Timberland's Jeff Swartz on Corporate Responsibility

No one preaches corporate responsibility quite like Timberland's Jeff Swartz. But with his company's revenue soft and the stock price tumbling, is his own job sustainable?

Jeff Swartz likes to tell this story. It is a somewhat strange anecdote, with an unexpected moral -- but Swartz is nothing if not unexpected. He is sitting in his New Hampshire office, wearing jeans and a baseball cap, and talking about the summer he spent as an 11-year-old sweeping floors in his father's factory. "My dad said he'd forgotten something in the shipping room, so I took off at a run," recalls Swartz, who today heads the company, shoemaker Timberland. "I didn't get very far when I heard his voice, 'What are you doing by running?' He made the point that there is a disconnect between my passion and the passion of others who do this to make a living, that by running, you slap them in the face. And I thought to myself, He's my hero, but he's wrong. He was right that you don't set a pace you can't keep, but that doesn't mean you can't set a pace."

Swartz may be the most unusual big-company CEO in corporate America today. In his early years at the helm of Timberland, he could do no wrong. Embraced by hip-hop trendsetters, his boot company grew eightfold in market capitalization from 1992 to 2005, hitting $1.6 billion. He used the bully pulpit of his position to deploy social initiatives galore, instituting some of the toughest worker-protection standards in the manufacturing industry, planting 1 million trees, and sponsoring thousands of volunteer events in dozens of countries. He won accolades from Wall Street and social activists alike.

Then something happened on the way to the awards ceremonies: Timberland stalled. The young hip-hoppers moved on, costing the company $150 million in annual sales, which Swartz says "is not coming back." The company saw its first-ever full year of revenue declines in 2007 and was forced to cut product lines and close stores. Timberland stock is down more than 50% from its high.

Yet Swartz remains as committed as ever to pursuing social change. He wants his company to be carbon neutral by 2010 and has built a solar-powered distribution center in California and a wind-powered factory in the Dominican Republic. During two lengthy conversations, at Timberland HQ and Fast Company's Manhattan office, Swartz is unguarded and freewheeling, challenging the values of both Chinese factory owners and American consumers. He can afford more independence than most chief executives, since his family effectively controls Timberland through Class B stock (his grandfather Nathan Swartz founded the company in 1952). But he also knows that he's not untouchable: "No one's performance, especially in this age, will get supported through time if it's substandard."

But will the halo of his social agenda be enough to retain shareholder support? At the same time, can it draw customers back to the yellow boot? These are complicated times for a chief executive committed to saving the planet. "We're halfway to heaven and a mile out of hell," he says. "Things aren't getting better, they're getting worse." Swartz talks about the path he's trying to walk.

We last talked on Earth Day, and you had just come from an event sponsored by Timberland. It seemed to have left you with mixed feelings.

Earth Day is an opportunity to invite people into a conversation and make social change part of our business model. We've done events all over the world where like-minded people stand up and say, "Yes, we care." One year, it was Prague; another year, it was in the shadow of the Vatican. This year, we staged a park event in the South Bronx. But the bigger question is, How do you call people to this goodness that is inside them and sustain it beyond a day?

There was this park ranger in the Bronx who said, "It's really nice you're here, but you'll be gone at the end of the day, and I still have responsibility for this neighborhood." We can get 50 volunteers on one day by creating this sense of crisis. But she needs five people every day. Crisis doesn't sustain.

Your business is going through major changes. One of the most profound is the loss of the hip-hop consumer.

I have a tremendous sense of regret. Part of it is practical. The fact that the consumer no longer desires to buy our product the way he or she once did creates real pressure -- $150 million of revenue [lost] in a company our size is consequential from a shareholder perspective.

But the second part is, we had a lack of self-awareness. We undervalued our own brand. We were making utility products: It rains; it snows; this will keep you warm and dry. The consumer says, "I appreciate those benefits, but I'm going to wear this in the summertime unlaced without socks." The consumer says, "You understood the literal benefits of waterproofing and insulation; I understood the psychic benefits of confidence and a sense of self-assurance." And we said, "Check. Wow, got it." We are not a boot company, we are a brand, and our brand is not about protection against the elements; our brand is about confidently striding through life's challenges.

Not long ago, you had trouble with factories you were working with in China.

We were working with a factory owner called Kingmaker, and we tried a hundred different ways to remediate the violations to human dignity that underscore its business model. Eventually, I came to the conclusion that its value system is different from mine. There was no way to make it work. So we disengaged. It was a painful process. We had to move production. Our prices went up, our costs went up, and it couldn't have been worse timing. But we spent three years getting to that choice. When do you make the judgment that the blend of social issues that relate to China requires action? I don't know. We're not part of the Tibet crowd or the Darfur crowd, but in a way, we are party to the same conversation.

