Question: Which companies need to focus more on corporate responsibility?
Jeffrey Hollender: There are, of course, the examples that you open up and see in the newspaper every day, like British Petroleum, and Goldman Sachs, and Toyota. Those companies are a warning flag to every other business that’s not doing the right thing. You now, those businesses happen to have gotten caught in the mess that they’ve created. They are not alone in doing some terrible things. But they’re unique in that they’ve gotten caught.
If you go back in time and you think about a company like Toyota, several years ago, while they were running all these ads about the Prius, and how sustainable the Prius is and how much the cared about the planet and the environment—at the same time, secretly they were lobbying in the California against increased gas mileage standards. So, you know, on the one hand they wanted to appear as this sustainable company while, you know, with the other hand, they’re actually fighting the changes that are required to make the world more sustainable for everyone else. That is the kind of duality that I see at too many companies. Too many companies who want to talk about... I mean, I remember four years ago, General Motors put up billboards all around New York and the country advertising the Volt car. Now, the Volt car was not being made. They had no idea if it was going to be made, they had no idea when it was going to be made, but that didn't stop them from advertising a car that didn't exist as a way to bolster their image as a responsible business.
Things like that are destructive to your reputation. And many companies don’t understand that this new world that we live in, the transparency that is created by the Internet raises the stakes for companies getting away with stuff that they used to be able to get away with. Transparency will be forced upon you if you choose not to be transparent yourself, and you will get caught doing the wrong thing—whether you get caught by your own employees, whether you get caught by a blogger, whether you get caught by an NGO, or the government—you’ll get caught. And businesses need to be proactive in, a) disclosing the problems that they have, which they’re scared to do, and committing to the path that they’re going to take to make change.
Question: Will BP ever recover?
Jeffrey Hollender: You know, BP, when you think about it, has had a series of problems. You might say it was a gutsy thing for a company who, you know, 99% of what they sell is petroleum to say, "We're going to be beyond petroleum." Now, when they made an announcement, I was rooting for them to win, but it was a pretty audacious claim to make. And clearly not a claim they were wiling to stick with, because shortly thereafter they started getting out of the alternative energy business and wasted hundreds of millions of dollars claiming to be something that they really were not ready to be. But then they had a terrible explosion in a plant in Texas that killed some of their workers. Then of course, they had this tremendous spill in the Gulf of Mexico.
There is a series of patterns which goes back to the issue of what kind of culture do we have. What kind of culture do we have that we ignore the questions that must arise inside the company about the... this intelligence to do some of the things that we're doing? That to me is a sign of a culture where those questions are repressed, those questions aren’t answered and a handful of people are allowed to continue to do the wrong thing because they ignore the challenges that are raised internally.
And I think that BP, you know, is a metaphor in a lot of ways. I mean, I think about this oil spill, which is a very visible representation of the way that we're abusing the environment. But it's really no different than the way we handle chemicals. We have an open spigot through which millions of pounds of toxic chemicals are dumped into our society into the air, into the groundwater, through our products—it just happened to be invisible. The effects are still there—increased asthma rates, increased cancer rates in children—but we have many oil spills, whether they’re chemicals, whether they’re petroleum. And this goes back to the notion that we as a society and particularly we as businesses have all the warning signs of what's ahead. You know, how many more spills do we need? How many more earthquakes do we need, or volcanoes, or hurricanes? I mean, the earth, in a sense, is telling us, "You can’t keep doing this." There is a price that is going to be paid for your behavior.
Question: How can companies better create a sense of corporate responsibility?
Jeffrey Hollender: I don’t know whether Tony Hayward has children, but if he does, I bet he’s getting an earful from his children about how embarrassing it is to go to school every day as the child of the president of BP. We should not underestimate the pressure that that brings on CEO and senior management. BP today is not a company you want to tell people you work for when you show up at a party. So, there is part of this social pressure that will come to bear on the company. But we also need to hold the government accountable, the government has totally, historically, not held these oil companies accountable for their responsibilities as we see with the Mineral Management Agency. We need to support NGOs because often it is pressure from groups like Greenpeace, which I am a board member of, that will help tilt the scale.
Look, you know, you won’t catch me buying gas at a BP station probably for the rest of my life. And I think that it is this combination of factors: it's pressure from the government, pressure from the NGOs, pressure from their internal employees, as well as what we can do as individuals. You know, you may think that in this day and age writing letters and emails doesn’t make a difference. It does. I can tell you as a business owner and manager, when someone writes a letter I know that there's probably a hundred, if not a thousand people that feel the same way that that person felt. And that carries a lot of weight. It’s not one letter or one email. It is a representation of hundreds or thousands of people who feel the same way.
Question: How does a CEO ensure that his or her entire organization is committed to sustainability?
Jeffrey Hollender: The challenge of moving the commitment to sustainability beyond senior management is ultimately a cultural challenge. You have to send that message. You have to incentivize people. If you pay out bonuses based upon increased sales and profits and not sustainability initiatives, where will people put their attention? On profits and sales. So, you have to embed these ideas and incentives within your culture. You have to reward people who are sustainability leaders, not just the biggest salespeople.
And so it is ultimately a cultural challenge and you need to design your culture to function and be aligned with your sustainability objectives—which also means that ultimately it has to be embedded in corporate strategy. The only way to be really responsible and really sustainable is if it's part of your strategy as a company. It can’t exist in a compartment. It really doesn’t work to have a sustainability/corporate responsibility police person who ensures that everybody else at the company is responsible. That sense of responsibility has to live in everybody that works in the company; in every department, in the strategies and goals and objectives of every department and every person.
Question: Do you have faith in consumers?
Jeffrey Hollender: I have faith in consumers, but will never depend upon them to solve all of the challenges that we face. I mean, yes, the marketplace is important, and there are more and more consumers every year buying green and sustainable products. That’s a good thing. But consumers face some fundamental challenges.
When I talk to young people, they constantly ask me, why are the good things expensive and the bad things cheap? We have created an economic construct through rules and regulations and tax codes that allows businesses to escape from most of their negative impacts.
So, if you're an automobile manufacturer and you sell a car that gets poor gas mileage and that poor gas mileage creates a lot of air pollution that translates into increased asthma, allergies, cancer—you as a manufacturer bear no responsibility for those negative impacts. Those negative impacts are dumped onto society and we pay those negative impacts as a society.
Now I think that if you’re going to do bad stuff, if you’re going to be a farmer and use pesticides that pollute the groundwater, you should have to pay for all of those negative impacts. And if that was the case—if traditional growers of food paid the full cost of soil erosion, water pollution, adverse health affects on their farm workers because of exposure to pesticides—something quite amazing would happen; organic food would cost half the price of what traditional food would cost. And we wouldn’t ask consumers to make a very difficult decision, which is do the right thing, make the right choice, buy the sustainable product, but don’t get any financial benefit for making that choice.
So, ultimately we have to change the system. We have to change the economic landscape so that business and consumers are all aligned and incentivized to make the sustainable choice. You shouldn’t have to pay extra to buy a hybrid car. You shouldn’t pay extra to buy organic clothing. Those products are better and more sustainable and more responsible for the planet and they should cost less.
Recorded on June 11, 2010
Interviewed by Jessica Liebman