October 1995
The Globe and Mail Report on Business Magazine

Rain-forest Chic

by Jon Entine

Maybe Ben & Jerry's and The Body Shop set themselves up for a fall by appearing to have a monopoly on making an honest buck. But their struggles are a lesson on how little we know about the minefield of "ethical" marketing.

"The church used to be the dominant force in our lives." The burly, rumpled speaker with wild hair sounds almost professorial as he builds a case for the coming New Age of profits with principles. "Then came the nation-states, where we looked to government for support and guidance. That era is ending."

Who would have thought that this ruby-faced college dropout would one day hold an audience spellbound with his version of intellectual history. "Today," says Ben Cohen, sounding now like an earnest Republican at a Rotary Club luncheon, "we are in the era of business. Business is our new universal community. We are the leaders who can turn business into a positive social force."

The crowd breaks into applause. The affection, and indeed the adulation, can be felt by everyone in the room. It is a June celebration to open the Los Angeles chapter of Business for Social Responsibility, a trade group that promotes itself as environmentally and socially progressive, and the audience has come to hear its hero. Ben Cohen, 43, and his high-school buddy, Jerry Greenfield, started mixing up batches of ice cream 16 years ago at an abandoned gas station in Burlington, Vt. Today, Chunky Monkey, Cherry Garcia and Rainforest Crunch are staples for fortysomethings everywhere. Although he no longer runs the company day to day, Cohen remains the chairman and lovable, eccentric corporate symbol of Ben & Jerry's Homemade Inc., which has seven Canadian outlets and worldwide sales of about $200 million (U.S.).

The soul of Ben & Jerry's is natural, artery-clogging ice cream and a quixotic social philosophy. It is one of the best known of a growing list of "progressive" firms such as skin-and-hair-care franchisor The Body Shop International PLC (BSI), eco-friendly apparel makers Patagonia and Esprit de Corp, and Tom's of Maine, which sells natural toothpaste and personal-care products.

Cohen's company has set an impressive standard of ethical innovation. It publishes a state-of-the-art social audit of its operations, gives an astonishing 7.5% of pretax profits to charity, buys only local dairy products to help preserve the family farm, and refuses to back down from its support of peace and social-justice causes even if that means alienating some potential customers.

Ben Cohen is more the rule than the exception among successful, New Age entrepreneurs. Many grew up in the sixties, their values shaped by civil-rights activism, Vietnam protests, free love, drugs and an unremitting belief in the moral and cultural ascendancy of the baby-boom generation. Many now run public companies that have ridden the green wave into the hearts, minds and pocketbooks of eco-consumers. Cohen and the founders of other successful eco-businesses, who in many cases are worth millions and even hundreds of millions of dollars in company stock, now jet around the world spreading the New Age gospel of anticapitalist business.

Cohen rails on to his audience about the greedy, soulless character of Corporate America, and then boasts of how a corporation has made a difference in helping save the rain forest. "The success of our Rainforest Crunch," says Cohen, "shows that harvesting Brazil nuts is a profitable alternative for Amazon natives who have seen their lands ravaged to create grazing areas or for mining." The crowd is on its feet. It is an inspiring moment.

Yet Ben & Jerry's own 1995 annual report, released just days before, carries the not-so-socially responsible details of what some anthropologists are calling the "rain-forest fiasco." While the label of Rainforest Crunch, one of Ben & Jerry's flagship products, suggests that buying the ice cream helps preserve the Amazon's endangered rain forests, the documented social benefits of its Third World microproject are ambiguous at best.

The popular fascination for social marketers—who have built an image as a leading force of social change—obscures a far more complex reality. Consumers with a high tolerance for pricey goods—most New Age products command a hefty premium over ordinary brands—play a modest role in raising awareness of social problems. At worst, though, cause-related marketing can be little more than baby-boom agitprop, masking serious lapses at socially conscious firms.

