Growth Through Global Sustainability: An Interview with Monsanto’s CEO, Robert B. Shapiro
HBR: Why is sustainability becoming an important component of your strategic thinking?
Robert B. Shapiro: Today there are about 5.8 billion people in the world. About 1.5 billion of them live in conditions of abject poverty—a subsistence life that simply can’t be romanticized as some form of simpler, preindustrial lifestyle. These people spend their days trying to get food and firewood so that they can make it to the next day. As many as 800 million people are so severely malnourished that they can neither work nor participate in family life. That’s where we are today. And, as far as I know, no demographer questions that the world population will just about double by sometime around 2030.
Without radical change, the kind of world implied by those numbers is unthinkable. It’s a world of mass migrations and environmental degradation on an unimaginable scale. At best, it means the preservation of a few islands of privilege and prosperity in a sea of misery and violence.
Our nation’s economic system evolved in an era of cheap energy and careless waste disposal, when limits seemed irrelevant. None of us today, whether we’re managing a house or running a business, is living in a sustainable way. It’s not a question of good guys and bad guys. There is no point in saying, If only those bad guys would go out of business, then the world would be fine. The whole system has to change; there’s a huge opportunity for reinvention.
We’re entering a time of perhaps unprecedented discontinuity. Businesses grounded in the old model will become obsolete and die. At Monsanto, we’re trying to invent some new businesses around the concept of environmental sustainability. We may not yet know exactly what those businesses will look like, but we’re willing to place some bets because the world cannot avoid needing sustainability in the long run.
Can you explain how what you’re describing is a discontinuity?
Years ago, we would approach strategic planning by considering “the environment”—that is, the economic, technological, and competitive context of the business—and we’d forecast how it would change over the planning horizon. Forecasting usually meant extrapolating recent trends. So we almost never predicted the critical discontinuities in which the real money was made and lost—the changes that really determined the future of the business. Niels Bohr was right when he said it is difficult to make predictions—especially about the future. But every consumer marketer knows that you can rely on demographics. Many market discontinuities were predictable—and future ones can still be predicted—based on observable, incontrovertible facts such as baby booms and busts, life expectancies, and immigration patterns. Sustainable development is one of those discontinuities. Far from being a soft issue grounded in emotion or ethics, sustainable development involves cold, rational business logic.
This discontinuity is occurring because we are encountering physical limits. You can see it coming arithmetically. Sustainability involves the laws of nature—physics, chemistry, and biology—and the recognition that the world is a closed system. What we thought was boundless has limits, and we’re beginning to hit them. That’s going to change a lot of today’s fundamental economics, it’s going to change prices, and it’s going to change what’s socially acceptable.
Is sustainability an immediate issue today in any of Monsanto’s businesses?
In some businesses, it’s probably less apparent why sustainability is so critical. But in our agricultural business, we can’t avoid it. In the twentieth century, we have been able to feed people by bringing more acreage into production and by increasing productivity through fertilizers, pesticides, and irrigation. But current agricultural practice isn’t sustainable: we’ve lost something on the order of 15% of our topsoil over the last 20 years or so, irrigation is increasing the salinity of soil, and the petrochemicals we rely on aren’t renewable.
Most arable land is already under cultivation. Attempts to open new farmland are causing severe ecological damage. So in the best case, we have the same amount of land to work with and twice as many people to feed. It comes down to resource productivity. You have to get twice the yield from every acre of land just to maintain current levels of poverty and malnutrition.
Now, even if you wanted to do it in an unsustainable way, no technology today would let you double productivity. With current best practices applied to all the acreage in the world, you’d get about a third of the way toward feeding the whole population. The conclusion is that new technology is the only alternative to one of two disasters: not feeding people—letting the Malthusian process work its magic on the population—or ecological catastrophe.
What new technology are you talking about?
We don’t have 100 years to figure that out; at best, we have decades. In that time frame, I know of only two viable candidates: biotechnology and information technology. I’m treating them as though they’re separate, but biotechnology is really a subset of information technology because it is about DNA-encoded information.
Using information is one of the ways to increase productivity without abusing nature. A closed system like the earth’s can’t withstand a systematic increase of material things, but it can support exponential increases of information and knowledge. If economic development means using more stuff, then those who argue that growth and environmental sustainability are incompatible are right. And if we grow by using more stuff, I’m afraid we’d better start looking for a new planet.
