Great Expectations

Dec. 21, 2004
Manufacturers grasp the need for community involvement, but follow-through still is lacking.

Feral cats took over the old New York Central rail yard in Cleveland after humans abandoned it. When it closed in 1981, the yard became an unofficial dump for discarded sinks, rusty dishwashers, bald tires, and stray animals. The yard's powerhouse, at one time Cleveland's largest, and its twin smokestacks came to symbolize the Midwest's Rust Belt. Jack H. Schron Jr. would learn to care for the brownfield as much as he does his 58-year-old family business. His investment in the polluted industrial parcel would make Schron a poster child for Ohio's new brownfields law and a hero in the local community. During World War II the New York Central rail yard hummed. It employed nearly 4,000 people repairing train engines and moving freight cars. Two miles away Schron's grandfather started Jergens Inc. to manufacture fixtures and tooling components. Schron's father grew up in the neighborhood and attended high school minutes from the rail yard and the family business. By the time 52-year-old Schron began high school, New York Central was on the decline. He remembers the years it stood as a local eyesore. "You didn't want to be caught dead there," he asserts. In 1997 Schron, now president of Jergens, began seeking more space for the growing family business. "We thought about expanding where we were in Cleveland [or] moving to Chicago where we have another factory. We looked at raw land but just didn't feel right about gutting fields and ripping up trees," he says. Schron looked all over for a new home for Jergens' 150 employees before he had his "Eureka!" moment. He suddenly realized that the old New York Central land would be ideal for economic and social reasons. Right off I-90, the site would be easily accessible to employees. It also would help Schron fulfill a personal goal --restoring a part of the city that his family had called home for generations. "We can't do the kind of doughnut development that happened in the 1980s," he argues. "The suburbs won't be viable if the heart of Cleveland dies." In addition to occupying a role in Schron's family history, the old rail yard had an important champion in then-governor, now-senator George Voinovich. Voinovich was drafting Ohio's first brownfields law at the time that Schron was thinking about moving. It became law as Schron debated with site consultants and members of his family. There were risks in being the first to test the new legislation; at the time, draft regulations weren't even in place. In the end the New York Central site won out. Schron established a personal family trust to buy land on the polluted parcel. His name went on bank loans for the property, making him personally liable. The trust would lease the property back to the company. Construction began in May 1998 and by September 1999 Jergens opened its manufacturing facility on remnants of concrete blocks that once had held locomotives. During the official opening Schron rubbed elbows with officials including Sen. Voinovich and Cleveland's Mayor Michael White. Since then Schron has opened the 105,000-sq-ft headquarters facility to the community for events such as holiday parties and meetings. Cleveland State University is planning to hold courses for its M.B.A. program at Jergens, thanks to its convenient location. "We're bringing more people to the area. It's clean, well lit, and not unsafe anymore," Schron points out. Small companies generally lack corporate citizenship programs such as the one that turned Jergens into an economic-development anchor for a decaying neighborhood, reveals an IndustryWeek survey of manufacturers. The research effort, conducted by e-mail in association with the Boston College Center for Corporate Community Relations, Chestnut Hill, Mass., sought to determine executive attitudes toward the responsibility of companies to serve their communities in philanthropic ways. Some 255 responses were received (42% of respondents are chairmen or CEOs; 38% serve as president or COO; 20% are owners or partners). Over 85% of respondents employ fewer than 500 people, and 15% employ more than 500. Survey respondents agree that companies should organize volunteer programs, give grants to nonprofit organizations, and help to solve society's problems. Corporate citizenship will become even more important in the next three to five years, predict half of those surveyed. Some 95% of the manufacturing executives say developing a positive reputation and relationship in communities is important for achieving corporate objectives. Despite the weight company officials place on corporate citizenship, more than half of them lack formal programs. Some 70% admit they fail to consider community goals in business unit plans. By not connecting with their communities, executives are putting their companies in jeopardy. "Business leaders are not understanding the implication of changing expectations of communities," warns Steve Rochlin, director of research and policy development at the Center for Corporate Community Relations, whose mission is to influence business to successfully partner with communities to create healthy places to live and work. The international membership organization has provided research, executive education, and consultation on citizenship issues since 1985. Companies without solid reputations consistently built through nonprofit board service and leadership in community issues face problems including rocky relations with regulators and a greater chance of labor unrest. "They're creating a vulnerability that's a threat to their ability to operate without interruption," points out Rochlin. And it's not just local communities making demands. Socially responsible investors also want to see companies take the ethical path, says the Social Investment Forum, a U.S. trade association whose members invested over $2 trillion in 1999. Activist groups are forcing companies to behave, and they're channeling their concerns into shareholder resolutions. Amnesty International, for example, is lobbying members of multinational boards to recognize the hazards of ignoring labor rights. The Internet makes it easy to broadcast a company's morally questionable practices to investors, board members, and consumers. Executives who lead companies ethically astray face serious penalties. In 1999 F. Hoffmann-LaRoche Ltd. officials were sentenced to several months in prison and were assessed individual fines worth over $100,000 for fixing prices of vitamins over several years. The company was sentenced to pay a $500 million fine. Boards of directors also must keep an eye on ethics and compliance measures or face individual liability. All respondents to the IndustryWeek survey agree companies should be ethical in operations, but putting together an ethical mission across cultures and borders can be tricky. United Technologies Corp., Hartford, found a way. Moral dilemmas fall under the responsibility of an ethics officer. Respondents also agree that communities should expect companies to be environmentally responsible. STMicroelectronics NV is a company for others to benchmark. It operates in 17 countries and applies the most stringent regulations anywhere it has a presence to all of its locations worldwide. It also has led a seven-year campaign to slow global warming. Survey respondents say they're particularly concerned about a handful of problems: crime, education, health care, substance abuse, and training and development. Parker Hannifin Corp., Cleveland, is taking steps to stop substance abuse among children. And at Crown Cork & Seal Co. Inc. concerns over job training in Philadelphia prompted CEO William J. Avery to sell 12 of his antique cars to personally fund a program to teach manufacturing skills to people with weak employment histories. Back at the old New York Central site in Cleveland, Jergens is serving society by slowing sprawl. Its new location also fulfills a business need. The company recruits employees from among the curiosity seekers who tour the phoenix that has risen from the ashes of an urban brownfield. Civic Responsibilities Percentage of respondents who "strongly agree" or "agree" that companies should:

