SUSTAINABILITY & THE
TRIPLE BOTTOM LINE
SUSTAINABILITY AND THE TRIPLE BOTTOM LINE
WHITE PAPER PREPARED BY MBA STUDENTS
UNIVERSITY OF NORTH CAROLINA’S
KENAN-FLAGLER BUSINESS SCHOOL
AT THE
Authors
Claire Eager (EMBA 2006)
Todd Palmer (EMBA 2006)
Kevin Potts (EMBA 2006)
Denny Sullivan (EMBA 2006)
Kaarsten Turner Dalby (EMBA 2006)
Abstract
Whole Foods Markets (WF) owns and operates the largest chain of natural
food stores in the United States. Already an internationally-recognized brand
synonymous with organic and natural foods, the chain prides itself on its
commitment to sustainable agriculture, wise environmental practices and
community involvement. This paper applies a SWOT analysis to each of the
key triple bottom line elements (economic impact, environmental stewardship
and social responsibility) associated with Whole Foods’ operations to assess
the degree to which they have achieved their goals in corporate social
responsibility. The paper finds that while WF has made great strides in
proving the profitability of its business model, mainstreaming demand for
organic, locally-grown foods, and promoting Fair Trade products, market
pressure to scale its business threatens to undermine many of its founding
principles, e.g., supporting local farmers and minimizing the food miles
associated with transporting produce. The authors’ recommendations include
developing a quantifiable measure of the company’s efforts to meet its
environmental commitment and more stringently monitoring the custody
chain for its Fair Trade products.
Publication Date
2006
©2006 Kenan-Flagler Business School, University of North Carolina, Chapel Hill, NC,
USA. Reprinted by permission. Available online at www.cse.unc.edu. This white paper was
prepared by EMBA students for class MBA251B Sustainable Enterprise, taught by
professor Albert H. Segars. It is reprinted for educational purposes. Citations and source
accuracy have been reviewed, but cannot be guaranteed; clarifications or comments may be
directed to cse@unc.edu.
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Keywords:
Triple bottom line, Whole Foods, SWOT
analysis, food retailing, sustainable
agriculture,
grocery,
supermarket,
economic
value
added,
EVA,
environmental
stewardship,
organic
foods, natural foods stores, National
Organic Standards Board, microcredit,
Wal-Mart, corporate responsibility, fair
trade, community citizenship
SUSTAINABILITY AND THE TRIPLE BOTTOM LINE
Table of Contents
1. Executive Summary
2. Industry Overview
Industry Definitions
12 Steps Supporting Sustainable Food Economies for Individual Shoppers
Industry Effect on the Environment
3. Financial Overview
Strengths
Weaknesses
Opportunities
Threats
4. Environmental
Strengths
Weaknesses
Opportunities
Threats
5. Social Commitment
Strengths
Weaknesses
Opportunities
Threats
6. Conclusion
Appendix A: The Sixteen Decisions
Appendix B: A Broad Classification of Micro-credit by Muhammad Yunus
1. Executive Summary
Whole Foods Markets (WF) owns and operates the largest chain of natural and organic food stores.
Its company mission is “to promote the vitality and well being of all individuals by supplying the
highest quality, most wholesome food available.” 1 Its goal is to become an international brand
synonymous with not just natural and organic foods, but with being the best food retailer in every
community in which they are located. Whole Foods emphasizes it is a mission-driven company
and believes in providing an empowering work environment for their team members. 2 Its motto,
“Whole Foods, Whole People, Whole Planet” reflects the expanse of its commitment. As a result, it has a
number of Corporate Responsibility Initiatives in place. Whole Foods is committed to sustainable
agriculture, wise environmental practices and internal and external social programs.
This paper applies a SWOT analysis to each of the key triple bottom line elements (Economic
Impact, Environmental Stewardship and Social Responsibility) for Whole Foods and presents a final
score for each section (shown in Table 1 below).
1
2
United States SEC Forms 10-K Fiscal Year End 9/25/2005
United States SEC Forms 10-K Fiscal Year End 9/25/2005
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Triple Bottom Line Element
Score (of 10)
Economic Impact
Environmental Stewardship
Social Responsibility
7
6.5
7
Table 1: SWOT Analysis Scores for Whole Foods Markets (based on analysis of papers’ authors)
2. Industry Overview
The food retailing industry, as it relates to supermarkets, is clearly focused on traditional
community involvement. For example, Kroger, the nation’s leading supermarket chain in terms of
size and revenues, is focused on charitable contributions and contributing products to food banks.
Kroger’s “Neighbor to Neighbor” charitable giving program provided $126 million in donations in
2004. Following is a list of benefactors of this program: 3
•
•
•
•
•
•
•
America’s Second Harvest and other food banks
Local schools, clubs, churches, community organizations
Local in-store campaigns for cancer research, the United Negro College Fund
The Salvation Army
The Red Cross
Victims of tsunami in Asia and Africa
Race for the Cure events
Other grocery chains claim similar contributions relative to the size of the companies.
While this work and the contributions are very worthwhile and important to communities, WF has a
more comprehensive approach to sustainable enterprise. WF has an approach of examining the
origin of the products before agreeing to retail them. WF is focused on creating a sustainable food
chain by focusing on the four primary areas listed below: 4
1.
2.
3.
4.
Sustainable Agriculture
Wise Environmental Practices
Community Citizenship
Integrity in all Business Relationships
A selection of retail food industry statistics follow to provide an overview of the industry.
3
4
www.thekrogerco.com/corpnews
“Our Core Values” as published in the 2004 WF Annual Report.
