But to consider the debate at hand related to business, I agree with Mackey in terms of responsibility. I do not, however, wish to relate social responsibility to creating value, and most certainly do not consider it a cloak for those exercising the value of responsibility in their business. Many, yes many, businesses have tainted the public view of responsible business practices because of their use of social responsibility as a cloak. However, we do reap what we sow, and while some may even see that view as a cloak for the personal bottom line, it is evident that contributing to one’s community and environment establishes relationships beyond a networking perspective.

It is conceivable that a company may desire to contribute to the community and the environment for the simple sake of doing so. Building relationships is a key element of leadership, and social responsibility builds relationships – regardless of the bottom line.

Mackey claims that corporations following his multi-stakeholder-pleasing model will eventually prevail in the economic landscape by winning the competitive test of the marketplace. He may well be right. But if he is, that will only prove Mr. Friedman right, who claimed that Mr. Mackey’s model and his own profit-maximizing one are equivalent, for surely a model which prevails in the economic landscape maximizes long-term profits. Mackey points out that if they truly are equivalent, his own description has more marketing appeal. But I believe that Mackey’s model is more than just marketing and packaging.

If we are to look for meaningful differences between the models, we need to look for cases in which a corporation finds a way to maximize value for its multiple stakeholders (Mackey describes his as customers, team members (employees), investors, vendors, communities, and the environment) *without* maximizing profits. Consider, for example, a corporation which systematically spends (reinvests) would-be-profits across its various stakeholders in such a way as to be left with zero profits every month. This corporation could grow and become very valuable, providing a return on investment for its shareholders. And yet it may well become less valuable for its shareholders (investors is the term used in the above-mentioned debate, but only some of the shareholders of a corporations are investors; shareholders typically include entrepreneurs and employees as well) than a sister company that does everything else equal except it does not distribute (as much of) its profits to non-shareholder stakeholders. For some of the wealth created by the first corporation would have gone to customers, vendors, communities, and the environment. And yet, I would claim, nothing is to say that the profit-maximizing corporation is either more socially responsible or better in any other way. For clearly the value created for non-shareholder stakeholders has non-zero value –even Friedman agrees with this when he says Whole Foods’ important contribution to society is to enhance the pleasure of shopping for food. In particular, and just to make the fallacy of profit as the sole measure of corporate success more clear, imagine a case where corporation A systematically makes $1B of profits a year in addition to disbursing $10B a year in value to other stakeholders (customers, employees, community, vendors, environment), while corporation B makes $1.1B in profits a year and generates only $0.1B in value to other stakeholders. All but the most rabid profit-maximizer would concede that it would be fair to call corporation A the more successful, certainly when measured by society (which is, after all, the judge that Friedman was after when he spoke of “social responsibility”).

Friedman might counter that even more successful would be a corporation C that kept all $11B as profits, for individual shareholders to distribute as each sees fit. But there are at least two fallacies with this:
First, that Friedman cites no evidence that individual shareholders are more competent in distributing wealth than corporations are –on the contrary, he mentions that in the real world we live in (a world that is inevitably more interesting to write about than theoretical constructs), tax laws make corporations more efficient at this task (assuming the citation of Adam Smith made by Friedman, “I have never known much good done by those who affected to trade for the public good”, holds true of governments, who collect taxes). Second, corporation C may not exist. For the very reason that propels corporation A to generate more value than corporation B might be the goodwill generated by its value-sharing policies among the various constituencies whose cooperation generates the value to begin with.

Conversely, a corporation which generates massive profits by selling and dropping hydrogen bombs for the wealthiest individuals on Earth to experience the power that money can buy is surely not a model of socially responsible business.

Capitalism is to me the most complex and fascinating system known to man. Far more complex than a single brain, or that the behavior of distant stars. But what makes the system so powerful is not a dictum that all agents must uniformly seek to maximize profits, but rather the fact that each agent in the market is free to act according to his/her own desires. When commanding all business to follow the same rule and optimize for the same metric, Friedman committed the very crime he so faults socialist regimes with: forgetting the power of free markets.

Alex Bäcker, Ph.D.
Altadena, California

Whole Foods continues to be a leader in taking actions that bring industry and the populace closer to living more sustainable lifestyles. The company philosophy on your website (“Vision of a Sustainable Future”) cites examples like your dedication to organic produce and poultry, the “green building” of your corporate headquarters and financial support of environmental organizations. These actions are highly laudable and needed.

I challenge you to take the bold, first step in terms of your policy regarding consumers and reusable shopping bags. Your current nickel-per-bag program is already very progressive. However, instead of offering customers a financial incentive to use their own canvas bags to carry their groceries, the time has come to begin penalizing them for not doing so.

This model has already become prevalent throughout supermarket chains in Europe, the U.K. and Canada. For example the German-headquartered Aldi chain — which boasts stores across the United States – asks customers to pay for their bags. Governments in Australia, South Africa and Ireland have even begun imposing taxes on the flimsy plastic bags typically used in supermarkets.

Let’s not wait for our government to take action. Other U.S. chains are reluctant to adopt this change, for fear it would put them at a competitive disadvantage. However, Whole Foods, whose image is so strongly associated with organics and sustainability, has such a loyal customer base that a campaign with a careful launch could serve to deepen customers’ bonds for the store.

Whole Foods would design and begin selling canvas (or similarly reusable, durable bags) with their logo on it. The sale of the bags would be a source of income for the company, and the bags would double as billboards for Whole Foods, as customers began using them – for groceries and other uses. Customers who purchase and use the Whole Foods-designed bags (or other reusable bags of their own) would continue to save a nickel-per-bag, as your current program warrants. However, customers, who require plastic or paper bags would pay an additional five cents, which Whole Foods could donate to an environmental organization or keep as income.

Whole Foods would see a savings in its cost for materials, because as more customers switch to reusable bags, fewer plastic/paper ones would need to be purchased. In addition, because it would be an unprecedented action in this country and viewed by some as both assertive and carrying some risk, it would result in a huge corporate story for you in the trade and mainstream press – yielding heavy publicity for Whole Foods. Your niche has become more competitive the last few years, and this action would reinforce your leadership status and insure your continued domination.

Most importantly it is the right thing to do. Plastic bags are working their way up the food chain in our oceans. Paper bags are a factor in the decimation of our forests. In real terms the institution of a program like this would do tremendous good for the environment (as well as for Whole Foods!) And if other firms eventually copy it – well, then Whole Foods will have demonstrated what true leadership is.

Please begin work on a program like this NOW so that its implementation can begin ASAP.

Sincerely,

Scott Piro