Tag Archives: Net Impact

Sustainable Supply Chain Management: Making Blue Jeans Green

The first session that I attended at the 2011 Net Impact conference was entitled the Past and Future of Sustainable Supply Chain Management: A Critical Reflection. The panel featured three representatives from different organizations in the garment industry.

Sustainable supply chains is one the topics that I find most interesting and most important. Making the business case for sustainability is critical to convince businesses to mitigate their impact on the Earth. Since most consumers are not willing to pay more for an item because it is marketed as being “green,” the best place to make the business case for sustainability is to find savings and opportunities within the supply chain.

One of the takeaways from the session was that when it comes to greening supply chains it comes down to what I would call the 3Ms: measure, mitigate, and motivate. Measure the impact of the product or service on the environment through a life-cycle assessment. With this information mitigate the environmental impact by changing the activities in the process that have the largest eco-impacts. Finally, look at the organization’s strongest spheres of influence within the supply chain and motivate those outside of the organization to also mitigate their impacts.

The most pertinent example from the session was Levi’s Water<Less jeans. Levi Strauss Co. conducted a life-cycle assessment on its jeans and determined that overall the largest impact its jeans have on the planet occurs post-purchase though the washing and drying of the jeans. Pre-purchase the largest impact is from the production of cotton. Levi’s therefore developed an initiative to reduce the water and pesticide use in cotton production and made changes to its production process to use less water. Finally, to address the post-purchase impact, Levi’s developed a campaign called “Dirty is the New Clean” advocating that consumers wash their jeans less. Levi’s is successfully greening its supply chain through using each of the 3Ms.

Another key takeaway from the session was that there is a limit to the savings you can get out of a supply chain. While improved processes reduce can reduce waste, inputs or logistical costs, there is only so much an organization can do before its “greening” starts costing money.

So where is the business case for sustainability in all of this? Over the next 10 years water is seen as one of the biggest risks to the garment industry. The industry is reliant on an increasingly scarce resource. In the short-run industry companies need to reduce their water footprint throughout the supply chain. However, this only achieves going in the wrong direction slower. Therefore, in the long-run, companies need to develop new business models. One possible model is to develop closed-loop systems so that used garments are used as inputs for new ones. Another is to reimagine the business such as Patagonia has done this in its partnership with eBay in developing the second hand market for its clothes.

Supply chains will remain the focus when incorporating the tenants of sustainability into business. However, in the long-run, tweaks to cut costs will need to give way more innovative strategies.

Psychological Traps in Sustainable Thinking

I am going to build on Matt Wilson’s excellent post about cynicism. I agree that overcoming cynicism is the first step – but what a big step it is! In this post I’ll talk a bit about leaving cynicism behind, about the psychological traps that are inherent in this decision, and how I personally experienced this at Net Impact in Portland.

My communications background spawned my interest in how people organize themselves and work with information technologies to make good decisions. I picked workshops at Net Impact that related to my areas of greatest interest – how to measure the impact of business decisions and how to share impact information with stakeholders to best support the common good. I went to workshops on integrated reporting, employee engagement, impact investing, organizational learning, innovative balanced scorecards, and other things on that theme. The results were mixed.

I’ll start with my cynic hat on: the workshop on employee engagement featured a rep from Southwest Airlines, whose much-studied rise to success was based on the competitive niche of getting people out of cars and into planes, massively increasing the carbon footprint of intercity travel in the US. The most sustainable thing Southwest could do is get people out of planes and back into cars again, but they don’t engage employees who think that way… I disappointedly snuck out of that session before it finished. I also left part-way through the workshop on creating a personal portfolio of “social impact investments” when I realized the gaping disconnect between the workshop content about evaluating the impact of the investments themselves from the systemic impacts of the personal investment goals brainstormed by the audience: fly to the tropics every winter, buy that second vacation home, the fancier car, and other first-world consumer fantasies. Investing money “in an impactful way” does not validate your wasteful lifestyle choices, people! There was a broader understanding of systemic issues decidedly missing here.

I don’t want to be a cynic or contribute to the cynicism of others – I agree with Matt Wilson (and Lord Hastings) that it is a huge barrier to progressive action. But my experience of Net Impact was that a relentless tide of positive optimism competed for attention with critical, realist discussion, and from my examples above I think there are legitimate reasons to be critical. Without a real, critical discussion of Southwest’s role in the carbon economy, or of the lifecycle costs of our investment/consumption habits, we ignore “the elephant in the room” and it becomes easy for people with dissenting views (like me) to feel isolated and cynical. Substituting “everything is great” for “everything is hopeless” hardly strikes the balance that is required to tackle the complexity of sustainability problems.