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Table 3: General Industry Statistics 6
Table 2: How $100 is Spent at the Supermarket 5
Number of Employees – 2002
3.4 Million
Total Supermarket Sales – 2004
$457.4 B
Number of Supermarkets – 2004
(> $2M in annual sales)
34,252
Net Profit After Tax – 2004/2005
1.16%
Median Average Store Size
45,561 sq ft
Weekly Sales per Supermarket – 2004
$260,214
% of Disposable Income Spent on Food
Perishables
$50.00
Beverages
$11.20
Non-Food Grocery
$ 8.37
Main Meal Items
$ 8.13
Snack Foods
$ 6.33
Staples, Condiments, Other
$ 5.42
Health and Beauty Care
$ 3.83
Food at Home
5.4%
General Merchandise
$ 3.81
Food Away from Home
4.1%
Pharmacy
$ 2.89
Weekly Sales per square foot of selling
area – 2004
$11.40
Sales per Customer Transaction – 2004
$27.31
Table 4: Who Shops for Groceries 7
Sales per Labor Hour – 2004
$79.77
Female Head of Household
69%
Average # of trips to week consumers
make to the Supermarket – 2004
2.2
Male Head of Household
19%
Both
11%
Average # of items carried in a
Supermarket – 2004
45,000
Other
1%
Table 5: Weekly Household Grocery Expenses 8
Size of Household
One
$60.10
Two
$83.90
Three-Four
$110.50
Five or More
$136.40
Type of Household
Children
$118.30
No Children
$82.30
Table 6: When Consumers Do Their Shopping 9
Sun
M
T
W
Th
F
Sat
21%
12%
12%
11%
12%
14%
18%
Industry Definitions 10
Grocery Store – Any retail store selling a line of dry grocery, canned goods or non-food items plus
some perishable items.
Supermarket – Any full-line, self-service grocery store generating a sales volume of $2M or
more annually.
Convenience Store – Any full-line, self-service grocery store offering limited line of high-convenience
items. Open long hours and provides easy access. Annual sales > $2M.
Independent – An operator of fewer than 11 retail stores.
Chain – An operator of 11 or more retail stores.
www.fmi.org.facts_figs. Progressive Grocer, 72nd Annual Report of the Grocery Industry – April 2005, p. 54.
www.fmi.org.facts_figs. U.S. Department of Labor, U.S. Department of Agriculture, Progressive Grocer magazine, U.S.
Census Bureau, Food Marketing Institute.
7 www.fmi.org.facts_figs. Progressive Grocer, 72nd Annual Report of the Grocery Industry – April 2005, p. 60.
8 www.fmi.org.facts_figs. Food Marketing Institute, Trends in the United States: Consumer Attitudes and the
Supermarket, 2005, p. 70.
9 www.fmi.org.facts_figs. Progressive Grocer, 72nd Annual Report of the Grocery Industry – April 2005, p. 60.
10 www.fmi.org.facts_figs
5
6
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12 Steps Supporting Sustainable Food Economies for Individual Shoppers: 11
1. When buying food that can be grown in the region, follow these purchasing priorities: a) Buy
locally produced food, b) Buy nationally produced food, c) Buy regionally produced food
(Americas, Europe, etc.).
2. When buying food that cannot be grown in the region, such as tea, buy fair trade products
where these are available.
3. Try to buy locally-produced, seasonal, fresh produce when available, from small, local shops
and markets, and request that produce be stocked from farms in the surrounding area.
4. Ask supermarkets how food products have been imported and avoid those products that have
involved airfreight distribution. Ask them to stock more produce in your local supermarket
from farms in your area.
5. Contact local authorities and ask if a local food directory is available. If not, ask them to
produce one or produce one yourself.
6. Consider establishing your own local produce marketing scheme or join an existing one.
7. Grow your own food using organic techniques.
8. Write to legislators demanding a clear labeling system showing the distance food has traveled,
its country of origin, and transport-related environmental impact.
9. Ask publicly funded cafeterias (school, universities, hospitals, prisons) to purchase more local,
seasonal, organic food.
10. Write to the officials at schools, universities, hospitals and ask them what actions are being
taken to introduce more locally produced, seasonal, organic food to their offerings.
11. Write to legislators requesting better food in public sector food offerings using local, seasonal,
organic food.
12. Ask the Regional Development Agency what they are doing to support sustainable food
economies in your area. Request support of your local food project.
Industry Effect on the Environment
Industrial agriculture and produce production can be detrimental to environmental sustainability by
their water pollution, soil erosion, pesticides, and the breakdown of local family farms. Typical
production methods can use a large amount of packaging, unhealthy additives, and depend on
long-distance transportation of food. Significant areas to be addressed for the food retail industry
include: energy use, waste reduction, recycling, and green building designs. WF efforts in these
areas of environmental sustainability have been very good.
3. Financial overview
In general, we found that the retail food industry is a conscientious participant in its effect on the
environment and social effects of its business. However, there is a wide variance in how
“awareness” is applied and committed from supermarket chain to chain. The first part of our triple
bottom line strategy analysis is to take at the look at the traditional “bottom line” or WF financial
performance.
Whole Foods Economic Value Added® Statement 12
We (WF) use Economic Value Added ("EVA") to evaluate our business decisions and as a basis
for determining incentive compensation. In its simplest definition, EVA is equivalent to net
operating profits after taxes minus a charge for the cost of capital necessary to generate those
profits. We believe that one of our core strengths is our decentralized culture, where decisions
are made at the store level, close to the customer. We believe this is one of our strongest
competitive advantages, and that EVA is the best financial framework that team members can
use to help make decisions that create sustainable shareholder value.
11
12
http://www.sustain.org/chain_help.asp
http://www.wholefoodsmarket.com/investor/eva.html
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We use EVA extensively for capital investment decisions, including evaluating new store real
estate decisions and store remodeling proposals. We are turning down projects that do not add
long-term value to the Company. The EVA decision-making model is also enhancing operating
decisions in stores. Our emphasis is on EVA improvement, as we want to challenge our teams to
continue to innovate and grow EVA in new ways. We believe that opportunities always exist to
increase sales and margins, to lower operating expenses and to make investments that add
value in ways that benefit all of our stakeholders. We believe that focusing on EVA
improvement encourages continuous improvement of our business.
Over 500 leaders throughout the Company are on EVA-based incentive compensation plans, of
which the primary measure is EVA improvement. EVA-based plans cover our senior executive
leadership, regional leadership and the store leadership team in all stores. Incentive
compensation for each of these groups is determined based on relevant EVA measures at
different levels, including the total company level, the regional level, the store or facility level,
and the team level. We believe using EVA in a multi-dimensional approach best measures the
results of decisions made at different levels of the Company. We expect to continue to expand
the use of EVA as a significant component of our compensation structure throughout the
Company in the coming years.
Table 7 below sets forth selected EVA information based on a 9% weighted average cost of capital
and a 40% tax rate for the fiscal years ended September 25, 2005 and September 26, 2004:
Table 7: Selected EVA Information (Shown in thousands of dollars.)
2005 ($)
2004 ($)
Net operating profit after tax (NOPAT)
165,579
136,684
Capital Charge
139,793
119,101
25,786
17,583
8,203
-- *
EVA
Increase in EVA
* EVA calculations not updated in 2003 due to lease restatements.
