The drive to build a sustainable company starts at the top, and is actively led all along the way by the CEO. Readers of this article will learn how the CEOs of two very different companies embraced sustainability and embedded the best practices for achieving it in their respective organizational cultures.
Once a year, employees at Burt’s Bees, the maker of natural, personal care products, sort through two weeks’ worth of the company’s trash. CEO John Replogle believes that the lessons learned from this company-wide “Dumpster Dive,” where all employees have a chance to identify missed recycling and reuse opportunities, build the company’s culture of sustainability in addition to saving tens of thousands of dollars a year. When the company first measured its trash in 2007, it was creating 40 tons of waste a month. By the end of 2009, Burt’s manufacturing facility achieved its zero-waste goal, an important milestone in its quest to be a zero-waste, zero-carbon company by 2020.1
Wal-Mart is taking a closer look at its trash, too, and like Burt’s, discovered how to make a profit from managing it better. In 2006, using 10-ton semi-compactors at 4,400 locations, the company was paying tens of millions of dollars to haul the trash away. It felt that there had to be a more efficient way to manage its waste. Today, using a process called “sandwich bailing.” Wal-Mart bundles layers of shrink wrap, garment bags and grocery bags between layers of cardboard into bales that are sold on the open market as a commodity to paper mills and other processing facilities. Wal-Mart estimates that sandwich bailing has diverted 182 million pounds of plastic from landfills.2
The efforts of companies as diverse as Burt’s Bees and Wal-Mart represent the many successes and challenges of the increasingly popular and mainstream movement towards sustainability. In 1983, the Report of the World Commission on the Environment and Development defined sustainability as “that which meets the needs of the present without compromising the ability of future generations to meet their own needs.” In this article, we expand on this definition, focusing on how sustainability is a strategic commitment and cultural change spearheaded by company leadership, one that leads to a positive impact on the environment and society, while protecting the company’s bottom line.
Sustainability is a leadership challenge
The experiences of both Burt’s Bees and Wal-Mart illustrate that sustainability is first and foremost a leadership challenge, not a technological one, as popularly believed. To highlight the leadership challenges associated with sustainability, we find it useful to draw attention to what we call the “first mile” and the “last mile” of the sustainability journey.
The first mile comes before a company or organization can institute technological change, when there is low-hanging fruit that individuals can tend to, that helps create a culture of sustainability within the company. But after companies have made small changes and technological innovations have been found, the novelty and associated enthusiasm of sustainability will have likely worn off, and achievement can occur only if there is deep commitment within an organization, and the company engages its other stakeholders. The key leadership challenge in the last mile of a corporation’s sustainability journey involves reaching outside one’s own organization to influence the sustainability practices of customers, suppliers and even competitors. While the buzz-word on everyone’s lips, ‘green technology,’ may be able to take us a long way towards sustainability, the first and last mile of the sustainability journey, and many in-between, will be traveled by man, not machine.
Below we highlight a number of important elements of successful sustainability efforts in both the first mile and the last, as shown by two companies that could generally be considered opposites: Wal-Mart and Burt’s Bees. In 2007, the former brought in approximately $400 billion dollars in combined revenue from its affiliates Wal-Mart, Wal-Mart International and Sam’s Club3. Burt’s revenues were a fraction of that, $23 million. Wal-Mart has more than 2 million employees4, while Burt’s Bees has about 400. Although Burt’s has its roots in natural, rustic processes, Wal-Mart only embraced sustainability after coming under attack for decades.5 Even though the two companies are so different, they both are grappling with many of the same sustainability issues. In response to their challenges, the two companies’ strategies and tactics for fostering commitment to sustainability and leading outside constituencies are similar in many aspects. We believe that some key best practices can be gleaned from comparing and contrasting their examples.
Creating a sustainable culture within the organization
Any company’s sustainability quest has to start inside the organization. Key leadership elements in this first mile of the journey include setting and communicating sustainability goals, articulating how they will be achieved, and engaging all levels of the organization in problem solving and implementation. No one individual alone, nor piece of equipment, will be able to complete this journey. Sustainability efforts make all employees at all levels in an organization necessary and interdependent.
Setting goals: The most effective first step in any sustainability effort is to set goals. For example, in 2008, Burt’s articulated an ambitious set of goals for 2020, including being “a zero-waste, zero- carbon company, operating on 200 percent renewable energy in LEED certified buildings.” To achieve these goals, the company required each employee to be creative and to make a commitment. As such, one of the 2020 goals was 100 percent employee engagement in Burt’s sustainability activities.
