02 Aug 2017

Going Green in Global Businesses

Professor Geoff Jones portrays the extraordinary and often eccentric men and women behind early environmental entrepreneurship
Profits and Sustainability: A History of Green Entrepreneurship (Oxford University Press)

Environmentalism and sustainability are top of mind these days, from Volvo’s recently announced switch to electric vehicles and hybrids to reports of increasing ice melt in the Arctic Sea. But it wasn’t always this way. In 1969, for instance, the chemical waste in the Cuyahoga River in Cleveland caught fire and burned for twenty minutes, and years before that, DDT seemed like just another bug spray. So what happened? How did green become mainstream? Professor Geoff Jones, a business historian at Harvard Business School, tells the tale in his new book, Profits and Sustainability: A History of Green Entrepreneurship (Oxford University Press). We recently talked with him in his office in the School’s Baker Library/Bloomberg Center.

What led you to write this book?

Jones: A couple of reasons. Business history has been poor at looking at environmental issues. It’s always looked at how wealth was created rather than the consequences of that wealth creation. I’m trying to fill that void with this book. What are the impacts of externalities like climate change, what are the consequences of growth, and what can companies do about these problems? I’ve been concerned about these matters for some time. In my 2005 history of Unilever, for example, I have a section on the company’s effects on the environment. When I worked on my last book, Beauty Imagined, a history of the global beauty industry published in 2010, I wrote about the trend toward natural beauty and saw how interesting it was, how fascinating the companies and characters were, and that triggered my view that I could write a more general book like this one.

On a personal note, I live just outside of Boston in a house designed by the pioneer modernist architect Carl Koch, who believed that a house and its landscaping should be as one with their natural environment. I look out my windows and see deer, turkeys, and all sorts of other animals walking by every day. I think that experience has crystallized my longstanding appreciation of the environment and the importance of sustaining it. This book explores how business can actually be a device to reverse the decimation of the natural world rather than contribute to it.

Geoff Jones

You point out at the beginning of the book that it tells the unknown story of a cohort of entrepreneurs, often regarded by contemporaries as “oddballs,” who believed that business could create a more sustainable world long before the 1990s, which many other accounts peg as the start date of green entrepreneurship. So when did it actually all begin?

Jones: Way back in the 19th century, soon after the start of industrialization. The people I talk about in the initial chapters of the book were especially interested in food and agriculture and suspicious--long before Rachel Carson in the early 1960s--about what happens when people eat something that’s been sprayed with chemicals and what that does to the soil and the rest of the environment.

Many of these pioneers came from religious groups that were concerned about healing and the health of human beings, and so they were among the first to recognize that all was not going well. Most other people were celebrating the growth of production and not taking into account the negative effects. And that’s been a problem with environmental issues all along. A few people have been waving red flags, saying things are not where they should be, but they were usually characterized as idealists at best, extremists at worst.

Who were some of these “oddballs”?

Jones: Sylvester Graham was a Presbyterian minister in Boston in the early 1800s who believed that a healthy diet would translate into benefits for society as a whole. He founded the American Vegetarian Society, among other things. But he will always be best known for creating the antecedent of what we all know as the Graham cracker, made of whole wheat and high-fiber flour, as an alternative to white bread, which was becoming increasingly popular but had chemical additives.

Consider also Dr. John Harvey Kellogg, a physician, vegetarian, and Seventh-day Adventist, a religious group founded in Battle Creek, Michigan, in 1863 and concerned about health reform. He specialized in making vegetable-based foods that were healthy and inexpensive. In 1897, he and his brother created a company to develop his products, one of which was corn flakes cereal. But as the company developed under his brother’s leadership, the story took an unhealthy turn with the addition of lots of sugar to its various products to make them more palatable and so commercially successful. The brothers had a falling out as a result, but cornflakes remain a staple throughout this country and beyond.

When it comes to the organic food movement writ large, however, you write that we have to look at the life of a fellow named Jerome Rodale. What’s his story?

Jones: The son of a New York grocer, he was a hypochondriac who first worked as an accountant for the Internal Revenue Service before establishing a small electrical manufacturing business with his brother. The money he made there enabled him to pursue an interest in publishing. Moving the manufacturing company from New York to rural Pennsylvania in 1930 after the Great Depression, he bought a small farm and also became involved in gardening. He felt that his diet and health improved as a result. That led to his starting a magazine called Organic Farming and Gardening. Soon renamed Organic Gardening, it became a bible for the early stages of this movement.

The Rodale Press followed, publishing major books on this topic. He also developed one of the first sets of standards for organic foods, an important achievement at the time, since the federal government had not established any. So Rodale was an amazing green institutional builder. I talk about institutional entrepreneurs quite a bit in the book, because I think that building the institutions and the knowledge of green business was as important as making a product. But at this point, the fact of the matter is that these folks still weren’t getting much attention.

But Rachel Carson changed that in 1962 with the publication of her book Silent Spring and its expose of the dangers of the pesticide DDT.

