the Body Shop - Rodney Schwartz

Yesterday I had a delightful lunch with a well-respected journalist. Somewhere amidst the tagliatelle, the conversation turned to The Body Shop and how my lunch companion felt betrayed by the Roddicks’ decision to sell out to, in her words, “bloody L’Oréal, of all people” (see BBC article ‘Body Shop agrees L’Oreal takeover’).

There followed a fascinating conversation. I owe her thanks for raising the point and giving me one of those rare opportunities to quote (or mis-quote) a journalist, rather than the other way around.

She felt betrayed by the deal because she had, for years, persistently bought Body Shop products because of what the company stood for, values which she felt would disappear under L’Oréal ownership. She also felt that L’Oréal was uniquely bad, in part because of its policy on animal testing. She did not mention its 26% ownership by Nestle, a consistently pilloried company.

I am not an expert on Nestle, L’Oréal or animal testing. What I believe is that L’Oréal paid what The Body Shop board considered to be an attractive price – I am not aware of any other bidders. It would be great if we lived in a world where there was a large ethical buyer around to put forward similarly attractive bids for companies like The Body Shop but, alas, we do not. In fact I cannot think of any large ethical company – certainly not one in a related sector. Who else could have launched a bid? A private equity firm perhaps, but they too would eventually exit – would they accept anything less than the highest possible price for their asset? No! So the owners could have passed up an attractive offer to maintain their “purity”? But no Board of a listed company can do this. Our system does not allow for this.

Secondly, Anita Roddick has publicly argued that as part of the L’Oréal empire she is having a positive influence on their practices. I suppose scepticism may be called for – but what if she, and The Body Shop, is changing L’Oréal? If L’Oréal is as evil as its critics claim, should one not at least try to “convert” it? Can anybody think of someone better-positioned to adjust L’Oréal’s position than this battle-hardened, resourceful revolutionary? Given what The Body Shop has done globally to get social and ethical issues incorporated into consumer behaviour, why not give them the benefit of the doubt?

For the sake of full disclosure let me say that I know the Roddicks, have worked with and like them – so perhaps my objectivity is hindered, but who among us is really objective? Also, there is a bigger point to make here which is getting lost. We can chuck stones at The Body Shop and the Roddicks, that’s easy (and very good fun), but they have done far more for the social business movement than me and most others. I worry that in our desire to hold revolutionaries to very high standards (standards which most of us rarely adhere to) we will discourage other from trying. And if we can indeed advance the social agenda at firms like L’Oréal, even marginally, then such progress needs to be applauded, not picked apart, at least at this early stage.

Social businesses have much to offer as a form of economic organisation. In fact, I believe they are vital to our economy. Firstly, the cause-related nature of these firms gives them a certain dynamism often lacking in mainstream businesses. Such dynamism, and the enthusiasm it elicits, benefits social businesses.

This is particularly true during the earlier entrepreneurial phase of development – resources are low and this energy may be the only “reserve” on which the company can draw.

Social businesses are also smaller than mainstream businesses. Staff and the management are therefore more closely connected to the needs of the market in which they operate. This is a concept I will explore in a later blog. They are also more agile, partly as a result of their size, which enables them to respond more quickly to changing market circumstances.

In fact, social businesses, as a construct, are uniquely well-suited to today’s environment in the way they utilise the market-based/capitalist system to meet clients” needs. Observers may criticize the system and the underlying moral assumptions, but as a mechanism to identify and then deliver against customer needs, the market is hard to beat. We may one day live in a world where the imperatives of the marketplace do not dictate so much of our daily lives, but this day has not yet come. Many have dedicated their lives to changing the system – I am too old to think about this and will work within this system to deliver the greatest potential social and financial returns.

An example of a social business which has responded to market needs is Divine (formerly Day) Chocolate Ltd., which has grown and prospered as a fair trade chocolate company. In 1997, a cooperative of Ghanaian farmers decided to produce their own mainstream chocolate bar to compete with other major brands in the UK – this based on interest from some international customers. Day Chocolate was formed with support from The Body Shop, Christian Aid, the NGO Twin Trading and Comic Relief. However, consumer interest remained limited until management improved the product (in terms of taste) and adopted more traditional marketing techniques. Now the firm has enjoyed rapid growth, is profitable and expanding. The growing interest in fair trade by wealthier consumers in the “North” was undoubtedly a factor, but the response to the market’s other needs (good taste) was essential.