Green Giants

E. Williams

• Publisher: AMACOM
• Year: 2015
• ISBN:
  9780814436141
• Topic: Business
• Subtopic: Sustainability in Business
• Index: Business

What do Brazil's top beauty brand, America's second-fastest-growing restaurant chain, and the world's third bestselling car have in common--besides achieving enormous success with revenue in the tens of billions? They are doing it all while holding to their convictions of implementing sustainable principles that help consumers live better lives. But they aren't the only ones. Green Giants examines nine companies--including Chipotle, Toyota, Unilever, Tesla, General Electric, and more--who have established the blueprint for sustainable success that anyone can follow. Author Freya Williams, an early pioneer of the modern sustainable business movement, discovered six factors responsible for the overwhelming success of these nine socially responsible companies:

• The Iconoclastic Leader
• Disruptive Innovation
• A Higher Purpose
• Built In, Not Bolted On
• Mainstream Appeal
• New Behavioral Contract

Packed with eye-opening research, exclusive interviews, and enlightening examples, Green Giants serves as your blueprint for merging wild profitability with social responsibility.

CHAPTER 1

The Iconoclastic Leader

“These stories begin with one person saying I absolutely believe in this and I want this to happen.”

—Professor Lynda Gratton, London Business School

In 1999, a chef named Steve Ells visited a factory farm in Iowa that supplied his nascent 16-outlet restaurant chain—Chipotle—with pork for its signature burritos. He was fresh from a trip to Niman Ranch—an operation that aims to raise livestock traditionally, humanly, and sustainably—where he’d gone to learn more about better ways to raise meat. Ells did not like what he saw in Iowa, “grim” is a word he’s used to describe it. The stark contrast between Niman and the commodity farm had a profound effect on him. Ells recalls resolving then and there to pursue a new strategy. He returned home to Denver and set about sourcing as much of his chain’s meat as possible from more humane, sustainable sources.

Colleagues remonstrated with Ells, fearing the substantially greater costs of this kind of meat would sink the small, vulnerable business. “I don’t care,” Ells is said to have replied. “It’s the right thing to do.”¹

And not just the right thing by the animals. Ells believed the meat tasted better, which would be better for customers and ultimately, therefore, for business. He introduced the new and improved meat into his restaurants, implemented a price increase of a dollar per serving—taking the pork menu offering, Carnitas, from the least expensive to the most expensive dish on the menu—and waited to see how the market would respond.²

And that was just the beginning. Ells stuck to his commitment to use meat from humane, sustainable sources as Chipotle grew, extending it to 100 percent of the company’s pork as well as to chicken, beef, and dairy. He added produce to the plan, working to source as much as possible locally when in season. It wasn’t always easy: There have been two occasions when Chipotle has had to work around a shortfall in the supply of ingredients that met its standards. But in each case, the company found a way through it. Chipotle sourced imported, grass-fed beef for a short period, rather than resort to conventionally reared meat, when its usual supply fell short in 2014. The company also pulled pork from about a third of its U.S. restaurants in 2015 when a pork supplier failed to meet ethical standards. Yet, despite efforts by opponents to stir up trouble, neither situation seems to have hurt Chipotle . jut; on the contrary, customers and commentators have appreciated its refusal to compromise.

Ells’s early decision, as well as his tenacity and perseverance, paid off. Today, Chipotle is both the nation’s largest restaurant seller of naturally raised meats and its most profitable fast casual restaurant chain, with margins of 25.9 percent (compared to 19 percent at McDonald’s) and 2014 revenues of more than $4 billion.³ Indeed, Chipotle’s commitment to “Food with Integrity” has become so recognized a contributor to its success that, rather than suggest it dilute the strategy to manage costs, analysts describe it as a reason to consider the company’s stock; they even list insufficient supply of the right ingredients as a threat to future business performance.⁴ (Who ever thought we’d see Wall Street analysts fretting over the living conditions of the nation’s pigs?)

