Why The Honest Company believes their customers are 'brilliant' (2024)

Carla Vernón believes in company transparency."We don't tell ourselves fairy tales, and we assume the people we make products for are brilliant," says Vernón, chief executive officer of The Honest Company.

"For example, before we raise prices in-store, we let our shoppers know via social media which items will be affected. And to the best of our ability, we tell them why so they're not surprised," she tells the BBC. "We believe we're in a mutual relationship that requiresus to treat our consumers with respect and understand that they're making smart choices."

Co-founded by actress Jessica Alba, The Honest Company is dedicated to creating clean and sustainably designed personal-care products. Since assuming her role in January 2023, Vernón has led the company's commitment to driving shareholder value, while also preserving its long-term strategy to continuously bring trustworthy products to the market. In their recent Q4 and full-year 2023 report, The Honest Company showed a 10% revenue increase, reaching $90m (£71.2m), attributed in part to strategic – and transparent – price adjustments.

Vernón, who has more than two decades of leadership experience, and previously held executive positions at Amazon and General Mills, discusses the benefit of keeping standards high, and why "honest" is more than just a company name.

Executive Lounge

What led you to The Honest Company?

I ran the consumables categories at Amazon, which includes everything you can think of in the middle of a grocery store. Honest was a big player for us at Amazon in that category, because shoppers loved the brand. So, when we returned to in-person meetings from the time everything was only on Zoom during the pandemic, I met the Honest team, learned more about the brand first-hand, and tried some of its skincare products.

I had already tried every skincare product you can think of while at Amazon, and knew when a product was good. When they asked me if I would consider being the company's CEO, I thought, this is a brand where I know the product quality is great and I know the brand has the potential to be big, but it's not big yet. And I thought, this is a combination I can work with.

I have always wanted to use my talents to do good work, but at places where I can do that work on a big scale because the world has big problems. So, throughout my career, I tried to choose opportunities that allowed me to marry both. When the opportunity came to help lead and grow Honest, which was born as a purpose-driven company, it spoke to me because I knew I wanted to attract a workforce that also wanted to use their day jobs to do good in the world.

Women CEOs are growing, but not yet the norm. How has being a female CEO affected you?

I don't want this answer to come across as a downer at all because in the end, I'm an absolute optimist. But the truth is, in my experience, not only as the CEO of The Honest Company, but at every major inflection point in my career, one of the challenges I have faced is stepping into every job guilty until proven innocent, instead of the reverse.

What I mean by this is, often when I step into a job looking like I do, an Afro-Latina woman with dreadlocks – now they've got a little salt and pepper, so maybe I've got gravitas, but they didn't used to – there are a lot of people who've never worked for a woman or a black leader. So often, I'm first received with doubt. I need to earn and prove my credibility and trust in order to get my stakeholders, whether those are investors or employees, to come along for this beautiful journey.

In November 2023, Vernón spoke at Time's Latino Leaders Event in California (Credit: Getty Images)

However, given how we are all raised in this society, I don't blame anyone. We're not as accustomed to imagining women and brown people at the helms of business. But I would say I'm used to it and I stay resilient. In my mind, I'm like, don't worry, you won't doubt me for long. This is going to be great and it's going to be fun.

If there are people who are encouraged to pursue their dreams because of me, then I'm blessed, because I'm paying back what other women did for me. I have children, nieces, nephews and a network of people I think of as my extended family. I'm trying to be that sister or auntie on LinkedIn and on social media for the broad masses. So, I use social media to give positive encouragement and how-to tips to others to help pull more diverse people into these spaces.

I have high standards and a lot of heart, and I try to combine those. I believe my authenticity is what carried me along my journey, and I hope my legacy is really bringing into corporate America and to the next generation the courage to be authentic.

Many consumers are demanding more organic products than they did when The Honest Company first launched in 2012. How has the company stayed ahead of other players in the industry?

Honest was founded on a principle that we needed to look at mainstream products that exist in the market and know that people still want those items, but they want them in a new, better way, stripped out of suspicious ingredients and chemicals that people don't want for themselves or their loved ones. And that bar for Honest continues to grow.

We call it the "Honest Standard". One of the ways we mark the Honest Standard is by our "No list" – 3,500 ingredients we will not put in our products. That's an example of a way in which we like to raise our bar. Because if our No list needs to evolve, we like that saying, 'if you know better, you do better'. So, when the external market requires us to improve and raise our standards, we do it.

It's kind of like the David and Goliath theory. We might be the small guy, but if we, by being successful, can also make the competition raise and elevate their standards regarding what they serve to their consumers, then we love winning and helping the industry at the same time.

