Green As Cyclical…Is It All A Fad?

Thanks for the great response and feedback to my last post, I’ve got a queue of businesses I’ll be profiling over the next few months and will report on findings in coming posts

Social entrepreneurism is a business model that is marketed squarely under the “green” banner. The more I dive into this topic, the more I find messaging and philosophies taking me back to the environment. Not that there is anything wrong with that emphasis. However, the concentric circles of social entrepreneurism are: People, Profit, Planet seem to be lopsided, with emphasis on “planet,” making “profit” a dirty word. In this post I’d like to review and example and a method for measuring profit to benefit “planet.”

Either Al Gore has done a heck of a job marketing his mission that everything is planet related…or I’m missing those companies that are seriously interested in profit. To this, I would like to do a 3-part series: Green as Cyclical, Green as Hip, Green as Rebellious.

To follow up on a notion I posed in my last blog “Is This All A Fad?” I spent some time thinking about how fads come about…through consumer demand. I really want to focus on the profit side of social entrepreneurism. The movement of cash flow through a system while also supporting environmental concerns is exciting to me. My quest for understanding is: how to “sustain the demand” and move out of the fad category into mainstream behavior.

In this post:

  • Local Is…Just Like Me
  • I Want My Piece…Of The Pyramid
  • Featured Company: Wal-Mart

Local Is…Just Like Me
Last night I went to dinner with some gal pals at a nice, local restaurant and the topic of “organic” came up. Our book clubs were choosing selections like Botany Of Desire, Omnivore’s Dilemma and Fast Food Nation.

People here in Seattle are very fluent on the issues of organic and local. Usually one in three of any set of acquaintances has a Veggie Box delivered once a month, and most people here in Seattle seem to recycle in their homes. And yes, there is an silent (but very polite) judgment given to those who don’t.

A friend mentioned that she recalled Earth Day being a bigger deal when she was in high school (she had actually gotten the day off) but the emphasis on recycling and “green” later died down. I experienced the same thing. Neither of us are fad-chasers and didn’t want to be roped into “buying green” simply because People magazine said Cameron Diaz is not buying eco-friendly lip gloss. We clearly fall into a specific customer segment: purchasers-requiring-a-good-case-to-switch (beyond simply price).

Biodynamics have been around since the turn of the century, the benefits of which may be found in the “quality of produce, the health of land and livestock, and the freedom from environmental problems increasingly generated by many modern farming methods.” Essentially, biodynamic farming and gardening looks upon the soil and the farm as living organisms. It regards maintenance and furtherance of soil life as a basic necessity if the soil is to be preserved for generations, and it regards the farm as being true to its essential nature if it can be conceived of as a kind of individual entity in itself – a self-contained individuality. It begins with the ideal concept of the necessary self-containedness of the farm and works with furthering the life of the soil as a primary means by which a farm can become a kind of individuality that progresses and evolves. For more info, check out the Biodynamic Agriculture movement started in 1924 by Austrian scientist Rudolf Steiner.

I Want My Piece…Of The Pyramid
Rather than get neck-deep in research I’ve no professional experience with, I’ll risk use my own personal experience here to set up an argument: I believe the idea of sustainability ebbs and flows in relation to times of glut in the economy. Biodynamic Agriculture came about on the tail end of the 1920’s (pre stock crash) and we are embarking on a green-fest now (pre “major economic turmoil”). Economic stress forces us to make more measured decisions, think twice, think about dependencies and consequences, consume less, consume thoughtfully.

