UBC Net Impact

Friday Opening Keynote

From Source to Blue Bin: Extending U.S. Beverage Producer Responsibility

Kim Jeffery, President and CEO, Nestle Waters

William McDonough, Author, Cradle to Cradle

The 2010 Net Impact conference began with a stimulating discussion between Kim Jeffery and William McDonough, who discussed today’s bottled beverage industry.  It was interesting to see people react to Jeffery’s story, which could easily be construed as anti-environmental, especially in the eyes of this particular audience.  Bringing the founding father of bottled water to speak to a room full of sustainability activists was a bold move.  He was introduced by the moderator, Marc Gunther, as “an environmentalist,” a description which provoked some cynicism.

What the audience wanted to know was: Why should people drink bottled water when we have access to clean, drinkable, free tap water?  Why would we drink water that has been shipped an average of 270 miles by truck (a “tight footprint” according to Jeffery), and bottled in PET made from fossil fuels?  Rather than answer this question directly, Jeffery deflected it in a few ways.  His overarching arguments were:

1) People need to drink more water, period.  People drink too much soda, and health problems such as diabetes and obesity have become epidemics.  Water, very aptly described by Jeffery as a “healthy hydration beverage,” should be consumed more, and people should be free to choose whatever form they prefer, be it tap or bottled.  When asked if reusable bottles would be a preferable alternative to disposable plastic bottles, Jeffery answered “If that’s your bias, that’s fine.”  He posits water as the driving force behind the “health and wellness trend” that needs to happen.  Bottled beverages became mainstream in the late 1980s, and Jeffery is proud to have introduced water as an option so people could choose to consume something other than sugary pop.

2) As far as the trash issue goes, Jeffery was optimistic about the role Nestle is playing, and about the contribution the company is making in the bottled beverage industry.  Nestle has reduced the weight of its bottles so that they require less plastic, and the company promotes recycling.  According to Jeffery the problem doesn’t lie in the plastic bottles, but in the recycling infrastructure (or lack there of) in the U.S.  Curbside recycling is not available to many Americans, which means that consumers simply don’t recycle enough, preventing those PET bottles from being reclaimed.  While Jeffery admits that the bottling industry should be responsible for the lifecycle of its product, he believes that the more important issue is tackling the root of the problem by increasing the availability of recycling facilities.

Jeffery sees this an a governmental problem, not a business problem.  We cannot increase our rates of recycling without the government installing facilities and increasing existing infrastructure.

Jeffery doesn’t see this happening any time soon, so his vision for a recycling America is one in which the initiative is taken by privately funded companies who would coordinate recycling programs on a state level.  He sees two problems with government-run recycling programs.  First, there aren’t enough of them.  Second, they take money from states by retaining any unredeemed bottle collection funds.  In other words, if people don’t return their bottles the government keeps the 5 or 10 cent deposit per bottle.  It was interesting that Jeffery first positioned his product as a cure to our health epidemic, then displaced blame for environmental harm onto the government.  He even threw in a quasi-patriotic plug, saying that if people preferred to drink bottled water, that’s perfectly fine because “[t]hat’s what America’s about, we have choices.”

Interestingly, the keynote speaker the following morning was Gary Hirshberg, the founder of Stonyfield Farm organic yogurt.  We learned from Hirshberg that all of Stonyfield’s highly perishable products are shipped by freight in an effort to minimize the company’s carbon footprint.  Nestle, on the other hand, uses the “just in time” inventory policy, apparently requiring the company to ship bottled water by truck.  It was interesting to hear two entirely different opinions on this matter in two days.

Bill McDonough, the author of Cradle to Cradle, had some insights to contribute.  He dispelled the idea of being able to throw things “away” – a place that “doesn’t exist.”  Instead of trying to achieve zero waste, McDonough urges us to “eliminate the concept of waste” entirely.  It’s not about minimizing, but about optimizing.

