in San Francisco. The three-day conference, sponsored by firms including American Express, was priced for executives. As in the corporate fitness conferences of the eighties, nothing really new was said. What was revolutionary was that CEOs were saying it. In a global economy where instant communication increasingly makes every transaction transparent, the new rules of competitive advantage for creating wealth could have been written for Sunday school.
One keynote speaker was Marilyn Tam, a former top executive at fitness companies including Nike and Reebok. The title of her talk and her new book, How to Use What You've Got to Get What You Want (Jodere), sounds like a typical cutthroat get-rich-quick scheme. But it's not. Tam, the second daughter in a traditional Chinese family in Hong Kong, tells an unlikely and inspiring American success story based on four values, the first of which is: "Tell the truth all the time. Why complicate your life by having to remember lies?"
Here's hoping that Tam's book and the Spirit in Business World Conference (spiritinbusiness.org) help to make honesty, as well as fitness, necessary for life at the top.
— Stephen Kiesling