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- Herausgeber: John Wiley & Sons
- Kategorie: Fachliteratur
- Sprache: Englisch
The classic guide to sustainability strategy and implementation--updated for today's businesses To ensure business success, companies must embrace sustainable management. Firms need to find the overlap between business interests and the interests of society and the environment before they can secure a lasting competitive edge. By making the case for sustainability as a fundamental business practice, The Triple Bottom Line became an instant classic when first published in 2006, showing a generation of business leaders how to find their sustainability sweet spot--where profitability merges seamlessly with the common good. Now updated with ground-breaking stories of successes and failure, this revision of The Triple Bottom Line is a critical resource for all managers and leaders. * Features in-depth success stories of sustainability practices at major firms such as Wal-Mart, GE, DuPont, American Electric Power, and PepsiCo--and shows why companies such as BP and Hershey continue to fail * Draws on Andy Savitz's 25 years of pioneering consulting and research in the field * Includes all-new reporting and analysis on the practice of sustainability and the triple bottom line in business today, providing new insights on where sustainability is headed The Triple Bottom Line is essential reading for any firm to meet the challenge of creating lasting value for both shareholders and society.
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Seitenzahl: 513
Veröffentlichungsjahr: 2013
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Table of Contents
Cover
Praise for The Triple Bottom Line
Title
Copyright
Dedication
Introduction
Notes
Part One: The Sustainability Imperative
Chapter 1: A Bitter Aftertaste: Hershey Struggles to Master the Sustainability Challenge
Utopia of Chocolate
The Dark Side of an Icon
A Habit of Secrecy
The Hershey Heritage Goes Up for Sale
The Chocolate Hits the Fan
About-Face
Lessons from the Chocolate Mess
Notes
Chapter 2: The Sustainability Sweet Spot: How to Achieve Long-Term Business Success
Where Profit Meets the Common Good
“Prove It!”
Three Ways Sustainability Enhances Your Business
Additional Business Benefits of Sustainability
Hard Cases
Why Now?
Notes
Chapter 3: The Age of Sustainability
Sustainable Business—an Old Idea Made New Again
New Pressures on Business
A Freer World
A More Interdependent World
A Networked World
An Imperiled World
A Socially Conscious World
A Corporate World
A World of Empowered Employees
A World of Investor Activists
A World of Stakeholders
When Global Trends Arrive on Your Doorstep
Notes
Chapter 4: Business Responds
Sustainability Reaches the C-Suite
Organizational Support for the Sustainability Movement
Sustainability—a Story of Success and Failure
Reasons for Failure
From Superficial to Systemic Change
A Challenge for Every Manager and Every Department
Notes
Chapter 5: The Backlash Against Sustainability
The Cynics: “Sustainability Is Corporate Hype”
The Skeptics: “The Business of Business Is Business”
Notes
Chapter 6: Renewing the Penobscot: “A More Productive Use of Capital”
Giving a Voice to the Critters
Who Owns the Penobscot?
The Industrialization of the Penobscot
“We Are the Penobscot River”
Warfare over the Penobscot
Change in Ownership, Change in Attitude
Swimming Upstream Together
Hammering Out Consensus
Promises Kept
Lessons of the Penobscot Partnership
Notes
Part Two: How Sustainability Can Work for You
Chapter 7: Where Do You Stand Today?: Your Sustainability Self-Assessment
Determining Where You Stand
Who You Are
What You Do
How You Do It
How Sustainability Applies to Your Industry
Notes
Chapter 8: Sustainability Jiu-Jitsu: Turning Short-Term Challenges into Opportunities
Risks and Opportunities—the Yin and Yang of Sustainability
Look for Low-Hanging Fruit
Turn Crises into Opportunities
Notes
Chapter 9: Shaping Your Sustainability Strategy
Finding the Sweet Spot: Putting Sustainability at the Heart of Your Corporate Strategy
A Map to the Sweet Spot
Minimization and Optimization
Minimization: Pursuing Sustainability by Being Less Bad
Life-Cycle Assessment: Perfecting Business Processes
From Minimization to Optimization: The Sustainable Path to New Profits, New Products, and New Markets
Notes
Chapter 10: Implementing Your Sustainability Program
Making Sustainability Operational: Goals, Processes, and Key Performance Indicators
Getting Organized
The Virtual Sustainability Department
Integrating Sustainability into Every Department
Sustainability and Human Resources
Notes
Chapter 11: Managing Stakeholder Engagement
Why Stakeholder Engagement Is Essential
Stakeholders Have a Vote on Your Future
Seeing Through Your Stakeholders' Eyes
Who
Are
Your Stakeholders, Anyhow?
What Do Your Stakeholders Care About?
How Do You Prioritize Your Stakeholders?
Advanced Stakeholder Strategy
Notes
Chapter 12: Dealing with Special Stakeholder Challenges
The Many Faces of NGOs
Managing Partnerships with NGOs
Creating Your Own Stakeholders
Engagement with Your Value Chain
Complexities of Responsible Value-Chain Management
Customers as Stakeholders: The Power of Information
Employees as Stakeholders
Using Social Media to Enhance Your Stakeholder Relationships
Notes
Chapter 13: Measuring and Reporting Your Progress
Sustainability Metrics—the Unacknowledged Driver
The Global Reporting Initiative
The Costs and Benefits of Reporting
The Hidden Risks of Sustainability Reporting
The Rise of Online and Integrated Reporting
Notes
Chapter 14: Aligning Your Culture to Support Sustainability
Sustainability and Corporate Culture
Why Corporate Culture Resists Sustainability
The Three Levels of Corporate Culture
Evaluating Your Existing Culture
Identifying and Overcoming Underlying Assumptions That Hold You Back
Corporate Capabilities That Nurture Sustainability
Notes
Chapter 15: The Emerging Multipurpose Company
Sustainability: An Evolving Concept
The Multipurpose Business: Merging Private Profit and Public Good
Big Business and the Multipurpose Model
New Ways to Finance Multipurpose Businesses
New Ways of Measuring Value
Global Problems and Business Opportunities
Notes
Appendix: Creating a Sustainability Management System
Key Action Steps
Acknowledgments
About the Authors
Back-of-Book Advertisements
Index
End User License Agreement
List of Tables
Chapter 7: Where Do You Stand Today?: Your Sustainability Self-Assessment
Table 7.1 Key Sustainability Issues in Selected Industries
Chapter 9: Shaping Your Sustainability Strategy
Table 9.1 Minimization and Optimization
Chapter 11: Managing Stakeholder Engagement
Table 11.1 Sample Impact Chart
Table 11.2 Sample Priority Table
List of Illustrations
Introduction
Figure I.1 The Triple Bottom Line
Chapter 2: The Sustainability Sweet Spot
Figure 2.1 The Sustainability Sweet Spot.