I believe it was 1990 or 1991 when the Earth Day in Central Park was the place to be, the cause to support and virtually forgotten the following year. Paul Simon played there and it seemed to be an event for the Boomers to wax nostalgic over. I went off to college, where budget alone forced one into temporary vegetarianism. Lack of funds makes one think of The Pyramid a little differently when you can only afford food from two of the modules. {Note: check out that gov link! Looks like they’ve spend some tax dollars on the nutrition site!} Once I got my first job, I lived above a 4-star French Bistro I couldn’t afford to eat at – classic fire escape-meets-train-tracks-romanticism of post college life. I recall being squarely at the bottom of the pyramid and cultivating a fondness for cereal and rice. I also remember the “crunchy” kids who raved about the benefits of tofu, saving the planet, and leaving a smaller footprint. Good message, made sense, but came from the wrong communication filter. What A-student whose parents played golf and drove a Ford would follow people who looked like they spent the better part of their days sitting in mud puddles together thinking of making love children? It’s no accident that the hippies of the 60s grew up to go work on Wall St.

You can create change out of the back of a WV bus – but you can’t scale. The ability to scale is what attracts customers, voters, (and yes ladies and gentlemen) – profit.

Featured Company: Wal-Mart
For all the negative press they’ve gotten about how they pay their workers (many books and web sites focus much attention here – and rightly so, much of it is completely valid), there is another side to the coin. Wal-Mart has a sustainability program. Here is a company that pinches every penny. They are discussed as the example for line management, manufacturing and production in every business school in the country. I wrote a piece recently of how I thought the Wal-Mart model works, taking a $4.95 item as an example and wondering what I’m really paying for. $4.95 doesn’t really even cover the cost of the shelf space, indicating volume on this unit is pretty high – something Wal-Mart specializes in. Add cultural notions of quality into the mix: Americans’ need for the “new” and acceptance for planned obsolesce, or the German desire for lifelong quality and you begin to see the complexity of the marketplace, not to mention the wrench that cultural impact has on production.

What brought Wal-Mart into the Sustainability discussion? Did they finally ask the question: “If our customers are no longer paying for this item, than who is?”

Short Answer: Yes

Walmart measures everything. M&M peanut sales experiences a dip on a certain day of the week due to kids’ after school buying habits. To combat this, stores move them closer to the register on those days to maintain profit margins. No product is too small to watch, measure and learn from and there is no shortage of business school students to solve those problems. So when their customers start to take notice of their business practices, begin to shop elsewhere or not at all – that affects shareholder value. Therefore, it makes good business sense to expose their practices, hold themselves accountable for the decisions they make and try to be better corporate citizens.

Their mission states: “Our opportunity is to become a better company by looking at every facet of our business—from the products we offer to the energy we use—through the lens of sustainability.” Given their ability to scale and lead by example, WalMart should take a leadership position for setting goals and achieving them, responsibly. They have successfully intertwined social goals to their ROI and it should not go unnoticed how hard it is to adopt new financial or project targets in an established culture of focus on the bottom line.

Press Release: Wal-Mart Completes Goal To Sell Only Concentrated Liquid Laundry Detergent: More than 4,000 Wal-Mart stores across the nation have transitioned to concentrated liquid laundry detergent, saving significant amounts of natural resources

Look at this language…it’s like poetry to me (Truly, I love this stuff! Understanding and appreciating different company cultures for the purposes of driving effective data driven change is what I do for a living – there is romance, a longing to be a better “person” in this kind of math.)

Wal-Mart Stores, Inc. (NYSE: WMT) today announced it achieved its goal to offer only concentrated liquid laundry detergent in all of its U.S. and Canadian stores. The commitment was originally made by Lee Scott, president and CEO of Wal-Mart Stores, Inc., at the Clinton Global Initiative on September 26, 2007. The transition to selling only concentrated detergent has acted as a catalyst to transform the entire liquid laundry detergent category across the retail industry and save vast amounts of natural resources.

Let’s dissect that: (re enactment solely based on personal experience with the product management lifecycle in several companies, not with WalMart specifically and does not represent the opinions of socialventurelabs, Wal-Mart or Microsoft – so just have fun and humor me) J

0-6 months on the project of liquid detergent

This means that some product manager who just graduated business school got assigned to a laundry detergent. She had hoped for something with more sex appeal, but thankful she didn’t get the problems of adult diapers to solve. She has completed their project management training and is now equipped to rid the world of unnecessary features thereby increasing customer satisfaction and shareholder value. (Note the lack of attention to natural resources in this phase).

