IN SAVAR, BANGLADESH, next to the Genda Government Primary School, there’s a river full of toxins from nearby textile factories. The ‘suffocating’ odor in the air makes students and teachers feel dizzy, vomit, and lose focus. Debilitating headaches for students and teachers aren’t uncommon; occasionally students faint. Ironically, the children of Savar are entirely dependent on these factories, which make the clothes we buy in the West. The income their parents earn allows them to go to school. But those factories are also the worst fixture in their lives.
They do protest the pollution. But the industrial interests always win out. According to the school’s headmaster, Mohammed Abdul Ali, “We’ve never seen the owners take our appeals seriously . . . everything is going on as usual. They have a good relationship with the politicians. That is why they don’t care.” Every now and again a reforming minister or regulator comes to power and attempts to do something but is inevitably stifled. For a short period Munir Chowdhury, an environmental official, held textile factories accountable, conducting raids and imposing fines. He didn’t last; he was transferred to another department. More often than not, ministers are part of the problem. “These people who are setting up industries and factories here are much more powerful than me,” says Mohammed Abdul Kader, the mayor of Savar. “When a government minister calls me and tells me to give permission to someone to set up a factory in Savar, I can’t refuse.”1
I ARGUED IN the previous chapter that business is the most powerful force for progress the world has ever seen. One way or another, we all depend on trade, capitalism, and the profit motive for the big positive changes we want to see in the world, from creating opportunity and tackling inequality, to providing the products and services that help make our lives richer and more pleasurable, to the innovations that help fight poverty, hunger, and disease. There is no government in the world, no part of the public sector anywhere that does not rely on successful, profitable businesses for its very existence. To combine businesses with markets is evidence of our ability to create institutions that, broadly speaking, deliver human progress and make the world a better—and more human—place.
But too often business fails us. In the last chapter we saw how the structure of modern capitalism has helped create massive, often global corporations that manipulate laws, purchase political power, and use their economic might and incumbent advantages to suppress competition. These businesses objectively make a mockery of capitalism. There are plenty of others, however, that fail on a different count. They may operate in competitive markets; they might not lobby or litigate their way to the top, but they nonetheless do harm, not through their dominance of anticompetitive practices but simply by the way they behave.
SUPPLY CHAIN
In our globalized economy, to save themselves—and us, as consumers—money, many companies base their supply chains in places like Savar, where the rule of law is weak and the potential for corruption high. Too often they take advantage of holes and blind spots in the system that allow them to pass on all of the costs of their operations to exceedingly vulnerable populations.
Take the ubiquitous pair of denim jeans. Their blue color might be their most inhuman feature. In countries like China, India, and Bangladesh, wastewater that is used to dye and process textiles is routinely dumped untreated, saturating rivers and streams with carcinogens like chromium, lead, cadmium, arsenic, and mercury. This not only poisons the factory workers and their families who live nearby; it kills off fields and local fish supplies as well. In the Pearl River Delta in China’s Guangdong Province the water literally runs blue from the synthetic pigments used to process 200 million pairs of jeans dyed there every year.2 According to Green Cross Switzerland, 9 trillion gallons of water are used annually in textile production around the world. Most of it is dumped untreated.3
Sometimes our quest for low prices even kills: in 2013 garment makers in the Rana Plaza building in Dhaka, Bangladesh, were ordered back to work the day after cracks appeared in its structure. It collapsed soon after, killing 1,129 people.4
Over the past decade the Internet has done a great deal to help concerned consumers choose alternative, ethically produced goods. “We sell online and through our store directly and skip middlemen,” explains Mark Spera, cofounder of BeGood Clothing, a San Francisco startup. “That’s how we’ve been able to offer a disruptively low $15 price point on our T-shirts.”5 The entire clothing line is made in Los Angeles and San Francisco in good conditions, by workers paid fair wages. And all from materials that are organically harvested and processed sustainably, without the use of harsh chemicals. The Internet has also allowed BeGood to be maximally transparent about how suppliers are treated. At their store and online each item carries an explanation of the materials and processes involved as well as the people and places along its supply chain. More information means better, more conscious choices.
The problem is that the jeans produced in Guangdong or the shirts made at Rana Plaza are cheap; the shirts sold at BeGood in San Francisco are, although relatively inexpensive, still not competitive with what’s sold to the average Western consumer. But the only reason sweatshop textiles are cheap is because the businesses that produce them choose not to treat people decently. Taxpayers, not the businesses, then foot the bill for the harm they cause—assuming local officials or international governments do anything at all. So rather than perpetuating the fiction that social and environmental responsibility is an indulgence for the rich, we should be asking why we continue to subsidize companies that offload the true costs of their operations onto taxpayers.
Even supply chains that don’t explicitly pollute incur costs we don’t see. I live in California, where an epochal drought has led to severe water restrictions, replete with parched lawns, untilled acres, and unflushed toilets. And yet while we worry about leaving the faucet running, many of the products we use and consume require far more water to produce and to bring to us than we ever could consume through our taps. The almond has famously gotten a bad rap (each one needs about a gallon of water to grow), but other foods are just as bad: two ounces of rice take 15.1 gallons; a strawberry takes a quart. Animal products are even worse: four glasses of milk require 143 gallons of water, whereas just 1.75 ounces of beef require 86 gallons.6 Meanwhile the average American uses thirty-five pounds of cotton per year, equal to 3,500 gallons, and a one-way cross-country flight uses as much water as 1,700 toilet flushes.7 But again, because these processes are obscured, we don’t understand them.
