North America is home to some examples of companies that are genuinely listening, learning and striving for a sustainable way of running their business
It is hard for any company to tackle the complexity of the challenge to grow sustainably while pleasing all stakeholders. Two factors are increasingly important – innovation and smart partnerships. If there is one trend that has invigorated the sustainable business landscape and opened the doors to new possibilities, it is the growth of benefit or “B” corporations.
These “corporations with a conscience”, the invention of B Lab founders Jay Coen Gilbert, Bart Houlahan and Andrew Kassoy, are attempting to move from shareholder capitalism to stakeholder capitalism – no easy feat.
B corps put emphasis on qualitative goals as well as on financial performance. In addition, certified B corps must meet responsibility standards laid out by the non-profit B Lab.
The first B corps were certified in 2007 and just seven years later there are more than 900 B corps in 32 countries and 60 industries. Canada on its own has just over 100 B corps. The necessary legal infrastructure for the 675 B corps in the US is currently in place in 20 US states.
The assessment B corps undergo for certification is a powerful tool that can be used to assess current environmental and social behaviour and potential improvements.
The next huge step forward, predicted by some to happen in 2014, is for a B corp to go public, or vice versa for a public corporation to be certified as a B corp.
Social and environmental, then financial
Alter Eco Foods, based in San Francisco since 2005, is an example of a B corp forming for social and environmental reasons and subsequently growing financially. Alter Eco sells chocolate, quinoa, rice and sugar, and was founded by French and Australian nationals who wanted a corporate structure somewhere in between a multinational and an NGO. Alter Eco is pursuing poverty alleviation through organic, fair trade, and carbon-neutral farmer cooperatives.
“Our efforts to be sustainable are at the heart of the company,” says founder Mathieu Senard. “In order to grow, we have had to think a lot about how to scale without ever compromising.”
The company recently passed the $10m sales mark, which takes it out of the baby leagues of the food world and makes it a bantamweight.
“It’s very challenging,” Senard says. “We have to play by the same rules as the non-B-corp food brands, and pay the same costs of distribution.”
Alter Eco has a large group (80 in total) of patient investors, and it broke even for the first time in 2013. B Lab and the B corp certification assessment clearly helped Alter Eco, Senard says, to look at every aspect of the business – not just sourcing and supply chain, but also employee engagement and benefits – to make it the “most responsible” company it could be. Now the crux is determining exactly the sweet spot between “mission-driven” and “healthy returns”.
“We are in a food business, where it’s difficult to get to $10m [sales],” Senard says. “Now if we can finally show that we can be profitable, and bring healthy returns … even though we are not exactly sure where healthy returns should fall, that is a feat. Our investors are in it for the long run. They are not asking us to drive up sales in the next few years just to sell the company. They understand we are also growing the mission.”
Senard sees financial growth on the horizon – sales of $14.5m are predicted in 2014 – and says the company works constantly to keep the triple-bottom-line balanced. “This is what we talk about all the time,” he says.
Outdoorwear company Patagonia, headquartered in southern California, was an early B corp, and is experimenting in growing its mission through non-traditional partnerships. Patagonia already sells its own garments both new and used, on its website. It has prided itself on the fact that its clothing is so well made that it lasts far beyond the “fast fashion” timeframe.
Now the massive online auction site eBay will also re-sell used Patagonia items in an initiative called Common Threads. Together eBay and Patagonia have enlisted 60,000 customers though social media to pledge to reduce, reuse and recycle outdoor clothing, as well as repair garments through another company called Ifixit.
Patagonia is also moving towards what founder Yvon Chouinard calls the “responsible economy” and neither he nor the company is exactly sure what that will look like. But Chouinard says it is the most important thing the company has every done – other company environmental campaigns addressed symptoms, he says. Pursuing the responsible economy, and enlisting committed stakeholders, takes on the “core” of being sustainable.
Chouinard was always convinced that committed individuals would be drivers for transformative change. Social media has rapidly given more of those committed individuals a voice, and now another B corp called Change.org is giving more of them a powerful platform.
