It’s Saturday morning; I’m having my tea and reading an Economic Times interview with Rosabeth Moss Kanter, the renowned management expert and Ernest L Arbuckle Professor of Business Administration at Harvard Business School. I have included exerpts from the interview here because I agree with much of what she says, in particular her comment that principles and profitability are not necessarily antithetical (I tend to think of them as symbiotic). I do think that there are other, better examples of the mutually reinforcing nature of principles and profit than the P&G example she gave—think Seventh Generation, IceStone, Equal Exchange. The questions of the interviewer are in regular typeface, Professor Kanter’s answers in italics:

What do you think is changing – human nature of the nature of business?

. . .

As far as the nature of business goes, there is nothing inherent in the idea of profit, which says you have to make it in ways that violate social norms or that it has to come only in the short term. That’s the nature of the financial systems that are erected around the business and they can be dismantled. So we can change the rules as we have in the past.

I think companies with values are more sustainable in the long run because they are willing to make short-term trade-offs in the interest of longer-term benefits. It’s like what Winston Churchill said about democracy, ‘It’s the worst system we could imagine, except for all the others’.

Do you think the present financial crisis will change the way we do business? Will there be a movement towards responsible leadership?

I hope so and actually I think it will. Not today or tomorrow, but hopefully by the end of August, when people will be ready for that message. Because you can demonstrate that the surviving companies with good reputations and high sense of values are also profitable and that gets people’s attention.

The rising generation is much more socially conscious and idealistic, and also somewhat angry. They are not going to stand for these practices and they now have new communication tools. So there is a big generational effect that’s going to help. And the problems of the world are much more apparent to people now. There is more pressure and interest in solving these big problems, and business has the capabilities. It’s really about a better way to run a company that pervades all aspects of business because when you begin with values and principles, you use them to assess what you do.

You speak of values-led capitalism. In these difficult times, can one realistically expect values to prevail over profits?

It does not have to be principles over profits. In fact, principles often get you profits because the bank in Brazil (Banco Real) that walks away from customers who didn’t pass muster on their environmental and social loan selection criterion, had the customers coming back to them with a plea to help them comply. They also got new customers who said this is where we would like to put our money.

There is evidence that these two put together work very well. P&G had a product that they thought was a wonderful way to make a difference in the world, something the poor could really afford and needed. It’s a water purification sachet called ‘PuR’, and it turns out they couldn’t make a business out of it.

There was a big argument in the company to pull the plug on the product but people said ‘we can’t do that because of our values’ and this is important for poor people. So they set up a nonprofit organisation and gave the sachet to it, and they got enormous goodwill from other partners, like NGOs and governments.

After the tsunami, the demand for sachets was such that warehouses were emptied. So they recovered the cost but value to them came in employee commitment, demonstrating their values to the customers, and in many other ways.

. . .

When you do have a handful of companies practicing values-based capitalism, what is it about their culture that allows them to foster such values?

It has to start with the leaders. I remember being criticized as a sociologist years ago because I had to fall back on explanations involving individual leaders. But it does begin with leaders. New CEOs who take over have a sense of obligation to the country in which they operate. Leaders like Lorenzo Zambrano of Cemex, who wasn’t the founder but had the feeling that his company had to meet the highest standards. High standards are really something that these companies have in common, but to just talk about values misses the point. They aspire to be the best, one can call it ambition but then values mean being the best on multiple dimensions.

These companies are responding to the leaders and they are also responding to the times and these companies are much more in touch with their various stakeholders. They take in the feedback. If you are listening to a range of various stakeholders, you are much more likely to be sensitive to them. You are less likely to use a corporate jet when you are going for a handout.

In good times, everyone was a good leader. But now when the tide has ebbed, lots of people seem to be swimming naked. Are a lot of good leaders making bad decisions or they were not such good leaders to begin with?

They weren’t too good to begin with. I have no trouble in saying they don’t deserve a disproportionate share of wealth because they didn’t necessarily have to work very hard. I think they were probably okay, but not geniuses, and the times were good.

Social psychologists called it the fundamental attribution error: in examining the behaviour of others, people exaggerate the role of internal causes and invoke traits as a primary cause. They were lucky to be presiding in good times when the companies had a lot of momentum, and they also had a lot of smart people working for them.

Read the full interview at http://economictimes.indiatimes.com/Interview/Rosabeth-Moss-Kanter-Professor-Harvard-Biz-School/articleshow/4289927.cms

I just can’t help myself. With the NCAA Basketball Tournament in full swing, the World Baseball Classic clamoring for my attention, and the weather finally conducive to running outside (comfortably); I’ve got sports on the brain.

I’m not going to fight it. No. Instead, I want to celebrate one of the leaders of sustainability in sports. Of course, I’m talking about the Council for Responsible Sport (ReSport), which provides an independent certification for sustainable athletic events.

