Are There No Good Companies?

Nityanand Jayraman has a piece in which is a damning indictment of Hindustan Unilever’s role in contaminating a thermometer factory site in Kodaikanal with mercury.

The sordid story carries the usual villainy of an evil corporation that puts its commercial interests above the safety of its workers, the community around it and the environment. While this was a while ago, things haven’t changed much. Even today, we see this movie playing out, in company after company, around the world.

Unilever dumped broken thermometers at the site and let the mercury leach into the ground. It did not train its workers adequately in safety procedures. And when confronted with the clean up after the government shut down the factory, it argued for laxer standards and denied wrongdoing. Pretty standard fare for such cases.

What makes the story uglier though, is that this thermometer factory in Kodaikanal was moved from Watertown in New York state in 1980, after the US started cracking down on environmentally hazardous factories. The standards that the US was pushing for made it economically unviable to operate. However, environmental regulations in developing countries like India are either weak or weakly enforced. So Unilever moved the factory and its accompanying hazardous contamination to India.

This is called regulatory arbitrage. It takes a special kind of villainy for a company to do this.

The factory operated from 1980 to 2001, when the Tamil Nadu government shut it down and asked Hindustan Unilever (HUL) to clean up the site. HUL has done some work but is negotiating on the extent of the clean up required, which is what led to this video. The video, by the way, is brilliant – an example of how art can be put to work by activism. Without the video, the reach of this message would be a hundredth of what it is now.

Hindustan Unilever was my first job out of business school. Hindustan Lever or HLL as it was known in those days was the top Consumer Packaged Goods job for business grads in those days. I was proud to be working for them. They had the absolute best management training program in the industry. For 18 months we got the kind of cross-functional training that was the envy of every management graduate. As part of it, we had to spend 4 months in a village in rural Uttar Pradesh and work on a rural development project. HLL had a Rural Development Program that truly helped the villagers in a very backward area of the country. I thought I was working for a company that was not just a well managed company, but also a company that wanted to give back.

Soon the scales fell from my eyes. It wasn’t really managed very well. I was a junior manager and had very little visibility into top management decisions. But even from my vantage point I could see that the company treated its distributors very poorly. Dumping or channel stuffing was so common that the trade often had months of stock – ruining their economics and the stock of tea they carried (I was in Lipton). The top management knew this was happening but couldn’t bring themselves to stop the practice.

At the time, this was befuddling to me. Doesn’t someone at the top have the courage to tell headquarters that we have to reduce stock levels in the channel even if it means a bad quarter? But I was young, and naive. Now, of course, I have a better understanding of these matters. Managers are poor agents for shareholders. Shareholders themselves are poor long-term stewards of public companies. They can sell and get out at any time. But while they hold stock in the company, nobody wants a miss on a quarter.

You can look at management making self-serving short-term decisions that hurt the company in the long-term (while quoting Keynes “…in the long term we are all dead” with a smirk on their faces) and shake your head and say “Such is human nature.” But when they knowingly poison the ground and kill unborn children, it makes your bile rise to your throat.

I worked at HLL from 1989 to 1994. The thermometer factory was in full production at the time. The top executives that interviewed me and confirmed me from a management trainee to a manager – the Chairman of the company and several high-ranking executives – probably knew that mercury was going into the ground in Kodaikanal. It makes me sick, just thinking about it. If you want to be charitable to them, you might choose to think that they didn’t know. They just never went near it, never reviewed its operations, afraid of what they might find. Still, they are guilty of neglect and willful ignorance.

Screen Shot 2015-08-10 at 10.58.14 AM

Today’s Unilever is a very different place. Ironically, the company seems to have bet its future on its Sustainable Living Plan. Many of its brands are positioned primarily on what they do for the planet. The screenshot above is from Unilever’s company website. The blurb under CEO Paul Polman’s picture talks solely about Unilever’s Sustainable Living Plan.

All this is quite creditworthy and I hope they are successful. But they must pay for their past sins. I hope Hindustan Unilever cleans up the site and compensates the victims. It would be the right thing to do and it would be good business too. You can’t be betting the company’s future on Sustainable Living while fighting a PR battle about dumping toxic waste in a third world country.

But what I know will not happen is that no former executive will be held responsible. That just never happens. Pay a fine. Take a temporary hit to earnings. And move on. That’s not real deterrence. But that’s the best we can expect. Whether you are leaching mercury into the ground water or bringing down the world’s financial edifice, you can feel safe that the company you work for has your back.

Of Leaking Electricity

My Dad's wiring!
Have you noticed how in India if you visit your friends or family, you always need their help to turn the TV or computer on in the morning? Why? Because it is too darned complicated. For instance, to turn on the computer you may need to switch on some or all of the following:

– Wall socket
– Power strip
– Second wall socket (because the power strip doesn’t have enough outlets)
– Computer
– Monitor

Yesterday I was being brave at my parents’ house and decided to try turning on the computer myself. I went down the checklist and turned on the computer, but the broadband modem wouldn’t turn on. After many minutes of jiggling wires and testing for loose connections I finally discovered this small button on the back panel of the modem – another switch – and of course it had been switched off.

Its almost as if we revel in taking something simple like switching on the TV and and making a sacred ritual out of it – a complicated series of actions which cannot be executed without rigorous training and is designed to obfuscate outsiders.

I used to find this exasperating until I got interested in clean tech last year. It turns out that the Indian approach to turning off power to appliances that are idle actually does save electricity. It probably also extends the life of the appliances, though I haven’t read any research on that.