Figure 2.2 GE's Ecomagination Sweet Spot.
Figure 2.3 GE's Healthymagination Sweet Spot.
Figure 2.4 GE's Water Filtration Business Sweet Spot.
Figure 2.5 PepsiCo's Healthier Products Sweet Spot.
Figure 2.6 Wal-Mart's Sustainability Sweet Spot.
Chapter 3: The Age of Sustainability
Figure 3.1 The Rise of Corporate Accountability and the Age of Sustainability.
Chapter 9: Shaping Your Sustainability Strategy
Figure 9.1 The Sustainability Map.
Chapter 11: Managing Stakeholder Engagement
figure 11.1 Categories of Stakeholders: Target Analysis.
Figure 11.2 Sample Influence Grid.
Figure 11.3 Influence Grid as Viewed by the Board of the Hershey Trust (August 2002).
Figure 11.4 Influence Grid as Revealed During the Hershey Sale Controversy (September 2002).
Chapter 14: Aligning Your Culture to Support Sustainability
Figure 14.1 The Three Levels of Organizational Culture.
Guide
Cover
Table of Contents
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Praise for The Triple Bottom Line
“Informative, persuasive, and practical, containing valuable advice for anyone seeking a more responsible and profitable approach to business.”
—Steve Reinemund, former chairman and chief executive officer, PepsiCo
“An engaging mix of powerful ideas and practical advice. Values matter, and Savitz shows how profitability and responsibility can and must go hand in hand.”
—Michael Morris, former president and chief executive officer, American Electric Power
“‘Some circumstantial evidence is very strong,’ Savitz and Weber recall Thoreau saying, ‘as when you find a trout in the milk.’ The flood tide of corporations they profile provides powerful evidence that the triple bottom line is going mainstream.”
—John Elkington, founder and chief entrepreneur, SustainAbility
“A timely contribution to why big corporations engage in sustainable development and how managers can implement it in their companies.”
—Bjorn Stigson, former president, World Business Council for Sustainable Development
“Must-reading for any corporate manager or investor seeking the ‘sweet spot’ where financial and stakeholder interests meet. It provides powerful arguments, cogent analysis, great stories, and dozens of real-world insights into how companies are enhancing profits through sustainability strategies.”
—Mindy Lubber, president, CERES; former regional administrator, U.S. Environmental Protection Agency
“Savitz and Weber's The Triple Bottom Line offers a perspective that is already influencing the wisest and most socially responsive corporations in the world. This well-written, insightful, and practical book will guide executives for decades to come.”
—Max Bazerman, Jesse Isador Straus Professor of Business Administration, Harvard Business School
“Amidst the proliferating number of books on corporate sustainability topics, Savitz's The Triple Bottom Line is a refreshing relief. Its accessible style, jargon-free language, and thematic organization avoid the tendency toward cheerleading and case study overdose characteristic of the field. Savitz speaks with clarity, authority, and good humor.”
—Allen White, senior fellow, Tellus Institute; cofounder, Global Reporting Initiative
“The Triple Bottom Line is full of practical advice based on Savitz's hands-on experience working with corporate managers. This book is a very readable guide for those who want to build a successful and sustainable business for the twenty-first century.”
—Arnold S. Hiatt, former chairman and CEO, the Stride Rite Corporation
“Most executives have a superficial or misguided understanding of sustainability. The Triple Bottom Line should be required reading for business leaders who seek to enrich their shareholders, society, and themselves.”
—Scott Cohen, former editor and publisher, Compliance Week
“Responsible leadership ensures that what we have today will be around for future generations. This book shows us both what it takes to lead responsibly and what happens when people fail to do so. An insightful book for those who seek how they can personally make a difference.”
—Samuel DiPiazza, former global chief executive officer, PricewaterhouseCoopers LLP
“Andy Savitz puts sustainability in a clear, practical framework supported with real business examples.”
—Travis Engen, former president and chief executive officer, Alcan, Inc.; chair, Prince of Wales' International Business Leaders Forum; chairman, World Business Council for Sustainable Development
The Triple Bottom Line
How Today’s Best-Run Companies Are Achieving Economic, Social, and Environmental Success—and How You Can Too
REVISED AND UPDATED
Andrew W. Savitz
with Karl Weber
Jacket design by Faceout Studio
Copyright © 2014 by John Wiley & Sons, Inc. All rights reserved.
Published by Jossey-BassA Wiley BrandOne Montgomery Street, Suite 1200, San Francisco, CA 94104-4594—www.josseybass.com
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Wiley publishes in a variety of print and electronic formats and by print-on-demand. Some material included with standard print versions of this book may not be included in e-books or in print-on-demand. If this book refers to media such as a CD or DVD that is not included in the version you purchased, you may download this material at http://booksupport.wiley.com. For more information about Wiley products, visit www.wiley.com.
Library of Congress Cataloging-in-Publication Data
Savitz, Andrew W.
The triple bottom line : how today's best-run companies are achieving economic, social, and environmental success—and how you can too / Andrew W. Savitz, with Karl Weber.— Revised and updated.
pages cm
Includes bibliographical references and index.
ISBN 978-1-118-22622-3 (cloth); ISBN 978-1-118-33317-4 (ePDF); ISBN 978-1-118-33037-1 (ePub)
1. Success in business. 2. Social responsibility of business. 3. Industrial management—Environmental aspects. I. Weber, Karl, 1953-II. Title.
