Conscious Company Magazine | Issue 4 Fall 2015

THE PARADIGM SHIFT | 17 RISING SOCIAL ENTREPRENEURS

THE FUTURE OF BUSINESS AS USUAL

SUSTAINABLE

BUSINESS PLANNING 7 STEPS

SECRETS TO HAPPY EMPLOYEES KIP TINDELL, CEO

THE CONTAINER STORE

THE FUTURE OF FINANCE LEADING DISRUPTORS JASON MCLENNAN ROBERT EGGER TONY SCHWARTZ

THE FASTEST GROWING FOOD COMPANY IN THE WORLD HAMPTON CREEK’S CEO JOSH TETRICK

FOOD | ENERGY | FINANCE | INNOVATION & DESIGN | LEADERSHIP Display until December 31, 2015

TABLE OF CONTENTS FOOD

42

A SYSTEMS THINKING RENEGADE ROBERT EGGER DISCUSSES THE FOOD SYSTEM*

INNOVATION & DESIGN

50

12

GREEN BUILDING’S RESIDENT TROUBLEMAKER A CONVERSATION WITH JASON MCLENNAN*

STARTING THE FOOD SYSTEM OVER A CONVERSATION WITH JOSH TETRICK*

FINANCE

20

26

22

28

A BUILDING THAT DOES GOOD ARCHIBLOX

RETHINKING THE WAY WE LIVE ECOCAPSULE

*Cover Story

THE FUTURE OF FINANCE TOP EXPERTS WEIGH IN*

MONEY, MISSION, AND LEGACY A GUIDE FOR CONSCIOUS COMPANIES

32

THE NEW TREND IN INVESTING: FARMLAND

38

AN IMPACT INVESTING PIONEER’S JOURNEY

59

BUILDING A COMMUNITY OF BUSINESSES ZINGERMAN’S DELI

ENERGY

66

4 DISRUPTIVE ENERGY TECHNOLOGIES

70

SMART DESIGN MEETS A PROFOUND NEED AT NOKERO

74

WHAT DOES THE CLEAN POWER PLAN MEAN FOR BUSINESS?

LEADERSHIP MARKETPLACE

79

17 RISING SOCIAL ENTREPRENEURS*

90

SECRETS TO HAPPY EMPLOYEES KIP TINDELL, CEO OF THE CONTAINER STORE*

96

WHY Q4 IS THE MOST IMPORTANT FOR SUSTAINABLE BUSINESS

102

OPTIMIZING EMPLOYEE ENERGY INSIGHTS FROM TONY SCHWARTZ*

BUILDING THE BUSINESS

120

SUSTAINABLE BUSINESS PLANNING 7 EASY STEPS*

124

4 LESSONS LEARNED FROM CLOSING THE B CORP STORE

128

IS BENEFIT CORPORATION LEGISLATION NECESSARY?

132

GOING ALL-IN WITH ELECTRONIC RECYCLERS INTERNATIONAL

136

AN IN-DEPTH LOOK AT CONFLICT MINERALS

141

INTEL’S CONFLICT-FREE SUPPLY CHAIN

FROM THE EDITORS This issue is our 4th and final issue of 2015. As we close out this year, we’re focusing on paradigm shifters - the people and companies that are doing things differently and disrupting entire industries in their wake because we are in dire need of pushing the needle forward. So we’re celebrating these risk-takers who are working hard to redirect the ship and build a different kind of future. They are risk-takers both because they believe business can be a force for good and because they have the audacity to believe that work can and should be a place where we find joy and purpose.

Through our ongoing event series Sum+Substance, we have been hearing firsthand the stories of individuals who are deeply fulfilled by their work, leading us to believe, as Vicki Saunders so aptly pointed out, that it is much riskier to lead a mediocre life and never pursue your true calling, than to do what it takes to follow your dream. We would love for you to join us for one of these nights of storytelling in Boston on October 22 or in Chicago on November 4. We will announce our 2016 dates and cities soon.

We encourage each and every one of you take the time to identify your calling, embrace your strengths, lean into them, and ask yourself how you want to spend the precious, fleeting time we have - our shared nonrenewable resource. We hope you find the interviews and articles that we’ve brought to you to be inspiring, hopeful, invigorating, and most importantly, examples of the direction we all must head in.

With respect and gratitude, Maren, Meghan, & the entire CCM Team

FALL 2015 • ISSUE 4 The Conscious Company Magazine Team CO-FOUNDER AND EDITOR-IN-CHIEFTESS Meghan French Dunbar CO-FOUNDER AND COO Maren Keeley ART DIRECTOR Cia Lindgren ADVERTISING MANAGER Amber Lee Eckert BUSINESS DEVELOPMENT MANAGER Kate Herrmann COPY EDITORS Jack Mott Robin Dickerhoof ASSOCIATE EDITORS Samantha Voncannon Devon Bertram TRANSCRIPTIONIST Jonnifer Cadorna ENERGY EDITOR Pablo Leon MEDIA CONSULTANT Lesley Barnes WEBSITE GURU Jay Mantri & Thrive Consulting Group

Photo: Julie Harris Photography

ADVISORY BOARD Ashley Coale Devon Bertram Emily Olson Katie Dunn Nathan Havey Scott Dunbar Wendi Burkhardt

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NEWSSTAND CONSULTANT BILL GOLLIHER & FULL CIRCLE STRATEGIES, LLC

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INNOVATION & DESIGN

THE LIVING BUILDING CHALLENGE SPOTLIGHT:

THE BROCK ENVIRONMENTAL CENTER Location: Virginia Beach, VA Owner: Chesapeake Bay Foundation Date of Completion: Nov. 14, 2014 Total Gross Area: 10,520 SF Total Construction Cost: $8,000,000 Certifications: LEED Platinum; on track to earn Living Building Challenge certification.

ENERGY

The Center is predicted to be net-positive energy. The design takes advantage of daylighting, natural ventilation, well-insulated walls and roofs, triple-glazed windows, geothermal heating and cooling, and a highly efficient HVAC system to reduce the building’s energy use by over 80 percent, while two 10 kW wind turbines and a 45 kW photovoltaic panel produce more energy on-site than the building consumes.

WATER

The Center is predicted to be truly net-zero water, and is possibly the first in the US to receive a commercial permit for drinking treated rainwater in accordance with federal requirements. Rainwater is harvested and treated to provide for all water uses in the Center. Composting toilets reduce water demand while also treating waste on-site.

DESIGN

The Brock Center’s design embodies the client’s goals to protect, preserve, and celebrate the Center’s ecologically sensitive site while simultaneously showcasing technologies that contribute to net-zero energy, water, and waste. The curved building form responds to the nearby shoreline, maximizes daylight, and embraces passive solar principles. Prominent, curving roofs recall the forms of the site’s wind-swept live oaks, the wings of a gull, and the protective shell of an oyster, while also enabling rainwater collection.

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INNOVATION & DESIGN

In 2000, the Chesapeake Bay Foundation’s (CBF) Philip Merrill Environmental Center in Annapolis, Maryland opened. It was the first project in the world to earn LEED Platinum certification. Since opening, thousands of visitors have toured the Center to learn more about the Chesapeake Bay and green building. CBF wanted to build on the success of the Merrill Center by creating another environmental education center, this time in Virginia Beach. The goal was the same: to create the greenest building possible. This time, that meant going beyond LEED Platinum to comply with the rigorous requirements set by the Living Building Challenge (LBC), a certification program promulgated by the International Living Future Institute that defines the most advanced measure of sustainability in the built environment today. LBC standards require the facility to have “net zero” impact on the environment. The Brock Environmental Center is on track to become the first building in Virginia to earn LBC certification. Beyond the ambitious goal of LBC certification, CBF wanted to create a building that was in harmony with its unique site. The project sits within a 118-acre, undeveloped waterfront landscape, which served as an inspiration for its design.

RESILIENCE

Resilience principles informed the design of the Center so that it will withstand the test of time. Raised 14 feet above sea level, it anticipates future storm surge impacts associated with sea-level rise. Its steel structure, laminated glazing, and cladding are designed to weather hurricane impacts and wind-borne debris.

MATERIALS

Natural, locally sourced materials were selected to support the local economy and reinforce a sense of place. The ingredients of the materials were screened to ensure no hazardous chemicals wound up in the Center.

Salvaged building products were used extensively, including maple floors reclaimed from a local gymnasium and interior wood trim made from salvaged school bleachers. All wood doors, cabinets, countertops, mirrors, sinks, toilet accessories, lockers, etc., were salvaged from local demolition projects. Even cabinet pulls were made from salvaged champagne corks.

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GREEN BUILDING’S RESIDENT

J

ASON MCLENNAN IS OFTEN REGARDED AS ONE OF THE MOST INFLUENTIAL PEOPLE IN THE SUSTAINABLE BUILDING MOVEMENT.

In addition to winning the prestigious Buckminster Fuller Challenge, he developed the Living Building Challenge, which is the new pinnacle for sustainable building and design - setting the bar far higher than LEED Platinum certification (for more details about the rigorous requirements of the Living Building Challenge, see our interview with Amanda Sturgeon in Issue 2). Leonardo DiCaprio has handpicked McLennan to design his new restorative eco-resort on a private island off of Belize, which, upon completion, will provide a new model for what is possible in the sustainable design world. McLennan currently serves as the CEO of the International Living Future Institute, an NGO that provides green building solutions and education to raise the bar for true sustainability in the built environment. We spoke to McLennan on Bainbridge Island, Washington, about the genesis of the Living Building Challenge, what it takes to shift the paradigm of an industry, and creating handprints rather than footprints.

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INNOVATION & DESIGN What inspired you to get into sustainable building?

Jason McLennan: I grew up in Northern Ontario, Canada, in a city called Sudbury - a mining town of about 100,000 people. It had over 100 years of mining history.

They discovered the richest vein of nickel in the world from a giant meteorite that crashed thousands of years ago, creating the second largest impact crater in the world.

It produced a huge amount of nickel and copper, so this town emerged, but to get it, they devastated the landscape. They cut down all the trees for miles around. They had open pit fires to melt the rock, creating incredible air pollution.

It basically acidified all the soils, killed off all the lakes, and created a moonscape. They built the world’s tallest smokestack. It’s taller than the Eiffel Tower. You could see it for miles around. It’s like a big cigarette sticking up in the planet, and they built it to stop the local air pollution because it devastated the area so much. They built the smoke stack to send the pollution to the United States, which worked beautifully to kill off the trees in New England. It was the largest point source of acid rain in the world in the ’70s and ’80s.

However, in the ’80s, the whole community got involved in a large re-greening campaign to transform the landscape. As I grew

up, the trees grew up alongside me. I watched the regeneration of an entire landscape. Sudbury went from being the butt of jokes in Canada to one of the best places to live within the span of one generation. So I became an environmentalist at an early age.

We spent a lot of time outside fishing, hiking, and just being in nature. Seeing our ability to completely devastate a place and then bring it back was a powerful lesson because we don’t often get to see the “bring it back” part especially to that extreme. To participate in that as a child, it made an impression.

In middle school, I started to get interested in architecture

“The idea of changing the world one building at a time was wearing on me.” and design and I started to get frustrated as I really started to open my eyes to how the city was planned and how development was happening in the community. In any kind of frontier place, there usually isn’t very good investment in infrastructure and buildings and you usually get the worst of it because the powers-that-be live somewhere else. So there was crappy architecture and crappy buildings for the most part. There definitely wasn’t green architecture happening there.

Also during middle school, there was a boom in nickel prices, and they were building a lot of new developments. A developer ended up buying this area where I had planted trees as a kid at school and the first thing they did was cut down all the trees that we had planted when we were younger, which was like a knife in the heart.

They scraped away all of the soil that we had helped heal and made a flat parking lot and a strip mall.

It really angered me because it was just so careless.

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I started to wonder why we built buildings that were so lifeless and don’t take into consideration what is unique about a place. That got me thinking, and I knew I was going to be an architect by 10th grade. The “green” side of it, for me, was just the way we had to go. I had a calling pretty early on that this was what I was going to do. I started taking drafting classes and art classes and everything I could to get ready to be a designer.

Tell us about the genesis of the Living Building Challenge.

JM: After I graduated from the University of Oregon, I wasn’t sure what I wanted to do exactly and I ended up getting a call from Bob Berkebile, who is one of the pioneers in green building. Bob was looking for somebody who understood sustainability at a deep level and he

worked three or four years fulltime on this and then it went away, which was really unfortunate. The project ended and I said, “Well, what the hell do I do now with this knowledge?” We had had millions of dollars to spend on research architecture firms never get that much money to do research and I was in charge of all the technologies and all the systems to figure out what true sustainability would mean. We felt like we had to get this information out, so I started a green consulting group called Elements where we started training other architects. We worked with our competitors, which was a new thing. Why would you teach HOK [a competing architecture firm based in St. Louis] how to do what you know? Well, that’s how we make change. You learn more as a teacher than as a student.

Because of this, I ended up

way focused on going beyond LEED it was just stuck in this paradigm that had been created. That’s the way it works though, right?

People get locked into a particular perspective. LEED started in 1999 and by 2004 it was really exploding because there was a need in the market for some definition. Better designers were making buildings work better. The financial barriers were coming down. It was good, but there was complacency setting in and it became, for a lot of firms, about chasing points [Editor’s note: LEED is a points-based certification system - the more points a building achieves, the higher the level of certification, with LEED Platinum being the highest level]. Their eye wasn’t on the ball, and they were focused on the wrong things.

I had started thinking that we needed to shake this up and then, parallel with that, there were real

“People don’t seem to have either the honesty or the courage to figure out where they really want to get. You can imagine your truly ideal life or job but why don’t you actually try to get it?” hired me right over the phone.

We had this project in Bozeman, Montana that was funded by NIST [National Institute of Standards and Technology]. The premise was to design a truly sustainable building, but nobody knew what a truly sustainable building really was and it became my job to figure it out. I came up with this term “living buildings.” We started coming up with the rules for what a living building would be in 1997. In 1998, I published a paper on living buildings before LEED was around.

This building in Montana was going to be everything that the Living Building Challenge describes, but it was killed for political reasons and never happened. I had 14

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becoming a partner at the firm.

I started out as Bob’s intern and within a few years, I was a full partner in one of the most important firms in the United States. I was the youngest partner at the firm, doing projects all over the place on sustainability and I had made it as an architect. It was an honor to be selected. But you make it and then you go, “Is this it?” It wasn’t my goal to be a typical architect.

At that point, LEED had emerged and was doing a lot of great things, but it only went so far. I had this sense of, “Here is where we need to get to and LEED only gets us to here and there’s a huge gap between the two.” There was no sign that the industry was in any

world events that I started seeing.

Katrina happened in 2005. Al Gore’s movie “An Inconvenient Truth” came out. You started to get a sense that, not only were we not moving anywhere fast, but we actually had a real timeline. There was actually a huge urgency to make changes, but we were acting as if there weren’t.

I kept working on this idea and published my book “Philosophy of Sustainable Design” in 2004 where I talked about “living buildings” to start to change the conversation. I was definitely getting anxious for change to happen, and one night, I came home late and realized that the idea of changing the world one building at a time was wearing on me. You work on these projects with

INNOVATION & DESIGN

these two- to five-year timelines and you hope that they have the impact that the Bullitt Center is going to have, but you don’t always know because shit happens. I just began to get very anxious about the future, so I came home that night and said, “I’ve got to change.” Even though I was a partner and everything was great, I knew I had to make a change. On a whim, I turned on the computer and looked for green jobs out there that might be interesting.

Almost the first thing that came up was that the Cascadia Green Building Council was looking for an Executive Director, and I thought, “Oh, that’s interesting.” I kind of knew that it was the right thing to do, which was really scary, but I knew that I couldn’t launch something like the Living Building Challenge from a forprofit architecture firm. It would’ve just seemed like a marketing thing or like it was a way for us to get work.

It needed to rise above that to the public realm.

Cascadia was the rebel wing of the US Green Building Council (USGBC). Its reputation was that it was where the troublemakers of the green building scene were in the greatest numbers, and I kind of liked that. They didn’t know when I interviewed that I had the Living Building Challenge. It was a secret, but when I came to my first board meeting, I said, “Well, thanks for hiring me, but I have a surprise for you. I have some intellectual property that I want to give to your organization for free, but there’s a catch and the catch is, we have to agree as a board to put everything we have into doing this work and if you don’t, I’ll give it to someone else.” To their credit, they voted unanimously to do it and suddenly we were going to be putting out a different standard than LEED, as a

McLennan led the design on Heron Hall Living Building project

USGBC chapter. That was 2006.

We had a lot of battles at the beginning. Everything I pushed forward was illegal everywhere in North America. So that was one hurdle [laughter]. Everything I asked for in the materials world was not available. That was another hurdle.

Solar was prohibitively expensive.

But I knew it was achievable because we had done every aspect of the challenge in pieces at BNIM [Berkebile Nelson Immenschuh McDowell, Inc., the architecture firm where McLennan first worked].

People said, “You can’t do it.” I said, “No, I’ve done each of these things, just not all together.”

In Joseph Campbell’s “The Power of Myth,” he talks about following your bliss and putting yourself in the field of bliss of others so that people will then help you. There’s a bit of a spiritual dimension to that, but I just knew that this was the right

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The Bullitt Center designed by Miller Hull follows McLennan’s Living Building Challenge Standard

idea at the right time. Intellectually, you doubt and you wonder, but at my core, I knew this was going to happen. It has unfolded as I felt it would, which has been cool.

In terms of shifting the paradigm, it seems as though the formula you’ve devised is setting a standard that is so high that it’s borderline audacious. Is that what it takes to shift an industry or paradigm?

JM: That’s part of it - the big hairy, audacious goal theory - but that’s only part of it. It’s not so much about an audacious goal; it’s about putting our efforts towards the actual ideal outcome that we want. Most people start by compromising immediately on what they want because they have a hard time imagining going from where they are to where they need to go. As a result, they begin to compromise and then get down the road three years later and they really wanted to be in an entirely different place.

It’s like when a ship sails and it has to keep tacking with the wind.

To the person on shore, it looks like the ship is heading in the right direction, but if it’s a few degrees off, it will end up miles and miles from the actual destination. You 16

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Photo: Nic Lehoux

always have to know what the destination is, and that’s something that the whole green building movement - and most movements for that matter - don’t get. They don’t take the time to clearly articulate the vision of success and hold that sacred and refuse to compromise. When you do that, that’s when the magic happens. So it’s not so much that it’s an audacious goal, because you can set an audacious goal that still isn’t your ideal. You can spend your whole life and energy wondering why you never quite fulfilled or reached what you wanted to. It’s all about having that vision.

People don’t seem to have either the honesty or the courage to figure out where they really want to get.

You can imagine your truly ideal life or job - but why don’t you actually try to get it? That is the question.

Why do you try to do something else for four years and then maybe later you’ll do what you want? The odds are, you’ll never get to that ideal job and you’ll have spent all those years of your life doing something you didn’t want to do. People don’t feel like they have permission to go to that next realm.

With green building, as long as LEED Platinum was the paradigm, everyone tacked to that. But if the

real goal is way over there, then why are we spending 20 years re-jiggering the economy toward something that is still going to lead to a failed ecological state? If you have all the time in the world, baby steps are fine. But if you have a limited amount of time, you may have to step much bigger than a baby step. You actually have to think about how long you have to get to the ideal place. That’s why all these false promises by politicians - x percent reductions by 2050 or 2030 are all bullshit. It’s all outside of their jurisdictions. It’s never enough to get to where we actually need to be so it’s completely useless. What would we have to do if we actually believed in the science? What would we have to do in 10 years, not in 50?

It means we’d have to start building living buildings. We’d have to start dumping the fossil fuels out of our economy now and as fast as we can.

How do you get an industry that sees LEED Platinum as the pinnacle to “re-tack” the boat and focus on living buildings as the new goal?

JM: Our strategy has been to use inspiration instead of guilt, which is why it was really hard until we had the first living buildings completed.

It’s one thing to talk about these things, but when you can show people the Bullitt Center, they can say, “Well, it works in Seattle.” I can then say, “Do you want to see one in Pittsburgh?” They start to run out of excuses and it changes the entire model. It really works toward that saying, “The best way to make changes is to make what you want to change obsolete.”

Tesla is making the internal combustion engine obsolete. Living buildings are going to make regular buildings obsolete - that’s my goal.

Once you reach economic parity and you have a better product, it’s almost an instantaneous change.

We fight and fight and fight and all of a sudden, you have this huge shift. Think about laptops or cell phones. Anything society adopts goes through a denial and resistance

INNOVATION & DESIGN

phase, then you have early adopters, and this curve where the better thing is more difficult because the paradigm we’re in is not set up to support it.

Everything is set up to support the current system.

That’s why doing the right thing is harder than doing the wrong thing.

Change is not going to work if you have to be a green saint. You have to change the paradigms fast and in such a way that it’s easier and it’s better. When you do that, then you win. That’s where we’re getting with solar soon. That’s where we’re getting with the internal combustion engine.

Imagine in 20 years if they stop

If they can’t afford it, that’s not their fault.

But there is a lot that people can do and those are the things that they should do. People can lower their footprint in a lot of ways.

Hopefully, we’re also talking now about “handprints.” People can influence their handprints as well, which are the positive actions. This is another paradigm change - why do we always only count the bad?

We try to minimize our footprint, but you’ll always have a footprint.

You don’t have to have money to talk to somebody else. Influence them, and when you help them

Where would you like to see sustainable design go in the next 15 or 20 years?

JM: I’d love to say that all buildings will become living buildings, but everything we’re talking about is just the new paradigm. I don’t know if it’s 15 years or 30 years, but the Living Building Challenge will either provide the roadmap to make the change or it will be the safety net when we have to change. If we don’t change in time and we’re truly fucked, we’ll have to make radical changes and, hopefully, having a few decades of models like the Bullitt Center that show us that

“Change is not going to work if you have to be a green saint. You have to change the paradigms fast and in such a way that it’s easier and it’s better.” making internal combustion engines in vehicles altogether - nothing new out of the assembly line ever again with an internal combustion engine.

It’s possible. Now what would that change for air pollution? What would that change for war? Same with coal plants and all the damage there. We could be there within that timeframe because the costs are coming down.

It’s getting more elegant. That’s what we’re trying to do with buildings as well.

For someone who can’t afford to design something from scratch or who is living off a small income, what does living sustainably look like, in your opinion?

JM: You do what you can, first of all, and you do what you can afford to do. Not everyone can afford solar panels, but you do what you can. We have to change the system so that it’s achievable for everyone as opposed to expecting everyone to be able to afford the right thing in the system that’s not set up for it. I tell people not to feel guilt and shame if they can’t live in the perfect eco-thing yet.

reduce their footprint, that’s your handprint. When you teach your child about something or you volunteer for a charity, you’re increasing your handprint. You can create a rich world. It’s not always about what you buy and what you don’t buy to reduce your footprint. Your handprint can be much more beautiful. It’s just a different paradigm.

You guys have a footprint. You cut down trees and you use inks [to produce the magazine]. But by having people understand these stories, you guys are handprinters, right? You basically believe you can do more good in the world by causing the impact that you have. In the end, you’ll always have a footprint and can make it as small as you can, but what we really should focus on are the positive things that we can do, which is what you’re doing. You’re telling the stories of what needs to be told and getting information out to change people and that’s much bigger and has a much more positive impact than the FSC paper [Editor’s Note – no, we did not pay Jason McLennan to say this for us!].

we have a better option will help.

Plan A though is that we change in time to make a difference. Either way, we have to act like we have to do it now, as fast as we can.

How do the challenges that you are experiencing today differ from the challenges in 2006 when you first started launching this?

JM: People don’t think I’m crazy as much as they used to. We have proof.

It’s not just theory and ideas. It is still just in some markets in some places, but more and more people are saying, how do we get there faster now? Why aren’t we doing it? Now, it’s taken on a different life where when you see another developer pull it off, you want to do it, too.

We are trying to question it too for example, what are we doing to continue to scale the rapidity of the change itself? We’ve changed state laws in a few places, which we’ve done for water [to allow for greywater discharges]. We’ve tried to remove the barriers and provide models. It’s all helping, but in the end, there’s going to be some sort of societal force

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that will create that tipping event.

Economics will also play a big part of it and disruption will play a part of it.

Of all the projects you’re working on right now, what is the most exciting one for you?

JM: Probably what I’m doing in Belize, and my house, for different reasons.

With the house, suddenly I have to follow all my own rules now. What a pain in the ass [laughter]! I set up all these firewalls so that I can’t influence the committees and the auditors and my board members. So, it’s very difficult [laughter]!

What can you tell us about the Belize eco-resort project with Leonardo DiCaprio?

JM: It’s an opportunity to go further and at a larger scale than anyone’s done with solar and renewables, with habitat restoration. For me, it’s an opportunity to influence a demographic that needs to be influenced almost more than anyone the people who have the most influence in how the world is run and need to get this. The average citizen’s footprint or handprint is only so big.

If you can influence heads of state, prime ministers, presidents, CEOs of the most powerful corporations of the world, and celebrities who have

thousands of Twitter followers, you can change their paradigm and they start to ripple out change in their networks and their universes. That’s the scale issue.

For me, this project is all about getting the longest stick you can and trying to pry something open.

It’s very easy to be cynical about something like this project if you just look at it on the surface and say, “It’s a playground for the rich,” which it is.

But I have playgrounds and they have playgrounds, but they’re different.

With this project, we’re able to afford to do things that, right now, are not yet easy to afford. Those who have resources should pay for those things first to make it cheaper for everybody else, to make it easier, to be the guinea pigs. It should be those who have the means to do it, not the poor.

We shouldn’t experiment on the poor.

We should experiment on the rich. Let them drive down the costs of things.

We can get someone like this to start changing everything just by visiting a place that’s better than anything they’ve ever experienced.

There’s no fossil fuels anywhere, there’s no plastic or petro-chemical products anywhere, the water is all from the sky, the energy is from the sun and the experience is better.

They will be like, “Why are we not doing this in my corporation, my manufacturing facility? Why are these

An overview of Blackadore Caye Restorative Island, the restorative eco-resort McLennan is partnering with Leonardo DiCaprio on

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not the ordinances in my nation? Why am I not doing this?” We can show them it’s not weird, and in fact, it’s better. We can start to change some of these people. These are the people who have the ability to change the world and they have a mouthpiece to the world. When I have celebrities using composting toilets and hopefully loving it, then maybe I’ve been successful in making this whole shift.

So that’s my reason for working on this project and the project is, we hope, going to be a game-changer.

It’s going to get a lot of attention. It’s already getting a lot of attention.

What is inspiring you or giving you hope for the future?

JM: I’m really excited about solar right now - the economics of it has changed so rapidly in such a short time, even faster than a lot of us predicted. We’re getting close to grid parity with fossil fuels now and it’s already there in a lot of markets. Imagine if we could dump fossil fuels within the decade! It would literally change the world. I’m pretty excited that I can see the light there. I hope we get there soon.

What advice do you have for younger generations?

JM: Give a shit.

INNOVATION & DESIGN

BEYOND CARBON NEUTRAL

AUSTRALIA-BASED ARCHIBLOX’S CARBON POSITIVE HOME ARCHIBLOX AT A GLANCE Location: Melbourne, Australia Employees: 60 Founded: 2008 Business Type: Architecture Designer and Builder In Short: Archiblox designs and builds carbon positive buildings that produce more energy on-site than they require.

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hat if your home or office building went beyond doing “less bad” and actually did some good for the world? Melbourne, Australia-based architecture designer and builder Archiblox is addressing this question head-on with the world’s first prefabricated, carbon positive home.

The firm’s buildings are able to produce more energy on-site than they consume, and can be designed, built, and delivered to you (if you live in Australia) in a 12- to 28-week time frame. The company’s unique model is demonstrating that prefabricated modular architecture is a viable alternative to traditional construction methods, and that its speed and efficiency saves people time, money, and stress.

The firm has intentions to branch out internationally in the future with its designs and bring this revolutionary building style to other countries.

Photos: Tom Ross

Co-founders Jon Friedman (left) and Brad McNamara (right).

THE SPECIFICS The carbon positive home comes equipped with in-ground “cool tubes� to help cool the building, sliding edible garden walls, and a green roof. It is made with sustainable materials and built to be airtight for energy efficiency purposes. Built with a passive solar design, the buildings include energyefficient appliances and water-efficient taps and fixtures.

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2 1. Multipurpose Joinery - Functions as desk, shelving, ladder, bed, storage.

2. Open plan kitchen, living, and dining area. Plywood is VOC and formaldehyde free.

INNOVATION & DESIGN

RETHINKING THE WAY WE LIVE WITH ECOCAPSULE

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ith population and housing costs on the rise, coupled with the earth’s finite resources and space, it may be time to rethink how we live. A number of architecture and design firms are beginning to take this reality to heart and create smaller, more efficient dwellings. One such firm is Nice Architects, hailing all the way from Slovakia.

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INNOVATION & DESIGN

Overseas Transport

Solar Cells

Local Transport

Wind Turbine

Rainwater Collection

The Nice Architects team has designed the Ecocapsule, a miniature solar and wind powered portable house that enables occupants to live entirely offgrid for up to a year. The dwelling comes equipped with a double bed, a composting toilet, a kitchenette, built-in water filters, and a shower. To provide running water, the Ecocapsule’s spherical shape optimizes dew and rainwater collection if there is not another source of water nearby. It also produces its own energy using solar panels that are embedded in the structure itself and a retractable wind turbine, combined with a battery for those rare times when neither the sun is shining nor the wind blowing. The unit can be towed behind a car on a trailer or transported in a shipping crate, allowing applications ranging from shelter during humanitarian crises to an affordable housing option in cities like New York and San Francisco. The firm is taking pre-orders and will ship the first models out in early 2016.

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THE FUTURE

As the financial crisis of 2008 demonstrated, the financial services industry plays an outsized role in the economy as a whole. As a result, we will never transition to a more sustainable economy without a major paradigm shift in the finance industry. We asked four finance experts for their thoughts on the root cause of the problems within the current system and what is most needed to make change for the better.

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WHAT IS THE BIGGEST SHORTCOMING OF THE TRADITIONAL FINANCE INDUSTRY FROM A SUSTAINABILITY PERSPECTIVE? Wall Street, management teams, and boards, especially of public companies, are incented to maximize financial returns or shareholder value. The biggest shortcoming of the traditional finance industry is this narrow perspective on value. Value is more broad-ranging and includes economic, social, and environmental factors that currently, and over time, can both create and destroy shareholder value.

FRAN SEEGULL

CHIEF INVESTMENT OFFICER AND MANAGING DIRECTOR, IMPACTASSETS

Even though locally owned businesses account for half the US economy and are highly profitable, they receive far less than half of commercial lending and almost no investment from pension, mutual, or insurance funds. Since local ownership is a necessary (if insufficient) condition for sustainability, today’s investment system is completely broken.

MICHAEL SHUMAN

AUTHOR, “THE LOCAL ECONOMY SOLUTION: HOW INNOVATIVE, SELF-FINANCING ‘POLLINATOR’ ENTERPRISES CAN GROW JOBS AND PROSPERITY”

A lack of systems thinking. Investors place capital at risk when they fail to understand that the biological carrying capacity of our world is changing.