This story illuminates four salient facts about Ells. First, he underwent a conversion, which for him kicked off an inner journey, instilling in him a sense of conviction and permanently altering his view on the world. Second, he had the courage to stand up and change the direction of his business, setting it on a course that at the time seemed risky and counterintuitive, at odds with conventional business thinking. Third, he had the commitment and tenacity to stick with the course he had set, even in the face of skepticism and opposition from others within the business, rather than buckling at the first sign of opposition. And fourth, he is something of a contrarian, comfortable in the role of provocateur, challenger, and outsider.

Ells is an Iconoclastic Leader. Such leadership is the first of the six shared traits of Green Giants that you’ll read about in this book. As you delve into these companies’ stories, you’ll find that the decision to either start or change course to a sustainable strategy can almost always be traced back to one specific individual—the pioneer and long-term champion of the Green Giant strategy.

Big deal, you may say. All strong organizations have strong leaders. But the Iconoclastic Leaders of Green Giants are different. In addition to requiring the traits of all strong business leaders (because building a billion-dollar business of any sort requires that), these Iconoclastic Leaders tend to share a unique combination of additional characteristics: the 4 Cs.

1. They are fueled by an inner sense of conviction that they need to take things on, often resulting from a personal conversion.

2. They have the courage to stand up and change things, often in a way that seems counterintuitive or risky to colleagues or shareholders.

3. They have the commitment and tenacity to stick with the idea through thick and thin, through objections and obstacles, to see it to fruition.

4. They are contrarian, happy to live with the role of outsider, espousing a different view from everyone else; indeed, they thrive on it. Crucially, though, they are constructive contrarians, not contrary for the sake of it.

These characteristics are the 4 Cs of Iconoclastic Leadership.

In this chapter, you’ll meet the Iconoclastic Leader at each of the nine Green Giants under study, taking a look at what each did and why. You’ll delve into the 4Cs of Iconoclastic Leadership. And finally, you’ll explore how you can become an Iconoclastic Leader, no matter your background or role within your company.

MEET THE ICONOCLASTIC LEADERS

The following table provides information on the nine Iconoclastic Leaders studied in this book.

Company	Leader	Title
Nike	Hannah Jones	CSO
Background: Corporate responsibility background as director for Nike of EMEA 1998–2004. Before that, a reporter and social action campaigner.
Unilever	Paul Polman	CEO
Background: CFO at Nestlé and P&G. Became CEO of Unilever in 2009.
GE	Jeffrey Immelt	Chair & CEO
Background: Long-time GE executive. Joined GE in 1982. Became CEO in 2001.
IKEA	Steve Howard	CSO
Background: Climate activist; formerly CEO of The Climate Group. Joined IKEA in 2010.
Natura	Antônio Luiz da Cunha Seabra	CEO
Background: Entrepreneur who founded Natura in his garage in 1969.
Whole Foods	John Mackey	Cofounder & Co-CEO
Background: Entrepreneur who cofounded Whole Foods in Austin, Texas, in 1980.
Chipotle	Steve Ells	Founder and Co-CEO
Background: Classically trained chef who founded Chipotle in 1993 in Denver, Colorado.
Tesla Motors	Elon Musk	CEO & Chief Product Architect
Background: Engineer. Founder of PayPal. CEO and CTO of SpaceX. Chair of SolarCity.
Toyota	Takeshi Uchiyamada	Chairman of the Board
Background: Test engineering and technical administration at Toyota. Formerly chief engineer of the Prius.

THE 4Cs AND THE C-SUITE

As you peruse the job titles of the Iconoclastic Leaders, notice that for a group selected on the basis of their success leading a sustainable business strategy, surprisingly few of them have “sustainability” in their title. Instead, the majority—seven out of the nine—are chair and/or chief executive officer.

It’s important to emphasize that the CEOs didn’t make this list simply because success was achieved on their watch. Instead, these people are the individuals who envisioned, shaped, owned, and drove through the Green Giant strategy at their respective companies. In the words of Professor Lynda Gratton of the London Business School, who has studied sustainable business leadership extensively, they are the ones who stood up, said “I absolutely believe in this and I want this to happen,” and saw it through from inception to execution.

