What Matters Most:

CORPORATE VALUES AND

SOCIAL RESPONSIBILITY

Jeffrey Hollender

A
bout a year and a half ago, I started writing a book about the true
nature of business responsibility. It was going to be a book written
in response to the climate of scandal caused by the whole sordid
Enron/WorldCom/ImClone mess. I was sure this atmosphere was
going to result in companies of all kinds jockeying to look like good corporate
citizens even as they continued practicing bad business-as-usual behind the
scenes. I wanted to expose the coming fraud.
I wanted my new book, What Matters Most (Basic Books, 2003), to be
about exposing another dose of corporate greenwashing. I was going to take
companies to task for making it look like they were doing the right thing when,
in fact, they were doing the same old wrong things beneath the thinnest veneer
of social and environmental responsibility. I was raring and ready to go, primed
to play the muckraker and unmask the evildoers. However, the more I dug, the
more I discovered a single fact that surprised even me—namely, that some of the
changes occurring in America’s corporate culture are not window dressing at all,
but are actually important, substantive changes rooted in a sincere desire to
make the world a better place. It turned out there are companies taking respon-
sibility to heart and changing the way they did business.
As I continued to write, what emerged was a much different book than
the one I set out to create. I kept discovering businesses that really are changing
and businesspeople legitimately thinking beyond bottom line mentality. A book
that I thought would likely end with no small sense of hopelessness, instead

This article is based on a presentation by Jeffrey Hollender on March 30, 2004, as the sixth annual
Peterson Lecture on Business Ethics sponsored by the Center for Responsible Business at the Haas
School of Business, University of California, Berkeley. <www.haas.berkeley.edu/responsiblebusi-
ness>

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 What Matters Most: Corporate Values and Social Responsibility

ended up imbued with tremendous optimism; the further I dug, the more I saw
a light at the end of a very long tunnel. Companies were coming to the conclu-
sion that they did not want to end up shattered wrecks like Enron and World-
Com. They were beginning to engage in the fundamental processes of change
necessary to ensure their sustainability and, perhaps more importantly, our own
as well.
I must admit that I also wrote the book because my whole life has been a
dance with issues about values and responsibility. I felt that through my experi-
ence as President and CEO of Seventh Generation, the nation’s leading brand of
natural household products, I could help explain the history of social responsi-
bility, where it has come from, where it is today, and—most importantly—how
we as businesses, as employees, as customers, and as investors can engage and
help move the rest of the business community forward in a direction that will
maximize its positive impact on the world.
Of course, every company has their own timetable for such develop-
ments. By many measures and in many opinions, businesses today are not mov-
ing fast enough. Make no mistake, they are moving, and this is overwhelmingly
positive news. Corporate responsibility has become a very widespread move-
ment. Some twenty-five hundred companies around the world, including many
of the largest multinationals, have voluntarily decided to start looking at their
social behavior, articulating the types of commitments they want to make and
creating corporate social responsibility reports that place this commitment in
black and white for all the world to see.
Beyond this voluntary participation, countless other companies have
been forced into being more responsible whether they like it or not. The largest
insurance company in Britain, for example, now requires every firm that it
insures to make disclosures about envi-
Jeffrey Hollender is President and CEO of the ronmental risks, human rights risks,
Vermont-based Seventh Generation, the leading risks in relationships with communities,
brand of natural household products in the United and so on, because as an insurer they
States. He is the author of What Matters Most:
How a Small Group of Pioneers Is Teaching Social know that these things matter. More to
Responsibility to Big Business, and Why Big Business the point, they can refuse vital insurance
Is Listening. <www.whatmattersmost.biz> coverage to companies whose excessive
wrongdoing is cause for concern. Since
the businesses this company insures represent over twenty-five percent of the
total value of the British Stock Exchange, this policy has had a significant impact
on the behaviors of many companies.
There also appears to be a populist sentiment of sorts at work here.
Underneath the senior management at most companies, I found vast ranks of
employees who have a tremendous desire to take the high road and do the right
thing. In most cases when things go seriously wrong, it is poor leadership that
sends the company in the wrong direction, not thousands of employees who
conspire to do the wrong thing. Workers and managers are seeking opportuni-
ties to do good and are waiting for someone to structure an activity that they can

