The best books on Responsible Business

Our topic for today is the five best books on responsible business. Can you tell us a little bit about yourself and how you got interested in this?

I started work at 20 for Patagonia before it was Patagonia, when we still made climbing gear. I intended to stay for six months, and 51 years later I’m still here. I never meant to be in business; I am vocationally a writer. I had a lot of disregard for conventional businessmen, as did most of the people who originally worked for Patagonia, most of them climbers and surfers.

We’ve gone through quite an evolution as a culture over the years. We were always concerned about creating high-quality products, and we early on focused on preserving the natural world we loved.

It took us longer to understand the environmental implications of what we did as a business. Often this happened by by accident. A ventilation problem in our Boston store led us to the discovery of the toxicity of the chemicals used to grow conventional cotton, which till then we had always thought of as a benign natural fiber. That discovery in turn inspired us to switch to the exclusive use of organic cotton.

I’ve also had the opportunity over the last nine years to work with students in the Yale environmental, divinity, and business schools, exploring how business affects society, asking what can business do to to be much more of a positive force rather than primarily a negative force on the environment and natural world.

Your first recommendation for us is Six New Rules of Business, by Judy Samuelson. Can you introduce us to this book?

Judy Samuelson is the executive director of the Aspen Institute Business and Society Program. She comes at the relationship between business and society from an insider perspective rather than as an academic or scientist. In Six New Rules for Business she argues for a long-term approach to business success, that every responsible (and effective) business has a purpose other than to provide short-term profits for shareholders.

She argues that good business today is not driven so much by capital (because capital is no longer scarce), but by talent, particularly internal talent and by the capacity to innovate. Business today is also affected externally by factors it can’t control. What’s its level of trust, its reputation among customers and society at large?

One of the things I’ve noticed is that the long-term interests of business often coincide with the long-term interests of nature and society; short-term interests do not.

Talent may be more scarce than capital, but capital is often much better organized. What prevents talent from organizing, and thereby prioritizing long-term interests? How does it happen, when it does happen?

For the past 50 years, it has been the dogma of businesses and of business schools that maximizing shareholder value is the only real measure of business success. In effect, the stock price becomes the primary product of any company.

Employees have a different perspective. If you work for a company you know that profit is necessary to a business, as is air to breathing. But we don’t wake up thinking, “I’m going to breathe air today.” We wake up thinking about what we’re going to do. We want to create or improve certain kinds of products or services. We think about how we want to change things.

Those are the motivations that drive people in business. I’ve come to believe over the past ten or fifteen years that the best-kept secret in business is the motivating power of values. People don’t want to talk about that around the business table because it sounds too squishy. But in fact, it’s a strong motivator.

“The best-kept secret in business is the motivating power of values”

I’ll give you a quick example. We got into a conversation with Samsung Electronics about the problem of microfiber waste from our clothes, and from everyone’s clothes, but particularly synthetics because they persist in the environment—they’re not captured by washing machines or municipal water filtration systems.

I had a talk with executives sponsored by Samsung’s sustainability department, and a couple of them got the idea, “We make washing machines, let’s help solve this.” Initially, many of their colleagues were skeptical, but once they figured out how to successfully filter out 98 percent of the microfiber fleece, it became a source of pride for the whole company. I think achieving something, designing something that works, or doing anything creative that turns out to be effective, is a much stronger source of pride than boosting stock price artificially or raiding a competitor and sucking out its value.

I like what you said about a desire for meaning and creativity being the strongest motivator at work — that’s certainly been true for me.

When we introduced organic cotton, between 1994 and 1996, we had a really hard time. Because we were buying organic cotton from farmers, we broke our connection to the global supply chain. The spinners, who turn the fiber into yarn, wouldn’t talk to us because they hated organic cotton. They said it gummed up their machines.

Finally, this guy in Bangkok, who ran one of the largest spinning mills in the world, figured out how to cool the shop floor so the machines wouldn’t gum up. We asked him, five years later, “Why did you even talk to us? We were so small and you were so big.” He said, “I guess you can call me a closet environmentalist.”

On the topic of both the long-term future and the natural environment, your next recommendation for us is Sustainability Scorecard, by Urvashi Bhantnagar and Paul Anastas. Can you introduce us to this book?

Where Judy speaks as an insider from a business perspective, Bhantnagar and Anastas speak from the perspective of scientists. Bhantnagar is also a health executive, and Anastas, once the chief scientist at the EPA, is known as the father of green chemistry.

What they argue, and our experience at Patagonia bears this out, is that if you want to take sustainability seriously and make that integral to your business, you have to make it integral to the business model. What Sustainability Scorecard is designed to do is to integrate sustainability efforts into the production of products. If you habitually confound yourself by not buying into the existing practices and, instead, look at what will not only reduce the harm that your products cause in their manufacture but also create positive good, that creates a virtuous circle—and products that otherwise would not have been made.

