Do Employees Do it Better? The Role of Business in Sustainable Development

The pattern is familiar.

An entrepreneur or entrepreneurs, such as Ben Cohen and Jerry Greenfield of Ben and Jerry's, or Roxanne Quimby and Burt Shavitz of Burt's Bees, launch an innovative company that challenges conventional business ethics.

In the case of Ben and Jerry's they worked hard to source dairy products locally, and to integrate concepts of sustainability into their business. In the case of Burt's Bee's they eschewed chemical components - by then the norm in personal care products - and with the corporate motto of 'For the Greater Good' tacitly placed corporate responsibility above profits.

However, as the companies grew and the entrepreneurs who started them got older - they wanted to retire, or try their hand at other endeavors and the companies which they started, were bought out, and swallowed up by the very types of companies that they had deliberately avoided emulating.

Does this pattern of business development, repeated time and time again by conscious businesses such as The Body Shop (bought out by Estee Lauder), Tom's of Maine (Colgate-Palmolive), Horizon Organic Milk (U.S. Dean Foods Co.,), Odwalla (Coca-Cola), Naked Juice (Pepsi) evidence that the multinational, publicly traded, corporate model is the only one that we have to create lasting businesses? And what, if anything, does the shape of business have to do with, well, Sustainable Development?

As it turns out understanding and helping to shape the structure and role of business is a critical component of sustainable development. Mega companies such as Wal-Mart, McDonalds and Nestle are often viewed as unsustainable not only because the products in which they trade are often environmentally harmful, but also because their very economic structure is one that typically removes money and wealth from the economies in which they are embedded. They often concentrate wealth, funneling it from local communities upwards to an elite few; a reality that President Abraham Lincoln warned about in an 1864 letter to Colonel William F. Elkins. In it he said,

"I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. As a result of the war, corporations have been enthroned, and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is destroyed."

Although he was off in the timing (the collapse of the Great Depression helped to redistribute a great deal of wealth), in the past 30 years in the United States there has been a protracted period of wealth and income inequality. As of 2001, 10% of the population owned 71% of the wealth and the top 1% owned 38%. On the other hand, the bottom 40% owned less than 1% of the nation's wealth; our current economic recession has only served by most estimates to further entrench this divide.

This is not a good thing.

As Edward Wolf, a professor of economics at New York University and the author of Top Heavy: The Increasing Inequality of Wealth in America and What Can Be Done About It, points out in the May 2003 Multinational Monitor this wealth inequality isn't simply morally repugnant, it's actually harmful to a society's well-being.

"There is now a lot of evidence, based on cross-national comparisons of inequality and economic growth, that more unequal societies actually have lower rates of economic growth. The divisiveness that comes out of large disparities in income and wealth, is actually reflected in poorer economic performance of a country. the high level of inequality results in less human capital being developed in this country, which ultimately affects economic performance."

In other words establishing the multi-national, too-big-to fail, wealth concentrating corporate model as the de-facto model of economic development is not sustainable.

But if selling out a company in this manner is not sustainable, what are the alternatives?

Bob Moore of Red Mill Natural Foods hit upon a solution. He sold out. To his employees. The program just unveiled this February gives his 209 employees full ownership of the business - one that produces and markets more than 400 whole-grain flours, cereals, and bread mixes.

He is not alone in choosing to go this route: King Arthur Flour Company of Vermont is employee owned as is W.W. Norton and more than 11,000 companies in the United States. In fact, an April 2006 International Labor Organization (ILO) World of Work Magazine article says that a growing body of research shows that employee owned companies are successful both in business terms and more widely applicable than most suspect. In addition, because employees are embedded both in the business and in the communities which they work (unlike distant executives at the top of most giant corporations), the willingness to increase profits despite the negative effects on their community are lessened. A 2002 study by the Ohio Employee Ownership Center shows that communities with high rates of employee ownership score higher on fifteen of seventeen quality of life measures, ranging from crime to education, measures communities, than communities without such ownership.

It's not that employee owned is a panacea- United Airlines was employee owned before its collapse in 2003 - but rather that they seem to lend themselves more suitably towards creating sustainable, livable communities. And that is something worth paying attention to.