Source: Planning for Sustainability, A Starter Guide
By: Alaya Boisvert, Pong Leung, Kim Mackrael, Chad Park and Mike Purcell; The Natural Step Canada; 2009
Reflection:
Those in the Sustainable Community Development program here at UWRF are familiar with The Natural Step (TNS). It’s a system/paradigm introduced in the first class we take. I don’t think it’s the only approach to sustainability, but it’s as good a place to start as any. Since I’m far more familiar with the concepts in this document, I’ll take this opportunity go give you what I see as the highlights of TNS.
The first is the four conditions a system must meet in order to be sustainable. I’ve hinted at and alluded to them in other posts, but it’s worth it to lay them out here:
In a sustainable society, nature is not subject to systematically increasing...
...concentrations of substances extracted from the earth’s crust,
...concentrations of substances produced by society,
...degradation by physical means,
and, in that society...
...people are not subject to conditions that systematically undermine their capacity to meet their needs
When considering these, I like to think of domestic analogies to put them in perspective. The first two state basically, if we make a mess of our house, we still have to live in it. If we make a big enough mess, it’s going to be toxic and kill us. The third is related. If we don’t take care of our house, it’s going to stop protecting us and, eventually, it will fall down. The last is perhaps the most oft-overlooked aspect of sustainability. We all have a survival instinct. It’s a lot stronger than we suspect. If it comes down to surviving today or worrying about sustainability tomorrow, we’re going to survive today, even if that means chopping down rainforests and dumping raw sewage into rivers.
The rest of the document lays out how you’d apply that to a given organization. The highlight of this is TNS’s ABCD Planning Process: Awareness, Baseline analysis, Compelling vision, Down to action. What I like about this is their emphasis on developing a vision and then working toward that vision. It seems this is backward from how changes normally occur and would prevent a lot of unintended consequences.
Perhaps the greatest strength of TNS is a combination of the above. You could pick apart the system conditions for sustainability, although they are so simple, and rooted so firmly in laws of nature that it would not be easy, and there are certainly other ways of implementing change than the ABCD approach, but taken an a system, from Business As Usual to a sustainable business, TNS is a straightforward path that does an excellent job of adapting to different situations. Now, if you’re a forward thinking organization with the foresight to hire a sustainability savant such as myself, that may not be such a big deal. But, if you’re new to the sustainability thing and want a relatively simple way to get there, TNS makes it about as straightforward as possible.
Thursday, April 1, 2010
Wednesday, March 31, 2010
Investor Leadership On Climate Change
Source: Investor Leadership On Climate Change, An analysis of the investment community’s role on climate change, and snapshot of recent investor activity.
By UN Global Compact; UN Environment Programme Finance Initiative; Principles For Responsible Investment
Synopsis: Analysis of risk and opportunity regarding climate change is incomplete without considering the role of investment in the process of mitigation. Investor Leadership on Climate Change explores the relationship between climate change and investment.
Reflection:
Most of the talk surrounding anthropogenic climate change (ACC) deals with risk. If we don’t do this, this is what’s gonna happen. The flipside of that coin is opportunity, which gets talked about, but not as much. Most of that talk centers around business and employment opportunities, such as startup businesses in green energy and the jobs those businesses could create. That’s true, and it’s all well and good, but change on the scale necessary doesn’t happen without money. Lots and lots of money.
We’ve talked about investment before (Who Cares Wins) and the fundamental question of that document is also the fundamental question addressed by this one: why wouldn’t sustainable businesses be good investments? Investor Leadership On Climate Change takes it one step further, narrowing down the scope to look specifically at the relationship between investment and ACC.
And really, that relationship isn’t complicated. Accepting that Business As Usual is not sustainable and is in need of an overhaul, we’re looking at developing new technology, training and re-training staff, creating new and renovating existing infrastructure, etc. As much as we like stories of the American Dream, hauling ourselves up by our bootstraps, mom-and-pop businesses do not have the capital to undertake such an overhaul, and if they do, they likely represent portions of the business spectrum too small to mitigate climate change on the scale necessary. Big Business is Business As Usual. It was, in large part, Big Business that got us into this mess, so it’s Big Business that needs to play a leading role in getting us out. In re-reading the latter sentence, I realize it sounds vindictive, but that’s not my intent. My point is simply that these are big problems, affected by a lot of variables. Those variables can only be addressed by a sufficiently large entity, such as Big Business.