Wal-Mart began its sustainability initiatives the same way. Company leaders looked at their business comprehensively and set goals. Wal-Mart calls its approach “Sustainability 360.” It sought to 1.) Eliminate waste, 2.) Be powered by renewable energy and, 3.) Sell sustainable products.6 It’s important to note that these goals are indeed socially, ethically and environmentally inspired, but that they are also tied directly to Wal-Mart’s bottom line.
The above practices teach us that leaders need to articulate how sustainability fits into a company’s mission and profit, and to show how these efforts can literally fit into a day’s work. Paid days of company-wide volunteering, such as the Dumpster Dive at Burt’s Bees, are smart initiatives for showing your people that sustainability is truly important to the organization’s central mission. When sustainability goals are conceived at the top, they often cascade down and become contagious, leading employees to think twice about throwing their recyclable trash in the wrong bin or leaving the water running for longer than necessary.
Measurement and Reporting: Along with setting goals, companies will find measuring and setting baselines essential to creating a sustainable and financially successful business. As Burt’s shows, measurements can quickly have an impact. In 2006, Burt’s started to outline its sustainability goals and standardize the process of collecting data on energy consumption, water use, and waste. CEO Replogle believes the key benefit of measurement was an increase in awareness and thus encouraged employees to find solutions: As he said, “What gets measured gets done.” For example, after Burt’s began measuring waste, workers on the production line observed that less water would be wasted if the company used steam to clean the production containers rather than fill them with water. Water consumed by this task was thus reduced by more than 90 percent.
One benefit of reporting is that it provides companies with an avenue for addressing stakeholders directly and telling them why your company is making sustainability choices. Wal-Mart’s 2009 CSR Report read: “Sustainability is built into our business. It’s completely aligned with our model, our mission, and our culture. Simply put, sustainability is built into our business because it’s so good for our business.”7 Burt’s Bees got across a similar message in its first sustainability report published in 2008 when it wrote that, “sustainability is in our DNA.”
Such disclosure of social and environmental activities has grown in popularity over the past decade, as companies have come under pressure from diverse stakeholders to be transparent and accountable for how they are impacting their broader environment. Many are relying on third parties such as the Global Reporting Initiative, which gives teeth to their proclamations, for it expresses progress in a common language and facilitates external auditing. Stakeholders, such as socially responsible investors, are increasingly finding such reporting essential.
Working from the Bottom-Up and Top-Down Simultaneously: Arguably, the most challenging task in leading sustainability is to gain the cultural commitment and alignment that will enable companies to achieve the last mile of their sustainability journey. In order to achieve enduring sustainability, leaders must create bottom-up opportunities and foster them with support from the top.
Since the company began measuring, tracking and setting goals, the spark for Burt’s Bees’ sustainability initiatives has come from employees’ insights and their personal interest in environmental issues. For example, after a suggestion from its linesmen, Burt’s extended the existing paper label on its high selling lip balm, so it could also serve as a tamper proof seal, thus eliminating the need for shrink wrap film. Over the course of a year, this eliminated 900 miles of film per every 20 million units of lip balm. It also saved over 3300 kilowatt-hours of electricity and $300k annually. The company’s leaders not only now listen when such ideas are discussed, but they also create formal mechanisms to encourage this sustainable mentality. Today, Burt’s Bees ties each employee’s annual incentive to the company’s overall sustainability performance and offers “Eco-benefits,” which include cash compensation for employees who bike or carpool to work, as well to those who buy a high-efficiency or hybrid vehicle. The intent is to keep all employees aware of their individual responsibility within the larger sustainability mission.
Wal-Mart, with far more employees, high turnover, and many part-timers, faces a different challenge for embedding sustainability in its corporate culture.8 To ensure each division is sustainable, Wal-Mart has created Sustainable Value Network (SVNS), rather than a Sustainable or Corporate Social Responsibility Division. Each network is lead by a management team and those associates in the division most closely aligned with the business and the real-world applications of the SVN’s goals. SVNs promote sustainability within their own business area.9 (To spread sustainable practices further through the company, Wal Mart created the Personal Sustainability Project in 2006, “created by and for associates,” where each employee creates his or her own sustainability goal.10
For deep commitment to sustainability to take hold, it is essential to have top-level support and participation, especially since such activities look different from the tasks employees traditionally associate with those that have value. Otherwise, employees may be hesitant to become engaged. Leaders need to articulate that while financial performance remains imperative, so too is the need for viable sustainability initiatives. It is particularly helpful when leadership makes a core strategy and core values a hub from which all initiatives and programs emanate. At Burt’s Bees for instance, John Replogle is a member of ECOBEES, an employee-driven sustainability organization. It is important to stress that he is not in charge of the group, but only an equal participant. He thus leads by example.
