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Over
the past decade socially responsible business has surged into the
public view. From Ben & Jerry’s to The Body Shop to Eddie
Bauer, companies are marketing their business practices as much
as their products—and customers are lining up to support them.
But even as the Peace Pop and shade-grown coffee capture media attention
and market share, businesses that take the social dimension of commerce
seriously are still in the minority.
By and large, this is not a result of cold-heartedness among business
leaders. It is rather a failure to understand the great benefits
of serving social needs. Part of the problem is that the traditional
short-term value proposition of the market, which often benefits
shareholders, does not typically drive innovation or long-term thinking.
When only a narrow economic perspective dominates—when any
narrowly defined perspective dominates—creativity tends to
suffer. As a result, business models that create opportunities to
profitably address social concerns are simply not considered, and
when they are, the social dimension tends to be window dressing
for the traditional bottom line.
There is an alternative. Opportunities blossom when business models
are designed, right
from the start, to support social, environmental and economic concerns.
Instead of meeting the bottom line through a series of compromises
between economy, ecology and equity, businesses can employ their
dynamic interplay to generate revenue and value in all three sectors.
That’s what we call triple top line growth. From this perspective,
design questions such as “How can I create jobs?” and
“How can I support the health of my community?” become
as important as “How much will it cost?” And when questions
such as these drive the design process, companies not only serve
society and nature, they also become more innovative, profitable
and stable in the long-term.
Ben & Jerry’s provides a good, early example of socially
beneficial triple top line thinking. The company broke from traditional
business practices by inviting their employees to be partners. Not
only did the company’s leaders try to create a fair, safe and
comfortable work environment, they encouraged innovative thinking
on the shop floor, shared benefits equitably, and developed a pay
scale that tied executive salaries to employee wages. Ben &
Jerry’s also developed partnerships with nearby dairy farmers,
which helped create a superior product while supporting local agriculture
and commerce. The idea was simple: We’re all in this together.
With that defining value in mind, Ben & Jerry’s created
a successful, profitable, socially responsible business.
The Benefits of Partnerships
Ben & Jerry’s innovative thinking allowed it to create
a variety of successful partnerships, which proved to be a key ingredient
in the company’s success. Indeed, partnerships—with employees,
customers, suppliers and competitors, as well as with nature—are
the foundation of any sustainable business. By expanding the dimensions
of a company’s concerns, partnerships make a business both
more effective and more socially beneficial. Partnerships with suppliers
allow companies to ensure the safety and quality of every material
they use. Partnerships with other businesses allow companies to
set intelligent, industry-wide standards and develop profitable
recovery systems for recyclable materials. Partnerships with customers
create long-term business opportunities through the leasing, recovery
and replacement of valuable products over many product life-cycles.
And partnerships with nature allow businesses to cost-effectively
filter water, harvest the renewable energy of the sun, and create
delightful, regenerative public spaces.
Clearly, effective partnerships can generate a long-term perspective
while also generating good business results. Consider the pioneering
work of Herman Miller. When the furniture manufacturer engaged its
suppliers as partners in implementing its new sustainable design
criteria, the company took a giant step into the future and benefited
in myriad ways. Most obviously, the strategy ensured the consistent
procurement of safe materials—no small matter when making products
designed for recycling. But that was not all that built the business
case. As one Herman Miller engineer pointed out, “Getting a
handle on supply chain issues from an environmental standpoint has
also helped us get a handle on the organization and prioritization
of materials.” Now, using a database built with new information
from suppliers, Herman Miller can record the volume and content
of the raw materials it uses and distributes, figures it had not
previously tracked. This kind of material research and tracking
was instrumental in the making of Herman Miller’s award-winning
Mirra chair, which is designed for disassembly using nearly 100
percent recyclable materials and no PVC. Could a high-performance
office chair selling vigorously while being heralded as “the
next icon” be bad for business?
Expanding the Social Dimension of Commerce
So the point of expanding the social dimension of commerce is not
philanthropy. It’s just good business. When we work with our
commercial clients we always ask, “Can you make your product
or provide your service at a profit?” If the answer is no,
they reconsider their business plan. As we see it, the goal of an
effective company is to stay in business as it transforms, providing
economic value as it discovers ways to generate positive social
and environmental effects.
But that does not mean business-as-usual. Expanding the social dimension
of commerce requires extraordinary creativity, new business models
and a willingness to re-imagine economic value. There are as many
entry points into this process as there are businesses searching
for new opportunities—so much needs to be done that the possibilities
are endless. What seems clear is that businesses profit when they
do not limit themselves to a narrow definition of serving social
needs.