Perhaps the scariest paragraph in Investor Leadership on Climate Change is the following: “…a trajectory of very rapid growth in investment in low-carbon energy supply is required – reaching US$500 billion a year by 2020. Without this growth in investment, it is extremely unlikely that the necessary GHG stabilization levels will be achieved. We cannot afford a fall in levels of investment in this sector.” What makes this scary is politics. In the U.S, Big Business and Republican are all but synonymous. Recent polls show the majority of Republicans do not accept that climate change is being caused by human factors. If you don’t believe that Business As Usual caused these problems, where is the motivation to change it?
By UN Global Compact; UN Environment Programme Finance Initiative; Principles For Responsible Investment
Synopsis: Analysis of risk and opportunity regarding climate change is incomplete without considering the role of investment in the process of mitigation. Investor Leadership on Climate Change explores the relationship between climate change and investment.
Reflection:
Most of the talk surrounding anthropogenic climate change (ACC) deals with risk. If we don’t do this, this is what’s gonna happen. The flipside of that coin is opportunity, which gets talked about, but not as much. Most of that talk centers around business and employment opportunities, such as startup businesses in green energy and the jobs those businesses could create. That’s true, and it’s all well and good, but change on the scale necessary doesn’t happen without money. Lots and lots of money.
We’ve talked about investment before (Who Cares Wins) and the fundamental question of that document is also the fundamental question addressed by this one: why wouldn’t sustainable businesses be good investments? Investor Leadership On Climate Change takes it one step further, narrowing down the scope to look specifically at the relationship between investment and ACC.
And really, that relationship isn’t complicated. Accepting that Business As Usual is not sustainable and is in need of an overhaul, we’re looking at developing new technology, training and re-training staff, creating new and renovating existing infrastructure, etc. As much as we like stories of the American Dream, hauling ourselves up by our bootstraps, mom-and-pop businesses do not have the capital to undertake such an overhaul, and if they do, they likely represent portions of the business spectrum too small to mitigate climate change on the scale necessary. Big Business is Business As Usual. It was, in large part, Big Business that got us into this mess, so it’s Big Business that needs to play a leading role in getting us out. In re-reading the latter sentence, I realize it sounds vindictive, but that’s not my intent. My point is simply that these are big problems, affected by a lot of variables. Those variables can only be addressed by a sufficiently large entity, such as Big Business.
Perhaps the scariest paragraph in Investor Leadership on Climate Change is the following: “…a trajectory of very rapid growth in investment in low-carbon energy supply is required – reaching US$500 billion a year by 2020. Without this growth in investment, it is extremely unlikely that the necessary GHG stabilization levels will be achieved. We cannot afford a fall in levels of investment in this sector.” What makes this scary is politics. In the U.S, Big Business and Republican are all but synonymous. Recent polls show the majority of Republicans do not accept that climate change is being caused by human factors. If you don’t believe that Business As Usual caused these problems, where is the motivation to change it?
Tuesday, March 30, 2010
More on Belief
*WARNING* The following link is Rated R for adult language and sexual imagery. Click at your own risk.
If You Put Your Mind To It You Can Believe Anything
OK, so I get my news in equal parts from the NY Times, The Daily Show, and The Onion. I like a balanced, unbiased perspective. Kidding aside, there is wisdom in good satire, and I consider The Onion to be some of the best satire out there. I post the above link because it illustrates what may be the most serious issue standing between us and a sustainable culture/society. There is a staggering, intimidating, often terrifying amount of data telling us that The Way Things Are is not sustainable. As I've stated before, anything not sustainable will, by definition, eventually cease to exist. Between now and then, there is our quality of life to consider.
I'm also not advocating abandonment of skepticism. Skepticism is absolutely essential. In fact, skepticism underlies the scientific method; without it, there is no scientific method. However, on that grand continuum of belief, between naivete on one end and deluded rejection of reality on the other, is healthy skepticism. It is imperative we find that line, walk it, and communicate to others how to do the same.
