Sustainable Excellence: Is it enough?

November 21st, 2010

The Energy Collective

November 21, 2010 by Marc Gunther

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Last week was a terrific week for corporate sustainability. Unilever unveiled a bold plan to reduce its environmental impact and Chevrolet — Chevrolet! — announced $40 million of carbon reduction projects. Forestry giant Georgia Pacific–owned by the Koch brothers, of all people–signed an agreement to protect endangered forests in the southern U.S., winning praise from the Dogwood Alliance and NRDC. Greenbuild, the world’s largest convention on environmentally-friendly buildings, attracted 1,000 exhibitors and 27,000 people to Chicago. Wow.

None of this will surprise readers of Sustainable Excellence: The Future of Business in a Fast-Changing World (Rodale, $25.99) by Aron Cramer and Zachary Karabell, a smart, readable and provocative book that argues that business success in the long run will be earned by companies that “integrate consideration of society and the environment into their DNA.” As CEO of Business for Social Responsibility since 2004, Aron has had a front-row seat (actually, a place on the field) from which to track changes in how business is being done, while Zachary is an accomplished journalist and scholar who also did a stint as a Wall Street money manager. Together, they have provided a map of the ever-evolving business landscape, along with valuable guidance to executives who must deal with a range of sometimes competing pressures on companies to do good and to do well.

What’s the business case for sustainable excellence? They write:

What has made sustainable excellence necessary is the simple imperative of maintaining profitability in a world altered by a trio of interlocking challenges: the financial crisis that hobbled the economy, the rise of the emerging world and the increased urgency to decouple economic growth from natural resource consumption.

In short, the drive to integrate sustainability into business is a function of thousands of companies recognizing that now and in the future, this is the only viable path forward.

Aron and Zachary tell stories about GE, Google, DuPont, Shell, Levi-Strauss, BP, PepsiCo, Starbucks and Coca-Cola, among others–companies that, to varying degrees, are redefining themselves to deal with the long-term trends they’ve identified, and to meet the rising expectations of business that come from their employees, their customers, communities and NGOs.

Nike, for example, which was once “a defensive symbol of corporate irresponsibility,” has turned around to make “sustainability an important foundation of its future growth”–by not only protecting the rights of workers in its supply chains, but also be redesigning products, sharing its intellectual property with others to have a greater impact and speaking up in Washington for climate regulation.

Walmart, too, is a remarkable turnaround story. Formerly a lightning rod for criticism, particularly over its labor practices, Walmart “has changed dramatically, and rapidly,” Aron and Zachary argue. Its “supply chain efforts have made Bentonville, Arkansas, the unlikely epicenter of sustainable excellence.” These days, they write, “some observers believe that Walmart has more influence on the business environment than the US government and other regulators.”

That’s a provocative point, and it raises a question: Has business overstepped its role? Walmart (not EPA) sets standards for packaging. Clothing makers like Gap and Timberland enforce labor standards in China which are properly the province of state authorities. Big companies are doing what governments once did, without the democratic controls we have, at least in theory, over governments. (I wrote a FORTUNE story about this idea back in 2005, headlined Cops of the Global Village.)

I called Aron to ask him about this, and about a few other issues raised by the book. He acknowledged that lines have blurred between the responsibility of government and business, particularly when government inaction creates vacuums. In the U.S., dozens of big companies have set carbon reduction goals even though the government has not. In China, he said, “there has been a de facto outsourcing of labor enforcement from governments.” The same goes for environmental rules in China where Walmart, among others, is delving into the environmental practices of its suppliers.

Underlying the whole idea of sustainable excellence, in fact, is the notion that companies need to take an expansive view of their role in the world, one that goes way beyond obeying the law and making money. You might think that in the absence of government rules, big companies might fell less need to worry about climate or global poverty, but Aron says no: Government inaction “increases the imperative on business to pursue sustainable excellence,” he said.

Pressures on companies are growing from other sources, he notes including NGOs or self-organizing publics. Using Facebook, thousands of people organized a boycott of Whole Foods Market, he said, after founder John Mackey publicly opposed President Obama’s health care plan.

“In the Web 2.0 world, you have shifting coalitions of interests that can self-organize in the way it would have taken a Greenpeace or an Amnesty International to organize decades ago,” Aron says.

I’ve got a couple of quibbles and one significant beef with Sustainable Excellence. In an otherwise superb chapter on leadership, the authors are too kind to Sir John Browne, the former chairman of BP, who they praise as the first major oil company CEO to acknowledge the threat of climate change in a speech in 2007. While they note that BP’s subsequent safety record was terrible, they write:

Still, the disconnect between words and actions at BP does not to diminish the signal importance of Browne’s “man bites dog” moment, which transformed forever the way companies viewed the crucial question of energy and climate.

Uh, no. I see the BP story not as a “disconnect between words and action,” but as one where the words were emptied of all significance by the company’s actions. BP has lost its voice because of its operational woes. Meanwhile, the authors are too tough on Bill Ford, also around the question of words and actions: While it’s true that the Ford company chairman has failed to deliver on his grandiose claim in 1999 “to preside over the demise of the internal combustion engine” (and that the grass roof on a Ford factory in Dearborn was a misplaced prorioty), Bill Ford’s legacy will be that of a leader who consistently pursued environmental responsibility, recruited a strong CEO in Alan Mullaly to help him, helped his company survive without a government bailout and will, in the future, become the “green” leader among U.S. automakers.

This leads me to my more significant beef. Like all books about corporate responsibility or sustainability (including my own), Sustainable Excellence has a tendency to ascribe too much power to business. Ford can’t sell small cars unless consumers want to buy them. BP can’t go beyond petroleum without global controls over carbon pollution. Sales of organic food by Walmart and everyone else slow down during a recession. Business, in other words, isn’t all-powerful, and it doesn’t operate in a vacuum. It’s constrained by a competitive economy, a culture, an ecosystem of expectations and regulations shaped by all of us.

Aron and Zachary are very smart, so of course they know this. When I called Aron, I asked him whether Sustainable Excellence — which is at heart a hopeful book — left him believing that forward-thinking companies can solve global environmental and social problems on their own, without government action. Of course not, he said: “Business can’t do it alone. Smart policy is essential.” But this book gives us reason for optimism, as well as a framework to understand the dramatic changes reshaping the corporate world.