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The Responsible Business

Reimagining Sustainability and Success

By Carol Sanford

New book redefines business success, asking:

what does it mean to be profitable with responsibility in your DNA?

“The Responsible Business challenges many assumptions corporate leaders, investment advisors and sustainability experts have long taken for granted and on which many have even built their careers. It provides a road map that can help innovative businesses think about how to be truly transformational.”

Sam Ford, Fast Company Expert Blogger

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Increasingly, successful businesses today are adding a simple caveat to the definition of building an influential and profitable company: be responsible. According to Carol Sanford, author of THE RESPONSIBLE BUSINESS (Jossey-Bass; hardcover; March 15, 2011), in order for businesses to truly succeed, they must go beyond simply being “less bad” and instead create healthier, more vital communities, bio-regions and nations where they are based and that they serve.

THE RESPONSIBLE BUSINESS lays out a system-wide strategy for businesses, calling on them to customize their approach and asking them to build from their own distinctiveness. Her approach can be used to leverage not only the effects on Planet Earth, but also to measure the impact of every decision on all the company’s stakeholders – employees, suppliers, customers and the community at large. Sanford sees the relationship among and between these stakeholders as a five-pronged system of interconnected points. Sanford refers to it as a pentad, a term borrowed from ancient Greek geometry representing a multidimensional figure with five dynamic and interactive aspects that move in tandem and can only be understood in terms of their relationships. “It suggests a quintuple rather than a triple bottom line,” says Sanford.

Using global and local examples such as Procter and Gamble, DuPont and Red Hat, Sanford takes and in-depth look at what it takes to truly transform an organization from the inside out.

“The Responsible Business,” writes Sanford, “sees itself as a co-creative partner in ensuring the vitality and health of all the communities it belongs to. It develops its capacity to play the role of partner. It sees itself as getting smarter about what it takes to be a change agent in making the systems it touches healthier and more vital. That includes changing its method of managing, which is often overlooked.”

As the financial meltdown meets the new “green” mandate, the time could not be better for a book that offers a systemic approach to real change that moves beyond mere programs to one that does not limit itself to simply being less bad.  THE RESPONSIBLE BUSINESS presents a means to proactively and continuously build a better world while engaging in the business of doing business.

“Any company can do this,” says Sanford, “be they manufacturer, retail, or high tech. The principles work in all settings where there is commitment to seeing it though and implementing it.”

THE RESPONSIBLE BUSINESS:

Reimagining Sustainability and Success

Author: Carol Sanford

Publication date: March 15, 2011

ISBN: 978-0-470-64868-1

Hardcover $39.95

Website:

About Carol Sanford

Carol Sanford is on a mission to create a better world, and she believes that business can and will play a major role in accomplishing that. “It will be more than just a responsibility program,” she says. “Responsibility will be in the DNA of the business and everyone will participate to make a real difference.” This movement will be profoundly beneficial to business and capitalism.

To that end, Carol has been leading major consulting change efforts in both Fortune 500 and new economy businesses for more than 30 years. Her client list includes long-term relationships with Colgate Europe and Africa; DuPont Canada, US, Asia and Europe. She also works with new economy companies like Intel, Agilent and leaders of corporate responsibility such as Seventh Generation. Her work enables business and organizations to see themselves as a co-creative partner in ensuring the vitality and health of all the communities they belong to. The responsible business works to develop its capacity to play the role of creative partner. It sees itself as getting smarter about what it takes to be a lead agent in making the systems it touches healthier and more vital, not just reduce harm.” The reciprocal benefit to the business is measurable.

She combines her economic development experience with her extensive business education and background when working with Responsible Governance in Community, Provincial and Regional Policy and Education.

Carol has lectured at MIT Sloan Management and University of Michigan, Ross Business School and is judge and mentor for University of Washington Global Business Center Social Entrepreneur Competition, Seattle.

Carol has published dozens of works in 10 languages, including a series of articles in Executive Excellence, Stephen Covey’s newsletter and At Work, a Berrett Koehler Journal.

