Businesses that boom by treading lightly on the earth
In the United States alone, small businesses (roughly defined as having fewer than 500 employees) make up 99.7 percent of all employers and generate nearly 41 percent of domestic sales and 97 percent of all U.S. exports. The small companies highlighted here, which would be considered a success by most any conventional standard, are experimenting with new business models and incorporating sustainability with high ethical standards to make their workplaces more humane, their products more earth friendly, and their legacy about a lot more than decimal points on a ledger.
Nonprofit or for-profit — why choose?
One morning in March 2005, an American University student climbed atop the roof of the student center and unfurled a large banner: “Ideas into Action: Living Wages, Organic, Shade-Grown, Nonprofit. Pura Vida — The Guilt-Free Choice.”
The school was choosing a new coffee vendor, and the students were declaring their preference over another, better-known Seattle coffee company. It was a demonstration from a commercially proven demographic that many companies would have to spend millions to attract.
Cofounders John Sage and Chris Dearnley met 20 years ago while they were attending Harvard Business School. Sage went on to make millions at Microsoft, Dearnley to do missionary work in Latin America. Years later, after a round of golf, Dearnley offered up a bag of Costa Rican coffee and a partnership was born: a 100 percent charitably owned enterprise that combines a profit-driven beverage company and a charitable nonprofit.
Both arms of the business have been successful: Pura Vida sold half a million pounds of coffee in 2005, making it one of the country’s largest fair trade sellers; it also contributed $1.4 million to innovative social programs benefiting at-risk children and their families in the countries from which it gets its coffee, tea, cocoa, and chai.
“The power to multiply resources and generate long-term, sustainable returns is unique to capitalism, yet we believe that those same forces — forces that can take a dollar and multiply it into $100 — can be used on the nonprofit side as well,” says Sage.
Pura Vida is now served on more than 100 campuses. The company’s branded “Sustainable CafŽs” are full-service campus espresso bars that showcase sustainability down to the last wood panel and coffee sleeve. To see where all those latte dollars go, students might visit coffee farmers and the social programs the company supports. Or they might take an economics lesson on Pura Vida, as Harvard Publishing now distributes a multi_media case study on the company’s charitable model to business schools across the country.
Cleaning a dirty industry by recycling
When Matthew and Bonita White of Magnolia, Texas, were planning their nuptials three years ago, they shopped in vain for rings made with recycled gold. They married anyway, without the bands that bind, and then started their own company, greenKarat, an online retailer of recycled gold jewelry.
Gold mining is notorious for ravaging the environment and displacing indigenous people. The production of a single 18-karat gold ring, the poverty relief organization Oxfam estimates, generates at least 20 tons of mine waste. And 80 percent of new gold mined every year gets made into jewelry, even though untold tons sit unused in bank vaults and dresser drawers.
For the bejeweled with a social conscience, greenKarat offers some 40 products made from melted-down bracelets, watches, and computer parts at facilities that meet international environmental standards. Additionally, each piece of jewelry has a tracking number consumers can use to ascertain the product’s ecological footprint: whether it was laboratory grown, for instance, ecologically minded, or fairly traded.
The Whites hope to both curb further extraction and raise the consciousness of fellow jewelers and consumers. Since March 2004 eight major retailers, including Tiffany & Co. and Cartier, have pledged to depart from “dirty gold” sales and urged mining corporations to clean up their act.
Zak Zaidman and Stephen Brooks, who at the time had no experience in food retail, admit they were overmatched as they sat across a conference table from buyers at Whole Foods Market’s headquarters in 2004. They did have a good story, though.
Farmers in a Costa Rican banana cooperative were selling delicious banana vinegar out of plastic bottles in small grocery stores and roadside stands. The cooperative was certified organic, ready to export, and desperately seeking an international market. When Brooks and Zaidman got wind of its plans, they helped the company meet standards for distribution and eventually forged a partnership.
In negotiations with Whole Foods, the two disclosed all of their costs in order to arrive at a fair margin for everyone involved, particularly the farmers. At this, as Zaidman tells it, the buyers practically rolled their eyes. “We were being more transparent than anyone is used to,” he recalls. “Everyone expects negotiations to be a poker game where you show some cards and hold others. Instead we opened and showed our hand totally.”
Transparency worked. Whole Foods buyers not only signed on to stock Kopali Organic’s wares, they offered the fledgling company signage and marquis shelf placement at 23 markets. The company even equipped each Kopali display with a looping video telling the human and ecological story behind the food products, which now include dried fruit, honey, and preserves produced by Mexican farmers, in addition to the original banana vinegar.
Organics is the latest in Brooks and Zaidman’s family of radical ventures, both nonprofit and for-profit, all linked with Costa Rica. There’s an educational tour and travel company, an 85-acre off-the-grid organic farm and educational retreat center, and a fledgling real estate development project that is buying former farmland to create ecological villages.
Brooks and Zaidman hope to set up satellite offices in other countries to develop new products and serve small farmers. And in May they’re rolling out a television pilot on the Travel Channel that will endeavor to feature sustainable agriculture projects in 13 countries. “Once upon a time, farmers got most of every dollar that was spent on food. Today, they get almost none of it,” says Zaidman. “Capitalism as usual hasn’t worked for them, so we have to change the rules of the game.”
