The C-Suite

Think You're An Environmentalist? Prove You Mean It

Wednesday, August 13, 2008 / KW

New York Times columnist Thomas Friedman is a big boy — author of several best-selling books and one of America's most influential opinion-shapers about topics like globalization, economic policy, the "war on terror," and the energy crisis. Over the years, his ideas have been subject to plenty of scrutiny and criticism. But I was a bit startled to see his recent column on sustainable energy policy attacked by Daniel Luzer in the respectable Columbia Journalism Review not on the basis of any logical or factual errors but on purely personal grounds:

Friedman … is married to Ann Bucksbaum, the heiress to the $2.7 billion General Growth Properties fortune. Founded by Friedman's father-in-law in 1954, GGP is America’s second largest real estate investment trust and owns, develops, and operates regional shopping malls in forty-one states.

That's right, malls. Fat, energy-hogging, climate controlled, sprawl-inducing — many of the most palpable examples of American waste and ecological irresponsibility are owned and managed by Tom Friedman's family.

This makes [Friedman's] gee-why-don't-you-write-your-congressman naivete a little hard to take. Friedman actually has direct access to a company with some control over the level of waste the United States perpetuates on the world.

Is this fair or reasonable? Arguably not. Who knows how much actual influence Tom Friedman wields over the company his father-in-law founded? Nor does Luzer's article offer any information as to whether GGP has taken any steps to move the properties it manages toward greater energy efficiency or eco-responsibility. Apparently, as far as Luzer is concerned, the fact that GGP runs malls is damning in itself — and it thoroughly undermines Friedman's credibility.

This little episode offers an interesting reflection on the place of sustainability in the American dialogue today. Although more and more people now recognize the legitimacy of sustainability issues in the political and business arenas, there is somehow still a need to prove one's bona fides before advancing a sustainability argument — as though, unless you can somehow prove your personal purity, you're likely to be considered a hypocrite just for talking about sustainability. (Remember the attacks on Al Gore for owning a big house and flying around the world by jet.) And as Luzer's column suggests, criticism of your sincerity is just as likely to come from the left (i.e. from environmental advocates) as from the right (i.e. environmental skeptics).

It's funny: Anyone can make an argument on behalf of self-serving, absolute laissez-faire policies ("Down with regulation! Drill in Yellowstone! Pollute at will!") without having their right to make that argument questioned. The assumed sincerity of self-interest insulates the anti-sustainability crowd from this form of criticism. Environmental advocates are held to a higher standard, one that extends not only to their own behavior but even to that of that families.

If you're a CEO working to position your company at the forefront of the sustainable business movement, you should devote a little time to analyzing (and, if necessary, "cleaning up") your personal behavior as well, including the kinds of cars you drive, the houses you own, and the holdings in your retirement account. If your efforts on behalf of sustainability provoke resistance or resentment from any quarters, you can be sure all those purely personal matters will come under scrutiny — fair and reasonable or not.

If it can happen to Tom Friedman, it can happen to you.

Modeling Transformational Leadership In Business And In Government

Friday, August 01, 2008 / AS

As the 2008 presidential campaign heats up, perhaps the only point of agreement between Barack Obama and John McCain is that our country needs dramatic change. Both candidates are campaigning as change agents: Obama's slogan is "Change you can trust," while McCain campaigns on "Reform, Prosperity, and Peace," which, if you stop to think about where America is today, is just another way of saying "change."

Neither candidate has been specific about what change is needed nor about how he plans to make the change, and I doubt that either one has a detailed plan for change that goes much beyond the hope to change his own address to 1600 Pennsylvania Avenue.

Perhaps you're wondering what this has to do with the theme of sustainable business. Actually, the connection is simple. In the world of sustainability, corporate executives are trying to change their organizations in all sorts of ways, from culture and systems to the way they recruit and compensate their people to how they measure and report their performance. What can this year's presidential candidates learn from business leaders about creating change?

I've written before about how Mike Morris, one of my favorite CEOs (and clients, although I had very little to do with what follows) has created culture change at the electric companies he has been invited to lead, from Consumers Energy to Northeast Utilities (NU) and now American Electric Power.