HF5386.S346 2014
658.4′08—dc23
2013030805
To Penelope and to our children, Noah, Zuzzie, and Harry; their cousins, Louis, Sarah, Daniel, Olivia, Julianna, Elliot, Sophia, Jacob, and Jonah; and their offspring, who will hold us accountable.
Introduction
The whaling industry personified American prosperity for more than one hundred years. It employed seventy thousand sturdy seafarers and fueled hundreds of thousands of homes and businesses here and abroad, earning fortunes for boat owners and more than a few enterprising crewmates. The intrepid whaler was celebrated in song, story, and even high art, including what is arguably the greatest American novel, Melville's Moby-Dick. Whaling was a tale of courage and initiative—a tale of America.
Today nearly all the whales are gone, and so is the industry built around them. The decline began in the mid-1840s, when hunters ignored decreasing stocks and continued harpooning grays, rights, humpbacks, and other species of this enormous, elegant mammal. Within a few years, the industry that had thrived for a full century collapsed entirely. The era of American whaling still stands as a symbol—but now it represents the shortsightedness of businessmen whose thirst for profit made their enterprise unsustainable.1
Sadly, the lessons of the past have still not been fully absorbed by today's fishing industry or by the governmental agencies that regulate it. Fishing grounds the world over are being depleted as the industry exploits valuable species to the point of extinction. Predator species like tuna, swordfish, and salmon have been especially hard hit, with the prized Pacific bluefin tuna having suffered a population decline of more than 96 percent. In the Gulf of Mexico, species like red snapper, grouper, and amberjack have fallen to just a fraction of the population deemed capable of supporting itself.2 Another once-great industry, it seems, may be on the verge of becoming unsustainable.
This is a book not about the whaling or fishing industries but about how to avoid their fate. It is a look at how businesses can prosper financially while protecting and renewing the social, environmental, and economic resources they need—and how they can fail if they do not tend to those resources.
The centerpiece of this book is the concept of sustainability. The term originated around a growing awareness, in the 1980s, that nations had to find ways to grow their economies without destroying the environment or sacrificing the well-being of future generations. Sustainability has since become a buzzword for an array of social and environmental causes, and in the business world it denotes a powerful and defining idea: a sustainable corporation is one that creates profit for its shareholders while protecting the environment and improving the lives of those with whom it interacts. It operates so that its business interests and the interests of the environment and society intersect. And as we will show, a sustainable business stands an excellent chance of being more successful tomorrow than it is today, and of remaining successful, not just for months or even years, but for decades or generations.
Sustainable organizations and societies generate and live off interest rather than depleting their capital. Capital, in this context, includes natural resources, such as water, air, sources of energy, and foodstuffs. It also includes human and social assets—from worker commitment to community support—as well as economic resources, such as a license to operate, a receptive marketplace, and legal and economic infrastructure. A company can spend down its capital for a while, but generally not for long. A firm that honors the principles of sustainability, by contrast, is built to last.
Sustainability in practice can be seen as the art of doing business in an interdependent world. Sustainability in the broadest sense is all about interdependence, which takes several forms.
Sustainability respects the interdependence of living beings on one another and on their natural environment. Sustainability means operating a business in a way that causes minimal harm to living creatures and that does not deplete but rather restores and enriches the environment. The whalers of the nineteenth century failed to respect this form of interdependence and destroyed their industry as a result.
Although most people think first of the environment when they hear the term, sustainability also respects the interdependence of various elements in society on one another and on the social fabric. Sustainability means operating a business in a way that acknowledges the needs and interests of other parties (community groups, educational and religious institutions, the workforce, the public) and that does not fray but rather reinforces the network of relationships that ties them all together.
Sustainability also respects the interdependence of differing aspects of human existence. Economic growth and financial success are important and provide significant benefits to individuals and society as a whole. But other human values are also important, including family life, intellectual growth, artistic expression, and moral and spiritual development. Sustainability means operating a business so as to grow and earn profit while recognizing and supporting the economic and noneconomic aspirations of people both inside and outside the organization on whom the corporation depends.
The only way to succeed in today's interdependent world is to embrace sustainability. Doing so requires companies to identify a wide range of stakeholders to whom they may be accountable, develop open relationships with them, and find ways to work with them for mutual benefit. In the long run, this will create more profit for the company and more social, economic, and environmental prosperity for society.
The concept of sustainability is sometimes confused with other terms that are widely used in business today. Many businesspeople, authors, and experts use the expression corporate social responsibility (CSR), for example, to refer to a company's obligations to society at large. It's a useful term, and we will occasionally use the expressions “responsible business” or “corporate responsibility” as shorthand for the kinds of managerial practices we recommend. We prefer the term sustainability, however, because responsibility emphasizes the benefits to social groups outside the business, whereas sustainability gives equal importance to the benefits enjoyed by the corporation itself.
Similarly, the term business ethics, which is commonly used to describe the social and moral responsibilities of businesspeople, is too narrow in its focus for our purposes. Business ethics emphasizes specific choices made by individual managers: What should I do when I'm asked or tempted to pay a bribe, cut corners on safety, or fudge the corporate accounts? It doesn't address broader operational questions, such as the following: Who should be consulted when decisions are being made that affect large numbers of people outside the company? To whom are business managers responsible? How should companies systematically measure the impact of their activities on society?
Sustainability has developed as a unified way of addressing a wide array of business concerns about the natural environment, workers' rights, consumer protection, and corporate governance, as well as the impact of business behavior on broader social issues, such as hunger, poverty, education, health care, and human rights—and the relationship of all these to profit.
Many books about sustainability focus on how society can benefit if companies take a more responsible approach. This book turns that lens around, examining how companies can become more profitable by doing the right thing. One powerful way to grasp this connection is the concept of the Triple Bottom Line (TBL), originally proposed by sustainability guru John Elkington. Elkington suggested that businesses need to measure their success not only by the traditional bottom line of financial performance (most often expressed in terms of profits, return on investment [ROI], or shareholder value) but also by their impact on the broader economy, the environment, and the society in which they operate.3
In conducting their businesses, companies use not only financial resources (such as investment dollars and sales revenues) but also environmental resources (such as water, energy, and raw materials) and social resources (such as community employees' time and talents, and infrastructure provided by governmental agencies). A sustainable business ought to be able to measure, document, and report a positive ROI on all three bottom lines—economic, environmental, and social—as well as the benefits that stakeholders receive along the same three dimensions.
