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Monday, Sept. 8, 2008
Biz models need green revamp: Coke chief
Corporate social responsibility projects aren't just things you do to be nice, but things you invest in because they are crucial to your long-term business interests, Coca-Cola Chairman Neville Isdel told a recent seminar in Tokyo.
"They are nice things to do, but if that is the only reason that we're doing them, they would be cut out of the budget when the business is tight," Isdel said. "If we're only doing them because they are nice, they should be cut in the first place."
Speaking at a Keizai Koho Center- organized event on Aug. 27 on "The 21st century corporation: a new model for a true sustainable growth," Isdel said businesses back efforts to support the sustainability of the communities they serve "because they are essential to the future of our business and to our ability to earn a profit in the 21st century."
Today, consumers have new expectations, and "that has created an entirely new set of requirements that we must meet if our enterprises are to be successful," Isdel said.
While people used to look up to governments to solve issues like pollution, water and food shortages, and overpopulation, today's consumers "expect us to be part of the solution to everything from climate change to health and wellness," he said.
In the past century, companies were safe being profitable or providing high-quality products or services, he said. But no longer.
"We need a revised business model that puts business in a much broader context," Isdel said.
Although the typical business model still includes the basics, such as serving market needs, being legally compliant, and appropriately rewarding shareholders, today's realities require companies to go beyond those basics, he said.
To be profitable today, Isdel said, a company must support the sustainability of the community it serves or it will flounder.
"If the community that we serve is not sustainable, then we do not have a sustainable business," he said.
Any sustainability efforts supported also must be relevant to its core business or they will lose support from shareholders and board members, he added.
The efforts should be of strategic interest and "not personal interests or certainly not random interests," he said. "It should not be the pet project of the CEO."
And they must be sustained.
A company "cannot support one project for one year and then pull the plug on it and go off in a different direction the next year," he said. "You see that happen too often . . . If you're going to have an impact, you have to stay engaged."
For Coca-Cola Co., a company for whom water is key to all its products, lack of public access to drinking water is a serious problem in many of the communities it serves, Isdel said. So the company set a goal of "returning to communities and nature an amount of water equivalent to what we use in our beverages and in its production," he said.
Coca-Cola is trying to reach that goal by reducing its water use, recycling water used in the manufacturing process and investing in rainwater harvesting, he said. Over the last four years, Coke has cut its worldwide water consumption by more than 6 percent, he added.
Isdel also said businesses must partner with governments and nongovernmental groups "on issues where it is appropriate and relevant to play a role."
A business must — in both perception and reality — be a "functioning part of every community in which it operates," he said. "You have to be seen as the local fabric of the community and as something that adds real value to the neighborhood," he explained.
These and other requirements are crucial for companies like Coca-Cola because its "entire business depends on consumers choosing us individually — one bottle at a time," Isdel said.
Coca-Cola sells 1.5 billion bottles a day globally — a figure that he said represents the number of individual choices consumers make every day to buy its products. Each choice is something that will be made "if the consumers admire you as a company and feel that you are part of the community," he said.
And the businesses who understand this critical dynamic of making a profit in the 21st century environment, he said, "will be the businesses that deliver long-term sustainable growth for years to come, no matter how economies shift and evolve."