WORKPLACE
Although the Internet might help concerned shoppers find BeGood’s T-shirts (or indeed, save water), it can also do just as much to obscure abuse and harm. We make a fuss about corporations like Walmart because we can identify their employees—we see them in the aisles and at the registers. But online retailers like Amazon, however innovative and cost saving for consumers, can hide how they treat their people behind the clean facade the Internet allows them to put up. Amazon’s workers are out of sight and, as a result, easily out of mind. Undercover investigations have revealed employees toiling in warehouses for low wages in slave-like conditions. One investigative report describes life for a temporary worker in his fifties at an Amazon warehouse in Allentown, Pennsylvania:
[He] . . . worked ten hours a day as a picker, taking items from bins and delivering them to the shelves. He would walk thirteen to fifteen miles daily. He was told he had to pick 1,200 items in a ten-hour shift, or 1 item every thirty seconds. He had to get down on his hands and knees 250 to 300 times a day to do this. He got written up for not working fast enough, and when he was fired only three of the one hundred temporary workers hired with him had survived.8
At an Amazon facility in Wales, employees work fifty-plus-hour weeks at minimum wage. They’ll be fired if they take more than three sick days in a three-month period (or get sick twice and show up late by a minute twice, or get sick once and are late four times, and so on). According to one undercover journalist who visited in 2013, strict fifteen-minute breaks start wherever the worker happens to be in the warehouse at the time, which could be a long walk away from a place to sit down. And that’s after passing through airport-like security to be patted down (to prevent theft).9 At the Pennsylvania warehouse employees are actually tagged with their own personal GPS so managers can govern their movements ‘scientifically.’ If employees don’t go to the toilet nearest them, they are asked why.10 Treating people like this is humiliating and undignified.
It’s not just warehouse workers. A recent report in the New York Times highlighted the intense pressure on Amazon’s white-collar employees, those working on software, product development, and marketing. Employees faced “annual cullings,” often based on anonymous feedback from colleagues, who were all competing against each other; they openly wept in the office under the pressure; facing a boss described as an “insatiable taskmaster,” some employees worked for days without sleeping. Perhaps most troubling were the reports of employees in deep personal distress, facing family crises or even cancer diagnoses, who were given little to no flexibility and faced serious repercussions for their corresponding shortcomings.11 This lack of compassion, this treatment of employees as mere cogs in a well-oiled machine, is certainly within the legal rights of an employer to do. But it’s not human. Yes, Amazon workers might be marginally more productive, but at what cost? Surely there is a better way to run a business.
In fairness, although Amazon did not dispute the accuracy of the allegations, Jeff Bezos, the company’s visionary founder and CEO, has said these reports don’t depict what he believes he’s building. “The article doesn’t describe the Amazon I know or the caring Amazonians I work with every day,” he wrote, acknowledging that he would leave such a company himself if he thought the article painted a full and complete picture. Indeed, he said that any employee facing circumstances as described by the Times should immediately escalate the issue to Amazon’s human resources department.12
In response to the earlier warehouse exposé, Amazon said, “We’re working hard to make sure that we are better tomorrow than we are today.” No doubt they are. But warehouse employees, many paid just a few dollars above minimum wage, are still often required to sign heavily restrictive noncompete contracts, thereby limiting their ability to change jobs, even if they’re just working seasonally. When one warehouse in Coffeyville, Kansas, was shut down, laid-off employees were admonished in their severance agreement to “fully comply” with the noncompetition agreement as they struggled to find new jobs.13
At Amazon, as at many big companies, it’s the subordination of human values that allows harm to take place. Bureaucratic, tech-enabled systems eliminate basic humanity and the personal connection, kindness, and empathy natural to nearly all of us. I don’t know him, so I can’t be sure, but I sincerely doubt that Bezos would, if he found himself in one of his warehouses with an employee betrayed by the personal GPS as having gone to the ‘wrong’ toilet, actually ask that employee why. The system, the process, the bureaucracy—these are things that distance people from each other.14
A CULTURE OF FAIR PAY
Amazon is not alone. Companies everywhere proclaim that “people are our greatest resource,” yet too many treat their employees as nothing more than units of production, paying them as little as they can get away with, putting them on zero-hours contracts, imposing incredibly stingy—and counterproductive—sick, holiday, and leave policies. But others choose to do things differently.