The small companies in the vanguard of the movement are learning that "social responsibility" is a margin game: When profits are rolling in, as they were in the 1980s, progressive gestures are painless. But now, as they face growing pains and intense worldwide competition, many of these enlightened firms are firing workers, closing inner-city stores, cutting back on charity projects, and making their products in overseas sweatshops. In other words, they are acting like most businesses when confronted with difficult bottom-line challenges.

This not-so-pristine reality has been largely absent from the coverage of New Age entrepreneurs because the journalists who have so slavishly chronicled their prior success share with the firms some common cultural values. Many have convinced themselves that growing up protesting Vietnam and environmental degradation forever marks them as progressives, even though they now drive BMWs instead of VWs, and their closest brush with social responsibility in a Ben & Jerry's Peace Pop.

Ironically, the social and environmental contributions of New Age business pale when compared with the substantial reforms taking place in major corporations. Selling quality products, treating employees, vendors and franchisees with integrity, and upgrading their environmental practices are improvements, they have discovered, that go straight to the bottom line. And given their massive financial resources, many familiar blue-chip firms are in a better position than New Age entrepreneurs to effect social change as they quietly, but determinedly, adopt higher standards of affirmative hiring, pollution abatement and community involvement practices. "Even a tiny, 1% improvement in the environmental standards of a DuPont of a Monsanto," says corporate ethics guru Paul Hawken, author of The Ecology of Commerce, "will have a more meaningful impact than creating a hundred new Patagonias."

We'll look at some unheralded examples of progress on the corporate social responsibility front. But first, a sobering behind-the-gloss look at some firms that have gotten rich and famous by "having a heart" and wearing on their sleeves.

Efforts to "save the rain forest" have brought together two popular movements: the environmentalists' struggle to protect the forest against clear-cutting and the romantic quest to preserve indigenous cultures. Capitalism-on-the-Amazon as popularized by Ben & Jerry's and The Body Shop has an almost serendipitous history, In 1988, after a Grateful Dead rain forest fundraising concert, Cohen found himself at a party where a Cambridge, Mass. anthropologist explained his pet project of saving the rain forest. The anthropologist convinced Cohen that Amazon natives could achieve self-sufficiency by selling fruits and nuts instead of selling mining and logging rights. A few days later, Cohen was mixing up batches of Brazil-nut brittle ice cream in his Vermont kitchen. Simultaneously, Rainforest Crunch and the rain-forest harvest were born.

The eco-capitalism movement got a big boost the following spring when Sting, The Body Shop founder Anita Roddick and other celebrities turned that year's Amazon peoples' conference in Altamira, Brazil, into an international media event. Within months, BSI was selling rain-forest hair rinse and bath beads while Ben & Jerry's launched Rainforest Crunch. Both companies promoted their rain-forest products as eco-friendly solutions to mining and clear-cutting.

"Money from these nuts," read the label for Rainforest Crunch ice cream when it was launched in 1990, "helps to show that rain forests are more profitable when...cultivated for traditional harvest than when their trees are cut and burned for short-term gain." The product was an overwhelming, overnight success—at least for Ben & Jerry's which reaped millions of dollars' worth of free publicity for showing how profits and principles can go hand in hand.

The view from Amazonia was quite different. Amazon peoples' groups and anthropologists feared opening up this fragile area even to supposedly friendly capitalists. There also is no evidence to support the central premise of the harvest—that nuts could ever approximate the income that natives collect by selling off land rights to miners and foresters.

The anticipated source for Ben & Jerry's nuts—the Xapuri co-operative in the Amazon—never produced the necessary quality or quantity to meet exploding demand. And the description of the Xapuri cooperative as "forest peoples" was odd: The co-op is largely run by ethnic Europeans and mixed-blood rubber tappers who arrived as contract workers at the turn of the century during an earlier wave of rain-forest exploitation.

