Read Seth’s entire blog, “The Plan-o-gram Scramble” at Inc.com.

We hear a lot of talk about our nation’s environmental challenges, but where will the solutions come from? We hear a lot about the need to create green jobs during these challenging economic times, but where will those opportunities come from? There’s a Chinese proverb that appears underneath our bottle caps that says, “If we don’t change the direction we are headed, we will end up where we are going.”

Well, it doesn’t take Rachel Carson to realize that the companies who built their success in the old extractive, one-way economy are not going to be the innovators in the decades ahead. And the entrepreneurs at Bethesda Green’s incubator are stepping up to the challenge — whether it’s developing a technology to assess the environmental impact of consumer products, Savenia LLC, or a rain barrel company, Aquabarrel, that helps us capture a precious natural resource, these incubator companies will help identify the solutions that improve our community, our nation, and even the world. And if anyone doubts that these start-up companies can play an important role in our economy, just ask the 100 employees of Honest Tea, many of whom live and work in Montgomery County.

I know that for me personally, this new center helps address several challenges I encountered back in 1998 when I started Honest Tea. Of course, there were the usual challenges of not having enough money, not knowing anything about the beverage business, let alone trying to sell barely sweetened tea at a time when everyone else was drinking liquid candy. When you start a business out of your house, it can be difficult to make people believe it is a real business — like the time I interviewed a Maryland MBA student for an internship in the guest bedroom of my house. On top of that, my third son Isaac, who is 12 now, had just been born, so it didn’t seem too professional to have a 10 month old as my coworker.

I also had trouble getting vendors to work with us. I tried to convince our bottle supplier that Honest Tea was a real business, but the only address I could supply was a post office box, and that doesn’t build confidence, because when you’re trying to collect a payment, the folks who work at the post office aren’t going to be much help. So that’s where an incubator can help — a real office, without babies, bedrooms, and with a real mailing address, not to mention wireless, copying machines, and a conference room. But even more important, the chance to network and interact with a community of entrepreneurs and experts who can share insights and inspiration

What’s especially nice about this moment for me is that it helps bring closure to a conversation I had with a fancy-pants investor who flew in from Boston to tell me how to run Honest Tea back in 1998. In addition to giving me lots of bad ideas about how we should be creating an energy drink, he said you’re a natural foods company, you shouldn’t be based in Bethesda, you should set up a P.O. Box in Vermont or New Hampshire.

Well, aside from the fact that wouldn’t be honest, I said to myself, “Why can’t Bethesda be a place known for its commitment to sustainability?” We have more Ph.D.s than any community in the country. We have natural assets like the Metro and Capital Crescent Trail. We have some of the nation’s most prominent leaders in the world of environmentally responsible business, including Calvert Group and Earthshare. And now we have our own green business incubator — the first in Maryland. So I’ve already alerted my friends at the post office that they may soon be hearing from entrepreneurs around the country who will want to set up a P.O. Box in Bethesda.

It’s been impressive to watch what’s happened in the bottled water industry over the past few years. In 2000, the average 500 milliliter water bottle weighed 24 grams empty. Today, the average water bottle is 12 grams, and manufacturers continue their race to out-lighten each other. Bottled water marketers have a big advantage over bottled tea suppliers because they are able to fill their bottles cold. To pasteurize tea, we have to fill our bottles at 190 degrees. When hot liquid goes into a plastic bottle, the bottle expands – that’s why when you peel off the label of a Gatorade bottle you see expansion panels underneath. We designed our bottle to expand on the bottom when the hot tea is poured in – once it cools, the bottom pops up and the bottle maintains its round shape. You may see some bottled teas in lighter-weight bottles, but they are using preservatives (in lieu of pasteurization) to keep their drink safe. Honest Tea is committed to organics, so those super-thin bottles are not an option for us.

We worked over several years with our supplier, Graham Packaging, to design a lighter weight package that looks similar to our previous bottle (click here to see our old and new bottle — the original was 38 grams and the new one is 30 grams). We managed to design a bottle that is 22 percent lighter, though we had to add a deeper cavity underneath the bottle because the thinner bottle needed more support in order to maintain its structure. As the new bottle starts hitting store shelves, we have been hearing from consumers who think that the new bottle is our way of trying to sell them more air. Who hasn’t been disappointed to open up a bag of chips and find out there seems to be more air than chips? Here is a typical e-mail that we received from a customer named John:

I just bought a bottle of Orange Mango, and was amazed that the bottle is so deceptively designed.

