Businesses can't take on complex environmental and social issues without input from the full spectrum of stakeholders ranging from NGOs and community groups to their suppliers, employees and investors.
Let's look at Timberland, which is intensely focused on its global supply chain, especially in Asia and South America where several hundred factories and two dozen tanneries use vast amounts of energy and water to make millions of pairs of leather boots and other footwear every year. Even a tiny increase in energy or water prices can cost these suppliers millions of dollars a year.
Alert to the high costs and environmental impacts of leather, Timberland began partnering with leather buyers and suppliers a few years ago to slash the energy and water footprints at its tanneries. Tanneries participating in the Leather Working Group project have already reduced water and energy use by an average of 15-20 percent and all tanneries now working with Timberland must meet specific Gold and Silver performance targets.
It saves the planet -- and it also saves money. And Timberland got there by listening to their partners -- in this case, industry peers and suppliers.
Companies across all industries, from GE to Best Buy to Nike, are collaborating like never before with stakeholders to get a jump on the next big, smart sustainability idea or avoid the next embarrassing misstep, be it an environmental disaster or bungled community relationship.
The business case for "opening the doors" is powerful. Today's hyper-fast, viral economy can elevate or destroy companies and products in a matter of days, so antagonistic stakeholder relations are no longer an option. Technologies like Facebook and Twitter are accelerating these trends so that throwing ideas out on the web and asking the global smartmob to develop solutions is the new norm.
Employee Engagement: Water < Less Jeans
Levi Strauss discovered exactly this when it challenged its employees to solve a vexing challenge: the colossal water footprint of its iconic jeans.
Jeans manufacturing is surprisingly water-intensive, from the cotton in the denim to the finishing touches to make them fashionable and comfy. Most jeans are washed in industrial washing machines three to 10 times during the finishing process -- and that water adds up.
So about a year ago the company looked inward to find a solution, tapping an employee stakeholder group that knows its culture and processes intimately: the design team. "Sometimes the way to achieve a more sustainable design is to rethink a traditional process and find a way to do it better," said Levi's Brand Concepts Director Carl Chiara. Their breakthrough idea? Stonewash their jeans with just the stones, no water.
"The laundry thought we were crazy," added Chiara, but the team really wanted to "challenge conventions."
That they did, reducing the amount of water used to finish jeans by an average of 28 percent -- and up to 96 percent (just 1.5 liters!) for some styles. That adds up to about 16 million liters of water saved for the 1.5 million pairs of jeans coming out in Levi's spring 2011 Water < Less collection. The reduced water use is also cutting its energy bills.
Knocking down walls between companies and the communities where they operate is another must. In addition to avoiding disruptive project delays, it can help build more-loyal workforces and stronger reputations.
Shareholder Engagement: Thinking Together
Calamities like the BP oil spill, Massey coalmine disaster, and more recent natural gas drilling explosions are also rewriting the rules of engagement between companies and their shareholders.
Investors whose portfolios have been being pummeled by these disasters are getting more impatient and vocal. With increasing frequency, shareholders are banding together to demand face-to-face engagements with companies -- and entire industry groups -- on how they are managing riskier types of fossil fuel extraction, whether deepwater drilling or hydraulic fracturing.
These conversations have already prompted several gas fracking companies, such as Williams and Range Resources, to publicly reveal their water management and recycling practices and steps they are taking to avoid explosions and other accidents. The larger goal of these meetings is industry-wide "green performance" standards for hydraulic fracturing -- a topic that will be discussed further at a closed-door meeting of gas companies and investors at the Ceres Conference May 11 and 12 in Oakland.
These investor/company dialogues are not only focused on energy extraction. They also include issues like water scarcity threats for electric power utilities and pesticides use by food giants like McDonald's.
In 2008 a group of investors, including the AFL-CIO, filed a shareholder resolution asking McDonald's to address the environmental and human rights impacts of pesticide use in its vast potato supply chain -- a whopping two billion pounds a year.
During the subsequent dialogue, an idea that met everyone's needs emerged: survey best practices of farmers that supply brands such as Campbell's Soup, General Mills and Gerber. "There was a moment in our conversation when the idea dawned on all of us," said Sanford Lewis, attorney for the Investor Environmental Health Network, which coordinated the dialogue for its members and allies. "There was a quality of thinking together that happened in the process."
McDonald's finished the survey last year and is now moving forward to share and promote the best practices across the industry using a web-based tool. "We're looking to push the bell curve in terms of broader application -- without impacting crop yields," McDonald's Bob Langert told me in an email in April. "This work is not being done just for McDonald's potatoes, but has been developed for all (growers)."
While engagement success stories abound, major challenges persist in fully leveraging stakeholder perspectives to solve our biggest sustainability dilemmas. One area where companies can do better is by bringing diverse stakeholder perspectives together all at once rather than meeting with individual organizations. Ceres' stakeholder corporate engagement model follows this philosophy and we've found it adds value for everybody to share differing perspectives and to come up with more innovative solutions, while also instilling stronger and deeper levels of trust. Stronger feedback loops is another area where companies can improve. According to a 2008 KPMG survey of the 250 largest global corporations in the Fortune 500, almost two-thirds engage in formal stakeholder engagement (nearly double since 2005), but only about a third of the companies that do so publicly responded to the feedback they received. So companies need to keep the two-way communications flowing, ensure they disclose performance results, and inform stakeholders of how engagement results in changes for their business.
In the end, building a sustainable economy requires team effort: companies partnering with a wide array of stakeholders, all of whom can add value to corporate social, environmental and financial performance. Acting in isolation is no longer an option.
Image CC-licensed by Eastop.