The TBL captures the essence of sustainability by measuring the impact of an organization's activities on the world. A positive TBL reflects an increase in the company's value, including both its profitability and shareholder value and its economic, environmental, and social capital (see Figure I.1).
Figure I.1 The Triple Bottom Line
The table shown in Figure I.1 is an oversimplification, of course. Just as meaningful financial reporting cannot be reduced to one number, so sustainability does not sum precisely. There is yet no way to accurately or completely describe environmental benefits or social benefits using a number, and some of the numbers themselves require a great deal of explanation, which is precisely why most financial reports include pages of management discussion and analysis.
The TBL exists currently as a kind of balanced scorecard that captures in numbers and words the degree to which any company is or is not creating value for its shareholders and for society.
Elkington's formulation is central to understanding sustainability. Whereas the practice of sustainability is still an art, the measurement of sustainability is becoming a science, including specific goals and parameters by which businesses can measure and judge their own progress. As we'll explain in detail later, thousands of companies around the world have been measuring and reporting their performance in the environmental, economic, and social spheres. And growing numbers of institutional and individual investors, consumers, and workers are beginning to evaluate companies according to the TBL.
Sustainability, then, is not simply a matter of good corporate citizenship—earning brownie points for reducing noxious emissions from your factory or providing health care benefits to your employees. Nor is it merely a matter of business ethics—of doing the right thing when confronted with a particular moral dilemma that arises in the course of doing business. Sustainability is now a fundamental principle of smart management, one that's all too easy to overlook or take for granted in a world where the financial bottom line is often treated as the only measure of success. And as we will show, even well-run companies with good intentions and with years of success behind them can now fall hard if they ignore the principles of sustainability.
If sustainability is more important today than ever before, it's probably because corporations have, over the past few decades, entered what we call the Age of Sustainability. They are increasingly being held responsible for a wider range of activities and impacts, not just for their financial ones. They are accountable not only for their own activities, but for those of their suppliers, the communities where they are located, and the people who use their products. They are being called to account not only by investors and shareholders but by politicians, whistleblowers, the media, employees, community groups, prosecutors, class-action lawyers, environmentalists, human rights advocates, public health organizations, and customers. These stakeholders come from every corner of the world, armed both with the traditional media and with global megaphones called the Internet and social media.
As a result, businesses are being forced to respond to social, economic, and environmental changes in the world around them. Just as the issue of climate change is fundamentally altering the commercial and regulatory landscape for energy and auto companies, so the aging of the population in the developed world and the availability and cost of health care are changing the basic business model for hospitals, pharmaceutical companies, and makers of medical devices. Just as Nike was transformed by the discovery of children working in its overseas factories, so Wal-Mart has had to come to grips with “the high cost of low wages,” and McDonald's with the growing public concern over childhood obesity. No sooner had Google and Facebook invented new ways to connect people and ideas around the world than they had to grapple with social issues ranging from online hate speech and government censorship to data privacy and copyright protection.
The best-run companies, large and small, are responding to these challenges. Toyota develops the gas-electric hybrid engine, and the Prius catalyzes an entirely new category of vehicles that every other carmaker seeks to emulate. DuPont moves away from chemicals to become the world's largest producer of soy protein. Procter & Gamble goes head-to-head with Unilever to figure out how to develop and sell products to the desperately poor in ways that will help lift them out of poverty. And most of these moves are generating enormous financial benefits. Toyota became the number-one car company in the world, largely on the basis of the hybrid; Wal-Mart and its suppliers are saving billions on the basis of its environmental programs to reduce waste; and PepsiCo claims annual revenue increases of $250 million from new purchasing programs that seek out companies owned by women and members of minority groups.
Perhaps most significant, corporations are reaching out to their harshest critics, demanding to know how they can improve, and seeking new forms of collaboration, innovation, and partnership to improve their results—many with startling success. They are publishing TBL reports and revealing their successes and even their failures using Facebook, Twitter, and other forms of online media, driven not by governmental mandates or journalistic sleuthing but by the new transparency that is a natural outgrowth of the Age of Sustainability.
This book will show you how and why companies are making such previously unheard-of changes in their behavior, and it will provide you with a road map you can follow as you start or speed your own journey toward the goal of sustainability.
We come at these issues not as though they were abstractions, but through more than two decades of working on them with some of America's biggest, most robust corporations. Andy Savitz led the sustainability practice at PricewaterhouseCoopers, one of the world's foremost financial advisory services companies, and has helped senior executives and midlevel managers apply the Triple Bottom Line at their firms and in their departments, in the process making them more sustainable. He has since begun to work more closely with employees and human resources professionals to embed sustainability within the cultures and employee life-cycle processes of their organizations. Karl Weber gained similar insights through his research and writing on a series of books exploring business strategy, corporate decision making, and the innovative practices of many of the world's most successful companies, as well as his collaborations with such innovative social entrepreneurs as Nobel Peace laureate Muhammad Yunus, pioneer of microcredit and founder of Grameen Bank.
In these pages, we'll provide you with a set of tools—must-dos, don't-dos, and simple charts and lists—and stories to carry you down the road to sustainability for your business. In the end, you should emerge with an understanding of why and how this transformation is occurring and what you can do to become part of it.
Correctly understood and applied, sustainability is about strategy, management, and profits. But in today's interconnected world, thinking about profits as if they were unrelated to the environmental and social impacts of what you do to earn them is shortsighted and counterproductive. Social and environmental issues are creating risks and opportunities that fundamentally change the playing field for individual firms, industries, and business itself. The best-run companies see this and are turning these trends to their advantage. The Triple Bottom Line will help you apply the same advanced thinking to your own business.
