Inside Economic Diplomacy Podcast- Episode 6: Award for Corporate Excellence

Remarks
Bureau of Economic and Business Affairs
Washington, DC
March 3, 2016


MR. OMAR PARBHOO, SENIOR ADVISOR, BUREAU OF ECONOMIC AND BUSINESS AFFAIRS, DEPARTMENT OF STATE: : 16 years ago the State Department launched the Secretary of State's Award for Corporate Excellence or ACE to honor US companies that are representing American values by operating sustainably and responsibly around the world. On March 1st, we hosted the 17th Annual ACE ceremony to recognize three very deserving companies. In what has become an Inside Economic Diplomacy tradition, I sat down with the three recipients to hear more about their work and what the ACE means to them.

But before we get into those discussions, I wanted to take a moment to highlight the 10 finalists from whom our winners were chosen. These firms are creating new methods to advance environmental and commercial sustainability. They're promoting and respecting the rights of their employees in local communities. And they're growing small businesses with missions to both turn a profit and do good in the world.

We'll have a link to these finalists on our website state.gov/econpodcast. I strongly encourage you to read all 10 of their inspiring stories. For now though, we'll focus on the three winners of this year's award to corporate excellence I'm Omar Parbhoo. Welcome to a special episode of Inside Economic Diplomacy.

When recognizing corporate excellence it's hard to lump together all the good that's done in the world into one award. For that reason this year's ACE was given out in three distinct categories, human and labor rights, environmental sustainability, and small and medium enterprises. Starting with the latter, the Small and Medium Enterprise Award went to East Bali Cashews in Indonesia. The young company is a cashew producer that operates in a rural community in eastern Indonesia.

In this community, incomes average $2 per day. While villagers were harvesting a lot of cashews, they were exporting 85% of them to be processed abroad, only to import the same nuts with a steep markup. Realizing that the community could better sustain itself simply by processing and packaging the cashews locally, Aaron Fishman, a young American, approached four local investors, and in 2012, he founded East Bali cashews.

Within a year the company's factory had produced 150 tons of cashews and has grown rapidly since. The firm currently employs 350 local workers, 85% of whom are previously unemployed women. The team has improved the quality of local agriculture production and expanded services to address the health and educational needs of over 800 children of company employees.

I had the pleasure of speaking with Aaron Fishman, the CEO of East Valley Cashews on the day of the award. Welcome, Aaron, and thank you for joining us. Congratulations again on receiving the ACE for Small and Medium Enterprise.

MR. AARON FISHMAN, CEO OF EAST VALLEY CASHEWS: Thanks, Omar. It's really an honor to receive it.

MR. PARBHOO: You're a for profit company that also invests in your local community. What is it like running a company with a dual purpose of profit and social good?

MR. FISHMAN: I think first and foremost, it's really an honor to run a company with both of those goals. I think profit is a necessary part of any company and it allows us to grow and expand, but the social purpose, it's not only about CSR. It's not charity. It's actually the reason for our existence and it's the power behind our company. It is a really great honor to see people who have previously never held employment or who have very, very limited access to resources enter a formal workforce. And it's really a life changing event. So it is truly an honor to work at a company like that.

MR. PARBHOO: That's great. East Bali Cashews seems to have grown quite rapidly. Like all companies I'm sure hiring skilled workers and obtaining capital were important to this growth. But can you elaborate on how you went about attracting talent and pursuing investment?

MR. FISHMAN: Yeah I think when we first started, people thought we were slightly insane. And if you see the factory location, it is literally in the middle of the jungle in a place that recently got electricity, still doesn't have running water, and really is the poorest area of Bali. And so, yeah, we do have challenges in a lot of areas as you mentioned. But I think again those challenges help us become a stronger business.

MR. PARBHOO: You said it still does not have running water.

MR. FISHMAN: We still do not have running water.

MR. PARBHOO: Wow. Well, I know East Bali Cashews has a number of community programs in education, health, and probably on a lot of the issues you mentioned. How do you decide which type of programs to launch?

MR. FISHMAN: A good question. I think we do always again go back to your previous question of how do you maintain both profit and impact, and I think we focus on where our efforts will lead to both. And so for example, opening a school, which is what we did is not as-- there's no profit that will ever come behind the school. But whereas our farmer programs, our drying centers, and our new seedling supply program, that is both impactful and sustainable in terms of a profitability measurement.

MR. PARBHOO: Can you elaborate on some of those impacts?

MR. FISHMAN: Sure. So for example, in our drying centers, we created them to move the value add process closer to the villages, closer to the farmers. And what that enables the farmers to do is to learn about cashews, learn about cashew processing, learn about drying cashews. And by doing that we are getting a much higher quality product. We have to pay around 20% more for it, but we're getting much higher quality product. And basically this what we're doing is removing waste from the system. So the farmer is benefiting, we're benefiting, everyone is benefiting from something like that. So it's an impactful yet also profitable program.

