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- Center for Leadership Development and Research
- Center for Social Innovation
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Organic Industry Pioneers Say Business Can and Must Be Part of the Solution
November 2005
STANFORD GRADUATE SCHOOL OF BUSINESS—Can businesses make monumental profits and deliver strong returns to shareholders while also promoting the health of people and the planet? Two phenomenally successful pioneers of the organic foods industry, Gary Hirshberg and Greg Steltenpohl, uttered a resounding "yes" to a standing-room-only crowd at Stanford's Memorial Auditorium on Nov. 11.
The founders of Stonyfield Farm and Odwalla, respectively, said that as people awaken to the ravages of global warming and the negative health effects of pollution, and as small companies prove they can edge out the big guys by being socially and environmentally responsible, corporate America is now frantic to get into markets that once seemed too fringy to be taken seriously. The two urged aspiring professionals attending the 13th annual Net Impact Conference to boldly bring green inspiration to regular old companies and do no less than support a new model of capitalism that enriches communities, not just corporate beneficiaries.
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Drawing on his past 23 years as his self-chosen title of CEO of Stonyfield, now the third-largest yogurt producer in the United States, Hirshberg shared many ways his company has focused on reducing its ecological footprint while maximizing profitability. The firm has saved millions per year in utilities and garbage bills, for example, by changing its lighting, extracting heat from its wastewater, and reducing its packaging. "The savings have been my venture capital," Hirshberg said. "I call it the First National Bank of Conservation."
Paying a little more up front to buy raw materials that align with socially responsible values also has led to tremendous financial benefits in the long run, he said. "Five years ago, the organic sugar we purchased from Brazil was 100 percent more expensive than regular sugar," Hirshberg said. "Today, the organic farms we've supported achieve much higher yields than conventional farms, and they are at parity in terms of pricing." The company in turn invests some of its savings in green packaging research and carbon offsets to neutralize its manufacturing plants' contributions to global warming.
Stonyfield's mission to save family farms while providing superior quality yogurt has helped the company achieve the "holy grail" of marketing customer loyalty without big advertising expenditures. "The Cokes and Pepsis of the world cheapen the product and take the enormous margin that's left over to buy advertising," Hirshberg said. "As an organic company we can't cheapen the product because our mission is to reinvest in our farmers. We've had to be more clever at finding a way to make up the net margin." Offbeat events like handing out 85,000 yogurts in the Chicago train station to thank people for taking public transportation have resulted in rises in market share dramatic enough to earn Stonyfield a permanent place on grocery store shelves.
While Danone now has majority ownership of the company, Hirshberg said he continues to manage independently. The partnership, he said, marks the French company's own first move into the organic space. "And if Danone goes organic," said the pleased progressive, "then Nestle, Unilever, and Kraft will have to follow."
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Greg Steltenpohl, former CEO of Odwalla, the leading U.S. supplier of fresh juice and beverages, similarly called upon MBAs in the audience to "blow up" old notions of capital and capitalism. "One of the jobs of this century," he said, "is for us to feminize business—make it more nurturing, inclusive, community based, and cooperative—so we can look at helping each other rather than trying to be first."
Steltenpohl talked about his own efforts in this direction with his new beverage company, Adina, which is helping restore traditional agriculture in Senegal by sourcing hibiscus from local women farmers. "We've set up cooperatives and send more than a fair wage directly to these women," he said. Adina also has been capitalized in a unique way—instead. Instead of relying on venture capital firms, it has solicited personal funds from venture capitalists as individuals. "This has created a network of passionate supporters," he said.
Nature provides perhaps the best model for new forms of capitalism, Steltenpohl said. "A redwood tree is able to suck moisture out of the air and pump it and nutrients back into the soil," he said. "We need to make corporations do that in the next 20 years because the urgency of our environmental problems requires it."
Indeed, said Hirshberg, business needs to become part of the solution. "Business and commerce have had an incredibly negative impact on the planet," he said. "In our ignorance and arrogance we've focused on a linear, exploitative model of inputting resources at one end and having capital and waste come out the other. We can no longer live by the mythology that this activity will not have repercussions for future life and that we can somehow send the byproducts away. There is no away."
The panel was one of more than 50 held Nov. 11-13 as part of the Net Impact conference organized in conjunction with the School's Center for Social Innovation and Public Management Program. Net Impact is an organization of some 12,000 members with 100 chapters around the globe dedicated to using the power of business to improve the world.
—Marguerite Rigoglioso