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. “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.