Green business is booming, from electric cars to petroleum-free laundry detergent to organic bamboo pajamas. The green economy now accounts for $1.3 trillion a year in revenue and the market for environmentally friendly products is growing at seven times the rate of conventional products. From 2015 to 2019, more than half the growth in consumer packaged goods—a category that includes a wide range of food items, household products, and toiletries—was from products marketed as sustainable. And companies are not solely relying on their own expertise anymore but are soliciting the help of their supply partners in developing sustainable products. The payoff can be significant, yielding not only greater environmental benefits but also economic gain.
While many companies have made substantial progress in becoming more environmentally friendly, they have often been slower to address social issues such as labor conditions and worker rights. Tech giants Apple and Amazon tout their green initiatives but have been criticized for the grueling conditions facing their factory workers, delivery drivers, and warehouse employees. Starbucks has had a climate change strategy for nearly 20 years and aggressive goals to be carbon positive by 2030. Yet last year, reports revealed that young children in Guatemala were picking some of the beans that eventually end up in its coffee.
How can companies make sure they are socially responsible in addition to being environmentally friendly? As a professor at Michigan State University’s Eli Broad College of Business who studies corporate social responsibility and green supply chains, I’m interested in how efforts to foster environmental and social sustainability intersect. My research shows that there is a spillover effect whereby companies that develop capabilities for environmental sustainability can leverage them to improve their social impact. In other words, companies can draw on their expertise in going green and use it to do good.
We’ve Made More Progress on Environmental than Social Responsibility
The concept of corporate social responsibility is often described using the idea of a triple bottom line, with benefits for planet and people as well as profits. While many companies have made progress on the environmental front, they have been slower to tackle social issues for a number of reasons.
First, in an era of complex global supply chains, it is difficult to measure and monitor a business’s social footprint. Environmental outcomes like pollution and water use are more easily quantified than discrimination and worker empowerment. They also tend to be more visible to consumers making decisions on what to buy. It’s easier to see the amount of plastic packaging on a product or check a list of ingredients than to know the labor conditions of the workers who produced it.
There is also less agreement on what the standards for social impact should be. Labor laws and cultural norms vary from country to country across global supply chains, and there are plenty of areas without clear consensus. The ISO, a prominent international certifying body, set its environmental management standards (ISO 14000) in 1996 but didn’t release social responsibility standards (ISO 26000) until 2010.
In addition, going green is often profitable, while the business case for social responsibility can sometimes be less clear. Environmental initiatives like streamlining production processes and reducing waste can produce cost-savings alongside the ecological benefits. Yet many businesses have a hard time evaluating the potential impact of social initiatives. For example, will increasing wages and benefits hurt profits or will it pay off by making workers more productive and reducing turnover?
It can also be hard to predict whether adding social sustainability to a product already marketed as green will further boost sales. It is often the consumer who triggers a firm to become more sustainable, as some of my other research has shown. But for consumers, environmental and social issues are often coupled together. When a business makes a product environmentally friendly and socially sustainable, there might not be significant additional appeal to the consumer, making it difficult to say if adding the social dimension was worth the cost.
The Spillover from Green to Good
While corporate social responsibility has lagged behind environmental progress, my research suggests that the path to social good may be easier than we think. In an analysis of data on more than 1,100 multinational corporations, my colleagues and I found a spillover effect in which companies that had developed capabilities for environmental sustainability also had better social supply chain management. Our findings suggest that companies can leverage what they’ve learned by going green as a foundation for doing social good.
Part of this spillover from green to good is about the firm’s orientation and philosophy. Developing a culture that values factors other than profit in decision-making is a major shift, but once achieved it can easily be extended from the environmental to the social. The same goes for thinking of one’s organization as part of a global community with accountability to external stakeholders and standards.
The spillover effect also comes from the concrete policies, processes, and governance and management systems developed for environmental purposes that can be redeployed and adapted for social responsibility. For example, to make its supply chain greener, a company will likely have cultivated relationships with trusted suppliers and established policies and reporting systems for monitoring and regulating their activities. This groundwork can be redeployed to new objectives like tracking and improving working conditions in factories. These capabilities can have a tremendous impact, as strategic sourcing and supplier engagement not only deliver on sustainability initiatives but also economic performance.
At the heart of the spillover effect is people. Employees with expertise in environmental sustainability can leverage their skills in service of new social initiatives. A company’s partnerships with suppliers, certifying bodies, industry groups, sustainability experts, and other key stakeholders around environmental goals, which my other research has shown to be very powerful, can be redeployed in similar ways. Honing the company’s human resources and engaging employees and partners in the process—listening to feedback, collaborating, and addressing each stakeholder’s needs—is essential to capitalizing on the green-to-good spillover.
Patagonia, a leader in corporate responsibility, is an excellent example of how environmental and social sustainability can reinforce each other. The company built its brand around nature and protecting the outdoors, but has also woven social impact into its identity, working hard to make sure its clothing is not produced in sweatshops. It follows a specific vetting approach when considering new factories and has implemented initiatives providing workers with fair wages, subsidized childcare, and flexible work schedules.
Patagonia also works closely with its suppliers to ensure they can meet both social and environmental standards, in addition to product quality standards and business metrics like price and capacity. These efforts are integrated across the company, with the emphasis on social issues going back almost two decades to when Patagonia established the role of a manager entirely focused on social responsibility. One critical piece of their success is that company leadership is 100% behind the cause.
Businesses Can and Should Build on Environmental Success to Do Social Good
Given the serious environmental and social crises our society continues to face, from climate change and water scarcity to human rights and gender equity, we must begin to value all three dimensions of the triple bottom line. A comprehensive vision of sustainability protects not just the natural world but the human workers, consumers, and communities who live in it.
We should look for ways to harness and amplify the spillover from green to good. Companies should create multidisciplinary, boundary-spanning corporate social responsibility teams to increase this cross-pollination. Nongovernmental organizations, policymakers, and certifying groups should expand their sustainability lens to incorporate the good as well as the green. Consumers should do the same, creating pressure for companies to take the lessons they’ve learned from becoming more environmentally friendly and apply them to urgent social issues.
The most important finding from my research is that environmental and social sustainability are not in competition, but in fact mutually reinforce one another. An increasing amount of research also suggests that they both bolster financial profitability in the long run, making the case for the harmony of a true triple bottom line.
Tobias Schoenherr is the Hoagland-Metzler Endowed Professor of Purchasing and Supply Management in the Eli Broad College of Business at Michigan State University. Recently recognized as one of the top 10 thought leaders worldwide in supply chain management research, he is an award-winning teacher and scholar focusing on sourcing, including environmentally and socially responsible supply chains.