Stirring Up Corporate Culture with Gary Hirshberg

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For 25 years, Gary Hirshberg, the co-founder and "CE-Yo" of Stonyfield Farms, has shown that making yogurt doesn't necessarily require the same old culture. From the get-go, this environmental activist has used his decided capitalist venture as a laboratory to promote green business practices. Along the way, he's harnessed his idealism and iconoclasm to build one of the leading brands in the dairy case. All the while, he's demonstrated that getting bigger doesn't necessarily mean having to lose one's passion or values. GreenBiz executive editor Joel Makower talked with Hirshberg recently on the occasion of the publication of his new book, Stirring it Up: How to Make Money and Save the World.

Joel Makower: Gary, you said in your book that economic self-interest is the most powerful if not the only force capable of bringing about the changes needed to ensure the well being of the planet. That doesn't sound like your typical environmentalist manifesto.

Gary Hirshberg: No, but I think it may sound like a wizened, gray-haired old environmentalist. I've been involved in various kinds of activism for 30 years and what I find is that not unlike political campaigns is a kind of emotional ebb and tide and certainly in general that ebb and tide sweeps up the activists, the already convinced.

But when you look at trying to penetrate deeper into society, into the mainstream to make true and lasting changes, I think in the end it's important to face up to the fact that we are an economic species. We are driven by where the comfort is, where the jobs are, where the safety and security is and that means it has to make economic sense.

JM: So how have you managed to bridge those two? It sounds like it requires a very different mindset than most businesses have these days.

GH: Well, I think it is a different mindset in sort of totality and if you say, at the very philosophic level, I think you're absolutely right, but when you get down to practice you realize it's not so complicated. What we used to call total quality management (TQM) back in the 80's it was really about making sure there were no stones unturned in terms of your outputs of your business. Are you operating at the most efficient managerial level possible? The idea of greening your business or being greener as an economic entity merely takes what used to be called TQM and takes it external.

Let's take into consideration the environment, the community, the supply chain upstream and the distribution chain downstream and recognize that these are practical opportunities to either reduce expenses or increase your profits by building affinity with your consumers. So in practice, what we're really talking about here is plugging leaks but also recognizing that the action of plugging leaks, that is of improving your efficiency makes you potentially more appealing to your consumers.

One interesting thing, Joel, is that we've discovered of late is nearly everybody who does a climate footprint in their business discovers that their supply chain is in fact where the lion's share of their footprint exists. So in practice if we're serious about making an environmental difference or even if we're not, if we're just trying to make more money supply chain is obviously one of the first places you go. You want to have a more secure supply; you want to have the most efficient and lowest cost supply and so forth and so on. So this attitude that again, could be seen as highly radical is really no more complicated than looking at where the biggest opportunities lie to reduce our costs.

JM: You sound like this is a lot of good business sense and of course a lot of it is but I'm struck by as you wrote in the book some of the things that you did as a company that just flew in the face of what is really conventional business wisdom. For example, you paid some suppliers almost twice as much for certain ingredients. You hardly do any advertising. In fact you promote other's causes on the package labels. You promote government oversight for your business and you pretty much leave no stone unturned in terms of talking about your environmental progress or lack thereof if you're actually not doing as well as you had hoped. How do these options at the time come to you as good business sense when in fact it's sort of the opposite of what everyone else has done?

GH: Sure. Good question. Well of course you have to pull that question apart. The government standards for example, I'm certainly not a fan of big government but in the case of organics lack of a clear definition of what is organic, lack of a clear standard would allow organics to become what natural is now which is a meaningless term. So this is one of these instances where in fact commerce has needed to have something that either makes it clear that your product, your service, your process is organic or not, black or white and unfortunately regulation is the only real way to do that along with, by the way, the teeth to support it.

In the case of the supply chain though when we started out we had -- I often joke that the only problems we had -- we had a wonderful company. The only problems we had were no supply and no demand. All kidding aside nobody knew what organics was but we knew that in order to move farmers to a place of greater comfort that we as a processor were going to around as a reliable customer it wasn't just sitting around the kitchen table and saying, "We're nice guys. You ought to sell to us and turn your lives inside out and go through this three year process of converting your fields and your animals," and so on.

What it really came down to was we needed to pay them enough money to give them an incentive to take that risk. Of course farmers converting to organic are no different than all the rest of us. As the early pioneers, if you can get a couple of them then they'll move others there. But it's a big, big leap that we're asking them to make.

