Conscious Company Magazine | Issue 2 Spring 15

MAKING MONEY WITH MEANING | HOW TO RETAIN THE BEST TALENT

THE FUTURE OF BUSINESS AS USUAL

GROUNDBREAKING

INNOVATION ALEVO MASS DESIGN GROUP PANGEA ORGANICS

THE POWER OF DOING THINGS DIFFERENTLY

CHIP CONLEY

FOUNDER: JOIE DE VIVRE HOTELS & HEAD OF GLOBAL HOSPITALITY, AIRBNB

ROCKY MOUNTAIN INSTITUTE

THE SECRET OF SELLING WITHOUT SELLING OUT

PLUM ORGANICS

LEADING SUSTAINABLE

CHOCOLATE BRANDS

KIMBAL MUSK ON THE FUTURE OF THE FOOD SYSTEM

FOOD | ENERGY | FINANCE | INNOVATION & DESIGN | LEADERSHIP

WHAT IS CONSCIOUS COMPANY MAGAZINE? For hundreds of years, the one and only measurement of a “successful company” has been monetary. This measurement of success is changing. No longer are people content to judge a company simply by how much money it makes. A new definition of success in business is emerging and it centers on a company’s ability to have a positive effect on society and the environment, in addition to making money.

The most successful businesses on earth, and the ones that will enjoy longevity in the marketplace, are the ones that have created new operating models that take all stakeholders into account. We want to celebrate these businesses. Our mission is to help redefine what it means to be a successful business by featuring the stories of companies that operate consciously, by providing their leaders with a megaphone to inspire other businesses to do the same, and by showing the world just how powerful business can be when used as a force for good.

WHY PRINT? Throughout the process of conceptualizing this publication and bringing it to life, we have been asked multiple times about our decision to print this magazine from a sustainability perspective. We not only understand these concerns, but we have wrestled with them ourselves. Our decision came down to our deep desire to spread the word as far as possible about the amazing businesses that will be featured in our pages.

Printing Conscious Company Magazine allows us to increase the exposure of our brand through our retailers, expand the conversation about sustainability and social justice, and, hopefully, reach and inspire people who might not otherwise pay attention to this movement.

Additionally, we have taken a number of steps to ensure that our printing is done in a sustainable way: we are using Forestry Stewardship Council (FSC) certified paper for all printed material; we are partnering with local Boulderbased PrintReleaf to help reduce our environmental impact by planting trees across a global network of reforestation projects; and we have pending B Corp certification to ensure that we stay on track to meet our sustainability goals. We practice what we preach in all facets of our operations, and we hope you will hold us accountable if you believe that we can do something better.

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FROM THE EDITORS

S

pring is a time of hopeful renewal. The world begins to thaw, seedlings bloom, animals migrate north or awaken after long winter hibernations with the instinctual knowledge that warmer weather is just around the corner, and new life emerges all around us. In this second issue of Conscious Company Magazine, we have brought you many stories of remarkable businesses and entrepreneurs who embody this same spirit of resilience, evolution, innovation, and hope for the future.

In creating this issue, we had two very powerful interviews with Chip Conley and Kimbal Musk, who both spoke of near-death experiences. In each case, both men felt a sense of urgency to make changes to their work that would make their lives more meaningful. While reflecting on these stories, we were inspired by the idea that no one has to wait for a near-fatal wake-up call to begin living a more meaningful life. Renewal is possible. We can each make the choice, right now, to fuel our lives and our work with intention and purpose.

As Chip Conley put it, “For how many hours we work each week, … to not have and find joy in what you’re doing is really a missed opportunity.” Joy and purpose make for healthy humans and happy employees, who are just as important to the long-term sustainability of a company as the environmental health of the natural resources on which a company relies.

The response to our first issue from you, our wonderful supporters, has been overwhelmingly positive. The Conscious Company Magazine team believes it will soon become “business as usual” for companies to incorporate both the human and the environmental aspects of sustainability, and your tremendous support has only strengthened that conviction. As Joshua Onysko, Founder of Pangea Organics, said to us, “The fringe always predicts the future.” Business has already begun evolving. Consumers are demanding more of their products and of the companies that make them. Companies are being held accountable by increased transparency. Soon, doing good will be the only way to do well.

We thank you for helping to hasten along this hopeful future by supporting the magazine, sharing it with your communities, adding your voice to the conversation, and supporting the many businesses for whom this future is now.

With gratitude and respect, Maren and Meghan

SPRING 2015 • ISSUE 2 The Conscious Company Magazine Team CO-FOUNDER AND COO Maren Keeley CO-FOUNDER AND EDITOR-IN-CHIEFTESS Meghan French Dunbar ART DIRECTOR Cia Lindgren ADVERTISING MANAGER Amber Lee Eckert COPY EDITORS Jack Mott Robin Dickerhoof TRANSCRIPTIONIST Joshua Welch Liz Chiodo ENERGY EDITOR Pablo Leon MEDIA CONSULTANT Lesley Barnes WEBSITE GURU Jay Mantri & Thrive Consulting Group ADVISORY BOARD Ashley Coale Devon Bertram Emily Olson Katie Dunn Nathan Havey Scott Dunbar Wendi Burkhardt NEWSSTAND CONSULTANT BILL GOLLIHER & FULL CIRCLE STRATEGIES, LLC PRINTING PUBLICATION PRINTERS COVER PHOTO: LISA KEATING www.lisakeatingphotography.com CONTACT INFORMATION GENERAL INQUIRIES, SUBSCRIPTIONS, AND REPRINTS: info@consciouscomag.com ADVERTISING: advertise@consciouscomag.com PHONE: 720.924.1091 www.consciouscompanymagazine.com facebook.com/consciouscompanymagazine Follow us @ConsciousCoMag

TABLE OF CONTENTS

MARKETPLACE

LEADERSHIP

12

59

YELLOW LEAF HAMMOCKS

16

A CONVERSATION WITH JOSHUA ONYSKO, FOUNDER OF PANGEA ORGANICS

21

THE SECRET TO HAPPILY INTEGRATING WORK & LIFE

ENERGY

39

COMPARING B CORPS & BENEFIT CORPORATIONS

ALEVO’S BREAKTHROUGH BATTERY TECHNOLOGY

24

42

SELLING THE COMPANY. A CONVERSATION WITH NEIL GRIMMER FROM PLUM ORGANICS

34

EQUAL EXCHANGE

LEADING THE ENERGY REVOLUTION AT ROCKY MOUNTAIN INSTITUTE

50

4 EXCITING ENERGY INNOVATIONS

54

NAMASTE SOLAR

62

COVER STORY: A HEART TO HEART CONVERSATION WITH CHIP CONLEY

70

RETAINING THE BEST TALENT

74

THE MISSING LINK AT UBER JEFF CHERRY

78

5 WAYS POLICY PROMOTES INNOVATION | ASBC

FINANCE FOOD

91

KIMBAL MUSK ON THE FUTURE OF FOOD

102

TRANSFORMING A CRANBERRY FARM - STARVATION ALLEY

107

THEO CHOCOLATE

114

4 TOP SUSTAINABLE CHOCOLATE BRANDS

126

IMPACT INVESTING WHERE TO START FRAN SEEGULL

128

DEVELOPMENT IMPACT BONDS | ANNA BOWDEN

132

SHAREHOLDER ADVOCACY 101

137

SHAREHOLDER ACTIVISM

INNOVATION & DESIGN

140

ASPIRATIONAL ARCHITECTURE

BY MASS DESIGN GROUP

146

SETTING THE HIGHEST STANDARDS THE LIVING BUILDING CHALLENGE

150

LEADING INNOVATION LARRY KEELEY

155

SYSTEMS DESIGN: FUTURE OF FISH

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YELLOW LEAF HAMMOCKS INTERVIEW WITH RACHEL CONNORS, CO-FOUNDER THE GOODS • Creates “prosperity wage jobs” to break the cycle of extreme poverty and debt slavery.

• Diverts communities from destructive slash and burn agriculture.

• Empowers women within communities (only a weaver can collect payment for her work, not her father, husband, etc.).

• Ensures children have the opportunity to go to school.

• Focuses on holistic approach to sustainable economic development (environmental stewardship, economic health, social equity, and cultural vitality).

• Hammocks packaged in eco-friendly totes made from repurposed parachute fabric.

Carbon offsets for all shipping.

• Responsible office practices (corporate car sharing, paper-free office, green printing).

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“When you create enough jobs, it has the effect of pulling the entire community out of poverty and empowering people to build the future they dream for themselves.”

What does Yellow Leaf Hammocks do?

Rachel Connors: Yellow Leaf Hammocks is a social enterprise dedicated to two important objectives: sustainable artisan job creation and awesome relaxation.

Each of our hammocks is 100 percent handwoven and directly supports highwage job creation in rural Thailand. Just as importantly, these hammocks are beautiful, stylish, and ridiculously comfy.

What inspired you to start this company?

RC: We were born out of a “vacation inspiration”! My co-founder Joe Demin was on an epic voyage through Thailand

when he first discovered a handwoven hammock outside of a tiny stilted hut on the Andaman Sea. He had always been obsessed with finding the perfect hammock, but none of the ones he found in American shops were comfortable enough or designed to his standards.

He was so excited about the hammock outside this hut that he asked a million questions and learned that it was handmade by an endangered hill tribe in northern Thailand. He got permission to head up to visit the tribe, convinced a cabbie to drive him 600 miles out in the jungle to their village, and left that day with a handshake deal to distribute the hammocks in America.

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Joe was most inspired by the realization that hammock weaving had empowered the tribe to begin pulling themselves out of poverty. For decades, charity and band-aid solutions had not been able to make a real difference in this marginalized community, but the weavers had discovered their own solution and all they were lacking were sales channels to the outside world.

We started out selling the hammocks at local markets and fairs, sharing the story, and feeling amazed at how the products and impact resonated with people. We had enough success with those first events that we decided to launch an e-commerce website, leave our jobs, and try to expand this job-creating opportunity.

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MARKETPLACE TOP THREE LESSONS FROM RUNNING A MISSION-DRIVEN BUSINESS:

1

GO FOR IT!

Don’t waste time killing yourself over creating the perfect website or a pretty powerpoint. Just get out there, start talking to people, and start selling your solution. I guarantee you will go through dozens of iterations of your messaging and you will never feel like your website is “done.” But you can only improve by sharing your story, getting feedback, and gaining supporters. All that time you are spending worrying about a font could be spent helping people!

2

DON’T BE AFRAID TO ASK.

My co-founder Joe is much better at this than I am. He is not afraid to walk up to anyone from a magazine editor to Fabio (true story) to share his ideas about Yellow Leaf Hammocks. He will negotiate better terms with vendors or pitch crazy partnerships that end up becoming amazing assets. I am learning all the time that I have to be a little more pushy in order to build the best business possible and to lobby on behalf of our weaving families. People love to be a part of something that’s creative and that’s creating a positive impact, so invite them in.

3

STAY LEAN AS LONG AS POSSIBLE.

We stayed completely bootstrapped for years. We reinvested the profits from every sale into the business and made some hard sacrifices to maintain control of our vision. But now that we are growing and have more funding available, we are still sticking to that bootstrapped mentality. One of our mentors, Tom Chi of Google X, advocates for “rapid prototyping,” which is basically the idea that you should fail small and fail quickly to get to a better idea. We joke that we made big mistakes with small amounts of money as we started out - but now we can make fewer mistakes with larger amounts of money as we grow. The first thing you should do is not go out and raise $1 million by giving away control of your business. The first thing you should do is go make $100,000 from your idea and learn from that experience.

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Do you have any metrics on the impact that the company has made so far?

RC: Our most important metric is job creation - that’s the foundation for all the rest of the change we are able to create. Over the past year, we have grown from employing about 75 weavers to creating jobs for more than 200 people! Every time we create a weaving job, we can divert a whole family (including the kids) from slash and burn agriculture, help break the cycle of debt slavery, and ensure that 100 percent of their children can go to school instead of working in the fields.

Additionally, we have helped dozens of weavers through financial literacy training and helped them build their first savings accounts through our Kiva partnership. We help make sure that every weaving family has full Thai citizenship and access to public services (schools, public health, etc.).

When you create enough jobs, it has the effect of pulling the entire community out of poverty and empowering people to build the future they dream for themselves.

What is one of your favorite stories from Yellow Leaf Hammocks?

RC: One of the things that has been amazing is going back to Thailand and seeing the changes that are taking place on the ground. We will come back and see that people have tile floors in their houses where there used to be dirt or watch kids start to outgrow their parents because they’ve had better childhood nutrition. It makes everything we are doing in our San Francisco office feel more tangible and provides that boost of energy that you need to keep making it happen.

You point out that Yellow Leaf Hammocks is not a charity. Why do you prefer to run the organization as a for-profit business? What insights do you have regarding the benefits of running a venture as a for-profit business rather than a nonprofit?

RC: The number one reason we launched as a for-profit business (and a certified “Best for the World” B Corp) is financial

sustainability. We believe that a market-based, mission-driven business is the best way to ensure the long-term viability of this solution.

There is definitely a place for charity and aid in the fight to end poverty, but that can only go so far. Donors can dry up, causes can be forgotten, and it can be hard to get all of the scattered pieces of the puzzle in place in order to truly overcome poverty in a community.

By running as a business, we force ourselves to be results-oriented and ensure that these artisan jobs will be available for the long haul. Our weavers are empowered by doing incredible work, instead of being ashamed and reliant on handouts.

We also think it’s important to put product first. We have the most gorgeous designs and the best construction of any hammock out there.

This shouldn’t be a product that people are buying out of guilt - this is what you buy when you want to own the best, most comfortable hammock in the world - and the social impact is the icing on the cake.

What advice would you give to someone who is thinking of starting their own mission-driven business?

What mantra should entrepreneurs repeat to themselves over and over?

RC: I have two signs above my desk.

One says, “Don’t Forget to Be Awesome” and the other says, “Hustle.”

The first one is to remind myself that what we are creating is amazing. It is literally life-changing for thousands of people, and I should be excited and emboldened by that every single day.

It’s a huge responsibility, but also the best job in the world.

The other sign is to remind me that big ideas are nothing without execution.

Those moments when you get to hug a proud mom with a great new weaving job or jump on a stage to share your story are few and far between. What this all boils down to is making things happen, which is far from glamorous!

It’s hard work and sometimes (gasp) boring, so make sure you remember that social entrepreneurs make spreadsheets, too.

What is your vision for Yellow Leaf Hammocks moving forward?

RC: We are just getting started!

Our goal is to support 1,000 artisan jobs by 2018. That’s the big number circled in our heads for the short-term.

We just took on our first small round of funding, so we are dedicating that to growing our wholesale business and introducing some cool new products in 2015. We’re in talks for some more really cool partnerships, so hopefully there will be some announcements on that front soon.

We envision this brand growing to embody the full scope of the “hammocking” lifestyle that we believe in. There are not a lot of companies out there that can offer a fun outdoor lifestyle, a commitment to conscious living, and a direct social impact.

We also want to be mentors, friends, and role models to other job-creating social entrepreneurs. We want to stand as proof that it is possible to build a profitable, positive company without any special connections, insider knowledge, or rich uncles. If young people have a choice between going to work for a big consulting firm or a tech giant versus bootstrapping an impact start-up, we want to be there giving them the thumbs up and telling them to go for it!

Photos: Yellow Leaf Hammocks

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BOULDER-BASED PANGEA ORGANICS is on a mission to create a more sustainable future through its organic, responsible skin care line. The award-winning company has experienced tremendous growth, largely as a result of its commitment to operating as a holistically sustainable brand. We spoke with Founder and Chief Product Officer Joshua Onysko about everything from his company’s responsible sourcing practices to selling “Rolexes” in a red light district.

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THE GOODS • Organic • Cruelty-free • Fair Trade (whenever possible) • Handcrafted • Responsible packaging • Non-GMO ingredients Tell us about the moment when you decided to start Pangea Organics and what that decision looked like for you.

Joshua Onysko: So, as you guys have found out - you’re among the few and the proud who have figured out that fear is your biggest ally when you allow it to be your motivator, right? So, you guys took off, and most people just let fear push them down. Congratulations, first of all. You won.

Thank you!

JO: In 1999, I woke up in Jackson Hole, Wyoming, and I decided to move to India to ride the trains. I called my mom in Rhode Island - my poor mom - and I was like, “Mom, I’m moving to Bombay in two months to ride the trains.” And she’s like, “Do you watch the news? You’re going to get killed!

Blah, blah, blah.” And I said, “Don’t worry, I’m coming home in two weeks to visit you.”

I went home and we were making dinner and I saw this little coffee table book, How to Make Natural Soap. I thought, “Oh, making soap, this is interesting,” and I started reading it and thought, “You can go to Whole Foods in Providence and buy all these ingredients. This is the perfect bonding project to do with my mom before I go get killed in India!” [Laughter] I went to Whole Foods and I smelled essential oils for the very first time.

I picked oils out and bought olive oil and vegetable oil and then I went to the hardware store and bought lye and some goggles. I came home and

I surprised my mom with everything and she got all excited because she had never made soap.

We made a batch of soap and the next morning we cut it up and we gave it away. I threw some bars in my backpack and I took off to India. I ended up traveling for almost two years through India, Nepal, Tibet, China, Hong Kong, Macau, Tokyo, Thailand, and Cambodia and hitchhiked up to Alaska, then went back to Asia.

I was sitting in Cambodia in the Angkor Wat temples with my best friend in the world, Tom, who I’d been traveling with on and off. And I was just burnt out - emotionally and physically. I’d run out of money so many times and had done weird things like sold “Rolexes” in a red light district and sold peaches on the side of the Ganges. I was just done. I was verging on depression and I knew I wanted to come back to America and start something. I decided I was going to start a soap company and Tom, literally right off the bat, said, “You should call it Pangea.” And I felt it.

I was on a flight three days later, went back to Jackson, packed up my stuff into a footlocker, told all my friends I was moving to Boulder to start a soap company and eleven people ended up coming down with me. We rented a house and I turned the garage into a soap factory with beer kegs with the top cut off and burners and handmade soap molds. I sold soap on the Pearl Street Mall. I’d go to the Red Rocks [Amphitheater] parking lot during concerts and to farmers’ markets and church bazaars - anywhere

there were people, I was selling soap.

Then we got our first retail account and then our second. Our seventh was ABC Carpet & Home in New York, a pretty famous five-story super high-end home décor store, which gave us a big push. Then I started getting deep into alchemy and realized that everything in body care was just crap, both from the way it actually worked to how it was being marketed and what was really in it. Even if you read the ingredients, it would leave you confused.

One of our biggest manufacturers told me in confidence once that 70 percent of the products he makes for brands that sell in the natural products industry omit ingredients from the ingredient label in order to be able to make it through the standards. 70 percent! And he said, “It makes me sick, but I can’t do anything.”

Is that illegal?

JO: No, and who’s checking? Nobody.

Everyone thinks the cosmetics industry is regulated by somebody. I’m like, “It’s regulated by you.” From the very beginning, I’ve always said, “No matter what, we’re going to list all of our ingredients. We’re going to be constantly innovating to make the cleanest, most effective skin and body care products in the world.”

We’ll always be organic, but I always tell people that that comes second to me

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because it’s always going to be there.

It’s not just about being organic though - it’s about being organic and making products work. If you put out a product that’s sub-par and it’s organic, you’re just hurting the industry because people are having a bad experience with an organic product.

We pride ourselves on being on the fringe of innovation constantly when it comes to preservation, efficacy, and emulsification.

Our products have to work and they have to outperform anything that you can buy in Sephora or at a cosmetics counter at Whole Foods. Unless we can do that, we’re not going to win over the global market. So we’ve always set out to exceed people’s expectations when it comes to efficacy.

Will you give us an example of the most recent success that Pangea has had?

JO: We pulled out of retail. The company was thirteen years old, had retail contracts in nineteen different countries, and had the stores that every new business thinks of as the golden 18 |

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chalice - Whole Foods, Sephora, Macy’s, Nordstrom - but we pulled out. There’s a couple different reasons why.

First, I felt like if we were going to stay in retail, I was going to have to lower our standards in order to lower our costs in order to compete with what was in the market, which I never would have done, and which is why I needed to find an alternative. Every day at Whole Foods, we’d go in and the buyers would say, “Oh, there’s this new organic brand.” I’d look at it and it was just Chinese packaging and crap. I constantly had to explain myself at that level and deal with all of the buyers and compete with twenty thousand different SKUs [stock keeping units - otherwise known as barcodes] in a department. Retail is dying. Retail is going out of business, and they’re fighting and clawing with margin wars on the way down.

Pulling out of retail breathed life back into me as far as what Pangea was about. Pangea is really about inspiring people to make changes. That could be a change in the way you take a shower or how you think about where ingredients are coming from or your relationships

with the farmers all around the world.

When I used to sell soap at the Boulder farmers’ market, I would look at people and say, “When you use this soap, you’re affecting communities in up to 12 different countries with one bar.”

Right now, it takes 6.9 million acres of land to grow the ingredients that we use in our products, and Pangea is a tiny brand. As our company grows and we have these Independent Pangea Business Owners [individuals who sell Pangea products directly] all over the country, we’re explaining to them that the work that they’re doing selling Pangea is changing the world. They are increasing the amount of organic agriculture in communities around the world, and I’m not talking about Longmont, [Colorado,] I’m talking about places where people didn’t have access to clean water because of how toxic the agriculture was. They’re directly changing that.

How’s it going so far?

JO: It’s been amazing. I mean, the first year was pretty rough because the mistakes I made are the mistakes that

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people told me I was going to make. The cool thing about pioneering something is that you jump in even though you know you are going to make mistakes. You know you’re going to fail. On a recent motorcycle trip, a group of us were sitting around a campfire one night and drinking God-only-knows how many bottles of wine, and we were trying to figure out what the definition of an entrepreneur is. By sunrise, we came up with this: an entrepreneur is someone who has the willingness to fail enough times to find success.

Willingness is the key word, right?

We all decided that we had failed so many times that success was bound to happen. When I got into direct sales, I knew there were going to be failures, and I knew what they were going to be, but we finally put the right team together - I hired a CEO from the MLM [multi-level marketing] world, a VP of sales, and a head of technology - and just rebooted the entire thing. It’s amazing how different it is.

Can you tell us more about your relationships with the farmers that produce your ingredients?

JO: We source from 50 different countries, and a good part of my job is meeting with these farmers all over the world - from two hours up the Nile from

Cairo where a good chunk of our organic essential oils are produced, to the family that grows our seaweed on the Oregon coast.

When we were creating our mud mask, which is our number one product, there were two types of seaweed I wanted to use: gigartina and wakame. There’s three places you can get those seaweeds: 1) China, 2) Chile, or 3) the Oregon and California coasts. Both China and Chile have the same type of practices they have these machines that literally clear cut the ocean floor and destroy everything. They grind it up and you don’t even know what’s in the powder - it’s got some seaweed, some shellfish, some whatever.

We found this amazing family living in southern Oregon and they were hand-harvesting the seaweed. It was four times the cost, but I didn’t care.

Two years ago, I rode my motorcycle out there. We got up at like 3:30 a.m. and we drove down to the beach where that closing scene of The Goonies was filmed, and we all got into wetsuits and we went down to the ocean. John and Carrie, the husband and wife team who harvest the seaweed, went down to the ocean at low tide and did a tobacco offering and literally did a prayer to the ocean for providing their sustenance because this is how they make their living.

They went in and they picked one out of every four plants to leave the ocean floor intact. John said to me, “If I do it this way, when I come back in two months, it’s all revegetated and I affected nothing. If I take all four, when I come back here there’ll be nothing here.” When you try to tell that story when your product is on a shelf, it’s next to impossible. But as I travel around the country and we have these summits and I explain this to our Independent Pangea Business Owners, they tell that story to their customers and those customers tell it to their customers and so forth.

That’s why I love this business model, because it’s a pure connection, and the bigger we get, the more I have the ability to fly to different places and tell people about it.

What is your personal definition of a conscious or sustainable company?

JO: I think that my short off-the-cuff definition is a company that inherently cares and takes action on the things it cares about.

What have been some of the biggest challenges that you’ve faced in the name of upholding your standards?

JO: We’ve given up tens of millions of dollars’ worth of business because we

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MARKETPLACE have a line that we drew that we don’t cross. Two big retailers came to us in 2008 and wanted to do “Pangea Light” - the Pangea naturals brand. They said, “Here’s nine million dollars and this is what we’ll do, and we’ll take the branding and do this.”

I was at home that night and I was just like, “Fuck no.” I don’t want to wake up and be that guy, because at that point I had met so many people who had started businesses with these amazing ethics and then someone came and waved a check at them.

I knew that the money wasn’t going to make me happy. I was already happy. So why do something that I didn’t want to do? I’ve been blessed to be surrounded by amazing investors and board members who truly believe in Pangea and they’ve been sticking it out with us for 15 years. That’s unique. Not a lot of brands have that. We don’t have any VC money, and the people who’ve invested in Pangea invested because of our ethics.

seems wingnut and crazy now is going to become commonplace.” I remember when Boulder banned smoking indoors.

It was the second town in America to ban smoking. Now it’s like half the country.

We’re seen as this cutting-edge town, but we’re stewards of a fringe that we know will become the future. So right now, whatever Pangea is doing, in the future it’s just going to be common and that’s why it’s important if you’re going to put yourself out there. Don’t just do something cool and sit on your laurels and think that you’re going to change the world that way. You have to constantly be stewarding that fringe, because the rest of the world is following you. And if you just sit there and do nothing once you’ve done one thing that’s cool, then everyone’s going to pass you by and you’re not going to be inspiring people anymore. You’re just going to be that company that one time did that thing, you know?

What is the best advice you’ve received on building a successful business?

Besides financials, what metrics do you consider important as a company?

JO: I would say that one of the biggest lessons in life the past two years has been (and you hear this all the time) find your real skill set - you know, what you’re really, really good at. Entrepreneurs like you guys are going to figure out that you’re good at everything. You can go out and raise money and get interviews and pitch people, but after about the first 15 or 16 months, you should get together and say, “What am I really good at? There’s one thing I’m really good at.” Just focus on that and then surround yourselves with people who can do everything else.

JO: The metric I’m trying to develop in my department is: what are we displacing? Because that’s what we’re

What has been an effective leadership style for you? What pieces of wisdom would you impart to other people who are going into leadership positions?

JO: It’s the age old “lead by doing” advice. It really works. People see the way that I live and sometimes they make changes based on that, and if they come to me and ask, “Why are you a vegan?

Why do you wear this? Why do you do that?” I’ll take the time to talk to them and really explain why.

Another thing I would say is that the fringe always predicts the future. At my events, I always say, “Whatever 20 |

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doing - we’re not creating things that people aren’t currently using, we’re creating things that people are already using. So, every time I replace someone’s shower gel with our shower gel, I’m displacing 14 chemicals in their family. Period. There’s 4.2 people using that shower gel every day and if the family replaces everything with Pangea, it can be up to 297 chemicals that have been displaced through Pangea products.

As we create more products that displace other companies’ products, we’re displacing more chemicals. The average woman in America puts 500 chemicals on her body a day before she leaves the house. People at events always say, “Oh, I only use like five products.” I’m like, “Let’s go into your bathroom.” One spray of perfume: 240 chemicals, and it has isopropyl alcohol, so it’s going right into your bloodstream.

Deodorant: 19 chemicals. One blush could have 42 chemicals in it. And they just don’t know, right? So I start adding it all up on my phone and I say, “You don’t use 500, but you use 301.” And it’s pretty easy to get rid of all of these.

It’s not work - it’s simple. If you treat your body like an outhouse, it’ll treat you like shit. If you treat it like a temple, it’ll Photos: Pangea Organics treat you like a god.

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B CORP

BENEFIT CORPORATION DO YOU KNOW THE DIFFERENCE?

BY JONATHAN STORPER

Many people use the terms “B Corp” and “Benefit Corporation” interchangeably.

While similar in concept, there are important differences. B Corp is the term used for any for-profit entity that is certified by the nonprofit B Lab as voluntarily meeting higher standards of transparency, accountability, and performance. Think of it as the Good Housekeeping Seal of Approval for businesses voluntarily trying to do well by doing good. By contrast, a Benefit Corporation is a type of corporation currently recognized in 27 states with legally protected requirements of higher purpose, accountability, and transparency.

WHAT IS A B CORP? Any for-profit entity can be a B Corp provided it is certified by B Lab and pays the applicable membership fee. My law firm, Hanson Bridgett, LLP, is a founding B Corp but is not a corporation at all; rather, it is a limited liability partnership (LLP). It became a B Corp by passing the B Lab Impact Assessment, which analyzes the operations of an organization as a whole and provides a score based on how the business conducts its operations. The assessment analyzes many things about the business’ operations, including, for example, the quality of its products and services, its treatment of workers and the environment, and if and how the business supports its community. Passing the assessment test requires a score of no less than 80 out of 200 points. The idea behind being a B Corp is to do well by doing good, but also to measure what matters and to report on it.

Certified B Corps pay membership fees based on their annual revenues. These membership fees go to support the nonprofit activities of B Lab, including its ongoing work to continually improve the comprehensive assessment tool and the third party auditing services necessary to certify and recertify B Corps from time to time.

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Photo: B Lab

In return for membership fees, B Corps receive various membership benefits. One of the most important is being part of a community of B Corps and part of a movement dedicated to creating a more just and conscious economy that works for all. B Corps are now located in 32 countries, have various gatherings around the world including an annual retreat, provide opportunities to support each other’s businesses, and impact policy and legislation throughout the country and throughout the world. Fellow B Corps support each other as a community and also support each other financially by referring business to one another. B Corp certification is voluntary and can be changed at any time by the owners of the business. The B Corp movement has been lauded by Bill Clinton, Robert Reich, and David Brooks, among others.

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WHAT IS A BENEFIT CORPORATION? By contrast, the Benefit Corporation is a type of corporation.

The Benefit Corporation actually sprang out of the B Corp movement. It arose because many entrepreneurs felt that the B Corp certification could not provide the kind of legal protection that a government recognized legal form could provide. Unlike a B Corp, which can be any type of for-profit legal entity, a Benefit Corporation is a type of corporation.

There are many reasons for this that are too long to go into in this article, but suffice it to say that the Benefit Corporation was created to build the B Corp mission into the DNA of the corporation.

Let’s go into a bit of detail: A Benefit Corporation is a for-profit corporation, but in addition to creating value for its shareholders, it has three additional legal attributes: 1) accountability, 2) transparency, and 3) purpose.

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ACCOUNTABILITY

TRANSPARENCY

PURPOSE

Like a certified B Corp, a Benefit Corporation must consider the impacts of any action on not only its shareholders, but also on its employees, its customers, the community, the environment, the short or long-term interests of the corporation, and the ability of the corporation to accomplish its public benefit purpose.

A Benefit Corporation must assess its overall social and environmental performance on a yearly basis using an independent third-party standard, many of which are free to the public, such as the B Impact Assessment mentioned earlier. The standard must be developed by an entity that has no material financial relationship with the corporation, and the standard’s criteria and development process must be publicly available.

In addition, the amount and sources of financial support for the entity developing the standard must be publicly disclosed, along with any relationships that could reasonably be considered to present a potential conflict of interest. The purpose of these requirements is to prevent the corporation from using an assessment tool that is self-serving. Unlike a B Corp, however, a Benefit Corporation is free to use any assessment tool that meets the criteria noted above, including the B Impact Assessment, but is not required to use the B Impact Assessment tool. A Benefit Corporation is also NOT audited by a third party like a B Corp is, though a Benefit Corporation could be both a Benefit Corporation AND be certified as a B Corp by B Lab.

A Benefit Corporation must report its overall social and environmental performance to its shareholders and the public in an annual benefit report. The report must describe the third-party standard selection process, the ways in which the Benefit Corporation pursued any general or specific public benefit during the year, and any circumstances that hindered the creation of the public benefit. By contrast, a B Corp is not required by law to create such a report, though it is encouraged to do so. If a Benefit Corporation fails to pursue its public benefit purpose or issue the benefit report, its shareholders may bring an action in court to force the corporation to do so in order to ensure transparent operations. There is no court action for failing to meet B Lab’s standards for B Corps, though a B Corp could lose its certification if any audit irregularities are not corrected.

Benefit Corporations fundamentally change how a company is permitted to act. In addition to creating shareholder value like other for-profit companies, a Benefit Corporation must provide a general public benefit, namely, a material positive impact on society and the environment as a whole. Specific examples include providing low-income individuals or communities with beneficial products or services, preserving the environment, promoting economic opportunity, and improving health in the community.

