The Good Earth

Paul Dolan is no woolly-headed idealist. The head of Fetzer Vineyards is a fierce competitor who happens to believe that sound environmental and social practices are also good business. It's all part of his "triple bottom line" approach.

Paul Dolan is taking a stand. The 53-year-old president of Fetzer Vineyards is leaning over in the foggy early morning light to examine a small bunch of merlot grapes. He picks one and tastes it slowly, head cocked to one side. "These are really ripe. You can just taste the sugar in them. It's because of the weather here in Mendocino. The heat during the day develops the flavors and the textures, and the cool of the night means the acids don't respire and the grapes don't mold," he says. "Also, it's the way we farm. Everything is organic." Indeed, every single one of the 2,000 acres owned by Fetzer is certified organic. Dolan has sworn to convert all of his 200 outside grape growers to organic methods by the year 2010. And Fetzer is considered a "zero waste" business by the state of California. "It's just how business needs to be done," he says.

Taking a stand is something Dolan writes about with particular passion in his new book, a surprisingly readable manifesto on sustainable business. In True to Our Roots: Fermenting a Business Revolution (Bloomberg Press, 2003), Dolan urges all businesses to commit to the "triple bottom line," a measure of corporate success that takes into account not just profit and loss but also social and environmental impact, and he offers the story of Fetzer's own transformation as an example.

To those who say that going organic, using alternative power sources, providing living wages for workers, and eliminating waste (all of which Fetzer does) are nice, fuzzy goals that don't make financial sense, Dolan simply points to his own success in a tough industry. The wine business is one of the most competitive on earth: Fetzer dukes it out in a market crowded with nearly 3,000 wineries in the United States alone, while fighting older, more established European labels and trying to hold off upstart Australian and Chilean brands. Many American wineries are still recovering from the twin blights of phylloxera and Pierce's disease, which ruined thousands of prized acres in California's wine country over the past decade. And the entire industry suffers from downward pressure on prices caused by overplanting during the booming 1990s.

Dolan hardly fits the stereotype of a boutique organic farmer running his business at a loss to pursue an expensive dream of environmental and social nirvana. Not a chance: Fetzer says it's the sixth-largest premium winery in the United States; it sells 3.5 million cases of wine and posts annual revenues upward of $220 million. In 2002, Fetzer was the country's best-selling wine brand in the $7 to $10 category, with the number-one merlot and cabernet sauvignon as well as the number-two chardonnay and riesling. Fetzer wins awards, too: It took home more medals at the 2002 California State Fair than any other winery, has earned three Gold and two Best-in-Class medals for its premium varietals at the New World International Wine Competition, and won Wine & Spirits magazine's Winery of the Year award nine times. No, Dolan is no woolly-headed idealist. He's a fierce competitor who simply believes that business and social progress go hand in hand. As he writes in his book, "no margin, no mission."

An Organic Epiphany

It all started in 1986. Dolan was still the head wine maker, and Jim Fetzer--then CEO of the winery--decided to open an organic garden to provide food for the vineyard's tasting room and café. The theory: Great wine should be tasted with great food, and organic food was just coming into vogue. But when Dolan and Fetzer marveled over the quality of the first round of organic produce, the new gardener, Michael Maltas, challenged their use of "poisons" everywhere else on the property, asking, "How can you expect me to farm this way, when you guys are spraying chemicals in the vineyards?" Fetzer and Dolan decided he might be onto something. "Michael made us say, 'God, we've gotta try this in the vineyards,' " Dolan recalls. That year, he and Fetzer began to experiment with growing a small block of grapes organically.

When those first experimental grapes ripened, Dolan couldn't believe the difference in their taste. They made the nonorganic grapes seem bland. He continued the experiment with different blocks, and in 1989, he began growing large quantities of organic grapes. The results of the experiment convinced Dolan that years of applying chemical pesticides and fertilizers had stripped the soil of its richness and that the resulting dull grapes were affecting the quality of Fetzer's wine. In 1991, Fetzer launched a label called Bonterra (meaning "good earth"), made of 100% organically grown grapes. It was the first mass-marketed organic wine in the United States. The philosophy extends even to the packaging: To spare trees, Bonterra labels are made from a plant fiber known as kenaf and are printed with soy-based inks; the corks aren't sanitized with chlorine; and the cases are made from recycled cardboard.

A year later, Louisville, Kentucky-based Brown-Forman purchased Fetzer (adding the winery to its existing brands including Jack Daniel's, Southern Comfort, and Finlandia Vodka), and named Dolan president of Fetzer. One of his first decisions was to commit to going 100% organic by 2010. All the grapes on Fetzer-owned land--about 20% of the total--are already organic. Without chemicals to fertilize the grape crop and keep insects and fungi away, growers had to learn different ways to address these same problems. They undertook what was then a fairly unusual practice of growing "cover crops," which have since become standard at wineries around the world. In the aisles between the vines as well as in fallow fields, growers plant different crops to crowd out weeds, repel bugs, and provide soil nutrients. If diseases persist, growers have other remedies, such as sprinkling sulphur dust and copper sulfates (which are approved for organic use) on the roots of vines and spraying assorted oils on the grapes to keep away pests and fungi.