NATASHA LAMB

PORTFOLIO MANAGER AND DIRECTOR OF EQUITY RESEARCH & SHAREHOLDER ENGAGEMENT, ARJUNA CAPITAL

“Modern portfolio theory” ignores multiple profound risks. People are beginning to connect their morals with where their money is. Carbon pricing is coming. Environmental standards must strengthen. Misreading the signals of the generational transfer of wealth and power is a potentially disastrous outcome. The current financial system ignores too much about the values, worldviews, and priorities of people, their money, and the unifying necessity for a global soft landing. Tax fairness and good work for all are essential for basic stability. We must redesign and rapidly adopt new principles for legitimate investing. Much of what is currently acceptable and legal is hurting most everything that matters. We can solve these profound global challenges, and the financial system truly holds most of the cards.

JOEL SOLOMON

CHAIRMAN AND CO-FOUNDER, RENEWAL FUNDS

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OF FINANCE

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“WE CAN SOLVE THESE PROFOUND GLOBAL CHALLENGES, AND THE FINANCIAL SYSTEM TRULY HOLDS MOST OF THE CARDS.” - JOEL SOLOMON

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WHAT CHANGES NEED TO BE MADE TO ADDRESS THIS SHORTCOMING?

In our world of dwindling natural resources, exploding population, rising economic inequity, and the increasing impact of climate change, Wall Street, businesses, and consumers must broaden their current concept of “value.” All companies create positive and negative social and environmental value. Negatives might include pollution, pesticides used in growing food, and antibiotics in livestock. Positives might result from clean energy being used and generated, educational services for employees and consumers, and diversity in management teams and boards. Factoring these externalities into the value equation would require top-down government policies and standards-setting such as mandated sustainability reporting and a carbon tax or a cap-and-trade system for emissions. But consumers have power, too. By consuming, voting, and investing according to their deeply-held values, they can send a strong message to Washington, Wall Street, and Main Street, igniting systemic change from the bottom up.

Three areas of legal reform are critical: • First, we must help resuscitate community banks (which naturally lend to local business) by giving them regulatory relief from Dodd-Frank and by breaking up the current oligopoly of megabanks.

• Second, we must overhaul securities reforms to make it easier and cheaper for local businesses to issue securities and for unaccredited (retail) investors to trade them on local stock exchanges and to pool them into local investment funds. The SEC should give the states broad permission to innovate new kinds of local exchanges and funds.

• Third, states should put in place an income tax credit for all local investment (as several Canadian provinces have done). This will greatly stimulate early-stage local investment.

Investors need to recognize that the next fifty years will not look like the last. Population growth, the burning of fossil fuels, and mismanagement of our natural capital is driving immense physical changes in the form of global warming and resource scarcity.

The short-term thinking that created this problem will not solve it. A systemic view of the earth is needed, understanding that the future will not resemble the past, as human activity pushes the limits of the earth’s and atmosphere’s capacity. And while evolving economic and development assumptions are commonplace in traditional finance, investors have not factored future physical scenarios into their decision-making. Investing sustainably is a question of timeline and fiduciary duty. Financial advisors need to take the long view to steward their clients’ capital to avoid investments that have the greatest risk and invest in sustainable solutions. Stepping off the mouse-wheel of quarterly results takes courage, but continuing to invest with the status quo can no longer be considered the gold standard.

The phenomenal privilege of having power and making enormous sums of money must be held with a sense of moral depth, societal responsibility, and commitment for the long-term well-being of the whole. We need leaders who drive for carbon pricing, tax fairness for the many, balance sheet accounting for full life-cycle and externalities, along with ultra-high efficient use of natural resources, and ensuring self-respecting work for all. We must embrace, demand, and reprioritize service in, partnership with, and support for government’s role as arbiter for the resource and societal commons. Constant arms races and war cannot be the organizing principles for economic resilience for the long term. The brilliance of human ingenuity in finance must be harnessed to create a multi-generational imperative to balance the needs of a planet that will soon be home to 10 to 15 billion people. The current approach was the winning model for its time and for the then-current level of understanding of ecology and its limits. To continue that now-outdated model is to guarantee chaos and tragic times ahead. I believe that in our hearts, most of us want a more loving legacy. It’s our primary life purpose to leave the very best systems in place to support those eventual generations we can only dream about.

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MONEY,

MISSION, LEGACY

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By Michael Whelchel and Nancy Rosenzweig

“As soon as the money comes in the destiny is changed,” said Odwalla founder Greg Steltenpohl,

who never wanted to sell the company that is now owned by Coca-Cola.

Mission plays a central role in conscious companies. In many cases, the mission of the company is the founder’s raison d’être, the grounding and deep conviction at the core of the company, the gravitational center of its operations. While strategy, marketing, operations, and finance are necessary elements, it is mission that holds the seat of honor at the corporate table in purpose-driven companies.

The key financial transactions in a company’s lifecycle can threaten the prominence of mission. Companies organized around mission often find core purposes challenged when a new investor gains an influential stake or when a new buyer has no dedicated stake in mission continuity. These financial transactions represent decision points that can have permanent effects on the mission and future of a company.

Through working with over 100 mission-driven companies and funds, we have distilled tactics and strategies to enable CEOs and owners to grow and sell companies in which mission is strengthened over time and flourishes into the future.

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FOUNDING CONSIDERATIONS

Structure Build mission into the founding organizational documents of a company. Consideration of mission in a company’s founding stage will serve to inoculate the company against future compromise. Companies can reinforce mission in operating agreements by setting conditions that require a two-thirds shareholder majority to vote for any change to the mission. Companies can be formed as Benefit Corporations, giving legal protection to directors and officers to consider the interests of all stakeholders, not just shareholders, when making decisions. These entities also create additional rights for shareholders to hold directors and officers accountable to considerations of social and environmental interests in addition to profit maximization.

Value Proposition Infuse the company’s brand with the core purpose. In purposedriven companies, mission is often inseparable from a company’s brand.

A brand built around core mission principles encourages customers or consumers to select a product or service over its competitors because of value alignment. In this strategy, values are inseparable from value proposition. For example, Plum Organics’ brand means organic, tasty baby food, accessible to all American families, grounded in values of better nutrition and equal access. Zipcar built a brand around the convenience of car ownership without the hassles.

Every Zipcar takes several cars off the road, diminishing the need for car ownership, connecting Zipcar with sustainability.

OUTSIDE CAPITAL CONSIDERATIONS Introducing outside capital happens throughout the lifecycle of a company and can include seed capital, growth equity, and later stage equity. All money is not created equal. It is imperative to find a good capital fit

at every stage. There are a number of considerations important to securing an investor harmonious with a company’s mission.

Stage Identify investors that are suitable to a company’s size and position. A venture capital fund may require too much formality for a nimble earlystage company. A high-net-worth individual may not have the capacity or appetite for the follow-on investing a growth-stage company may require.

Timing Ensure investors’ timing constraints are aligned with the company’s timeframe. Is the investor time aligned? What is the investor’s expectation around the timing of capital return? Does the company have adequate time to meet investor expectations related to business results and returns? A fund may have three years left in its lifespan and put pressure on the company for a quick exit in order to provide returns to investors.

Fit Determine that investors are values-aligned. Investors should be invested in the mission and purpose of the company. Does the investor’s investment thesis fit with the company’s mission? An investor may be hedging on the cost of consumer staples while the company is trying to preserve family farms. If the investor assumes a board seat, the company will want assurances that the person is mission-aligned and compatible with the existing board.

Procedures should be in place to address disagreements and facilitate resolutions. It is wise to check references and speak to other CEOs in the investor’s portfolio.

Structure Get creative in structuring the deal there are a number of ways to ensure purpose. A few are highlighted here.

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1 ALTERNATIVE PAYBACK.

Staged dividend payments are variable payments linked to a percentage of revenue or cash flow that prevent an investor from exiting all at once. Payments are made over time until the investor reaches an agreed-upon return threshold. As these payments are variable, they link the timing of liquidity to the health of the enterprise and can create more patient capital.

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SUPERVOTING STOCK. In this strategy, typically two classes of shares are created. The founders’ class carries a higher number of votes per share. This strategy allows founders to maintain control as stockholders throughout the life of the company, even as their ownership is diluted. A related strategy is supervoting at the board level. The board seats held by the common stockholders (often the founders) get a multiple (e.g., 2-5 times) on their votes. The common director designated by the common stockholders will have control over major board actions, which can include a change in mission. A final variation of this strategy allows founders to have veto power to block an exit if they believe it to be in conflict with the company’s mission.

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FINANCIAL RETURNS.

Founders are able to link financial returns with the impact that the company achieves. The investors’ return is directly tied to the measurable impact created by the organization, thus ensuring a focus on the core mission of the company.

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“The key financial transactions in a company’s lifecycle can threaten the prominence of mission.”

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REVENUE SHARING MODELS.

Revenue sharing agreements provide investors with a way to achieve a return without taking equity, therefore avoiding exit pressures and control conflicts. Revenue sharing allows investors to achieve a return through an agreed-upon percentage of a company’s revenue stream over a certain period of time.

EXIT CONSIDERATIONS At the point when a founder desires liquidity or is ready to sell the company, there are many choices to ensure the company’s purpose endures:

1 CREATE A LIQUID MARKET FOR PRIVATE STOCK.

There is frequently pressure for liquidity when a founder wants to diversify his or her wealth or desires cash, when the business needs a cash injection, or when investors are becoming impatient.

An exit is not the only way to address these situations. Many companies hire an investment banker to help them sell minority shares of the company at regular intervals, allowing shareholders the option of liquidity without changing control of the company. Creating a pool of mission-aligned buyers can help address the need for liquidity while bringing in new investors committed to the company’s mission.

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SELL TO A MISSION-ALIGNED FUND.

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speak with their portfolio companies to evaluate how the fund has furthered the company’s purpose after the acquisition.

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SELL TO A FAMILY OFFICE.

Family offices typically have more flexibility than private funds and employ a buy-and-hold strategy versus the buyand-sell strategy most funds utilize. A buy-and-hold strategy ensures a higher level of mission continuity over time.

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SELL TO A STRATEGIC PARTNER.

While there are well-known stories in which large corporations acquire and then compromise mission-driven companies, there are as many positive stories - e.g., Honest Tea, Stonyfield Farm, and Plum Organics. In some cases, the acquired company can have broad and significant influence on the mission of the acquiring company.

IPO.

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Though many people think of an IPO as a vehicle to achieve windfall multiples on their investments, it can also be a way to preserve a stand-alone brand. By avoiding the need to be folded into the larger portfolio of products and services of a strategic buyer, an IPO can ensure that the founding principles of the company will endure.

The good news for today’s valuesbased entrepreneurs is that the field of impact investing is rapidly becoming mainstream and it is increasingly

feasible to find long-term, valuesaligned investment partners. “For companies where purpose is part of the culture and success of the business, investment firms are evolving new models to meet these companies’ needs for values and long term capital,” said Diana Propper, Managing Director of Cranemere, Inc., an innovative investment firm in the sector. New ideas and methodologies for investors and entrepreneurs to collaborate and make a difference are being generated with increasing frequency. To connect in the field, organizations such as Conscious Capitalism or Social Venture Network provide forums through which business owners can share best practices with other CEOs. When a company considers critical financial transactions there is now an ecosystem that can support it, including law firms and investment banks that specialize in maintaining mission along with financial considerations. Indeed, with an intentional approach to preserving mission, we can shape our destiny. $ Michael Whelchel is Co-Founder and Managing Partner of Big Path Capital.

Leveraging one of the largest networks of impact investors globally, Big Path Capital assists purpose-driven companies ensuring mission preservation across financial transactions including acquisitions, mergers, and capital raises. www.bigpathcapital.com.

Securities offered through Intellivest Securities, Member FINRA, SIPC. Nancy Rosenzweig is a social enterprise maven, having spent the last 20 years in leadership roles scaling some of the country’s most iconic social enterprise brands. She now heads up M&A for Big Path Capital, where she helps her client companies meet their financial needs for growth while preserving their purpose.

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FINANCE

INVESTING IN THE FUTURE OF FOOD WITH FARMLAND LP Farmland LP is disrupting at the nexus of sustainable agriculture and finance.

The San Francisco-based investment fund is successfully demonstrating that sustainable agriculture at scale is not only economically viable, but can generate healthy returns for investors. The company purchases farmland, deploys a regenerative crop and livestock rotation plan to make the farm sustainable, leases the farmland to farmers, and then shares the revenues of the farm with the farmers. It’s the ultimate win-win, with investors and farmers working in tandem to heal the ecosystem of the farm, produce healthier food, and make more money than they would with conventionally produced crops.

The fund currently has $100 million of farmland under management in both California and Oregon. The model has grabbed the attention of some of Silicon Valley’s elite, including the likes of Ali Partovi and Scott Banister, for its simple yet disruptive solution. We spoke with General Partner Stephen Hohenrieder and Vice President of Marketing and Investor Relations Erin Roach about this innovative investment model and what it could mean for the future of food.

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$ INVESTORS Investors invest their money with Farmland LP

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MARKET

FARMLAND LP

Farmland LP uses a revenue sharing model with the farmers that benefits both the farmers and Farmland LP’s investors

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Farmland LP purchases farmland

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SH: In most cases, either the owner or the tenant is still involved. If you think about farmland ownership in the United States,

Farmland LP develops a regenerative crop and livestock rotation plan for the newly acquired farmland and converts the farm to organic, sustainable practices

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Farmland LP leases the farmland out to farmers who grow and produce sustainable crops that can be sold at a premium

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When you purchase a farm, how often are the original owners still involved with the project? Is that something that you try to incorporate or do you typically purchase the land and go your separate ways?

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Stephen Hohenrieder: If you look at the migration of farming from the mid-1950s to today, you’ve really had a progression toward monocrops, where you’re growing a lot of one thing and relying on synthetic inputs to enhance your soil fertility. There are economies of scale and there are reasons why farmers do it - they want to grow a lot of the same thing; they want to sell to one market rather than having to develop a lot of markets for different things; and they want to be able to make full use of the equipment that they own (it takes different equipment to grow different crops). To solve for that conflict, we have decided to rotate farmers instead of rotating crops.

We buy conventional farmland and convert it to more regenerative, organic practices. That may mean organic-certified or it may just mean more sustainable. When you think about those practices though, in many ways that really means farming the way that we did 100 years ago - planting a lot of different crops in rotation, integrating diverse livestock, and building soil fertility naturally in the course of your business.

We develop the crop and livestock plan for the farm and then lease the land to farmers who want to farm one of those fields. The farmers are then able to get two to three times the price for the crop because people will pay more for sustainably produced and/ or organic crops.

We structure our leases in such a way that we eliminate some of the risks for the farmer. Rather than a straight cash lease, which is common, we charge a base rent and then we have a revenue sharing agreement with the farmer on their crop. So if they have a bad year, they don’t get wiped out.

On a particular field, we may not do as well as we would have otherwise, but if the land is as productive as we expect it to be and they are successful, then we all benefit from the increased revenue.

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Can you provide us with a high-level overview of the business model at Farmland LP?

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REGENERATIVE FARM PLAN

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FINANCE INVESTING IN FARMLAND Increases in farmland values have consistently beaten the stock market and outperformed the S&P 500 since the early 1990s.

GROWTH OF INITIAL $1000 (VAMI) $10,000 Farmland Real Estate S&P 500 3yr Yield Treasury

40 percent of land is leased to farmers today. One statistic that we have found to be really interesting is that there is about $2.4 trillion worth of farmland in the United States - the same as all the office buildings in the country - but only one percent of farmland is institutionally owned.

So, you have this incredibly fragmented ownership, but you have a lot of families who aren’t interested in farming anymore, so they’ve leased their land to other people. We see that in the acquisitions that we’re making, but we try to honor the relationships with the tenants just as we would with the owners. In some cases, it even means having members of the family stay on the farm indefinitely. We just did an acquisition where two older members of the family will stay in their houses as long as they’re alive.

Why aren’t more institutional investors investing in farmland and using similar tactics?

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Over the previous 150 years, cropland acreage has declined in the US while the US population has continued to grow.

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SH: Pensions, endowments, and insurance companies are all buying farmland, but even if they’re converting it to organic, they are still farming a monocrop. What we do is hard work. We’re both the landowner and management company, and a lot of other investors just want a straight cash lease. We’re curating a tenant mix of farmers who all want to be on our land and whose values are aligned with what we’re doing, but also creating an infrastructure and set of services that meet their needs.

From an investor perspective though, I think it’s interesting because it’s an uncorrelated asset. Most of the capital that we’re deploying - 80 to 85 percent - is going into land. There’s a stored value. From that, we’re able to generate current yield, and the land appreciates over time. So, we find that family offices and foundations are especially interested in what we’re doing.

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Supply of U.S. organic cropland growing at only 8% per year

2% 1% 0% 1997

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Erin Roach: First, I think real assets are undervalued in people’s portfolios in general. Second, there are people who are doing organic agriculture, but there is a difference between closed-loop and organic agriculture. Organic agriculture can be just another flavor of monocropping, but what we’re really doing is regenerative, which is a very different model, and the closed-loop nature of it makes it distinguishable.

SH: That’s a really important point. There are a lot of people who have simply replaced petroleum-based fertilizers and inputs with organic-certified inputs, but that doesn’t necessarily mean that it’s better for the land, though it’s certainly an improvement. I saw a saying the other day, “Organic is really doing less bad. Regenerative is making things better.” We’re really looking at building the health of the ecosystem in the course of producing food so that it’s productive in perpetuity. Out of that comes more profitability. It’s

FINANCE

really interesting as you think about investors because we have some very financially focused, conventional investors within our capital base.

They want to own agricultural land, but they look at what we’re doing as building value in that land asset rather than depleting it. So I think that there is an important distinction between being regenerative and being sustainable. There’s a lot of capital going into sustainability, but not a lot of capital going into more regenerative farming.

Why do you think that is?

ER: I would say it’s just more complex, and that’s not a bad thing.

It takes a little more knowledge.

SH: I would also add that it takes a different timeframe. If you are raising a ten-year fund, it’s very hard to do what we’re doing because you need to get the capital raised over a couple of years, you need to add that

value in the next few years, and then you need to give the capital back to your investors in the following few years. We are creating a perpetual vehicle. Everything we do is intended to generate cash flow, but with a tenplus-year perspective.

If you think about putting land into pasture for two or three years, we’re generating returns and income from it by putting livestock on it, but not as much as we could if we were to plant blueberries, for example, and generate a profit in that three years.

But ten years out, the land will be in much better condition than if we had just been growing blueberries for the whole ten years. That doesn’t mean that we don’t grow blueberries, it’s just that we think about what we’re doing down the road in between the blueberry crops.

There are also other ways that we’re able to derive value with our model. The land that we have about 50 miles east of San Francisco is right in the path of real estate

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development. So, we serve multiple purposes by farming this land and we’re able to derive value from that. We don’t ever intend to build houses on it, but we’re able to reduce our cost basis by also deriving the ecological and the conservation value from it. We’re talking to land trusts and we’re talking to other organizations that have an interest in protecting that land. We’re able to put it into conservation if it makes sense, or we’re able to derive value from habitat mitigation for different species of living things. When you look at it as an ecosystem, there are a lot of different sources of value other than just looking at it as being able to produce a lot of blueberries.

How do you foresee this system being scaled?

SH: Well, we’re raising more capital.

And we just completed a fairly

“Nature loves diversity, but economics loves specialization.”

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MAIN BARRIERS TO SHIFTING THE PARADIGM TOWARD SUSTAINABLE AGRICULTURE

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SPECIALIZATION Regenerative agriculture requires diversified management and skill sets. Most farmers specialize in only one or two crops.

2

significant acquisition. We intend to deploy $250 million total over the next five years.

these crops and achieve scale at the same time. Diversified farms have tended to remain really small.

ER: It really is a paradigm shift.

People need to think about farmland and farmland ownership differently.

It’s very much moving into the shared economy mindset. I think that’s probably the biggest barrier.

There’s plenty of land out there, but institutional investors have been thinking about it in a very square way “how much can this land produce by growing this one crop?” Nature loves diversity, but economics loves specialization. So people have just been boring down on specialization, where our model is very much about diversity.

SH: If you think about farmers, they’re trying to solve for their profitability.

All of the economics on the farm, for the most part, have shifted to the seed companies, the fertilizer companies, the food companies, the distributors, and everybody else. A lot of family farms are trying to figure out how they can capture more of the economic value out of what they’re growing, but the conversion risk to organic is high. The farmer has to wait three years typically [to become certified organic]. Many farmers don’t know how to generate revenue during that period, and they don’t know what the outcome will be at the end of the three years, whether or not it will pay off for them. We’re trying to demonstrate and provide a path for the fact that conversion makes sense financially.

It turns out that many of our farmer tenants actually are conventional farmers and because we’ve taken out that conversion risk, they are now farming organic crops. Also, there are markets developing for transitional products [crops produced during the

Why hasn’t sustainable agriculture scaled faster and what is needed to shift the paradigm of the industry to make sustainable agriculture the new normal?

ER: The reason why we haven’t been able to scale organic agriculture faster with the way that we’ve been doing it which is the way people have farmed for millennia - is that it’s very difficult for one farmer to specialize in all of

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CONVERSION RISK For most farmers, it takes a full three years to become certified organic, and farmers can’t afford to slow production or leave land fallow during that time.

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CAPITAL It’s expensive for farmers to finance land, equipment, and infrastructure improvements. A farmer’s growth is limited by the amount of land they can afford to purchase.

three-year conversion period of a farm becoming organic]. Garden of Eden is now starting to actually brand “transitional products” in some of its packaging. There is a grocery chain in Portland that has offered to buy all of our transitional products. All of a sudden, you’re starting to see this market evolve where people see the value in farming in these ways and they’re willing to pay a premium for products that may not be organiccertified. In the past, farmers basically had to farm organically for three years, but couldn’t be paid for any of the incremental value. Now, they’re starting to get paid for it.

The last thing really is market force.

There is such supply and demand imbalance for organically produced food that these off-takers, the food companies and distributors, have to figure out ways to solve for it. We have started to partner with some of these groups. Let’s say you have an organic vegetable distributor that may be significant in size. They are supplyconstrained on certain products from their farmers. The limiting factor to their farmers providing more of that product to them is more land. We are trying to help solve the problem of

FINANCE

supply for these distributors by working with their farmers to provide them with more land.

What do you believe has been the most critical element to attracting such high-profile and widely respected investors?

SH: I think that there are different profiles of investors who have different goals: there are very financially focused investors who look at deals from a pure returns perspective and whether or not the strategy adds value and drives returns in an asset that’s attractive to them; there are more aspirational investors who have somewhat of a balance; and then there are people who are very aspirational and look at it as risk capital.

No matter who it is and what the mix is though, I think that there are three

they’re raised and fertilizing the soil at the same time, all of a sudden, this other system that we’ve developed just seems silly. When there’s a bit of education involved, people usually love the fact that it’s such a simple, clean, elegant closed-loop solution, and it meets their sensibilities as people who are trying to find that constantly through their own businesses. It’s also a great counterbalance to volatile tech stocks. It’s a real asset.

What’s giving you hope for the future?

SH: I have a ton of hope because I think there has been a structural change in consumer demand. If you look at how we, as consumers, aspired to buy our food up until the early 1900s, we had a connection to the production. We thought about the relationship between our food and the land; it tended to be

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other to it. We share it. People are starting to look for a connection back to the source of their food and they’re willing to pay for it. If you look at food as a percentage of our total spend as consumers, it went from somewhere in the range of 15 to 17 percent of our income spent on food in the ’60s to 6 percent today. In the ’60s, somewhere around 7 percent of our income was spent on healthcare, today it’s somewhere around 16 percent. You had this inverse correlation. This has become an economic reason for people to shift what they eat, besides the cultural reasons and just the aspirational taste.

You’re seeing organizations like Kaiser Permanente develop food programs to be preventive and to drive health.

You’re just starting to see a shift in our healthcare system, which is going to take a really long time, toward keeping people healthy rather than addressing

“If everybody were doing sustainable agriculture, there are estimates that it would be the equivalent of taking 217 million cars off the road.” factors that really drive their decision to invest with us: 1) it meets their risk and return profile, 2) the strategy makes sense, and 3) it’s something they want to be a part of. They have the ability to deploy their capital into the equity markets, fixed income, or into other types of venture capital or private equity, but I find that a lot of our investors at the end of the day like being a part of what we’re doing. We’re generating the returns that they expect with the commensurate amount of risk. They believe in the story and our strategy, but it’s also something that they can be part of and that they want to support.

ER: What we’re doing is disruptive enough, and it’s also such a clean, simple, elegant solution to a real problem. When people learn that most of the land in the United States is being farmed for corn that’s being shipped all over the world to feed cattle who really weren’t designed to eat it in the first place, when you could just be feeding cattle on the grass that grows where

regional, but it didn’t have to be. After World War II, in the ’50s, it didn’t matter who you were or what your socioeconomic, cultural, or geographical background was, most people aspired to buy more packaged, processed, convenient, and branded foods. They were new and they were sexy.

That evolved through the ’60s. I remember in the ’70s thinking it was such a treat to get a TV dinner, right?

The fast-food system developed out of that. I remember in the late ’70s and early ’80s seeing signs at McDonald’s that read, “over 1 million served.”

I would argue, and I think people generally agree, the way we aspire to consume our food today across every socioeconomic level, culture, and geography - and this is more exaggerated in certain segments - is starting to look more like it did in the early 1900s and before. People are less interested in processed and packaged foods. They’re not sexy anymore.

Food is something that we experience with each other. We like to discover it together. We love to introduce each

symptoms. So, I am very hopeful about the future because I think that this is a structural shift. I think that it will take time, but I think people are building awareness just in the way they did in other food segments in the past. People are realizing there is value in these better-produced products.

ER: Two things. One is that sustainable agriculture truly has great potential to change the world. If everybody were doing sustainable agriculture, there are estimates that it would be the equivalent of taking 217 million cars off the road. We would really be turning the clock back on climate change. To me, it’s exciting that you can not only produce healthy food, but you’re also sequestering carbon and other greenhouse gases. I think that it’s just a very hopeful story. I also think that it’s things like this, like Conscious Company Magazine, which is raising the awareness that you can do business in a much smarter way. Business is truly an exciting lever for change. So, that’s hopeful, truly. $ Photos: Farmland LP

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AN IMPACT INVESTING PIONEER’S JOURNEY

FROM APPALACHIA TO SILICON VALLEY AND BACK AGAIN

By Amy Cortese

These days, you can often find Kevin Doyle Jones out walking with his dog, Izzy, on the sprawling 16-acre farm in western North Carolina that he now calls home. It’s a long way from the money and tech epicenter of San Francisco, where Jones runs a social impact fund, oversees the Impact Hubs he helped launch, and hosts the annual SOCAP conference, a high-powered gathering of impact investors that kicks off on October 6th.

Jones and his wife Rosa Lee Harden, an Episcopal priest, moved from the Bay Area to Asheville a couple of years ago to be closer to their grandkids.

“I want to invest in companies that are within a morning’s drive of where my grandsons go to sleep,” explains Jones.

Upon arriving in Asheville, Jones, never one to sit still for long, began looking around for ways to invest

to boost their growth, but Jones found few companies with the kind of goto-the-moon ambitions that venture investors (even the impact kind) crave. “There’s an audacity gap in the entrepreneurs in Asheville,” he says.

Also missing was a community of angel investors active in the area.

“No pipeline of companies. No pool of investors. So what do you do?” he wondered.

Silicon Valley.”

Jones is dismayed by communities that try to model themselves after Silicon Valley. “We should just get over the fantasy that we’re going to create Silicon Prairie or Silicon whatever we’re not,” he says. “Venture capital works in rare places, and you need a critical mass of all the right factors for that to work. And most places don’t have that.”

“WE SHOULD JUST GET OVER THE FANTASY THAT WE’RE GOING TO CREATE SILICON PRAIRIE OR SILICON WHATEVER - WE’RE NOT.” and make an impact in his adopted hometown. “I was trying to do here in Asheville what I had done in San Francisco reasonably well, which is venture capital and equity kind of things,” he says.

There was just one problem: he quickly discovered that what works in Silicon Valley does not necessarily work in Asheville.

Sure, there were plenty of good businesses looking for a modest loan

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That question led him on a quest to figure out how to invest in and strengthen communities like those in Southern Appalachia, the mountainous corridor stretching from West Virginia to northeastern Mississippi, far from the money centers, tech hubs, and billion-dollar unicorns. It’s a quest that has important implications for much of the country, because, as Jones points out, “There are many more places like Mississippi than like

Instead, communities would do better to take stock of the assets that they have and invest in them with local funds, he believes. “We need to focus on the rest of our economy. That’s where I’m finding it super interesting to work now.”

For the past year, he has immersed himself in the details of community-building, place-making, and resiliency - the hallmarks of local economy groups such as the Business

FINANCE Alliance for Local Living Economies (BALLE) and Transition Towns. But he’s brought to it a professional rigor and venture investor’s desire for scale and impact. That’s meant studying the flow of capital and resources on a community level, engaging diverse stakeholders, and devising ways to channel funds into projects and ventures that can strengthen the community. “This is like capital meets community organizing,” he says. “It’s a new kind of field.”

His first step was to create a Neighborhood Economics Network made up of big and small Appalachian towns stretching from Allentown, Pennsylvania to Nashville, Tennessee. The idea is to share ideas about what’s working, accelerate learning, and promote regional resilience.

He cobbled together a funding toolkit tailored for non-Silicon Valleys, like the towns in his network, where venture capital does not work. The Neighborhood Economics Funding Kit, as it is called, culls from existing ideas like low-cost lending, donor-advised funds, giving circles, and community savings bonds. The idea is to blend different forms of capital and bring them to bear when and where they make sense - and to let all residents participate, whether they have $25 to give or $25,000.

And, betting that there is a larger shift going on, possibly as big as the one that led him to create SOCAP a decade ago, Jones launched a brandnew event called (what else?) Neighborhood Economics.

In announcing the new initiative, Jones noted a return to the local economy as an underlying trend and motivation. “The movement toward place-based innovation and a network of resilient towns and small cities in an economy that is ultimately rooted in relationships of trust is a movement we must learn from and humbly participate in,” he wrote.

The first Neighborhood Economics gathering, held in Louisville last fall, was a modest affair. Whether the second one, scheduled for November 17 and 18 in Cincinnati, is dramatically bigger is almost beside the point. Jones takes the long view.

“Kevin is the rare combination of pioneering vision and humility,” says Tim Soerens, co-founder of Parish Collective, a faith-based community development group and Jones’ partner in Neighborhood Economics. “He sees ideas that could make real change and works hard to see them come into reality, but at the end of the day it’s not about him. He often says, ‘it just seems like this is the thing that wants to happen.’”

