IN the lobby of Timberland’s New Hampshire headquarters are collections of the company’s iconic yellow boots redesigned by children and charity workers across the world. Drawn on, painted over, plastered with photos — there’s one from Seattle covered in coffee beans — the boots commemorate community projects where Timberland and its staff have lent a hand.
A board behind the boots reads: “Deep within our heritage there’s an equally important ingredient to our success — our beliefs. Humanity, humility, integrity and excellence.” The company’s mission statement is: “To equip people to make a difference in their world.”
If it all sounds like a holier-than-thou pitch to the UN rather than a sales drive in the shopping malls of the midwest, there’s one man to blame: Jeff Swartz, the third generation of the Swartz family to run the outdoor clothing and footwear firm and one of the most outspoken chief executives in America.
Timberland is in trouble. “Authentic youth”, as Timberland calls the category formerly known as “urban”, are kicking off their boots in favour of less cumbersome footwear. Sales are down and a once solidly performing company is reviewing its future.
Valued at nearly $2 billion (£1 billion), it has reportedly hired Goldman Sachs for advice; but no deal is possible without Swartz family approval because they control 70% of voting shares.
Swartz won’t comment directly but said his options are open. If Timberland can’t reverse the sales decline, it could be sold. In the meantime, he is determined to reposition it as the leading voice in a new debate on social responsibility in corporate America.
If they seem like unrelated objectives then, as far as Swartz is concerned, you’ve missed the point; and he is determined that you get it. He believes corporations more than governments have to take the lead on social responsibility. He acknowledges many of his customers may not care how or where his products are made but believes they will and sees it as his responsibility to start that debate.
“Jeff could have inherited an ice-making company or a coffee house and he’d still have wanted to see how it could be used for a broader social purpose,” said Dave Aznavorian, Timberland’s global brand manager.
This is not the first time that Timberland has looked to redefine its brand. Founded in 1952 as a manufacturer of other companies’ footware, today’s Timberland came into existence in 1973 when the Swartz family decided to launch its own boot. Created using a unique waterproof leather, Timberlands were more expensive than their competitors. To explain the price, Timberland’s boots were originally sold with the advertising slogan: “Fine leather boots that cost plenty and should.”
Just as organic food sells at a premium, getting the eco-message out there should also help Timberland underpin its higher margins while doing some good, said Swartz. “I want people to believe in the power of the marketplace to make things better,” he said.
Timberland and Swartz have long been seriously interested in corporate social responsibility. His workers are given 40 hours’ paid leave a year for volunteer work and can take six-month sabbaticals to non-profit organisations.
The company runs a variety of eco-friendly projects; for example, it will plant a tree for every pair of boots bought at its Regent Street store in London.
Now he believes it is time to push the debate harder. “This year 30m people will buy something from our brand,” he said. Timberland can have a conversation where it can “gently, softly say you should know how this is made and you should be interested.” Next year Timberland is introducing a “Green Index” for its products. Making leather goods is a dirty business, not least because cattle are a major contributor of greenhouse gases.
The Green Index will tell shoppers how eco-friendly Timberland’s shoes are and the answer will not always be good. Graded from nought (the best) to 10 (worst). The yellow boot is a six and Timberland has yet to produce a nought.
Swartz said he was inspired by Marks & Spencer and its “Look behind the label” campaign that details the British retailer’s ethical standards for manufacturing.
But for all the ethical talk, Swartz acknowledges he has one big problem: China. Some 40% of Timberland’s goods are made in China, where workers have no political freedom and conditions can be appalling.
Financially, Timberland has to be in China, said Swartz. “But if I could not manufacture in China, I wouldn’t. If you ask me to justify being in China, I cannot,” he said.
“I buy the argument that 20 to 50 years from now China will be a free and open market. Come right this minute and see some of the working experience that some of these people have and it is indefensible.”
Not that Swartz is worried about outsourcing in general. “If I can get something made for $2 what’s the moral purpose of paying $7? I don’t think that’s moral, it’s thoughtless,” he said. The problem, said Swartz, was that “in China you can exploit all day long. China is interested in one thing — foreign currency.”
In an attempt to square the circle, Timberland has a code of conduct its factories must adhere to. Last year it pulled out of one factory after repeated infractions. It has also imposed a maximum 60-hour week on workers at its Chinese factories.
But even with these checks in place, Swartz is not happy. “Our aspiration is to be the good plantation owner,” he said.
Swartz’s family experienced the effects of working long hours in shoe factories literally first-hand. His grandfather lost the fingers on his left hand in a machine-tool accident while putting in extra hours in the run-up to his son’s wedding.
After imposing the cap, Swartz said he was left with another dilemma. Workers at Timberland’s factories complain that their hours are capped when they could be earning more at plants run by rivals like Skechers.
Companies have a duty to do what they can and be open about it, said Swartz. But they also have a duty to do the best they can for their shareholders.
This year Swartz has not been holding up his end of that deal. Timberland’s shares have fallen as the stock market has soared. The company expects full-year earnings per share to decline 30% this year.
Swartz said the decline was mainly “a fashion problem” but he doesn’t expect a quick solution. “Go to Europe right now and it’s like summer. The weather is dreadful for Timberland,” he said.
As well as weak boot sales, Timberland faces rising wage pressures and anti-dumping duties in Europe on products shipped from China and Vietnam, a decision he said was “100% politics and 0% logic”.
As in so many other industries, the pace of change in clothing has accelerated phenomenally in recent years. “When Nike launched a new product in the 1980s it did it in one colour and it would survive unchanged for four years. Now shoes have to be in three or four colours on day one and updated every season,” said Doug Clark, vice-president of Timberland’s research arm, Invention Factory.
Unlike most chief executives, Swartz can afford to ride out the storm thanks to his family’s support. But it is clear that all options are being explored and he talked openly about other “ethically minded” brands that had sold out to larger corporations.
In 2001, French food giant Danone bought Stonyfield Farm, an organic food producer based, like Timberland, in New Hampshire. Stonyfield’s management has gone on to have a significant impact on the French group and its organic ranges.
Swartz said he would “give up control for more power”. What he seems more wary of is the “Ben & Jerry syndrome”. Critics charge that the famously leftist ice-cream company lost its soul after selling out to consumer-goods giant Unilever. “They sold the company and went home,” said Swartz. Swartz would have to be carried out with his boots on.