The Company provides information regarding EVA as additional information about its operating
results. EVA is a measure not in accordance with, or an alternative to, generally accepted accounting
principles ("GAAP"). The Company's management believes that this additional EVA information is
useful to shareholders, management, analysts and potential investors in evaluating the Company's
results of operations and financial condition. In addition, management uses these measures for
reviewing the financial results of the Company and for budget planning and incentive compensation
purposes. EVA is calculated by subtracting a charge for the use of capital (capital charge) from net
operating profit after taxes ("NOPAT"). A reconciliation of GAAP net income to NOPAT follows in
Table 8.
Table 8: Reconciliation of GAAP Net Income to NOPAT (in thousands of dollars)
2005 ($)
2004 ($)
GAAP Net Income
136,351
129,511
Provision for Income Taxes
100,782
86,341
Interest Expense and Other
38,832
11,955
Net Operating Profit before Taxes (NOPBT)
275,965
227,807
Taxes (40%)
110,386
91,121
NOPAT
165,579
136,686
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Capital charge is calculated by multiplying weighted average EVA capital by our weighted average
cost of capital. A reconciliation of total net assets to ending EVA capital follows in Table 9:
Table 9: Reconciliation of Total Net Assets to Ending EVA Capital (in thousands of dollars)
Total Assets
2005 ($)
2004 ($)
1,696,953
1,370,882
Total Liabilities
Net Assets
537,648
523,589
1,159,305
847,293
Long-term Debt and Capital Lease Obligations
87,919
171,305
Implied Goodwill (from pooling-of-interest transactions)
162,803
162,803
Other
143,740
141,977
1,553,767
1,323,378
EVA Capital
Notes:
• EVA® is a registered trademark of Stern Stewart & Co.
• Accumulated components of net income not included in NOPAT
Strengths
•
The average weekly sales chart below shows consistent sales growth over the last four years.
This positive trend suggests strong financial practices and strong management. (Source data
from http://www.wholefoodsmarket.com//investor/fiveyeardata.pdf)
Figure 1: Average Weekly Sales (by Quarter)
700,000
Average Weekly Dollars
600,000
500,000
2002
400,000
2003
2004
2005
300,000
Q1 2006
200,000
100,000
0
1Q
2Q
3Q
4Q
FY
2002
376,335
395,062
406,019
395,831
392,837
2003
414,571
422,554
432,906
429,020
424,095
2004
478,666
488,908
483,560
478,165
482,061
2005
516,277
539,003
556,912
541,987
536,986
Q1 2006
584,554
Quarter / Year
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•
•
•
•
•
•
•
•
WF uses a very open human capital structure. Company information is shared freely with
employees, which leads to a very strong team-based environment. “The SEC has designated
all 6500 [Whole Foods Markets] employees ‘insiders’ for stock trading purposes.” 13
Each of the 180 stores is an autonomous profit center composed of an average of 10 selfmanaged teams -- produce, grocery, prepared foods, and so on -- with designated leaders and
clear performance targets.
Incorporation of the 365 brand of affordable organic foods provides more affordable
consumer access to natural and organic foods across categories.
Growth in health consciousness of American consumer provides WF with new and
expanding customer base for the future.
WF ROA is 8.14%, which is higher than 6.21% for Kroger.
For FY 2005, WF had a higher Profit Margin and Operating margin than Kroger, 2.97 and 4.87
versus 1.58 and 3.36, respectively.
88.2% of WF stock is held by institutional investors, suggesting long-term investment interest.
First-mover advantage and now the largest seller of natural and organic foods in the retail
food industry.
Figure 2: WFMI vs. NASDAQ Monthly Performance
40.00%
20.00%
0.00%
% Change in Value
29-Oct-99
12-Mar-01
25-Jul-02
7-Dec-03
20-Apr-05
2-Sep-06
-20.00%
-40.00%
-60.00%
-80.00%
-100.00%
WFMI Change
NSADAQ Change
-120.00%
Time
Weaknesses
•
•
•
•
13
With a Forward P/E around 40 and a Price to Book of 7.25, WF seems richly valued.
WF ROE is 12.54%, which is significantly lower than 23.92% for Kroger.
Although the volatility of the stock has evened out in recent years, there is still the prospect
for additional volatility due to the premium nature of the business.
WF business can be highly affected by economic cycles. Good times are great but bad times
have the potential to be really bad due to premium nature and numerous substitutes.
The Human Equation – page 93, Pfeffer. 1998 Harvard Business School Press.
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Opportunities
•
•
•
WF can play on its strengths to continue it upward growth trends.
WF Market's product categories include produce, seafood, grocery, meat and poultry, bakery,
prepared foods and catering, specialty (beer, wine and cheese), whole body (nutritional
supplements, vitamins, body care and educational products, such as books), floral, pet
products and household products. Theses areas are highly desirable consumer goods and WF
is well positioned in the market to capitalize on growth in these segments.
During the fiscal year ended September 25, 2005, the Company operated 175 stores, 165 stores
in United States and the District of Columbia, three stores in Canada, and seven stores in the
United Kingdom. Five additional stores were added in Q1 2006. Additional growth into new
US markets and developed international markets offers great potential. (See Figure 3 below.)
Figure 3: Whole Foods Market Store Count (2002-First Quarter 2006) 14
Store Count
1Q02 2Q02 3Q02 4Q02 FY02
1Q03 2Q03 3Q03 4Q03 FY03
1Q04 (5) 2Q04 (5) 3Q04 4Q04 FY04
1Q05 2Q05 3Q05 4Q05 FY05
1Q06
180
160
140
120
Year
100
80
60
40
20
0
Threats
•
•
•
•
14
Addition of “store brand” natural and organic food product lines from mainstream
competitors.
Economic downturns could affect WF more dramatically than mainstream competition.
Spin-off of healthy foods stores by mainstream competition such as Kroger or Harris Teeter.
The remarkable profitability of WF relies on attracting the best kind of customers -- those who
don't care much about price -- and then buying out most of the competition. So far, Bread &
Circus, Fresh Fields, Merchant of Vino, Mrs. Gooch's, Bread of Life, and Wellspring Markets
have been absorbed. The only competitors that remain are dozens of small natural food coops which have been able to parry WF advances by emphasizing their community ownership
and because they can survive on smaller margins. Wild Oats (Nasdaq: OATS) is one such
competitor which is assaulting WF by opening a new chain of natural food stores called
People's Market that emphasizes low prices.