In many ways, Jones has come full circle. He started out his career in Appalachia, first in northeast Mississippi, where he was a reporter for a weekly community newspaper owned

by Rosa Lee’s father that served the residents of Fulton. “My perspective on community comes from my fatherin-law,” says Jones. “He had to build a community so his business could survive.” From there, Jones bought and ran other publications in Mississippi, as well as a subscription service that monitored local legislation, before starting a catfish farming business - a brand new concept at the time.

Jones took to the road with a local chef to sell the idea that “catfish is not just something you eat fried as country food.” The bottom-dwelling fish, it turned out, becomes a flaky white fish when farmed. “The technology changed the fish, so we had to tell a new story about it,” he explains.

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When Rosa Lee decided to go to the seminary, the couple moved to San Francisco. The dot-com boom was just taking shape, and Jones started a company that produced conferences and events focused on Internet marketplaces. He sold it near the peak of the NASDAQ, before the dot-com era came crashing down to earth.

It was at that time that his daughter asked Jones a question that would change the course of his career. “She said, ‘Dad, what is your life about?’” he recalls. “I realized that I hadn’t answered - or asked - that question since college.”

After some soul-searching, Jones got involved with nonprofits, travelling to Africa to help combat the scourge of malaria. But he chafed at the restrictions and limits of the nonprofit world. That’s when his friend Tim Freundlich, then with the Calvert Foundation, approached him about collaborating. Along with a third partner, Joy Anderson, they created Good Capital LLC, a fund that would invest in for-profit enterprises with a social mission.

The idea was fairly novel at the time, and Jones brought a disruptor’s energy to it. “He was fresh and rambunctious, and it was a shot in the arm for me and the space at that time,” says Freundlich. Like farmed catfish, they needed to create a new narrative

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THE NEIGHBORHOOD ECONOMICS FUNDING KIT INCLUDES: LOW-COST LENDING

A DONORADVISED FUND

GIVING CIRCLES

KIDS’ COMMUNITY SAVINGS BONDS

Low-cost lending through platforms such as KivaZip, which makes zerointerest loans, or local, relationship-led lending circles.

A donor-advised fund that individuals may donate to. The fund makes debt or equity investments, with proceeds plowed back into the fund.

Giving circles, which can be book clubs, Sunday School groups, or others that meet regularly and trust one another. Members take turns recommending a cause to donate to and track.

Kids’ community savings bonds, which envision schoolchildren saving $1 a week, with the proceeds invested in a community project.

After 12 years they get their investment back with any returns.

for the fund to make sense. Thus was born Social Capital Markets - or SOCAP, as it’s fondly known.

From the start, SOCAP attempted to bring together a diversity of voices and perspectives, in contrast to the somewhat exclusive nature of philanthropic investing at the time. “Markets are about the valuable stranger and finding the unlikely ally. They need to work for the barbarians and the Byzantines, they need to work for the really fussy and the wild ones,” says Jones.

The first conference, in 2005, drew 600 participants. This year, more than 2,500 SOCAP attendees are expected to fill San Francisco’s Fort Mason Center.

The conversation at SOCAP has evolved. In the last few years, there has been growing focus on community-based investing - no doubt a reflection of Jones’ own evolution.

In the early days of SOCAP, “People didn’t have to think locally in the way they do now,” explains Jones. “The great downside of traditional capital wasn’t as clear to people as it has been post-2008.”

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began realizing that, if we want to solve the pressing problems facing our communities and society, we’re going to have to do it ourselves. “One motivation behind community investing is the realization that no one is going to come in and fix it for us, there’s not going to be a Marshall Plan, so we need to rely on each other. People are becoming entrepreneurial because it’s a necessity.”

Back in Asheville, Jones has immersed himself in the task of community-building. There’s a local food hub project, and he and Rosa Lee mentor local entrepreneurs at Accelerating Appalachia, an accelerator for food and textile producers. And the peer-learning network of Appalachian towns is going strong. “We’re learning and listening a lot to each other,” he says.

All of this suits him just fine. “To go from a place like Silicon Valley, where people love change, and go back and work in Appalachia where I started is an odd thing. But it feels really comfortable at the same time,” says Jones. “There are not a lot of investors I know that like to hunker down with rednecks as long as it takes, but

I’ve done that for years, so there’s a strange kind of familiarity with what I’m doing.”$

Amy Cortese is a journalist whose work has appeared in the New York Times, Businessweek, and other publications. Her book “Locavesting: The Revolution in Local Investing And How To Profit From It” helped popularize the concept of community capital. Her latest venture, www.locavesting.com, is a hub for local investing news, education, and resources.

FOOD & AGRICULTURE

HOW THE L.A. KITCHEN IS CREATING COMMUNITY AND CHANGING THE FOOD SYSTEM obert Egger is the ultimate systems thinker. Through the recently launched L.A. Kitchen, he’s tackling the issues of hunger, poverty, food waste, unemployment, and recidivism with one beautifully elegant solution that uses systems thinking to understand the interconnectedness of these disparate problems. Egger has already made his mark on the food system through the DC Central Kitchen, the country’s first community kitchen, which he founded in 1989. The DC Central Kitchen’s model uses food donated by hospitality businesses and farms to fuel a culinary arts job training program. During his 24 years as president, the DC Central Kitchen blossomed to become an $11 million per year, self-sustaining social enterprise; produced over 26 million meals; and helped 1,000 men and women find full-time employment. With an infectious commitment for shaking the tree and creating true change, he is now using the lessons learned from the DC Central Kitchen to expand his reach to his hometown of Los Angeles. We chatted with this tequiladrinking renegade about his thoughts on the food system and how we can collectively shift the paradigm of the industry for good - and he didn’t disappoint.

What are the biggest issues facing the food system right now? What are the primary sources of these challenges?

Robert Egger: Since the 1960s, large agri/food businesses have employed sophisticated marketing tactics to convince millions of everyday Americans to buy food that is cheap, unhealthy, and unsustainable. In recent decades, they have also turned to electing people to protect their interests and thwart any legislative attempt to give everyday consumers the ability to understand what they are buying. This is why Jamie Oliver rightly ended the first season of his television show “Food Revolution” in front of the US Department of Agriculture, challenging citizens to realize that food policy - what they eat, how much it costs, information about what’s in it - is not driven by science, or the health of citizens, but by profits.

Capitalism is cool, up to the point where we put the health and vitality of our nation at risk. This is why I think, when we talk about food in America, we must also be talking about advocacy, voting, and legislation.

What would you propose as potential solutions that would address the issue of food waste? Do you feel that the community kitchen model you developed in DC and LA could serve as a solution at scale?

RE: There’s an excitement growing about how to reclaim and use the staggering amount of food that is wasted each year simply because it isn’t pretty. But, it’s critical that we don’t see food just as fuel for the body.

All of the programs I’ve built or helped open (by being open-source about our work) use food as a tool to empower, uplift, educate, and employ. The key to this is processing food from its simple form (say, a tomato) into something nutritious, ethnically appropriate, and, when possible, shelf stable. So, in the case of a tomato, we use it to teach knife skills to a person in a culinary arts program. Then, that person can teach a volunteer. Together, they can make tomato sauce, gazpacho, or salsa by combining that tomato with other healthy ingredients. That product could save recipient agencies money that they

can re-invest in empowerment programs. Catch my drift? We need to use food as a powerful tool for change, not just something we consume to keep us moving.

Are there other innovative approaches to getting fresh, healthy food into food deserts that you find compelling?

RE: I dig the whole corner store conversion, but I’m compelled to keep drilling down until the maximum social impact is revealed. When you work with corner stores, you have to find the store, convince the owner, and retrofit the store if needed. Then you have to get inventory to the store, and hope the owner makes an effort to promote the products. Finally, and this is really important, you have to wonder where the profit you’ve helped make goes - does it stay in the community, or leave? Personally, I don’t dig that much uncertainty.

So I’m interested in developing a franchise model. With a franchise model, programs that aggregate donated or purchased fruits and veggies (like DC

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DISRUPTIVE BUSINESS MODEL

SOCIAL SERVICE AGENCY

LOCAL FARM

Fresh, nutritious meals and snacks prepared by program trainees are distributed to social service agencies serving Los Angeles’ most vulnerable populations and aging residents.

Working with local farms, L.A. Kitchen collects fruits and vegetables that would otherwise go to waste for cosmetic reasons and takes them to a processing center.

RESTAURANT

FOSTER HOME Emancipated foster youth are invited to take part in a culinary job-training program at L.A. Kitchen.

revealing the power of food Participants go through a 15-week training program run by on-staff social workers and volunteers and taught by certified culinary instructors and guest chefs.

PRISON Adults transitioning out of incarceration are invited to take part in a culinary job-training program at L.A. Kitchen.

Trainees are paired with industry partners for internships throughout the training program and are provided with food handling certificates, job placement support, and continued professional support upon completion of the program.

BUSINESSES L.A. Kitchen’s for-profit subsidiary, Strong Food, competes for food service contracts to develop the capacity and infrastructure to hire graduates of the culinary job training program.

FOOD & AGRICULTURE

Central Kitchen and L.A. Kitchen) could offer people (graduates of the training program, or even students at the local high school) a chance to become small entrepreneurs, selling products in their own communities. All you’d need is a small portion of the profits to replenish your inventory, so you could offer the person running the cart/stand the chance to keep 75 cents out of every dollar of the products that they sell.

That way, you get triple the impact food gets into the community, you give someone the opportunity to own their own little business, and you get an incentivized salesperson. Most importantly, you can help keep the money in the community. Everybody wins. That’s the power of food!

You work at the intersection of the nonprofit and for-profit sectors. What are your thoughts on how to best leverage this intersection?

RE: The key is for the charitable sector, the nonprofits, to move from being service providers to being job creators.

Giving away food isn’t fighting hunger.

It’s cool, critical, and sadly needed, but truly fighting hunger means creating wages, promoting policies, and helping to elect people who see the power of these ideas we’re discussing. Nonprofits must move past the notion that we cannot be actively engaged in the political process, or that we don’t have a role to play in creating jobs. Think about it - what’s the incentive for a business to hire a felon, a working mom, or a person who needs to help care for an ailing parent, let alone pay a decent wage or provide health care? There isn’t any incentive, which is why we, the nonprofits in America, should see that this is our time to help create those jobs. If you think about it, and I do, our motives aren’t redistributing wealth to investors as much as re-investing it in community. If you combine this with a new generation of mayors who need to keep as much money in the community as possible, this could be a great new era of public-private partnerships that get more people working and keep local economies humming.

What shifts would you like to see happen to the food system over the next ten years?

RE: I’d like to see us get mature about it and move past the romantic side of the discussion so we can get down to the brass tacks of creating a viable economy around the local food system. This is just one of the reasons I’ve chosen to work on the issue of senior hunger. Of course, the need to prepare for the wave of older Americans who will not have enough money in the bank for the extra years science will give them is critical, but if we can connect this need with city and state contracts to provide those meals, and then use the money to buy from local farmers, and then link that purchasing power with similar movements to provide healthy local food in schools, then you’re talking about an economy of scale that will make elected leaders realize the power of what we’re talking about.

I’d also like to work to create a political bridge between the generations around food policy based on what I

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“We need to use food as a powerful tool for change, not just something we consume to keep us moving.” think will be a unifying principle - access to healthy food. There’s tremendous potential to start electing people who show up on day one understanding the power of what we’re talking about.

Your work addresses a variety of issues, from food waste to unemployment. Do any of these issues feel more insurmountable than the others?

RE: If I were trying to tackle hunger, poverty, food waste, unemployment, and recidivism as individual issues, which is what too many people attempt to do, they would be insurmountable. I believe that they are

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interconnected, and that you can only address them (at the street level) when you see those connections and build models that use perceived weaknesses as strengths. I’ve always tried to show that the things we view as “part of the problem” are better used as part of the solution. In our case, we take food that’s wasted, and use it to train men and women who are home from prison, exiting foster care, or coming out of rehab. They learn by preparing beautiful meals for the community. When they graduate, they can work for our social business, Strong Food, which uses the food we buy from local farmers to create healthy senior meals, snacks, or products for large institutions that want to include

local products in their meals. Through this system, food is recovered, people are trained and employed in jobs that make them feel like they’re contributing to society, fewer people go back to prison, agencies and people get great meals that make them healthier, and the city or county gets a big-ass bang for their contract buck because all that money serves, sustains, and shakes up the community.

What gives you hope for the future?

RE: Tequila. And the growing chorus of friends, colleagues, and engaged citizens who say, “Fuck that!” when told that they can’t make a difference.

We can, and we will.

Photos: L.A. Kitchen

FOOD & AGRICULTURE

FOOD WASTE

BY THE NUMBERS

40% $165 The estimated amount of food in the US today that is wasted and goes uneaten

$

$

$

BILLION

The estimated value of the food thrown away by Americans every year

35 MILLION

TONS

The amount of food that was disposed of in the US in 2013

20% 1/3

The approximate percentage of US methane emissions that come from uneaten food rotting in landfills

The amount of all food produced worldwide that was wasted in 2013, worth around US$1 trillion

25 MILLION The estimated number of Americans who could be fed by reducing food waste in the US by 15%

20 POUNDS The average amount of food wasted per person every month in the US

IN ORDER TO GET FOOD TO AMERICANS’ TABLES, WE USE: 10% OF THE TOTAL U.S. ENERGY BUDGET

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45% OF U.S. LAND

80% OF THE FRESHWATER CONSUMED IN THE U.S.

FOOD & AGRICULTURE

THE BUSINESS CASE FOR

ADDRESSING FOOD WASTE MM LOCAL One of the primary reasons food is wasted is because people purchase more than they need and the food expires before they can consume it. Enter MM Local. The Coloradobased company cans organic produce from local farms at the height of ripeness so consumers can enjoy local produce without worrying about it expiring.

Photo: MM Local

FOPO FOOD POWDER A team of international graduate students combined forces to develop this innovative powder that tackles food waste and world hunger. The company collects nearly expired produce from local markets and spray dries the food to create a nutrient dense powder with a shelf life of two years. The powder, which can be sprinkled onto food items like yogurt, smoothies, or cereal, retains anywhere from 30 to 80 percent of its original nutritional value. The company has already contracted with the United Nations Food and Agriculture Organization and the Philippine government to pilot its first run, partnering with local farmers to collect food that would otherwise be wasted. Once officially launched, the powder will be available for retail purchase as well as available for humanitarian efforts at a lower cost.

Photo: FoPo Food Power

DAILY TABLE In June 2015, Doug Rauch, former President of Trader Joe’s, opened Daily Table in Dorchester, Massachusetts. The nonprofit retail store partners with growers, grocery stores, and food companies to collect excess food that is past its prime (based on the arbitrary “sellby” date that is placed on many food items) that can then be purchased at Daily Table at a deeply discounted price. The company also prepares ready-to-go, healthy meals with price points that compete with fast-food restaurants.

With plans to expand to multiple locations, this new model is providing fresh, healthy food to lower-income individuals while simultaneously reducing food waste.

Photo: Daily Table

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HAMPTON CREEK

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WHAT WOULD IT LOOK LIKE IF WE STARTED OVER HAMPTON CREEK AT A CLANCE Location: San Francisco, CA Founded: 2011 Employees: 76 Structure: Privately held Current Valuation: $900 million+ Fun Fact: 13 billionaires have invested in the company to date In Short: Hampton Creek uses technology to create healthier food using plant proteins to substitute for animal products

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Hampton Creek started with the question, “What would it look like if we started over with the food system?” With that question at the core of everything it does, the company took an entirely different approach to making food. Using technology to find plant proteins that can substitute for eggs, the company is designing healthier, less expensive food that reduces water and land use, CO2 emissions, cholesterol, and the degrading and often inhumane conditions associated with egg production.

Within a year of launching, the company exploded in the marketplace. Its products have been picked up by the likes of Target, Walmart, Whole Foods, and the Dollar Tree - even 7-Eleven has pledged to use Hampton Creek’s signature product Just Mayo on all of its sandwiches moving forward. Their next line of products, Just Cookies, has recently been picked up by over 2,300 schools serving more than two-and-a-half million kids every year.

Following such tremendous growth, the company has recently become the most valuable food technology company in the world, valued at close to a billion dollars. However, growth on this scale doesn’t come without its fair share of controversy.

The company has been criticized for everything from incorrect labeling to having the CEO’s dog in the lab (a practice that was abandoned over two years ago). The American Egg Board, a government-backed egg lobbying group, has launched a concerted attack on Hampton Creek (see sidebar). CEO Josh Tetrick’s personal life and character have come under scrutiny as well.

Nobody ever said it would be possible to change the world without a little controversy along the way. The fact remains that what the company is trying to do could be game changing, and the impact that it has had to date is astounding. While exploring what it would look like if we started over in the food system, Hampton Creek has created a bold new model for how to shift the paradigm within an entire industry that has caught the attention of some of the largest companies and most influential people in the world. We got the chance to speak with CEO Josh Tetrick about everything from systems thinking and finding the right investors to his concerns about taking the company public.

“

IF YOU CAN EXPRESS WHAT YOU WANT INSTEAD OF BEING A VICTIM TO WHAT CURRENTLY IS, WHAT WOULD THAT LOOK LIKE?

”

FOOD & AGRICULTURE

HAMPTON CREEK’S 2015 IMPACT 1.5 BILLION gallons of water saved

+

94 MILLION square feet of land preserved

What do you believe is the most important component to driving change in the food system in the US and what is the biggest shift that you would like to see occur?

Josh Tetrick: We really think about systems change with this big question that obsesses us as a company, which is, “What would it look like if we just started over?” It’s easy to tweak the edges, but when we ask this question, it forces a different way of thinking. We call it first principle thinking. If you can express what you want instead of being a victim to what currently is, what would that look like? Asking that question forces us to clean out the cobwebs from our head and get rid of the habits and excuses and just say, “If we could just start from scratch, what would that really look like?” That question can be applied to lots of things, not just

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6.5 BILLION

grams of CO2 + emissions + avoided

2.8 BILLION

milligrams of cholesterol avoided

food. But if you apply it to food, the current food system really does need to be looked at in a way that prompts an entire start-over.

There’s tons of crappy food out there - it might taste all right, but it’s cheap, it’s degrading to the planet, and it’s really awful for our bodies.

Then you have the “alternatives,” which can be too damn expensive and often don’t taste that good. Everything that we’re trying to do as a company is sort of a third way of doing it, which is to say that if we started over with food, it would be good for the body and the planet, it would always taste better, and it would always be less expensive.

If you could figure out a way to create that offering, you wouldn’t just have to rely on the conscience and goodwill of people. You would just make the good things so damn good that it would be silly not to choose

11 BILLION

milligrams of + sodium avoided

it. Ultimately, I don’t know if that is a pessimistic or an optimistic way of looking at the world, but we think it’s an effective way of looking at it.

What other industries do you think are ripe for a paradigm shift?

JT: I think we could apply the question “what would it look like if we started over?” to energy. There’s 7.1 billion people on the planet right now.

If we could start energy over from scratch, there’s no way we’d be building coal-fired power plants. We’d be thinking of clean, distributed energy that’s cheaper than coal.

If we were starting communications from scratch, we probably wouldn’t build landlines anymore. We’d probably just go straight to cellphones. If we could start the education system from scratch, we wouldn’t have to deal with all of the habits that

FOOD & AGRICULTURE

we have in the educational system. We’d probably teach kids how to thrive in the world where you can Google something in a millisecond.

We wouldn’t have to memorize facts. We’d have adaptive learning.

If we could start politics from scratch, we would probably have a world in which we wouldn’t have corporations and super-PACs funneling hundreds of millions of dollars into the candidates. We’d probably make the playing field a little bit more equal. I think at least most politicians might agree with that. You wouldn’t have a world where politicians spend 50 percent of their time raising money as opposed to thinking about how to be a better government.

It’s difficult because there’s so much capital and habits invested in the current way of doing things that it makes it difficult to say, “What the hell would it look like if we started over?” That’s why this question is so powerful for us and for systems thinkers because it means you’re not locked into this jail cell of the current reality - you can create something entirely different. That’s what gets us up in the morning more than anything.

Is your ultimate goal to scale as fast as possible? What do you believe has been the most critical element to your growth so far?

JT: The ultimate goal is to create more positive impact than any company ever has period. We make decisions based upon being a permanent company that’s going to have an incredible impact on the planet, not based upon shortterm gains. If a larger company wanted to acquire us for a big sum of money (and one has already suggested it), everyone in the company would riot if I

said yes. The people that I’m working with could have any job that they want, but this is about something larger. We want to create a mechanism for a profound impact and food just happens to be the playing field that we play on.

Ultimately, we want to be a public company that’s around for 300 years that fundamentally changes the system. We are lucky that investors don’t run the company - we do - and we have the ability to make decisions based upon permanent long-term impact.

There’s an opportunity here to be something much more extraordinary and have much more of an impact. We would rather risk it all doing something that is extraordinary and on the edge than be “sort of good.” We’d rather not be in business if we’re just “sort of good.”

Do you have any concerns about being able to maintain your mission and values if you go public?

JT: Definitely. We wouldn’t go public unless we felt like we could maintain our mission and that’s going to relate to how we think about the board structure, how we think about the articles of our company, and how it would affect our long-term investors, so it’s definitely a concern. We wouldn’t go public just because it feels nice to give investors their money back. We’d only go public if it felt like it would increase the probability that we could do more of why we started, and could have much more of an impact and do more of what we want to do. When we eventually do it, we’ve got to do it in a way that’s thoughtful and doesn’t put us in a situation that takes us farther away from what we’re trying to do, as so often happens.

YOU KNOW YOU’RE DISRUPTING A SYSTEM WHEN...

Controversy with the American Egg Board Shortly before CCM went to press, The Guardian uncovered evidence that the American Egg Board (AEB) - an egg lobbying group overseen by the USDA - had conspired with a member of the USDA and hired PR firm Edelman to try to take down Hampton Creek. More than 600 emails obtained through the Freedom of Information Act (FOIA) by Ryan Noah Shapiro, a public records expert at MIT, and his lawyer, Jeffrey Light, show AEB employees doing everything from orchestrating lawsuits to jokingly (we hope) making threats against Josh Tetrick’s life. The AEB has rules that govern how it can spend its funds and some believe the tactics it used in this concerted attack on Hampton Creek may have been illegal.

The AEB’s attack began in August 2013, when Joanne Ivy, president of the AEB, claimed that Hampton Creek represented “a crisis and major threat to the future of the egg product business.”

From there, the AEB orchestrated the following: • Joanne Ivy and Roger Glasshoff of the USDA forwarded information to the FDA that challenged Hampton Creek’s labeling as “mayonnaise.” In August 2015, the FDA officially warned Hampton Creek that it can no longer call its Just Mayo product mayonnaise.

• The AEB paid Edelman $43,000 to convince food bloggers to promote eggs in their posts.

• The AEB worked behind closed doors with Unilever to help the company with its lawsuit against Hampton Creek in 2014 (the lawsuit was later dropped).

• The AEB offered to pay Anthony Zolezzi, an external sustainability contractor, to call Whole Foods and encourage the company to take Hampton Creek products off shelves (Whole Foods still sells Hampton Creek products).

• In two instances, joking comments were made threatening Josh Tetrick’s life. In December 2013, AEB executive Mitch Kanter proposed, “In the meantime, you want me to contact some of my old buddies in Brooklyn to pay Mr. Tetrick a visit?” And in October 2014, Mike Sencer of Hidden Villa Ranch asked, “Can we pool our money and put a hit on him?”

At the time of printing, it remained to be seen if disciplinary action will be taken against the AEB or those involved in the controversy.

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TOP THREE LESSONS LEARNED SO FAR AS CEO Break the Rules

All of the rules that people think are out there about how much impact you can have, how fast your company can grow, or the kind of people who you can hire, most of those rules are just made up by people who are not necessarily smarter than me or you. Instead of listening to the rules, focus on what you want, the impact you want, and the growth that you want. If you truly go after that, you can probably do a lot more than what someone who follows the rules thinks is possible.

Hire Mission-Driven Talent If you can figure out a way to find talented people who are really mission-driven, who are annoyed by the current state of the world and want to make it a lot better, and get them to focus on their strengths in a workplace setting, you can do incredible things.

Get Back to Work

There will always be things that come up. In the three years we’ve been in business, there have been thousands of obstacles and thousands of good things that have happened. But whether something really awesome or not-so-awesome happens, if you just focus on getting back to work, it’s usually the best way to approach things.

You can talk things to death or be extraordinarily happy or sad about something, but if you really believe in the thing you’re working on, just get back to work and keep moving in the right direction and life will end up responding pretty well to that.

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What steps are you taking to ensure that you’re actually maintaining your core values in the face of such tremendous growth?

JT: There are two main things. One is the folks that we hire. It’s obviously been a process, but we’ve gotten a lot better about telling the difference between people who want to come here because they want to make a lot of money and people who care about the mission with their whole hearts. We found that when you bring in leaders whether that leader is a 21-year-old student who has just graduated or a 63-year-old Chief Scientific Officer - if they truly believe in making impact, that’s one way to guard against losing your values.

Second is making sure that, when we’re making decisions on the products that we decide to develop, we have a set of filters. If the potential product is not - and we quantify this - better for water, better for reducing carbon emissions, better in terms of reducing land use, better for cholesterol, and if we’re finding ourselves in a situation where it’s actually hurting farmers instead of helping farmers, even if it’s incredibly profitable, we won’t release it. If a product doesn’t taste better according to a sensory evaluation, we won’t release it. If a product is more expensive than what the traditional product would be, we won’t release it.

We have these guardrails in place that keep us focused on what we’re trying to do. Everyone is aware of these filters and we hire people who are really mission-oriented to maintain that focus.

How have you worked to find mission-aligned investors and what advice do you have on building out a board?

JT: One piece of advice I have on mission-aligned investors is that you have to be real about it. Every time I’m even considering accepting money from an investor, I tell them, “Please know the following: First, we have no interest in being acquired by another company, even if the check is large. If that scares you, it’s OK, but you’re probably not the right investor for us. Second, yes, we care about being profitable, but the

things we’re doing are based around solving big problems. That’s who we are. That means that we’re not going to do certain things that other companies might do. If that’s going to frustrate you and you’re going to be bothered by that, I’m telling you now.”

Also, look at what the investors have done before. One of our investors is Li Ka-Shing, who has a firm called Horizons Ventures. If you look at Horizons’ investments, it has invested in a lot of mission-driven companies. Other investors we have include the Founders Fund. It has invested in incredible companies that are trying to find the solution to cancer or trying to help with distributed clean energy. Khosla Ventures is an investor - it invests a ton in sustainable agriculture and clean energy. Another one of our investors is Eagle Cliff, started by Tom Steyer, who’s an environmental activist, and his wife Kat Taylor. They live their lives in a mission-oriented way. If you look across our investors, almost all of them have a history of investing in socially and environmentally minded companies.

In terms of the board, I would say for any entrepreneur, especially if it’s a mission-driven company, you need to control the direction of your company, not your investors. It’s important that you have a board composition that supports that because the truth about life is that some days will be awesome and some days will be dark. That’s called life. When you’re having a dark day, you’ve got to stay focused on just getting the damn job done and not be distracted by a thousand different voices telling you to do it another way or people wanting to jump off the boat.

The more that you can control the direction the better, and that directly relates to the people on your board and the votes on the board.

How have you handled a situation where you didn’t see eye to eye with some of your investors as far as the direction you wanted to take the company?

JT: Well, it starts with knowing and being real with them about the fact that the company is not run by them.

You have to set that expectation right

“Our ultimate goal is to create more positive impact than any company ever has - period.�

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EGGS BY THE NUMBERS 7.6 BILLION

305 MILLION

The number of hens in the US that are used for egg production

The number of eggs produced in the US in July 2015

17

93%

The number of egg companies in the US that each have a flock of more than 5 million hens

The percentage of hens that are caged during egg production

67

The number of square inches that most hens are confined to inside battery cages from the get-go so it’s not confusing, even before the investment.

And then you need to listen in a way that’s not bullshit. You need to know that you brought these people in because they have a particular perspective and that even if you’re not going in that direction, it is helpful to really understand what their perspective is.

And you need to ask questions if you don’t feel like you fully understand where they’re coming from. Then, in the end, if it doesn’t feel like it’s the path that you feel is correct for the company, saying, “This is the path that we’re choosing and these are the rational reasons why,” and being totally open about it.

That’s why it’s so important to pick your investors because you can have investors that say, “OK, but we’ll still do it my way.” If you’re deliberate about choosing people who are aligned with you, who get that you’re not just going to be spinning around the advice train, who trust you to make smart, permanent, long-term-oriented decisions, you can try to mitigate some of that 56

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The number of gallons of water it takes to produce one egg stuff up front.

What does the internal sustainability of Hampton Creek look like and how intentional are you guys about the culture that you’re building?

JT: It’s one of the most important things. We have an amazing Head of People, Allison Hopkins, who formerly led HR at Netflix. Her most important role in the company is working with me to ensure that we’re living our values every day. You’ve got to nurture it and Allison does a great job. A really smart person told me once, “Culture always beats strategy.” You can be as strategic as you want about all of these things, but if you don’t have a group of people who have the right habits of doing the right thing, then the strategy will be bullshit.

Is there anything that you wish someone had told you before starting Hampton Creek?

$337 MILLION

The value of US egg exports in 2014

JT: I wish someone had told me that most of the ideas about what is possible have nothing to do with what’s actually possible but are based upon the current reality. We could have gone a lot faster right from the beginning. If you want to create something entirely different, you’ve got to seek out those people who are not always living within the current frame of things - the folks that are doing really extraordinary things. If you’re going to listen to people, listen to those people.

I also wish someone had sat me down and told me that you’ve got to hire phenomenal leaders right in the beginning stages of the company because I shouldn’t be running around doing everything. Get amazing people that can scale this thing sooner rather than later - that would have been a good lesson.

Thankfully though, we haven’t been around for that long and we’re pretty good about quickly seeing things that need to be fixed and amplifying the things that are awesome and doing it faster than most people can ever even imagine.

FOOD & AGRICULTURE

At this point, what is your definition of success?

JT: For me it is getting more of these awesome people, who I am looking at right now [in the Hampton Creek lab], to figure out how to use more of their strengths to align with making more and better products, selling more and better products, telling really compelling stories, and having an incredible impact.

Longer-term, the definition of success is creating more impact than any other company in the next ten years. That’s the measure that keeps me up and gets me excited more than anything. When we think about that, that’s less water use, less land use. It’s promoting entrepreneurship and bringing farmers around the world into a better global food economy.

It’s taking out some of the crap from the food system and putting in things that are better in ways that we can really measure and being able to say in the next ten years, “We created more than any other company has.” That’s what the bigger purpose and drive is.

Food is the most profound platform to change, frankly, because it’s so screwed up. It is so degrading to our values in so many ways that we can flip that model on its head and hopefully make the future a little bit better.

“If you can just make it a little bit easier for people to do the right thing, they’re going to do it.”

What is giving you hope for the future?

JT: In a little more than a year of being out there, we’ve saved more than a billion gallons of water. In the lifespan of a company, that’s just a flash and it makes me optimistic. There are so many people out there who want to put their strengths toward something good, and just looking at the lab right now, I see chefs, I see biochemists, I see someone with a psychology degree on the phone - and all of these incredibly talented people want to do something good. And it’s working. It’s working in terms of its impact. Some of the largest companies in the world are buying into it in a short period of time.

