For Many Firms, Ethics and Sustainability Are Nothing New

By Steve Bates Apr 28, 2014

Spurred in part by legislation supporting “benefit corporations” in many states, some companies are reinventing themselves as more ethical and sensitive to environmental and community needs.

But doing the right thing is hardly new. Many companies have been ethical and sustainable for decades, often with little public recognition. And they have thrived despite the challenges of large competitors and economic downturns, emphasizing practices that build strong ties to their communities and boost profits in the process.

“It’s not about philanthropy. It’s about how to be more profitable by being more responsible,” said Andrew Savitz, an author, speaker and advisor on sustainability issues who is based in the Boston area.

Many organizations that have been committed to sustainable practices for decades—if not generations—are small and family-owned. “It’s a lot easier for small companies to be agile and to change their cultures,” said Bob Willard, a Toronto-based author, speaker and advocate for sustainability. These companies don’t face constant pressure from shareholders to maximize returns.

However, even some large, publicly traded companies have discovered the rewards of ethical and sustainable business practices. Interface Carpet made a sudden shift in this direction two decades ago after an epiphany by its founder, Ray Anderson.

Erin Meezan, vice president of sustainability for Interface, whose U.S. headquarters are in LaGrange, Ga., said the company decided that “we’re going to waste less” in the carpet production process. At first, shareholders were skeptical. But “when you start talking to investors about saving money, it’s very powerful.”

Meezan said Interface estimates that it has saved about $400 million in carpet production costs since then. “We continue to see the benefit” of environmentally sensitive practices, she said.

“Very often a company’s orientation toward sustainability is driven by a founder or current leaders,” as was the case with Interface, said Willard. He added that when employees buy in to the mission, productivity and sales can really take off. “There’s something magic that happens when employees are allowed to work with things that are aligned with environmental or social causes.”

“It has to be reinforced constantly from the top of the organization,” said Savitz. He added that human resources plays a significant role in keeping management and employees on the same page in organizations that pursue ethical and sustainable practices.

“Talk to your employees,” he advised. “They want purpose.”

Ethics: Recession-Proof

For the first century of its existence, the Ward family egg farm in Monroe, N.H., was a typical mom-and-pop operation. Jesse Laflamme, a member of the Ward family who took over operations about a decade ago, found that “the world was changing around us.” Egg production was consolidating in a few large companies. Supermarkets were following a similar pattern.

Laflamme’s parents had a vision of a fully organic business, despite the fact that producing eggs without cages, antibiotics, hormones, pesticides and animal byproducts is more expensive than factory egg farming. Laflamme bought into the concept, in part because it seemed the right thing to do and in part because it would set his operation apart from the competition.

“It was what we wanted to do, but it was forced upon us,” he recalled. “I had a feeling early on” that customers would pay more for a healthier product.

Messaging was tricky for the company, which became known as Pete & Gerry’s Organic Eggs. “We fumbled through it” at first, said Laflamme. He got plenty of advice from other organic farms. Then came the recession. Things looked bleak—until 2010, when more than 1,000 people were sickened by salmonella from bad eggs and more than half a billion eggs were recalled.

“That opened some eyes,” said Laflamme. “That made us recession-proof.”

Today, Pete & Gerry’s ships about 1 million eggs a day, boosted by a network of more than 70 small farms and by a loyal workforce. “We pay a living wage. We’re paying 90 percent of our employees’ health insurance. In agriculture, nobody does that,” said Laflamme.

Though the Pete & Gerry’s brand is strong, being an ethical and sustainable business has its costs, Laflamme acknowledged. “All things must be paid for,” he stated. “You have to spread the truth and get your customers to buy in to what you are doing.”

Added Laflamme: “Consumers are voting with their values now.”

‘You Have Got to Have a Story’

Like Pete & Gerry’s Organic Eggs, Mills Office Productivity faced the prospect of being overwhelmed by large chain operations. Mills, an office supply firm located in Vancouver, British Columbia, was started in 1949 as a stationery company. In 1989, the family-owned business joined a Canada-wide office supply buying group. But it has felt relentless pressure from big chains such as Staples.

About 11 years ago, said current Mills CEO Brad Mills, he realized that his company needed to promote both its ties to the community and its environmental conservation practices. “You have got to have a story. That’s the only way that a company of our size can survive in a world of office supply giants.”

His company, which is a benefit corporation, became carbon-neutral in 2007 by investing in projects that have permanent environmental benefits and offsetting its carbon footprint. In 2010, it purchased its first electric truck. It has since added an electric Smart car and electric delivery bicycles.

Through a partnership, Mills has been hiring residents of Vancouver’s impoverished Downtown Eastside neighborhood who are shunned by almost every other employer. Some residents have served time in jail. Some have been addicted to drugs or alcohol. Some have mental health issues, have other disabilities or are homeless.

Mills trains them to work in warehouses or helps place them in the local H.A.V.E. (Hope Action values Ethics) Café. The café operates as a culinary training academy. All participants are trained without charge for permanent jobs in the food service industry.

“About 700 people have gone through there,” noted Mills. “Eight-five percent have gotten jobs. There is a young man who killed someone at the age of 18 who is working in a downtown restaurant as a cook. It’s remarkable.”

At first, “everyone was skeptical” about hiring the down-and-out, he recalled. But after the first trainees started succeeding, the doubts dissipated rapidly. Now, employees at Mills are spearheading ethical and sustainable practices, he said. “The next generation is taking it to the next level.”

Mills said that he can’t really describe why he moved the company so thoroughly in ethical and sustainable directions. “I don’t have a clue. It just made sense to me.”

And though he understands the need to tell the Mills story, “I still feel a little bad” about self-promotion efforts, he said. “I’m trying to keep humble.”

Employees Make the Difference

Portland, Ore.-based Neil Kelly Co., another family-owned benefit corporation, was founded as a weatherization company in 1947. Today it is a leading design-build remodeling firm in the Pacific Northwest.

It was created on the premise that it would be “a remodeling company that people could trust,” said Julia Spence, the firm’s current vice president of human resources. Founder Neil B. Kelly maintained that “relationships with the community make a business thrive.” But in addition, management’s relationships with its employees are critical, said Spence.

The company relies heavily on its employees, who number more than 180. For two decades, every worker has been invited to participate in the annual business planning process.

Even though the company does not have shareholders to please, it operates like it does. A board of directors holds its president accountable. When the recession hit several years ago, “senior management voted to take a major pay cut,” Spence recalled. A few layoffs were required, but the company soon began to grow again.

Some employees who have left the organization voluntarily have returned, often to better positions. Spence is one of them.

“I started as an architectural drafter. I thought I would be happy with a design career,” she said. However, the company encouraged her to explore other career options. She left, got her master’s degree and discovered her “real passion”—HR.

Steve Bates is a freelance writer based in the Washington, D.C., area and a former writer and editor for SHRM.

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