The harvest soon proved a windfall for the landowners who have long controlled trade in this region. To meet demand, the agency purchasing nuts on Ben & Jerry's behalf, in which Cohen was a partner, was forced to buy from the commercial markets supplied by some of the most notorious, antilabour agribusinesses in Latin America, including the Mutran family, which has been linked in Brazilian press reports with the killings of labor organizers. By the spring of 1994, the Xapuri had cut off all supplies, saying their own harvesting efforts were hopelessly uneconomic. The project has run in the red for the past three years, generating none of the promised charitable contributions to the Amazonians that were to have flowed from sales of Rainforest Crunch. And there is no evidence that the harvest has provided an incentive for forest natives to curtail their auctioning of land, mining and timber rights. "It's really a disingenuous marketing strategy to say if you spend $2.99, you'll help save the rain forest," says Michelle McKinley, executive director of Cultural Survival, which used to run the project for Ben & Jerry's. "We rushed into this project recklessly. We created a fad market overnight and the hard-sell promotions have contributed to a lot of confusion. The harvest just didn't work."

Even Ben & Jerry's latest annual report takes the company to task. "It is a legitimate question," writes environmentalist Paul Hawken, who conducted the audit, "whether representations made on Ben & Jerry's Rainforest Crunch package give an accurate impression to the customer." Hawken quotes sharp criticism from Amazon civil-rights groups, then concludes: "There have been...undesirable consequences which some say were predictable and unavoidable." In the five years since Ben & Jerry's launched Rainforest Crunch, traditional commercial suppliers have provided about 95% of the Brazilian nuts used in making the product.

Like many eco-entrepreneurial firms, Ben & Jerry's is a reflection of its hard-driving, frequently myopic leadership, which sometimes admits to major mistakes without correcting them, and turns eager apologies over minor gaffes into yet another marketing promotion. The label on the firm's most famous product was altered in the spring. It no longer tells the story of how purchasers of Rainforest Crunch ice cream are helping aboriginal hut harvesters, but sustainable harvesting in the rain forest is still mentioned. Cohen publicly disputes Hawken's analysis, saying Ben & Jerry's at least meant well, and lamely credits his firm with "creating demand" for rain-forest products.

Ben Cohen often talks about his kinship with Anita Roddick, charismatic founder of U.K.-based The Body Shop International PLC. Cohen and Roddick, 53, are regarded as the king and queen of progressive business.

In 1976, Roddick opened a tiny shop in the faded English resort town of Brighton. It offered "one-stop ear piercing" and sold beauty products with natural-sounding names in refillable plastic bottles. It soon developed a cult following and expanded dramatically through franchising. Today, Anita Roddick and her husband, Gordon, oversee a $1-billion (sales) chain of 1,290 mostly franchised Body Shop outlets in 45 countries. Canada, with 113 stores—all of them franchises—is BSI's third-largest market.

Roddick is arguably the most successful self-made businesswoman in the world. For years, no competitor could match her two-for-one sale: Buy a bottle of non-tested-on-animals Brazil-nut hair rinse and get social justice for free. Roddick became a favorite of affluent baby boomers, a New Age feminist heroine weaned on can-do chutzpah and do-right values. "Anita," Ralph Nader told People magazine, "is the most progressive businessperson I know."

BSI, Ben & Jerry's and other eco-marketers have cleverly use cause-related marketing to brand what are essentially commodity products—in this case ice cream and cosmetics—and to fuel a booming niche market in so-called "green" products. They also pad their bottom lines by spending very little, if anything, on conventional advertising. Instead, they benefit from free and largely favorable media coverage of their "new way of doing business." Roddick has long understood the power of the press. As she was preparing to open her first store, a couple of local undertakers started squawking about her use of the name The Body Shop. She went to the local paper, the Evening Argus, and landed her first story—a lesson in free media she wouldn't forget. By its own calculations, BSI has racked up as many as 10,000 press mentions in a single year

Despite glowing press, BSI has long been held in mixed regard in the corporate social responsibility movement. Roddick is almost universally admired for stirring debate on important issues: environmental degradation, the use of animal testing on cosmetics and other products, the role of corporations as model community citizens. But the firm is also known for exaggerating its progressive practices.

