The Responsible Business: Reimagining Sustainability and Success

Prologue: A New Business Mind

I remember the moment vividly. In June 2006 Al Gore had just stepped to the podium in the Walmart convening hall in Fayetteville, Arkansas. The audience roared to its feet, cheering enthusiastically. Two rows down and visibly moved stood Scott Burns, one of the producers of An Inconvenient Truth. The moment was historic and the crowd knew it: one of the world’s least sustainable companies was taking on sustainability leadership. H. Lee Scott, Walmart’s CEO and one of climate change’s most vocal skeptics, had turned on a dime and committed his company to do their part in reversing global warming. Even doubters in the audience were electrified by this monumental shift.

Scott’s passion and commitment inspired the room “Even the most recalcitrant among us,” he said with an embarrassed smile, “can change and see what they had not seen before.”1 That day I knew that Walmart was serious. This was no lip-service marketing campaign; the company was making a real commitment to increase responsibility and use the mega distributors' unprecedented leverage to create global change. It was thrilling—and deeply disappointing.

The intention was so good, yet the ways of thinking proposed to guide the change were so far from adequate. My disappointment wasn’t with capitalism or corporatism. I believe that corporate business will be among the critical sources for solutions to the problems we now face as a species on Earth. Nor did I question Scott’s sincerity. My disappointment was with the way Walmart framed its vision and the strategies it proposed for realizing it, which I believed were going to limit or even prevent success.

Almost exactly a year later I was a speaker and workshop leader for the annual Ceres Conference, an ambitious gathering of the most pioneering companies working in the arena of corporate responsibility. Ceres networks investors, environmental organizations, and public interest groups to work together on sustainability challenges.” The conference was a great place to be on a bright spring day. The world, I thought, seemed to be waking up. But here, too, I was disappointed.

Once again I expected to hear about real change. Jim Rogers, the president of Duke Energy, spoke with inspiring passion about his company’s commitment to producing alternative energy at a reasonable cost. His speech laid out specific commitments to doing what is necessary and setting an example with regard to sustainability.

He was followed by Paul Keller of Bank of America; Steve Elbert, vice chairman, British Petroleum, America; Jeffrey Swartz, CEO of Timberland; Gary Hirshberg of Stonybrook Farm; Theodore Roosevelt IV, managing director at Lehman Brothers; and a few dozen other industry titans—a Who’s Who of important companies. All had had a “come-to” moment, realizing that they were part of the problem and must become not only part of the solution but also solution leaders.

At so many of the gatherings that I’ve attended in my capacity as an expert on responsible business development and strategic management, business leaders share their inspiration and their commitment. Organizations describe what they’re doing to reverse damages and prevent further harm, and they exchange best practices for becoming sustainable. People take notes on techniques for energy conservation, shifting behavior, and changing policy. Yet I am increasingly disturbed and distraught.

I don’t like what I see happening in the field of corporate responsibility. I believe all these well-intentioned people and laud their commitment. I’m concerned because the responsibility-sustainability train is finally leaving the station, and it’s going the wrong way. Companies are seeking and implementing solutions with exactly the same fragmented mind that created the problems in the first place. There is no shift in how they think, only a shift in what they are thinking about. Failure to work on how to think slows the pace of change, and in many cases exacerbates the problems.

Procter & Gamble (P&G): Responsibility Prototype

Fifty years ago, a small cadre of visionary thinkers in Procter & Gamble’s (P&G’s) detergent products group launched an era of new design for business systems. The ranking member of the team was Bob Seitz, a manufacturing division manager. Bob had firsthand experience with compelling innovations in work systems that were fostering important changes in the company’s spirit and performance. He had been deeply engaged with these innovations, and he wanted to try extending the management designs from manufacturing to an entire business. He decided that the place to start was at a new detergent business unit he was bringing online in Lima, Ohio. He recruited Charles Krone, an engineer at P&G’s Kansas City operation for which Bob had line responsibility, to help him.

