Green Giants

How Smart Companies Turn Sustainability into Billion-Dollar Businesses

 Green Giants

Author: E. Freya Williams
Pub Date: August 2015
Print Edition: $27.95
Print ISBN: 9780814436134
Page Count: 288
Format: Hardback
e-Book ISBN: 9780814436141

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Excerpt

Chapter 1: The Iconoclastic Leader

"These stories begin with one person saying I absolutely believe in this and I want this to happen," Professor Lynda Gratton, the London Business School

In 1999, a chef named Steve Ells visited a factory farm in Iowa that supplied his nascent 16-outlet restaurant chain--Chipotle-- with pork for its signature burritos. Ells did not like what he saw. He recalls seeing animals in pain and resolving then and there to find a new supplier of meat. Ells returned home to Denver, and set about sourcing as much of his chain's meat as possible from more humane, sustainable sources.

Colleagues remonstrated with Ells, fearing the substantially greater costs of this kind of meat would sink the vulnerable small business.

"I don't care," Ells is said to have replied. "It's the right thing to do."

And not just the right thing by the animals. Ells believed the meat tasted better, which would be better for customers and ultimately, therefore, for business. He introduced the new and improved meat into his restaurants, implemented a price increase of a dollar per serving - more fast food heresy - and waited to see how the market would respond. Sales increased by 100%. Carnitas, the pork dish, went from the least popular item on the menu to the most popular.

And that was just the beginning. Ells stuck to his commitment as Chipotle grew, extending it to 100% of its pork as well as chicken, beef and dairy. He added produce to the plan, working to source as much as possible locally or organically. It wasn't always easy; Ells hit a speed bump in 2013 when a shortage of ethically reared beef led to temporary substitutions with conventionally reared meat - and uproar from the press.

But Ells' early decision, as well as his tenacity and perseverance, paid off. Today Chipotle is both the nation's largest restaurant seller of naturally raised meats and its most profitable fast casual restaurant chain, with margins of 25.9% (compared to 19% at McDonalds) and 2014 revenues of over $3 Billion ..Indeed, Chipotle's commitment to "Food with Integrity" has become so recognized a contributor to its success that, rather than suggest it dilute the strategy to manage out cost, analysts describe the strategy as a reason to consider the company's stock, and list insufficient supply of the right ingredients as a threat to future business performance. (Who ever thought we'd see Wall Street analysts fretting over the living conditions of the nation's pigs?)

This story illuminates four salient facts about Ells. First, he underwent a conversion, which for him kicked off an inner journey, instilling in him a sense of conviction and permanently altering his view on the world. Second, he had the courage to stand up and change the direction of his business, setting it on a course that at the time seemed risky and counter-intuitive, at odds with conventional business thinking. Third, he had the commitment and tenacity to stick with the course he had set, even in the face of skepticism and opposition from others within the business, rather than buckling at the first sign of opposition. And fourth, he is something of a contrarian, comfortable in the role of provocateur, challenger and outsider.

Ells is an Iconoclastic Leader. Such leadership is the first shared of the six shared traits of Green Giants. As you delve into these companies' stories, the decision to either start or change course to a sustainable strategy can almost always be traced back to one specific individual -- the pioneer and long-term champion of the New Billion Dollar Brand strategy.

Big deal you may say, all strong organizations have strong leaders. But the Iconoclastic Leaders of New Billion Dollar Brands are different. In addition to requiring the traits of all strong business leaders (because building a billion dollar brand of any sort requires that), these leaders tend to share a unique combination of additional characteristics -- the 4 Cs.

1. They are fueled by an inner sense of Conviction that they need to take things on, often resulting from a personal conversion;

2. They have the Courage to stand up and change things, often in a way that seems counter-intuitive or risky to colleagues or shareholders;

3. They have the Commitment and tenacity to stick with the idea through thick and thin, through objections and obstacles, to see it to fruition; and

4. They are Contrarian, happy to live with the role of outsider, espousing a different view from everyone else; indeed they thrive on it. Crucially though, they are constructive contrarians, not contrary for the sake of it.

These characteristics are the 4 Cs of Iconoclastic Leadership.

In this chapter, you'll meet the Iconoclastic Leader at each of the Green Giants, and take a look at what they did, and why. You'll delve into the 4Cs of Iconoclastic Leadership. And finally you'll explore how you can become an Iconoclastic Leader, no matter your background or role within your company.

Meet the Iconoclastic Leaders

Nike, Hannah Jones, 48, CSO

Unilever, Paul Polman, 57, CEO

GE, Jeffrey Immelt, 58, Chairman & CEO

IKEA, Steve Howard, 47, CSO,

Natura, Antônio Luiz da Cunha Seabra, 71, CEO

Whole Foods, John Mackey, 60, Founder & co-CEO

Chipotle, Steve Ells, 48, Founder and co-CEO

Tesla Motors, Elon Musk, 42, CEO & Chief Product Architect

Toyota, Takeshi Uchiyamada, Formerly Chief Engineer, now Chairman of the Board

The 4Cs and the C-Suite

As you peruse the job titles of the Iconoclastic Leaders, notice that for a group selected on the basis of their success leading a sustainable business strategy, surprisingly few of them have "sustainability" in their title. Instead, the majority--seven out of the nine--are chairman and Chief Executive Officer.

It's important to emphasize that the CEOs didn't make this list simply because the success was achieved on their watch. Instead, these six are the individuals who envisioned, shaped, owned and drove through the Green Giant strategy at their respective companies; who, in the words of Professor Lynda Gratton of the London Business School, who has studied sustainable business leadership extensively, stood up, said "I absolutely believe in this and I want this to happen," and saw it through from inception to execution.