In the US on the other hand, there is almost no attention paid to what is called “standby power” – the power consumption by appliances, especially modern, intelligent electronic appliances, when they are idle but not turned off. Standby power is a big source of lost energy. Lawrence Berkeley Labs has a website dedicated to educating the public about standby power. According to them, a typical American home spends as much as 10% of its power consumption on standby power.

Typical American attitudes to switching off stuff are that they a) don’t want to be bothered about it and b) find it funny when someone does it. As far back as 1933, James Thurber, in one of my favorite funny books, My Life and Hard Times, describes his mother’s paranoia

… mother lived the latter years of her life in the horrible suspicion that electricity was dripping invisibly all over the house.

because of which she would go around turning switches off all over the house even if there was nothing plugged into them.

I suspect most Indians won’t find this funny. Switching off stuff comes naturally to them. And if a good percentage of them don’t know that electric current doesn’t flow unless the circuit is completed, that’s natural. The other thing that is “piped” into the home is water and that drips all the time.

On the other hand, I don’t know if too many Americans find this funny either. If two thirds of them believe that Obama is a Muslim and a whole bunch of others hold these kooky beliefs I think there must be a lot of people like Thurber’s mother out there.

Chennai Expressway Threatens the Beaches

Son Naren Pradhan has been having a pretty interesting few weeks in Chennai. He is interning at the Tree Foundation a non-profit committed to environmental education and conservation. Protecting sea turtles is a focus area for the Foundation. Naren spends his time caring for the turtles and writing about them and the Chennai wetlands.

Last year Naren got involved in the effort to stop the construction of an elevated expressway along the coast line in Chennai through an organization called Reclaim Our Beaches. There was a protest rally on the Besant Nagar beach on July 31. Protestors were encouraged to bring their own placards. Naren’s “Turtlezilla” placard was a big hit. The Hindu covered the protest here.

A mega project like the Chennai expressway can have wide ranging impact. The affected include displaced fishermen, marine life and citizens who use the beaches.

The success of a civic protest can often hinge on effective images and symbols. The oil spill in the Gulf of Mexico coincidentally has an impact that is quite similar though much larger – it affects the livelihoods of fishermen and destroys the coastal ecosystem. The most striking images of the disaster have to be those of birds covered in oil. I wonder what would be the most effective images for the narrative in the Chennai expressway protests.

The Chennai expressway protests have a “disadvantage” when compared to the BP oil disaster. The expressway hasn’t been built yet. And you can’t wait for that – once it is built it will be too late. So the key “marketing” challenge is how to paint a picture right now, of what is going to happen if it is built. For the opposition to become a grassroots movement, the public needs to see in their mind’s eye what is going to happen. The fear and concern that will follow is what the movement will feed on. The Hindu article for example, has a beautiful photo of the Marina beach. If I was new to the issue I would have to read the whole article carefully to form an opinion. If like people, I didn’t read it, I would carry the image of a serene beach in my head!

Words don’t travel as well as pictures do.

Reuse is Like Cutting Consumption in Half

If you are like me you don’t send Fedex packages too often (not yourself, at any rate). I happened to do that a couple of days ago and was quite tickled to see a simple change that Fedex had made to their envelope. You know, the one made out of stiff cardboard which looks like it can stop a bullet if need be to save the two sheets of paper inside.

Well, Fedex is doing its bit to save the planet. What they’ve done is they made the foldover (“lip”?) on the envelope longer and put two strips of adhesive instead of one. The first time you use the lower strip to seal the envelope. The receiving party opens the envelope using the handy “opener” (?) embedded into the fold. After opening it, there still remains one strip of unused adhesive which can be used to send out another fedex package.

I thought it was very ingenious. But the tubelight went off only after I had assiduously used both strips of adhesive to make doubly sure that my super important package was sealed shut!

Photo by hyku

Copenhagen – the Mother of all Negotiations

Who hasn’t been in a tough negotiation? If nothing else, negotiating with your kids can often be most difficult. But the negotiations at Copenhagen summit and next year on climate change are going to be the hairiest negotiations you can ever imagine.

An FT article [pay wall] shines some light on why the negotiations were so difficult. The biggest reason is of course that these are multi-lateral negotiations. And different groups have different interests. Developed countries want developing countries to make commitments on emission reductions while not over committing themselves. They also want transparency in developing country emission measurement.

Developing countries don’t want emission reductions to get in the way of development. They want developed countries to pay for clean technology.

There are a also a whole bunch of developing countries in Africa who are not significant emitters but will feel the brunt of climate change. They have nothing to give in the negotiations but a lot is at stake for them.

And then there are also a few heads of state like Chavez, Morales and Ahmadinejad, who simply use the stage to take potshots at the US and the West. But they still have to be invited to party.

Obviously, 170 independent actors can never achieve any consensus. So groups were formed. US, UK, Germany, France as representatives of the developed countries and China, India, Brazil and South Africa as representatives of the developing world. But this still wasn’t enough to get an agreement. The bulk of the world’s emission in the next 20 years is going to come out of the US and China. If only these two countries had sat down and thrashed it out, we would have had a deal.

The world is not going to be happy with their leaders if they don’t put their shoulders to the wheel and get a deal together soon in the new year.

Evoking Negative Images can make for Effective Messaging

The California Academy of Sciences in San Francisco has unmatched green credentials. A roof top garden called Living Roof, insulates the building. The solar canopy has 60,000 photo voltaic cells. The insulation in the walls is recycled denim. The disposable plates and forks in the cafeteria are compostable. All waste bins come in threes. The one that is generally called ‘trash’ carries a powerful message in its label. Brilliant.