AMDP Investment Proposal - Dr. Bronner's

TO:                   Clark Hansen, Chief Executive Officer, AMDP

FROM:             Jaren Aunan, Research and Development Department

DATE:              February 28th, 2019

SUBJECT:       AMDP Investment Opportunity in Dr. Bronner’s

As you requested, I have identified and researched a possible investment opportunity with a company that is committed to socially responsible goals, environmentally sustainable opportunities, and sustainable financial success. I highly recommend considering Dr. Bronner’s for the two-million-dollar investment. In this memo, I will lay out:

·      The AMDP investment criteria

·      Background information about Dr. Bronner’s

·      A few of the company’s sustainability claims

·      Expert opinions from the health and nutrition industry

·      My final recommendation

AMDP Investment Standards

Here at AMDP, we have investment criteria that companies must meet for funding consideration.

The Triple Bottom Line

A triple bottom line makes sure to take into consideration more than just an income statement. This framework extends to include both environmental impact and social responsibility as well. This framework can be summarized by the three P’s, which include:

·      Profit – the way a company ensures revenue growth and cost-cutting (when appropriate) to generate a profit in order to please shareholders

·      People – the way a company treats its employees, customers, the community where it does business, and all other stakeholders involved

·      Planet – the way a company strives to reduce waste, invest in renewable energy sources, and reduce its ecological and carbon footprint (University of Wisconsin…)

Corporate Social Responsibility

Corporate Social Responsibility (CSR) aims to benefit both businesses and society (McKinsey & Company). CSR ensures that companies operate in ethical ways, taking into account the triple bottom line framework. Activities may include partnering with local communities, philanthropy activities, socially responsible investment, and progress towards environmentally-friendly goals (The University of Edinburgh).

Social Enterprise

A social enterprise is an organization that hopes to drive positive change towards a social issue through the creation of its products and services (McCallum). Social enterprises – whether for-profit or non-profit – use their revenues or profits to support community projects and stakeholders (Fowler).

Carbon Footprint

A company’s carbon footprint measures its total direct and indirect greenhouse gas (GHG) emissions. The GHGs are compared across a standardized unit called a carbon dioxide equivalent. This unit is then multiplied independently by each gases’ 100-year global warming potential (GWP). Quantifying the carbon footprint requires collecting emission data, then multiplying by the factors. Third-parties also offer carbon footprint calculators (Carbon Trust).

Here at AMDP, we consider carbon footprints because GHG emissions are correlated with the Earth’s rising average temperature. As a result, and in line with our Triple Bottom Line, we look to invest in businesses that are taking action to minimize their carbon footprints and help prevent further global warming.

Background Information about Dr. Bronner’s

In this section, I will give some context of the company I am recommending. I will lay out:

·      A historical and current summary of the company

·      An analysis of the company’s reputation in regard to the triple bottom line

·      A limited financial analysis of the company

A Summary of Dr. Bronner’s

Dr. Bronner’s became an established soap producer under its creator Emmanuel Bronner in 1948. Emmanuel’s grandson, David Bronner, currently serves as the CEO of the private firm (Dr. Bronner’s: Ourselves…). The 71-year-old company is known for producing its personal care products, including its iconic pure-castile liquid soap line. Other product categories include organic lotions, organic shaving soaps, organic lip balms, organic hand sanitizers, and edible organic coconut oils. The organic liquid soap differentiates itself by having many uses – the soap can be used to clean almost anything, like your face, body, hair, dishes, pets, floors, laundry, and even teeth. Dr. Bronner’s diverse product portfolio is certified to the highest sustainability standards, which I will talk more about in the coming sections.

Dr. Bronner’s Reputation in Relation to the Triple Bottom Line

The company is seen as more than just a soap company trying to generate profit. Dr. Bronner’s actually doesn’t have any shareholders – the company is entirely self-financed through the Bronner’s family (Dr. Bronner’s – 2015 All-One! Report). In the field, it is perceived as a progressive activist and a sustainability leader. The company is known to donate large portions of its profits to charities and activist causes (Knoll). Some of these profits go towards GMO labeling activists and hemp legalization activists (Brush). Dr. Bronner’s also has a reputation for its sustainable palm oil production (unsustainable production has nearly wiped out Orangutans in Indonesia). Given that palm oil is one of the main ingredients in the company’s soap, Dr. Bronner’s created its own sustainable palm oil production site in Ghana (Knoll). Also, David Bronner has capped his salary at no more than five times that of the lowest paid employee and has even managed to increase profits steadily (Brush and Knoll). These initiatives are in direct alignment with the triple bottom line of people, profit, and planet and also show how the company acts as a social enterprise.         

Proven Revenue Growth

The company reported global net sales of $122.5 million in 2018. Of these net sales, $8.8 million (7.2%) of this revenue went towards charitable donations and sponsorships while $27.1 million (22.1%) went towards wages, benefits, and profit sharing. The rest of the revenue went towards goods and services expenses, interest expense, depreciation, raw materials expense, taxes, and reinvestment into the company (Dr. Bronner’s – 2019 All-One! Report). Dr. Bronner’s revenue has steadily increased from $4 million in 1997 to now $122.5 million in 2018 (Stolzoff). The news website Quartz has graphed this revenue growth, which you can find below.