MR. PARBHOO: That's great. And I know East Bali Cashews as a young company. And starting any business in any condition is really hard. But what advice would you give entrepreneurs in launching a startup, particularly a social enterprise?

MR. FISHMAN: Yeah, I think social enterprise has lost a lot of its meaning in the past five years just because it hasn't been clear. It's never really been defined. So we've kind of moved away from that term slightly. And we really want to just-- we're a business and we're a sustainable business. And the advice I would give anyone starting a business like ours would be to really, from the outset, focus on your business.

Because if you get caught up in social enterprise or if you get caught up in things that are on the side, and you don't focus on the core of your business, and you go bankrupt, all of your impact is lost. If you don't grow as fast as you can grow, then you're wasting time. You're hurting the people who you could be benefiting by not focusing directly on what makes your business successful and what's unique about your business.

MR. PARBHOO: That's really well put. Thank you. So can I ask one last question? What does receiving the ACE mean to you? I think after we did the project with KKR Capital in 2013, and that was just pure fortunate chance that they were looking for a social enterprise and we were looking to raise capital at that point. And really they kind of put us on a more global stage in terms of-- not in terms of the product, but in terms of really introducing us to others so they could find out about us, so they could learn that there is a better way to process cashews and there's better products out there.

What I think really the ACE award means is kind of a culmination of that project. So really beginning in 2013, and having the American Ambassador to Indonesia, Ambassador Blake, come to our factory and open the school. And then subsequently be nominated for the ACE award as Indonesia is just coming on to the global stage in a lot of ways. And the potential in that country and the potential with the people of that country I think is massive. So the ACE award, I think really represents all of those things to us as a company and I think to anyone who knows that we've received it.

MR. PARBHOO: Aaron, I really respect the work you're doing. Thank you for joining us on the podcast and congratultions again.

MR. FISHMAN: Thank you, Omar.

MR. PARBHOO: Moving on to the second category of this year's ACE, Cargill was given the award for human rights and labor rights for its operations in Vietnam. The company has worked in Vietnam to help develop the country's cocoa industry to meet the growing demand for certified sustainable chocolate. Cargill is actually now responsible for 70% of Vietnam's cocoa exports.

Over the past decade there was work Cargill a strain more than 12,000 cocoa farmers in good agricultural practices to help them increase their yields and incomes. And beyond that, the company has trained more than 1 and 1/2 million farmers in best practices through its workshops, with the goal of improving productivity and ultimately raising farmers earnings. Beyond those core business functions though, Cargill has pioneered school construction programs, building more than 70 new schools in rural communities across Vietnam, which benefits tens of thousands of children.

To Hear more about this work, I had the privilege of sitting down with Cargill's Chairman and CEO, David MacLennan. Dave, thank you for joining us. I really appreciate you coming here and representing Cargill. And congratulations for the ACE on human rights and labor rights. It's a new category and we're really proud that we can award that to a company like Cargill.

MR. DAVID MACLENNAN, CARGILL'S CHAIRMAN AND CEO: Thanks, Omar. It's great to be here.

MR. PARBHOO: So Cargill recently launched four focus areas under its corporate social responsibility. If you don't mind, I'd like to read them off. Land use, water, climate change, and farmer livelihoods. Can you tell us a little more about how and why you chose those areas?

MR. MACLENNAN: We created a group of our senior leaders to study exactly where do we want to focus relative to sustainability. We called it a 100 day working group. I didn't want to take longer than 100 days to decide where would our areas of focus be. Really it's the areas where we can make the most impact, the four that you mentioned. Being an agricultural and food company, we can change the world. We can be a leader in sustainability.

It's one of my own visions for Cargill as CEO to be the most trusted supplier of sustainably sourced food and food ingredients in the world. And so in those four areas, we thought our work with farmers, our work with supply chains, we're in many around the world. That's where we could have the most impact. And that's where we're focusing our efforts. It's not to say other areas aren't getting that same focus, but that's where we thought we could be most impactful.

MR. PARBHOO: It's a very commendable mission.

MR. MACLENNAN: Thank you.

MR. PARBHOO: You were awarded the ACE for your work on improving livelihoods in Vietnam. How has that impacted your work with local farmers, as well as your business operations in the country as a whole?

MR. MACLENNAN: I don't think we would have enjoyed the success we've had in Vietnam if it weren't for this. They really go hand in glove. We've opened 76 schools. I had the privilege of being present in November of 2015 at the opening of our 75th. Our aspiration is open 100 by 2020.

