With the fairly recent news of Trump pulling out of the Paris Agreement on climate change, the question of whether or not the private sector will step up when it comes to sustainable development has been popping up everywhere. Regardless of what you think of Trump’s decision, this is an interesting question to consider. Can we really trust all these bloodthirsty corporate leeches to not stake claims to their own holes in the ozone layer and throw radioactive waste into our lakes and rivers? Or at least to try to implement sustainable business practices?
Conférence des Nations Unies sur les changements climatiques – COP21 (Paris, Le Bourget)
Because of the spike in emissions since the Industrial Revolution, many like to blame capitalism for the downfall of own environment. I have even seen an argument that Ontario could eliminate its reliance on “dirty nuclear” by shifting from a five-day workweek to a three-day one. Believe it or not, that is actually one of the more far left-wing opinions I’ve heard regarding this. While the rise in our standard of living involves placing greater demand on the environment, is it far fetched to say we need to completely do away with the free market to save the environment?
Coming back to the question of whether or not we can trust the private sector to step up, here are several sub-questions to also consider:
- Do businesses want to be sustainable?
- What is the point of being sustainable?
- What influences those businesses?
- Who influences those businesses?
To answer the first question, the following two need to be addressed. The main point of being sustainable is environmental preservation, but is there another benefit that would appeal to businesses? Attaining a competitive advantage is generally the driving force for businesses, so it’s safe to assume businesses would want to be sustainable if one benefit of sustainability was competitive advantage. The classical views of business and the environment has been that there is a tug of war between profitability and sustainability when it comes to business strategy. However, there is plenty of evidence to dispute this traditional way of thinking about it, especially as businesses are implementing sustainability initiatives in pursuit of a competitive advantage. It can be further argued that not only is adopting sustainable practices good for business, but it may even be essential for staying competitive in today’s society.
So, who influences businesses? To start, we do! As there can be no profits without customers buying into a product, the trend of customers wanting to do business with environmentally sustainable firms has quite an impact. For example, look at the popularity of brands such as the Body Shop, which has garnered attention for it’s anti-animal and environmentally sustainable stances. The sex appeal of Tesla could also be explained by the drive (no pun was intended while writing this) to try to be more sustainable with electric vehicles.
People also tend to forget that a corporation is made up of a bunch of people that so happen to be human and experience human emotions, such as concern. Sustainability is of great personal importance for quite a few executives, though there is still much room for influence within the firm from employees. A Walker Information survey conducted of 1,694 employees, eighty-six percent of respondents had favourable opinions of their companies’ ethics being committed to their companies, only fourteen percent of respondents had unfavourable views being committed, and forty-two percent of respondents saying that the ethical integrity of a company would influence their choice of employers. Hence, sustainable practices could be an excellent way to attract and retain talent.
Lastly, there is the mere idea of being more sustainable as a means of becoming more efficient, which tends to lead to higher profits in the long run. For example, take a family that decides to invest in new windows to save money on heating and cooling costs. A commercial example would be the oil industry’s development of more durable equipment, reducing the costs of building new equipment and the inputs and environmental impacts of having to do so. While this isn’t the case for every business, environmentally friendly practices could drive down operating costs.
So no, businesses and the private sector as a whole are not evil citadels of death and destruction, willing to stop at nothing to make a profit. Not every company cares about the environment, but the old days of the tug-of-war between profits and sustainability are gone. I could go on for hours about what specific firms are doing in terms of sustainability and innovation, but instead I’m just to finish with a quote from Tom Steyer from the Silicon Valley Leadership Group’s Energy and Sustainability Summit in 2015: “In California, we are a worldwide example that you don’t have to choose between a healthy environment and a strong economy.” Let’s try to follow that example.
Hi Cristina,
I enjoyed reading your article “Make Sustainability Great Again.” Why? Because it is a complex unstructured problem with a multitude of solutions and opportunities.
I’ve let the information you provided in your article ooze and percolate through my brain for a few days to see what reflections would result. Here they are …
With the onset of Social Media, abusers of our shared worldwide environment cannot fly below the radar and hope to evade detection. Bad news travels quickly. Since every decision to purchase a good or service is not merely based on lowest price, customers may turn to other firms who offer competitive solutions without the downside of adverse environmental effects. As such, environmentally inconsiderate purveyors have a higher propensity to endure a loss of business volumes and therefore be at an elevated risk of ongoing sustainability and relevancy. These same businesses may also face potential litigation resulting in diminished profits and even ongoing viability. This is a ugly scenario for the creditors, equity investors and the firm. As an example, I recall an accusation in the automobile industry of software tampering to evade the detection of harmful vehicle emissions. What were the consequences? These included, but were not limited to: (1) strong customer dissatisfaction through the loss of market value in their purchased vehicles (i.e. affecting resale values) (2) loss of new vehicle sales through the damage of brand reputation, (3) degradation in stock price (hurting the equity investors), potentially increased borrowing costs through higher business risk (4) litigation costs and (5) large fines taking a bite out of current period revenue and profit.
On the flip side, businesses who show respect and stewardship for the environment have a competitive advantage. I see this on a personal level. My employer is generally accepting of having employees work from their “Home” office where possible. Shared benefits include: (1) greater employee productivity by redirecting time spent traveling (especially in bad weather) to time spent selling and solving problems, (2) reduced employee stress and improved morale, (3) reduced CO emissions and congestion on the road, and (4) reduced office footprint with lower real estate costs. Though these greater efficiencies the firm’s workforce contributes more to revenue generation, cost reduction and improved customer responsiveness.
I have enjoyed this stimulating exercise Cristina. I hope that I have contributed some helpful perspectives as to why players in our economy need to be ever mindful of the need to be sustainable for their stakeholders and themselves!
Sincerely,
Edward Lescisin, BSc., MBA, CMA, CPA