But sustainability and development might be compatible if you could create value and satisfy people’s needs by increasing the information component of what’s produced and diminishing the amount of stuff.
How does biotechnology replace stuff with information in agriculture?
We can genetically code a plant, for example, to repel or destroy harmful insects. That means we don’t have to spray the plant with pesticides—with stuff. Up to 90% of what’s sprayed on crops today is wasted. Most of it ends up on the soil. If we put the right information in the plant, we waste less stuff and increase productivity. With biotechnology, we can accomplish that. It’s not that chemicals are inherently bad. But they are less efficient than biology because you have to manufacture and distribute and apply them.
If companies genetically code a plant to repel pests, farmers don’t have to spray with pesticides. That’s what’s meant by “replacing stuff with information.”
I offer a prediction: the early twenty-first century is going to see a struggle between information technology and biotechnology on the one hand and environmental degradation on the other. Information technology is going to be our most powerful tool. It will let us miniaturize things, avoid waste, and produce more value without producing and processing more stuff. The substitution of information for stuff is essential to sustainability. (See the sidebar “Monsanto’s Smarter Products.”) Substituting services for products is another.
Monsanto’s Smarter Products
Explain what you mean by substituting services for products.
Bill McDonough, dean of the University of Virginia’s School of Architecture in Charlottesville, made this come clear for me. He points out that we often buy things not because we want the things themselves but because we want what they can do. Television sets are an obvious example. No one says, “Gee, I’d love to put a cathode-ray tube and a lot of printed circuit boards in my living room.” People might say, “I’d like to watch the ball game” or “Let’s turn on the soaps.” Another example: Monsanto makes nylon fiber, much of which goes into carpeting. Each year, nearly 2 million tons of old carpeting go into landfills, where they constitute about 1% of the entire U.S. municipal solid-waste load. Nobody really wants to own carpet; they just want to walk on it. What would happen if Monsanto or the carpet manufacturer owned that carpet and promised to come in and remove it when it required replacing? What would the economics of that look like? One of our customers is exploring that possibility today. It might be that if we got the carpet back, we could afford to put more cost into it in the first place in ways that would make it easier for us to recycle. Maybe then it wouldn’t end up in a landfill.
Substituting services for products is one solution. Selling a carpet service instead of a carpet could be more sustainable.
We’re starting to look at all our products and ask, What is it people really need to buy? Do they need the stuff or just its function? What would be the economic impact of our selling a carpet service instead of a carpet?
Can you cite other examples of how we can replace stuff with information?
Sure. Information technology, whether it’s telecommunications or virtual reality—whatever that turns out to be—can eliminate the need to move people and things around. In the past, if you wanted to send a document from one place to another, it involved a lot of trains and planes and trucks. Sending a fax eliminates all that motion. Sending E-mail also eliminates the paper.
I have to add that any powerful new technology is going to create ethical problems—problems of privacy, fairness, ethics, power, or control. With any major change in the technological substrate, society has to solve those inherent issues.
You referred earlier to using information to miniaturize things. How does that work?
Miniaturization is another piece of sustainability because it reduces the amount of stuff we use. There are enormous potential savings in moving from very crude, massive designs to smaller and more elegant ones. Microelectronics is one example: the computing power you have in your PC would have required an enormous installation not many years ago.
We’ve designed things bigger than they need to be because it’s easier and because we thought we had unlimited space and material. Now that we know we don’t, there’s going to be a premium on smaller, smarter design. I think of miniaturization as a way to buy time. Ultimately, we’d love to figure out how to replace chemical processing plants with fields of growing plants—literally, green plants capable of producing chemicals. We have some leads: we can already produce polymers in soybeans, for example. But I think a big commercial breakthrough is a long way off.
Today, by developing more efficient catalysts, for example, we can at least make chemical plants smaller. There will be a number of feasible alternatives if we can really learn to think differently and set design criteria other than reducing immediate capital costs. One way is to design chemical plants differently. If you looked at life-cycle costs such as energy consumption, for instance, you would design a plant so that processes needing heat were placed next to processes generating heat; you wouldn’t install as many heaters and coolers that waste energy. We think that if you really dig into your costs, you can accomplish a lot by simplifying and shrinking.
Some people are talking about breakthroughs in mechanical devices comparable to what’s being done with electronic devices. Maybe the next wave will come through nanotechnology, but probably in 10 or 20 years, not tomorrow.