Whether it’s the world’s largest retailer, Wal-Mart, or the world’s biggest food services company, Compass Group, or one of the largest convenience stores in the world [7-Eleven], they’re not just saying they’re buying into it, they’re buying it. They’re actually having an impact, too. It’s hopeful for me that if you can just make it a little bit easier for people to do the right thing, they’re going to do it. It’s an exciting thing to know that if we build that world for them, we can do so much good.

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GROWING DEEP WITH

HOW ONE LOCAL DELI IN MICHIGAN BECAME A $40 MILLION LOCAL ENTERPRISE

ZINGERMAN’S AT A GLANCE Location: Ann Arbor, MI Founded: 1982 Number of Employees: 585 Annual Revenue: $45.6 Million Annual Profits: $1 Million Sectors: Food, Consulting Local Ownership: 100% Local Sourcing: Over 60%

Mention the name “Zingerman’s” in Ann Arbor, Michigan and you’ll be hard-pressed to find someone who doesn’t smile. In the early ’80s, Paul Saginaw and Ari Weinzweig came together to open Zingerman’s Deli, a specialty food store and deli that serves overstuffed, now-world-famous sandwiches. Zingerman’s Deli became a local institution in Ann Arbor and quickly received national acclaim.

However, from day one, Saginaw and Weinzweig were adamant that they wanted their business to be truly unique, which meant that there could be only one. That meant they wouldn’t franchise their hugely successful brand. Simultaneously, they were faced with the challenge of how to dynamically grow the company to support their employees. After a decade in business, they found a solution - one that would not only provide them with the dynamic growth they were searching for, but that would bolster the local economy in Ann Arbor. The two men decided to create a network of 10 to 15 vertically integrated businesses that could support and supply each other and operate independently. The results and growth have been astounding and have created a model for true local economic prosperity. Paul Saginaw shared his story and insights on everything from open-book management to Zingerman’s creative employee ownership model.

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THE STORY OF HOW ZINGERMAN’S DELI GOT STARTED My partner Ari Weinzweig and I met in the late ’70s when we found ourselves both working in a restaurant in Ann Arbor. Ari was a recent graduate of the University of Michigan. I was working for the company that opened the restaurant as the general manager.

On my first day there, Ari started as a dishwasher. We met and struck up a friendship. I had grown up in Detroit and he grew up in Chicago where every neighborhood had a delicatessen, but here we were, stuck in Ann Arbor. It was a wasteland - you couldn’t find a real quality sandwich - and we thought that Ann Arbor could use a good delicatessen.

I left that company and went off with a friend to open a fish market.

Later, our landlord approached me and asked if I wanted to be partners with him and open a restaurant in a building he owned across the street, which I didn’t want to do. But I said I

would love to rent the space from him and he was happy to do that. That was on a Saturday. On Sunday morning, I went to Ari’s apartment and woke him up and said, “It’s time for you to give notice at your job. I found a location for us to open the delicatessen we’ve been talking about.”

We sat down at his Smith Corona typewriter and typed out our business plan and our vision of what we wanted.

We said that we were going to gather the finest artisan-made products from around the world and have a specialty food store, and smack down in the middle of it we were going to have this bustling sandwich shop serving overstuffed sandwiches. It was a very clear vision in our heads before we ever made our first sandwich. We also said that we wanted to be unique and, for us, by definition that meant that there is only one of you. If we were ever going to grow or expand, we would never do it by replication. That was not a model that interested us. We wanted to be great at what we were doing and we wanted to be unique, not necessarily big.

We borrowed $20,000 against my house and opened in March of 1982.

We were right - people wanted to eat a good sandwich and they wanted to try all the different foods in the store. We were busy enough that when we first opened and our friends would come in to congratulate us, we’d throw them an apron and ask them to get behind the counter [laughter]!

THE TRANSITION FROM A DELI TO A COMMUNITY OF BUSINESSES Things went really well for about the first ten years. We were winning awards, getting a lot of exposure in the media - it was a pretty heady time.

But about ten years into it, I started to notice things in the work environment that caused me concern. Sales were flattening, profitability was going down, and it kind of seemed like people were just coming in and punching the clock. We also had a formal leadership team and there was a lot of disagreement among them about where our

“We approach things with an abundance mentality rather than a scarcity mentality. There is plenty to go around.”

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ZINGERMAN’S COMMUNITY OF BUSINESSES

A Revolutionary Business Model to Drive Local Economic Prosperity

HOW IT WORKS • The community consists of ten operating businesses and one shared services business.

• Paul Saginaw and Ari Weinzweig are involved in all businesses in the community.

• All businesses are separate legal entities and have different ownership.

• Decisions for all businesses are made by consensus.

• All businesses source first from each other, then from other local sources.

• Employees of each business can participate in a profit-sharing program within each business and can also opt to purchase a form of stock in the entire community of businesses.

• Partners meet every two weeks, where decisions are made that affect all businesses in the community.

Specialty food store and deli Founded: 1982

Retail and wholesale bakery Founded: 1992

Mail order catalog allowing for food to be distributed nationwide Founded: 1993

Event venue Founded: 2014

Consulting group teaching Zingerman’s principles to other businesses Founded: 1994 Wholesale, made-to-order candy Founded: 2008

DANCING SANDWICH ENTERPRISES

Full-service catering and event company Founded: 1996

Sit-down, full-service restaurant Founded: 2003

Service Network

Wholesale coffee roaster Founded: 2003

ZINGERMAN’S SERVICE NETWORK Retail and wholesale cheese and gelato Founded: 2001

EFFECT ON THE LOCAL ECONOMY “The result of the model is that Zingerman’s now has sales of over $40 million per year and has created over 550 jobs in the Ann Arbor economy. To me, that’s the way that economic development should work. In a given business, look at where it’s getting its inputs, find the value-adding opportunities, and try to make a map of different ways of building local self-reliance through that.

To me, that kind of model, if it were practiced across the country, would put conventional economic development out of business.” // Michael Shuman, Community Economics Expert

A shared services business that provides internal technical and administrative expertise, including finance, IT, marketing, and payroll, for all businesses in the community.

FOOD & AGRICULTURE biggest opportunities were and how to take advantage of them. There was risk avoidance because we didn’t want to do anything crazy, but I thought we were really stopping the innovation.

Also, if you were up-and-coming in the organization and you wanted to grow professionally and financially, there wasn’t a lot of room for you because we were a young organization and had almost no turnover at the leadership level. You had to wait for somebody to die in order to move up and nobody was about to do that. We knew we were going to lose people because we didn’t provide them with growth opportunities. We knew we would end up losing people to our competition after we had taught them very well how to compete with us.

That was a problem. Also, we wanted to provide a very robust benefits package to our staff. We wanted the people who worked for us to be able to afford to live in the community, raise families, and send children to school, and all of that was going to require dynamic growth. So, we had to come to terms with how we were going to stay true to our initial vision of not growing by replication but at the same time have dynamic growth and provide opportunities for our team.

So, one day I dragged Ari outside and I sat him down on the bench in front of the deli and I said, “You know, we’ve been at this for ten years. Ten years from now, what do we look like?” He goes, “Oh man, why are you bothering me? You know, the dishwasher called in sick, the cooler’s broken, and the lunch rush is about to start. I got real work to do.” I said, “Well, this is our real work.” I understand that the everyday pressures are very, very real, but somebody in the organization has to be looking down the road saying, “this is where we’re going.” When you have a business and people come in every day and put out a really great effort, they are giving you the gift of followership. In exchange for that gift, you owe them a debt and part of that debt is to provide a safe, inviting, inclusive workplace where they feel really good about coming every day. Part of that is a legacy of guiding principles that determine how we’re going to behave within this organization and the other part is an 62

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attractive, achievable, strategically sound, inspiring, widely shared vision of the future that says, “This is where we’re going and it’s going to be fantastic. You are part of it and this is the role you’re going to play.”

We went back and forth for a year trying to figure out who we were and where we wanted to go. We didn’t have any roadmap out there - we just had these ideas about the type of organization that we wanted to be. I remember I was in Seattle at the Elliott Bay bookstore and I came across this book “The End of Bureaucracy and the Rise of the Intelligent Organization” [by Gifford and Elizabeth Pinchot]. I pretty much read the whole book just sitting there, went outside to the pay phone, called Ari and said, “I think I’ve just figured it out. Go out immediately and get this book. This might be the roadmap for us.” That started us thinking about what we wanted to do, and then we were at a conference in Washington, D.C. and we were listening to somebody lecture that was

Paul Saginaw (left) and Ari Weinzweig (right)

really boring. We walked outside, sat on the steps, and fully hatched this idea out for what we were going to do.

It was a long process though - about a year of going back and forth - but we came up with a 15-year vision that we called “Zingerman’s 2009” that said: 1) We were going to stay very local, but we would open 12 to 15 businesses, all in the Ann Arbor area, and all of them would carry the brand.

2) We were going to provide ownership opportunities in the brand to the people who worked for us.

3) We would partner with and finance those who came forward who were passionate about a product or service and were willing to operate according to our guiding principles and they would become part of this community of businesses.

4) We wouldn’t do anything unless it represented a quality improvement over what we were currently doing.

FOOD & AGRICULTURE 5) We wouldn’t be interested in something just because it was a market opportunity but because there was a passion and a willingness to go for greatness and market leadership.

6) We were going to be customers and suppliers of each other and we would have a shared services group so that when businesses were opening we would be able to provide a level of technical and administrative expertise that startups can’t afford but desperately need, in which the ongoing mature businesses would subsidize the startups because that would strengthen the brand and create new customers and suppliers for everybody.

THE BENEFITS AND CHALLENGES OF USING OPEN-BOOK MANAGEMENT We wanted a workplace where decisions were not made based on who had the most authority. We wanted to tap into the wisdom of everybody who worked there. It was something that we always had worked towards and then 15 years ago or so, we were introduced to a book written by Jack Stack and Bo Burling-

ham called “The Great Game of Business.” Jack Stack had done a leveraged management buyout of a company called Springfield ReManufacturing Corporation where they took over a business that was really suffering and was straddled with a lot of debt. He was trying to figure out what to do and came upon this [open-book management] as a survival tool.

When people say “open-book management,” most of the time they think about sharing the financial information of a company with everybody who works there. While that is certainly true, at its core, open-book management is inviting everybody to come in and help make the decisions that run the business. In order to do that, people need all the information, and the financial information is one of the big tools that you need. Jack Stack had a process that was based on what they called weekly financial huddles. Either within the business or, if the business is big, within the acting department, you have a weekly meeting where there is a big white board up on the wall, which is essentially the profit and loss statement for that department. It looks like

a financial statement - you have your line items, your sources of revenue, and your expenses. Next to each line item, there is the name of the employee who is responsible for that line. It is their responsibility to get the information up on the whiteboard in advance of this huddle and then to lead the discussion and report on their line item. It starts out driven by the annual plan with all of your planned sales or revenues and expenses for the week. Then we discuss what you actually did and what the variance was. If you’re beating the plan, we discuss what we’re doing right and how to keep doing more of it. If you’re lagging, we discuss what we’re going to do in order to get those numbers back on plan.

In most organizations, there’s a financial meeting where the accountant or the CFO are up there regurgitating what has happened historically. So the accountant holds all the financial information at the top, but the wisdom about what’s actually happening on the shop floor or on the retail line is held by the frontline staff. In most organizations, the people at the top think that people down at the bottom on the frontline are

“At its core, open-book management is inviting everybody to come in and help make the decisions that run the business.”

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not concerned about this information, that they’re not smart enough to understand it, and can’t handle it. The people down on the frontline think the people at the top are kind of stupid and that they’re not really concerned about what really happens on the shop floor at the frontline with the customers.

Open-book management is a system that respects all parties and where information flows back and forth. You can have the dishwasher responsible for the sales figure and leading the discussion on how we’re going to meet our sales numbers. That huddle is where the real work of the organization happens.

In order to get people there, you have to train them beforehand so everybody speaks the same language, though. We have to account for things in the same way. So financial education is a big part of our training in our organization. In “The Great Game of Business,” they talked about business as a game. In any game, you have to know the rules, you have to keep score, and then we share the winnings. The annual plan is where everybody helps develop the rules and the numbers. We all know what level of profitability we have to hit in order for the business to be sustainable. Everything in excess of the planned numbers is the gain and that gain is shared with the staff. When the staff looks at all those numbers - sales, labor, net operating profit, breakage, etc. - they are also looking at the numbers that show them how much money is going into the sharing pool that they will be able to share in.

In terms of challenges, information is power and the people who traditionally hold this sort of information don’t readily want to give it up. They worry about job security. They worry about what people are going to do with those numbers. There’s a lot of baseless fear that comes from that. With the frontline staff, a lot of people were excited, but others saw it as us asking them to do a lot more work for the same amount of money or thought we were going to ask them to get interested in something that they didn’t really care about.

You have to fight through the resistance. Our organization is like any other organization. We generally have two reactions to change: people are either against it or they are really against it.

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So, you have to work through all of that and be willing to stick with it in order to give it the time it needs to get traction.

It took 18 to 24 months to start to get the real traction, but I remember distinctly struggling with this for about 18 months and then one day watching a dishwasher who was in high school pick up an empty plastic jug of mayonnaise out of the recycling box and hold it up to the prep cook and say, “You didn’t take the spatula and get the rest of the mayonnaise out of there. That’s my profit-sharing check in there!” I was ready to cry. This high school kid had connected every single dot.

ALTERNATIVE METHODS OF EMPLOYEE OWNERSHIP All the businesses are separately incorporated legal entities that don’t own each other. The common ownership between them is Ari and me. We couldn’t use a traditional employee ownership plan like a co-op or an ESOP [Employee Stock Ownership Plan] because in order to do so, we would have to roll up into one organization. We really believe that who we are and where we are is greatly informed by how we are structured and we didn’t want to ever mess with that.

So we have these separate businesses, but then Ari and I have a business that we own together called Dancing Sandwich Enterprises, which holds our interest in each business, anywhere from 10 percent to 80 percent, because we’re partners with all the different businesses. It also owns the intellectual property and we license that to the businesses and that’s where our revenue comes from. We don’t take a salary from the businesses. Then the employees are each able to buy one share in that business for $1,000 that will entitle them to distributions every year that the businesses are profitable. We finance that $1,000 purchase with payroll deductions and then when they leave, they get their $1,000 back. The value of the share doesn’t really fluctuate - it’s more like a ticket to play the game. If things go well, they should get their $1,000 back in two years. That’s how they are participating in the financial performance of all the businesses together.

So, even if they are at a business that

lost money, if the whole community did well, they will get a distribution. So, the employee has a salary, they may be on a bonus plan based on meeting certain objectives, there is gain sharing within each of the businesses, and now there is another form of gain sharing that is community-wide.

It’s something we have wanted to do for a very, very long time. We wanted to share. It’s the same thing that drove us to allow the employees to become partners in the organization. Not everyone is going to become a partner, but we wanted everybody to be able to benefit.

If you look at business not as existing to create wealth only for the ownership, but rather to provide everybody associated with it with a better life, and if you have a notion in your head that there is such a thing as having enough, it is extremely liberating. If the business adopts this, it gives you enormous freedom to be generous, to innovate, to experiment, to be creative, and to have a lot of fun. In order to do that, you have to have a desire to share and be generous with what you have. Ari and I approach things with an abundance mentality rather than a scarcity mentality. There is plenty to go around. It’s a lot more fun to operate that way. You may not get incredibly wealthy, but you will have an incredibly rich life.

LESSONS LEARNED ALONG THE WAY AND ADVICE FOR BUDDING ENTREPRENEURS A great deal of who I am was informed by how I was raised. I was deeply informed by my grandfather, who was a small business man. He had a philosophy that said, “half of what you have belongs to those who need it,” and “if you’re successful, make the people around you successful.” He truly lived his life that way and that was just a huge influence on me. My grandfather also told me that you shouldn’t shit on the rungs as you climb the ladder of success because they are the same ones that you come back down on [laughter]!

But for entrepreneurs, I would say imagine that your real work is to create a vision that describes the world that you want to live in. Then, with all your heart, give yourself over to that vision.

Photos: Zingerman’s

ENERGY

DISRUPTIVE ENERGY

INNOVATIONS

Accio Energy Accio Energy has developed a new way to harness the energy of the wind called electrohydrodynamic, or EHD, wind energy.

Best suited for offshore applications, the EHD system consists of wind-permeable panels and a device that sprays positively charged seawater droplets over the panels. The wind naturally separates the positively charged drops from negatively charged ones, building up an electric potential that provides high-voltage direct current electricity.

The EHD panels are modular and much smaller than the massive offshore wind turbines that have led to many complaints about ruined ocean views. Accio Energy’s technology also has no moving parts and can produce up to 40 percent more energy than a traditional wind turbine with the same megawatt rating. Made primarily out of tubes that can be easily mass produced, the EHD system has the potential to make the dream of cheap and reliable wind energy a reality.

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Photo: Accio Energy

ENERGY

Freewire Technologies Freewire Technologies has created two exciting mobile charging products, the Mobi Charger and the Mobi Gen. The Mobi Charger is designed to recharge electric vehicles (EVs) without the need to install an expensive charging station that can only serve one vehicle at a time.

With the combined powers of a smartphone app and a human attendant, the Mobi Charger allows EV drivers to park anywhere. Drivers simply check in on the app to request a charge, and the attendant takes care of the rest. The Mobi Charger is designed to make EV ownership more convenient and reliable.

The Mobi Gen replaces dirty, noisy diesel generators with a clean source of mobile electricity. The Mobi Gen is fully motorized so it can be used anywhere, and, unlike diesel generators, it can be used indoors as well as outdoors. Though no one enjoys the noise and fumes from traditional generators, the Mobi Gen’s nearly silent operation is particularly useful on film sets.

Both mobile chargers use second-life EV batteries, keeping them out of landfills, and can be recharged using renewable energy or other grid power.

Photo: Freewire Technologies CONSCIOUS COMPANY MAGAZINE | FALL 2015 67

ENERGY

Photo: Jamie Newton

Lucid Energy Energy is the most significant cost of operating a water delivery system.

Lucid Energy’s LucidPipe Power System offers the chance to offset some of these costs by capturing energy from water as it flows downhill. The system consists of a large pipe with built-in hydro turbines that spin as the water moves through the pipe with only a moderate reduction in water pressure. By replacing sections of gravity-fed water pipelines with the LucidPipe Power System, water system operators can generate renewable, reliable, baseload electricity that doesn’t depend on the wind blowing or the sun shining.

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ENERGY

Project Sunroof by Google In August, Google announced the launch of Project Sunroof, an initiative to help homeowners quickly and easily decide whether installing solar panels makes sense for them. Using information that is already in Google Earth such as roof orientation, shade from nearby trees and buildings, and local weather patterns, Project Sunroof will calculate the solar potential of a given roof and estimate a homeowner’s potential savings from installing a solar system. Users can also get connected to solar installers in their area if they decide to go solar. At press time, Project Sunroof was only available in San Francisco, Fresno, and Boston, but Google hopes to make it available across the country and the world soon.

Photos: Google

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ENERGY

NOKERO

When Smart Design Finds a Profound Need

BY MICHAEL J. READEY

S

teve Katsaros didn’t start out with the intent to help children in rural Africa with their homework, but his solar light company, Nokero, is certainly having that impact today. Back in 2010, his idea for a low-cost, reliable light was conceived from a more practical design challenge. Katsaros was walking around a construction site and noticed strings of lights hanging overhead.

He thought, “Hey, why can’t those be solar?” As a consummate inventor with a mechanical engineering degree from Purdue, Katsaros quickly sketched out a design for a portable, battery-powered LED light in which the batteries were recharged by a solar cell. Within a few days he had the details worked out and sent the design off to the US Patent and Trademark Office, which issued a patent that would later win the USPTO’s Patents for Humanity Award.

Within a short period of time, Katsaros started selling early versions of the light, mainly to outdoor enthusiasts.

Then he got a big break. CNN became aware of the innovative design and ran a story about Katsaros’ portable solar light. Aid organizations saw the interview and immediately connected the product to the right market - the billions of people in the developing world who currently burn kerosene for lighting purposes.

Aid workers contacted Katsaros and outlined the opportunity, and it all came together. His solar light now had a mission, and his new company Nokero, short for “No Kerosene,” was born.

THE NEED AND THE OPPORTUNITY According to a recent A.T. Kearney report, nearly 1.4 billion people have no access to grid electricity - almost 20 percent of the world’s population.

And these numbers are expected to

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grow in the future. For example, in Sub-Saharan Africa alone, 600 million people live off-grid, a number that is expected to become 700 million by 2030.

Without electricity, people resort to using kerosene to illuminate their homes at night. Not only is the quality of the light poor, the health effects

of kerosene are tragic. Every year approximately 4.3 million people die from indoor air pollution such as kerosene fumes, according to a recent study by the World Health Organization. Another million people die from kerosene-related fires, with countless others suffering serious burns.

ENERGY

THE PRODUCT Katsaros quickly realized that waiting for grid infrastructure to come to remote villages was not an option, and that even renewables-based microgrids were still far off and economically out of reach. His new design challenge was to take his solar light and tailor it to meet the needs of these 1.4 billion potential customers, most of whom made the equivalent of only $1 or $2 a day.

Within a few product generations, Katsaros’ team produced Nokero’s now-flagship product, the N202. About the size of a baseball, the N202 solar light weighs only 90 grams (about 3 ounces). It charges throughout the day and provides seven hours of light at night.

Retailing for $13, it is affordable, and it enables customers to eliminate the need for kerosene. Importantly, Nokero sells the product at wholesale prices, which allows the company to make a sustainable profit and provides the capital to grow and develop new products.

Soon, Nokero’s solar lights were illuminating households in the villages of rural Africa, India, and South America. Children were able to study well into the night, while parents were able to invest their newfound savings from no longer needing to purchase kerosene into an overall higher standard of living.

As Nokero started to see success, another challenge of daily life in the developing world became evident - charging one’s cellphone.

In Africa, more than 700 million people use cellphones as their primary way to communicate and conduct business.

But without grid electricity, charging those phones becomes a weekly chore. For instance, it’s common for someone to spend an entire day walking from their remote village to a neighboring town to visit the cellphonecharging store. They’ll pay anywhere from 25 cents to 75 cents to charge their phone, (equivalent to about $50 for the average American), then walk the long journey home.

Nokero addressed this by turning its portable solar light into a cellphone charger by boosting the charge capability and integrating USB ports into the assembly, all for a retail price of about $30. That increased functionality not only saves time and money for the end user, but it allows them to make money by becoming the local charging source in their own village.

Photo: Erin Preston

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THE DISTRIBUTION CHALLENGE

4.3 MILLION The number of people who die every year from indoor air pollution such as kerosene fumes

1.4 BILLION

The number of people worldwide who do not have access to grid electricity

With the advantages of a large market and an aggressively priced product having many desirable features, one would think Nokero would be an easy sell. Not so, according to Nathan South, Nokero’s General Manager.

When targeting the developing world, there are no obvious distribution channels to use to get the product to the end customer. “There are a couple different models we’re exploring,” says South. “One is direct-sales to an aid organization or corporate social responsibility group. They generally have feet on the ground, in country, and can handle that last-mile distribution to the end user.” This was the case with the recent Nepal earthquake, during which Nokero sold thousands of lights to an aid organization all at once, which then quickly distributed them throughout the region to those without power.

“Another model we employ is to look for distributors and retailers in a country that are already selling products - any kind of products,” adds South. “It doesn’t have to be solar but any consumer-based good. We sell at a wholesale price to them, and they take care of importing, warehousing, and ultimately sales.” It’s common to have a wholesaler that will then distribute to a number of independently owned retailers. But that’s also part of the challenge. In such a multi-tiered supply chain, everyone wants their margin.

“So what you’ve envisioned as a $10 product may end up selling for $20.

And that becomes too expensive for the final customer. So distribution is my challenge number 1, 2, and 3.”

same amount of light with solar energy, which provides much higher quality illumination, is less than $3 billion.

That frees up $27 billion to be spent on education, home improvements, and a range of other cultural and social activities that result in a better quality of life.

According to Nokero - and supported by several studies - children using Nokero’s solar lights increase their study time by nearly 50 percent, meaning a better-educated population. Nokero’s customers are also realizing their entrepreneurial potential, creating new ventures such as local cellphonecharging businesses, or allowing existing businesses to work more productively by staying open during the evening hours, all of which enhances economic vitality within the village.

And perhaps most importantly, a single $13 Nokero solar light provides enough illumination to serve nearly a whole household, entirely eliminating the need for kerosene lamps and candles and the tragic health consequences associated with them.

When asked what keeps the Nokero team going day in and day out, South says it best: “We just think there is something to running a business that benefits society. For me, it helps me get going every day. Yes, I’m selling technology, but now it’s truly lifechanging.” Six million people would likely agree. Photos: Nokero

MAKING AN IMPACT

1 MILLION

The number of people who die every year from kerosene-related fires

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Since its formation in 2010, Nokero has sold just over 1.3 million lights in over 120 countries. That translates into a positive impact on nearly 6 million people. Economically, the case for solar lighting is compelling. For example, it is estimated that the developing world spends upwards of $30 billion annually for kerosene, just for lighting purposes. The cost of providing the

Michael J. Readey, Ph.D., currently resides in Boulder and is a senior executive with a local environmental engineering firm specializing in biogas purification and renewable biomethane development. He has been involved in environmentally sustainable technologies and businesses for most of his career, working for both small startups and large multinational companies.

ENERGY

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ENERGY

WHAT THE CLEAN POWER PLAN

MEANS FOR BUSINESSES

BY TOM MURRAY, VICE PRESIDENT, CORPORATE PARTNERSHIPS, ENVIRONMENTAL DEFENSE FUND

As I listened to the radio while commuting this summer, I heard reporters talk up how big a deal the EPA’s Clean Power Plan (CPP) was for companies, our nation, and our planet. But when so much of the initial news coverage was focused on what we didn’t know about the CPP, one interview in particular stood out from the noise. Ralph Izzo, CEO of Public Service Enterprise Group (PSEG), an electric utility, took to the airwaves to talk about three things he did know: the science is in on climate change; the CPP will create business opportunities for PSEG and others; and the future for PSEG and utilities in general will be increased reliability, more energy efficiency, and increasing energy from carbon-free sources.

THE NEXT PHASE OF CORPORATE LEADERSHIP Mr. Izzo isn’t the only one who sees opportunity in energy efficiency and clean power. Many companies have set ambitious energy goals to increase efficiency, cuts costs, and lower their emissions.

Momentum for climate action has continued to build over the past few months, with many high-profile companies signaling their support for climate leadership and making new commitments to reduce emissions, drive low-carbon investments, and deploy more clean energy through the American Business Act on Climate Pledge, the Ceres Climate Declaration, and the We Mean Business coalition. Chinks are also appearing in the opposition’s armor, with BP, Shell, Apple, Google, and others exiting groups like the American Legislative Exchange Council (ALEC) over its stance on climate change.

For nearly 25 years, Environmental Defense Fund (EDF) has partnered with leading companies to accelerate environmental innovation in their products, operations, strategies, and supply chains.

In fact, it was EDF’s early partnerships with

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McDonald’s and FedEx that first attracted me to the organization. Together, we have kick-started market transformations in sectors including fast food, shipping, retail, private equity, and commercial building energy efficiency. While we’ve made considerable progress, there’s still a lot of work to be done to reach the low-carbon, clean energy future we can create together.

To get there, businesses must now take the next step in leadership by supporting and helping to shape the smart regulatory and policy changes required to preserve the natural systems that people, communities, and companies need to thrive.

In the near term, we need more aggressive private sector leadership and strong support for solutions like the CPP. Any sustainability officer who has tried to competitively price green power or build the business case for an energy efficiency program has a stake in how the CPP gets implemented by the EPA and the states. By weighing in at the state level, companies can encourage states to act early and boldly, helping accelerate the shift towards a lower-carbon economy and ensuring states leverage every opportunity to expand renewable energy and energy efficiency.

ENERGY

WHAT’S NEXT WITH THE CLEAN POWER PLAN ACCELERATING PROGRESS FOR SOME, BUILDING ON-RAMPS FOR OTHERS

MANY BUSINESSES ARE ALREADY MAKING THEMSELVES HEARD

The CPP builds on progress already being made by states and businesses.

It allows states to tailor emission reduction plans that take advantage of their own unique opportunities, and it ensures important emission reductions from existing power plants, the single largest source of carbon pollution in the United States and one of the single largest sources in the world. Statements from numerous power companies, states, industry experts, and others confirm that the CPP is achievable and many states are well on their way toward meeting their 2022 goals.

That’s in part because natural gas and renewables have accounted for 93 percent of all new power generation since 2000, with coal-fired plants being retired in many areas due to market and other pressures.

Organized by Ceres, 365 companies and investors sent letters to governors across the country calling for swift development of state implementation plans to comply with the CPP. These companies and investors know that there is tremendous economic opportunity in tackling climate change and look forward to working with their governors to develop state plans over the coming year.

BUSINESS CAN BE STATES’ CO-PILOT The plan puts states in the driver’s seat to develop plans and strategies to reduce emissions efficiently and cost-effectively at the state level.

Companies, however, have a choice: they can put up roadblocks that delay innovation and impact health and the environment; or they can help pave the way by working closely with states to design the approaches that will work best for the environment and the economy. Choosing the latter gets us down the road further and faster to lower emissions, increased efficiency, and cleaner energy options.

“Those who are already leading the way on sustainability are returning real value to their customers and investors by committing to cleaner and more efficient energy use.”

THE CPP WILL HELP SHIFT SUSTAINABILITY AND INNOVATION INTO HIGH GEAR Those who are already leading the way on sustainability are returning real value to their customers and investors by committing to cleaner and more efficient energy use. Under the CPP, opportunities to deploy these solutions should increase: electric utilities facing obligations to reduce their own emissions will be incentivized to expand programs that help businesses invest in more efficient equipment, purchase green power, and deploy renewable energy at their facilities.

IT’S TIME TO ACCELERATE The CPP builds on the progress we have seen in recent years and will help ensure that the nation accelerates the transition to a low-carbon economy.

That progress is crucial to help build support for a global deal on climate by showing other world leaders that the United States is committed to getting its own emissions under control.

What companies need to do now is to stay informed and get engaged in the states where they’re headquartered or operate. Understand how the states in which you do business are planning to address the roll-out of the CPP, and use your leverage to influence business-positive and low-carbon outcomes.

Tom Murray spearheads the Corporate Partnerships program at Environmental Defense Fund, working with multinational companies to accelerate environmental innovation in business products, services, and operations. Ranked #1 for effective environmental partnerships by the Financial Times, Tom’s team has kicked off transformations in market sectors from shipping to retail, and from oil and gas to private equity.

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ENERGY

CHANGING THE

ENERGY CONVERSATION

BY JIMMY JIA In 1964, the Columbia River Treaty between the US and Canada created the hydropower management framework for the Pacific Northwest.