It was interesting to see the synergy between Jeffery and McDonough, who have worked together before in their efforts to point the bottling industry in the right direction.  McDonough sees plastic bottles as an asset, because as a source of fixed carbon, they are nothing less than “solid oil.”  Like Jeffery, he advocates more infrastructure to increase recycling rates, so that we might reclaim more of this resource that is being thrown to the elusive “away.”  One thing that they could both agree on is that bottled water may be a face of the problem, but it is not the real culprit.  As both men pointed out, if bottled water were to disappear tomorrow, the sustainability problem we’re facing today would still exist.  We have to think about long-term solutions to the source of the problem, rather than attack surface issues.

This is largely about creating infrastructure to make recycling readily available to everyone.  Today only 1 in 3 disposable water bottles are recycled; Jeffery hopes that this rate can double in the next ten years.  For McDonough, infrastructure is certainly an important issue that needs to be tackled.  Even more pressing than that, however, is creating a mental infrastructure that will motivate us all to become part of a major paradigm shift.

This panel discussion was tight. The conversation was engaging, well moderated, and the panelists` opinions seemed to be as close as their physical proximity to each other. Though it built an expansive building for its students, the Ross School wasted no table space.

Dan, from General Mills was big on small movements that turn big. He mentioned an Earth day volunteer program that was extremely successful. He saw the power in engaging employees by having them volunteering in the local community.

An impatiently enthusiastic audience member asked : “Why was it successful?“

Dan: “Because it was not business related.“

My thought: Interesting that people would have more fun away from work. I guess motivating people to engage sustainability comes with making more natural, social, and less about work.  I also guess this depends on what you are trying to accomplish as an organization- volunteerism with some sustainability and spirit or sustainability within a business decision context.

Dan: “We sent camera people to document what (these volunteers) were doing and publicized accross the entire organization.“ I apologize if the quote is not 100% correct. – hope Dan will forgive me for butchering his words.

thought: Publicize Success! this guy went to UBC and took OBHR.

At this point, Jeff from PWC, patient, but itching to chime in the conversation, said he was interested in measurement and engagement. Measuring carbon foot print led to a reduction of 20%. He also mentioned the competing value framework can be used to reconcile the employee`s individual values and the corporate culture.

thought: I was now convinced Dan Skarlicki had visited these guys.

Caroline from HP finally had a chance to speak. She managed to create a training program accessible to everyone and added incentives to drive people to use it.

thought: Incentives too!

Dan from General Mills, then recounted how last 2 summers he held sustainability sessions and found it useful to start from the ground up, build online communities for sustainability (not formal training but sparking ideas).

thought: Great concept. I think that adding some direction could help but allowing people to form their own ideas is much more powerful motivator. After all, I rarely like other people`s ideas as much as my own even when mine are much worse.

The moderator now makes it clear that she is not moderate in her opinions. She described how some organizations that are trying to build awareness of lack of nutrition and disease in developing countries have used simulations as a tool to motivate. They actually simulate how it would feel to be a person under these conditions.

thought: This is going a little further than Rawl`s veil of ignorance.

A confident, vocal MBA student then showed that we had not lost focus on business: “how do you make the link between initiatives and improving the bottom line?“

Jeff from PWC responded by citing the king of the bottom line, Goldman Sachs.  He mentioned that GS Sustain (an investing criteria) evaluates how a company performs environmentally, what its social governance policies are, and finally, its cash flows.

thought:  There are many investment firms that have socially responsible investment funds and portfolios. This actually drove me to Goldman Sach`s website and I watched their promotion video. It is very well done. The push to investing in socially responsible companies is definitely emerging as the investment opportunities in this sector are great. A problem that has to be solved is one of measurement. How do we rank technologies and companies when it comes to sustainability? There is a lot more work to be done in this area. It is also interesting to note that GS is concerned about cash flows and not necessarily earnings–as a MBA student, I know why this makes sense.

The panel discussion had been very good so far but my expectations were soon going to be reset. A woman from the audience mentioned that she worked for Boeing in a lead HR role ( I wasn`t able to jot down her title). She reports to someone who reports directly to the CEO of Boeing (again not absolutely sure on this). She found it useful to get employees to drive change from the bottom up but then go to your decision makers with a business case.  I was impressed by her experience and thought that it was too bad there wasn’t more room at the speaker table.