The key to sustainability, then, lies in technology?
I am not one of those techno-utopians who just assume that technology is going to take care of everyone. But I don’t see an alternative to giving it our best shot.
Business leaders tend to trust technology and markets and to be optimistic about the natural unfolding of events. But at a visceral level, people know we are headed for trouble and would love to find a way to do something about it. The market is going to want sustainable systems, and if Monsanto provides them, we will do quite well for ourselves and our shareowners. Sustainable development is going to be one of the organizing principles around which Monsanto and a lot of other institutions will probably define themselves in the years to come.
Describe how you go about infusing this way of thinking into the company.
It’s not hard. You talk for three minutes, and people light up and say, “Where do we start?” And I say, “I don’t know. And good luck.”
Maybe some context would help. We’ve been grappling with sustainability issues here long before we had a term for the concept. Part of our history as a chemical company is that environmental issues have been in our face to a greater extent than they’ve been in many other industries.
My predecessor, Dick Mahoney, understood that the way we were doing things had to change. Dick grew up, as I did not, in the chemical industry, so he tended to look at what was coming out of our plants. The publication of our first toxic-release inventory in 1988 galvanized attention around the magnitude of plant emissions.
Dick got way out ahead of the traditional culture in Monsanto and in the rest of the chemical industry. He set incredibly aggressive quantitative targets and deadlines. The first reaction to them was, My God, he must be out of his mind. But it was an effective technique. In six years, we reduced our toxic air emissions by 90%.
Not having “grown up in the chemical industry,” as you put it, do you think differently about environmental issues?
Somewhat. Dick put us on the right path. We have to reduce—and ultimately eliminate—the negative impacts we have on the world. There is no argument on that subject. But even if Monsanto reached its goal of zero impact next Tuesday, that wouldn’t solve the world’s problem. Several years ago, I sensed that there was something more required of us than doing no harm, but I couldn’t articulate what that was.
So I did what you always do. I got some smart people together—a group of about 25 critical thinkers, some of the company’s up-and-coming leaders—and sent them off to think about it. We selected a good cross-section—some business-unit leaders, a couple from the management board, and people from planning, manufacturing, policy, and safety and health. And we brought in some non-traditional outsiders to challenge our underlying assumptions about the world. My request to this group was, “Go off, think about what’s happening to the world, and come back with some recommendations about what it means for Monsanto. Do we have a role to play? If so, what is it?”
That off-site meeting in 1994 led to an emerging insight that we couldn’t ignore the changing global environmental conditions. The focus around sustainable development became obvious. I should have been able to come up with that in about 15 minutes. But it took a group of very good people quite a while to think it through, to determine what was real and what was just puff, to understand the data, and to convince themselves that this wasn’t a fluffy issue—and that we ought to be engaged in it.
People came away from that meeting emotionally fired up. It wasn’t just a matter of Okay, you threw me an interesting business problem, I have done the analysis, here is the answer, and now can I go back to work. People came away saying, “Damn it, we’ve got to get going on this. This is important.” When some of your best people care intensely, their excitement is contagious.
So now we have a bunch of folks engaged, recognizing that we have no idea where we’re going to end up. No one—not the most sophisticated thinker in the world—can describe a sustainable world with 10 billion to 12 billion people, living in conditions that aren’t disgusting and morally impermissible. But we can’t sit around waiting for the finished blueprint. We have to start moving in directions that make us less unsustainable.
How are you doing that?
There’s a quote of Peter Drucker’s—which I will mangle here—to the effect that at some point strategy has to degenerate into work. At Monsanto, there was a flurry of E-mail around the world, and in a matter of four months a group of about 80 coalesced. Some were chosen; many others just heard about the project and volunteered. They met for the first time in October 1995 and decided to organize into seven teams: three focused on developing tools to help us make better decisions, three focused externally on meeting world needs, and one focused on education and communication. (See the sidebar “Monsanto’s Seven Sustainability Teams.”)
Monsanto’s Seven Sustainability Teams
We realized that many of the things we were already doing were part of a sustainability strategy even if we didn’t call it that. We’d been working on pollution prevention and investing in biotechnology for years before we thought about the concept of sustainability. As we made more progress in pollution prevention, it became easier for everyone to grasp how pollution—or waste—actually represents a resource that’s lost. When you translate that understanding into how you run a business, it leads to cost reduction. You can ask, did we do it because it reduces our costs or because of sustainability? That would be hard to answer because optimizing resources has become part of the way we think. But having the sustainability framework has made a difference, especially in how we weigh new business opportunities.