She holds undergraduate degrees from UC Berkeley in Economics and Public Law and a graduate degree from California State University, San Jose in Urban Planning. She currently lives in Seattle, Washington.

What others are saying about THE RESPONSIBLE BUSINESS

"This is a very significant book.. The stories are among the crispest, most evocative case histories I have seen…for any corporate leader trying to …create a business that recreates the world… Gives people the framework they need."

Art Kleiner, Editor-in-Chief, strategy + business, and author, The Age of Heretics

Through Seventh Generation’s work with Carol Sanford we learned the value of systems thinking and how these frameworks made us a more effective business and me a better values-based leader. Carol’s approach also makes it possible for people in our company to be more conscious and work from a commitment to a higher set of values.

Jeffrey Hollender, Co-founder and chief inspired protagonist of Seventh Generation, author of The Responsibility Revolution, with Bill Breen

The powerful concepts in The Responsible Business have changed the process of sustainable development and how communities truly thrive. Indeed, these proven approaches will be the roadmap to truly achieve the deepest level of living communities.

Bill Reed, Founding member of LEED System, Co-author of The Integrative Design Guide to Green Building

This way of thinking about running a business, offered in The Responsible Business, is a critical source of possibilities for a re-imagined future. Rarely a day goes by that I do not call on this way of thinking and looking at the world. It is useful in most walks of life, and in taking on the big business decisions that so many of us face every day.

Chad Holliday, Chairman, Bank of America (from 2010), Former Chairman and CEO, E. I. DuPont Corporation.

This is a bold and inspiring book; one of those game-changing books that come around only once in a decade. It will change how I teach organizational behavior and management. I return to different sections repeatedly and gain something new each time.

Pam Hinds, Stanford University, Management Science and Engineering, Co-Director, Center for Work, Technology & Organization.

A Responsible Business thinks strategically, comprehensively and inclusively with all stakeholders.  Carol Sanford's book provides executives and investors with the tools and examples to build a better world while seeking positive human impact and profit. She shows how the leaders accomplish this for their firms, shareholders and society.

R. Paul Herman, CEO, HIP Investor Inc., registered investment adviser; author, "The HIP (Human Impact + Profit) Investor: Make Bigger Profits by Building a Better World"

Responsible businesses: Procter and Gamble, Kingsford Charcoal and Red Hat

Procter and Gamble: Reinventing the Soap Business

Fifty years ago, a small cadre of visionary thinkers in Procter & Gamble’s (P&G) detergent products group launched an era of new design for business systems. The ranking member of the team was Bob Seitz, who, had experience with compelling innovations in work systems at P&G and knew firsthand how those changes had impacted the company’s spirit and performance. He decided that it was time to embed innovation into a new detergent business unit he was bringing on line in Lima, Ohio.

From the outset, they challenged every outworn paradigm that held business captive. They connected the entire workforce directly to the business’s financial and market context. They innovated with regard to every part of the product development, manufacturing, and marketing process. Bob’s principle was that Lima was a business strategy and they needed to avoid confusing it with a social experiment.

The commitment to this new paradigm was challenged by a new Michigan law quickly making its way through the legislature outlawing phosphates in detergent. Procter and Gamble’s R&D department had already been seeing evidence that phosphates created environmental problems and were one step ahead in removing them from their detergents.

The biggest challenge was relabeling existing cartons. Lima teams pulled in corporate help from P&G sourcing, marketing, and sales. Ken Wessel, the business brand manager, found a label-printing company that could respond immediately once the new legal wording was in place. The teams also had to augment packaging machines so that they could “blow” cover-up labels onto existing cartons. This kind of modification had been tried without success on many occasions, but making it work this time was the only way to meet the legislative timeline.

Five days after they began the effort, the Michigan legislature passed the bill. It was noon on Thursday. All of the outlawed detergent products were to be removed from stores throughout the state by Friday midnight. Would a day and a half give the Lima teams enough time to replace their products?

When Ken saw the way the teams responded, he knew that something miraculous was happening. P&G was succeeding in doing the right thing for their customers and for the planet, and they were meeting an impossible deadline.

