It's rare for any public company to announce it's foregoing a penny, let alone $2 billion, in low-hanging sales. But that's what CVS did yesterday, when it announced an intention to stop selling cigarettes and other tobacco products by October. The estimate of $2 billion in lost revenue is from not only cigarettes, but also incidental purchases that smokers might make.
While you could argue this move is long overdue--and that CVS still sells plenty of "unhealthy" products--I still believe the move is worthy of praise for two reasons. One, CVS is taking a fiscal hit for a cause. Any company with that much gumption is okay with me. Two, CVS is leading the way in its industry. Its main competitors, Walgreens and Rite-Aid, still sell cigarettes (and have not announced plans to change that).
Leadership Means Going First
According to Wharton professor Michael Useem, an expert on corporate leadership, the act of leading often means embracing a high financial cost for a larger purpose. His textbook example of this is Merck's campaign against river blindness in Africa.
In the 1970s, Merck faced this dilemma: A drug to fight river blindness would cost $200 million to develop. But development lagged because there were no potential customers for the drug (given the pervasive poverty in Africa). Merck CEO Roy Vagelos's leadership-defining decision--and by extension, Merck's--came in 1985. Despite the protests of his advisers, Vagelos greenlighted the development of the drug. He also authorized the spending of hundreds of millions to distribute it.
Today, such charitable programs are a staple of corporate social responsibility in the pharmaceutical industry. But they weren't in 1985. And that's why Merck, for its actions, staked a claim of being both an industry leader and a company to admire.
I'm not trying to put CVS's recent decision in the same ballpark as Merck's. That would be like comparing an appleseed to an orchard. I only bring up Merck to highlight that leadership often means going first, and taking a fiscal hit. Those two acts, in the business world, are the equivalent of bravery.
Sustainability Leadership in Sochi
With CVS and Merck as a backdrop, it was fascinating to read Adam Aston's recent opinion piece in the Guardian, in which he takes to task the majority of Olympic sponsors for "doing too little to advance sustainability."
The exceptions? Dow, which has pledged to offset the organizing committee's carbon footprint, and GE, which has supplied two ultra-efficient gas turbines to provide power at the Olympics village and venues.
But Aston calls out everyone else--a list including Coca-Cola, McDonald's, Procter & Gamble, Visa, Panasonic, Samsung--for not doing enough. The bummer of it all, he notes, is that the games present a fantastic opportunity for sustainability leadership because of their international visibility.
Moreover, there are sustainability problems to be solved. For instance, the United Nations and World Wildlife Fund have cited Russia's construction practices for damaging natural ecosystems. The Associated Press reported finding mountains of construction debris in an unlicensed landfill, and environmental activists say they've been harassed by officials.
In other words, the opportunity to show sustainability leadership in Sochi is out there.
But few companies have stepped up to take it. In that context, Merck's example from all those years ago is worth remembering. And CVS's recent decision is worth praising.