The Six New Rules of Business: Creating Real Value in a Changing World
Judy Samuelson
192 pages, Berrett-Koehler Publishers, 2021
Before the final chapters of World War II—when business leaders across the country, from national conglomerates to local service providers, were called to embrace the challenge of absorbing millions of servicemen, returning from the battlegrounds in Europe and the Pacific, the Committee for Economic Development took root. Hundreds of thousands of jobs were needed, and when this challenge was met, it jump-started an extended period of economic expansion that made the US economy the envy of the world.
A smooth transition from a wartime to a peace-time economy was far from certain when the conversation began, the scope of engagement envisioned, and the plans were laid out. It required all hands on deck—and an ability to put the health of the system—and in this case, the nation—first.
The collective challenges we face today are just as complex—in significant ways, more so. The cacophony of voices calling for bold changes can be hard to hear clearly amid protestations by those who benefit from the status quo. The confusion in the public square, and fears of both unintended consequences of taking action—or the prospect of inaction—emerge in this moment of low trust in institutions of all kinds. This moonshot moment on climate; the need to prepare for mass recalibration of work in an era of artificial intelligence; to open up the economy to face economic exclusion, racism, and inequality—a persistent blind spot in our economic evolution—each of these challenges requires business at the table with clarity of purpose and long-term commitment to the health of the commons. These challenges require new forms of partnership, embracing your competitor, and in many cases working alongside them to better the industry as a whole—for the good of the commons. Contemporary problem-solving requires all of the parties at the table.—Judy Samuelson
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Building Trust at the Table—The Cod Industry
A tangible example of contemporary problem-solving on a systems challenge of remarkable complexity comes out of the cod industry in the Barents Sea, which spans the arctic shores of Norway and Russia between the North Atlantic and the Arctic Ocean. Once the backbone of the economy in the North Atlantic, cod is a mild-flavored white fish commonly used in fish and chips and fish sandwiches. Cod liver oil is still a popular nutritional supplement.
In the 1600s, codfish was so ubiquitous and central to nutrition that it played a starring role in the triangle trade among Europe, Africa, and the Americas. Entire books have been written that chronicle age-old battles about fishing rights and attempts to govern cod fishing on the open seas. Cod was abundant and also lucrative. Dried cod of high quality was shipped from the rocky shoals of New England to as far away as Asia. The slave economy depended on cod from Newfoundland; “salt fish” was an inexpensive, high-protein form of sustenance on the sugar and cotton plantations of the Caribbean.
Today, cod is a threatened species and a symbol of the failure of markets to self-regulate. Regardless of cod’s status on the watch lists of environmentalists, it still pays for rogue operators to flout expansive protocols designed to sustain the fish supply for the long term. The threats to productive fisheries in this moment are very real. Newfoundland cod stock declined to such a degree in the early 1990s that even after a long-standing moratorium on fishing, it remains largely depleted and may never recover.
The pressures on the health of cod, haddock, and other fish stocks in the North Atlantic range from climate change to unintended effects of fish farms, but the major factor is what NGO activists label “IUU” catch: “illegal, unregulated, and unreported” fishing. IUU fishing is the underbelly of the high demand for cheap fish for ready markets in the UK, Europe, and North America.
The strategy deployed by groups from WWF to Greenpeace is a familiar one. The fishing industry—including suppliers that encompass everything from industrial-scale trawlers to intermediaries who engage in piracy—is hard to influence and harder to govern. Direct campaigns aimed at the consumption of fish by mass consumers are horribly complicated given the market confusion of varieties, origins, and substitutes. The activists have focused instead on a brand with significant leverage up the supply chain—one that is vulnerable to social media and headlines.
Enter McDonald’s.
In 2007, Greenpeace released the following announcement:
Oslo/Amsterdam, International—Eight of Europe’s largest and most influential seafood companies have signed and addressed a joint letter to the Norwegian government, committing to do their best to avoid illegal Barents Sea cod and have called on the Norwegian government to provide up-to-date black lists so companies can live up to this commitment. The signatories include some of Europe’s largest seafood processors and purchasers such as restaurant chain McDonald’s as well as Espersen, Royal Greenland, Young’s Seafood and Iglo/Birds Eye, Frosta/Copack.
