Take the S out of CSR: Jeffrey Hollender On What's Ahead for The Way We do Business

Jeffrey Hollender is the co-founder of Seventh Generation and a vocal advocate for responsible business practices. Vault.com'sCSR Editor Aman Singh chatted with him on his latest book, The Responsibility Revolution, the future for the discussion surrounding Corporate Responsibility--a civic duty or an important accountability issue within companies--how it will pervade our professional life and whether CSR should be practiced as a separate discipline or best inculcated by integrating it with traditional skill sets taught in business schools.

The Book

CSR

Training Business Leaders in Sustainability

Seventh Generation

Inspiration behind "The Responsibility Revolution"

This book comes out of the context of a book I wrote five years ago called What Matters Most, which focused on why businesses need to be more responsible, looked at the history of corporate responsibility, what worked and what hasn't worked.  Five years later, my unfortunate conclusion is that the potential and promise that corporate responsibility has is not being fulfilled.  In fact, businesses while making many positive attempts over the years, haven’t fundamentally changed the trajectory they're on. Corporations around the globe continue to outweigh the positive impacts.

So this book in essence, was a challenge to say, "Hey, we're not doing good enough, and in many cases we're failing to fulfill our responsibility.  That it's time for a revolution, and if not now, it may very well be too late to change the trajectory of many challenges we're facing, whether it's global climate change, fresh water, inequity between rich and poor, etc.," and rather than focus the book on what's wrong, we tried to be encouraging and more uplifting by telling stories of companies that are doing things right.

Choosing examples for the book: Too many or too little?

The challenge was twofold. One, while there are many good stories, there are not as many as I would liked to have to choose from.  Secondly, when you're writing a book of this kind, you also have to tell stories that haven't been told before. Because there are so many companies who are out there waving big banners about what they're doing, it's hard to find the companies that are truly doing great work but haven't aggressively promoted the work and everybody doesn't know what they've accomplished.

Big enterprise vs. small

The goal was to pick small, medium and large companies to show that it's not a restraint to be small or to be larger, that these responsible initiatives can be accomplished by companies of all sizes.

…The CSR movement

The challenge we face is that corporate responsibility has yet to be embraced in a holistic systemic fashion.  [We end up with] highly compartmentalized programs and initiatives, that in many respects don't mitigate the continued negative impacts that business has.  [For example,] Toyota makes a car like the Prius that is great from an environmental perspective, and then they go and lobby against higher mileage standards in California. They are then taking the position that yes, we want to reap the benefits of selling a green car, but we don't want the auto industry as a whole to become more efficient and responsible.  And this is symptomatic of what we [are] seeing in the market place.

In many cases it's much worse like a chemical company who wants to highlight the fact that they're giving money away for cancer research, while making chemicals that cause cancer. We have programs and activities, but we don't have systemic change that is necessary to deal with the issues that our society is facing.

…The terminology: "Corporate Social Responsibility", "Corporate Responsibility" or "Corporate Sustainability"?

First of all, we try to remove the "S" from CSR whenever we speak about it, because this is not a social or an environmental issue.  Corporate responsibility has to embrace holistically its impact and responsibility.  The only concern I have about sustainability is that like adding the "social" to CSR, it tends to be viewed through an environmental lens, rather than a holistic lens. Sustainability really is a holistic systemic concept, but that's not how most people understand it.  So I say corporate responsibility, because at least, I'm not signaling that it is about social issues or just environmental issues.

It's like talking about global climate change, and talking about business and environmental issues. Many of the biggest negative impacts we're beginning to see around the world are related to health issues, where rising temperatures cause the presence of disease that hadn't existed in those areas before and so the local health officials are unfamiliar in dealing with it. And truthfully, global climate change is a systemic problem because it will create weather issues that will disrupt business and the supply chain, it will create health issues, it will create starvation when parts of the globe receive less precipitation, and in order to deal with these challenges, we have to work with them in a much more holistic fashion.

We have to understand the reasons that we are facing are fundamentally economic and political in nature that we've structured the way we incentivize business in a fashion that encourages the excessive and irresponsible use of fossil fuels.  We have historically awarded Exxon-Mobile billions in tax subsidies and other benefits.  Why in a world that is facing this crisis are we providing so many subsidies to the oil industry? If coal companies had to pay $1/ton for CO2 emissions they would all be losing money.  They can't even afford to take marginal responsibility for their environmental impact in their current business model or they'd all be out of business.

CSR & the Oil industry: An Impossible paradox?