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 What Matters Most: Corporate Values and Social Responsibility

participate in that will allow them to make positive contributions to their

community.
The most frequent obstacle to this “will of the people” is a lack of enlight-
ened corporate leadership. However, in researching my book, I also found that
far more corporate leaders than I would have imagined have “gotten religion”
and have made becoming responsible a fundamental part of where they want to
take their company. There are the well-known examples like Ray Anderson at
Interface Carpets in Atlanta, Georgia, but there are also thousands of unknowns,
from Chiquita to Intel, who have made many of Interface’s same changes with-
out seeking or receiving the same level of publicity.
While many of these CEOs have had a legitimate change of heart, others
have simply finally begun to see the purely practical light and decided to make
changes, not necessarily for altruistic reasons, but because they make good eco-
nomic sense. Many have now seen how their competitors’ financial perform-
ance has been significantly improved by better practices. Though I am happiest
with purer means of motivation, I am glad that businesspeople are at last grasp-
ing the fundamental truth that by being more responsible they can quite simply
make more money. They can mitigate financial risks they would otherwise
encounter, retain their best employees, build stronger and more respected
brands, live in greater harmony with the communities in which they do busi-
ness, and boost the bottom line. Whether it is a CEO that realizes his or her
company’s contribution to global warming is an increasing legal liability or one
who understands that such pollution is an inefficiency and inefficiencies cost
money, the result is better behavior that benefits us all.
I recently read a report where the German sustainability rating company
Oekom Research and Morgan Stanley Dean Witter had completed a study indi-
cating that companies with higher sustainability ratings outperform their coun-
terparts who score lower on sustainability practices. The study, which examined
the 602 companies in the Morgan Stanley Capital International World Index
that have received Oekom’s Corporate Responsibility Ratings, found that the
186 highest-ranked companies in terms of sustainability outperformed the
remaining 416 companies by 23.4 percent between January 2000 and October
2003 [<www.socialfunds.com/news/article.cgi/1289.html>].
I think this represents a fundamental shift that is occurring in society and
business, one that is making responsible corporate behavior an imperative rather
than something a handful of businesses choose to do. I also think this shift is
fundamentally raising the expectations that the public has of the role business
should play in society. There are a number of signs that the public will not toler-
ate the kind of behavior that they tolerated in the past. There is a new level of
expectation, and it is going to change the unspoken guidelines under which
commerce operates. It does not mean that every business is going to become a
good business, but we are in the process of setting the bar higher than it has ever
been set before, and these new standards are going to force some level of change
on even the most reticent companies. Public opinion, public relations and public

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 What Matters Most: Corporate Values and Social Responsibility

pressure from an increasingly enlightened citizenry are already starting to see

this change.
Add all these factors together, and it is clear we can be optimistic about
the changes taking place. Like a giant, lumbering tanker in the cumbersome
process of adjusting its course, the corporate world is slowly turning itself
around and heading in the right direction. Because it has to; because truly,
if profits are going to survive in any meaningful form, the engines that create
them are going to have to become fundamentally involved with the problems
that we face as a global society.
The key to change is to keep up the pressure, and while many of my
motivations for writing this book changed as it unfolded, I did not set out to
write a book that was just for people in the business community. Though I
wanted it to be useful to them, I wanted to write it for the rest of us because it
is our responsibility as consumers, employees, investors, and individuals to help
the companies we buy from and work for become conscious of the bigger picture
and attuned to the future we are creating. I also wrote the book for those who
work in the nonprofit sector who want to better understand how they can con-
structively and strategically engage with businesses and find ways to work col-
laboratively rather than in constant conflict.
The role of NGOs has changed as dramatically as the role of businesses
has changed. We think of Greenpeace as this endlessly combative organization,
casting a bright light on all the corporate misdeeds around the world, and yet
today, you have Greenpeace in England working in deep collaboration with
Shell Oil Company not over a few months, but over many years. This collabora-
tive relationship is helping Shell find a way to change, creating a positive impact
on the environment. This is a tremendously important and positive change. It
does not mean that those relationships are without conflict, the book articulates
how difficult and strained those relationships can often be, but in the end those
relationships are responsible for producing positive change. At BP and Shell, at
Chiquita, at Starbucks, at Nike, at almost every company I can think of, some
significant part of the positive change has come about because of a relationship
with a NGO.
Another important challenge is that corporate responsibility issues are not
black and white. There is no such thing as a perfectly responsible company. You
can find something wrong with every business on the face of the earth including
Seventh Generation. Even those companies that you might think are “walking
the walk”—such as Patagonia, Tom’s of Maine, and Ben and Jerry’s—have issues
of responsibility that they need to deal with. That is a challenging picture for the
public, because once the consumer comes to terms with the fact that every com-
pany is somewhat good and somewhat bad, the question for them becomes
“how good is good enough?” How good does a company have to be for the con-
sumers and shareholders and investors to feel like “this is a company I want to
support?” This is one of the most challenging questions both the corporate world
and the public face.