The US was interested in developing hydropower but needed a steady supply of water. Since the first third of the river resides in Canada, Canada agreed not to develop powergeneration capabilities. Instead, it would develop and operate its dams for flood control purposes and maintain a steady water supply to the US. In return, Canada would receive 50 percent of the power generated as part of the Canadian Entitlement.

This coordination of water resources has helped the region meet over 60 percent of its power needs from clean renewable hydropower. Although the treaty has no end date, either side can give a ten-year termination notice. Both countries are considering whether and how to renegotiate the treaty.

As important as the treaty is to electricity, the negotiations and discussions are not conducted in the language of energy - kilowatts, kilowatt-hours, voltage, amps, power factor, etc. Those decisions are left up to the engineers. Instead, the participants are determining their 76

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positions based on fishing rights, flood control, irrigation needs, tribal lands, recreation, economic development, and other demands. The actual energy issue has become ancillary to and is disconnected from these business, governmental, and social concerns.

This disconnect exists on a personal level as well. I am frequently asked by frustrated professionals, “Why don’t people care about energy?”

When asked, businesspeople will tell you how much they are concerned with renewable energy and the environment. According to the National Federation of Independent Businesses, out of 75 priorities, the cost of fossil fuels ranks as the third highest concern and cost of electricity as the 12th highest concern for smallbusiness owners. Yet reducing energy use in a cost-effective manner is ranked only 43rd out of 75 concerns.

Why is there such a disconnect between unavoidable energy costs and available energy actions?

I believe this disconnect exists because the energy industry focuses on issues of supply while businesspeople focus on outcomes.

This is exacerbated by the societal attention given to energy supply. The topics of solar, wind, coal, nuclear,

and a litany of other sources are just one side of the multifaceted problem.

Even energy efficiency, which on the surface looks like a demand-based argument, is generally discussed in terms of buying more devices, products, or equipment. One cannot solve any problem by looking primarily at supply or purchases. Decisions should be made based on needs and outcomes.

Businesspeople are driven by corporate goals. They speak in the language of revenues and expenses in order to manage priorities and uncertainties. Energy is typically treated as a critical resource but not as a manageable one. However, good energy practices can often support business goals. For example: 1. An architect wants to target “green” and “sustainable” clientele.

He installs solar panels on his office next to a busy thoroughfare in order to advertise his commitment to the environment, even though the panels will take over 15 years to pay back.

2. A homebuilder wants to increase the asset value of his home when he sells it. He designs and builds a highly energy-efficient home. He uses a track

ENERGY

Energy is typically treated as a critical resource but not as a manageable one. record of lower monthly bills to justify a higher selling price.

3. A restaurant owner wants to be able to sell more product by building a walk-in refrigerator. This would expand his capacity to sell and, at the same time, would replace four old and unreliable refrigerators that could break at any time. The single unit replaces four refrigeration condensers with one, reducing his overall energy usage.

In each of these decisions, the business need took precedence over the energy outcome. Certainly, in these scenarios, a reduction in consumption was aligned with the business’s end goal. However, there are far more examples of desired outcomes that increase energy consumption. These include anything from the increased convenience of same-day delivery to long commutes from living far away from work.

A new, outcome-oriented approach is to align energy strategy with business goals. The most costeffective method for achieving an outcome is the one that also consumes the least amount of resources, including energy. For example, in the late 1890s, the outcome our society wanted was low-cost, universal access to electric power. Samuel Insull of Commonwealth Edison Company pioneered the infrastructure and regulatory regime we have today in

order to serve the largest consumer load with the fewest number of power plants. The results of his efforts are apparent: since 1960, according to the Energy Information Administration, the inflation-adjusted cost of electricity has actually fallen by 10 percent. In that sense, our energy infrastructure is a runaway success and we should be proud of the engineering and ingenuity that went into delivering the correct solution.

However, as with any product, consumers’ tastes change over time. Consumers now want sameday delivery of products, universal Internet access, affordable intercontinental travel, and bananas available year-round in the grocery store. No longer satisfied with just low-cost and universal power, consumers now demand reliability, resilience, and environmental security while maintaining the existing benefits of universal access, convenience, and low cost. Engineers can certainly build any of these systems, except that some of these requirements complement each other while others are opposed. For instance, solar power can contribute to environmental security but can’t provide for thermal comfort at night.

Adding batteries will solve that problem - and improve resilience and reliability - but significantly increases the cost of the system. Waiting for better low-cost technologies requires delaying meeting environmental

goals.

Aligning our business outcomes with energy goals can significantly reduce energy footprints. For instance, a walkable neighborhood is both convenient and requires less driving, reducing the need for fossil fuels. Thermal comfort can be attained by turning on the air conditioner, but it can also be achieved by opening a window or insulating the walls. Buying fresh food every day can reduce the need for cold storage of food, reducing the size of a refrigerator and its corresponding energy usage. Frequently, best practices tend to increase quality of life and reduce energy impact at the same time.

Our conversations about energy are too one-sided. We need to discuss energy outcomes with the same vigor as we talk about supply. After all, societal needs can frequently be satisfied by consuming more energy, and as a result, we expect abundant and cheap energy to be readily available to solve our problems.

Too often we forget to ask what the desired outcome is and whether energy is even needed to deliver it.

Instead, let’s start by looking at the outcome. From there, we can figure out the lowest-cost method to provide it. You may be surprised. The lowestcost delivery may just also consume the least amount of energy and have the lowest environmental footprint.

Jimmy Jia is CEO of Distributed Energy Management, where he helps business owners save money by aligning utility strategy with business goals. He teaches the Sustainable Energy Solutions program at Pinchot University, helping managers incorporate energy outcomes into the decision-making process. He coauthored “Driven by Demand: How Energy Gets its Power.”

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17 RISING

SOCIAL ENTREPRENEURS

Conscious Company Magazine partnered with leading accelerators, incubators, and educational institutions to identify 17 rising entrepreneurs who see things differently, are shaking the tree, disrupting industries, making money, and doing good. These individuals are bold. They’re young. They’re fearless. And they are the face of the up-and-coming generation of changemakers willing to risk it all to make the world a better place.

Without further ado, we present 2015’s Rising Social Entrepreneurs.

LEADERSHIP

Founded: 2013

Location: Rwanda & East Africa

Industry: Women’s Rights and International Development

FOR EMPOWERING WOMEN TO BECOME LEADERS IN THEIR COMMUNITIES

Resonate provides experiential leadership training to women and girls in Rwanda and throughout East Africa in order to support and unite them to lead change in their communities. Gender inequality inhibits the growth and development of communities both locally and globally. By coaching women to become leaders, Resonate unleashes their self-confidence, strength, and power to lead positive growth in their communities.

ANA

PANOYIM SOLANGE IM

OSSER AYLA SCHL

> RESONATE, LEAD TRAINER > AGE: 32

> RESONATE, FOUNDER & CEO

> AGE: 27

“I want to live in a world where every little girl can be or do anything she dreams up Resonate is building that dream into a reality.”

“Every day I get to witness the transformation of the women we work with - women like Francine, who was previously unable to live up to her dream to be a leader and who now conducts monthly meetings to solve problems in her community - and that gives me hope for a better future.”

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LEADERSHIP

Founded: 2010 Location: Seattle, WA Industry: Adventure and Lifestyle Products

.C. BHUWAN K > ECOPRISE, FOUNDER AND CEO > AGE: 29

FOR CREATING ACTIVEWEAR THAT TRULY GIVES BACK

Bryan and his team at MiiR inspire and empower through amazing design and transparent giving. The company’s line of bottles (water bottles, growlers, and tumblers) directly facilitates clean water projects, its line of bags gives to educational initiatives, and its line of bikes gives bikes to those in need in developing countries.

“Through my work at Ecoprise, we improve the lives of millions of Nepalis who face energy poverty and would not have knowledge and access to these solutions if we did not exist.”

Founded: 2012 Location: Nepal Industry: Clean Energy

FOR PROVIDING CLEAN ENERGY TO BASEOF-THE-PYRAMID COMMUNITIES

Through Ecoprise, Bhuwan and his team provide clean energy solutions to base-of-pyramid communities in Nepal to create economic, environmental, and social benefits. The company’s model is based on appropriate technology design, shared distribution channels, and specific knowledgetransfer processes. The company works with banks, co-ops, and self-help groups to develop financing programs that increase affordability and incorporate a support package that includes credit, marketing, sales materials, and business skills training.

meroecoprise.org

É BRYAN PAP > MIIR, FOUNDER & CEO > AGE: 30 “We believe in good design and that products should be functional and beautiful, and also believe companies have the unique ability to change the world for the better.” miir.com CONSCIOUS COMPANY MAGAZINE

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LEADERSHIP

“We see our work as an opportunity to use entrepreneurship as a means of creating a more sustainable urban economy - simultaneously upcycling ‘waste’ and feeding people.” // Dan

Founded: 2012 Location: San Francisco, CA

Industry: Packaged Food

FOR TURNING “WASTE” FROM BREWERIES INTO HEALTHY FOOD

Craft beer is booming, and with it, so is food waste. Eighty-five percent of brewing’s byproduct is grain - over six billion pounds annually. Breweries extract sugars as a liquid, and the physical grain that is left behind with its protein and fiber is considered “waste.”

Yet, this grain can offer the food system a sustainable source of nutrition. Dan and Jordan teamed up to create ReGrained to upcycle this grain and close the loop by turning it into delicious food, like granola bars.

“We are inspired by the potential to find the sweet spot between profit and purpose by creating win-wins for our customers, partners, community, and planet.” // Jordan

HWARTZ JORDAN SC > REGRAINED, CO-FOUNDER AND CHIEF GRAIN MASTER > AGE: 25

OCK DAN KURZR > REGRAINED, CO-FOUNDER AND EXECUTIVE GRAIN OFFICER > AGE: 25 regrained.com

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LEADERSHIP Founded: 2012 Location: Guelph, Ontario and Cambodia Industry: Natural Health

FOR CREATING A SIMPLE SOLUTION TO COMBAT IRON DEFICIENCY

G DAVID YEUN > GREEN MONDAY, CO-FOUNDER AND CEO > AGE: 39 “Our planet is sick, people’s health is suffering, and animals are subject to unimaginable cruelty. As a long-time vegetarian, I know that if we can mobilize a collective shift to a more plant-based diet, all these environmental and social problems can be much alleviated.”

Iron deficiency is the world’s most common micronutrient issue, negatively impacting the lives of half of the world’s population, mainly women and children in developing countries. Gavin and the folks at Lucky Iron Fish have developed a simple solution to combat iron deficiency in Cambodia and beyond. The Lucky Iron Fish is a simple at-home fortification tool. Boiling the company’s product for ten minutes as a part of food preparation can release up to 90 percent of a person’s daily required iron intake.

The product can be re-used for up to five years, and only costs around $5. It is shaped like a fish - a symbol of luck in Cambodia.

Founded: 2012 Location: Hong Kong, China, and US Industry: Food

FOR CREATING A PLATFORM TO GET A COUNTRY TO “GO GREEN”

David Yeung and Green Monday are on a mission to combat climate change and global food insecurity. Using a plantbased diet as an entry point to promote a low-carbon, healthy, and sustainable lifestyle, the group has created a platform that enables businesses, schools, and individuals to make green behavior happen. The platform is built upon both a social pillar and a venture pillar. The social side drives advocacy campaigns to raise awareness and demand for a green lifestyle, while the venture side takes an active role in the market to increase the supply of green choices by way of impact investing, corporate consulting, and food retail and distribution.

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STRON GAVIN ARM

> LUCKY IRON FISH, FOUNDER AND PRESIDENT > AGE: 28 “We are committed to being a true social enterprise with a positive social attribute in every aspect of how we do business, and it is my hope that we can prove that social enterprises are not a fad but the future of business.” luckyironfish.com CONSCIOUS COMPANY MAGAZINE

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LEADERSHIP Founded: 2009 Location: Nampa, ID Industry: Ethical Footwear

FOR CREATING A SHOE THAT KIDS WON’T OUTGROW

Over two billion people have some kind of soil-transmitted disease. Over 300 million kids do not have shoes - and countless more have shoes that do not fit. When kids have shoes that fit, they can stay healthy and continue to go to school, help their families and communities, and have as many chances to succeed as possible. Kenton and the team at Because International have created The Shoe That Grows - a shoe that can adjust and expand five sizes and last up to five years - to address this problem.

The team distributes shoes to kids worldwide, providing a pair of shoes that fits year after year.

ANJA MARIA MAY > ANGAZA LTD., CO-FOUNDER > AGE: 24 “I am passionate about environmental conservation and want to help people understand it better in a ‘non-rocket science’ kind of way.”

Founded: 2012 Location: Kigali, Rwanda Industry: Ethical Fashion

FOR UPCYCLING NON-BIODEGRADABLE WASTE INTO ACCESSORIES

E KENTON LE > BECAUSE INTERNATIONAL, FOUNDER > AGE: 31 “The mission of my life is to put other people in the best possible position to succeed, and I absolutely love doing this for kids around the world. I am constantly inspired as I listen to those living in extreme poverty to hear their thoughts, ideas, and dreams for how their daily lives can be improved.”

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At Angaza Ltd., Maria and her team upcycle Kigali’s nonbiodegradable waste into fashion accessories such as bags, wallets, and gadget covers, creating green jobs along the way. The team is also revolutionizing the way environmental issues are taught in schools in Rwanda by engaging students in fun, handson activities such as tree planting, competitions, and upcycling to engender a more conscious generation of Africans rooted in sustainable practices.

angazarwanda.com

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FOR MAKING HEALTHCARE MORE ACCESSIBLE Founded: 2013 Location: Yangon, Myanmar

Industry: IT, Healthcare

“As a Myanmar-American who lived a comfortable, healthy, relatively easy life in comparison to my co-founder, I feel that it is fundamentally unjust that one’s life outcomes are largely predicted by luck - luck of geographic location of birth, luck of the socioeconomic status of the family one is born into, luck of one’s ethnic, gender, and national identity.” // Michael

In Myanmar, eight children die every hour. Thirty-two million people suffer from infectious diseases such as malaria, dengue, tuberculosis, and HIV/AIDS. Eighteen million people suffer from hypertension. Dr. Yar Zar Min Htoo, Co-founder of Koe Koe Tech, contracted Hepatitis B from a rural doctor who reuses dirty needles. As a result, Yar Zar Min Htoo and his cousin Michael Lwin developed Koe Koe Tech. With just a phone and the company’s mobile health apps, a rural person in Myanmar can gain access to Population Services International-generated information in 32 health categories; the ability to teleconsult with quality doctors (who use clean needles), rural health workers, and midwives; and the ability to purchase high-quality, lower-cost health products.

IN MICHAEL LW > KOE KOE TECH, CO-FOUNDER AND MANAGING DIRECTOR > AGE: 32

R MIN HTOO DR. YAR ZA > KOE KOE TECH, CO-FOUNDER AND CHIEF TECHNICAL OFFICER > AGE: 31

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Founded: 2013 Location: Producing products in Cambodia, selling internationally in 15 countries Industry: Ethical Fashion

FOR TURNING GARMENT WASTE INTO CLOTHES

LLER RACHEL FA > TONLÉ, FOUNDER AND CREATIVE DIRECTOR > AGE: 29

The garment industry is the world’s second largest polluter, throwing away about half of what it produces (approximately 50 million tons) in wasteful manufacturing. Imagine if we could cut this pollution in half just by wasting less. Rachel and her team at tonlé are on a mission to prove that that’s possible. Using remnants discarded by large manufacturers, the company produces beautiful, comfortable garments and uses every scrap, creating zero waste in the process. In one year, Rachel and her team have saved 22,000 lbs of textiles, 70 tons of CO2, 450 lbs of pesticides, and 46,296,600 gallons of water. And they’re just getting started.

“It’s hard to say whether the environmental significance of what we’re doing or the positive changes in people’s lives that we see through our work is more important to me, because at the end of the day how we treat the planet is destroying people’s lives today and we have to do something about that.”

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Founded: 2005 Location: Washington, DC and Ghana Industry: Beauty and Agri-business

FOR EMPLOYING WOMEN THROUGH SHEA BUTTER

The motto of Shea Yeleen is Transform your Skin, Transform a Community. For the last decade, Rahama and the Shea Yeleen team have committed their efforts to supporting economic empowerment of women producers of shea butter in rural Ghana. The company helps Ghanaian women bring high-quality organic shea butter products to the global marketplace while providing them with a source of living wages. Through the business model that Rahama has developed, shea trees are protected from being cut down, consumers have access to healthy and natural bodycare products, and women are financially and emotionally empowered.

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LOSSBE SHANA SCH

> EZBZ INC., FOUNDER AND CEO > AGE: 34 “I have been working with local businesses for over 15 years and always felt that marketing platforms work against them instead of for them. I wanted to create a platform that facilitated connections between consumers and businesses in a fair and honest way.”

Founded: 2011 Location: New York, NY Industry: Internet Marketplace

FOR CONNECTING CONSUMERS WITH LOCAL BUSINESSES

RIGHT RAHAMA W > SHEA YELEEN, CEO AND FOUNDER > AGE: 36 “I want to live in a world where women everywhere have the financial stability to care for themselves and their families. Each time I visit the shea cooperative and hear a story from a woman who was able to save money or send her child to school, it keeps me going.” sheayeleen.com

Shana and the folks at myEZBZ.com directly connect consumers with local businesses through an online concierge service. Using proprietary technology that can match any consumer request with related local businesses in minutes, the website presents a consumer with all reputable local businesses at the same time and creates a level playing field where large and small companies have the same opportunity to win the consumer’s business. A business cannot pay more to receive an advantage and the consumer is able to support local businesses instead of the larger corporations that usually dominate first-page results on most other search platforms.

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LEADERSHIP Founded: 2014 Location: Virginia, Maryland, and Washington, DC Industry: Local Food

FOR BRINGING HEALTHY FOOD TO FOOD DESERTS

Tom and the good people at 4P Foods are working to fix the broken food system by bridging the gap between small family farms that use sustainable practices and those who want to support them. The company also uses the power of that community to get good, healthy food into the food deserts that need it most - those that bear a disproportionate burden of the externalized costs of industrial food production. In a sense, Tom and his team are delivering food from good people to good people, and, perhaps more importantly, using food as a tool for social justice.

A YUSUF TUR > OBAMASTOVE SPC, FOUNDER > AGE: 39 “The stove saves lives and the environment and creates green jobs for extremely poor communities. I am most inspired by the team that I work with and the villagers we serve who are living on less than $1 per day.”

Founded: 2007 Location: Ethiopia

Industry: Cookstoves

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UGAL TOM MCDO > 4P FOODS, FOUNDER > AGE: 30

“Our farmers, our members, our team, our partners - as individuals they are all amazing, but the change that is possible when they are all working towards the same vision is humbling, inspiring, and powerful.”

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FOR DESIGNING AN AFFORDABLE COOKSTOVE

An estimated three billion people regularly breathe in poisonous smoke from open fire cooking. It is becoming one of the world’s most pressing health and environmental problems, killing over four million people each year, according to the World Health Organization. Yusuf Tura is tackling this problem head-on through his company Obamastove, a designer, manufacturer, and distributor of locally made, low-cost cookstoves. In addition to cookstoves, Obamastove also manufactures improved briquettes, which are custom-made to fit inside its Obamastoves. The company has made, sold, and delivered over 250,000 stoves, each costing less than $10, and the product is now the top-selling stove in Ethiopia.

obamastove.com

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THE CONTAINER STORE

Kip Tindell, Chairman and CEO of The Container Store

THE CONTAINER STORE AT A GLANCE Founded: 1978 Employees: 6,000 Location: Headquarters in Coppell, Texas; 72 store locations nationwide Sales: $782 million in 2014 Awards: 16 years in a row on Fortune’s “100 Best Companies to Work For” list Fun Fact: The company boasts an annual employee turnover rate of around 10%, compared to an industry average of 100% In short: Retailer of storage and organizational products with a renowned employee-first culture.

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W

hen speaking with Kip Tindell, it feels as if you should be sitting on a back porch swaying in a rocking chair, sipping some sweet tea while watching the sun set below a Texas sky, pondering the nature and purpose of life, until you remember that you’re speaking to the Chairman and CEO of a multi-million-dollar public company. But perhaps that’s what has brought Kip Tindell so much success. He brings his heart and his love for people to work with him every day and has created the hugely successful Container Store in the process. As a founding company of Conscious Capitalism, The Container Store is often looked to as a leader and example when it comes to stakeholder engagement and employee happiness. Kip spoke to us about the company’s legendary culture, his views on women in the workplace, and how paying employees better wages directly benefits his bottom line.

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ON THE LEGENDARY CULTURE AT THE CONTAINER STORE I’m very proud to be running a business where all of our decisions are made in accordance with our seven Foundation Principles, which really are the principles that are the underpinning of the quirky, yummy culture that is The Container Store.

Our Foundation Principles are not just compatible with but are absolutely synonymous with Conscious Capitalism.

7 Foundation Principles

1 Great Person = 3 Good People Communication IS Leadership Fill the other guy’s basket to the brim.

Making money then becomes an easy proposition.

The Best Selection, Service, and Price Intuition does not come to an unprepared mind. You need to train before it happens.

Man in the Desert Selling Air of Excitement!

We’re very proud of the fact that we operate our business this way. It makes our employees incredibly proud. It makes our vendors incredibly proud. It makes, ultimately, our shareholders proud. I think the cool thing about Conscious Capitalism is that the universe conspires to assist you when you behave this way. If you’re an individual and you behave this way, you will have greater respect and love and admiration from other individuals. If you’re a company that behaves this way, your employees are fiercely proud of it and therefore their productivity is higher. You become your vendors’ best and, oftentimes, favorite customer.

If you look at the companies that best represent Conscious Capitalism, they have outperformed the S&P 500 Index by 14 to 1 over the last 15 years. That’s not 40 percent better.

That’s 1,400 percent better! I think the reason is because the universe conspires to assist you when you are a Conscious Capitalist company and it’s a heck of a lot easier to succeed in business when everybody’s trying to help you than when everybody is against you, trying to hurt you.

ON THE EVOLUTION OF A CONSCIOUS CAPITALIST We have always operated this way.

The wonderful thing about starting a business is that you get to create the company’s culture around your own life view. I was always very taken with the notion that you can’t have one code of conduct for your personal life and then somehow have a looser code of conduct for your business life.

When you hear people say, “You have to understand, it’s just business,” I’m like, “Oh no, I don’t understand at all.

Are you going to treat the people you do business with worse than you treat the people in your personal life?”

The Foundation Principles come from this little file I’ve kept dating all the way back to high school of the greatest thoughts that I’ve ever been taught or read or even thought of myself. We’ve always been very aware of how we treat each other, how we

treat a customer, and how to take care of our employees. If you’re lucky enough to be an employer, you have a great obligation to make sure your employees look forward to getting out of bed and coming to work in the morning.

After about ten years in the business, we opened a Houston store that was doing about triple or quadruple what we expected it to do and it was just mayhem. We couldn’t keep up with everything. We were hiring people who weren’t right. So, we had to formalize the Foundation Principles and begin to communicate them formally to this whole new staff.

I thought they would all think it was overwrought or silly or something.

Instead, they went crazy for them.

They loved them and everybody in the company encouraged me to formally go through them with everybody on a consistent basis.

Thirty-five years ago, Herb Kelleher [co-founder of Southwest Airlines] told me, “Kip, you can build a much better organization based on love than you can with fear.” I was like, “Whoa. Who is this guy talking about love in the workplace?”

These days, John Mackey and I are always talking about love in all of our speeches on Conscious Capitalism and finally people aren’t shocked anymore. The great thing is that eventually a good capitalist is going to adopt the methodology that is most successful. The skepticism is vanishing. Raj Sisodia and I gave a speech not long ago to all the business school deans in America. There wasn’t any skepticism at all on everything we had to say about Conscious Capitalism. These MBA program deans knew that this stuff is right and true.

It’s not kumbaya. It’s not altruism.

It actually does work better than any other form of capitalism. Business school deans understand that. The rather unsophisticated business people still have skepticism with Conscious Capitalism, but the more sophisticated ones do not. You still get old, crusty, Texas oil guys who are 80 years old who you can’t break through with, but what I’ve been delighted in finding is that people are CONSCIOUS COMPANY MAGAZINE

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beginning to believe it.

The Container Store only went public a little less than a year and a half ago. When we did our IPO road show, I was so thrilled to discover that what the giant investors of Wall Street wanted to hear from me most was about Conscious Capitalism and about the employee-first culture of The Container Store. I was afraid they would do the opposite. The good news for us and for anybody who loves and is determined to spread the word about Conscious Capitalism is that we’re making progress. I can’t tell you how different it is now than, say, five or six years ago when talking to people about this.

In fact, “communication is leadership” is one of our foundation principles. You can’t discuss the feminization of American or global business without making some generalizations. So, forgive me as I make some generalizations, but women just tend to communicate better than men. Most people would agree with that. A lot of people might think that men are better on teams than women simply because we used to have more male sports teams, but women are a lot better on teams than men. Teams, particularly in business situations, are more mutually supportive with women than with men. Even on our board, the women are more nurturing than men.

worth into what we do for a living and how we do at it - more than we should.

If you have a person who works at a company that nurtures them and develops them and makes them feel great about themselves and evolves them upward on Maslow’s hierarchy of needs, they take better care of their children. They treat their spouses better. They treat the Golden Retriever better [laughter]. We think a lot about that at The Container Store. Every employee is somebody’s precious child, right?

I hear spouses saying, “The Foundation Principles have made her a better mother. It’s made her a better wife.” I used to be so embarrassed when they said that. I could hardly

“It’s not kumbaya. It’s not altruism.

It actually does work better than any other form of capitalism.”

ON WOMEN IN LEADERSHIP ROLES AND THE FEMINIZATION OF THE BUSINESS WORLD I think it’s 23 of the Fortune 500 CEOs are women - 23 out of 500! There are only 20 US Senators who are women, out of 100. I think that women tend to make better business executives than men. I fervently believe that. I think it’s OK to say that because we’re nowhere near parity.

Men went off to World War II. They came back after the war, started businesses, and applied the leadership principles that they learned in the military to running those businesses.

Now a couple of generations later, we’re finally to the point where we understand that that’s a terrible way to run a business. The top-down command structure is a horrible way to run a business.

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Sixteen or so of our top 22 leaders [at The Container Store] are women.

They keep me around because I helped start it [laughter]. Twenty years ago, I used to think that the next CEO needed to be the person with the highest IQ in the company. I no longer believe that.

The social or emotional IQ is actually more important than the intellectual IQ, but the two are not mutually exclusive. We have a lot of key women in this company that I think are both quite a bit smarter than me and are vastly better at communication and social skills than I am.

I see the feminization of business taking place. Everybody assumes it’s going really well, but we’re actually going pretty slowly and it’s such a wasted resource.

Then I have my own views about the balance between family and work. You’re a better family member - whether you’re a mom or a dad - if you’re fulfilled in your life. In this culture, we put too much of our self-

listen to it - it was too flattering of the company. I was embarrassed by it, but now I understand. One of the great things about Conscious Capitalism is that you have people out there treating all their stakeholders, which very much includes their employees, in a way that nurtures and develops them and advances them on Maslow’s hierarchy of needs and become better, more secure people. Then they treat everyone around them better.

If you can do that one company at a time - Whole Foods has about 40,000 employees and we have around 6,000 - if those people feel better about themselves and take better care of everybody around them because of it - that’s what we’re trying to do.

We’re trying to build a business where everybody thrives and there’s nothing more important than that.

I’m very passionate about that.

Good ole’ Milton Friedman so famously said, “Corporations exist to maximize returns for shareholders.” We’re like,

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“I know you won the Nobel Prize, Milton, but at The Container Store, we put the employee first and if we take care of her first before anybody else, she will take better care of the customer than anybody else. If those two people are really ecstatic, the shareholders are going to be ecstatic, too.” We’re very passionate about it. It’s not just me saying it. The employees will say it too. People join the company and they never leave. We do 263 hours of training in the first year; the average in the retail industry is eight hours of training a year. When you walk into the store and a person who has been there for six or 12 years is helping you solve your toy storage issues, they actually know what they’re doing and ultimately they take care of your toy storage problem.

ON HOW YOUR BOTTOM LINE BENEFITS FROM PAYING YOUR EMPLOYEES WELL One of our Foundation Principles is, “One great employee could easily have the productivity of three good employees.” If you really believe that, why would you ever hire anybody who’s not great? It’s very much a meritocracy. We’re trying to find the greatest people we possibly can.

Nobody’s overqualified - you wouldn’t believe the backgrounds of a lot of people that we have working. We try to pay 50 to 100 percent higher than the industry average. We’re paying great people that - I’m not in the habit of paying mediocre people well. You pay great people well.

The “one equals three” thing is pretty interesting. It allows you to pay somebody double, but you’re getting three times the productivity, so the company wins. The employee wins because she’s getting paid twice what somebody else might pay her.

The customer wins because they’re getting this one-equals-three great employee giving them this Container Store legendary service, and the other employees win the most because it’s so much fun to get to work with people who you think are great. Perhaps the number one component of being a

great place to work is that you feel like you work with other great people. It’s terrible to work with mediocre or lousy people. The image there is that we want to get out of bed, come to work in the morning, and do great things with really great people and then go home at night feeling wonderful about what we accomplished.

A bad boss doesn’t recognize what the human spirit is about because he or she assumes that all of the employees want to come to work, lay around, and do as little as possible. That’s not the human spirit. People want to do great things with other great people and feel really wonderful about it and do it again the next day.

We also inverted the pyramid. I make far from the industry average.

Our other top people make below industry average. It’s an inverted pyramid in that the people closest to the customer make 50 to 100 percent above industry average. It’s hard to do that if you overpay the people at the top. I’ve actually averaged maybe 16 times the average worker’s pay over the last decade or so. Depending on which survey you’re looking at, the average [CEO pay] is 250 or 350 times the average worker’s salary, depending on how big of a company it is. Whole Foods has it capped at 19 times.

John Mackey only takes $1 per year.

Our payroll philosophy is to really make sure that our average full-time salesperson in the store makes around $50,000 a year. That is not an enormous amount of money in this day and age, but it’s an enormous amount of money for a retail salesperson. It’s actually very close to double the industry average. I’m passionate about paying great people well and we believe that that is a profit strategy.

The first 25 percent of any employee’s productivity is mandatory - they have to do that much or they will get fired in any company. The next 75 percent of their productivity is voluntary. They only give that in accordance with how they feel about

“If you’re lucky enough to be an employer, you have a great obligation to make sure your employees look forward to getting out of bed and coming to work in the morning.”

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their boss, their products, their culture, and yes, their pay. We know from the Great Place to Work Institute that compensation is not the number one thing on the list when you survey employees about what’s important to them. Culture and other things come before that, but pay is important. It’s very important. Great people need to be compensated well and you’ll be more profitable if you do. I’m proud to be a big proponent of that.

