Chiquita Cleans Up Its Act
For more than a century, the banana producer was nobody's idea of a role model. Now it's forging new ground in corporate responsibility.
By Jennifer Alsever, Business 2.0 Magazine

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At first, Dave McLaughlin didn't tell his bosses at Chiquita that he was talking to environmentalists, much less taking their suggestions. After all, the banana company's executives so mistrusted the "greens" that meetings with them often turned into shouting matches.

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Chiquita employees in Costa Rica and elsewhere have seen marked improvement in working conditions.
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Four healthy habits
1) Chiquita now recycles 100 percent of the plastic bags and twine used on its farms.
2) The company cut pesticide use by 26 percent while providing better protective gear for workers.
3) Improved working conditions include Chiquita-built housing and schools for employees' families.
4) Buffer zones along farm borders help prevent chemical runoff and erosion.

"They would sit at opposite ends of the table," McLaughlin says.

But what began as a dialogue between McLaughlin, then a Chiquita (Charts) general manager in Costa Rica, and the nonprofit Rainforest Alliance has since cleared a path toward a companywide transformation. Starting in 1992, McLaughlin essentially used his two Costa Rican farms as test beds to rein in environmental abuses.

Those changes - and their impact on the bottom line - persuaded Chiquita in 1996 to allot $20 million to overhaul the environmental and employment standards at all of its 127 farms, which employ 30,000 workers in seven Latin American countries.

With McLaughlin recently appointed Chiquita's senior director of environmental and social performance, the company is becoming a study in corporate responsibility, rather than a counterexample.

"It would be a challenge to find a company that has come so far and so fast," says Chris Wille, sustainable agriculture chief for the Rainforest Alliance, which certifies Chiquita's progress.

For decades the $3.9 billion fruit giant was synonymous with the notion of the rapacious multinational. Farmworkers toiled long hours in dangerous conditions, agrochemical runoff contaminated water, and tropical forests were cleared for expansion, says J. Gary Taylor, coauthor of Smart Alliance, a book about Chiquita. "We had a problem that could impact our brand," McLaughlin says.

Enter New York-based environmental group Rainforest Alliance, which had previously worked with timber companies in Indonesia to lessen the impact of logging operations. (The nonprofit does not accept donations from companies that it certifies, though they can buy tables at its annual dinner.)

Face time

In 1992 the Alliance sent banana companies a list of environmental and worker-rights standards required to gain its certification; Chiquita's officials dismissed the proposal as too expensive. Determined, two Rainforest staffers got face time with McLaughlin at one of the Costa Rican farms. By the end of the four-hour visit, McLaughlin realized the environmentalists weren't crazy after all and agreed to work with them.

Four months later McLaughlin told Chiquita executives about his activities up to that point, which included cutting down on agrochemical use, and presented them with a budget for the remaining changes. "Dave had to fight for every penny," says former Chiquita CEO Steve Warshaw, now the COO of a financial services firm in Cincinnati. "He was very compelling and persistent."

During the next two years, McLaughlin says, Chiquita spent $40,000 to overhaul the Costa Rican farms. One of the first steps was phasing out the toxic pesticide paraquat, replacing it with the milder glyphosate, and building new warehouses to store the chemicals.

McLaughlin began monitoring water quality in rivers and wells and providing workers with better safety equipment. The farms also started recycling programs, turning plastic bags into paving stones for sidewalks.

After letting the Rainforest Alliance inspect McLaughlin's farms, Chiquita decided to replicate the changes throughout the organization; in 2000 it began publishing annual corporate responsibility reports to track the progress.

"They were really transparent," says Michelle Lapinski, director of food and agriculture advisory services at the nonprofit Business for Social Responsibility. "When someone admits they weren't perfect, you trust them a little more."

Today all 110 of Chiquita's company-owned farms and the vast majority of its independent farms are certified by the Rainforest Alliance. Chiquita now recycles 100 percent of its plastic bags and twine and has reduced pesticide use by 26 percent.

Slowly addressing labor needs

Though the improvements in working conditions aren't nearly as dramatic, things are getting better for Latin American employees, who can now join unions. Disputes with Honduran labor unions in late November prompted Chiquita to spend two days renegotiating the workers' contracts.

In addition, the company has installed showers, lunchrooms, and locker rooms for workers. "Clearly there've been improvements, but it's far from perfect," says Stephen Coats, executive director of U.S. LEAP, which advocates for Latin American worker rights.

Still, Chiquita is just getting started, and the results are beginning to show up on the bottom line. According to spokesman Michael Mitchell, the company now saves $5 million a year on pesticides, while productivity is up 27 percent. "Our CEO said, 'This is the first time I've made an investment decision without having a spreadsheet in front of me, and it's been one of the best,'" McLaughlin says. "I agree totally."

Jennifer Alsever is a freelance writer based in Denver.

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.