Can you give me some examples?
One of the seven sustainability teams is discussing how to gain a deeper understanding of global water needs and whether we at Monsanto might meet some of those needs with our existing capabilities. That is an example of a conversation that might not have occurred—or might have occurred much later—if we weren’t focused on sustainability. Agricultural water is becoming scarcer, and the salination of soils is an increasing problem. In California, for example, they do a lot of irrigation, and when the water evaporates or flushes through the soil, it leaves small amounts of minerals and salts. Over time, the build-up is going to affect the soil’s productivity.
Should we address the water side of the problem? Or can we approach the issue from the plant side? Can we develop plants that will thrive in salty soil? Or can we create less thirsty plants suited to a drier environment? If we had plants that could adapt, maybe semidesert areas could become productive.
Another problem is drinking water. Roughly 40% of the people on earth don’t have an adequate supply of fresh water. In the United States, we have a big infrastructure for cleaning water. But in developing countries that lack the infrastructure, there might be a business opportunity for in-home water-purification systems.
I realize this is still early in the process, but how do you know that you’re moving forward?
One interesting measure is that we keep drawing in more people. We started off with 80; now we have almost 140. And a lot of this response is just one person after another saying, “I want to be involved, and this is the team I want to be involved in.” It’s infectious. That’s the way most good business processes work. To give people a script and tell them, “Your part is on page 17; just memorize it” is an archaic way to run institutions that have to regenerate and re-create themselves. It’s a dead end.
Today, in most fields I know, the struggle is about creativity and innovation. There is no script. You have some ideas, some activities, some exhortations, and some invitations, and you try to align what people believe and what people care about with what they’re free to do. And you hope that you can coordinate them in ways that aren’t too wasteful—or, better still, that they can self-coordinate. If an institution wants to be adaptive, it has to let go of some control and trust that people will work on the right things in the right ways. That has some obvious implications for the ways you select people, train them, and support them.
Would it be accurate to say that all of your sustainability teams have been self-created and self-coordinated?
Someone asked me recently whether this was a top-down exercise or a bottom-up exercise. Those don’t sound like very helpful concepts to me. This is about us. What do we want to do? Companies aren’t machines anymore. We have thousands of independent agents trying to self-coordinate because it is in their interest to do so.
There is no top or bottom. That’s just a metaphor and not a helpful one. People say, Here is what I think. What do you think? Does that make sense to you? Would you like to try it? I believe we must see what ideas really win people’s hearts and trust that those ideas will turn out to be the most productive.
People in large numbers won’t give their all for protracted periods of time—with a cost in their overall lives—for an abstraction called a corporation or an idea called profit. People can give only to people. They can give to their coworkers if they believe that they’re engaged together in an enterprise of some importance. They can give to society, which is just another way of saying they can give to their children. They can give if they believe that their work is in some way integrated into a whole life.
Historically, there has been a bifurcation between who we are and the work we do, as if who we are is outside our work. That’s unhealthy, and most people yearn to integrate their two sides. Because of Monsanto’s history as a chemical company, we have a lot of employees—good people—with a recurrent experience like this: their kids or their neighbors’ kids or somebody at a cocktail party asks them what kind of work they do and then reacts in a disapproving way because of what they think we are at Monsanto. And that hurts. People don’t want to be made to feel ashamed of what they do.
I don’t mean to disparage economic motives—they’re obviously important. But working on sustainability offers a huge hope for healing the rift between our economic activity and our total human activity. Instead of seeing the two in Marxist opposition, we see them as the same thing. Economics is part of human activity.
What are the organizational implications of that?
Part of the design and structure of any successful institution is going to be giving people permission to select tasks and goals that they care about. Those tasks have to pass some kind of economic screen; but much of what people care about will pass because economic gain comes from meeting people’s needs. That’s what economies are based on.
The people who have been working on sustainability here have done an incredible job, not because there has been one presiding genius who has organized it all and told them what to do but because they want to get it done. They care intensely about it and they organize themselves to do it.
I don’t mean to romanticize it, but, by and large, self-regulating systems are probably going to be more productive than those based primarily on control loops. There are some institutions that for a short period can succeed as a reflection of the will and ego of a single person. But they’re unlikely to survive unless other people resonate with what that person represents.
