Earlier this week, I had the chance to participate in a discussion at the Obama-Biden Transition Office with other leaders of the sustainable business community. The topic was setting an agenda to support mission-driven businesses.

The transition office had a great deal of energy around it — and security detail too. The front was protected by concrete barriers, guards, and lots of suits walking around with earpieces. It was fun to spot Attorney General-designate Eric Holder coming into our elevator and Health & Human Services-designate Tom Daschle walking through the metal detector.

The topics that we discussed ranged from supporting green technologies to community-development lending to organic farming. Some ideas were practical and easy to implement, others were thought-provoking, if not immediately achievable — but the meeting was refreshing in two important ways:

• First, that it happened! Although the companies represented in the room were leaders in the field of mission-driven business, we collectively represented less than $1 billion in revenue, less than one division of most multinationals. So the fact that the incoming administration is interested in our views is an event in itself.

• Second, it was wonderful to hear such a strong desire to encourage our approach to doing business. The question of the day was how can an Obama-Biden administration support and encourage mission-driven businesses?

The participants in the room and on the phone (calling in from around the world) were an impressive collection of leaders. The businesspeople included:

• Amy Domini of the Domini Index
• Timothy Freundlich of Calvert Foundation
• Priya Haji of World of Good
• Gary Hirshberg of Stonyfield Farm Yogurt
• Adam Lowry of Method
• Ronald Grzywinski of Shorebank
• Jeffrey Hollender of Seventh Generation
• Wayne Silby of Calvert Group
• Julius Walls Jr. of Greyston Bakery
• Ed Dugger of UNC Ventures

Also in attendance were leaders from several non-profits that are helping to organize the charge for sustainable entrepreneurship, including:

• Alisa Gravitz & Melissa Bradley of Green America (formerly Co-op America)
• Doug Hammond of BALLE – Business Alliance for Local Living Economies
• Julie Kantor & Steve Marriotti of National Foundation for Teaching Entrepreneurship
• Deb Nelson of Social Venture Network
• Andy Kassoy of B-Corporation

There was no shortage of ideas. Some of the more innovative ones included:

• A green business expansion fund
• Funding of clean energy victory bonds
• Creation of a federal gas tax to support the development and funding of more sustainable energy
• Development of a more robust recycling infrastructure
• Development of a new form of business — the B-corp concept, which encourages companies to include issues of social and environmental accountability within their charter
• Creation of an Institute for a Sustainable Economy
• A 90 percent tax on short-term capital gains, to encourage a longer-term approach to business

In addition to chiming in on some of the ideas above, I encouraged the team to explore more models like the USDA Organic labeling system — federally enforced standards that encourage companies to stretch to meet positive criteria without relying on federal mandates to impose change on companies. The continued growth of organics could be replicated with federal standards for building materials, cars, and even international labor practices.

While it’s too early to say what will come out of the meeting, it’s exciting to get the discussion started. One of the challenges of supporting mission-driven business is that the concept is so broad that there isn’t one policy or Cabinet department that can take on the task. Organic food companies may interface with Agriculture, while community loan funds may interact with Treasury, and all could probably benefit from interaction with the Small Business Administration. In recognition of the fact that the opportunities and challenges for companies like ours are multi-dimensional (not under the purview of one Cabinet department or the Small Business Administration), the transition team had representatives from several different parts of the next executive branch.

It is clear that the whole transition team is committed to openness, not just in the way they invited a wide range of companies to present their views, but in their insistence that any material presented at the meeting be posted on the Internet. For a look at the materials, check out www.change.gov.

Many of the transition officials will be out of a job by the end of the week, as they await the new administration to finalize its leadership. So there won’t be any immediate action as a result of Tuesday’s meeting, but the conversation has begun — and that on its own is progress.

I had lunch recently with representatives of our certifier, Pennsylvania Certified Organic, who were in town for a meeting of the National Organic Standards Board. Among the questions the board discussed was organic certification for fish, which raised some fascinating questions.