Jones: Yes. Rachel Carson is considered by most accounts as the changing influence on environmental consciousness, and there’s no question that her book had a huge impact. She was a trained journalist, so she knew how to write well and had a good eye for what would capture people’s attention. In addition, the fact that the pesticide companies tried to sue her gave her a great deal of publicity, which helped her promote the book. Interestingly, she never mentions the word organic in the book, even though she drew heavily data on the impact of pesticides collected by two female organic farmers in New York, because she believed that organic food people were generally regarded as cultists or weirdos, and that sort of connection would diminish her influence. That’s an indicator as to how astute she was. Instead, she focuses on the dangers to nature and human health.

Also important to the increased exposure of the environmental movement at this time was a 1968 photograph of the Earth taken by an Apollo 8 astronaut. The striking image of the small blue and white planet in the midst of the sprawling universe caught the attention of the world and was widely adopted by environmental organizations that were formed just a few years later, including Friends of the Earth and Greenpeace. To say a single photograph was transformational would be an overstatement, but this photograph went a long way toward achieving that.

For a long time, there was a feeling that green entrepreneurs couldn’t really make a difference on their own, that they would have to depend on government and federal regulations to protect the environment and promote good health. How and when did that point of view begin to change?

Jones: Looking at the evidence over the long term, I’m extremely skeptical about the ability of governmental policies to achieve very much. With some exceptions, they have a very bad track record when it comes to changing policies, partly because of the constant coming and going of political parties jockeying for positions of power. In contrast, sustainability processes and changes require a steady, long-term commitment.

That said, beginning in the1960s the entrepreneur began to be seen as a kind of popular folk hero with the coming of the likes of Alice Waters of the Berkeley, California, restaurant Chez Panisse, which to this day specializes in organic dining; Paul Hawken, who managed Boston’s first macrobiotic and natural food store and later cofounded Smith & Hawken garden tool supplies; and the late Anita Roddick, founder of the Body Shop natural cosmetics stores. Other names include Yvon Chouinard of Patagonia apparel, Gary Hirshberg of Stonyfield Yogurt, Götz Rehn of Germany’s Alnatura organic food stores, the solar energy pioneer Eliot Berman, and eco-tourism icon Stanley Selengut.

In the late 1980s, British management consultant John Elkington helped the cause by co-authoring the Green Consumers Guide, a comprehensive listing of firms that were doing good things for the environment and society. In 1994 he also came up with the concept of the triple bottom line, an accounting framework focusing on the social, environmental, and financial facets of a company – a set of tools and measures that resonated well with organizations wanting to become more sustainable. Changing mindsets is crucial, and these pioneering green entrepreneurs played important roles in doing that.

A number of green entrepreneurs have gone public or sold their ventures to big legacy companies. Odwalla, for instance, is now owned by Coca-Cola and Burt’s Bees by Clorox. What about the ability of publicly owned companies to go green?

Jones: I’m not confident about the ability of public companies to pursue real sustainability, because they are too geared to quarter-to-quarter results. If true sustainability involves persuading customers to consume less, and thus buy less, public companies, with their fiduciary commitment to revenue growth and shareholder value, are between a rock and a hard place. Although a number of companies have shown a commitment to sustainability, there are limits to what can be done. To solve this problem, I think we need to change the whole concept of fiduciary duty, which going forward should include a duty to the natural environment. Individual consumers also need to be more willing to pay for greener products.

Growth, mergers, and buyouts cause other problems as well. The organic food industry in the United States is a case in point. Whole Foods, for instance, has grown to the point that it now imports organic food from around the world, a process that requires all sorts of transportation. That might be good for consumer choice, but it is bad for the carbon footprint. On another front, the educational component at early organic stores via leaflets and other materials they used to promote green ideology has largely gone away in the age of the organic superstore--and with it their ability to change mindsets and lifestyles. Scaling in many green industries has created new challenges for sustainability.

So is the title of your book, Profits and Sustainability, an oxymoron?

Jones: It depends on how you define profits and sustainability. If you define it as simply painting your head office green and using green packaging, you can make a lot of profits, since there is now a distinct green customer segment. But if you define sustainability as a radical attempt to change people’s minds and values, then it’s a lot tougher. Similarly, if you define profits in the conventional way with a single bottom line, that’s one thing. But if you incorporate into your balance sheet environmental externalities such as water and chemical use, pollution, and carbon emissions, that’s another matter.

My HBS faculty colleague George Serafeim is among those working on trying to change the metrics in corporate reporting in order to capture these kinds of externalities in a company’s balance sheet. Modifying the metrics in this way can create a much more sustainable capitalist system in which it’s no longer an eccentricity to think about these things. Once these other factors are built into the reporting systems, managers will be able to use all their inventiveness to make sustainability happen.

All things considered, are you optimistic about a green future?

Jones: It all comes down to making big decisions regarding values, lifestyles, and purchases. There’s certainly increased awareness among millennials, who are more inclined, for example, to move to downtown areas and use public transportation rather than get bogged down in long commutes. Chances are they don’t even own a car. Millennials also think more about what they’re eating and what they’re buying, favoring products that are good for both them and the environment. They’ve grown up hearing about icebergs melting and shorelines being reclaimed by the ocean. They know things have gotten serious. That’s a start that hopefully bodes well for the future.

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