Name: Levi Strauss CEO: Sustainability and Business Go ‘Hand in Hand’
Uploaded: 2019-05-14
Duration: 19 min 47 s
Description: Chip Bergh sits down with Fortune's Alan Murray at the Fortune Global Sustainability Forum Dinner in San Francisco.

Everyone knows that 2019 is the year of the IPO. But when you hear you tend to think of these new companies like Uber, Lyft, Slack and Pinterest. Tonight we are going to focus on a company who IPO last month is around since 1853. And that's Levi Strauss. So let me welcome Chip Bergh to the stage. [ APPLAUSE ] [ MUSIC ] Why don't you sit over there. [ UNKNOWN ] You're close. Kind of give you away. Yeah it's in my contract. You have to wear those everywhere. Yeah. So we're going to talk about sustainability in a minute but I want to talk about the business a little bit because you took this job in 2011 right. And those have been really tough years For retailers. Yep. And, somehow, you've made it through. And you got to this IPO. And the stock price has actually risen, since the IPO, which is not the normal experience. So talk a little bit about what that has been like, for the last eight years. Well So first of all, thank you for inviting me to be here, Alan and it's great to be here. The business, when I joined the company it was a turnaround opportunity and it was a big part of the reason why I joined. I grew up, I spent 28 years at Proctor & Gamble. I'm a brand guy. I Built my career building brands, and when I got the call for this opportunity and started doing homework on the company, the company actually peaked in sales in 1996 at certain point $ 7. 1 billion in sales 1996 we were all alive at that time. I think, we were bigger than Nike, back then. Right. And they used to benchmark us, we were the best apparrel company in the industry and we went from 7 billion to 4 billion in five years. A massive shareholder value destruction, and then the company kind of batched a long So, it was a turn- a- round opportunity and I fundamentally am not from apparel and I'm not from retail. I'm a brand guy but I really believe that if we could fix the brand, the rest would follow, that the company would be fixed by fixing the Levi's brand. And this is brand that I grew up with, I'd like to say everybody's got a Levi's story. And we've done it. We've turned this company around. We grew 8 % in 2017, double digit growth last year, growing the top and bottom line, The value of the company, now that we're public, the value of the company is four times, almost five times bigger than it was when I joined. We've created a lot of shareholder value obviously for the family. And now We've had publicly traded debt. So we were kind of public and training for a long, long time. We had to do quarterly filings and quarterly conference calls and everything else but they were debt analysts, very different than equity analysts. So that's obviously been a hard slog. Yeah. Eight years of tough work. So how does sustainability. Fit into that. How did you even have time to think about sustainability? Well, first of all this company has a long track record of not being afraid to take stands on important issues whether they're social issues or issues that impact. And so, not surprisingly, this company has been very, very engaged in Focussing on doing the right thing, which is really what the values of [ UNKNOWN ] is all about. Going back long before me, going back decades literally. And we launched a programme called Terms of Engagement, back in the 1990s, it's now almost 30 years old. That really focused on safety of employees in the supply chain and also making sure that things that were going on in a lot of the developing countries where apparel is made with child labor and stuff like that, that would never happen in our company. But I fundamentally believe that Sustainability in business go hand in hand like doing the right thing. And sustainability actually can drive it. It's not an added costs? It's known fact I mean I'll say it here but in the 1990s, sustainability was code language for cost savings. You know, we were lightweight in plastic bottles, we were taking water out of out of laundry detergents. We were doing things like that under the name of sustainability. But it was also cost saving. So it was good for business back then too. But today, you know, the young consumers there, they're buying brands based on brands that are aligned with their values. And I really do believe that this young generations today, the Gen Z are growing up today which will become the economic force driving business and then not to distant future. They really do care about the world and the planet. Will I pay more for blue jeans if they know that they come from a company that's committed to sustainability? Well, they'll buy that companies brand. Over somebody else's brand that's not for sure, whether they'll pay more for it, I don't know but they will definitely, it is more than a tiebreaker for them. I've read your sustainability reports, one of the things that's interesting, you recognize Your direct business is only a tiny, like 1 % of the total impact on the environment. To do this right, you had to reach deep into the supply chain. That's not easy to do. For sure, and I can talk a little bit about that. But actually one real quick story. So we did a life cycle analysis of a pair of jeans just to look at The full carbon imprint on a pair of jeans from growing the cotton all the way through to the consumer washing the jeans for a couple of years. And and what we discovered is that only about 2 % let's just focus on water only about 2 % of the water that is used by a pair of jeans through that full lifecycle is within our control. About half is growing the cotton and producing the denim fabric, and getting that fabric to our factories where we eventually get it and cut it, and then sew it into a pair of jeans, and then get it to a store. And then the other half, just about, is the consumer washing the jeans, which is way overdone and- I have to tell people, you said washing jeans is way overdone. So, Chip, when you were two years into your