The Triple Bottom Line was first published in 2006. We've been gratified by its success. Thousands of business leaders, consultants, students, researchers, and others concerned about the future of free enterprise and human society have examined our ideas, and many have generously shared their feedback and experiences with us. Guided by reader comments and questions, we've prepared this second edition, bringing the ideas, stories, examples, and recommendations up-to-date. We've also expanded the contents to incorporate fresh insights that we've developed in the course of our continuing research and Andy's ongoing work with a variety of corporate and nonprofit clients.
We hope this revised and updated version of The Triple Bottom Line will prove valuable both to those who appreciated the first edition as well as to a new generation of readers.
Notes
1
The story of how the combination of overfishing, declining whale stocks, and the growing availability of alternative fuels (such as kerosene) gradually decimated the Atlantic whaling industry starting in the mid-nineteenth century is told in many sources, including such books as
Men and Whales
, by Richard Ellis (New York: Knopf, 1991).
2
Fiona Harvey, “Overfishing Causes Pacific Bluefin Tuna Numbers to Drop 96%,”
Guardian
, January 9, 2013,
http://www.guardian.co.uk/environment/2013/jan/09/overfishing-pacific-bluefin-tuna
; “Overfishing Strips Tens of Millions from Southeast Economy,” Environmental Initiatives Fact Sheet, Pew Charitable Trusts, September 4, 2012,
http://www.pewenvironment.org/news-room/fact-sheets/overfishing-strips-tens-of-millions-from-southeast-economy-85899414509
.
3
See John Elkington,
Cannibals with Forks: The Triple Bottom Line of 21st Century Business
(Philadelphia: New Society, 1998), especially ch. 4.
Part OneThe Sustainability Imperative
Chapter 1A Bitter Aftertaste: Hershey Struggles to Master the Sustainability Challenge
Utopia of Chocolate
Hershey is an iconic American brand. Founded as the Hershey Chocolate Company in 1894 by entrepreneur and philanthropist Milton S. Hershey, the Hershey Company (as it's now known) has come to be synonymous with chocolate in the minds of millions of consumers. Its classic brown-wrapped bar is almost as recognizable as the curvaceous Coke bottle. Today the company boasts annual revenues of over $6 billion, employs some fourteen thousand workers, and sells candies and confections under names that include not only Hershey itself but also Kit Kat, Twizzlers, Jolly Ranchers, and a growing array of “premium and artisan” chocolate brands.
Perhaps even more intriguing, Hershey has managed to expand into a global giant with operations in countries around the world and a growing presence in markets from China to Mexico, while steadfastly clinging to its image as a classic American company. At the heart of this image is Hershey's home base, the bucolic Pennsylvania town once called Derry Church but long since renamed in honor of the man and the company whose history dominates the community.
Indeed, Hershey, Pennsylvania, is much more than the home of a chocolate factory. It's a popular tourist attraction whose mission is to combine chocolate with family fun. On a typical summer day in Hershey, you'll find tourists strolling Chocolate Avenue, gawking at streetlights shaped like Hershey Kisses and shopping for candy-themed souvenirs at the dozens of gift shops. Bedazzled children and obliging parents can be seen lining up for tours of Hershey's Chocolate World and squealing with delight on the ten roller coasters at nearby Hersheypark, while those with more sedentary tastes relish a whipped cocoa bath or chocolate hydrotherapy at the Hotel Hershey's pricey spa, or simply savor the sweet aromas wafting from the factory.
All these pleasures have one thing that unites them even more than their chocolate flavor: the steady stream of income they produce for Hershey's twelve thousand residents, nearly all of whom have some connection to the company. It's a heartwarming image—a charming American city built on the heritage of a classic company and a product loved by almost every child—and plenty of adults.
Making the story even more charming is the history of the connection between the Hershey Company and the town it dominates. Their fates are closely entwined, and that's the way Milton S. Hershey wanted it.
The deeply religious Hershey, a member of the socially conservative Mennonite sect, wanted his wealth to be used “for a purpose of enduring good,” and he viewed his little Pennsylvania town as a utopian community, designed and managed for the good of all its inhabitants.1
Hershey himself largely built the town in the early years of the twentieth century. Through his Hershey Improvement Company, he founded most of its leading institutions, including the local bank, department store, zoo, and public gardens modeled on those at the French royal court in Versailles. He laid out the bucolic street design, built a trolley company, and designed houses for factory workers and bigger houses for corporate executives. He even founded a community college that local residents and company employees could attend free of charge. During the Great Depression, despite a 50 percent drop in chocolate sales, he kept the workers from his factory busy building a hotel, a community center, a sports arena, and public schools—all, of course, bearing the Hershey name.
Milton also founded the Hershey Industrial School—now known as the Milton Hershey School—which today provides free room and board, clothing, medical care, and schooling for some eighteen hundred disadvantaged children. The charitable trust that Hershey created in 1909, which owns and operates the school, also owns or controls about 70 percent of the voting shares of the Hershey Company. As the company's website declares with justified pride, “Students of Milton Hershey School are direct beneficiaries of The Hershey Company's success.”2
Yet despite the noble intentions of Milton Hershey and the undoubted good the company has done, Hershey's once sugar-sweet reputation has turned increasingly bitter in recent years. Headlines about Hershey no longer focus solely on happy customers, enthralled tourists, or charitably sponsored schoolkids. Instead, the news about Hershey has centered on a series of embarrassing controversies that have put the company in a startlingly negative light.
The Dark Side of an Icon
Consider, for example, the rash of disturbing stories that hit the presses in August 2011—the height of the tourist season in Hershey—when some four hundred young foreign workers at a Hershey plant in Palmyra, Pennsylvania, staged a noisy walkout over their mistreatment by the company. The students had been brought to the United States from such countries as Costa Rica, China, Poland, Turkey, and Romania through the State Department's J-1 guest worker visa program. They'd been told, in the words of a recruiting brochure, “You will gain valuable work and life experience, expand your resume, improve your English, have opportunity to travel in the U.S., make great memories and form lasting relationships. No matter where you end up in the U.S., your Work and Travel Program is sure to be a summer you will never forget!”3
Sure enough, it was an unforgettable summer—but not in the way the students expected. Rather than experiencing American culture and making lifelong friendships, the students found themselves laboring in candy warehouses, packing and lifting fifty-pound boxes of Reese's Pieces, often on the 11 pm overnight shift. They earned so little that they couldn't even cover their grossly inflated living expenses—one group of six students was reportedly charged $2,400 per month to share a three-bedroom apartment normally rented for $970.
