Whole Foods Corporate Responsibility

Whole Foods Corporate Responsibility

From just one store with fewer than 20 employees, Whole Foods Market has grown into a multi-national enterprise with hundreds of stores in the United States, Canada and the United Kingdom and nearly 73,000 employees today. With a mission dedicated to improving the eating habits of its customers, Whole Foods has successfully leveraged its business model in ways that have contributed to its sustained growth in recent years. This paper provides a review of the relevant literature to develop a corporate social responsibility strategy for this company, including an evaluation of the company's mission, an estimated time frame for implementation, and a projected budget. A summary of the research and important findings concerning corporate social responsibility and Whole Foods Market are provided in the conclusion.

Review and Analysis

Overview of Whole Foods

Established in Austin Texas in 1980, Whole Foods Market has grown from its modest beginnings to become the leading company in the natural and organic foods market today. According to the company's Web site, "Whole Foods Market was founded when four local businesspeople decided the natural foods industry was ready for a supermarket format. Our founders were John Mackey and Renee Lawson Hardy, owners of Safer Way Natural Foods, and Craig Weller and Mark Skiles, owners of Clarksville Natural Grocery" (Company history, 2013, para. 2). In 1980, the first Whole Foods Market opened with a small cadre of less than 20 people, but the store proved an immediate success and growth has been consistent since that time, due in large part to a series of thoughtful acquisitions and mergers. When the company launched the Whole Foods market concept, there were no more than five natural food supermarkets in the United States compared to the hundreds that exist today (Company history, 2013). As noted above, the company's current status was fueled in large part by a series of mergers and acquisitions over the years, including those set forth at Appendix A.

The company also reports that it has one operating segment, natural and organic foods supermarkets and that the company is the largest retailer of natural and organic foods in the U.S. And overall, the 11th largest food retailer based on 2011 sales rankings from Progressive Grocer (Form 10-K, 2012, p. 4). As of the end of its fiscal year in September 2012, the company operated 335 stores in the United States, Canada, and the United Kingdom (Form 10-K, 2012, p. 4). Its stores average 10 years in age and 38,000 in square feet and are supported by (a) the company's Austin headquarters, (b) regional offices, (c) distribution centers, (d) bakehouse facilities, (e) commissary kitchens, (f) seafood-processing facilities, (g) meat and produce procurement centers, and (h) a specialty coffee and tea procurement and roasting operation (Form 10-K, 2012, p. 4). As of the end of its fiscal year in September 2012, the company employed approximately 72,700 team members, including approximately 53,100 full-time,

16,400 part-time and 3,200 seasonal employees (Form 10-K, 2012, p. 7). According to the company's most recent Form 10-K, "Full-time team members accounted for approximately 76% of all permanent positions at the end of fiscal year 2012, with voluntary turnover of less than

10% (2012, p. 7).

The company maintains that the growth in sales of natural and organic foods is being fueled by a number of forces, and trends, including the following:

1. Heightened awareness of the role that healthy eating plays in long-term wellness;

2. A better-educated and wealthier populace whose median age is increasing each year;

3. Increasing consumer concern over the purity and safety of food; and,

4. Environmental concern (Form 10-K, 2012, p. 4).

Life-cycle Analysis

The analysis of the complete range of environmental costs associated with the manufacture and distribution of consumer items can represent a valuable and timely enterprise when it is properly administered (Portney, 1993). In the case of Whole Foods, the context involves the foregoing trends and forces in natural and organic foods preferences in the company's target markets. According to Portney, "Consumers' growing interest in the environmental implications of their purchases has spurred various 'buy green' campaigns" (p. 70). There have been some other initiatives involving this buy green trend including boycotts of products that are regarded as harmful to the environment, investments by consumers who take a company's environmental record into account when making stock purchases, and through green marketing efforts by firms that that highlight the environmentally desirable aspects of their manufacturing processes or the ecologically responsible track record of their products (i.e., "all natural" or "made from recycled materials") (Portney, 1993, p. 69).

According to Nam (2012), "Life cycle analysis [is] a relatively new approach [that] examines the way the production, use, care, and disposal of a product affects the environment and the people involved with the product" (p. 49). In sum, a life cycle analysis is similar to environmental full-cost accounting and has been used by a growing range of manufacturers. Manufacturers of a wide rang of consumer products including disposable diapers and disposable cups currently se life cycle analyses to assist consumers in making informed choices concerning the products they purchase (Portney, 1993). Likewise, life cycle analyses are being included that describes the ingredients in detergents as well as the containers for orange juice in an effort to grow their market share among environmentally conscious shoppers (Portney, 1993, p. 70).

Corporate Social Responsibility Evaluation

Although it is not necessarily cheap, corporate social responsibility is increasingly being recognized as an important component for well-managed companies today. In this regard, Anderson (1999) advises that, "Well-managed companies of today will make every effort to meet its obligations to society. To help them with this, some companies have written objectives and policies in this area" (p. 254). A review of the corporate literature maintained by the company in its Web site, press releases and Securities and Exchange Commission filings indicates that Whole Foods has not specifically addressed this need in a single, overarching manner. This may be due in part to the complexity of the process involved and the skepticism of many business managers concerning its efficacy. In this regard, Anderson (1999) notes that, "In spite of [the need], social objectives and goals exist in an area that is not always easy to assess and objectively appraise" (p. 254). As Anderson also points out, though, "Just because it is not easy is no excuse for not trying to do something constructive about it" (1999 p. 254). In the business world, it is axiomatic that in order to improve something, it must first be measured and this is also the case with corporate social responsibility. For instance, Anderson adds that, "To gain some semblance of control in this area and to make certain that social objectives are actually being met, more companies have started using a social audit to measure, monitor, and evaluate the contributions that the company is making to society" (1999, p. 254). There are a number of advantages to conducting a corporate social responsibility evaluation, including the following:

1. It gives management the information it needs to evaluate the effectiveness of programs related to affirmative action, ecology, community development, and the like.