To avoid delays on the Lima startup, Bob engaged corporate leadership with the vision and helped them see how it would serve P&G’s long-time commitment to innovation. Bob received promises from P&G executives to support expanded boundaries for this organizational design initiative. He committed to meeting extraordinary goals and targets, something for which he already had an established reputation. Howard Morgens, P&G’s CEO, was happy to have Bob’s help in growing the detergent businesses through the application of innovative practices.

Bob brought over my long-time friend Ken Wessel, who was then one of P&G’s key business and manufacturing brand managers. He was asked to manage the new P&G, Lima, venture’s business side, and Charles Krone would handle the work-design side. In a relatively short time, they had teams in place and launched a new operation and cross-functional relationships with colleagues in sales, marketing, R&D, and other departments.

They set out to develop the thinking, ethos, and values of everyone involved and to challenge every outworn paradigm that held business captive. They connected the entire workforce directly to the market the business’s financial and market context. They innovated with regard to every part of the product development, manufacturing, and marketing process. Bob made a firm rule they were not to associate with the organizational development group in P&G’s human resources (HR) department and were not to attend outside seminars or host unapproved visitors. His principle was that Lima was a business strategy and the team needed to avoid confusing it with a social experiment.

Lima’s teams were built in an entirely new way. The focus was placed on developing team members’ capability for systemic thinking. Prior to this, teams had focused narrowly on their tasks and efficiencies, and the new demands placed on them—responsibility for the totality of the business—required a profound educational process.

Early in their education, the teams were asked to delve into the inner workings of their raw materials in order to understand them thoroughly by themselves and how they interacted with the environment. To accomplish this, the teams had to engage the company’s R&D department in a collaborative discovery process. It wasn’t long before they discovered that the phosphates used in their detergent formulations were producing disturbing results in their laboratory tests.

Phosphates, they realized, had the potential to negatively affect water and the biological systems of rivers and wetlands. This led them to do a literature search, which uncovered confirming evidence from universities and research labs and notes of alarm from communities around the country.

They pulled in more technicians and went to work looking for alternative materials. They interviewed their raw material suppliers and nearby universities, testing ideas and formulations, searching for a way to make a superior, nonpolluting product.

This mission to reinvent detergent got a boost in momentum when the teams hired a new technician, Louis Risser. Lou was a successful entrepreneurial farmer who wanted to do something new and challenging. He was a keen observer and had noticed the effects of phosphate-based fertilizers on water quality in a variety of waterways.

Lou joined the cross-functional team that was working on phosphate-free formulations to make detergents harmless to rivers without inhibiting their cleaning capabilities. They built a system to switch out old formulations and began working with engineering, product development, sourcing, and sales to make a transition. They were diligent but did not highly accelerate the launch of improved products. They were going slow to do it right.

In response to studies released by the University of Michigan and other university laboratories, the Michigan legislature suddenly began to move to outlaw phosphates. Lou knew that the two biggest sources of phosphate pollution were fertilizers in farmland runoff and poor sewage management. He and other technicians in the brand leadership team approached Michigan legislators to inform them of P&G’s support for a ban on phosphates and to reassure them that P&G’s own research clearly showed that viable alternatives existed.

What they were not successful in communicating was how important it would be for the legislature to simultaneously address the more significant issues of fertilizer and sewage in the same piece of legislation. Lou decided to take his case to the agencies that could do something about the problem. With the full support of P&G Lou set out to educate state water agencies, municipalities, and farm bureaus on ways to change their own systems.

Although the bill to ban phosphates was moving rapidly through the legislature, the cross-functional teams at Lima were hastening to speed up their raw materials transition. Because of their commitment to 'do the right thing,' they were well ahead of the competition. Suddenly they had the opportunity to become the only company that could adequately and immediately meet the new regulatory requirements. When it became clear that the bill was coming to a vote, they had less than two weeks to complete the transition.

The biggest challenge was relabeling existing cartons. Lima teams pulled in corporate help from P&G sourcing, marketing, and sales. Ken Wessel found a label-printing company that could respond immediately once the new legal wording was in place. The teams also had to augment packaging machines so that they could “blow” cover-up labels onto existing cartons. This kind of modification had been tried without success on many occasions, but making it work this time was the only way to meet the legislative timeline.