If You Put Your Mind To It You Can Believe Anything
OK, so I get my news in equal parts from the NY Times, The Daily Show, and The Onion. I like a balanced, unbiased perspective. Kidding aside, there is wisdom in good satire, and I consider The Onion to be some of the best satire out there. I post the above link because it illustrates what may be the most serious issue standing between us and a sustainable culture/society. There is a staggering, intimidating, often terrifying amount of data telling us that The Way Things Are is not sustainable. As I've stated before, anything not sustainable will, by definition, eventually cease to exist. Between now and then, there is our quality of life to consider.
I'm also not advocating abandonment of skepticism. Skepticism is absolutely essential. In fact, skepticism underlies the scientific method; without it, there is no scientific method. However, on that grand continuum of belief, between naivete on one end and deluded rejection of reality on the other, is healthy skepticism. It is imperative we find that line, walk it, and communicate to others how to do the same.
Monday, March 29, 2010
Life Cycle Management
Source: Life Cycle Management, A Business Guide to Sustainability
By UN Environment Programme, 2007
Reflection:
“We can't solve problems by using the same kind of thinking we used when we created them."
The above quote, by Albert Einstein, is perhaps the most succinct way of summing up the changes necessary for a movement toward sustainability, but it’s particularly appropriate for thinking about life cycle management (LCM). In a nutshell, LCM is an attempt to control as many variables as possible in the life cycle of a given product, from raw material extraction to what happens to the product when it has outlived its useful life, in order to get those variables in line with the principles of sustainability.
The above quote is apt because traditionally, a manufacturer likely would not consider controlling variables outside it’s “roof,” i.e. a bicycle hub manufacturer wouldn’t worry about where or how the aluminum they use is mined. They would be concerned with the price and quality, and the mining and smelting would be the responsibility of the miners and smelters. Using an LCM approach, that same manufacturer would consider those variables their responsibility, and would control them as much as possible, which is to say, they may not be able to dictate which mining techniques are used, but would make the producers aware they represent a market demanding a product mined as responsibly as possible, or would communicate to the smelter they desire a product containing a minimum amount of recycled materials. In this respect, LCM is yet another example of sustainability through communication, using the market as a tool and an evolutionary process. Referring to the latter, quick changes through LCM may not be possible, so we must do the best we can, continually striving for improvement.
As far as Life Cycle Management as a resource is concerned, I found it to be a complete and compelling document; yet another I’m putting in my toolbox, to be brought out when some forward-thinking company hires me to make them sustainable. I especially appreciated the mini case studies included; it’s sometimes surprising where you can find sustainable business practices.
Also of note was the “Plan-Do-Check-Act” cycle in the section on implementation. As the semester progresses, I am finding more and more similarities in plans for implementation, regardless of what is being implemented. I’m not entirely sure what to make of this, other than it seems plausible that we’re looking at some kind of convergent evolution, which is a good thing. If it is indeed convergent evolution, it means we’re working with a best practice that has been tried and tweaked to work as well as possible with what we know now about how organizations operate.
By UN Environment Programme, 2007
Reflection:
“We can't solve problems by using the same kind of thinking we used when we created them."
The above quote, by Albert Einstein, is perhaps the most succinct way of summing up the changes necessary for a movement toward sustainability, but it’s particularly appropriate for thinking about life cycle management (LCM). In a nutshell, LCM is an attempt to control as many variables as possible in the life cycle of a given product, from raw material extraction to what happens to the product when it has outlived its useful life, in order to get those variables in line with the principles of sustainability.
The above quote is apt because traditionally, a manufacturer likely would not consider controlling variables outside it’s “roof,” i.e. a bicycle hub manufacturer wouldn’t worry about where or how the aluminum they use is mined. They would be concerned with the price and quality, and the mining and smelting would be the responsibility of the miners and smelters. Using an LCM approach, that same manufacturer would consider those variables their responsibility, and would control them as much as possible, which is to say, they may not be able to dictate which mining techniques are used, but would make the producers aware they represent a market demanding a product mined as responsibly as possible, or would communicate to the smelter they desire a product containing a minimum amount of recycled materials. In this respect, LCM is yet another example of sustainability through communication, using the market as a tool and an evolutionary process. Referring to the latter, quick changes through LCM may not be possible, so we must do the best we can, continually striving for improvement.
