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Five Things Business Leaders Must Do in 2011

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As 2010 came to a close, StrategyOne, an Edelman public relations company, released the results of a survey on the public attitudes toward American business. The results were pretty ugly, but hardly surprising:

  • Six in ten respondents said corporate America didn't meet expectations in 2010; seven in ten have higher expectations for 2011.
  • When asked to grade how well corporate America did in 2010, 82 percent assigned a grade of 'C' or lower, and 40 percent assigned a grade of 'D' or 'F.'
  • Eighty-eight percent of consumers found that corporations had recovered from the recession better than American families, and 85 percent thought corporations had better prospects for the coming year.
  • Only 17 percent of those surveyed thought companies deserved an 'A' or 'B' for honest and moral conduct in 2010.

Surprised? No one who occupies a corner office today should wonder why Americans hold such a low opinion of them and their colleagues. Consider these facts -- eight reasons why we've entered very dangerous territory.

  • According to the commerce department, profits at American companies grew to an annual rate of1.659 trillion in the third quarter of 2010 -- the highest they've been since the government began keeping track more than 60 years ago.
  • Just 1 percent of Americans own 90 percent of the nation's wealth. For the richest among us, annual income soared from 4 million in 1974 to an average of 35 million in 2007.
  • Tax rates on executive pay have been cut in half since 1970. From 1985 to 2004, taxes on the top 0.1 percent fell from 42 percent to 34 percent.

Meanwhile...

  • The U.S. housing market is down around 25 percent from its peak in 2006. In many markets, the drop is even worse. The average price of homes in Southern California, for example, has plummeted 41 percent.
  • The broader and more meaningful U-6 measure of unemployment, which includes people who have stopped looking for work or who can't find full-time jobs, is currently around 17 percent.
  • The unemployment rate for native-born African-Americans with less than a high school education is 28.8 percent. Their U-6 measure is a catastrophic 42.2 percent.
  • One out of every seven Americans now rely on food stamps.

While most consumers could not cite these statistics, they are nonetheless experiencing their very real impacts each day.

They're also unwittingly suffering from our economic system's lack of full-cost accounting, which has made it perfectly acceptable for companies to "externalize" their negative social and environmental impacts and shift the burdens of these impacts, financial and otherwise, to society at large.

The result is the de facto public subsidization of harmful practices and products, a world where "bad" stuff is cheap (think coal, candy and genetically-modified corn) and "good" stuff is comparatively expensive (think organic food, hybrid cars, and higher education). Put it all together and you get the biggest challenge we face as a nation today -- a dangerously negative trajectory pulling us ever closer to the point of no return.

Twenty three years ago, I founded Seventh Generation with the idea of creating a different way of doing business, and I've spent over two decades building the company into one that many consider a model of meaningful systemic corporate responsibility.

During my tenure, I saw business make an incredible amount of progress. Milton Friedman's thesis that the only responsibility of business is to increase shareholder value has been rejected in boardrooms across the country. Today, an increasing number of businesses are committed to taking responsibility for all of their stakeholders, even if their results fall well short of expectations.

While many of you know that I am no longer executive chairman of Seventh Generation, my work in corporate responsibility from inside a company has given me a rare perspective on this evolution,. The fact remains that all businesses will need to become radically more sustainable, transparent and responsible to succeed and survive in the twenty-first century. It's no longer simply "nice to do"; it's become a business imperative.

So, what do we do about our current mess?

As we know from Americans' attitudes about business and the state of our economy, big changes are needed. The time for incremental improvements has passed, and if business leaders don't step up and make some major changes, they will risk an increasingly more aggressive and violent public response. To reverse course and avoid these outcomes, here are five things business leaders must do in 2011:

  1. Insist on a national economic strategy (as the Chinese have) that makes tough choices about America's future. We need to regain our lead in alternative energy, rebuild a modest manufacturing base, diversify our agriculture, and spend much less on defense and much more on education, infrastructure and public transportation
  2. Embrace transparency. There's nowhere left for business to hide anyway. Tomorrow's most successful brands will be authentic because they are transparent and able to build loyalty that advertising can't buy.
  3. Realize that corporate responsibility and sustainability aren't departments. They're business strategies, and only strategies that are holistic and systemic will work. The age of doing good with the left hand while screwing people and the environment with the right hand is over.
  4. Show a little self-restraint. Greed isn't good anymore. Senior management compensation is out of control, and political influence by business is killing our democracy. Start doing the right thing because it's the right thing, not because your lawyer told you to do it. It's a simple matter of survival--wiping out what remains of the middle class will leave no one to buy your stuff!
  5. Create ownership not employment and high wage green jobs not low-wage service sector positions.

Together, these steps form a reasonable and effective way to begin promoting the politics and policies of a just and sustainable world. This is the task that I believe to be the most important and profound challenge in today's society, and the time for us to get to it is quickly running out.