Jonathan Storper co-chaired the legal working group that drafted benefit corporation legislation in California and is a partner at the law firm of Hanson Bridgett, LLP in San Francisco, where he works with mission-driven businesses.

Often I am asked if B Corps and Benefit Corporations can attract capital. Some recent major transactions show that they can attract significant capital infusions.

Specifically, the acquisitions of Method by Ecover and of Plum Organics by Campbell Soup Company, and the conversion of Alliant International University to a Benefit Corporation backed by Bertelsmann [a German mass media conglomerate] show that the value of B Corps and Benefit Corporations is being recognized in the marketplace. B Corps and Benefit Corporations represent a new breed of conscious capitalism, combining higher purpose, accountability, and transparency where there’s no trade-off between return on investment and social impact.

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SELLING THE COMPANY WITHOUT SELLING OUT

PLUM ORGANICS WHERE GOOD IS CONTAGIOUS

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lum Organics, based in Emeryville, California, is on a mission to provide healthy, organic food for babies and toddlers nationwide.

After being acquired by Campbell Soup Company in 2013, the company has quickly scaled to become one of the largest organic baby and toddler food brands in the US. Not only is the company a certified B Corp, but it legally became a Benefit Corporation (if you don’t know the difference, see the previous article by Jonathan Storper) after its acquisition - proving that missiondriven businesses are finally getting a seat at the table with larger organizations.

Plum is a shining example of how a company can marry purpose with profit and not only maintain its core values after being acquired, but make an even larger impact by being part of a larger corporation. We spoke (and maybe even shed a tear or two) with CEO Neil Grimmer and Head of Mission Victoria Fiore about the company’s acquisition and its goals for the future.

Neil, will you tell us the story of starting this amazing company?

Neil Grimmer: I have a very nontraditional business background; I have an undergraduate degree in fine art - specifically conceptual art – and a graduate degree in design. After design school, I went to IDEO, a design and innovation firm, and spent seven years there. While there, I started leading projects for McDonald’s, Pepsi, and a number of the big food companies trying to help them figure out what the future of food was, especially in relation to health and well-being.

This was 2000 to 2006, and a lot of these companies had what they would characterize as “fun-for-you foods,” and they were starting to come out with “better-for-you foods,” which were sort of big versions of the fun-for-you stuff.

But there weren’t really any “goodfor-you foods.” While I was working to really understand what “good-foryou” would look like in the context of some of these big companies, I had an epiphany. It was based around this idea that no matter what kind of food you create for some of these bigger food companies, if you don’t have a good company that lives underneath it, it’s not going to work. When you think about the early 2000s, you had Clif Bar and Patagonia really starting to push on these ideas and codify them into their businesses. Now we have stuff like B Corp that can help us solidify these notions, but, at the time, they were very emergent ideas.

And I was completely transformed by them.

You have to start with the building blocks - the culture, the company, the mission - to be able to create that end

product to which people say, “Yeah, that’s healthy for me.”

Soon after that epiphany, I had the opportunity to jump from IDEO to Clif Bar, which was really practicing a lot of this stuff. I led strategy and innovation there for about a year and a half. The CEO of Clif Bar, Sheryl O’Loughlin, and I then spun out to start what is now Plum, and it was based on this set of building blocks and learning experiences that made us say, “Look, we want to create a company focused on better food for kids, but we want to do it with great design and sustainability in mind.” We really started to build it out like many of our peers and the brands that we love and respect that are probably also in this magazine. We wanted to build a foundation and demonstrate that business can do things radically different from the old guard, and that it should be a hallmark of the new economy in that it has purpose and profit intricately linked together.

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That was the genesis for why we started what we started. We wanted to create an innovation engine that completely disrupted the market.

Will you talk a bit more about those sustainable business practices and your values and mission as an organization?

NG: Early on, we set a lofty goal that we wanted to be in every high chair and lunchbox in America. If we had a healthy product at either one of those two feeding occasions, it meant there would be less of the bad stuff, and we would actually materially be able to change the way that kids eat. Along the same lines, we realized that we’re not only selling baby food, but we’re actually shaping little palates for life. If we could introduce kids to the really good stuff at an early age, there’s an imprinting that happens where you can actually get them to start to love foods that you’d typically see “picky eaters” rejecting. As you start to think about the issue that we have of toddlers and then kids not adopting healthier foods, a lot of it starts from the first foods that we’re feeding our children.

One of our partners, Dr. Alan Greene - author and leading pediatric nutrition expert - started doing a lot of work around understanding the dynamics of palate development from the very first stage. His research found that typically parents will try to feed their kids foods like spinach only one or two times. If Johnny doesn’t like it, Johnny rejects it, and parents have this assumption that, “Well, he’s just not wired to like it.” What Dr. Greene unpacked in his research is that if you can break through the threshold of those two to three tries and expose your child to spinach six to ten times, there’s an 70 percent higher likelihood that they will adopt spinach in their diet as they grow up!

When we started thinking about that, we said, “OK, that takes our mission and our aspiration and our purpose of getting the very best foods to kids in the very first bite and puts some real teeth behind it - we can actually take action against that.” So, you’ll see that in many of our products, we’ll have spinach show up in two to three to four formats for an infant or a toddler to eat in a day, so they get repeated exposure to those tastes and we 26 |

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can build it out over time.

We’ve grown to become the number one organic baby food company in the United States, which has been incredible, and we have also been able to equally elevate our mission. Our food philosophy has driven our mission, and as we started getting broad penetration in most retailers around the country, we felt like we had checked off one part of our mission, which is giving all American families a choice for an organic option and having it available anywhere they go shopping for their kids’ food. At the same time, we realized that there were millions of kids that actually weren’t getting proper nutrition in this country and didn’t even have the opportunity to walk into one of those stores and buy an organic option or, in some cases, weren’t able to go in and buy any option. As we started really unpacking this, we realized that one out of five kids in America go

NO MATTER WHAT KIND OF FOOD YOU CREATE FOR SOME OF THESE BIGGER FOOD COMPANIES, IF YOU DON’T HAVE A GOOD COMPANY THAT LIVES UNDERNEATH IT, IT’S NOT GOING TO WORK.

hungry every day - roughly 16 million little ones in this country.

I remember sitting in a meeting with one of the largest national hunger organizations in the US and I asked the question, “Has anyone designed a product specifically to address the nutritional needs of hungry children, more specifically infants and toddlers, in the US?” And a woman from the organization basically said, “No, that’s an interesting idea, but partner with us and we’ll take your donations and we’ll translate it into food offerings.”

We stepped back and said, “We could certainly donate money to organizations, but what would be more powerful is to take our innovation engine and actually create a new product that is designed for donation that includes macronutrients and is made with little ones in mind.”

Our product, the Super Smoothie, is the result of that effort.

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Originally, we launched Super Smoothies as a product exclusively to donate to little ones in need, but we kept it broad enough that it could be a great snack for kids or adults, because when you’re dealing with the issues of hunger and food insecurity throughout the country, you want it to be as accessible as possible.

Soon after launching this program, we donated about 500,000 Super Smoothies to select nonprofit partners, including Convoy of Hope. We started telling Target about this program and Target fell in love with the idea and so we co-created this notion of a buy-give program for every four pack of Super Smoothies. We pay for this out of our own budget. We took a quarter of a million dollars out of marketing and said, “Let’s do this instead of buying more advertisements.”

I think it was very successful for both the community that we were serving and for our employees, but it grounded us as a company, too. We now feel like we are holistically addressing this issue in a more meaningful way. It’s been cool to have this as a creative engine for our company around how we can marry the purpose and the profit of the business together.

can build this company, the faster kids will have access to better food.”

Through the process of getting all of these inbound inquiries, we got exposed to Campbell. I had breakfast with Denise Morrison - the first female CEO of this 147-year-old company - and it was amazing. It was one of those moments where you realize that behind all of these big brands, there are people - and in this case an amazing person. Denise was just really wonderful. I sat down with her and she said, “I have two daughters and they have kids and my grandkids are not Gerber babies, they’re Plum babies.” She literally told me the story of how her daughters were raising their children on Plum and how she deeply understood the role that we were playing in young families’ lives. The business discussion certainly came up at some point in time during the breakfast, but we spent most of our time talking about the mission of the company, our shared interest in innovation, and how if you innovate in a way that fits with people’s lives, you can actually impact lives in a broader way. I left feeling like that particular company represented a different kind of dynamic for Plum and it ultimately was the choice that we made. As you

can imagine, it was a very tumultuous process. There was a lot going on within a one-month period, Happy Baby sold to Groupe Danone, Ella’s Kitchen Group sold to Hain Celestial, and Plum sold to Campbell. Having spent time with Paul from Ella’s Kitchen, who’s become a good friend of mine, we both felt like being acquired really gave us the opportunity to expand our missions.

Soon thereafter, I was sitting in a room with Mark Alexander, who was the President of Campbell North America at the time. This was day one with my new boss, and I have to say I was wicked nervous because I hadn’t had a true boss in a bunch of years. Mark was great though. We talked about the philosophy of keeping Plum distinct and whole and separate from the core, but also ways to leverage the core of Campbell to help drive our mission, productivity, and the business. On my punch list of things to discuss was becoming a Public Benefit Corporation [Editor’s note: in some states, such as Delaware, where Plum Organics is incorporated, Benefit Corporations are called Public Benefit Corporations]. In this meeting, I started to describe what a Public Benefit Corporation was and why it was

Let’s dive into Plum’s acquisition by Campbell Soup Company, especially your decision to incorporate as a Benefit Corporation after you were acquired.

NG: In 2013, we were north of $80 million in sales. We had skyrocketed.

We were one of the fastest-growing organic brands in the country. We were seemingly on everyone’s radar. There were a lot of mergers and acquisitions happening in the health and wellness space. I was probably spending 40 percent of my time fielding inbound inquiries from both national and international food companies and private equity investors. It was getting to the point where we had a fiduciary responsibility to address some of these things and look at some of our options.

But, for me, I was far more focused on how to deliver on our mission, which is getting into every home in America. We felt like speed was a part of our drive from day one, thinking, “The faster we SPRING 2015

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critically important to Plum. Mark did a lot of listening and head nodding, and at the end he said, “Well, it sounds very consistent with how you would have run your business if you weren’t owned by us, and it seems very integral to your mission, so let me take this back and connect with Denise, and we’ll get back to you.” Literally a day later, Denise and Mark called and said, “We’ve got a ton of questions, but we love this idea so let’s try to figure it out.” Three weeks later, we had new bylaws written for the company and we were a founding Public Benefit Corporation alongside our friends Method, New Leaf Paper, and Alter Eco. It was incredibly exciting.

Could you speak to some of the challenges that you’ve faced with being acquired? For other missiondriven companies that are considering doing it or are in the process of doing it, what advice would you give them?

NG: I’ve always talked about speed being essential to us. When you work with a much bigger organization, regardless of who it is, it takes longer to get things done. You have multiple connection points - you have connections within different departments and then layers within those departments. When we were untethered, we were a very decisive

value proposition of your brand. I think that’s going to be the hallmark of the new economy.

From a leadership perspective, do you feel that you’ve had to make any decisions for the sake of the business that haven’t been in line with your values?

NG: Never. Never. Businesses are dynamic. You’re always playing around with tension points, but we have never made a decision that has felt inconsistent with our values as a company. I think one of the things that we talk about a lot with Campbell

If we take steps in our business that erode the DNA of the company or that challenge our fundamental values, it will translate into lost profits.

To me, what it signified was that there’s a new kind of relationship that’s happening between big and small companies. I think we see it as an opportunity to take all of the things that we do that are fundamental to our business and bring those to the bigger organization - being a challenger brand, having mission and purpose at the core, and, quite frankly, having the bigger company help us grow and expand and scale in a way that allows us to deliver the quality that we need to deliver to families in this country. It’s different from acquisitions in this space 10 years ago when I think there were a lot of examples where it didn’t work very well, like with Kashi and Kellogg.

I think there was a lot of disregard for the cultures and the purpose that were behind those brands and the big companies thought of them more as food product in a package. Now, there’s a new awareness that all of these things are actually in the DNA of what makes sustainable brands successful.

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decision-making organization. We’d do things quickly and get stuff done in a pretty meaningful way. So that’s been one thing that we’re kind of wrestling with. Some of those things, however, are really quite positive for our business. We now have more processes around operations, quality, and finance, which are the foundations of the business, and they’re making us a better company. While we can’t move as quickly as we would like, those kinds of foundational things are really helpful.

In terms of advice - what got us to where we are today is not what is going to get us to the next level. You can’t keep working on the engine while you’re racing around the track; you have to actually stop and build a different kind of vehicle that allows the company to scale.

Also, make sure that your values are locked into the core of the business.

Whatever your fundamental business is about - the products you’re making or the services you’re providing - make sure that your mission is at the core of that so that if you deviate from your mission, you’ll be deviating from the

is - and I think this is why there’s a new awareness around these kinds of partnerships now than there used to be - if we take steps in our business that erode the DNA of the company or that challenge our fundamental values, it will translate into lost profits. It will generate a loss of consumer faith and trust, which always leads to the slow decline of a brand. We have a shared value of always doing the right thing from a business ethics standpoint, but all of the other components of what we do at Plum that make us an authentic brand are all integral to our overall business performance. We try to make sure that those things are so linked together that if the brand lost its way, it would also lose its consumer base.

We have to ask about it - Campbell has a fiduciary responsibility to its shareholders. And you as a Benefit Corporation have a legal responsibility to your stakeholders. Do you ever foresee a conflict?

NG: No. I go back to what we do as a company. We drive shareholder value,

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full stop. The work that we do here is driving a deep, loyal, passionate consumer fan base, and that is driving shareholder value. I don’t actually see those things going against one another. Not only that, but Campbell actually does a lot of work to tackle hunger in America, as well. There’s a lot of alignment of values between our organizations around where we put our focus.

What have been the unexpected benefits of being a part of Campbell?

I know that Campbell has a CSR [Corporate Social Responsibility] program. Have you been able to strengthen your sustainability practices as a result of the acquisition?

Victoria Fiore: In terms of sustainability, it’s been a big help. Dave Stangis [VP of Sustainability and CSR at Campbell] is renowned for being one of the thoughtleaders who’s doing the really tough job of getting into a big corporation and shifting things. It’s much easier to have a CSR job when you’re working for a values-based company, but when you’re working for a company that’s a little bit more traditional, it’s just remarkable work to create change. He has done a ton of work on environmental impact.

His research has been really helpful to us, because here it’s just me and my colleague Becky who are trying to figure all this stuff out in terms of how we do it at scale, but we now have this huge resource center that’s been surprisingly

beneficial.

Also, Campbell’s CSR department does a ton of work around hunger, and it specifically focuses on the communities where it has a presence. Camden, New Jersey is one of the poorest communities in America, and it’s where Campbell’s headquarters is. It has a ton of influence there with the nonprofit community, and we’re partnering to see if we can leverage some of Campbell’s resources to get some food in the communities that we’re helping.

I feel like a lot of people see an acquisition as selling out, but it seems like it’s actually amplifying your impact. Do you feel the same way?

NG: I do. I think that it’s a meaningful story that needs to be told, because it’s not a popular idea right now. I think we all have stories that we tell ourselves, and they help us simplify a very complex world. The reality is, the world is

complex, relationships are dynamic, and, in our particular case, we’re intentionally not having that classic story of a corporate buyout - we’re both Campbell and Plum. We’re actively working to reinvent that story and that narrative.

With your values at the core of everything, was it difficult to choose the investors that backed you when you started Plum?

NG: Actually, we put a lot of thought into that, and we made a little framework that we used to help us because we had never raised money before. We didn’t know how to do it at all. But early on, we said that we needed to make sure that we didn’t lose sight of the fundamentals when we were trying to raise money. I think of it as the Maslow’s hierarchy of socially minded

“Business needs to be personal in order to make the social and environmental changes that we need.”

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CULTURE

COACHING

INVESTOR HIERARCHY VS. CONTROL

CONNECTION

CASH

business when it comes to investing.

At the base [of the pyramid], it is all about getting cash into the organization in exchange for equity in the business. That’s usually where any conversation starts with investing.

For us, it was about connections (the second level) - for example, “in your network, who do you know and how can they help us amplify our business?”

The third level is where we were looking for people that could coach us. We’re young executives and we thought we had some potential, but typically you hear about these stories where investors say, “We’ve been

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around the block 50 times, we know how this thing works, we’ll give you money but we want to call the shots in the business.” We said, “Look, our intuition tells us that we could probably lead this business to success, we just need your support and coaching. Take those 15 years of experience and those 50 times around the block and help us be better executives.” Then, the last and top level is culture. This is where we said, “Are you willing to get behind a mission-driven organization and make the tough choices, for example, taking a quarter million dollars out of marketing and putting it into a product

that’s going to be donated? And are you willing to invest in people?”

This hierarchy has been really helpful, and we had the good fortune to have had enough business traction that we were able to transact at the higher levels of the pyramid, whereas oftentimes if a business is struggling or failing, you’re transacting on that lower level of just getting enough cash.

For any entrepreneur in this space, you’ve got to find the right partners.

On the personal side, what’s inspiring you guys right now? What keeps you going?

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NG: I’d start with the people and the culture. We built a company where we all wear our hearts on our sleeves as a company. You have to take almost a personal orientation to business, sort of defying the logic of, “Hey, it’s not personal, it’s just business.” We think that’s complete bullshit, and we think it needs to be turned on its head. Business needs to be personal in order to make the social and environmental changes that we need. When you take that orientation and you get a hundred plus people that are aligned in the same way, amazing friendships start to form.

For example, we got an email from a family saying, “We know a family that has a child who has terminal cancer that has been using one of your products that has been discontinued. He literally won’t eat anything else. We’ve scoured the retailers in our neighborhood to find all these products, but they’re running out, and he’s running out of his supply. Can you help us?”

Immediately, we reached out to the family and to the mom, Jacki, and said, “We heard about your story, and we’re going to reach out to our retailers to see if we can find more of these morning mashup products.” [At this point in the interview, there was simultaneous crying from many in the group - we won’t name names.]

Honestly, we were all brought to tears on this thing - it was pretty emotional.

I said, “OK, we’ve got to find more products out there, but we’ve also got to do something more - this is why we’re in business. We’re in business to solve this problem for this little boy.” I think we all kind of just stepped back and were like, “This is absolutely what we do.

This is why we do it.” The team rallied, and Ami [Hamilton, Plum’s Director of Communications and Public Affairs] was kind of the quarterback on this thing. We got our head of operations to see if we could get pouches donated, production time donated, and raw materials donated.

Our art designers stepped up and said, “We’re going to create a unique package for Harlan.” His name was Harlan the Hero, and he had been surviving brain cancer for a number of years. At this point, I think they didn’t know how much time he had left, but he was in the later stages of his fight with cancer. Literally everyone stepped up; our production partners, our packaging partners, and

our raw ingredient partners, within two minutes of hearing this story, said, “We’ll totally help out,” and we ended up creating 5,000 custom Harlan’s Oatmeals - we renamed the product - and on the back there’s a little love note from the company.

Anyway, this story has an incredibly sad ending: he passed away before he could receive his shipment of these. But I think, for us as a company, it really kind of codified why we’re in business - we’re in business to do this, right? The community reaction to it was very personal, and they were like, “Wow, it’s amazing to see a company actually be a human being.” Even though it was really a tragic story, I think it’s given our company a level of focus and commitment to the mission that we’re on in a very tangible way beyond making products for retailers.

BUSINESS CAN DO THINGS RADICALLY DIFFERENT FROM THE OLD GUARD, AND IT SHOULD BE A HALLMARK OF THE NEW ECONOMY THAT IT HAS PURPOSE AND PROFIT INTRICATELY LINKED TOGETHER.

VF: We ended up creating a really strong friendship with the family. Because Harlan never actually got Harlan’s Oatmeal, we continued to produce it, and we said, “We’ll figure out what to do with it later.”

Within the past month, we ended up working with Jacki, Harlan’s mom, on this. We said, “We want to keep Harlan’s story alive, so you tell us what charities you want us to donate the product to.” She wanted it to go beyond North Carolina, where they’re from, and go across the country, so that she felt that his story was being told. We picked a handful of charities around the country and delivered the pouches.

We wrote a note about why we were working together and called up folks to make sure that the products had arrived.

People were just blown away by Harlan’s story and the fact that kids could know his story now by enjoying these pouches. It was pretty amazing.

NG: Good is contagious. When you do good things in the world, it inspires other people to step up and do good things. When I think about what we’re in business to do - we’re inspiring good in the world.

Photos: Plum Organics

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EQUAL EXCHANGE THE GOODS • Introduced the Fair Trade concept to US grocery stores and restaurants in the late 1980s, starting with coffee.

• 98% of products are fairly traded.

• Approximately 95% of products are also certified organic.

• 100% employee-owned on a oneperson/one-share basis. Every employee from the youngest warehouse worker to the CEO own an equal portion of the business and, accordingly, receive an equal portion of any profits.

• One of the nation’s largest, most successful worker cooperatives.

• Democratically governed by 117 “worker-owners.”

• Mission to serve small-scale farmers and support sustainable farming.

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Equal Exchange has an incredible story. Can you tell us a bit of your story and also tell us if the company’s key pillars have changed over the last 28 years?

Rodney North: The creation of Equal Exchange shared something in common with many other pioneering, mission-driven enterprises. The three co-founders (Rink Dickinson, Michael Rozyne, and Jonathan Rosenthal) saw something that badly needed a solution long before society would see it.

Despite being way ahead of the curve, they were able to launch and slowly grow the business.

Eventually, dozens and then hundreds of other firms (both tiny startups and Fortune 500 behemoths) jumped into the Fair Trade category.

For mission reasons, this was a great victory for Equal Exchange - an affirmation of our model and a great benefit for all the small-scale farmers that finally began to get a better deal.

However, it also meant a massive influx of competition that Equal Exchange had not had before.

We also faced the challenge of some brands using the language and imagery of Fair Trade, while actually cutting some corners and not practicing Fair Trade as rigorously as us or other high-bar enterprises. This meant that they had more resources left over for marketing or profits and could lure away conscientious customers while not actually delivering the same benefits to farmers.

Unlike some pioneering, missiondriven brands, Equal Exchange not only survived the new competition, but we actually began to grow faster than ever. A key factor was the growing awareness of Fair Trade, which created opportunities for us to expand into new categories like chocolate and bananas.

Like many small, successful, conscientious, privately held brands, we received a constant stream of bids from private equity firms to buy our company. But unlike most (including Odwalla, Honest Tea, and Annie’s), we never entertained those offers. In fact, we included a clause in our bylaws to essentially forbid it. To be more precise, our bylaws state that if Equal Exchange is ever sold, the net proceeds

must be donated to another Fair Trade enterprise. There would no “windfall” or “cash-out” for the worker-owners, not even for the co-founders.

The key pillars of Equal Exchange’s mission are: • Fair Trade with small-scale farmers.

• Support for sustainable farming.

• To operate as a democratically governed worker cooperative.

• Encourage consumers to think about, and care about, small-scale farmers around the world.

Remarkably, these have never changed. In fact, our performance in regard to the pillars has only gotten stronger over the years. For as long as Equal Exchange has had performance metrics (since the late ’90s), one or more of the metrics has always been the quantity and the quality of our Fair Trade sourcing practices. Not only have we consistently increased the volume of our Fair Trade imports each year, but we’ve also expanded the communities we touch by increasing our product lines to include new crops like tea, cocoa, sugar, olive oil, honey, dried fruits and nuts, and even fresh produce (bananas and avocados).

How did Equal Exchange “flip the script” on investors to protect your mission?

the money call the shots, but at Equal Exchange the labor “hires the capital.”

In that sense, we’ve flipped the script.

Every enterprise needs to bring together a wide variety of resources in order to succeed - it needs a whole array of different kinds of human capital, ideas, financial capital (including debt and equity financing), maybe land and/ or office space, management expertise, raw materials, supplied services (e.g. shipping, bookkeeping, design), formal and informal networks, and much more. However, only the people who provide one of these resources (equity financing) enjoy special privileges that none of the other providers receive.

They are not only paid for what they provide, but they also get to claim any profits and they get control of the business (or at least the option to exercise control if they wish, depending upon what portion of the total equity they are providing and when they provide it).

At Equal Exchange we do, of course, pay outside investors for the use of their funds (approximately five percent per year), but ownership, voting power, and the right to profits (and the responsibility for losses) lie exclusively with the employees.

One might wonder why investors would accept these terms. For one

RN: Typically, the investors in a business hire “labor.” Those who put up

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MARKETPLACE

Can you speak to some of the challenges of being employeeowned and the benefits you have seen as a direct result?

CHALLENGES: • You must hire very, very carefully because you are not simply hiring a salesperson, accountant, or warehouse worker, but someone who will probably become a fellow owner with a vote in key company matters.

• You cannot raise capital the same way as most small businesses or startups since you cannot cede control of the business (even partially) to investors. Therefore, you will probably have to search harder to find investors who will accept your terms.

• Because 99.99 percent of American workers have never worked in a worker co-op and have no experience with democracy in the workplace, you have to create a robust, in-house education and training program to prepare employees for the responsibilities and unique demands of employee-ownership and employeegovernance.

BENEFITS: • You have a much, much better chance of protecting the company’s mission and ideals in perpetuity.

• There is very strong employee buy-in and enthusiasm for both the company’s success and its mission (since employee control is an inherent part of the firm’s mission).

• Employees’ interests are strongly aligned with the company’s interests.

• There is much lower staff turnover.

• The co-op model consistently generates enthusiasm and respect among our customer base, the public, vendors, investors (if you have the right type), and even the media.

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thing, investors often do not exercise the prerogatives of control (think of the stock you own through your 401k). But more importantly, investors, like other people, have a mix of motivations. Our investors are excited by what Equal Exchange is accomplishing in the world and the way we are changing industries. They appreciate how we fight for farmers, workers, and the environment. And they know we have a strong record of paying dividends. Taken together, we simply offer investors a different, but still attractive mix of incentives, and it’s a mix that allows control to stay in the hands of our 117 workerowners.

Equal Exchange has strong opinions about Fair Trade USA. Can you tell us more about your position and help us understand what we as consumers need to do to truly support small farmers and food producers to help them thrive?

RN: Over Equal Exchange’s 28-year history (our 29th anniversary will be May 1, 2015), we have seen that when an effort to reform an industry succeeds and takes hold, you can be sure that certain responses and reactions will follow suit. We have seen the following progression with the growth of organic farming, sustainable forestry, cage-free eggs, and Fair Trade:

1 2nd st

There are pioneers driven by a strong moral or environmental purpose.

Individuals, companies, and/or NGOs try to write rules and definitions to codify the new practices.

3

rd

Certification organizations are created to audit farmers and/or businesses to verify that they are meeting the new rules.

4

th

A large business or a group of them create new certification organizations that have similar but less demanding standards, or these businesses try to convince existing certifiers to lower their standards.

5

th

The original champions of the concept push back against the corporate late-comers and try to defend a highbar vision.

The Fair Trade movement is now in that fifth stage. It is our strongly held conviction that Fair Trade USA (an NGO that was once the only Fair Trade certifier in the US) has gone too far to accommodate the wishes of large corporations and that it has seriously diluted its certification standards. For the consumer, this means that the products bearing the Fair Trade USA logo may or may not represent authentic Fair Trade.

For example, while you would expect that a Fair Trade product is something grown by a small-scale farmer who was paid a fair price, it could have been sourced from a large plantation. Or you might naturally assume that all the ingredients in a chocolate bar with the Fair Trade USA logo were fairly traded, when in fact, chocolate companies are no longer required to use Fair Trade sugar.

Therefore, we encourage consumers to seek out brands that have demonstrated a commitment to authentic Fair Trade. Consumers can also look for two newer certifications from Fair Trade America and the Small Producer’s Symbol, which have been launched to challenge Fair Trade USA. Why did the three founders of Equal Exchange choose to structure the business as a for-profit worker cooperative?

RN: In choosing this structure, the founders were hoping to achieve many things at once. For starters,

MARKETPLACE

“OUR INVESTORS ARE EXCITED

BY WHAT EQUAL EXCHANGE IS ACCOMPLISHING IN THE WORLD AND THE WAY WE ARE CHANGING INDUSTRIES.” they wanted to show that commerce could be conducted in a different, more humane manner - that it didn’t have to be a dog-eat-dog situation. Had they incorporated as a non-profit, any success they subsequently had would have had no value as a lesson or as an example to business owners, leaders, or industry observers. Their example would have been dismissed. So, Equal Exchange chose to be a for-profit.

The founders also wanted the mission to be entrusted to those who were actually doing the work - those who were closest to it - which meant the business should be owned by and accountable to the employees. Plus, they believed in equality and economic democracy, as is practiced by the 40 farmer cooperatives that supply Equal Exchange. Put all those elements together and you get a worker cooperative.

What advice would you give to young entrepreneurs hoping to start missiondriven businesses?

RN: Start thinking immediately about questions like: How can we be sure that we never drift away from our mission or are pulled away from it for financial reasons? (The co-op model can often be the answer.)

What happens if - for whatever reason - one day I am no longer running this enterprise? How can I make sure that it will continue to operate according to its original ideals?

Don’t put off solving some of these challenges until “tomorrow” or “later.” If you do, it will be too late. Your course will already be set and the opportunity to put the necessary protections, structures, or bylaws in place will have passed.

Photos: Equal Exhange

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ENERGY

THE HOLY GRAIL OF ELECTRICITY? ALEVO’S SHIPPING-CONTAINER-SIZED BATTERIES COULD REVOLUTIONIZE THE POWER INDUSTRY

S

wiss-based innovator Alevo has created a large-scale energy storage solution with its pioneering battery systems, called GridBanks, and grid data analytics developed by a supercomputer. GridBanks are specially designed shipping containers loaded with batteries that store and dispense electricity on command. A simple analogy is that each GridBank acts like a piggy bank, saving electricity when there is extra and then spending it when it is needed. Because electricity that is not consumed in real time becomes wasted, being able to store surplus energy and deliver it when and where it is needed can result in huge cost savings and environmental benefits. Alevo’s groundbreaking lithium battery technology is also non-flammable and can withstand significantly more charging cycles than ordinary lithium-ion batteries.

Alevo recently announced plans to bring manufacturing of GridBanks to the US, taking over a former Philip Morris cigarette factory in Concord, NC. The new Alevo plant is projected to create as many as 2,500 new jobs in the next three years - a win-win for the local economy and the environment. We spoke with Scott Schotter, Chief Sustainability Officer at Alevo, about the company’s exciting new technology and its plans for the future.

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ENERGY

Alevo’s goal is to use its technology to eliminate the 30 percent of energy that is lost before consumption. Tell us more about this - how is energy lost before consumption and how will Alevo reduce this waste?

Scott Schotter: Electricity is wasted by design and also by the inefficiencies of an aging electric grid infrastructure.

To prevent blackouts and stay reliable, grid operators intentionally produce more electricity than is needed by design. This extra headroom makes sure the lights stay on if there is an unpredictable event or when extra electricity is needed, like during severe weather. GridBanks help reduce this intentional waste by storing - rather than generating - the electricity that was required for headroom, allowing power plants to produce less.

The aging electric grid (some parts are 100 years old) wastes energy all along the path of electricity’s journey from generation to consumption. Grid congestion and moving electricity itself create waste that, until now, could not be recovered. By placing GridBanks along the route that the electricity travels, utilities can store and release electricity as needed by moving it over aging wires during nighttime off-peak hours to have it ready at the locations it’s needed during peak hours.

Since 44 percent of electricity comes from coal, fuel savings in both scenarios can reduce greenhouse gases significantly. Alevo has built a supercomputer that shows grid operators where to place GridBanks along the grid and that determines what services offer the best economic and environmental benefits.

How will Alevo’s technology enable utilities to add more renewables to the grid?

SS: The main weakness of renewables is that they produce electricity intermittently, and when they do produce, it is not always in sync with the peak electricity needs of the grid.

Sadly, the sun doesn’t shine and the wind doesn’t blow on command, and since renewables generate electricity that must be consumed in real time, much of what is produced by renewables is wasted.

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The good news is that GridBanks can “time shift” electricity production by acting as electricity reservoirs that store excess renewable energy and then release it when the demand is there. GridBanks make renewable electricity reliable for grid operators.

Essentially, GridBanks mitigate renewables’ intermittency flaw, making increased investment in renewables a more realistic option because, when they are combined with the energy storage capability of GridBanks, they become a much more reliable source of electricity production for utilities.