The Body Shop is more difficult to read than a Ouija board. Its good works, and its reported problems, can be as much a product of head office as its far-flung franchisees in Australia, Japan or Saudi Arabia. Undeniably, though, BSI draws its spirit from its rags-to-riches-to-Robin Hood model, Anita Roddick.

Roddick is a study in contradictions. She is perhaps best known for her relentless campaign for a total ban on animal testing. The company does aggressively enforce its limited ban by refusing to use ingredients tested within the last five years. The practical impact of the ban is limited, however, given that most ingredients in widespread use today were once animal tested; and many of the new ones are developed first for medicinal use, which BSI says puts them outside its rule. In any event, BSI is hardly unique among the scores of major world cosmetics makers that have adopted similar bans on ingredients recently tested on animals. This reality is reflected in BSI's 1989 decision to back down from its testing-related product claims, and change its product labels to replace the slogan NOT TESTED ON ANIMALS with the vague AGAINST ANIMAL TESTING.

At the International Chamber of Commerce Conference in Cancun in 1993, Roddick lambasted the distinguished business and government leaders in the audience for trading with what she called the "torturers" and "despots" in China's political regime, who allow sweatshops to churn out cheap goods for greedy, "nomadic" capitalists who put low labor costs above ethics. Her admonition: Just say no to trading in Chinese goods. The behind-the-rhetoric reality: BSI for years had bought its popular baskets in China, and they continued to be on sale at Roddick's stores even as she spoke.

BSI has earned a reputation as the premier "natural" cosmetic company. But BSI uses mostly off-the-shelf industrial recipes that employ artificial colors, synthetic fragrances and chemical preservatives as base ingredients. It's products don't always fare well in comparison tests. Consumer Reports magazine rated its Dewberry fragrance last out of 66 products it tested; and in 1993, the German magazine Oko-Test (Green Test) found formaldehyde residue in a few BSI products. BSI has been vigorously responding to the quality issues, investing in new-product development and striving to prevent bacteria problems.

While BSI was claiming it was giving away "an inordinately high percentage of pretax profits to often controversial charitable campaigns." And Roddick was saying, "What else do I do with the money than give it away?", there are no records that show BSI gave any money to charity prior to becoming a publicly traded company in 1984. And until 1994, BSI donated less than the U.S. corporate average of 1.5% of pretax profits. In the past two years, as criticism mounted, BSI donated an impressive 3% of pretax profits in 1994 and 2.3% in 1995. Roddick touts her "Trade Not Aid" program as a progressive substitute for handouts and claims she pays "First World wages for Third World goods." In fact, BSI pays going wages and in 1994 paid only about 0.3% of worldwide sales to its Trade Not Aid producers. University of Chicago anthropologist Terence Turner, who has visited BSI's trade project with the Kayapo tribe in Brazil, calls its programs "Aid Not Trade," a play on The Body Shop slogan. "Indigenous cultures give these companies free aid in the form of their green image," Turner says, "with almost no trade in return." Stung by a growing chorus of critics, the company has revamped its ethical trading department and pledges to increase its Third World purchases.

BSI has suffered its share of franchise problems. The small-business committee of the U.S. House of Representatives has received many complaints from BSI franchisees around the world. "[BSI] is a company that promotes itself as operating on a higher ethical plane than others," says Dean Sager, an economist with the committee, which recommends changes to franchise legislation. "In their franchising they are not worse than anyone else, but they certainly don't appear to be any better."

In 1993, the U.S. Federal Trade Commission launched an investigation of alleged BSI violations of the Federal Trade Commission Act in the sale of products and franchises, subpoenaing former franchisees and requesting internal documents and videotapes from BSI. The FTC, which seldom resorts to formal charges in its efforts to reform practices, issued a letter in March saying that "no further action is warranted by the Commission at this time," and that the end of the investigation should not be taken as a sign that a violation had or had not occurred.