Five days after they began the effort, the Michigan legislature passed the bill. It was noon on Thursday. All of the outlawed detergent products were to be removed from stores throughout the state by Friday midnight. Would a day and a half give the Lima teams enough time to replace their products?

When Ken saw the way the teams responded, he knew that something miraculous was happening. P&G was succeeding in doing the right thing for their customers and for the planet, and they were meeting an impossible deadline.

In stores all over the state, drivers were met by salespeople who helped them clear shelves and stock them with reformulated P&G products packaged in cartons that met the legal ingredient requirements. They filled not only their own shelf space but also the spaces of all their competitors, every one of which had failed to meet the crucial deadline and would not be able to get products on the shelves for another few months.

P&G’s business market share increased irreversibly, by more than twenty points in most parts of Michigan. Their achievement was simultaneously a terrific success for the planet, distributors and consumers, and P&G’s employees and investors.

P&G’s Guiding Principles

These innovative business practices produced a financial powerhouse, but they did much more. Staff at P&G’s Lima plant worked alongside the local community and state agencies to clean up water and sewer management, protecting water decades ahead of current mandates. P&G redesigned manufacturing systems to reduce carbon emissions and other pollutants decades ahead of other companies. It redesigned products to remove damaging chemicals and eliminate harmful processes. It changed the way women and minorities were hired, developed, and promoted inside the business and outside in the community. Incredibly, it did these things not because they were legally mandated or demanded by activist groups. It did them simply because it was the right thing to do.

The P&G pioneers were among my early mentors. Fifty years ago they birthed a way to create social and planetary health while building a business that was innovative, creating a great place to work and live, and delivering an excellent return on investment. They worked to change practices, formulations, and logistics fast—really fast. They never set sustainability targets but were more sustainable in the 1960s than most businesses are today. The P&G story is not offered here to illustrate a set of best practices or a generic development template. It describes a way of doing business that evolved naturally over time, a way of living a principled life. Instead of rules and procedures, the Lima teams were guided by five essential principles.

1. Do what is right. In a recent conversation, Ken pointed out to me that the term stakeholder did not exist as part of business language in the 1960s, but the concept was understood. “We affect a lot of people and systems when we act. We should take them into account.” (Personal communication, March 23, 2010.) It wasn’t complicated, and it worked.

2. Work together. The staff at P&G’s Lima plant is committed to engaging and developing all the people and groups who were necessary for success and effectiveness. All were given respect and the opportunity to contribute in a way that mattered to them personally and to the work itself. All working sessions included time for improving team members’ thinking capacities.

3. Get results. Although the process was important, it wasn’t an end in itself. Lima’s people changed the way they worked in order to get different outcomes. They gathered daily for work sessions, not meetings. They continually asked themselves how to improve the way they were working and exceed their performance commitments. Progress was shared publicly so that people could get involved. Results were routinely twenty to thirty times greater than what they had promised.

4. Develop continuously. This was the deepest innovation in the system. The P&G pioneers believed you could not grow a business without growing people. In addition to regular training, they worked to become systems thinkers, practicing and reflecting on innovative ways to plan and evaluate work. Regardless of their levels in the organization, everyone worked to become more self-managing with regard to thinking and behavior. They understood that ego and reactivity could undermine their effort. They reasoned that a lack of self-managing capability leads to excuses, politics, and distractions. Rather than make suggestions and hand off responsibility, they made decisions collectively and took responsibility together for the whole. As a happy consequence, employees’ family members also became better thinkers and decision-makers, and everyone’s ability to see the effects on planetary and social systems expanded as they learned to understand systems better.

5. Do it all--simultaneously. Lima employees developed a fifth principle, which they articulated in just two words, “same time.” They learned to apply all of the principles simultaneously, as part of their daily work. They understood that the principles were holistic and could not be applied selectively. They learned through doing, working together, seeking to do the right thing, never against one another, always as unique individuals contributing to something bigger than themselves.