As far as Life Cycle Management as a resource is concerned, I found it to be a complete and compelling document; yet another I’m putting in my toolbox, to be brought out when some forward-thinking company hires me to make them sustainable. I especially appreciated the mini case studies included; it’s sometimes surprising where you can find sustainable business practices.
Also of note was the “Plan-Do-Check-Act” cycle in the section on implementation. As the semester progresses, I am finding more and more similarities in plans for implementation, regardless of what is being implemented. I’m not entirely sure what to make of this, other than it seems plausible that we’re looking at some kind of convergent evolution, which is a good thing. If it is indeed convergent evolution, it means we’re working with a best practice that has been tried and tweaked to work as well as possible with what we know now about how organizations operate.
Friday, March 26, 2010
Supply Chains
Sources:
Unchaining Value, Innovative Approaches to Sustainable Supply
The Lean and Green Supply Chain
By SustainAbility, UNEP, The Global Compact and USEPA Environmental Accounting Project respectively
Reflection:
The reflection that spurred my post about synthesis (A Little Synthesis) was catalyzed by these resources. In reading these, I was continually struck by the logic represented therein, which begged the question, why isn’t this Business As Usual? I was never struck by the revolutionary way in which they proposed supply chains be managed, nor case studies in which a company’s behavior represented a level of thinking to which we’re still striving. To be perfectly blunt and honest, my reaction was, “well…duh.” I still wonder what I might be missing.
My enduring understanding of these resources is one of disappointment, not in the resources themselves, or the information they contain, but in the fact that business practices that make so much sense, that represent sound risk management, efficient use of raw materials, streamlined distribution, etc. are categorized as “sustainable business practices.” Speaking in relative terms, these resources are relevant not because the authors are so advanced, but because Business As Usual is so far behind. We will all be better off when we catch up.
Unchaining Value, Innovative Approaches to Sustainable Supply
The Lean and Green Supply Chain
By SustainAbility, UNEP, The Global Compact and USEPA Environmental Accounting Project respectively
Reflection:
The reflection that spurred my post about synthesis (A Little Synthesis) was catalyzed by these resources. In reading these, I was continually struck by the logic represented therein, which begged the question, why isn’t this Business As Usual? I was never struck by the revolutionary way in which they proposed supply chains be managed, nor case studies in which a company’s behavior represented a level of thinking to which we’re still striving. To be perfectly blunt and honest, my reaction was, “well…duh.” I still wonder what I might be missing.
My enduring understanding of these resources is one of disappointment, not in the resources themselves, or the information they contain, but in the fact that business practices that make so much sense, that represent sound risk management, efficient use of raw materials, streamlined distribution, etc. are categorized as “sustainable business practices.” Speaking in relative terms, these resources are relevant not because the authors are so advanced, but because Business As Usual is so far behind. We will all be better off when we catch up.
Who Cares Wins
Source: Who Cares Wins: Connecting Financial Markets to a Changing World
By The Global Compact
Reflecton:
Why wouldn’t “sustainable businesses” be a good investment? After reading Who Cares Wins, this question is my enduring understanding.
The central assumption of Who Cares Wins is that the way environmental, social and corporate governance issues are managed is part of companies’ overall management quality needed to compete successfully. I challenge you, Loyal Readers, to show me that assumption is false. I’ve tried, and I cannot.
Keeping in mind that my knowledge of investing is exactly as deep and broad as my knowledge of law and socioanthropology, and also remembering that unemployed bike mechanics don’t have a lot of money to throw into the market, this is what I would look for in a business:
First, I want responsible management. I’m trusting them to use my money to make money, not lose it.
Second, and related to the first, is risk management. Risk is an unavoidable aspect of business and investment alike, and it is often indistinguishable from opportunity. This truth brought forth the cliché, you must spend money to make money.
Third, I want a company that is in touch with their market, past, present, and future. Past, because history can teach us a great deal about where we are and where we’re headed. Present, because markets are fast-paced and dynamic and you have to stay on top of them. Future should be self-explanatory.