In stores all over the state, drivers were met by salespeople who helped them clear shelves and stock them with reformulated P&G products packaged in cartons that met the legal ingredient requirements. They filled not only their own shelf space, but also the spaces of all their competitors, every one of which had failed to meet the crucial deadline and would not be able to get products on the shelves for another few months.

P&G’s business market share increased dramatically (by more than twenty points) in most parts of Michigan and eventually nationwide. Their achievement was simultaneously a terrific success for the planet, distributors and consumers, and P&G’s employees and investors.

Kingsford Charcoal: Business Without Tradeoffs

Twenty years ago, Kingsford Charcoal comprised one-third of the Clorox corporate workforce, but by almost all measures it delivered a poor return compared to the rest of the company and others in the industry. In just two short years the situation was reversed. Kingsford had halved its workforce while doubling its revenues, and it led the company in returns in many categories. Even more remarkable, it had closed half of its plants without disrupting the lives of its workers and their communities, ensuring that every laid-off worker was supported in creating or finding an equivalent or superior job before they lost a paycheck. And they had decreased their carbon footprint when no one was even talking about such things.

The transformation began in 1985 when Will Lynn, President and General Manager of Kingsford set out on a major effort to transform the company. When they began, the company had outstripped the capacity of its manufacturing facilities. In the process, it had lost control of standards and quality as it tried to catch up with demand. It relied heavily on outside technical and management expertise.

Seen from the outside, this transformation looked to be virtually impossible. Kingsford, headquartered in Oakland, California had most of its plants sited in backwater communities, in poor regions like Appalachia and the rural south. Many workers lacked high school educations, and many more couldn’t even read.

Will Lynn refused to accept and act on the stereotypes about his workforce. For him, this was easy. He was amazed by watching people grow and he was dedicated to discovering and developing the wisdom in every member of the workforce. He worked to bring out each employee’s unique contribution. He believed Kingsford had no problem with willingness on the part of its people.

Will knew that he needed to grow people’s ability to think like business owners. He felt that every employee should be able to understand the business as a whole and be capable of making whole decisions based on stakeholder effects along side a profit and loss report.

One day he had a conversation with Rod Lorimer, vice president of manufacturing for Clorox. Earlier in his career, Rod had been connected to the pioneering program at Procter and Gamble’s Lima, Ohio business. He had been part of redefining the role of the people in their manufacturing business, seeing them as sources of creativity rather than as extensions of machines.

Will suspected that maybe there were lessons from P&G that could be applied at Kingsford. Rod insisted that Will ask himself some challenging and unorthodox questions: Did he believe every person in his organization could grow and contribute significantly beyond their current level? Could developing his own and everyone else’s critical thinking skills really make a difference? Was personal development something that belonged in the workplace as part of creating a better business?

From the beginning, Will was attracted to working this way because it respected everyone, regardless of position or education. It set out to grow every employee, starting from the premises that there was more than one kind of intelligence in people, and that tapping multiple kinds of intelligence would grow a healthier business. This approach developed people’s ability to think better and contribute.

Almost immediately there were positive changes. Managers who had been little more than administrators suddenly started to re-conceptualize the businesses they were in—not making charcoal but enabling great backyard barbeque. Within months they were exploring potential relationships with “picnic partners” like Frito-Lay and Kansas City Masterpiece, and within a year they were talking to grill manufacturers about how to deliver a better barbeque experience. They learned to make swift and accurate assessments of which ideas were going to work, reducing product ideation testing from a two-year to a six-month process. They discovered that running a business could be fun, creative, and improvisational.

Within a couple of years, a transformation had occurred throughout the entire workforce and in many of the supplier operations as well. The business looked more like a jazz orchestra, with every player helping compose the music as they performed it. Workers across all functions organized themselves to promote their own development—everything from literacy programs to learning the science and technology needed to run the business.

Meanwhile, departments dissolved their boundaries. Salespeople sat in the R&D labs and reported on what they were hearing from customers. Marketing managers recruited from across the organization to plan their product launches. Suppliers were part of innovating new technologies and processes including reducing water and power consumption by over 50%. They quickly were becoming one integrated business team. As Will put it, “It used to be that you had to go up in the organization, then across, and back down again. Now they’re all just people, trying to make this business work for everyone.”

