Without a Map (Part 1)

A born entrepreneur, the ex-CEO of Seventh Generation talks about today’s labor movement, changing the rules of business and politics, and the biggest failure at his old company.

More than twenty years ago, Jeffrey Hollender founded Seventh Generation and went on to build the fledgling company into every affluent customer’s favorite badge of sustainability. In October of last year, Hollender was forced out of the company. Today, he continues his fight to provoke business leaders to think differently about the role they and their companies play in society.

K: What’s going on with business and politics nowadays? The Federal government almost shut down last Friday. Are business and politics inseparable with the amount of lobbying, influence and corporatism?

Hollender: Business has far too much influence in politics and that is bad, on the one hand, because citizens feel disenfranchised and don’t feel that they have a vote and don’t participate in the political process. But worse, we have a situation where a relatively small group of very large companies have our political agenda and our economy effectively held hostage to their own interests.

If you just look at the recent controversy surrounding the fact that General Electric pays no taxes and in fact will get a $3-4 billion tax refund, we have also created a terribly uneven playing field. How can small and medium-sized companies that create most of the jobs and are critical for our economic recovery compete with large companies who get large subsidies from the government and don’t get to take advantage of the loopholes that a company like GE gets to take advantage of?

It’s a serious, serious problem that is, I think, crippling our economy and spoiling our environment.

I want to circle back to that, but first let me ask you this. I just moved to DC from Wisconsin, and am wondering, have you been following the fight with WI Governor Scott Walker and his attempt to eliminate collective bargaining?

Yeah.

To me, it seems like Walker was trying to destroy the Democratic party and it wasn’t really about labor unions. However, the idea of eliminating labor unions doesn’t seem all that outdated to me in a world where transparency is king. Curious to know your thoughts.

Over a 30-40 year period we’ve seen membership in unions fall roughly around thirty-five percent to under ten percent. A significant amount of that decline is a result of business’ influence on politics that have increasingly made it difficult for unions to organize and acquire new members.

There is no question that there has been a campaign by politicians as well as certain companies to marginalize, if not totally eliminate, the union movement in the United States. And I think that’s dangerous because the unions were probably the only significant political counter balance to big business in America.

Right…

As a co-founder of an organization called the American Sustainable Business Council that has 65,000 small and medium-sized companies as members, more of these businesses have taken a position to support labors like collective bargaining and we don’t see that as bad for business. We believe, as I do, that we need more good-paying jobs because an economy where people are making minimum wage is an economy where the government will endlessly have to subsidize families because they can’t afford the services that they need to survive.

Do you see any differentiation between public and private sector unions though? Where public sector unions might not be as necessary as private sector unions?

No, you know, I don’t see a large difference. I think there are a huge number of challenges with the way the teachers’ union has functioned. And I think the challenges that we have in eliminating bad teachers from the system are problematic. But that doesn’t mean we shouldn’t have a teacher’s union. I think the issue is that we need to make some changes in the way a teacher’s union functions. But I would not ever go as far as saying teachers should not be unionized.

Okay. Let’s move on. It seems like a lot of your initial drive in this area of social justice was a result of the privilege that you had growing up. Do you see, at all, that being socially conscious is a luxury of the privileged class?

No, I think that being socially conscious is in no way something that is a luxury of being privileged. There is a tremendous social consciousness within the union movement. There is tremendous social conscious in all aspects of society. I wish there was more social conscious within the privileged. I think too many people who are very comfortable and affluent don’t accept their responsibility to share that wealth with too many other people and to advocate for people are aren’t was well off as they are.

It’s sad that, statistically, lower income people give away a greater percentage of their income than affluent people do, and I think that one fact alone would cause one to not come to the conclusion that the privileged are more socially conscious than the unprivileged.

What about being environmentally-friendly? Is that a luxury of the privileged class?

Well, environmental consciousness has become too much of a luxury of the privileged class for a couple reasons. One, environmental products are often more expensive than traditional products and one would not expect people from all economic classes to choose to pay a premium. Secondly, because people who are more affluent tend to take advantage of and access higher levels of education, they better understand the reasons why sustainable products are important.

I have always said that one of the biggest failings of Seventh Generation was that it reached primarily more affluent consumers who were already healthier and living more sustainable lives, and was not effective at reaching more people broadly.

That is true generally of all types of green products and organic food, and underlying that is an economic problem. Why is it that green products or organic foods should cost more money? They shouldn’t. They cost more money because those businesses don’t externalize their costs on to society the way other businesses do. By internalizing those costs, the product costs more money. But it shouldn’t be that way; it should actually be the reverse. Sustainable products – because they don’t have as negative an impact on society and the environment – should actually cost less money.

I completely agree. What is the solution?

Well, the solution goes back to where we started the conversation. As long as large companies control the political process, we won’t make much headway in changing the tax laws or any of the issues that allow businesses to externalize their costs. We take one example alone, global warming, and we can’t even get there to be a price on carbon. We’re a long, long, long way from changing that playing field. Unfortunately, we live in a society today where we make products that are often bad for your health and bad for the environment artificially cheap. People consume those products that adversely affect their health and the environment and we move more quickly down the road in the wrong direction.

So what’s bad for you is good for the economy? Is that how it’s playing out?

What’s bad for you is good for a select group of large companies.

Right.

It’s actually not good for the economy because when people eat the wrong things and don’t get healthy, what we see is rising health care costs that ultimately make America less competitive with the rest of the world.

What we have today is a paradigm where companies are making the most money they’ve made in sixty years. Corporate profits are at an all-time high and growing faster in the fourth quarter of 2010 than they’ve ever grown in sixty years. At the same time, as we have massive unemployment and an environment that is being degraded. And unfortunately we’ve created a system that allows companies to make huge profits while people are unemployed and the environment suffers. So we have systemic problem in the way we’ve designed our economy.

In Part 2 of this interview (coming next Friday), Hollender talks about how he would launch a company today, the tensions of scale, and what motivates him the most.