Looking Outside the Organization: Reengineering the Supply and Demand Chains
Companies at the vanguard of sustainability initiatives are also coming to realize that traveling the last mile of the sustainability journey isn’t completed by their organization, but by other key stakeholders such as consumers, suppliers and even competitors. Such approaches produce benefits for the individual companies and multiply the overall environmental impact.
Reengineering consumers: Changing the perceptions and interests of consumers to engage in more sustainable behavior benefits more than just Wal-Mart. One way that Wal-Mart is trying to change consumer behavior is through the products it stocks. For example, stores no longer sell conventional light bulbs, but only compact fluorescent bulbs, which use 75 percent less energy.11 It also offers only liquid laundry detergent for cold water and 100 percent-compacted, liquid laundry detergent. This step saves not only water, but also 95 million pounds of plastic, 125 million pounds of cardboard, as well as many millions of dollars in transportation costs.12 In light of Wal-Mart’s enormous size, these changes have positive ripple effects internationally.
Burt’s Bees has made several strategic decisions to educate consumers about the term “natural,” and thus distinguish itself as a leader in the Natural Products and Personal Care industry. In February 2008, Burt’s launched a “Natural Vs” campaign to address the confusion among consumers over what constitutes a truly natural product, and to try to persuade consumers to switch to natural. The advertisements depicted the difference between benefits of natural ingredients in Burt’s Bees products vs. the surprising – even shocking – ingredients found in non-natural, personal care products. Burt’s supports this transition and awareness by placing a “natural bar,” which denotes the percentage of natural ingredients, on all its products and website.
Still, attempts to change deep-seated consumer habits can be challenging. For example, Wal-Mart started selling square milk jugs. The company was excited – the square jugs saved packing space, and were cheaper to ship and better for the environment. Wal-Mart expected that customers would be excited too – the milk was fresher when it came to the store, and cost less. It seemed like a win-win. But surprisingly, Wal-Mart experienced backlash against the change. Specifically, many buyers spilled milk when first trying to pour milk with a square jug. Shoppers wanted their old milk back. Sam’s Club, a division of Wal-Mart, lured shoppers with chocolate chip cookies to demonstrate the “rock-and-pour” technique the square jugs needed (as opposed to the “lift-and-tip” that worked for their old milk jugs)13. It is still to be determined whether or not these square jugs are here to stay.
Reengineering the supply chain: Beyond fomenting change among their customers, companies can also extend their standards down the supply chain. For example, at the Beijing Sustainability Summit in October, Wal-Mart made it clear to its suppliers – from China, Costa Rica and the U.S. – that they are expected to comply with ethical standards and environmental laws.14
In light of Wal-Mart’s vast scope, many tasks in the last mile had to do with reengineering habits along its supply chain. For example, as a part of the Supplier Energy Efficiency Project, Wal-Mart engineers are dropped into its suppliers’ operations, where they conduct an energy audit. They are also supporting farmers as they transition to producing organic cotton. The current structure of transitioning conventional cotton farms to organic farming is very costly for farmers, especially because there is a three-year lag between the time when they begin to implement organic processes and when they can sell their products as organic. To alleviate this financial burden, Wal-Mart has reached out to 1,000 farmers and asked them to convert to organic, offering to pay premium organic prices, even during the transition time, when the cotton is not officially organic.15
Even a smaller company like Burt’ Bees has over 400 suppliers, so its efforts to examine suppliers’ behaviors and develop action plans for becoming more sustainable means upstream changes have great potential. Looking to reduce the volume of its shipping and consolidate it, Burt’s chose to stay closer to home when selecting suppliers to minimize shipping-related emissions. Today, its top ten suppliers of raw material are located in their home state of North Carolina. Burt’s Bees is also in the process of helping its corporate parent, Clorox, develop a supplier code of conduct that addresses environmental and social concerns.
