A Conversation with Seth Goldman

My co-founder, Barry Nalebuff, a professor at Yale School of Management, thought of our company name: Honest Tea. I love it because it embeds a social consciousness in the company. The name itself holds us to a high ethical standard. One of the primary messages I was taught as a child was that money should never be an end. You need to have more substance in your life than just money. Recently I took my kids to see my grandfather's gravestone, on which are inscribed the words Wisdom is more precious than rubies. I grew up with that idea. I also grew up in the Jewish religious tradition, where charity and obligation were taught. When I went to Torah school, even as a five-year-old I was expected to give some charity (called tzedakah). It was just ingrained in me.

Beyond that, a specific experience has influenced my interest in ethical action at Honest Tea. I had gone to a privileged, private school, but the summer before I went to college I worked at a camp for inner city kids. That experience highlighted for me the impact that differing economic circumstances have on growing up. It has inspired me to create wealth in communities where there isn't as much, which we are able to do at Honest Tea through partnerships with our suppliers around the world. We create partnerships with the communities that are supplying our ingredients (and we use organic ingredients whenever possible). We now have community partnerships with the Crow Indians, City Year, The Village of Haarlem in South Africa, and a small community in Guatemala.

One of the distinguishing features of our company is our commitment to social and environmental responsibility. On our very first bottles, we put a logo down in the corner that said, "Plant a tree."� It was meant to signal that we were committing to being responsible to the environment and the Earth. Before anyone invested in our company, our commitment was understood; our statement of social responsibility

Honest Tea's Statement and Aspirations for Social Responsibility Social responsibility is central to Honest Tea's identity and purpose. Not only is the value of our brand based on authenticity, integrity and purity, but our management team is committed to these values as well. We will never claim to be a perfect company, but we will address difficult issues and strive to be honest about our ability or inability to resolve them. We will strive to work with our suppliers to promote higher standards. We value diversity in the workplace and intend to become a visible presence in the communities where our products are sold. When presented with a purchasing decision between two financially comparable alternatives, we will attempt to choose the option that better addresses the needs of economically disadvantaged communities. —From www.honesttea.com

was in our first business plan. When we started, I didn't know exactly what form our "social responsibility"� would take, but I was committed to being proactive about it.

People wonder if it's possible to run a socially responsible business and still be profitable. In fact, it is financially beneficial to us. Partnering with us helps our supplier communities become economically self-sustaining—eventually lowering the costs of our raw materials—and if the community partnership is strong, we're able to develop a relationship that will help us grow our brand and make our business stronger.

In South Africa, for example, we found a community that was cultivating a product called Honeybush, but we had no way to bring it to market. The farmers' plots of land were so small— most of the Honeybush was harvested wild in the mountains— which made that community an unreliable source of supply for us. Now we're giving a small portion of our profits to a cooperative of community growers there. This will allow them to add more hectares to their plots and to process the Honeybush themselves, so that it's in a form that we can use. Helping the community growers develop their own capacities helps our business become more profitable.

As an entrepreneur, one of the ethical challenges I face is that I just can't ignore the need for capital. I need money to get started and to expand. I feel the ethical thing to do is to make my aspirations clear to investors and employees. So, at the outset, I explain to potential investors and employees why we think it's important to do business in a socially responsible way. I explain that without our ethic of responsibility to the Earth and to community, we would not be as successful as we are. Our community partnerships are a key part of our whole brand proposition. These partnerships may not make us as much money in the first year, but over a period of five to ten years, they will allow us to be more successful than we otherwise would be.

We've been in business four years and this year turned a profit for the first time. We're now the best selling bottled tea in the natural foods industry. We do $5 million in sales, and are growing at a rate of about 75 percent a year. We would like to be a model for other businesses to follow. In some sense, that is what drives our goal to be a fast growing company. We want to be robustly successful, not just a strong niche company. Our aim is to demonstrate that you don't have to make ethics and success a trade-off. They can go hand in hand. We would like to get to the point where other businesses ask themselves, "What would Honest Tea do in this situation?"�

—Based on an interview with Pamela Gerloff

© 1990-2005, More Than Money, All rights reserved