Finally, many BSI fans are surprised to learn that BSI shares its name, many of its early products and its vaunted refilling philosophy with an earlier pioneer of socially progressive cosmetics, The Body Shop of Berkeley, Calif., which opened its doors in 1970. The founders of the tiny U.S. Body Shop chain sold the rights to its name to the Roddicks in 1987 for 3.5 million (U.S.).

Without question, it was Roddick who conquered the world with her version of the concept, but critics are put off by her image as having more or less exclusively invented the idea of progressive cosmetic marketing.

Despite its problems, BSI still has many loyal supporters. "The Body Shop is a leader in socially responsible corporate participation in Canadian society," says Beverly Wybrow, executive director of The Canadian Women's Foundation. She notes that The Body Shop Canada has used promotional campaigns to generate more than $140,000 in funds for domestic-violence prevention programs in which CWF is a partner.

BSI itself suggests that its performance is being judged against unrealistically high standards. "We all admit that we are retailers, pure and simple," says Margot Franssen, president of The Body Shop Canada. "We aren't exactly out to change the world, but instead to make our communities a little bit better." The company operates a state-of-the-art production facility, and it is the rare Canadian firm to offer subsidized on-site day care at its head office.

Depending on one's perspective, Roddick is either a visionary crucified for excessive enthusiasm or an exploiter of idealistic followers. The biggest problem for The Body Shop now is not performance—it has made dramatic strides in almost every area of its operations in the past two years—but credibility.

It's a rare company, of course, whose history isn't blemished by occasional inconsistencies between the founder's vision and the way that vision is played out. What's rate in this case is Roddick's strident assertion that she occupies a high moral plane shared only with some of here peers in the New Age fraternity. "Over the past decade, while many businesses have pursued what I call business as usual, I have been part of a different, smaller business movement, one that has tried to put idealism back on the agenda," Roddick told the Mexican conclave of big-business leaders, urging them to follow BSI's example. "We are creating new markets of informed and morally motivated consumers. We are succeeding and thriving as businesses and as moral forces."

Even if they lived up to their reputation as models of a new type of "virtuous capitalism," relatively small, faddish firms have little impact on the economy. In that sense, can they be regarded as being a more powerful force for good than such multibillion-dollar firms as drugmaker Merck & Co. and computer giant Hewlett-Packard Co., which for decades have quietly but conscientiously made large charitable contributions, involved themselves in the communities in which they operate, opened their corporate practices to public scrutiny, and pioneered in management practices that create intensely loyal workforces?

The urge to demonize Big Business and idolize eco-entrepreneurs caricatures the complexity of business. Most companies resemble dysfunctional families. Even the best of them make mistakes or compromise their ideals under bottom-line pressure. "Some of the best environmental programs are the creation of some of the worst polluters." notes Paul Hawken. "Innovative solutions are not the exclusive province of so-called progressive companies. We have to keep an open mind and look for solutions wherever they may be."

Many of those solutions originate with Big Business. At a time when affirmative hiring is a popular target of politicians and right-wing talk-show hosts, companies such as Polaroid Corp,. Texaco Inc. and Dow Chemical Co. are more determined than ever to promote women and minorities into higher levels of management, and have done so far more aggressively than most New Age companies.

Even before the Bhopal tragedy, chemical companies were frequent target of environmentalists. Yet the industry's Responsible Care program of scrupulous controls on the manufacture and use of toxic chemicals, largely designed in Canada and adopted by most major North American chemical producers, is an important initiative that other industries are under pressure to emulate.

Big Oil and Canada's Big Five banks are perennial lightening rods for critics in the ecology and consumer-rights movements, and with some justification. But it's two firms drawn from the ranks of Big Oil and banking, Imperial Oil Ltd. and the Royal Bank of Canada, that are spearheading the Imagine campaign to prod all Canadian corporations, which lag U.S. firms in giving, to raise their donations to at least 1% of pretax profits. Imperial gave about $5 million to 600 groups last year alone; the Royal Bank donated $15 million. By comparison, charitable giving during BSI's entire history as a public company totals less than $6 million.