ON MAINTAINING THE COMPANY’S MISSION THROUGHOUT THE IPO PROCESS We fervently believe that the best way to take care of your shareholders is to take care of and to optimize all of your stakeholders. Ed Freeman is the father of the stakeholder model and he uses the term, “Harmonize the needs of all the stakeholders,” including the community, the customer, the employees, and the vendors. At The Container Store, you can’t tell the difference between a vendor and an employee. We’re

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famous for putting the employee first and taking such great care of the employee, but we do the same with the vendor and that’s what leads to the highest gross margins and the most innovative products.

If all you want to do is make as much money as humanly possible as quickly as possible, I would submit to you that Conscious Capitalism is the way to do it. What’s great is that more and more people are believing that and understanding that - more CEOs, more people on Wall Street - in fact, I think most people are beginning to believe that. It is certainly far from universal yet, but we’re all starting to talk about it.

I learned a lot about how to be a Conscious Capitalist public company by sitting on the Whole Foods board for the past eight or nine years. I talked to all of the public companies’ CEOs that I most admire in the country, and had fabulous conversations for several years before making this decision. I think our private equity firm was a little surprised that we wanted to go public.

I think they were delighted that we did.

I think there are people like Jim Sinegal at Costco who have pioneered a lot of this. Sinegal has had these famous conversations with an investor who will say, “I think you’re overpaying your people,” and he explains why they’re not and that it is actually just the way that they do things. They pay their employees just under double what their closest competitor does and their financial performance is better.

The other thing that’s been so remarkable about our IPO is that it’s very hard to get stock in the hands of employees when you’re private. The only way to get stock in the hands of your employees when you’re private is for the owners to dilute themselves.

Very few people understand that it’s better to own 50 percent of a dollar than 100 percent of a nickel. It’s just a concept that most people can’t grasp. Everybody claims to want to get more stock into the hands of employees, but when it comes time for them to get diluted, they’re hard to find. They usually have a spouse or a lawyer or an accountant who just refuses to let them get diluted.

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“The wonderful thing about starting a business is that you get to create the company’s culture around your own life view.”

The great thing about being public is that stock options and whatnot are kind of standard operating procedure.

Right before the IPO, we were able to do some stock options that were very significant for our employees. Up to that time, we had been very deficient in that area. I’m very passionate about that and we were able to make up a lot of ground. The Directed Share Program, which is sometimes referred to as the “friends and families” of the IPO, had 14 percent of our IPO go to it, which was overwhelmingly employees and very beloved, long-term vendors.

That was a very happy day for us. Take the most devoted employee in any company in America, you give them a little piece of the action, and they’re going to be even better. It makes the employee even more united with the shareholders.

What I’ve learned is that it’s not quarterly capitalism - it’s Conscious Capitalism. We always love to say that because we’ve managed to miss a quarter or two, and when you do that, you’ll see some impatience for sure. But we know that the best way to serve our beloved shareholders is by maintaining our culture that has driven the value of this company all along. We’re not going to change what has made us successful simply because we’re public. It would serve the shareholders poorly if we did.

ON ADVICE FOR ENTREPRENEURS My advice to young, budding entrepreneurs is do it now. If you’re just getting out of school, if you just got an MBA, or whatever, go start something. It’s the greatest thing in the world, but do it now while you’re young and poor because the minute you have a spouse and a kid or two and a six-figure income, you will never do it. You won’t leave all of that responsibility to start something. You’ve got to do it now.

Also, the true artist of life blurs the distinction between work and play.

I don’t think I’m very balanced. I’m still working 70 hours a week after 37 years, but I love what I do. While Monet was painting “The Water Lilies,” was he working or playing? He was doing what he wanted to do. That’s what’s cool. That’s how you start a great business. That’s how you love it.

Blur the distinction between life and play because building a business takes a lot of time and effort.

ON WHAT GETS HIM EXCITED TO WORK EVERY DAY I think it’s about minding your wake.

You make sure that you’re aware of the impact you have on the world and other people. You have more impact on

your business and the people around you than you think you do. Everybody’s wake is much bigger and more powerful than they think.

Even though it’s kind of corny, “It’s A Wonderful Life” is my favorite movie. The whole movie is showing the incredible power of one guy’s wake. I think that’s a pretty good summation of Conscious Capitalism. You get individuals and whole companies to be aware of their wakes. A conscious company behaves differently from companies that are not aware of their wakes. Sometimes society pays for the cost of a good sold from an unconscious company. That’s wrong. If a company is mindful of its wake, it ends up being an unassailable business and has a competitive advantage over other companies.

If all you want to do is make as much money as possible as quickly as possible, this is the way to do it. Either way, it makes your life so much richer and better and your relationships with people so much more beautiful. I just feel like I’m one of the luckiest people in the world to understand this, to be operating a business that’s renowned for doing things this way, and I think its results are because of that culture.

We started the business with $35,000 in 1978 and now it’s worth more than $35,000. I think it’s this yummy, quirky, wonderful culture that has created that value creation.

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Why Q4 2015 is the Most Vital Quarter Ever for Sustainable Businesses to Make Their Voices Heard

BY JEFFREY FRENCH

Not that most folks who are reading this need the reminder, but in December of this year, the United Nations Climate Change Conference will take place in Paris, France. This fall, in the lead-up to the conference, is the most crucial time humanity has seen in our longstanding effort to create the first truly global commitment to reduce human drivers of climate change. If the international

disruption and economic catastrophe.

Despite this dreary momentum, for the first time in years we have reason to believe that such a commitment in Paris is possible. The world’s three major emitters - the United States, China, and the European Union - each recently made their own individual, independent commitments to reducing (or capping, in the case of China) emissions. This, taken

And other countries have noticed.

UN Secretary-General Ban Ki-moon immediately greeted the Clean Power Plan as essential for bringing other key countries on board and securing a universal, durable, and meaningful agreement in Paris in December.

President Francois Hollande of France similarly labeled it a major contribution to success in Paris. More significant, as part of the lead-up

“Our inability to break out of our 20th century dependence on oil and coal is not due to the economic guidance of the invisible hand it is a political failure.” community fails to adopt a shared commitment with an ambitious plan for how to reduce emissions, many climate experts believe that we will not have enough time to develop yet another political process after Paris.

We are likely in the final hour of having any chance - and we have yet to agree on whether we are even going to truly try.

After the failure to generate binding obligations by countries in previous global climate summits such as Copenhagen in 2009 and Cancun in 2010, the goalposts have been moved backwards. Now, the focus is only to outline the terms for an eventual commitment from which subsequent improvements can later be made. This retrenched approach is radically bleak, especially in light of recent signs that even the well-known two degrees Celsius goal may be insufficient to avoid devastating levels of social 96

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together with economic realities like the falling price of renewable energy (solar energy recently surpassed the 1 percent threshold of global energy supply as China becomes its fastestgrowing source of demand) enables us to truly believe that Paris offers a real opportunity to break the existing cycle and create a meaningful global agreement.

Here in the United States, President Obama’s recent Clean Power Plan is a vital first step in getting beyond the failed legacies of previous summits. The Obama administration signaled to the rest of the world’s leaders that the US aims to reduce its carbon emissions by 32 percent by 2030, from 2005 levels. Deeper still, the administration is using innovative legal maneuvers like the plan’s Clean Energy Incentive Program to encourage states to meet targets earlier than 2030.

to the release of the Clean Power Plan, the US saw China make specific public targets on carbon emissions goals - including an offer to ensure 20 percent of its energy would come from renewable sources by the 2030 deadline and that during this time it would drop its carbon intensity by 60 to 65 percent.

Predictably, this significant political and diplomatic step in the US immediately came under fierce attack from opponents of sensible climate policy. Over a year before the president announced this plan, political strategists in the US Chamber of Commerce began preparing the “industry’s” strategy to undercut any new planet-saving regulations Obama might be able to muster.

This damning auto-reaction from the Chamber and many similarly minded powerful circles at both national and state government levels is worrying

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not only due to the outsized role of US emissions in climate change, but also due to the impact American political wavering on its commitments will signal before Paris.

This possible political backslide is worrying because previous attempts at global action were hampered by a lack of US leadership. Rather than playing its preferred role of global leader, the United States has been one of the key obstacles to a truly sustainable future. The US has proven unable or unwilling to make true concessions at the global summits despite our place at or near the top of carbon emissions by any measure. While other major countries certainly share blame for our current lack of a global agreement - often out of a concern for their own need for economic growth - Americans must recognize in time for the Paris negotiations that having roughly five percent of the world’s population while consuming roughly 25 percent of the world’s fossil fuels is not a sustainable

vision for the 21st century.

Our inability to break out of our 20th century dependence on oil and coal is not due to the economic guidance of the invisible hand - it is a political failure. And unfortunately, a major cause of our poor political prioritization of sensible climate policy has been the contradictory at best, and abhorrent at worst, activities of important American business lobby operations in Washington, DC. Rather than rely on scientific consensus, the US Chamber of Commerce and other major industry groups like the National Association of Manufacturers have chosen the wrong side of a crucial moment in history.

Despite the statements of these large industry associations, do not be fooled into believing that carbon is as critical to the economy and American jobs as they would have us believe.

Most industries are not dependent upon carbon emissions. According to a 2013 PricewaterhouseCoopers (PwC)

report issued by the Carbon Disclosure Project, around 73 percent of total greenhouse gases are ultimately produced by just ten percent of the largest 500 companies in the world.

What this means for us is that there is no such thing as “The Business Lobby,” which monolithically opposes steps to address the climate crisis.

Instead, American business leaders can be divided into three camps defined by their stances and action on climate change:

Three Camps

1

First are the abhorrent - but refreshingly honest businesses and lobby organizations who unashamedly and publicly decry climate science and its logical policy responses. Industry giants like the Koch brothers should come to mind, with their shortsighted support for organizations like the American Energy Alliance and the American

The Landscape BILLION

32% 25% 85% 73% $10 The planned percentage by which the US will reduce its carbon emissions by 2030, from 2005 levels, under the Clean Power Plan.

The percentage of the world’s fossil fuels used by Americans, despite the US having only 5% of the world’s population.

The percentage of business leaders who are demanding clearer policy signals from governments to support sustainable growth.

The percentage of total greenhouse gases that are ultimately produced by just 10% of the largest 500 companies in the world.

The estimated amount that will be spent on the 2016 US presidential race.

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Petroleum Institute. We need not spend much time considering how to engage them.

2

Second are the enlightened group of business leaders and their companies who are already committing to a sustainable future.

This is not just the small group of organic sellers at your local farmers market. Instead, major companies are already distancing themselves or even breaking away from the major lobby groups over the latter’s retrograde stance on climate change and environmental regulation. Since 2009, this list has included companies like Apple, Best Buy, Johnson & Johnson, Microsoft, and Nike.

Just this past August, Shell removed itself from membership in the American Legislative Exchange Council (ALEC) due to ALEC’s anti-scientific stance on climate change. And the month before that, alongside the announcement of Obama’s Clean Power Plan, 13 major corporations including giants like Apple, Berkshire Hathaway Energy, Google, and Microsoft signed the American Business Act on Climate Pledge. This pledge collectively committed them to reducing their carbon footprints and investing as much as $140 billion combined in lowcarbon technologies. Crucially, this announcement was explicitly designed to signal America’s intent to make major binding commitments in Paris this December. This pledge was further strengthened through a letter to 29 US governors, signed by 365 businesses, highlighting how the plan is beneficial for their economies and job creation.

Some of the more recognizable brands that were signatories include Ben & Jerry’s, Eileen Fisher, General Mills, and Staples.

3

A third and final group is arguably the most important as we look to achieve a historic tipping point for writing America’s new chapter as a leader in global climate policy. This group is comprised of the confused or misguided companies who contradict their public efforts to support genuine climate action

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“Those concerned with sustainability within the business community must get louder.” through their sustained membership in the trade lobbies that actively stymy responsible efforts. This indirect lobbying means that corporations are often parties to lobbying efforts that are at cross-purposes with their own public stances. These companies are the clear targets for action and pressure by their colleagues and consumers.

Notably, in a 2013 survey of CEOs around the world by the UN Global Compact, 85 percent of business leaders demanded clearer policy signals from governments to support green growth. Yet, often here in the US, many companies who make the right public statements on climate change still contract out political activities to trade associations. This minimizes their risk; membership in these lobbies, particularly when it is discreet, enables a company to influence a wide range of political processes without opening the company up to the wrath of consumers.

According to the Union of Concerned Scientists, over half of the companies on the boards of four major lobby groups affecting climate change legislation do not disclose their membership on those boards.

Companies knowingly tolerate the inconsistencies between their public values and those of the lobby groups who supposedly represent their

interests.

In 2014, this gap between many companies’ public stance and their public advocacy came to the fore as Coca-Cola, Intel, and Verizon refused to endorse the US Chamber of Commerce’s anti-Environmental Protection Agency regulation fight, which centered on policies attempting to minimize carbon emissions.

However, leaving the Chamber was perceived to not be an option for these companies because it provides crucial access on many other policy questions where their interests do align.

In light of these divergent approaches to climate policy within “big business,” how can members of our Conscious Company community help ensure the US remains steadfast in its commitment to the Clean Power Plan as we approach Paris? It is time to conclusively mobilize a transformative critical mass of American industry influence on our political system.

Business lobbying is nothing new and it should not be regarded de facto as nefarious. But after the Supreme Court’s Citizens United decision, lobbying carries an unprecedented and outsized influence. Those concerned with sustainability within the business community must therefore get louder. As recently as this summer’s Republican primary debates - when Donald Trump made sure we knew that his donations to US politicians get them to “do whatever the hell you want them to do” - there have been frequent reminders that ours is a political system built upon political donations and lobbying. Current expense estimates for the 2016 presidential race surpass $10 billion.

The winners of the Democratic and Republican primaries are predicted to each spend twice as much as either Obama or Romney spent in 2012. We have limited time and must use these political realities to our advantage.

We can do this in a sustained way that goes beyond consuming wisely.

Taking action across three key areas will be important for us as consumers, as shareholders, and as business leaders this fall:

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Three Key Areas

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Demand transparency: Require that corporations publicly disclose trade lobby group memberships - and whether they are aware of those lobby groups’ positions on climate change. Disclosure is increasingly recognized as a best corporate governance practice.

Asking companies to publicly account for the gaps between their known public climate stance and those indirectly lobbying on their behalf can have meaningful outcomes. Recent battles have been fought within the boardrooms of companies like Verizon and ExxonMobil on the vital question of whether to be transparent about their political giving. Sadly, those two battles ended up as losses for advocates of transparency, but conversely, Wal-Mart opted earlier this year to significantly increase its transparency regarding political giving due to pressure from shareholders.

We can and must ask for transparency around climate-related political contributions.

Photo by André Robillard

2

Encourage engagement: Urge those companies involved in business associations that lobby against climate action to loudly and publicly disagree with climate change stances that diverge from the commitments we need as we head into the Paris negotiations. Many local Chambers of Commerce already have distanced themselves from the US Chamber of Commerce - and this style of internal pressure from well-known members of the US Chamber will dampen enthusiasm for maintaining its current short-sighted path.

3

Create a new type of divestment campaign: Divestment traditionally refers to the important process of convincing shareholders and large investment funds to remove their financial support from companies engaging in objectionable practices. In the leadup to Paris, our sustainable business community and consumer base must augment this well-established push for responsible investment by demanding responsible lobbying - even when the lobbying is indirect.

Consider the example of Google, which remains a member of the US Chamber despite having also signed the American Business Act on Climate Pledge. What would be our ideal ask of

a company like Google? Not to simply leave the US Chamber, but to be a part of the creation of a meaningful corporate lobby association that would rival the current dominant anticlimate change business lobby groups.

Such a climate-savvy association could have a core membership of companies who have already left the US Chamber since 2009. The creation of such an entity will give companies currently conflicted about leaving the US Chamber of Commerce a viable alternative. In other countries, massive splits within the national “business lobby” over policy priorities and approaches has seen the rise of newly powerful associations - most notably in India where the historically powerful Federation of Indian Chambers of Commerce and Industry lost many major Indian companies to a business group called the Confederation of Indian Industry in the 1990s and 2000s.

Ultimately, the very large gaps in the American business community on climate change provide an opportunity to do something about the Paris negotiations and Obama’s Clean Power Plan this fall. Corporate lobbying is powerful, but by following the steps above we can help tip the balance of lobbying power in an empowering way. Let’s recognize and reinforce the efforts of those companies already on the right path by pressuring those in the middle to join us in the months and years ahead.

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4 KEY INSIGHTS FOR CONSCIOUS ENTREPRENEURS

S

ERIAL ENTREPRENEUR VICKI SAUNDERS KNOWS BUSINESS.

In addition to founding multiple companies, she’s created SheEO, a network of individuals who support women entrepreneurs through mentoring, networking, and investing. She is also the author of “Think Like a SheEO: Succeeding in the Age of Creators, Makers and Entrepreneurs.” Saunders shared key insights about leadership and business with the founder of Emerging Women, Chantal Pierrat.

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On Why It’s Great That Everything is Broken

On Finding Meaning Over Money

“Almost everything needs to be redesigned, reinvented, or redefined.”

“All bets are off on the black-and-white world we’ve been living in.”

This is something I’ve really been thinking about my whole life: how do you create an environment for people to believe that they’re free and that they can do more than they think they can? I think at this particular point in time in the world, when I look at it, it looks like everything is broken. For me, that’s a great time to be alive. Everything’s broken? What a great time to be alive! If you’re a creator, maker, or entrepreneur, this is kind of your nirvana, because if you look out on the street - when I look out on the street, anyway - almost everything needs to be redesigned, reinvented, or redefined. And I really think it’s important that women are at the table for that redefinition, because I think we can do better in creating a better world.

The vast majority of Millennials and many other people now really want to have meaning - meaning matters to them more than money. Making a difference matters more than what the salary is. And ideally, we mash the two together and you have a meaningful, well-paying job, or you have a meaningful, awesome, growing startup.

It’s not enough anymore to just provide a good product. You have to have a good product that’s sustainable, that adds value to the community that it was developed in, that makes you feel better, and delights you. There are seven billion people on the planet - how do you stand out above the crowd with your product? We went from the 20th century, which

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was dozens of markets with millions of customers, to this new world where we have millions of markets with dozens of customers. To make yourself stand out, you really have to get into the heartstrings, the emotional connections, the meaning of people, so that they become rabidly excited about your product, because they have so many other choices out there.

When I look at all of these people that are going, “I don’t want to go to Wall Street when I graduate. I want to go do something that makes a difference in the world, because look at the state of the world. What is the highest form of leadership and the biggest impact that you can have?” People are asking these questions now, as opposed to just pursuing money, because we’ve got so many studies now showing that it doesn’t really lead to happiness. And what people really want is a sense of that personal advocacy that they have in the world.

I think that all bets are off on the black-and-white world we’ve been living in. We are really moving into a much more integrated perspective, where people are looking at, “How does this make me feel when I use this product? How does this make me feel when I work at this company?” as well as, “What is this company doing? Is it doing good things in the world? And what are we putting out there in the world? Is that the best thing that I can do with my life?”

On “Flipping It” And Limiting Beliefs “We’re only limited by our imaginations.”

If you believe that you can have what you want, then you can have what you want. If you don’t think that’s possible, then of course, you create that reality. One of the things that I have been working on for years and years and years is listening to my language for times when I have limiting words that come out.

For example, I’ll hear myself saying, “It would be really hard to do that.” And then I quickly notice that and go, “Well, what if it wasn’t? What if I could do it faster? What if I could do it in a different way? What if I could make it a game? What if it could be fun?”

And I’m constantly flipping that, because really, we’re only limited by our imaginations. It’s important to be

constantly checking in on yourself when you say those things, because your words create your reality.

If you’re walking around going, “I can’t do this unless I raise a million bucks,” then you’re limiting yourself.

What if there were a way to do it differently? What if there were a new approach? When you walk in with a thought that things are going to be a certain way, you create that reality. So if you don’t want that to be true, be careful about what you’re thinking. I think this is really important in every part of your business. It’s going to be really hard to raise money, and if you have that in your head all the time, “It’s really hard,” then you create the situation for it to be hard.

On Risk “The risk for me is living in mediocrity and never achieving my potential.”

If you actually think it’s a risk to quit your job and go do what you want to do, then you need to think about that for a minute. I mean, the risk for me is living in mediocrity and never achieving my potential. That, to me, would be the biggest disaster ever. So I actually don’t think of it as risk when I think about, “What do I want to achieve?” I tie it much more into my impact and my being and my purpose for why I’m here.

If that’s actually an issue for you, then you need to really pay attention to that. It doesn’t mean just chuck it. If you have a job and you think you need $100,000 a year or you built your life around that, then yes, you can’t go and create a business until you’ve got a revenue model that’s going to support it.

Entrepreneurship is the big buzzword of the day.

Everybody wants to be an entrepreneur. But what does that really mean? I think people want to feel like they have autonomy and they’re working on purpose and they’re increasing their mastery around whatever that is in the world. That’s the real motivation stuff, and whether or not you’re doing that in a startup or you find a way to do that within a company or within a government department, wherever that is, I think looking at your impact is a critical component of it. I’d really step back and ask, “What’s the risk? Why do you need to have what you think you need to have? And is that really true?”

Chantal Pierrat is the founder of Emerging Women, which exists to support and inspire women to express themselves authentically through the work that they do. The organization strives to provide the tools, knowledge, and network to help women lead, start, and grow businesses in a way that integrates feminine values such as connection, collaboration, and heart.

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IN MANY CIRCLES, TONY SCHWARTZ NEEDS NO INTRODUCTION. Through his work at The Energy Project, the company that he founded in 2003, Schwartz has established himself as one of the foremost experts on employee energy and performance. His writing is regularly featured in the New York Times, he had the most popular blog for the Harvard Business Review for three years running, he has written two New York Times bestsellers (“The Way We’re Working Isn’t Working” and “The Power of Full Engagement”), and he regularly keynotes at conferences worldwide. Tony shared his insights with us on everything from the shortcomings of mindfulness to what is needed to shift the paradigm of leadership.

ON CREATING CHANGE What I’ve learned since the day I started doing this work twentysomething years ago is that the only way to begin to shift the way people think is to start out by speaking to them where they live currently. Where corporate public businesses live, and to some extent even private businesses, is to see the world as profit, and when it comes to public companies, quarterly profits. I’ve always been interested in subjects that seem to organizations, historically, to be secondary to their primary concerns and more subjective and on the fringe.

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When it comes to change, although we wish it weren’t so, the primary and often the only reason people change is because the pain of whatever it is that they’re doing exceeds the pain of imagining doing something else. Over the last five years, dating back to the end of the recession, a real and dramatic shift in demands has occurred. The reason it has changed is, first, so many people got laid off during that era that, when companies suddenly had demand for their products and services again, they had so many fewer employees to deal with. And second, the much more profound reason for the change is that, over the last several years, the

demands of technology have become virtually intolerable for people and for organizations. Digital technology has created so much more input into people’s lives as far as expectations go, both around the volume of information they’re expected to deal with and the frequency with which they’re expected to deal with it, that for the first time maybe in human history, we’ve gotten into a situation where people just can’t do more. They can’t do all the things they’re being asked to do. So that’s the framework in which I think the openness to a new way of thinking has begun to emerge. It’s a reaction to an experience of desperation.

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ON EMPLOYEE ENGAGEMENT I think the era of engagement is actually relatively obsolete, meaning engagement as a measure of performance, or likely performance, simply isn’t a sufficient measurement anymore. The definition of engagement is the willingness to invest discretionary effort on the job, the willingness to go the extra mile, the sense of commitment that makes a person show up with more motivation. But willing no longer guarantees able. So even if you have a highly engaged workforce, what you really want to understand as a leader is whether people are both willing and able. That’s the key.

The way we look at it at The Energy Project is that the way in which you get the most energized workforce meaning the way in which you get people to bring all of themselves to work everyday - is by meeting their core needs. And you can’t meet just one need - like the spiritual need to be doing something that’s serving something beyond profit - and expect that that by itself is going to be sufficient.

You have to meet all the four core needs. One of them is the need for a sense of meaning and significance from your work, but the others are a need for a sustainable life at the physical level, the need to feel valued and cared for at the emotional level, and the need for self-expression at the mental level through feeling that you can contribute in some unique way to the company you’re working for.

When all four of those needs are met, that’s when you get a workforce firing

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CORE NEEDS IN THE WORKPLACE

on all cylinders.

In our research with the Harvard Business Review, of the 20,000 people that we surveyed, 60 percent said that their companies were not meeting a single one of those four needs. Conversely, when a person tells us that just one of those needs is being met, every performance variable that we studied went up, and it went up on a straight line based on the number of needs met. So, if two were met, they outperformed those who had just one need met, and three more than two, and four more than three. That’s really what we think of as the key to creating a work environment that leads to a fully energized workforce.

sustainable performance and energy as being a function of treating people as whole human beings and being concerned not just with the work skills they bring to the table but also with what’s going on inside them that makes it possible for them to bring those skills to work. Bizarrely, because the metaphor for how people should work has been machines, the result is that we pay almost no attention in the workplace to how people feel, even though how they feel is directly connected to how they perform.

The way I look at it is, America’s corporate world and the global corporate world have been focused on the “what” for 200 years since the industrial revolution - by the “what” I mean the strategy and execution of business plans - and they’ve been focused almost not at all on the “how.” They’ve focused on what’s externally visible at the expense of what’s internal. The combination of the shift from seeing people as machines to understanding that they are human beings, and from seeing them as simply a function of what they do that’s visible to being aware of what they feel, is the heart of the paradigm shift that I think needs to happen. The emotional component is at the very heart of this paradigm shift because how people feel is emotional. That’s what feelings are, they’re emotions. If you learn how to skillfully manage your own emotions and you learn as a leader how to better manage the emotions of those you lead - presto! - you’ve got a whole new level of capacity that you’re tapping into.

The trendy focus on mindfulness as

ON SHIFTING THE LEADERSHIP PARADIGM The paradigm shift that needs to occur in leadership is away from the assumption that human beings are capable of operating the same way machines or technology do - meaning at high speeds, continuously for long periods of time - toward recognizing that human beings actually operate very differently from machines.

They have these complex ranges of needs and you can’t meet them in the same way that you meet a machine’s needs. A machine really doesn’t care whether or not you appreciate it.

It doesn’t care whether or not it’s working in service of a higher cause, and it doesn’t think about whether or not working long hours is going to eventually burn it out, although even machines get burned out by being operated for too long continuously.

The real shift is toward thinking of

PHYSICAL HEALTH

EMOTIONAL HAPPINESS

MENTAL FOCUS

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ON THE MOST COMMON MISTAKES LEADERS MAKE The most common mistakes that leaders make stem from the inattention to, and the failure to make important, those needs of people that most profoundly influence their capacity to perform. Raj Sisodia, the co-author of “Conscious Capitalism,” has been very articulate about this. We privilege one set of qualities among leaders almost to the exclusion of another. By that I mean the archetypically masculine qualities are generally valued - like toughness, while in no way giving value to gentleness; or honesty but not empathy; and action-orientation but not reflectiveness; and drive but not renewal and recovery.

So what we’ve done is we’ve left out 50 percent of the qualities that are necessary for effective leadership and pretended that leadership is a function

59% FEEL CONNECTED

UNSATISFIED

34%

The percentage of workers who are unsatisfied feeling physically depleted, emotionally drained, mentally distracted, and lacking in meaning and purpose

The percentage of people who feel a connection to their company’s mission.

Those who don’t feel such a connection are 62% less likely to stay with their employers and are 45% less engaged

of the other 50 percent. For example, you take a quality like honesty and you say to yourself, “Why wouldn’t you want people to be honest?” Of course you would, that’s the first thing you want to be sure of. Honesty or integrity is in virtually every statement of values of the big companies - not that they necessarily live by it, but it’s certainly a stated value. The reason that honesty is valued is in part that its opposite, dishonesty, is so insidious. But honesty, when it’s overused, becomes cruelty. Honesty is not a virtue by itself. Honesty is part of a set of virtues, namely honesty and empathy, or honesty and compassion.

If you have too much honesty, you get cruelty and it becomes a toxin rather than a value. And that’s the way we run American businesses. We overrely on certain qualities in order to avoid their negative opposites, not recognizing that we need a balanced relationship when it comes to these

7%

NEEDS MET

the solution to all these problems beginning with the problem of how exhausted people are - is a typical, superficial solution to a complex problem. While I have no complaints with people who use mindfulness and any other meditative technique to quiet their emotions, to calm their bodies, to focus their attention, it doesn’t address the core emotional issue that we’ve been talking about, which is that people don’t feel at work the way they need to feel in order to perform at their best. The way they need to feel is what we call high positive emotion: they need to feel good, they need to feel happy, they need to feel excited, they need to feel optimistic, they need to feel cared for. You don’t get that by sitting for 15 or 30 minutes and breathing deeply. You get that by the way you are treated by those who have dominion and power over you.

The percentage of people who have their core needs met at work

The percentage of people who are satisfied in their jobs

37% JOB SATISFACTION

Source: The Quality of Life @ Work Study by The Energy Project and Harvard Business Review

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qualities because any overused quality becomes a liability.

If you’re a musician and you only have a certain number of notes available to you, invariably at some point you’re going to play that note too many times. At the heart of the new work that we’re doing is really looking at what it means to be wholly human, and I just described an example of what it takes to be wholly human.

You don’t need more traditionally masculine qualities or more traditionally feminine qualities,

hours without a tremendous cost, all the way from just plain lower productivity and lower quality when you work too many hours, all the way to sickness and even death when you overvalue work at the expense of rest. Work is a virtue; too much work is overwork, and the balancing opposite is often rest and renewal. In the new paradigm, we value rest and renewal because we recognize it’s a part of what it takes to be sustainably high-performing or to be able to work at your best. The highest value isn’t derived from the

“The highest value isn’t derived from the number of hours you’ve worked, it’s derived from the energy you are able to bring to whatever hours you’ve worked.”

need to embrace both. The most commonly accepted strengths are not necessarily strengths when they’re overused. Courage overused becomes recklessness. Courage, to be effective, needs to be tempered by prudence. Confidence overused becomes arrogance, which needs to be tempered by humility, but we haven’t valued humility, we’ve only valued confidence. And what do you get? You get an awful lot of the disasters that we have in business as a function of arrogance, overconfidence, and so on.

Essentially what we’re talking about now is consciousness. Higher consciousness, which gets dismissed in the business world as soft and woo-woo, in its most practical sense simply means feeling more and excluding less. It’s seeing the whole. It’s the full range of what’s possible. The work we’re doing is to try to awaken in people the full range of not only who they are but who they could be, because the only way to increase capacity - which we must do in this more and more demanding and complex world - is to get access to more qualities and more choices that you can make in any given situation. There’s no way you’re going to work more

number of hours you’ve worked, it’s derived from the energy you are able to bring to whatever hours you’ve worked. That’s a big shift.