As we’ll see in the following chapter, Costco pays its employees well above the living wage, and it is one of the most successful companies in the world—in a cut-throat, slim-margins industry. For them, paying a decent wage increases productivity, makes recruiting easier, and lowers turnover. Whole Foods publishes the pay of every employee, from top to bottom. This might seem extreme, but it engenders social solidarity. When top executives make hundreds of times more than those at the bottom (they don’t at Whole Foods), it’s demoralizing. J. P. Morgan purportedly said that he would never lend money to a company whose best employees were paid more than twenty times anyone else because it would be unstable. (In 2014 Jamie Dimon, JPMorgan Chase’s CEO, made about 160 times his average employee’s salary.15)
This is not some immutable law of business. Ethan Berman was the founder and CEO of RiskMetrics, a financial services company that was, ironically, spun out of JPMorgan Chase in 1998. He insisted in a letter to his board that he be paid less. He wrote, “Last year I was disappointed in the way I was compensated and I have therefore taken to writing this note in the hope that it does not happen again in 2005.” He continues, “As I told the committee before last year’s meeting, there is no amount of stock options, restricted stock or any other stock-based compensation that would make me feel more of an owner, or increase my commitment to the company,” he advised. “Instead, I ask the committee in looking at the list to broaden its definition of ‘leaders’ beyond employees with significant managerial or financial responsibilities to those who display time and time again the values that we as a company believe in and therefore ‘lead’ others by example not by mandate. That, as much as any other attribute, will create value in the long run.”16
Berman was right: In 2008 RiskMetrics went public at a valuation of just over $1 billion. In 2010 it was acquired by MSCI for $1.55 billion—a 48 percent increase in just twenty-four months.17
TIME SOVEREIGNTY
Treating people as human beings in the workplace means more than just paying them fairly, though. Businesses are in control of a broad range of conditions for their workers, including how much of their time they demand. Work is just one part of people’s lives, and although employees have obligations to their employers, employers should respect employees’ obligations to their friends, parents, children, or relatives and afford them as much flexibility as possible. Often totally unnecessarily from a business point of view, workplace culture too often enforces norms of working twelve hour or more days. When new employees think the only way to be promoted is to work excessive hours, then the cycle simply continues. As one psychologist put it, “Long hours has become a proxy for good performance.”18
Sir Richard Branson, founder of the Virgin Group, is one boss who decided enough was enough. After an encouraging note from his daughter and reading that the ‘take as much holiday as you want’ policy at Netflix increased morale, creativity, and productivity, he decided to do the same for salaried employees across Virgin. He wrote, “It is left to the employee alone to decide if and when he or she feels like taking a few hours, a day, a week or a month off, the assumption being that they are only going to do it when they feel a hundred percent comfortable that they and their team are up to date on every project and that their absence will not in any way damage the business—or, for that matter, their careers!”19 Of course, this model has its pitfalls: social pressure may lead employees to take less vacation. But it should be admired for its innovative spirit. Americans especially need to take more time off (they take an average of fourteen days a year to the Europeans’ twenty-eight), and any serious idea to encourage that should be welcomed.20
Time-off policies are critical to get right because they can have enormous impacts on family life. Becoming a parent should be a joyous milestone, not an occasion to lose a chance at a career or be laid off, as it is for many who work. Mothers in particular face brutal challenges upon having children, with workplace policies and cultures that make it difficult if not impossible to resume their careers. Couples should be able to get pregnant whenever it is right for them, and there should be comprehensive job protection for mothers who are. Until such formal protections are in place—and corporate culture to match—I’m afraid Princeton political scientist, think tank executive, and former State Department official Anne-Marie Slaughter is right: “Women still can’t have it all.”21
It isn’t just about maternity or paternity leave, though. It’s also about allowing parents to take care of their children, and sons and daughters to take care of their aging parents. Many businesses impose negative consequences on workers who have to take time off due to a family emergency. Again, though this is a problem that affects all types of workers, it is felt acutely by low-wage earners. As with holiday time, whereas 90 percent of high-wage workers have the flexibility to take paid time off or move their schedule around during a family crisis, less than half of low-paid workers have these same benefits.22
This is inherently inhuman. Family is central to human nature and the most important institution in society: being a parent is one of the most human acts possible, giving birth to a child even more so. But by becoming mothers, women end up bearing a steep cost for this indispensable duty. They suffer the indignity of losing out on career advancement, of being forced to choose between meaningful work and spending time with their children, and of every choice they make being wrapped in terrible guilt thanks to the failure of business culture to adapt to a world of gender equality.
Helping parents be better workers and better mothers and fathers at the same time is central to treating employees like people and making business more human. Better family leave policy especially matters to low-wage employees. Predictable hours, workplace flexibility, paid leave, days off—these are all part of the same theme: respecting workers by treating them well, treating them in a way that is more human.
DISCRETION AND AUTONOMY
You see the trend toward inhuman treatment of workers in other ways too, and again, technology can exacerbate but also help. Bosses are often incentivized by systems created by management consultants or software programs bought in order to help improve ‘efficiency.’ The result: employees are inhibited from exercising their abilities to the fullest and not trusted to use their judgment, work autonomously, or make decisions outside of specific frameworks.
Much of this comes from the drive to quantify performance. You can understand the impulse that led to Amazon forcing its warehouse employees to track themselves with countdown-beeping GPS devices, but how can that justifiable impulse be channeled into a more human approach?