For instance, Paul came up with an idea for a process imitating photosynthesis that sucks carbon out of the air. That turns out to produce a pretty good vodka. But the vodka is just a beginning. Paul and his partners believe that the same process can eventually be used to make jet fuel. To me, this is an example of how business, out of all the sectors in society, government, and civil society, has the potential to be economically self-sustaining—and do the right thing.

Business don’t need to raise tax money to operate, though one of the books we get to later will argue that government has provided a lot of the research and development that gets passed on for free to business. Businesses don’t have to go to rich donors to to fund our activity. We can create products that actually sustain our enterprise itself and does something worthwhile and necessary.

I love their book and their idea because I think that they’re really showing the way. If I were an entrepreneur right now, I would look at that book very closely.

I enjoyed the vodka story! I think I read that as well as being chief philosopher of Patagonia, you’re also the unofficial chief storyteller?

I was the original catalog editor and writer, so that’s how I got that moniker.

Can you tell us about how storytelling plays into sustainability and responsible business?

It’s a complicated question to answer. We’ve been talking for 35 years about the environmental crisis and about defending nature, focusing on specific issues like the need to preserve wilderness. Our own work on sustainability grew out of our love for wilderness.

Our storytelling goes back to our start as a climbing equipment company. Climbing stories have a natural arc. You try to attain something, you’re going to the heights. You run into some existential problem that may prevent you from reaching the top, but then you succeed (or not), and make your descent back into the ordinary world and life. The earliest writers for the company, including Doug Robinson, and the founder, Yvon Chouinard, were great mountain storytellers.

It’s also important that the number of customers we had for climbing equipment was small. There was no question of trying to manipulate our customers or use transactional language. You didn’t create a focus group to see which tone of voice would go over the best. You were speaking to people as friends and equals.

Particularly when we started to make environmental arguments, we spoke the way you would talk to friends about something that they may not know about, that you had just started to learn about. We would be enthusiastic, and also respectful. I think that informed the way we talk to our customers. When we’re at our best, we still follow that rule, to treat friends and customers as equals.

Your next recommendation for us is the deliciously titled Doughnut Economics, by Kate Raworth. Can you tell us about this book and its relationship to responsible business?

Two of the books I recommend are written by economists. Raworth calls herself a ‘renegade economist.’

What she did is an interesting work of synthesis. She looked at the work of the Stockholm Resilience Centre, which defined nine planetary boundaries we can’t exceed without inducing planetary peril. These include climate change, toxic pollutants, and the overabundance of nitrogen and phosphorus that comes from industrial farming of fertilizer. Those are all ecological ceilings we can’t transcend.

Then, she looked at the UN’s Sustainable Development Goals (SDGs) adopted in 2015, which were signed onto by 183 different countries. These include the right to peace and justice, housing, good food, access to water, education for women. There are seven basic building blocks of the SDGs, and Raworth refers to these as social foundations.

She puts the social foundations together with this idea of the ecological ceiling and says there’s a space in between, where you have the possibility for a regenerative economy that serves both natural systems and human wellbeing. Doughnut Economics also talks about the processes by which you can start to change the economic goals and move toward an economy that actually does serve nature and human beings.

Raworth argues for a larger systems approach to how we think about what we do as a society. I don’t think she uses this quote, but there’s one I love from Dwight Eisenhower, who was America’s chief logistician for World War II. He said, “Whenever I can’t solve a problem, I make it bigger. I can never solve it by trying to make it smaller, but if I make it big enough, I can begin to see the outlines of a solution.”

Another thing that interests me and relates to another book on the list is that, like Judy Samuelson, Raworth is looking at the role of business in society. The entities that have taken up the idea of doughnut economics are not so much individual businesses, but places.

Amsterdam, for instance, has adopted doughnut economics as its model for economic growth. That’s interesting because globalized business has no loyalty to a specific place, but its harms are felt in specific places—through the pollution of a particular river or the poisoning of the air in Beijing or Seoul.

I think that looking at place—the welfare of places, the wellbeing of human community and of the natural systems—is absolutely essential to change in the way we do business. Raworth doesn’t really talk about that, but she leads us there.

This ties in with your next book as well: Bill McKibben’s Deep Economy. Can you introduce us to this work?

This is the oldest book on the list. It was written in 2007 and made a very deep and lasting impression on me. He’s arguing for the revival of the local. This relates back to what we were talking about with Kate Raworth and place. When McKibben writes about deep economy, he argues that a place is better off when it has a significant amount of local food, local entertainment, local culture, and local business.

He argues forcefully against the idea of growth as a necessity in the economy. He says this is something introduced to society with the Industrial Revolution and the inventions of the steam engine and the cotton gin. Kate Raworth also says that she thinks it’s essential that regenerative economics be agnostic about growth, that it must not necessarily view growth as an advantage.

What happens is that politicians of every stripe from left to right say, “What we need to do is to grow the economy to add more money so we can solve the problems we have.” But every time we grow the economy, we create new environmental and social problems because we’re not distributing that growth evenly; we’re distributing it increasingly unevenly.