ON THE FUTURE I’m incredibly hopeful. I am an optimist by nature, so you have to discount against that! But I’m incredibly hopeful because we are working with the largest companies in America, from Google to Alcoa to Coca-Cola to Nestle to Bristol-Myers Squibb, and what we’re seeing over and over again is that the way we’re working isn’t working, which has been our mantra since I wrote that book five years ago. It’s been clearly recognized by lots and lots of the most senior executives in these big companies. There is an openness to the recognition that what got them to success simply isn’t sufficient in a world that is changing at the speed that our world is changing.

We’re seeing companies, from senior leaders all the way up to CEOs, willing to try things and to challenge their own assumptions at a level that is dramatically different than it was even two years ago.

If you ain’t got hope, you ain’t got nothing, right?

3 Leadership Traits that Impact Employee Performance Most RESPECT Employees who feel respected by their leaders feel:

• 63% more satisfied with their jobs • 55% more engaged • 58% more focused • 110% more likely to stay with their organization

APPRECIATION Employees who feel recognized and appreciated by their leader feel:

• 53% more focused • 58% more engaged • 109% more likely to stay with their organization

POSITIVITY Employees with positive leaders feel:

• 54% more engaged • 71% more enjoyment at work • 2.5 times more trust and safety • 105% more likely to stay with their organization

Source: The Quality of Life @ Work Study by The Energy Project and Harvard Business Review

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The Paradigm Shift to Shared Leadership: From Round Earth to Flat Hierarchies

BY LORI HANAU

W

e once believed the earth to be flat. The moment we discovered it wasn’t, the possibilities of our existence and what we could accomplish began to expand exponentially. Of course, the earth was always round, even when we believed it wasn’t. That’s the thing about paradigms.

They typify our interpretation of reality, which is not the same as what is really there. When we change our paradigms, we make visible what we couldn’t imagine before.

A paradigm shift is a fundamental change in view of how things work in the world. So what about the way we work in the world? What is clear is that the established way of working isn’t working. According to reports that Gallup has been generating since 2000, two-thirds of employees today feel disengaged and experience a lack of meaning at work, costing the American economy an estimated $450 - $550 billion annually. Over the past fifteen years, these numbers have barely budged. Globally, the percentage of disengagement in the workplace is 87 percent across 142 countries.

These figures are sobering enough without even taking into account the cost to our societal and human evolution.

One order of paradigm shift and a strong cup of coffee, please! Like all good paradigms, the way out of the problem comes when we see it with new eyes. Try to see the crisis at work as a call to shift how we relate to leadership. As challenges and opportunities approach whole-earth scale, we must cultivate new muscles for leading together, rooted in our innate abilities to accomplish organizational objectives and collectively impact social change. In the new paradigm, leadership does not look like a corner office or a five-page CV. In the new paradigm, leadership is for everybody. To change the way we work, we have to change the way we lead, and ideas on how to do just that are popping up all over the map under names like participatory leadership, 106

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facilitative leadership, systems leadership, collective leadership, collaborative leadership, and shared leadership.

The good news is, change is already afoot. Cooperative business models, crowdsourcing, and the democratization of information are just a few examples of a cultural shift of consciousness from isolated individualism toward collective intelligence and shared power, forcing us to rethink group structures, impact, and the way we lead.

In the current paradigm, leadership is positional. We relate to our work first and foremost through our roles, our status, and our expertise in order to execute outcomes. This “boss” model of leadership requires those of us at the top to hold the answers, survive a universe of stress, and assume singular control over outcomes and others. Meanwhile, as employees, we feel more disconnected from our livelihood and we relinquish our agency at work. Have you ever shrugged off the chance to make something better at work, thinking, “that’s not my job”? Or told yourself you’d take on that extra task only if you got a raise? I’ve been there, and I’m not proud of it. Regardless of our role or title, showing up only through our roles perpetuates relationships rooted in a competitive growth mentality, separating us, diminishing our drive, and pushing us to hide our truths behind our titles. It compromises our creative and cultural potential.

Frederic Laloux, in his book “Reinventing Organiza-

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tions,” poses the question, “Could we invent a more powerful, more soulful, more meaningful way to work together if we only changed our belief system?”

This inquiry has had a firm hold on me ever since I went to work at my father’s human-centered business in the early ’90s. Led by my father, Ken Hanau, Vermont Container was a soulful organization built on empowerment and dignity. The expectation was that everybody who worked there, from the top of the org chart to the bottom, held a shared responsibility to lead from these values, from the inside out. I

I’ve defined “Shared Leadership” as “the practice of bringing out the greatest capacity in everyone by empowering each individual to be responsible for and engaged in the success of the whole.” This is not positional leadership. This is a fundamental shift to lead from our personal and collective agency, in all that we are and all that we do.

To lead consciously, we must shift our orientation from relating first through our roles, statuses, and expertise, to relating first through the genius of our humanity and equality, what exists at the core of us.

equality, wholeness, and collective intelligence matter first and foremost.

Conscious and human-centered companies, working through shared power, are already leading the way.

Shifting the leadership paradigm requires that we bring our whole selves to work, learning to lead from our humanity first. Think that’s scary? Imagine being told that the earth was round when everybody knew it was flat. It is a scary thing, coming to realize that reality isn’t the same as what we’ve been conditioned to believe. We resist, we ridicule, until we reorient. Let’s be

“When we change our paradigms, we make visible what we couldn’t imagine before.” never heard him give a speech without reminding us that the essential importance of relationship first - leading with our humanity - equaled a thriving and meaningful business. And we thrived in every way. I sold corrugated boxes for nine years of my life and I jumped out of bed every day, inspired and proud to go to work, as an equal part of a greater whole. As a collective, we knew we were in a rarified ecosystem.

“Another world is not only possible, she is on her way. On a quiet day, I can hear her breathing.”

- Arundhati Roy So how do we arrive here today?

How do we open to conscious leadership? The first question we have to ask is, “What parts of ourselves do we leave behind when we step into our roles and identities?” The second question is, “What will happen if we stop leaving these parts behind?” When we step into our work, leading primarily through our roles, we leave out our biggest collective asset: our shared humanity. In any group, relating to each other first through our humanity ignites a creative field of connectivity and soulfulness - our group wisdom that has no room to surface in our typical mode of operating as fragmented parts of a whole.

This re-orientation integrates the qualities of reciprocal relationships into hierarchical settings, building mutual trust, compassion, respect, and generosity. Roles are still necessary to produce outcomes, but how we approach our roles changes fundamentally. And leading from our core supports the innate blossoming of collaboration, because we begin together from the place of our innate equality. The essential aspect of our humanity is bypassed in the current paradigm of leadership.

brave together and begin with the way we lead. We aren’t just shifting the paradigm around work and leadership.

We are upgrading our humanity.

“If you have come here to help me, you are wasting your time. But if you have come because your liberation is bound up with mine, then let us work together.” - Lilla Watson, Australian Aboriginal artist, activist, and educator When we reorient our awareness and lead from this wisdom, we naturally rise together and open toward each other. Leadership is both a product and driver of contemporary culture. As leadership adapts to meet the needs of the times, it simultaneously shapes how we see our problems, our solutions, and ourselves. We are at the beginning of a reorientation or paradigm shift from top-down, positional leadership to more systemic and collaborative ways of leading, generated from the soulful wisdom that our humanity,

Lori Hanau is dedicated to supporting shifts in consciousness, communication, and community in the workplace. She founded Global Round Table Leadership, where she works with people and teams to build the personal and shared leadership capacities required to meet the call and needs of our times. She is also faculty in Marlboro’s MBA in Managing for Sustainability. Lori has been supported in shared leadership by Claire Wheeler of Rework for the writing of this article. Visit www.globalroundtableleadership.com to learn and share your stories of shared leadership.

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THE POLICY SOLUTION TO CLIMATE CHANGE THAT BUSINESSES CAN GET BEHIND

BY DAVID BRODWIN, CO-FOUNDER AND VICE PRESIDENT OF COMMUNICATIONS, AND RICHARD EIDLIN, CO-FOUNDER AND VICE PRESIDENT OF POLICY, AMERICAN SUSTAINABLE BUSINESS COUNCIL (ASBC)

E

fforts to counter climate change have long been criticized as “antibusiness.” As result, many senators, representatives, and political aspirants continue to deny climate change in public. But behind the scenes, in private conversations, some of these same political leaders acknowledge the threat. They understand the risk that climate change poses to business and the economy, as well as to the planet, and they seek a way forward. But the way forward needs to be friendly to business, friendly to the economy, and friendly to the national competitiveness of the United States.

A tax on carbon is coming to the fore as the centerpiece of a solution that meets these tests. Although most conservatives in Congress are not yet using the “T word” publicly, it’s clear that, behind closed doors,0 it is under active consideration. Back in April, ASBC’s Richard Eidlin, VP of Policy (and one of the authors) attended an 80-person meeting in Dallas, hosted by Trammell Crow, a real estate developer and producer of Dallas’ annual Earth Day event. Nearly everyone

1 A simple, clean, price-oncarbon system. This is preferable to complex regulations that are hard to get right and easily gamed.

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there, from Suncor (an energy company) to the Hoover Institution (a conservative think tank) to Natural Resources Defense Council (NRDC, an environmental group) agreed that the best comprehensive solution was a national tax on carbon. It was encouraging to see the discussion move from “is there a problem?” to “what’s the optimal role of government and markets in the solution?”

In another sign of progress, former Republican Congressman Bob Inglis and Democratic Senator Sheldon Whitehouse have brought forward climate plans designed to appeal to conservative business interests.

Whitehouse and Inglis will discuss their plans in an open meeting with business leaders at ASBC’s 4th annual Sustainable Business Summit. Senator Whitehouse first introduced his plan at the American Enterprise Institute, a leading conservative, free-market think tank.

Because of the strength and power of business in the United States, no plan for climate protection can pass without active support from business. This likely requires three components:

2

3

A way to protect American business from “free riders.” USbased businesses will suffer if the US imposes a price on carbon and other countries don’t.

A path to deal with the costs of the stranded assets of the fossil fuel industry and its customers.

The industry is simply too big and too politically powerful to be ignored.

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A PRICE ON CARBON Of all possible climate solutions, a carbon tax is the most economically-efficient, most transparent, easiest to plan for, and hardest to game. That’s why many business leaders prefer it. The general parameters of a carbon tax are simple: the federal government would apply a specific tax amount to all carbon used in the country. The tax must be set high enough to incentivize companies to reduce emissions while also giving businesses and households sufficient time to adjust. Meanwhile, other proposals like cap-and-trade have had uneven results in world carbon markets. It’s a good solution in theory, but in practice it has proven difficult to set the right cap and to adjust the cap properly over time.

Purely regulatory approaches are also hard to get right, and given the dysfunction in Congress, it’s almost impossible to make reasonable adjustments to regulations as the need arises. And they can bring the problems of government attempting to pick winners and losers among different industries and technologies.

A CARBON CLUB But how do we ensure that other countries take similar steps and compete with us on an equal footing? Modeled on successful treaties such as the European Union and the World Trade Organization, the Climate Club would be essentially a trade treaty that allows member countries to trade with us without tariffs if they put a price on carbon similar to ours. Countries that don’t join would be penalized with a trade tariff. US business interests would protected as each country weighs the cost of carbon reduction with the cost of tariffs.

“The discussion is moving from ‘is there a problem?’ to ‘what’s the optimal role of government and markets in the solution?’”

STRANDED ASSETS “Stranded assets” are the assets that will no longer be useful once we move off coal and oil. These include the value of reserves left in the ground, and of the equipment used to extract, process, and burn these fuels. Revenues generated from the carbon tax could be used to offset the loss of stranded assets. Carbon-dependent businesses could receive loans or credits as they transition to a new business model. Communities that are economically dependent on the fossil fuel industry could be assisted.

Low-income households could be supported in reducing their energy use.

With Congress jammed, business leaders must press for a practical solution that works for all stakeholders including those who depend today on fossil fuels. It won’t be easy, but if business leads, the political establishment will follow.

The American Sustainable Business Council advocates for policy change and informs business owners and the public about the need and opportunities for building a vibrant, sustainable economy. Through its national member network it represents more than 200,000 businesses and more than 325,000 entrepreneurs, executives, managers, and investors from a wide range of industries. www.asbcouncil.org

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CONSCIOUS

BUSINESS PLANNING

BY GERRY VALENTINE AS CONSCIOUS BUSINESS LEADERS, WE ARE COMMITTED TO RUNNING COMPANIES THAT NOT ONLY MAKE MONEY, BUT ALSO HAVE A POSITIVE IMPACT ON THE PLANET AND THE PEOPLE WE TOUCH. However, there’s one hard reality we need to face - in order to have the impact we want, our businesses need to be successful. In fact, some might say that conscious businesses have a higher imperative to succeed because if we fail, we harm those who depend on us - our employees, our customers, and perhaps even the communities we work in.

I see too many well-conceived and well-intentioned conscious businesses flounder or fail because of a very solvable problem - they lack effective business planning. Good business planning provides a roadmap so employees can stay aligned towards common goals; it provides foresight that protects against disruptions; and when done correctly, it unlocks creativity and innovation.

One problem is that most conventional planning tools don’t meet the needs of conscious companies. Many leaders also expect planning to be an arduous, time-consuming process that just produces lots of paper, but it doesn’t have to be. Below is a seven-step business planning process that’s designed for conscious companies. It’s flexible and lightweight, and the only documentation needed is to take good notes during the planning meeting - those notes become your plan!

SEVEN-STEP BUSINESS PLANNING FOR CONSCIOUS COMPANIES

NO 1

Review Your Purpose

The statement of purpose (or mission statement) is the foundation of any conscious business, and it needs to be the foundation of business planning.

Though companies use many different formats, the essence of a great purpose statement is often just one to three sentences, and it answers this key question: What problem does your company solve for your customers/ stakeholders/the world, and why are they better off because you? Here are some great examples: Google: “…to organize the world’s information and make it universally accessible and useful.”

Nordstrom: “…to give customers the most compelling shopping experience possible [and] offer the best possible service, selection, quality, and value.”

JetBlue: “In the air and on

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the ground, we’re committed to bettering the lives of our customers, crewmembers, and communities - and inspiring others to do the same.”

A poorly conceived purpose statement (or lacking a purpose statement altogether) is often the root of serious business problems.

Make sure your purpose statement is a compelling representation of your company.

N 2

O

Map Your Stakeholder Ecosystem

In addition to making a profit, conscious businesses consider the impact they have on their stakeholder ecosystem to be a fundamental part of their success - this is a key way in which planning for conscious businesses differs from planning for conventional businesses. Stakeholders

include customers, employees, suppliers, communities you work in, and more. Most conscious companies also list the planet or the environment as a stakeholder as well. Map out the stakeholders your business interacts with.

NO 3

Assess Accomplishments & Challenges to Date

Look back over the last year and brainstorm a list of the company’s key accomplishments. This includes larger quantitative results, like revenue or launching new products, but also smaller or less tangible things, like improving employee moral. Do the same thing for challenges that have emerged.

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NO 4

Assess Strengths, Weaknesses, Opportunities, & Threats

Brainstorm your company’s consistent strengths. These are the things that set you apart from your competitors.

Perhaps you have superior customer service or extremely dedicated employees. Brainstorm the company’s weaknesses - places where you consistently underperform. Maybe you are plagued by product quality problems or repeatedly missed deadlines. Now brainstorm potential opportunities and threats that may come up in the future. Opportunities might include new markets that could open up, and a threat might be a new competitor on the horizon.

NO 5

Do a Stakeholder Impact Assessment

Think about how your company’s activities have impacted your stakeholder ecosystem. For example, if you increased profit by unfairly cutting costs, that might have negatively impacted your vendors and employees. If you reduced greenhouse gas emissions, that had a positive impact on the environment stakeholder. Add any positive impacts on shareholders to your list of accomplishments. Add any negative impacts to the list of challenges.

NO 6

Set Goals, Measurements, & Strategies

Now you’re ready to establish your plan. To identify your goals, look at your list of accomplishments and challenges, along with your strengths, weaknesses, opportunities, and threats, and ask the following questions: • What are the most important things we need to accomplish in order to achieve our purpose?

• What past accomplishments can we further leverage?

• What challenges do we most need to address and how can we do that?

• How might we leverage our strengths and offset our weaknesses?

• What opportunities can we take advantage of, and what threats do we need to guard against?

List the most important goals that emerge. I typically recommend no more than five to seven goals.

They should be big picture items like, “Increase sales by 20 percent,” “Decrease our operating costs by ten percent,” or “Deliver our products in 24 hours or less.” Also, for conscious companies, remember stakeholder goals like “Decrease our power consumption by ten percent” or “Improve our relationship with the local community” should also be listed.

Make sure each goal has a specific measurement and timing, meaning that you’ve identified exactly how you will know the goal has been achieved and when. That’s generally easy for quantitative things, like a sales goal, but it can be more challenging with qualitative goals like “Improve customer service.” Clearly articulated measurements are also an important leadership tool, because they allow your team to know exactly how you define success, what you expect to see, and when you expect to see it.

If you’re having trouble defining a specific measurement then that often means your goal isn’t specific enough.

Next, define the strategies for each goal. Strategies define how you’ll achieve each goal, and they give your team a sense of direction.

For example, a goal to increase sales by 20 percent might have strategies like “Identify new customer segments and increase repeat purchases.” A good test to see if you have the goal/ strategy alignment right is that you can articulate them in an “achieve [goal] by [strategy]” construct.

For example, “Increase sales by 20 percent by identifying new customer segments and increasing repeat purchases.” with an Immediate NO 7 End Next-step Action Plan

The final step is to create an immediate next-step action plan. This is not a detailed tactical plan, but rather the immediate next steps you need to move the plan forward,

although sometimes developing a tactical plan is one of the immediate next steps. Developing financial projections based on the identified goals is also typically one of the immediate next steps.

Make sure that each goal has at least one immediate next step to ensure it moves forward. Examples might include, “Review sales goal with sales force,” or “Develop a list of options for reducing power consumption.” Each immediate next step should include four things: 1) the specific next step, 2) who is responsible, 3) what will be delivered, and 4) when it will be delivered.

Follow up to ensure progress.

The most important next step is to set a time to reconvene and follow up on progress against the business plan. I generally recommend that companies reconvene once every three to four months to assess progress against the plan. This allows them to make sure the business stays on track, to make any needed adjustments, and to make sure they get the maximum value out of the planning process.

Gerry Valentine is founder of Vision Executive Coaching. He works with socially responsible leaders to build companies that can change the world - focusing on business strategy, innovation, and leadership. Gerry has 30 years of leadership experience with multiple Fortune 100 companies, an MBA from NYU, and a BS from Cornell University. Connect with Gerry at: www. linkedin.com/in/gerryvalentine, Twitter: @gerryval, or email: gerry@VisionExecutiveCoaching.com

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TIPS FOR SOCIAL ENTREPRENEURS

BY KATHERIN KIRSCHENMANN Since 2008, the DO School has worked with over 240 young changemakers, giving them the skills to launch social ventures in over 70 countries around the world. Through an experiential education process, these social entrepreneurs also co-create social innovations to overcome real-world challenges posed to them by leading organizations. Our Fellows have uncovered many lessons that were not originally in our curriculum - and re-emphasized the importance of others.

Among the most vital tips to guide social entrepreneurs are the following:

1

CELEBRATE YOUR FAILURES

Every person who sets out to change the world experiences failure.

Sometimes these failures will only be small bumps in the road to success, and at other times, they will be a major disaster. The key for entrepreneurs is not only to “learn from it” but to celebrate those failures. Members of our social enterprise community go beyond simply analyzing and tracking their mistakes to transform the energy from those falls into momentum to achieve greater things. This is why early on we learned from one of our young changemakers the importance of having a Courage Day and a Fuck Up Night - events that encourage our Fellows to be brave and risk failure as part of our process of helping young social entrepreneurs in their journeys.

2

FIND A COFOUNDER AND TEAM MEMBERS YOU OFTEN DO NOT AGREE WITH (BUT NOT TOO OFTEN)

Few, if any, leaders ever truly have it all. Even creative giants like Steve Jobs constantly harnessed and relied upon the talent around them that complemented and contradicted them in order to be consistently successful.

To create an organization geared towards sustainable growth means you absolutely must know what you are and are not good at. Only then can you find the right co-founders and team members who will help you succeed. The ideal co-founders and first team members will have different backgrounds that augment your own strengths and can make up for your deficiencies. A co-founder is also, by the way, an ideal way to get free support and knowledge when you get started. You should, however, be pretty clear with each other on your roles and expectations, because trouble between co-founders is one of the key reasons why startups fail.

3

BE TRUE TO YOUR PASSION, YOUR VISION, AND YOURSELF TO TRULY GET MOVING

Social entrepreneurs redefine what is possible by connecting their day jobs to their true purpose. Many receive feedback that their ideas will not work, that they are crazy.

When you run into this pessimism, congratulations; now you know that you are on your way to becoming a true social venturer. When this happens, that is the time to follow your passion and to create a vision of how to get there. These actions will sustain that amazing big dream that will get you started and keep you moving in tough “lean” times.

Because, ultimately, getting started and DOing is the most important element to social enterprise. Don’t waste too much time writing the perfect business plan and designing the perfect organizational model to meet your vision. Instead, start engaging with your stakeholders, understand your market, pilot your idea, and then iterate based on the feedback you get.

Katherin Kirschenmann is the Co-founder and Chief Program Officer for the DO School - an education social enterprise that helps people turn their ideas into action. By combining an effective innovation method with real-life implementation experience, the DO School empowers changemakers to create impact in their communities, either within existing organizations or by creating new social ventures. Through this process, participants also get to join an intertwined global network of successful DOers. www.thedoschool.org

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BUILDING THE BUSINESS

THE BEST ADVICE I NEVER GOT “Culture matters the most. It turns out if you don’t worry about culture, you’re still going to have one, it’s just going to be an unintentional culture.

Five years into the bank, we realized there was something going awry and it had to do with culture. We did a survey among all of our colleagues in focus groups and places where they could feel comfortable and they called out the 10 indicators of our highly unintentional culture. They were things like a ‘dump and blame culture’ or ‘hair-on-fire management.’ We had to go from that point to figure out what culture we did want and track a path there, but my advice is to think about culture from the get-go.” // Kat Taylor, Co-founder and Co-CEO, Beneficial State Bank

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FOUR LESSONS LEARNED From Closing the B Corp Store

BY TIM FRICK

Last year, Mightybytes launched the B Corp Store, the only place online where consumers could buy products exclusively from certified B Corps. In August 2015, we closed the store’s virtual doors. The metrics we measured pointed toward a pivot and we decided it was time. During the process, we learned valuable lessons about how conscious consumers shop online and how much money you have to spend on marketing to get in front of them.

QUICK BACKSTORY B Corps are companies that use the power of business to solve social and environmental problems. The global B Corp community includes over 1,300 businesses that range in size and scope from household consumer brands like Patagonia and Ben & Jerry’s to smaller companies like Sencha Naturals and Rescue Chocolate. By embracing rigorous standards for accountability and transparency, B Corps offer a better way to do business.

When we launched our store, there were no B Corpspecific shopping options available online. Vine.com had a virtual B Corp storefront for a while, but it was buried deep within its interface and was hard to find. Ours would be easy to find. We also ran qualitative analysis experiments to get real feedback from potential users and all signs indicated that we were on to something.

As part of our market research, we compiled a growing list of statistics on conscious consumers: • Aspirational consumers represent more than one-third of consumers globally (38 percent) and are defined by their love of shopping (93 percent), desire for responsible consumption (95 percent), and their trust in brands to act in the best interest of society (50 percent).

• 89 percent of US consumers and 91 percent of global consumers are likely to switch to a brand that is associated with a cause, given comparable price and quality.

• 50 percent of global consumers said they would be willing to reward companies that give back to society by paying more for their goods and services (44 percent in the US and 38 percent in Canada).

With numbers like these, we were certain that an online market that supported groundbreaking companies like B Corps and donated a portion of proceeds to B Lab, the nonprofit that certifies B Corps, would do well. Unfortunately, things didn’t turn out that way. Here are some challenges we faced and things we learned along the way.

1

WE VALIDATED THE WRONG IDEA

Our goal was to use “Lean Startup” principles to first validate our hypothesis that conscious consumers wanted a place to buy B Corp products.

After all, we were bootstrapping this thing, so we needed to find cost-effective ways to build and launch it. An iterative lean/ agile framework predicated on the idea of validated learning launching only what you need in order to prove or disprove a hypothesis and nothing more seemed the perfect fit.

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BUILDING THE BUSINESS

“To market a conscious brand, you need tenacity; the needle may move only a little bit from month to month, and sometimes not at all.”

We started by running a simple promotional campaign with product giveaways from store vendors. We targeted very specific user persona types in key target groups over the course of a month and captured about one thousand email addresses. We received enthusiastic responses on social channels about the store’s impending launch. It was all very encouraging.

The problem was, that campaign didn’t validate our hypothesis. We thought we validated conscious commerce, but it turned out we really just validated that people like free stuff. We validated coupons.

2

PRODUCT PLACEMENT MATTERS

Retailers pour millions of dollars into researching the psychology behind placing products on shelves. Whether you realize it or not, your customer experience has been handcrafted specifically to optimize your purchasing opportunities. There’s a scientific reason why suntan lotion is placed next to swimsuits and beer cozies in June.

Someone paid a lot of money to figure that out.

Our criteria were a bit different. As long as you were a certified B Corp, you could sell your products in our store.

This resulted in products like foot cream being sold alongside green tea mints, dustpans, kids’ clothes, water carafes, and chocolate - not the most consistent shopping experience from the user’s perspective.

3

DROP-SHIP FULFILLMENT ISN’T SUSTAINABLE

We opted out of doing our own fulfillment to save time and money on the MVP (minimum viable product) and instead chose drop-shipping, which is where vendors ship products directly

to consumers who buy them. This proved to be a huge hurdle for a couple reasons: • If shoppers purchased products from multiple vendors, the cost of shipping added up significantly, causing cart abandonment.

• Many B Corps simply were not set up to handle drop-ship fulfillment, so that was a dealbreaker for being carried in the store.

• Additionally, shipping from multiple locations is not the most sustainable way to run online commerce. While we planned to offset the emissions generated from shipping the products sold, in general it wasn’t a very sustainable strategy. That said, it was pretty much the only way we could launch an MVP without incurring exorbitant fulfillment costs. We looked into United Natural Foods Inc./Honest Green for fulfillment, but the number of B Corps in their product feeds were, at the time, quite low. Other options we researched were even less fruitful.

4

offline, we still believe in the mission of getting more people to change retail for the better by advocating for conscious companies with their dollars.

Mightybytes is a B Corp and we believe a great deal in what this community of businesses has to offer. Companies that use business as a force for good are better for people and planet. So we were excited when Abe’s Market, an online retailer of natural goods (also located in Chicago) agreed to create a B Corp-specific landing page on its store and to migrate a number of our vendors to its marketplace. We were excited to learn that it would consider becoming a B Corp as well. Now conscious consumers can buy from B Corps at a marketplace that has the critical mass needed for growth and innovation, not from some scrappy startup working out of the conference room of a web design firm.

IT’S EASY TO FALL INTO THE TRAP OF THINKING NO ONE CARES

When we didn’t see traction over time, team interest in pushing forward began to wane. To market a conscious brand, you need tenacity; the needle may move only a little bit from month to month, and sometimes not at all. Plus, time can be your enemy. Tenacity costs more money when you see little progress over the course of months. You justify just one more month with the hope that by trying something new you will notice a shift for the better. It can be tough to know when to pivot and when to stay the course, and it is extremely difficult to be an overnight success in this space.

A LIGHT AT THE END

Tim Frick is the owner of Mightybytes, a certified B Corporation that builds creative digital solutions for conscious companies. An author and regular conference presenter, Tim is currently working on his fourth book. He is also Board President of Climate Ride, an organization that produces long distance endurance events that raise funds for environmental causes. He can be reached via @timfrick on Twitter or his blog at timfrick.com.

Though the B Corp Store is now CONSCIOUS COMPANY MAGAZINE

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THE BEST ADVICE I NEVER GOT “The best advice I never got is that confusion is actually not always a bad thing. I think a lot of times we have such a strong desire for clarity, for answers, and for good planning, but I have found that it’s those times when I am faced with a lot of confusion and a lot of choices that give me the windows of opportunity to really check in with what my gut is telling me to do. Sometimes you just have to embrace the confusion.” // Alfa Demmellash, Co-founder and CEO, Rising Tide Capital 126

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BUILDING THE BUSINESS

IS BENEFIT CORPORATION LEGISLATION REALLY NECESSARY?

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BY JONATHAN STORPER

or some time now society has been debating what structural reforms are necessary to prevent another Great Recession, and whether and how to expand economic growth for all.

While not a new idea, there has been increased interest in recent years in shifting the paradigm of the current economic reality to one of a more sustainable economy that works better for all people.

Part of this debate must focus on how business can be better used as a force for good and how laws can encourage and support such businesses. One primary purpose of laws is to protect and promote public health, safety, welfare, and the common good. There has been much discussion about the proper role of American corporate law in this regard, and whether corporations exist to promote the common good or something more narrow - namely, to benefit the owners. Arguments about the role of the American corporation go back to the early part of the 20th century, when business and legal scholars debated the role of companies in society. By the 1960s, it seemed settled that the role of the corporation was to promote the interests of shareholders only and there was not much discussion on this point for many decades.

The rise of more conscious companies, social entrepreneurship, and a new generation of Millennials interested in businesses being part of the solution to society’s ills has reignited the debate about the role of the corporation in today’s world and whether it’s necessary to re-imagine the corporation so that directors are required to do the right thing.

Against this backdrop, the new,

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socially responsible, for-profit Benefit Corporation was born in 2010. In addition to providing shareholder value, Benefit Corporations are a new breed of company that are required to create a material positive impact on society and the environment from the entire operations of the company. Directors of Benefit Corporations must consider how the actions of the corporation affect all the stakeholders of the corporation, including its employees, creditors, the community, and the environment. Among other things, Benefit Corporation statutes are some of the first laws to recognize the environment as a stakeholder in a business. At the time of the printing of this article, Benefit Corporation status is available in 30 states and the District of Columbia, and 14 other states are considering making this type of corporation available.

But does this new type of company solve a real problem? After all, don’t traditional corporations have the ability to do good by providing a living wage, employee benefits, donations to charity, and the development of less-toxic products, among other things?

Many argue that the concept of shareholder primacy requires that boards of directors maximize shareholder value such that any other positive effects on society must be incidental to efforts to increase returns to owners. All too often this maxim has led to corporate actions that are detrimental to the other stakeholders, including the employees, the community, the environment, and society. For example, we’ve seen the catastrophic consequences that occur when the

BUILDING THE BUSINESS

market focuses on narrow interests like the short-term price of stock, instead of creating long-term value that benefits all of a company’s constituencies; the failure to take into account exigencies of business like pollution or climate change; or even the sale of less expensive but more toxic products.

Legal commentators have joined the fray in recent years, arguing about whether a more socially responsible corporate form is necessary or whether traditional for-profit companies can create the change necessary to truly shift the paradigm to a more sustainable economy.

Let’s pull the curtain back and peek in at the debate.