Dolan is a fourth-generation wine maker who grew up steeped in the wine country's culture. His organic conversion led him to believe that protecting the environment meant more than simply growing grapes without chemicals. It meant improving the environment for workers and investing in their skills and futures. It meant reducing emissions from farm vehicles and figuring out how to eliminate solid waste at the winery. And it meant making enough money so that Fetzer could serve as an industry example of how to do things differently. Fetzer employees named this vision E3, which stands for economics, environment, and equity, or the triple bottom line. Every decision at the company is put to the E3 test: Does it support fair and safe standards for employees? Does it protect or improve the environment? Does it make economic sense?

The Dirt Building and the Whopper Tractors

At Fetzer, evidence of Dolan's E3 conversion is everywhere. There is, for example, the dirt building. Fetzer's offices are housed in a 10,000-square-foot mossy-brown structure. It's textured, like stucco but softer, with wispy fibers that you can see if you lean in and look closely. It is, in fact, created out of pressurized layers of dirt--a material called PISÉ , or pneumatically impacted stabilized earth. The interior support beams are made of remilled, recycled wood from barns around the Fetzer properties, and solar power is the primary energy source for the building.

The PISÉ office building is the perfect example of a project that sounds idealistic and impractical. Dolan says it's anything but. "You just include sustainable practices in the decisions that you would have to make anyway. We needed offices. We were going to build a building anyway. Recycled wood is more expensive. Solar panels are very expensive. At one point, we were looking at a $200,000 cost overrun," he says. The solution? "We made the building smaller. And we added the solar panels later, when we found some more money."

Fetzer also runs its entire fleet of tractors and big-rig trucks using biodiesel fuel--which is made from soybean oils and repurposed cooking oil collected from local fast-food restaurants--mixed in with regular diesel. "When we first started using it, the vineyard smelled like Whoppers," remembers Tom Piper, director of vineyard operations at the winery. "It used to make us all hungry."

Fetzer has also broken ground with its labor policies and employee benefits. Many full-time vineyard workers have housing on the property, and the winery is currently building more housing for seasonal employees. "When we started asking for employee input, we learned that our pay was really low here," Dolan says. "And people needed better benefits. They particularly wanted preventative immunizations for their kids." Fetzer started covering vaccines for children and raised its wages to bring them in line with local averages.

Dolan highlights the English-language classes that Fetzer provides to employees free of charge. "Many of our workers are from Mexico, and they don't have the language skills. We believe that everyone should be able to fully participate in the community," he says. Dolan's director of facilities management, Guy Goodacre, puts it more pragmatically. "Those English lessons pay for themselves when a guy understands his supervisor and doesn't pump cabernet into a 3,000-gallon chardonnay tank. That happened to us. It was 140,000 bottles of wine that turned into pink chardonnay."

"No Margin, No Mission."

To fund these projects in environmental and social equity, Dolan faces the never-ending need to perform. Many of his initiatives were started during the high-growth 1990s. His challenge is to maintain them now that the global wine industry is under tremendous competitive pressure. Dolan insists that now is the time to dig in and recommit to the E3 principles. "This is a good time to press our organic transition with outside growers. With the incredible oversupply of grapes, growers are open to anything to make their product more attractive," he says.

At the same time, Dolan is working hard to build the category for organic wines. Most stores in the United States still don't have a section for organics, and consumers aren't familiar with them. Fetzer has developed a special organic label, Five Hills Blue, that retails for just $5.99 at supermarket chain Trader Joe's. To help build the category, Dolan says he's introducing Trader Joe's to organic-wine makers in Argentina, Australia, and Chile. He is also working with a second supermarket chain, Albertson's, to develop a similar proprietary organic wine.

Dolan's methods seem to be rubbing off. Parent company Brown-Forman, which produces Lenox china and Hartmann luggage along with wines and spirits, launched its first-ever chairman's conference on sustainability this year. "Not everything that Dolan is doing in California translates perfectly for our other business units, but we are trying to learn from Fetzer as much as possible," says spokesman Phil Lynch. Leaders from the California wine industry, who once chastised Dolan for rocking the boat, banded together last year under the banner of the Wine Institute (a trade group for the California wine industry) to introduce the first statewide sustainable wine-growing-practices code. "Paul and Fetzer are trailblazers," says Kari Birdseye, a spokeswoman for the institute. "When they'd proven that being sustainable can save you money and make you more efficient, well, that was attractive to business owners, and they were ready to get on board." With his book, which hit shelves last month, Dolan is hoping that the mystique of the wine business will be enough to draw in readers from other industries to listen to his message: "The world doesn't readily show itself in sustainable ways. You make the decision that this is the way business must be done. It's that simple."

Alison Overholt (aoverholt@fastcompany.com) is a Fast Company staff writer based in San Francisco.

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