Whole Foods Strives to Be an Ethical Corporate Citizen
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Daniels Fund Ethics Initiative University of New Mexico http://danielsethics.mgt.unm.edu Whole Foods Strives to Be an Ethical Corporate Citizen INTRODUCTION In a period of time when green is on everyone’s mind, it seems fitting that Whole Foods Markets are popping up with their distinctive green signs in neighborhoods across the country. Beginning with their first expansion in 1984, Whole Foods has consistently grown domestically. In 2007 Whole Foods began opening stores in the United Kingdom. While continually opening new stores, the company fueled its expansion by acquiring other food chains. For instance, it acquired one of its largest competitors, Wild Oats, in 2007. Whole Foods has consistently ranked as one of the World’s Most Ethical companies for its emphasis on organic food, healthy living, customer satisfaction, quality, and sustainability. The firm has also been elected as one of the top companies to work for. Although customers are considered to be the company’s highest valued stakeholder, Whole Foods has adopted a stakeholder orientation that focuses on the needs of its stakeholders, including its employees and the community. Whole Foods has spearheaded efforts in the grocery industry to source its food products responsibly and search for innovative solutions to improve its environmental footprint. The company emphasizes healthy living and seeks to contribute to the communities in which it does business. However, despite Whole Foods’ significant accomplishments in business ethics, it has not been free from criticism. In its pursuit of growth, it has been accused of placing local stores out of business and has received mixed responses from some consumers. Other ethical issues include antitrust investigations and questionable activity by CEO John Mackey. This case will begin by providing brief background information on Whole Foods’ history. It will then examine Whole Foods’ mission and values, followed by how it strives to live out its values to become a good corporate citizen. We will also examine some ethical issues that Whole Foods has faced to demonstrate the complexity companies experience in order to constantly engage in ethical decision making within their businesses. COMPANY BACKGROUND In 1978 two entrepreneurs in their twenties used a $45,000 loan to open a small natural foods store in Austin, Texas. John Mackey and his then-girlfriend Rene Lawson Hardy wanted to help people live better. At the time, there were fewer than a dozen natural foods markets in the nation. The couple named their business SaferWay as a spoof on Safeway. The entrepreneurs had a rocky start. At one time they used the store as a residence after being kicked out of their apartment for storing food products. After two years Mackey and Hardy agreed to merge SaferWay with This material was developed by Casey Caldwell, Erica Lee Turner, and Jennifer Sawayda under the direction of O.C. Ferrell and Linda Ferrell. Danielle Jolley provided editorial assistance. It is provided for the Daniels Fund Ethics Initiative at the University of New Mexico and is intended for classroom discussion rather than to illustrate effective or ineffective handling of administrative, ethical, or legal decisions by management. Users of this material are prohibited from claiming this material as their own, emailing it to others, or placing it on the Internet. Please call O.C. Ferrell at 505-277-3468 for more information. (2012) 2 Clarksville Natural Grocery, owned by Craig Weller and Mark Skiles. The newly merged company called themselves Whole Foods Market. The company continued to face challenges. Less than a year after opening, a devastating flood hit Austin, wiping out Whole Foods’ inventory. With no insurance and $400,000 worth in damages, the company’s future looked dire. Yet with the help of the community, the store reopened four weeks after the flood. In 1984 the company expanded into Houston and Dallas. Four years later they acquired a store in New Orleans, followed by one in Palo Alto, California, a year later. The company continued to grow during the 1990s as Whole Foods merged with over a dozen smaller natural groceries across the nation. Whole Foods continued to thrive in the early twenty-first century and today earns more than $10 billion in revenue, owns more than 300 stores and employs more than 56,000 workers (compared to nineteen workers in 1980). John Mackey continues to lead Whole Foods as the company’s CEO. From the onset, Mackey desired to create a company that incorporated the values of healthy living and conscious capitalism. Conscious capitalists believe “that a new form of capitalism is emerging that holds the potential for enhancing corporate performance while simultaneously trying to advance the quality of life for billions of people.”1 For Mackey, businesses should seek to balance the needs of all stakeholders rather than simply try to earn a profit. As a result, Whole Foods places the customer as first priority. The company has adopted criteria such as the Whole