Recently, you tried to persuade another major shoe manufacturer in Hong Kong to embrace renewable energy.

I spent an hour trying to share with him why the sustainable, renewable energy stuff we are doing in the Dominican Republic is a good strategic thing and why he should consider it. This is a practical, hard-nosed business leader, so I'm not going to try to sell him on the moral valence -- that China's voracious energy needs have macroscopic consequences for the world at large. I'm making the point that the cost of energy is hurting his business: In 100 years, you will feel good that you made a smart business decision to build solar and wind and geothermal here in China.

And his response?

He says to me, "There are lots of things wrong with your argument. The rate of change in China is way faster than you can understand as an American. The industrial revolution took you 100 years; it's taking us 15." He has no idea if his factories are even going to be there in that time, so he can't make a commitment.

So you risked your relationship and Timberland's relationship, and squandered time you might have spent negotiating nitty-gritty business details such as input costs, and got nothing?

The question is, Can I be the change agent? Can I show him how he can sponsor change that will be good for his business and good for some mixture of commerce and justice? Maybe I am self-indulgent, and if I am and our performance suffers, I will get fired. Even though we have two classes of stock, there are sharp metrics to measure how the brand performs commercially. There are plenty of examples of people losing control. All I continue to say to shareholders is that I believe I am pursuing sustainable value.

Do you ever get tired of being the poster boy for social change?

I don't have the physiology for being a poster boy. The standard of poster boy is you've got to be unimpeachable, right? That's a fool's CV. The right thing to do is to be one step behind the poster boy, so he gets knocked on the head, and then you learn from that and adjust. On the other hand, when you hear, "After you, after you," and nobody moves, eventually you've got to close your eyes and jump. Maybe that's absurd. But I have to try.

That's why, when we go to China next week on business, I'm taking my three children. I want to spend a day of family time in the factory. Sam, my 18-year-old, says, "Bring your checkbook, because it's gonna cost you money," and he's dead serious. "I'm going to see things that I'm going to tell you are not good enough," he says. I'm actually fired up about this. I said to my wife, "Debbie, do you think they can handle going into the dorms where the workers stay?" I want them to see the Great Wall, and I want them to see the great questions that a consumer has to face.

So the consumer shares the blame?

The consumer says, "I'll have a conversation with you; it will be all on my terms. Your product is going to have to be visually beautiful, technically perfect, and distinctive. And it has to be available where I shop at a price I'm willing to pay." Now, if it is all of those things, you gain the permission, in the one minute the consumer deals with your brand, to devote about 10 seconds to the issue of values. And if you miss any step along the way, you are talking to yourself, which is a terribly sad place to be.

You seem to get a much bigger charge out of talking about these issues than you do about boots.

We are like Madame Defarge [from Dickens's A Tale of Two Cities], click-clack with our needles and meanwhile the world is coming to an end. When we left Kingmaker, for its persistent human-rights violations, the right outcome should have been that no one else went in. And yet good brands piled in, and the consumer's take was, Don't ask, don't tell. And that is hard for me to live with.

How do you break the circle?

The only thing that stops the circle is faith. I have a religious feeling that guides me. [Swartz is an observant Jew.] I can't show you the scripture that relates to the rights of a worker, but I can show you text that insists upon treating others with dignity. It says in the Hebrew Bible one time that you should love your neighbor as yourself, but it says dozens of times that you shall treat the stranger with dignity.

The power of transformation isn't in somebody else's hands; it's in ours. There's a story I like to tell about a woman whose only possession is a parakeet. She puts the bird in the window so she can share its song with the kids walking by. But these two knuckleheads come by; they live in the same neighborhood, the same circle, but have a different worldview. "We have nothing, so we will take your bird." They stand in front of her and ask, "Is the bird alive or dead?" If she says alive, they will kill the bird, and if she says dead, they will let it fly away. Her answer is: "I don't know. It's in your hands." It is her way of putting responsibility back on them.

When I tell that story, I say to people, "Look at your hands." There could be one finger up because my speech is long and boring, or your fist could be clenched because you are furious at the way the world is. But if you unclench your hands and look at the palms, at the creative power in your hands, you recognize it is in your hands, nobody else's. So join hands, and save the world.