Consider the annual performance review. Studies have shown that they are demotivating and serve little purpose, as bosses score most of their employees in the middle to avoid awkwardness.23 The more human alternative is also the one that, more simply, improves performance: frequent, informal meetings. Most employees want to learn and improve anyway. Telling workers what’s wrong or what could be improved ahead of time gives everyone a chance to take action: “The boss’s job is to fill in the gaps and accomplish results,” UCLA business professor Sam Culbert argues. “It’s not to give report cards.”24
Generally workers at every level want to take action to excel at their jobs. But for that they need sovereignty over how to go about doing them. It’s easy to see how managers’ impulse for ‘quality control’ leads to structures that drastically curtail discretion, but by treating workers like robots, they send a tacit message that they simply aren’t smart, observant, or creative enough to know how to accomplish the task at hand. This is inhuman. And it causes them to be inhuman toward others.
Some businesses are choosing to behave differently. MetroBank in the UK was founded only six years ago and determined to break the mold of its competitors (which universally rank badly for customer service). Its staff are incentivized with bonuses based not only on profit but also on customer service results. Branches are open 361 days a year, from 8 a.m. to 8 p.m. on weekdays, and calls must be answered by the third ring, twenty-four hours a day, seven days a week. Most impressively, customer-facing employees are to say “yes” to customer requests as much as possible. They can say “no,” but only after seeking a second opinion from a colleague first.25
Zappos, the online retailer (now owned by Amazon), has built a brand on customer—and employee—happiness. In 2010 it even ran an advertising campaign featuring real-life recordings of calls its employees had with customers. The fact that employees are encouraged (and trusted—there are no phone scripts) to go out of their way to make customers happy is part of its business model and one of the reasons customers come back. In 2011 a Zappos employee sent a large bouquet of flowers to a woman she had spoken to on the phone after she was having trouble finding shoes that were comfortable enough for her sensitive feet that had been damaged by medical treatments.26 Another time a customer service agent went in person to another store to buy a pair of shoes that were out of stock and deliver them to a customer who happened to be staying nearby the company’s headquarters in Las Vegas . . . for free.27
IN HIS INFLUENTIAL business book, The Outsiders, investor William Thorndike Jr. profiles eight CEOs whom he found, over the course of almost a decade’s worth of research, to be exceptionally successful. Though he didn’t originally set out to write a book, his interest was piqued after discovering that many of his subjects managed their companies in the same way.28 For example, “there are two basic types of resources that any CEO needs to allocate,” Thorndike writes, “financial and human.”29 In addition to being frugal and humble, the best CEOs, he found, were expert at managing both. When it came to allocating capital, they were obsessive and hands-on. But when it came to managing people, Thorndike found that the best CEOs were master delegators, “running highly decentralized organizations and pushing operating decisions down to the lowest, most local levels in their organizations.”30
At the time CEO William Anders took the helm of defense contractor General Dynamics in 1990, the military-industrial complex, propped up for decades by the Cold War, was collapsing around him. General Dynamics was in no better position: straddled with $600 million of debt and negative cash flow, it was not clear the firm would survive.
Coming from the military, most defense executives had brought with them the same highly centralized, bureaucratic style of management they were used to. Things would be different under Anders, though. After he sold off many of the company’s units to focus on a few specific markets, Anders (and later his successors, James Mellor and Nicholas Chabraja) made it General Dynamic’s top priority to spend capital efficiently and radically decentralize, with responsibility pushed as far down as possible into the organization. Management from then on was to involve itself minimally in each division, holding subordinate managers “severely accountable” (in the words of Chabraja) but left alone if they were performing well. “By the end of Chabraja’s tenure,” according to Thorndike, “the company would have more employees than when Anders arrived but only a quarter as many people at corporate headquarters.”31 Today General Dynamics is thriving: with over $2.5 billion in profits, the company is now worth over four times what it was when Anders took over. “There is a fundamental humility to decentralization,” Thorndike observes, “an admission that headquarters does not have all the answers and that much of the real value is created by local managers in the field.”32
More human businesses give discretion to their employees. It’s not a free-for-all, of course, but companies with even a somewhat decentralized culture are organizations filled with empowered problem solvers who understand their limits, know when to ask others for help (or refer upward when need be), and use the creativity each of us has to make the little part of the company they’re responsible for better. At Johnson & Johnson decentralization is not only key to its business strategy but also how it supports employees. “It gives you a tremendous opportunity to develop people,” according to William Weldon, the company’s CEO. “You give them a lot of opportunity to work in different areas, to work in smaller companies, to make mistakes and to ultimately move to larger companies.” Centralization, however, is a tremendous risk: “If one person makes one mistake, it can cripple the whole organization.”33
MARKETING
Regardless of their structure, there are certain behaviors that should be beyond the pale for every business, and one of the most widespread abuses today is targeted marketing to children. Children are exactly that—children—and it is simply not human for businesses to treat them as consumers. Yet the food and beverage industry, for example, spends $10 billion each year advertising food—mostly junk—to children and adolescents.34 As a result, children between two and eleven view over four thousand ads for food and beverages per year, adolescents twelve to seventeen almost six thousand.35 For every advertisement promoting fruits or vegetables, children in 2014 saw fourteen for candy and thirty-one for fast food.