But from our standpoint, business and our involvement with farmers, farmer livelihoods, we're not going to be successful as a company in Vietnam if we don't invest in the community, if we don't invest in the farming community. They are our lifeblood. They're our partner. We want them to trust us and we want the country to trust us.

We have been referred to by some government officials in Vietnam as the school company. And in fact we're an animal feed company. I'm proud to be known as the school company. But the fact is the two, our two missions, our two visions in business and in social responsibility, in helping farmer livelihood, they're really inextricably linked.

MR. PARBHOO: With 76 schools, I can understand why you're called the school company. It's very commendable.

MR. FISHMAN: Thank you.

MR. PARBHOO: If I can paraphrase Secretary Kerry, when choosing between doing well and doing good, the right choice is doing both. Cargill clearly subscribes to this principle, but what are some of the challenges you face in trying to balance these two goals?

MR. MACLENNAN: You know, I agree with the Secretary that they're not mutually exclusive. To do well you have to do good and vice versa. The challenges are, sometimes from a commercial standpoint, it doesn't always feel like doing good or doing the right thing may not be commercially viable or it may eat into your profit margins. And for us, with our mission to be the global leader in nourishing people, that comes first.

So often times, the challenges are working with our commercial leaders to say, it may feel expensive. It may feel like it's coming out of your profits, but ultimately they're inextricably linked. They're not mutually exclusive. And in fact, to do well, to do well in our business we have to do good. We have to do good things in the country to succeed.

MR. PARBHOO: Yeah. you clearly sow that message well.

MR. MACLENNAN: Thank you. So I'm glad to have the chance to speak to you about all this. Just a couple more questions. As the CEO of one of the largest US companies, how do you think governments in the private sector can better collaborate on our shared goals of promoting human rights and protecting the environment? I think it's imperative that governments, NGOs, civil society, indigenous people, and private sector all collaborate. We recently had an exercise on climate change called Food Chain Reaction.

And we brought together academics, NGOs, government officials, to contemplate what could happen in the world if different scenarios, such as a massive drought in North or South America that would infringe upon food supplies or impact prices. And in the first round one of the discouraging findings was nobody thought to include the private sector in the conversation and nobody thought to include the private sector in the solution. By the second and third rounds of the scenario planning, the private sector was very much at the table.

So the point I'm trying to make is that whether it be in scenario playing or in real life, you've got to have a collaboration. We were a partner to signing the New York Declaration on Deforestation at the UN in 2014. And the fact is, we were a signatory along with many other constituents, governments, other private sector players, NGOs, representatives of indigenous people. We can't do it alone. But at the same time I would say governments can't do it alone either. We have to have all parties at the table.

MR. PARBHOO: I fully agree, and I believe the US government fully agrees. So we're happy to have partners like Cargill and others. Lastly, your company has likely received many awards in the past. What does it feel like to receive the ACE award today?

MR. MACLENNAN: Well I got up at 4:00 AM this morning from Minnesota to be here. So it was a small personal sacrifice of sleep to be here. I'm very proud. And Jorge Becerra, who is our country rep and leads our business in Vietnam, is here as well. But for me it's a very strong feeling of pride to be able to represent the company to receive this ACE award.

I was just in Vietnam in November, so I've seen what we do in the country. But to stand alongside my colleagues, to stand alongside Serena Lin who runs our feed business worldwide, is an inspiring moment for me to say, all the hard work that our colleagues do around the world and in Vietnam, to be recognized by Secretary Kerry and the Department of State, it's a real honor. So I really wanted to be here.

MR. PARBHOO: Dave, the honor is all ours, and I really appreciate you taking the time to talk to us today.

MR. MACLENNAN: Thanks, Omar.

MR. PARBHOO: The third award this year was given in the category of environmental sustainability. And this year, Weyerhaeuser was recognized for its work in Uruguay. Weyerhaeuser it was one of the first companies to harvest and replant trees in an environmentally sustainable way here in the United States. And it's carried on this work in an impressive way in Uruguay by being a pioneer in aforestation.

I'm a bit embarrassed to say that aforestation was a new word for me. But it means that the company has been planting new forest where none previously existed. What were once large areas of degraded pasture land are now forests of pine and eucalyptus that absorb about 56,000 tons of carbon dioxide every year. What's more, Weyerhaeuser's manufacturing facility in Uruguay is carbon neutral, with all their heat and power being generated from renewable fuels. For these efforts, the companies been recognized as a project of national interest by the government of Uruguay and of course, also recognized by the State Department with an award for corporate excellence.

I had the honor of speaking with Kristen Sawin Weyerhaeuser's Vice President of Corporate Affairs and Public Policy about these efforts and more. Kristen, thank you so much for joining us and congratulations on the ACE for environmental sustainability.