CEO Yeah. Spot- You spoke at a Fortune Conference- Yeah. Fortune Brainstorm Green in Laguna Legal, California. I didn't even work at Fortune at the time, but I saw this, it got such headlines. You said- Still getting headlines. It's still getting headlines. You said, I never wash my jeans. That's not what I said. [ LAUGH ] That's- For the record, okay- That's the way Fortune reported it, I don't know. [ LAUGH ] For the record, yeah, no. The headline was You know, Levis CEO never washes his jeans. [ LAUGH ] But what I said was I don't put my good jeans into a washing machine, and I do so wash but I'm wearing the jeans tonight that I was wearing. Those were the ones that you're wearing. I did it just for you, Allen [ LAUGH ] These jeans are like ten years old. They have never been in the inside of a washing machine. But we But I said it essentially, remember I am a marketing guy. [ LAUGH ] I said it as a shot across the bow. The average consumer in the United States throws their jeans in to the washing machine every other wearing. In China, it's every ten wearings and so a lot of hand washing in china. And in Europe it's about every five. We consume way more water than we need to. Your jeans don't need to be washed every other time unless you're mucking stalls or something. But most of us are wearing our jeans to the office these days. So it was shot across, but it is going to go on my tombstone, I think, when I die, because it's got 80 billion impressions. So Chip, you have You've, we're really happy to have you here tonight. You've twice been on Fortune's Change the World list, which I should tell people in this room is a list we started four years ago to focus on companies that were having a major impact on social problems as part of their core profit making Operations and we work will Michael Porter in Harvard and the shared value initiative to do it it's a very rigorous list. So it's quite an honour but you also made this year the world's greatest leaders list. I understand that had a big impact on your, Well first of all it blew me away so I'm a story teller I'm sorry but, I was on vacation, so it was like two weeks after the IPO or three weeks after the IPO that the list came out and I had no idea it was coming and we're sitting on outside our hotel room, having a cup of coffee with my wife, myself and my 10- year- old daughter, our 10 year- old daughter. And after I digested the fact that I was actually on this list, I showed it to my daughter and to my wife and my daughter started to flipping through the article and she said, and I thought she would say, dad am so proud of you, or that's so awesome dad. She's flipping through, she goes, you know what is the most amazing thing dad. You're only 7 spots behind Greta Thunberg. [ LAUGH ] Does everyone knows who? Tell people who's Greta Thunberg she's like. For those of you that don't know her she is a 16- year- old Swedish girl who is not been going to school every Friday for the last 2 years because she is protesting in front of the government house. About the Eben climate change and that's whats why I said this next generation that my daughter is part of and grand she is part of is gonna be the most socially active, the most politically active and they're already are I think arguably than my generation some of your generation like philimelanio or Genex or Forget it. These guys are gonna take over the world much faster than we all think. And how much are they responsible for driving the increased corporate focus on sustainability? How much of this coming from employees? I think the world of CEO has changed dramatically, because We have a number of stakeholders everywhere have to listen to. An employee is really do care about these things. We sit here in San Francisco in the hard of Silicon Valley, I used to say the northern tip of Silicon Valley, but now the Valley has moved into San Francisco just try to get office space here And so we compete. Unless you're a designer or a merchant, most of our functions are very, very fungible, they can go anywhere. If you're in HR or finance or marketing, you can go work for Salesforce or Google or Apple or Facebook, and they're all here in the city. And the reason employees Join Levi Strauss. And the reason we have such low turnover, and we just went public, but is because of the values of our company and what we stand for. And it is a source of competitive advantage, and sustainability is one of the key planks for that. Yeah, I wonder, we have a couple of CEOs here tonight who are wrestling with the same thing. I wonder, you mentioned Mark. Mark, can I put you on the spot? Can you give Mark Benioff the microphone? You've had a big corporate commitment to sustainability for quite some time now, Is it because of the employees principally? What's the driving force? Well, I think that when we started our company. And in this room I was just remembering that I had a program on this very topic with Warren Hellman, who was kinda very instrumental in the history of- Levis. Levi Strauss and San Fransisco and Wells Fargo. And other kind of instrumental Organizations to our city. And, you know, I think that very much the theme of that discussion, which was quite a few years ago now, and Warren has passed on, is that business remains the greatest platform for change. We have these incredible vehicles to be able to express ourself with our Recent credible resources, including our employees, our customers, our partners. But at a time in the world when governments are less functional than ever, we have a unique responsibility to improve the state of the world. And certainly at Salesforce, we're deeply committed to that from the beginning. As you know we put 1 % of our equity, profit, and time into a foundation when we started the company. And that's resulted in about a third of a billion dollars in grants, millions of hours of volunteerism, and we run 40, 000 nonprofits and NGOs for free. But I think at the other level, the more practical level, we're here in San Francisco and anybody who wants to try this out You can leave this beautiful St Regis Hotel and