Reengineering industries: In addition to having an impact on the supply chain, leading sustainable companies can also influence their competitors. Burt’s has been dedicated to challenging other companies to do the same. It was notably proactive in establishing a standardized definition of “natural,” as well as a symbol on its packages to denote adherence to this “natural standard.” To do this, it gathered leaders from other natural companies, including Aubrey Hampton from Aubrey organics, Bill Whyte from Badger, and the Bronner family from Dr. Bronner’s, to develop a standard for the entire industry. Burt’s and others from the industry established not only standards, but also a symbol denoting that “natural” was a part of approved product labels. Wal-Mart made a similar move on July 16, 2009, when it announced plans to develop a worldwide sustainable product index, intended to establish a single source of data for evaluating the sustainability of products.16
Both of these efforts are examples of how organizations can not only institutionalize sustainability, but also enhance their competitive position by improving industry structure. For example, Burt’s Bees’ vulnerability to being attacked for not being organic is reduced to the extent that it now has a commonly identified definition of natural. Similarly, Wal-Mart’s adoption of transparent standards has reduced its risk of being criticized for using exploitative practices. This also mitigates fallout from what may be perceived to be a too-sudden and expedient focus on being transparent, because as it works to institutionalize transparency, more consumers will understand what it means.
Clearly, the journey towards sustainability is not a short one. As companies as diverse as Burt’s Bees and Wal-Mart show, one key to effective sustainability efforts is to ensure that the message is instilled in the organizational culture so that employees become committed and dedicated to being active participants in the sustainability journey. This first mile includes activities such as setting realistic goals, developing measurements and making sure that ideas can travel from the bottom up and get top-level support. Also essential to achieving bold sustainability objectives is engaging key constituencies outside the organization. This last mile includes the challenge of changing the perceptions and habits of consumers, suppliers and even competitors. Smart, thoughtful and committed leadership can thus create strategic advantages for their firms by embedding these practices in a company’s culture and in new business models and practices.
- All data Burt’s Bees from: Chris Marquis, “Burt’s Bees: Balancing Growth and Sustainability,” Harvard Business School Multimedia Case No. 410-704.
- Walmart, “Zero Waste Initiative,” http://walmartstores.com/sites/sustainabilityreport/2009/en_w_0WI.html, accessed August 17, 2010.
- Hoovers Database, Walmart Stores Key Numbers.
- Hoovers Database, Walmart Stores Key Numbers.
- Ylan Q. Mui, Washington Post. “Wal-Mart Sharpens Vision, CEO Embarks on Mission of Social Responsibility,” January 24, 2008, http://www.washingtonpost.com/wp-dyn/content/article/2008/01/23/AR2008012303375.html. accessed August, 2010.
- Remarks as Prepared for H. Lee Scott, Jr. (CEO and President of Wal-Mart Stores, Inc.) “Sustainability 360: Doing Good, Better, Together,” Lecture to the Prince of Wales’s Business & the Environment Programme: February 1, 2007.
- Wal-Mart’s 2009 CSR Report, “Letter from Mike Duke,” http://walmartstores.com/sites/sustainabilityreport/2009/letterMikeDuke.html, accessed August, 2010.
- Wal-Mart’s 2007 CSR Report, http://walmartstores.com/sites/sustainabilityreport/2007/communityJobs.html, accessed August, 2010.
- Wal-Mart’s 2009 CSR Report, http://walmartstores.com/sites/sustainabilityreport/2009/en_overview.html, accessed August, 2010.
- “Wal-Mart announces expansion of associate-driven personal sustainability projects,” http://walmartstores.com/pressroom/news/6379.aspx.
- Stephanie Rosenbloom, “Wal-Mart Unveils Plan to Make Supply Chain Greener,” NY Times, February 25, 2010, http://www.nytimes.com/2010/02/26/business/energy-environment/26walmart.html, accessed August, 2010.
- “Wal-Mart Concentrated Liquid Laundry Detergent Fact Sheet,” September 2009, http://www.walmartstores.com/download/2328.pdf, accessed August, 2010.
- Stephanie Rosenbloom, “Solution, or Mess? A Milk Jug for a Green Earth,” NY Times, June 30, 2008, http://www.nytimes.com/2008/06/30/business/30milk.html, accessed August, 2010.
- Wal-Mart, “China Sustainability Summit Fact Sheet,” http://walmartstores.com/Sustainability/8685.aspx, accessed August, 2010.
- Wal-Mart, “Faded Glory Transitional Cotton Attitude T-Shirts,” http://walmartstores.com/Sustainability/8180.aspx?p=8176, accessed August, 2010.
- Wal-Mart, “Walmart Announces Sustainable Product Index,” http://walmartstores.com/pressroom/news/9277.aspx, accessed August, 2010.