Currently, wind- and sun-generated electricity is only about five percent of US electricity consumption, in part because of the limitations imposed by their intermittency.

In addition to increasing the use of renewable sources of power, many argue that people in developed countries simply need to consume less energy than they do today. How does Alevo feel about this? Are you doing anything as a company to address this?

ENERGY

SS: Alevo’s work in innovating breakthrough battery technology and creating an intelligent delivery system for this technology will radically increase efficiency in the energy industry.

Efficiency means doing more with less, and applying GridBanks to existing networks will mean, in real terms, that even if people don’t change their electricity habits at all, they would be using less electricity. Whichever way you take that argument, increased efficiency in energy supply is a good thing. Alevo works on developing nations’ grid infrastructures as well, helping build their economies through efficiencies while reducing their greenhouse gas emissions.

How do your corporate social responsibility (CSR) initiatives benefit Alevo’s bottom line?

SS: We’re going to be employing thousands of local people and creating state-of-the-art facilities. A happy and

healthy workforce directly supports our bottom line. Like any other business today, we have a strong focus on efficiency. In many respects, good CSR is just good business.

What impact does the company project its technology could have on the energy sector over the long term?

SS: Alevo hopes to have a huge impact on the energy sector over the long term.

GridBanks are energy source agnostic, meaning they function with all types of energy sources - nuclear, renewable, and fossil fuel. This allows GridBanks to not only provide immediate efficiency savings in the current environment, but also to be a key technology for supporting the uptake of renewables by major utility providers.

Alevo’s GridBank is solving one of the world’s greatest energy problems - the ability to store and deliver gridscale electricity when and where it is needed. The electric grid is the largest

supply chain in the world and it has no significant storage capabilities. If you consider how the food and computer industries exploded when storage was added, just think what storage can do for electricity. We believe our impact will be long-lasting and revolutionary.

What other companies or leaders are you inspired by?

SS: Thomas Edison, Nikola Tesla, and Henry Ford were pioneers we respect for their advancements in electricity and for creating efficiencies at a commercial level. The Alevo name is inspired by Alessandro Volta, the Italian physicist who invented the first battery. Alevo has the invention - the first utility-grade battery that can’t burn or explode and has an extremely long life - now we need to bring it to the world and show what it can do. We definitely believe in the mantra, “Go big or go home.”

Photos: Alevo

“Alevo’s work in innovating breakthrough battery technology and creating an intelligent delivery system for this technology will radically increase efficiency in the energy industry.”

Alevo’s new facility at the former Philip Morris cigarette factory in Concord, NC SPRING 2015

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ENERGY

LEADING THE ENERGY REVOLUTION AT

A CONVERSATION WITH JULES KORTENHORST, CEO Roughly a decade ago, after being part of the team that built Sitel - one of the largest call center companies in the world - Jules Kortenhorst decided to take a sabbatical and spend some time considering what his next step should be. It was then that he transitioned to public service and he has been working to tackle climate change ever since. He began first in politics, running for the Dutch Parliament and then heading up the European Climate Foundation. He now finds himself at Rocky Mountain Institute (RMI), the Boulderbased “think-and-do� tank that finds solutions to the most pressing issues in the energy world. Mr. Kortenhorst has been leading RMI as CEO since 2013 as the organization works to swiftly scale its impact and accelerate the transition to efficiency and renewable energy.

Conscious Company Magazine sat down with Mr. Kortenhorst to discuss the remarkable work of RMI Co-founder and Chief Scientist, Amory Lovins, and the team at RMI, as well as his experience as a leader in the clean energy movement.

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ENERGY

RMI’S WORK Reinventing Fire, written by Amory Lovins and the RMI Team, presents a multitude of solutions to the energy challenge. How have some of these solutions gained traction since the book was published?

Jules Kortenhorst: On the whole, the energy revolution is gaining traction.

There is something magical about the moment when renewable technologies become less expensive than traditional, fossil-fueled sources, right? Solar power is suddenly making economic sense, and you can see this in the speed at which photovoltaics are rolling out. Solar PV costs are coming down dramatically, installed solar capacity is tracking with Reinventing Fire’s projections, and solar’s installed cost per watt is tracking

virtually no maintenance, very low fuel cost, they have the acceleration of a Porsche 911, a range of 300 miles, and the same price as a conventional option.

For the first time, EVs are bridging the divide between the electricity and transportation sectors. Lithiumion battery developments and price declines driven by the automotive sector are crossing over into stationary residential applications; clean solar power is providing an alternative to fossil fuels for cars that once burned only gasoline or diesel; and vehicle-togrid technologies are offering firming capacity for variable renewables and ancillary grid services such as frequency regulation. [Editor’s note: vehicle-togrid technologies allow electricity to flow back and forth between an EV and the grid. With smart controls, these technologies can allow EV owners to sell electricity back to the grid when output

JK: As an organization, we have to increase our impact. We have, over the course of time, had many great insights, but great insights are not good enough - they don’t achieve impact. It is great insights and ideas deployed at scale that have impact in the end. I’m here to help the organization transition to an organization that is obsessed with scaling impact. If we don’t very quickly switch the ways in which we provide ourselves with energy, then it’s game over for our children and grandchildren (I’ve got four of them, and they’re a huge source of inspiration).

What’s challenging is the powers of old who are holding on for dear life to the financial interests of the past. If you are a coal business, oil or gas business, or in the old vehicle business, then you are worried about this transition. In the next ten years, we will see massive businesses being built, enormous

“We have to increase our impact. We have, over the course of time, had many great insights, but great insights are not good enough they don’t achieve impact. It is great insights and ideas deployed at scale that have impact in the end.” with or just ahead of the US Department of Energy’s SunShot targets. Battery costs per kWh are similarly exceeding most industry analyst forecasts. We are across the tipping point with solar.

Energy efficiency is progressing in other sectors as well, such as with LED lighting and transportation. Five or ten years ago, LEDs were 17 times more expensive and therefore unaffordable.

Now they’re still a little more expensive, but not by much, and if you know that your electricity costs drop by 20 percent as a result of using them and that they last 15 years instead of five months boom - there you go.

Electric vehicles (EVs) are on the cusp of a revolution, which can be seen in innovative cars such as Tesla’s Model S, Nissan’s LEAF, BMW’s i3 and i8, and Chevrolet’s upcoming Bolt. Tesla, for example, will soon sell a car for $35,000 - and when electric vehicles become sexier, cheaper, faster, and better than the old thing, why not, right? There’s

from renewable energy technologies drops, such as when a cloud passes over a large solar facility or the wind stops blowing at a wind farm. Also, renewables sometime require additional generation resources in order to provide electricity at the proper frequency and voltage, and batteries, including EV batteries, can provide these ancillary services.]

In other areas, efficiency is not gaining traction fast enough due to misinformation about its benefits and because of transaction costs or perceived hassles. Regardless, integration of these solutions is what is exciting.

fortunes being made, and big new companies emerging. At the same time, we will see old companies disappear, old ideas go away, big companies become small companies, and massive fortunes disappear. So naturally, there is pushback, particularly from a certain part of the political spectrum, because they are representative of those old interests. However, many of the energy incumbents have a different perspective and find it hard to understand that their world is dramatically changing. We are working with them to help them realize that they can thrive by accepting these changes and transforming their business models.

Speaking of integration, the business case for many of the shifts proposed in Reinventing Fire seems clear and logical, especially for the private sector. What is preventing the adoption of these ideas more quickly?

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“BUSINESS CAN BECOME MORE COMPETITIVE, PROFITABLE, AND RESILIENT BY LEADING THE TRANSFORMATION FROM FOSSIL FUELS TO EFFICIENCY AND RENEWABLES. THIS TRANSITION WILL BUILD A STRONGER ECONOMY, A MORE SECURE NATION, AND A HEALTHIER ENVIRONMENT.”

Source: Rocky Mountain Institute

ENERGY RMI makes a very clear case that improving energy efficiency will save money. In theory, efficient markets should adopt superior solutions. So, what’s impeding momentum?

JK: Efficient market theory has been debunked - markets are not efficient, and this is true in the case of the energy efficiency market. In other words, pure economics alone haven’t been enough to move large amounts of capital and see adoption at scale. A number of other market barriers still stand in the way. One reason is that there are enormous information gaps and a lot of misinformation about the benefits of energy efficiency. Most people fail to take into account the value of efficiency beyond the energy cost savings - the myriad of other quantifiable benefits such as risk reduction, better brand reputation, or improved employee health and productivity - that come with superefficient buildings.

market-driven change is greater than ever. The impetus for the partnership with Carbon War Room is partly that we are both driven by a mission to accelerate market-based change to a clean, prosperous, and secure energy future by mobilizing the private sector.

We exist for the same reasons Carbon War Room is bold and innovative. It’s focusing on entrepreneurs, mobilizing capital, and removing market barriers to speed adoption. RMI has a long and accomplished track record founded on fact-based analytical rigor, as well as developing breakthrough insights and solutions. By merging in a strategic alliance with Carbon War Room, we feel we can have an even greater impact, combining the strengths of both brands against today’s most pressing energy challenges.

to short-term financial results cannot, and we can convene diverse industry stakeholders that otherwise find themselves at odds or in competition based on our reputation of trust, sound thinking, and data-driven rigor that we’ve built.

What other industries besides energy do you think could benefit from the “think-and-do” tank model?

JK: We need to rethink how we live within the planetary boundaries that are so abundantly clear. I expect that we will see a similar revolution in agriculture, land use, and forestry. To address climate change, we need to shift those sectors just as we need to shift global energy use. So whether it is water, biodiversity, the agricultural system, or phosphates and nitrates and the health of our soil system, what’s required is a combination of deep insight and understanding of what can be done that

“The biggest change we will see in the next 25 years is the transition to a low-carbon energy future. There will be huge opportunities, and also huge losses. Those that move to make themselves part of that revolution are likely to do extremely well and will play a part in preserving this planet as a safe place for future generations.”

Often there are transaction costs and implementation hassles or simply a lack of organizational focus. For example, in the built environment, we see a lot of problems due to the landlord-tenant gap, in which landlords may not be incentivized to invest in energy efficiency upgrades since the tenants are the ones who pay the utility bill and would realize the financial benefits.

Can you tell us about your merger with Carbon War Room? What was the catalyst for this merger and what are RMI’s ultimate goals for this partnership?

JK: Against the backdrop of an accelerating energy revolution but a slow-moving policy agenda, the need for

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RMI is a nonprofit. In what ways do you work with private industry to further your goals or implement your solutions? How does this corporate structure help further RMI’s objectives and goals?

should be done. Then it’s about making sure that those ideas are implemented.

JK: RMI and Carbon War Room extensively partner with the private sector in almost everything we do. The corporate sector is the most powerful institution we have to scale solutions, and that is what is now needed. Our independent, nonprofit, nonpartisan stance has been very helpful, allowing RMI to work together with individual companies, industry organizations, and associations to bring about the changes we want to see. We’re able to take a long-term view that corporations held

JK: It’s actually a question that we are right in the middle of debating because of the fact that, as a part of the merger, we’re also looking at what our strategy should be. Are we focused on the right impact areas? How do we compare having impact in China, where we do a lot of work, versus having an impact on small Caribbean islands? Or working on the new business models of utilities in the US versus driving energy efficiency in the built environment. It’s so hard to compare apples with oranges.

What does success look like for RMI, and what metrics are you using to measure progress along the way?

ENERGY Some of the metrics we are honing in on are the reduction in greenhouse gas emissions, the reduction of fossil fuel use, and the acceleration of capital flows in the direction of new business models and energy systems of the future. For now, this is the best way to assess and compare these projects and the work we’re doing.

POLITICS AND INDIVIDUALS What role do you feel politics play in mitigating climate change? Which governments, if any, do you think model the most progressive and constructive behaviors?

JK: Government policy can play a critical role in setting standards, like it has done with building codes and fuel efficiency (CAFE [Corporate Average Fuel Economy]) standards. But, what we need is leadership. President Obama is showing that leadership and so is the Chinese government. Yet, unfortunately, there are short-term populist leaders in many parts of the political arena that deny the reality of climate change to protect the interests of the fossil-fuel industry. Clearly, we need to price the externalities of carbon emissions. Politics and policy have an important role to play, but thank goodness it’s not the only lever we can pull.

Interestingly enough, the Chinese government is as committed to this issue now as any, and it is interesting to see how they are putting in place bold measures to reduce the carbon intensity of the Chinese economy, reduce greenhouse gas emissions, and reduce air pollution. When you travel to China, it’s often unbearably poor air quality to operate in. So, China is absolutely heading in the right direction, but we’re not all the way there yet.

What role do you feel individuals’ behavior plays in mitigating climate change? Are we in a world where we need to consciously change our behavior or can we design things people will love and enthusiastically adopt that are transformational in terms of carbon impact?

JK: A dear friend of mine once said to me, “We will not fix the climate change issue until we shift the consciousness of mankind.” I think he may be right.

We need to help people around the world come to grips with the planetary boundaries we face. Although that will require a shift in consumer behavior, innovative technologies and business models can help make that shift easier and maybe even imperceptible. Smart thermostats improve personal comfort while decreasing energy use of homes.

New business models - such as car sharing - are transforming how people meet their mobility needs, enabling a reduction in total vehicle miles traveled. Entrepreneurs will continue to find novel solutions to our energy challenges and each of us can also play an important role in the decisions we make - from separating household waste, to buying a plug-in car, to replacing incandescent light bulbs with LEDs, to voting for political leaders that are advocating for the right decisions.

ON LEADERSHIP Can you tell us a bit more about what building inspired organizations means to you?

JK: If it’s only techniques or tricks, then it will never have lasting impact. I think it starts with genuine care for people.

I think great organizations, and great leaders, care about their people. That doesn’t mean there is no accountability or that there cannot be toughness when it’s required. It certainly doesn’t mean that an organization shouldn’t be results-oriented. But underneath it all, I think people recognize that great leaders really care.

I think a second ingredient that is more apparent to me now is that if you just try to build organizations and your goal is “to make a boatload of money,” then the people who are going to show up will be there because they want to make a boatload of money. They’re not going to show up because of their heart. One of the things that I’ve been privileged to do is to work with people and build organizations that have a mission that is greater than just making money. In leading RMI and Carbon War

Room, one of the real privileges is that we get out of bed every morning because of the impact that we get to drive, and that’s wonderful.

What have you learned from failure either personally or professionally that has really served you well in your career?

JK: Working on this issue [of climate change] for the last ten years has been incredibly hard - making a few steps forward, stumbling, falling, facing setbacks, and then having to get back to fighting the battle again. I think one important leadership lesson is that, in the face of a challenge or setback, you cannot give up; you have to keep trying.

This issue is simply too big. One way of looking at it is, when a door closes, somewhere else a window opens, and you’ve got to keep going. That is so true in entrepreneurship with a startup, as well. I have been fortunate enough to have been part of some really successful businesses, but I’ve also been a part of failures and things that didn’t work out.

As disappointing as that can be, you’ve got to scrape yourself back up and keep going.

What advice do you have for entrepreneurs, scientists, engineers, and organizations as far as having impact in today’s world?

JK: The biggest change we will see in the next 25 years is the transition to a low-carbon energy future. There will be huge opportunities, and also huge losses. Those that move to make themselves part of that revolution are likely to do extremely well, and will play a part in preserving this planet as a safe place for future generations.

Follow your passion, follow your dream, and go for what you believe in.

There is something to be said about learning the basic skills, the tools, the things that you need in order to be successful in the world. That can be a hard trade-off, whether you go to learn those skills or whether you go to follow your heart. Is it possible to do both at the same time in the same place? Follow your heart is the one piece of advice that I can give, though. Photos: RMI

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ENERGY

EXCITING ENERGY

INNOVATIONS Blade Dynamics

Ever wonder why utility-scale wind turbines are so big? It turns out that increasing the length of the blades exponentially increases the energy output of the turbine. The only problem is transport - most large turbine blades must be shipped to their final destination on trucks with extra-long beds, which have trouble turning corners in small towns along the route and often need special permits to travel along the rural roads that lead to the wind farm’s location. These obstacles increase costs and reduce the overall cost effectiveness of many wind energy projects.

With locations in the UK and Louisiana, Blade Dynamics is designing modular wind turbine blades that can be shipped in segments on standard-length trucks and assembled on-site. The blades are also lighter than conventional blades, which means they can be even longer without increasing the size of the turbine they are installed on, further decreasing costs and increasing total energy production.

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Photo: Blade Dynamics

ENERGY

Photo: Michael D. Spencer

The Copenhagen Wheel by Superpedestrian, Inc. Long before there were solar panels or diesel fuels made from algae, there were bicycles. In a twenty-first century twist, Cambridge-based startup Superpedestrian is upgrading the humble bicycle with the Copenhagen Wheel, an invention of nearby MIT. This plug-and-play addition to any commuter bike automatically provides a boost to your pedaling when you need it without the need for a throttle, preserving the normal biking experience while making hills and long distances much easier (and less sweat-inducing). Much like a hybrid car, the wheel uses regenerative braking to help charge its battery, and it even connects to your smartphone so it can learn your route and calculate how many calories you burn, among other statistics. By making biking just a little easier and just as much fun (if not more!), its creators hope that more people will opt for bikes over cars for their daily commutes.

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ENERGY

Photo: LuminAid

LuminAid LuminAid was founded on the idea that victims of natural disasters, in addition to food, water, and shelter, typically need a reliable source of light.

LuminAid’s solar light is incredibly compact for easy transport to disaster areas and it inflates, turning it into a lightweight lantern with diffuse light that is also waterproof and floats. In addition to disaster relief, the lights are ideal for outdoor activities such as camping and backyard barbeques and they stow easily in emergency and first-aid kits.

Through the company’s Give Light, Get Light program and its partnerships with several international NGOs, LuminAid has also distributed over 10,000 of its clean, affordable light source in areas around the world without access to electricity. Shortly before we went to press, founders Anna Stork and Andrea Sreshta appeared on ABC’s “Shark Tank” and struck an investment deal with famed investor Mark Cuban. We can’t wait to see what they do next!

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ENERGY

Enessere The Enessere Hercules Wind Generator marries innovative renewable energy generation with aesthetic design. While generating electricity with wind is appealing for many businesses and homeowners, traditional wind turbines are typically too large for onsite applications and their efficiency is greatly reduced when they are installed in urban areas where the wind tends to be gusty, rather than in rural areas where the wind is more constant.

With a design so appealing it might be mistaken for a dynamic sculpture installation, the Hercules Wind Generator is a vertical-axis wind turbine that produces about the same amount of electricity as an average family uses over the course of a year.

Its shape, which is rather mesmerizing when it is spinning, is designed to produce electricity regardless of the wind’s direction. Its handcrafted wooden “wings� are lightweight and complement any type of architecture. Designs like this could go a long way toward integrating more renewable energy sources into urban landscapes and living spaces.

Photo: Enessere

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INTERVIEW WITH CO-FOUNDER BLAKE JONES THE GOODS • Employee-owned cooperative: after a one-year “candidacy” period, long-term employees have the opportunity to become a “Co-Owner” by buying one share of voting common stock (i.e. 1 person, 1 share, 1 vote).

• “Extreme transparency” and open-book management.

• Certified B Corp and “Best for the World” awardee (2012-2014).

• Environmental stewardship: solar-powered and LEED-certified office buildings, free bus passes for all employees, plug-in hybrid car fleet, and “near-zero” waste operations.

• Community giving: 20 percent of annual net income after external investor dividends goes to the “community” stakeholder, or local non-profits, totaling over $850K since 2005.

• Values-aligned pay structure: no sales commissions, no individualized bonuses (all Co-Owners receive the same dividend), maximum 6-to-1 cap on highest-to-lowest total pay, and Co-Owners receive six weeks of paid time-off per year.

• Namasté MBA: effort to share the entire experience of small business ownership and increase the financial literacy of Co-Owners.

• Flexible work environment.

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Can you tell us the story of starting Namasté Solar?

Blake Jones: In 2004, I returned home to Colorado after working for three years with solar electricity in Nepal.

My co-founders, Ray Tuomey and Wes Kennedy, and I discovered that we all shared a common vision for starting a company that would help prove that there’s a better way to do business than the conventional norm. We wanted an employee-owned, transparent, and democratic workplace whose purpose was to benefit all of the company’s stakeholders, not just its stockholders. While living in Nepal, I had been using the word “namasté” on a daily basis as a greeting of great respect, and Wes used it regularly as a yoga practitioner. We interpreted its meaning as “recognizing the interdependence of all things,” such as employee morale and the bottom line, energy policy and the economy, public health and the environment, etc. We thought this meaning was a perfect fit for our company name, and that led to Namasté Solar being officially incorporated on February 2, 2005.

One of the scariest times for entrepreneurs is actually making the decision to jump in. What did this decision look like for you?

BJ: It was indeed a scary decision. For most of my life, I had never even considered the possibility of becoming an entrepreneur. When my wife and I lived in Nepal, I worked for a renewable energy company where I learned about the challenges of small business management.

During a particularly trying period, I remember telling my wife, “Wow, running a small business is really tough - please don’t ever let me start one!” Even as Namasté Solar was getting launched, I couldn’t believe what we were doing - and neither could my wife, who reminded me what I had said just a few years earlier in Nepal - but our passion and excitement for our vision pushed us over the edge into the scary unknown, and that’s been the fuel that has sustained us ever since.

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“Our passion and excitement for our vision pushed us over the edge into the scary unknown, and that’s been the fuel that has sustained us ever since.”

What inspired Namasté Solar to become an employee-owned co-op?

BJ: When we started the company, we were naïve, first-time entrepreneurs, and to put it plainly, we were simply unaware of the cooperative model.

Instead, we invented our own wheel, so to speak, by creating our own customized employee-ownership structure. Interestingly enough, it was similar to a cooperative structure because we made many big picture decisions democratically on a onevote-per-person basis. However, we also allowed all long-term employees to purchase as much stock in the company as they wanted. This resulted in increasingly varied levels of stock ownership, which in turn resulted in early Co-Owners having more stockholder-level control than those who joined later, which was not what we had intended.

So, on January 1, 2011, our approximately fifty Co-Owners voted

to convert to an employee-owned cooperative, and we couldn’t be happier with that decision. The cooperative model more closely matches our democratic ideals and more equitably distributes the risk-reward equation and small business ownership experience for our Co-Owners. Lastly, as part of our transition to a cooperative model, we created two classes of stock: a class of cooperative voting stock, of which only employees could own a single share, and a class of non-voting preferred stock.

The preferred stock enabled us to start accepting external investors without compromising our cooperative model or democratic employee control.

What have been the biggest challenges of being a co-op and how have you addressed these challenges?

BJ: Our biggest challenge by far has been fast growth, both internally at our company and also externally in the solar market. We found ourselves

getting swept away by the booming solar market, which we call the “solar coaster,” and we unintentionally doubled in size every year for our first five to six years. With our unique business model, we had no blueprints to follow, and trying to scale the model so quickly put a lot of strain on both it and us. We had to learn how to embrace change and evolve our unique business practices very quickly.

Sometimes it felt like we were continually having to make painful compromises between our original vision for the company on the one hand, and growth and scale and external market realities on the other. For example, we actually started the company based on consensus decision-making, but as we grew to over forty people, we had to transition to democratic decisionmaking, which has worked well with now over a hundred of us. When we were small, we held votes on a onevote-per-person basis for just about everything, but as we scaled up SPRING 2015

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we transitioned to more representational forms of democracy with more empowerment votes for individuals, teams, committees, etc. I remember getting some very helpful advice from one of our employee-owned company role models, New Belgium Brewing, based nearby in Fort Collins, about trying to distinguish between the “principle” and the “practice.” You want to keep your principles intact as you grow, of course, but you might need to change the way that you practice the principle or act on it. This paradigm has been very helpful.

What unexpected value has resulted from structuring the business as a co-op?

BJ: One enormous benefit of being employee-owned is that everyone thinks and acts like an owner.

This directly translates into better work quality and better customer service, but I guess this was a benefit that we had both intended and expected.

Some unexpected benefits stemmed from the cooperative model being more prevalent and well-known than we had realized, and this, in turn, helped us to better communicate who we are and to raise external capital more easily than we predicted.

Previously, it could be challenging for us to describe our unique, customized, employee-ownership structure. We would say we were employee-owned and here’s how it works, and here’s what that means, but simply saying we’re a cooperative usually registers with people instantly. A good analogy is that I can give you a tour of our building and show you all of its energy-saving and progressive design characteristics, or I can just tell you that it’s LEED Gold certified, and boom, you get the idea more quickly. Another analogy is that we can now say that we’re a certified B Corp, which helps us take a shortcut in telling you that

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our company has a measurable, positive impact on society and the environment.

As an aside, we really like being a cooperative and a B Corp, and having LEED certification, because it allows us to contribute to all three of those important movements. Lastly, in terms of raising money from external investors, we have been pleasantly surprised at how many people specifically want to invest in a conscientious, democratic, cooperative model like ours. In 2012-2013, we raised about $750,000 from 25 values-aligned, external investors. We were even oversubscribed and had a wait list.

The interest and support that we received was far greater than we could have imagined.

What role do you see solar playing in the energy industry 20 years from now?

BJ: In 20 years, I think that solar panels will be a more common sight on rooftops than chimneys, satellite dishes, or TV antennas

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ever were. People who can’t put solar panels on their own roof will have the option to participate in a “community solar” project the same way they can grow vegetables at a nearby community garden. The cost of solar will keep coming down and the technology will keep getting better - and not just for solar, but also for storing energy and managing a grid that has multiple distributed generation sources of different types like wind, solar, fuel cells, etc. 20 years from now, I want a more balanced energy portfolio, just like I want a well-balanced retirement and savings portfolio. Right now, it’s too concentrated with fossil fuels. Instead, we’ll have a diversified energy portfolio that still has some conventional energy, but also lots of renewable energy, and solar will be a big and ever-growing part of it.

What policies are hindering solar development and what policy changes are needed to promote solar development?

BJ: There’s a policy called “net metering” that is in place in almost all 50 states that has been the foundation for solar development in the US for the past ten years. Unfortunately, this policy is under attack by many utilities, and it is critically important that we maintain net metering in order to continue the healthy growth of the solar market. How does net metering work? Well, when a solar system is on the roof of a hospital, for example, it first goes towards meeting the immediate power needs of the hospital building. If the building doesn’t need the electricity, it gets exported to the utility grid and gets used by a neighboring building. In this scenario, net metering allows for the utility meter to spin both backwards and forwards at the same retail rate.

Many utilities don’t like net metering, primarily because I think they feel threatened by the growing popularity and affordability of rooftop or distributed solar. Utilities claim that if a solar system owner produces as much electricity as they consume, then they aren’t paying their fair share of maintaining the utility grid. This is a

valid perspective, but it’s also only one perspective out of many others, and it doesn’t come close to telling the whole story. Distributed solar also provides added value to the grid and the utility not to mention the community and the environment and public health, etc. - by providing electricity production and voltage stabilization throughout the grid closer to where the electric loads are, which also prevents the need for costly grid infrastructure upgrades and eliminates efficiency losses via transmission lines. So, we need strong ongoing support for net metering policies nationwide.

Also, I’d personally like to see all subsidies for all forms of energy - both conventional and renewable - come to

“You simply can’t try new things or be truly innovative without a willingness to fail or make mistakes.” an end. That’s probably not going to happen, especially because oil, gas, coal, and nuclear subsidies are so firmly entrenched and are difficult for the public to see. But the good news is that solar costs have been plummeting for the past ten years and will continue to go down until we can finally wean solar off of government subsidies. I think this will happen within the next five years. In some places, like Hawaii and the sunny Southwest, it might happen earlier.

When unsubsidized solar can compete against still-subsidized conventional energy, that’s when the real excitement will begin!

What insights do you have regarding quality leadership and building an effective team?

BJ: At Namasté Solar, one of our core values is “distributed leadership.” We believe that leadership, in different forms and at different times, can and

should come from all people and roles throughout our company. I have a plaque on my desk that sums it up nicely. It says, “No one of us is as smart as all of us.” When you combine distributed leadership, a democratic workplace, transparency, and employee-ownership, the end result is very powerful. It increases the chances that you find the optimal solution, that people synergize as a team, that everyone is engaged and committed, and that everyone thinks and acts like an owner. Over the last ten years, I’ve learned that democratic, collaborative, and distributed leadership has far more potential to build highperforming teams and organizations than traditional “command-and-control” leadership.

What have you learned from failure, either professionally or personally, that has helped you in your career?

BJ: I believe that failure and mistakes are critically important parts of learning and growing, both for an individual and an organization. It’s hard to accept failures, and I have to continually remind myself of this lesson, but you simply can’t try new things or be truly innovative without a willingness to fail or make mistakes.

And you need more than willingness, of course. How does your company culture perceive and address mistakes?

How do you learn from them? Are your colleagues scared of getting blamed for mistakes, or do they proactively expose them and ask for help in finding a solution?

What’s next for Namasté Solar?

BJ: We’re continuing to grow and are expanding our services nationwide.

This year we’re opening a third branch office in the Northeast and a fourth in the Southwest. We’re excited about the growth outlook, albeit nervous as well, and we hope that our past experience and our “Namasté MBA” will help us with the never-ending search for balance between mission, values, and culture on the one hand, and growth, change, and adaptability on the other.

Photos: Namasté Solar

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AUTHOR AND ENTREPRENEUR

MARTIN BJERGEGAARD on the Secret to Happily Integrating Work and Life

M that also that that

artin Bjergegaard has not only co-authored the International Bestseller Winning Without Losing: 66 Strategies for Building a Wildly Successful Business While Living a Happy and Balanced Life, but he also co-founded Rainmaking, a “company factory” launches and builds startups. Since 2006, the company has invested in 165 startups and runs Startupbootcamp, Europe’s leading startup accelerator program. One might assume working at this pace is entirely unsustainable, but Martin has discovered a set of tactics help him to maintain balance and happiness in the face of it all.

Your company Rainmaking has created 20 companies, invested in 200 startups, raised more than $100 million, and created more than a thousand jobs based on three core values: being Warm Hearted, a Whole Person, and World Focused (WWW). What was the process for developing these values? What tactics do you practice to return to these values, especially in times of crisis?

Martin Bjergegaard: When we started Rainmaking in 2006, all four of us had had experience with the traditional way of doing business through working at big corporations and international consultancies. We felt that most corporate cultures had too much cynicism, too much of a narrowminded focus on profit, and too many egos fighting over power. That culture didn’t really do it for us so we decided to create our own thing.

When we sat down to design Rainmaking, we quickly agreed on one overarching guiding principle: our company should make us, and everyone else interacting with it, happier than we would have been without it.

Talking more about it, we quickly realized that for us to thrive we needed a culture of warm-heartedness - a place where we would actually care about each other as human beings, not just as means to an end.

“It’s one thing to agree on values, it’s another thing to live your values day after day.”

Three of us had recently become first-time parents and we definitely knew that we wanted to be a very integrated part of our children’s lives and upbringings. Not even the most exciting startup in the world could make us compromise on that dedication. Health is also immensely important to us - not just as a concept, but as a daily commitment to being active, eating properly, and feeling great. So we wanted a good balance between our passion for Rainmaking and our other joys and commitments, which made us all agree on the Whole

Person component.

Finally, we decided to connect with greatness rather than fear. We imagined how well things would go and how big and successful Rainmaking would become (at a time when we had just quit our jobs and were about to borrow whatever small amount we could from the bank).

Then we asked ourselves the question, “Now that we are successful, is there anything we regret?” In this frame of mind, it was obvious that cutting corners and compromising on integrity would be a really stupid thing to do.

A lot of people become successful but only a few of them are proud of the actions they took to get there. We wanted to internalize that insight and, by design, put ourselves in the latter category.

Of course, it’s one thing to agree on values, it’s another thing to live your values day after day. Soon after we started Rainmaking, the financial crisis came and almost knocked us over. We had managed to raise $2 million in 2007 from nine business angels and, on the back of this investment, we sped up our activities and launched quite a few new businesses. Then, suddenly everyone SPRING 2015

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around us was paralyzed and it became a very difficult business environment.

Most of our investors lost a huge part of their fortunes during 2008 and 2009.

Whenever we met with them, they looked so depressed and were worried if things would ever return to normal.

Personally, I decided to stop following the news altogether - it was simply too depressing. I asked myself, “What frame of mind do I need to maintain in order to get through this crisis in one piece?” The words “strong,” “enthusiastic,” and “happy” came to me. Luckily, my co-founders are very resilient, so we supported each other, made a new plan, felt good about it, and kept moving forward.