Consider the Spanish manufacturing company Mondragon Corporacion
Cooperativa (MCC). An industrial business group that includes makers
of automotive parts, domestic appliances and machine tools, MCC
was built on the idea that a good business generates a broad spectrum
of positive social effects. Founded in 1956 to create jobs and essential
products in the Basque region, MCC has developed a cooperative business
model so effective that the company has grown from a single factory
producing oil stoves and paraffin heaters into a 218-member business
group that employs nearly 70,000 people and relies solely on self-funded
investment.
In fact, MCC has always relied on self-funded investment. When it
received no support from traditional banks, it started its own,
Mondragon Bank, which has become an industry leader. By generating
its own capital and re-investing it, rather than acting purely in
the interests of shareholders, MCC can fulfill the cooperative’s
commitment to a democratic workplace and to “protecting the
cooperative members’ right to self-government.”
In other words, MCC’s social commitment starts at home. The
cooperative is organized to foster the one-person, one-vote democracy
of the MCC’s General Assembly, which expresses “the will
of the members,” and to encourage a “high level of worker
involvement in the company through direct participation in capital
and management.” Simply put, MCC sees its employees as partners,
and because employees take part in decision-making, they see themselves
that way too.
MCC energetically supports this basic social partnership both in
the workplace and in the community. When it saw that local educational
institutions were not meeting the community’s social needs,
MCC started a university, which today provides academic and technical
training to students in the Basque region, half of whom go on to
work for MCC. In addition, MCC sets its salary scale at 1 to 6.5,
a smaller difference between management and entry level employees
than is commonly seen in the corporate world; distributes profits
to all members, including laborers and technicians; pays generous
social security benefits; creates jobs for people with disabilities;
lends technical assistance to local community development efforts;
and supports social projects in developing countries. Going far
beyond the marketing of a product designed to address a single issue,
MCC’s deep social involvement generates a wide spectrum of
value, which in turn strongly supports the company’s economic
success.
Redefining Customer and Competitor
MCC could effectively extend its social reach even farther. While
its partnerships with its employees are strong, the company could
also begin to develop profitable partnerships with its customers.
Like most companies in today’s marketplace, MCC tends to see
those who buy its products as consumers—its relationship with
the customer does not extend beyond the sale. For a maker of quality
durable goods that’s a missed opportunity.
Why not provide the “service” offered by durable goods
rather than sell the product itself? In this business model, MCC
would retain ownership of the valuable materials it uses to make
its home appliances while the customer enjoys the service of clean
clothes, home-cooked meals, and so on. At the end of the product’s
useful life, say a defined period of two or three years, MCC would
recover its washing machine or electric stove and replace it with
a new model, re-using its high-quality durable parts in the next
generation of appliances. Instead of selling to a customer once,
the company, in effect, becomes a long-term service provider. The
customer, meanwhile, continues to get the most up-to-date service
available, as well as the peace of mind that comes from supporting
a responsible company. This is not an unknown concept; copier companies
typically lease large copiers and constantly seek to upgrade the
quality and scope of their services to stay competitive.
In this mutually beneficial, long-term relationship between customer
and producer, everybody wins. By taking full responsibility for
materials throughout a product’s life cycle, a company transforms
the one-way, cradle-to-grave flow of materials into safe, cyclical
cradle-to-cradle material flows. Rather than continuously taking
new raw materials from the earth, it uses them again and again,
preserving and profiting from their value through many product life
cycles. Commercial activity becomes a kind of nutrient management
system (as opposed to a waste management system) in which the producer-customer
relationship keeps valuable materials flowing through production,
use, recovery and remanufacture. Meanwhile, as we have seen in Herman
Miller’s pioneering designs, the resulting need for new cradle-to-cradle
systems drives effective, ecologically intelligent innovation. All
of these changes serve social needs—they are good for the earth,
good for business and good for our common future.
They also signal a new era of business-to-business partnerships.
