“When you are being asked to make the business case for sustainability – perhaps ask them to make the business case for being un-sustainable.”

In the mid 1990s, while struggling to address InterfaceFLOR’s environmental policies, Ray read Paul Hawken’s The Ecology of Commerce. He began to see the role that companies, like Interface, played in crippling the environment. In response, he launched a comprehensive plan to reconstruct, bit by bit, the entire supply chain.

“We began to tackle the face of mountain we identified as waste. We defined waste…as any cost that we incurred that does not add value to our customer and that translates to doing everything right the first time, every time. It’s not just waste material, scrapped and low quality and so forth. If you send something to the wrong destination and have to get it back and reship it — that’s waste. If you incur a bad debt — that’s waste. So we defined waste very broadly and over time we actually said that any energy that comes from fossil fuel by our definition is waste and we need to eliminate it…. It became very clear very quickly this was the smart thing to do. Not only did we start to generate answers for those customers, they embraced us for what we were trying to do. The goodwill in the market place has just been stunning. The rest of the business case is pretty simple. I cost it down not up.” 

Seventeen years later, InterfaceFLOR has cut both landfill waste and water usage by 80%, reduced energy used per product unit by 43% and lowered greenhouse gases by 44%. Thirty percent of the company’s energy now comes from renewable sources. As Ray knew, “There are noble fortunes to be made in the transition to sustainability.”  Interface has saved $433 million between 1995 and 2010, an awesome amount that much exceeds the company’s investments in sustainability.

Beyond demonstrating that responsible business is profitable, Ray racked up hard evidence that the profit doesn’t lie in the emotional branding of t-shirts or shoes but in revolutionizing the way an industry, even manufacturing, functions.

In determining to leave no mark on the earth, Ray left an immortal mark on us.

Why integrate a social mission into your business?

You’re an entrepreneur with an idea and maybe a business plan, a small-business owner or the head of mid-sized company.  To expect you to add social purpose to your business just because it’s a good thing to do, is foolish.  You have a bottom-line and other obligations to meet.  You don’t have extra resources to allocate to ‘doing good.’

But doing good is a business strategy, not merely a moral argument or trend.  Businesses with a strong social mission have a competitive advantage.

1. People will talk. consumers, competitors, investors, suppliers and the press.
2. Increased productivity and employee morale.  People want to work for a greater purpose and want to know that their work makes a difference. Employees who are happier work harder and smarter because the work has become personal.  These type of employees are advocates for your company, not just employees of it.
3. Consumer preference. Consumers prefer companies that make a positive impact on the world.  Eighty-three percent of U.S. consumers want more of the products and services they use to benefit causes (2010 Cone Causes Evolution Study) and 62% of global consumers will switch brands if one works with ’good causes’ and the other does not (Edelman, 2010).
4. Innovation.  More companies like Nike, GE and Interface are using sustainability to drive innovation. Seventeen years ago, the late Ray Anderson, who served as Interface’s CEO, committed to becoming a zero-waste company by 2020. Since then, Interface has eliminated hundreds of millions of dollars in resource and waste disposal costs, increased sales by more than one billion and changed the way the entire carpet industry does business.
5. Influence.  Your company’s initiatives will be modeled as more companies realize the benefits of having a social mission.
6. Lower marketing costs.  Your mission will help your marketing. A line of grocery products founded and once produced by Paul Newman (Newman’s Own) is a somewhat banal story that merits only a mention in the press. The fact that the company donates 100% of profits to charity is a story that sticks, intrigues and encourages participation through purchase.
7. Talent recruitment.  People want to work for employees that care; a social cause is indicative of a favorable workplace.
8. Attract talent for less. Kevin Jones of Good Capital calls this “meaning premium.”   People want to work for a company that allows them to contribute to a greater purpose and are willing to be paid less for the opportunity (NB: this isn’t an argument for underpaying employees).
9. Attract young talent.  Teach for America is a top employer of exceptional college graduates. Last year 12% of  seniors at Ivy League schools applied to work with Teach for America, vying for one of the most challenging and low-paying jobs out there.
10. Talent retention.  When employees are part of a larger mission and feel their contributions make an impact in the world, they’re engaged, proud and motivated.
11. Savings in resource and disposal costs. You’ll save money by reducing energy, water and material consumption. Producing less waste and reusing water or materials costs you less to purchase and less to haul away.
12. Supplier advantage.  Stonyfield Farm pays its organic suppliers a floor price that won’t ever drop, protecting its suppliers from market swings and production hiccups. In return, when supply for organic milk or sugar outpaces demand, Stonyfield is first on the delivery list and is guaranteed a fair price because it’s built a relationship with its suppliers.
13. Risk management. Being in tune with your stakeholders alerts you to potential risks and helps you safeguard against them. An offshoot of this is that your company is better informed and positioned to identify new business opportunities.
14. Future-bound company.  Successful companies that others evangelize and model represent more than just a product or service. They represent a philosophy, culture or experience. When you channel this back into your business, you’ve made your competitive edge that much more edgier.
15. Fun.  Science proves what most of us know–making a difference feels amazing. We feel happy, enlivened and creative.