And it works. According to the Institute of Medicine, food advertising directly affects food choices and purchase requests, in turn shaping diet and health.36 Moreover, food marketed with cartoon characters, such as Dora the Explorer, Scooby Doo, and Shrek tastes better to children. In one study 85 percent of children chose graham crackers with cartoon-decorated labels over the plainly wrapped alternatives; 55 percent of them said the (identical) crackers from the cartoon package tasted better. For gummy candies, the bias was the same.37
Which is why it’s even more insidious that factory-food marketers target children in low-income areas. According to Yale University’s Rudd Center, low-income Latino neighborhoods have up to nine times the density of outdoor advertising for fast food and sugary drinks than more affluent, predominantly white areas. Two-thirds of food ads seen by children on Spanish language TV are for fast food, candy, sugary drinks, and snacks. Advertising for dairy, 100 percent juice, plain water, fruits, and vegetables—combined—comprises just 3 percent.38
It’s not just on TV. Advertising is in even more places today, pervading mobile apps and games, social media, and online banners. A 2012 study found that advertisements support 87 percent of the most popular children’s websites.39 At least these ads are identifiable. The boundary between marketing and content, especially for children, is increasingly blurred. Food manufacturers now create websites with videos, original content, and games, and 81 percent of websites for foods that had been marketed on children’s TV networks have games designed for children.40 Product placement in TV shows and even in video games blurs the lines further. One study calculated that children view ten times as many Coke brand appearances through such embedded advertising than they do through traditional commercials.41
On top of the actual direct harm they do, these inhuman practices also give rise to the worst kind of corporate cynicism and spin. All the big offenders happily participate in studies and conferences about responsible marketing. I remember when running Good Business, I would be completely dumbfounded by some of the things clients of ours would say. Coca-Cola flat-out denied they ever marketed to children, despite their massive sponsorship of sports like soccer or their annual TV ad featuring “Santa Claus coming to town.” Ho-ho-ho, Atlanta. McDonald’s used to say, hilariously, “We don’t market to children. We market to families, and families have children in them.” Well, that’s all right then.
But companies can choose to use their brand and product marketing for good. The makers of the popular children’s television show Sesame Street signed a deal in 2013 with the Produce Marketing Association, which promotes fruits and vegetables, to license its characters for free.42 After becoming aware of company research that showed only 4 percent of women consider themselves beautiful, Unilever launched the Dove Campaign for Real Beauty in 2005 and has been running it ever since. Its 2006 “Evolution” video, which shows in time lapse how makeup and digital editing can transform an average woman to looking like a supermodel, has over 18 million views on YouTube. It not only was shown to have a tangible—albeit short-term—effect on the self-esteem of girls who viewed the ad43 but also sparked a global outcry calling for unmanipulated images in ads and media spreads; Jezebel, an online feminist news site founded the following year launched with an offer of $10,000 for the best example of a magazine cover photo being retouched.44 Dove’s choice to sell products that not only avoid distortive views of female beauty but actually challenge stereotypes serves in stark contrast to the rest of the industry, which unfortunately has failed to catch up.
Although young children aren’t necessarily buying the clothing and beauty products, the effects of advertisements promoting them have serious consequences. According to Common Sense Media, a San Francisco–based nonprofit, “Almost as soon as preschoolers complete the developmental task of mastering a concept of their bodies, they begin to express concerns about their bodies.”45 Nearly a third of five- and six-year olds think their ideal body size is thinner than what they perceive to be their own.46 Remember: this is not kindergartners with a healthy awareness of their own obesity risks, this is mental illness in the form of body dysmorphia. According to research conducted by the Girl Scouts, 48 percent of girls aged thirteen to seventeen “wish they were as skinny as fashion magazine models.”47
SUSTAINABILITY
No one should underestimate the value—and difficulty!—of delivering the business basics: as any entrepreneur or CEO will tell you, it’s really hard to make a good product, provide a good service, and earn a profit on it. But when companies like Dove use their incredible power to simultaneously mix profit with positive social impact, we see the truly amazing potential of business. And one of the most encouraging business trends over the past several decades is business leaders’ realization that companies can take serious steps to minimize their negative environmental impact and still be profitable.
Ray Anderson founded his Georgia-based carpet business, what would become Interface, Inc., in 1973 after seeing modular carpet for the first time in England. With each tile easily installed and removed, it was the perfect flooring to accommodate the rise of cubicles (and proliferation of wires and cords) across corporate America. Plus, damaged tiles could be easily removed and replaced, drastically cutting the cost of maintenance. “I fell in love with the idea,” he said in an interview before he died. “It just made so much sense.”48 Customers agreed: within a decade the company had gone public. Over the next ten years Anderson would expand his empire to Europe and the Middle East, later expanding to Asia as well and, over time, acquiring more than fifty other companies. Today Interface has grown to become one of the world’s largest carpet manufacturers, with over $1 billion dollars in annual revenue.49
Carpets, however, are made primarily from petroleum; their manufacture requires an enormous amount of it—not to mention water and energy—and it produces a huge amount of unrecyclable waste. By the early 1990s people were starting to take notice. “We’d begun to hear this question from customers that we’d never heard before—in so many words—‘What’s your company doing for the environment?’” Anderson recalls, “We had no answers. . . . It was very embarrassing. It was awkward for our sales people. It was awkward for our manufacturing people. For our research people.” So in 1994 the company assembled a task force to look into sustainability. Right before they launched their initiative the team asked Anderson—a prolific speechmaker—to say some words. Though he supported the task force’s goals, he didn’t really have anything to say—that is, until someone gave him a copy of environmentalist Paul Hawken’s book The Ecology of Commerce.
