Corporate Leadership

Moderator:
   James Murdoch, British Sky Broadcasting

Panelists:
   Ray Anderson, Founder and Chairman of Interface, Inc.
   Yvon Chouinard, Founder and Owner of Patagonia, Inc.
   Dean Kamen, Founder of DEKA Research & Development Corporation
   Jeff Seabright, Vice President for Environment and Water at The Coca-Cola Company
   Rob Walton, Chairman of the Board of Directors at Wal-Mart

Date: August 10, 2007

Location: Aspen, Colorado

Description:
This panel discussion, titled "Corporate Leadership: How Smart Firms are Making the World Better and Safer," explores making the business case for action on sustainability and restorative practices. Examples show that the premise that businesses that are doing "good" and are also doing well by it.

Running Time: 1 hour, 35 minutes

Corporate Leadership:
How Smart Firms are Making the World Better and Safer

The first panel discussion — "Corporate Leadership: How smart firms are making the world better and safer" — included some well-known big business names: Rob Walton, Yvon Chouinard, Jeff Seabright, Dean Kamen, and Ray Anderson. James Murdoch of Sky Broadcasting moderated the panel.

I honestly think there was a huge integrity aspect to this panel discussion. I really would like to have seen a few total dinosaurs — nasty, polluting, wholly "brown" companies' CEOs — up on stage being asked the same questions as the five that were there. The problem with that is they never would have come. Classic Catch-22. The companies who are brave enough to face the hard questions are undoubtedly the companies that are genuinely concerned. The dinosaurs ignore it. There's a simple lesson in that — after all, the dinosaurs went extinct.

The various industry leaders began by describing their journeys to sustainability. For Ray Anderson it began 13 years ago, when his customers began asking him what Interface (www.interfaceinc.com) was doing in terms of environmental issues. Ray admitted he wasn't sure how to respond. Eventually, he put together a small group of employees and charged them to "do something. Do anything." Interface started working on it in terms of reducing waste and the very notion of waste.

Yvon Chouinard's story was very different, as his company, Patagonia (www.patagonia.com), has had an environmental bent since it was founded. "It's easy for us as we've been at this since 1970," Yvon said.

"I don't have to answer to any stockholder," he added later. "We consider our stockholder the planet."

Coca-Cola's Jeff Seabright noted that businesses of all sorts were changing quite rapidly: "I've been at Coke ( www.thecoca-colacompany.com/citizenship/environment.html) three years and what I've seen in just three years — not about Coke but about the world of business and how business is stepping up to these challenges — really [has been] quite fundamental and quite transformational. It's not just about tunneling through the cost barrier, it's not just about impressing investors on Wall Street…. It's about connecting with consumers."

Rob Walton noted that sustainability is not a broad consumer issue with Wal-Mart (www.walmartstores.com) customers, but that it's important to special groups of consumers.

Moderator James Murdoch posed a question about the speed of deployment for better technologies. Inventor Dean Kamen responded by describing humanity's short time frame for decision-making. He spent ten years (and $50 million) experimenting with devices that provide clean water and electricity.

"You could wipe out 50 percent of all chronic disease on the planet just by giving people clean water," he observed. "And you know how to do that, I think. But if we stay with our 18th century Industrial Revolution models of big distribution systems that come from centralized places for water, or even more ridiculously, big power plants, [and the related] distribution systems, transmission lines, and switch gear, to bring a little bit of electricity to people all over the world — that''s an idiotic 200-year-old idea. And yet 1.6 billion people get up every morning and don't have access to clean water and slightly less than that have never used electricity. And we expect them to be productive?"

Dean described the "black boxes" he'd developed that produced clean water and electricity with no infrastructure whatsoever "and they just worked." And, he noted they could also be used in the developed world.

"We've got a 99.96 reliable grid and we're going to spend another $400 billion trying to get the other 0.04 percent? That's nuts. Just put a little box everywhere to take care of your needs…the frustration isn't that we don't have the technology. We don't have the mindset and we don't have the willingness to really invest in things that matter for the long term for six billion people."