At NU, Morris worked with his deputy Dennis Welch, the VP of Environment, Health and Safety, to turn New England's largest power company from a cantankerous, arrogant, regulatory scofflaw into a model of environmental compliance.

On arrival, he announced that he would not tolerate obstructionism or hardball tactics when it came to dealing with regulators. Within days, he set an example by going to see the Connecticut Attorney General and legislative leaders, and traveling to meet with employees at the plants for face-to-face discussions on critical compliance issues. At the same time, he appointed Welch to create a company-wide environmental management system. Plant managers and employees would now be evaluated on their ability to make their programs compliant and keep them that way.

As a result, NU drastically reduced its legal problems and was ultimately able to sell its "troubled" (i.e. historically non-compliant) nuclear power plant (aptly named Millstone), for hundreds of millions of dollars more than its predicted sale price.

Now Morris and Welch are making change again at AEP, one of the nation's largest electric companies, which also happens to be the single largest consumer of coal on the planet. For over a century, AEP has been an innovator in the electric business, with hundreds of patents to its credit. But the company's ability to create solutions, along with its gigantic size and financial success, led to a sense of hubris and an our-way-or-the-highway approach to doing business.

When Morris arrived, deregulation and climate change were already rocking AEP's world. Reliance on coal, our dirtiest source of energy, was increasingly under attack He realized that the company's culture needed to change, and change quickly.

Morris sent a strong message, first to his leadership team and then through the ranks: "In today’s interdependent world, our ability to succeed as a business will be based on our willingness and ability to work collaboratively with all of our stakeholders, not just tell them what we plan to do." He then modeled this behavior, not only by demonstrating direct, solid and useful relations with political and industry leaders, and with AEP unions and employees, but also by showing candor and honesty in discussing the company's strengths and weaknesses.

For example, Morris wrote in the company’s first sustainability report that, despite many accomplishments, "2006 cannot be counted as a good year for us. One of our employees died on the job doing what should have been a routine task, and a contract worker died in a fire at a construction site... [T]his is completely unacceptable to me, to our company and to our employees." The report also detailed the company’s positive and negative environmental, health, and safety impacts — unlike many sustainability reports, which are filled with pure "happy talk."

Once again, Welsh began to create programs to back up Morris' words. He buttressed the company's health and safety programs with clear accountability standards. He launched a stakeholder engagement process with Ceres and national environmental organizations, and held periodic environmental calls with them like those the company held with investors and financial analysts. This year, the company has expanded the process to include stakeholder engagement at the regional, state, and local levels.

Will this new approach provide AEP with the breathing room it needs to develop the new clean-coal and other technologies it needs to succeed for another hundred years? The jury is still out. But it's fair to say that Morris and AEP have been a breath of fresh air in the debate over how to address climate change.

Which brings me back to our presidential candidates. If they're serious about change, Morris and other corporate sustainability leaders like Chad Holiday at DuPont and Katsuaki Watanabe at Toyota, who are transforming their companies for leadership in the 21st century, have a lot to teach them — about sending clear, unambiguous messages concerning the need for cultural change, and then matching their own actions to their words; about altering processes and incentives within an organization (or an administration) so as to reward new modes of behavior; about establishing lines of communication and accountability with outside stakeholders of every kind, including those usually considered adversaries; and, above all, about practicing genuine transparency — which, of course, is possible only when you really have nothing to hide.

If the next president practices policies like these, he'll go a long way to restoring the faith in government that millions of Americans have lost in the last decade.

Environmental Risk — Still An Afterthought Rather Than a First Thought

Wednesday, July 30, 2008 / KW

Here's a quite interesting report from The Economist about how business executives are incorporating environmental factors into their decision-making. The highlighted list of findings from the survey of 320 international execs includes:

Environmental risk management is frequently managed in an ad hoc fashion.
There is no clear consensus about who should be responsible for environmental risk.
Many companies conduct strategic activities without a formal assessment of environmental risk...

