CitySoft in the News 


Can Business Still Save the World?
   
Inc. Magazine
April 01, 2001

The pioneers of socially responsible companies -- stars like Anita Roddick and Ben Cohen -- had big hearts and even bigger mouths. They hated capitalism but loved what it could help them do. Now they have followers. Sort of. Meet the new generation of activist entrepreneurs "When we first started Ben & Jerry's, we had no intention of going into 'business' -- we saw it as pretty much a lark. Then there came a time about five years ago when Jerry and I noticed that we were no longer scooping ice-cream cones behind a counter and working in the ice-cream shop, that we were bosses and administrators who were spending a lot of time on the phone and doing paperwork. When we were introduced to people and they asked, 'What do you do?' there came a point when the answer was not 'I'm a homemade ice-cream shop owner but 'I'm a businessman.' And I had a hard time mouthing those words." -- Ben Cohen, co founder of Ben & Jerry's Homemade Inc., in the article "Coming of Age," in Inc.'s 10th-anniversary issue, 1989.
   
   
The times they are a-changin'
Chances are, when you hear the term socially responsible business, a handful of companies -- and their founders -- leap to mind: Ben & Jerry's Homemade (Ben Cohen, Jerry Greenfield). The Body Shop International (Anita and Gordon Roddick). Smith & Hawken (Paul Hawken). Patagonia (Yvon Chouinard). They're the (once) wild-and-crazy pioneers of a new frontier -- the folks who brought us ice cream named for devotees of electric Kool-Aid and shampoo squeezed out of mud from the Atlas Mountains. At the same time they espoused "principles before profits" and a commitment to making the world -- from the New York City subways to the Pentagon to the Amazon rain forest -- a better place. They set up shop in the late 1970s or the 1980s, and most of them, with the help of doting media, grew fast and furiously.

But the road to success had its bumps as well. For a self-professed socially responsible company, fast growth doesn't present just the typical entrepreneurial challenges -- things like maintaining product quality, keeping pace with demand, managing cash flow, and coping with sales shortfalls. It also presents special challenges, ones that come with adhering to a higher standard -- that is, doing all of the above while treating employees, suppliers, and customers well, which includes being forthright in marketing claims and vendor relationships. In other words, walking the talk is the name of the game. "All I can say is that we strive to be socially responsible," says Wild Planet's Daniel Grossman.

And that's where, for all the positive change they effected, some of the 1980s icons got into trouble in the mid 1990s. Ben & Jerry's got called on the carpet for claiming that its Rain forest Crunch ice cream was made with nuts collected by Amazon "forest peoples." In fact, to compensate for quality problems, the nut supplier, Community Products Inc. (which Cohen also owned), bought 95% of the nuts from commercial vendors. In a similar fashion, the Body Shop got skewered when a magazine article questioned its claims about animal testing, alleged that the company used petrochemicals in some of its "natural" products, and charged that its Trade Not Aid program accounted for less of its supplies than it had claimed. (The Body Shop denied all the magazine's charges.)

The people who started socially responsible companies in the '90s had the benefit of learning from their predecessors mistakes. Which made us wonder: How did those lessons influence the way the new founders shaped their companies?

The younger entrepreneurs are quick to acknowledge their '80s counterparts as their mentors, the people who laid the groundwork for a whole new way of doing business. "They are prophets," says Wild Planet CEO Daniel Grossman. "There is no doubt." But the new breed has added its own, decidedly more pragmatic ingredients to the socially responsible business mix. "Ben and Jerry basically threw everything on the wall to see if it stuck," says Sustainable Harvest founder David Griswold. "That's not the process kind of approach that today's socially responsible businesses are taking." The differences we uncovered between the '80s revolutionaries and today's company builders were as startling to our minds as a first taste of Ben & Jerry's "Orgasmic Flavors" of ice cream was to our palates more than two decades ago.

What you sell is important
The product or service of the new companies, not just the mission, must be socially responsible -- that is, it must advance the health and well-being of those it affects (individuals, companies, the environment), not undercut them. (See "The Young Turks," below, for profiles of the seven companies we've chosen to represent the new breed.) Hence: barely sweetened iced tea and totally biodegradable tea bags (Honest Tea Inc.); garden, home, and pet products made from recycled or organic materials (WorldWise Inc.); organic, shade-grown coffee with a guaranteed base price for growers (Sustainable Harvest Inc.); Web development using urban workers (CitySoft Inc.); nonsexist, nonviolent toys (Wild Planet Toys Inc.); revitalized communities and neighborhoods (Village Real Estate Services); and recycled paper products (New Leaf Paper LLC). "We want the product that we're providing to have an impact," says Seth Goldman, co founder of Honest Tea.