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7 Comments

  • Sjb1946

    The description of equality and the way an employee should be treated and those who came to buy is found in the story of/ Ruth. Boaz is the first example of how an employer treated all his employees and what was expected of an employer to be fair.

  • Kyleigh Helfrich

    I agree that there should be a central "clearing house" if you will of information on companies that are going out of there way to not only be environmentally friendly but create sustainability. I think its hard to find out about the good things that companies are doing unless they spend hundreds of millions of dollars on marketing and branding like a company like GE does on their Econimagination products. It is sad that many times there is such a disconnect between doing "good" and profiting from it. When the urban community embraced Timberland's the company made a fortune. I wonder if they could reach out to that community again to get their support with some of the eco/people friend initiatives that they want to do. As we saw in the last election it is the young people who are a major motivating force in our country.

  • Jim Murray

    Mr. Swartz
    I only buy American made sneakers & boots and let my co-workers know it and now they are starting to buy only USA made products. Please let the American people know how you are helping the planet. Please also give me feed back on this plan.
    Mr. Pickens has been working on a plan to help break us of our dependence on foreign oil. I for one believes he is on the right track but I believe he also needs the American consumer to do there part.

    I have an idea to get the public in touch with these products and that is by building or using one of the buildings that have become available because of the economic climate we are in. The building would be an Expo center that would bring the top solar, wind & geothermal systems under one roof. The only way a product could be shown is that the alterative energy company would have to supply a power point presentation telling about their product and have a engineer come once a year to give a class to the public.
    At the expo center there would be all the info available for federal & state programs to help with the expense of purchasing an alterative energy product.

    Energy Palace
    Mission statement

    To bring the public in touch with the latest advances in energy products and educate them so they will be informed when they are ready to purchase an energy product.

    How we at Energy Palace plan on achieving this goal.

    1.Pull together the top enervator in the energy market and have them bring a rep out once a year to teach the public about their products.
    2.Organize class trips from local high school and colleges, so they may gain insight into the progress the energy market is headed.
    3.Set up a working relationship with local fully insured & bonded if need be contractors.
    4.Work with Federal, State and local governments in ensuring the consumer gets all the benefits available to them.
    5. Oversee that the consumer is not getting gouged by companies or contractors that adjust their price based on the amount the government gives in subsidies

    Please read over and give me you thoughts

    Thanks
    Signed
    James Murray
    James Murray
    Home E mail JJMJR27@msn.com
    Work E mail James_Murray2@ML.com

  • Jonathan Fry

    The values and goals Swartz has set out for Timberland should be applauded. He's asking the right questions, "Can I be a change agent? How can I continue to be committed to pursuing social change while navigating rough waters?" Too many CEOs are afraid to ask and even more afraid to answer those types of questions. But the market has shifted and it’s time for Timberland to reexamine its business model. Today’s companies need to be more adaptive than ever to survive. While it's very hard to retool a business once its in progress, Timberland has an incredible opportunity to reposition and rebrand itself. If the hip-hop customers aren’t coming back, why not start connecting with a group of consumers that share the same values and goals of Timberland? Today’s consumer is willing to pay somewhat of a premium on products produced by companies touting and living social change. The sad thing is, this is the first time I've ever heard about the incredible efforts going on at Timberland. The park ranger in the article was right when he said, "A crisis doesn't sustain..." I just hope Timberland can find its way out its current crisis, because we need a lot more CEOs like Jeff Swartz in the world.

  • Kyleigh Helfrich

    There seems to be a disconnect between the corporate responsibility initiatives at Timberland, goals/ethics of Jeff Swartz and the brand itself. Perhaps more customers would buy the product if the brand marketed these values? Swartz says that he wants his brand to embody "confidently striding through life's challenges" but does the consumer get that? Does the brand say that? And if so, what does that even mean? Today there is a huge segment of the population who want to support brands that directly assist causes. Whether it is alleviating aids in Africa - i.e. Red Campaign, or helping to build wells in 3rd world countries - Starbucks and Ethos Water...it is all in the marketing. If the consumer doesn't get the message everyone loses out.

  • davinder singh

    There is part of information or fact missing.There is difference between Made or assembled with country name.
    The explanation is fine from Timberland but if they can add this information then it can be analysed.
    The information about source of product components is important.

  • Lee Mitchem

    Utilizing Timberland's production demand to force positive change in an industry and countries is an important leverage tool. While it is admirable that Swartz attempts to convince his current business partners to use greener production methods, perhaps his entrenched conversion battles cause him to miss new opportunities with potential start-up businesses that already want and plan to incorporate those practices? How much entrepreneurial investing is Timberland contributing?