A profitable co-op that still cares about small farmers
The bucolic farm scene on Organic Valley’s milk cartons is more than a branding scheme. As the largest organic farmer-owned cooperative in North America and the second-largest producer of organic dairy products, Organic Valley is doing its best to save the last of the family farmers from extinction.
The co-op, based in LaFarge, Wisconsin, has long faced mean odds. Since the 1960s, some 600,000 family farms have been swallowed up by large companies. For instance, one of Organic Valley’s major competitors, Horizon Organics, was purchased by the multinational corporation Dean Foods in 2003.
So far, though, corporate competitors have only made Organic Valley more resolute. What began in 1988 as a group of seven Midwestern organic dairy and vegetable farmers has mushroomed into more than 730 farmers producing juice, eggs, meat, and soy products sold in more than 10,000 stores. High market prices for these products in the past few years have translated into unheard-of growth for the $245 million cooperative: 25 percent annually, a rate faster than both the conventional and organic food industries.
Demand for organic dairy products has been so steep that the co-op is currently recruiting 25 to 50 new dairy farmers each year. To compete against corporate buyers who lure farmers with signing bonuses and the promise of higher prices, Organic Valley offers ownership and has a track record for consistent, satisfactory prices for farmers and commitment to the values behind family farming. Recently the co-op launched Generation Organic, an organization that provides education and support for young farmers who may otherwise abandon family farming.
Because it is owned by members, Organic Valley is able to thoughtfully debate every decision, from pasture standards to whether or not to sell at Wal-Mart. An elected board of directors sets a sustainable annual price paid to farmers. Profits are shared: 45 percent to farmers, 45 percent to employees, and 10 percent to the community. To raise equity, a challenge that has troubled other co-ops, Organic Valley started a well-supported preferred stock program, selling to individuals and local communities; they are granted limited influence but favorable returns. “Cooperatives represent an alternative to what’s wrong with corporations,” says CEO George Siemon, who is at the vanguard of proponents of stricter organic standards and sustainability.
Moving forward, some co-op members at Organic Valley are growing their own fuel, and a committee of farmers and staff are exploring energy self-sufficiency.
Activists in the boardroom
If you’re looking for a vegetable-based laundry detergent, chlorine-free diapers, or a paper towel made from postconsumer recycled fibers, chances are you’ll find Seventh Generation. The Burlington, Vermont-based private company, which started 17 years ago as a mail order cataloger, has emerged as the nation’s leading brand of nontoxic and environmentally safe household products. But its president, Jeffrey Hollender, doesn’t talk like most corporate chieftains.
“I would be delighted if Procter & Gamble wanted to copy everything we’re doing,” says Hollender. “That would bring about greater change far faster than we’re going to do on our own, and would force us to set the bar even higher.” So far the major brands haven’t stepped up. Seventh Generation commands 48 percent of the natural household products market, and revenues grew by 40 percent in 2004.
The company applies a “systems thinking” approach to accomplish its mission, which is to use its products, work culture, and educational and marketing materials to inspire positive change. The company donates 10 percent of its profits to social and ecological causes, offers generous employee wellness benefits, and is offering scholarships to 100 budding activists to attend a Greenpeace training camp. A new line of organic cotton feminine care products rolling out this spring will be donated to women’s shelters, and a website will promote volunteer work at those shelters.
The company’s self-reflective corporate responsibility report, written in collaboration with nonprofits, employees, and the local community, sets a standard, balancing gains like the replacement of petrochemicals in its products with shortcomings like lack of workplace diversity. The soul-searching document is a model of how companies can go beyond being a good corporate citizen with a neutral net impact.
“Capitalism needs much higher aspirations than anyone has so far dared to talk about,” says Hollender, a tireless lecturer who last year spoke at more than 25 business schools. “Doing less ‘bad stuff’ — that is not going to get us to where we need to be.”
The idea of a “triple bottom line” financial institution seems oxymoronic. Yet Vancouver’s Vancity, a democratically run cooperative credit union with nearly $12 billion in assets, offers mortgages, investments, savings accounts, and insurance at 42 branches. And since the bank’s roughly 330,000 customers also own the bank, their votes ensure that the institution offers favorable returns to its community and the environment without compromising financial returns.
Since 1945, when it started with the premise of “banking with the unbankable,” Vancity has been one of Canada’s most visionary companies. In the 1960s, for example, it was the first to offer loans to women without requiring a male cosigner. More recently, it became the first financial institution in the country to use 100 percent postconsumer wastepaper, and it has pledged to go “carbon neutral” — emit no more greenhouse gases than it can offset — by 2010.
Vancity also supports community members who want to make more ecologically sustainable choices. It was the first financial institution in Canada to offer special financing for hybrid automobiles and energy-efficient home renovations. Each year, it awards hundreds of grants worth between $500 and $1 million to community groups working for environmental and social justice.
And its innovative employee benefit program redefines the concept of worker friendly: When a branch is robbed, staff members get free massages.