We’re going to have to figure out how to organize people in ways that enable them to coordinate their activities without wasteful and intrusive systems of control and without too much predefinition of what a job is. My own view is that as long as you have a concept called a job, you’re asking people to behave inauthentically; you’re asking people to perform to a set of expectations that someone else created. People give more if they can figure out how to control themselves, how to regulate themselves, how to contribute what they can contribute out of their own authentic abilities and beliefs, not out of somebody else’s predetermination of what they’re going to do all day.
How will you measure your progress toward sustainability? Do you have milestones?
For something at this early level of exploration, you probably want to rely for at least a year on a subjective sense of momentum. People usually know when they’re going someplace, when they’re making progress. There’s a pace to it that says, yes, we’re on the right track. After that, I would like to see some quantitative goals with dates and very macro budgets. As the teams begin to come to some conclusions, we will be able to ignite the next phase by setting some specific targets.
This is so big and complicated that I don’t think we’re going to end up with a neat and tidy document. I don’t think environmental sustainability lends itself to that.
As your activities globalize, does the issue of sustainability lead you to think differently about your business strategy in different countries or regions of the world?
The developing economies can grow by brute force, by putting steel in the ground and depleting natural resources and burning a lot of hydrocarbons. But a far better way to go would be for companies like Monsanto to transfer their knowledge and help those countries avoid the mistakes of the past. If emerging economies have to relive the entire industrial revolution with all its waste, its energy use, and its pollution, I think it’s all over.
“If emerging economies have to relive the entire industrial revolution…I think it’s all over.”
Can we help the Chinese, for example, leapfrog from preindustrial to postindustrial systems without having to pass through that destructive middle? At the moment, the signs aren’t encouraging. One that is, however, is China’s adoption of cellular phones instead of tons of stuff: telephone poles and copper wire.
The fact that India is one of the largest software-writing countries in the world is encouraging. You’d like to see tens of millions of people in India employed in information technology rather than in making more stuff. But there’s an important hurdle for companies like Monsanto to overcome. To make money through the transfer of information, we depend on intellectual property rights, which let us reconcile environmental and economic goals. As the headlines tell you, that’s a little problematic in Asia. And yet it’s critically important to our being able to figure out how to be helpful while making money. Knowledge transfer will happen a lot faster if people get paid for it.
Will individual companies put themselves at risk if they follow sustainable practices and their competitors don’t?
I can see that somebody could get short-term advantage by cutting corners. At a matter of fact, the world economy has seized such an advantage-short-term in the sense of 500 years—by cutting corners on some basic laws of physics and thermo-dynamics. But it’s like asking if you can gain an advantage by violating laws. Yes, I suppose you can—until they catch you. I don’t think it is a good idea to build a business or an economy around the “until-they-catch-you principle.” It can’t be the right way to build something that is going to endure.
The multinational corporation is an impressive invention for dealing with the tension between the application of broadly interesting ideas on the one hand and economic and cultural differences on the other. Companies like ours have gotten pretty good at figuring out how to operate in places where we can make a living while remaining true to some fundamental rules. As more countries enter the world economy, they are accepting—with greater or lesser enthusiasm-that they are going to have to play by some rules that are new for them. My guess is that, over time, sustainability is going to be one of those rules.
Doesn’t all this seem far away for managers? Far enough in the future for them to think, “It won’t happen on my watch”?
The tension between the short term and the long term is one of the fundamental issues of business—and of life—and it isn’t going to go away. Many chief executives have gotten where they are in part because they have a time horizon longer than next month. You don’t stop caring about next month, but you also have to think further ahead. What’s going to happen next in my world? If your world is soft drinks, for example, you have to ask where your clean water will come from.
How do you react to the prospect of the world population doubling over the next few decades? First you may say, Great, 5 billion more customers. That is what economic development is all about. That’s part of it. Now, keep going. Think about all the physical implications of serving that many new customers. And ask yourself the hard question, How exactly are we going to do that and still live here? That’s what sustainability is about.
I’m fascinated with the concept of distinctions that transform people. Once you learn certain things—once you learn to ride a bike, say—your life has changed forever. You can’t unlearn it. For me, sustainability is one of those distinctions. Once you get it, it changes how you think. A lot of our people have been infected by this way of seeing the world. It’s becoming automatic. It’s just part of who you are.