Green before green was cool

Shaklee, a direct seller of nutrition, personal care and household cleaning products, embraced environmental responsibility decades ago, says Fortune's Marc Gunther.

By Marc Gunther, Fortune senior writer

NEW YORK (Fortune) -- When you hear the words "green business," what company comes to mind? Patagonia, maybe? Whole Foods Market (Charts, Fortune 500)? Starbucks (Charts, Fortune 500), or Group Danone's Stonyfield Yogurt?

Probably not Shaklee, a direct seller of natural nutrition and personal care products and environmentally friendly household cleaners. But Shaklee was a green business pioneer before any of those companies were started.

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If you are under 30, you may not have heard of Shaklee. A one-time Fortune 500 company that is now mostly in private hands, the Shaklee brand has been "under-marketed" for years, its CEO, Roger Barnett, concedes.

But Shaklee - which was started in 1956 by a chiropractor named Dr. Forrest Shaklee, deploys 7,500 worldwide distributors (many of them homemakers working part-time) and generates nearly $500 million a year in revenues - often has been ahead of its time. Consider:

*In 1960, following the founder's dictum to "follow the laws of nature and you'll never go wrong," Shaklee introduced Basic-H, one of the first nontoxic, biodegradable household cleaners. It is highly concentrated, so it requires far less packaging than rival products.

*In the 1970s, Shaklee removed phosphates from its laundry detergents, even as other manufacturers fought state and local bans on the chemicals. Many detergents today still contain phosphates, which can lead to buildup of foul-smelling algae in lakes and rivers.

*In 2000, before General Electric (Charts, Fortune 500) created "Ecomagination" or Wal-Mart (Charts, Fortune 500) embraced sustainability, Shaklee went "carbon neutral" and offset its greenhouse gas emissions. The company built windmills and solar panels to generate emissions-free energy.

*And thoughout its history, Shaklee has relied on networks of direct sellers to spread the word about its products - a concept that in the digital age has become known as "peer-to-peer social networking," as in Facebook and MySpace.

Barnett became chairman and CEO of Shaklee in 2004 when his family investment company, Activated Holdings, and a private equity firm, Ripplewood Holdings, acquired 81 percent of Shaklee from its previous owner, Yamanouchi Pharmaceutical of Japan, for about $310 million.

Barnett, who is 42, is an accomplished executive. A graduate of Yale, Yale Law and Harvard Business School, he made his money by running two successful companies - Arcade Ltd., best known for creating the scent strips in magazines and packaging, and an Internet startup called beauty.com. He's got an interesting family background, too - his father Victor Barnett was once chairman of Burberry, the British-based luxury clothier, and his mother, Helaine Barnett, spent nearly 40 years as a lawyer with the Legal Aid Society of New York, providing legal services to the poor.

He's on a mission to combine profit and purpose. One reason he bought Shaklee, Barnett told me, is because the company has the potential to make money and make a difference in the world as well. The company's natural products, he says, are good for consumers and for the planet, and its direct-selling business model gives thousands of distributors the opportunity to become successful entrepreneurs.

"Our two products - health and income - are what every government and NGO are trying to deliver to people," Barnett says. "We're creating entrepreneurs by teaching how to sell healthy products to other people."

Barnett said Shaklee's culture and products were in good shape when he bought the company, but that its marketing needs a boost. "We have to introduce Shaklee to another generation of people," he said.

Much of that marketing is word-of-mouth. The direct sales model has worked for such well-known firms as Avon, Mary Kay Cosmetics and Tupperware. Barnett's wife, Sloan, who is a TV reporter in San Jose, Ca., did her part recently by hosting a Shaklee party for about 40 friends at five-story townhouse in Manhattan. Among the guests: Jessica (wife of Jerry) Seinfeld, Renee Rockefeller and Melania Trump.

On a more global scale, Shaklee is partners with the 2004 Nobel Peace laureate, Dr. Wangari Maathai, and her grass roots group, called the Green Belt Movement. The company is backing her efforts to plant 1 billion trees around the world, using its distributors to spread the word. More than half of the company's distributors work outside the United States, most in Asia.

Daniel Esty, a Yale professor and co-author of "Green to Gold," about how sound environmental practices help companies to innovate and create value, says: "I don't know of a company that is doing more to make environmental stewardship part of its core business practice and its commitment to the public than Shaklee." Top of page