Store count data available at http://www.wholefoodsmarket.com//investor/fiveyeardata.pdf
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4. Environmental
While WF’s financial health is what enables it to sustain its commitment to the triple bottom line, its
commitment to Environmental Stewardship is reflected in its core values.
Sustainable Agriculture
We support organic farmers, growers and the environment through our commitment to sustainable
agriculture and by expanding the market for organic products. 15
Wise Environmental Practices
We respect our environment and recycle, reuse, and reduce our waste wherever and whenever
we can. 16
Strengths
15
16
•
Leads the movement for sustainability in advocacy of organic foods and believes that
companies and individuals must share their portion of responsibility as tenants of the earth.
•
Strong advocates of fewer and safer pesticides in non-organic foods. Provides the customer
with education surrounding the negative effects of pesticides and questionable food
additives. Works with manufacturers to ensure foods meet strict quality standards.
•
Received the first “Green Building” award in Austin Texas by using sustainable material
specifications and conscientious construction methods. The EPA profiled Whole Foods as a
waste reduction and recycling record-setter because of the 42% waste reduction and recycling
in the construction.
•
Heavy promoters of less-toxic cleaning products. Provides customers with education on the
subsequent positive impact that can be made to water and air quality.
•
Promotes the purchase of bulk food to reduce packaging waste.
reusable packaging.
•
Provides financial support to environmental organizations.
•
Take Action Centers, located in every store, educate the customers on environmental issues,
new legislation, and provide suggestions on how customers can effect change.
•
Wholefoodsmarket.com provides education and public participation strategies on how WFM
and the public can shape how the human food supply intersects with the environment.
•
Largest retailer of organic foods.
•
The sole retail representative on the National Organic Standards Board. Played a key role in
creating national organic standards. Whole Foods role on this board has also allowed them to
make a positive impact on environmental legislation.
•
The sole retailer that participated on the EPA/USDA Tolerance Reassessment Advisory
Committee. The committee’s task was to advise agencies on how to fairly reassess
all pesticides.
•
Environmentally sound cleaning and store maintenance programs.
•
All stores participate in local community recycling programs.
Also promotes
http://www.wholefoodsmarket.com/company/corevalues.html
Ibid
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•
All stores have water and energy conservation policies.
•
All Whole Foods stores, facilities, bake houses, distribution centers, regional offices, and
national headquarters have offset 100% of their electricity use with clean wind energy. This is
the equivalent of annually removing 20 million pounds of carbon dioxide pollution from the
atmosphere. Whole Foods is the only Fortune 500 company to purchase renewable energy
credits. The EPA stated “In the corporate world this is huge. When a market leader does
something like this, others will emulate.”
•
WF Green Mission program turns old produce, food and cardboard from WF into garden
compost, which they sell for $1.99 a bag. The program assists in completing the
environmental loop by returning the resources back into the ground from which it originated.
The program composts 7,280,000 pounds of food waste annually.
•
The newly built Las Vegas Whole Foods store serves as a green model for future stores. The
store features an innovative daylight harvesting system. It consists of 33 skylights to disperse
natural light, a solar powered mirror system, and a light sensing and dimming system to
eliminate excess power use.
•
Unusable computer equipment, cell phones, and batteries are recycled, while usable
equipment is donated to non-profit organizations.
•
Green audits are conducted at stores in an attempt to spark new ideas to minimize Whole
Foods impact on the environment.
•
Fish for Our Future is a Whole Foods campaign that offers environmentally sound seafood
such as salmon. Whole Foods has worked with the Marine Stewardship Council, World
Wildlife Fund, and the Alaska Seafood Marketing Institute to highlight fisheries with
sustainable seafood practices.
•
Provides education to customers about mercury in fish and the FDA’s advisory.
•
First retailer to be Certified Organic by Quality Assurance International in 2003. The
certification means that Whole Foods handles organic foods and follows national guidelines
from receipt through packaging and sale.
Weaknesses
•
Whole Foods has shown a strong effort to remove genetically engineered ingredients from its
private label products. However, in 2005 Whole Foods stakeholders filed a shareholder
resolution to adopt a policy to identify and label all WF private label products with respect to
the presence or absence of genetically engineered ingredients. Although the shareholders
voted to approve this policy, the labeling project is not completed.
•
Whole Foods has not conducted an analysis of the impact of its distribution system and the
resources which are consumed by suppliers driving to their stores. This is important when
considering the concept of food miles, a concept which looks at the distance from where the
food is grown to where it is purchased, and the resulting resources used in the transportation.
A decrease in food miles occurs as a result of using local farms.
•
Whole Foods does not have a formal environmental management system. As a result it does
not measure, set concrete goals for improvement in, or track the progress toward these goals.
It will be difficult to quantify actual progress made, without a company-wide system for
tracking environmental impact. In addition, the company doesn’t produce an environmental
report, which would be the optimal place to communicate progress towards environmental
goals.
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Opportunities
•
As explained in the previous section, Whole Foods has not completed their project to provide
labels on its private label products, which serves to indicate whether or not the product
contains genetically-engineered ingredients. If Whole Foods completes this project, they will
be considered a leader in transparent labeling efforts. The transparent labeling will increase
revenue due to higher traffic of genetically-engineered-conscious consumers. Since Whole
Foods is a leader in its industry for environmental sustainability, if Whole Foods wins, the
environment wins.
•
As also explained in the previous section, Whole Foods is not tracking food miles for the
products it sells. Whole Foods should track and report the average food miles associated with
each product it sells. This would enable customers to select products with fewer food miles,
increasing demand for local farmers and decreasing resources used in transportation of food.
Although Whole Foods does make an attempt to source local products, tracking food miles will
give them quantifiable targets to track and improve upon.
•
Whole Foods does not have a formal environmental management system and does not
produce an environmental report. A company-wide environmental management system and
environmental report would allow Whole Foods to have quantifiable results to prove their
commitment and enable them to promote their innovation to their peers. This will lead to
emulation by their peers, having a positive effect on the environment.
Threats
•
Whole Foods has experienced customer frustration due to their delay in the genetic
engineering labeling project. Continued frustration could lead to a decline in revenue. A
decline in revenue could have potential to decrease the amount of financial support Whole
Foods provides to external environmental projects.
