While Berkshire has won plaudits for good corporate citizenship,29 critics complain about the absence of conglomerate-wide reporting on items such as social responsibility and sustainability.30 Many Berkshire subsidiaries—including Brooks, Johns Manville, Lubrizol, and Shaw—are in the vanguard of such corporate stewardship. They join elite global companies in the practice of issuing formal responsibility and sustainability statements and audited reports on the corporate treatment of stakeholders, especially employees at home and abroad, and of the environment.
Berkshire is unusual in that its structure does not lend itself to issuing a formal corporate report at the parent level. And the number and size of Berkshire’s subsidiaries can obscure some of their internal measurement and reporting efforts. Critics urge consolidated policies, including a conglomerate statement of responsibility or charter of sustainability. It may unduly interfere with subsidiary autonomy to set corporate-level policy, but a consolidated report will prove valuable in order to highlight the varying ways that Berkshire subsidiaries embrace stewardship—and assure continued adherence.
Shaw Industries, for example, led the carpet industry to newfound appreciation for its responsibility concerning environmental protection and sustainable development.31 During the 1990s, people began to realize the environmental costs of using non-biodegradable artificial fibers to make carpets; disposing of them presented a significant waste management problem. Shaw then started to promote carpet recycling programs. It began to produce synthetic yarn sourced from recycled plastics such as soda bottles and developed a polyolefin backing material that cut raw material use in half.
McLane embraces a “green advantage initiative” to manage its fleet of trucks that stock America’s supermarkets.32 The initiative stresses reducing environmental impact and increasing operational efficiency. Efforts include improving gas mileage by lowering truck highway speeds and recycling thousands of gallons of water used to wash produce. McLane installed $7 million of efficient lighting in its distribution centers and invested $100 million in automation scheduling technologies to plan truck shipments, reducing the cost and impact of its fleet.33
Acme Brick makes an ecological product: bricks of earthen clay.34 The bricks provide efficient insulation, thereby reducing energy usage and costs. Since its founding in 1891, Acme has built plants near distribution destinations—an idea codified in today’s environment design protocols that define a five-hundred-mile radius.35 Recycling incorporates scrap clay and sawdust into the brick. Reclamation programs create wetlands for wildlife and plant whole forests on former production sites. Acme Brick has won numerous industry awards for its environmental stewardship.36
Concerning employees, finally, Brooks, like many apparel, footwear, and sporting equipment makers, remembers the furor that engulfed Nike, Inc. in the late 1990s and early 2000s when customers learned of abusive labor practices in its Asian factories. They boycotted Nike products in protest, and the company reformed. Many factors contributed to Nike’s transgressions, including relentless cost pressures in its competitive markets. The price of athletic footwear declined rapidly in the late 1990s and early 2000s, and Nike competed by finding the cheapest ways to make shoes, which included inhumane labor practices.37
Brooks avoided this vise thanks to a business model focused on a premium brand at premium prices, a piece of equipment for the serious runner, selling higher-priced shoes in specialty stores. Brooks is not the low-cost producer in its industry, and its overseas factories are not the low-cost factories. As chief executive officer Jim Weber explained in an interview for this book, his customers value the company’s investment in such responsible behavior.38
Retaining subsidiary autonomy at Berkshire is important, both as a cultural matter and because the needs of the businesses vary so greatly. For example, jewelry companies focus on the ethical mining of minerals; home furnishing companies on preserving forests; transportation companies on reducing fuel usage and emissions; and energy companies on targeting renewable sources. For some companies, priority rivets on internal operations, whereas others look to the supply chain; for some the concern is employee safety while others attend to a particular customer type. At the same time, it may be valuable for Berkshire as a group to collect and publicize results.
The need for internal control systems and consolidated reporting will likely increase as Berkshire expands into the international arena. A few subsidiaries boast major global operations, especially ISCAR/IMC, as well as Gen Re, Lubrizol, and MiTek. Others have important overseas operations, including Berkshire Hathaway Energy, CTB, Dairy Queen, FlightSafety, Justin, and Larson-Juhl. A majority of the companies have at least some operations in Canada and Mexico (e.g., Benjamin Moore, Fruit of the Loom, Johns Manville, and the Marmon Group), and many manufacturing companies own or operate facilities in Asia (e.g., Brooks and TTI). Yet until its acquisition of ISCAR/IMC, begun in 2006 and completed in 2013, Berkshire had acquired only American companies.