Strongly Agree Agree Combined %
Be environmentally responsible 74.4% 25.6% 100.0%
Be ethical in operations 88.6% 11.4% 100.0%
Earn profits 76.9% 18.8% 95.7%
Employ local residents 52.4% 41.7% 94.1%
Pay taxes 32.5% 61.6% 94.1%
Encourage and support employee volunteering 28.3% 60.6% 88.9%
Contribute money and leadership to charities 23.2% 61.8% 85.0%
Be involved in economic development 13.8% 61.7% 75.5%
Be involved in public education 15.0% 57.9% 72.9%
Involve community representatives in business decisions that impact community 14.3% 47.8% 62.1%
Target a proportion of purchasing toward local vendors 14.2% 47.2% 61.4%
Help improve quality of life for low-income populations 8.4% 46.1% 54.5%
Source: IndustryWeek Impact Issues Ranking of issues that concern executives as to their impact on the company: (1="not concerned" and 7="highly concerned")
Education 5.9
Job training and development 5.6
Health care 5.5
Crime 5.4
Substance abuse 5.2
IT: access to and understanding 5.2
Environmental issues 5.2
Equal opportunity 5.1
Child care 4.8
Transportation 4.7
Child or domestic abuse 4.7
Race relations 4.4
Economic development for local communities 4.4
Cultural understanding 4.3
Affordable housing 4.0
Disaster relief 3.9
Low-income community development 3.7
Immigration 3.7
Minority business development 3.5
Sprawl 3.4
Arts and culture 3.3
Source: IndustryWeek

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