As companies work to implement cradle-to-cradle systems—data
systems for tracking material flows, for example—they are finding
that cooperation and information sharing are valuable tools. In
the packaging industry, leading companies such as Estee Lauder/Aveda,
Tropicana/Pepsi and Unilever have created the Sustainable Packaging
Coalition (see green@work, July/August 2004, www.sustainablepack
aging.org) to together pursue a “positive, robust environmental
vision for packaging” that includes developing cyclical material
flows and increasing the demand for “environmentally intelligent,
cradle-to-cradle materials.” Major players in the electronics
industry are also engaged in integrating cradle-to-cradle principles
into the design of products, production processes, distribution
logistics and material recovery systems. Textile manufacturers,
meanwhile, are considering “pooling” cradle-to-cradle
materials and purchasing power to cooperatively strengthen their
position in the marketplace. In each case, industry-wide partnerships
are providing a platform for shared leadership and collaboration
among a wide range of stakeholders—suppliers, manufacturers,
dismantlers, government agencies, academia and non-governmental
organizations—involved in realizing a cradle-to-cradle world.
They are competing in the original and best sense of the word; they
are striving together, like athletes in training getting fit together,
and thereby achieving more than they could possibly achieve alone.
Serving the Many
Even if all the world’s companies were to follow the example
of these innovators, they would still not have fully extended the
socially beneficial reach of commerce. In spite of great changes
in the way the world does business, there are still more than four
billion people on the planet who do not have reliable access to
the most basic goods and services. The global economy simply doesn’t
serve them. As a result, they are left to burn wood scraps for fuel,
draw water from foul streams and gutters, and do without shelter,
electricity, and even the most rudimentary household conveniences,
such as soap. In this context, choosing to preserve a forest for
its own sake simply isn’t an option.
Why not make that an easier choice? Why not serve the bottom of
the economic pyramid and create profitable businesses doing so.
That’s precisely what C.K. Prahalad, a business professor at
the University of Michigan, suggests in his new book The Fortune
at the Bottom of the Pyramid: Eradicating Poverty Through Profits.
Prahalad sees serving the world’s poor as the next great business
practice, an economic opportunity he values globally at $13 trillion
a year.
But serving this market, he says, “can’t be based on philanthropy”
or conventional measures of corporate social responsibility. Instead,
corporations need to involve the poor in creating solutions. “If
we stop thinking of the poor as victims or as a burden and start
recognizing them as resilient and creative entrepreneurs and value-conscious
consumers,” writes Prahalad, “a whole new world of opportunity
will open up.”
The opportunities extend from the bottom of the pyramid to the top.
When traditional companies make a serious commitment to becoming
involved in this “invisible market,” there are opportunities
for generating growth, opportunities for local entrepreneurs, opportunities
for millions to live better lives, and opportunities to preserve
and restore the earth. In Nicaragua, for example, alternative energy
pioneer E+Co is working with local entrepreneurs to cost-effectively
deliver solar power to a region of the country where the average
per capita annual income is less than $300. In Mexico, the cement
making giant Cemex has created an innovative pricing and credit
system to make it possible for millions of Mexicans to build affordable
housing. In India, Hindustan Lever is marketing soap in single sachets
so that the millions of people who live on under $1 a day can have
access to a sanitary product that can literally save their lives.
Before long, these sachets may well be made with biodegradable materials
that can be collected and used as garden mulch, extending the social
benefit of affordable soap into the natural world.
Becoming Partners with Nature
As companies expand the social dimension of commerce, creating partnerships
throughout the economic pyramid, new products and services will
continue to improve people’s lives. But to truly eradicate
poverty we will need to create yet another new partnership: a partnership
with the living earth. Too often business plans that deliver on
the financial and social bottom line do not deliver on the ecological
bottom line. To be sure, serving the entire economic pyramid improves
the prospects of the natural world, but if an intention to restore
the earth is not an explicit part of serving social needs, then
the goods and services business provides will tend not to benefit
people and nature.
A partnership with nature begins with an intention to enhance the
human ecological footprint. Rather than trying to simply conserve
resources, to take less, we try to celebrate the fecundity of the
earth by generating positive, regenerative environmental effects—more
clean air, more clean water, more habitat, more healthy soil, more
natural and cultural diversity. The only way to do this is to create
designs in harmony with nature’s laws. That means designing
green roofs that create habitat and filter water; solar powered
factories that produce perpetually recyclable products; biodegradable
packaging that restores the soil; buildings that generate more energy
than they consume; communities that restore wetlands with natural
water flows.
Each design decision, then, can be seen as an opportunity to celebrate
nature as a partner in creating a delightful, culturally rich human
world. When the business models of today’s companies reflect
this expansive view of serving social needs, then the things we
make can truly serve our common future.
William A. McDonough, FAIA, and Michael Braungart are founders
of McDonough Braungart Design Chemistry, a consultancy that works
with a wide variety of companies to implement eco-effective design
and commerce strategies. For more information, visit www.mbdc.com.
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