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CHANGING BUSINESS FROM THE INSIDE OUT
A Treehugger's Guide to Working in Corporations
By Timothy J. Mohin
Berrett-Koehler Publishers, Inc.
Copyright © 2012 Greenleaf Publishing Limited
All right reserved.
ISBN: 978-1-60994-640-1
Chapter One
The department of good works
This chapter covers the evolution of the corporate responsibility function within companies, its organizational structure, and how these factors affect the practice.
Doing well is the result of doing good. That's what capitalism is all about (Ralph Waldo Emerson).
I believe that most people would claim that they want to do good things for others. But, when it comes to their careers, that inner altruism is often forced into the back seat. At the risk of stating the obvious, "the business of business is business." When you go to work for a company, whatever your role may be, you are expected to deliver a return on the company's investment in your pay and benefits. For most roles within big companies, this means that saving the world may not fit into your job description – at least at first glance.
The reality of working in a big company is this: you are given a set of goals, your progress toward those goals is measured (usually in periodic performance reviews), and your performance is typically ranked against your peers (which is somewhat counterintuitive since most companies extol the value of teamwork). The environment is competitive, with money and advancement up the corporate ladder on the line. On top of the intrinsic competition, and lurking in the background at most companies, is the very real threat of layoffs that are increasingly a fact of life. All of these pressures drive you to keep your head down and remain focused on delivering on your goals, not taking time out to help make your company more sustainable.
Most of the books on sustainable business give you academic models, case studies, and high-level theories on how to embed sustainability into business or how companies can unlock hidden value by investing in corporate responsibility. As discussed in the introduction to this book, all but the most senior of corporate jobs don't have the scope or authority needed to drive this type of change. This book focuses on practical, proven strategies to drive sustainability from a staff-level position.
To set the context, this chapter describes the genesis of corporate treehugger jobs. Corporations have had small groups of people in altruistic roles for many years. Recently, the number of these jobs has been increasing along with rising awareness and importance of corporate responsibility. This chapter lays out the evolution and raison d'être of business functions that contribute to society, from the traditional community affairs team, to a full-fledged corporate responsibility department.
The evolution of corporate responsibility
Steven Covey, in his timeless classic The Seven Habits of Highly Effective People, coined the phrase "seek first to understand" (Habit 5). Following this rule, let's first step back and reflect on how social responsibility became intertwined with business. Starting in the 1970s, as the fundamental environmental protection laws were put into place, companies were on one side and environmental groups were on the other side while the government played referee and set the rules and regulations. As these battles subsided, something happened: the environmental movement won the hearts and minds of the public. With public support for environmentalism polling overwhelmingly favorable, companies changed their tactics from fighting regulation toward voluntarily "greening" their operations. Since that time, the traditional interest groups have been rearranged. Instead of lining up against environmental regulations, most of the Fortune 500 companies are now spending significant resources to demonstrate their sustainability credentials.
Like the end of the cold war, the victory of the environmental movement slowly filtered into our collective consciousness and a new world order emerged. In the new world, all things green are good. "Green" has become a verb. Cigarette packages carry environmental messages and even defense contractors publish sustainability reports. Being against "green" in the new world is like being against technology. Raising objections to sustainability will guarantee your status as a Luddite. The future, it seems, will be green (or, for the more cynical, at least be branded with green leaves printed on Forest Stewardship Council certified post-consumer paper with soy-based ink).
The point is that most companies are no longer actively (or openly) campaigning against environmental rules. On the contrary, most big companies are now tripping over each other to demonstrate their good works and many are finding value beyond enhancing their brand reputation. To do this work, companies need a department of good works – a group of people who are responsible for the care and feeding of the company's reputation as a responsible corporate citizen ... the tree-huggers in the corporate world.
The battle for the corporate soul
An example of the shift toward corporate "greening" was the near-mutiny at the U.S. Chamber of Commerce in 2009 when PNM Resources Inc., Exelon Corp., PG&E Corp., and Apple resigned from the Chamber over differences on climate policy (Nike also resigned from the Chamber's board of directors but vowed to remain a member company). These companies took a visible and principled stand to oppose the Chamber's regressive stance on pending U.S. legislation to protect the climate.