The P&G workforce in Lima also discovered that their principles were applicable to a host of social issues. Seeing the world through their lens made injustice and inequity obvious. Embracing Do what is right led to a rejection of corporate diversity programs by African American as well as white employees. They discovered that race sensitivity programs had a tendency to encourage the classification of people by race within surprisingly narrowly defined boundaries. The new Lima system had been designed to care deeply about individuals, all of them. The Lima employees stated it as an integrated principle “Everyone is equal with regard to our principles. We work together. We each, and all, get results. We develop everyone to bring more of his or her potential into the work.” (Personal Communication from Ken Wessel, March 23, 2010.)

One highly engaged employee, Lily White, served on five boards in the community, including the school board. As an African American, she was highly concerned about the African American youth of her community and worked to make a better future than history predicted they were likely to have. When race riots hit in the late sixties, she worked with students and community leaders to create dialogues that helped defuse the situation and built a new foundation for people to engage deeply with one another. Lily and her husband hosted “Hamfests” in a building they built in their backyard for this purpose. She reasoned that people have to listen if they are eating. Chewing gave everyone time to talk and reflect.

Lily White was known and loved inside and outside of P&G. When she died, people flew to her funeral to remember and honor her contribution. Crowds spilled over into adjacent buildings

Almost half of the Lima workforce was involved on local boards and in other social organizations. They were a new kind of activist, living and transferring their principles into the life of the community. They regularly reflected on how well they were living up to their principles and made changes to get it right.

Bringing It Home

The work at Lima was profoundly original, but it wasn’t an anomalous success. Instead, many of the people who built the Lima, Ohio, detergent business moved on to P&G Ivorydale, a union plant with a hundred-year-old history, and repeated their success there. Bob Seitz enlisted executives to support change in what was often referred to as P&G’s “mother” plant. This time he was backed by a set of performance indexes from Lima that set the standard for the industry in every business and social category.

From Lima and Ivorydale, leaders moved on to other businesses, inside and outside of P&G, and they continued to produce amazing results. Though the P&G experiment has been reported extensively, the real story remains largely undocumented.

As Bob is fond of saying, the P&G story “was so different that outside people couldn’t even see it. They didn’t get it.” He eventually banned visits from outsiders, saying “They printed the wrong stuff and led people astray.”[SG: Also want to keep this sentence. Have typed it back in.] Bob is right—most people don’t get it. Most sustainability and social efforts work on symptoms, parts, and pieces. However well-intentioned they may be—and most are founded on fearless and imaginative commitments to social process—almost all approaches to sustainability and fair trade start from false premises. The Responsible Business framework described in this book offers an alternative, building a systemic approach that follows the P&G principle of a same-time business transformation—simultaneous, systemic, and ubiquitous.

Leadership Lessons from the P&G Prototype

1. Working on the business as a whole is the only path to simultaneous business and values success. Many popular programs lead to fragmentation and thereby limit creativity and success.

2. Working with a business can affect the corporation it is part of. The Lima venture is often cited by P&G CEOs as the beginning of real innovation in their company.2

3. The P&G endeavor was designed uniquely for this business and was based on principles rather than preexisting programs or popular concepts. In fact, it defied most of the popular concepts of its time.

4. Significant shifts at a business level can affect an entire industry. P&G’s detergent business was studied for decades because of its distinctiveness and market effectiveness. According to Bob Sykes, over twelve hundred books and case studies were published on the topic between 1970 and 2000.

5. Courageous leadership based on a steadfast connection to principles rather than personal credit and reward is required.

P&G, Lima, used radically new methods to build a business. In 1960, almost no one in any industry was talking about carbon, pollutants, climate change, and social justice. Yet the P&G group naturally generated systemic solutions that addressed these and other challenges because it was the right thing to do.

P&G’s methods are now fifty years old, but they have yet to be adopted by most companies, in spite of validated results. In the following Introduction, I will outline some fundamentals of responsible business development, most of which have evolved from the principles and methods that were first developed—in some cases extensively—at P&G.