None of this is a revelation. It’s a very simple understanding of what makes a viable corporation, and everything I’ve said applies equally to Business As Usual and sustainable business. Where does the difference lie?
My experience with investing has taught me that there exists a direct correlation between risk and rate of return. The higher the risk, the greater the rate of return, and vice versa. Accepting the notion that sustainable business is really Business As Usual with exceptional risk management on a longer-than-normal timeline, we get closer to an answer to our question. But if one must choose between safe and fast, I’d still choose safe.
By The Global Compact
Reflecton:
Why wouldn’t “sustainable businesses” be a good investment? After reading Who Cares Wins, this question is my enduring understanding.
The central assumption of Who Cares Wins is that the way environmental, social and corporate governance issues are managed is part of companies’ overall management quality needed to compete successfully. I challenge you, Loyal Readers, to show me that assumption is false. I’ve tried, and I cannot.
Keeping in mind that my knowledge of investing is exactly as deep and broad as my knowledge of law and socioanthropology, and also remembering that unemployed bike mechanics don’t have a lot of money to throw into the market, this is what I would look for in a business:
First, I want responsible management. I’m trusting them to use my money to make money, not lose it.
Second, and related to the first, is risk management. Risk is an unavoidable aspect of business and investment alike, and it is often indistinguishable from opportunity. This truth brought forth the cliché, you must spend money to make money.
Third, I want a company that is in touch with their market, past, present, and future. Past, because history can teach us a great deal about where we are and where we’re headed. Present, because markets are fast-paced and dynamic and you have to stay on top of them. Future should be self-explanatory.
None of this is a revelation. It’s a very simple understanding of what makes a viable corporation, and everything I’ve said applies equally to Business As Usual and sustainable business. Where does the difference lie?
My experience with investing has taught me that there exists a direct correlation between risk and rate of return. The higher the risk, the greater the rate of return, and vice versa. Accepting the notion that sustainable business is really Business As Usual with exceptional risk management on a longer-than-normal timeline, we get closer to an answer to our question. But if one must choose between safe and fast, I’d still choose safe.
Tuesday, March 23, 2010
Rethinking Business Regulation
Source: Rethinking Business Regulation, From Self-Regulation to Social Control
By Utting, Peter
Reflection: (My apologies for a rambling, disorganized post. In the midst of dealing with a difficult resource, my hard drive crashed, so getting back on track was a process, and I didn’t edit this one very well)
Again, this was a difficult resource for me. I have a rudimentary and incomplete understanding of corporate regulation and accountability, so considerable backtracking would need to occur in order for me to fully understand what overhauling or changing that regulation involves. I feel like I hardly have enough time for forward tracking, let alone backtracking, so I’m left with more questions than answers.
Through discussion with Smart People, several aspects of material in prior resources was reexamined, giving me a better understanding of what this resource is about. Most importantly was a key characteristic of the codes, standards, and frameworks discussed in my post of that title. All (or at least most) are voluntary, and were developed by corporations themselves. Self-awareness by/of corporations is important, but this creates a distinct conflict of interest for them. When the Founding Fathers drafted the Constitution, they recognized the difficulty in objectively regulating oneself and wrote a system of governance that featured checks and balances to keep the different branches of government honest and to prevent any one of them from acquiring too much power. It is the inability of corporations to objectively self-regulate in the best interests of everybody that creates problems. To whom are corporations responsible and accountable? If they answer only to shareholders, their priority will be maximizing profit. It seems this is the way things have been historically. An effect of this is making pollution control, emission control, efficient use of raw materials, etc. a lower priority. If it becomes more profitable to flush your garbage rather than recycling or repurposing it, we end up with sick ecosystems, the effects of which we’re now recognizing.
If, on the other hand, a corporation tries to balance profit with environmental stewardship and socially just business practices, it will not be as profitable in the short term. In Business-As-Usual, where emphasis is placed on the numbers for next quarter rather than next century, this puts that corporation at a disadvantage, making it vulnerable. It’s easy to see why, in our myopic society, the sustainable corporation is a new concept. In fact, this tension between profitability and corporate social responsibility is mentioned in Rethinking Business Regulation.