Jason Saul was by far one of the most interesting speakers that I had an opportunity to listen to at Net Impact this year. His new book – Social Innovation Inc – emphasizes his message that instead of using business to drive social change, companies need to use social change to drive business.

As business leaders we need to be part of the solution! Its businesses, and not government or non-profit groups, that should lead the effort to eradicate global injustices such as poverty. Our society values social outcomes and there is now an economic incentive to address social issues. We need to find the economic possibilities within social issues. While charity and accountability are “nice” things to do, they do not have any business value. Right now businesses donate money with funds that are available after they have made all of their strategic decisions – but we need to ask ourselves, “ how can we solve social problems with leftovers?” This strategy is not designed to produce value and we have set the bar too low. Instead we need to change the paradigm of what we’re thinking because right now corporate social responsibility (CSR) is a support function and not a strategic function. To win, we need to fundamentally rethink social strategy.

Here is the big shift…

The Social Contract:

-Are we being responsible? Managing risk. Philanthropy. Support function. Leveraging the business to drive social change.

Social Capital Market:

Are we generating value? Impacting the bottom line. Social innovation. Strategic function. Leveraging social change to drive the business.

This creates a new definition of social innovation: an intentional business strategy, leverages the core business, creates economic value and positive social change. We should ask ourselves how do we expand the market?

1) Backdoor Market Entry

2) Pipelining Talent

3) Submarket Products – need to address an unmet need

4) Emotive Customer Bonding – people value impact

5) Reverse Lobbying

In order to leverage social change to drive business companies need to identify the pure business objectives, research the social change that will influence those outcomes, analyze their core competencies and assets, and then revolutionize business solutions to social problems. This requires a leap of creativity and innovation in order to find new ways to solve social problems.

This session included Jim Walsh (Professor at the Ross School of Business, University of Michigan),
Judith Samuelson (Executive Director, The Aspen Institute), and Dr. Srikant Datar (Senior Associate Dean at Harvard University and Author, “Rethinking the MBA”).  

There were several themes discussed in this session that made me think critically about the MBA degree as well as my current experience at Sauder School of Business. The general feeling from our speakers was that many business programs are not meeting all the needs in order to adequately prepare students for leadership positions. For example, there is not enough emphasis placed on putting our learning into practice. Moreover, the necessity of innovation is becoming increasingly important as is determining how we frame problems.

Business today touches more areas and we’re being asked to solve the problems of our time. We should view business as a world agent to solve these problems; however, we can also recognize that business is the source of many world issues. It’s competition versus a better world and we have a responsibility to create a better world. We must lead and teach by example. Moreover, we need to be critical of our education because we do not just need to learn the analytics but also focus on doing and taking action. Knowing is the foundation and once we get beyond knowing then we can become effective leaders who empower and lead people. We should recognize the lens with which we view our decisions and we should understand why we do things. There needs to be a fundamental rebalance of our thinking skills into integrative thinking.

We should have an optimistic view of management education. This past financial crisis has created an opportunity for us to step up and articulate how we want to run our businesses. It has also created a greater concern for our environment and where business fits within it. We each have an increased responsibility to understand these issues and the role of regulation. Our next steps are to determine how to bring this learning deeper into the MBA curriculum because the students should have a voice in how they want the shape of their education to look. We should also realize that there has been a measureable shift in our attitudes…it is now one of a confident humility because we don’t have all the answers. We have a choice to either save the world or destroy it and the MBA is an important tool with which to accomplish this.

The final thought these leaders left us with was “make others better for knowing you”. It was truly an inspiring session and gave me a lot of things to consider as I choose my path in this program.

One of my favourite sessions at Net Impact this year was moderated by Nick Aster from Triple Pundit (www. triplepundit.com – Green Business News) with representatives from Chevron, Angel Point, and Microsoft.

