By Peter Asmus
This year’s Business Ethics awards feature a blend of small and large, public and private firms.
* The Environmental Reporting Award goes to Baxter Healthcare Corporation for its cutting edge environmental auditing and reporting;
* another Environmental award goes to 3M for sustaining its environmental commitment over many decades;
* the Living Economy Award, which honors smaller firms, goes to Organic Valley, an organic farmers coop;
* The Antioch Company receives the first Social Legacy award, for enhancing its social mission over time.
Organic Valley, Living Economy Award
For being an exemplar of the living economy: locally rooted, human scale, stakeholder-owned, and life-serving – seeking fair profits rather than maximum profits.
Those who have given up hope for the small family farm in America can take heart in the success story of Organic Valley – a $156 million cooperative of 633 organic farmers. With dairy, meat, and egg producers in 16 states and one Canadian province, Organic Valley is the third largest brand in the entire organic foods industry – and more than ten times the size of any other organic food co-op.
15 years ago the cooperative was nothing but an idea. Next year, revenues are expected to reach $184 million. After experiencing a 60% annual growth rate in its early years, the firm has hit a new and sustainable plateau, says CEO George Siemon.
“Over the last three years, we have reached maturity and are now regularly meeting our financial targets. Of course, we place a cap on our profits, since we want to maximize our service to our customers. Odd as it may sound, we want to minimize profits in order to safeguard the corporation.”
“We are a national cooperative that features regional producers,” continues Siemon. “We believe in sending our food products as close to home as possible.”
The co-op initially sold cheese products and has expanded to other dairy products, eggs, meat, and produce. Organic Valley introduced the nation’s first organic butter in 1990 and supplied the organic milk for the first organic yogurt distributed nationally. Organic milk sales grew 500% from 1994 -1999.
Unlike consumer co-ops, in this producer co-op farmer- members must make significant upfront investments. Attached to each purchased share is the obligation to deliver a set quantity of raw product. The co-op limits membership. This helps match supply with demand. It also allows the co-op to set stable prices to farmers, who have suffered from the whims of global commodity price swings.
Perhaps the most appealing aspect of the co-op is that each year, the producers set the prices themselves, an approach that circumvents the dictatorship of commodity markets. This is truly revolutionary. Dairy farmers belonging to Organic Valley have received payments 60% higher than farmers producing conventional dairy products.
Beyond that, Organic Valley’s innovations extend to creative ways to raise capital, a challenge for many cooperatives. It issues two classes of stock (some to outside investors), in addition to using bank credit. By Wisconsin state law, the co-op is limited to offering 8% return. “During the dot-com days, 8% looked pretty meager. Today, it looks like a goldmine,” says Siemon.
“Organic Valley supports small dairy and meat processing plants all across the country,” says Neil Ritchie, national organizer for the Institute for Agriculture and Trade Policy. Ritchie adds that Organic Valley’s fixed price for products offers a great model for revitalizing rural America. “A stable price for producers is so important. It’s like having a living wage for workers. It allows people to stay where they are, build equity, and develop opportunity for their kids.”
CEO George Siemon, 888/444-6455; www.organicvalley.com
Baxter Healthcare, Environmental Reporting Award
For rigor, transparency, and leadership in environmental accounting and reporting.
Baxter Healthcare Corporation (Deerfield, Ill) is a true pioneer when it comes to rigorous environmental auditing and reporting. Long before it was fashionable, Baxter put teeth into its promises on the environment, creating clear goals and frankly assessing progress toward them.
“Baxter was doing environmental reporting five or six years ahead of nearly everyone else and their reports were truly breakthrough documents, says Iain Watt, corporate accounting specialist with the Coalition for Environmentally Responsible Economies (CERES). Even more impressively, they “admit their shortcomings in a frank manner, which gives a whole new level of credibility with consumers,” he says.
“I particularly like their ‘Environmental Financial Statement,’ which shows not only the negative, but the positive financial effects of their investments in environmental programs. In its 2002 report, Baxter shows a savings of $65 million in “total environmental income, savings and cost-avoidance.”
Baxter’s revenues exceed $8 billion with a workforce of 50,000 people in more than 110 countries. Among its key products are a plasma-based and recombinant clotting factor for hemophilia, IV solutions, and dialysis-related products and services.
Ron Meissen, Baxter’s senior director of engineering in Environment, Health and Safety (EHS), points out that “BaxHealth,” a web-based EHS information system, is an internal tool that’s been critical to Baxter’s environmental reports. “EHS professionals enter data on a regular basis from operations all over the world.” Each quarter, BaxHealth spits out data on progress toward EHS goals.
Baxter met its air toxic and CFC reduction goals in 2001, four years ahead of schedule. Since 1988, they reduced these emissions by 99%. The company is aligned with the Kyoto Protocol, pledging to reduce greenhouse gas emissions by 30% per unit of production by 2005, compared to a 1996 benchmark. And it’s a founding member of the Chicago Climate Exchange, which is establishing a cap-and-trade system for member organizations to reduce or offset emissions of carbon dioxide.