Foods Trade Guarantee and the Eco-Scale Rating system to ensure that customers receive the highest in quality organic products. Although Whole Foods sells a number of brands, it also sells its own private labels including its 365 Everyday Value, Whole Market, and Whole Kitchen/Whole Pantry. Its 365 Everyday Value private brand is for customers who desire high quality organic food but who also wish to save money. Because organic food usually costs more, the 365 Everyday Value is meant to appeal to more budget-conscious consumers. However, although Whole Foods recognizes the importance of customers, it also considers the health and well-being of its other stakeholders, including employees and communities. Its mission statement consists of three goals: 1) whole foods; 2) whole people; 3) and whole planet. According to its mission statement, Whole Foods has adopted a stakeholder orientation to guide its activities. This approach, along with a strong adherence to its core values, has been crucial in establishing Whole Food’s reputation as a firm committed toward benefiting its stakeholders. MISSION STATEMENT AND CORE VALUES Whole Foods’ core values, described in Table 1, are an outreach of Whole Foods’ mission statement. Whereas the mission statement provides a general direction, Whole Foods’ values gives additional details about how it is turning its mission into a reality. The core values also provide an idea of how 1 “What is Conscious Capitalism®?” http://consciouscapitalism.org/learnmore/ (accessed August 24, 2012). 3 Whole Foods ranks certain stakeholders. Whole Foods calls the company values its Declaration of Interdependence to emphasize how interdependent the company is upon its stakeholders. The first two values involve meeting customer needs. Whole Foods describes its commitment toward selling the highest quality natural and organic products available as attempts to be buying agents for customers and not selling agents for manufacturers. Next, Whole Foods turns its attention to the happiness of its employees. Whole Foods believes that satisfying customers and employees will create wealth for shareholders. The community, the environment, and suppliers are essential stakeholders for Whole Foods to serve. It is clear from Whole Foods’ core values that the company takes a stakeholder orientation in how it does business. Table 1 Whole Foods Market’s Core Values • Selling the Highest Quality Natural and Organic Products Available • Satisfying and Delighting Customers • Supporting Team Member Happiness and Excellence • Creating Wealth Through Profits & Growth • Caring about the Community & Environment • Creating ongoing win-win partnerships with suppliers • Promoting the health of all stakeholders through healthy eating education Source: Whole Foods, “Whole Foods Market’s Core Values,” http://www.wholefoodsmarket.com/values/corevalues.php#selling (accessed July 13, 2012). LIVING ITS VALUES The success of Whole Foods can be credited to the fact that it has modeled its operations around its key stakeholders. Mackey’s vision of a model company was one that earned a profit and yet considered it a responsibility to benefit society. This vision has turned Whole Foods into one of the most successful organic grocers in the world. The following section will delve further into how Whole Foods meets the needs of its customers, employees, communities, and the environment. 4 COMMITMENT TO CUSTOMERS Since customers are the highest priority at Whole Foods, the company has adopted a number of strategies to meet the needs of this stakeholder group. For instance, Whole Foods retail stores maintain an inviting environment, complete with eateries and tables both inside and outside the store for visitors to dine. Free sampling is common at Whole Foods locations to allow customers to try the products. Employees are instructed to treat customers like a valued part of the family. Although many consumers consider Whole Foods products to be high-priced, its 365 Everyday Value products appeal to the more price-conscious consumer. The company also builds customer relationships through the use of social media. Whole Foods maintains Twitter and Facebook accounts that the company actively utilizes to post information on sales, answering customer concerns, providing articles or tips about healthy eating, and even re- tweeting information from food experts. Each Whole Foods location has pages on social media, as well as some of their departments. This targeted approach allows Whole Foods to connect with customers and address concerns in real-time. Whole Foods’ customer-centered focus has paid off. In the American Customer Satisfaction Survey, Whole Foods was voted the second highest in the supermarket category after Publix. Whole Foods largely differentiates itself from its rivals by emphasizing quality over price. As consumers become more and more health-conscious and the trend toward organic food continues, Whole Foods has become well suited to attract this target market. To reassure consumers that its products are of the highest quality, Whole Foods offers a number of quality standards.