One of the key takeaways from this session was that business is a self-regulated conversation now and the web helps us develop this conversation, especially regarding corporate responsibility and what types of activities the companies is engaged in. Companies need to monitor their image on the web because it now places them at a disadvantage if they are not engaged in this practice. This feedback can also lead to valuable insights for the company and they should look for productive conversations online. A second key takeaway was that all messaging needs to be integrated with everything that the company does and it needs to be tied back to objectives and strategies. This creates a cohesive message that can be understood by their target audience as well as the general public. Additionally, social media allows companies to “tell their story” about how they are contributing to their communities and the environment whereas this was previously more difficult. Moreover, it forces transparency and reduces their capacity to manipulate the message.

There were also few best practices that were discussed in the session. Companies should not edit comments posted on social media outlets – they need to have thick skin because you have to understand that you will never please everyone. Companies should have a measured response to negative feedback but should not overreact because this tends to exacerbate the situation.  They should also recognize that different people want to be communicated to in different ways so they need to tailor it to their audiences. Additionally, consistency is key because each experience a user has with the company should be the same. Both Chevron and Microsoft also spoke about the necessity to measure social media with a balanced scorecard (both quantitative and qualitative) with broad and specific metrics. This emphasis on measurement ensured that they were focused on engaging the right audiences and looking at emerging trends.

In conclusion, social media is a necessary means to communicate with your stakeholders; however, it should not be the only way companies engage their target audience so they need to combine these efforts with traditional advertising methods. All of the representatives also recognized the importance of accessibility of the internet and social media and each company was thinking about different ways to make this technology available to more people around the world.

Rural Africa. What is the first thing that comes to your mind?  Maybe you hear the excited voices of little kids in their matching school uniforms yelling at you as you pass them by. Maybe you see the NGO symbols of World Vision, Doctors Without Borders or the Gates Foundation. Maybe you hear the crazy vuvuzela sounds lingering from the recent FIFA World Cup. Maybe you smile at the thought of the incomprobable feeling of standing at the edge of a savannah.  Maybe you smells the extraordinary scents that make up an African market.

Of all these things, do the terms “co-creation, community impact measurement or the largest potential source of business opportunities” come to mind? If not, well, they should.

Base of the Pyramid business strategy was the name of the game for for Dr. Stuart Hart, a Professor from Cornell  and Dr. Ted London, a Professor from the U of Michigan during a featured session on the Friday morning of the Net Impact conference. Continuing the work of Base of the Pyramid Guru, the late C.K. Pralahad, Professors Hart and London instilled in their audience a mutual sense of opportunity and urgency as they spoke about the future of business at the base of the pyramid.

“Reese’s Peanut Butter Cups”

Businesses in developed countries are seeking new customers and new markets. Dr. London made referred to “you are fired if we get to Fortune 50” while pointing out the nearly triple growth rate potential for markets in developing nations versus developed nations. Communities in developing countries are looking for sustainable chances to lift themselves out of poverty and become active contributors to their nation’s economy, and to economies around the world. To add a little bit of Canadian flavour, let’s refer to Roger Martin’s, book, “The Opposable Mind: How Successful Leaders Win Through Integrative Thinking”, which suggests that, when faced with a decision where the two feasible outcomes are not quite desirable, the ability to form a third outcome, one that is better than either choice of the initial two, is an ability that sets business leaders, and thus their companies, apart. Essentially this idea is the that of Reese’s Cups – chocolate and peanut butter on their own are great, but together, oh wow. Definitely better than either on its own. (For those who know me well and know that I am deathly allergic to nuts, this parallel might seem strange, but I’ve been told more than once that Reese’s Cups are quite irresistible, and the example serves to prove a point)

So let’s focus at the base of the pyramid. It’s not all about multinationals coming into developed countries and forcing products on impoverished consumers. It is about co-creating value with the millions of culturally vibrant communities that are full of ideas and drive. There is a stronger case than ever for economics to value social good.  Add this call to action to the voices of the beautiful African kids, and be a part of business community that really does what it should – comes and unites.