“There is no cultural exchange, none, none,” said one twenty-year-old Chinese student. “It is just work, work faster, work.” A Ukrainian student added, “All we can do is work and sleep.”
With the help of organizations including the National Guestworker Alliance and the Service Employees International Union, the students brought their plight to the attention of authorities—and the world. Officials at the Labor and State Departments promised to launch investigations. Making matters worse for Hershey, critics in the media were quick to link the apparent abuse of student workers to a broader picture of questionable labor practices by the company. In a scathing op-ed titled “America's Sweatshop Diplomacy,” Fordham University law professor Jennifer Gordon pointed out that the work done by the students had previously been handled by unionized Hershey workers earning between two and four times as much. Their jobs had been eliminated, their productivity replaced by that of unorganized workers who were easier to exploit. She called Hershey's use of low-wage foreign students “a microcosm of the downsizing and subcontracting that so many American companies have pursued during the past few decades in search of ever cheaper labor.”4
It's arguable that the negative spotlight on Hershey was somewhat unfair. As company spokespeople were quick to point out, Hershey had not hired the student workers directly. Hershey owns the Palmyra plant where they labored, but the facility was managed for Hershey by a logistics company called Exel. Exel, in turn, had outsourced its staffing to a vendor called SHS OnSite Solutions, which in turn recruited the student workers through a nonprofit organization known as Council for Educational Travel, USA (CETUSA). The glowing promises of “opportunity to travel” and “great memories” had come from CETUSA, not Hershey itself.
These mitigating factors are undeniable. But there's also no doubt in the public's mind that a company like Hershey is ultimately responsible for conditions in a factory it owns and profits from. Yet Hershey's only response to the revelations was a belated effort to pressure its labor suppliers to offer the student workers a week's vacation.
Subsequent investigations made it clear that the members of Hershey's shadowy chain of labor suppliers had behaved very badly. In February 2012, the Occupational Health and Safety Administration fined Exel for failing to report forty-two serious injuries between 2008 and 2011. And in November 2012, the federal government fined all three contractors $143,000 and ordered them to pay more than $213,000 in back pay to the foreign students.5
The Hershey Company wasn't named in the case. Nonetheless, the company's reputation had been seriously damaged by the ongoing publicity. Understandably, every news story focused on the Hershey connection and the harsh light it shed on a classic American institution. Which makes it strange that, when news of the government findings appeared, spokespeople for Hershey refused to respond to questions from the media. Hershey's own website—which carefully tracks most news about the company—contained no references at all to the ongoing controversy. And Hershey's corporate social responsibility (CSR) report for 2011—which devoted eight pages to the company's labor policies and practices, all avowedly designed to keep Hershey “a great place to work”—failed even to mention the guest worker case.6
It was a troubling story that left many people wondering about the reality behind the glowing Hershey image.
A Habit of Secrecy
Hershey's odd refusal to publicly address the mistreatment of young guest workers—for which many people held the company liable, regardless of its legal responsibility—is unfortunately totally consistent with a company tradition of operating behind closed doors that, over the years, has done much to tarnish the proud legacy of Milton Hershey.
For example, although Hershey has always boasted of its philanthropy, details of how the company operated and its impact on the communities that hosted it have traditionally been hard to come by. Media analysts and social activists seeking such information were routinely turned away. It wasn't until 2010 that Hershey finally joined competing firms in the confectionary industry by issuing its first CSR report. This long-overdue report finally addressed some of the more controversial aspects of the company's business, including its environmental practices, its labor policies, and the impact of chocolate candies in a world where childhood obesity is a growing public health problem.
Hershey's report claimed that the company had made an exemplary commitment to responsible behavior in all these areas. In his “Letter to Stakeholders,” John P. Bilbrey, Hershey's CEO since May 2011, declared, “I am confident that Hershey's CSR strategy will help support and advance our growing global business. It is based on our values, aligned with our culture, focused on partnerships, open to change and evaluated through continuous improvement measures.”7
But many of Hershey's critics were less impressed. Consider, for example, the company's record on ethical sourcing of cocoa, which is of course a major component of Hershey's most popular products.
Around 70 percent of the world's cocoa crop is harvested in West Africa, where abusive human rights practices such as forced labor, child labor, and human trafficking are rampant. In countries like Ghana and Côte d'Ivoire, children are pulled from school, forced to work in the cocoa fields and factories, and frequently injured on the job. Human rights activists have been protesting these conditions for years, and a number of food companies have responded with substantive changes. They've instituted programs to trace the sources of their raw materials, moved to enforce decent labor standards, and sought certification for their products by Fair Trade, which provides the strictest system of external monitoring in this arena.
On these issues, Hershey trails others in its industry. Its CSR report lists a number of initiatives aimed at ensuring more responsible sourcing, including a five-year, $10 million investment in “cocoa sustainability efforts” and a project called CocoaLink that uses mobile technology to deliver training on topics including child and forced labor to farmers in Ghana.8 At first glance, this sounds impressive. But back in 2009, a rival chocolate firm—the Swiss-based Nestlé—had announced plans to invest $110 million in sustainability initiatives over a ten-year period, just one of several industry programs than dwarf Hershey's comparatively tiny effort.9
Business magazine Fast Company summed up the company's track record by saying, “Hershey, despite having a market share in the U.S. of over 40%, is doing the least in the area of fair trade.”10 In October 2012, Whole Foods announced that it was halting orders of Hershey's “artisan” Scharffen Berger chocolates due to concerns over child labor among Hershey's West African suppliers.11 And a consortium of environmental and labor groups was so underwhelmed by Hershey's claims of social responsibility that it issued its own analysis rebutting the company's official CSR report: Time to Raise the Bar: The Real Corporate Social Responsibility Report for the Hershey Company. The report concluded,
Hershey, one of the largest and oldest chocolate manufacturers in the United States, prides itself on its commitment to supporting its community and underserved children in the United States, yet it lags behind its competitors when it comes to taking responsibility for the communities from which it sources cocoa. Hershey has no policies in place to purchase cocoa that has been produced without the use of labor exploitation, and the company has consistently refused to provide public information about its cocoa sources.12
Look closely at that last sentence. The issues of stakeholder engagement, trust, and transparency leap to the surface. The more one studies the Hershey track record, the less the 2011 student worker fiasco looks like an outlier. Instead, history suggests that Hershey's continuing sustainability problems are linked to a consistent corporate culture whose negative features—especially a penchant for secrecy—repeatedly undermine the company's attempts to live up to its self-image as a model of responsible business.