The bottom of the bottle has been designed with a hollow to displace fluid,
making it appear that the customer is buying more than is the case.

Yes its 16.9 ounces, but I’m sure your marketing dept has determined that
purchases are based on visual impressions.

I have bought your product regularly, but will stop

With a name like Honest Tea, I would expect more than these types of cheap tricks!

My partner Barry responded with this note:

Dear John,

Many thanks for writing, for your honest critique, and your longstanding support. We recently switched to a thinner bottle, one which is 22 percent lighter. This saves us money and saves the world resources. The only problem is that the thinner bottle had the risk of getting dented. In fact, this was a real problem that forced us to redesign the bottle. To help keep its shape, the inside must be under pressure. When the bottle is filled with hot tea, the liquid expands and the plug on the bottom pops out. (If you squeeze real hard, you can make this happen.) Then as the tea cools, the plug pops back in and creates the pressure on the inside that prevents the bottles from being damaged. The thinner plastic means we needed more pressure and hence the bigger plug. There really is 16.9 ounces inside and we aren’t trying to pull a fast one. But I can see how you could get confused or could think that we are trying to be deceptive. We need to do a better job explaining why the bottle has this design. In the next label run we plan to say something to explain this to our customers. I hope that makes you feel that you can still trust us and will stick with us.

Honestly yours,
Barry

Once we explained the physics of the bottle, John’s response was quite different:

Thanks for that explanation. I feel I may have jumped to conclusions, but I’m glad I wrote and didn’t just abandon you guys!

The physics behind the design solution are actually very interesting.

Thank you for taking the time to answer my concerns. I’m glad to hear what it was all about.

I will continue to support Honest Tea!

Of course, the challenge for us is that most consumers won’t take the time to write us, and we will end up losing customers because we took a major step forward for sustainability. So the lesson here is that while environmental efficiencies can help a business, make sure to communicate what you are doing and why it’s important. Sometimes a positive step for the environment could be a step backward for business if you don’t explain it to consumers.

Occasionally I worry that all our talk about organics, healthier products, Fair Trade, and sustainable packaging might come off as bragging, but I am starting to be more comfortable heeding Golda Meir’s advice. She once said, “Don’t be so humble, you are not that great.”

Why social entrepreneurship?
I have always had a personal interest in social causes, and incorporating that passion into my business came naturally — tea is a beverage that we recognized had a “natural” link to everything we wanted to accomplish — a healthy product with a strong connection to the environment. The other interesting thing about tea is that it is consumed by some of the world’s wealthiest cultures but consumed by its poorest, so there were clear and immediate opportunities for creating community wealth.

How can a company have a social impact?
Honest Tea was created to be an agent of environmental and social change, but what I’ve learned is that different people answer this question different ways. Our consumers will say that they’ve benefitted from a healthier product for themselves and their kids. Workers in the tea gardens we source our tea leaves from will say that they have benefitted from our Fair Trade and organic purchasing, and the eco-systems of our supplier communities (if they could talk) would appreciate the reduction in synthetic chemicals in the environment. But the impact I see everyday is the connection we are making with millions of American consumers who appreciate the product AND the way we operate as a company.

How does Honest Tea do all of this?
Most of the sustainability initiatives we have implemented make great business sense, so within the company, there’s not much controversy about how we operate. For example, our office is designed in a more sustainable way, but it’s also an attractive space that helps make people happy working there. It might be harder to argue that giving away bikes to employees is a great business decision, but I decided this was an important reward for their hard work, and a nice way to communicate our values to our employees. Outside the office, Honest Tea focuses on sustainability through green energy, recycling programs for Honest Kids, Plant a Tree and Bethesda Green. But the greatest impact may be through our product itself — we are making important strides with respect to reducing the environmental footprint of our packaging. Our bottles are the area where there is the greatest room for improvement.

Be “Honest” about Coke.
The key element of the Coke relationship is that while we haven’t changed any aspect of our product, we’ve dramatically changed the universe of people who will be exposed to our product. For example, I just found out that our drinks will be served at Fenway Park — a place near and dear to my heart. We would never get that kind of exposure without Coke’s help. Coke is supporting the rapid expansion of the brand, and we are running the business.

But why — was it profits or competition?
We weren’t as worried about profitability as we were about sales growth. The only way Honest Tea can have a widely significant environmental and social impact is buying selling lots of product, and Coke can help us do that. While we continued to grow in keeping with our annual compound growth rate of 66 percent, I had concerns about our ability to maintain that pace a few years from now. We’ve never let the competition drive our own strategy — our mission drives our strategy.