There definitely were a few times when we were really challenged on our values. For instance, we had to close down one of our startups early on that was based on one of my ideas and which I had been running as CEO for more 60 |

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than a year. We had to close it down because we ran out of money while we still had a substantial burn rate. In some ways, it was tempting to file for bankruptcy - the conditions for doing so were definitely met. Instead, all the Rainmaking founders decided to cut back on our own salaries for a year to be able to pay everyone what we owed them. It did hurt at the time, but that tough year went by quickly and today what is left is a feeling of happiness for being able to adhere to our values, even under difficult circumstances.

Rainmaking has seven co-founders/ partners and you’re all committed to deepening your personal friendships with one another along the way. What strategies do you employ to honor this commitment?

MB: Like any relationship, the key is to spend time together. We have

Rainmaking offices in London, Berlin, and Copenhagen, and Startupbootcamp (our accelerator program) is in ten cities globally and expanding. We all travel and have teams to attend to, so we need to be intentional about spending enough time together just the seven of us. We are very dedicated to doing so because we know that our friendship is our most important asset. For us to thrive, it needs to be a friendship, not just a partnership, because this way we truly get joy, energy, and happiness from working together. Going into the office every morning, we want to have the same feeling as when we were kids going to the after-school club - that amazing feeling of, “I am going to play with my friends.”

Four times per year, we spend a few whole days together, all seven of us. We call these days “Energy Days” because we realized that the most important outcome of these days is that we are

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all energized afterwards. With this intention, quarrels, endless budget sessions, or a strict agenda cease to make sense. These are very enjoyable days in which the social part is fully integrated with the business part.

It’s obvious that you can’t have too big of an ego if you are to work together as seven equals. Luckily, none of us has a need to be right all the time or to get things “our way.” We are all aware that our individual interpretation of a situation is just that - an interpretation.

We don’t claim to know what is

Your book, Winning Without Losing, outlines 66 strategies for building successful businesses while maintaining balance and happiness.

Which of these strategies consistently shows up in your everyday life? Are there any strategies that have proven to be the most important to you personally?

MB: I follow my own advice in the book and make a “today list” every day. I write down the three things that are wildly important for me to get done

work with nice, skilled, and passionate people who share our values.

What insights do you have regarding leadership? What leadership qualities do you look for in the leaders of the companies that you invest in and what leadership techniques have proven to be most critical to your personal leadership style?

MB: In leadership, personal maturity is key. Maturity has nothing to do with age, but everything to do with how

“Our company should make us, and everyone else interacting with it, happier than we would have been without it.” ultimately right or wrong. We are very pragmatic in that sense.

If something is truly important to us, we will be transparent about it and the rest of us will listen and do our best to accommodate that preference. Just having this opportunity means that we very seldom use it.

Working with friends is often seen as something not to do in the business world. What advice do you have for entrepreneurs who are thinking of working with friends or who already work with friends?

MB: There’s definitely a risk working with friends. But there is also a very meaningful upside. Personally, I have had so much fun, enjoyed so many shared experiences, and have deepened my relationships by working with my friends. However, it definitely wouldn’t work with all of them, so you have to be very thoughtful and selective. Only choose a friend for the work if he or she is the ideal candidate for the job, irrespective of the friendship.

today. At least one of these needs to be strategic, moving me forward toward my big goal for this year. To have this razor-sharp focus makes a huge difference when done consistently day after day. It reduces the risk of procrastination and clutter and gives me something to feel good about every day when I’ve accomplished what I set out to do.

I also have walking meetings almost daily. It’s such a nice way to interact and work with others. The mind works best when the body is in motion, so it’s actually a terrible idea to sit in a meeting room where the air gets stale.

It’s amazing how many meetings can actually be done outside!

What is the most important quality to you and your partners when you are considering investing in a business?

MB: We have to be really excited about it. Of course, we consider the typical things like scalability and early traction, but ultimately our excitement is what matters most and that has a lot to do with the founding team. We love to

much a person has evolved beyond the ego, his or her insecurities, the need to be right, and the tendency to panic and see ghosts where there are none. We believe that leadership today is about building the right team, setting the right direction and tone, and then supporting people while they work their magic. It’s not about being bossy or knowing it all.

Rather, I feel that leadership is about creating the space for others to shine and thrive.

We don’t really apply any leadership techniques. We just try to be mature, compassionate, honest, and respectful.

What gives you hope for the future?

MB: That humanity has been making amazing evolutionary strides during the last 100 years - or 1,000 years, if you will. We still have some way to go before we have a safe, fair, and prosperous world for all of us. But when I remember where we have come from, I think we have made tremendous progress and we keep on evolving. This is quite possibly the most exciting time in human history!

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CHIP CONLEY THE VISIONARY LEADER ON THE PAIN OF TRANSITION, THE ENDURANCE REQUIRED FOR SUCCESS, AND FINDING HIS CALLING, AGAIN.

C

hip Conley has been regarded as one of the most innovative CEOs in the nation. After founding the hugely successful boutique hotel chain Joie de Vivre at age 26 and growing the company into an empire with a quarter-billion dollars of annual sales in his 24 years as CEO, Conley moved on in 2010 to pursue other passions. He is the author of four books, including New York Times bestseller Emotional Equations: Simple Truths for Creating Happiness + Success; he launched Fest300, a website that details the top 300 festivals around the world; and he recently became Head of Global Hospitality and Strategy at Airbnb.

While his long list of accomplishments is indeed staggering, what differentiates Chip is the manner in which he has pursued his career and joy for life as a truly conscious leader. He has always done things differently and has succeeded as a result. We were fortunate enough to sit down with this Renaissance man to discuss everything from near-death experiences to the importance of thanking your employees.

st o m e h t is “Culture ic g e t a r t s important r o f r o t ia t n e differ .� y n a p m o c y an

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You founded Joie de Vivre when you were 26 years old. What did that decision look like? Were you fearful and, if so, how did you overcome it?

Chip Conley: Being an entrepreneur, especially when you’re inspired by an idea that you’re channeling, is sort of like immaculate conception [laughter].

You’re in a place where, with each passing month, you feel more pregnant.

I don’t mean as a man to be disrespectful in any way to the trials and tribulations of being a pregnant mother, but I do think there are a lot of similarities. It feels like something you have to do. It actually feels at some point like you don’t have a choice. Something is implanted in you. I have felt that way a few times with some of my various businesses, but with Joie de Vivre I felt it for sure.

I got to know Bill Graham, a famous concert promoter back in the ’70s and ’80s, when I was working for a commercial real estate development company after business school. I didn’t love what I was doing. I believe you have three choices in your work - it’s either a job, a career, or a calling. I thought I had a calling, and soon after I took the job I found out that it was just a job. I really wanted a calling. I could see Bill Graham had his calling as a famous concert promoter. I was working on a project with him as part of my job, and, at some point, he said to me, “I don’t know what you’re doing in your company right now, but what San Francisco needs is a great place for bands to stay.” As a concert promoter, he was bringing musicians to town all the time. He said, “The hotels here are either really expensive and old-school or really generic. There’s not much that’s interesting.” This was the mid-1980s. Boutique hotels were just getting off the ground.

So, on my 26th birthday, I finished a business plan for Joie de Vivre, which was a very impractical name for a company. It was also a really soulful name for a company because our mission statement was also the name of the company. How many companies out there in the world have their mission statement in the name of the company?

Our mission statement was to create “joy of life.”

Long story short, I was young enough

Chip’s Advice on Finding Investors In Peak: How Great Companies Get Their Mojo from Maslow [Chip’s third book and a favorite of Zappos’ CEO, Tony Hsieh], there are three chapters that are specific to the investor and how you can apply Maslow’s hierarchy of needs to the investor. It helps as an entrepreneur to ask and understand the question “What kind of investor are you dealing with - a transactional investor where it’s all about return on investment, a relationship investor who’s really looking to build a relationship and maybe do multiple investments with you, or a legacy investor who is really focused on the mission?” If you’re going to do a long-term project, you’d better have legacy investors. If you have only transactionally aligned investors, you’re just going to find that those are the people who want to make as much money as quickly as possible, which is not what you’re doing usually if it’s a mission-driven organization.

to feel like if I failed in my mid-to-late 20s, it would be a badge of courage. I felt a lack of fear because, when you’re 26, you don’t think much about what could go wrong. It’s harder as you get older, as you have kids, when you get stuck in your ways - that’s when it’s easy to think of all the things that could go wrong.

Is there anything that you know now that you wish you had known at 26 while starting Joie de Vivre? Is there anything you would have changed?

CC: One thing that I did with my team, that was brilliant and incredibly

stupid at the same time, was create 52 boutique hotels mostly in Northern California, some of which we owned and some of which we just managed.

In the 40 to 50 percent of cases where we owned the hotel, for each one we had a different set of partners. This gave us a lot of flexibility, because no one investor group controlled us, but it was really problematic in terms of how many different relationships we had to take care of - at one point we had 180 different partners. It taught me a lot about who I wanted to do business with and who I didn’t want to do business with, which was a very good lesson.

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From the standpoint of being a leader, how did you get your core team to handle the two downturns that you went through - the dot-com bust and the 2008 recession - especially when dealing with such a vast network?

CC: I’m so proud of this. During the dot-com bust, revenues in San Francisco for hotels dropped about 35 percent over a four-year period. In Silicon Valley, where we had a bunch of hotels too, they dropped 52 percent. It was a depression, not even a recession.

What I’m proud of is that we didn’t lose anyone. We did two key things: 1) we did not lose any of our senior people - they all took 10 to 20 percent

pay cuts and had a pay freeze for three to four years, but we didn’t lose a person, and 2) on the other extreme, we didn’t lay anyone off. We were the only hotel company in the Bay Area that didn’t. We cut salaries for the people who could afford the cut, so it gave us the ability to address the hierarchy of needs for the people at the bottom of the totem pole in the company - the hourly workers. While occupancies dried up and it got a lot quieter in the hotels, rather than having housekeepers or bellmen or front desk hosts have the sense that they didn’t know if they had job security, we secured the base of the pyramid so people actually felt safe and not fearful. They didn’t feel anxious

about losing their jobs, so they not only worked better, but they enjoyed what they were doing more.

I like to think of it like a college rowing team. You usually have eight people on a rowing team and a coxswain - and if they’re doing their jobs well and they’re working together at the same time, then a somewhat miraculous physics proposition happens - the boat starts to actually elevate out of the water. The reason a boat that is higher in the water goes faster is because it has less resistance. That’s what a great team does. That metaphor completely defined the 15 key leaders in our company during that downturn.

During the downturn, we’d have weekly executive committee meetings with the 15 of us and we’d end those meetings in an awful place with everybody asking, “How are we going to get through this?” Since emotions are contagious - I actually believe that CEOs are Chief Emotion Officers because emotions are contagious what we wanted to do was create an environment where the emotions of anxiety and depression were not feeding off of each other. So I said, “Next week, come to the meeting ready to tell us about someone from the company who did something amazing, and why we should recognize them. Then someone else from a different team and a different part of the company will actually go and say thank you to that person.” We would only spend 10 minutes talking about these examples, but what happened was that we created a catalytic ripple effect, but instead of the ripple of anxiety, it was the ripple of love, gratitude, and recognition. Three things happened as a result of that: 1) It shifted the energy of the people in the field because they were getting recognized. Most people are used to working in companies where they only catch you when you’re doing something wrong, and if they do catch you when you’re doing something right, they don’t say thank you. They just felt better and it showed.

The Hotel Vitale rooftop Photo: Joie de Vivre

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2) It shifted the energy of the executive team. We got back to the mission and the meaning of why we were doing this

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in the first place. It was about “joie de vivre.”

3) Because of how the executive team was expressing gratitude, we created cross-departmental relationships that were critical in the downturn.

What other kinds of concrete tactics or techniques do you use for employee engagement?

CC: Culture is the most important strategic differentiator for any company. Culture needs to be intentional. Employee engagement tactics should come down to asking,

it. I just couldn’t believe that it was just a world of work. I didn’t have the language of job versus career versus calling back when I was 26, but I did believe that, for how many hours we work each week, especially in this country, to not have and find joy in what you’re doing is really a missed opportunity. Historically, we’ve thought that success drives happiness. The shift of saying, “Happiness drives success,” is an important one.

How did you go from hating your first job at McDonald’s to deciding to study business?

curious, you’ll live a long time. Curiosity is a really important component of being a great entrepreneur. Everybody thinks that the best leaders need to have all the answers. Really, the best leaders often have the best questions.

How do you maintain your curiosity, as well as your sanity?

CC: The difference between workaholism and having a calling is not evident on the surface when you study someone, because it’s what’s going on inside. If you’re a workaholic - and I have some workaholic tendencies - there’s an addiction that’s driving

“For how many hours we work each week, especially in this country, to not have and find joy in what you’re doing is really a missed opportunity. Historically, we’ve thought that success drives happiness.

The shift of saying, ‘Happiness drives success,’ is an important one.”

what are the things you’re doing in your company to be intentional about your culture? Do you have core values that weren’t decided by a senior executive team alone, but feel like they flowed up from everybody? How do you create cultural ambassadors as you grow the company? Being intentional about democratizing culture is critical.

I give a lot of talks at other companies and it’s always fascinating to me when the CEO comes up and whispers to me, “I don’t think we have a culture.” [laughter] I will say back to the CEO, “Well do you have a personality?” To which they’ll say, “Of course I have a personality!” I respond, “You have a personality. The company has a culture.

If you actually don’t think you have a culture, you probably have a bad culture.”

Is this something that you’ve felt in your heart since you were 26 starting that first hotel?

CC: Oh, it started well before that. My first job was at McDonald’s and I hated

CC: If you told me at age 13 or 14 when I was working at McDonald’s that I was going to go into business, I’m not sure what I would have thought. To be honest though, it seemed very practical, but what became clear to me is that I love the creativity of business. I love the capacity of an entrepreneur to be creative, and having creative freedom meant a lot to me. I’m definitely an artist at heart. To quote Khalil Gibran in The Prophet, “Work is love made visible.” I really wanted my love for creativity to be deeply embedded in the company.

An important part of my success has been staying true to that creative spirit. Everybody gets very focused on creativity and innovation, but at the core of both is curiosity. I think that curiosity is starting to get the respect it’s due - creativity and innovation have been on front stage, and curiosity has been behind the scenes. To use a business perspective, Peter Drucker, a famous management theorist, basically said that curiosity was the fuel of creativity and innovation, and if you’re

you, and the purpose of the work is to distract you from something else. It’s fear-driven. A calling is quite different than that. Instead of being fear-driven, a calling is love-driven. In both cases you may lose track of time. In both cases you may lose hours of sleep. For me it was a combination of workaholism and calling, but it was 80 percent calling and 20 percent workaholism. I loved what I was doing. It didn’t mean I didn’t have a full life; I have. I’ve had two long relationships. I have two biological sons with a lesbian couple. I have a 38-yearold foster son who has been with me since age 13. I have three grandkids, one of them age 20. And I have just the most bountiful collection of friends and interests.

As an entrepreneur, it’s important to be focused in the early years, but if you have to stay so completely focused on your business to the exclusion of so much else beyond, say, the first three to five years, then something went wrong.

That will lead to narrow-mindedness.

If you’re narrow-minded and you’re a successful company, someone else is

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Photo: Souls of San Francisco

going to come along and knock you off your pedestal, because you’re not seeing the rest of the world.

An entrepreneur should remind him or herself every year, around the New Year, why he or she started the company in the first place. For me, I started Joie de Vivre because I wanted creativity and freedom. About 22 years into the company, when I had a flatline experience, I woke up and realized that I didn’t have creativity and freedom anymore. I had become the CEO of a company with 3,500 people and a quarter-billion dollars in sales, and I pretty much had become everything that I didn’t want, which was structure and administration and running a large operation. I had stopped doing my annual year-end inventory. I had stopped asking, “How am I feeding creativity and freedom in my work?”

That’s when I realized, “Wow, is there a way for me to go back to creativity and freedom?” At that point, I really said, “No, I have to find it somewhere else.”

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So I spent the next two years figuring out how to sell the company and then create space in my life for what was supposed to happen next.

Can you tell us more about your flatline experience and the decision to step away from Joie de Vivre?

CC: In 2008, I broke my ankle sliding into third base while playing baseball at a bachelor party with the mayor of San Francisco, Gavin Newsom, at AT&T Park. When I went to the hospital, they fixed my ankle, but they didn’t notice a cut on my leg that I hadn’t noticed either. A few days later, I was in Montana at Gavin Newsom’s wedding, and I got really sick because I actually had fertilizer in my leg. My leg went septic. I was going to have to have my leg amputated in Montana, but instead they put me on a strong antibiotic, and I came back to San Francisco. Rather than staying at home, which is probably what I should have done, I had a speech in St.

Louis and went off to give it while on crutches. Afterward, when I was signing books, I just slumped in my chair at one point and went unconscious for three minutes. I woke up on the floor, and paramedics were on their way.

Fortunately, my heart didn’t stop until the paramedics got there. Then, over the next 90 minutes, my heart just kept stopping in the emergency room and the ICU. There was no explanation for it - I think maybe I had an allergic reaction to the antibiotic.

While in the hospital, I had Viktor Frankl’s book Man’s Search for Meaning, which is about his concentration camp experience, in my briefcase. I had been going through a hard time and I was trying to figure out, “What’s going on in my life?” In my hospital bed I sketched out an equation: “despair equals suffering minus meaning.” I distilled Man’s Search for Meaning to an equation. Suffering is a constant.

If you’re a Buddhist, you’re familiar with this concept, but if you’re not a

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Buddhist, just know that suffering is always going to be there. However, meaning and despair are variables, so if you increase the meaning, you decrease the despair. That became my leadership perspective for the next two years as I was getting the company ready to sell.

In November 2008, we had a leadership off-site with our top 80 people in the company. It was so clear at that point that we were looking at a bloodbath of a year in 2009, for our company and for hotels and travel in general. I was supposed to give a cheerleading speech, and instead I threw away the speech and said, “Well, some of you don’t know I had a flatline experience three months ago. Some of you do. The main thing I’ve learned in the last few months is this equation.

I want to spend the next hour talking

about how we, as leaders, create meaning in our work, because if we do this with the 80 of us, the 3,500 other people in the company will feel it, and we can actually teach it.” At that point, I started actually teaching emotional equations and emotional intelligence classes during the downturn to line level employees, as well as managers.

Even a flatline experience can give you the opportunity to say, “What’s the leadership lesson in that?”

After you decided to sell the company, what did that two-year process of preparation look like for you? Was there grievance or doubt?

CC: Yes. There were a lot of things.

During that time from 2008 to 2010, our company was just going through

an awful time. We were losing money.

We had hotels that were in financial disarray. During the dot-com bust, I felt like a gladiator and my job was really to get everybody pumped up. During the Great Recession, I felt like a prisoner.

I owned the management company and was a partner in so many of these hotels. I felt stuck. I felt the prison of being the founder and the CEO of the company because I couldn’t just float my resume and leave. It was really important for me to get clarity about the idea of moving on to make sure that I was ready to move on.

After the flatline experience in St. Louis, I was supposed to go to Houston to do a half-day seminar for 150 entrepreneurs. I was out of the ICU in the waiting room and my father showed up. We still didn’t know what

“Everybody gets very focused on creativity and innovation, but at the core of both is curiosity.”

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was wrong with me, and I said, “Can I go to Houston? There are over 100 entrepreneurs there, and they booked me a year ago, and I really want to give this talk.” My dad said, “Yeah, rock on, let’s do it.” The doctors however said, “We don’t know, just have your dad really watch you.” Everyone else in my life was telling me to get home.

But, I went to Houston and did this half-day seminar. During my four-hour session with these entrepreneurs, my dad was in the back of the room just watching me like a hawk. On the plane back to San Francisco my dad said, “Chip, I just have to tell you - I have never seen you give a speech or do a creative workshop like that before. I’ve seen you give so many speeches before,

be because there are a lot of people who are going to be distraught about you leaving.

Everybody was saying, “Don’t sell now. This is the worst time you could sell it. It’s not going to be worth much money.” I just didn’t care. My life was a lot more important to me, and as it turns out, we did fine. I didn’t sell any of the real estate, I just sold the management company and the brand, and then later the real estate values went way, way up.

So...

Let’s discuss your role at Airbnb. Has your definition of hospitality shifted at all now that you’re working in the sharing economy?

You have been regarded as one of the more innovative CEOs in the world.

Beyond curiosity, are there other drivers of innovation that you’ve identified?

CC: There’s an art and a science to innovation. I think some of it is creating the habitat for great ideas to ferment and to grow, for yourself personally and for the organization. I’ve learned over the years that there are certain activities that help me get into a creative flow - running, especially on a beach, and anything related to water, like taking a bath or being in an ocean. Sometimes the best ideas come in the shower. So how do you create that creative habitat for a team? Brian Eno is a musician and he

“Everybody thinks that the best leaders need to have all the answers. Really, the best leaders often have the best questions.” but I guess I just had never thought of it as something you could do for a living.

I came to St. Louis a couple of days ago to make sure you didn’t die. Tonight, I saw how you want to live. I want to help you figure out how to sell your company so you can truly live. I don’t want this experience of you having to be the identity and the CEO of your company to kill you.”

Peak, my third book, did really well and it had an effect on people in terms of how to think differently about business.

I had this feeling after it came out that, “This is my next calling.” I had built my identity on my calling of being the CEO and founder of Joie de Vivre and really helping to grow boutique hotels’ presence, but I realized that my calling for it had sort of evaporated.

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CC: My definition of hospitality has always been, “A generosity of spirit from the heart.” If it’s not from the heart, then it’s service. Service is from the head - hospitality is from the heart. I believe that our best Airbnb hosts are absolutely great examples of hospitality, because there’s a generosity of spirit coming from the heart with those people.

However, the standard deviation of an Airbnb experience is more extreme than in a hotel. In a chain hotel, part of the brand promise is predictability and no surprises. Airbnb is sort of the opposite of that. It’s really different and you’re not always sure what you’re going to get. Part of my role in the company and part of what we’ve been moving toward is trying to create more dependability, but we don’t want to create consistency.

Consistency would mean the same thing over and over again - that’s not what we are. Dependability means we are able to back up a situation if something goes wrong. We want to help hosts deliver on the promise of what their listing says it’s going to be.

has a concept called “scenius” - it’s the idea that genius comes from the scene, and the scene meaning the certain kinds of spaces, communities, or places that create a scene or a space where genius is more likely to occur. That is, I think, part of the reason why off-sites are such a helpful way to potentially get there.

If someone needs to break through a conceptual block, they might not be able to do so in an office. One part of innovation is simply understanding what the best habitat is for yourself and your team.

For Joie de Vivre, our innovative approach to creating hotels started with the very first hotel, the Phoenix - a broken-down motel in a bad neighborhood. We had a premise that every time we created a hotel, it would be based upon a magazine and five adjectives. Magazines and boutique hotels have something in common: they’re both very niche and very lifestyle oriented. When we created the Phoenix, we knew the spirit of the place would be musicians and creativity, so we decided

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Rolling Stone Magazine would be our touchstone for personality. We came up with five adjectives that defined Rolling Stone: funky, irreverent, adventurous, cool, and young at heart. Those five adjectives defined everything we did from the staff we hired, to the decor, to the restaurant, the kinds of services we offered, even the name.

Over time, we learned that this is a great organizing principle to make sure everybody - the designer, the contractor, the sales team - is on the same page about the soul of the hotel.

What was miraculous, and something we noticed over time, was that the people who fell in love with the hotel would have used those same five adjectives to describe themselves. The boutique hotel was, in essence, a mirror for the aspirations of the customers.

That’s why I said early on in Joie de Vivre, “We are not boutique hoteliers; we are in the business of identity refreshment.” This is why people fall in love with our hotels - it refreshes their identity. In that space, they are the best version of themselves.

Innovation can benefit from

structure, but structure alone doesn’t do it. There has to be a seed of inspiration and art that is driving it. The best way to plant seeds, the artful seeds that are going to grow, is to get out of your normal space. I’m not talking about offsites - go to the zoo, or go to a museum.

I actually think it’s really good to go to spaces where creativity is already happening, or things are happening, and you can think in ways that you wouldn’t have otherwise.

It might just be our theory, but we believe that this world of extreme transparency and information sharing is leading to a world where the karmic capitalist cycle is actually going to happen a lot faster and we’re going to get to a place where businesses have to do good.

CC: It’s been said that “reputation is the new currency,” and there’s a lot of truth to that. There’s a book that just came out about reputational currency, which is the idea that your reputation is built upon both your observable actions and your non-observable actions, which are

based upon people’s perceptions of you.

That is so powerful - and dangerous if you are wreaking havoc in the world.

The more the Internet becomes a fundamental piece of our lives, the more this will be true, because the Internet provides the medium for people to have more transparency than they had before.

Walmart is a bit of an example of this.

A few years ago, its stock price basically tanked and wouldn’t go anywhere, even though the company was doing really well from a financial perspective. It had everything to do with a sense from investors that the company’s reputation and its growth were at risk because of bad karma. It influenced the stock price, and it ultimately influenced the company to get more eco-savvy and made it start looking at some of its HR practices. Walmart has a long way to go, but the fact is, it started looking at it because it realized there’s a lot of communities that don’t want its stores there.

What advice do you have for entrepreneurs?

CC: There are three things: 1) Don’t take it all so personally. That’s hard, but that’s number one. You can think that a business is going to scar you if it doesn’t succeed. A lot of it is luck and timing, and you learn so much along the way. That doesn’t mean you shouldn’t work hard; you just shouldn’t take it personally if certain things aren’t working right. You have to be resilient, too, because timing and luck can change.

2) Surround yourself with people who are outside of the business, who are not living a rollercoaster life. They will give you perspective, whether it’s by talking about their children or talking about your children (the children you haven’t seen much lately!) [laughter] - or just by allowing you to move out of your echo chamber to actually see that there are other things happening in the world.

3) Take care of yourself. Whether it’s exercise, diet, or sleep, do things! Get a massage or whatever you need - it will help to make sure that your physical and spiritual form is still operating well.

Photo: Fest300

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LOOKING TO RETAIN THE BEST TALENT? Start With Purpose

BY RICHIE ARONSON

ATTRACTING AND RETAINING TALENT IS MORE CHALLENGING THAN EVER BEFORE. The recruiting process has become extremely costly and complicated for many organizations, so much so that it has become its own industry. Since the 2008 recession, many companies have begun investing in customized recruiting services to find the “right” person for the job. On the other hand, technology, the surge in data collection capabilities, and social media tools have made finding candidates easier than ever before.

However, despite the increased investment in and effort behind today’s recruiting processes, nearly one-third of the American workforce changes jobs every 12 months. The harsh reality is that, as a nation, we are completely disengaged from our work. A recent Gallup poll shows that the vast majority of American workers - nearly 70 percent - are actively disengaged, or in other words, are emotionally disconnected from their organization and its mission. It’s easy to imagine how this disengagement causes productivity to plummet, retention rates to decline, and overall employee happiness and excellence to fade into vague notions at best. These negative impacts all come with costs, and it has become impossible to deny that they directly impact the bottom line - it’s estimated that annually this disengagement is costing US companies $450 to $550 billion annually. In short, for most of us, work is a depleting, dispiriting experience and, in many ways, the problem is getting worse.

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ESTABLISHING COMPANY CULTURE As concerns about hiring and retaining top talent grow, establishing a desirable company culture has become one of the primary differentiators for today’s leading companies. Many people today see a healthy work environment as more important than a boost in pay. This is understandable given that Americans spend more time at work than ever before.

Designing the culture of your organization is an art form with immense power, and successful managers are aware that organizational design directly affects behavior. This understanding allows them to consider various levers to tinker with inside the organization. With skillful leadership, this unique synergistic system amounts to much more than the sum of its parts - stimulating productivity, creativity, well-being, and ultimately helping a company achieve its goals. So what levers should managers look to pull in order to embed lasting engagement within the culture of their workplace?

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A FEW OF TODAY’S EVOLVING PERKS Retention and Engagement Initiatives Throughout the US COMMON • Health care coverage for full time employees - 98% • Flex time - Allowing employees to choose their work hours within limits established by the employer - 52% • Telecommuting - 59% • Continued education (aka professional development) or skill strengthening both on-site - 61%- and off-site - 78% • Free coffee - 75% • Health and lifestyle coaching - 47% • Retirement preparation advice - 43% • Subsidy for smartphone - 41% • Community volunteering program - 40%

GAINING TRACTION • Rewards/bonuses for completing wellness programs - 36% • Casual dress every day - 32% • Laser vision correction coverage - 28% • Standing desks - 20% • On-site gyms or yoga classes - 20% • Free snacks and beverages - 20% • Company-owned car for employee use - 20% • Matching employee charitable contributions - 20% • Mentoring program - 18% • One-on-one financial advice - 17% • Discount ticket services - 30% • Organization-sponsored sports teams - 12%

THE FRINGE • Employee stock purchase plan - 12% • Benefits for same-sex partners - 15% • Emergency/disaster loans from employer - 12% • Job sharing - 9% • Pets at work - 4% • Paid paternity leave - 12% • Paid adoption leave - 12% • Nap rooms - 3% • On-site stress reduction program - 3% • Free commuter shuttle - 2% • Elder care assistance - 2% • Results-only work environment - 3% • Unlimited vacation days - <1% • Babies at work - 1% • Down payment assistance - 1%

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THINGS ANY ORGANIZATION CAN DO Start by hiring the right people.

Put their commitment and passion for the organization’s mission ahead of all else.

There are countless approaches to improving workplace culture and engagement that many companies embrace to attempt to differentiate themselves from the crowd. Facebook, a leader in workplace culture, has a long list to copy from - the company provides profit sharing, communal ski passes, on-site dry cleaners, unlimited vacation days, free coffee, a 401(k) matching program, a dog-friendly office and dog walkers, continuing education, flexible work schedules, nap rooms, mandatory walks in nature, on-site child care, exercise stipends, and the list goes on.

Zappos, another industry leader, is structured as a “holacracy” - it has shed the hierarchical pyramid structure and instead has distributed power among all its employees. To demonstrate this, the entire C-suite serves lunch to all employees one day per week.

Google, another company that has invested heavily in its culture - and holds the title of Fortune number one company to work for for the sixth year in a row - not only provides new parents with paid leave, but it encourages parent-child time and relaxation by providing a $500 stipend specifically for take-out food.

LOOKING AT WHAT REALLY COUNTS However, there is more to the story. Both salaries and benefits are motivating, but if employees aren’t engaged and don’t truly love what they do, even the shiniest new toys will eventually get tossed aside. It’s

Focus on improving employees’ strengths.

the essence of a company, the core values and the purpose embedded in its operations, that keep the greatest talent around. People must trust who they work for, take pride in what they do, and enjoy their coworkers.

In addition to the creative perks mentioned above, Facebook binds its employees together with a valuesoriented common purpose of connecting the world online. Nearly two-thirds of the world’s population can’t access the web and therefore has limited access to news, educational resources, and other services. Mark Zuckerberg sees getting the entire developing world connected online as a social responsibility that the company is addressing through its new Internet.org initiative. Although costly at first, this should pay off in the long run by expanding the universe of potential Facebook users. This shared value connects employees through a mission bigger than themselves, building a foundation for lasting engagement and improved performance.

Of course, not everyone runs the world’s largest social networking company, so how can this connection be achieved within a typical organization?

What can you do to unite your employees?

One of the most important ways to generate long-term engagement is to foster employees’ understanding of the ethos and values of the organization and their emotional connection to it.

It’s crucial to strengthen employees’ emotional ties to the mission of the organization and identify a common purpose to pursue as a team. Mission-

Create an environment that improves employees’ well-being.

driven companies are said to be 30 percent more innovative and boast a 40 percent stronger level of employee retention compared to companies that are solely focused on the bottom line. If you want to bring innovative practices into the workplace, you need to identify a purpose that inspires your employees.

While effective managers are skilled at creating value through process improvements, great leaders know how to align the mission and purpose of their company with the company’s business strategies, culture, brand, and performance measures. Nearly 70 percent of employees in the US today believe that businesses are not doing enough to create a sense of purpose and deliver meaningful impact, and when it comes to Millennials (who will soon comprise the majority of the workforce), more than 70 percent want their employers to focus on societal or mission-related issues. To explore this further, Gallup, Inc. looked at nearly 50,000 business units across 49 different industries and 34 countries. Its findings confirmed an intuitive notion we all share: margins and mission are not at odds with one another - in fact, the opposite is true. To figure out what it takes to stay relevant, innovative, and attractive to today’s most impressive talent, it’s not enough to ask what perks to offer or wonder whether you should replace the conference table with couches and hammocks. Start by asking what the purpose is behind your organization. Why does your company do what it does, and why do you do what you do every day?