The important point I want to make is that giving up cynicism doesn’t have to force a personal choice between full blown cynical gloom and an obstinately positive attitude. Blind positivity is the first psychological trap when you try to get over your cynicism. For a really excellent summary of the trap that positive thinking sets for us, see Barbara Ehrenreich’s (brilliantly animated) talk here: https://www.youtube.com/watch?v=u5um8QWWRvo. In this respect I think Net Impact could offer more value to participants by offering structured “360° feedback” sessions to companies, organizations, or individuals to help them broaden their understanding of how to improve, rather than the panel discussions where everyone is applauded for making an upbeat presentation about whatever positive work they want to highlight.

On the bright side, my best experience at Net Impact was attending a workshop on organizational learning hosted by Libbie Landles-Dowling of Bridgespan consulting group. The focus was on how to systematize the incremental learning and critical feedback process in every project and consulting engagement, and make this information available to an organization in an accessible, searchable way. It was the most useful angle for tackling the psychological traps I have described here – it allows a whole organization to make critical reflection a core part of project work, and help make decisions based not just on our belief that we are doing the right thing, but on the best data that we can muster about what has worked well in the past. This workshop, and other sessions that focused on how to engage with stakeholder groups in ways that allow you to get at the root of problems, made the conference worthwhile for me.

However, once you start down the critical appraisal road, the complexity of issues can become overwhelming, and we fall into the next psychological trap: “analysis paralysis”. An MBA-friendly analogy is the case competition – you have to start with research and get all your issues sorted out before making a plan of action. Experienced case crackers warn about “analysis paralysis” – getting stuck on trying to find the “perfect”, mutually exclusive, collectively exhaustive set of issues that describe the problem at hand. Cynicism in daily life comes from a sort of “analysis paralysis” – it is very easy to dwell on all the reasons why different ideas haven’t worked in the past, and to wait around for the “perfect big idea” to come along. To get past this stage you have to hold your nose and take the best course of action you can with the information that you have available. Be prepared to work iteratively, fail many times successively, and keep learning on the way (this is what Design Thinking is supposed to help with). This trap gets me the most, and I blame that on an undergrad steeped in marxist economic critiques and post-modernist cultural studies: heavy on the criticism, but light on decisive plans of action!

Cynicism is rooted in fear that leaders of social change or sustainability movements are inappropriately positive about their missions – perhaps naively, for lack of experience; perhaps deliberately, to hide a personal interest in attracting funds and followers; or perhaps because they are blinded by their own ideological beliefs. Ideology is the most common, and most insidious cause for cynicism – the most passionate, zealous leaders, no matter how well intentioned, seem more prone to be fundamentally misguided or blind to the shortcomings of their vision. Cynics think that uncritically taking direction from these leaders will lead to a disappointing or destructive outcome, far from the ideal of “doing good by doing well” or whatever other catchy phrase Porter and Kramer have coined that motivates us to get on the sustainability train.

It’s difficult to keep far enough ahead of the torrent of writing on the subject to critically appraise anyone’s claims to being progressive or sustainable. Sometimes you have to go with your gut and hope for the best. As a result of attending Net Impact and reflecting on my experience there, I now feel much more focused on what I am looking for in a potential employer, and how to ask them about it. I know not ask really soft-ball questions like “what do you do about sustainability”, because most companies now have a well-rehearsed ‘elevator pitch’ about how green they are (I guess I remain cynical about these elevator pitches). I will ask “how will you get me involved, as an employee, in finding out where the problems are in the sustainability of your strategy? How will the company incorporate this learning at every level into its strategy? What sustainability problem are you facing now that you expect to still be working on in twenty years?” These are the questions that will get a bit more real information about their future vision. Overall I would recommend Net Impact to anyone who is ready to roll up their sleeves and take action, and perhaps even inspire some die-hard cynics to do the same.

Toward Sustainable Capitalism

One of the more interesting sessions that I attended was the one led by Mr. David Blood, of Generation Investment Management. Mr. Blood has a long and storied past in the Investment Banking industry, having spent the bulk of his professional career at Goldman-Sachs. According to Blood, he sort of fell into his first position at the firm, gradually rising to the position of CEO of Goldman-Sachs Asset Management. He watched the evolution of today’s economy through its ups and downs. In 2003, having realized that his path at Goldman-Sachs had reached its logical conclusion, he retired from the firm in order to forge his own identity in the asset management field. And what an identity he has created.

