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Costco, Sheri Flies, The James Beard Foundation Leadership Award And How Sustainability Differs From Charity

A hat tip to Andreas Schindler at Pilz Schindler GmbH, which promotes its Don Limon brand of limes around the world. He sent us a link to year-old video of Sheri L. Flies, accepting the 2011 James Beard Foundation Leadership Award.

Sheri is an intriguing individual. She is trained as a lawyer and for 13 years was Costco’s Corporate Counsel. In that capacity, she got involved in a project by which she studied the supply chain that began with a cooperative of farmers growing French green beans in Guatemala. In the end, she was so captivated by the work that she recreated her career and now works as Assistant General Merchandise Manager — Corporate Foods at Costco.

Costco is a fascinating company and, by all accounts, Sheri is a wonderful person — not only highly competent but genuinely caring about the fate of people in the whole supply chain. She deserved this award, and Costco deserved the award — mostly because so many who address sustainability choose to ignore the ethical component.

Companies like to focus on energy-savings, because that can save them money. Sheri insisted, and Costco executives agreed, to focus on the ethical component of sustainability.

We have written a lot about sustainability, and we have found that in the business world, it has become intellectually incoherent. Although we have had correspondents who have argued that sustainability can be profitable, we don’t think that is a meaningful definition.

After all, if it is profitable to do something, then it is just proper business management to do it. In order for sustainability to have a meaning distinct from proper business management, you need to be able to say that an executive who believes in sustainability would do X, but an executive who does not would not follow that course.

The problem is that all these values — whether sustainability or food safety — are problematic because companies are in business to produce a return to their shareholders and because society wants food to be available inexpensively.

We once ran a piece that mentioned an incident when Karen Caplan, President and CEO at Frieda’s, inquired of a group of retailers if, in light of their deep dedication to food safety, they had changed their KPIs — Key Performance Indicators — and nobody had.

The bottom line is that whether sustainability or food safety, companies tend to adopt minimum standards and then the issue is moot. In other words, it is very difficult to get retail buyers to pay extra to exceed the firm’s minimum standard on food safety, sustainability, traceability or any other metric. This is because at the end of the year, all else being equal, if there are two divisions and one made $10 million that year and conformed to the retailer’s standards for food safety and sustainability while another executive ran a division that made $8 million but bought product that significantly exceeded the retailer’s standard, the bonus goes to the more profitable division.

We place below Sheri’s acceptance speech, and it is worth watching. She is, obviously, deeply committed to helping women; indeed we would urge those who give out the Women in Produce Award at United to consider Sheri for the award, where she would join her Costco co-worker Heather Shavey in the pantheon of great female leaders of the trade.

Yet we find the whole question of sustainability and its relationship to businesses something of a quandary. First, on the video, Sheri is introduced and given the award, and the presenter highlights that her efforts led Costco to set up a foundation to “support the farmers and their families, to insure that they have access to higher education, to clean water and health care.”

This is surely a wonderful thing, and both Sheri and Costco merit praise for starting such a foundation. But this is not sustainability. It is the opposite of sustainability. This is charity to help poor people. If the supply chain was sustainable, the farmers would make enough money from selling their crop that they would not require charity.

Now we don’t criticize Costco or any other retailer on this point. We understand fully that Costco can’t just decide to pay triple the price for green beans; it has to sell products competitively. This is why efforts to help growers often revolve around things such as Fair Trade initiatives. In these initiatives, consumers are notified that they have an opportunity to pay more and help producers in developing countries.

It is also, though, why many are hostile to big box retailing, organizations such as Costco, Wal-Mart, etc., that don’t so much pay market rate as create the market. To those who want people along the food chain to get paid more, the leverage of these large buyers is not desirable. Of course, as a society, we have allowed these organizations to flourish because with their efficiency and buying power, they deliver such value to consumers.

See the whole thing here:

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