This post was originally produced for Forbes.
Privately-held dōTERRA is a rapidly growing direct seller of essential oil-infused products with $1.2 billion in annual revenue. Three years ago, the company launched an effort to use its supply chain to reduce global poverty by creating economic opportunities for rural communities in developing countries like Nepal, Somaliland and Madagascar.
While founder and CEO David Stirling declined to provide gross margin data for the business, he suggested that the margins of publicly-traded direct sellers, about 80 percent, would “provide a broad approximation.” So the margins are good, giving the company some wiggle room for developing its supply chain for impact.
Emily Wright, the company’s Executive Vice President over sales and marketing, notes that the company was founded with a social enterprise mindset. “dōTERRA’s core mission is to improve the health and wellness of its customers through natural products and education.” Two corporate social responsibility initiatives have expanded the social purpose of the company: the dōTERRA Healing Hands Foundation (HHF) and the supply chain program launched in 2013 called “co-impact sourcing.”
Stirling explains the thinking behind co-impact sourcing, “Our Co-Impact Sourcing model for essential oils help us achieve three goals: 1) ensure the long-term supply of these key raw material inputs for our products, 2) develop effective marketing through telling legitimate impact stories highlighting the people and projects producing these oils for us, and 3) effectively mainstream directly into our business model our philanthropic priorities as a company.”
The extensive poverty in many of the countries where dōTERRA was already sourcing product, helped create the opportunity, Stirling says, to strategically develop a program for sustainable economic development.
Tim Valentiner, the company’s director of strategic sourcing, is the one tasked with developing and implementing the co-impact sourcing program. He says, “As dōTERRA continues to experience incredible growth we realized we needed to focus attention particularly on our oil sourcing strategy in order to meet our growth needs but also to be able to give back in a meaningful way.”
Valentiner, who spent time at the World Bank, brings some gravitas to the challenge of driving impact through the supply chain. The program, he says, is growing quickly. “We currently have Co-Impact Sourcing initiatives happening now in 10 different countries: Guatemala, Nepal, Somaliland, Kenya, Madagascar, Haiti, India, New Zealand, Jamaica, and Bulgaria – with some new initiatives in additional countries currently in development.”
Valentiner notes that the co-impact sourcing and HHF efforts work together. “Linked to many of Healing Hands Foundation funded projects and partnerships are Co-Impact Sourcing initiatives where we are able to facilitate social impact and community-benefiting projects for farmers, harvesters, and distillers, their families and communities.”
The company’s new sourcing of Nepalese Wintergreen starting in 2015 is an example of the new model. Valentiner says, “Throughout several districts of Nepal, women harvesters go out early in the morning to collect Wintergreen leaves in hand-woven baskets and carry them down the mountain on their backs (fully loaded these baskets can weigh up to 80 pounds). Because of the remoteness of these locations, there are typically few other job opportunities for these women. By providing fair and on-time payments to the harvesters and distillers, these women are able to have additional household income for food, clothing, and school supplies for their families.” In addition, HHF funds are used to support the communities where the harvesters live in Nepal.
The earthquake presented a moment of truth for dōTERRA. Rather than cut and run, the company doubled down. “Because dōTERRA was already working with these Wintergreen producing communities prior to the earthquakes in 2015, we were able to quickly react in partnership with CHOICE Humanitarian to provide much needed post-earthquake relief in severely impacted areas of Nepal,” Stirling says.
Valentiner adds, “Recently, during the months of March, April, and May 2016, three different groups of 40 volunteers each including Wellness Advocates [dōTERRA distributors] and dōTERRA staff were able to travel to Nepal on humanitarian expeditions to participate directly in working side by side with Nepali people to help rebuild Nepal following the 2015 earthquakes. They were able to see Healing Hands Foundation funds in action, provide Days for Girls feminine hygiene training to community members, as well as participate firsthand in the harvesting, collection, and distillation of Wintergreen essential oil.”
“In partnership with CHOICE Humanitarian, the dōTERRA Healing Hands has been a leading force in rebuilding some of the areas of Nepal hardest hit by the earthquakes, including distribution of emergency relief supplies immediately following the earthquakes, building of 200+ temporary homes, 45+ temporary classrooms, permanent homes, repair and new construction of Wintergreen oil distillation units for 20+ communities, repair of multiple existing schools and assembling of over 500 new desks,” Stirling says.
The team boasts that HHF funds were used to construct two 10-room, “earthquake resilient” schools in Nepal. The first, completed two weeks ago, is reportedly the first new school completed since the 2015 earthquakes.
Valentiner notes that effective impact measurement remains a challenge, but it is one that the company is addressing. “We are currently developing metrics for measurement of our Co-Impact Sourcing Guiding Principles in order to ensure that we can effectively measure progress and identify successful areas for replication or scaling up elsewhere, as well as areas for improvement. We realize this is a challenge but are fully committed to impact assessment and reporting in order to help show how our Co-Impact Sourcing model is successful.”
Wright says that effort also makes marketing sense. “Consumers (especially millennials) are demanding more and more to buy products from companies that are not only socially responsible but truly produce sustainable products, traceable products. So it is becoming much more than just having a catchy CSR program as a company.”
“Consumers are demanding to know traceability for their products and we believe that a key part of international development is and will continue to be carried out by businesses that see the value and the return on investment for social impact programs linked to the sourcing or manufacturing of their products from developing countries,” she concludes.
On Thursday, May 26, 2016 at 4:00 Eastern, Stirling, Wright and Valentiner will all join me here for a live discussion about the co-impact sourcing program and the dōTERRA Healing Hands Foundation. Tune in here then to watch the interview live. Post questions in the comments below or tweet questions before the interview to @devindthorpe.