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There are many companies like Nike who became very well known for
mishandling one significant aspect of their business (such as their case labor
relations and supply chain management) and who are not known for—in fact,
have failed to effectively communicate—many of the positive things they have
accomplished on the environmental front. This challenge is compounded by the
fact that the media tends to publicize the bad and largely ignore the good. Often
companies are reluctant to promote their positive accomplishments for fear that
by holding themselves up for doing something good, they will only attract more
criticism—which then becomes part of a never ending spiral of confrontation,
positive change, followed by closer examination, followed by more
confrontation.
Of course, I do think it is through the concept of transparency and disclo-
sure that we as employees, consumers, and investors can get enough informa-
tion to come to those conclusions ourselves. Today, thankfully, there is an
increasing number of third parties who read and evaluate these corporate dis-
closures, much the way financial analysts attempt to decode corporate financial
statements, and who can help draw conclusions with which we can agree or
disagree. What is so hard is that the playing field does not yet have defined and
agreed upon boundaries. There is no consensus about what is an acceptable bal-
ance between the positives and negatives, or a rate of change that is fast enough
and deep enough to clearly conclude that a business is doing a “good” job in
fulfilling its obligation to be a responsible corporate citizen. This is a new world
that business has to navigate through, and this is why they need help.
I am continually asked what key issues a company must address to
become a socially responsible. I think it all starts with values. First, you have to
develop and build consensus and understanding around a clear set of values and
operating principles. This does not mean a list that is mounted on a plaque and
hung on the wall—it must live in the hearts and minds of every employee. Sec-
ond, commitment from the top of the company is key, because if the head of the
company is not committed to being open and honest how can you expect any-
one else to be. Once you are clear on your values, you then move into a more
formal process of determining what structure, benchmarks, and measurements
are needed to evaluate your progress toward achieving a set of goals based on
your values. There are a whole variety of structures. Most of them are framed in
the kind of Corporate Social Responsibility (CSR) reporting companies do to
determine and disclose their socially responsible activities. The benefit of these
reports is that they ask you a series of questions that force you to address differ-
ent aspects of your business. Next, you need to decide how change will happen
operationally—who is responsible for what, where are the conflicts, challenges,
roadblocks, and so on.
I also think the notion of transparency and disclosure is something you
have to come to terms with early on, because the kind of transparency and dis-
closure that is required of a responsible business is very different from what
most businesses are used to. Most businesses are used to only disclosing financial
information, or positive news about new products, new customers, or new hires.