Big can be beautiful, too?
We’ve seen our friends at Stonyfield Farm Yogurt grow to more than $300 million in sales, and they certainly seem to have maintained their commitment to mission. I think one of the biggest challenges accompanying growth is maintaining the culture of the brand. One of the ways we’ve helped to insure continuity is by hiring and promoting from within. We have a robust intern program, and count nine former interns among our 95 employees, nearly 10 percent.

How does a social entrepreneur get started?
The advice I’d give to an aspiring social entrepreneur is no different than that I’d give anyone starting out — it’s important to get some experience selling something. It’s not for everyone, and if you don’t feel comfortable being a salesperson, if you can’t handle rejection or don’t like the feel of it, find something else to do, because even if you don’t end up selling your product, you need to sell investors, employees, vendors and the public on your enterprise.

Is there an advantage to being a social entrepreneur?
Social entrepreneurs have the edge over traditional entrepreneurs because they bring a passion to their work that is fueled by a belief in what they are doing. I appreciate the benefits of money, but if building Honest Tea were only about making a payday, I would have switched to something easier long ago. The only risk with social entrepreneurs is that they occasionally let their passion cloud their judgment.

How did you start?
Step one to starting Honest Tea was a series of e-mails with my cofounder, Barry Nalebuff, about six months before we launched. He was a former professor of mine at the Yale School of Management, and we’d had some lively exchanges about the beverage industry when I was his student. Through e-mails and telephone conversations, we evolved the concept for Honest Tea. I also began talking to everyone I knew who had any connection to natural foods, food service, or the beverage industry. I gave them samples of the drinks we were brewing in my kitchen, and brainstormed ideas with anyone who would listen.

How did you raise capital?
We first raised $500,000 to get off the ground. That wasn’t too difficult because we raised it from people who couldn’t say no — ourselves, our parents, relatives, and roommates. The hardest money to raise was the $1.2 million in 1999, when we took in money from people we didn’t know.

How hard was it to sell the product?
We were very lucky because the buyer at Fresh Fields (later Whole Foods) got it. We clearly showed what we were selling was different from anything else he was selling, so he was willing to give us a try.

What can go wrong?
For us, production was a huge challenge. I hired a consultant who was a friend of a friend. He helped us figure out how and where to make our product. Once the product was made, the biggest challenge was distribution. At first, we did our own distribution, which was brutal, but helped me understand how it worked. Then we started to work with all kinds of distributors: cheese distributors, corned beef distributors, even charcoal distributors, until at last we developed relationships with natural food and beverage distributors. We struggled and learned through trial and error.

What makes a successful business model?
It helped Honest Tea that we had a strongly differentiated product and a very clear brand concept. So, we had a good start; after that it is all hard work.

Any do-overs?
We probably waited too long to hire professional operations staff. We could have saved ourselves lots of money and sleepless nights if we had gotten some knowledgeable folks in earlier. But, even the mistakes were part of the journey and we learned from them.

The dream?
We seek to have Honest Beverages be available wherever beverages are sold. We want to be the leading organic beverage brand.

As our headcount has quadrupled, one strategy we have increasingly relied on is promoting from within — starting with the interns we hire in the summer. I wish I could say this was an intentional HR strategy, but we aren’t that smart. It wasn’t until I noticed that approximately 10 percent of our employees are former interns that I came to fully appreciate the benefits of this approach.

First, we hire people who are proven to work with our company. By the time our interns join us as employees, they are already pretty far along the Honest Tea learning curve. And perhaps most important, they have already demonstrated that they know how to work with our team and our culture, which is critical to our brand.

There’s no better proof this strategy works than looking at the roles former interns play within our company today. A few of our success stories include:

- Blaine, West Division Sales Manager — In charge of managing all sales activity with West Coast distributors, including our new Coca-Cola distributors

- Mike, Product Development Manager — Takes the lead on managing the formulation and sourcing on all our products

- Patrick, National Field Marketing Manager — Oversees a team of 14 marketing managers plus their “road warriors” (summer interns)

- Kassidy, Business Development Manager — Also our National Foodservice Manager

Of course, these folks didn’t rise directly from intern to manager. They proved themselves whenever they were tested, and even though we always interviewed outside candidates for the positions, our proven internal candidates turned out to have an Honest edge.

Another benefit of this strategy is that everyone who works in our organization, including our interns, understands there are opportunities for advancement, and so they are highly motivated to perform. We’re still hiring our interns for 2009, so if you know someone ready to move some cases, check out our website.

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.

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.

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.

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.