Back in January, many of you, 3p readers, told us that when it comes to sustainability, George Siemon was the top CEO in all the land. For the rest of you who might not know about this organic farming pioneer, we’d like to introduce you.
Triple Pundit talked with Siemon recently about what it means to focus on sustainability, the challenges and opportunities that co-ops create in the business world, and some of the lessons he has learned throughout his career.
Back in 1988, Siemon became a founding member of the Cooperative Regions of Organic Producer Pools (CROPP), but you probably know the firm by its popular brand name: Organic Valley. CROPP is now the largest organic farming cooperative in North America, with more than 1652 farmer-owners in 33 states and four Canadian provinces. Aside from his role as “C-I-E-I-O,” Siemon serves on the board of directors for Global Animal Partnership, a nonprofit dedicated to improving animal agriculture. He’s spent much of his career helping to develop national standards for organic certification.
Triple Pundit: Tell us how you define sustainability. What do you think is the role of business in building a more sustainable world, overall?
George Siemon: Sustainability has gone through several renditions for what it stands for. There was a time when sustainable agriculture was not necessarily organic agriculture, and now sustainability is being used to talk about, of course, carbon credits and [carbon] footprints. To me, sustainability means the way things fits together in a holistic way, for the long term. The word sustainable is actually very connected to the word organic. Organic means the integrated part making a whole, and sustainability is a lot about that. I’m kind of offended when I see sustainability used in a narrow way.
3p: What is the role of Organic Valley in the broader sustainable business movement?
Siemon: Well, since sustainability is all about how things fit together, one thing we’re very concerned with is economic sustainability. So one of the things we really try to build into our co-op is the idea that we should be paying farmers and employees what we call a “sustainable wage.” So much of the farm commodities are based around a wage that goes up, down, all around. And we feel that if you’re going to talk about sustainable land use and environmental concerns you have to talk about economic sustainability.
One of the things that is interesting about us is that we’re a co-op. So [when you] get into the issue of ownership and turnover of ownership, we have an alternative way of doing a business. By being a co-op, our owners are primarily our users, and their benefit for being owners is that we’re taking as good of care of them as we can in our daily interactions, rather than only being about building business value or dividends on ownership, or about an exit strategy. We’re the opposite of an exit strategy. We want our business to be just like we are today, in 50 years. Our farmers hope that their children will be farming their farms, so there’s this whole long-term perspective, and it’s unique that a co-op can talk in those terms.
3p: What are the challenges that come with being a co-op?Siemon: Usually financing is one of the bigger ones. Some people say the structure of a co-op is difficult because you have a lot of people trying to make a decision, but that’s a matter of choice. Some co-ops are run in a manner where there is no group process because everything is done through the board. Our co-op is very group process oriented because our mission is to build a great group of farmers who understand the marketplace, so group buy-in is a big part of what we do. Overall, though, we’ve run a very sound business because otherwise you really can’t get anywhere.
Because we don’t have outside investors, our farmers have to make an investment in our co-op, to be part of it, and that’s unique in the way we go about it. We also have a unique program where we sell preferred stock to non-farmer owners; that is an instrument that pays 6 percent and we’ve been able to raise money that way. There is no business value they get from the business growing—only as a set 6 percent return. So that makes it attractive to us and attractive to them.
3p: Is there a point at which you cap the number of members you have? At some point does the number get too high?
Siemon: We’ve gone through that question all these years—we’re 22 years old now—and for us it’s all about the mission, and if we can do the mission with 100 farmers or 1,000 farmers, then it’s OK. So we’re not going to cap our size. We’re going to cap how much we take on and we don’t want to spread our product line out [too thin]. Our basic product line, 88 percent of which is dairy, we’ve been growing steady at it. In terms of size, we’ve already outgrown the ability to have general meetings—we’re a national business—and for everyone to know each other. We left that 15 or 20 years ago. There’s certainly a concern [about growing too much], but it goes back to our report card on our mission, not our size.
3p: We often talk about corporate leaders having a “Ray Anderson moment,” in reference to the Interface Carpet founder’s realization that his company was in deep ignorance of its environmental impact and that it needed change that. How has a sustainable philosophy been realized at Organic Valley?
Siemon: It’s actually quite the opposite—we were too dreamy-eyes and idealistic when we started, and so we had sober up, so to speak. My family went through bankruptcy, and came out of it, but the process taught me a valuable lesson that, you know, your ideals are great, but you have to have a business foundation to support those. So my enlightenment was to not try to do everything at once, but to build a broad, solid foundation, and then we would be able to do more of what our mission was, instead of trying to do it all at once, and failing—so we have found the happy medium. Now that we’ve reached maturity, we’ve been able to turn back and do some of the idealistic things we always felt were important.
Compromise is a part of doing business. A simple example would be we’ve hauled milk into North Carolina from Ohio and built up a business. And then we started working with farmers in North Carolina so we could start a local business. You could say it was a compromise to haul milk that far but we had market realities to address.
We’ve now reached the point where we are looking throughout the company for more opportunities to do things and invest more in sustainability.