Jeffrey Hollender
Jeffrey Hollender is cofounder and chairman of Seventh Generation, and the author of How to Make the World a Better Place, What Matters Most, and The Responsibility Revolution: How the Next Generation of Businesses Will Win.
We talked to Hollender about his book, What Matters Most, and about making the business case for responsible corporate behavior.
McLaughlin: How did you come up with the title for What Matters Most?
Hollender: Well, I wanted the title to reflect that it’s more an inspirational than a how-to book. I was also trying to reach out to a broader audience than the people who typically read business books. And, like many people, I want to figure out what does matter most in the context of the challenges the world faces, whether it’s relative to the environment, employment or human rights.
My perspective is that business is the most powerful force on earth, and that what matters most is harnessing the power of business to make the world a better place. I don’t mean to neutralize or minimize its impact, but to harness its power to make a positive difference.
McLaughlin: Do you think it’s a myth that corporate social responsibility and profitability cannot coexist?
Hollender: It is a myth. I think that today, more so than ever, corporate responsibility is the best strategic as well as financial path that most businesses can follow. For most businesses there are both compelling reasons to be responsible and compelling statistics that validate that responsible businesses do better according to traditional financial metrics. Of course, how you define “responsible” is somewhat of a conundrum.
McLaughlin: In the book, you talk about the transparency of events–that consumers are no longer shielded from disasters, and that the harmful or destructive policies and practices of companies are more readily apparent. Are more informed consumers fueling the movement toward corporate social responsibility?
Hollender: The impetus is from multiple sources. There is a growing and significant push from the business community, primarily from sectors like the insurance industry, which has learned how critical this kind of transparency is to risk evaluation. Outside the United States, especially in Europe, there is a push from governmental and regulatory bodies, although that is certainly not the case in the US.
The media has played an increasingly significant role in covering this issue, and non-governmental organizations (NGOs) and nonprofits are also playing a very active role. The two sectors that are less active in the US than they could be are consumers and government. In a perverse way I take heart in the fact that so much change is happening in spite of the lack of consumer and governmental pressure.
McLaughlin: What do you think is the cause of consumer indifference in the US?
Hollender: Again, it’s a combination of factors, including feelings of powerlessness and disconnectedness. Most consumers don’t believe they can make a difference anyway. Also, information is not as readily available as it could be, and it’s not easy for consumers to take action.
McLaughlin: Even twenty years ago, corporate responsibility was part of the curriculum in business schools. Why hasn’t the notion caught on?
Hollender: Largely because of the myth we just talked about–that corporate social responsibility is nice if you can afford it, but it’s not an essential part of business and it’s hard to justify.
When the financial and economic case is clear to the business community that responsible companies do better, from a purely competitive perspective everyone will get dragged along to keep up with the leaders in their industries.
I think that the moral and ethical case–society calling businesses to task–is less likely to be effective. There is pressure for continued access to corporate charters on responsible behavior and, in theory, that’s absolutely the right approach. But in the short term, I think it’s going to be the financial case for corporate responsibility that drives change.
McLaughlin: Don’t most corporate mission statements include some reference to social responsibility?
Hollender: Yes. And in Europe, there is widespread acceptance at the senior management level of most big companies that society won’t grant a license to operate if a business isn’t a good corporate citizen. Some of the more enlightened companies in the US understand that.
But the notion has taken much greater hold in Europe, where there’s greater acceptance that business has to play a positive role in society. Very few CEOs in Europe say our primary objective is to maximize our return to shareholders. You just don’t hear that with the frequency with which you hear it in the United States.
McLaughlin: This is a little off topic, but you may have heard that some communities voted to prohibit Wal-Mart stores from being built. Do you think it’s that kind of activism that will ultimately force companies to be more responsible?
Hollender: Absolutely. It’s very encouraging that a community is aware of the unintended and less obvious impacts Wal-Mart would have on it and looks beyond the case Wal-Mart makes about why it should be allowed to open a store.
McLaughlin: You mean like more jobs and lower prices?
Hollender: Right. The community is saying we care about a broader range of issues that Wal-Mart is not addressing and, based on that broader set of concerns, we don’t want that business in our community. I hope that level of community involvement is going to happen a lot more often, although I’m not sure I would bet on it.