Two of the best-known current

In his paper “The Dangers of Denial,” Chief Justice Leo Strine of the Supreme Court of Delaware weighed in on this debate. He debunks as wishful thinking the views of commentators like Professor Stout who argue that directors can always balance the interests of stockholders and other stakeholders in a traditional corporation. As Chief Justice Strine wrote “Directors must make stockholder welfare their sole end, and ... other interests may be taken into consideration only as a means of promoting stockholder welfare.” Justice Strine’s opinion is quite important because he is the Chief Justice of the Supreme Court of Delaware, the most influential court on issues of corporate law in the

As Justice Strine has aptly pointed out in his comments, however, the entrepreneurs who use this model “bear a special responsibility for the movement’s ultimate fate.

If their commitment to social responsibility is simply a greenwashed cloak for a desire to squeeze out profits for themselves and stockholders by feigning but not actually having a sincere regard for other corporate constituencies, the Benefit Corporation movement will quickly lose credibility among socially responsible investors and policymakers.” In addition, to be sustainable, companies that do the right thing must also generate returns to succeed with investors and in the marketplace.

“The rise of more conscious companies, social entrepreneurship, and a new generation of Millennials interested in businesses being part of the solution to society’s ills has reignited the debate about the role of the corporation in today’s world and whether it’s necessary to re-imagine the corporation so that directors are required to do the right thing.” writers in this area are Professors Lynn Stout of Cornell Law School and Stephen Bainbridge of UCLA School of Law. Stout argues in her book “The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations, and the Public” that “the notion that corporate law requires directors, executives, and employees to maximize shareholder wealth simply isn’t true. There is no solid legal support for the claim that directors and executives of US public corporations have an enforceable legal duty to maximize shareholder wealth.”

Bainbridge, on the other hand, represents the opposite view - namely that corporations are required to maximize shareholder wealth. In his April 15, 2015 New York Times article “A Duty to Shareholder Value,” he cites two important legal cases, Dodge v. Ford Motor Co. and eBay Domestic Holdings Inc. v. Newmark, for the principle that “corporate directors are bound by fiduciary duties and standards” requiring them to “promote the value of the corporation for the benefit of its stockholders.”

United States.

Some have expressed concern that as the first major sustainable corporate form of its kind, the Benefit Corporation is both untested and risky for directors. To the contrary, rather than increase the risk to directors who balance stockholder interests with other stakeholders, it reduces the risk to directors by expressly requiring it. And the Benefit Corporation is integrated into the lengthy body of state corporate law except on the narrow issue of this balancing effect, which is expressly authorized. As a result, it does not relax traditional protections afforded to investors against directors involved in self-dealing transactions or other conflicts of interest. The Benefit Corporation model simply changes the type of accountability structure present in a more traditional corporation so that directors have room to resist demands for shortterm profit over other relevant social and environmental interests. In this way, the Benefit Corporation has the potential to change the way business is done for the better.

Americans have become increasingly disillusioned with corporations - and for good reason.

If the Benefit Corporation movement adheres to its principles, it can create meaningful positive change by proving that corporations can do well by doing good.

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.

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THE BEST ADVICE I NEVER GOT “The best advice I never got would be to set up a mechanism where I could rotate out dispassionate, misaligned shareholders and bring in passionate shareholders on an annual basis. I realized the concept when I was talking to Gary Hirshberg [of Stonyfield Farm] and he was telling me how he would rotate out dispassionate shareholders every year and then bring in passionate shareholders and I think that’s one of the keys that allowed him to grow [his company] to $400 million before he had to exit. It’s critically important because a single shareholder can, over time, erode your entire shareholder base.” // Dale Rodrigues, Founder & Director, Mary’s Gone Crackers

THE BEST ADVICE I NEVER GOT “When we started, it was just about getting the crackers out there and getting them into people’s mouths, but there was a bigger vision behind it. We had been told so many times, ‘You can’t do this. You won’t be able to do that.’ It would have really helped if someone had said, ‘Hold onto your vision. Get clear. It’s going to evolve, it’s going to change, but the more you hold onto your vision, the more solid you’re going to be.’” // Mary Waldner, Chairman & Founder, Mary’s Gone Crackers 130

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Presented in partnership with

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ELECTRONIC RECYCLERS INTERNATIONAL AT A GLANCE Location: Headquarters, Fresno, CA; 8 locations across US Employees: 1,050 Founded: 2002 Industry: Recycling In short: Electronic Recyclers International is the largest electronics recycler in the United States, specializing in responsible dismantling of electronic waste

GOING ALL-IN ON ELECTRONICS RECYCLING

A

WITH JOHN SHEGERIAN

s technology proliferates on a global scale, electronic waste is becoming an ever-growing, increasingly complicated problem at the nexus of environmental and social issues. When electronics are thrown away, toxic minerals such as cadmium and lead leak into groundwater. Many of these devices also store sensitive information, such as social security numbers and credit card information, which is oftentimes recoverable on a device’s hard drive.

Tackling this problem head-on is John Shegerian, Chairman and CEO of Electronic Recyclers International (ERI) and ERI’s subsidiaries, RecycleNation.com and UrbanMining.org. Under Shegerian’s leadership, ERI has become the fastest and largest electronic waste recycler in the world. With a license to de-manufacture and recycle everything from computers to drones, ERI has developed and now houses the largest e-waste shredder in the world. The company processes more than 275 million pounds of electronic waste annually here in the US and has plans to expand its reach internationally. We discussed the issues surrounding electronic waste with Shegerian, as well as leadership, work-life balance, and the importance of going all-in.

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ON ELECTRONICS RECYCLING How would you describe the problem that ERI is working to solve?

John Shegerian: We’ve taken cleantech and evolved it from what it was in 2005 - an environmental imperative and we’ve made electronic recycling a social phenomenon in conjunction with the rise in awareness of cybersecurity and the importance of data destruction. It has gone way beyond just an environmental imperative - it is now a social phenomenon. You have to recycle your electronics the right way, not only for the environment, but to protect your data. Data is the new oil.

What is something that you wish everyone knew about electronics recycling?

JS: All electronics have arsenic, lead, beryllium, cadmium, and other hazardous materials in them that have no business going into our landfills and have no business getting shipped abroad to be recycled irresponsibly.

When they go into our landfills, we know those hazardous materials will get into our ecosystems and poison our water, our land, our animals, our plants, and eventually the humans on this planet.

The cool part is, all electronics can be responsibly recycled - 100 percent can be turned back into commodities that can be repurposed after being appropriately dismantled and shredded. And all of those commodities - steel, gold, silver, plastic, aluminum, copper, glass - can be sold to smelters around the world for repurposing, which will therefore protect the precious resources that we still have below the ground, save massive amounts of energy, and keep our landfills and our ecosystems clean of all these horrible, hazardous materials.

What’s the largest challenge when it comes to electronics recycling and how can it be overcome?

JS: We’re creating a business where it didn’t exist before, in an industry that was horribly decentralized, and we professionalized it and we’re socializing the message. But it’s never easy to go, as Peter Thiel put it, from zero to one. To create something that didn’t exist before is never easy because you don’t have a game plan.

If you were to buy a franchise that’s already successful, they give you a book and a game plan and a blueprint on how to franchise because they have done it before. But when you’re going from zero to one, where no one’s ever been before, there are challenges that you never expected. You have to overcome all of them well enough so that you don’t make fatal mistakes and you actually create a business that becomes sustainable and valuable to the economy and society.

How have you seen the electronics recycling industry change over time?

Are there any trends that you’ve identified?

JS: Going back to the first answer I gave you, it started as an environmental imperative and is now a cybersecurity social phenomenon. The second trend is that the electronics are going from big to small, but there are more of them than ever before. When we first got started, there weren’t iPhones, iPads, Apple Watches, 3D televisions, or Google Glass, for example. There are just more things.

We have to recycle all the stuff that goes into your smartphone, but who’s going to recycle all of the solar panels, drones, robots, and wearables? That’s us, too. So there are more things, with the internet of everything, including hard drives that are in cars and hard drives that are in all of our devices.

It’s all got to go somewhere, and ERI provides a solution for responsible recycling.

What is the most pressing challenge that your industry is still trying to solve?

JS: It’s still very difficult, in an economically viable way, to recycle solar panels. We’re working on that.

#1

Electronics are the fastest-growing solid waste stream in the world, with the US being the largest producer of electronic waste worldwide.

25

The number of US states where it is illegal to throw away electronics.

15-20% The estimated percentage of e-waste that is recycled globally.

Most of the remainder is dumped in developing countries.

40% The percentage of consumer electronics recycled in the US in 2013.

70%

The percentage of toxic waste in America’s landfills that comes from e-waste, even though e-waste represents only 2% of the overall trash in landfills.

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$60 Million The estimated value of the gold, silver, and other precious metals that are dumped each year

by Americans throwing away electronics.

65 Million Tons

The amount of e-waste that we are estimated to produce by 2017, the weight of which is equivalent to almost 200 Empire State Buildings.

55, 550 & 20,000 The number of pounds of gold, silver, and copper, respectively, that can be recovered from recycling 1 million cellphones.

92% The percentage of used hard drives out of 150 tested by MIT that contained recoverable sensitive information, including social security numbers, credit card numbers, and medical records.

$3.5 Million The average cost to a company from a small data breach.

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It is also economically difficult to recycle and recover certain metals.

We have R&D going on for both of those challenges and we see solutions coming in the future.

creation. What better opportunity is there than creating something that adds value and that people want?

When you’re filling a void that was needed, it’s truly amazing.

Where do you see ERI going in the future? What are your future goals?

What do you identify as the top three characteristics of an effective leader?

JS: The future goal is to continue to build our position in the industry, get better as a company, and continue to grow here in the United States, but now to live up to our name and become a truly international brand.

We feel like it’s only the top of the second inning. We feel that the opportunity is greater than ever because we’re at the crossroads of regulations, sustainability, cybersecurity, and data protection, and we feel that combination is something that’s unbeatable since we’re at that convergence of these mega-trends. It’s challenging but fun, I’ll tell you that. It makes it worthwhile to get out of bed in the morning.

ON LEADERSHIP You’ve been a lifelong entrepreneur.

What advice do you have for people who are building businesses?

JS: It’s going to be harder than you ever thought, but the rewards are so amazing that the journey is worth every minute of every day. I would never change anything that I did. I have no regrets. I still get excited to get out of bed in the morning and look ahead. To me, it’s just a great journey.

For other entrepreneurs, if you believe you have something that you need to create or that would be valuable to society and to what we do here on this planet and it’s something that can be done differently and that’s never been done before, being an entrepreneur is both the most humbling and rewarding experience that any person could ever have.

There’s nothing better.

We’re the artists of the business world. Every day we get to go back to the canvas and paint what we’re creating, retouch, remake, and continue to mold and update our

JS: Brains, energy, and character. If you have the first two, but not the third, a person can be unbelievably dangerous. So to me, the three best characteristics of any great leader are brains, energy, and impeccable character and integrity. Knowing how to give yourself enough self-care to nurture all three of those critical elements will serve you well. Those are the three trademark qualities that I look for in others that I want to work with, that I want to hire, and that I aspire to be every day.

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

JS: I have plenty of failures. Failure is a very humbling experience. If you can humble yourself enough to learn from the mistakes you made and then pick yourself back up, put the gloves back on again, and get back in the middle of the thing, failure will serve you almost better than any success that you can have. When you are successful, you almost start believing that it was all you and not the hard work of all those around you and how the stars aligned. You start becoming a little bit too self-reflecting on all that you did. If you do failure the right way and you really become humbled by it, and you realize that every day is best started on your knees and every day is best ended on your knees, then you’ll come out of it a much better person and eventually, a much better leader.

How have you approached worklife balance throughout the course of your career and found a way to not only devote yourself to your company but also devote yourself to a family?

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JS: First of all, I don’t really believe in work-life balance because I don’t think it’s that binary. I don’t believe that you could ever totally say, “I’m at work and I’m shutting everything else out.” And I don’t think you could ever say, “I’m with family and I’m shutting everything else out.” If you’re the type of entrepreneur that I see as great entrepreneurs besides bringing energy and character to your work - you need to have somewhat of an “all-in” personality. You’ve got to be all-in, whatever that means for your business.

When I started ERI, I had to personally guarantee a $10 million dollar loan before there was ever any company or an industry or anybody in front of us - that’s being all-in. When you have an all-in personality, there’s no going back. You have to demonstrate that quality to your employees, co-workers, and colleagues, but at the same time make sure your loved ones know that no matter where they are at any given time, you’re all-in with them, too.

If both sides know that you’re all-in with them at all times, and that when you need to be present with them, you will be 120 percent present with them given the necessity at that moment, then you can manage the work-life balance. It’s never going to be 50-50 because that’s just fantasyland. That’s “Field of Dreams” entrepreneurship.

It’s just impossible. I’ve always been a hyper-focused entrepreneur, but my kids also know that I’m hyper-focused on them no matter where I’m at or what I’m doing. People love the all-in personalities because they know then that they’re safe, that in the end I’ll be with them, whenever they’re in real need.

What is the best advice that you’ve ever received?

JS: The funniest advice I’ve ever gotten, which is really good, came when I was sitting one day at a luncheon and I asked Ted Turner, who was sitting next to me, what the magic was to his success. He looked at me, and in a Southern drawl with a twinkle in his eye like only he could have, he said, “Early to bed, early to rise, work like hell, and advertise.”

That was just the best. For Ted Turner to say that to me - I loved Ted Turner as a kid and I’ve always looked up to him - it doesn’t get better than that.

There are so many great people that have influenced me personally and taught me lessons in life. I’d say the best advice is just to be yourself and tell the truth; that way, you don’t have to fake it. They always say, “Fake it until you make it,” and there’s some element of truth to that in life when you’re starting a business, but if you’re yourself every day and you tell the truth, then you

can go to sleep at night and get a good night’s rest and get up and hit it every day. It makes it really easy.

And the big one is to never give up. I’ll tell you what - there are more challenges that will come your way and being an entrepreneur is like walking a high wire without a net on a regular basis. When you want to give up and when you want to quit, you have to always remember why you started to begin with. When you can do that on a daily basis, there’s no quitting allowed.

What is giving you hope for the future?

JS: My two children, Cortney and Tyler.

Both of them chose professions that make the world a better a place and have social bottom lines. The fact that they are more sustainability focused and care about the environment also gives me tremendous hope and helps reaffirm the good work ERI and its employees are doing on a daily basis.

Photos: Electronic Recyclers International

TO MANUFACTURE ONE COMPUTER AND MONITOR, IT TAKES:

530

48

360

pounds of fossil fuels

pounds of chemicals

gallons of water

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Photo: Fairphone

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E H T T A K O O L H T P E -D IN AN

E U S IS S L A R E IN M T IC L F N CO

BY HILLARY M. RUPERT

THE PROBLEM IN THE DEMOCRATIC REPUBLIC OF THE CONGO The Great Lakes Region of the Democratic Republic of the Congo (DRC) is rich in 3TGs - tin, tantalum, tungsten, and gold - and is the primary location for the extraction of these natural resources. These minerals are found in many countries, but the consistencies of the ore found in this region are some of the best for electronic and automotive products. Many consumers are unaware that the 3TGs are sourced from a war-torn region and are used in the manufacturing of everyday products such as smartphones,

computers, cars (hybrid or electric), jewelry, and even zippers.

The DRC is the fourth largest country in Africa and has an estimated population of over 79 million. At the time of its independence in 1960, the DRC was the second most industrialized country in Africa largely due to its mining and agricultural sectors. It is a country rich in natural resources, such as raw mineral ore, gold, diamonds, and cobalt, and is home to the world’s second largest rainforest. These resources are estimated to be worth $24 trillion. Yet, despite its wealth in natural capital, the DRC ranks 186th out of 187 on the UN Human Development Index, which measures and ranks countries’ levels of social and economic development.

THE 3TGS

TIN (Sn) is cassiterite in its mined form. It is used in solder alloys for joining pipes and circuits.

TANTALUM (Ta) is columbite-tantalite in its mined form and is used in electronic components of items such as cell phones, computers, video game consoles, digital cameras, and jet engines.

TUNGSTEN (W) is wolframite in its mined form. It is used in metal wires and electrodes.

GOLD (Au) is a difficult mineral to trace because it can be melted at a low temperature. Oftentimes gold is melted on-site and turned into objects such as rings or bracelets that are easily smuggled.

These three minerals require extremely high temperatures in order to be transformed into usable materials. They are transported from the mines through the Covered Countries (nations that border the DRC) to reach shipping ports. From there these minerals are shipped to smelters, mostly located in Asia, where they are turned into usable materials and sold to suppliers or original equipment manufacturers (OEMs).

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CONFLICT MINERALS IN THE DRC BY THE NUMBERS

MILLION +

5

The estimated number of people who have been killed over the last 17 years in the Congo in the bloodiest war since WWII, as a result of conflict fueled by controlling the country’s vast natural resources

300,000

$1-$5

The estimated average daily wage for a miner, who is often locked into debt to local traders and strongmen

THOUSAND

The number of Congolese people who die every month from hunger, preventable disease, violence, and displacement

MILLION

8-10

The estimated number of women who have been raped in the Congo during the conflict. 15,000 women were estimated to have been raped in 2009 alone

45

The estimated number of people in the DRC (up to 16% of the population) whose livelihoods are dependent on mining

The percentage of the world’s coltan (the mineral that Tantalum is extracted from) supply that the DRC possesses

80%

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12/13 The number of major mines in the DRC that are estimated to be controlled by armed militia groups

CONSCIOUS COMPANY MAGAZINE

A large percentage of the artisanal and industrial mines located in the DRC lack infrastructure and oversight and are known to be controlled by armed rebel groups.

In 2014, a study performed by the International Peace Information Service found that over half of Congolese miners work in mines where armed groups are present.

Additionally, mineworkers are often enslaved, being forced to work 48-hour shifts. Child labor is rampant. Mine safety is virtually nonexistent, with mudslides and mine collapses being common occurrences.

Aside from the perilous working conditions and lack of safety standards, miners are paid very little.

It is estimated that the average pay is the equivalent of between $1 and $5 a day. The local infrastructure does not benefit from the profits of this trade; rather, the profits often land in rebel pockets that support rape, war, and violence. According to the Enough Project, “armed groups earn hundreds of millions of dollars every year by trading conflict minerals.”

WORKING TOWARD A SOLUTION There are responsible mines in the DRC; however, there is not yet a formalized process for certifying conflict-free minerals. NGOs on the ground in the region are working on creating processes and identifying trade routes. Mines to Markets [a program through Pact] is developing a chain-of-custody system for tin and tungsten extraction and processing. Despite these efforts, conflict-free sourcing remains a systemic challenge for stakeholders.

Managing the complexity of this issue and facilitating solutions requires stakeholder engagement.

One organization that helps in this regard is the Conflict-Free Sourcing Initiative (CFSI). The CFSI is a nonprofit/business alliance organization that formed in 2011 under the umbrella of the Electronic Industry Citizenship Coalition.

More than 200 companies from

seven different industries participate with the CFSI. The CFSI also works with smelters, government officials, NGOs, and accounting firms. These stakeholders gather annually at a two-day conference to further these collaborative efforts around conflict minerals.

THE DODD-FRANK WALL STREET REFORM AND CONSUMER PROTECTION ACT On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) was signed into federal law. Section 1502 of the new law requires companies that manufacture or contract to manufacture products that contain 3TGs to publicly report to the Securities and Exchange Commission (SEC) whether or not their products contain conflict minerals from the DRC or its immediate neighbors (known as the Covered Countries) and must describe their due-diligence efforts. Many companies have begun using a platform created by the CFSI to comply with these new reporting requirements.

The compliance requirements of Dodd-Frank are being implemented in stages and become stricter with each passing year. Companies were first required to file annually in June 2014, when they reported data from 2013. For the first two filing years, companies had three options on the SEC compliance form for reporting the use of conflict minerals in their supply chains: DRC Conflict-Free, Not Found to be DRC Conflict-Free, or Undeterminable. For the 2015 filing year, the form is changing and companies will only have two reporting options: DRC Conflict-Free or Not Found to be DRC Conflict-Free. This represents a significant change in how companies are required to report. There is speculation that NGOs and socially responsible investors will begin paying special attention to these filings, especially because companies are required to post these filings on their websites.

MARKETPLACE CONFLICT MINERALS COMPANY RANKINGS

In 2012, the Enough Project ranked the largest electronics companies in the world based on their due diligence, use of, and investment in conflict-free minerals.

Intel HP SanDisk Philips AMD RIM Acer Dell Apple Microsoft Motorola Mobility Nokia Panasonic IBM Sony LG Samsung Toshiba Lenovo Canon Nikon Sharp HTC Nintendo

24*

60 32

54

4

48 11

48 44 14

42

13

40 15

40

13

38 15

38 35 19

Companies 30% and over

35

Companies between 10 and 30%

33 5

6

27

Companies 10% and below

27

*Lighter shaded area represents 2010 score, if available

27

7

27

2

21 5

17 8 8 8 4

0 0

10%

20%

30%

40%

50%

60%

70%

Percentage of progress toward responsible sourcing on conflict minerals

Identifying and removing conflict minerals is a complex challenge that impacts both upstream players (mines to smelters) and downstream players (smelters to consumer products). Section 1502 compliance is costly and complicated because global supply chains are multitiered with suppliers and sub-suppliers.

These supply chains can span thousands of miles with routes through the various Covered Countries. As a result, the economic impact of due diligence on companies is sizable. In 2014, the SEC estimated that “conflict minerals programs would cost companies up to $4 billion in the first year, and drop to between $200 million and $600 million in later years.”

Due to the complexity of global supply chains and the newness of Section 1502, companies and their suppliers are trying to understand both how to comply with the legislation and why they should make compliance a priority. At this point, companies that continue to use conflict minerals in their supply chains do not face any direct fines under Dodd-Frank, but the economic, environmental, and social repercussions to the DRC and the Covered Countries, as well as human rights violations, are huge if these practices continue. However, pulling out of

the region altogether to seek alternative mineral sources will have unintended consequences on regional economies, where mining these minerals supports hundreds of thousands of jobs. Therefore, the key is to support responsible, legitimate minerals sourcing within the DRC and its nine adjoining countries.

LOOKING FORWARD A few trends are expected to emerge within the next few years as the conflict minerals landscape evolves and becomes more sophisticated. Independent audits of companies’ conflict minerals reports will become more prevalent if companies can determine their products are “DRC Conflict-Free.” Validated conflict-free smelters are also expected to increase in number. Additionally, companies are feeling the pressure to comply and are requiring their suppliers to go through online training programs and ranking them across three tiers: low risk, medium risk, and high risk. Some companies are even threatening to sever supplier contracts for non-compliance.

Promoting ethical sourcing from the DRC and the Covered Countries can strengthen supply chains and lower

risk factors while helping to end human rights abuses in the region. Ethical sourcing could even help raise the economic and social status of the DRC and the Covered Countries. Socially responsible companies are in a unique position to use conflict minerals regulation as an opportunity to incorporate ethical sourcing practices into their supply chains.

Some companies are even finding that ethical sourcing provides a competitive advantage.

Hillary Rupert holds an MBA in Sustainable Systems. She is a Conflict Minerals and Sustainability consultant and has traveled through 30 countries. She helps support and steer corporations in their responsibility to enhance rather than deplete the world’s environment. She can be reached at hillary.rupert@pinchot.edu.

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FAIRPHONE

Netherlands-based Fairphone began in 2010 as a campaign to generate awareness around the use of conflict minerals in everyday electronics. In 2013, the campaign formally transitioned into a social enterprise when the company began selling smartphones that were free of conflict minerals. Fairphone has sold over 60,000 smartphones in Europe, is one of the fastestgrowing European startups, and has become the first mobile phone manufacturer to achieve B Corp Certification.

THE SPECIFICS Every smartphone contains roughly 40 different minerals, from silver and chromium to the conflict minerals tantalum, tungsten, tin, and gold. Fairphone works directly with suppliers in the Democratic Republic of the Congo to source conflict-free tin and tantalum, suppliers in Rwanda to source conflict-free tungsten, and suppliers in South America for fair trade gold.

FAIRPHONE AT A GLANCE Location: Amsterdam Employees: 39

BUSINESS MODEL

Founded: 2010

Fairphone launched its first product through crowdfunding in 2013, when roughly 20,000 people pre-purchased the first Fairphones for €325 apiece. Fairphone now uses a pre-order model for its products, which helps the company maintain financial independence and prove to suppliers that there is consumer demand for the product prior to production. The company is currently taking pre-orders for the Fairphone 2, the second iteration of the phone, from customers in Europe.

Industry: Electronics In Short: Fairphone builds smartphones using certified conflict-free minerals from the Democratic Republic of the Congo, Rwanda, and South America.

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Fairphone doesn’t stop there, though. In addition to contributing to the creation of a conflict-free mineral supply chain, the company also focuses on workers’ rights (it has started a worker-controlled Welfare Fund at its manufacturing location in China), design (you can purchase spare parts on the company’s website and the company’s blog explains how to fix your phone yourself if it breaks), and product life cycle (Fairphone collaborates with Teqcycle to promote recycling of the product at end of use) to create a more holistically sustainable product. Fairphone is also deeply transparent with its customers, publishing its full list of suppliers and cost breakdowns and detailing its entire process on its website.

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Photos: Fairphone

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Intel CEO Brian Krzanich announces that the company is now making and shipping conflict-free microprocessors.

Intel’s Conflict-free Supply Chain Roughly six years ago, Brian Krzanich, who was then leading Intel’s manufacturing operations worldwide and is now the company’s CEO, received a letter from the Enough Project explaining the situation in Africa. Profits from the sale of minerals mined in the Democratic Republic of the Congo (DRC) were, in some cases, funding human rights atrocities and crimes in the region. In response, Intel, the world’s largest and highest-valued semiconductor chip maker, began tackling what initially looked to be a near-impossible challenge - the company set out to create a conflict-free supply chain.

Since that time, Intel, industry partners, and NGOs have taken on the complex, decentralized electronics industry supply chain to go straight to where the source of the minerals can be traced - the smelters who process and refine raw materials from around the world. Intel employees have traveled to over 90 smelters in 21 countries to help establish and implement the ConflictFree Smelter Program (CFSP), an innovative industry audit system run by the Conflict-Free Sourcing Initiative designed to validate smelters’ sourcing practices. Carolyn Duran, Intel’s Director of Global Supply Chain Management, took the time to tell us about the company’s pioneering work.

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What is something that you wish everyone knew about this issue?

Carolyn Duran: Technology is driving economic growth and improving lives around the world. Yet, some of its most basic building blocks - minerals like gold, tantalum, tin, and tungsten - are being used to fuel conflict and violence.

We have the power to change that.

Everyone from individual consumers to business executives managing a supply chain should know that they have a role.

Can you provide us with an example of one of the projects that you are currently working on?

CD: Our current focus remains on eliminating the routes for illicit conflict minerals in the DRC and adjoining countries, and we believe that our best means of doing that is to get more smelters and refiners validated by an independent third-party audit program.

We continue to work with smelters and refiners that have not received a “conflict-free� designation and encourage their participation in such programs.

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What is the largest challenge that you face in working to source conflict-free minerals? How are you addressing it?

Why does Intel continue to source from the DRC rather than choosing to simply source from another country?

CD: The largest initial challenge was really to just get our arms around the problem and what we were going to try to do. These minerals come from mines all over the world. Once a mineral is processed into a metal, it’s impossible to know which mine or country that metal originated from. Given that, we figured out that we needed to work with the smelters and refiners to determine where they sourced their raw materials.

These smelters were not accustomed to the audits and processes that we were setting up. It was an exercise in education, negotiation, and the will to get started. Now, however, the people running the smelters see the benefit of being able to claim that they are conflict-free. We were able to focus in on our core product, the microprocessor, and start our work there. Now, our biggest challenge is with the broader supply chain - building on what we have learned from our initial work and extending that to all of our products.

CD: The simple solution would be to source minerals from somewhere else, somewhere safer. However, a DRC-free policy could inadvertently hurt the economic opportunities for artisanal and other legitimate miners operating in that region. Intel has taken the direction that we want to continue to support sourcing minerals from the region, as long as it is possible to demonstrate the chain of custody necessary to conclude that the minerals are not funding conflict.

This is a huge, complicated problem involving numerous stakeholders.

What advice do you have for other companies that are concerned about conflict minerals?

CD: There is no doubt that this is a complex problem. We had no idea what we were going to find when we began, but now - working with industry, government, and NGO partners - we have a clear path forward. And we want

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to help other companies get involved, particularly others in the electronics, jewelry, aerospace, and automotive industries. Large users of these minerals will make a deeper, faster impact. My advice is to get involved with the Conflict-Free Sourcing Initiative. A path has been charted for you.

What advice do you have for consumers who are worried about this issue?

CD: Consumers should know that they have power in their purchasing. Consumer concern about where the products they use come from and the impact they have is increasingly more evident. The Enough Project publishes reports on progress of various electronics companies toward conflict-free goals. We have begun branding Intel products that are conflictfree, which can be found on our conflict-free website.

Additionally, although we talk a lot about the role of industry and consumers, the role of government cannot be understated. The US State Department, the United Nations, and the African Union need to work together to facilitate peace in the region. We believe that technology should be a force for good, from the ground up. If governments and manufacturers tackle this issue together, we can eliminate the market for conflict minerals and support the peace process in Congo.

Can you speak to some of the progress that you have already made and the goals that Intel has for the future?

CD: Let me start by saying that we are proud of our progress, but know that more needs to be done. In 2012, our first major step in this long process was to validate our microprocessors as conflict-free for tantalum. Last year, we reached another milestone in this long journey - Intel is manufacturing and shipping conflict-free microprocessors. Right now, we are working to achieve a goal to make all our products conflict-free in 2016.

“We believe that technology should be a force for good, from the ground up.�

What is giving you hope that progress can be made?

CD: There is cause for hope. Private sector companies, NGOs, and African and other partner governments, including the European Union and the United States, are coming together to help forge a responsible conflictfree minerals trade in the region. Momentum is building. The Conflict-Free Sourcing Initiative now includes more than 200 companies from seven industries.

Photos: Intel CONSCIOUS COMPANY MAGAZINE

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PARTING THOUGHT...

“HERE’S TO THE CRAZY ONES, THE MISFITS, THE REBELS, THE TROUBLEMAKERS, THE ROUND PEGS IN THE SQUARE HOLES… THE ONES WHO SEE THINGS DIFFERENTLY - THEY’RE NOT FOND OF RULES… YOU CAN QUOTE THEM, DISAGREE WITH THEM, GLORIFY OR VILIFY THEM, BUT THE ONLY THING YOU CAN’T DO IS IGNORE THEM BECAUSE THEY CHANGE THINGS…THEY PUSH THE HUMAN RACE FORWARD, AND WHILE SOME MAY SEE THEM AS THE CRAZY ONES, WE SEE GENIUS, BECAUSE THE ONES WHO ARE CRAZY ENOUGH TO THINK THAT THEY CAN CHANGE THE WORLD, ARE THE ONES WHO DO.” - Steve Jobs

Photo: Steve Hill