5. Social Commitment
Whole Foods takes pride in its commitment to environmental impact and social commitments. For
our analysis, we sought to frame our scrutiny with some kind of quantitative measurement. Our
Philanthropic Commitment Figure (PCF) is derived by dividing the annual philanthropic spending
by the annual net profits:
PCF = $Philanthropy/Net Profit
This ratio can provide an initial reading on a company’s investment in communities compared to
size of their purse. Clearly, quantifying philanthropic effect would be difficult, but quantifying
actual expenditures – such as WF’s donation of $550,000 to start the Animal Compassion Foundation
– is certainly doable. In addition, this measure eliminates any bias towards large or small companies
since it is tied to the individual company’s net profitability, not revenues.
This measure will, however, require that companies make their philanthropic spending more
transparent (and will certainly encourage actual spending and creative “spin” on expenditures). For
instance, for 2005, the only solid figures we could obtain for such spending for WF was its
investment in the start-up of their two new foundations. Using these figures alone, however, against
its annual net profits would be clearly misleading.
Strengths
WF has a stated policy of supporting local communities, and it does so by participating in events,
providing educational tours, and direct donations.
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Corporate Culture
Since it opened its doors, WF has gone to great lengths to promote its commitment to employees, as
seen in this section of its Company Values statement: 17
Supporting Team Member Happiness and Excellence
Empowering Work Environments
Our success is dependent upon the collective energy and intelligence of our all of our
Team Members. We strive to create a work environment where motivated Team
Members can flourish and succeed to their highest potential. We appreciate effort
and reward results.
Self-Responsibility
We take responsibility for our own success and failures. We celebrate success and see
failures as opportunities for growth. We recognize that we are responsible for our
own happiness and success.
Self-Directed Teams
The fundamental work unit of the company is the self- directed Team. Teams meet
regularly to discuss issues, solve problems and appreciate each others' contributions.
Every Team Member belongs to a Team.
Open & Timely Information
We believe knowledge is power and we support our Team Members' right to access
information that impacts their jobs. Our books are open to our Team Members,
including our annual individual compensation report. We also recognize everyone's
right to be listened to and heard regardless of their point of view.
Incremental Progress
Our company continually improves through unleashing the collective creativity and
intelligence of all of our Team Members. We recognize that everyone has a
contribution to make. We keep getting better at what we do.
Shared Fate
We recognize there is a community of interest among all of our stakeholders. There
are no entitlements; we share together in our collective fate. To that end we have a
salary cap that limits the compensation (wages plus profit incentive bonuses) of any
Team Member to fourteen times the average total compensation of all full-time Team
Members in the company.
The company is consistently ranked in the “Best Companies to Work For” list, and their employee
satisfaction rates are high. Their employee turnover is among the very lowest in the industry.
FORTUNE® Names Whole Foods Market #15 on 100 Best Companies to Work For
List - Employee Stock Options, Company Growth among Reasons Company is Honored for
Ninth Year in a Row 18
In the last three years, WF has established two global foundations --The Animal Compassion
Foundation and Whole Planet Foundation-- that have impressive goals in animal welfare and in
economic development for the poor, respectively. They have donated over $1.1 million in seed
17
18
http://www.wholefoodsmarket.com/company/corevalues.html
Whole Foods Company Press Release, 9 January 2006
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money raised from two global “Five Percent Days,” where five percent of all customer purchases at
all Company stores on January 25, 2005 and October 25, 2005 were donated to the foundations. 19
The Animal Compassion Foundation seeks to improve the quality of life of farm animals through
educational services and research aimed at assisting ranchers and meat producers around the world
to achieve a higher standard of animal welfare excellence.
Whole Foods Market Reviews Humane Treatment of Live Lobsters; Company
Questions Sale of Live Lobsters, Implements Timeline to Investigate Methods to Significantly
Upgrade Compassionate Conditions Throughout Entire Supply Chain Process 20
Whole Foods Market Shoppers Help Raise More than $650,000 for Animal
Compassion Foundation on Global Five Percent Day; Non-Profit Celebrates First
Anniversary of Bringing Together Ranchers, Meat Producers and Researchers to Share
Innovative Ideas to Help Improve Lives of Farm Animals 21
The Whole Planet Foundation mission is to create economic partnerships between WF and the poor
in the developing-world communities supplying products to its stores. Through innovative
assistance for entrepreneurship — including direct micro-credit loans and tangible support for other
community partnership projects — they hope to unleash the energy and support the creativity of
every human being with whom they work.
The Whole Planet Foundation represents a significant expansion of WF’s mission to actively
participate in its extended global communities. The creation of this foundation directly connects WF
customers and Team Members to the villages in developing countries that supply us with products.
They hope that establishing these community partnerships will not only ensure the expansion of
equitable trade with deserving producers, but will also improve the economic well-being of
everyone involved.
Following an initial commitment of $570,000 for one calendar day each year, WF donates profits
from its “Five Percent Days” to the Whole Planet Foundation and distributes the money using a
micro-credit model.
Micro-credit and the Poor
Micro-credit, or Grameen-credit, is a credit system designed by Muhammad Yunus in Bangladesh in
1977 and institutionalized through the establishment of the Grameen Bank in 1983. Its sole purpose
is to give the poor access to credit without requiring contracts or collateral, enabling them to rise out
of poverty through their own efforts. 22
The Whole Planet Foundation believes that the Grameen micro-credit program is the best system
available for combating poverty in developing countries. Professor Yunus’ methodology reaches
more people with fewer restrictions, less cost, and greater success than any other. Working directly
with individual borrowers and families — instead of with community representatives or co-op
supervisors — the Grameen micro-credit system ensures that money actually gets to the people who
need it most. The Grameen system is not a subsidy system: it is built on loans that must be repaid.
For many, the seemingly small loan creates “dignity” for the borrower/recipient. It also ensures
that the money is recycled back into the community in the form of new loans. These new loans, in
turn, increase that community's economic and social well-being. 23
For example, a loan for $200 or even less can make a huge difference in the lives of the poor. A
borrower might use a loan to purchase a sewing machine in order to start a small business making
clothing. Another might buy a goat to begin a milk and cheese production business.
United States SEC Forms 10-K Fiscal Year End 9/25/2005
Whole Foods Company Press Release, 15 November 2005
21 Whole Foods Company Press Release, 6 January, 2005
22www.wholeplanetfoundation.org
23 www.wholeplanetfoundation.org
19
20
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Micro-loans are primarily extended to women so they can develop and run businesses to generate
income for their families. From Grameen's experience, women tend to take the money they earn and
invest it their families, education, and homes, countering those cultural obstacles in developing
countries that make it so difficult for women to advance.