McLaughlin: Do you think there is an underlying activism emerging–not just among expected activists, but by everyday individuals?
Hollender: I guess you have to question if this is an extension of the “not in my backyard” phenomenon or something else. I think this is a little different because it’s a much more complex matter. It’s not about locating a nuclear reactor in your community, which is a much simpler issue.
What I worry about is that, given all we know about global warming and the impact that has on the environment–and to a lesser extent health–we as a society keep buying more and bigger cars. Unless we are provided financial incentives not to do so, many of us don’t close the loop on doing what we know is the right thing to do. And that trend worries me. How much information do we as a society need before we change our behavior in response to that information?
McLaughlin: Has the corporate social responsibility movement grown in the last few years?
Hollender: It’s substantially growing. Today 125 of the 250 world’s largest companies publish corporate social responsibility reports (CSRs); 2,500 companies worldwide publish them and I expect that in the next couple of months when we see how many 2003 reports are published, we will see by far the highest number ever. Now not all those reports are equally valuable.
McLaughlin: Aren’t some of the reports window dressing?
Hollender: Absolutely. But whether you look at the attendance at relevant conferences or the number of publications, staying on top of what is happening in the CSR world is almost a full-time job. There is just so much happening.
And I think that one could easily argue that the economic drivers that are playing a part in that are just not going to go away. When you consider that 75% of the average US company’s value is represented by intangibles, it is an absolute requirement for businesses to protect their brands and their reputations since those intangibles are their assets.
Corporate social responsibility is a critical component of managing the risk related to your brand and your reputation and your other intangible assets. It’s hard for me to see that those fundamental drivers are going to do anything but grow in strength.
McLaughlin: Do you think companies that make destructive products like tobacco or firearms can be socially responsible?
Hollender: That is a tough question. Even if you look at the oil business, it’s not easy. Corporate social responsibility is linked to sustainability and oil companies are extracting a nonrenewable resource.
You can argue that companies like BP are attempting to change their businesses so that they will depend on renewable rather than nonrenewable resources. How long it will take them and if they will succeed are unanswered questions.
I hesitate to say that any company is totally beyond redemption because I’m not sure whether that perspective is limited by creativity of thinking. When it comes to a product like tobacco, I guess if there was some way tobacco companies could reinvent their products so people could smoke without any of the negative side effects maybe they could be responsible companies.
Maybe if you eliminated the negative effects of tobacco and you argued that the process of smoking relaxes people and relieves stress without any of the negative side effects, who knows? But companies in certain industries have a far harder, if not an impossible, road. And so they tend to focus on donations and philanthropy because those are the easiest ways they can engage.
McLaughlin: If you were sitting across the table from the CEO of a company like Exxon Mobil, what would you say?
Hollender: I put Exxon at the bottom of the list of socially responsible oil companies because they spent so many years fighting the assumption of responsibility. And from every possible perspective, that’s contrary to the basic tenets of what responsible business is about.
A question that comes up frequently from employees is what can I do within my own company to help move it in the right direction? I don’t know how you can deal with a company like Exxon without making the business case for this being the wrong thing for them to do. And it’s a complicated business case because not all Exxon’s revenue comes from consumers.
I will drive out of my way to buy gas somewhere else. But you’d really have to look deeply at Exxon’s turnover rate for employees relative to other oil companies of its size. Are they actually experiencing a higher turnover rate because people don’t feel particularly good about working there, and what’s the cost associated with that?
The toughest challenge we face is the resilience of a value system and a culture that is hard to penetrate with the notion of responsible behavior. If the leadership and the culture at a company are not open to having the discussion, the only thing that can create change is a disaster that’s so large that they can’t ignore it.
McLaughlin: Just one more question–what are you reading these days?
Hollender: Lynn Sharp Paine’s book, Value Shift, is absolutely on the top on my list. Another of my favorites is Simon Zadek’s book, The Civil Corporation.
Other than that, I’m reading books about poverty. Getting back to the impact a company like Wal-Mart has on our society, I’ve begun to think about the effect that the minimum wage structure has on society and I’m trying to figure out how we can hold companies accountable for that impact.
McLaughlin: Thanks for your time.
You can find out more about Jeffrey Hollender, his books, and his company at www.seventhgeneration.com.
You might also be interested in our interview, Jeffrey Hollender: The Next Business Revolution.
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