“Individuals used to have e-mails or letters as tools, which were pretty easily ignored by companies,” says Charlotte Hill, press relations manager for Change.org. “User-generated online campaigns really empower more people.”
Hill highlights the recent petition of Sarah Kavanagh,a 16-year student from North Carolina in the US. Kavanagh’s petition asked PepsiCo to take brominated vegetable oil (BVO, a flame retardant that is banned in Europe) out of its signature Gatorade sports drinks. More than 200,000 signatures later, PepsiCo announced it was removing BVO from Gatorade.
“‘Leaning in’ is what it is all about,” says Hill, “It is companies saying: ‘We are listening, we value your opinions.’”
Hill says she understands why some companies are not comfortable with this much engagement and might consider petitions confrontational. So Hill and her colleagues created a service at Change.org specifically for decision makers, which she says can facilitate better dialogue between petitioners and companies.
“Companies say, ‘Yeah we get petitions and we don’t know what to do.’ People don’t understand all the factors.” Now, if Hill sees a petition becoming popular, she contacts a company and helps them craft a response.
Etsy, Southwest Airlines, Ikea US, and Whole Foods, Hill says, have all been responsive, and found the result is “reasonable dialogue” and an entirely new level of stakeholder engagement. Hill considers this to be the future for activist-corporate interaction.
“In the sustainability world, those annual reports don’t cut it. Most people aren’t going to pick up your report, look at your graphs, make some kind of informed decision about you,” she says. “On an issue of importance to them they are going to start a petition directed at you.”
The company's task in this new landscape, Hill says, is to bring people along to see its viewpoints about doing good at the same time as really listening to stakeholders’ opinions.
“The reality is that more people are having a seat at the table and their opinions are having impact,” she says.
Case study: Staples
Stationery that’s not standing still
Office supplies giant Staples is the only North American retailer to make it to the 2014 Global 100 Sustainability List put out by Corporate Knights, and it is leading in the US and Canada on the mounting problem of electronic waste.
In 2010 the company set a goal for recycling 18m kilograms of e-waste (and 100m toner cartridges) annually by 2020. Four years later Staples is halfway to that goal. A recent “technology trade-in” programme has dual goals of raising consumers’ awareness about Staples’ progress on e-waste and getting consumers who are serial upgraders of phones and other electronics to recycle their old devices when buying new ones.
This doesn’t mean that Staples or North America is by any means winning the e-waste war. Staples definitely has the edge in number of places to drop of e-waste (1,500 store locations) and convenience for consumers – leaving e-waste at stores is free and easy. But Staples’ efforts are outstripped by the 10m tonnes of new electronics entering the stream in the US alone each year.
A UN study published in December 2013 estimated the global e-waste mountain is expected to grow from 48.9m tonnes in 2012 to 65.4m tonnes in 2017. This is the weight equivalent of 11 great pyramids of Giza, the study says.
Jake Swenson, director of sustainable products and services, says Staples is advancing e-waste efforts through partnerships. Already the company has convinced nearly all of its partners in collecting and processing e-waste to certify their operations to the E-Stewards standards, which make sure no e-waste ends up in landfills or developing countries.
Swenson says Staples’ next foray is in understanding and helping reduce suppliers’ carbon emissions.
“Carbon reduction and climate resiliency – those are important elements of our sustainability,” Swenson says. The company recently set a new ambitious goal for its own carbon reduction of 75% from its 2010 baseline.
Case study: Cosia
Oil sands collaboration
Collaboration hasn’t exactly been a byword in Canada’s oil industry. Competition is fierce over resources, because potential pay-offs are lucrative. But the idea of “shared value” creation has led Canada’s oil sands producers to agree to collaborate and share their innovations … up to a point.
The Canada Oil Sands Innovation Alliance (Cosia) consists of 13 companies controlling 90% of the industry’s output, and is concentrating on environmental improvements in water, disposal of waste materials, greenhouse gas emissions and land use.
