MIT Sloan Management Review

Jeffrey Hollender, a founder of Seventh Generation, spoke at the MIT Sloan School of Management today. Apparently he spoke several times around campus, but we caught him at a lunch time talk billed as “creating a game plan for transition to a sustainable economy.”

During a compact introduction, Dean David Schmittlein noted that introducing the notion of corporate responsibility into one’s business as Seventh Generation has, “adds complexity.” Hollender’s talk delivered some of that complexity.

Hollender is the “chief inspired protagonist” of Seventh Generation (some founders get to pick their own titles). As someone whose role at the company revolves around thinking, it’s no surprise that he started and ended his talk with words about consciousness in the most basic sense: the decisions you make are based on what you pay attention to. In world full of unintended consequences, he argued, “what you pay attention to helps you end up with more of the consequences you want.”

The consequences Hollender wants, for his business, his society, and his planet, are “revolutionary. Many of our problems will not be solved by the sort of incremental change that we see in the political process and in business.” He went on to diagnose our current predicaments (economic, environmental, and moral) and offered some possible ways out. Although the audience was a mix of students, faculty, and staffers, it was clear that it was the students he was talking to. “We don’t want to sustain the world we have,” he said. “We want to change it.”

“The single greatest challenge we face,” he said, “is the system we have created, embodied in academics and business. We have taken a world that is endlessly interdependent and divided it into countless pieces. There are two million NGOs that have taken a piece of the problem, same in business, but failed to realize that everything one does affects the other.” He celebrated cross-disciplinary collaboration (citing the global sustainabile food lab associated with MIT Sloan’s Peter Senge) and identified what he said are the “keys that are critical to what kind of solutions are necessary”:

• He talked how how business money in politics is “negative and disruptive, and it prevents the transition to a sustainable economy.” He advocates full public financing of elections.
• He argued for full cost accounting. “In our society, good things cost more than bad things. Why? Government rules lead to an incredible distortion in the economy … if you’re a business and you do the right thing you get no benefit from an institutional perspective.”
• He laid out an argument against the current structure and ownership of business and financial markets. “Things get more expensive even when there’s no increased demand. The purpose of business has become misguided, immoral even … we need the influence of government to be in line with the interests of society. Right now the deck stacked against sustainable businesses.”
  

Hollender’s proposed solutions are those he has made in print and in person before — businesses should practice radical transparency, treat their employees as their greatest assets, and exert leverage through supply chains (he spoke at some length on how WalMart has become a de facto regulator). During a brief question-and-answer session, he emphasized that his own company has far to go to live up to its own values. “Out biggest failure as company is that we have failed to make even marginal impact when it comes to justice and equity… We make compromises every day. The key is to be transparent about them.”

And Hollender concluded with a note about the contradictions inherent in the economics and politics of our time. He spoke of meeting a representative of the Service Employees International Union, who told him that, to get an acceptable return, “the SEIU pension fund invests in mutual funds that are full of companies who want to put labor unions out of business.” It’s quite complicated.

We’re used to thinking about innovation in technology, in products or services, or even in management methods or business models. But in a recent article in strategy+business, Marjorie Kelly highlights a type of innovation that is less commonly discussed: innovation in corporate structure, ownership and governance. 

Kelly, a senior associate with the Tellus Institute, suggests that some of the behaviors that helped lead to the financial crisis in 2008 are a result of the intense focus on short-term profits that characterizes many contemporary for-profit companies. She suggests that new emerging models – such as a “social business” that has a social mission as well as a profit-making one and that does not seek to maximize the profits investors receive –”can be thought of as emergent new organizational species, occupying a new sector of society that is a greenhouse of design experimentation in which the future of our economy may be growing.”

This week, MIT Sloan Management Review is in Long Beach, Calif., for this year’s TED conference, which starts tomorrow. We’ll report daily. Now in its 25th year, TED remains an unclassifiable event. The letters of the name originally stood for technology, entertainment, and design, but in recent years the tag line for the event has become “ideas worth spreading.”