With all the concerns about mercury and other toxins in our food supply, it’s easy to understand why consumers and retailers are interested in purchasing certified organic fish. But as we discussed what would be involved in certifying organic fish, it quickly became apparent how complicated such a task would be.

First of all, there’s the question about how to maintain the integrity of the water supply. The organic rules are straightforward about what goes into the land. Livestock and agricultural crops cannot be situated on land that has been treated with synthetic chemicals in the past three years. As we have learned with purchasing organic honey for Honest Tea, there are even rules that apply to land where bees might fly — an apiary, where bees gather, cannot be within two miles of any pollution source. And if you think monitoring the flight of bees might be difficult, consider analyzing fish habitats such as oceans, lakes, and rivers, not to mention migratory paths. And how can you enforce and secure a clean water supply? An oil spill dozens of miles away could still contaminate a tuna population.

Of course, one potential solution to protecting a water supply would be to raise fish inside netted areas or on aquafarms, but those are hardly the conditions we envision for healthier fish. There is also the question of where the organic food for the fish comes from. For fish that consume seaweed, it’s not hard to understand how organic seaweed might be cultivated, but for fish that consume other small fish, it’s harder to understand how organic fish food is created.

While I agree that consumers should be able to identify a way to tell whether their fish is produced in a more sustainable and healthier way, I don’t believe organic certification is the proper mechanism for doing so. Organic certification currently applies to agricultural product. The word agriculture itself is derived from the Latin root ager or “field” and ultimately I don’t think fish can be, or more importantly, should be, from a field.

A few years ago, an article that mentioned Co-op America and Sam’s Club and Wal-Mart in the same paragraph was usually about activists protesting the nation’s largest retailer. And yet, as I prepared to speak at Co-op America’s Green Festival in Washington on Nov. 9 and Co-op America’s Green Business Conference in San Francisco on Nov. 13, I came to realize that while the activist consumers and green/social entrepreneurs who gain support and inspiration from Co-op America are the vanguard of innovation and sustainability, the folks at Sam’s and Wal-Mart can play an important role in enforcing that change.

Companies like Honest Tea, Seventh Generation, Stonyfield Farm, and hundreds of our peers, would not have made it without the supportive network that Co-op America represents — conscious consumers and economic enterprises that seek to make economic decisions consistent with their values and their hopes for a better future.

I’ve worked with Co-op America for more than 13 years — going back to before I launched Honest Tea — and they live, work, and breathe their mission. I still recall traveling to Chicago to speak at a socially responsible investing event with executive director Alisa Gravitz in 1997. She held on to her juice can from the plane for the whole the trip until she could find a place to recycle it, which eventually turned out to be back home in Washington. (As it marks its 25th anniversary, Co-op America is changing its name to Green America.)

But even the leading-edge companies occasionally need prodding, and Honest Tea’s came from Sam’s Club. When we first presented our Honest Kids variety pack to Sam’s Club earlier this year, we took three cartons of our Honest Kids boxes and shrink-wrapped them together, with a cover sheet. It looked like this:

Our buyer, Dacia, liked the product inside — she was sold on the idea of a healthier, organic kids drink, but she knew it was still going to be a stretch for her customers, many of whom didn’t regularly buy organics and were not familiar with our brand. She also told us the packaging needed to be more effective as a sales tool and she pushed us to get rid of the unnecessary, costly, and environmentally wasteful packaging. Sam’s sent a packaging designer and sustainability expert to our offices in Bethesda and together we worked on a new way to present Honest Kids to Sam’s Club customers. We changed the package, and reduced the overall weight of the packaging by 41 percent. Here’s what the new package looks like:

We started selling our Honest Kids variety pack with Sam’s in May of this year, and together we’ve sold more than 24 million pouches in just five months, twice as many pouches as we’d sold during Honest Kids’ first year on the market. It has been especially surprising to see where our organic pouches are selling well — some of the top-performing stores are in cities where Honest Tea hardly exists, cities like Anchorage, Alaska, Pearl City, Hawaii, and Metairie, La.

