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Disruption From Within: An Ongoing Challenge

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MAKE CHANGE
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I can still remember the very first board I was asked to join. I was honoured that I had reached whatever it is one reaches when asked to become a board member. On accepting, I was sent a lovely letter of thanks from the CEO with a request for a substantial sum of money -- at least for me. I wondered who had so ill advised them about my financial status.

You would think that experience might jade me from falling captive to "board-om." Fortunately, it was a blessedly unique event. Since then, I have felt a lot more useful, learned a lot more and had a lot more fun on the boards of a wide variety of organizations. I would like to mention two in particular, not because the other 9 have less compelling goals, but because these two highlight how two courageous entrepreneurial leaders, operating in very different contexts, are leading their respective organizations in challenging what have been the operating business models for their respective "sectors." While vastly different in size and annual revenue, their implicit goal is similar: to transform inequitable and unsatisfactory systems and practices. On the eve of the Skoll World Forum's 10th anniversary celebration next week, these organizations, one a publicly listed company and the other a globally oriented Fair Trade social venture, underscore how the ecosystem of positive disruptors is exponentially growing.

The first one, Royal DSM, is a €10 billion Life Sciences and Materials Sciences company based out of The Netherlands. Originally a small Dutch coal mining company founded in 1902, DSM evolved into a bulk chemicals company focused on the production of plastics. However, over the last decade under Feike Sijbesma's leadership, the entire portfolio of the 110 year old company with 22,000 employees has been transformed into a Life and Material Science company.

To do so, 22,000 employees needed to be recruited to drive the change from within. Sijbesma's motives? "I have two young sons," he told me when we first met. "I started thinking about what I would tell them about what I had done with my life and realized I did not want my only story to be that I increased the value of the company's stock. I knew my colleagues felt the same." The transformation of DSM has not been easy, and it has taken several years -- and is ongoing under the theme of "people, planet and profits." Greenwashing? Not a chance. Sitting in the board room with Feike and his senior colleagues at DSM in Amsterdam last week, it struck me that one would be hard pressed to distinguish this group from the most ardent social and environmental advocates.

How has this process affected shareholder value? The value of DSM stock has substantially increased. In fact, it was the biggest increase amongst large stocks on the Amsterdam Stock Exchange over the last ten years, even though over 50 percent of DSM's portfolio has been divested in this process of transformation. DSM has made huge steps in increasing its presence in emerging markets, today around 40 percent of sales, and in improving innovation practices and culture in the company. Feike and his colleagues attribute these achievements to a greater commitment to the mission of the company and the cohesion this transformation process has catalysed among its staff.

The second organization could not be more different in size and structure than DSM. Paul Rice founded Fair Trade USA in 1998 to bring the Fair Trade movement -- so well entrenched in Western Europe -- to the USA. With a current annual budget of about US$10 million of which 75 percent is earned revenue, the organization has enabled family farmers in the developing world to earn nearly US$250 million in above-market income, bringing dramatic improvements in health, housing and education to their communities. The organization works with over 750 business partners, with sales at US$1.5 billion in over 100,000 retail outlets, including Starbucks Coffee, Dunkin' Donuts, Green Mountain Coffee and Ben & Jerry's, and currently certifies coffee, tea, chocolate, sugar, fresh fruit, rice, flowers and garments.

But two years ago, Paul was faced with an unfair aspect of the Fair Trade model in relation to coffee and cocoa. Until then, Fair Trade USA was a member of Fair Trade International (FLO), the European-based organization that coordinates Fair Trade labeling at an international level. The problem was that while FLO allowed certification for large estates producing bananas, tea and flowers, it restricted certification of coffee and cocoa to farms that had organized into cooperatives. That meant that only 8 percent of coffee farmers could reap the benefits of the Fair Trade model. Yet the poorest coffee farmers work on large estates that make up the bulk of coffee production.

Amid a torrent of bitter public controversy that garnered major headlines, Paul took the step to pull Fair Trade USA out of the FLO. Critics accuse Fair Trade USA of watering down standards, motivated by the larger fees to be earned from certifying a higher volume of products. Not so, Paul emphasizes -- the greater the volume of certified coffee, the greater the impact on poverty reduction.

Both DSM and Fair Trade USA have been met with great resistance by the ideologies that dominate their respective sectors. For both DSM and Fair Trade USA, their challenge is to free themselves from the entrenched status quo, joining the growing movement of companies and social ventures that are committed to supply chain sustainability -- incorporating both environmental and social aspects. I am privileged to have a front row seat and witness how revolutionary disruption sometimes must start from within.