What is a Good Company?

Excerpt from The Good Company by Robert H. Girling; Hill Press 2012

Clif Bar & Company, an American business that today is one of the world’s best known brands, started out as a small bakery named Kali’s Sweets & Savories selling calzones. In 1990, owner Gary Erickson went on a day-long, 175 mile bike ride. Partway through the ride, despite his gnawing hunger, he could not take another bite of the chalky energy bar. Erickson decided he could do better. Two years later, after much experimentation in his mother's kitchen, Erickson settled on a recipe for the Clif Bar, named after his father. In September 1991, Erickson introduced the Clif Bar in three flavors at a bicycle show. In its first year, fueled primarily by strong sales in bike shops and the growth of the health foods movement, sales of Clif Bar exceeded $700,000. Sales doubled each year, and by 1997, revenue surpassed $20 million.

Today, Clif Bar is among the leading makers of organic energy and nutrition foods. Erickson and his wife, Kit built their company using a business model that integrates its socially responsible values into every area of the business. They’ve achieved a remarkable 10-year compounded annual growth rate of 23 percent. The company gained national acclaim for its commitment to the environment and its support for important causes such as the fight against breast cancer. It is also renowned for its treatment of employees.

Outside magazine named the company to its list of Best Places to Work in 2008, 2009, and 2010. Health magazine named Clif Bar & Company the “Healthiest Company for Women to Work For.” And Fortune Small Business added Erickson to its list of “Best Bosses in America.”

Why all the acclaim? The company transmits its values. Since 2001, Clif Bar has doggedly pursued its goal to conduct every aspect of its business sustainably. "I have a responsibility to the people of Clif Bar,” said Erickson. “We want to sustain a business where people can live, not just make a living. We believe that if we provide meaningful work as well as something beyond work, people will do their jobs well and lead healthier, more balanced lives." Clif Bar's focus on health, well-being, and sustainability sets it apart from the average company. Erickson willingly turned down the opportunity to make $60 million by selling Clif Bar so he could fulfill his vision of a sustainable business.

Seeking to reduce its ecological footprint, Clif Bar set a goal to build an ecological company, one that would work with nature and conserve the planet’s resources. The company set out to reduce its packaging material, offset carbon dioxide emissions with wind energy and partner with a host of environmental organizations such as the Organic Farming Research Foundation. In 2004, Clif Bar received the EPA's Green Power Partner of the Year Award, EPA's highest honor for buyers of “green power,” or electricity created by renewable resources. Clif Bar also won the StopWaste Efficiency Award from the Alameda Waste Management Authority, an honor that rewards corporate efforts to recycle, compost, and prevent waste. In April 2009, Clif Bar joined BICEP, a coalition of 18 companies with the goal of passing progressive climate and energy legislation.

“At Clif Bar we have created a business model that looks well beyond the bottom line,” said Erickson. “We are a vision-centric company and we work hard to not only sustain our brand and business, but our people, our community, and our planet.”

 Good Companies Prioritize People, Communities, Planet And Profits

In this book I use the term good company to convey the concept of a business that looks beyond the private profit that benefits shareholders and investors to include the welfare of employees who produce the products and services (as well as those of its suppliers), the community that hosts the company, and the environment that supplies the natural resources.

This figure illustrates how good companies benefit from responsible behavior. Beginning with economic/employee responsibility, i.e. fair treatment of employees by providing fair wages and a safe workplace, companies lay a foundation for success. Beyond that, to be socially responsible, the company will undertake and support beneficial activities and practices in the community. It will also engage in environmental responsibility with a focus on reducing environmental harm through recycling, waste reduction, avoiding harmful production and use of toxic chemicals, and reducing energy consumption. Furthermore, in order to sustain itself, a company must generate a financial return or income in excess of its expenditures.

According to conventional 20th century business practices, an organization’s long-term viability has been measured solely on profitability, the bottom line. Many companies still assess themselves annually according to that out-dated model. However, today we know different. We know that true long-term success depends on a broader, more inclusive set of criteria. This has led to the notion of the triple or quadruple bottom-line.

Multiple bottom line reporting views the company to be responsible and accountable to all stakeholders, not just the investors or shareholders. The stakeholders of an organization include anyone who is affected by the business activities of a company including shareholders, customers, employees, the community and suppliers.

To summarize, good companies focus on serving their customers by caring for their employees and the community. In order to do this, they treat employees fairly while making contributions to the community, care for the planet, and are profitable going-concerns.

Robert Girling is a professor in the School of Business and Economics at Sonoma State University. A Stanford University, Ph.D. and author of many articles and books, including The Good Company. He is a social entrepreneur who co-founded the Sustainable Enterprise Conference series which works to promote a 21st Century Sustainable Economy in Northern California.