The worlds of Sam’s and Co-op America coincided for me in October when I met with Co-op America’s board to discuss whether the ownership of a company should make a difference in determining whether a company should qualify for Co-op America’s Seal of Approval. I argued that Co-op America should be identifying and supporting solutions wherever they come from. I cited Honest Tea’s marketing partnership with the Saturn VUE Greenline Hybrid, noting that we specifically partnered with a sustainable part of GM’s business, and were absolutely not partnering with the Hummer, another GM brand.

I also shared our packaging experience with Sam’s Club. A board member challenged me, “Do you think Sam’s pushed you to reduce the packaging because they wanted to help the environment or because they wanted to save money?” My response was, “Who cares? Of course it would be nice to think that they were solely motivated by a desire to reduce our environmental footprint but at the end of the day even if Sam’s was only trying to save money, their impact was more important than their motivation.”

Our packaging experience with Sam’s Club in no way excuses or denies that there are other ethical challenges presented by the success of Sam’s and Wal-Mart. But it does highlight the fact that solutions can come from unexpected sources. I told a member of Sam’s leadership team that I wished they sold cars, because if he told the auto companies they needed to make cars that got 40 miles to the gallon, I bet Detroit would find a way to make it happen. Automakers have a record of protesting efforts to raise Corporate Average Fuel Economy standards, but there aren’t many large companies that will tell Wal-Mart they can’t sell them what they want.

Look what happened with laundry detergent. Wal-Mart sells approximately 25 percent of all liquid laundry detergent sold in the United States, so when the company demanded concentrated laundry detergent, which would result in less plastic, less water, less cardboard, and less fuel consumed, all the major companies responded by competing to see who could make their detergent the most concentrated.

One of my favorite bottle cap quotes is by Henry Ford, (whose controversial past is a topic for a separate blog). “You cannot build a reputation on what you are going to do,” he once said. And just as there are some companies that claim to be socially responsible but fall short (they claim to donate their profits to charity, but never make any profits), there are mainstream companies that make significant change happen, even if it’s not a core part of their mission.

We met last week with Sally Greenberg, the new head of the National Consumers League to discuss some ideas about how we could inform and mobilize consumers around issues of social responsibility. It was nice to hear that Sally has been a loyal Honest Tea consumer and even convinced the liquor store near her office to carry Honest Tea. As we talked, our conversation helped me realize just how critical active consumers have been to Honest Tea’s success.

The first chain to carry our teas in 1998 was Fresh Fields in the D.C. region (the 17 stores were later converted to Whole Foods locations and are still Honest Tea’s strongest performing stores). We delivered 15,000 bottles directly to the Fresh Fields warehouse, and they in turn sent the bottles to the stockrooms of the stores, which eventually got around to putting the bottles on the shelves.

As we quickly developed a loyal following, our two Net Impact MBA interns and I took to visiting the stores as much as seven times per month. We alerted the stores whenever Honest Tea was out of stock, but there was no way the interns and I could check every store as often as we would have liked. Thankfully, our consumers insisted on being able to buy Honest Tea, and they politely (mostly) nagged the stores to bring out more Honest Tea from the stockroom. This pattern of behavior eventually led to the stores keeping more adequate inventories of Honest Tea in stock.

This support was especially important because often there would be a salesperson from a competing beverage distributor who would spot the empty space on the shelf and take the opportunity to restock it with a different beverage. But our vocal consumers trained the store personnel to protect our shelfspace.

As we started to develop additional distribution, we created a form that consumers could bring to stores to help them purchase Honest Tea. Often, we would meet with managers of college and office cafeterias who would say they had received requests for organic or Fair Trade offerings but that they were obligated to work with Coke or Pepsi because they had a contract. We always pushed them on this logic: Was the contract intended to prevent the cafeteria from providing their customers with what they want? Are Coke and Pepsi prohibiting you from selling healthier, organic drinks to your customers? Sometimes this logic actually worked. And then of course there were cases where the senior person in the company or the president of the college would tell the manager that he or she had to carry Honest Tea, and it was done.

