JANUARY 31, 2009
By SEAN KILLIAN AND NATE SPRINGER
The role of companies in society is fundamentally changing.
From blue chips like Ford Motor Company to innovative start-ups like TerraCycle, Inc., that was the pervasive message on Friday at the Ross School of Business Net Impact Forum, a one and a half day-long event featuring panel discussions and keynote speeches about the social and environmental challenges facing business today.
“The markets now value social change — and they didn’t use to. Something big has happened in the last year,” said Jason Saul, president of Mission Measurement, a social impact consulting firm. “Goldman Sachs found out this year that the companies that did well in sustainability measures consistently outperformed the market by 25 percent.”
According to Saul, corporate social responsibility is now the baseline and built into stakeholders’ expectations for companies and, as a result, the ability to differentiate on CSR has been destroyed because everyone does it. In short, “CSR is dead.”
More than 300 people from academia, business, non-profits, and government attended panel discussions that included the energy goals of the Obama administration, innovative business models in developing countries, and transportation in a carbon-constrained world. The conference was sponsored by the Target Corporation, Deloitte Consulting, the University of Michigan’s Erb Institute for Sustainable Enterprise, and a variety of institutes and clubs on campus.
“Sustainability is one of the biggest trends hitting industry at large,” explained Tom Lyon, director of the Erb Institute and a professor at both the Ross School of Business and the School of Natural Resources and Environment. “Almost every company has had to come to terms with it. Many have been reluctant, but they are realizing that they have no choice.”
Ford is one of those companies that, despite its recent worse-than-expected $5.9 billion fourth-quarter loss, is focused on sustainability and the next generation of transportation: “Because of congestion, because of climate change, because of the gap between rich and poor, we made a commitment to provide transportation solutions that are not necessarily just cars and trucks,” said Dave Berdish, manager of Social Responsibility at Ford.
DTE Energy is another company focused on sustainability. Mike McNalley, director of Energy Efficiency and Business Energy Services at DTE Energy, sees the move away from fossil fuels and toward a more sustainable economy as a business opportunity for businesses and for Michigan: “Michigan has some unique geological features for carbon capture and storage. The technology is not mature, but that’s an area where we are in a good spot.” He added, “We can accelerate commercialization of technology that is almost commercially viable, so they can be widely available.”
Chevron, an unlikely participant at a conference that was in part focused on the environment, saw the Net Impact Forum as an opportunity to hold a dialogue about issues it cares about. “Stories about us are either about record profits or not doing the best thing for the environment,” said Kirsten Thorne, public policy advisor with Chevron and a panelist at one of the breakout sessions. “So, fundamentally we miss the opportunity to have a constructive dialogue about our sustainability plans. This is a great place to have that dialogue.”
She said that she also viewed Net Impact as a venue to recruit. While recruitment at business schools has traditionally focused on finance, Chevron’s new identity as an energy company requires a more multidisciplinary set of skills. “Net Impact was unknown to us before this, but there’s a level of multidisciplinary expertise [found in the organization] that Chevron could definitely benefit from.”
Other companies in attendance were not simply reacting to sustainability measures or seizing opportunities to expand into new markets with existing operations; instead, these companies were founded on sustainability in the first place.
“We were able to create a company that sells products made entirely of waste,” said Tom Szaky, CEO of TerraCycle, a company that began selling plant food in 2001 and now fills the shelves of Wal-Mart and Target with its pencil cases, bags, cleaning products, and fire starters.
“By shifting the demand curve of waste,” he explained, “we can move garbage from having a negative value to having a positive value, and in effect eliminate the very concept of waste.” TerraCycle has been featured in the Wall Street Journal, New York Times, Better Homes and Gardens, and other national publications. Its business partners now include most large consumer brands.
Powerhouse banks like JPMorgan Chase and elite consulting firms like McKinsey were also on hand to both explain the skin they have in the game and to urge students to consider the skills required to become business leaders. “This is not a niche trend that some students happen to be studying,” said McKinsey’s Shannon Bouton. “I cannot think of any industry that will not be affected by carbon” and sustainability issues.
And this isn’t going away with the recession.
“With the downturn, it’s easy to think sustainability will go away, and students might tend to think that they should focus on getting to Wall Street,” Lyon said. “But the downturn for sustainability is not the same downturn for the rest of the economy. Companies are not giving up their efforts to reduce greenhouse gasses.”
Few companies are feeling the impact of the recession more than Ford, and sustainability remains in the budget and at the core of corporate strategy. “It's part of our long range strategy,” Berdish said. “When we're looking at 2020, 2030, and beyond, we're looking at electrification. We are looking into different buses, trains, and trolleys.”
According to Saul, what was once considered a trend has become so mainstream that all companies in every sector are integrating these strategies and are looking for the right people to do it. “In fact, we are not asking enough of companies, and we are not helping companies do more,” Saul said. “And that’s the key for you. It’s not about disproving a negative, it’s not about saying we’re doing less bad. It’s about creating positive social change that is benefiting the business.”