Additionally, micro-loans are repaid to the borrower's local project fund and continue to support the
borrower's community. This facilitates an entrepreneurial spirit that enhances income potential in
rural villages, creating opportunities for others.
Improving the economic health of a poor community improves its social health as well. A social
agenda termed The Sixteen Decisions 24 evolved naturally from the Grameen Bank's early efforts to
help the landless poor in Bangladesh. Initiated by the poor for their own benefit, this agenda
imposed rules upon the community of borrowers that solved a variety of societal problems,
including physical health and safety, and helped ensure a continued rise out of poverty.
The Grameen methodology for micro-credit over time has proven itself as a viable approach to
ending world hunger and poverty. Since 1983, The Grameen Bank has lent more than $5 billion to
over 4 million poor people worldwide. Professor Yunus turned conventional banking on its head
with the founding of the Grameen Bank, and its success has been proven through the enriched lives
of its borrowers. 25
The Grameen Trust is a division of the Grameen Bank that manages micro-credit projects outside the
borders of Bangladesh. It is WF’s partner in all existing and future projects, providing personnel and
much-needed expertise wherever required around the world. We are proud to be associated with
such an eminent organization and pleased to be able to contribute to the noble work they do for the
world's poor.
Whole Foods Partners with Earth University
Created in 1990 under the sponsorship of the EARTH University Foundation, EARTH University in
Costa Rica strives to create leaders for the 21st century — agents of change who will fundamentally
shape the direction of environmental protection and development in Latin America and the global
community as a whole. 26
The University's non-traditional curriculum emphasizes agriculture as a human activity and is
dedicated to advancing social commitment, environmental awareness, an entrepreneurial mentality,
and the development of human values. Each aspect of EARTH's academic program incorporates a
community development component through which local farmers act as educators, sharing their
knowledge with the young people who seek to follow in their footsteps.
The program addresses two basic areas, human development and sustainable agriculture, creating
opportunities for interaction, research and educational exchanges between local farmers and
EARTH students and professors. This interaction permits participants to identify local communities'
most pressing problems, needs and hopes, and work together to develop innovative solutions.
Whole Foods Partners with Universidad Francisco Marroquin
Founded in 1971, Universidad Francisco Marroquín (UFM) is a private, secular, coeducational,
nonresidential, and nonprofit university. Its mission is to teach and disseminate the ethical, legal
and economic principles of a society of free and responsible persons. Academic disciplines cover
diverse areas including architecture, business administration, clinical nutrition, dentistry,
economics, education, international relations, law, medicine, political studies, public accounting,
psychology, social sciences. 27
Appendix 1 The Sixteen Decisions www.wholeplanetfoundation.org
Appendix 2 The Grameen Methodology
26 www.wholeplanetfoundation.org
27 www.wholeplanetfoundation.org
24
25
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UFM targets the brightest students for admission and it has the most rigorous entrance
requirements in Guatemala. The University is emphatic that selection of students be based solely on
academic criteria. No information on ability to pay, ethnic, religious, or other affiliations is requested
at any point in the admissions process. Students of all religions are represented, as are members of
Guatemala's Maya ethnic community. Women generally comprise between 55% and 60% of the
student body. 28
UFM enjoys international recognition, measured in part by the world-renowned scholars and
leaders who have accepted UFM honorary doctoral degrees. Among them are Nobel laureates in
economics Milton Friedman, Friedrich Hayek, James M. Buchanan and Vernon Smith; heart surgeon
Michael DeBakey; Peruvian novelist Mario Vargas Llosa; U.S. ambassadors Jeanne Kirkpatrick and
William Middendorf II; Austrian psychologist Viktor Frankl; former Prime Minister of the Czech
Republic Václav Klaus; and U.S. publisher Steve Forbes. 29
Raises Real Estate Values, Supports Environmental Efforts
This intro from an article in the Wall Street Journal sums up WF’s new power in real estate
development:
“The sheer size and glamour of the 74-story Met 3 condo tower in Miami should be enough to
bring in buyers. But with more than 50,000 condos in development in the city right now,
what really sets Met 3 apart is the Whole Foods Market that fills its ground floor. The hip
purveyor of organic produce and fancy cheeses has joined the gym and the concierge as a
must-have amenity in luxury-condo towers that are sprouting up in cities across the
country.”
Metropolitan Magnet --- If Whole Foods Market Is Part of a Retail/Condo Complex, New
Apartments Sell Briskly 30
Weaknesses
There are voices that contradict the company’s squeaky clean, good citizen image. Small grocers,
independent organic stores, local farmers, and communities against new stores in their
neighborhood make comparisons to Wal-Mart (over development, loss of other jobs), higher prices,
etc. Selected examples follow:
“The debate in Eugene in many ways mirrors any community's efforts to thwart the building
of a Wal-Mart or a Costco. Opponents here are casting Whole Foods as a big corporation
dressed in natural fibers, though the reality is usually far simpler. Residents are likely more
afraid of losing choice.” 31
Small natural-food stores feel pinch of Whole Foods 32
Analysis: The grass looks greener in the organic aisles
“Wal-Mart's decision to open an organic "supercentre" in the US has been mirrored at
its UK subsidiary Asda, which intends to treble its organic range this year.” 33
Wal-Mart's Organic Offensive; Not everyone is pleased by the giant retailer's push into
natural foods, starting with some very anxious U.S. farmers 34
www.wholeplanetfoundation.org
www.wholeplanetfoundation.org
30 The Wall Street Journal, 11 May 2005
31 Wal-Marting Whole Foods, Supermarket News, 12 September 2005
32 Article by Jeff Meyer, Christian Science Monitor, 15 September, 2003
33 Marketing Week, 6 April 2006
34 BusinessWeek Online, 29 March 2006
28
29
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Whole Foods Won't Give Up at Hilldale
“The proposed Whole Foods grocery behind the Hilldale
Shopping Center is not dead yet. Chicago-based developer
Joseph Freed & Associates is planning to make another
pitch before the city Plan Commission, which had voted 6-1
against the proposal.” 35
Animal Rights Groups Split on Whole Foods' Initiative
“The formation of a farm animal welfare foundation by
Whole Foods Market stores is getting mixed reviews from
animal rights groups.” 36
While most detractors are outsiders, there are voices from within who also take issue with some of
WF’s practices. Stockholders have complained that they are being barred from participation in major
company decisions. Stockholders may not intuitively receive consideration as part of sustainable
efforts, but as individuals and as embedded members of the WF community, one would expect WF
management to treat them in a manner consistent with the company’s stated goal for dealings with
all business partners: “[to] treat them with respect, fairness and integrity at all times.” 37 Mackey’s
response to the disgruntled shareholders – “They can always be shareholders somewhere else” –
hardly displays the expected bonhomie. The exclusion of stockholders in industry-recognized
standard practices also seems at odds with the company’s commitment to transparency in all
dealings.