Having competed in and worked at numerous triathlons and other races myself, I can attest to the fact that such events generate a lot of waste. I immediately think of the aid stations, where tired athletes reach for cups of water, cool sponges, and energy gel packets. You have to see it to believe the litter that accumulates in the quarter-mile thereafter!

The guys at ReSport present an equally compelling argument for sustainability in sports. You’ll have to visit their website for yourselves to get the full story, but allow me to relay just one of their statistics: based on their travel to the event alone, “athletes on the starting line of Ironman Hawaii produced… the equivalent to the yearly carbon footprint (electricity and natural gas) of 972 average American homes.”  Amazing!

The concept of certifying sustainable athletic events gets me all sorts of excited. Just think if we could extend this model to the major spectator sporting events of today—the Olympics, the World Cup, and even professional leagues??!!!

How cool would it be if next year’s NCAA Tournament was certified as sustainable? I’ll leave you to ponder that idea as you watch this weekend’s first- and second-round games.

Let’s go Demon Deacons!

In a letter to the New York Times, published March 8, I suggest that the antitrust laws consider disallowing acquisitions that would result in companies that are considered “too big to fail”. Click here to read the letter.

On Friday, March 6, I attended a press event for the CRO’s release of its 2009 list of 100 Best Corporate Citizens. The room was filled with CRO people and representatives of companies that made the list, including IBM, Hess, Verizon, Avon, Entergy, General Mills, and Bristol-Myers Squibb. I attended on behalf of Symantec, which was ranked 23rd on this year’s list, and I was surprised to find myself pleased that four of our current clients are ranked among the top 40.

Why was I surprised? Mainly because I have an innate suspicion of these kinds of lists; they are often based on arbitrary scoring systems and murky methodologies. What’s more, those methodologies can change at the drop of a hat. This year, the CRO abandoned lobbying and CEO compensation—a key governance indicator (in this economic environment, given all that’s transpired in the past year?)—altogether as scoring criteria rather than refining and explaining their weightings. For example, last year a company was penalized for lobbying, regardless of whether it was lobbying for tougher safety regulations or for drilling on protected lands.

The result of these changes was that some companies dropped down or off the list while others moved up, some precipitously. In fact, about half of the companies on CRO’s 2009 list are new to it—which means that approximately half dropped off altogether. Are we to assume that the companies that disappeared also fell off in their sustainability efforts? Are we also to assume that a company that moved up by seventy points is suddenly hitting on all cylinders? Perhaps if the CRO were truly transparent about and consistent with its methodology, these leaps would be less puzzling—or nonexistent.

But it’s more than suspect methodologies. My big concern is that some companies that rank high on the list will, in essence, “believe their own press” and relax: CEOs thrilled at high placement will feel no pressure to be more transparent and will simply coast. What’s more, there is an element of cognitive dissonance to watch out for. I would guess that those who rank higher are less likely to question the methodology than those who rank lower or not at all. (In fairness, however, some of the top-ranked companies at the press event openly questioned the methodology.)

Do these lists have any value at all? Absolutely. If your company is newly ranked or moves up the list, you can promote its sustainability efforts both internally and externally and boost morale, especially in this dark and dreary economic climate. And whether you ranked high, low, or not at all, you can—and should—use the list to help push for more resources to move sustainability forward in your organization. Wherever you end up, recognize the list for what it is and use it however you can.

United Technologies Corporation (UTC) recently announced its 2008 Annual Report, becoming one of the few companies embracing combined financial and corporate responsibility reporting (Novo Nordisk is a well-known pioneer in this space).

From the perspective of today’s economic climate, it’s a shrewd move. UTC is telling investors that sustainability is here to stay as a core element of the company’s business strategy—and showing them how the environmental characteristics of its products is helping to maintain sales. UTC is likewise demonstrating to stakeholders that environmental and social issues are being considered on a daily basis throughout the company’s operations with attendant emphasis on accountability for sustainability performance.

Both the integrated approach and the report theme of “More with Less” is right in line with current public sentiment. A Harris poll conducted in late January finds that 51 percent of Americans say that environmental and economic goals can be aligned (without trading off one for the other). At the same time, efficiency and cost-cutting are again being viewed as a hallmark of both personal and corporate responsibility.

UTC’s choice to combine reports is but another sign of how sustainability is becoming an indispensable management tool—and source of competitive advantage. When companies strip away the hype and start providing sustainability metrics as part of their financial narratives… now we’re really getting somewhere.

Last week I served as guest editor for Andrew Winston’s Eco-Advantage Strategies newsletter. In this issue I explore climate reporting: who cares and how some companies are communicating their efforts to their key stakeholders.

In last week’s edition of Sustainable Life Media’s Climate Management Weekly, Kathee Rebernak offers tips for effective reporting on your climate impacts.

Cadbury 2007-08 Corporate Responsibility and Sustainability Review PDF