After working in the financial sector, Richie Aronson moved to Seattle to work in the sustainable business industry and complete postgraduate studies in sustainable systems. Richie enjoys using his entrepreneurial background to design programs that help others to enhance social and environmental resources. He is currently developing a new concept offering sustainable tourism for travelers interested in creating meaningful impact for underserved communities.

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THE MISSING LINK AT UBER:

ETHICS, INNOVATION, AND CONSCIOUS CAPITALISM

BY JEFF CHERRY

F

or the last few months at the Conscious Venture Lab, we’ve been having discussions about Uber.

The “uber” successful transportation app has changed the way we think about getting around in cities, and the innovation has already turned the brand into a verb. In fact, I Uber all the time.

Despite its success, there has been a significant backlash against the company that speaks to something much deeper than the competitive ire of local taxicab drivers.

AN UBER MESS The media and regulators have not been good to Uber lately, yet the ride sharing service’s customers continue to propel Uber’s profit margins upwards. Can the company’s fortunes continue to rise amongst this scrutiny and pressure? Of course they can, but for me this begs the question of, how much better could the company be, how much more value could it be creating if only it paid as much attention to innovating on its cultural model as it has on its competitive model?

Those who drive their own cars, take public transportation, or rely on “old-fashioned” (read: regulated and thoroughly insured) taxi cab services may have only had a passing familiarity with San Francisco-based Uber before the company started making headlines for all the wrong reasons. Naturally, taxi drivers, who are strictly regulated and are Uber’s most direct competitors, have voiced plenty of disdain for the startup.

Much worse, alleged sexual assaults in Chicago, New York, Boston, and Delhi have called into question the safety concerns involved with taking rides with strangers.

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like Spain and Belgium, cities like Hamburg and New Delhi, and the state of Nevada, where Uber has been banned. Add to the mix accidents where Uber drivers were underinsured, and the company is facing a recipe for disaster if it doesn’t make some changes - or at least respond to these legitimate concerns with a bit more maturity and a little less arrogance.

Uber’s PR response to these incidents has been underwhelming at best. Technically, it has made some minor additions to the app like a safety checklist for riders in Boston and Chicago reminding riders to make sure the license plates and driver match the one they requested upon arrival. In other words, Uber has lobbed the responsibility of safety back to its customers.

But Uber’s worst offense of all came to light during the recent tragic events in Sydney, when a terrorist took 18 people hostage in a café. The 16hour ordeal ended with two hostage deaths and four others injured - and Uber making more money than ever, thanks to its “surge pricing” model.

During the day, as panic-stricken Sydney residents tried to flee from danger, Uber’s prices surged to as much as $100 per ride - quadruple the company’s normal rate. Instead of apologizing, Uber defended itself, saying the price surge was not gouging

and that its purpose was to attract more drivers to the scene.

THE REAL PRICE OF INNOVATION For the record, I’m not attempting to write another article just to bash Uber; it has made itself an easy target and that’s been done. Honestly, I think the company will eventually get this right. But the long list of offenses

by Uber represents more than just bad behavior - it represents bad business.

Sure, the company has disrupted the transportation industry, but it seems this “disruption” has come without a sense of organizational ethics. It’s my belief that innovation, unmoored from organizational purpose or ethics, leaves space for many bad things to happen. This seems to be the case with Uber and, as such, its experience gives us a case study from which to investigate how purpose and profit tied together can create truly worldclass companies.

Innovation for innovation’s sake has been a longtime driver for Silicon Valley. However, simply being innovative is no longer enough - the winners of the future will be those companies that understand how to engage all stakeholders by “outbehaving” the competition.

Even innovation that helps solve

LEADERSHIP Source: Taxi-deutschland.net

Places Uber* is driving with no restictions.

Places where Uber* has legal problems, is in a legal dispute, or threatened by a ban.

Places where Uber* has been banned.

Updated: 01/22/2015 * Uber = Uberpop, Uberblack

societal problems like road congestion and carbon emissions (which Uber certainly can affect with products like Uber Pool) will begin to fall flat if companies don’t also understand that social capital, driven by ethical behavior and the power of real relationships, will be an incredible driver of value in the future.

This is the power of Conscious Capitalism. When we as businesspersons endeavor to deliberately create purpose-driven and stakeholderfocused companies; when we do the incredibly hard work it takes to become conscious leaders and build a corporate culture that is authentic, transparent, empathetic, and engaging; in other words, when we remove the blinders of shareholder centricity, not only can we be more innovative, but those innovations come with ethical leadership that consistently pushes the organization to elevate the humanity of our stakeholders, not treat them with disdain and disrespect.

As a participant in the entrepreneurial ecosystem, we see too many startups chasing investment capital and building lean business models, but not considering the tenets of Conscious Capitalism as they strive for growth and innovation. They fail to grasp what seems to be an emerging truth, that purpose and social capital will be the true value drivers in the future.

The backlash against Uber is real, and the company isn’t handling it well because it doesn’t seem to understand this idea. So far, its response to the issues mentioned above has been hamhanded. It is as if the company believes the innovation itself should suffice. As societal forces continue to influence how we decide what companies to work for, buy from, partner with, invest in, and allow into our communities, innovation itself simply isn’t going to be enough to create great and enduring companies.

Truly successful companies are great because they’ve found a better way to create value for everyone and a better way to treat all of their stakeholders.

This is not simply about the regulatory backlash that Uber is facing. Some of that is driven by competitive fears and it is clear that Uber is a fierce and formidable competitor for the taxi market. My advice to the taxi companies is to do a better job and rise to the challenge of competition - it always makes us better. Some may say Uber is trying to skirt regulations, but it’s my belief that that situation will find its own remedy.

As an early-stage investor and director of an accelerator, I spend an inordinate amount of time thinking about how we integrate training on ethics, purpose, culture, authenticity, and transparency into the work we

do with our portfolio companies. It’s my belief that venture investors and the growing accelerator industry need to start thinking about these issues as well. Once the negative headlines have been made and the lives of real customers and employees have been affected, it’s much too late for a company to try to “correct” its way back to being a good company. The mindset of Conscious Capitalism needs to be baked into startups - their people and their culture - from the very beginning.

Uber profits just aren’t enough - we should be striving for uber ethics, too.

Jeff Cherry is the Founder and Executive Director of the Conscious Venture Lab, an accelerator and VC fund for conscious entrepreneurship. He is an evangelist for the transformation of capitalism, attempting to bring whole brain thinking into the realm of business creation and a more human-centered form of investing. www.consciousventurelab.com SPRING 2015

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GOOD REASONS TO PUT THE SOCIAL INTO INNOVATION

BY FLORIAN HOFFMANN, PRESIDENT

O

nly 20 years after the rise of the Internet, our time is defined by ever faster change, visible both in markets and our societies. For business and social leaders, innovation has become central to coping with, and capitalizing upon, these transformations. The wide variety of approaches to managing these changes makes it no surprise that innovation has become a term both highly-regarded and yet somehow under-defined.

Within the field of entrepreneurial education and training, our daily work has revealed that there is tremendous potential to champion a new kind of innovation - one that is social. Let me give you four good reasons why.

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INNOVATION AS A SKILL AND NOT A PRODUCT Innovation used to be very much about an invention, a product, or a service. In many industries it still is, and those inventions have the potential to make our lives better. Yet, predominantly, it has become much more complicated to predict what a consumer will need or what a good product should look like in five years’ time. This is the case for both our personal lives as well as for organizations and both often have to adapt to different circumstances very quickly. To operate successfully then, innovation should be seen as a skill that people have, rather than a product or a service. And if we consider innovation as the capacity to create “a lasting and sustainable solution to a problem that is new,” then we need to empower ourselves and our employees with this skill. Innovation in this sense is social in that it is all about people - their ideas, their passion, and the skills to turn them into action.

LEADERSHIP

SUSTAINABLE GROWTH FOR THE FIVE BILLION So if innovation is about solving problems by creating something new, where is the biggest opportunity to exercise this skill? Undoubtedly, there are tremendous opportunities and challenges in the highly developed economies of the world. But there are also around five billion people in the world fighting to escape poverty. Business opportunities and innovation in new products and services for this growing population often address humans’ most crucial needs such as health, energy, education, agriculture, and urban development, to name just a few. There is tremendous potential in what is often referred to as “bottom-billion business,” and any company that aims to innovate for this market will have to think about products and services that make these customers’ lives better. Innovation in this space has to be social by definition.

IDEAS THAT ARE SUSTAINABLE Even if there is disagreement about where the majority of growth will take place in the future, questions remain on how we will manage to maintain our living standards and create the same standards for more people on the planet without further depleting our natural resources. We have learned by now that this objective is not something that is “nice to have” but is a fundamental necessity. Any innovation that reduces our carbon footprint, reduces waste, and improves the way we consume resources is also an innovation that fundamentally takes into account our societies and has the potential to be hugely valuable economically.

“Any innovation that reduces our carbon footprint, reduces waste, and improves the way we consume resources is also an innovation that fundamentally takes into account our societies and has the potential to be hugely valuable economically.”

GOOD BUSINESS If you agree with me on the constant change that we face today, we also have to ask ourselves who the actors are that have the most leverage and power to impact our world. As our world gets ever more interconnected and we have more information readily available to us, big businesses have to answer to their consumers and employees regarding what kind of role they want to play in the world. CEOs increasingly recognize that in order to continue to have a broad customer base, good business sense means doing business in a way that is good to society and the environment - not for the sake of morality, but for the sake of the medium- and long-term value of the company. Unilever’s CEO, Paul Polman, has taken it even further and has created a vision to turn his company into “the world’s biggest NGO.” But whatever the goal is, business development in today’s world cannot be de-coupled from the direction our societies and our environment take. Innovation inherently needs a social component for business to make sense.

There are wonderful reasons to have ample hope with regard to the direction the world is going. There are also tremendous problems and challenges on the ground around the globe. Our lives today are defined by changing circumstances. We will have to adapt and we will have to create new opportunities as we go along. Taking the social dimension of innovation into account will not only allow us to be more effective, it will also give us the chance to create something that is larger than our own personal self-interest. That is why thinking about innovation is the most fun and the most impactful when it is social.

Florian Hoffmann is a social entrepreneur and innovator in the field of education. As President of the DO School, he is part of shaping the new landscape of higher education. Florian founded the DO School as an organization offering innovative executive programs to today’s emerging entrepreneurs and leading organizations.

By combining an effective innovation method with real-life implementation and blended learning, the DO School programs empower change-makers to turn their ideas into actions that create real impact in society. While doing so, the institution creates an intertwined global network of successful DOers. In addition, Florian regularly contributes to the ongoing discourse on innovation, education, and youth unemployment through articles and talks. thedoschool.org

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LEADERSHIP

WAYS GOVERNMENT POLICIES HELP BUSINESS INNOVATION

BY DAVID LEVINE, CO-FOUNDER AND CEO, AND RICHARD EIDLIN, CO-FOUNDER AND VICE PRESIDENT OF POLICY, AMERICAN SUSTAINABLE BUSINESS COUNCIL

I

t’s gospel among American politicians and business leaders: innovation is key to the success of individual companies and entire industries. And yet, many of these same people contend that to optimize innovation, government needs to stay out of the way.

We disagree and believe there are many opportunities for business and government to work together.

Government has played a pivotal role in spurring innovation throughout American history. Think of the national train system in the 1880s, in which federal authorities mediated among a small group of monopolies to establish a standard gauge for all railroads so rolling stock could be shipped anywhere in the US, from one line to another. Or consider the basic research grants that enabled the invention and development of the semiconductor, with the Defense Department serving as the initial risk-taker and customer.

Today, the stakes are high; the health of our planet and our economy depend on innovation occurring on a massive scale. America’s international competitiveness is also at stake. As a percentage of total federal spending, R&D [research and development] is at its lowest levels since 1956. In contrast, China doubled its R&D expenditures between 2008 and 2012.

Government support of innovation should be a complement though, not a replacement for private ingenuity and risk-taking. The American experience of public sector involvement, in contrast to many European nations, rarely ends up stifling innovation, capturing the best talent, or otherwise depressing market forces. Successful outcomes require smart policies that recognize and then work to correct market failures (e.g., imperfect information and externalities). The guiding hand of government is a fundamental condition for success. And for effective government support of innovation to occur, responsible business leaders need to advocate for it.

HERE ARE FIVE AREAS WHERE CONCERNED BUSINESS LEADERS SHOULD CONSIDER ENGAGING:

1.

RULES AND REGULATIONS

When the Clean Water Act and Clean Air Act passed in the 1970s, polluters complained it would raise their costs.

Other companies, however, embraced the challenge and reoriented their entire production processes to “design out” the pollution. Their new products required less raw material to produce (reducing costs), and had a higher degree of quality (thus increasing the price they commanded in the market).

In turn, these firms reduced their liability exposure, became more profitable, and captured a greater market share from consumers eager for environmentally superior products.

Regulations can indeed sometimes be challenging to adapt to or burdensome to comply with in the short term.

They may require a reallocation of resources and adjustment of business models. Regulations must not be designed to reduce competition or prop up incumbent industries. Instead, they should be crafted to stimulate innovation, break up monopolies, and protect the common good.

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2.

INCENTIVES AND DISINCENTIVES

Government has a long history of using fiscal policy to encourage certain economic, environmental, and/or social outcomes. Seeking to address climate change by putting a price on carbon is one important example. We think it’s time that Congress acknowledges the macro “free rider” problem of climate change by setting a price on carbon, ideally “upstream” on the nation’s largest CO2 emitters. The per-ton price will serve as a clear and efficient market signal to shift consumption patterns and investment decisions. The price needs to be set high enough to encourage a shift in the extraction and production processes of fossil fuels as well as reflect their sunk-costs advantage over renewables.

Taxing carbon would move energy firms and consumers towards using cleaner fuels. And, we believe that a price on carbon, if efficiently designed, could also help to reduce the overall level of federal subsidies for solar, wind, nuclear, etc.

What the revenues from a price on carbon are used for is open

LEADERSHIP

“Today, the stakes are high; the health of our planet and our economy depend on innovation occurring on a massive scale.” for discussion, but some ideas we favor include infrastructure investment, supporting the economic transition of coal intensive communities, and lowering worker payroll taxes.

Any discussion of federal or state energy incentives needs to appreciate the long-standing support (e.g., tax credits, depreciation allowances, insurance coverage) policymakers have provided the coal, nuclear, and oil and gas industries.

The litmus test should be: is this a mature industry? If yes, it should no longer be supported by taxpayers. In time, renewables will achieve parity and government subsidies will not be needed. Until that happens, government has a role to play in helping foster nascent industries.

3.

INDIRECT INVESTMENT

Remember when you drove your family down to the beach for a nice relaxing vacation? The government played a pivotal role in enabling that. The Interstate Highway System is a perfect example of what’s called “pump priming” - stimulating the economy, mostly through government spending. In this case, the federal government provided funds to build the Interstate system (around $425 billion in 2006 dollars, by one estimate). It resulted in massive increased economic activity - not just construction and maintenance, but increased commerce and tourism between states. And without government investment, it wouldn’t have happened.

Or take basic research. The private sector often shies away from research that has a long lead time before it can be monetized. So, we have government funding of research at the university level. For example, the National Institute of Environmental Health Sciences provides grants to measure and investigate how the environment impacts human health.

The science that emerges can be used by the private sector to develop new products and services.

Or look at the Design for the Environment program, a voluntary program run by the US EPA, which helps businesses and institutional buyers identify and choose cleaning and other products that perform well and are safer for human health and the environment.

4.

DIRECT INVESTMENT

Anyone who followed the Solyndra debacle knows that any direct investment, in the public or private sector, is risky.

Solyndra secured a $535 million loan from the Department of Energy and ultimately defaulted.

Here’s what you may not know: the program responsible for the Solyndra loan also made a great many others - and is now turning a profit. Best of all, that success has legitimized the clean energy market and enabled similar companies to get loans from the private sector more easily. In many cases, when the private sector is unable or unwilling to take investment risks to foster new directions or even new industries, the government can play a vital, direct role.

5.

GOVERNMENT AS FIRST MOVER

If you’re reading this on a computer, you’re benefiting from the government being an early adopter. Our electronic systems have been dependent on semiconductors, especially transistors, for decades now. But when the first transistor was invented in the 1940s, nobody used them - the vacuum tube was still the popular technology.

Then the military became the first major customer for transistors. The federal government essentially provided a market for transistors, making it possible for the private sector to develop its products at a time when a private sector market didn’t exist. Without government involvement, it wouldn’t have been possible, or at least would not have happened nearly as quickly, to see these products come to market.

Our mixed economy works best when the public and private sectors collaborate. Each has a unique role. The private sector excels at being nimble and responsive.

Government ensures a level playing field and corrects market failures. Together, the opportunity to enhance innovation and move it in a direction that benefits society is immense.

The downside risk of government involvement is that the decision-making process may become ossified, captured by special interests, or too bureaucratic. Business leaders must provide guidance for strengthening these processes.

In today’s political environment, we know that too much of government policy-making has become dominated by legacy business interests that fight to keep the status quo.

Forward-thinking business leaders who believe in both a vibrant democracy and economy should engage in the public policy process. Make sure your values and visions are known to policy-makers, lest those who hold a more parochial view dictate the future.

Founded in 2009, ASBC and its organizational members now represent more than 200,000 businesses and more than 325,000 business leaders across the United States.

These diverse business organizations include trade associations, local and state chambers of commerce, microenterprises, social enterprises, cooperatives, green and sustainable business groups, local main street businesses, women business leaders, economic development organizations, and investor and business incubators. ASBC has been joined by a wide range of companies including Patagonia, Eileen Fisher, Ben & Jerry’s, Seventh Generation, Clif Bar, Etsy, New Belgium Brewing, Green Depot, New Resource Bank, and Trillium Asset Management. ASBC informs and engages business leaders while educating policy makers and the media about the need and opportunities for a sustainable economy. www.asbcouncil.org SPRING 2015

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FOOD & AGRICULTURE

KIMBAL MUSK ON THE FUTURE OF THE FOOD SYSTEM,

THE ENGINEERING FEATS OF THE BIG MAC, AND FINDING MEANING IN HIS WORK.

E

NTREPRENEUR AND RESTAURATEUR KIMBAL MUSK has had a long and varied

career with one common denominator: success. He has founded and advised a myriad of ventures including Zip2 (acquired by Compaq), PayPal (acquired by Ebay), Everdream (acquired

by Dell), Tesla Motors, SpaceX, OneRiot (acquired by Walmart), and SolarCity. He has also used his business acumen to launch some of the top restaurants in the US with The Kitchen, The Kitchen Next Door, and The Kitchen Upstairs in locations such as Boulder, Denver, and Chicago.

In addition to his culinary ventures, he is also Founder and CEO of The Kitchen Community, a nonprofit that brings learning gardens to public schools across the nation. The organization has just built its 200th garden, impacting over 100,000 children on a daily basis. Mr. Musk is taking on the food system in a profound way and successfully building community through food wherever he goes. We had the chance to sit down with Kimbal to discuss everything from his first painting business to the local farm system.

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What inspired you to be an entrepreneur?

Kimbal Musk: Both of our parents were entrepreneurs and our families were very entrepreneurial. But actually, I grew up in the late ’80s and people were really excited about Wall Street, which is arguably entrepreneurial but not really. I got really excited about it, too, and signed up for business school and worked my ass off and got a plum assignment in one of the big banks for my first summer. And it sucked. It was horrible. I had bosses that just were completely uninspiring. No innovation, no real energy. I simply was not able to work for those people.

So, after that I decided I was going to try to be an entrepreneur and I signed up for College Pro Painting, which is a franchise painting group. You get an area, you learn how to paint, you train people to paint, and you build a business. It was basically Entrepreneurship 101 - you learn how to hire people, pay people, sell to customers, make sure the product quality is good - things like that. And it was very, very hard but very, very successful. I was the top manager in my first year and then, for my second year, I got the best territory in Canada. I was good at what I did and did very well.

But, I was totally bored. I got through the first year, which was more about learning how to be an entrepreneur and that was very exciting. But the second year, where it was just actually going door to door selling paint jobs, was super dull.

I just could not wake up in the morning and get excited. So I quit.

It just had no meaning. It was just money. And I’ve been very good at making money. That part has not been a problem for me. The problem has been, how do you do it and enjoy your day at the same time? And so, I got in on the Internet and that was awesome - it changed the world.

It was 1995 and no one believed it was the right thing to do. We came out of the gates with a mapping technology that no one had ever seen before, which is now totally normal. We were the first to do maps and door-to-door directions on the Internet. It was really cool.

But then towards the end of that, in ’99, I started to lose interest again because it was the new gold rush and everyone was coming in and it just lost its 92 |

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“A lot of people pretend when they go out to eat lunch that they’re not eating out of the back of a Sysco truck. The Kitchen is an ingredient-focused restaurant.

Unless you cook, you don’t really appreciate the fact that, whatever you’re eating there, someone actually prepped it. A lot of people don’t fully understand how different The Kitchen is from most restaurants. It’s not just that it’s good food and that it’s organic and local.

It is the largest buyer of local organic food in the state of Colorado. It just built its two hundredth organic, functioning school garden at elementary schools around the country. It’s truly amazing.” ~ Joshua Onysko, Founder, Pangea Organics meaning. We sold our company, and I was like, “I’m out of this.” I went to New York to learn to cook and I loved that. It was very hard though, because cooking schools in New York were old-school and it was very weird to get screamed at by chefs, and you’re just standing there while spittle lands all over your face.

And you just stand there like, “I cannot believe I’m listening to this.” I mean it was unbelievable. I was just looking at them thinking, “Are they for real? Is this a joke?” I left there thinking, I’m never, ever going to have that environment in any of my restaurants, and we’ve succeeded in that.

We were actually curious about your transition into food. What was the catalyst behind that?

KM: My father was a pretty good cook.

He had a restaurant when I was a kid. So I kind of liked that side, but I’ve actually been cooking for myself and for my family since about the age of twelve. My father taught me a little bit about it at the restaurant they owned through high school. Our family is a super high energy family, so it was the best way for me to get everyone to just sit down and chat for a little bit. Otherwise, we would not really see each other during the day.

We’ve had the same experience through our restaurants - our mission at The Kitchen is “Community Through Food.”

And it really means a lot in the Boulder community and the Colorado community.

It also means a lot at home.

We would love for you to define what it means to you to be a social entrepreneur.

KM: I’ve actually been working on defining this, so it may sound a little cold, but it really is a blend of measurable social outcome and measurable financial outcome. Financial outcome is pretty easy because it’s been done for hundreds of centuries - since the amoeba. But the social outcome is very amorphous and hard to define. At The Kitchen, we are doing something interesting - we don’t have a reason to do it; our investors do not care about it, but we care. The investors care on an intellectual level but that’s not the reason they support us.

Basically, we are measuring every dollar that we put into local farms in Colorado.

We put about $1 million into Colorado farms a year - that’s five percent of the local farm industry, which is incredibly huge.

We measure that because it matters to us. We also measure how many dollars we put into relationship-based supply.

For example, when we’re getting fish in Colorado, the relationship-based supply is a fishmonger in Maine or someone that we know in Hawaii who’s bringing us fish. A relationship is also a baker who we know

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FOOD & AGRICULTURE

{

“I believe that it will be a much better world if we are able to come back to real food where you can understand what your food is and you can understand what you’re putting in your body.”

in Colorado, but who gets their flour from outside of the state. So, we have another $2 million a year that we put into these suppliers.

We are very conscious about our menu creation, so we actually measure how many people we serve. Most restaurants don’t think in terms of number of guests served. They think in terms of average check, total revenue, and bottom-line cash flow. Our primary measurement is how many guests we’re serving, because the number of people you reach with more consciously created food is a critical social metric. I think that, among all of the restaurants, we have served over a million guests, which will increase with the new Chicago location this year.

How do you actually choose the food producers that you’re working with?

What does that process look like?

KM: We have a very big team now, so the process probably changes every

time, but, I think at a high level, we care about the relationship first. If we can look someone in the eyes and say, “OK, I think you’re a good person and you’re going to do the right thing for the earth and for the environment in terms of how you’re going to farm, we’ll trust you in terms of, whether things go wrong or right, we’re working on this solution together.”

Relationships come first and foremost and quality of product usually comes right out of that because there are very few times that you meet someone that you really connect with but the food isn’t right. That’s just very unusual. So, our number one value is that it all starts with relationships.

How much of The Kitchen’s menu is organic or biodynamic? Do those certifications matter in terms of the food that you’re selecting or is the locality more important?

KM: We care a lot about farming techniques but we actually don’t measure that. We measure the locality or the relationship and we’ve always avoided being called organic. We also don’t really like the farm-to-table label.

We started way before farm-to-table and farm-to-table is very much a marketing term. It’s not really respected correctly.

I would love to talk about The Kitchen Community and how you decided to transition to starting your own nonprofit.

KM: I kind of got frustrated towards the end of 2008. I wasn’t really happy with what I was doing - it was similar to when I left the Internet. The technology stuff I was doing didn’t have a lot of meaning to it. It was a good, interesting company but not meaningful for me in terms of what I was doing.

And so I really started to get back into food because that’s where I really enjoy myself the most. I was still trying

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FOOD & AGRICULTURE to figure out how I would do it and being very cautious not to get into something that didn’t have meaning for me. I didn’t want to dive into anything without it really feeling right. But I kept trying to dive in, and I couldn’t figure it out, and then I went down a ski hill on an inner tube with my little children, got to the bottom and the tube flipped. I landed on my head and broke my neck. I was horizontal for two months and paralyzed on my left side. That was really intense.

I had a lot of time to think. I was the CEO of a software company at the time and, from the hospital bed, I resigned and said, “You know, this is just not for me.”

Then I called my partner, Hugo [Matheson], from the hospital and said, “We’re going to go figure out food and how we can grow this in a more scalable way.”

Because, while The Kitchen was wonderful, it doesn’t reach a lot of people and it doesn’t really move the needle. I wanted to be part of something that reached more people.

So I told Hugo, “Let’s go figure out how to grow the restaurant. We’ll add a Kitchen in Denver, but I want to create a lower cost, more affordable version of The Kitchen.”

Hugo and I worked together and we created The Kitchen Next Door and opened it a year later and were quite successful. It’s onethird the price of The Kitchen and the same philosophy about the food, but has more of a Whole Foods supply chain than a local one.

That’s not to say it isn’t local; it’s very local, but we have benefited a lot from what Whole Foods has done in terms of product quality. The Kitchen is very much a, “Anne the Farmer, what have you got for us today?” kind of thing, whereas The Next Door’s menu is a “printed once a year” kind of thing. The Kitchen Next Door has enabled us to reach significantly more people than we ever could have reached through The Kitchen.

On the nonprofit side, I looked at what Bryce [Winton Brown of the Growe Foundation] was doing and it was fantastic.

He had succeeded in getting garden-to-table learning integrated into the curriculum in the Boulder Valley School District, which, if you know anything about the education system, is a huge accomplishment for anyone, but for this movement is really huge.

The data on science is, if you teach kids science in a Learning Garden, especially around fourth and fifth grade, that’s the best way for them to change their The Kitchen Chef/Co-founder Hugo Matheson

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FOOD & AGRICULTURE nutritional habits because they’ll double their intake of fruits and vegetables. Just by using vegetables and touching them and pulling them out of the ground and growing them, it just changes their whole view on things compared to something their parents put on a plate at home.

So the results were really powerful, and I thought, you know, Bryce is taking care of Boulder but what could we do that would take it around the country and do something that really scales? I decided after my accident that I’m not interested in small scale. I decided that, given the right amount of time, energy, and resources, plus luck and all that stuff, this is the kind of thing that needs to happen and therefore it will happen if it’s done correctly.

We looked at school gardens and noticed they were in the corner of the schoolyard and they had fences around them. Those fences are expensive. They’re wooden raised beds. Wooden raised beds fall apart. It was also very hard to teach with them. If you bring a bunch of kids to a fenced-off area, they do more damage than good to the garden. Teachers also need two or three people with them to help and that’s hard to organize. There’s no spontaneity in that environment.

From the kids’ side, because there’s a fence blocking them from the garden, zero spontaneity is allowed. They are kept out of the garden. And I thought, “there’s got to be a better way to do this.” I asked Jen [Lewin], who is the other cofounder of The Kitchen and my ex-wife, to help us figure this out and she designed the Learning Garden system, which is like Lego blocks in that you can put together any shape and size garden and it can be used in any schoolyard on top of rooftops, pavement, asphalt, grass, even toxic soil. Because the system is so flexible with regard to the location, we put it right next to the playground instead of putting it in the corner of the schoolyard.

The Learning Garden system was designed so that it was raised high up enough that kids could run through it with no need for a fence, so kids can enjoy it all day long. From a teaching perspective, it was so pretty that teachers would want to use it on a regular basis and say, “It’s a nice day, let’s go outside and read a book in the garden.” It really changed the whole way gardens were done in schools. We’ve also been able to scale it, which is what really matters to us. We’ll be doing our two-hundredth Learning Garden installation in two weeks.

It’s amazing the impact it has on these kids, it really is, and the teachers, as well. While nutrition is important to them, it’s also the rest of the school day and the whole child that really matters to them. With the Learning Gardens,

“I really do believe that communities can be deliberately built when the core fabric of that community is food how people eat it and what they eat.”

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“If your product is good - and I mean truly good, meaning people resonate with it and they’re enjoying it and they are buying it - then you’ll be fine.” the kids will go outside, they’ll do some lessons, they’ll get a little energy out and they’ll come back and they’ll just be more available for learning the rest of the day.

Speaking of levers of change in the food industry, you sit on the board of Chipotle, which has been in the news a lot lately for being just such a lever.

What do you identify as the most important instruments for change in the food system? What are your hopes and predictions for the food system and how can we actually change it for the better?

KM: I think it is a tough problem. We’re talking about food at a scale that is virtually incomprehensible. We have to feed three hundred million people here and seven billion globally - that’s just a scale that most people don’t understand and is hard to comprehend. I would say that, with all that, the supply chain has to change. It’s just not interesting to live in a world that has shitty food. I just think that sucks.

It’s my personal opinion, but I really do believe that communities can be deliberately built when the core fabric of that community is food - how people eat it and what they eat. I believe that it will be a much better world if we are able to come back to real food where you can understand what your food is and you can understand what you’re putting in your body.

A friend and I were talking the other day and I learned that apparently there are 72 ingredients in a McDonald’s Big Mac [Editor’s note: the CCM team’s research verified this fact]. Really?!

How is that needed? It’s built into the system because McDonald’s needs it to be non-perishable so that the burger can survive for a long time. You can cook it and it will still taste like a Big Mac an hour later. From an engineering standpoint, it’s kind of a remarkable feat, but it’s terrifying at the same time.

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(and what we’re seeing from Chipotle’s success) is real food. Not only do you want to know where it came from, but you want to look at it and say, “I want that” or “I want this.” I think that Chipotle benefits enormously in its approach because there’s so little trust in the world today around what food you’re getting from whom. Being able to look at what is going to be put into your burrito or your taco really does help with that trust.

When you’re small like The Kitchen, I don’t think we have to do that, but when you’re competing against McDonald’s, it makes a huge difference. Actually, what’s funny is that McDonald’s started on a very similar idea. There was a lot of food poisoning in the ’40s and ’50s so a lot of the health regulations came into place at that time so we don’t have that problem anymore.

One of McDonald’s great successes in

its original restaurant was having glass on all sides so people could go in and see the entire kitchen, see how the food was handled, and see everything being made.

Obviously, at that point, it was just meat with bun - simple ingredients and real food. McDonald’s actually started with this process. It was this bizarre idolization of technology and food that took us to a place where we have these sort of Frankenstein products.

My theory is that the Millennials are a much more educated generation. It’s not because of school and so forth; it’s because they have access to information.

Wikipedia is available whenever they want. If you were wondering how many ingredients are in a McDonald’s burger, well, if you were living twenty years ago, that was an impossible thing to find out. My friend and I found out within three seconds. And we were shocked.

Now that’s going to influence

FOOD & AGRICULTURE

“Younger people are productive and smart and they understand they can make money in many different ways but are choosing to do it in a way that matters to them.”

how hard business is, and, after the fact, people forget about the failure. But failures happen for me often enough for me to remember them.