Even more deeply embedded in the company are the employees, particularly those on the floor, and
a non-trivial number of these employees have been decrying the company’s treatment of them for a
number of years (www.wholeworkersunite.org). WF has an official stance against unions. The
proponents of unionizing argue that as WF has grown (at amazing rates), it has lost touch with its
original commitment to employees and that employees now need some level of protection against
corporate insensitivity and even abuse.
Whole Foods Shareholders Complain They've Been Muzzled
NEW YORK (Dow Jones)--Whole Foods Market Inc. (WFMI) has earned socially
conscious investors' loyalty with its progressive environmental policies and shelves
filled with organic food. 38
Salary Cap Policy
WF wants to empower its team members to create their own work reality. Their Labor Productivity
and Team Member Incentive “gain-sharing” programs give team members a direct stake in the
overall picture. They reward team members for increasing labor productivity, team and store
performance. Moreover, they believe in a fair and equitable workplace. To that end, WF has a salary
cap which limits the compensation (wages plus profit incentive bonuses) paid to any team member
in the calendar year to fourteen times the company wide average salary of all full-time team
members in the company. 39
The Capital Times & Wisconsin State Journal, 8 April 2006
Supermarket News, 7 February 2005
37 www.wholefoodsmarket.com
38 Dow Jones News Service, 04:16 PM, 8 March 2006, 1132 words, (English)
39 Whole Foods Declaration of Interdependence. http://www.wholefoodsmarket.com/company/declaration.html
35
36
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Table 10: Whole Foods Salary Cap
Year
1999
2000
2001
2002
2003
2004
2005
Average
Hourly Wage
$
12.36
$
12.84
$
13.46
$
13.69
$
14.07
$
14.66
$
15.30
Annual
Wage
$ 25,709
$ 26,707
$ 27,997
$ 28,479
$ 29,266
$ 30,493
$ 31,824
Averge
Multiple
10
14
14
14
14
14
14
Salary Cap
$
257,000
$
373,900
$
391,900
$
398,700
$
409,700
$
429,600
$
436,800
In addition to salary and bonus, however, Mr. Mackey and his senior executives receive stockoption grants whose values aren't capped by the ratio. Mr. Mackey and his team received grants of
17,000 stock options each in 2005 (see Table 11 below). Each grant will be worth $370,000 if the
shares appreciate 5 percent annually over the option term of seven years. WF shares have more than
tripled over the past three years, and total shareholder return over the past decade has averaged 23
percent a year.
Table 11: Whole Foods Executive Salaries and Compensation (2003-05)
Name and Principle Position
John P Mackey
Chairman of the Board and CEO
Year
Salary
2005 $ 356,000
2004 $ 342,000
2003 $ 326,000
Other
Stock Options
Compensation
Granted
Bonus
$ 126,000 $
460,000
17,000
$ 118,000
13,750
$ 114,000
8,000
Glenda Flanagan Chamberlain
Executive VP and CFO
2005 $ 299,000
2004 $ 277,000
2003 $ 264,000
$ 170,000
$ 128,000
$ 94,000
17,000
11,500
8,000
A.C. Gallo
Co-President and Chief
Operating Officer
2005 $ 314,000
2004 $ 296,000
2003 $ 282,000
$ 176,000
$ 88,000
$ 104,000
17,000
13,000
8,000
Walter Robb
Co-President and Chief
Operating
2005 $ 314,000
2004 $ 296,000
2003 $ 282,000
$ 155,000
$ 163,000
$ 85,000
17,000
13,650
8,000
James P. Sud
Executive VP of Growth and
Business Development
2005 $ 299,000
2004 $ 277,000
2003 $ 264,000
$ 147,000
$ 128,000
$ 94,000
17,000
11,500
8,000
Lee Valkenaar
Executive VP of Global Support
2005 $ 299,000
2004 $ 268,000
2003 $ 255,000
$ 128,000
$ 97,000
$ 106,000
17,000
19,250
6,000
Cashing in their options grants has added significantly to the compensation of WF executives in
recent years. Some critics of pay ratios say formulas that exclude options are useless. A pay cap is
meaningful only if it applies to total compensation -- not just cash, says Alan Johnson, managing
director of Johnson & Associates, pay consultants in New York. “Usually it's a charade,” Mr.
Johnson says. “Employees see through it. They know the CEOs are making millions on stock. So to
limit salary, what does that prove? It's a PR gimmick.” 40
Effects of Share Based Repayment on Compensation
In December 2004, the FASB issued Statement 123(R) “Share Based Repayment,” which requires all
companies to recognize an expense for share-based payments, including stock options, based on fair
value of the equity instrument. Furthermore, in April 2005, the SEC adopted a final rule amending
40
www.sfgate.com/cgi-bin/article.cgi?f=/news/archive/2004/04/12/financial1040EDT0053.DTL
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Rule 4-01(a) of Regulation S-X amending the compliance date for FASB 123(R) to be effective starting
with the first annual reporting of the first fiscal year beginning on, or, after, June 15, 2005. 41 Because
WF has been a heavy user of stock-based pay, giving its 32,000 employees or, in WF-speak, its "team
members," a direct stake in the chain’s profitability is a key to its guiding philosophy of serving
customers, employees, and investors, in that order. 42
Now, however, the new accounting rules have prompted WF to begin rationing its awards of stock
and options so earnings eventually are dented no more than 10%. WF isn't saying how much this
will cut team members’ compensation. However, in the past four quarters, WF posted earnings of
$147.5 million. Had the costs of its stock-based pay been deducted from profits, earnings would
have come to $120.4 million, more than 18% less. Had WF wanted to limit the earnings hit to 10%, it
would have had to cut the value of its option awards by perhaps 40% or 50%.
Opportunities
Compare Demographics around Individual Store Locations
The minimum real estate requirements guidelines provided on the WF website describe a
community that sounds definitely un-inner city. WF could put its fiscal and social strengths to good
use by expanding into these communities.
