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Markets With a Mission

10/29/2009 --

Net Impact conference focuses on the side of business that goes beyond profit and loss.

ANN ARBOR, Mich. — The mission of a business might seem simple: Produce a product or a service, make a profit, and use that profit to expand the business.

But social and environmental issues are impacting the business world like never before. Customers and shareholders are demanding more accountability and, in return, these companies are putting pressure on their suppliers to conform to new standards.

The 2009 Net Impact Conference at the Ross School of Business, "Markets With a Mission," showcased ways in which some companies are adapting to the changing landscape and presented an overview of opportunities sprouting up.

But it's a different way of thinking about the fundamental mission of a business that some might want to consider, said keynote speaker Jerry Greenfield, co-founder of Ben & Jerry's Homemade Inc. He and partner Ben Cohen saw business evolving into a powerful force in society -- along with religion and government -- but could identify few entities that embraced a mission other than providing a product or service.

"We thought differently," Greenfield said. "We said a business is a combination of organized human energy and money that equals power." So the pair decided to use that power to shape the business according to their values. Ben & Jerry's was organized to track two bottom lines -- how much profit the company generated, and how much it improved the quality of life in the areas in which it operates.

For example, the ice cream company created partner shops run by nonprofit agencies that help at-risk youth and bought brownies from a bakery that employs people recovering from substance abuse problems. It also has taken sides on a number of controversial social issues. Some ideas worked; some didn't, but that's the normal process of innovation, Greenfield said.

"I'm not saying Ben & Jerry's is the right way to do things," Greenfield said. "It's a way to do things. I try to share my experiences so people who want to integrate their values into business see that you can do that and still be successful."

While large retailers might not support social causes so overtly, they still face some major changes in the game. Retail giant Walmart recently announced plans to put eco-labels on every item sold in its stores. That involves radically new ways of thinking about suppliers, supply chain, IT systems, and how to measure progress.

"There is great value in systems thinking," said Rand Waddoups, senior director of strategy and sustainability for Walmart. "You have to have enough information on a system to make better decisions to optimize the whole. If you don't have transparency in the system, you can't optimize that system. If you have transparency, costs will be easy to find because you're looking at ways to affect the value of the whole system, not just one piece."

It also means that those responsible for sustainability efforts aren't siloed into one office or department in the company.

"The days of the sustainability professional are over," Waddoups said. "What we do have is a world where people create an expertise for themselves and apply sustainability to that expertise. I'm a merchant through and through, but a merchant who has figured out that sustainability is interesting and important and can change the way we buy."

With many companies still in the infancy of sustainable practice, the specialist might not be dead yet, "but I don't think it's a career path," said Michelle Harvey, project manager of the corporate partnerships program at the Environment Defense Fund.

What is needed are people with expertise in lifecycle analysis, research, and optimization. And a huge demand exists for people with multidisciplinary graduate degrees, she said.

Many consulting practices, meanwhile, have expanded to include sustainability services. Ironically, some consultants fear they may practice themselves out of a career, pending how well business embraces their recommendations going forward. But the consensus from both big firms and entrepreneurial consultants is that it's not a self-destructing industry because the issues facing companies --energy conservation, lower carbon footprints, cost-cutting -- are ongoing. The real question is whether consulting firms should maintain a separate sustainability department or infuse that expertise to all areas across the firm.

For example, the assurance and verification of environmental performance is becoming an issue in accounting and is thus a big deal for auditors, said Chris Park, MBA '90, principal, enterprise sustainability, at Deloitte Consulting LLP.

"The goal is to have all services have that value-added piece of where environmental and social performances come into play," he said.

The good news for sustainability consultants is that it usually doesn't matter anymore whether the company's top executive believes in climate change or not for a firm to consider an environmental strategy.

"It's just a business reality," said Shannon Bouton, who works in the climate change and energy efficiency practice for McKinsey & Co. More companies than ever are compelled to address sustainability today, if only to cut costs in light of the economic downturn.

But companies still require a fast payback on their efforts, sometimes faster than is possible. It's a consultant's job to keep making the financial case for better environmental performance.

"We have to realize there are a lot of good business decisions that are bad environmental decisions," Park said. "They are a lot closer than they were 10 or 12 years ago, but they are not one to one."

One thing is certain when it comes to environmental and sustainability efforts: The field is still evolving. The regulatory backdrop isn't settled, standards vary widely for eco-labels, and it's not clear how consumers really feel.

That might make career choices hard to pinpoint but it does open up opportunity to help shape the future, said Mike Faupel, director of agile agriculture at the Applied Sustainability Center. Academics and experts must continue to produce research and data.

"We need consistent methodologies we don't even have yet," said Faupel. "In accounting they have GAAP. What we don't have is GASP, generally accepted sustainability principles." —Terry Kosdrosky



For more information, contact:
Bernie DeGroat, (734) 936-1015 or 647-1847, bernied@umich.edu