"We're exposed to an almost $3 billion market. If we got just a 5% market share, you're talking about a $150 million business." Don Knauss, the CEO of , may be laid up in Houston recovering from rotator-cuff surgery, but he can't help getting exercised about his company's breakout new product line. Late last year, the former exec launched Clorox's first new brand in 20 years, a collection of natural-cleaning products called Green Works. "You're always trying to figure out what megatrends are going on," says Knauss, 57, who took over less than two years ago. "From day one," he says, he focused on the "explosive growth" opportunity in sustainability.
Green Works is one of the most successful launches of a new cleaning brand in recent memory. But it also has wider implications for anyone interested in the movement of the mainstream marketplace toward greener products. For Earth Day 2008, Knauss rang the opening bell at the New York Stock Exchange -- a first for a Clorox chief -- and at his side stood a most unlikely partner: Carl Pope, the executive director of the Sierra Club, the country's first -- and largest -- national environmental organization. Just a few weeks earlier, Clorox had announced that the Sierra Club logo would appear on all Green Works labels. In return, the Sierra Club would receive an undisclosed fee based partly on Green Works sales. It sounded like a win-win for everybody. What could go wrong?
Depends who you ask. Knauss couldn't be happier. He has seen Green Works' momentum continue to build, withand other major retailers increasingly devoting shelf space to the hot-selling line. But within the Sierra Club, the reaction to the deal has been contentious, with emails flying back and forth and charges that Pope's executive committee has sold out -- and is retaliating against dissident members. The Sierra Club is now trying to pacify its troops, but the awkward pairing with Clorox underlines both the huge potential upside for major brands discovering green and the danger for nonprofit environmental groups plunging headlong into the for-profit world. It's the sort of thorny situation we're likely to see more often as saving the planet becomes less a cause than an industry.
By the time Knauss arrived at Clorox, in October 2006, company chemists had already been experimenting with biodegradable plant- and mineral-derived cleaning formulas for nearly a decade. "It was kind of a pet project -- we call it 'skunk work' -- in R&D," says research group manager Sumi Cate. "And as we were watching the technologies evolve, we saw the world was changing. We have seen a shift in both the supply and the quality of technologies available." Meanwhile, Clorox marketing executive Jessica Buttimer, a new mother, had noticed how fellow moms were constantly "chattering" about natural cleaning with a level of concern that seemed to belie the 1% market share held by brands such as Method and Seventh Generation. Surveys showed that 44% of consumers were theoretically interested in buying green cleaners -- a huge unexploited market -- so Buttimer and her team conducted interviews and identified the top-three reasons consumers weren't following through: doubts about effectiveness, expense (most green cleaners cost twice as much as conventional ones), and inconvenience (products tended to be available only at special stores). Clorox was positioned to address all of those concerns, and Knauss gave Buttimer's group the go-ahead for a new product line.
By last summer, thanks to Cate's chemistry group, Clorox had five products that were 99% petrochemical-free (ironically, the remaining 1% comprised the "fresh" scent and the green coloring) and matched or beat standard cleaners in consumer tests. Thanks to Clorox's volume and leverage with suppliers, they could be priced at just a 20% to 25% premium. But one challenge remained: how to get people to believe that Clorox could really be green. Green Works products qualified for the EPA's "Design for the Environment" label, certifying that they are free of the most toxic chemicals. Still, "there were a lot of greenwashing reports starting to surface," Buttimer says. "Consumers were a little bit skeptical." Clorox called in an outside expert, Joel Makower, founder andexecutiveeditorofGreenBiz>.com. He recommended that the company engage with environmental nonprofits to build support. "We looked around, and no one had greater credibility than the Sierra Club," says Knauss. "They were the Good Housekeeping Seal of environmental groups."
When Clorox approached him, Pope had already been pushing for a shift in mind-set at the 116-year-old Sierra Club for some time -- from a mandate to "stop bad things," as he puts it, to one about "making good things happen."
"Instead of just saying, Let's boycott somebody who's making a toxic product," Pope explains from his San Francisco office one recent summer day, "let's find a good product and help people who are trying to help consumers." To that end, the club passed a resolution in 2001 to pursue more corporate relationships, and in 2005, it plugged the Mercury Mariner Hybrid SUV. That raised a few eyebrows both within and outside the Sierra Club, but nothing compared to the uproar over the Clorox deal.
Pope mentions a few times that the Sierra Club's due diligence during the Clorox deal included the "toughest scrutiny" of the products themselves. (Knauss also makes a point of the Sierra Club's "severe vetting process.") In an internal email obtained by Fast Company, Pope told Sierra Club leaders, "We consulted with the executive committee of the board of directors, the corporate-relations committee, the toxics committee, the energy committee, and the environmental-quality committee. None of these entities found fault with Green Works as a product line."
But that isn't the whole story. Jessica Frohman, the volunteer cochair of the club's toxics committee, says her panel never took the standard vote on the Clorox products: "The Green Works proposal said CONFIDENTIAL all over it. My committee never saw it. My cochair and I did ask [Clorox] a lot of questions -- we wanted to know what was in the product." They reviewed the EPA's report on the Green Works ingredients and asked about the environmental effects of other Clorox products such as bleach. But, Frohman says, "the people who serve on these committees are more policy wonks than chemists. There isn't anyone in the Sierra Club who's going to guarantee anything about those products. If it were up to me, I would have done a lot more investigation down that path... . It doesn't make me thrilled, to be perfectly honest."