Founder-CEOs Seabra and Mackey built businesses with sustainability at their core--a more natural beauty brand or a natural, organic grocer. As far back as the garage in Brazil where Seabra started Natura in 1969, or the natural foods store Mackey and his girlfriend opened in Austin, Texas in 1980, sustainability was integral to the concept. Musk joined Tesla in 2004, seven months after its incorporation. A serial Silicon Valley entrepreneur with successes at PayPal and other start ups under his belt, he quickly became the driving force, both spiritually and financially, of the electric vehicle start-up that would almost certainly have failed without him.

At the multinationals, GE and Unilever, Jeff Immelt and Paul Polman didn't just give their approval to plans dreamed up by their teams. Ecomagination and the Unilever Sustainable Living Plan were (and are) invented and personally led by them -- as we'll learn in this chapter. In both cases, the stakes were high. Both put their reputation and position in the balance to achieve success, and are viewed by the outside world and by their teams as the unequivocal leaders of these strategies.

At Toyota, the story was slightly different. The agenda that resulted in the development of the Prius was initially set by then-Chairman Eji Toyoda and was propelled forward by other very senior executives including the subsequent President Okuda. But today, the man appointed as chief engineer on the project, Takeshi Uchiyamada, the one who figured out how to crack the code on a hybrid powertrain, is viewed as the father of the Prius. And today he is the Chairman of the Board.

What does this tell us? In sustainability discussions, it's common to hear people say 'leadership has to come from the top'. This is usually taken to mean that the CEO has to be engaged and lending his or her support. The Green Giants suggest we take the sentiment literally.

But why is an Iconoclastic Leader in the CEO role a key ingredient to success in building a Green Giant business?

In the coming chapters, we'll explore how Green Giants are different from other companies. They've developed innovations that overturned the way things were done in their categories, investing millions, sometimes billions, of dollars into things like R&D and supply chain re-engineering to create products and services they didn't make before - that no one's made before. They have oriented their organizations around a purpose beyond profit -- rethinking the business model and taking on decades of established business ideology to prove there's a new way of doing things. They've made sustainability not the job of a separate department or team trying to sprinkle a little sustainability where they can, but embedded it right at the heart of the structures of their business, into the guts and sinews of their organizations. They're re-engineering the value proposition to the customer and are forging a new behavioral contract with their key stakeholders. In the process, they're building a new kind of company.

Sometimes there was a strong legacy of sustainability or corporate responsibility at the companies before the Iconoclastic Leaders' times. This could be said of Nike, GE and Unilever, for example. Typically, though, the Iconoclastic Leader put things into hyperdrive, shifting gears from a sustainability strategy that was primarily about reducing the operational footprint and managing risk, to a business strategy that was about transformation and growth.

And that's the crucial point. The Green Giant strategies explored in this book are not sustainability strategies, with a goal of reducing energy and water consumption or waste--though those are critically important (and are being addressed by the GGs). They are business strategies with a goal of transforming the organization. They've shifted sustainability or social good from where they spend or save their money, to how they earn it.

The stories in this chapter will illustrate why, to make this kind of change happen, you often have to be the boss. You need to be the anointed owner of the strategy of the business, with license to initiate a transformation agenda. You need the power to direct resources at scale and to remove roadblocks when they arise. You need a veto right, to overrule colleagues should it become necessary. You need the big picture view of the organization. And you need enough personal capital and authority for employees, board members, shareholders and customers to go along with you when you inevitably find yourself saying, "I know this sounds weird, but you have to trust me".

It's hard enough to drive this kind of change through an organization when you're the boss. It's nigh-on impossible when you're not.

What, then, of those who are not? Two of the C's are not CEOs but CSOs, Chief Sustainability Officers. They are no ordinary CSOs. The Iconoclastic Leaders at Nike and IKEA, Hannah Jones and Steve Howard, represent a new breed of CSO. They are change agents, empowered to drive the Green Giant strategy through the organization. Both report directly to the CEO and are on their respective executive teams, which the majority of CSOs are not. They break the mold of the job description, going beyond efficiency and compliance, the heartland territories of the CSO, to innovation and transformation. Both stay extremely close to their CEOs. Both also had the added advantage of inheriting a conducive environment; as we'll learn later, IKEA has had a social purpose and a culture of efficiency since the 1970s; pioneers had opened the door to the changes Jones has since driven at Nike, including board member Jill Ker Conway and original Corporate Responsibility lead Sara Severn. And they embody the 4 Cs. This combination of unique position, company legacy and personal character has allowed Howard and Jones to function as the Iconoclastic Leaders in their respective domains, even though they don't sit in the very top spot.

Perhaps surprisingly, though, deep sustainability chops are not a prerequisite to becoming an Iconoclastic Leader that drives a Green Giant strategy forward. In fact, the only one of the nine who comes close to fitting the image of a traditional treehugger is John Mackey of Whole Foods. Naturally sustainability and corporate responsibility loom large on the resumes of Jones and Howard. But Paul Polman and Jeff Immelt are blue chip corporate to the core; one used to be a CFO, the other a business leader; Elon Musk is a Silicon Valley whizz kid; Steve Ells a chef and Uchiyamada a career Engineer.

No, besides that all-important C-suite title, the characteristics that most distinguish the Iconoclastic Leaders from their peers can't be found in the pages of their resumes. They are intangible. They are the four Cs.

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