Ben & Jerry: CSR challenges and opportunities when creating a business and making it grow

Cases
Strategy documents
C04/2011

Public Affairs

CSR challenges and
opportunities when
creating a business and
making it grow: the case of
Ben & Jerry’s
When you set up a business, if you have a CSR based approach, this means that
you will build on sound social and environmental principles. But at the same time
it may also mean that problems relating to competition and the viability of this
model will arise later on.

When Ben Cohen and Jerry Greenfield opened conscious principles underlying the concept of
their first Ben & Jerry’s store for homemade CSR, in the opinion of Joan Fontrodona, lecturer in
ice cream in a old petrol station in Burlington, Ethics at IESE Business School (Barcelona, Spain):
Vermont (USA) in 1978, they did so after
completing a five dollar correspondence business 1. Socio-political
course with the University of Pennsylvania and 2. Ethical
with very little capital, but faithful to their ideals 3. Economic
(laid down in their hippie days in California at
the end of the 60s) and mapped out a three-fold It is true that Ben & Jerry’s was one of the first
mission for their business. They both realized from firms in the US that from its outset applied the
the beginning that the business only be successful concept that would later be known as Corporate
if all the product goals (social, environmental and Social Responsibility to its business model. When
financial) were reached together. they decided to found an environmentally and
financially sustainable company that would create
These aims represent what John Elkington, in 1998, the development they sought for all their interest
first called the “triple bottom line” (also known groups, they put in place criteria that took account
as the “triple balance”) together with the three of the impact that these activities would have on

Document prepared by Corporate Excellence with reference to, among other sources, the intervention of Joan Fontrodona during the
sessions of the Executive Education Program “Making Social Responsibility Work: The Cornerstone of Sustainable Business” organized
by the IESE Business School in Barcelona in July 2011.

CSR challenges Ben & Jerry’s: Triple Misión The counter-cultural, anti-business image of the two
and opportunities hippie college friends, together with their idealism,
when creating a Social Product Economic
business and making became extremely popular with the American
mission mission mission
it grow: the case public. They were seen a model of commitment and
of Ben & Jerry’s To operate the To make, To operate the
responsibility, promoting socially beneficial causes,
Company in a distribute and Company on
way that actively sell the finest a sustainable such as refusing to use cloned animals to supply
recognizes the quality all financial basis their commodities, or transgenetic products.
central role natural ice cream of profitable
that business and euphoric growth, increasing
plays in society concoctions value for our But the more the business grew, the more internal
by initialing with a continued stakeholders
innovative ways commitment and expanding
and external commitments they took on. In
to improve to incorporate opportunities for personnel management, and as a result of their policy
the quality of wholesome, development and
of equality and joint decision-making, a policy was
life locally, natural ingredients career growth for
nationally and and promoting our employees. introduced that forbade directors’ remuneration to
internationally. business practices exceed five times that of the lowest-paid worker: the
that respect the
Earth and the so-called 5-1 policy.
Environment.

The question of coherence vs. reality
Fuente: Ben & Jerry’s, 2011. In many US companies in the 70s the ratio between
top and bottom salaries was 90-1. Today, because
of the financial and real estate crisis that affected
society, on the environment (especially animals) the whole world in 2008, the debate is still open,
and on corporate responsibility. especially in the boardrooms of large firms and
financial bodies. This debate does not only concern
From the start, the mission and it goes without the comparison with employees’ base rate pay, but
saying, the vision, and ethical values of Ben & Jerry’s profits, cut-backs, hiring and firing, re-locating and
were social. The corporate culture of the company using public money to rescue large businesses.
was imbued with a spirit of social engagement based
on a clear-cut idea: a caring and supportive form of
capitalism with a human face, which at the time ‘From the beginning the
some called ‘anti-establishment’. mission, and it goes without
The underlying principles brought to their values saying, the vision, and
and behavior became concrete practices and policies. ethical values of Ben &
Ben & Jerry’s decided from the beginning that their
business approach would be based on introducing Jerry’s were social, based on
an ethical vision into the venture, to ensure the a clear-cut idea: capitalism
firm’s sustainability and cost effectiveness, rather
than the traditional approach which, at most, with a human face’.
shares out profits or repairs environmental damage
after carrying out its activity normally, as many The reason that Ben & Jerry’s began to have
other businesses do. problems with their remuneration policy in the 80s
(when the atmosphere in the States was marked
by the yuppies and neo-liberal revolution of the
From beginnings to the first problems Reagan era) was the following: the salaries for the
Since the moment it began to operate, the firm upper echelon of directors was not competitive
bought only natural and organic products, and in in market terms and the business had problems
the 70s and 80s was already recycling all the paper in hiring professional people from outside the
and cardboard it needed to make its own containers. market. At the same time, the lower echelons
It was actively involved in the farms, which supplied were earning more than the going market rate.
raw products, to ensure that the animals were well This had a secondary effect: many of the people
fed and cared for. at an intermediary level did not want promotion
because then their responsibilities would rocket
But over time the business grew massively and while their salary barely changed.
extremely rapidly, and it became necessary to
fight off the unfair attempts of its competitors to In this situation, the ability of the people joining
prevent this. Ben & Jerry’s took Boston’s Haagen the company to adopt the culture and values of
Dazs to court for trying to obstruct the distribution Ben & Jerry’s was vital: only those who shared the
of its products, and won people’s sympathy with its company’s mission and vision would be able to
direct, informal and politically incorrect grassroots understand and live out the spirit of this American
campaign, that asked “What’s the Doughboy afraid ice-cream manufacturer. Hence the importance of
of?’ (a reference to Pillsbury Doughboy, the firm selection and value management, especially for an
that owned Haagen Dazs). organization based on a socially responsible model:

Cases 2

CSR challenges Ben & Jerry’s: Development From fair trade to the buy-out by Unilever
and opportunities In the 90s Ben and Jerry’s began to promote fair
when creating a
of remuneration policy
business and making trade in the supply chain and in production and
it grow: the case marketing, with a view to establishing fair dealing
of Ben & Jerry’s 5-1 7-1
with all the agents involved, from the suppliers
Maximum salary Maximum salary
of a senior of a senior of the ingredients to the end consumer. The Ben
& Jerry’s Foundation was set up to participate in
activities in the community, with 7.5% of pre-tax
x5 x7
profits devoted to this end. And prices were kept
Salary of an Salary of an
employee employee 20% below those of their competitors.
under under
Their model, clearly based on the ethical concept
1978 -1990 1990 -2000 of theories of justice versus utilitarianism, which
integrated all their social, legal, cultural, economic
Source: Author, 2011. and environmental concerns into a single vision, in
line with one set of policies and one ideal: namely
that the success of a company cannot be reduced to
in addition to not wanting to focus their employees’ a single dimension. Sustainability, success, must be
motivation on such a mechanic element as salary. kept in the balance between the other dimensions
(the business as a good operator: quality and results,
But behind the important debate this generated the business as a good colleague and citizen: social
at all levels of the organization, what was at risk, attitudes and commitment), even though this may
what was in danger of being lost, was something far create problems for leadership and management.
more serious, particularly for Ben Cohen, the heart
and soul of the company. In his opinion, the 5-1 But in 2000, the news that the two college friends
remuneration policy was morally right, because it were retiring and selling the business to a Dutch
represented the company’s mission, vision, and conglomerate, with the promise that the new
values and was the raison d`être for the huge success owners would respect the ideas and spirit with
that they had achieved up till then. which the company had been founded, left their
followers aghast.
The coherence with this model was basic, but it
was also important to exercise pragmatism and Today, Ben & Jerry’s ice-cream company is still
take account of reality. So, eventually, the salaried an organic and free trade enterprise, with zero
policy was modified and broadened, and the 5-1 Co2 production emissions. A proportion of sales
ratio became a 7-1 ratio. The way the company continue to be devoted to the Foundation and it
functioned also had to be adapted to corporate is still at the forefront of CSR as later initiatives,
standards such as reporting, controls, procedures, such as the three-fold balance between the needs
meetings and producing memoranda. It was as if the of farmers, dairy cattle and the environment shows,
company went from adolescence to adulthood in as or the cooperation with the World Wildlife Fund
short a period of time as its growth had been. and the explorer Marc Cornelissen to initiate the
Climate Change College. The company still is
doing what it says.
‘The 5-1 remuneration
policy was morally right, Conclusions: simple answers
because it represented the to being successful
company’s mission, vision, History offers us many lessons and many learning
opportunities. The first is that myths can be
and values and was the overturned, demonstrating that it is possible to

raison d’être for the success be competitive and successful while being socially
responsible at the same time. The second is that
that had been achieved’. this is not at all easy and that the road is full of
obstacles. In the corporate world where CSR is
Occasionally one must change and adapt policies still trying to convince firms of its benefits, Ben
in order to maintain one vision alive, and take & Jerry’s proved that answers were simpler than
into account the conditions and circumstances of we thought and that we did not need to re-invent
the surrounding culture. Flexibility is a necessary the wheel: we only need to make a true, genuine
condition for socially responsible companies too. commitment to this ideal.

Cases 3

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Ben & Jerry: CSR challenges and opportunities when creating a business and making it grow

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