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Self-Serving Stewardship: How Manufacturers Help the Planet

8 minute read
Stephan Faris

In the late 1980s, Pier Luigi Loro Piana was in a bind. As a chief executive of the Italian luxury-fashion company Loro Piana, he wanted to offer his customers the finest animal fiber in the world: the hair of the vicuña, a small llama-like creature native to the high plains of the Peruvian Andes. The problem was that the animal was listed as endangered, its fleece subject to an international embargo.

The solution he came up with was to become involved in the animal’s protection. Until the embargo, which had been put in place in the 1970s, the vicuña had been at risk of being hunted to extinction. Its hair, finer than the softest cashmere, fetched high prices on the global market. (Loro Piana’s father Franco had been among the first to import it to Italy.) But the demand had at one point cut the total population to just 5,000. And while the ban on exportation allowed the numbers to rebound, there was little chance the hunt would be permitted again.

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The answer, he decided, was to partner with the government of Peru to develop a new way to harvest the vicuña’s hair. Instead of the animal’s being killed for its fleece, it would be sheared like a sheep. The company would get the raw material to make its coats, scarves and sweaters. The Peruvians would be blessed with a new source of income. And best of all, the vicuña would continue to recover. “We needed to find a socioeconomic role for the animals to give the local Peruvians an incentive to protect them,” says Loro Piana. “A live vicuña needed to be worth more than a dead one.”

Call it an act of selfish environmentalism. In 1994 the Italian firm became the majority partner in a consortium, the first organization since the ban to be allowed to buy, export and market the luxury fiber. Today the company runs a 2,000-hectare reserve dedicated to the preservation and study of the vicuña. Across the entire Andes, the animal’s population is nearing 200,000. Once every two years, those in Peru are gathered for shearing. The rest of the time, they range wild.

Loro Piana isn’t the only company that has turned green in service of its bottom line. Just as its chief executive realized that without the vicuña, there would be no vicuña scarves, other executives around the world are becoming aware that ecological degradation has the potential to put their businesses at risk. “A lot of companies start out with the environment as a way to look good,” says Phil Radford, executive director of Greenpeace USA. “Then they find out there are both reputational and financial gains.”

For Coca-Cola, that realization came in the mid-2000s, when the global beverage giant became entangled in a controversy over its water use at a bottling plant in India. Nearby villagers held the company responsible for a dramatic drop in the level of the region’s groundwater. Their demonstrations caught the attention of environmental activists, and the resulting negative publicity sparked protests and boycotts at college campuses across the U.S. and Europe. Coming as it did at a time when the company was expanding its pure-water products like mineral water, the unrest rang as a warning. In the future, Coca-Cola’s fortunes would be tied to those of the environment.

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Today Coca-Cola maintains a database combining water-flow data with predictions for population growth, economic development and climate change, giving it an idea of the challenges its various plants can expect to face in the coming century. It has asked all its facilities to map out a water plan, to understand where their supply comes from and what they can do to protect it. “Because we operate in all but three countries, we’re somewhat a canary in a coal mine,” says Greg Koch, director of the company’s global water-stewardship program. “We’re seeing water stress manifest itself in all types of places and in all types of ways.”

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In some places, like California, the focus is on water conservation. In others, like Ireland, the company has worked to help upgrade the infrastructure. In India, it is teaching farmers about drip irrigation. In Vietnam and Thailand, it has teamed up with WWF to help preserve the entire Mekong River basin. “These efforts are not a separate thing [from the company’s core business] — like, here’s what the environmental guys are doing,” says Koch. “Yes, there’s some altruism involved and wanting to do the right thing, but the single biggest reason is our business.”

What Coke realized is that environmental risk is by its nature tied up with political and reputational risk. “Our water use is highly visible,” says Joe Rozza, a global water-resource-sustainability manager at the company. “It’s in our product as an ingredient. And we use it for cleaning and heating and cooling.” In many cases, to be sure, Coke’s buying power would allow it to continue to operate even in areas where water had become polluted or scarce. But while watching the taps run dry would be bad enough, the graver threat, as the company learned in India, is being blamed for the shortage. “Water is part of the social, political and economic fabric of society,” says Rozza. “It touches everybody’s life every day. It’s really redefining the risk landscape of the future.”

Still, there’s no question that environmentalism in pursuit of profit has its limits. It works only as long as it serves the bottom line and doesn’t undermine the company’s core business. “McDonald’s is a great example,” says Radford of Greenpeace, which has worked with the fast-food giant in efforts to reduce tropical deforestation. The company’s environmental efforts are commendable, he says. “But the world simply can’t sustain that much meat. So that’s one company that’s hard to imagine being truly green.”

Loro Piana, for its part, sells a lot more cashmere than vicuña hair — despite serious concerns by environmental groups that the downy-haired goats that produce cashmere are the cause of land degradation and desertification. And it’s not clear that the company could afford to maintain its commitment to the vicuña if demand for the fiber suddenly dropped. What would happen to the animal if the economic underpinnings of its preservation ceased to exist? Business-based conservation “needs to go in tandem with broad government policies and incentives,” says Justin Ward, vice president of business practices for Conservation International, an environmental group that blazed the trail for corporate partnerships. “It’s not an either-or proposition. The question is, How can government policies and private-sector action be most complementary?”

One way the two can work together is for companies to act as canaries in a coal mine. Consider the issue of climate change, a pressing one for politicians and executives alike. “When we talk climate change, what we’re really talking about is the diminishing of quantity and quality in our supply chain,” says Jim Hanna, director of environmental affairs at Starbucks.

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For the Seattle-based coffee company, restrictions on carbon emissions are nothing compared with the threat that global warming could pose to its primary product: the climate-sensitive arabica coffee bean. Already, the company’s small-scale suppliers have complained about changing weather patterns that have begun to disrupt their yields. Warm winters have unleashed pest infestations; earlier rainy seasons threaten to drown their crops; stronger storms are wreaking havoc in the fields. And while it may not be possible to link these types of specific environmental changes to global warming, they offer a worrying window into the future. “We’re not going to wait around for the impact to be so severe that there’s nothing we can do about it,” says Hanna.

Some members of Congress are skeptical about global warming, but Starbucks joined a coalition of companies, including Nike, Timberland, Levi Strauss and Sun Microsystems, to lobby the U.S. government to take action to reverse climate change. “Our goal in Washington is to raise the awareness of elected officials that not everybody in the business community opposes legislation on climate change,” says Hanna. Their efforts, say the companies involved, are slowly bearing fruit. “Congress really seems to like to hear from business leaders,” says Anna Walker, senior manager of government affairs and public policy at Levi Strauss, whose chairman has testified before the House Select Committee for Energy Independence and Global Warming. “When it comes time to vote, it’s helpful to them that their constituents hear that there’s a business rationale behind their decision.” When it comes to the environment, sometimes it’s still money that makes the most convincing case.

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