As entrepreneurs ourselves, what insights and advice do you have for entrepreneurs trying to get things off the ground?

my decisions on McDonald’s burgers forever. You can’t unlearn that stuff, right? And so I think that’s the advantage that our Millennial generation has. If food producers don’t appreciate that, they’re going to learn a very difficult lesson in the next few years.

still want that experience of sitting down and having a conversation and eating and ordering food together. I believe that’s the next big opportunity in the industry, too - figuring out how to bring real food into that sector.

Do you think the fast casual dining sector is what will take the type of change we’ve been discussing and scale it?

Let’s talk about failure. Not that it seems like you’ve experienced much [laughter], but what have you learned from any failures that you have gotten through?

KM: I think fast casual is pretty much owned by Chipotle. I think it’s a perfectly fine service system and, the more I learn about it, the more I wouldn’t bet against Chipotle.

What I think I’m more excited about is the idea of restaurants where you can sit down and eat with your family and friends. When we started The Kitchen Next Door, we were very tempted to do fast casual because we have a lot of respect for Chipotle. And we actually decided, you know, that’s just not who we are. Our mission is “Community Through Food” and we believe that people crave the idea of being able to sit down with their friends and eat a meal and break some bread with each other.

So, our restaurants are all sit-down restaurants and, I don’t know exactly, but I believe casual dining is still about forty-seven percent of all dining in the country, which doesn’t include fine dining or fast casual or fast food or any of that.

Casual dining is still probably the biggest segment. That tells me that, despite the convenience of fast food and the price point of fast casual and fast food, people

KM: No, we failed a lot actually. In all honesty, it’s amazing how many times I fail on a regular basis. For me, I recognize the failure and I’m OK with it, and then I move on very quickly.

I think that there are two kinds of failure, though. There’s the existential threat, which is life or death. And then there’s the non-existential threat which is, “OK, that sucked, but let’s move on.”

The existential threat is really hard, and I don’t deal with that too often. That’s when your company shuts down or is close to being shut down.

That’s a very difficult place to live. I do that once every ten years for a year and that’s about as much as I want to do it. It’s really hard. I’ve had at least one, maybe one and a half failures like that. It sucks, it really does. But I’ve had a lot of other successes.

It’s amazing that people only remember the successes, though; I’m always amazed. Even with Tesla, people are saying, “Wow, you guys have just had such an amazing ride.” Well, two years ago people were thinking we were going to be dead. I think people don’t appreciate

KM: I think I have an easy one: it’s really all about product. If your product is good - and I mean truly good, meaning people resonate with it and they’re enjoying it and they are buying it - then you’ll be fine.

There are macroeconomic things that can happen, but that’s unusual. If you have a great product that people want, then you’ll figure it out. The times that I’ve struggled is when I haven’t had the product come together in my head properly. And if I can’t get it together in my head, it’s not going to come together in reality.

Have you dealt with resistance within your social circles because of the way you choose to do business?

KM: Well, if you do anything, you’ll get resistance. If you wanted to create a better shoelace, you’ll have a ton of resistance. Anytime you have an idea that you think is interesting, by definition, ninety-nine percent of people are not going to think that it’s interesting. So it doesn’t matter what you’re doing.

There’s a great quote from a friend of mine - one of the best entrepreneurs out there - which is that starting a business is like chewing glass and looking into the abyss. His point is you’d better like your glass sandwich. If you like what you’re doing, you’ll get through it.

What is exciting you right now?

KM: I think that social entrepreneurship is going to be a big deal. I think there are a few things that need to come together with it, but I think younger people are productive and smart and they understand they can make money in many different ways but are choosing to do it in a way that matters to them and the people around them. That’s going to change the world a lot. It’s very exciting to see.

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The Bosch kitchen. Perfektion in every detail.

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© 2015 BSH Home Appliances. 15BK23B-04-121764-1

FOOD & AGRICULTURE

INTERVIEW WITH JESSIKA TANTISOOK, FARM KEEPER & CO-FOUNDER

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FOOD & AGRICULTURE THE GOODS • • • • • •

Organically grown Locally grown and locally sold Undiluted raw juice Focus on farmer livelihood Celebration of food & drink Testing conventional wisdom

We’ve got to know - where did the name Starvation Alley come from?

Jessika Tantisook: Starvation Alley was a term coined during the Great Depression. It was the name of the road on the Long Beach Peninsula, where we live, that housed many of that era’s hard-working farming families. Now, it’s where we work on our cranberry farm. We kept the name as an ode to those that came before us and see it as solidarity with those still working hard for food, however that may look.

What motivated you to jump into the world of cranberry farming?

JT: My partner Jared and I moved back to Washington State from Ohio in the fall of 2010. Jared actually grew up right next to the bogs, but didn’t know a thing about cranberries until we decided to farm them five years ago.

Before that, we’d done a bit of everything food-related, from opening and managing a cafe to vegetable farming to fishing. We decided to start our cranberry adventure at a point where we had some flexibility with other life commitments and were excited to keep working in the world of conscious food. The cranberry industry had potential for big change and everyone we asked about growing them organically said, “You can’t do it.” So, of course, we had to try.

What can you tell us about the process of transitioning Starvation Alley Cranberry Farm from a conventionally run operation to an organic one?

JT: Cranberries are perennial plants and when we started in 2010, the farms we bought were already planted and in production using conventional practices. The process to transition away from conventional to organic methods takes three years and there’s a number of possible organic certifying bodies to choose from. Starvation Alley is certified with the WSDA [Washington State Department of Agriculture] and our inspector comes out once a year to physically observe operations on the farm - checking sheds, reading labels, looking at the land. Over the threeyear process, we saw a significant loss in yield. Some of this was of course due to changing the inputs that the plants were used to, but honestly, I believe that most of the loss was due to us being new farmers. The last two years we’ve seen gradual increases in production and feel like we’re just getting the hang of things.

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FOOD & AGRICULTURE What has been the most challenging part of this process?

JT: Unlike most commercially grown crops like apples or kale, very little research exists on growing organic cranberries.

This makes it extremely hard for small farmers to consider transitioning because they can’t risk the potential loss of yield from doing in-house research and development. We have a dedicated cranberry extension office in our small town, but the urgency doesn’t seem to be there for researching and supporting environmentally sustainable growing, even though the industry (which is 99% conventionally grown) is currently facing serious oversupply issues.

What has been the most unexpected reward?

JT: Definitely the span of collaborations we’ve been a part of! We’re now working with two of our neighboring farmers who are in transition on advancing organic production research. We’ve also greatly benefited from many other small

Northwest businesses who are willing to share best practices and develop delicious cranberry co-labs like cider and mustard!

And of course, our friends and family across the country who are endlessly providing their talents to the bogs and the business are our constant rewards.

These relationships support and inspire us to keep working hard to make the food system better.

We heard that you encountered a great deal of skepticism regarding this transition to organic from the outset.

What kept you working toward your goal?

JT: We are doing something really important. Of the 40,000 acres of cranberries produced in the US (around a $2 billion industry), only a little over 300 acres are produced organically. In the four short years we’ve been in business, we’ve seen a change in what people think is possible. It seems like semantics, but hearing experts go from saying “you can’t grow organically” to “growing organically is hard” is a huge step forward.

Has the cost of organic certification impacted your business?

JT: Not significantly. Our farm’s cost of inputs has increased a little. We’ve had to invest money in some new equipment and staff time in creating compliant recordkeeping systems, plus annual certification costs of around $1,000 (though there’s a cost-share grant that covers a small percentage of the fees for qualifying businesses). Otherwise, it’s not too scary.

What else sets your product apart from other producers in your industry?

JT: Cranberry for Concoctions is the only raw, unsweetened, undiluted cranberry juice you can find (unless you happen to be juicing your own berries). We’re really proud of that because cranberries are so often covered in sugar, which negates many of their beneficial health properties, or cooked to the point that they lose their bright, fruit-forward flavors. It’s not concentrated, but acts like a concentrate.

An ounce or two of our juice mixed into

Jessika Tantisook and Jared Oakes of Starvation Alley Farms

“

Everyone we asked about growing them organically said,

‘You can’t do it.’

”

So, of course, we had to try.

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a glass of soda water or your morning smoothie is delicious!

What can you tell us about the second branch of your business, especially the choice to establish it as a social purpose corporation?

JT: Starvation Alley’s business is divided into two parts - the farming and the juice production. When we decided to start the second branch, we became a Washington State Social Purpose Corporation (SPC).

For all tax purposes, an SPC functions like a corporation (C Corp). It’s different, however, in that it allows a corporation to make decisions for itself and its shareholders based on more than just a financial bottom line. It allows a business to put a social purpose (such as helping reduce the negative environmental impacts of farming or increasing the livelihood of farmers) above the purpose of making a profit.

What advice do you have for young, entrepreneurial farmers or food producers?

JT: Meet people where they are. As I say that, I think it sounds like the opposite of all of our company values (commitment to environmental sustainability, testing conventional wisdom), but what I’ve learned through this journey so far is that food is a very personal subject to almost everyone. Empathy will move us farther than an attachment to what’s “right.”

Keep asking yourself why you are making each decision and trust the process.

Where would you like to see Starvation Alley go in the next five to ten years?

JT: I hope our business is a model for sustainability at scale. We’ll stick to conscious growth of both berries and bottles of juice sold. We’ll be transparent in our processes and be committed to educating consumers about the importance of their choices to buy local and organic.

The other thing I’m excited about is continuing to build a business that respects and encourages work-life balance for employees and owners - cranberries might not benefit from the climate in Thailand, but I sure do.

Photos: Starvation Alley Farms

FOOD & AGRICULTURE

THE CHOCOLATE INDUSTRY By the Numbers

1.8

>$2 $

$

The average cocoa farmer in West Africa makes less than $2 per day.2

CHOCOLATE A+ A AB+ B C+ C CD DF

MILLION

The estimated number of children who work in chocolate production in West Africa (Ivory Coast and Ghana), which supplies more than two-thirds of the world’s chocolate.1

10,000

>5%

The average cocoa farmer receives less than five percent of the price of a chocolate bar.2

30%

The estimated number of child laborers in chocolate production who are victims of some form of slavery.3

Mars, Nestlé, and Mondelez collectively purchase more than 30 percent of the world’s cocoa.2

THE TAKEAWAY

Equal Exchange, Divine, AlterEco, SweetRiot, Theo zel,

e o, Divine

BY DR. ELLIS JONES

Shaman, Sjaak’s, Coco-Zen, a, Endangered Species, Rapunzel

The availability of organic, fair trade, and ethically sourced chocolate is exploding. While you still may have to look a little harder, you should be AH!LASKA, Terra Nostra, Cloud able to find alternatives to your favorite chocolate-based snacks that will Nine, Tropical Source, Sunspire allow you to feel good about what you’re purchasing and make a Green & Black’s, Newman’s Own, significant difference for others. Your best bet is to avoid most of the Dagoba large chocolate producers as their records around both social and environmental issues remain troubling.

Chocolove, Lindt, Ghirardelli Lake Champlain

Nutella, Ferrero Rocher, Droste, Russell Stover, Whitman’s, Ritter

Godiva

Swiss Miss

Nestlé, Perugina, Toblerone, M&M Mars, Ovaltine, Cadbury, Dove

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For more information on companies, brands, and how they rank based on the latest data we have available, visit www.betterworldshopper.org, download the Better World Shopper app for iPhones, or pick up a copy of The Better World Shopping Guide (4th edition) at your local independent bookstore.

“Oversight of Public and Private Initiatives to Eliminate the Worst Forms of Child Labor in the Cocoa Sector in Cote d’Ivoire and Ghana,” Payson Center for International Development and Technology Transfer, Tulane University.

“Women and the Big Business of Chocolate,” Oxfam.

3 US Department of State.

1

2

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THEO CHOCOLATE Location: Seattle, Washington Products:​Classic chocolate bar line, caramels, seasonal ganache confections, specialty products (drinking chocolate and pairing kits), classic candy (peanut butter cups)

THE GOODS • First bean-to-bar maker of Organic, Fair Trade, Fair for Life, and Non-GMO certified chocolate in North America.

• Unique business model that pays farmers a premium based on quality that is above and beyond Fair Trade pricing standards.

• All products are certified Non-GMO by the Non-GMO Project.

• Deliberately avoids commodities linked to deforestation (e.g., palm oil).

• Provides technical assistance and resources to farmers to enable better yield and production (e.g., fermentation and drying).

Debra Music

• Encourages full transparency and traceability along the entire supply chain.

• Works alongside farmers and like-minded partners to help achieve economic stability, increase household incomes, and improve access to vital services in communities where beans are purchased.

• Actively educates more than 60,000 visitors annually on fair trade principles, organic agriculture, and social responsibility via the company’s public factory tours.

Joe Whinney

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Starting a chocolate company seems like both a dream come true and also a risky endeavor - can you tell us about your decision to start Theo Chocolate and what finally convinced you to really go for it?

Joe Whinney: Though there were certainly risks involved, founding Theo Chocolate has absolutely been the best professional decision I’ve ever made. By the early 2000s, I’d been working with chocolate makers in the US for around ten years, helping them source organic and Fair Trade chocolate from farms across Central America.

As commodity prices rose and the market continued to shift, it became clear that having a wholly owned manufacturing facility would be critical if I wanted to continue paying farmers fair prices. Because I wasn’t willing to compromise the Fair Trade market I’d helped to establish, I set out to find a factory and a team of like-minded

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individuals who wanted to create the best organic, ethically sourced chocolate in the world.

With this mission in mind, I moved out to Seattle with Theo co-founder Debra Music in 2004. We spent a couple years assembling a team and developing our brand, business plan, and facilities before opening up shop in 2006. Theo Chocolate was the first - and at that time, only - bean-to-bar maker of Organic, Fair Trade, Fair for Life, and Non-GMO Project certified chocolate in North America.

Despite some challenges along the way, we’ve been creating amazing chocolate from the purest ingredients ever since.

What inspired this approach to making chocolate?

JW: My interest in chocolate began in earnest when I started volunteering with a conservation group doing work in Mayan communities. After spending time in many beautiful villages across Central

America and, later, in Africa, I fell in love with the land and the people farming there. For all the positives, though, there were real issues about the way farmers were treated. The systems in place tended to exploit workers and promote poor, dehumanizing treatment. This was back in the 1980s, when organic cocoa farming wasn’t as defined of a practice as it is today.

Since then, I’ve spent a lot of time and effort to establish export and trade protocols that champion organic agriculture and Fair Trade principles.

After several years of hard work, I’m proud to have had a role in bringing the first supplies of organic cocoa beans into the United States in 1990.

By the time Debra and I founded Theo in 2006, there was no question as to how our company would do business.

Our inaugural production run was the first organic, Fair Trade chocolate made right here in the US, where our entire manufacturing operation is based. We

FOOD & AGRICULTURE

were founded on a mission to deliver chocolate of the highest quality while improving livelihoods in farm communities where our cocoa is grown and harvested. We’re proud to have never wavered from that commitment.

How do you identify the farmer groups and grower cooperatives that you work with and how do you develop and maintain these relationships?

JW: Using quality cocoa beans is the single most important step in producing delicious chocolate. We look all around the world for the best cocoa beans that will serve as the basis for our products.

Many variables can affect the quality of a cocoa bean - things like humidity, soil, ecosystem biodiversity, and access to sunlight.

Some of these variables are controllable, but others aren’t. When we think about selecting our suppliers, then, we need to begin by identifying a bioregion and climate that lend themselves to growing and fermenting chocolate. Some of our sourcing regions are well-known and conventional within the industry, but others - like the Democratic Republic of Congo - are products of our own research and professional networks.

Once we zeroin on a particular region, we build partnerships with certified organic and Fair Trade producer groups that are comprised of local smallholder farmers. Because Theo requires ingredients of the highest quality, we are invested in making sure our suppliers understand how to grade beans in the same way we do.

Not only that, our farmer co-op and export partners must demonstrate full transparency throughout their businesses so that we can ensure our payments are going toward improving farmer livelihoods.

Once we select producer groups, we personally meet with farmers to explain our pricing model, which provides

significant price premiums for cocoa of a superior quality. Through our farmer education programs, we’re able to teach our suppliers how to grow and harvest beans that will earn them the highest premiums. It’s a way of doing business that is completely separated from the global commodity price of chocolate, meaning that - by doing business with Theo - farmers can be assured they won’t receive a lower price for their chocolate based on circumstances out of their control (such as political unrest).

It’s important to us that we maintain close working relationships with our suppliers, which is why members of our team personally travel to origin sites regularly to visit and learn how operations are changing and progressing.

Of all of the things that you do to be more sustainable or conscious, what is most important to you or what are you most proud of?

JW: Our recent work in the Democratic Republic of Congo - where we now

a major source of income for women and families in the region. By creating business opportunities in the regions where we purchase beans, we’re seeing a positive ripple effect that’s included improvements in food security and access to healthcare.

We’re extremely proud to call eastern Congo our primary cocoa sourcing region. Our activities in the region have been instrumental in supporting Theo’s mission to create delicious products while working to improve livelihoods and protect the environment in farm and factory communities alike. Last year alone, we imported around 600 metric tons of Congolese chocolate.

As a chocolate producer, why is it important to operate sustainably and what is your greatest hope for the future of the chocolate industry?

JW: Aside from fundamentally being the right thing to do, operating sustainably ensures that Theo’s business is not controlled by speculation or spikes in the global commodity price of chocolate.

Because we actively avoid cocoa grown on plantations created by deforestation, we run no risk of land degradation negatively impacting the quality of our products. If we’re defining sustainability as protecting the availability of our operating environment for generations to come, we’ve gone to great lengths to ensure we’re creating enduring change and improvements in our sourcing regions and manufacturing site.

My greatest hope for the chocolate industry is for quick and clean adoption of business practices that support workers across the entire supply chain.

Theo is founded on the belief that there is a common thread that binds us, from the cocoa farmer to the chocolate lover, and we’re devoted to making our world a better place. We’d like to see that belief adopted more widely.

“We’re seeing the rise of conscious consumerism, where people seek out companies that act in alignment with their own personal values.” source more than 50 percent of our cocoa beans - has been immensely rewarding. It’s a complex and challenging region to do business in, but we’ve been able to create a tremendous amount of good through our work with the Eastern Congo Initiative (ECI). By training Congolese farmers to grow high-quality Organic and Fair Trade certified cocoa, Theo and ECI are helping to economically empower communities - an act that rallies against poverty and violence in the region and sets individuals on a path towards a better future. Because cocoa is a fastgrowing, high-yield crop, it requires minimal re-planting and can serve as

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FOOD & AGRICULTURE

“

“

We’re proof that it’s possible to run a successful business that is firmly rooted in relationships and has a strong moral compass.

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FOOD & AGRICULTURE

How do you think operating consciously benefits your bottom line?

Debra Music: I think we’re seeing the rise of conscious consumerism, where people seek out companies that act in alignment with their own personal values. There is still a great amount of work to be done before this type of behavior becomes commonplace for mainstream consumers, but we’ve had the pleasure of meeting and working with extremely passionate customers who understand the importance of designations like Fair Trade and Organic.

We’ve had a tremendous amount of success over the nine years that we’ve been in business, thanks in large part to our dedicated partners in the organic and natural food retail marketplace.

We’re proof that it’s possible to run a successful business that is firmly rooted in relationships and has a strong moral compass.

We’re firm believers in quality, and sustainability and ethical sourcing are not by themselves substitutes for a delicious end product. Instead, these practices serve as guiding principles that, by their very nature, drive quality.

If we didn’t believe our products provided the best chocolate experience available anywhere, no amount of activism would keep us in business. I think people recognize and respond to our commitment to quality across the board, with respect to both taste and social responsibility.

What insights or advice do you have for other mission-driven entrepreneurs?

JW: Don’t be discouraged if you aren’t able to bring about meaningful change overnight. We’ve had to work hard for years to begin making a real difference.

For that reason, you have to also really love what you’re doing.

At Theo, we like to say that our company is rooted in passion, grounded in beliefs, and put into practice every day. My advice would be to find the venture that, for you, contains that capacity for passion, belief, and day-today dedication. From there, stick with it while not being afraid to adapt in order

to accommodate new and innovative ideas and a changing marketplace.

Where would you like to see Theo Chocolate go from here?

DM: We’d like to continue to see our business grow so that high-quality organic, Fair Trade, non-GMO chocolate is accessible and affordable to chocolate lovers everywhere. We’re not trying to create an exclusivity around our

brand - we want to include everyone in our mission and vision because the belief that we are all connected is at the very heart of our business. We want to do everything we can to reach more consumers and inspire them to learn not only about chocolate, but about proper environmental stewardship and, ultimately, about the true cost of food.

The way to a sustainable future for all of us is educated consumers voting with Photos: Theo Chocolate their dollars.

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OF ALL OF THE THINGS THAT YOU DO TO BE MORE SUSTAINABLE OR CONSCIOUS, WHAT IS MOST IMPORTANT TO YOU OR WHAT ARE YOU MOST PROUD OF?

SUSTAINABLE CHOCOLATE BRANDS

MADÉCASSE Location: Ambanja & Antananarivo, Madagascar, and Brooklyn, New York Products:​Chocolate Bars, Pure Vanilla Extract, Bourbon Vanilla Beans, Couverture Baking Discs

Madécasse is the only chocolate available in the US that’s actually made in Africa, while nearly 70 percent of the chocolate in the US market is made with cocoa from Africa. That is a heartbreaking and outrageous statistic to us. We’re proud to be among the very few companies worldwide who have even attempted chocolatemaking in Africa, and we’re empowering Africans in the process, economically and socially. We’re committed to supporting sustainable development and economic diversification in Madagascar; we want our chocolate to inspire our customers while lifting up our producers, turning the chocolate industry on its head along the way.

AS A CHOCOLATE PRODUCER, WHY IS IT IMPORTANT TO OPERATE SUSTAINABLY? Like anything, chocolate-making takes natural and human resources. Irresponsible use of the natural resources in our chocolate threatens their survival and, especially in Madagascar, preserving biodiversity is a global priority. So, we grow our cacao in a way that doesn’t damage the surrounding forest, and we help our farmers implement sustainable agriculture practices, among other things. Alleviating poverty in Madagascar is another key to the island’s sustainable development. So, we provide high-wage jobs, skills training, and a stable market for our farmers, factory workers, and office staff. This isn’t something we do on the side; sustainability and responsibility are built into our ethics.

THE GOODS • Fair for Life certified chocolate.

• Chocolate made in Madagascar, from start to finish.

• Focus on sustainably developing the local economy in Madagascar.

• Packaging made and hand-wrapped in Madagascar.

• Use of locally sourced ingredients.

• Direct relationships with Fair Trade certified farmers.

• Founded by former Madagascar Peace Corps Volunteers.

• Use of a rare, original strain of cacao, referred to as “pure Ancient Criollo,” found nowhere else on Earth, helping it to stay viable through responsible harvesting.

Photo: Madécasse

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FOOD & AGRICULTURE

TCHO Location: Berkeley, California Products:​PureNotes dark chocolate, SeriousMilk chocolate, TCHOPairings chocolate bars with ingredients, cocoa powder, cacao nibs, drinking chocolate, and couverture.

THE GOODS • TCHOSource direct sourcing and farmer relationship management program.

• Fair Trade Certified.

• Certified Organic.

OF ALL OF THE THINGS THAT YOU DO TO BE MORE SUSTAINABLE OR CONSCIOUS, WHAT IS MOST IMPORTANT TO YOU OR WHAT ARE YOU MOST PROUD OF? TCHOSource is our unique program dedicated to partnering directly with our growers and working closely with them to produce great cacao. We provide innovation, technology, and know-how that empowers them to improve their livelihoods and hone their craft. They provide the superior beans that enable us to produce obsessively good chocolate. TCHOSource is the ultimate win-win, setting the stage for long-term growth and sustainable development through fulfillment of mutual self-interest.

AS A CHOCOLATE PRODUCER, WHY IS IT IMPORTANT TO OPERATE SUSTAINABLY? To consistently produce the best chocolate that we can make, we have to go all the way back to the source to ensure that the flavors we value can be maintained from year to year. Sustainably managing our supply chain is the right thing to do both for our business (and its consumers) and for our suppliers on whom we depend entirely for the best quality cacao in the world.

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SUSTAINABLE CHOCOLATE BRANDS

RITUAL CHOCOLATE Location: Park City, Utah Products:​Single Origin Chocolate

OF ALL OF THE THINGS THAT YOU DO TO BE MORE SUSTAINABLE OR CONSCIOUS, WHAT IS MOST IMPORTANT TO YOU OR WHAT ARE YOU MOST PROUD OF? Because we are buying from and have a direct relationship with small cacao producers, it’s easier to track their working conditions and ensure that there is no child labor or overall poor labor conditions on the farm. We are contributing to what we call a “quality” buying model for cacao, which allows farmers to charge a sustainable price for their cacao based on quality and flavor. Chocolate makers can then produce a quality chocolate and customers can experience a high quality and healthy chocolate with a complex and interesting flavor.

AS A CHOCOLATE PRODUCER, WHY IS IT IMPORTANT TO OPERATE SUSTAINABLY? Chocolate is an agricultural product that doesn’t do well under “factory farming” conditions. Cacao grows best when the forest is healthy (e.g., biodiversity, healthy soil, thriving insect population, etc.). Cacao is also a very delicate species and struggles to produce fruit when conditions aren’t just right. So, if we aren’t directly doing our part to lessen our negative impact on the planet, we are directly hurting the future of cacao.

THE GOODS • Direct relationships with cacao farms.

• Pays cacao farms for quality, allowing them to set their prices three to five times higher than Fair Trade and/or the world price.

• All packaging can be recycled.

• Bean-to-bar process reduces carbon footprint (because the cacao changes hands fewer times).

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Photo: Ritual Chocolate

FOOD & AGRICULTURE

ALTER ECO AMERICAS Location: San Francisco, California Products:​Chocolate bars and truffles made from cacao beans from the Peruvian Amazon and the Ecuadorian Coast THE GOODS • USDA Certified Organic.

• Fair Trade Certified.

• Carbon Neutral Certified.

• Non-GMO Project Verified.

• Benefit Corporation.

• SF Green Business.

• In 2014, Alter Eco contributed to planting 5,085 trees through carbon offset programs with partner cacao farmers in Peru.

• Employee benefits such as paid public transportation, which promotes lower carbon emissions during work commute.

Photo: Alter Eco

OF ALL OF THE THINGS THAT YOU DO TO BE MORE SUSTAINABLE OR CONSCIOUS, WHAT IS MOST IMPORTANT TO YOU OR WHAT ARE YOU MOST PROUD OF? At Alter Eco, we’re most proud of our “full-circle sustainability” model. We work to nurture all aspects of our business in the most sustainable way, from the people involved in our organization to the supply chain to the environments where we source our goods. As a company, we have identified four main areas where we can have maximum impact: 1) sourcing through direct relationships and Fair Trade with our farmers and cooperatives, 2) producing only organic and non-GMO foods, 3) offsetting our carbon emissions and reforestation, and 4) creating minimal waste by transitioning our product lines to home compostable packaging.

- Edouard Rollet, Co-Founder & Co-CEO, Alter Eco Americas, PBC

AS A CHOCOLATE PRODUCER, WHY IS IT IMPORTANT TO OPERATE SUSTAINABLY? It is important to operate sustainably because we need to respect the hard work of the farmers who produce a crop that allows millions of consumers worldwide to enjoy their favorite chocolate delicacies. Fostering a full-circle sustainability model guarantees that children in farming communities are in school where they belong, and not working in the fields. It also means respecting the health of farmers and consumers by exclusively using organic crops and refusing the use of chemicals. Finally, it is an opportunity to promote agroforestry, which produces the best cacao beans while replanting trees and combating deforestation.

- Mathieu Senard, Co-Founder & Co-CEO, Alter Eco Americas, PBC

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LOCATION: SAN FRANCISCO BAY AREA YEAR FOUNDED: 2013

“We know that excellence usually comes in small batches.”

Tell us about the mission and purpose driving Yellow Seed.

Yellow Seed is an impact-driven, nonprofit enterprise connecting farmers at origin to new markets. We’ve designed a web platform to facilitate conscious trade of quality products between small farms and ethical buyers who support sustainable farming and fair wages.

Co-creative Cacao, our beta website, will initially connect cacao producers around the globe to craft chocolate makers.

Our debut platform is a place where farmers can sell products for a fair value and receive feedback from buyers on how to improve quality, while buyers access a collaborative network for resource efficiency. We know that excellence usually comes in small batches, and we are invested in these farmers for 118 |

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the same reason that we shop at local farmers’ markets at home: these farms support ecological agriculture and the communities where they live.

Where did the idea for Yellow Seed come from?

Nancy Zamierowski, one of Yellow Seed’s founding team members, co-authored the 2012 LINK Toolkit for the International Center for Tropical Agriculture (CIAT).

In it, she outlined a methodology and a participatory guide to improve inclusive trading relationships with small-scale farmers. Early supporters included the Bill and Melinda Gates Foundation and the design firm IDEO, which awarded CIAT a Human Centered Design planning micro-grant. This sparked an exploratory initiative to help small-scale farmers and

small-batch artisan food makers connect to one another, trade, and learn.

The original team assembled in 2013 while completing MBAs in sustainable systems at Bainbridge Graduate Institute at Pinchot University. The team has since expanded in 2014 to include key origin relationship managers and design support roles.

Why did Yellow Seed’s founders feel it was important to connect farmers and producers?

The supply chains of our current food system are unsustainable and face increasing constraints.

With 85 percent of the world’s farmers in emerging markets, small-scale farms face limited market access. Modern supply chains pressure many of these

FOOD & AGRICULTURE

BROWSE FARMS AND PRODUCTS

CONNECT WITH FARMERS

farmers towards homogeneity and scale, forcing most to sell their unique crops below value in low-paying local markets subject to commodity fluctuations.

Likewise, increasing numbers of socially and environmentally aware buyers face time, distance, and financial challenges to trading directly.

Large industrialized agriculture has been challenging the viability of smallscale farms (the key farms who support biodiversity and local economies) at an alarming rate. Our platform creates the space to begin reversing this trend at scale because different participants along the supply chain are able to listen to one another and work together.

Farmers can hear feedback from buyers as to what “good quality” really means to them and, in turn, they can tell their story and explain what resources they need to succeed. Buyers can learn about new origins, connect with each other to efficiently ship products together, and collectivize their efforts online to

MAKE A DEAL

support farmers through long-term working relationships.

Our vision of the future is a thriving globalized world that is nourished through a web of small agro-ecological farms. Resilient, adaptive, and regenerative, these networked supply chains are where conscious trade will flourish.

CELEBRATE!

We looked for challenges and opportunities and then translated what we learned into the functions of the site.

As we build toward our vision in small steps through the website, we look forward to listening to the feedback we receive from our first users and iterating based on what we hear.

What challenges has Yellow Seed encountered and how have you addressed them?

What does the future of Yellow Seed look like? What other products or commodities do you feel this business model could positively impact?

Supply chains are incredibly complex, and with the added dimensions of cacao’s rising demand and climateconstricted supply, this entrenched commodity system is facing major dilemmas. We spent our first year just listening through extensive user interviews with farmers at origin, as well as with buyers across the industry and their supporting networks.

Our web platform is beginning with cacao this spring and the user activity on the beta site will inform how and when we expand features and products.

Eventually, we would like to include other forms of cocoa beyond just beans, as well as other commodities such as coffee and tea. Follow our path towards conscious trade at yellow-seed.org and @cocreativecacao on Twitter.

Photos: Yellow Seed

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FRESH CORNER CAFÉ

ADDRESSING FOOD DESERTS IN DETROIT Interview with Co-founder Val Waller

WHAT IS A FOOD DESERT? A geographic area such as an urban neighborhood or rural town that lacks access to affordable, fresh, and nutritious food. For those without access to a car, these areas are particularly challenging because they are typically only served by fast food restaurants and convenience stores, leaving residents with very few options to purchase healthy meals and resulting in higher rates of obesity and other diet-related diseases.

D

etroit-based Fresh Corner Café is tackling the issue of getting affordable, high-

quality meals to residents who are living in food deserts. This innovative, mission-driven business is strategically leveraging the expansive network of neighborhood convenience stores in the city to market fresh, ready-to-eat meals.

We spoke with Co-founder Val Waller about her company’s mission to get healthy food to all Detroiters.

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FOOD & AGRICULTURE

Can you tell us the story of how Fresh Corner Café got started?

Why does Fresh Corner Café sell many of its products via convenience stores?

