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Responsibility

Profits with principles: being socially responsible can pay

Kevin Tan |

For the sake of the environment, you shouldn’t wash your jeans each time you wear them; you should wait until you’ve worn them two or three times. This somewhat unusual advice comes courtesy of John Anderson, President and CEO of jeans maker Levi Strauss & Co, a company promoting itself as a socially responsible corporation that supports environmental and humanitarian causes.

Championing Levi’s ethos of ‘profits with principles’, Anderson says the company’s values are rooted in the communities in which it operates. “It’s always been very important to us that we give back as much as we take out,” says Anderson, who was the keynote speaker at an American Chamber of Commerce luncheon in Singapore recently.

“Corporate social responsibility focuses on the responsibility to people and to the environment which we work.”

But Anderson acknowledges that it’s easy for companies to talk up their commitment to corporate social responsibility (CSR) during the good times, until they hit rough patches.

“The real test is how companies live up to those values. How they integrate them into their business and how they stay true to them when times are tough; (it’s) much easier when times are good.”

The test of Levi’s commitment, says Anderson, came when the company introduced its so-called ‘terms of engagement’, a code of conduct for its employees, suppliers and contractors. This details Levi’s expectations of workplace conditions, including the prevention of child labour, and the promotion of the health and safety of workers.

“The cost for us went up 50 cents a pair of jeans. Those days we were making 400 million pairs of jeans,” Anderson recalls.

“Think about it, 50 cents, that’s what it went up. You can imagine the furore within the company: ‘We can’t afford to do it’.”

“But from the top down, we said ‘we’re going to do this, we’re going to take a leap of starts’ because we believe the industry will follow us. And guess what? Ninety per cent of the industry today is working with us after we implemented that. And our company survived just fine.”

When asked why Levi’s management decided to accept the significant increase in costs, Anderson explains that the Haas family, which controls the privately-held company, strongly supports CSR, and that management believed “it’s the right thing to do”.

“As business leaders, we need to make the case that serious, rigorous society-wide approaches to corporate social responsibility are exactly what healthy companies do,” says Anderson.

“We believe consumers will continue to vote with their wallets and support companies who embed their values in their products and work to create positive changes in the world.”

Certainly Levi’s CSR initiatives have incurred costs in the short term, which would not be tenable without the support of key stakeholders.

“I can also tell you it has to start from the top. Shareholders, the board, management have to believe in this, because otherwise it would not be successful.”

“Because consumers will find you out. They will find you out if you’re only doing it in good times and you back off in hard times. Consumers will find you out if you only go halfway down that journey.”

To be sure, Levi has notched up numerous achievements in championing humanitarian and environmental causes over the years.

More than two decades ago, it was among the first companies to raise awareness about HIV/AIDS. Anderson says Levi pioneered workplace policies and practices that were adopted by its employees around the world. “Our active involvement in confronting the HIV/AIDS problem in South Africa through our Levi Red Tab For Life programme has helped to make the brand number one in a country, with 75 per cent of the young people saying this issue is important to them,”

“So we built the brand by aligning with an issue the government struggled to confront. And that’s a commitment we still have today.”

Anderson added that Levi has been working for the past two years with other apparel brands, as well as non-governmental organisations, to stop the practice of using child labour in harvesting cotton in Uzbekistan. To that end, they have asked suppliers not to use cotton from that country until the government shows progress in ending the practice.

Turning to the environment, Anderson says Levi is aware that cotton farming requires significant amounts of water and pesticide. That has led Levi to produce apparel made from recycled soda pop and blended organic cotton. Notably, Levi’s recent marketing campaign asked consumers to trade in their old jeans, which could then be recycled by Levi for its own commercial use.

“Our vision is this: we will build environmental sustainability into everything we do so that our profitable growth helps restore our environment. So we wanted to link the environment through our guided market process and we also want to tie it to profitable growth,” says Anderson.

“And I think both can fit very closely together. If you do that, people can really align behind what you want to do. But you have to be pragmatic, you’ve got to demand profitable growth but you can’t tie it to environmental and social issues."

In the final analysis, companies have to sustain their commercial viability to be able to continue to “do the right thing”, says Anderson.

“That’s why it’s very important we link it to profits with principles. One of the dilemmas that we’ve been dealing with over time is that there are many people who say ‘let’s do it regardless of the impact on profit’.”

“No, can’t be done. I say to many people, ‘I can only guarantee I can keep contributing to the community in which we operate, if we deliver sustainably-profitable growth’. So you got to have that tension there.”

“I’ll be honest,” he adds. “We do it because it’s the right thing to do but it’s also got to make business sense.”

 

Levi Strauss CEO John Anderson spoke to AmCham in Singapore on September 4, 2009.