Baxter is working to green its supply chain. Meissen says they have met with about 100 suppliers over the past two years to identify ways to integrate sustainable development into their operations. Kristin Pierre, manager of the US Environmental Protection Agency’s Green Suppliers’ Network, says Baxter is a pioneer in environmental supply chain management. “I think what you’re seeing at Baxter is the first wave of companies getting a better handle on what is actually happening in their own supply chain.”
Pete Friedmann, Director, Stakeholder Relations, 847/948-3951
3M, Environmental Excellence Award
For sustained commitment, innovation, and substantial impact in three decades of environmental stewardship.
A leader in waste reduction and energy efficiency since the 1970s, the 3M Company of St. Paul, Minn. is not resting on its laurels. Today it’s moving into “lifecycle management,” also known as “design for the environment.”
Since 2001, every new 3M product undergoes a life-cycle management review. Lifecycle Management is the next step beyond 3M’s early Pollution Prevention Pays program, which focused on reducing emissions in manufacturing. Now the focus is “on the products themselves in all stages of a product’
s life cycle, including customer use and disposal,” said 3M’s staff vice president, Environmental Operations, Katherine Reed. “This is done by including environmental considerations during product design to minimize environmental impacts in the first place.”
Reed used the example of sandpaper, 3M’s first product from 1902. “We discovered that solvents were used to manufacture many of our products, but weren’t in the product itself. That means the solvents were going up the stack, requiring pollution controls,” she explains. After $2 billion in R&D investments over the past 15 years, 3M developed product lines of solvent-less tapes, sandpapers, and adhesives instead.
Understanding the negative ecological footprint created by solvents contributed to a shift in 3M’s product mix to new areas of opportunity. 3M is getting into the power generation business, for example. Its new membrane electrode assembly is used to manufacture fuel cells.
Richard Renner, Manager, EHS Communications, 651/733-1135.
Antioch Company, Social Legacy Award
For sustaining a commitment to employee ownership and profit-sharing over 75 years, through two generations of management.
How do you sustain social mission in a firm past the founding generation? Countless socially responsible businesses have been sold to major public corporations, only to see social focus slowly diminished. Since the ownership structure ultimate holds a company’s mission, one of the best ways to institutionalize social mission is to help employees become owners. This is the path of the Antioch Company of Yellow Springs, Ohio, a $400 million firm whose roots date back before the Great Depression, and whose current hot product is, of all things, scrapbooks.
Ernest Morgan, who ran for Ohio governor and state senator as a socialist, started the Antioch Company in 1926 while attending Antioch College. Distressed by the volume of waste generated by the printing process, Morgan and a fellow student began investigating ways to turn these wastes into a business opportunity. The first products were decorative bookplates from printing scraps.
As early as 1929, the Antioch Company practiced profit sharing. When the company incorporated in 1946, employees were able to nominate two of nine board members, a practice which continues to this day. In addition, three employees serve as non-voting board members. The company’s Employee Stock Ownership Plan was created in 1979. The following year, Antioch purchased Webway of Saint Cloud, MN., a manufacturer of photo albums whose products led to Antioch’s Creative Memories line of scrapbooks, which today represent 90% of revenue.
Antioch creatively combines a focus on its product line and employee empowerment in its mission statement: “To serve human needs by making a difference in the way people remember, celebrate, and connect, and to maintain a community of work that offers opportunities to prosper and inspires hope for the future.”
Today Ernest’s grandson Lee Morgan is CEO. With roughly 900 participants, the ESOP now owns 45% of the company. Morgan says he’s made enough money and is now working on selling the reminder of the Morgan family stock to employees.
Since 1979, the value of company stock has risen from $4 to $496. This phenomenal growth means any employee-owner who has worked at the company 18 years or more is a millionaire, regardless of age, race, gender, or income level. That translates into 38 millionaires at Antioch who will soon retire. One problem with such success is that early employee owners tend to be far richer than newcomers – since they receive larger allocations of stock. To solve this, the Antioch Company devised an innovative way to reallocate ESOP proportions. The company “reshuffles” the stock-to-cash ratio in each person’s account each year, to mirror the stock-to-cash ratio within the ESOP as a whole. “This ensures fair treatment of all plan participants,” comments Karen Thomas, with the Ohio Employee Ownership Center. While older employees grumble about having to give up valuable stock, younger employees are motivated to continue the legacy of the firm because they share in the wealth.
According to Thomas, Antioch’s is a trend-setting national model. “Antioch figured out a way to address the real injustice of most ESOPs. They came up with a solution, tried it, and it works,” she says.
Legacy preservation in many ways is natural to employee ownership. Thomas says, “In a way, an ESOP becomes a quasi-public trust. People know the business will be part of the community for the next generation.”
Lee Morgan, CEO, 937/767-6266
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FROM Business Ethics, Winter 2003, a SustainableBusiness.com Content Partner
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