But the most responsive buyers are always the ones running smaller stores, where consumers feel more comfortable making requests and often have a personal relationship with the buyer. Once things catch on with the smaller stores, the larger chains start to pay attention. And we were always delighted to receive a call from a larger chain that invited us to a meeting because it had received a request for Honest Tea from a consumer via email or the store suggestion box.

The bigger stores have very little incentive to take on new products, but they are more responsive to consumer request than I had thought they would be. There’s no question that Honest Tea, or for that matter, most emerging brands, wouldn’t exist without active and engaged consumers.

As we wrapped up our conversation with Sally, we discussed donating bottles of Honest Tea for the National Consumers League’s annual dinner. Then Sally said, “Well, I’ll have to check with the catering folks at the hotel — sometimes they have rules about which types of beverages they can serve.” And I had to remind her, Remember who the customer is! You are paying money to the hotel for your event. You have every right to insist that your money be used to create the experience you desire.”

Sometimes even the most thoughtful consumers can forget how much power they possess.

We’ve recently hired more than a dozen new marketing and salespeople to support our expansion out West with Coke’s distribution network. I saw our newest team members in action this past week at sales rallies in Arizona and California as we introduced the brand. These Honest Tea-m members bring a great surge of energy to the company just when we need it. And yet, I teased them that it doesn’t seem fair that their jobs are so easy after nine previous years of hard work.

Any salesperson who has been with Honest Tea for more than two years has had to deal with setbacks and disappointments from distributors and buyers who didn’t think there was a need for a low-sugar, organic beverage. During Honest Tea’s first five years, distributors rejected us at least eight times more than we were accepted. And in retrospect, many of the beer and soda distributors we were begging to give us a chance were actually not the best fit for us. These folks made our work frustrating, and even though we enjoyed the challenge, it was never easy to get one on board.

Now we’re launching Honest Tea with a network of Coke distributors who have been hearing firsthand from their customers that they need a healthier, organic brand, so the Coke salespeople are as eager for Honest Tea as we are to work with them. It has led to quite a few pinch-me-I’m-dreaming moments this week.

But today was as much a new day for Coke as it was for us. Honest Tea will be the first organic brand to go on either Pepsi or Coke trucks, and for many stores and consumers, it will be the first organic product that they encounter. For that matter, today was the first day that many Coke salespeople came to understand what the terms organic and Fair Trade Certified mean, and I was delighted to see more than a few heads nodding in approval.

We’ll see what happens when the cases enter the warehouse in a few weeks, but after the rallies, the Coke salespeople were buzzing about all the accounts they wanted to bring Honest Tea. I had to remind the new HT folks that it wasn’t always this way, but I’m not worried about them getting off easy. There is still plenty of hard work to be done. Even when you’re running downhill, you still have to move your legs very quickly.

Growth often has a bittersweet element to it. Last month, we announced plans to switch the distribution of our plastic bottles for most of the West Coast to Coca-Cola Enterprises (CCE), the largest beverage distributor in the world. Because we’ve endured agonizing distribution challenges over the past seven years, there’s an indescribable sweetness to actually be able to have our product distributed in almost every possible account: colleges, convenience stores, restaurants, stadiums, even Disneyland!

And yet, having spent our first seven years begging distributors to carry Honest Tea, it felt very weird to tell the independent distributors who we once idolized and who helped build our brand that we would be terminating our distribution contracts. Some of them congratulated us, some of them were bitter, all of them are being compensated. But as much as money plays a role, there really is more to these relationships than money, and in many cases, just being able to buy someone out of a contract feels a bit hollow. Our sales team worked passionately to get these guys (more than 90% are men) to have the same passion we do, and many of our distributors did drink the Kool Aid, or in this case the Honest Ade.

When I called to tell them of the switch to CCE, many of the owners, who are often second- and even third-generation owners, lamented that every year it’s getting harder to run an independent distribution business. Last year many of these same folks lost Vitaminwater and Fuze to Coke, and before that they lost Snapple to Cadbury and Sobe to Pepsi.

