The Case for More (Not Less) Regulation
Plastics manufacturer Fred Keller has built a thriving, profitable, and highly celebrated business by embracing—rather than resisting—regulation.
Daniel Shea
Man on a Mission Fred Keller drops in on the first shift in his automobile-parts plant. His $250 million company has been balancing mission and money for nearly four decades.
Daniel Shea
One Word: Plastics Cascade employee Erica Kirkland inspects a molded part for a chair. As part of a program to raise funds for breast-cancer research, a bin of pink colorant will be used to make pink recycling carts. Newly finished dash mats await delivery to Ford.
Daniel Shea
Brain Trust Keller consults with key members of his team—(from left) CFO Steve Peterson; Christina Keller, head of a new-business group (and Keller's daughter); and Kenyatta Brame, who led the company's bid to become a B Corporation.
As the founder and CEO of a West Michigan plastics manufacturer employing a thousand people, Fred Keller lives by rules. There are those he must follow, passed down by big-letter entities such as OSHA, the DOL, and the EPA. There are others—like ISO, the voluntary international certification of quality management—that he and other manufacturers follow. And there are still others that a much smaller but growing group of companies heeds—LEED green-building standards and B Corporation guidelines of social and environmental responsibility.
Following the letter of so many laws could easily become overwhelming, confusing, and—as opponents of regulation might argue—paralyzing. But a well-thumbed card in Keller's wallet has long served as a cheat sheet or a compass:
Do all the good you can
By all the means you can
In all the ways you can
In all the places you can
At all the times you can
To all the people you can
As long as ever you can.
It's a quote from 18th-century theologian and social reformer John Wesley, co-founder of the Methodist movement. It's also a highly unusual set of business principles, but Keller doesn't hesitate to pull it out in the middle of meetings. It's a gesture that might seem grandiose. But since starting Cascade Engineering 38 years ago, Keller, by nearly all accounts, has walked the walk. He has built a $250 million company and helped uplift an entire community by steadfastly asking the question: What good can we do?
These have been difficult years for U.S. manufacturers. In the past decade, nearly 54,000 factories have been shuttered or moved offshore, including 40 percent of facilities with payrolls of more than 1,000, according to data from the Bureau of Labor Statistics. The U.S. has about five million fewer manufacturing jobs than it did in 2001, a decline of 28 percent.
Thoughtful and easygoing at 66, Keller seems more like a well-groomed college professor than a hard-charging businessman. But mention manufacturing's decline, and Keller gets fired up. "We've lost industry after industry—we don't make shoes here; we don't make fabric here; we don't make machine tools," he says. "You can look at it and say, 'Well, it's a global economy, and we just have to buy where the lowest cost is.' You hear the argument that we're just not competitive. But American industry is not dumb. We can compete."
Launched in 1973 as a plastic injection molder with six employees, Cascade Engineering has blossomed into a diversified manufacturer with 15 business units and a product line that includes waste containers, auto parts, and furniture components—and, more recently, wind turbines, solar panels, and affordable water filters for the developing world. The company's technical innovations, sustainability efforts, and programs for employees have earned it multiple awards, including Chrysler's Technology Role Model Award, the White House's Ron Brown Award for Corporate Leadership, and the National Governors Association's Distinguished Service Award. Sales were hit hard during the recent recession—they plunged 40 percent, leading to an unprecedented round of layoffs and voluntary separations. But thanks to a recovering economy and growing new business lines, revenue is projected to grow 17 percent this year, and the company is hiring once again. About 1,000 employees work at 14 locations worldwide, with about 500 in Grand Rapids.
Keller, of course, isn't the only American manufacturer who is thriving. But you would be hard-pressed to find many others who share his approach to business. Although the National Association of Manufacturers, or NAM, which represents 11,000 U.S. manufacturers, has forcefully condemned recent moves by the EPA to regulate greenhouse gas emissions, Keller voluntarily cut his company's emissions 20 percent from 2005 to 2010. Though NAM would trust national energy policies to "the marketplace and its proven ability to meet the nation's energy needs," according to its official policy statement, Keller advocated for a renewable portfolio standard in Michigan (requiring electricity providers to get 10 percent of their power from renewable sources by 2015) and supports a mandated phaseout of U.S. oil imports. Though various business groups complain about the cost of regulatory compliance, Keller believes that going "beyond compliance" has saved him money. "I'm all for setting goals and having voluntary compliance," says Keller. "But is it enough? That is the question."
Far from simply embracing regulation, Keller seems to go out of his way to find ever-stricter standards to obey. Last October, for example, Cascade became a certified B Corporation, a sort of LEED certification for socially responsible businesses. The B stands for benefit, and companies seeking the status undergo a rigorous assessment process and periodic audits to document their performance on more than 170 specific measures of environmental stewardship, employee pay and benefits, and contributions to community well-being. (In addition, B Corps pay a sliding-scale annual membership fee—Keller, whose revenue puts him in the highest bracket, will cough up $25,000 per year.) Cascade is by far the largest company, and one of the only manufacturers, to join the network of nearly 400 businesses. (See "The Social Entrepreneurship Spectrum: B Corporations." )
"It's one thing for a company making an organic energy bar to become a B Corporation; it's another to take a company from a traditionally dirty industry and make a transition," says Andrew Kassoy, a co-founder of B Lab, the nonprofit that created the standards in 2007 with founding companies such as King Arthur Flour, Seventh Generation, and Method. "Submitting to third-party certification and the transparency that comes with it is really putting yourself out there. Fred's a totally different kind of person to make this commitment."
Amid the noisy debate about how to revive American manufacturing, Keller is something of an outlier. "The best thing business can do for the world is to do business and make a profit," says Kenneth P. Green, a resident scholar at the American Enterprise Institute. "By doing that, you improve employees' lives and everyone else's lives." Requiring businesses to comply with tougher standards on things such as energy use and workplace safety, meanwhile, is downright harmful, according to NAM. "We do not support overregulation and reactionary regulation that hinders business with no measurable results," says the association's spokesman, Michael Froelich. David Vogel, a professor at the University of California, Berkeley's Haas School of Business, supports regulation of greenhouse gases as a way to shift business incentives. But he doubts that Keller's approach would work for more than a handful of businesses. "It is a viable strategy for some companies," Vogel says. "But it's a niche model. Many firms aren't able, or willing, to do it."