They have I think in hindsight now realize that in fact in most cases for our farmers they've said, "This is the most economic thing they could have done." Many of them have made money for the first times in their lives after farming decades and having converted -- only after having converted to organic. But for us it was a matter of not just enticing some farmers over but really offering a completely different economic model that took them off the roller coaster ride that is conventional commodity milk pricing in this country. The leap of faith though, to cut right to the heart of your question, is that the consumer would ultimately care about any of this stuff.

I'll be the first to admit that when we started we were kind of preaching to a small chorus and the art I suppose if there is any in what we've discovered over these 25 years here is that by being very up front about these steps that we're taking which as you say are sometimes illogical we endear ourselves to the consumer. The leap has to be one for any business whether you're selling B2B or directly to consumers that you're going to reach -- have an emotional connection with your customer. I would just submit that my experience says that if you can achieve that and again, an emotional connection is not a frail one. It's something that you build that's got integrity.

You have to do your part to live up to their expectation but if you achieve it then you get this thing that I call the Holy Grail of consumer products, which is loyalty. The economic reality of loyalty is that you have to spend less on advertising or marketing once you've achieved it. I think that the average consumer, certainly the average business person now understands that externality is like climate, are going to have to be factored into our businesses. Therefore if you can provide them solutions that will help them to reduce their climate footprint, that will help them to be see in a solution then they're going to be a bit more loyal to you.

JM: I'm wondering whether the kinds of things that you're talking about on here, the things that you've done in your business are things that only a start up, smaller company can do or are these things that a larger, much bigger ship to turn can actually make the kind of changes or take the kind of daring steps that you've made?

GH: Yeah. Well through most of my career I wondered the same thing and frankly what finally led me to capture these thoughts in a book was my very clear realization that in fact this is -- we're ready for mainstream here. I came to that conclusion by my close working relationship with Groupe Danone. For certain in the 80's and 90's to go organic or to measure your planet footprint or to be concerned about these externalities took a certain amount of -- I don't know -- kind of a mutant gene or something.

It took a definitely a different perspective. But now, even at the highest levels of consumer products and again, Danone is the fourth largest food company in the world. These folks, number one, do not need to be convinced at all that cutting their climate footprint, reducing their use of fossil fuels is money in the bank. But secondly, they are desperately seeking competitive advantage over -- in the case of Danone Nestle, Kraft, Unilever and so forth. So for them to be able to make themselves more appealing to a Wal-Mart who has clearly stated they want their supply chain to be responsible to someone who is just looking for the most efficient cost effective way to produce the highest quality or whatever the customer's requirement. When you lay all of this out in sort of simple -- all the sustainability talk out in terms of simple, competitive advantage these guys are all over it.

The case in point is that Danone is in the bottled water business, which is obviously a problematic business when you look at environmental footprint. So what they've been able to do again, with enormous buying power is convert their plastic bottles for Evian bottled water into 100 percent recycled material. They've done a complete climate map of their entire supply chain and they're now reaping enormous returns from all kinds of reductions everywhere from literally the source right through to the end consumer.

They're hardly alone. Royal Dutch Shell now is building or proposing to build the largest wind farm in the world on the North Sea, enough to power London. If you think that they've gotten there because of some moral proposition -- we're talking billions of investment -- then you're completely missing the point. They see this as the next economy. They recognize that there's maybe endless amounts -- maybe not -- we're not at the very end of the oil supply chain but we're probably approaching the end of the cheap oil supply chain. Therefore they need to see themselves as an energy provider looking at renewables as much as they've looked historically at fossil fuels.

JM: You're talking about Groupe Danone which is the big French company that has purchased -- is it majority share of Stonyfield?

GH: They have a majority.

JM: Obviously a big business. I was struck in your book about the sort of epiphany moment that you had back in 1982 when you visited Disney's Epcot Center in Orlando, Florida and saw the Kraft Pavilion. I think I was there just about that same year and probably -- so we sat in similar cars on the same path. You were struck that this is basically a corporate advertisement promoting all the things that corporate food production now represents, fertilizers and herbicides and pesticides and monoculture and everything else. I'm wondering 25 years later now that you're part of a big company and that both you and Kraft have likely evolved what do you think of Kraft now.