“I had never given a thought to what we had taken from the earth or were doing to the earth to make our products—except to always be sure that there’s enough of that stuff running through the pipeline to keep our factories running. It was a spear in the chest experience,” Anderson said. “I read it and wept. It laid out so clearly the problems of the industrial system. The system of which my company, my creation—this third child of mine—was an integral part.”
Now his personal mission, Anderson pushed Interface researchers to look into every aspect of the enterprise that could be made more sustainable. They switched to renewable energy, eliminated as much waste as possible from their manufacturing plants, and made concerted efforts to ‘close the loop’ on their products so that they could be fully recycled at the end of their useful lives and turned into new products once again. Anderson’s vision—what became known as Mission Zero—was for Interface to have no negative environmental impact by 2020. Ray Anderson died of cancer in 2011. He didn’t live long enough to see Mission Zero accomplished. But company executives say that in the seventeen years leading up to his death, their environmental initiatives have reduced greenhouse gas emissions by 24 percent, fossil fuel consumption by 60 percent, landfill waste by 82 percent, and water use by 82 percent—all while avoiding over $450 million in costs.50
Around the same time Anderson had his epiphany, Bill Whiting, the marketing director (and, later, CEO) of B&Q, the British equivalent to Home Depot, had a similar experience. When a journalist asked him at a press conference how much tropical hardwood, much of which comes from precious rainforest, B&Q stocked, he confessed he didn’t know. “Well, if you don’t know, you don’t care,” the journalist replied. Stung, and now determined to know the answer, he hired a scientist, Dr. Alan Knight, to come work for B&Q as an environmental specialist. Knight dove right in, investigating the social and environmental problems associated with the timber B&Q sourced. He discovered that much of the company’s timber was harvested using clear-cutting techniques, whereby entire forests are practically mowed down, devastating both natural ecosystems and local communities. So in 1991 B&Q announced that within five years it would only source timber from ‘well-managed forests’—that is, forests where such destructive processes were not allowed.
But in 1991 there was little expertise on how to ‘manage forests well,’ especially to meet the business needs of a large multinational firm with a complex supply chain like B&Q’s. So Knight oversaw a forest laboratory in Papua New Guinea, where destructive logging techniques were commonplace. He and his team were interested in developing techniques to train local communities to manage their own forest resources in an environmentally responsible way (e.g., using portable sawmills allowed them to harvest only high-value timber, minimizing damage and ensuring future yields). The project also developed systems for independent verification of well-managed forests so that timber buyers other than B&Q knew where their product came from and how it was harvested.
With this expertise B&Q was able to help create the Forest Stewardship Council in 1992, an independent NGO to set forest-management standards and oversee sustainable timber certification at a global level. As a result, countless forests—and the communities they support—have thrived. And B&Q—hardly a niche, ‘ethical’ brand on the fringes of the marketplace—was able to not only meet its target but also to apply the techniques it had learned to other products throughout its supply chain, setting the company off on an ongoing quest to better steward the people and nature it touched.51
TECHNOLOGY’S PROMISE
Although, as we have seen, technology can have a baleful impact on the human side of business, it can also work the other way, especially by improving information. The Internet enables consumers to discriminate on the basis of more than just quality and price: they can increasingly take human and environmental impact into account too. As companies like BeGood raise the bar about how much information is provided about consumer products, social impact becomes a consumer feature just like any other. This has been a winning strategy for firms like Patagonia, the environmentally sensitive—and enormously successful—maker of outdoor clothing. It has used its websites to show where and how its products are made, recently announcing the completion of a seven-year process to make sure all the down feathers used in jackets and sweaters are 100 percent traceable and cruelty-free. One section of their website, the Footprint Chronicles, traces the journey of some of their products around a global map, showing images, videos, and descriptions of each step along the way.
Or browse the website of Everlane, a much younger clothing maker. On the top of its homepage are links to its main sections: “Men’s,” “Women’s,” then “Factories.” When you click on the page, up pops a map pinpointing each part of its supply chain, from leather shops to distribution centers to mills and factories. Each of them has a dedicated page showing basic data, like the number of employees, the date it was established, even current time and weather. Further down is a description of which products are made there, how Everlane found this particular factory, details on the materials it sources, and information about the factory’s owner. If you scroll down, you can look at high-resolution images taken by Everlane’s staff. Back on the individual product pages, which all link to their relevant factory-profile pages, Everlane takes transparency a step further, breaking down where every penny of the purchase price goes—from materials and labor to transport and profit.