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They are not used to having to report how much pollution they are creating,
what the impact of that pollution is on the environment, and what the health
impacts of the pollution might be. There could be other issues that pertain to
their products’ safety, problems with quality control, conflicts with local commu-
nity groups, or allegations from other businesses of unfair competition that are
all within the appropriate scope of disclosure and transparency. Companies need
to understand and come to terms with what is required from a transparency and
disclosure perspective because if you don’t, you will never create trust, which I
think is the fundamental part of being a socially responsible business.
As I noted, businesses are looking for non-profit partners to help them in
the process. If you are operating in a third-world country and you are extracting
natural resources, it is probably not on your agenda to build constructive com-
munity relations with the indigenous people in the area. You may not have the
experience needed to develop those relationships so you create partnerships
with NGOs who can help you address those challenges in a responsible manner.
I think it is important to remember that we are in the middle of this fun-
damental change and while we have learned many lessons on what works and
what doesn’t, there are many unresolved questions that we are still in the
process of seeking answers to. It is a messy process. Furthermore, it is a new
process that has poorly defined boundaries—when we talk about responsibility,
what exactly are we responsible for, how broadly does that responsibility extend,
where does it start, and where does it end?
We have seen how difficult it is for businesses to live in a time of such
rapid change, where the expectations of their stakeholders can change from
month to month. A company’s responsibility often seems to grow ever wider in
concentric circles, bringing greater territory and increasing the tension between
what they are obligated to account for and what critics feel is fair to take aim at.
If you think about Nike, everyone today can say they should have been respon-
sible for the way the laborers who made their products were treated by the con-
tract manufacturers who employed them; however, ten years ago there were
thousands of American companies who did not think twice about this and
would have never considered it part of their responsibility. Our whole economy
was built in part upon goods and services provided by third-world countries at
very cheap prices. We as consumers have benefited from that structure and no
one asked the question “why is it so cheap to get things made in China?” Today,
I think that most businesses that sell a consumer product that bears their brand
name understand the risk and responsibility equation that goes along with third-
world manufacturing. What they don’t understand is what is next, what will
they be accountable for tomorrow that they have not thought about today.
I have done a lot of thinking about the ways we have put such principles
in motion here at Seventh Generation and how others can use the lessons we
have learned at their own company.
I should probably start by saying that Seventh Generation is far from per-
fect and that a core part of corporate responsibility is being open about our fail-
ures and shortcomings. We do practice a whole variety of techniques to help

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ensure that we behave in a manner that is in keeping with our values—it all
starts with those values. Developing a culture that both understands and is com-
mitted to those values is essential. Articulating the behaviors that are consistent
with those values and creating benchmarks to monitor your behavior against
your values is a discipline we are just learning to master.
We started the process long ago by clearly defining our values, our
mission and our operating principles. Once we established who and what we
wanted to be as a company, we made those values a benchmark against which
we could measure our actions and decisions, and, ultimately, determine whether
or not we were accomplishing our objectives. While excellent employee benefits,
community involvement, charitable donations, outstanding customer service,
and products that exceed customer expectations are all important, if not critical,
we practice corporate responsibility based upon a new set of metrics: How hon-
est and complete is the communication between staff members as well as with
customers and other stakeholders? How safe is it to challenge your boss (how
many people are willing to show up and sit across from me and let me know
that they feel that my own behavior seems to conflict with our stated values)?
What is happening with employee turnover, and why are people leaving? To
what extent do our products and our entire company deplete the planet of non-
renewable resources, create greenhouse gasses, or produce solid waste? These
are just a few of hundreds of questions we ask and track on a daily basis.
We do a variety of other things, too. Every year we take several days
and have a staff retreat where we explore what our values mean, how well we
are doing at living them, and in what ways can we make changes to better live
those values. We just completed our first corporate social responsibility report
(released on Earth Day 2004) to publicly set forth how well we are doing, how
we intend to measure ourselves, what a good job means, and what goals we
are setting for ourselves in the future. We integrated personal, community, and
value-based goals into everyone’s job description and performance expectations.
How well our employees do on dealing with their personal and community
goals affects how much of a bonus they earn. We also use coaches to facilitate
interpersonal development; we provide on-site massages; we take two days a
year to snowshoe, raft, or just walk through the woods together; and we insist
that everyone in the company serves on a committee like our “green team” or
“community service group.” There is a long list of other activities. We focus
pretty obsessively on the importance of work-life balance.
We also use 360-degree reviews, where everyone in the company evalu-
ates everyone else. This means that everyone at Seventh Generation gets the
opportunity to critique my job performance, the way I live our values, and the
degree to which I effectively provide leadership for the company’s vision. With
a list of about fifty or so measures, it is not a process for faint-of-heart CEOs or
anyone else who is not deeply committed to their own ongoing personal
growth. However, it is as rewarding as it is interesting, and it is most assuredly
helped me become a better leader and a better person, too. Does all this take
away from our business success? Not at all. We have been growing at about 25%