MS. KRISTEN SAWIN, WEYERHAEUSER'S VICE PRESIDENT OF CORPORATE AFFAIRS AND PUBLIC POLICY: Thank you. We're really proud of that.

MR. PARBHOO: Yeah, as you should be. It's a very great award and I think your company absolutely deserves it. At the awards ceremony, we heard that responsible business conduct is not just about what a company does with their money, but also how they make their money. It seems sustainability is hardwired into Weyerhaeuser's core business model. But can you tell me more about what that means in practice?

MS. SAWIN: Yeah, absolutely. You know at Weyerhaeuser we say that our priorities can change but values remain the same. And we have had the same core values for this company for as long as it's existence. We're over 116 years old. So whereas over a century into what we really believe is the foundation of sustainability.

We pioneered reforestation in the United States. We were the first company to replant an area that we harvested. We worked with the federal government to ensure that others could do the same and have policies in place that that incented that behavior, because we feel very strongly that it's foundational to everything we do. Frederick Weyerhaeuser who founded the company used to say, it's not that we're making investments today for our children, we're making investments today for our grandchildren. Because it just really takes that long to grow a tree.

MR. PARBHOO: So Weyerhaeuser won this year's ACE in the environmental sustainability for your work in Uruguay. The government has named Weyerhaeuser's operation a project of national interest. What are some of the ways your company and the government are working together to accomplish your shared objectives?

MS. SAWIN: There's a few ways. One of the things that the government is interested in is making sure that there is economic opportunity broadly throughout the country, and not just in the capital city of Montevideo. So this is a project that is more rurally located and supporting rural jobs and rural communities. Additionally, we have partnerships with the public school authority and we train teachers on environmental sustainability principles, and we work with curricula in the schools on teaching children at their level you know, what's appropriate in these ways.

Additionally, our folks are very involved in the community through employee volunteer programs. We fix wells at schools. We paint. We do all kinds of activities in and around the community. And it's the breadth of the programs I think, that caught the government's attention and not just one thing or another. In addition the cogeneration, renewable energy project itself does provide energy for our own purposes, but it also provides energy for about 45000 homes in the area.

MR. PARBHOO: Can I focus on just one aspect of the breadth of what you do? I know you are a pioneer on safety in the forestry sector. What are some of the ways you've sought to raise the bar in the safety of your operations?

MS. SAWIN: So, safety in either a manufacturing environment or frankly timberlands, they're very risky. There's lots of activity, lots of energy that's moving. And it is really important to us. Safety is our number one core value at Weyerhaeuser. It's important to us that our folks go home safe every day. So we require specific training to certain standards. We require folks to shut down mill operations instead of try to reach a hand into some motion that's part of the process. We require our foresters to also wear hard hats and high visibility vests.

And we require all of this also of our contractors, which is pretty unusual. And then one of the things we've done is we've pioneered a couple safety programs around the world. We've done one in Vancouver, British Columbia and another one in the United States where we're training loggers on safe practices. Because it's one of the riskiest jobs in the world is logging.

MR. PARBHOO: Wow. It sounds like excellent work. In many ways, the job of sustainability is never done. Like you said, it's not just about the children, it's about the grandchildren as well. How does Weyerhaeuser continue to innovate and implement best practices in Uruguay and beyond?

MS. SAWIN: We have a fairly significant research and development program within our timberlands division that evaluates just a host of things, from water quality, implications for our practices, chemical use, how do you replant, what is the right time of year to replant, what is the right distance between the seedlings. We spend a lot of time and energy really looking at ways to do the right things, the right way every time. And it's foundational to who we are. It's another part of our just core values, is that integrity and that ethic to always be focused on doing the right things for the right reasons. And sustainability is the underpinning of it all.

MR. PARBHOO: So finally, what does winning the ACE mean to you?

MS. SAWIN: I was really excited when I heard that Weyerhaeuser is the inaugural winner of the sustainability award. It's just so much a part of the ethic of the people that work in our company and so much a part of how we look at our business model and what we provide, that it was just truly an honor to be recognized in that way for this first one. It's pretty miraculous.

MR. PARBHOO: Your company is very deserving of it, so I'm glad we were able to recognize your work. Thank you so much for joining us today.

MS. SAWIN: Thank you. These three impressive companies are among the many US firms that are doing good in the world while doing well commercially. Again, I highly recommend you visit our website, state.gov/econpodcast to read more about all the amazing finalists of this year's award to corporate excellence. Recognizing these companies is our small way of supporting their responsible business practices. It's important to highlight the good work that's being done globally by American firms. And we'll do it again next year. For now, thanks for listening to Inside Economic Diplomacy. I'm Omar Parbhoo and I hope you join us again soon.