To Aggregate or Segregate – Is That The Question?

Amidst a host of rich and deep discussions at the Sustainable Food Laboratory summit this week in Oregon, we kept coming back again and again to a few underlying themes. The complex relationships among commodities, organic produce, price, and brand value was one of these touchstone issues.

Given the current structure of food and agriculture markets, organic costs more – across the entire supply chain from farm to table. Depending on the type of food, some of this added cost comes from the need to certify, track, and move products through distribution networks that are parallel with but not quite the same as the networks for conventionally grown products. In this regard, organic is segregated from mainstream produce.

Some consumers accustomed to paying lower prices for conventional food are increasingly willing to pay a premium for the value of ensuring that what they eat is closer to pure and unadulterated food. And businesses are eager to build brand equity, trust, loyalty, and gain access to this still small but rapidly growing market.

But if organic agriculture aims to ‘go mainstream,’ when does a segregated and ‘special’ product itself become a commodity? And if it does, does it thus transform and redefine the commodity market? “Mainstream,” implying a majority of consumers, may be less the issue than knowing what it takes to shift standard industry practice to a new level. And more on that shortly.

Dave Brewer, Emerson Dell Farm, explains his use of new seeding techniques to an international delegation of business and NGO leaders participating in the Sustainable Food Laboratory summit outside Portland, Oregon.

A Conversation with Bill Clinton about Climate

Having heard President Clinton speak a few times while he was President, it was inspiring to have a conversation with him on Saturday (July 2) after his unscheduled presentation at the Aspen Ideas Festival

A handful of us were talking after listening to his view of the 2012 election: Obama Administration success stories, observations on the Republican field, and calculations regarding Hispanic votes. I then solicited his thoughts on climate. He had just explained the critical importance of generating and managing uncertainty as a tool for political power.

I asked if he thought this ‘uncertainty principle’ could also be applied to generate support for successful climate and energy policy. After a brief pause, as his famous piercing blue eyes narrowed slightly, he said, “yes, I do.” He talked quickly and intensely about the importance of a single line in the stimulus legislation that Republican leaders have targeted. The fight is over $2 billion that has helped jump-start electric-vehicle battery manufacturing in the United States. (According to DOE, the 26 plants now operating will have capacity to meet 20 percent of global market demand in 2012).

A passionate advocate for aligning economic growth, “green jobs” and reducing carbon, Clinton then looked around, lowered his voice and leaned in to speak with the four of us in a huddle (perhaps because Chris Matthews and Gov. Haley Barbour of Mississippi might otherwise have overheard his next point). Pointing again to the new jobs created in the automobile battery sector with federal support over the last 18 months, he said “and they are worried that we really will generate the jobs with these investments…and that’s why they killed it.” He then raised his eyebrows evocatively, “Got it?”

We then shook hands with the 42nd President of the United States, as he thanked us for coming and for the questions we posed.  With nothing to gain and no votes to solicit, Bill Clinton still left us all feeling that we had had a few moments with one of the truly commanding leaders of our age.

Geology and The Bottom-Line

Hannah Jones, VP of Sustainable Business and Innovation at Nike, had the most memorable lines among dozens of speakers at two recent conferences, the “Ceres Conference 2011: Igniting Innovation, Scaling Sustainability” and The Conference Board’s “Corporate Citizenship and Sustainability” gathering in Washington, DC. Hundreds of senior executives from America’s leading corporations exploring urgent questions of climate stability, water resources, sustainable agriculture, and innovation and entrepreneurship. But Jones stole the show with two powerful remarks. Knitting together transparency, a key metric for responsible corporate reporting, with core business performance, she quipped that “if you’re going to be naked you better be buff!”

At a more granular level, we learned why SAP, in a small but significant shift, now releases financial results with its sustainability report, forcing a common language across the NGO and financial communities. If you want to see SAP’s carbon footprint you cannot escape their profit and loss statement; and if you are looking for their operating margin you also come face to face with “total energy consumed.”

We also reengaged what I see as an increasingly tired question -- is there “a business case for sustainability?” Do companies ‘do sustainability’ to make money, to reduce costs, or to enhance license to operate, brand equity, and to retain new and younger employees who want to feel good about their work every day? We heard powerful examples of business growth, market opportunities created, and profits generated from embedding sustainability in corporate DNA and also using it as a lens to drive innovation.

But – and it is a big but – it seems to me that the way we have framed this debate diverts us from the core sustainability challenge. And that is how we think about time. There is a disconnect between the incentivized behaviors of short-term profit-maximizing corporations and the increasingly bold proclamations by corporate leaders that their organizations will increasingly act with the interests of intergenerational equity at the forefront of strategy, planning and business operations.

Whether the fossil fuels we use to generate electricity, water to make myriad food products, or trees for desks and paper; all of the natural resources (including atmospheric gases) that we use to make products (or hold industrial “wastes,” like carbon) exist across a geologic time-scale measured in hundreds of millions of years. Three-year ROIs and quarterly earnings reports are but microscopic specks of dust across, for example, the 350,000,000 million years during which coal was formed from giant plants that died long before the dinosaurs.

When we ask (and ask and ask!) that sustainability justify itself on the altar of modern-day market capitalism, is this not a bit like arguing with a lump of coal over its own formation? We, rather than the coal, are the newcomers; who says it needs to explain itself to us? Coal is surely not going to adjust to our short-term needs. The core question is thus not about the business case for sustainability but rather the lack of a sustainability case for short-term profit maximizing behavior.

