Case Corporate Excellence The focus on CSR enables companies to become conscious of the environment but at the same time may lead to problems related to competition and the viability of the model itself. History has many lessons and conclusions in store: the first lesson is that it is possible to challenge the myths and demonstrate that one can be competitive and socially responsible at the same time. The second lesson is that it is not easy and that the way to success is full of obstacles. In the business world where corporate social responsibility adepts are still trying to convince companies about potential profits, Ben&Jerry’s showed that the answers to many questions are not as difficult as we thought and that it’s not needed to reinvent the wheel. What’s needed is true and genuine commitment.
When Ben Cohen and Jerry Greenfield opened their first Ben & Jerry’s store for homemade ice cream in a old petrol station in Burlington, Vermont (USA) in 1978, they did so after completing a five dollar correspondence business course with the University of Pennsylvania and with very little capital, but faithful to their ideals (laid down in their hippie days in California at the end of the 60s) and mapped out a three-fold mission for their business. They both realized from the beginning that the business only be successful if all the product goals (social, environmental and financial) were reached together. These aims represent what John Elkington, in 1998, first called the “triple bottom line” (also known as the “triple balance”) together with the three conscious principles underlying the concept of CSR, in the opinion of Joan Fontrodona, lecturer in Ethics at IESE Business School (Barcelona, Spain): 1. Socio-political 2. Ethical 3. Economic It is true that Ben & Jerry’s was one of the first firms in the US that from its outset applied the concept that would later be known as Corporate Social Responsibility to its business model. When they decided to found an environmentally and financially sustainable company that would create the development they sought for all their interest groups, they put in place criteria that took account of the impact that these activities would have on When you set up a business, if you have a CSR based approach, this means that you will build on sound social and environmental principles. But at the same time it may also mean that problems relating to competition and the viability of this model will arise later on. CSR challenges and opportunities when creating a business and making it grow: the case of Ben & Jerry’s Public Affairs Strategy documents C04/2011 Cases Document prepared by Corporate Excellence with reference to, among other sources, the intervention of Joan Fontrodona during the sessions of the Executive Education Program “Making Social Responsibility Work: The Cornerstone of Sustainable Business” organized by the IESE Business School in Barcelona in July 2011.
Transcript
When Ben Cohen and Jerry Greenfield opened their first Ben & Jerry’s store for homemade ice cream in a old petrol station in Burlington, Vermont (USA) in 1978, they did so after completing a five dollar correspondence business course with the University of Pennsylvania and with very little capital, but faithful to their ideals (laid down in their hippie days in California at the end of the 60s) and mapped out a three-fold mission for their business. They both realized from the beginning that the business only be successful if all the product goals (social, environmental and financial) were reached together.
These aims represent what John Elkington, in 1998, first called the “triple bottom line” (also known as the “triple balance”) together with the three
conscious principles underlying the concept of CSR, in the opinion of Joan Fontrodona, lecturer in Ethics at IESE Business School (Barcelona, Spain):
1. Socio-political2. Ethical3. Economic
It is true that Ben & Jerry’s was one of the first firms in the US that from its outset applied the concept that would later be known as Corporate Social Responsibility to its business model. When they decided to found an environmentally and financially sustainable company that would create the development they sought for all their interest groups, they put in place criteria that took account of the impact that these activities would have on
When you set up a business, if you have a CSR based approach, this means that you will build on sound social and environmental principles. But at the same time it may also mean that problems relating to competition and the viability of this model will arise later on.
CSR challenges and opportunities when creating a business and making it grow: the case of Ben & Jerry’s
Public Affairs
Strategy documentsC04/2011
Cases
Document prepared by Corporate Excellence with reference to, among other sources, the intervention of Joan Fontrodona during the sessions of the Executive Education Program “Making Social Responsibility Work: The Cornerstone of Sustainable Business” organized by the IESE Business School in Barcelona in July 2011.
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society, on the environment (especially animals) and on corporate responsibility.
From the start, the mission and it goes without saying, the vision, and ethical values of Ben & Jerry’s were social. The corporate culture of the company was imbued with a spirit of social engagement based on a clear-cut idea: a caring and supportive form of capitalism with a human face, which at the time some called ‘anti-establishment’.
The underlying principles brought to their values and behavior became concrete practices and policies. Ben & Jerry’s decided from the beginning that their business approach would be based on introducing an ethical vision into the venture, to ensure the firm’s sustainability and cost effectiveness, rather than the traditional approach which, at most, shares out profits or repairs environmental damage after carrying out its activity normally, as many other businesses do.
From beginnings to the first problemsSince the moment it began to operate, the firm bought only natural and organic products, and in the 70s and 80s was already recycling all the paper and cardboard it needed to make its own containers. It was actively involved in the farms, which supplied raw products, to ensure that the animals were well fed and cared for.
But over time the business grew massively and extremely rapidly, and it became necessary to fight off the unfair attempts of its competitors to prevent this. Ben & Jerry’s took Boston’s Haagen Dazs to court for trying to obstruct the distribution of its products, and won people’s sympathy with its direct, informal and politically incorrect grassroots campaign, that asked “What’s the Doughboy afraid of?’ (a reference to Pillsbury Doughboy, the firm that owned Haagen Dazs).
The counter-cultural, anti-business image of the two hippie college friends, together with their idealism, became extremely popular with the American public. They were seen a model of commitment and responsibility, promoting socially beneficial causes, such as refusing to use cloned animals to supply their commodities, or transgenetic products.