McKibben is a great storyteller. One of the tales I remember best is about working with an organic farmer. McKibben writes that on an industrial-scale farm you can get great productivity from all the fertilizers, chemicals, and water you use. Then he says you can even get greater productivity on a small organic farm, but it involves much more intelligence and much more human involvement. You’ve got to look for weeds. You’ve got to look for bugs. You can’t just create massive rows with machinery that’s going to do the work without the benefit of intelligence.

I feel that there’s a recurring theme here of short-termism in the traditional manner of business. Do you have any ideas about how we’ve ended up in a situation where caring about the long term is a renegade position?

There were seeds of this in industrialism itself and in capitalism, but I think it’s been overtaken in the past 50 years by the short-term success of short-term thinking. The problem is that the ideology of shareholder supremacy and quarterly profits does create tides that lift many boats—but they also flood communities.

To counteract that, we need to look at smaller enterprise. We need to look at place. We’re facing an extreme environmental crisis, not only climate change but also disturbances to the web of life, the loss of species. To address that, you need to care about it. To care about it, you need to have a particular place in mind: a forest you love, or a stretch of water, or your hometown and defending its drinking water.

We lost that capacity as we accelerated globalization. We got a lot of benefits from globalization, but the cost has been the ability of people to make decisions across the table, with neighbors and foes, about the future of where they live.

Your last recommendation for us is The Value of Everything by Mariana Mazzucato. Could you introduce us to this book?

Mariana Mazzucato is an economist at University College of London, and she’s not a renegade. She’s very well respected in her profession and is a consultant to numerous governments. She’s an advocate of growth, but she makes an argument in The Value of Everything that I think is critical.

She says that in neoclassical economics, for the past 150 years, the idea of value has been tied solely to price. What people will pay became the sole determinant of value.

Mazzucato goes on to say that for the first 300 years of economics as a science, certainly in the time of Adam Smith, people contested the idea of value. They saw value as related to the usefulness of a product, and argued about that value, for and against. What does a product provide society as a whole? What benefit? We’ve lost that discussion.

She also argues that much of the innovation that comes about, which businesses use to create their products, was developed by governments. Space exploration—the moonshot—is an example. A lot of technical innovations created by the Defense Advanced Research Project Agency (DARPA) went into tech businesses and were used in products for those companies.

Mazzucato also argues that there’s no difference, in economics, between value creation and value extraction. For calculating gross domestic product (GDP), if someone marries the babysitter, you’re hurting GDP because you’re removing the economic benefit of paying the babysitter. But if you pollute, you’re benefiting the economy because the cost of cleaning up the pollution gets rolled up into GDP. The way we define the success of the economy is contributing to the problems we have.

Your list reflects quite diverse perspectives. Is there a common thread that runs through all or most of the books you’ve recommended?

I think if I were going to tie these books together, I would say they’re all looking at business as a unit within society, along with government and civil society, and that in this time, businesses have an obligation to make things and offer services that are useful and also address our problems.

That’s the beauty of what Bhantnagar and Anastas are advocating for radical innovation. And when Kate Raworth gets going with the idea of doughnut economics, you see connections to the possibilities in circularity, where one company’s waste becomes another company’s feedstock. That creates enormous opportunities to reduce environmental harm as well as create social benefit.

I think anything that awakens the imaginations of the people who are making things and offering services, rather than just trying to make everything 2 percent more efficient or less costly, is a good thing. All these books point us in the right direction.

I believe this is the topic of your new book, The Future of the Responsible Company, which you’ve written with Patagonia’s founder, Yvon Chouinard. Can you tell us more about this book?

The Future of the Responsible Company is a massive rewrite of a book we did ten years ago. In light of what’s happened over the past decade, we feel strongly that business has a responsibility, as much as any other sector, to devote its energies to solving the problems we have and providing useful things at the same time.

Our original book, The Responsible Company, was based largely on the experience of our first 40 years in business. One of its arguments was that a successful business has to be successful for its stakeholders. That includes the bottom line, but also the welfare of employees, customers, the communities we operate in, and also nature. I think we were one of the first to argue that nature is a stakeholder in itself for business.

What makes a business responsible hasn’t changed. What has changed is the acceleration of the environmental crisis, and the social crisis attendant to that, the rising inequality and disruption that climate change has caused in many parts of the world.

We felt the need to talk about the special responsibility of business to address the problems, and to talk about the ways and the places in which people can look to the future for meaningful and effective work to do the right thing. One thing we mention is the model of one company’s waste becoming another’s feedstock, and circularity of businesses that work together. They may be in very different markets, but their processes may complement each other.

For instance, in Halifax, you’ve got a municipal solid waste plant that can recycle 95 percent of what comes in—including sandwich wrap, which nobody else can do. The spent brewery grains and wet garbage processed by the waste plant become free feedstock for a local business that raises soldier flies, whose waste provides feed for another local business, an organic on-land salmon farm.

I love the specificity of your experiences—it’s so valuable to have really concrete examples, and see the principles in action in these very specific ways.

We wrote the new book to redefine the possibility of what a responsible company can do. For people who are interested in working for responsible businesses, what does the future look like?