One of the best pieces of advice I’ve ever received came from our former board member Jeff Swartz, CEO of Timberland, who told me to “run the business like you’re going to own it forever.” And though we were mindful to create distribution contracts that anticipated changes in ownership, we have always run it that way. And that mindset has been one of the keys to our success — while other beverage companies were more focused on flipping the company, jumping on fads and trends instead of building an enduring brand.

I expect that once the orders from CCE start rolling in, we will celebrate the new opportunities, but as an entrepreneur at heart, I will always have an appreciation for the folks who got us to this point.

My co-founder Barry Nalebuff celebrated his 50th birthday last week. Since we started the company almost exactly 10 years ago, the occasion gave me the chance to reflect on our partnership. I remember when I told my Yale School of Management classmates that I was going into business with our former professor. They were puzzled, to say the least.Barry had a reputation as a cold-calling, occasionally heartless egghead who was a genius with numbers and strategy and less adept with interpersonal skills. I had a reputation as almost the polar opposite. And though neither reputation was completely accurate, we were — and still are — a study in contrasts, or as Barry likes to say, complements.

Before we launched Honest Tea, I traveled up to New Haven and spent the day with Barry at his kitchen table talking about our hopes and dreams for creating the business. For Barry, it was a chance to bet on his own ideas, as opposed to consulting for others. For me it was the chance to create an organization that could be an agent of social and environmental change. So our motivations weren’t exactly the same, but they were easily aligned and ten years later I can say that it has been an almost perfect partnership.

Over the years we have each had to draw on our different skill sets, sometimes to offset each other. When Barry’s bluntness alienates a prospective investor or customer (his attempts to get HT sold at the Yale cafeterias ended with shouting and slammed doors and phones), I am usually able to smooth things over. My tendency to trust people at their word and hope that things will work out has occasionally resulted in production headaches and cost overruns. But Barry comes in with his hard-nosed analysis and occasional tirade to get things back on track. Our CFO Jonathan and I joke that when a banker or a supplier is being a little inflexible, we offer to arrange a conference call with Barry to explore different solutions, and they often cave before the call even starts.

As Chair of our board, Barry has the benefit of familiarity with the business and the luxury of not being involved on a daily basis. This helps gives him the opportunity to ask insightful and creative questions. One of the most important ways that Barry’s creativity paid off has been with respect to our equity structure. He devised a capital structure that gave us warrants as we grew so that we could maintain control. As a result, we never fell prey to investors who wanted to take a more intrusive role in the company (and there have been many over the years). I especially appreciate this fact because I have seen lots of beverage entrepreneurs lose control to heavy-handed investors calling the shots.

Of course there have been disagreements — usually around label messages, with Barry leaning toward intellectual, snarky language and me leaning toward more down-to-earth wording. But having endured more than our share of challenges over the past ten years, I wouldn’t trade Barry for all the Fair Trade organic tea in China — unless it came at a really good price.

See the special Black Forest Barry label we created for Barry’s birthday.

We had some fun this week when our Black Forest Berry was mentioned on the front page of The New York Times as the drink of choice for presidential candidate Barack Obama. Our office gets requests every day from consumers trying to find our tea and so we were happy to help Obama campaign aides find stores that carry Honest Tea (we’re trying to make it easier, but it’s still a challenge in places like Kentucky!).  I saw Obama earlier this year and he told me that while he had previously been a big Community Green drinker, he was steering himself away from the caffeine in green tea in favor of our herbal Black Forest Berry.

I know this kind of publicity can’t hurt but am not yet clear how much it helps. As a company we certainly don’t take political stances, and I know that our tea has been spotted on the desk of more than one conservative talk show host, so it’s nice to know people on all sides of the political spectrum can enjoy a bottle of tea together.