PCH breaks down the supply chain even further. Founded by the Irish entrepreneur Liam Casey, PCH is one of the world’s largest technology hardware manufacturing companies; it also makes most of its products in China. But that doesn’t mean consumers can’t see exactly how their products are made. PCH customers can go to the company’s website, click on a product, and see where it is made. But more than that, they can see the individual workers who worked on it; they can literally see their names and the times they clocked in and out of the factory. “You see photos of production workers all the time. We actually name the workers,” says Casey. Rather than keep them anonymous, Casey feels it’s important that his workers, wherever they are in the world, are credited for their contribution. “It’s natural,” he says, to highlight them. “When you spend nineteen years building a company and these people work with you, they’re a part of that story, so it’s only right that you share the success with them and that they understand all the products they’re working on and where they go.”
“Transparency is about a lot more than worker relations. It’s also about engaging with consumers. . . . You can track a product right through all the workers involved in a product, the factories. Shipping time.” Casey believes that educating the consumer so completely allows them to not just buy a better product but also to make a purchasing decision that has wider benefits. “If you give consumers the choice—here’s information that shows a well-managed supply chain vs. one that’s a black box—if you can share that information, they will make a decision that is a better decision.”52
It’s not the Internet alone that’s having a huge effect on businesses’ social and environmental impact. Ubiquitous mobile technology can enable a hyper-transparent supply chain we could never have imagined twenty years ago. In previous decades ‘corporate responsibility’ meant the occasional, unannounced inspection, with the results being filed away or scanned into big PDFs hidden on investor-relations websites. But now, with mobile technology nearly everywhere, we can fundamentally change how we evaluate a company’s working conditions, not to mention its overall impact on vulnerable communities.
“The current tool is an audit and certificate,” says David Bonbright, head of Covox, an innovative human-rights monitoring firm. “It doesn’t tell you how to solve any problems that might arise, just that there are problems.” So Covox takes a more human, twenty-first-century approach based on the fact that nearly every worker in the developing world—even the poorest—has a mobile phone. Workers are asked directly about their own conditions, questions like: “Does your employer treat you fairly?” “Are working conditions healthy and safe?” and “Does the company respect your community’s rights and behave like a good neighbor?” Every day a question like this is posed to a different representative sample of workers via text message to their mobiles; this way everyone’s voice is heard. The results are immediately reported, collated, and delivered. Now, rather than a twelve- to twenty-four-month lag in discovering that something is wrong on the ground, issues can be discovered and diagnosed continuously. And with basic (anonymized) user data such as gender and age, Covox can gain even further insight into particular issues and how they’re affecting workers and their community. It’s more than mere compliance, Bonbright explains. “It’s about capturing the voice of marginalized people who are part of the supply chain.”53
Tools like Covox aren’t in the hands of every consumer yet. But they could be. And even if consumers are unable or unwilling to pressure for change, companies’ embrace of such technology can improve local communities’ ability to hold their own legal and regulatory bodies accountable. Indeed, it may be the key—or at least play a significant role—in building and sustaining legitimate local governance in some of the most corrupt and oppressive corners of the world. This is where technology proves itself, when wielded correctly, as an enabler of good business—and good govenment—empowering society to make sure corporations put people first.
EMBRACING COMPETITION
Most technology companies seek patents so they can jealously guard their tech from their competitors. Tesla, the electric car company based in Palo Alto, has instead done the opposite, opening up all of its proprietary technology to the public in the spirit of moving the electric car industry forward. Originally, writes Tesla founder and CEO Elon Musk, “We felt compelled to create patents out of concern that the big car companies would copy our technology and then use their massive manufacturing, sales and marketing power to overwhelm Tesla. We couldn’t have been more wrong. The unfortunate reality is the opposite: electric car programs (or programs for any vehicle that doesn’t burn hydrocarbons) at the major manufacturers are small to non-existent.” Musk’s goal is a future of environmentally sustainable cars; he hopes to profit, of course, through Tesla, but he also realizes that Tesla doesn’t have the capacity to rapidly supply the world with electric cars. If the world is to wean itself from fossil fuels, he reasons, Tesla can’t be the only electric car.
Musk’s philosophy is admirably civic minded, but it also reveals the frustration many entrepreneurs have with the way our legal system seems to serve entrenched interests (as we saw in the previous chapter) rather than true innovators. “Too often these days [patents] serve merely to stifle progress, entrench the positions of giant corporations and enrich those in the legal profession, rather than the actual inventors,” he goes on to say in his letter announcing Tesla’s decision to make public its technology. “After Zip2 [his first company], when I realized that receiving a patent really just meant that you bought a lottery ticket to a lawsuit, I avoided them whenever possible.”54 Innovation is really hard, but when companies approach it in the right way, collaborative competition rather than zealous rivalry can help move society forward.
SOMETIMES, THOUGH, LARGE corporations aren’t well placed to push innovation forward. Although they might be good at producing certain core goods and services efficiently and effectively, they just aren’t the best at new thinking. Businesses that find themselves in this situation can react in one of two ways: they can either invest in erecting barriers to entry so that new, more innovative competitors can’t get off the ground (see Chapter 6), or they can work with new entrants and form mutually beneficial relationships that produce more value for society than what either can offer on their own.