Dr. Bronner’s Claims

The company prides itself in being a sustainability leader with third-party certification. The company claims to make products that are fair trade certified under the Fair for Life Certification Program. This includes ensuring ethical working conditions, fare wages, and transparency across the entire supply chain. Products are also certified organic under the United States Department of Agriculture (USDA). Other claims by the firm like not animal-testing products are certified through the Coalition for Consumer Information on Cosmetics’ (CCIC) (Dr. Bronner’s: Our Customers…). The company claims to be diverse, with 50.9% of employees being women and 57.5% of employees being people of color. Finally, the company claims to be charitable by giving to many causes in 2018 like Animal Advocacy ($755,000), Civil and Human Rights ($346,000), Community Betterment ($590,874), Environment and Climate Change ($481,200), and Poverty and Homelessness ($190,000) (Dr. Bronner’s – 2019 All-One! Report).

Expert Opinions

The Nutrition Business Journal (from the health and nutrition industry) highly regards Dr. Bronner’s initiatives. The business journal praises Dr. Bronner’s for its seriousness in organic and fair-trade labeling – Dr. Bronner’s actually filed lawsuits against companies that claimed to sell organic products without the USDA organic certification. The industry expert also recognizes Dr. Bronner’s donations by pointing out that the company donated $400,000 towards Proposition 37 (an initiative that would require labeling of genetically modified food), $200,000 towards marijuana legalization, and thousands of dollars toward fair trade projects overseas (Organic Excellence Award). Natural Foods Merchandiser, a magazine in the natural and organic products industry, praises Dr. Bronner’s for using 100% post-consumer recycled materials in packaging and for installing solar panels at factory headquarters to generate about half of the factory’s energy needs (Carter). Using renewable energy helps reduce GHGs and the company’s carbon footprint.

Final Recommendation

I strongly believe Dr. Bronner’s is worth considering for the investment. As I have communicated throughout the memo, this company prides itself in being a sustainability leader in the personal care industry while going above and beyond AMDP’s investment requirements.

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Works Cited

Brush, Marc. “Why exit?” Nutrition Business Journal; ProQuest, 27 Aug. 2014.

Carbon Trust. “Carbon footprinting guide.” Carbon Trust, https://www.carbontrust.com/resources/guides/carbon-footprinting-and-reporting/carbon-footprinting/#docdownload-6865

Carter, Rachel. “Climate changers – Business Steps Up To Be The Change.” Natural Food Merchandiser; EBSCOhost, 1 Jan. 2018.

“Dr. Bronner’s – 2015 All-One! Report.” Dr. Bronner’s, https://www.drbronner.com/wp-content/uploads/2017/01/Bronner-All_One_Report-2015.pdf

“Dr. Bronner’s – 2019 All-One! Report.” Dr. Bronner’s, https://www.drbronner.com/media-center/all-one-reports/

“Dr. Bronner’s: Our Customers – Organic integrity.” Dr. Bronner’s, https://www.drbronner.com/about/our-customers/product-certifications/

“Dr. Bronner’s: Ourselves – The Dr. Bronner’s Story.” Dr. Bronner’s, https://www.drbronner.com/about/ourselves/the-dr-bronners-story/

Fowler, Elizabeth A., et al. “Transforming Good Intentions into Social Impact: A Case on the Creation and Evolution of a Social Enterprise.” Journal of Business Ethics; ProQuest, 28 Nov. 2017.

Knoll, Hedda Ofoole. “A pragmatist perspective on sustainable global value chain governance – the case of Dr. Bronner’s.” Emerald Publishing Limited; emerald insight, 7 Jan. 2018.

McCallum, Scott. “Social enterprise is the solution we need right now.” Washington Examiner, 10 Jan. 2019, https://www.washingtonexaminer.com/opinion/op-eds/social-enterprise-is-the-solution-we-need-right-now

McKinsey & Company. “Making the most of corporate social responsibility.” McKinsey & Company, Dec. 2009, https://www.mckinsey.com/featured-insights/leadership/making-the-most-of-corporate-social-responsibility

“Organic Excellence Award.” Nutrition Business Journal; ProQuest, 18 Jan. 2013.

Stolzoff, Simone. “70 Years After Its Founding, Dr. Bronner’s Soap Is A Trendy $120 Million Dollar Company.” Quartzy, 4 Sept. 2018, https://qz.com/quartzy/1374780/dr-bronners-soap-is-a-trendy-120-million-company/

The University of Edinburgh. “What is corporate social responsibility?” The University of Edinburgh, 3 July 2017, https://www.ed.ac.uk/careers/your-future/options/occupations/csr/what-is-csr

University of Wisconsin – Sustainable Management. “The Triple Bottom Line.” The University of Wisconsin, https://sustain.wisconsin.edu/sustainability/triple-bottom-line/