The result? In five years, Kingsford had grown from a regional to a national brand, controlling 60 percent of a growing market. A business within a corporation had been able to instill a responsible culture and significantly affect its parent company. Will’s gamble had paid off.

Red Hat: Turning a Profit on Free Product

Though our previous examples were manufacturing companies, this kind of change can happen anywhere. Even high tech companies can create benefit for all stakeholders simultaneously. In 1998, Paul McNamara was the fifteenth employee hired at Red Hat. His job was to search out business models based on profits generated by free offerings and to convince venture capitalists to invest in a company that gave away its software. His second challenge was to bring on board the best people in the new open source industry—freewheeling and idealistic software designers who were giving away their expertise. “The open-source community…is the essence of doing it for free,” he was told. “And by the way, they don’t do bosses.”

Paul knew he had entered a very different universe from IBM, where he had started his career. This was pure passion—a community giving its extraordinary skills to create something meaningful that could be available to everyone. These engineers earned their livings at day jobs working on software design that within a few years would be replaced by what they worked on for free at night. They were the best in the business and they were revolutionizing the field of computing just because they could.

Early in the game, several things were clear. The users and creators of open-source software were the same. Red Hat’s engineers continued to co-evolve Linux, contributing all of the code they developed for Red Hat Linux back to the Linux community. From the start Red Hat made its offerings work for customers, co-creators, communities, and investors. Reciprocal benefit was inherent in the design. Red Hat is successful because it doesn’t isolate its stakeholders and try to manage them separately. It sees them as one entity and brings them together to create one of the most amazing businesses of the new century, one founded with a stakeholder integration ethic. This requires thinking systemically and understanding stakeholders as sources of opportunity and creativity.

A Conversation with Carol Sanford

Q. Why this book and why now?

A. I don’t like what I see happening in the field of corporate responsibility. I believe all these well-intentioned people and laud their commitment. I’m concerned because the responsibility-sustainability train is finally leaving the station, and it’s going the wrong way. Companies are seeking and implementing solutions with exactly the same fragmented mind that created the problems in the first place. There is no shift in how they think, only a shift in what they are thinking about. Failure to work on how to think slows the pace of change, and in many cases, exacerbates the problems.

Q. In the book, you talk about a basic framework that describes what it means for a business to work in a systemic way. Can you tell us more about that?

A. The basic framework I’ve developed is made up of five interconnected points and is called a pentad. In this framework, the customer or consumer is the first and foundational stakeholder. The second stakeholder, the co-creator, refers to all the people and organizations who contribute to the creation of a product or service, from raw material suppliers to employees and contractors. The third stakeholder is Earth, the original source and infrastructure without which human activities would be impossible. The fourth stakeholder is community, the human inhabitants of all of those places with which a business needs to partner in order to source its materials and workers, manufacture its goods, sell its products or services, and recycle or store its waste. The fifth stakeholder is the investor, without whom a company’s dreams would be difficult or impossible to realize.

Q. What is the biggest challenge that companies face when choosing to be a Responsible Business?

A. The biggest challenge for a company that aspires to be a Responsible Business is to stop working on parts, and start recognizing and working on whole systems. Any company that begins to understand how stakeholders work as a system will certainly increase its efficiencies and simplify its priorities. When a business fully accepts its responsibilities to its stakeholders, investors will gain, but businesses that fail to live up their responsibilities cause decay, decline, and diminishment of returns for every stakeholder in the system. Responsibility is a no-brainer, though it takes brains to pull it off.

Q. Any closing words about being a Responsible Business that we may have missed?

A. I think it’s vitally important to understand that to be truly effective, responsibility work has to be done while doing business. It cannot be bolted on but must be built in. When businesses settle for doing less and less bad, they fail to take on the really interesting and necessary challenge of fostering the health of the whole, of making a meaningful contribution to the ability of stakeholders to pursue their own systemic responsibilities.

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