When I first heard about the Net Impact conference one of the reasons I questioned going was the sheer hypocrisy of flying across the continent to get there. I ultimately decided to go because I thought perhaps what I learn and what I share could potentially do more good than the bad I created by getting there. I donated my aeroplan miles to a charity, offset my emissions and there I was, at a conference full of hypocrites like me. Before beginning to understand if I was actually justified I’d like to parallel this with two major themes I encountered at the conference: trade-offs and measurement.
Companies make trade-offs all the time in order to act in accordance to their values. If product freshness is of utmost importance they could end up throwing out a large amount of their raw materials that don’t measure up. Consumers do the same thing, if it’s worth it to you to buy the more sustainable product to pay more that’s a trade-off you’re willing to make. The tough part is figuring out what exactly those trade-offs are. If I buy a vegetable because it’s local doesn’t necessarily mean that it’s the more sustainable choice. You have to take more than transportation emissions into account such as efficient land use and harvesting techniques. Gary Hirshberg, founder of Stonyfield Farm, explained that importing fruit from New Zealand in one case was actually more sustainable than growing it locally. Actually measuring these things is incredibly complicated and many judgement calls and hypotheticals must be considered along the way. Tom Todaro, CEO & Co-Founder, Targeted Growth an alternative fuel maker talked about how in investigating how his product would compare to crude oil there was a 500 page document that not even he could begin to understand.
Right now most consumers make sustainable choices when it comes to some food, transportation, energy usage and general packaging waste. We think that we’re doing good by riding our bikes and buying local fruit and vegetables but we don’t consider the impact of the shirt we’re wearing or the cellphone we use. It would be much easier to make these decisions if there were clear measurements to all products we consumed so we understood what the trade-offs were. Until that happens I would urge you to continue to question how sustainable the choices you make really are because it’s not as simple as it looks. Did my learning and sharing sustainable ideas, charity donation and carbon offsets really balance out the negative emissions it took to fly me to Michigan and back? I don’t know. But I suppose questioning it is a good first step.

After listening to panelists and key note speakers all day, I was inspired – but I needed something to get my energy level back up. So on Friday afternoon I attended the Detroit Impact Brainstorming Session. This was a great workshop that allowed me to get my hands dirty solving a real life problem. I must admit, it was a little intimidating at first sitting down at a table with only a handful of people, but once I saw the post-it note pads, I knew exactly what I was in for. Luckily I was introduced to the Design Thinking process a few weeks back and have practiced it several times since then. Seated around me were MBA students from various backgrounds; law, engineering, portfolio management, etc. We were briefed on the case in less then 5 minutes, and before I knew it I was scribbling down ideas.

The problem we addressed was as follows: although a storied American city with an iconic history, Detroit is a mere shadow of its former self. The city is facing major problems: a high crime rate, record unemployment, foreclosures, corruption and gang violence to name a few. In particular we focused on a neighbourhood about 7 miles east of downtown that was nearly abandoned. From aerial photographs we could see sparse housing, empty parking lots and very few amenities. Our task was to figure out how to revitalize this neighbourhood, and build a community that people could be proud of.

We began by discussing what it was that we valued most about where we live – a sense of community, safety, shared green-space, bike paths, fine cuisine and a short commute to work were a few that came up. These values transitioned to ideas about what should be in this development. Parks? Check. Farmers market? Sure. Dedicated pedestrian streets with a strict “no car” policy? Why not? A renewable energy plant pumping clean electricity to all residents? Now we’re talking! Before long our wall was full of ideas – some familiar, others a little far fetched, and some completely off the wall (build a giant water park??)

The session was a great way to get involved at the Net Impact conference – and it reinforced the fact that like it or hate it, design thinking is everywhere and can be a very effective brainstorming tool. The most rewarding thing about this session is that the case is an actual problem. The group involved with this development will actually build on these ideas to help put in motion the plans for this community and hopefully start bringing people back to Detroit. Who knows, maybe someday I’ll eat my words as I fly down a waterslide at Detroit’s newest water park….