The next issue I see, related to the first, is the motivation for a corporation to voluntarily comply. In Rethinking Business Regulation, the author identifies several stages of self-regulation. It seems the corporations with which I’m familiar are in the “defensive” or “compliant” stages, in which they either deny they are part of the problem or adopt a policy but treat compliance as added cost. At that stage, there is little motivation to comply. In fact, compliance could be seen as a competitive disadvantage, and the corporation may be criticized by shareholders. As I see it, this is the role of marketing. I’ve seen examples of sustainable business practices being profitable, and those profitable companies have remained so without using their sustainable practices as a marketing tool, possibly because we’re not accustomed to sustainability (as I use the term in this blog) being a competitive advantage.
This is stupid, but in the interest of time, I’m going to wait to expand on that. What it does present is the opportunity to discuss how hardening regulation could help the corporation. Let’s start with an experiment you’ve already conducted. Walk down the cereal isle in your local grocery store. What proportion of the boxes make some statement using the label “natural”? Now, compare the ingredients of those to each other and to the cereals that are “unnatural”. Differences? It’s been a while since I’ve done this, but if memory serves, you will find unpronounceable ingredients on the boxes labeled “natural”. How can this be? The term “natural” is not regulated. There are no standards that must be met in order to put it on your packaging. As such, it is meaningless. After all, there’s no shortage of naturally occurring yet really nasty compounds.
“Organic” on the other hand is regulated, and the government has set standards that must be met in order for a product to be labeled as such. No matter the product, from soda pop to rolled oats, if it says organic, the ingredients will not have used synthetic fertilizers or pesticides. This is a good thing for consumer and grower alike, as it gives us information about our purchases and a powerful marketing tool for the grower.
This is why corporation could/will benefit from hardening this regulation. It will give them meaningful information that can be used to market their products.
The final thing I’d like to mention are the thoughts that run through my head when pondering business regulation. As I’ve mentioned in the past, my parents are republican in the traditional, small government interpretation of the word. Mom counts Ayn Rand as a formative influence and has voted Libertarian many times. Dad is a small business owner. They’ve had an undeniable influence on my political beliefs. When I read about regulation, it is them I hear, whispering about the inefficiencies of bureaucracies and the pitfalls of unintended consequences, and who can argue they’re wrong? There is a fear that regulation is a trammel, and if our business and industry are trammeled and others’ are not, we will be out-competed, and we will fail. Again, this is a logical, if not appropriate, concern, but it does not take into account the ability of our businesses, industries, and economy to adapt. Agriculture in the U.S. used to be based in large part on slave labor. That system was shown to be unsustainable and the government regulated it. Industry here and abroad used to depend on child labor. That system also was shown to be unsustainable, and it was regulated. Industry adapted. These are examples which the wisdom of time has made obviously unsustainable, but the Civil War shows it was not always so obvious, and a great many people couldn’t conceive of an economy without it. The transition to sustainable business will not be easy, smooth, or straightforward. There will be many setbacks and ample opportunity to question our motivation and efficacy, but I absolutely believe there will come a time when we look back on many of our current business practices with the same disbelief with which we view slavery and child labor.
By Utting, Peter
Reflection: (My apologies for a rambling, disorganized post. In the midst of dealing with a difficult resource, my hard drive crashed, so getting back on track was a process, and I didn’t edit this one very well)
Again, this was a difficult resource for me. I have a rudimentary and incomplete understanding of corporate regulation and accountability, so considerable backtracking would need to occur in order for me to fully understand what overhauling or changing that regulation involves. I feel like I hardly have enough time for forward tracking, let alone backtracking, so I’m left with more questions than answers.