The challenge is that from a regulatory and tax perspective, we've encouraged the wrong kind of business activity, and it is not the fault of the coal industry alone. For various reasons, we cannot make the transition out of coal overnight.  But, we have to start looking at more aggressive changes to the tax and regulatory structure that will begin to incentivize the right kind of business industry. China is a great example.  China invests as much money in alternative energy in one month, as the U.S. does in one year.  They are investing at twelve times the rate that we are.  And that will result in an accelerated change in the development of their industrial sector.

I also believe that they will become a global force for alternative energy technology, because their government has made a strategic decision to invest in an industry that they see as critical in the future, as well as an incredible opportunity from a financial perspective. However, in the United States, we continue walking down the path that we've been on for the last five decades.

CSR: Is Government Regulation the Answer?

[If] financial reporting is mandatory for all businesses, social and environmental reporting should also be mandatory.  I don't know how an employee can be expected to choose a company that aligns with their values without this information.  I don't know how a consumer can be expected to choose who to purchase from without this information, and I don't know how an investor can intelligently make a decision about who to invest in, when all they see is numbers out of context, with all the other values and behaviors that are a critical part of the way the company functions.

Wal-Mart's Sustainability Index

I have historically been one of Wal-Mart's largest critics, and today I believe that they have made more positive change on a multiplicity of fronts than any large corporation.  That doesn't mean that they don't still have hundreds of challenges that lie ahead of them. I recently spoke on a panel with the president of Wal-Mart Canada and was extremely impressed with the passion and commitment that the management team has, and the number of initiatives that they're working on that they have yet to share publicly. I find that encouraging, and not just because they're such a large company, but because of the influence they have over other companies.

Responsible B2B Practices? CSR & the Banking, Law and Consulting Industries

Unfortunately, they escape public view and thus can't be impacted by the same pressure that comes from consumers and NPOs, and the hope is that responsible businesses, whether they're a Seventh Generation or a Wal-Mart, will hold their business partners to the same standard as they hold businesses that provide them with products that are sold to consumers. So when we look at the corporate responsibility quotient of all our activities, we look equally across vendors who make products for us, whether that’s services from a law firm or an advertising firm. It is, in the end, a values alignment with those business partners just as we want to see those values reflected in the products we sell.

At the end of the day, every company understands fully well that the expression of corporate responsibility can't only come in areas that are easily visible to consumers.

CSR as a Deliberate Career Choice

I speak at several business schools and I talk to a lot of midlevel managers and there is a growing concern in terms of people looking for jobs. People are beginning to discover and realize that if they work for a company whose values are not aligned with their own, it's increasingly difficult to have a happy fulfilling career.  So it is becoming an increasingly important fact.

The biggest challenge we face, however, is that many midlevel managers don't know how to have the kind of influence within their corporations that they'd like to have.  We've started the Sustainability Institute with Kaplan several months ago to try to help teach people at all levels on how to bring sustainability into their businesses, i.e., how to make the business case for why your company should take more responsibility or take up sustainability initiatives. And in many cases, we need to do a better job educating people about how to make that business case, because it [just isn't as cut and dry as] 'Hey this is a nice thing or the right thing to do.' If you're going to present an argument to your manager about why you eliminated toxic chemicals from your supply chain, you have to be able to make a business case about why that makes sense for your company.

CSR: Transitioning from civic duty to company strategy

At a meeting with his management team several years ago, (then CEO of Wal-Mart) Lee Scott said, in no uncertain terms, that if you want to have a future at this company, want to grow and earn the right to have greater responsibility, you have to understand that this company is serious about sustainability, and unless you can show your leadership in that, you can forget about making progress through the management structure at Wal-Mart.  We need more CEOs like Lee Scott who are willing to stand up and say that to their management team. It is necessary to see systems in place at companies that incentivize and reward attention to sustainability issues, not just financial metrics.

…The tipping point

The Chamber of Commerce has been a destructive force in carving progress toward greater corporate responsibility.  Six months ago, I helped start the American Sustainable Business Counsel.  They have 40,000 business members, who advocate for a more sustainable and just economy, argue for things like CSR reporting, as well as aggressive global climate change legislation and financial reform.

We need to gather the collective voices of small and medium-sized businesses to counter the dominant voice that a handful of multinational corporations add to the chamber of commerce. That preserves an economy that is disconnected from what we need to make America successful and competitive in the future.

Also, when we write job descriptions and incentive plans, sustainability metrics and objectives have to be baked into them so that people understand that a company is serious about ensuring that people focus on the issues.

Top three CSR concerns

One is the lack of real transparency which remains at odds with corporate responsibility.  A radical transparency is required for anyone to have enough information to determine whether a company is responsible.  Second would be the compartmentalized, programmatic way in which corporate responsibility is practiced. Companies think that because they have three or five working initiatives, they are a responsible company. But it needs to be a process that transcends these compartments and is viewed in a holistic way.