The event is certainly an elitist one. It’s expensive, hard to get into, and you’re just as likely to bump into web inventor Tim Berners-Lee as Overboard star Goldie Hawn in the food lines. If nothing else, TED is a trip. The veteran conference (this reporter has been to six of them) has gone through many permutations. Under curator Chris Anderson, TED is still full of technology, entertainment, and design, but it has really lived up to the change-the-world rhetoric that was always a bit more under the surface during Richard Saul Wurman’s ace stewardship. One high-profile example: Al Gore’s warning about global warming turned into An Inconvenient Truth after a movie producer saw him deliver the talk at TED. Last year E.O. Wilson debuted here the first iteration of his Encyclopedia of Life, funded by a TED grant.

The change-the-world attitude gets a bit out of hand: there’s plenty of talk about how for the past two years the gift bags, by Rickshaw Bagworks, have been constructed from 100-percent post-consumer recycled beverage bottles, but hardly anyone points out that the bags are overstuffed with non-essential items that have a much greater impact on the environment. Indeed, TED is a place for conspicuous consumption, even if it’s relatively sustainable consumption; it’s the only conference I’ve been to in which I’ve seen anyone drive up in a Tesla. (I’ve seen two today here as well as an even more cutting-edge vehicle.) Those with similar ambitions to TED’s, but a more limited budget, may wish to consider attending the alt-TED BIL, which is also in Long Beach this week (and which I hope to visit while I’m here).

For many years, TED was held in Monterey, Calif., but success has brought it to a larger venue farther south, in Long Beach (there’s a smaller, parallel, event being held east of here, in Palm Springs). At Monterey, most of the conference took place in one area. Here, with banners everywhere and events more spread out, it feels like the event has taken over the town, like Sundance does in Park City, South by Southwest does in Austin, and Davos (aka the World Economic Forum) does in, well, Davos. We’ll see how that works.

Indeed, just like last year, TED is coming right after Davos, which was a downer and inspired anger from even sober-minded management thinkers. Last year, TED presenter Craig Venter contrasted the optimism of TED with the pessimism of Davos. This year, especially, we could use a little optimism.

Especially if that optimism is realistic. Except for its entertainers, TED is an irony-free zone, a place where earnest speakers talk about fixing the world as if it is not merely possible, but mandatory. As we’ll see during the conference, the speakers here have a pretty good track record at improving one or another part of the world. The theme for this year’s event is “The Great Unveiling,” which refers in part to the conference’s new location, but also to new ideas due to be debuted here.

So why should managers care what’s happening here? Because the best new ideas helps make good managers better. The joke among TEDsters (an annoying term, yes, but it has stuck) is that attending the conference is an endurance sport. It’s one thing to be in a room listening to spectacular insights for a few hours. It’s another to be doing so for half a week. Nonetheless, part of the experience you get from being at events like TED is that feeling of being overwhelmed: someone just said what feels like the smartest thing you ever heard — and then the next speaker says what feels like the smartest thing you ever heard — and then … well, you get the idea. It’s intellectually exhausting, but it’s also thrilling. And, during the best talks, you can’t help thinking: How can I act on this?

“The era of self-interested companies trying to maximize shareholder wealth at any cost appears to have been supplanted by an era of corporate social responsibility, a  phrase used to describe a decision by the company’s management to consider the impact their decisions will have on their customers, employees, suppliers and communities, as well as their shareholders.” So write Remi Trudel and June Cotte in their article “Does It Pay To Be Good?” in the Winter 2009 issue of MIT Sloan Management Review.

Trudel and Cotte report some interesting findings from their research:  Consumers are willing to pay more for goods that are ethically produced and expect to pay less for those that are unethically produced. What’s more, consumers were generous in their definitions: In an experiment, they rewarded a company that had 25% organic cotton in t-shirts with a price premium similar to what they gave a company with 100% organic shirts.

That kind of favorable consumer response to social responsibility may help explain another trend — one reported on this week by Fortune: Despite the economic downturn, companies are not abandoning their corporate social responsibility programs.  ”This recession is wiping away a lot of things, but so far, corporate responsibility seems to be a survivor,” Aron Cramer, president and CEO of Business for Social Responsibility, told Fortune.