2. Since managers tend to direct attention to those activities for which reports and evaluations are required, the existence of a social audit tends to promote active concern for meeting social performance goals.

3. It provides information that enables management to compare the relative effectiveness of different social programs.

4. It enables management to provide information to external groups that make demands on the firm for social performance (Anderson, 1999, p. 254).

Because this evaluation can generate sensitive and potentially damaging information concerning a company's CSR existing practices, Anderson recommends performing due diligence to ensure that the evaluation, once completed, is the most appropriate method for disclosing this type of information to the public. According to Anderson, "As helpful as an information and social responsibility status report might be to both the company and the stockholders, care must be taken in generating this data and the resulting report. The company must determine the best medium for disclosing the information to the public" (p. 254). In some cases, companies may elect to include this information in their annual reports, or through the publication of a completely separate document; however, whichever approach is used, care must be taken in order to ensure that it is strictly focused on the interrelationship of company resources and company commitments to corporate social responsibility (Anderson).

A well-presented report system will reinforce the corporate social conscience and demonstrate the balance between the corporate objective of profitability and the company's obligation to society. Developing a good social reporting system is an iterative process that typically experiences several growth stages, including: (1) establishing a foundation, (2) improving reporting quality, and (3) refining the system (Anderson).

The evaluation of Whole Foods is a systematic effort to measure and assess the company's performance in the area of social responsibility. The basic steps taken in performing a corporate social responsibility evaluation are monitoring, measuring, and appraising all aspects of the company's social responsibility performance (Anderson). A CSR evaluation for Whole Foods using these procedures is presented in Table 1 below.

Table 1

Strengths and Weaknesses in Whole Foods' Planning, Organizing, Directing, and Controlling Social Responsibility

Component

Strengths

Weaknesses

Planning

Whole Foods is a mission-driven company (Company history, 2013). The company's most recent Form 10-K emphasizes that Whole

Foods Market is currently the world's leading retailer of natural and organic foods and America's first national 'Certified Organic'

grocer" (p. 4).

There are no discernible formal legal, moral, or ethical standards planning processes within Whole Foods. The only remedial action taken against legal, moral, or ethical problems is a reaction to a serious problem that has arisen in one or more of these areas. Likewise, there is no consistent plan for philanthropic giving.

Organizing

The company's domestic Whole

Foods Market stores each employ between approximately 40 and

650 team members who generally comprise 10 self-managed teams per store, each led by a team leader (Form 10-K, 2012, p. 7).

There is no discernible written policy about moral or ethical standards or it is poorly or loosely worded.

Unwritten or loosely worded, vague standards are also poorly communicated.

There is little or no consistent or organized policy of charitable giving with respect to quantity, organization, or location.

Directing

Each team within a store is responsible for a different product offering or aspect of store operations such as prepared foods, grocery, or customer service, among others. The company also promotes a decentralized approach to store operations in which many decisions are made by teams at the individual store level. In this structure, an effective store team leader is critical to the success of the store. The store team leader works closely with one or more associate store team leaders, as well as with all of the department team leaders, to operate the store as efficiently and profitably as possible (Form 10-K, 2012, p. 7).

Little or no direction or support is given with respect to conduct, penalties, or punishments to be taken by management and/or employees in the areas of legal, moral, or ethical standards.

Little or no direction, guidance, or support is given with respect to what the company will do about choosing or giving to charitable organizations.

Controlling

The company's core controlling values are:

* Selling the highest quality natural and organic products available;

* Satisfying and delighting their customers;

* Supporting team member happiness and excellence;

* Creating wealth through profits and growth;

* Caring about their communities and their environment;

* Creating ongoing win-win

partnerships with their suppliers; and, * Promoting the health of their stakeholders through healthy eating education (Form 10-K, 2012, p. 5).

There is poor or little or no control over legal, moral, or ethical conduct. Each team member performs according to his or her understanding and standard of legal, moral, and ethical conduct.

Source: Form 10-K (Strengths) and Anderson (1999), p. 22 (Weaknesses)

Metrics

A well-conducted life cycle analysis should include the following metrics:

1. The costs of air and water pollution and solid wastes that are generated during the raw materials extraction process;

2. The energy used and the pollution that results from manufacturing the product;

3. The costs of the environmental harm that might occur during the distribution and use of the product;

4. The solid or liquid wastes that must ultimately be discarded following final use (Portney, p. 70).

Evaluation of the Company's Mission

The company's stated mission is to promote organically grown foods, healthy eating, and the sustainability of its entire ecosystem. Through its corporate growth, the company reports that it has experienced significant and positive impact on the natural and organic foods movement throughout the United States, helping lead the industry to nationwide acceptance over the last 32 years (Form 10-K, 2012, p. 4). As noted in Table 1 above, though, the company, though, does not routinely publish any information concerning its corporate social responsibilities in these areas. Therefore, addressing these gaps in the company's reporting and directing mechanisms represents a valuable addition to Whole Foods' corporate social responsibility regimen.