Through discussion with Smart People, several aspects of material in prior resources was reexamined, giving me a better understanding of what this resource is about. Most importantly was a key characteristic of the codes, standards, and frameworks discussed in my post of that title. All (or at least most) are voluntary, and were developed by corporations themselves. Self-awareness by/of corporations is important, but this creates a distinct conflict of interest for them. When the Founding Fathers drafted the Constitution, they recognized the difficulty in objectively regulating oneself and wrote a system of governance that featured checks and balances to keep the different branches of government honest and to prevent any one of them from acquiring too much power. It is the inability of corporations to objectively self-regulate in the best interests of everybody that creates problems. To whom are corporations responsible and accountable? If they answer only to shareholders, their priority will be maximizing profit. It seems this is the way things have been historically. An effect of this is making pollution control, emission control, efficient use of raw materials, etc. a lower priority. If it becomes more profitable to flush your garbage rather than recycling or repurposing it, we end up with sick ecosystems, the effects of which we’re now recognizing.
If, on the other hand, a corporation tries to balance profit with environmental stewardship and socially just business practices, it will not be as profitable in the short term. In Business-As-Usual, where emphasis is placed on the numbers for next quarter rather than next century, this puts that corporation at a disadvantage, making it vulnerable. It’s easy to see why, in our myopic society, the sustainable corporation is a new concept. In fact, this tension between profitability and corporate social responsibility is mentioned in Rethinking Business Regulation.
The next issue I see, related to the first, is the motivation for a corporation to voluntarily comply. In Rethinking Business Regulation, the author identifies several stages of self-regulation. It seems the corporations with which I’m familiar are in the “defensive” or “compliant” stages, in which they either deny they are part of the problem or adopt a policy but treat compliance as added cost. At that stage, there is little motivation to comply. In fact, compliance could be seen as a competitive disadvantage, and the corporation may be criticized by shareholders. As I see it, this is the role of marketing. I’ve seen examples of sustainable business practices being profitable, and those profitable companies have remained so without using their sustainable practices as a marketing tool, possibly because we’re not accustomed to sustainability (as I use the term in this blog) being a competitive advantage.
This is stupid, but in the interest of time, I’m going to wait to expand on that. What it does present is the opportunity to discuss how hardening regulation could help the corporation. Let’s start with an experiment you’ve already conducted. Walk down the cereal isle in your local grocery store. What proportion of the boxes make some statement using the label “natural”? Now, compare the ingredients of those to each other and to the cereals that are “unnatural”. Differences? It’s been a while since I’ve done this, but if memory serves, you will find unpronounceable ingredients on the boxes labeled “natural”. How can this be? The term “natural” is not regulated. There are no standards that must be met in order to put it on your packaging. As such, it is meaningless. After all, there’s no shortage of naturally occurring yet really nasty compounds.
“Organic” on the other hand is regulated, and the government has set standards that must be met in order for a product to be labeled as such. No matter the product, from soda pop to rolled oats, if it says organic, the ingredients will not have used synthetic fertilizers or pesticides. This is a good thing for consumer and grower alike, as it gives us information about our purchases and a powerful marketing tool for the grower.
This is why corporation could/will benefit from hardening this regulation. It will give them meaningful information that can be used to market their products.
The final thing I’d like to mention are the thoughts that run through my head when pondering business regulation. As I’ve mentioned in the past, my parents are republican in the traditional, small government interpretation of the word. Mom counts Ayn Rand as a formative influence and has voted Libertarian many times. Dad is a small business owner. They’ve had an undeniable influence on my political beliefs. When I read about regulation, it is them I hear, whispering about the inefficiencies of bureaucracies and the pitfalls of unintended consequences, and who can argue they’re wrong? There is a fear that regulation is a trammel, and if our business and industry are trammeled and others’ are not, we will be out-competed, and we will fail. Again, this is a logical, if not appropriate, concern, but it does not take into account the ability of our businesses, industries, and economy to adapt. Agriculture in the U.S. used to be based in large part on slave labor. That system was shown to be unsustainable and the government regulated it. Industry here and abroad used to depend on child labor. That system also was shown to be unsustainable, and it was regulated. Industry adapted. These are examples which the wisdom of time has made obviously unsustainable, but the Civil War shows it was not always so obvious, and a great many people couldn’t conceive of an economy without it. The transition to sustainable business will not be easy, smooth, or straightforward. There will be many setbacks and ample opportunity to question our motivation and efficacy, but I absolutely believe there will come a time when we look back on many of our current business practices with the same disbelief with which we view slavery and child labor.
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