Done right, over a time-scale that accommodates both geology and the bottom-line, human ingenuity and nature’s incredible diversity and robustness can likely find a harmonious synergy. But this will take real leadership.

Who among the leaders of the Fortune 500 wants to tackle this issue of time and link his or her compensation equally to sustainability performance and profits by insisting that compensation be reviewed on a three-year basis across an integrated bottom line? Who at the SEC wants to lead the charge to bring corporate oversight out of the 19th century and into the 21st century by moving beyond limited reporting of climate risk to helping figure out how to bring trillions of dollars of environmental externalities onto the books of our nation’s corporations?

Hannah Jones also noted that at Nike, “we are measured against our potential.” Who among our corporate leaders today has the courage to just ….?

Leaders Today

Leaders today can little afford to be mere experts. Effective decision-making demands of leaders that we move fluidly and confidently across issues rather than be constrained by what we know. Making decisions with access to all the information required is easy. But leadership is about making the right decision in the face of limited or conflicting information.

• How can we see over the horizon to plan for emerging issues before they impact the bottom line?

• When traditional research approaches aren’t helping clarify a decision, what outside-the-box approaches will help?

• If we do what we measure, but we are not fundamentally in the business of sustainability, how de we embed metrics that make sense?

• How do we drive change, and preserve our organizational identify?

• What’s the effective way to asses an NGO/Corporate partnership to see if it really makes sense?

Whether we term it marketing or outreach, how do we effectively engage citizens (or consumers) beyond those that already know us and support us?

Call it sales, call it advocacy; we are all in the business of communications. And reaching across traditional divides is critical to addressing the great challenges of our age.

There is no such thing as climate policy without energy policy. Without addressing poverty, sustainable agriculture will never reach its promise of feeding not only this but also the next generation. Water issues are central to political, financial, health, and geographic realities and possibilities.

A Hospital without Patient Safety?

Corporate responsibility is to the management of a company what patient safety is to the administration of a hospital. If you are not doing it, what are you doing?

But as the concept of corporate responsibility has expanded beyond it initial construct of corporate social responsibility, so too the early focus on transparency, reporting, metrics and monitoring leaves much of this work outside the core business of business. Who would go into a hospital for surgery if we knew in advance that there were only, say, seven people working on patient safety while the rest worked on… what?

So for all the good that CR has done and is doing, in too many organizations the issues remain peripheral – small teams of dedicated people, sometimes with the ear of the CEO, pushing nudging the core business into incremental changes. Like tugboats working with a tanker, we often remain far from the engine room of power, profit, decision-making, and prestige.

Whether an executive, a stakeholder, a shareholder, or a CR professional we must confront the reality of popular fiction. Corporate structure is a figment of our legal and cultural imagination. Phenomenally effective at generating economic growth and the stuff that we all use and discard, and this engine has been one of prosperity for many millions of people, so too has this imaginative structure enshrined a set of incentives that all too often set people against one another. Short-term profit maximizing behavior clearly has denuded forests and stripped mountaintops bare. Long-term social development and cultural unity has often frayed as corporate institutions excel. Incumbents use market power to stifle innovation, even though they were yesterday’s innovators.

We know what CR looks like today, but tomorrow?

Are you Handling or Mishandling the Climate Challenge?

The issue of our time is framed for failure. Climate change is the norm and everyone experiences it daily; the weather changes. Climate stability, however, is the goal – for people, business, and global ecosystems. We need predictable climatic conditions to make good decisions – whether to make major capital investments or whether to carry an umbrella.

And the climate is not an environmental issue but rather the connective tissue that ties energy together with business, development and poverty with agriculture, and health with the environment. No mere question of semantics, the fundamental definition of the challenge has immense impact on how we work to develop solutions.

The challenge is not fundamentally science, finance, or even policy. Rather, we lack the thinking and the institutions capable of effectively responding to an issue that cuts across so many traditionally distinct areas of expertise – especially when compounded by issues of risk allocation and intergenerational financial equity.

Are you handling or mishandling the climate challenge?

Going on Three Decades

Difficult to manage, impossible to avoid, and the endless driver of opportunity, driving and managing changehas been at the core of my work going on three decades. Living and working in Moscow as the Berlin Wall collapsed, guiding senior Western business executive through the splintering of the Soviet Union, and mapping the massive social, political, and global economic changes brought forth by perestroika and glasnost I experienced the turmoil and opportunity of profound change.

The dynamic process through which organizations and individuals act and react has much in common with the interaction of organisms and the natural balance of our globally linked ecosystems. As evolution happens every moment, but cannot be seen except across millennia, the power of entrenched thinking, cultural norms, and infrastructure cannot be swept aside in a moment. Yet, disruptive change happens; incumbent players are toppled and a new order emerges.

As nature abhors a vacuum and water flows until stopped, so too information floods our world – much of it incomplete, inaccurate, or manipulated to suit the needs of one actor at the expense of another.

Whether through research and strategy development or the execution of communications programs, I honed a unique mix of skills enabling me to work effectively at the intersection points where organizations tend to stumble and where high level yet narrow expertise often proves an obstacle to original thinking and the capacity to see opportunities in challenge. Not easily pegged I work in the white space, across and between neatly delineated departments and functions on organizational charts.

Whether presenting at a trade conference, driving a strategic brainstorming session, creating new means of communications, or providing one-on-one counsel to nonprofit or business leaders, my work is firmly grounded in how things are today – and how they might be in a better world tomorrow.