To borrow a phrase from Malcolm Gladwell, these high-profile defections from the Chamber signaled a "tipping point." It seemed that the companies who left the Chamber had reached the point at which the risk to their brand image for being seen as opposing climate protection legislation was greater than their potential savings from avoiding climate regulation.
One of the themes of the film The Corporation is that companies will always act out of their own self-interest. If this is true, the defections from the Chamber might signal that the benefits of a responsible reputation are now far more valuable than avoiding the costs of climate change legislation. Perhaps these defectors were the vanguard of companies making rational, self-interested decisions in favor of the environment because to do so makes economic sense for them. By leaving the Chamber, they stood to benefit by protecting and enhancing their reputations as responsible environmental stewards. From this perspective, distancing themselves from the Chamber's efforts to dilute or defeat the climate bill was a rational business decision.
But this change may have been even larger than it seemed. The Chamber represents its members on a wide variety of legislative issues. According to the New York Times, the Chamber's 2010 budget was approximately $200 million. This is a formidable war chest of resources to influence a broad range of legislation beyond the climate bill. So, by exiting the Chamber, these companies were, in effect, saying that the value of their green reputation exceeds the overall value they would get from the Chamber's substantial lobbying might on all issues.
This case is about the battle for the corporate soul on environmental issues and corporate responsibility. If the value of being green now exceeds the value of avoiding costly regulations, it represents a sea change in thinking by corporate leaders.
Where corporate responsibility lives
There is no standardized organizational structure for the corporate responsibility department. In many companies the function grew out of the environment, health, and safety department, but it can exist almost anywhere within the corporate structure. There are, however, a few departments and functions that are traditionally focused on corporate responsibility issues:
Public affairs and community relations
A traditional home for treehuggers in a big company is in the public affairs or community relations department. These are usually small groups of people whose role is to build relationships with the local community – such as citizen groups, elected officials, and other influencers. They donate corporate money to worthy charities, field complaints from neighbors, sit on local boards, and coordinate employee volunteers to work on community projects. In larger companies, these departments often manage corporate philanthropy by running the company foundation, which donates money to selected charities and often matches employee giving.
Many companies also combine their government affairs – or lobbying function – into this organization. In essence, the public affairs group is like a public relations firm for the company – working at the interface of the company and the public to boost the company's reputation and influence policies that affect its interests.
Companies have invested in these groups over the years for a number of reasons, all of which can be summed up under the phrase "license to operate." The public affairs team represents the company's story about job creation, economic growth, and prosperity, invests in community programs, and builds the relationships that help the company operate smoothly. This work builds the reservoir of goodwill needed to obtain permits, reduce taxes, or gain favorable policies without picket lines, protests, or costly delays.
Intel vs. Sumitomo: The license to operate
A case study of the "license to operate" paradigm comes from my days at Intel Corporation. In the late 1990s, the company was building a huge computer chip factory in the suburbs of Phoenix. The facility would use loads of water and hazardous chemicals, take up acres of land, and increase noise and traffic in the area. The Intel public affairs team fanned out to woo influential civic leaders. They held stakeholder sessions, listened attentively to concerns and took actions – often expensive actions – to reduce the factory's impacts on the community. They also worked with state officials to secure the most favorable tax and regulatory situation possible.
In the end, the permits were issued, the tax breaks were granted, and the factory was built in one of the more affluent areas of town. The community's reaction was overwhelmingly positive and, even through massive expansions (Intel has since built two more factories on that site), the relationship with the community has remained amicable.
Standing in stunning contrast was another computer chip company, Sumitomo, which had planned to build a semiconductor factory in Phoenix at about the same time. This facility would use a similar process to make semiconductor wafers, only it was supposed to be smaller and would be located in a less affluent part of town which, theoretically, would make it easier to get the needed permits. But Sumitomo didn't invest in the community or do much outreach with neighborhood activists. Instead, it focused its efforts on obtaining favorable incentives from the city. The public hearings over the permits for this facility erupted into a firestorm of public protest and outrage that nearly scuttled the entire facility, delayed construction, and damaged the company's reputation in the community. While the total costs of this incident were not made public, they surely exceeded the amount Intel invested in community outreach for its new factory in the same city.
