Impact and Profitability in Dialogue: Ben & Jerry's Ice Cream
by Maya Wolf, MBA 2019 (10/14/17)
Ben and Jerry’s Global Director of Social Mission, Rob Michalak, joined the Sustainable Global Enterprise Club late September to talk about the intersection of product, people, and planet at the ice cream company.
Ben & Jerry’s began in the late 70s as two friends selling soup and ice cream out of an old gas station in Burlington, Vermont . From the beginning, Ben and Jerry ran their business with the goal of achieving linked prosperity for all stakeholders, from farmers and franchisees to employees and customers alike.
The concept of linked prosperity is codified in the company’s long-standing Statement of Mission (estd. 1988), which presents product, economic, and social sub-missions side by side. The parallel layout of the Statement of Mission is important, indicating the equal and interconnected importance of each of its tenets. By forcing itself to maintain profitable growth alongside wins for its social and product missions, Ben & Jerry’s has leveraged the interplay of profit and impact to drive lasting sustainability. This interplay was particularly evident in Michalak’s discussion on pay compression and the effects of Unilever’s acquisition.
The 2008 financial crisis made executive compensation front page news. Occupy Wall Street further highlighted the trend of astronomical compression, the pay ratio of a company’s highest salaried executive to the lowest paid worker.
For the first decade of operations, Ben & Jerry’s maintained a tight compression of 5:1, a policy that helped the company deliver on its commitment to valuing all employees, with the added benefit of generating employee loyalty and goodwill.
A policy that keeps entry-level wages high and minimizes the pay gap between employees shines from a social equity perspective. However, in practice, it made recruiting top talent a challenge, especially in a tiny, remote place like Burlington. As more positions opened up, the company found it had to loosen its pay structure in order to hire quality executives. Compression inched up to 7:1 before the explicit cap was dissolved. Today, according to Michalak, the figure is closer to 20:1, still a far cry from the national average of 340:1.
Compression can be an effective way to prevent egregious inequities in compensation, but if it is taken to such an extent that it prevents a company from attracting the talent needed to grow the business, the social and economic equity achieved will never be brought to scale. By considering compensation in the context of both social and economic impact, Ben & Jerry’s settled on a balance of the two that has allowed the company to expand, and its social wins to multiply. (Click here to read about some of the initiatives Ben & Jerry’s cares about).
It’s easy to think about triple-bottom-line (3BL) business models as simply spreading out wins for profit, people, and planet. Michalak’s discussion on compensation at Ben & Jerry’s pointed me to how the 3BL business model can go a step further, attuning the different bottom lines to each other to achieve optimal outcomes none would achieve on its own.
Unilever bought Ben & Jerry’s in 2000. When asked about the acquisition’s effects on the ice cream business, Michalak listed heightened risk-aversion and tempered innovation. These don’t immediately strike one as changes to get excited about. But to the Global Director of Social Mission, both have played out in direct service to the company’s mission.
Consider flavor testing. Before Unilever, Ben & Jerry’s was liberal with its use of market-wide experimentation. Some flavors would inevitably flop and be discontinued, while those that did well could expect expanded distribution runs and many generations of shelf space in the freezer aisle.
In hindsight, according to Michalak, frequent discontinuations undermined job security for flavor-specific suppliers and distributors. Now, the company does more product testing up front, before products hit the shelves. The increased accountability to its corporate parent has helped Ben & Jerry’s improve the livelihoods of workers in its value chain in ways it wasn’t pressed to do before.
I came to Johnson in large part to learn how to turn sustainability challenges into business opportunities. Ben & Jerry’s is an example of what can happen when a company puts impact and profitability in dialogue with each other, to reach an outcome that neither the lens of impact nor of profitability can arrive at on its own.