The Hershey Heritage Goes Up for Sale
One of the most dramatic episodes highlighting Hershey's failure to practice the principles of transparency and stakeholder engagement burst into the news on July 25, 2002.13 On that date, which the townspeople of Hershey came to call Black Thursday, a story in the Wall Street Journal revealed that the board of the Hershey Trust, the charitable organization that owned a controlling stake in the Hershey Foods Company and thereby in the future of everyone in town, had suddenly decided to sell the company to the highest bidder.14
The news flashed through town. The questions followed in an instant. Why sell Hershey? Who might the new owners be? What would they do with the Hershey plant, the theme park, the spa and hotel and gardens, and all the other attractions that had made their town a center of tourism? What would happen to the chocolate-related jobs that drove the local economy? Would Hershey, Pennsylvania, become a ghost town?
No one could say.
Of course, the idea of putting a company up for sale is far from unprecedented. It's a story that has been told in one company town after another all across America: corporate interests decide to sacrifice the local economy, culture, and tradition in pursuit of profit. And in most towns, after a period of dismay and anger, the citizens quietly accept their fate.
Not in Hershey.
A coalition of angry citizens formed within hours. It included former CEOs of Hershey who hated the idea of selling the company they'd nurtured; leaders and members of Chocolate Workers Local 464 of the Bakery, Confectionery, Tobacco Workers and Grain Millers International, the union that represented twenty-eight hundred employees at the Hershey plant; alumni of the Milton Hershey School; and thousands of business owners and residents of central Pennsylvania who feared the death of a town they cherished.
A week later, five hundred townspeople converged on Chocolatetown Square for the first protest rally in the history of bucolic, conservative Hershey. The emergence of a broad coalition of activists vowing to fight the sale was the last thing Hershey's leaders had expected. And on August 12, an ambitious state politician—Pennsylvania attorney general Mike Fisher—got involved. That day, Fisher filed a petition with the seemingly named-for-TV Orphans' Court Division of the Court of Common Pleas of Dauphin County, Pennsylvania, calling for prior court approval of any deal to sell Hershey. This was an ironic turn of events, considering that the impetus for selling Hershey seemed to have originated with a suggestion by a member of Fisher's own staff. In December 2001, the staff member had urged the board of the Hershey Trust to diversify its stock holdings, 52 percent of which were in Hershey Foods. Fisher would later say that his office simply had in mind a sale of a portion of the Hershey stock—not a complete divestiture. But by then the damage from the misunderstanding—if that's what it was—had already occurred.
The remarkable battle for control of Hershey that followed illustrates many of the complexities of running a responsible business in an age when stakeholders of every stripe are increasingly assertive, outspoken—and powerful. And it raises a host of questions that business leaders everywhere need to consider—questions like these:
Do the responsibilities of a business manager go beyond earning the highest possible profits? If so, what are those responsibilities, and how should they be balanced with the pursuit of profits?
What responsibilities does a company have to its workers, their families, the community where they live, and society at large? Is it enough to pay fair wages, provide competitive benefits, and supply needed goods and services—or should a company do more?
What information should be disclosed about corporate decisions and activities to those who have a stake in them? How should the leaders of a company take into account the viewpoints and concerns of those stakeholders? And who should have a say about the fate of the company?
How should the answers to these questions impact the daily decisions made by leaders of a company? If a company does have responsibilities to society that demand the involvement of a wide range of stakeholders, how do these responsibilities affect the management methods and strategic approaches of leaders in every department of the business?
The leaders of the Hershey Company and the Hershey Trust were upstanding citizens of the corporate world and the local community. Yet when challenged to chart a course for future decades in a rapidly changing world, they stumbled, hurting the company financially and leaving Wall Street and the American public with a badly damaged image—one that subsequent events have failed to repair. The reason, we believe, is that they failed to adequately address the questions we've just raised. It's a mistake that other business leaders must avoid.
The Chocolate Hits the Fan
The news that Hershey Foods was in play was big news on Wall Street. Hershey's stock rose from $63 a share into the seventies, and a list of potential buyers quickly emerged, including such international food industry powerhouses as Kraft Foods, Nestlé, and Cadbury Schweppes. Sale prices of up to $12 billion were mentioned in the press, and lawyers, bankers, and fund managers began licking their chops at the prospect of enormous fees and profits.
But in Hershey, Pennsylvania, the news produced shock and dismay. Bruce Hummel, business agent for the union, recalls being stunned when he heard that Hershey was for sale. “The National Labor Relations Board rules stipulate that the company is supposed to inform the union when a major change like a sale is in the works. They never said a word to us.”15
Local folks also wondered: Why had Hershey kept them completely in the dark? That isn't how people in small-town America treat their friends and neighbors . . . unless they are ashamed or embarrassed about what they are doing.
In retrospect, some Hershey residents felt that the decision to sell the company must have been in the works for months. CEO Rick Lenny had been the first outsider named to direct the fortunes of Hershey Foods. Shortly after his arrival at the company in March 2001, a number of long-term company executives had been quietly pushed toward early retirement in what some employees called “the purge.” Now that the sale plan had been announced, many concluded that Lenny had been hired specifically to clean house and make the company more attractive to a would-be buyer. Hershey confirmed no such thing. But under the circumstances, the locals were now unwilling to accept the company's word.
Stunned and angry townspeople felt they had no choice but to launch a grassroots campaign to oppose the sale, including the formation of a watchdog group they called Friends of Hershey.