But the more the business grew, the more internal and external commitments they took on. In personnel management, and as a result of their policy of equality and joint decision-making, a policy was introduced that forbade directors’ remuneration to exceed five times that of the lowest-paid worker: the so-called 5-1 policy.
The question of coherence vs. realityIn many US companies in the 70s the ratio between top and bottom salaries was 90-1. Today, because of the financial and real estate crisis that affected the whole world in 2008, the debate is still open, especially in the boardrooms of large firms and financial bodies. This debate does not only concern the comparison with employees’ base rate pay, but profits, cut-backs, hiring and firing, re-locating and using public money to rescue large businesses.
‘From the beginning the mission, and it goes without saying, the vision, and ethical values of Ben & Jerry’s were social, based on a clear-cut idea: capitalism with a human face’.
The reason that Ben & Jerry’s began to have problems with their remuneration policy in the 80s (when the atmosphere in the States was marked by the yuppies and neo-liberal revolution of the Reagan era) was the following: the salaries for the upper echelon of directors was not competitive in market terms and the business had problems in hiring professional people from outside the market. At the same time, the lower echelons were earning more than the going market rate. This had a secondary effect: many of the people at an intermediary level did not want promotion because then their responsibilities would rocket while their salary barely changed.
In this situation, the ability of the people joining the company to adopt the culture and values of Ben & Jerry’s was vital: only those who shared the company’s mission and vision would be able to understand and live out the spirit of this American ice-cream manufacturer. Hence the importance of selection and value management, especially for an organization based on a socially responsible model:
CSR challenges and opportunities when creating a business and making it grow: the case of Ben & Jerry’s
Ben & Jerry’s: Triple Misión
Social mission
Product mission
Economic mission
To operate the Company in a way that actively recognizes the central role that business plays in society by initialing innovative ways to improve the quality of life locally, nationally and internationally.
To make, distribute and sell the finest quality all natural ice cream and euphoric concoctions with a continued commitment to incorporate wholesome, natural ingredients and promoting business practices that respect the Earth and the Environment.
To operate the Company on a sustainable financial basis of profitable growth, increasing value for our stakeholders and expanding opportunities for development and career growth for our employees.
Fuente: Ben & Jerry’s, 2011.
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in addition to not wanting to focus their employees’ motivation on such a mechanic element as salary.
But behind the important debate this generated at all levels of the organization, what was at risk, what was in danger of being lost, was something far more serious, particularly for Ben Cohen, the heart and soul of the company. In his opinion, the 5-1 remuneration policy was morally right, because it represented the company’s mission, vision, and values and was the raison d`être for the huge success that they had achieved up till then.
The coherence with this model was basic, but it was also important to exercise pragmatism and take account of reality. So, eventually, the salaried policy was modified and broadened, and the 5-1 ratio became a 7-1 ratio. The way the company functioned also had to be adapted to corporate standards such as reporting, controls, procedures, meetings and producing memoranda. It was as if the company went from adolescence to adulthood in as short a period of time as its growth had been.
‘The 5-1 remuneration policy was morally right, because it represented the company’s mission, vision, and values and was the raison d’être for the success that had been achieved’.
Occasionally one must change and adapt policies in order to maintain one vision alive, and take into account the conditions and circumstances of the surrounding culture. Flexibility is a necessary condition for socially responsible companies too.
From fair trade to the buy-out by UnileverIn the 90s Ben and Jerry’s began to promote fair trade in the supply chain and in production and marketing, with a view to establishing fair dealing with all the agents involved, from the suppliers of the ingredients to the end consumer. The Ben & Jerry’s Foundation was set up to participate in activities in the community, with 7.5% of pre-tax profits devoted to this end. And prices were kept 20% below those of their competitors.
Their model, clearly based on the ethical concept of theories of justice versus utilitarianism, which integrated all their social, legal, cultural, economic and environmental concerns into a single vision, in line with one set of policies and one ideal: namely that the success of a company cannot be reduced to a single dimension. Sustainability, success, must be kept in the balance between the other dimensions (the business as a good operator: quality and results, the business as a good colleague and citizen: social attitudes and commitment), even though this may create problems for leadership and management.
But in 2000, the news that the two college friends were retiring and selling the business to a Dutch conglomerate, with the promise that the new owners would respect the ideas and spirit with which the company had been founded, left their followers aghast.
Today, Ben & Jerry’s ice-cream company is still an organic and free trade enterprise, with zero Co2 production emissions. A proportion of sales continue to be devoted to the Foundation and it is still at the forefront of CSR as later initiatives, such as the three-fold balance between the needs of farmers, dairy cattle and the environment shows, or the cooperation with the World Wildlife Fund and the explorer Marc Cornelissen to initiate the Climate Change College. The company still is doing what it says.
Conclusions: simple answers to being successfulHistory offers us many lessons and many learning opportunities. The first is that myths can be overturned, demonstrating that it is possible to be competitive and successful while being socially responsible at the same time. The second is that this is not at all easy and that the road is full of obstacles. In the corporate world where CSR is still trying to convince firms of its benefits, Ben & Jerry’s proved that answers were simpler than we thought and that we did not need to re-invent the wheel: we only need to make a true, genuine commitment to this ideal.
CSR challenges and opportunities when creating a business and making it grow: the case of Ben & Jerry’s
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