Faced with the prospect of being without a product when a contract manufacturer could no longer make its natural baby wipes, Seventh Generation, a seller of natural household products, substituted conventional wipes. But some of the ingredients in the conventional product proved unacceptable to customers. To address the issue, a meeting was called among top management to decide whether to continue or stop selling the conventional wipes until a new natural formula was completed.
What would you do? Would you remove the conventional wipes and jeopardize hard-earned retail shelf space? Would you keep the product on the shelf and risk losing customer trust?
These questions and the above scenario, based on an actual occurrence at Seventh Generation, are the foundation of a new teaching case developed by Lundquist Professor of Sustainable Management Mike Russo and Dan Goldstein, M.B.A. '06, at the University of Oregon's Lundquist College of Business. The case challenges students to explore the complex issues businesses with strong environmental values face. And although a solution might at first glance appear straightforward, students quickly realize it is not an either-or proposition.
"The case is about balancing the strategic and economic factors that all companies face with the commitment to environmental stewardship and sustainability unique to values-driven organizations," explained Russo.
Students have to figure out how to balance customer expectations with supply chain realities, corporate responsibility with the bottom line, profit with values. They have to weigh the company's ethical mission against the hard realities that accompany a loss of shelf space--a competitor might usurp market share, distribution channels could be compromised. And they must consider, among other issues, how removing and disposing of a product deemed safe by the Food and Drug Administration could be construed as wasteful.
As coauthor Goldstein, who worked on the case while a graduate student, noted, "This case really etched in my mind what it takes to succeed as a company branded on sustainability. I hope students who read this case will similarly understand that sustainability and good intentions alone will not ensure revenue. A sustainable company may be forced from time to time to take short-term losses to preserve its story and keep its identity trustworthy."
And ultimately, Seventh Generation chose to do just that. It sold the current shelf stock, donated warehouse inventory to charity, and let the shelves sit empty until a natural replacement product was delivered. Did the company make the right decision? Well, as the case itself posits, that's for you to decide.