Chart Changes in Philanthropic Commitment Figure over Time
With each passing year, one would hope that the ratio of investment in the community to
investment in the company assets would remain at least consistent, or even grow if the ratio is low.
Tracking the percent change in the PCF also allows us to compare apples to apples for companies of
different sizes and growth strategies.
Develop a Quantifiable Measure for Environmental Commitment
There are more than enough methods to measure the financial health of a company and plenty of
professionals dedicated to the task. What we don’t have is a way to measure a company’s
commitment to decreasing its environmental footprint and helping others to do so as well.
Expenditures against the net profits (as in the PCF explained above) indicates commitment because
it represents how much the company is dedicating to environmental issues out of its own pocket,
based on the size of its pocket.
Threats
Fair Trade Issues
Farmers in many parts of the world live at a subsistence level. This places any company or country
that is more financially secure in a position of power over the producers, and that imbalance has
historically benefited the strong at the cost of the poor. The Fair Trade movement aims to level the
playing field, primarily because it is the humane and just thing to do. There are long term goals of
development and future purchasing power, but the spirit of the movement is benevolence.
Purchasers of goods who want to partake in the fair trade movement are supposed to pay their
producers at a rate that is consistent with the market price overall. No more arbitrage in potatoes –
or any other crop, for that matter. It’s a goal that WF has set for itself as a minimum standard for
business, and one that it proclaims loudly and with pride.
However, the phrase fair trade is not actually trademarked and its use is not governed or monitored
(the black and white fair trade logo is an opt-in effort to standardize delivery of the message), and
there are growing reports of misuse and deception. WF has come under fire for the coffee it sells
which it claims to be a fair trade product (in fact, WF has long used it as one of its flagship fair trade
41
42
US SEC Forms 10-K Whole Foods Market, Inc.
www.thestreet.com
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items). As it turns out, WF purchases their coffee from an intermediary, one of many in the coffee
business, and it simply buys from the lowest bidder amongst these intermediaries. The company has
made no efforts to ascertain the working or living conditions of the farmers that actually produce its
coffee. Issues like these signal potential problems for WF, as more activists dig into the company’s
high-minded claims.
Local Farmers
No one would argue that providing a fair wage to farmers in any country is an admirable goal.
However, as WF has grown and built larger and larger stores, its demand for product rises as well,
and local farmers feel neglected and threatened by this growth. Many leading agricultural and
environmental studies have shown that individuals and communities can drastically shrink their
environmental footprint on the planet overall. Local farmers want WF to recognize this as part of its
sustainability efforts. Unfortunately, a fair trade price for crops from a local (US) farmer is
significantly higher than what WF would pay in the global market.
Conclusion
Overall, mainstreaming the idea of a socially-conscious consumer, making it even fashionable, has
peripheral benefits, such as providing credibility and momentum for socially-aware business
practices and consumption, which mitigate some of the company’s negative actions. It is important
to note that the majority of the issues decried by opponents focus on WF actions that are inconsistent
with its stated goals. In essence, WF has made the public its auditor. WF has to address these issues,
visibly, and show progress or it risks destroying the brand image and brand promise it has so
successfully built.
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APPENDIX
Appendix A: The Sixteen Decisions
The Sixteen Decisions are paramount to the success of any micro-credit program designed to lift the
poor out of poverty and will always be a major component of the Foundation's effort. Please note
that these "decisions" are not universal but instead are adapted to fit various cultures and needs. The
ones listed here were created by Grameen borrowers in Bangladesh.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
The four principles of Discipline, Unity, Courage and Hard Work shall be followed in all
walks of our lives.
We shall bring prosperity to our families.
We shall not live in dilapidated houses. We shall repair our houses and work towards
constructing new houses as soon as possible.
We shall grow vegetables all the year round. We shall eat plenty of them and sell the
surplus.
During the plantation seasons, we shall plant as many seedlings as possible.
We shall plan to keep our families small. We shall minimize our expenditures. We shall
look after our health.
We shall educate our children and ensure than they can earn and pay for their education.
We shall always keep our children and the environment clean.
We shall build and use pit latrines.
We shall boil water before drinking or use alum to purify it. We shall use pitcher filter to
remove arsenic (or other naturally occurring toxic impurities).
We shall not take any dowry at our son’s wedding; neither shall we give any dowry in our
daughter's wedding. We shall keep the center free from the curse of dowry. We shall not
practice child marriage.
We shall not inflict any injustice on anyone; neither shall we allow anyone to do so.
For higher income we shall collectively undertake bigger investments.
We shall always be ready to help each other. If anyone is in difficulty, we shall all help.
If we come to know of any breach of discipline in any center, we shall all go there and help
restore discipline.
We shall take part in all social activities collectively.
Appendix B: A Broad Classification of Micro-credit
By Muhammad Yunus
•
•
•
•
•
•
•
•
It promotes credit as a human right.
Its mission is to help the poor families to help themselves to overcome poverty. It is
targeted to the poor, particularly poor women.
The most distinctive feature of Grameen-credit is that it is not based on any collateral or
legally enforceable contracts. It is based on "trust," not on legal procedures and system.
It is offered for creating self-employment for income-generating activities and housing for
the poor, as opposed to consumption.
It was initiated as a challenge to the conventional banking which rejected the poor by
classifying them to be "not creditworthy." As a result it rejected the basic methodology of
the conventional banking and created its own methodology.
It provides service at the door-step of the poor based on the principle that the people should
not go to the bank, (the) bank should go to the people.
In order to obtain loans a borrower must join a group of borrowers.
Loans can be received in a continuous sequence. New loans become available to a borrower
if her previous loan is repaid.
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•
•
•
•
•
•
•
•
•
All loans are to be paid back in installments (weekly, or biweekly).
Simultaneously, more than one loan can be received by a borrower.
It comes with both obligatory and voluntary savings programs for the borrowers.
Grameen-credit's rule of thumb is to keep the interest rate as close to the market rate,
prevailing in the commercial banking sector, as possible, without sacrificing sustainability.
Reaching the poor is its non-negotiable mission.
Reaching sustainability is a directional goal. It must reach sustainability as soon as possible,
so that it can expand its outreach without fund constraints.
Grameen-credit gives high priority on building social capital.
It is promoted through formation of groups and centers, developing leadership quality
through annual election of group and center leaders, electing board members when the
institution is owned by the borrowers.
To develop a social agenda owned by the borrowers similar to the following
"Sixteen Decisions."
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