Just as industries long held in poor regard deserve credit for their efforts to improve, high-profile "cause-related" marketers should be viewed with caution. For "socially responsible" business, whether practiced by New Age firms or hulking multinationals, is a land of contradictions.

  • Apparel giants Esprit de Corp, Levi Strauss & Co. and The Gap Inc. lavish their employees with progressive benefits, while some of their clothing is manufactured by suppliers that operate sweatshops in countries where human-rights violations are a common occurrence.
  • Reebok International Ltd., frequently cited as a progressive employer, has made hopscotch its sourcing credo, moving its manufacturing operations from South Korea and Taiwan to China, Indonesia and Thailand in search of the lowest wages. It also recently paid $12.3 million to settle price-fixing charges in the United States.

Baby boomers now seem less interested in sixties ideals of changing the world than "shopping for a better world"—the title of a popular "green" buying guide. But the inconvenient reality is that it's difficult for consumers to identify the "good guys" even with a scorecard. For instance, which companies are more "ethical" in dealing with the following controversial issues:

  • Gillette Co. and Procter & Gamble Co., which spend millions of dollars on safety-testing of their products and have pioneered in research and development into alternative cosmetics, but perform government-required animal tests; or The Body Shop, which has stimulated a useful public debate but relies on tested-on-animals ingredients and has been attacked by former allies in the animal-rights movement for oversimplifying this complex issue for commercial gain.
  • Monsanto Co. and DuPont, which have innovative pollution-control practices, yet have been guilty of environmental violations; or Ben & Jerry's, which publishes an annual audit of its corporate conduct, but sometimes ignores its most important conclusions.

There are no icons in the business world. At best we can identify firms that acknowledge their daily struggle to improve product quality, environmental practices, and worker and community relations, and which open their practices to outside scrutiny. "We are entering a new era in the world of socially responsible managing and investing," says Joan Bavaria, president of Franklin Research & Development Corp., a Boston-based social-investing firm. "It is not a black-and-white world with neat lines of demarcation. This is the real world of complex systems and internal contradictions."

A constructive response to these inevitable contradictions is to confront them. Bavaria is one of the founders of CERES, the Coalition for Environmentally Responsible Economies, which was set up by a group of social and environmental activists and public-pension-fund trustees to develop environmental standards and accounting guidelines in partnership with business. CERES has 54 members pledged to conducting internal audits of their environmental records, including Polaroid, General Motors Corp. and oil producer Sun Co., as well as Ben & Jerry's and The Body Shop. In recruiting new members, CERES looks for larger, "messier" companies that are struggling with problems, but are committed to transparency in disclosing and remedying problems. Even modest changes in the business practices of traditional manufacturing and resource firms—and and in Canada that's more than 40% of the GDP—will have far more sweeping economic impact than a handful of firms claiming no bottom-line instincts but which operate at the fringes of the economy.

Acting responsibly means being responsive to criticism. " I talked with both Ben and Jerry," says business student Ritu Kalra, who was present at a recent speech by Cohen and co-founder Jerry Greenfield at the University of Pennsylvania's Wharton business school. "Neither of them knew much about the harvest. When it came down to it, they didn't want to comment and didn't feel responsible for misleading labeling or telling half-truths."

The recent revelations about the rain-forest fiasco have hardly slowed Ben & Jerry's ice-cream tour. Even though the company has ditched its references to helping aboriginal nut harvesters, not many consumers realize how few of their eco-dollars go toward helping distant Amazonian natives.

At the Los Angeles New Age business meeting, Cohen relentlessly hawks his most famous ice-cream flavor. "We have made a difference in the rain forest," he declares. After the speech, dozens of people crowd around Cohen as he signs napkins and dishes out bowls of Rainforest Crunch ice cream. "It's so inspiring," says a fellow entrepreneur, licking her spoon, "to know that business can make money and still do so much good."