This case demonstrates the value of community outreach to a company and why most medium-to-large companies employ several people in a public affairs function. In many companies, the public affairs department either grew into or became the organizational host for the modern corporate responsibility function.
Environment, health, and safety
Another traditional hub for treehuggers in the corporate world is the environment, health, and safety (or EHS) department (these groups are referred to as EHS, HSE, or SHE; this book will use EHS). The treehuggers tend to hang out in the "E" part of the EHS team – the environmental group.
The environmental department is where I cut my teeth as a corporate treehugger. My position as global environmental manager at Intel had responsibility for environmental compliance for 17 manufacturing sites (and numerous other facilities) scattered across the planet as well as company-wide environmental sustainability and product environmental standards. My time and attention were consumed by tactical management considerations such as knowing which regulations applied to which facilities, monitoring emissions and resources, and dealing with permits for new facilities. When I started in this role, the term "sustainable development" was still fairly obscure and, like most companies, the primary focus was on compliance obligations.
In these early days, the environmental compliance function had the attention of senior management, and for good reason: noncompliance can cost a company a lot of money. Intel got a wake-up call from some Superfund sites (toxic waste that had filtered into underground water sources) that the company was responsible for cleaning up. The company has grown so large since then that it is hard to imagine this today, but the cleanup was so costly that it had a material impact on the quarterly earnings reports. Then came the Clean Air Act of 1990. Intel viewed the rigorous and restrictive permitting requirements of this new law as a potential deathblow to its ability to build the factories and invent the manufacturing processes at the pace it needed to stay on top in the hyper-competitive semiconductor business.
With stakes this high, the EHS department had plenty of attention from the executive suite. Environmental operations were reviewed every quarter with then CEO and company founder Gordon Moore (author of Moore's law) sitting in to oversee the group's performance. Every permit, cleanup site, and regulation was scrutinized in those meetings.
As the compliance and cleanup issues waned and public awareness of sustainability grew, responsibility fell to the environmental department to develop Intel's sustainability program. The program officially started when Intel issued its first public report in 1995, which was called the "environmental report." This report focused on the environmental improvements that the company accomplished over and above what the regulations required. The company had invested millions of dollars in pollution controls, process changes, and product changes to reduce its pollution and consumption of natural resources. Many of these investments were over and above what was required by the applicable regulations.
There were many internal meetings where Intel struggled over the return on these investments. Typically, my team was able to calculate the costs with precision, but the benefits were harder to quantify. During decision meetings the Intel staff often talked about values – such as "community goodwill" – which are vague and hard to monetize. The Intel management during this time deserves credit for making these investments in the face of unfavorable or unknowable return on investment (ROI). Most of these meetings ended when the decision-maker would ask, "Guys, is this the right thing to do?" We would go around the table and nod in the affirmative, at which point we agreed to move forward.
In many companies, similar to the Intel case, the environmental team was the birthplace of the sustainability program. While the environmental function continues to be a central component of a sustainability program (especially for manufacturing businesses), the expanded scope of issues and expectations from stakeholders has outgrown the capabilities of the environmental department.
The growing gap between EHS and sustainability
A few years ago, I gave a talk to a group of EHS professionals illustrating the growing gulf between environmental compliance and sustainability. Titled "Sustainability 101," I started the session asking for a show of hands on "who can define sustainability?" No hands went up and all I heard was the sound of crickets chirping. This audience was far more focused on the nuts-and-bolts of environmental management than the esoteric definition of sustainable development – the perfect group for my Sustainability 101 lecture! The widely used Brundtland Commission definition of sustainable development is "development that meets the needs of the present without compromising the ability of future generations to meet their own needs." This sounded like so much hot air to this group of compliance engineers.
(Continues...)
Excerpted from CHANGING BUSINESS FROM THE INSIDE OUT by Timothy J. Mohin Copyright © 2012 by Greenleaf Publishing Limited. Excerpted by permission of Berrett-Koehler Publishers, Inc.. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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