Finally, it is the absence of an understanding of a systems-based holistic way of thinking that is required to be a truly responsible company. I'll explain with an example: The LA Times did a big study on the Gates Foundation, where they compared the Gates Foundation investment portfolio and their footprint. So, if they own 5% in a mining company, 5% in an oil company and 5% in a chemical company, they calculated that the detrimental impacts that result from the ownership responsibility in the investment portfolio, is exponentially more damaging than the positive effects that emanate from the money that they give away.  It's a great paradigm of how disconnected we are as a society and as businesses and don't connect responsibility with how we invest money.  We just think about the good we do when we spend it.

Sustainability Institute with Kaplan

We have created a series of online courses that are interactive and can be purchased by an individual or a company. They are available in 20 languages and can be customized to the needs of a particular company.  So it is a solution that is applicable to a business of any size and is focused on teaching broad principles, concepts and practices.  We have modeled them to not be a high level strategic tool for management as much as a way to bring these concepts to all employees to help them understand why it is important for their company, what they can do, what the business case is, and what opportunities may lie ahead that they can make a positive contribution to.

MBA in Sustainability

The challenge when you think about sustainability is that it is a discipline that requires a vast diversity of perspectives.  It is helpful to understand engineering, but it's also helpful to understand chemistry, psychology, economics and history.  What I find most compelling about sustainability is the inter-disciplinary holistic perspective that is required to understand how it actually works. However, the absence of this systems-based capability and thinking that must underlie any practice of sustainability is a foundational thing that we need to remedy.

If we taught children systems thinking in first grade, they would know better about most of the things we do as adults, because they would understand the unintended consequences that flow from many of our actions. One of the few disciplines that we teach everyone in Seventh Generation is system thinking, whether you're an accountant or in sales, to work at a company like Seventh Generation and to actively contribute towards its mission, you have to understand systems thinking.  And for me this systems thinking underlies the practice of sustainability.

Ideal educational background for CSR

The most important background is to study systems thinking.  As for a foundation, all professional attributes compliment your capability.  But it is such an interdisciplinary practice that just because you have a degree in environmental science doesn't make you an expert in sustainability, or a degree in engineering or chemistry.  Because sustainability is best practiced by integrating all these perspectives and understanding how they function as a system.

From Sheer Survival to Leading Change

Seventh Generation was started 22 years ago as an aspiring responsible sustainable business.  But it is important to know that this was not something that we adopted as a part of an activity, and was built into the foundation of the company. When we raised money for the very first time, we spelled out in the offering documents specific ways in which we were going to express our business responsibility.

Also, we were way ahead of our time. There was little understanding of the whole notion of green sustainable products back in 1988, and in fact, the only products that we initially focused on were energy and water conservation.  We survived for the first 10 years as a very niche business, selling mostly to hardcore environmentalists—mostly people that were members of environmental organizations.  And there were a couple of key turning points in the evolution of the company.  One was the realization that what was bad for the environment was also bad for your health, and by focusing on the health issues as well as the environmental issues, we could possibly broaden the market that we were selling to.

The second thing was the success of the natural food industry, and the onset of retailers like Whole Foods, which provided access to an ever-expanding market. When we started, our tag line was "Products for a Healthy Planet," then 10 years later, we switched to "Safer for you and the Environment," and that was very much symbolic of the change in the market.

The last decade has fueled a combination of a growing awareness of environmental issue, the growing awareness of how toxic chemicals aggravate chronic health concerns. The company was able to grow at an average rate of 30% a year for those 10 years, to the point that we began to awaken some of the sleeping giants like SC Johnson, Clorox and Kimberly Clark, who over the past 24 months have began to aggressively enter the green product market.  And while many people would question this as a bad thing, it is in many respects, an incredible success for us, i.e. we have helped build this to a scale that has attracted change from the entire industry.

We also look at responsibility and sustainability as something that must first be practiced internally, before it can be practiced externally with any authenticity. A green product does not make for a green company and a responsible product does not make for a responsible company. So the holistic look that we want to aspire to and apply to our products, we also try to apply to our internal corporate culture. That ranges from limiting salaries to the highest paid person, to the lowest paid person, at a ratio of 14:1, to ensure that everybody who works at Seventh Generation owns equity in the company, so that they participate in the value that they're helping to create, and a whole host of practices in which we try to live up to our effort to become a more equitable and just company

The future

I'm heavily involved with the American Sustainable Business Counsel and it is the most exciting activity that I've embarked on, since I started Seventh Generation 22 years ago. My second venture is the Sustainability Institute, which is in collaboration with Kaplan, to teach sustainability to companies globally.  The combination of educating companies [leaders] and working to change the political landscape to create a more supportive environment for responsible and sustainable companies are the two things that I am going to focus on in the next decade.

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