ENN Publisher Jerry Kay Chats with Joe Sibilia, Founder and CEO of Meadowbrook Lane Capital, and CEO of CSR Newswire
Joe Sibilia is founder and current CEO of Meadowbrook Lane Capital, a self-described socially responsible/sustainable investment bank specializing in turning values into valuation. Meadowbrook Lane Capital's most recent transaction was the purchase of CSRwire, the corporate social responsibility newswire service that distributes corporate social responsibility news and non-financial reports to journalists, analysts, investors and thought leaders. CSRwire plans to create a private exchange connecting patient social capital to social entrepreneurs. Joe is also a founder of the Gasoline Alley Foundation, a 501(c)3 corporation designed to "teach inner-city and/or underprivileged persons to be successful entrepreneurs utilizing socially responsible/sustainable business practices while revitalizing inner city neighborhoods."
Jerry Kay: From your point of view, what is corporate social responsibility?
Joe Sibilia: Well there have been a variety of definitions... but what we concentrate on is turning values into valuations. We believe that a good corporate citizen that has concern for the environment and has concerns for the workers is interested in more than just the bottom line. Some have described it as a double or the triple bottom line. Corporate social responsibility is about what impact a company has on society -- whether it is a positive or a negative impact -- as well as the financial return.
JK: And you say that those values, caring about the employees, caring about the environment, etc., do, in fact, translate to the bottom line?
JS: In the past 30 years, many studies have been conducted (that suggest that is true). Actually, a recent book by Jeffrey Hollender entitled What Matters Most gives a very persuasive business argument for corporate social responsibility. One characteristic of corporate social responsibility is a reduction in liability lawsuits. There are non financial risk factors that are often not considered on a balance sheet, such as the environmental impact the human rights violations or product liability, and as a result of these things, in the long term companies that operate with a conscience outperform those that don't. They have less liability, more loyal employees, more loyal customers. And in the long run they become more valuable.
JK: Of course Meadowbrook lane capital is an investment business. What do you look for in a business to potentially invest other people's money in?
JS: We look for two things: one that the business model is a sound one, and also we look for its social impact. When we look for a business opportunity we look as the opportunity as a business -- t has to be profitable from a traditional financial metrics point of view -- and it must also have a positive social impact. We're really not interested in investing in a company exclusively to make money. The company can succeed as a business and fail as a force for social change but it can't fail as a business and succeed as a force for social change. We try to align the business operation with social values, integrating the interests of all the stakeholders, anyone who is affected by the company's product or conduct -- social and environmental -- and the financial side, as well.
JK: Would you give us some examples of companies that do that -- that merge financial sustainability with also being good in the community?
JS: One of the things that we're working on is a private exchange on CSRwire to connect patient social capital with social entrepreneurs and we hope to put on maybe 25 to 50 of the obvious, very well positioned, well branded, privately held companies. Patagonia, Tom's of Maine, Eileen Fisher, Wild Planet Toys...these are some of the companies that would be on our private exchange, where the company is in a growing industry, it's a growing marketplace, while at the same time they have strong social values and concern about the impact of their activities on all the stakeholders.
JK: How do you determine when a company is really doing what you're expecting it to do versus one that's just using words like "green" and "natural?"
JS: That's part of the due diligence process for us. People that are faking it, or greenwashing...it ultimately comes out. You look into someone's eyes during a negotiation and you know when you're talking with someone who's aligned with your values. Then when you go into the due diligence process and you look at the company and you find that they don't concern themselves with environmental degradation... I don't want to say it's obvious, but if you're looking into investing in a company that's making toothbrushes out of Stonyfield yogurt containers -- and that company does exists, it's called Recycline and they're in Massachusetts -- you can't fake the fact that they're bringing in recycled Stonyfield yogurt containers and crushing them and then melting them and making them into toothbrushes. You can't fake that. Then the question becomes is there a price point appropriate for the toothbrush and is there a market for the toothbrush, and a gross profit enough and that goes back to what I said earlier. You've got to have both -- success as a business and success as a force for social change.