6-9 months on the project of liquid detergent

She goes back and forth with the scientist on scent, color and viscosity of the detergent. She speaks with marketing on the shape of the bottle. After months of tedious conversation on the minutia of cleaning laundry, including ethnography studies in South America where women still beat their laundry on rocks and experience doing the laundry in part to establish a social pecking order, she wonders where her wide-eyed idealism to “change the world” went – is all this effort for the shareholders? (yes, but we won’t tell her that just yet)

9 -12 months on the project of liquid detergent

She receives reports or becomes aware of information on how the powdered detergents impact ground water which in turn damage local streams. (AHA! Her moment to shine) She presents her findings in the appendix of her next business review, making sure to leave the point out of the discussion, knowing that her manager will read ahead in the report and ask her questions based on the data.

14 months on the project of liquid detergent

Her manager takes the data and presents it to the VP.

18 months on the project of liquid detergent

The VP remembers his direct report sharing some information that might save revenue, just in time for performance reviews and is late for a golf game with the CEO, so he comes in with a bang and says “Lee, we’re going to tank in Brazil if we don’t go 100% liquid.”

Now Wal-Mart has top-down support for culture shifting, our product manager was promoted and is running the self care division, our senior manager is now an executive and the VP got his bonus. Wal-Mart now gets to count itself in the sustainable category, which is experiencing an increased boom due to educated consumers now voting with their dollars. This is how long it takes in many large companies to get a metric in front of a CEO or senior manager and have their attention, focus and action.

You can make the argument that Wal-Mart was a bottom line company, and in response to customer demand, they still are. However, they deserve credit for responding to that demand, and taking people, profit and planet into account when forming their corporate commitments.

Espresso Shot Insight (what’s this?)

One takeaway from this piece is measuring your social return on investment, something social venture labs helps businesses figure out through its workshops. It’s not an easy problem and looks like a lot of thinking that most businesses don’t have time to do. Spend a little time thinking through some of this, and you’ll run your business less reactively.

Your goal in data collection is to not get mired in the “how” or the details of data collection…but to determine whether you are making your target and develop efficient mitigation strategies. Don’t be intimidated with xls (which hopefully one day you will come to appreciate as the best software application ever created J) A simple survey or spreadsheet that captures rough numbers is better than nothing at all. When deciding on your metrics for measurement, think through what your ultimate objective is.

You have to keep the big picture in mind at all times, or like that time you went on that hike without your compass, you’ll be 5 miles from where you parked the car – not that ever happened to me….

Sample Objective for a measurement that benefits profit, community, planet runs a restaurant where they employ homeless workers. They train the homeless in a 16 week life skills and kitchen skills class.

This might be the kind of objective they would employ to increase the scale of trainings provided. The metric for “planet” in this case is “reducing homeless” which indirectly benefits planet by creating cleaner streets or reducint crime, etc.

  • Objective #1 = Provide 16 week kitchen skills training program for homeless
  • Measure = Trainings provided to homeless (x)
  • Target = Place 600 people a year in training (50 per month)
  • Initiative #1 = Increase number of training kitchens on-site
  • Initiative #2 = Increase on the street homeless outreach
  • Measuring = Number of homeless trainings provided to homeless (x’s)
  • Suggested Measuring Technique: Capture number of (x) trainings provided to homeless via the method of tracking monthly sign-ins
  • Suggested Tracking Technique: ExcelScale: Number of (x’s) trainings provided to homeless per (y) month
  • Data Entry: Compiled weekly and entered monthly

…you can see how this focuses on a small program element and how much administrative work is associated with just measuring one metric. Obviously, the goal here would be to open more facilities or go national with a model other kitchens might adopt, which is getting closer to the big picture…but you have to start small.

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