The focal point of the campaign is McDonald’s, which sources product across the world to feed about 70 million people each day. McDonald’s customers are drawn to quality and convenience at an affordable price, and behind the restaurant chain’s promise of tasty, well-priced food lies a complex set of suppliers, brokers, and producers that span some of the most environmentally sensitive places on the planet.
The arctic waters of the Barents Sea encompass one of the last healthy fishing grounds for highly popular white fish. The party convened to confront the declining health of these fisheries was led by Klaus Nielsen, CEO of Espersen, a Danish enterprise set up in 1937 for cod fishing in the Baltic Sea.
With 2,500 employees around the globe and an annual turnover of more than 200 million euros, Espersen is today a major supplier of processed white fish. The company’s history is chronicled on its website, but its future depends on a steady supply of cod:
"In the years ahead, we wish to further consolidate our business in order to be able to continue to absorb and learn from the challenges of the world and the market. As such, we steadily continue on the journey we set sails to undertake more than 75 years ago to ensure that we can serve delicious fish to our grandchildren 25 years from now—as well as to many generations to come."
I had a chance meeting with Nielsen and members of the company’s industry association, AIPCE, plus Jason Clay of WWF and Jim Cannon, founder of Sustainable Fisheries Partnership, at the Rockefeller Foundation’s conference center in Bellagio, Italy. The industry executives who participated in the dialogue depend on a delicate balance of guardrails and protocols to protect fisheries—ideally without killing off current production and revenue.
These producers sell into the vast market for what Americans once called fish sticks, including all forms of processed and breaded white fish that are still highly popular in lunchrooms, as frozen convenience food, and on McDonald’s menus throughout the world.
In 2006, the fishing industry in the Barents Sea was in crisis. A Swedish TV show had run a sting operation and released damning film footage that featured traders selling cheap cod from vessels that flouted the region’s fishing limits. Local authorities were offering phony or “fig leaf” quotas for illegal catch, and fishery management authorities and Norwegian scientists estimated then that as much as 50 percent of the catch violated negotiated limits.
The public reaction to the story proved a great opportunity for Cannon, whose organization, the Sustainable Fisheries Partnership, acts as a go-between among the private producers, the retailers, and the NGOs working to excise illegal fishing. Cannon was advising both McDonald’s and Espersen at the time, and discussions about a response were already underway. Public visibility was the missing link; it offered a platform for the campaigners to tie rogue operators back to the producers—and, ultimately, to the retailers and consumers. Cannon recalled it this way:
"Truls Gulowsen—aka Greenpeace Nordic—drew the lines and exposed the connections from the traders to companies like Espersen, and then to McDonald’s. Greenpeace originally asked for observers on vessels and full traceability, but the industry resisted; they did not think that would work. It took the public exposure to really get it to the top of the agenda for all the main buyers, to get things moving."
For producers like Espersen who depend on a steady supply of cod and white fish, a sustainable business plan required finding a way to keep the whole supply chain accountable. As the largest producer in the region, Espersen was the linchpin. Like the real estate owners eager to revitalize the park next door, or the Japanese businessmen tied to the brand quality of Made in Japan, regional producers including Espersen have real skin in the game.
McDonald’s is Espersen’s largest customer. The massive restaurant chain could choose to source elsewhere, and fleets operating in the Barents Sea have some freedom of movement, but the health of the fisheries in the Baltic and Barents Sea region was the lifeblood of Scandinavian and European producers like Espersen. If McDonald’s, the most popular restaurant chain in the world, severed its relationship, Espersen’s future was at risk.
But CEO Klaus Nielsen could not solve the problem alone. With the help of Jim Cannon’s organization, Espersen engaged the main European importers and, ultimately, its trade association to agree to police every vessel in the supply chain, using a contract and protocol that quickly became the industry standard. It heavily penalizes and eventually enforces a boycott on any trader who fails to assure that its catch is legal.