Through a series of serendipitous events he met and befriended former Vice-President Al Gore, whose most recent exploits in the Sustainability Industry are obviously well-documented. What came of these early meetings was a recognition of a common purpose, that of developing sustainable business through responsible investment. This recognition, that a) there is a market demand for such investing practices and b) creating a truly green economy requires the nurturing of sustainable businesses, led Blood and Gore to found Generation Investment Management, a firm with a strong mandate of poverty alleviation.

Ironically, the entire 1 ¼ hour long session can be boiled down into 5 key career observations that Blood developed over the course of his professional life:

  1. Hard work matters
  2. Keep your values, sacrificing advancement when the path toward it compromises your identity
  3. Humility is a fundamental necessity, as luck plays a significant role in life, whether it be professionally or personally
  4. A career is a marathon
  5. You can accomplish a lot if you don’t care who gets the credit

It’s this last point that I believe is essential to business leaders. There is a tremendous amount of ego and pride that contributes to an individual’s pursuit of professional and personal success. Being able to say ‘I did this’ can be both satisfying and addictive. Blood’s final observation, however, suggests that true leaders recognize the value in placing the goals of an organization ahead of those of the individual. And when those goals represent a positive social interest there is an inherent need for leaders to take a step back and truly analyze what matters most: their personal pride or the advancement of a common good. Ultimately, who gets the credit is irrelevant if the end result is that one more person will have a better life today and tomorrow. The real leaders will choose the common good every time.

We must love one another or die

When WH Auden wrote these words in his poem “September 1, 1939”, he could see the world was on a precipice. Having lived for almost a decade in Berlin just before writing this, Auden feared that what he had seen in a limited context was about to sweep the world.

As we find ourselves at a different precipice, where we can only choose either to act or not act, Auden’s sentiments find a new poignancy. Although not explicitly stated, this was where the session, Conscious Capitalism in Business: Rethinking the Way We Do Business, picked up. Professor Thomas Gladwin from the Ross School of Business at the University of Michigan painted a rather bleak picture of where capitalism has gotten us, and where he thought it would inevitably take us, which, in short, was nowhere. In his opinion, unless we disassemble this machine called capitalism, the machine will continue to consume until it consumes itself and everything else around it.

Fortunately, despite the heavy truths in Dr Gladwin’s argument, the other three panelists did not share his grim inevitabilities of the future. Dr Mark Albion, co-founder of Net Impact, and Dr Shubhro Sen and Dr Rajendra Sisodia co-founders of the Conscious Capitalism Institute, presented instead an alternative of hope for the future. For them, capitalism could be redeemed, but only with a measure of fundamental change.

Change, they argued, needed to come about first by rethinking and redefining what the world constitutes as success. They argued that the accepted paradigm that promotes the concepts of Good to Great is fundamentally flawed, and that it is in many ways the perpetuator of our problem. Under this paradigm, companies like Phillip Morris, Fannie Mae, and Circuit City are great. With the lucidity of hindsight, we can see that this was true of none of these. When the metrics only consider income statements for a set amount of years, an incredible amount is overlooked. The “Good to Great” concepts talk about being “long-lasting” and having “longevity”, yet, they only look at a narrow segment of time. Likewise, by only looking at a balance sheet or income statement, only a narrow slice of the costs and benefits are considered. Dr Rajendra Sisodia and the CCI demand that all relevant costs and benefits be considered. He used Phillip Morris as an example and asked just how the incredible costs that tobacco has had on society can be so conveniently externalized, as though they were intangible or inconsequential. Thus, CCI’s new definition of “great” makes the argument that “there are no side effects, just effects”. We can no longer just look at one metric, and ignore the rest – it is no different than looking at company that is hemorrhaging cash in operations, and judging it healthy because of an acceptable metric of net income.

Conscious capitalism argues for a much broader definition of success – one that looks to more than short-term gains. Dr Sisodia used Whole Foods as an example of a company that has prospered tremendously without sacrificing or ignoring sustainability, or social responsibility. In fact, these two factors that the present paradigm often sees as a burden are the very foundation of the company’s success. With policies like a 19:1 ratio for compensation, the company takes on a very balanced view that there has to be a limit to how much more an executive is worth than an entry-level employee. At a peak of three-quarter of a million dollars a year, it would be hard to say that these executives are self-denying philanthropists, but rather they are operating under a compensation scheme that is comprehensible to reason. When executives of other firms are operating at 200:1 ratios, it is hard to find rationale other than unbridled self-interest to justify such compensation.

Conscious capitalism is not anti-wealth; on the contrary, the CCI wants the world to be filled with profitable companies who are intent on increasing wealth. The differentiating factor is that conscious capitalism demands that companies take a longer, more encompassing view of profitability. If “long-lasting” is truly an attribute of a “great” company, then the outlook on success should by definition also be long-lasting.