Proud to be in business
Most of the current batch of ceos either went to business school or intended to (but got sidetracked by a business opportunity). But those who didn't go that route, like New Leaf Paper co founder Jeff Mendelsohn, understand the necessity of management expertise. "The best thing I did was hire a really good operations guy with a commitment to social responsibility, because he knows how to manage, run sales operations, and so on, better than I do," says Mendelsohn. The young founders are business people -- and proud of it. "I did a lot of entrepreneurial things from a young age," boasts WorldWise CEO Aaron Lamstein. "I started one of the first computer bulletin boards in Marin County in 1980, using a TRS-80 Model 3 -- that's before the IBM PC." Lamstein was planning to study for both law and business degrees when his mentor swayed him in another direction by suggesting that he start a company around an environmental concept. Seth Goldman even won a business-plan competition as a student at the Yale School of Management and later started Honest Tea with one of his professors.

Several of the new socially responsible entrepreneurs, including Goldman and Sustainable Harvest's David Griswold, make a point of hiring business-school grads (or using interns from the schools) to beef up their ranks. "I've had business-school graduates here because I feel like the longevity of the company really depends on competing, using the rules of business," says Griswold, who'd applied to business school but kept deferring when the chance to sell the beans of Mexican coffee farmers presented itself. "Good deeds alone don't work."

That's a far cry from the likes of Ben Cohen, Anita Roddick, and Yvon Chouinard, for instance, who saw businesspeople as tools of the military-industrial complex and profits as a dirty word. In fact, in the '90s, when the young turks joined their elders in the Social Venture Network (SVN), an organization for entrepreneurs and investors interested in promoting social responsibility in business, the tension between the business-school contingent and the veterans was palpable. (See "Social Venture Network," below.) "At that time Anita and Ben ... certainly in their public statements, were very clear," says Wild Planet's Grossman, who first attended an SVN meeting as an intern while he was earning his M.B.A. from Stanford Business School. "They were saying, 'We would never hire an M.B.A. M.B.A.'s are poison. They think about only one bottom line. They're fixated on the notion of net profits at the expense of everything else.'" It was only later, out of necessity, that the stance softened. "Ben and Anita dropped their rhetoric about the M.B.A. thing because, frankly, through the Trojan Horse we entered, and we were there steadily for years," says Grossman.

   
Business relationships matter
Do the best you can at the time
In today's socially responsible businesses, understatement is the name of the game. In keeping with that sentiment, the founders hold the following guidelines in common: Don't make promises you can't keep or claims you can't stick to. Be scrupulously honest.

Seth Goldman was very clear in explaining that the peppermint leaves he buys from I'tchik Herbal Tea are not grown on the Crow Reservation but are bought from still another source, and that he can't make claims about the labor conditions under which the company's herbs and teas are grown, because he hasn't visited the farms. Aaron Lamstein was totally up-front about the fact that he can't vouch for every condition under which workers manufacture his products, since the factories he uses are spread out across the United States, nor can he claim that all the components that accompany WorldWise's goods are recycled or organic.

"Before we go into a product agreement with anyone, we have extensive discussions -- first about environmental issues, second about social issues," says Lamstein. "Tremendous numbers of components are produced for our products: the box, the label, the product itself, the instruction sheet -- each could be made in a separate place. We don't visit the component manufacturers of every item. We don't have the answer to every question. Like all businesses trying to be on the cutting edge, we're learning as we go along. Our philosophy is that we need to do the best we can in as many places as we can. We also need to provide value to the customer."

Jeff Mendelsohn acknowledges that since New Leaf Paper is a rapidly growing company with only 10 employees, its priorities are developing its customer base, expanding its product line, and providing its customers with top-notch recycled papers and its employees with a fair and fulfilling work environment. "There are a number of social-responsibility issues that will become part of our agenda as we grow," says Mendelsohn. He notes that one of the mills that New Leaf Paper used recently closed its doors. "We were really sad for the employees, but we had no control over the situation," he says. Daniel Grossman goes one step further. He doesn't even describe Wild Planet as a socially responsible company. "I'm very careful about saying, 'This is a socially responsible company,' because it's not," he says. "There are plenty of things, if you came here, if you looked at them, you could say, 'Is that responsible?' So all I can say is that we strive to be. We're public about it, and we assess our performance."

Wild Planet manufactures its toys in China, and even though it screens the factories it works with and has an office in Hong Kong, Grossman acknowledges that the company doesn't have the level of control over the manufacturing process that it would have if the toys were made in the States. "The reality is, if we're trying to create models that are sustainable, you're not going to have the control over every piece of the business, so you have to pick your places, and you have to be really clear."

In Wild Planet's early years, Grossman says, there was discussion about producing the toys in the United States. "But that would have meant that we'd end up selling probably to the top 5% of the market. And our mission was to provide these pro-social, if you will, toys