JK: Is there an issue on which you would like to see companies focus more attention?
JS: One of my greatest learning experiences was starting a bank in western Massachusetts called the Bank of Western Mass. The focus of our attention was all of our investors would commit to being depositors. We would then commit to having a loan relationship with them. All of the investors were depositors and we lent money to them and to other small businesses in the community. So 98 percent of our deposits were lent to the local community. There's what's called the Community Reinvestment Act in federal guidelines for operating a FDC bank, which encourages or requires banks to reinvest back into their community. It was unfortunate to see other banks that didn't do anything for community reinvestment. They'd donate to the Red Cross or some other entity and put that in their file get a good mark from the Community Reinvestment Act. That probably has been the thing that has upset me the most over the years is that lack of community reinvestment by small community banks and savings and loans and FDIC-insured banks into the local community. One of the books that we featured on CSRwire recently is called Fortune at the Bottom of the Pyramid. There are 14 billion people on the planet who earn less than $1,500 a year. The book, by C.K. Prahalad, talks about eradicating poverty through profits and gives great examples of how micro loans and micro lending have helped. Even telecommunications and communicating between poor people improved their quality of life through profits. Often displaced environments or places that have been abandoned are not looked at as opportunities, but we look at those as opportunities to help -- and to earn a profit.
JK: You've also got a foundation you formed called the Gasoline Alley Foundation. What is it and what does it do?
JS: I've been able to reduce this to one sentence: We give value to that which has been abandoned. We're located on an abandoned street in Springfield, Mass. where there were a number of abandoned buildings. We took over four buildings. We put in 385 feet of sidewalk, we put in streetlights, we put in a corral for the mounted patrol for the police department, we have a small office for the community police that we gave them. Over the past 20 years we've incubated 40 companies, and we have nine here now. We teach inner city and under privileged people how to be successful entrepreneurs using socially responsible and sustainable business practices. In addition to the for profit enterprises, we have the Pioneer Valley Habitat for Humanity here, we built seven homes with 250 volunteers last year. We have a prisoner release program. We started businesses with people who are homeless pushing shopping carts up the street collecting cans and bottles to getting them into a small van, helping them start their business. We make the furniture in our office out of recycled metal material that can be found on the street, and we have our own furniture making business that we incubate here.
JK: You're also writing a book, entitled What I Learned Hanging Out at the Corner.
JS: Well I grew up on a street corner in Springfield and there's a certain philosophy and attitude on a street corner that I've tried to keep with me. The number one characteristic is loyalty. I've often been accused of being too loyal which can be a challenge when you're trying to run a business or investing in a business and someone may not be prepared to take the business to the next level and you've got to find a way to handle that. Or the business is in a position to be sold and you've got people who might not be capable of moving on to the next level. We had that situation occur to us when we sold one of our portfolio companies to the Pepsi Cola company. We designed 17 formulas and the technology that allowed fruit beverages to be dispensed at food serving locations, which saved all kinds of costs and packaging associated with dispensing fruit beverages. If you go to a food service outlet and the press the countertop unit and juice comes out it's our formula and our technology. Well, many of the men in the plant here weren't in a position to move with Pepsi, and I wanted to preserve all the employees in the unit. We took a section of the capital we made from the Pepsi deal and gave it to the manufacturing guys to start their own business.
JK: One of the best teachers on the planet is reality. Business is a totally real environment. Give us some advice for the average consumer. If someone wanted to invest a small amount of money in a corporate socially responsible business, what advice would you offer?
JS: There are a number of socially responsible mutual funds that have outperformed the market. If you go to socialfunds.com, they're a tremendous resource for socially responsible mutual funds that would spread out someone's risk along a series of mutual funds. There are some funds that are very, very strict in their screening process and there are some that aren't so strict. Going through Social Funds and looking at some of the prospectuses... that's is the most conservative, high yield approach to take for investing in socially responsible companies.
Source: Icicle Networks