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Organizational Change
What I Learned About Sustainability at REI, Part 4:
Innovation Over Trade-Offs

This is the fourth in a series of posts on things Kevin Hagen learned while leading Corporate Social Responsibility at REI for the past seven years (read parts one,

This is the fourth in a series of posts on things Kevin Hagen learned while leading Corporate Social Responsibility at REI for the past seven years (read parts one, two and three).

“So,” I said, “The problem with our stores is that they consume too much power.”

“No,” said Dean, “What I’m telling you is that our problem is not enough light. By adding more fixtures we can increase sales but you can’t do more light and less watts, that's impossible.”

Trade-offs. We see them everywhere in business. Conventional thinking says that improving environmental and social performance comes at a cost to the bottom line. That basic “either/or” assumption is baked into virtually every aspect of the way we think about business. We assume that “green” products are more expensive or don’t work as well — that’s why we have to convince consumers to want them. When someone asks us to make “the business case” for sustainability they already assume that it costs more — if they thought it was cheaper you wouldn’t have to make the case.

I think the most important thing I learned in seven years leading CSR and sustainable business strategy at REI is not to accept trade-offs. It sounds a little naïve, but in my experience “that’s impossible” is just an indicator of a sustainable business opportunity. This idea of rejecting trade-offs was emphasized in a 2011 Stanford Business School case study written by professor Stefan Reichelstein about REI. To accept trade-offs inspires compromise — less of something. When we reject trade-offs and hold the tension of higher expectations, insisting that we deliver more financial and more environmental/social outcomes we create the right circumstances for innovation.

Holding that tension isn’t easy when everyone is saying, “that’s impossible.” That’s one reason I have so much respect for the leadership at REI. The secret to holding the tension with confidence is giving people a way out — three things that lead to innovation:

1. Time: Usually the barrier is not cost, it’s time. The power of the status quo is difficult to overcome, so the leader must make the space and defend the time needed to find a better way and do the homework, internal selling and networking needed to do things differently.

2. Tools: In order to move past emotions or intuition, ensure that there is rigorous and wide scope measurement. For example, more than the cost of power, it was the lost sales due to poor lighting that helped drive change for Dean.

3. Permission to take risks and break rules: Often the hardest part is that the folks involved don’t have permission to do things differently or to fail. And that’s not just in their department – they need to be free to connect with others and engage bigger system solutions across organizational silos.

In the end, Dean led a new store design effort that completely changed store lighting. Rather than focus on fixtures, he engaged a wider circle of players and looked for bigger design solutions. Store lighting was dramatically increased with windows, skylights and solar tubes that project daylight far into a space, plus high-efficiency fixtures and LEDs. The team had to overcome an array of barriers to doing things differently across silos, from finance to security to code compliance. In the end, sales per square foot did increase while the co-op cut utility costs by over $3 million per year. Remarkably, from 2008 to 2012 REI added about 40 stores while retail electricity use remained almost flat.

By not accepting the light/power trade-off, Dean drove real innovation. It started as impossible until he saw a better system solution, used the metrics, took the risk, broke the rules and did the hard work to make the changes that led to quadruple wins — increased sales, lower costs, reduced environmental impacts and more uplifting space for employees who were more productive.

How does it end? You’ll know it worked when folks look at the final solution and say, “That’s not sustainability, it's just good business.”

This post first appeared on Kevin Hagen's blog on May 15, 2013.