The club's volunteer corporate-relations committee did vote on the Green Works deal -- and rejected it. One member, Stuart Auchincloss, a retired environmental lawyer, says he felt strongly that "we shouldn't be in the business of taking money for endorsing products." But Pope and the national board of directors rejected the rejection, and the executive committee promptly signed off on the Clorox proposal.
The Sierra Club brass further rankled the base by taking the unprecedented step of removing the heads of its 35,000-member Florida chapter on March 25, and suspending the chapter for four years. That chapter's leadership, which had publicly and vocally rejected the Clorox deal, accused the national leaders of exacting revenge. Sierra Club president Robert Cox has publicly stated that the suspension resulted from long-standing complaints by members and had nothing to do with Green Works.
Still, environmental blogs and the club's own Clubhouse Web site have been burning up for months with comments from angry members, some asking for a national referendum on the Clorox decision. In May, chapter leaders in northern Michigan resigned over the deal. Emails exchanged by a list of past members of the club's board of directors, obtained by Fast Company, voice dismay at the decision and the way it was handled internally. "It is not the club we have known in the past -- it is sad to see some leaders tired with it all and leaving," wrote one committee leader. A past director wrote: "They are destroying the club's credibility. They should all be ashamed of themselves." Another former director: "[Sierra Club founder] John Muir's birthday will be a sad one this year."
Further fueling the controversy, the club has refused to release financial details of its arrangement with Clorox to the public or its members, citing the terms of its contract with Clorox as well as its own rules. "The Sierra Club has a long-standing policy of not giving specific details about individual sources of funds from donors," says spokesperson Orli Cotel. "Our supporters can be assured that it is a significant contribution and is not restricted, which means that we can use the funds for any branch of our work."
With no independent scientific assessment of Green Works products, and with an undisclosed amount of money changing hands, what does that Sierra Club seal on the back of the bottle really mean?
For Clorox, it's nothing but upside. For the Sierra Club, it's risking -- if not undermining -- its most valuable asset: its independent reputation. In exchange for the use of its name, the Sierra Club applied precious little leverage. For example, it made no demands for Clorox to offer recycled packaging or change the environmental profile of other products. Not only did the club withhold financial information, but it also agreed not to lend its name to any other natural cleaning products, even if they're 100% organic and packaged in a coconut shell. Adviser Makower, who originally encouraged Clorox to reach out to nonprofits, is dismayed by the deal the Sierra Club struck: "To be tied directly to sales and not reveal [the details], and to be flacking the products, is, in any world, borderline unethical," he says. "It soils the living room for everybody."
The take-home message for the Sierra Club and other nonprofits may be that they need to draw a careful distinction between two types of nonprofit/for-profit relationships: cause-related marketing and endorsements. Historically, in cause-related marketing campaigns, a group such as the Sierra Club would collect proceeds from the sale of a non-mission-related product, such as a calendar. There are no special environmental claims being made about the calendar itself -- the organization's name is simply a sign of support. "It's like the Easter Seal," Pope says. "You're getting money from a candy. It isn't that the candy is better for polio."
In endorsement relationships, on the other hand, a group such as the Forest Stewardship Council or the Sustainable Fishery Advocates puts its seal of approval on a product that claims some mission-related benefits. No money should be involved, or that seal isn't going to be worth much.
In the Green Works situation, the distinction seems to have collapsed, which Pope himself admits. He says the Sierra Club has started a task force to reexamine its corporate policies in the wake of the experience. "Because we insist that these products meet our mission standards, the distinction for us between cause-related marketing and product endorsement is a little fuzzy. It's pretty clear that we're having a hard time keeping the distinction clear in our minds, so how can we possibly expect the consumer to keep it clear?"
Consumers, of course, may not care either way, and ultimately, Pope, as the leader of a grassroots organization, must strike a balance between keeping the club members happy and reaching a much broader audience. The club is facing challenges recruiting younger enviros, who increasingly choose to engage online rather than become lifetime contributing members, even as the activist volunteer core ages and shrinks. Of the 1.3 million Sierra Club contributors, only 800,000 have made the commitment to become members. Being exposed to millions of shoppers at Wal-Mart,, and elsewhere has to be a plus. "Many more people are buying Clorox Green Works than know what the Sierra Club is. It's like getting an advertisement on the back of the Clorox bottle," says Adam Werbach, a former president of the Sierra Club who is now a sustainability consultant with Saatchi & Saatchi S, working for Wal-Mart. "That's much more valuable than whatever dollars they got paid for it."
In the meantime, the unlikely partnership continues to grow despite its fraught beginnings. Green Works sales forecasts have already been boosted six times, and each product now leads its category within the natural-products universe -- and not through cannibalization. Green Works has actually grown the overall size of the naturals market by 300% in the categories it competes in, and more products are in the pipeline, all stamped with the Sierra Club seal. What's more, both Pope and Knauss say they're talking about a new effort to promote a green rebranding of Clorox's Brita water filters as an environmentally friendly alternative to bottled water. "When I got on board 21 months ago, the question was, How quickly can we sell this thing?" Knauss says of the Brita business. "In the last 9 to 12 months, as people have been educated about the sustainability issue, Brita has seen its strongest growth in over a decade."
Sounds like a win-win for everybody. What could go wrong?