The international fame of Milton Hershey's charming town had always drawn positive attention to Hershey Foods. Now it fueled controversy. People from around the world took an interest in the fate of the much-loved company and the town that millions had visited as tourists. Columnists and commentators who had recently gorged on the greed and duplicity of companies like Enron, WorldCom, and Adelphia found the Hershey story a tempting treat, writing feature stories on the saga with zinger headlines like “A Bittersweet Deal,” “Putting the Bite on Hershey,” and the seemingly irresistible “Kiss of Death.”
Everyone had something to say about the proposed sale, most of it negative. BusinessWeek's feature story “How Hershey Made a Big Chocolate Mess” excoriated the trust's handling of the sale, citing its failure to anticipate public protests, failure to win advance support from key constituencies, and failure to study the impact of any sale on the Milton Hershey School and its students.16
Outside groups connected the Hershey controversy to their own causes. A closely linked trio of nonprofit organizations—the Campaign for Tobacco-Free Kids, Essential Action, and Global Partnerships for Tobacco Control—weighed in with a strong protest against the sale. One of the potential buyers was Kraft Foods, whose parent company was the tobacco firm Philip Morris. “It would be terribly ironic if the School Trust were to effectively force the sale of Hershey Foods to a company associated with the orphaning of thousands upon thousands of children worldwide,” wrote Matthew Myers, president of the Campaign for Tobacco-Free Kids, in a September 12, 2002, letter to Robert C. Vowler, CEO of the trust. “Hershey and Philip Morris go together like chocolate and poison.”
Executives at the company and the trust hunkered down. Apparently stunned by the reaction of the town and bewildered by the avalanche of bad press—a new phenomenon for Hershey at the time—they refused comment when besieged by newspaper and TV reporters, and failed to provide spokespeople to air their side of the controversy at public forums. The investment world, initially delighted, began to voice displeasure and doubts. In early August, two Wall Street analysts downgraded Hershey shares as a result of the mishandling of the company sale. Others, certain that the sale would go through despite the controversy, began bidding up the stock price—typical behavior, of course, when a company is in play. Hershey stock reached a high of $79.49 on July 29, then stayed in the upper seventies as the company management began weighing potential offers, while all around them protests and legal maneuverings swirled.
About-Face
Community outrage grew steadily. A petition demanding the ouster of the trust's board grew to 3,000 signatures, then to 6,500, then to 8,000—in a town whose total population was only 12,000. The protests attracted all sorts of unlikely allies, from staunchly Republican small-business owners who contributed truckloads of pizzas and bottled water to sustain picketing union workers, to prosperous local realtors who showed up wearing fur coats to take lessons in carrying protest signs from union leader Bruce Hummel.
Determined to press on with its plans despite the outcry, the trust set a deadline of September 14 for prospective buyers to submit bids. By September 17, 2002, a deal was all but finalized to sell Hershey to the Wrigley Company for $12.5 billion. The sale price represented a 42 percent premium over the price of the stock prior to the sale announcement. It was also a full billion dollars richer than the only other offer on the table, a joint bid from Nestlé and Cadbury Schweppes. All in all, it was an excellent financial package, reflecting confidence that the Pennsylvania courts would ultimately approve the deal.
But as in any good small-town drama, there was a surprise ending. Just before midnight, Hershey Foods issued a terse statement: “Hershey Foods Corporation announced today . . . that the Trust's Board of Directors has voted to instruct the company to terminate the sale process that the company initiated at the direction of the trust.”17
The board had decided to kill its own deal—despite the $12.5 billion on the table and the $17 million in banking and other fees it had already invested in the scheme.
Board members refused to explain their reasons for quashing the sale, just as they had for putting it on the auction block. But media leaks from sources close to the board indicated that the overwhelming and continuing protests from the community had eventually split the board in two. Feeling like pariahs among the angry employees and people of Hershey, first one, then several board members had backed away from the plan. Finally, support for the sale utterly collapsed.
Hershey Foods CEO Rick Lenny, who had negotiated the deal with Wrigley, was deeply embarrassed and furious at the sudden turnaround, reportedly screaming at board members, “We had a deal! You told me if I brought you a deal that was acceptable we would all go ahead.”18 The investment bankers involved in arranging the deal were equally angry. One banker barked, “This has nothing to do with anything other than the politics.”19
Media around the world reported the startling outcome of the business battle in David-slays-Goliath tones. Thousands of Hershey employees, residents of Hershey, and Hershey School alumni celebrated, feeling that they had saved their company and their community through the power of protest.
The mood at Hershey headquarters was somber. Hershey stock fell nearly 12 percent to $65 the day after the sale was cancelled. By contrast, Wrigley stock fell just eight cents; conservative investors who favored Wrigley may have been relieved to be taken off the hook by Hershey's reluctance to consummate the deal. The Wall Street Journal observed, “Hershey now is left to chart a course as a stand-alone player that effectively can't be sold—but whose controlling shareholder [the trust] has shown it is ambivalent about its long-term commitment to the company.”20
Two months later, under pressure from the community, the employees, and the Pennsylvania attorney general's office, ten members of the board of the Hershey Trust were ousted. A new eleven-member board was created that included four members not on the earlier board, all inhabitants of Hershey or nearby communities. Two months after that, as the dust was finally settling, BusinessWeek magazine enshrined the Hershey Trust Company among its “Ten Worst Managers of 2002.”21
In the years since then, some things have changed while others have remained the same. Attorney general Fisher ended up being named by President George W. Bush to the United States Court of Appeals for the Third Circuit. Hershey has remained an independent business, majority control still firmly in the hands of the Hershey Trust. Richard Lenny served several more contentious years as Hershey CEO, battling his way through more labor disputes, plant closings, and intensified global competition until his retirement in 2007. And Hershey stock plummeted from its high price in the upper seventies, spending almost the entire next decade in the thirties and the forties. It failed to reach the $70.00 level again until June 2012.
Lessons from the Chocolate Mess
The story of Hershey in the twenty-first century, from the failed sale attempt in 2002 through the student worker fiasco of 2011 and the child labor controversies of 2012, is the saga of a company that is continuing to grope for answers in a complicated and contentious business and social environment. But of course Hershey isn't the only company to face these sorts of challenges. Business managers of all
