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Small business lessons for a big business world

CEO of Seventh Generation touts social responsibility, financial sustainability at Kellogg School speaking engagement

By Matt Golosinski

3/10/2004 - In the business world, what matters most?

For Jeffrey Hollender, CEO of Seventh Generation, the bottom line is about more than merely satisfying shareholders and meeting quarterly earnings expectations - essential as these elements are for his firm's success.

In his March 10 address at the Kellogg School, Hollender detailed the reasons why environmental sustainability and socially responsible business practices can also result in a financial boon for a company.

Hollender set out 15 years ago to "provide workable solutions to the daunting challenges facing our world." To work toward this lofty goal, he founded Seventh Generation, the nation's leading brand of nontoxic and environmentally safe household products.

Jeffrey Hollender, CEO of Seventh Generation 03/10/04
The journey has not always been easy, admitted Hollender, who is also the author of What Matters Most: How a Small Group of Pioneers is Teaching Corporate Responsibility to Big Business and Why Big Business is Listening (Basic Books, 2003).

"Even really good companies that are trying hard to be responsible sometimes come up against tough, complex ethical situations," said Hollender. As an example, he cited a recent experience his firm had when deciding whether to fulfill a large order with a California supermarket chain then embroiled in a labor dispute.

After much internal discussion, Hollender said Seventh Generation elected to honor the contractual obligation with the supermarket, in part because of the relationship the two companies had developed, but equally importantly because "we were not convinced that not shipping the order was the most constructive way to engage the labor situation."

Ultimately, Seventh Generation resolved this ethical dilemma by donating profits from the California stores to support the striking workers.

Socially responsible business practices begin, said Hollender, with the internal values and culture of a firm. In recent years, Hollender had, like many, watched the seeming ethical collapse of much of the contemporary business landscape in the wake of the Enron and WorldCom scandals.

It was the stream of discouraging headlines about corporate abuses that prompted Hollender to research and write What Matters Most, a project he initially expected would fulfill his worst expectations about greed in corporate America today.

He said he was pleasantly surprised to discover many firms, large and small, working to do the right thing. "I found that the state of business is much better than I expected," Hollender said.

Why the shift toward a better appreciation of the value that socially responsible business practices bring to a firm?

Hollender cited four main reasons for the trend:

1. The cost of doing the wrong thing has increased exponentially, and companies must be diligent to ensure their practices are ethically sound.
2. Some 75 percent of the value of American businesses is intangible and wrapped up in brand and reputation, elements that must be protected in ways significantly different than traditional tangible materials.
3. The electronic media environment has changed radically, empowering employees, customers and other stakeholders to have increased access to corporate "inside information." If this information is damning, the word "will circle the globe in a matter of minutes."
4. Because of the shifts in the dynamics above, business has been more proactive in bringing increased pressure on itself to be sure companies' practices are ethical.

Perhaps surprising to some who assume that sweeping ethical change in corporate America must come from outside the business world, Hollender noted one high profile example of how an industry is addressing the global warming crisis.

"According to a recent study and cover story by the British periodical The Ecologist, the single greatest force to slow global warming is "the insurance industry," said Hollender.

"Unlike the president of the United States, these firms who make a living forecasting risk have already made up their minds that global warming is real and will cost them money, so they are taking action now."

Hollender also pointed out that many more companies in all industries are increasingly transparent in their business transactions, as well as in their corporate sustainability reports (CSR). These CSRs are often available on company Web sites, and some of them are remarkably frank, said Hollender.

Hollender's book represents his effort to continue the trend toward widespread corporate responsibility by offering business leaders strategies to measure their social progress and communicate this progress to shareholders and employees, while integrating related values systems across a range of business units and partners.

Seventh Generation takes its name from the Iroquois belief that "In our every deliberation we must consider the impact of our decisions on the next seven generations."

The Kellogg School Social Impact Club sponsored Hollender's speaking engagement, which was followed by refreshments and a book signing.