Val Waller: The idea developed when two members of a six-student team stumbled across a variety package of cut vegetables labeled as soup mix inside a Mexican grocery store in Detroit. Marveling at the power of convenience, the pair convened their team and etched out the beginnings of a business plan that would soon win $1,000 in a business plan competition.

18 months, four rounds of customer surveys, two focus groups, and multiple iterations later, what began as a course project evolved into a blossoming business.

VW: While grocery stores offer exciting economic development tools, they don’t address the problem of urban sprawl and poor transportation.

Given the 700,000+ Detroiters dispersed across 139 square miles and the 70,000 households lacking private transportation, Fresh Corner Café acknowledges the important role physical proximity plays in access to healthy food. By connecting an expansive network of strong neighborhood stores with a burgeoning local food supply, our business model reduces barriers, uplifts existing assets, and targets neighborhoods with the most need.

What story makes you smile most when thinking about your company?

VW: What makes me smile most when thinking about our company is the idea of leaving a legacy - knowing that the work we do will hopefully be earmarked as part of the beginning of a larger trend of healthy eating, access to reliable healthy food, and food sovereignty in current and future Detroit development.

Can you tell us about your business model - how are you keeping costs low enough for everyone to be able to afford fresh, healthy food?

VW: We use a cross-subsidization model in an attempt to keep prices low.

We’re currently working on making prices even lower and accepting EBT [Electronic Benefit Transfer] cards for our workplaces and lunch-stands to further aid those who want to buy our products.

Is your business model scalable? Could it be applied to other food deserts in the US? VW: We definitely believe our model is scalable. Detroit is unique with regard to the massive amount of convenience stores, however, we’re confident and

have looked into bringing our model to other places such as Oakland, California, for example. Field leaders Policy Link and Food Trust point to a person’s relative proximity to healthy and unhealthy food retailers as a top indicator of and contributor to obesity, but traditional government interventions rely on big-box retailers to solve the problem. However, only a minority of the 550,000 Detroiters identified by Mari Gallagher as living in food deserts will benefit from a smattering of new grocery stores that are typically placed in more dense and affluent areas.

What was the biggest hurdle to getting Fresh Corner Café off the ground and how did you overcome it?

VW: One of our biggest and ongoing hurdles is the simple fact that many people don’t expect to see the types of products we provide in our selected retail spaces. Changing the social schema connected to these places has been difficult, so we opted to initially focus on creating a “store-within-astore” concept. This has worked for the most part, but we also felt that shifting the perception of these spaces will never happen with that tactic alone.

“BY CONNECTING AN EXPANSIVE NETWORK OF STRONG NEIGHBORHOOD STORES WITH A BURGEONING LOCAL FOOD SUPPLY, OUR BUSINESS MODEL REDUCES BARRIERS, UPLIFTS EXISTING ASSETS, AND TARGETS NEIGHBORHOODS WITH THE MOST NEED.” SPRING 2015

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We’ve overcome this perception challenge by being more active in these retail spaces. We give out free samples so that people can taste the food and see a face behind the products. A lot of our progress has been about relationship building and, because we are small, we can take the time to meet people and curate good experiences with our products.

Are there any other innovative businesses out there that are bringing healthy food into food deserts that you’re excited about?

VW: Yes! The Fair Food Network and its Double Up Food Bucks program provides Supplemental Nutrition Assistance Program (SNAP) beneficiaries with the ability to receive two dollars worth of fresh, Michigan-grown produce for every dollar they spend.

Another great business that we have partnered with - it makes our yogurt

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parfaits and all of our fruit cups - is Peaches & Greens. It is a small produce market located in the New Center area of Detroit. Funded by the CDC (Central Detroit Christian Community Development Corporation), its mission is to provide community residents the opportunity to have a safe, culturally acceptable, nutritionally adequate diet through a sustainable food system that maximizes community self-reliance.

As one of the leaders of your organization, what insights do you have about quality leadership?

VW: Step 1: Don’t take yourself too seriously.

Really, when all of this first started, I felt like I had to know how to do everything, have all of the answers, and be all the change I wanted to see in the world. Looking back, that is ridiculous and hindering for a few reasons: if you think you know everything, where do you

find space to grow and learn? Where do you find space to ask for help? Where do others find space to offer it to you? The whole “fake it until you make it” concept can only get you so far. I feel that the true difference between leaders and followers is that leaders aren’t afraid of failure or reaching out to others.

On that note….

Step 2: Trust your people.

When you’re running your own business, it’s easy to get too wrapped up in everything. You have a vision of how you’d like to handle things but it’s hard to trust that others can execute things in the same manner. We’ve surrounded ourselves with people that we can trust and really communicate with. Our team - the “Fresh Corner Crew” as we like to call ourselves - is just as passionate and driven as we are and when they’re out around town delivering or meeting people, because of their passion, we trust in their ability to be awesome brand ambassadors.

Photos: Fresh Corner Cafe/Val Waller

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FINANCE

IMPACT INVESTING FOR THE REST OF US -

A TOOLKIT FOR RETAIL INVESTORS

BY FRAN SEEGULL

I

mpact investing - investing for financial returns as well as social and environmental impact - is on the rise. More than $6.5 trillion is now invested with impact in the US.1 That is a 76 percent increase from 2012 and includes investments in the public capital markets and in private impact ventures. This trend is likely to continue for a number of reasons. First, more than $40 trillion of wealth is predicted to be transferred in the next 30 to 40 years from Baby Boomers to women and Millennials - two groups that are disproportionately interested in making investment decisions that are consistent with their social and environmental values.

Second, there are a growing number of intractable challenges that both require impact solutions and create an opportunity for financial returns. These problems are social (e.g., population growth, poverty, food security, and public health) and environmental (e.g., climate change, drought, sanitation, and other infrastructure issues) in nature. There is also a growing disenchantment with Wall Street and what many regard as its slavish focus on short-term value creation. These factors are creating a surging interest in and allocation of funds to impact investing.

While investing in the public markets through mutual funds, index funds, and exchange-traded funds (ETFs) is available to all investors, much of the deepest impact created by investing in private businesses is largely the province of wealthy, so-called “accredited investors” (see sidebar). So what about impact investing for the rest of us? How is impact investing being democratized and mainstreamed for the retail investor across asset classes?

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What is an Accredited Investor?

In order to invest in most private companies, one must meet the definition of “accredited investor” under applicable SEC private placement rules. The SEC requires individuals to have a net worth of at least $1 million, excluding the value of equity in their primary residence, or net income of at least $200,000 in each of the last two years and a represented expectation of net income in that amount in the current year. These standards are imposed, generally, because of the relative risk and illiquidity associated with investments in most non-public companies when compared to public companies. Because of the risks associated with these investments, prospective investors in these offerings must have the financial resources to withstand a full loss of invested capital.

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DEPOSITORY ASSETS Retail investors interested in impact should consider starting with their banking relationships. Alternatives to traditional banks include a range of community banks and community development finance institutions such as New Resource Bank and Beneficial State Bank, as well as credit unions.

These financial institutions accept deposits, and in turn, lend capital to ventures and projects designed to positively impact local communities and environments, often extending credit to individuals and entities disenfranchised from the traditional banking sector.

PUBLIC MARKETS Investing in the stocks and bonds of publicly traded companies is one of the easiest ways for the retail investor to get started in impact investing.

Socially Responsible Investing (SRI) was started by faith-based institutions that wanted to invest their capital consistently with their values. They typically employed negative screens to avoid so-called “sin stocks” - e.g., firearms, alcohol, tobacco, and others. In the 1980s, a more proactive way to invest in the public markets was established - Environmental Social Governance (ESG) investing, which uses positive screens such as sustainable supply chains, progressive employment practices, and business ethics. Some investors contend and research indicates that public companies creating ESG value and mitigating ESG risk may (and often do) outperform their cohorts.2 Actively managed mutual and index funds with positive ESG screens include offerings from Calvert Investments, Pax World, Parnassus, Domini, TIAA-CREF, MSCI, Vanguard, and others.

Disclaimer: Investments cited in this article are neither endorsements nor investment recommendations. This article is intended only to provide information and analysis about the range and types of impact investments in the marketplace.

Please seek the advice of a wealth advisor before making any investment.

PRIVATE MARKETS As mentioned earlier, debt and equity investing in privately held impact ventures has traditionally been restricted to accredited investors and institutions.

However, there are a handful of highimpact private debt offerings with low minimum investment requirements available to retail investors. Calvert Foundation’s Community Investment Note invests in impact enterprises in the US and the developing world across a range of impact themes, from microfinance to education, from Fair Trade to women’s empowerment. These one-to-ten-year notes have interest rates ranging from 0.5 percent to 3 percent and may be purchased by retail investors online through Vested.org for as low as $20 and through a broker at a minimum of $1,000. RSF Social Finance’s Social Investment Fund offers exposure to a range of for-profit and nonprofit impact ventures in food, agriculture, education, environment, and the arts for as little as $1,000. Retail investors may also engage in zero-interest peer-topeer lending through Kiva.org. Lastly, ImpactAssets, where I serve as Chief Investment Officer, has developed and will be offering products focused on microfinance and sustainable agriculture designed to democratize access to impact investing.

As for equity investing in private companies, a specific crowdfunding provision (Title III) of President Obama’s JOBS Act of 2012 would allow retail investors to purchase shares in private companies. While the SEC is still deliberating on Title III, a number of states have issued their own equity crowdfunding provisions that allow intrastate retail equity participation (see “The State of Crowdfunding” by Amy Cortese in Issue 1). Also, Direct Public Offerings (DPOs), an alternative method of fundraising from the public, enable unaccredited investors to purchase private company shares. Ben & Jerry’s $ and Annie’s Homegrown both conducted DPOs early in their fundraising histories.

A word of caution: retail investors should carefully assess their financial risk tolerance before making any private market investment.

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Impact investing is here to stay, and retails investors like you can help build its future. You can gain exposure to impact through depository institutions like community banks, mutual and index funds, as well as entities offering select private debt securities. Some of these investments may be appropriate for taxable assets. If you work with a wealth advisor, communicate your interest in impact investing clearly. If he or she has not heard of impact investing, encourage your wealth advisor to learn more about it. Other impact investments might be more appropriate for your retirement account. Check to see if your 401(k) plan has SRI and ESG mutual fund options, and if not, ask your plan administrator about them. A number of retirement funds, including Social(k) and TIAA-CREF, currently run retirement plans with strong impact options.

Impact investors believe that making investment choices based on positive values is the future of all investing.

That said, not all options are available to you as a retail investor at this time.

But with your interest, engagement, and advocacy, the market will evolve to meet your needs. $

Fran Seegull is Chief Investment Officer at ImpactAssets, a nonprofit investment firm seeking to increase the flow of capital to impact investing. She oversees impact product development for the firm and heads investment management for The Giving Fund, a $200 million impact investing donoradvised fund. Seegull is Adjunct Professor of Entrepreneurship at the Lloyd Greif Center for Entrepreneurial Studies at USC’s Marshall School of Business.

She tweets at @franseegull.

[1] “Report on U.S. Sustainable, Responsible and Impact Investing Trends 2014,” USSIF, 2014.

[2] Performance and Sustainable, Responsible and Impact Investing, USSIF, http://www.ussif.org/performance.

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INNOVATIVE INVESTING: DEVELOPMENT IMPACT BONDS

I

n his 2015 State of the Union address, President Obama spoke of the importance of using the lesson of Ebola to “build a more effective global effort to prevent the spread of future pandemics, invest in smart development, and eradicate extreme poverty.” What if this “investment” he mentioned wasn’t just an off-the-cuff message about the need to do more? What if it referred to the hard-core investors we normally associate with Wall Street and expensive suits? What if the large companies where we do our banking, save for our retirement, and manage our investments could help fund this global effort - say through vaccinations for millions of people in developing nations - while also generating a profit?

BY ANNA BOWDEN The concept isn’t as radical as you might think, and in fact, pilots like these are cropping up throughout the world.

The model is the Development Impact Bond (DIB). In the simplest terms, DIBs are a partnership between private sector investors, donor and host governments, and a local service provider (often a non-governmental organization, or NGO) to implement an economic development program. For example, let’s say the partnership is around improving girls’ education in a given African nation.

The partners will sit down together

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and assess the available data on girls’ education (such as the proportion of girls educated and how long they stay in school); what the limitations are to their education (e.g., is there a lack of access to schools or teachers, or are there disincentives to go to school such as laboring in a family business?); and finally, what the partners would agree is a good outcome for girls’ education. Let’s say the group agrees that, given available evidence, a 20 percent improvement in the number of girls completing school sounds ambitious, but achievable.

THE NEED FOR INNOVATION IN DEVELOPMENT FUNDING In previous years, donor agencies and organizations like USAID likely would have either directly implemented the girls’ education program themselves, or perhaps funded a local NGO or government body to run it. However, in recent years, donor agencies have faced a number of constraints, including limitations on foreign aid budgets and the political difficulties of selling expanded aid budgets to taxpayers who may

FINANCE

feel the impact of aid has been too limited over the years.

Donor agencies (not unlike other government departments working on domestic issues) have been pretty restricted in recent years. Yet, as President Obama points out, it’s more important than ever for us to invest in economic development programs. Inequality is at an all-time high. Lack of economic opportunity and livelihoods is feeding conflicts in several nations. Over the course of last year, Ebola rapidly spread in West Africa, claiming over 8,000 lives. Sadly, the list goes on.

In other words, we face persistent needs in developing economies, but a limited ability to pay for solutions. Perhaps the silver lining to these sorts of complex situations is that if there’s one thing we know about innovation, it’s that need and demand are its life source. As a result, we’re seeing a number of innovations emerge in the development space that seek to reduce poverty through new models and innovative sources of funding. DIBs are one of these innovations. The concept of DIBs is similar to Social Impact Bonds (sometimes called Pay for Success Bonds in the US) first launched in the UK in 2010 to reduce the proportion of prisoners who reoffend after being released from prison.

HOW DEVELOPMENT IMPACT BONDS WORK DIBs provide an up-front supply of capital from private investors to implement a specific project. This is helpful because it provides desperately needed funding much sooner than government-negotiated contracts tend to be able to provide it (if they even have funding available). That capital is given to a partner service provider to implement the program, such as a girls’ education program in our example above. If the girls’ education program achieves the agreed upon metric of a 20 percent improvement rate in the number of girls completing school, then the outcome funder (e.g., a donor government) will repay the private investors, with interest. Often, achievement metrics are tiered, so if the education program hits its target of 20 percent, investors might receive an eight percent interest rate. If, however, the program sees 25 percent more girls finish school, then the investors might receive 10 percent interest. Investors are only paid by the donor government if and when the project is successful. If it doesn’t work, the investors aren’t paid back.

You can see why the model is appealing to donors.

Donors avoid the large chunk of risk that goes with paying upfront for development programs that may or may not be successful. It also means that donors can increasingly focus their attention on service providers and NGOs that have a track record of generating innovative and effective solutions to development challenges. Therein lies another reason innovation is key to the DIBs.

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“

Smart, forward-thinking investors also see these investments as an opportunity to further expand into developing and emerging markets.

Throughout the life of the bond, the service provider is generally given flexibility to innovate around how the outcomes are achieved. The DIB partnership determines what will be achieved (e.g., a 20 percent improvement in education), but the service provider is encouraged to innovate and develop the most effective program to achieve that goal.

For investors, DIBs provide a mechanism to generate both a financial and social return on their investments. Smart, forward-thinking investors also see these investments as an opportunity to further expand into developing and emerging markets.

DEVELOPMENT IMPACT BONDS IN PRACTICE DIB pilots are now rolling out across the globe. Perhaps one of the best known is the Global Alliance for Vaccines and Immunization (GAVI). Through its partner body, the International Finance Facility for Immunization, GAVI has raised over $5 billion from private investors, including names like JP Morgan, la Caixa Foundation, and Vodafone.

An alliance of several donor nations including the United States, as well as the Bill and Melinda Gates Foundation, have committed over $6.3 billion to repay these investors if programs are successfully achieved. Since GAVI was launched in 2000, half a billion children have been vaccinated and over seven million lives saved from diseases like hepatitis B, measles, pneumococcal disease, rotavirus diarrhea, and yellow fever.

DIBs won’t be a silver bullet for poverty. In many cases, no matter how valuable the program, there won’t be a financial case to make an investment possible. Data and metrics around social issues can also be difficult to acquire in developing economies. However, the possibility of deploying alternative and innovative sources of finance to improve the health, education, and livelihoods of billions of people in poor economies is surely something we must continue to Photo: GAVI, the Vaccine Alliance explore. $

Anna Bowden is a Senior Associate at Social Outcomes, a strategy advisory company helping organizations achieve social impact. Anna has developed multiple impact investing and multi-stakeholder programs through her positions with Impact Investing Australia, One Earth Future Foundation, and the United Nations Principles for Responsible Investment.

She holds a Master’s in International Development from Oxford University.

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SHAREHOLDER ADVOCACY F

101

ounded in 1992, As You Sow is a nonprofit that promotes environmental and social responsibility through the use of shareholder advocacy. So what actually is shareholder advocacy? In a nutshell, anyone who owns shares of a company or a mutual fund in their portfolio or 401(k) has the right to influence the policies of that company. Once a year, at the annual meeting, every shareholder is asked to vote on a range of issues including electing the board, approving CEO pay, governance and policy questions, and an array of environmental and social issues that shareholders have raised. It starts with owning what you own and voting, and can grow from there. We had a chance to discuss this innovative lever for change with As You Sow’s CEO Andrew Behar.

Give us a high-level overview of what the process of bringing a resolution before a company looks like.

What is something that you wish everyone knew about shareholder advocacy?

Andrew Behar: Filing a resolution is an escalation of engagement with the company - it is not an act unto itself. It’s all about getting access to information or changing a specific policy at a company.

If you are a shareholder that wants some material information that has not been disclosed, or have an issue you feel the company should consider, it is best to write a letter or call the company and set up a meeting to discuss it. If the conversation does not lead to results and you own $2,000 worth of shares and have held them for one year prior to the filing date, you can submit a 500 word resolution to the company. This usually leads to a meeting with representatives of the company in which they ask you to withdraw the resolution. If that does not lead to action, and the company does not ask the SEC to exclude the resolution on technical grounds, then it is printed in the proxy and goes to a vote at the annual meeting.

AB: It is everyone’s right to ask the companies they own for material information and to work with companies to express their values and make sure that they act responsibly. In essence, it is a shareholder’s right and responsibility to help the companies that they own improve their business plans and increase their shareholder value.

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What is the biggest lesson that you have learned from the times when you didn’t succeed?

AB: How do you define success? These votes are non-binding, so even a majority vote does not mean that the company has to do what has been asked. However, imagine an individual shareholder with five percent or ten percent ownership of a company. That person would be able to call the CEO and talk things through.

That person would probably have a board seat. So, when a group of shareholders

that represent a five percent, ten percent, or sometimes 40 percent or even a majority vote want to have the same discussion, companies generally respond positively. For example, a 2011 As You Sow resolution at McDonald’s asking the company to shift from Styrofoam coffee cups to recycled cardboard got 29.3 percent of the vote. However, in the year after the meeting, the company did not make any changes. The next year we refiled and, before it went to a vote, the company agreed to a 2,000 store pilot, so we withdrew the resolution. The pilot was successful and led to a 14,000 store implementation and positive brand recognition for McDonald’s. You may have called our actions in 2011 unsuccessful, but tenacity and public association of the brand with specific action, or lack thereof, can lead to change. Over the years, there are literally hundreds of examples. Ultimately, we see this change as a shift in corporate consciousness, where shareholders, employees, customers, and management are all working together.

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AS YOU SOW SUCCESS STORIES ENERGY We had a 51 percent vote at

IDACORP [an electric

utility holding company] that led to the closure of a coal fired boiler and the kilowatts being replaced by wind. Our coal ash resolutions at Duke Energy, MontanaDakota Utilities Company, and Consumers Energy laid the groundwork for litigation on coal impoundments. Our fracking resolutions over five years led to increased disclosures by the major oil and gas companies that, in turn, have helped citizens and legislators see what was really going on and have influenced major decisions like the recent ban on fracking in New York State.

ENVIRONMENTAL HEALTH Our recent resolution at Dunkin’ Donuts on nanomaterials in its donuts led, interestingly, to its competitor Krispy Kreme adopting a “no nano” policy and is critical to our engagement with 15 other food manufacturers.

Our work on GMOs with a coalition of partners in the faith-based and grassroots community since 1999 has made the world aware of GMOs in infant formula and led to last year’s reformulation of Cheerios and Whole Foods Market’s labeling commitment.

WASTE

A few months ago, Procter &

Gamble (P&G), the world’s

largest consumer packaged

goods company, agreed to redesign 90 percent of its packaging to reduce waste. Last year, Colgate agreed not to use non-recyclable packing in three out of its four divisions. Coca-Cola, Pepsi, and Nestlé Waters agreed to recycle 20 billion plastic bottles. HP, Dell, and Apple agreed to recycle 500,000 tons of electronic waste after years of shareholder advocacy on these issues. Starbucks agreed to recycle 3.4 billion cups every year. All of this is reducing landfills and ocean toxins.

HUMAN RIGHTS 140 apparel companies have

signed our “no child slave labor in the cotton fields” pledge. We have also organized the electronics industry around conflict minerals.

Can you tell us more about the business case that you make to these companies to make them want to change their behaviors?

AB: Home Depot used to sell old growth forests in its lumber supply and there was a lot of pressure from groups that were doing things like climbing on its stores’ roofs and unfurling banners and doing protests in its parking lots. It was getting intense outside pressure. We were on the inside as shareholders and we came to the company with a business plan. We said, “Look, two percent of your sales are from lumber. If you switched from old growth lumber to farmed lumber, nobody would notice and nobody would care, but it would improve the brand. Therefore, you would be increasing revenue with no risk.”

The management looked at that and thought, “Yes, this makes economic sense and can help us get the people off of the roofs!”

There are certain ways that you can talk to a company that make business sense and it makes it easier for it to agree with your proposals, as opposed to the mentality of, “I am not going to cave to this aggressive shaming of my brand.”

It’s really important that these two types of actions, both external and internal, work in concert.

Would Home Depot have accepted our proposal without the outside pressure? Maybe not, but the point is that it responded better when we put it in a business context.

At the end of the day, it’s really about, how can you raise the consciousness of a company so it will act in the best interest of its brand and of society and reduce and reduce risk for shareholders?

The motivation isn’t just to be a good corporate citizen. It has to be economically feasible and it has to

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improve the company’s brand.

From a stockholder perspective, management that has good environmental, social, and governance (ESG) practices tend to be better management teams.

They’re thinking about the entire system. They’re being more efficient. An example of this is at UPS. UPS burns a lot of gasoline because it has a lot of trucks. The company did a study and now - I call this the “Zoolander move” - its drivers aren’t “ambi-turners.” They do not make left-hand turns. UPS found that sitting and idling to wait to make a left-hand turn burned more gas than just going around the block. The company saved tens of millions of dollars in gasoline because of this, and those cost savings go straight to the bottom line. Does it do good things for the climate? Yes. Does it save UPS millions of dollars? Yes. Somebody thought of that because they were thinking through the entire system from an ESG perspective. This is a company that is thinking. This is a company that has a higher level of consciousness.

What is giving you hope for the future?

AB: The fact that the shift is actively happening and every day we accelerate it. I see the walls of protective, reflexive responses being seen for what they are and a new openness beginning to flow.

We are all living together on a small, precious planet. The people working at large corporations don’t want to destroy it. They may have some misguided assumptions, but we are in the business of pressing transformation through steady, tenacious insistence on transparency and truth. I have a deep hopefulness for the future. $

Andrew Behar is the CEO of As You Sow, a nonprofit founded in 1992 dedicated to increasing corporate responsibility and establishing a safe, just, and sustainable world in which environmental health and human rights are central to corporate decision making. Programs create industrywide change through dialogue, shareholder advocacy, and innovative legal strategies.

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SHAREHOLDER ADV PRIMARY FILERS IN 2014

TYPES OF PROPOSALS FILED: 2014

INDIVIDUALS/ OTHER 6%

SPECIAL INTERESTS 6%

ENVIRONMENT - CLIMATE AND ENERGY 19%

SRI GROUPS 31%

SUSTAINABILITY 12% ENVIRONMENT OTHER 8%

FOUNDATIONS 7%

UNIONS 9% DIVERSITY 11%

POLITICAL ACTIVITY 30% RELIGIOUS GROUPS 17%

PENSION FUNDS 24%

OTHER 8%

ANIMALS 3%

HUMAN RIGHTS DECENT WORK 9%

U.S. SOCIAL AND ENVIRONMENTAL SHAREHOLDER PROPOSALS FILED 2004-2014 450 400 350 300 250

201 183 200

198

195

180

182

NUMBER OF PROPOSALS

100 50

60 49 87

180

192 417

200 150

185

56

62

48

65

68

61

49

140

145

148

153

148

153

2008

2009

2010

2011

2012

2013

64

113

103

111

2005

2006

2007

0 2004

VOTES

OMITTED

SOURCE: “PROXY PREVIEW 2014,” AS YOU SOW FOUNDATION

WITHDRAWN

DATA UNKNOWN

2014

SOURCE: IRRC, ISS, SI2. DATA AS 2-14-14

OCACY AT A GLANCE 2013 RESOLUTIONS OPPOSED BY MANAGEMENT WITH MORE THAN 40% SUPPORT COMPANY

PROPOSAL

PROPONENT

VOTE*

CF Industries Holdings

Publish sustainability report

Presbyterian Church (USA)

67.0%

CF Industries Holdings

Review/report on political spending

NYSCRF

66.0%

Alliant Techsystems

Report on lobbying

Midwest Capuchins

64.8%

CF Industries Holdings

Adopt board diversity policy

NYC pension funds

50.7%

Universal Forest Products

Adopt sexual orientation/gender ID policy

NYSCRF

49.1%

McKesson

Review/report on political spending

Miami Firefighters

46.8%

Equity Lifestyle Properties

Report on political spending & lobbying

Reinvestment Partners

46.3%

Hess

Review/report on political spending

Trillium Asset Mgmt.

46.0%

Cleco

Publish sustainability report

Calvert Investment Mgmt.

45.6%

Lorillard

Report on lobbying

Midwest Capuchins

44.2%

Leggett & Platt

Adopt sexual orientation/gender ID policy

NYC pension funds

43.9%

Valero Energy

Adopt policy on indirect political spending

Nathan Cummings Fndn.

42.9%

Peabody Energy

Report on lobbying

AFL-CIO

42.7%

Marathon Oil

Report on lobbying

NYSCRF

42.2%

Equity Residential

Publish sustainability report

NYC pension funds

42.0%

Pioneer Natural Resources

Report on hydraulic fracturing/shale gas risks Calvert Investment Mgmt.

41.7%

BB&T

Report on political spending and lobbying

Mass. Laborers’ Pension

41.7%

AGL Resources

Adopt gender identity anti-bias policy

Clean Yield Asset Mgmt.

41.0%

Cardinal Health

Review/report on political spending

Teamsters

40.1%

*Percentages presented as shares cast for divided by shares cast for and against. All proposals listed are advisory and majority votes do not legally require management action. Official passage can require other vote calculations including the consideration of shares cast as abstentions or total shares outstanding. Results above exclude one management-supported proposal at Cracker Barrel Old Country Store about pig gestation crates that earned 96.2 percent support.

SOURCE: “PROXY PREVIEW 2014,” AS YOU SOW FOUNDATION

$

FINANCE

TOP 15 MOST OVERPAID CEOS “CEO pay has grown nearly 1,000% over the past four decades, far exceeding growth in median worker pay or company share prices … Skyrocketing CEO pay packages represent a misallocation of assets that is detrimental to investors, and a driver of wider social inequality.

USD

Using a methodology that combines statistical analysis and an in-depth examination of over 30 ‘red flag’ indicators, the report found widespread consensus on the worst actors, companies with huge pay packages that showed relatively weak shareholder returns … Excessive and poorly structured CEO pay packages don’t just take money from shareholders and pose a risk for the destruction of shareholder value, they also prevent corporations from paying decent wages to their employees.”

$30,000,000 $50,000,000 $70,000,000 $20,000,000 $40,000,000 $60,000,000 $80,000,000 1. Nabors Industries Ltd. - Anthony G. Petrello - $68,246,187 2. Oracle Corporation - Lawrence J. Ellison - $78,440,657 3. Freeport-McMoran Copper & Gold Inc. - Richard C. Adkerson - $55,260,539 4. CBS Corporation - Leslie Moonves - $66,932,581 5. Discovery Communications, Inc. - David M. Zaslav - $33,349,798 6. The Walt Disney Company - Robert A. Iger - $34,321,055 7. CVS Caremark Corporation - Larry J. Merlo - $31,330,162 8. Viacom, Inc. - Philippe P. Dauman - $37,186,099 9. Regeneron Pharmaceuticals - Leonard S. Schleifer - $36,272,665 10. McKesson Corporation - John H. Hammergren - $25,919,882 11. Ralph Lauren Corporation - Ralph Lauren - $24,537,936 12. Salesforce.com, Inc. - Marc Benioff - $31,333,332 13. Exxon Mobil Corporation - Rex W. Tillerson - $28,138,329 14. The Estée Lauder Companies Inc. - Fabrizio Freda - $31,598,679 15. Chesapeake Energy Corporation - Robert D. Lawler - $22,423,367 Source: “The 100 Most Overpaid CEOs: Executive Compensation at S&P 500 Companies,” As You Sow

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FINANCE

$

SHAREHOLDER ADVOCACY

AN INVESTMENT ADVISOR’S PERSPECTIVE

BY DALE WANNEN AS I STOOD WITH SWEATY PALMS IN MY NICELY PRESSED SHIRT and faced the board of directors of Apple Inc., which included the CEOs of Avon Products, The Walt Disney Company, and J.Crew (along with Al Gore), at the Apple Inc. shareholder meeting, I stood proud knowing that, because of an ownership position of stock in this company, the largest company on the planet, I was able to explain to the board and CEO Tim Cook that Apple may have to keep a closer eye on workers’ rights issues in China. When you have Tim Cook’s full attention, well, it’s an interesting feeling to say the least. You may be asking, “Well, how in the world did you get to be in that position?”

Own any shares of stock in a company?

Congratulations, you are part owner of that company. Once a company commits to “going public,” it is giving up some ownership of the company to the public. Sounds simple right? Buying shares that trade on the NYSE or NASDAQ is really just another form of crowdfunding that allows the owners of stock to buy or sell shares via a marketplace.

One of the added benefits of owning shares is that it actually gives you a voice in how that company may be handling certain matters through the process of submitting a shareholder proposal.

Shareholder proposals can involve a myriad of different topics, from human rights to animal rights, from executive

• Asking First Solar and Urban Outfitters to have more women and minority representation on their executive boards.

• Asking Dean Foods to adopt a policy on phasing out the practice of dehorning cattle.

A shareholder proposal can be brought forth if the owner of that stock has at least $2,000 worth of stock and has held the stock for one year or more. No, you do not have to be billionaire activist Carl Icahn to influence corporate behavior, though I assume he gets a bit more of executives’ attention. Owning a mutual fund or an exchange traded fund (ETF) does not give you the right to file, which is one reason why owning individual

staring you down.

Do these proposals really do anything?

It is very rare for shareholder resolutions to win the support of the majority of shares voted at company annual meetings.

Moreover, most shareholder resolutions filed are non-binding, meaning that even if they gain a majority of votes, the company need not comply with their requests. Despite this, these proposals can make serious change.

I would have to imagine that if 25 or 30 percent of shareholders want a company to adopt a policy on cage-free eggs or on how to cut water usage, then the executives and board will be chatting about this at Monday’s morning meeting. There are many examples of change being implemented following a

“ONE OF THE ADDED BENEFITS OF OWNING SHARES IS THAT IT ACTUALLY GIVES YOU A VOICE.” compensation to toxic waste (and some CEOs’ salaries that may seem like toxic waste), from fur products to cage-free eggs.

Approximately 400 shareholder resolutions were filed in 2014 - that number having doubled in the past few years.

Some recent examples of these shareholder proposals include: • Asking JPMorgan Chase to report on how it considers greenhouse gas (GHG) emissions in its financing practices.

stock positions is actually making a comeback. Investors want to know what they own and want to exercise their ownership position. Once a resolution is considered material to the value of the company, the Securities and Exchange Commission (SEC) allows the proposal to be placed in the proxy statement, which then lets every shareholder vote “against” or “in favor” of the proposal.