Your company (1, 5 or 200 employees) is the ideal size to run a purpose-driven business. Although larger brands get more attention for the resources they can bring to their campaigns your company holds an advantage.

1. You’re more agile. You can plan, execute, track and revise nearly on-the-fly. Less memos, less approval, less internal politicking diluting the programs.
2. You can take more risks with your social mission. You have less of a reputation to uphold. You can be a renegade, a heretic, recognized for your commitment to social change and your willingness to try new ideas.
3. You face less financial accountability. Smaller companies aren’t held to the same monetary expectations as larger ones. Your programs’ strength lies in their impact and effect rather than your company’s financial commitment.  A big brand cosmetic company’s one-time campaign cost $500,000 in an upfront investment to its partner charity, the cost of a micro-site and prize expenses, and delivered just a luke-warm impact. Your cosmetic company can affect people more directly by offering products and makeovers to women re-entering the workforce in partnership with a workforce re-entry program and your local Dress for Success chapter. Cost? In-kind only.
4. You have a fresher slate. Small companies are often seen as more personal, less greedy and less noxious. There’s less initial cynicism of your motives and choices.
5. You entice stronger non-profit partners. Smaller companies are rarely able to attract (nor should they try to) the top crust of non-profits.  With fewer wooers and less brand value, a regional non-profit will be more willing to commit time and labor to the project, as opposed to just a sliver of its name recognition.
6. You can galvanize your employees around your mission more easily. As companies need to convince consumers of their sincerity, they also need to convince their own employees. The smaller a company, the shorter this process. Employees help determine the social mission, shape it and execute it.
7. You have more of your customers’ attention.  Generally, the larger a company is the more we view it as a commodity and the less likely we are to see it as an educator or driver of good. Would you be more willing to support a pin-up campaign at Walmart or your neighborhood cupcake bakery? One of your advantages as a smaller business is the frequency of touch points that you have with customers. Use these opportunities to bring them into your mission through storytelling, contribution and advocacy.

Having a social mission is not a drain on company assets or a tangential program, it is a business strategy that yields a competitive advantage, which smaller companies can better leverage.

It attracted more customers (around $150 million worth) because it aligned its business model with sustainability.

“Sustainability is at the forefront of our business model because of customer demand,” says Gap Adventures CEO, Bruce Poon Tip. A demand that Bruce seeded when he founded Gap Adventures 21 years ago. Beyond delivering authentic, sustainable travel experiences, Gap Adventures’ mission is to stimulate local economies. Tours use small-scale lodging and support local transportation and businesses. “A true sustainability model is about engaging local communities and the traveler, and delivers on the needs of both,” says Bruce.

Offering authentic, local experiences at local prices both supports Gap Adventures’ model and mission and positions it with new demographics. Instead of marketing to retirees looking for a port-to-port experience, the operator attracts younger travels at lower prices. A popular program is the company’s “You Only Live Once” tours, priced at $1,000-$1,500 for 12-18 days of remote, un-pampered travel.

Cause capitalism isn’t a trade-off. If you find yourself frequently faced with doing the right thing OR making a profit, make doing the right thing profitable by aligning it (i.e., your sustainability goals) with your business model and consumer base.

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I’ll be speaking with Bruce on a panel about brand integrated social responsibility at Sustainable Brands on June 9. If you like his model and have questions for Bruce, email me at olivia[at]causecapitalism[dot]com.

About Bruce Poon Tip
Bruce founded Gap Adventures in 1990 off of two credit cards. Since then, Gap Adventures has become a world leader in adventure travel, offering tours on seven continents to more than 100,000 travelers a year. He founded the Planeterra Foundation to make a positive difference in the lives of people around the world.

Panera Bread’s pay-what-you-want model is working. One year ago this week the Panera Bread Foundation openend its first Panera Cares Cafe, a store that looks in almost all regards like the company’s 1,453 others.

The prime distinction is that this St. Louis adjacent cafe lists suggested donation amounts instead of mandatory prices and accepts whatever payment amount the customer offers. Most diners pay retail price or more (per Panera, about 60 percent donate the suggested amount, 20 percent donate more and 20 percent less). The cafe performs at around 80 percent of retail and generates roughly $100,000 every month, netting $3,000 t0 $4,000 above costs.

This has been enough to pilot a small job training program for at-risk youth, developed in partnership with Covenant House Missouri. Three students graduated earlier this month and will begin working at local traditional Panera Bread cafes.