Dean's black boxes drew a lot of comment throughout the day, as did his interesting comment on just about everything. I recommend his firm's website (www.dekaresearch.com), even if just for the quote:

One of the more interesting chats centered on water. It might not sound like the heart of a corporate-issues discussion (at least it might not have 15 years ago), but, as James explained, it's important because so much is used in industrial processes, and because a company like Coke uses a lot — it's at the heart of the business — it is definitely a corporate issue. What are the solutions to water-related issues?

Knowledge is one.

"Increasingly, we're learning that we really need to understand the watersheds that sustain and nourish our operations because we have a shared interest in the health of those watersheds," Jeff said. "For us to deplete the resource that our biz depends on at the expense of the community makes absolutely no sense. Just the reverse. We have a shared interest in mutual success."

Coke works on a franchise model with about 300 bottlers around the planet. Taking lessons of water efficiency and sustainability to those franchisees begins with understanding how Coke itself can use water better, he said.

Jeff described Coke's efforts to get better at certain "green building" ideas, like rainwater harvesting and water efficiency, so that the company footprint is reduced.

Then, talk of regulation came up.

James asked about big business in the developing world and the role of governments in these issues.

Jeff described a 2001–2002 uprising in Kerala, India, against Coke. The local community thought Coke was contributing to the drop in groundwater. A court ruling found Coke wasn't contributing to the problem.

"But the community kept seeing the red trucks rolling out the plant gates, and our guys were not as sensitive to the perceptions in the community as they should have been," Jeff said. "And that was a wake-up call to us because water, unlike electricity as a commodity, is a deeply cultural and social commodity. It has religious symbolism. You need not just a physical license to take water, you need an emotional license, a cultural, social license. And so we really learned in that instance that the way we think about and manage water has to go beyond the physical management of the water…."

Strong, transparent [national and local] regulation is essential then, Jeff concluded.

James asked Yvon about partnering with grassroots organizations. This was one of several of Yvon's responses that drew applause: "My company exists to take the radical side of things. We don't give money to the symphony. I believe that the strongest force in America is civil democracy. I've given up on government. [John] Edwards gave a speech last night and I heard it on NPR this morning and there was not one mention of global warming in his speech. That's not on politicians' minds. They're strictly working on symptoms of society; they're not working on causes. If you look at a newspaper on any day of the year you'll see the gains we're making as a society are being made through civil democracy. If you look at the history of this country, whether it's civil rights or women's suffrage or getting out of Vietnam, none of that was accomplished through the government. All of it was done through civil democracy."

Yvon described how Patagonia supports the radicals — mothers standing in front of bulldozers headed for forests and those trying to stop toxic waste dumps. He said he hopes it sends a message to public companies, who are "real weenies" when it comes to these issues.

Sure, there's a difference between public and private companies and how (and the speed with which) they approach activists and activism, but Rob Walton explained his company doesn't ignore the issues.

He said Wal-Mart has a long-term focus when decisions are made. And despite being heavily family-owned, they still have to make decisions that are in the interest of all shareholders, not just family members.

Originally, the sustainability focus was on the Walton Family Foundation, but a few savvy advisors encouraged the family to consider environmental issues a company-wide challenge, Rob explained. And once Wal-Mart exposed middle management to sustainability "we started to see results very quickly."

"I think we're stirring the waters," Rob said. "One of our buyers decided to try marketing organic cotton in infants' clothing, and overnight we became the largest buyer of organic cotton in the world."

There are so many sustainability resources and [so much] information out there, he said, that it's not difficult to get into.

"It's not so hard, and there are lots of opportunities, so it's just been good business for us," Rob said. "It's not been something that there's been any conflict about."

Early on in his now-famous "conversion," (Mid-Course Correction) Ray Anderson thought he should be sharing what he was learning about creating a zero-waste company with other carpet-makers. "My Dream Team kind of hemmed me in one day and said 'Anderson. It's very important that Interface (www.interfaceinc.com) succeed at this and the way that you'll succeed is at the expense of your competitors'," Ray recounted. "'You've got to create a competitive advantage here that's demonstrable to industry everywhere'."