Executives at Santander UK, the British division of the global banking giant, decided several years ago that they weren’t in the best position to lend to small businesses. So it now works with Funding Circle, a peer-to-peer financing platform, to direct customers there when it makes sense. “SMEs need access to multiple sources of finance, and Santander’s partnership with Funding Circle is a good example of how traditional and alternative finance can work together to help the nation’s SMEs prosper,” Santander’s CEO Ana Botín said when the partnership was announced in June 2014.55 It’s also a good way for Santander to stay relevant—and survive—in the new banking economy. Since then, other banks have struck similar deals, either with Funding Circle or its competitors.56
Santander has also set up its own venture fund to find and invest in promising upstarts in the banking sector, upstarts that may very well disrupt itself. Santander is not alone. Investing in accelerators, incubators, and venture funds is a growing trend among some large companies—from SAP to Walmart, Deutsche Telekom to Nike—who might otherwise try to lobby government to regulate and close down insurgents. Of course, many of these companies still do engage in the type of antimarket, anticompetitive behavior we saw in the last chapter (Comcast has a venture investment division too), but that doesn’t diminish the promise of more corporate engagement with innovators.
MISSION
My favorite businesses, though, are not just those that provide value to the marketplace without doing harm but those whose profits are intrinsically linked to solving social or environmental problems. In the past five years thirty-one states have passed benefit corporation legislation, allowing for-profit companies to legally pursue social and environmental impact in addition to profit.57 The proliferation of ‘B-corps,’ including the now publicly traded Etsy, shows that multiple bottom lines are not mutually exclusive.
Consider Revolution Foods: started in 2006 by two mothers who met in business school, the company has figured out how to inexpensively make and distribute wholesome, additive-free lunches to children eligible for government-subsidized meals at their schools. To make food kids will actually eat, chefs visit schools to conduct taste tests—cofounder Kristin Groos Richmond describes their meals as ‘kid-designed’—and regional specialties, like jambalaya in Louisiana, are included on the menu.58 The company feeds hundreds of thousands of students in a thousand schools in twenty-six cities, delivering over a million meals a week and generating close to $100 million in revenue. Most importantly, 80 percent of their meals go to underserved communities. It’s a business model that embodies the intersection of good public policy, human-centered design, and real entrepreneurial spirit.59
Here’s another wonderful, mission-driven company. In the tech industry, despite high rates of pay and high levels of unemployed workers across the United States, there is a dire shortage of qualified software engineers. Meanwhile millions in Africa can’t find work. So Andela, a human resources firm, finds and trains top recruits in Africa to then work remotely for top tech companies, far more affordably than recruiting engineers at home. Each candidate is trained for at least one thousand hours.60 And rather than pay tuition, Andela pays them—at a combined cost of about $10,000 per fellow, as they’re called, for four months of training. Fellows then make a four-year commitment to the tech firms for which they’ll work, which include Microsoft and Udacity (which we’ll hear some more about in Chapter 9), and they can continue taking professional development courses throughout their tenure. Andela’s founder, Jeremy Johnson, was inspired to start the company after a trip to Nairobi several years ago: “I just became kind of blown away by the incredible under-utilized human capital that I saw everywhere,” he says.61 The company has already had more than fifteen thousand applicants. Though they’ve only been able to accept less than 1 percent of them, Johnson’s goal is to train one hundred thousand developers across Africa over the next decade. “Our hope and expectation is that the Andela fellows, as they go through the program and graduate, play a key role in the continued growth of the continent.”62
BUSINESSES ARE NOT governments. They can neither lock us up nor take our property. But they are tremendous organizations that accomplish tremendous things. Human progress owes an immeasurable debt to the ingenuity of the entrepreneurs, inventors, and innovators who have used the vehicle of business to benefit us all. Business isn’t without its faults, though. In this chapter we have seen examples of the good and the bad, and it’s obvious that if we want to make business more human, we need to encourage the former and discourage the latter. Some of that, as we saw in the previous chapter (and the one before that, Food) can be achieved by reforming the structure of certain industries—to make them fully competitive or to eliminate subsidies that harm society. Other aspects of inhuman business that cause concern can and should be tackled by government through specific legislation and regulation—for example, to mandate more human family leave policies in the workplace.
But it can’t all be done by government. In the end the many millions of businesses that exist in the world—most of them small—are run by people. We need those people to make more human choices about how they and their businesses behave. Just because new techniques, increased public consciousness, or smart technology make running a good business more and more feasible—and at a profit too—does not mean it’s inevitable. Businesses must choose to be good. And we must encourage them. Just as government should set the rules for fair markets, we should also demand it as investors, consumers, and suppliers, and—wherever possible—from within, as managers and employees. If demanding is too aggressive, then we at least need to be more curious. In our daily lives, we should all be asking, “Where does this come from?” “How were the people who made it treated?” “What are the effects on the environment?” Of course, for us to have these conversations, we need to know more. That’s why moving toward a norm of openness, transparency, and accountability—through a combination of technology, regulation, and public pressure—is such a big part of the answer, a way to make all businesses more human businesses.