Antônio Luiz da Cunha Seabra and John Mackey built businesses with sustainability at their core—a more natural beauty brand, on the one hand, and a natural, organic grocer, on the other. As far back as the garage in Brazil where Seabra started Natura in 1969, or the natural foods store Mackey and his girlfriend opened in Austin, Texas, in 1980, sustainability was integral to the concept. Meanwhile, Elon Musk joined Tesla in 2004, seven months after its incorporation. A serial Silicon Valley entrepreneur with successes at PayPal and other start-ups under his belt, he quickly became the driving force, both spiritually and financially, of the electric vehicle company that would almost certainly have failed without him.

At the multinationals on our list, GE and Unilever, Jeff Immelt and Paul Polman didn’t just give their approval to plans dreamed up by their teams. Ecomagination at GE and the Unilever Sustainable Living Plan were (and are) invented and personally led by them (as we’ll learn in this chapter). In both cases, the stakes were high. Both men put their reputation and position in the balance to achieve success, and they are viewed by the outside world and by their teams as the unequivocal leaders of these strategies.

At Toyota, the story was slightly different. The agenda that resulted in the development of the Prius was initially set by then-chair Eiji Toyoda and was propelled forward by other very senior executives including the subsequent president, Hiroshi Okuda. But today, the man appointed as chief engineer on the project, Takeshi Uchiyamada—the one who figured out how to crack the code on a hybrid powertrain—is viewed as the father of the Prius. And today, he is Toyota’s chairman of the board.

What does this tell us? In sustainability discussions, it’s common to hear people say “leadership has to come from the top.” This is usually taken to mean that the CEO has to be engaged and lending his or her support. The Green Giants suggest we take the sentiment literally.

But why is an Iconoclastic Leader in the CEO (or other major) role a key ingredient to success in building a Green Giant business?

In the coming chapters, we’ll explore how Green Giants are different from other companies. They’ve developed innovations that overturned the way things were done in their categories, investing millions, sometimes billions, of dollars into things like R&D and supply chain reengineering to create products and services they didn’t make before—that no one’s made before. They have oriented their organizations around a purpose beyond profit, rethinking the business model and taking on decades of established business ideology to prove there’s a new way of doing things. They’ve made sustainability not the job of a separate department or team trying to sprinkle a little sustainability where they can, but they’ve embedded it right at the heart of the structures of their business, into the guts and sinews of their organizations. They’re reengineering the value proposition to the customer and are forging a New Behavioral Contract with their key stakeholders. In the process, they’re building a new kind of company.

Sometimes there was a strong legacy of sustainability or corporate responsibility (CR) at the companies before the Iconoclastic Leaders’ times. This could be said of Nike, GE, and Unilever, for example. Typically, though, the Iconoclastic Leader put things into hyperdrive, shifting gears from a sustainability strategy, which was primarily about reducing the company’s environmental footprint and managing risk, to a business strategy, which was about transformation and growth.

And that’s the crucial point. The Green Giant strategies explored in this book are not sustainability strategies, with a goal of, say, reducing energy and water consumption or waste (though those are critically important and are being addressed by the Green Giants). Instead, they are business strategies, with a goal of transforming the organization and the way it makes money. These companies have shifted sustainability or social good from where they spend or save money to how they earn it.

The stories in this chapter illustrate why, to make this kind of change happen, you often have to be the boss. You need to be the anointed owner of the strategy of the business, with license to initiate a transformation agenda. You need the power to direct resources at scale and to remove roadblocks when they arise. You need a veto right, the power to overrule colleagues should it become necessary. You need the big picture view of the organization. And you need enough personal capital and authority for employees, board members, shareholders, and customers to go along with you when you inevitably find yourself saying, “I know this sounds weird, but you have to trust me.”

It’s hard enough to drive this kind of change through an organization when you’re the boss. It’s nearly impossible ...