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Whole Foods' "Conscious Capitalism"


Is "conscious capitalism" just a new buzzword or is it something truly different from the "instantaneous public relations hit" of corporate social responsibility efforts? In the mind of Kathy Loftus, global leader, sustainable engineering and energy management, Whole Foods, conscious capitalism is not just marketing, but reflects a "mission-driven approach" and commitment to long-term sustainability for people and the planet.

At a forum organized by The Atlantic magazine, Loftus said Whole Foods began 30 years ago, when it was called "Safer Way." The goal was to improve the "health of communities" by selling products that weren't created with fertilizers made of petroleum and chemicals. Interestingly, then as now, there wasn't really a sustainability department at Whole Foods, but greening work was embedded into every team and process. "Our culture, our ethos is to follow these principles so it's everywhere. It's inside-out."

Now, Whole Foods is a "shareholder-driven company" that proves you can do well and also do good. Indeed, Whole Foods does very well and is highly profitable. (There's a reason why it's called "Whole Paycheck.") But Loftus seemed to argue that healthy food simply costs more because like renewable energy, the cost of environmental externalities are incorporated into the cost. Whole Foods purchase food from animals they know have been treated well. They buy products grown on lands treated well enough so they will be arable long-term. These environmental benefits are integrated into the cost. She said the only alternative is that you "can spend less on food now, but pay more for medicine later."

But Derek Thompson, senior editor at The Atlantic, wondered how Whole Foods can continue to grow as a business when its products seem to be targeted at a liberal, affluent, urban and suburban market? Loftus said a program of increased productivity and energy efficiency has led to waste reduction and lower energy use. "IT, logistics improvements have helped us reduce costs," opening new markets.

Whole Foods has also "worked closely with partners to reduce costs," because unlike Walmart, it's a small company and can't shift the market on its own. With just 340 stores, in comparison with 4,000 Walmarts, Whole Foods has to "work with farms, partners, universities, and institutions." In fact, the firm has issued a "declaration of inter-dependence." It was perhaps the strength of the partner network that enabled Whole Foods to somewhat rapidly respond to fierce criticism by Michael Pollan and others that the company wasn't providing enough local produce. Loftus said the Whole Foods leadership clearly saw it as a "problem" and started growing the network of local farmers it taps and the amount of local produce it offers in stores through a new "local producer loan program."

The firm wants to be seen as a test-bed for new ideas. Product packaging is a clear target for innovation. "We can't just recycle. We have to get to the source of the problem." The firm now gives awards to suppliers who reduce waste and is looking at "cradle to cradle, life-cycle, and biomimicry analysis."

Their North Atlantic region center now uses waste cooking oil for energy and electricity. "This helped us solve the waste issue and also helped reduce our dependence on a taxed local energy grid." Solar power purchasing agreements are in place and there are exploratory efforts to determine the combination of rooftop solar and green roofs that works best. Here, Whole Foods could indeed become a leader in large stores by making their roof spaces productive, even creating rooftop farms local farmers could access. But what wasn't discussed was whether these stores are designed to handle the additional roof load, or even whether, given the average lifespan of these buildings, the investment makes sense. While Whole Foods seems to embed themselves in high-end developments created by developers thinking longer-term, does the average Whole Foods building really last longer than Target stores' 50-year max lifespan? It would be interesting to see the projections.

While some stores can hopefully be further greened, where they are placed is also a matter of concern. Many Whole Foods are in dense, walkable urban areas, but just as many require a car to get to. Driving long distance to purchase sustainable, local products may not make much sense. One audience member complained that a Whole Foods became part of a new development that cleared a greenfield site. Loftus' response seemed to say that Whole Foods finds the trade-off between accessing customers where they are and sustainability to be a tough one, but customer demand (and financial considerations) seemed to win out in that instance and others.

On the positive PR-side, Whole Foods will be adding a store in Detroit, testing out a new model that will offer lower-cost products and a more limited selection that requires fewer staff. "This won't be our flagship store but can be lean and focus on the right products. We can put these types of operations in other places." This is a good deed because there are a "so many under-served populations in the U.S."

Another panel explored what some other "sustainability and energy efficiency leaders" are doing in the marketplace. Beth Keck, who is Walmart's senior director of sustainability, said because her customers live "paycheck to paycheck," green simply has to be "integrated into the product so customers don't have to make a choice between green and not-green." She said fuel efficiency efforts alone have saved the firm $200 million. By improving efficiencies, the firm has "saved customers $1 billion on fresh fruits and vegetables." In terms of waste improvements, some 80 percent of the humungous firm's waste is now diverted from landfill. Still, there's much to done. As Nestle's Vice President for Sustainability, Michael Washburn said, post-c0nsumer recycling rates in the U.S. were just 45 percent, whereas they are closer to 80 percent in Scandinavia. Of the 20 billion plastic water bottles Nestle produces each year in the U.S., some 70 percent go to landfill. Time to set much higher targets.

Image credits: Local Food Bee