GH: Well it's very interesting. Of course the story for those who read the book as you have will learn that really they inspired me not by their positive role model but by the negative role model. What I recognized that day was that for the 25,000 people who were visiting my little ecological research institute that's how many people pay to go there every day. I said to my mom who was the senior buyer down at the Epcot Center, "I need to become Kraft if I want to move my values and my ecologic proposition into the mainstream. I've got to have that kind of reach."

So the funny thing I really emulated Kraft. I wanted to become as efficient as they were in reaching the consumer. Fourteen years after that statement we did pass Kraft in sales of yogurt and have really never looked back. We're five times their size. But interestingly just the other day my sister brought me a package of Kraft Organic American Cheese singles.

Now we can debate the packaging problems of American cheese singles but the reality is while I set out to be like Kraft then I'm now very pleased to tell you they've set up to be like us. What we did with Danone, Joel, was something very unique and almost anti-capitalistic. Danone bought out my founding share holders, all 300 of them and really ultimately owned 80 percent of the company but they left me in complete control, literally with majority control of my board. What that tells you is that they recognized that there was something more than just a good brand here. There was intellectual capital; there was a relationship that I really delve into in the book.

With our consumer that ties all of these points together, that demonstrates that you can be committed to sustainability, run an efficient and profitable business and build a bond with consumers without spending as much on advertising. Now I guarantee you that there isn't a large consumer products company in any sector out there who isn't interested in that discussion because they're all finding out that advertising is much less effective than it used to be. People are over messaged and more cynical than ever and they don't really believe what companies tell them. But what consumers do believe is what another consumer tells them.

So whether it's Kraft or Kellogg's or Nabisco or Danone these guys are through new media, through more thoughtful and cause related in many cases marketing they are working very hard to create that kind of word of mouth phenomena. The only way you create that is by building an emotional tie to the consumer, by building loyalty. So the way I view Kraft and all these other large companies is they really are the way that we're going to get into the 21st century here, the way that we're going to become a more sustainable economy. We're not going to get rid of them.

We've just got to change them. Fortunately they are all coming to us. They are all discovering that this is a way to make more money, build loyalty, reduce their dependence on advertising and in the long run build a more sustainable enterprise.

JM: Gary, you describe yourself in the book as unabashedly optimistic and hopeful and you certainly sound that way in this conversation and yet I know personally that you're probably your biggest critic. Do you think that Stonyfield Farm will ever be good enough?

GH: No, I can't imagine that we ever will be and the reason for that is that you and I are sitting here using words like sustainability and economics but what we're actually talking about is evolution. You trace the history of humans relationship to the planet and what you find is that wherever we could rub two sticks together and make something economic, something better than the sum of the parts then we would do so. We're a practical species and therefore when oil's there to be extracted and we labor under this myth of something called away where we can send our waste or we labor just with a more fundamental myth that we can extract from the earth and produce something called waste that doesn't exist in nature. These are -- we need to reflect on these steps and these approaches to the planet and recognize that they're pretty primitive and we've got to get to a much higher level again.

In my own view it should be by mimicking nature where again, the amount of sun striking the U.S. in a single hour is enough to power our economy for a year. There's energy there. We just have to adjust our minds to it. So I view Stonyfield's opportunity and challenge the same as I view our challenge and opportunities as a species which is that we're engaged in a process of continuous improvement.

If there's any hope for our children it's that some of us will figure out that we don't have to produce and toxify our planet, that we don't have to exploit every last bit of non-renewable resource, that there are more sustainable ways to do it. So Stonyfield is an experiment. It's obviously I think a successful experiment but we have a long, long way to go to reduce our carbon footprint to where I want it to and I don't think any of us should be faltered for that. No one in any enterprise or in any of our lives should be carrying around guilt.

We are where we are in this evolutionary cycle but on the other hand we're all compost sooner or later. A friend of mine says, "Don't take life too seriously. It's just a temporary condition." My view is I've got a couple more decades here hopefully of productivity and it's my intent to keep on pushing the envelope with this company and others that I'm involved with again, just try to expedite that evolution.

JM: Well Gary it certainly has been inspiring and your book, Stirring it Up: How to Make Money and Save the World, has a lot more inspiration about how you've gotten as far as you have. Thank you so much for taking the time to talk.

GH: I appreciate it Joel. Thanks.