"Going green" is one of the most frequently used buzzwords in the business world today. Tim Sanders, a former chief solutions officer at Yahoo! and a New York Times bestselling author, says "going green" is just one trendy facet of a much bigger movement that business owners ignore at their own peril. We talked to Sanders about his book Saving the World at Work: What Companies and Individuals Can Do to Go Beyond Making a Profit to Making a Difference, which is due out in September. Excerpts:
What is this revolution in business that your book focuses on?
I call it the responsibility revolution. Consumers across the country have become very sensitive to the impact of how their dollars are spent. In other words, they want to make a difference. They're very alarmed about the environment, communities in crisis, and people who don't make a living wage. Over the last 10 years, they've started to use their money to make a difference. That's why the theme for the last year has been businesses going green—that's what the customer wants. In my research, we've found that it even affects if someone is going to take a job. Companies that have an outstanding reputation for being good for the planet and their communities are going to get the brightest minds, the most profit, and they're going to attract the best types of customers—customers who are loyal and willing to pay a bit extra. In a few years from now, this will be how companies win and lose.
What's the best evidence that this is happening?
We did about a million pages of research across all the vertical industries to see how customer loyalty is changing. Study after study proves that when it comes to people under the age of 30, they will not work at a company they could not be proud to say they worked at. One example: Almost 97 percent of the top MBAs in the country, according to a Stanford study, would work for less money for a company "with a better reputation for corporate social responsibility and ethics." They use reputation as a tiebreaker between companies that are otherwise the same.
In Europe or Scandinavia, this is already happening. They call it "ethical consumerism." The companies that haven't made the leap there have suffered tremendous loss in market share.
The subtitle of your book says that businesses should "go beyond making a profit." But you also talk about how becoming socially responsible actually helps profitability. So is this really about looking beyond profits?
The problem is many big companies focus on just the next 90 days. They think the only thing they need to worry about is making money for their shareholders. The problem is that will not resonate with tomorrow's talent. They will view that as Gordon Gekko, and they will organize against it. But when you say, "We're going to return money to the shareholders and make a difference to the planet"—when you combine those two—productivity goes up, marketing costs go down, and profit lines increase because people spread your product by word of mouth.
Will people really pay a premium for companies that are socially responsible? Or is this just a fad?
You have to look at it over a 10-year period and not a 10-month period. Look at American Apparel and the apparel industry. We're talking about a shirt that costs $4 more than the average. Patagonia, for example—many people call it Patagucci. Here's a product line at least 25 percent bigger than its competitors. There is a lot of good evidence that people will pay more. The Toyota Prius was highly successful even before gas prices went up.
But here's the second point: It's not so much that people will pay more but that people will require less marketing. In a business right now, it costs somewhere between 11 to 18 cents on every dollar for marketing and promotion. What we've found is that when you are doing the right things for the planet, taking care of your employees, and giving back to your community, you unleash viral marketing. That's person-to-person and blog-to-blog marketing. I don't know if you've ever seen a Google ad on TV. I haven't. Google spread by word of mouth.
How do small businesses play into all of this?
I think this could be a new renaissance period for small businesses. It all comes down to your reputation. Our research says that how people feel about your company's social standing determines everything. A small business has an advantage already. They can market what they're doing to the local community with credibility. You should have seen how hard it was for Wal-Mart when it rolled out its sustainability program.