NYU Stern professor: Sustainability is 'good for humanity, but it's better for business'
- Sustainability isn't just good for humanity - it's good for business.
- That's according to Jeffrey Hollender, cofounder and former CEO of the sustainable consumer product company Seventh Generation, current co-CEO of Sustain Natural, and professor of sustainability at NYU Stern.
- On an episode of Business Insider's "The Bottom Line," Hollender said that sustainability is about more than the environment, and that sustainable business practices are good for business.
- This article is part of Business Insider's ongoing series on Better Capitalism.
Jeffrey Hollender knows what it means to run a sustainable company.
The professor of sustainability at NYU Stern is also the cofounder and former CEO of the sustainable consumer product company Seventh Generation and current co-CEO of Sustain Natural, which he runs with his daughter.
In an interview with Business Insider Editor-at-Large Sara Silverstein on an episode of "The Bottom Line," Hollender defined sustainability as "a systematic approach to thinking about the total impact a business has on the planet, as well as society."
It's not just about the environment, he said - it's also about how the company treats its employees, all the way through its supply chain.
And why is a sustainable business important? Is it important from a business perspective or from humanity's? Silverstein asked.
Hollender answered:
"For both really, I mean, yes it's good for humanity, but it's better for business. So if you treat your employees well, if you allow them to be owners of the company, they're more loyal, they're more productive, there's less turnover, and Harvard has done a study that actually shows that this translates all the way down to earnings per share in companies that are sustainable that treat their employees better."
The study Hollender mentioned is by Corey Rosen and Michael Quarrey, who wrote in the Harvard Business Review that in 1986, they compared the performance of 45 ESOP companies (companies that encourage employee stock ownership plans, or ESOPs) with similar companies that don't encourage employee ownership. They found, in short, that ESOPs had positive effects on measures like growth and worker participation.
"The lessons for management are clear," wrote Rosen and Quarrey. "Give employees an opportunity to acquire a significant share of the company and develop opportunities for them to participate as owners. This course is remarkably effective, remarkably exciting, and remarkably different from the one the vast majority of American companies travel."
Speaking with Silverstein on "The Bottom Line," Hollender said executives tend not to understand that sustainability will improve financial performance - they think it has to be a trade-off between being a good citizen and maximizing profits. But those can be one and the same.
"The truth is you will perform better financially by doing things like having a great sustainability program, by having women on your board and in your senior management and by treating your employees well and ensuring that they're owners of the company," he said. "Those things translate into better financial performance."