That third item is perhaps the most interesting. To spell it out in more detail, consider these specific data:

Less than half [of the companies surveyed] conduct an environmental assessment when developing new products and services, falling to 32 percent when selecting suppliers or partners, 26 percent when planning geographical expansion and 19 percent when planning mergers and acquisitions.

These findings certainly call into question the general assumption that most corporations today are doing a reasonably good job of considering environmental factors when making major decisions. In fact, they suggest just the opposite — that most companies are facing environmental risks not pro-actively but reactively, scrambling to figure out what to do with environmental problems after they jump up and bite them rather than anticipating and avoiding or minimizing them.

The survey leads me to conclude that we're mostly past the point of having to convince CEOs and their stratospheric colleagues of the relevance and importance of environmental issues. Now the challenge is getting these issues built into the decision-making systems of corporations, alongside financial, regulatory, legal, and other issues that routinely get examined and addressed before any big decision is made.

Making Sustainability Part Of Your People Strategies

Tuesday, June 03, 2008 / KW

If you happen to be a human resource professional, or if you own or run a smaller company and have "people" functions as part of your mandate, check out this good article by Adrienne Fox from the current issue of HR magazine. (It also happens to quote our fearless leader Andy Savitz, but that's not the reason we like it.) The piece offers a fine, thorough overview of lots of ways companies can get the HR department aligned with broader sustainability goals. Read it and ask yourself: How many of these strategies have we tried? Which ones should we experiment with?

Timberland And Stonyfield Farms — Two Little Guys Showing The Big Guys How It's Done

Friday, May 02, 2008 / AS

This week, I hosted a panel at the Ceres Conference at which Jeff Swartz, the CEO of Timberland, the boot company, and Gary Hirshberg, the CEO of Stonyfield Farms, the organic yogurt company, answered questions about the role of business in society. Prior to the panel, I spoke with them about sustainable consumption.

I was very pleasantly surprised.

Rather than the usual canned answers one often gets from CEOs at these events, both these Red Sox fans proved to be deeply committed, not to selling less shoes or yogurt, but to sustainable consumption and enlightened consumerism as a potential way out of the ecological and societal quicksand in which we find ourselves.

Gary explained that only about half of what we eat is real food, in terms of its nutritional value. For him, sustainable consumption starts with optimizing the food value chain, which will reduce waste and create value simultaneously. The resources we now waste to make Twinkies can actually feed lots of people.

Gary believes that we need enlightened consumers, i.e. a critical mass of organic yogurt eaters to really change the equation. Twenty years ago, when Gary realized this, he started Stonyfield.

Jeff represents the third generation of Swartzes to run Timberland, and has a harder case to make with boots. But he and Gary are on the same program. Timberland's mission is "to equip people to make a difference in their world," which includes showing consumers, employees, other companies, and his children how commerce and justice can go hand in hand.

Timberland works hard to sell boots on the basis of its environmental and social actions. This is "cause marketing," yes, but also a deeper attempt to change consumer preferences by helping people "to be the change they want to see in the world." And, yes, quoting Gandhi is apropos here — Jeff is deeply motivated by spiritual and inter-generational concerns.

I know when I am being sold a bill of goods, and this time I was not. Both of these guys have thought deeply about their actions, and they're not just walking the talk, they're running it. When we finished the panel later that morning, they deserved the prolonged standing ovation they received.

As for me, like some other unenlightened "experts" in sustainability, I had wrongly assumed that smaller companies like Timberland and Stonyfield were sideshows to the main event that the GEs and GMs of the world would move us forward, not the little guyes. Now I see the role that deeply committed CEOs like Gary and Jeff are playing and I would not be surprised if they had more of an impact, in the long run, than companies that are hundred of times as big.

And that size gap may not last forever. Under Jeff, Timberland has grown from annual revenues of $159 million to $1.6 billion, and the company now competes directly with Nike and Adidas. And while organic foods represent only three percent of the food consumed in the United States, Stonyfield sells six times the amount of yogurt as Kraft foods and is growing every day.

Maybe the answer lies in one of my favorite lines from The West Wing: "They'll like us when we win."