On top of this, the proponent is given approximately five minutes to speak at the annual shareholder meeting, and it can be quite the thrill to have the CEO and board

shareholder proposal. For instance, Best Buy implemented a recycling take-back program years ago due to an individual shareholder asking the company to do so.

I’m reminded of a black and white image from the 1960s of a person holding up one of those old shareholder ownership certificates making a statement at an annual shareholder meeting. Perhaps we will go full circle and that black and white image will turn color as investors realize they have the power to influence corporate behavior even here in 2015. $

Dale Wannen is President of Sustainvest Asset Management, an independent investment advisory firm based in Northern California that specializes in socially and environmentally responsible investing, helping clients meet their financial goals without having to sacrifice their morals. He can be reached at dale@sustainvestmanagement.com. www.sustainvestmanagement.com SPRING 2015

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Photo: Iwan Baan

ASPIRATIONAL ARCHITECTURE -

MORE THAN MINIMIZING THE FOOTPRINT AN INTERVIEW WITH MICHAEL MURPHY OF MASS DESIGN MASS Design Group, based in Boston, is proving that the built environment can improve lives. The design firm identifies projects that will effect the most catalytic changes and designs beautiful buildings that will improve the health and well-being of the communities that they serve. It also believes in using the building process as a tool to promote economic prosperity, educational opportunities, and environmental health. The group simply demands more from the built environment than traditional architects do and is inspiring others to design and build from a systems perspective.

We spoke with Co-founder and CEO Michael Murphy about his inspiring company.

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CAN A BUILDING SAVE LIVES? Following the 2010 earthquake in Haiti, cholera emerged throughout the entire country. Cholera is both a curable and preventable disease, but patients were only able to find medical care in temporary tents, which are particularly hard to keep sanitary.

MASS Designs partnered with Haitian health care provider Les Centres GHESKIO to design and build a state-of-the-art cholera treatment center and on-site wastewater treatment plant - the first permanent cholera treatment center in the country.

SO, YES, A BUILDING CAN SAVE LIVES.

INNOVATION & DESIGN

How did MASS Design get started, and what was your inspiration for creating this innovative design group?

Michael Murphy: I started the company when I was a student at the Graduate School of Architecture at Harvard. I had the opportunity to meet Dr. Paul Farmer, the founder of Partners in Health, and felt there was a call to action, which was essentially, “Why aren’t any architects helping us do work in the places that we’re working globally, from Rwanda to Haiti? What’s the disconnect between those who are experts and professionals in the built environment and those experts who are working for the communities most in need?”

that could really improve people’s lives, improve the organizations that we were working with, and become a symbol of positive social change.

Can you speak a little bit more about the sustainable side of your designs?

MM: It’s not just what you draw, but it’s how you build it. When you think of how you build, all of these other residual positive effects can emerge.

Reflectively, when we think about all of the decisions an architect might make on a drawing board or a computer screen, they’re really choosing a vertical supply chain of labor. They’re choosing an entire economy to impact. I think we give gravity to those choices. We think

MM: The reality of implementation is actually much more difficult than just getting a team of builders together.

In places with limited resources, there’s a significant dearth of not only quality builders but builders who have experience in more complicated design work. Or they just build differently.

They build well, but they don’t know how to read construction drawings from the US. There’s a real “lost-intranslation” component in the built environment.

We saw that in Haiti, for example, where 250,000 people died not because of an earthquake, but because of buildings that fell on them after an earthquake. The structural system was not in place to ensure that they were

“Well-designed buildings can be a place where people aspire to believe in something greater than themselves.”

It was like a rallying call, and I moved to Rwanda for some time to work with NGOs that were doing work in the built environment by building clinics, hospitals, housing, and schools, all largely without the services of architects and designers. When the opportunity came along to help an organization build a new hospital on a large scale in Rwanda, I was asked to support it. I discussed it with a collection of fellow colleagues from school, and we jumped at the chance to facilitate the new design of a building for this organization. That’s when I really started MASS - a social enterprise designed around using architecture to effect positive social change and working with other organizations to help improve their overall missions as well as their impacts on the communities that they served.

We started to ask hard questions like, “Does architecture matter? Can architecture make a difference? Is it a methodology or a mechanism for social change?” I think it was really a challenge or a call to action for us to see what architectural moves we could make 142 |

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deeply about who a building will affect, who will build it, what kind of impact it will have, and how we can leverage that to its maximum outcome.

When you talk about sustainability and being less bad, we also think about that in building. For too long, sustainable buildings have been about the least environmental footprint possible. Actually, we know now that it’s not about creating the least footprint, it’s about having a very resilient building that can withstand significant change or disruption. When we talk about the labor variable of decisions in the built environment, the future of sustainability is asking the questions like, “Who is going to build this thing? How do we calculate the real cost of labor? How do we calculate the real cost of the hands that made this and constructed these symbols of hope for our future?” We try to tie those things together in our reflections.

Can you expand on what it means to you to help people become better builders?

strong and earthquake-proof, that they could stand, or that they could protect people from hurricanes or from disease. We learned the big lesson that a good design can improve a place, but a well-designed building process is also a fundamental part of the change that was necessary.

Can you give us an example of a positive outcome from one of your projects?

MM: We had a female mason in Rwanda named Anne-Marie, and she was one of the first female masons. She was concerned with making this really beautiful stonework, and she was an inspiration for the job site and attracted other female masons. The masons were typically men, and there’s a kind of gender inequity in that, but she was really steadfast and talented and really stepped forward and became a team leader. She has gone on to lead masonry teams and has really been an inspiration for the entire job site. It’s really, really amazing.

INNOVATION & DESIGN

How do you measure your theory that better architecture can improve lives?

MM: We use four levels of impact.

We call them the “four E’s”: 1. Environmental: Buildings obviously have a footprint and we have to look at the environmental impact of a building.

2. Economic: We believe and have seen with our architecture that good design has a catalytic effect on places and local economies.

3. Education: A building process can improve lives overall by training people to become better builders and developing new skillsets in order to launch people into new workforce opportunities.

4. Emotional: Really well-designed buildings are more than just functional buildings; they’re actually symbolic and transcendent, and they provide dignity to people. Dignity isn’t quantifiable, but it is real, and well-designed buildings can be a place where people aspire to believe in something greater than themselves.

We do ourselves a great disservice in the aid world and in the world in general when we lower our expectations for how our built environments are designed and when we design with the bare minimum in mind. It’s really sad and problematic that the places where we spend 90 percent of our lives, i.e. inside buildings, are often not attuned or designed for the way in which we use them. We use these four E’s to demand more of architects and more of the public to understand what could be possible outside of just a place where you find shelter.

There’s also a fifth impact that we look at, which is the direct impact. Does the building achieve the ultimate mission of the organization that it’s serving?

For example, if it’s a health building, the organization likely defines its mission as improving health, reducing communicable diseases, or increasing access to medical care.

MM: Our basic indicator and fundamental question is, “Will this building effect catalytic change?”

There are a few different indicators.

First, is the organization achieving significant impact, and will this building help facilitate and improve its overall impact on the community that the organization is serving? Second, is the organization financially healthy enough to construct a building? A building is a major investment and a large capital expenditure, and the organization must have reached some kind of limitation in its growing capacity to provide service and therefore needs to invest in order to achieve a much more amplified amount of service and impact. Third, can we leverage the building process? Is there an opportunity to use our design approach so that it has the effect we want each building to have?

We’re really selective, and we’re not interested in building 10,000 buildings.

We’re just going to be building a few buildings, and we hope each one is going to achieve some sort of catalytic effect.

By that, I mean we want to really go upstream and change the way people build more generally in that region or nation.

“We started to ask hard questions like, ‘Does architecture matter? Can architecture make a difference?’”

What is your vision for the future?

MM: I want paradise to happen in the public, where we demand of the built environment that it improve our lives and that we hold it accountable for our health, our ability to live successful lives, and for its direct appreciation of the community that builds it. I think once we tie together our community, our neighbors, our labor that works on construction, the performance of our built environment, and our ability to live healthy lives, we’ll immediately demand a higher caliber of work. We will immediately make our buildings safer, and we will immediately see our built world through a different lens. I think a lot of architects feel the same way, and we just want to push it along.

Photos: MASS Design

How do you identify and then choose the projects that you’re going to spend your time on?

Michael Murphy

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The Living Building Challenge is regarded as the most stringent green building certification in the world, promoting living, regenerative buildings that produce more energy than they consume, avoid toxic chemicals, and reuse their water.

Projects can achieve three different certifications including full Living Building Certification, Petal Recognition, or Net Zero Energy Building Certification.

While Living Building Certification is the ultimate goal for most projects, there are seven different “Petals,” or performance categories, including place, water, energy, health and happiness, equity, beauty, and materials, in which projects can certify in the pursuit of full Living Building

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Certification. In order to achieve Petal Certification, projects must certify in three or more Petals and one of the Petals must be either water, energy, or materials. Full Living Building Certification includes projects that have achieved all seven Petals in addition to meeting 20 different imperatives established by the International Living Building Institute.

In addition to being a certification process, the Living Building Challenge can be seen

as a philosophy - a profoundly unique approach to looking at the environment. Rather than trying to be less bad, the Living Building Challenge steps back to ask the question, what does “good” look like? We had a chance to discuss this innovative approach to promoting a more sustainable built environment with Living Building Challenge Executive Director Amanda Sturgeon.

INNOVATION & DESIGN

Source: Living Building Challenge

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INNOVATION & DESIGN Leadership in Energy and Environmental Design, or LEED, is probably the most recognized certification in the built environment.

How does the Living Building Challenge differ from LEED and build upon it?

Amanda Sturgeon: The Living Building Challenge goes beyond LEED to create buildings and communities that are truly restorative. It challenges buildings and communities to become net positive in their energy and water use and to remove the worst-in-class toxins from all building materials.

The Challenge is intended to pull the market forward and to provide solutions for a living future that we cannot yet fully envision.

How many projects have been certified so far?

AS: To date, we have over 240 projects registered and 21 certified (with many more about to be announced at our upcoming Living Future Conference NO OF PROJECTS

300

in April). Some of these buildings have completed all seven Petals and all 20 imperatives and are Living Certified, while others have achieved three or more Petals and have Petal Certification or have achieved Net Zero Energy Building Certification.

We are seeing rapid expansion of the Living Building Challenge around the world, which is now in 18 countries.

We have a special concentration here in the US and Canada, of course, as well as in Australia and the UK, where we’ve got some incredible projects underway.

What is the largest systemic barrier to living buildings scaling and becoming the mainstream standard in the future?

AS: The largest barriers are regulatory, particularly around water. Everywhere you find a Living Building, you’ll find a new precedent being set for building codes. For example, the Bullitt Center in Seattle is often called the “greenest office building in the world.” Many water regulations had to be changed

SQ. FT. (MILLIONS)

due to the project, such as allowing the release of greywater into a public rightof-way in an urban area and harvesting rainwater for potable uses.

What has been the most popular Petal and which one seems to be the most challenging?

AS: Our most popular Petal is the Energy Petal, which requires the building to produce 105 percent of its energy use from renewable, on-site sources over the course of a year. What I love about this Petal is that it is so clear and simple (you either meet it or you don’t), but the project teams are left to determine the best way to get there.

Most of our project teams will probably tell you that our Materials Petal is the most challenging, given that we require that a certain list of toxic materials (called our “Red List”) be avoided. Initially, finding products that avoid these Red List materials was difficult, so we developed our own transparency label for manufacturers

LBC PROJECTS

ORGANIZATIONAL INTEREST

9 1-2 3-5

6-10

11-14

15-19

20-24

PRESENCE OF AMBASSADOR NETWORK

280 8

260 240

8,771,075 SQUARE FEET

7

232

220

PROJECTS 200

6

180 160

5

165

140 4

DECLARE PRODUCTS

120 100

3

80 60

2

40 20

1

2009

2010

2011

2012

2013

2014

2015

GLOBAL IMPACT - REGISTERED PROJECTS (NOV. 2014) Source: Living Building Challenge 148 |

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INNOVATION & DESIGN called “Declare,” which is a selfdeclaration label identifying a product’s ingredients.

Does the LBC offer any guidance for current homeowners on ways to renovate their homes in a sustainable manner? Can rehabilitating an older home bring it up to full certification or Petal Recognition under the LBC guidelines?

AS: Yes! We’ve had several homes go through the process, such as zHome in Washington. And yes, you can renovate an existing building or home and become certified. In fact, we recently released a framework for affordable housing projects that creates clear pathways for developers of these projects to achieve Living Building Challenge certification.

The LBC has seven focus areas: place, water, energy, health and happiness, equity, beauty, and materials. Can you provide us with a few examples of how you quantify and judge areas such as beauty or health and happiness?

zHome Photo: zHome

AS: The intent of the Beauty Petal is to recognize the need for beauty in order for us to have a living future.

The intent of the Petal is not to determine whether certain aesthetics are preferable to another but whether the human soul and spirit is enriched through the project and whether the occupants of the building are delighted to be in the project. The Beauty Petal is determined in part by an occupant survey.

When you reflect on where the LBC began and how far it has come, what is an example of the change you had hoped to create?

AS: The program has achieved more than we could have ever hoped. It has been rapidly adopted in a wide range of locations across the world and experienced a 40 percent increase in registered projects during 2014.

Having the first hospital register and the first projects in China register during 2014 were two highlights for the Challenge.

Bullitt Center Photo: Nic Lehoux

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LEADING INNOVATION:

USING CROWDS, CLOUDS, PARTNERS, AND PRIZES TO BUILD BREAKTHROUGHS

BY LARRY KEELEY, CO-FOUNDER AND PRESIDENT OF DOBLIN

T

he most pervasive misconception about innovation is that it is essentially synonymous with creativity. People almost universally believe that innovation comes from geniuses, gadflies, mavericks, rocket scientists, and agency types fueled on illicit substances. This belief is profoundly and dangerously wrong. Learning to see modern innovation more clearly can help firms of any size innovate more effectively - building bold breakthroughs more reliably. Any conscious company trying to have more impact with scarce resources should make it a priority to master these revolutionary methods.

Consider one simple example: as a startup business, you might want to create an app and have it manage sales, plus some zippy new sophisticated services. Back in the old days – about four years ago - you would have had to build such a capability with a secure back office, costing perhaps $4 to $5 million, before you received your first dollar of revenues. By contrast, today, fully 70 percent of all US startup firms begin

life inside the Amazon Elastic Compute Cloud, where you can simply select the functionality you need, then pay for the services by the hour. Your initial costs may run less than a dollar per hour, and those costs scale as your business does.

In this cloud world, you can prototype and iterate your startup perhaps seven times before you spend as much as you used to have to spend to get to your version 1.0.

These new tools and tactics are among hundreds that we track and teach at places like Kellogg Graduate School of Management or the Institute of Design in Chicago. Collectively, we call this revolution “lightweight innovation.” When you know about this new approach, and when you use these tools with discipline and dexterity, there are far fewer obstacles between your bold goals and effective execution of a newsworthy breakthrough business or service.

WHAT DOES EFFECTIVE INNOVATION ACTUALLY LOOK LIKE? Over the past thirty years, a small but dedicated group of scientists have worked diligently to learn what makes innovation succeed instead of fail. Their discoveries have been remarkable. Put simply, there is a huge and growing gap in the innovation results that pros get compared to average Joes (and Josephines). So, if you are new to the topic, start here…

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INNOVATION & DESIGN CLEAR DEFINITIONS: Innovation is the creation of a new viable market offering. Each of these words matters, especially “viable.” An innovation need not be truly new and they rarely are; they are just new in your market space. Note that “innovation” is a noun - it’s what you’re cooking up.

Innovating requires identifying complicated problems that matter, then moving through them to deliver elegant solutions. Research shows that more than 95 percent of the time, teams focus on the wrong problem when they try to innovate, so this helps capture the process side of innovation. Note that “innovating” is a verb - it describes what you have to do to innovate successfully.

PERVASIVE MYTHS:

1.

You should focus on a product. This is the single dumbest thing to try, but it is a nearly universal assumption.

In the unlikely event you succeed, it will be swiftly copied, since it is always easier to have an idea second. Focus on platforms instead.

2.

The most important thing is creativity. This is simply wrong.

Most people and nearly all firms have too many ideas. The key to effective innovation is discipline.

3.

Generate many ideas. This always leads to challenges in evaluating the ideas afterwards, and most firms do that very badly. Great innovators focus on a smaller number of bigger ideas.

Larry Keeley has worked for over three decades to develop more effective innovation methods. He has been identified by BusinessWeek as one of seven leading global innovation gurus, and separately as one of 27 leading global designers. He teaches innovation at both IIT’s Institute of Design, where he is also a Board Member, and at the Kellogg Graduate School of Management, where he has been recently appointed as a Senior Fellow.

4.

New technology is always key.

Surprisingly, this is very rarely true. Modern innovation is much more about the elegant integration of many well-known things rather than the primary invention of new things. The best innovations balance the offering with the business model and a great experience.

THE NEW SCIENCE OF INNOVATION Over the past couple of decades, innovation has been giving up its secrets. The best scientists of innovation always study which innovation efforts return the cost of capital for the developing team – call this a “hit.” Innovation scientists have learned many things that move the “hit rate” up from a global average of less than five percent to rates that are routinely above 35 percent and can range up to nearly 80 percent - prima facie evidence that there is now a science where before there were mainly only lucky strikes. Here are the keys to this emerging science:

1.

Make discoveries. You really have no right to innovate unless and until you know some stuff that others don’t.

So use social scientists, mine big data, and study users. Focus on what wastes their time, annoys them, or simply prevents them from using a category because they don’t feel they can.

2.

Use protocols, not brainstorming.

The cruelest thing we do to smart people is to stick them in a room and say, “Okay, innovate now!” What we’ve discovered is that it is simply harder than that - like major surgery or flying an airplane. So, give people step-by-step tools so they know what to do.

3.

Inside an organization, make it obligatory, not optional. The ideal way to do this is to incentivize senior executives to sponsor innovation, and use high-potential young leaders to author innovations.

LEADING INNOVATION NOW During any time of intense change, innovation is a vital leadership imperative. Simply put, if you are not changing boldly and swiftly enough now, you are very likely falling behind.

If you are innovating boldly, you can get your unfair share of attention - attracting partners, talent, and investors all in disproportion to your size. This is how you punch way above your weight. If you wish to master this newer, 21st century bold and lightweight innovation: • Author the boldest possible concepts the ones that can change the world.

• Then execute with lightweight tools and methods - using crowds, clouds, partners, and prizes, and by building your plans in the most elementary, modular ways.

When you do it right, it will be the hardest work you ever loved.

One new way to treat innovation is as a series of modular, smart tactics that act like Lego™ building bricks - so that innovation becomes less about brilliant invention and instead a simpler exercise of construction. Developed at Doblin in work led by my colleague Ryan Pikkel, the entire universe of innovation tactics presently numbers just 115 simple ideas - yet these are entirely enough to build literally any of the most valuable 4,000+ innovations currently active in the world.

For example, these five tactics show what Tesla has done to make itself the cool kids’ car: LICENSING

ENVIRONMENTAL SENSITIVITY

STRATEGIC DESIGN

TOTAL EXPERIENCE MANAGEMENT

MASTERY

GO DIRECT

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AWARD-WINNING DESIGN FIRM GREEN & ASSOCIATES, based in Hong Kong, is introducing sustainable household products made of recycled materials through its Ooobjects product line.

The firm uses recycled and upcycled waste coupled with harmonious design to create novel, sustainable products.

MATRY FLOWER POT SET This pot set is 100% biodegradable.

30% Wood Ash 30% Bamboo

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INNOVATION & DESIGN

MAGPIE HANGING HOOK SYSTEM This clever hook system is made from used carpet collected from exhibition fairgrounds.

Recycled Felt From Used Carpet

HLOOPY PHOTO FRAME SET Upcycled and converted food waste is made into new materials to create these biodegradable picture frames.

Tea Grounds

Apple Pomace Egg Shells Coffee Grounds

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INNOVATION & DESIGN

“We believe good design makes lives better.”

BUOY APPLE BRUSH Apple Dreg

These biodegradable brushes are made from apples and other biodegradable compounds collected from a juice factory in Shanxi, China.

Biodegradable Compound

Pigs’ Bristles Photos: Green & Associates

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INNOVATION & DESIGN

D

ID YOU KNOW THAT AN ESTIMATED ONE-THIRD OF THE FISH YOU PURCHASE AT THE SUPERMARKET IS MISLABELED?

Individuals who care about what types of fish they are purchasing don’t even have the option of “voting with their dollars” because the responsibly caught fish are often commingled with irresponsibly or illegally caught fish. With over one billion people worldwide depending on fish as their primary source of protein, and with limited options for consumers to purchase fish caught in a responsible manner that doesn’t promote overfishing, theCheryl Dahle stakes couldn’t be higher to change this system.

The team at Future of Fish is taking on the entire fishing industry in its mission to create such change. Future of Fish is a “nonprofit systems change incubator” that is working to bring traceable, trustworthy, and legally caught fish to market. The group recruits entrepreneurs, businesses, and other nonprofits to work together in what it calls “pods” to develop strategies for achieving this goal. In addition to facilitating the pods, Future of Fish provides in-depth research and systems maps that identify problem areas in the global fishing industry, hosts workshops to co-design strategic solutions to specific challenges, and provides advisory and media services for the entrepreneurs tackling these issues within the system. We discussed this innovative model for systems change with Founder and Executive Director Cheryl Dahle.

How did you develop the model for tackling this huge issue?

Cheryl Dahle: Like most origin stories, it’s a combination of intention and accident. My background is as a journalist, and then I was an analyst of nonprofits. In those jobs, I had a lot of opportunity to look at social change. As a reporter, I worked for Fast Company magazine for about ten years, writing about social entrepreneurs and the intersection of business and social change. I got to see a lot of patterns, and I became very interested in how we create new solutions to these thorny, really wicked problems. In doing that work, I came up with some theories on what I thought might be one approach to incubate bigger change.

I decided to couple a type of analysis that I had been applying to find patterns in the work of social entrepreneurs, with a design-based approach to coming up with new ideas. The whole point of the process was to understand what was missing from the current ecosystem of solutions. When we got to the end of the process, the idea was Future of Fish, a nonprofit systems incubator. However, we couldn’t find anyone to run it. We had thought we would find an entrepreneur already active in this space who would take it on, and we had this - in hindsight predictable - chicken and egg problem. The entrepreneurs we recruited said, “This is a fantastic idea, but you don’t have any money.” The investors said, “This is a great idea, but you have no team.”

At some point, I was trying to talk yet another entrepreneur into doing this gig and she turned to me and said, “What do you not get about the fact

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INNOVATION & DESIGN that you’re the entrepreneur here?” This really took me aback because I had always seen myself as a writer and an analyst. I went to the funder and asked, “If I led this project, would you seed fund it?”

And they said yes. It was a little bit of an accident, a little bit of pushing, and a little bit of just being so invested in the work that, had I not taken the risk and stepped up, two years’ worth of work would have been lost and I just couldn’t bear to see that happen, no matter how scared I was to move into the space of entrepreneurship.

Most people tend to assume I must have a degree in marine biology, or I must be one of those ocean people who surfs all the time. It’s not like that.

I’m terrible at snorkeling, and I didn’t even see the ocean for the first time until I was in high school because I was born in the Midwest. It did not come from a very deeply rooted love of oceans; it came from a very deeply rooted love for systems and a passion for tackling complex challenges.

What does it mean to be a “nonprofit systems change incubator”?

CD: I think people are familiar with what an incubator does - it tries to help things grow. Most incubators are focused on the level of one company and the sole success of that individual company.

At Future of Fish, we’re looking at a different level of change; we’re creating initiatives and systems through collaboration and collective impact. What that means in practice is that we only recruit entrepreneurs and individuals whose theories of change are actually targeting the systems levers that we’ve identified. There is a group intention around this initiative that’s not typically present in most incubators.

Can you provide us with an example of a successful project that Future of Fish has supported?

CD: Future of Fish finds new opportunities with both market potential and impact potential. We then cultivate a cluster of entrepreneurs around those ideas to build a business ecosystem. Those clusters, or “pods,” help take disruptive ideas and spread them to the mainstream while developing investable companies at the same time.

One example of that process is the work we’ve done with Tom Kraft, an entrepreneur in the seafood distribution and import business. His company had developed a homegrown IT system to track inventory and provide traceability down to the fillet, a breakthrough achievement in an industry that has a mislabeling rate of more than 33 percent and sells millions of metric tons of illegally caught seafood every year.

His innovation was the basis of a research paper we produced to document the business ROI of

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Photo: Future of Fish

INNOVATION & DESIGN Photo: Future of Fish

better IT. That report led us to convene technology vendors and seafood industry executives to devise ways to increase technology adoption, which will also decrease the amount of illegal product.

In the meantime, Tom has launched a new company to commercialize a technology system for other seafood companies using the insights he gleaned from his first effort. We’re helping him secure investors. Business wins, and the fish win.

In your vision for a reinvented fishing supply chain, what do you mean when you talk about moving from commodity fish to storied fish? What does storied fish mean to you?

CD: If we want markets to drive change, then the incentives have to be linked to the right behaviors. We can’t reward fishers who fish responsibly by paying them more if we can’t even accurately label and pack products. Until we have a supply chain that can deliver fish that have a story, what we get is fish without a history, which means it all gets valued at the level of a commodity. There’s no differentiation in the product if you don’t have a story, and there’s no story if you don’t have good data. So for us, that’s why this whole conversation begins with traceability and our ability to bring it to this supply chain.

What have been some of the most challenging moments since the launch of this project?

CD: I think that people tend to feel defeated working on these large, complex systems problems when they’re looking for short-term wins and easy answers. We’ve become embedded in the system we’re trying to fix, and we’re working alongside the people whom we’re trying to support, and this is totally a patience game.

You hear lots of “nos,” lots of “this will never work,” or “you’re on the wrong track.” When we first started our work, everybody said that focusing on traceability, data, and the middle of the supply chain was the wrong strategy.

Now, four years later, they all agree with us. Some of it is just the ability to believe in the wisdom you’ve unearthed by studying the system before it actually starts to come to fruition.

What strategies have you found to be truly effective for Future of Fish?

CD: I think one of the things that distinguishes us from some of the other players - not just in fish but, frankly, the way many nonprofits view problems - is that we’re not coming to people saying, “You’re wrong, you should adopt our way of thinking.” We’re coming to the table, listening carefully, and saying, “How can we understand the motivations that produce behaviors driving bad outcomes for the system?”

That means meeting people where they are and empathetically engaging with folks around how to drive change, how to design different pathways, and how to design different motivations to shift the outcome.

It’s much easier to stand back and say, “There are people who wear black hats and people who wear white hats.

We have the white hats, you have the black hats, so you’re wrong.” But it’s not a very effective way of driving change.

You can make an industry wrong all day long and it’s still going to function, and it’s still going to operate. Figuring out how to get in the trenches with them and then help them to change is a better strategy. As a journalist, I brought a level of openness and objectivity around not being vested in one approach.

It’s folly to think there’s one silver bullet, or that there’s one solution. I’m not attached to, “Hey we’ve got this particular idea, and this is the one that we need to run with, and there are never any other good ideas.” It makes it easier to build a platform where you can pull lots of different players to the table and see merit in everything that they’re doing.

Photo: Future of Fish

Photo: Jay Feming, Maryland Department of Natural Resources

Are there any other movements or examples of teams consciously trying to drive change in a system that you find inspiring and that you look to?

CD: There’s an organization called Black Male Engagement. It’s a project and initiative that’s intended to shift the perception of black males in the US as contributors, as opposed to risks or threats. A lot of the group’s work is taking a look at how we culturally and socially stereotype and then ignore facts and stories that run counter to those assumptions. One of its primary roles is to highlight positive stories of African

Future of Fish works with entrepreneurs that include 3D ocean farming pioneer Bren Smith (top), and Steve Vilnit (white shirt, bottom), Director of Fisheries Marketing for the Maryland Department of Natural Resources.

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American men who have been incredible achievers. What I find inspiring about Trabian Shorters’ work is that it started with great examples of leaders, but then built a distribution platform for those stories through media partnerships, a book, and outreach in specific cities.

He found a way to make that change in consciousness ripple out into the world.

Another great example is Patricia Majluf, a marine biologist in Peru.

She managed to reinvent the way that Peru consumed fish. Peru has a really large thriving anchovy industry, yet worldwide, anchovies primarily wound up being turned into pig or fish meal.

You take these really great, nutritious fish and you grind them up and turn them into animal food. This was happening in Peru, which at the time had a very high child malnutrition rate.

Patricia said, “This is crazy,” and part of what she did was to enlist chefs in a

How has it been working with some of the stakeholders from the fishing industry? Has there been resistance to your efforts and, if so, how have you dealt with it?

CD: A lot of other groups had done very deep work with fishers before we arrived on the scene. Particularly in the US, there is a lot of awareness and there are a lot of progressive fishers that understand that if the resource is overfished, they don’t have a future. The issue becomes not just environmental, but regulatory. I find that other people that I’ve met who have been most reverent about fish and most appreciative of the resource are not nonprofits, they’re fishers! When your livelihood is tied to something, the value of it is enormous. I’ve listened to fishers talk about the history that they have and the link they have to the fish in the sea,

your strengths, or if you don’t care about cultivating them, I’d think about doing something else.

What does working on “who you’re being” look like for you?

CD: [laughing] For me, it looked like working with leadership coaches, and it also has meant creating a space and a team that operates with absolute honesty. We have a commitment to admit when we make mistakes, and we can ask for forgiveness from the group.

We relentlessly confront all the ways in which I, and we, fall short, and that is a conversation we’re OK having.

Driving change in the fishing industry will be a long process, but has your work so far inspired you to look at any other systems that you might one day potentially like to work on?

“You can make an industry wrong all day long and it’s still going to function, and it’s still going to operate.

Figuring out how to get in the trenches with them and then help them to change is a better strategy.” movement to rebrand the anchovy as a sexy, elite food. It changed consumption patterns, and they ended up getting anchovies into state-sponsored school lunches throughout the whole country.

That started by her saying, “This doesn’t make any sense. We’ve got child malnutrition on the one hand and then we’ve got overfishing of anchovies on the other.” Essentially, by making the problem bigger - by making it a problem that belonged to chefs, a problem that belonged to child health advocates, to the schools, and to politicians, rather than to marine biologists alone - she made it everybody’s issue. That’s one of the things that systems change leaders do well.

and they break down in tears. It’s not true that fishers will reject change out of hand; I think a lot of it has to do with how you position the change.

What is the greatest piece of advice you could give to any young entrepreneur who has a vision for creating impact and driving change?

CD: I would say, as much as you work on your idea, work twice as hard on who you’re being as you do it. You are the instrument of change, and to be a good one, you have to consistently show integrity in your relationships through authenticity and open-hearted listening. All systems change demands a different form of leadership - one that’s networked, humble, enabling, and empathetic to its core. If those aren’t

CD: Yes, absolutely. Actually, the intention from the very beginning was to come up with a methodology that could create more solutions. Fish was always a demonstration case. In September, we launched a for-profit company called Flip Labs. It is our first effort toward starting to take this approach and apply it to other systems. We’ve been running now for a couple of months and we’re in conversations with several different partners about what topics we might take on, and the range is pretty interesting. We’re looking at everything from the treatment and diagnosis of trauma, to soil restoration, to looking at end-of-life care. All of those are systems that have plenty of different issues, and yet the methodology that we’ve designed is flexible enough to take on any of them.

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PARTING THOUGHT...

“WHEN WE RELEASE OUR IDEAS INTO THE WORLD, INCREDIBLE TRANSFORMATIONS CAN TAKE PLACE. IT TAKES COURAGE TO LET GO OF OUR BIGGEST AND BOLDEST WORK (EVEN OUR SMALLEST ONES), ESPECIALLY WHEN DOING SO REQUIRES ACKNOWLEDGING IMPERFECTIONS AND POSSIBILITIES FOR ERROR. BUT TAKING THAT CHANCE OFTEN LEADS TO GREAT THINGS MAGICAL THINGS EVEN - WHEN THE IDEAS ARE GOOD ENOUGH TO TAKE ON A LIFE OF THEIR OWN. THE UNIVERSE HAS A WAY OF PROVIDING WHAT IS REQUIRED WHEN WE ALLOW IT TO, DOING AWAY WITH BAD IDEAS (USUALLY FOR EVERYONE’S BENEFIT) AND ELEVATING GOOD ONES.” - Jason F. McLennan & Mary Adam Thomas, Zugunruhe: The Inner Migration to Profound Environmental Change