Interface has, apparently, succeeded.

"Our costs are down, not up," Ray said. "And that dispels that myth about this false choice between the economy and the environment. The waste elimination effort alone has brought $350 million of cost avoidance and that has more than paid for everything else we've undertaken in this journey."

The second thing is that "our products are the best that they've ever been," he said. "The lens of sustainability gave our product development people a totally different view of that function. When the head of product design read Janine Benyus's book Biomimicry (www.biomimicry.net) it absolutely turned him on. Today we're making products we never would have imagined ten years ago."

Zero footprint is the goal, Ray said, and "we're 45 percent of the way there."

Jeff described Pepsi's decision to offset its energy use with renewable credit (and applauded it) and said that sustainability is "a race to the top." It's good for all companies to be challenging each other this way.

He also described Coke's efforts to reduce HFCs in vending machines and the immaturity of the technology. The answer has been teaming up with everyone, including Pepsi, to boost demand for climate-friendly cooling machines so that they cost the same as more polluting machines.

Ray offered a nugget on the Milton Friedman School of Thought: "The business of business is business and business exists to make a profit for the shareholder," he said. "I do not know a CEO anywhere who expects to stand before her or his maker someday and talk about shareholder values. Or market share or clever manipulation of a gullible public. Business makes a profit to exist. It's not the other way around. It doesn't exist to make a profit. It makes a profit to exist and it must surely exist for some higher purpose."

Toward the end there was an boisterous dialogue about corporate responsibility, corn syrup, and mindsets.

It started with Yvon Chouinard.

"I think business has a responsibility for not only how it makes its product but for the product itself," he said. "If you're answerable to the stockholder or you're answerable to the consumer, you're going to end up like Coca-Cola putting corn syrup in all your coke because it saves three cents a bottle. And yet it's a major cause of diabetes in America. Bill Ford said he'd stop masking SUVs when the customer told him to. [Take] a company making land mines. You [might be] one of the best employers in the country and you're giving your people good jobs and good benefits and you're making the best land mines in the world — but you're making land mines. And you're going to say we'll stop making land mines when the consumer tells us they don't want land mines any more? I don't believe that. I believe business should be proactive. The real Coke freaks smuggle their coke in from Mexico because it tastes better because it's made with cane syrup. Imagine if Wal-Mart said to Coca-Cola and Pepsi, 'Look we don't want to carry your product any more until you get rid of that corn syrup.' They could do that to Kraft…. What if you went to Kraft, which has high-fructose corn syrup in — I don't know — 7,000 products or something? Wal-Mart is 25 percent of Kraft's business. You could change the world if you told Kraft, 'We don't want any more high-fructose corn syrup in our products'."

This brought Dean Kamen back to his observations about mindsets.

"We have institutionalized some of this lunatic thinking," he noted. "For instance, we all claim that healthcare costs are a crisis and the government doesn't know what to do about it…. The same government that can't afford to treat the 21 million diabetics subsidizes making corn so it's free. The same government subsidizes the tobacco industry. I think people should have a right to chose what they want to do including eliminate themselves (it's somewhat Darwinian), but you ought to be able to buy tobacco. You just shouldn't be allowed to smoke it where somebody else has to share it with you. You shouldn't have the government subsidizing your purchase of it then taxing you. It's crazy. Go back to the large-scale system, look at how people make decisions and try to make them rational. But they'll only be accepted if people like the immediate consequences. Make it fun. Make it something people understand why they did it, they buy into it, and they end up doing good and doing well."

As John Abele summarized in the next panel discussion, "it's all about the incentives."

One of my favorite stories during this panel happened right at the end when James Murdoch mentioned a few things about his own company, British Sky Broadcasting (www.sky.com). He told the tale of a chap in London who was starting a taxi service using hybrid vehicles. Sky went to him and said, "We're going to use you, but you need to be much bigger to serve our needs." So, Sky and our taxi-man worked out a deal. Sky loaned him the money to buy additional vehicles. Today he has about 80 cars and has repaid Sky. Not a bad deal for the environment, too.

—Cam Burns, RMI