The solution was engineered by industry leaders with the most to lose, thus the most to gain by ratcheting up the operating standard. When leaders raise the bar to protect their operating license, competitors follow.
Cannon explained how the contract works in practice in an email he sent in response to my query about the process:
"The contract basically says, 'Cheat me on one shipment and I’ll stop buying until you demonstrate you’re 100 percent clean, and if I hear you cheated any of my customers, I’ll also stop buying… And by the way, if you cheat me, I’m going to alert all my competitors.' By this means, a disreputable trader risks losing all their main customers—rather than losing just that catch…so it’s a much bigger deterrent …far bigger than the formal fines."
The program was a huge success. The road to arrive at a solution was a long one, but within six months, the fig leaf quota boats dropped out of the cod fishery, and illegal fishing dropped to near zero.
Building trust was critical to the system coalescing around a workable solution—and to the ability to cocreate. Cannon continued,
"We worked with the NGOs to ensure they understood and were ok with what the industry was trying to do—and to see that all the parties were aligned, at least privately, if not publicly. The individual relationships built between the businesses and Greenpeace have sustained to this day, which is a huge side benefit."
At this writing, the Barents Sea has since been the world’s largest source of sustainable cod—a healthy fishery, certified by the gold standard for sustainable seafood, the Marine Stewardship Council.
Bob Langert retired from McDonald’s in 2015. During his 25-year tenure, he managed dozens of complex negotiations between and among the company and the stakeholders representing various interests—including the parties to the agreement to secure the health of the fisheries in the Barents Sea. In 2019, he published The Battle to Do Good: Inside McDonald’s Sustainability Journey, which chronicles his experience at the center of a host of hot-button issues that defined his time with the company.
Bob and Jim Cannon agreed on at least three critical key ingredients for enlisting a critical mass of partners and competitors to realize a higher standard of practice:
- Public pressure. Media and public exposure of the kind provided by Greenpeace pressures key buyers and is an essential catalyst for action.
- Trust among parties. Cannon cites “calm and measured dialogue between the buyers, NGO pressure groups, and experts” as critical to keeping all parties at the table. Langert found that constructive dialogue requires a credible broker—an entity like Cannon’s organization—with impeccable credentials and the support of hard facts and science, to build trust.
- Private self-interest. Finally, and importantly, is the need for a collective and intelligent response from the supply chain of private actors, who ultimately benefit over the long term from attacking the problem at the source.
Underlying these ingredients is the need for a diversity of perspectives at the table, to ensure that the solutions address aspects of the problem that may not be apparent to the market-based principals—and that offer both out-of-the-box thinking and accountability. The table must accommodate those who speak for the health of the commons.
To eliminate overfishing in the Barents Sea also required reaching a critical mass of buyers and sellers. The entire fishery was at risk. Espersen brought other producers with significant market exposure to the table. Peers with reputations at stake and customer relationships to protect enabled a new industry standard to emerge. By working together, the trade group devised a solution that offered bad operators no place to turn.
The Work Ahead: Leadership for Cocreation
The story of the Barents Sea continues to unfold. Jim Cannon expects the region to be in the news again: “As the arctic ice recedes ever further… due to climate change, fishing boats are venturing ever further north and trawling on pristine habitat, including cold water coral areas.”
The problems that Cannon tackles in his organization are messy, complex, dynamic—seemingly intractable. Cannon has the vision, emotional intelligence, and commitment required to identify the first movers, help them envision a different future, and unlock the change needed in partnership with others.
Critics find the voluntary initiatives that link producers and consumers lacking; they want the clarity of law and regulation and visible punishment of scofflaws. Progress comes in fits and starts as campaigners and the consumer face reluctant leaders and investors. But in a global world, there are no command-and-control answers.
Even the most tangible change in business requires a special kind of leader—one who can subordinate his or her ego and link his or her ambition and skills to something larger, to root cause analysis and systemic change. Mark Moody Stuart of Shell, Bob Langert of McDonald’s, and Klaus Nielsen of Espersen are able to listen to critics but also work with their suppliers and even their competitors.