I will say another important thing is, the demographics of America are changing. That's not a secret. More single parent households, more people of colour, more black and brown families, more intersectional families. We were founded by diverse founders and now we're also led by a diverse leadership team and board. So, when we make products, we make them so that they're relevant, have clean standards and practical prices. People can see themselves in these products because they know we design them for the skin and hair everyone has.

What ways can leaders generally set themselves apart from competition?

There are really two very important things that I also always tell my folks at Honest. One, we're not here to sell fairy tales. So, we're not going to tell ourselves a fairy-tale version of the market or consumers. We're going to deep dive and understand real problems that real people have and real products they want. Often companies try to invent what they hope is the consumer's need, and that does not prove effective.

Then, the second thing is to assume consumers are geniuses. Assume your shoppers are actually the smartest people in the room. Smarter than you. You can't fake them with ingredients. You can't sell them something that's not worth their value. You can't talk them into something just because it's good for your company. So really, all of this is about being very honest with what the market wants – the core of what we do.

In The Honest Company's infancy, the business faced a lawsuit over ingredients. How was the company able to earn the public's trust back after the case was settled in 2017?

We have to be centred on the fact that we're here to serve the people. Give the people what they want. That doesn't mean we're perfect every time. While some things predate me, if and when we have made a mistake, what I love about Honest in our history is that we owned that reality. We promised to understand the market better and do better going forward. What I don't want to do is make the same mistakes over and over again.

In May 2021, The Honest Company made its public trading debut on the Nasdaq (Credit: Getty Images)

So, if we made a mistake in what we gave consumers and we disappointed them in any way, first you have to diagnose. Do you know what you did wrong? Do you know where you missed the mark? And did you make it right in the moment? Own it, make it right. Keep that relationship of trust going forward. Experiment, try new things. But leaders should always keep in mind the lessons they've learned and make a commitment to keep operating at that new, improved level. That's what I think we're doing.

To me, making consumer products is the most sensitive thing in the world. We make things people put on their bodies, use on the surfaces around their home, and for their babies – the most vulnerable among us. If we learn we have made a mistake, then we have to course correct, own that and be transparent. Our name is "Honest". Transparency must always be an aspiration and a truth for us and we have to continuously challenge ourselves.

What makes a good business plan?

I'm fortunate because I was trained inside of these Fortune 200 companies, Amazon currently being Fortune 2, and learned many best practices.

What I would emphasise as businesses are trying to scale their brand or company is that leaders must be very data centred. It is vital to not believe you can change consumer behaviour or teach people something. You have to enter at where consumers have a need that you're going to fill. So, don't tell yourself a fantasy story about how your product will revolutionise and cause people to do something different. Besides maybe Apple, very few companies can do that.

What we can do is listen closely for the gaps in the market. Be very honest then start building the kernel. Get the data in the market in a small distribution, figure out what's working, then build on that more. Find out which marketing resonated the most. Try a few things and be very honest with yourself as you experiment to shed what isn't working and double down on what is, and allow yourself to grow at a pace that's actually healthy for your business model.

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The last thing I would say is, be very honest about the business model you are accountable to. You have to be accountable to your investors, your employees, and you certainly have to be accountable to the people you serve. That requires financial discipline. And I do think some leaders get ahead and maybe over push the financial model to the point where it is unstable and then it's a dangerous place that's difficult to get out of. I always encourage people to build slow and strong then grow big.

The Honest Company by the numbers

How do you make sure you're building a business model that delivers for customers and shareholders?

The reason an investor would be attracted to our company is we should be doing something that the mainstream, big-scale companies can't do. We should be growing faster, or we should be attracting a new consumer to the market. So, we always have to have ideas that have enough newness and differentiation that they are going to have a faster growth rate than the mainstream things in the market.

But investors eventually run out of patience to just be pouring money into an enterprise. They eventually want the enterprise to be kicking money back out. And that really changed after the pandemic. We saw a watershed shift in all of the corporate marketplace. So, we introduced in our second quarter of last fiscal year, something we call the "Transformation Initiative". It has three components: brand maximisation, margin enhancement and operational discipline. Those are the three levers I use to operate an increasingly productive and attractive business model.

Ask yourself, are you using every penny? Because it's not your money. And are you using it wisely at the margin level? We made some tough choices already. We left a few international markets that were not delivering enough benefit to our business model. Last year, we left Europe and Asia for example. And that doesn't mean we'll never be in those markets, but it meant that right now, it was too much of a drag on our business model. There are a lot of cost savings up and down and in order to do that, the real race to the clock is to make sure we're eventually delivering the right kind of profitability on the bottom line that hit the timing our investors were willing to wait for.

That's our mission – how can we continue to increase growth while being disciplined on how we make sure the profit lands.

This interview has been condensed and edited for clarity

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