NYU Stern professor on what many people get wrong about sustainability: It's not just about the environment and it actually leads to better financial performance
- Jeffrey Hollender is the co-founder and former CEO of the sustainable consumer product company Seventh Generation. Hollender is a professor of corporate sustainability at NYU Stern. He is also the CEO of Sustain Natural which he runs with his daughter.
- Hollender says sustainability is not just about the environment. It's about thinking long-term and considering the impact a business has on the planet and society.
- Hollender says treating employees well leads to faster growth and better financial performance.
Following is a transcript of the video.
Sara Silverstein: So you created a sustainable business. Can you tell me what sustainability means to you?
Jeffrey Hollender: Well sustainability means a systematic approach to thinking about the total impact a business has on the planet, as well as society. And we often are overly focused on the environmental dimension and it's critical that we think about how people are treated, people that work at the company, people in the supply chain, and issues like employee ownership are as much a part of sustainability as lowering CO2 emissions.
Silverstein: And why is that important? Why does that make a company more sustainable, is it from a business perspective or for humanity's?
Hollender: For both really, I mean, yes it's good for humanity, but it's better for business, so if you treat your employees well, if you allow them to be owners of the company, they're more loyal, they're more productive, there's less turnover, and Harvard has done a study that actually shows that this translates all the way down to earnings per share in companies that are sustainable that treat their employees better.
Silverstein: And what is the main thing that you would impart on companies that are maximizing for shareholder profit? What's the one thing that they should really change to be more sustainable from a business perspective?
Hollender: Yeah, well sustainability is going to improve your financial performance and that's what people don't understand. People think it's a trade-off: am I gonna be a nice, good citizen and treat the environment well or am I gonna maximize profits? And the truth is you will perform better financially by doing things like having a great sustainability program, by having women on your board and in your senior management and by treating your employees well and ensuring that they're owners of the company. Those things translate into better financial performance.
Silverstein: We see a lot of different types of sustainable or socially responsible business. There's B Corps now, we have TOMS One for One, Seventh Generation is built on environmentally sustainable products. What different business models work and which ones are the most effective?
Hollender: Sure, so I think the gold standard is B Corporations. Sustain Natural is a B Corporation, Seventh Generation is a B Corporation. There's thousands of companies that have gone through this process, so that's really really, I think, the best gold standard. But there's also organizations like The American Sustainable Business Council that has hundreds of thousands of members and that is a terrific organization to be part of if you want to influence public policy because, remember, there's only so much companies can do. We also have to change the business landscape that change things like such short-term focus on investing, if we have, you know, rules where you get long-term capital gains treatment after 12 months, that's not helping from a sustainability perspective because we need to think in a much longer term fashion.
Silverstein: And what would you like to see change the most of America, in America policy-wise to help businesses think long-term?
Hollender: Well I think we need a variety of things. We need a price on carbon because it doesn't work to try to encourage companies to emit less carbon when they can emit it for free. I also think that we need to see higher minimum wages. I think moving towards $15 is the right thing to do, it's good for business, it's good for our country. We have to deal with issues like wealth inequality. We have a tremendous inequality in this country, much more than people realize. One out of six people use food stamps, so we've got to take care of our workforce better than we do.
We also need to deal with things like, you know, creating a longer-term framework, so we need to take the way capital gains are treated and give better incentives to people that make 10-, 20-, 30-year investments. Making a one-year investment is not what we should consider long-term.
Silverstein: And for people that want to create socially responsible companies, that aren't necessarily nonprofits or focused only on social responsibility. How do they do that? What advice do you have for them?
Hollender: Again, there's great tools like B Corporation and the American Sustainable Business Council. There's also organizations like the Social Venture Network and Business for Social Responsibility. These are all organizations and tools that will help companies move down the road towards becoming more responsible and more sustainable. I've written a bunch of books, seven to be exact, and "The Responsibility Revolution" talks about what are the best practices and how to put them into work.
Silverstein: And you're working on an eighth book about having a net positive impact. Can you explain to me what your thesis is?
Hollender: Sure, you know, we've become very focused in the world of sustainability about being less bad, less CO2 emissions, less water pollution, less waste, and what we really need to do is turn that on its head and think about, what does it mean to be a truly good company where you leave the world every day better off than it was the day before, not how we minimize our negative impact.
Silverstein: And can I ask what's the - what do you teach in the first day of your class at NYU Stern?
Hollender: Well I start with this whole question of values because I think if you're going to be a responsible, sustainable business leader, you really need to be clear about what your values are and what means the most to you and what you're going to use to steer the direction of your business and you know, it's interesting, but you know, college students are just in the beginning phase of formulating those ideas so we start with values and philosophy and beliefs. We then also talk about systems thinking because we think about things in a very, very compartmentalized way. We don't think about the inner relationship between things and so we also do a session on systems thinking. And that's where we start, we get to business plans and financial forecasts and all those other things, but we need to lay the groundwork first for what is required to be a real responsible, sustainable leader.
Silverstein: And what does that mean exactly, systems thinking?
Hollender: Systems thinking means, I mean, if we think about many decisions that companies make, they make a decision that makes sense within the narrow guardrails that they're thinking and often those guardrails are shareholder performance. You know, what is good for my shareholders this quarter? And the problem is that often leads to very bad decisions. If we think about what's happening with corporate stock buybacks, we have a raging market where companies are buying back their stock. They're spending more money buying back their stock than they are on investing in research and development. That's not a good trend from a long-term perspective. That will not leave us a strong country with great competitive advantages against other businesses. Stock buybacks are great for pushing up the stock price in the short term, pushing up options so that people can exercise them and make money, but those are not things that companies should be spending that much money on if they're thinking about making long-term decisions.
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