walk right here into the Minna Alley and walk right down the street and you'll see some of the worst homelessness on the planet. So you have the juxtaposition of our gorgeous Salesforce Tower two blocks away from here And yet you have this kind of very difficult situation. So that's why we're continuing to fight for things like proposition C, where we believe that every company should be paying one half of one percent of their gross revenues to support our homeless crisis. This is a critical time. In our city and then there's a linkage between our companies and our ability to actually do something relevant and that's really where- And how about sustainability, I mean, you can't take on every problem. From sustainability, number one, it starts with net zero So is your company net zero? Yeah. We are net zero today, we are the largest enterprise cloud computing company fast is growing. Are you net zero? Then are you able to move to renewable energies it's world economic forum or we just [ UNKNOWN ] with you we also created the step of challenge where we said do other companies join us in getting to net zero faster. Today we're at net zero, we'll be fully renewable by 2025. You talked about Greta, if Greta was here, she'd be pointing a finger and saying, hey, it's up to everybody in this room who caused this problem to fix it. The reason she's striking, if you watch her videos, we had her, as you know, at WEF also Her message is very simple, you people created the problem, you people fix it, my generation, don't put this on us. Right. Yeah, yeah. So that's a major thing. It's on the Time 100 by the way. Yeah, well that's good. And who owns Time Magazine now? [ LAUGH ] Could you hand? [ LAUGH ] [ APPLAUSE ] Could you hand the microphone across the table to Margo Georgiadis please, the CEO of Ancestry. com? I wonder how you think about these issues. Certainly, we very similarly to Mark really believe that we should also be net zero. We obviously use a lot of compute power. To store 30 billion digital records and how people find them. But we also obviously, with a growth of DNA, with 15 million people now in our network, there are millions and millions of people that are getting our kits. And we have to really think about the sustainability of that asset. And so everything we do, we have to think about how do we How do we net neutral ourselves so that we're not contributing to this problem? We all need to take a responsiblity for that and it' really important. And as Mark says there broader issues which are all connected to sustainability which is how we all care for each other. And obviously, we live in a world, as he was saying, where a lot of people spend a lot more time thinking about what divides us versus what connects us. And so I think we feel it's important to be part of a conversation about what really unites us as human beings and not focusing on our differences. Thank you, that's. [ APPLAUSE ] Interesting point though that the both of them make is that leadership on sustainability in this country at least, has moved from the government to the private sector. It's reversal of roles over the course of the last 15 years. What next? How far can you push this? How do you take this to the next level? Beyond sustainability? Or- No, how do you take sustainability to the next level. We clearly haven't cracked the code. We haven't solved the problem. Exactly. So I think a lot of it is, as companies discover something that does move the peanut ahead It's open sourcing it. So, and we've done that in a number of areas, so we've developed a screen chemistry list. I mean, one of the issues in the apparel industry is it uses a lot of chemicals. And we've developed a screened chemistry list and we open source it, we encourage it, we work with- Has it had an impact on your competitors? Well we're letting them use it and it's all intended to get the bad stuff out of the system, we've got a process as I said, genes require a lot of water to use them, we've got a process that's waterless, about 70 % of our volume today is produced using this Process that removes up to 98 % of the water in the manufacturing. We'd open source that to our competitors. We let them use our technology, cuz cutting down our water consuptions is a good thing. So, rather than keeping all our toys for ourselves and thinking it's a competitive advantage when you find something that really does work and it moves the needle ahead. Open source. I saw somewhere recently that you're experimenting with using hemp. Yeah. Silly genes it's actual say it is a real thing. If you don't like him you can smoke. My God. No actually so we're working with hemp and we're actually selling product right now in this season with process is called Cotton ice temp. So the problem with hemp Is it's a very fibrous material that feels like burlap and we're working with a supplier that has developed a manufacturing process that softens the hemp and then if you blend it in with cotton, it has a very cottony feel to it The benefit of hemp is it requires significantly less water to grow, you can get way more tonnage per acre of land, so it's a lot more efficient to grow and therefore it's a lot less expensive. So it and for jeans about 93 % of our raw materials It's cotton. Yeah. And so figuring out a way to reduce our dependence on cotton and move to other fibers that are more sustainable that have less of an impact on the world could be a really good thing. So we're experimenting with it. We're very very hopeful about it. Well Chip thanks for taking the time. Thanks for bringing back those genes that have never been washed just for you. We really appreciated and Chip will be in [ UNKNOWN ] in September, I will. I'm looking forward to it. Look forward to seeing you there, thank you. And in fact my wife is Chinese and I'm trying to bring her with us. Please do, yeah. Sure Excellent, thanks. [ APPLAUSE ] Thank you. [ BLANK_AUDIO ]

Levi Strauss CEO: Sustainability and Business Go ‘Hand in Hand’

Chip Bergh sits down with Fortune's Alan Murray at the Fortune Global Sustainability Forum Dinner in San Francisco.