I saw a blog that cited Obama’s preference for organic bottled tea as an indication that he had elitist tastes. I know there are always people looking for opportunities to throw the “E” word around, but there are few words I find more contrary to what Honest Tea stands for. In fact, I would argue it’s elitist to suggest that only rich or highly educated people should have an interest in healthy beverages. From our beginnings ten years ago, we have always strived to offer affordable organic and healthier choices for everyone. In fact, our original $1.19 price point was too low for our own good, especially when most of the competition was out there at $1.69 per bottle for non-organic tea. We lost lots of money in the early years, but we stuck to our lower price because we sold more tea, and we knew we were reaching more people. I know there are stores and restaurants that sell our tea for as much as $6.00 per bottle, but I can assure you that we don’t make any more money on those sales than the stores that carry it at $1.49!

In many ways, the deal we made with Coca-Cola will help ensure that we don’t become an elitist brand. If our tea is only available at higher-end stores, then the pricing and the venues help feed that elitist image. By contrast, if we’re sold wherever Coca-Cola is sold, then we’ve succeeded in democratizing organics. And that’s the kind of democratization all voters can endorse.

Today Bethesda Green, the local sustainability initiative we helped launch in January of this year, unveiled the first public recycling bin in Bethesda. Here are a few notes from my remarks:

When we launched Bethesda Green in January, I quoted the Chinese proverb, “If we don’t change the direction we are headed, we will end up where we are going.”

Today Bethesda is taking a step in a new direction.

You might ask why make such a big deal about one recycling bin? Changing the environment happens in steps, one bottle at a time, one bin at a time, one community at a time… and that’s what Bethesda Green is all about. It is what happens when people think globally and start acting locally.

When we launched Bethesda Green in January we weren’t sure what kind of turnout we would get. We thought if 35-40 eager and dedicated people came to our first meeting, that would be a great start. More than 300 people showed up. We realized that even if the only thing Bethesda Green accomplished was to give these folks an outlet to express and act on their environmental concerns that would be a service in itself.

But now, just four months later, the volunteers are organized into different working groups and are starting to deliver results. Today’s recycling bin is the first Bethesda Green program that allows residents to exercise a concern for the community’s environment on a daily basis.

Thanks to the generosity of The Coca-Cola Company and our community sponsors as well as the support of Bethesda Urban Partnership, we will initially be placing 20-30 recycling bins in the most heavily-trafficked areas of Bethesda – Bethesda Row, Woodmont Triangle and the Bethesda Metro. Once this initial test is implemented, we will seek to expand the program. And I’m confident that as Bethesda Green starts to deliver results, other communities will learn from our model, and start taking their first steps in a new direction.

This is especially exciting for me because when Coke made its investment in Honest Tea earlier this year, many people were curious to see what would happen. Skeptics said we would be adding high fructose corn syrup to our drinks, and tripling the calorie count. I’m excited that the first public manifestation of our partnership with Coke, before we’ve even sold a single case together, is our mutual support of a sustainability effort in Honest Tea’s hometown of Bethesda. There will be more to come.

Photos by Brian Lemley

Even though Honest Tea has enjoyed an annual compound growth rate of 66% for the past ten years, there’s never been a day or a week where I’ve walked in and said, “Wow! We’re growing.” Until now.

Lately, we’ve been ringing the gong in our office (reserved for company milestones) on a weekly basis as we break sales records. And though we expect great things to happen when we start distributing our drinks through the Coca-Cola system, all the growth we’re seeing so far this year is happening before the Coke distribution kicks in.

Last year our best sales month was $2.8 million for August. So when we set our April 2008 sales goal of $2.9 million we thought we were being aggressive. But we hit that number on April 15th, and eventually we took in orders for more than $5 million!

My immediate reaction is to try and explain the growth – maybe it’s our new products, our great new salespeople, our new label designs, our new presence with Honest Kids at Sam’s Club or more people looking for organic foods – it’s certainly not the weather! But at a certain point, all the possible reasons can’t explain everything, so perhaps it’s best not to overanalyze and just enjoy. And ring the gong!