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 What Matters Most: Corporate Values and Social Responsibility

a year for the past five years. We are profitable and have become the nation’s
leading brand of natural, non-toxic household products.
Altogether, the business of bringing socially responsible goals to life is
quite a process; and companies looking to do so should understand that there
is nothing easy about it. Many things have to happen before you can even take
the first step. I will say it again and again, it all starts with values. You have to
become really clear about what your values are and also about what it means
to live by them. On the road to social responsibility, a company is not going any-
where without this necessary map. Secondly, you have to have a commitment
from the top of the company, because if the senior management is not ready to
be brutally honest about what is working and what is not (and where they are
in the process), you cannot really expect anyone else to be either. In my own
case, I found I had to examine the way I led and managed people. As Gandhi
once said, “You have to be the change you want to see.” First and foremost, I
needed to be an example of what I wanted Seventh Generation to be. I had to
exemplify a certain level of honesty and disclosure. That does not mean I have
to be perfect, just honest about where I am succeeding and where I am not. The
trust that was going to be created within the company, and without, had to start
with me. I have come to learn that if you cannot be an example of what you
want your company to be, your company does not stand a chance of becoming
a truly responsible business.
This transparency forms the foundation of trust, and it is very different
from the kind of self-revelation that most businesses know. While companies
commonly disclose their financial information, they are not used to reporting
how much pollution they are creating or publicly considering what the health
impacts of that pollution might be. Adopting this kind of behavior, whether it is
on a personal level or on a corporate basis, can be very difficult because it is just
not in the DNA of most executives. It is not what they have been taught to do.
For the majority of both people and companies, it is uncharted territory littered
with unknowns.
Perhaps the most important thing to remember about this whole busi-
ness of transforming commerce into something that is fundamentally better for
everyone is that we are in the middle of the process, and while we have learned
many lessons about what works and what does not work, there remain many
lessons to be learned and many questions to be answered. With so many ques-
tions, there are bound to be mistakes made along the way. I think it is very
important for everyone to remember that it is okay to make mistakes during the
journey as long as we admit it honestly, openly, and with the best intentions.
Fortunately, in spite of the challenges, I think corporate responsibility is
something entirely possible to achieve on a broad scale. I also believe that there
has never been a better time to bring about this type of fundamental change.
Beyond the passion and commitment of many thousands of companies, the
risks of being irresponsible have never been higher. Today, we as employees,
customers, investors, community citizens, and interested non-profits have the

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attention of the business community. Businesses understand like never before

that they must not only listen to these other voices, they must seek them out.
Just look at the current landscape and you will find that many companies
leading the charge are among the world’s largest corporations. Look at Intel,
which employs sixty thousand people, and you will find a culture, a philosophy,
and a structure that are in keeping with many of the ideas contained in my
book. You will also find a great deal of hope in that simple fact. Big companies
can no longer say that social responsibility is really only possible in small firms.
Sure, it started with companies like The Body Shop, Ben & Jerry’s, and Patago-
nia, but today that baton has been passed to far larger entities. Admittedly, these
larger companies face decidedly different challenges, but I believe that any of
these challenges can be overcome.
This is a unique moment because we have those companies’ attention.
We need to seize this moment and use it to insist that business be in it for more
than the money, to insist that businesses also make a positive difference in addi-
tion to a buck. Business has the power to change the world and make it better
for this generation and those to come. However, that is only going to happen
if we demand that each and every company we patronize commit to this new
paradigm and all the possibilities it represents. After writing this book, I believe
those possibilities are almost endless.
Finally, after having said all this, I personally believe that for all the talk
of metrics and guidelines and benchmarks and indices, that the heart as opposed
to the head may well be the best place to find the real drivers of change. Inspir-
ing people to look inside themselves—for the passions and the ideas and for the
mission and the beliefs that we can all make a difference—is really what matters
most.

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