To make the sharing of innovations work in this traditionally competitive arena, Cosia companies signed a joint venture that precisely defines the scope within which collaboration occurs. Companies bring their innovations into a steering committee and give other Cosia partners access to research results and loyalty-free patent use rights. As Cosia chief executive Dan Wicklum puts it: “You’ve heard the saying good fences make good neighbours. Well, here it’s good legal agreements make good collaborators.”
Set up two years ago, Cosia hasn’t yet made concrete regional and aggregate goals for progress in its four target areas for environmental improvement. Wicklum says goals are difficult to agree on but Cosia companies are taking the performance goals very seriously. “We intend to share this with the public in the very near future,” says Wicklum.
But lack of goals does not mean lack of progress. Cosia companies have thus far shared 560 technologies that cost almost C$1bn (£540m) to develop. About 190 of the most promising of the shared technologies are beginning to be applied in projects. Wicklum highlights a new way of reusing wastewater from surface mining operations as one such example.
Cosia, Wicklum says, is not meant to be a communications effort but rather a collaborative way to accelerate environmental performance. The group is seeking outreach to stakeholders with one effort, however: a new programme from Cosia called E-Tap (Environmental Technology Assessment Portal). E-Tap is not exactly crowdsourcing oil sands eco-solutions, but close.
“E-Tap is a natural evolution of finding a solution to the challenges that companies had in responding [to new technologies],” says Wicklum. “Instead of many technology providers pitching to many companies now we do that through this one Cosia process.”
Case study: Chipotle Mexican Grill
Fast casual sustainable chain
Chipotle Mexican Grill is a fast-growing chain of 1,500 restaurants, started in 1993 in Denver by Steve Ells. In its first decade, Chipotle created an entirely new concept – not fast food, and not casual dining but a mash-up known as “fast casual”. For the past decade, while the company has continued a rapid growth trajectory it has also tried to create a sustainable supply chain.
Chipotle’s quest to have an “all-natural” supply chain started with Ells’s collaboration with natural pork producer Niman Ranch.
“Niman Ranch is an idyllic image of farming in America – big pastures and red barns,” says Chipotle spokesman Chris Arnold. “Unfortunately that’s not how most pigs [elsewhere] are raised – 95% are in confinement. [Ells] didn’t want his success tied to so exploitive a model.”
Ells’s epiphany moved Chipotle from branding its food as simply fresh – ie using nothing processed or frozen – to branding it as “natural”. The term has had plenty of greenwashing around it, and so Chipotle was careful to define “natural” meats as – at a minimum – those from animals raised without the use of antibiotics or added hormones.
“We knew it was going to be challenging but it was an easy transition for pork, and then we started with chicken, went on to organic beans and started chipping away at local produce,” says Arnold. A network of produce farms is key to the local produce goal, and Chipotle has said it would prefer there to be more mid-sized farms in the US and that they were less threatened by industrial agricultural consolidation.
Beef has, however, proved to be the most challenging item in the supply chain to source naturally. Chipotle’s beef protocol calls for cattle to be raised using high standards of animal husbandry and without the use of antibiotics. But it took the company a decade of effort to get to a point where it was able to serve naturally raised beef.
And sourcing the amount of beef at the standards the company requires is a big challenge, Arnold says. “The beef supply – and even more so when naturally raised – is constrained. It’s challenging to get what we need this year.”
Chipotle is trying to find new cuts of steak to use in restaurants to stretch resources further. But “fast casual” dictates, unsurprisingly, a need for fast service, and the company hasn’t yet found a perfect flavour and quality cut that will cook consistently in the same amount of time as the cuts served currently.
Arnold says the challenge facing Chipotle – using 60m kilograms of meat annually – makes the much larger supply required to satisfy McDonald’s goal for sustainable beef seem overwhelming.
But perhaps there may be synergies in partnering in future with the fast-food king. McDonald’s was once a major investor in Chipotle though the companies parted ways in 2006.
“Our aim is to use our purchasing power to drive change and hoping our success will motivate others,” Arnold says. “And we do see that. At [restaurant chain] Panera, for example, they have moved to natural chicken. Well, Panera uses the breast and we use thigh and leg meat. There’s a possibility for a complementary relationship there.”Canada corporate sustainability North America briefing region briefing USA