CASE STUDY

From the mouth of a master

Isdell...doing well by doing good

What sustainability means in practice, and why it’s such a critical factor in business success. Long-term investors, like pension funds, take note.

Coca-Cola is one of the world’s top brands, if not the top, and determined to remain so.

That requires a new business model, relevant to all businesses and investors in them, appropriate to the social requirements of this day and age.

No longer is it sufficient only to be profitable and provide a high-quality product or service. The established thesis of Chicago economist and Nobel laureate Milton Friedman, that the sole social responsibility of business is to increase profits, goes out of the window.

The case is forcefully presented by Neville Isdell, a UCT graduate and rugby player (more distinguished at the latter) of 1960s vintage. A former chairman and chief executive of Coke – having retired last year as chairman and the year previously as chief executive – he frequently returns to SA for sponsorship support of his alma mater and beers with his old buddies.

Unlike the secrets for its syrup, Isdell is quick to share Coke’s updated business recipe. Central is sustainability, classically defined as “meeting the needs of the present without compromising the ability of future generations to meet theirs”.

Sustainability began for him within the walls of all Coke companies by examining the impacts that each makes in such areas as energy, carbon, packaging and water, then innovating and making corresponding improvements.

“Then we need to step out of our own walls to understand, work with and help our suppliers,” he says. “We need to learn from our suppliers and the communities that we serve. We always need to ask: What are the factors that impact these communities’ health and well-being?”

The most visible example of transforming a business he considers to be giant US-headquartered retail chain Wal-Mart. Amongst its “remarkable” goals are to:

• Be powered 100% by renewable energy;
  
• Create zero waste;
  
• Sell products that are good for the environment and that sustain resources.
  

These, according to Isdell, are not slogans: “In our business each day, we work with Wal-Mart to help put these goals into action up and down the whole supply chain. What we’re learning from each other – because this process is interactive – helps Coca-Cola become more sustainable.”

When a company supports sustainability, Isdell emphasises that its effort must be connected to the core of its own business for it to be relevant. It’s what he calls ‘line of sight’: “If you don’t have ‘line of sight’ with your core business, it’s going to lose support with your shareowners and directors.”

Complementary is to partner with governments and civil society, on issues where it is appropriate and relevant to play a role, so that a “triangle of sustainability” is developed with business. Challenges to the planet are too urgent and complex for any one to address alone. The triangle, anchored in the three partners, creates the multiplier that accelerates the addressing of them.

For instance, Coke partners with governments and non-government organisations in addressing water challenges around the world: with the US Agency for International Development on community projects in 17 countries, helping a quarter of a million people in them gain access to clean water; another with the World Wildlife Fund in designing to conserve seven of the world’s most critical freshwater river basins which span some 20 countries.

Isdell doesn’t say it bluntly, but the motive is not entirely altruistic. For, without clean water, there cannot be Coke products. What he does say, nobly, is that these are primary examples of partnerships that help leverage Coke’s efforts: “As we do good for our communities, we are also being good for our business and being clearly relevant to our business”.

That, in a nutshell, at the essence of corporate sustainability. But he goes further, to urge that in perception and reality a business must be a “functioning part of every community where it operates”.

The hardest part is perception, to be seen as part of the local’s community’s fabric and adding value to the neighbourhood: “Otherwise, you won’t have the social licence to grow and, over time, you are not going to get the approvals you need to expand your business and to be free of government intervention”.

He identifies other important pillars for 21^st century success:

• To be a responsible employer, so that high-calibre employees are attracted and retained;
• To reflect diverse communities, so that it’s possible to see and respond quickly to changes;
• To manage change without disruption, that there’s a consistency in mission so and values built into strategy and execution.

Motherhood and apple pie? Perhaps, but implementation sets it apart. That’s what makes Coke a great company, from which all companies and investors seek to learn. In his Snowball biography, Coke director Warren Buffet praises Isdell’s leadership.

There can hardly be a stronger endorsement, not merely of the man in the Coke turnaround but of sustainability as a guiding concept in business practice and investor assessment. In both, sustainability is perilous not to prioritise.