Based on the cafe’s performance (covering costs, supporting a skills training program and providing good food and a positive experience to those who can’t always pay) the Panera Bread Foundation has since opened two more locations, in Dearborn, Michigan, and Portland, Oregon.

But why has Panera’s foray into voluntary pricing worked when others’ attempts have faltered?*

Because it’s based on a business.

It was Ron Shaich, Panera co-founder and now president of the foundation, who pushed the Panera Cares concept to provide food (in a dignified manner) to those who need it. His “Aha moment” came from helping deliver food to families in need, a process which he saw as inefficient and unbalanced. His response was to apply what he knew as a businessman to create something better.

Shaich began with market research. He visited other community kitchens around the country, stood in line for food at soup kitchens and shelters and had dozens of conversations with his team and One World Cafe Founder Denise Cerrata to refine the concept.

The inaugural location was strategic. Shaich had lived in Clayton, Missouri, for several years as he was building up Panera Bread. The area is a mix of lower-income and wealthy, socially conscious residents. In short, a population that could use inexpensive food and one that could pay full price and be inspired to contribute extra.

Then Shaich leveraged his second biggest advantage–the brand and resources of Panera Bread. (The first advantage being his business prowess.) Replicating the decor, music and menu items of traditional Panera cafes drew on brand recognition and consumer trust. And most importantly, it created a dignified experience that equally met the needs of wealthy and poor customers.

Significantly, Shaich and the foundation were able to take an existing store–and the support systems behind it–to pilot the Panera Cares concept, avoiding start-up costs. Same thing with staff, eliminating the need for full recruitment or training efforts.

The restaurant’s first two weeks, while a public relations boon, were a bit rocky. Shaich spent this time working in the cafe and making refinements: adding greeters to explain the pay-what-you-want concept to people and tweaking signage and the donation process. Four months after its launch, the cafe  was covering costs and began building up to the $3,000 to $4,000 it now generates monthly for its job training program.

What intrigues me most about the Panera Cares concept is its singularity. It’s not a typical community kitchen like SAME or One World Everybody Eats because it’s a product of–and in all ways but one a replication of–traditional Panera cafes. It has Shaich’s exceptional business mind and a successful national chain behind it, yet it’s run by the foundation and exists solely for community benefit. And it has an additional closed-loop social initiative: investing earnings in a job training program that feeds graduates back into the company as employees.

Shaich said he never got into business to be in business: “I got into business because it was the way in which I made a difference and I could have an impact.” He’s now challenging other executives to apply their expertise to solve social problems.
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* This list is cribbed  from a New York Times article:

Java Street Cafe in Kettering, Ohio; Tierra Sana, Queens; The Terra Bite Lounge in Kirkland, Washington; One World Everybody Eats in Salt Lake City.

I’ll be speaking with Ron Shaich on a panel about brand integrated social responsibility at Sustainable Brands next month.

Image credit: AARP.org

But it wasn’t launched as a social responsibility initiative. It was launched as business strategy. And it’s proven extremely successful, attracting millions of new customers, influencing greater store sales and establishing Walmart as the third largest pharmacy in the United States with 16 percent market share.

Walmart launched the program because it saw a market opportunity to meet the specific need (inexpensive medication independent of insurance status) for an enormous population (not only the uninsured and Medicare recipients but anyone looking for affordable prescriptions or one-stop shopping).

As Jason Saul writes in his recent book, Social Innovation, Inc., this was a “true business strategy that happened to involve social change as a leverage point.”

Of course social impact shouldn’t only be a freak side effect of a business strategy. Opportunities are born from the challenges around us. As Peter Drucker says, “Every single social and global issue of our day is a business opportunity in disguise.”

Bill Marquard also speaks about reframing social issues as an opportunity for business growth, rather than as a societal obligation. During last year’s Sustainable Brands conference he used Groupe Danone’s partnership with Grameen to illustrate this. To address the issue of malnutrition in Bangladesh, Danone elected a market-based approach over a philanthropic investment, product donation or cause marketing campaign.

The output is a new yogurt product available for around nine cents that fulfills children’s basic nutritional needs. The outcomes of this venture, both social and business, are tremendous. Through it, Danone developed a new market in Bangladesh, created a low-cost product that’s since been introduced to French consumers and strengthened operational efficiencies (the small footprint manufacturing facilities and processes that were developed in Bangladesh are being replicated globally). This market-based solution also yielded a greater and more enduring social impact (a new national industry, more jobs and access to critical nutrients for many Bangladeshis) than if Danone had just gifted money.

Bit by bit, we’re seeing more companies using their core business to address social issues and viewing these issues as potential profit. It’s not unethical. It’s the most generous thing a company can do.

You can hear Jason Saul speak at Sustainable Brands next month. As a presenter, I can offer 20% off conference registration through May 15. To register with the discount, email me at olivia[at]causecapitalism.com.