tag:theconversation.com,2011:/ca/topics/green-business-20441/articlesGreen business – The Conversation2023-03-06T22:10:35Ztag:theconversation.com,2011:article/1978722023-03-06T22:10:35Z2023-03-06T22:10:35ZA new UN report offers businesses a template for achieving true sustainability<figure><img src="https://images.theconversation.com/files/513020/original/file-20230301-1707-v9hpo3.jpg?ixlib=rb-1.1.0&rect=50%2C10%2C6659%2C4406&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">In order for corporate sustainability approaches to actually work, they need to be genuine and authentic.</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><iframe style="width: 100%; height: 100px; border: none; position: relative; z-index: 1;" allowtransparency="" allow="clipboard-read; clipboard-write" src="https://narrations.ad-auris.com/widget/the-conversation-canada/a-new-un-report-offers-businesses-a-template-for-achieving-true-sustainability" width="100%" height="400"></iframe>
<p>Not a day goes by without hearing about the fragility of our natural ecosystems and the <a href="https://doi.org/10.1111/conl.12713">repercussions that extractive economic activity are having</a> on them.</p>
<p>This state of affairs is not recent — it has been ongoing at the very least since <a href="https://www.clubofrome.org/publication/the-limits-to-growth/">the Club of Rome non-profit warned us back in 1972</a> that infinite economic growth and rapid demographic development are incompatible with life on Earth.</p>
<p>The situation today is even worse. Despite <a href="https://unfccc.int/process/bodies/supreme-bodies/conference-of-the-parties-cop">numerous historical conferences</a> and <a href="https://www.washingtonpost.com/opinions/2022/04/04/new-ipcc-climate-report-on-averting-catastrophe/">countless promises</a> to make economic activity more compatible with the capacities of our planet, the environmental progress of the last three decades is not enough to meet the challenges posed by climate change.</p>
<p>While the focus of climate action has often been on greenhouse gas emissions into the atmosphere, we are finally starting to <a href="https://theconversation.com/biodiversity-treaty-un-deal-fails-to-address-the-root-causes-of-natures-destruction-196905">realize the impact of human and industrial activities on biodiversity loss</a>. </p>
<p>Earth’s diminishing biodiversity is exacerbating climate change by inhibiting Earth’s ability to protect and regenerate itself. The services <a href="https://ipbes.net/assessing-knowledge">biodiversity provides us are countless</a>, and the situation remains clear: nature does not need us, but we need it.</p>
<p>We believe a paradigm shift is possible, and that part of this shift will involve the integration of a true sustainability approach in business. But for this approach to work, it needs to be two things: genuine and authentic.</p>
<h2>A landmark report</h2>
<p><a href="https://cdn.unrisd.org/assets/legacy-files/301-info-files/B70382A13E0AE0BDC125841F003C46AC/SDPI---Allen-White-Keynote-Speech.pdf">A true “Brundtland moment”</a> — in reference to the <a href="https://www.britannica.com/topic/Brundtland-Report">landmark 1987 report on sustainable development</a> — is how Global Reporting Initiative co-founder Allen White described the <a href="https://cdn.unrisd.org/assets/library/reports/2022/manual-sdpi-2022.pdf">United Nations’ Authentic Sustainability Assessment report</a>.</p>
<p>White argues that historians will look back on this publication a decade from now as a great historical moment in the trajectory of sustainability. Many other leaders and experts in the sustainability ecosystem agree on <a href="https://sustainablebrands.com/read/new-metrics/un-releases-manual-for-companies-to-conduct-authentic-context-based-sustainability-assessments">the importance and relevance of this report</a>.</p>
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<img alt="A monarch butterfly, with orange wings and black veins, spreads its wings on the stalk of a plant" src="https://images.theconversation.com/files/513018/original/file-20230301-16-tq9bgn.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/513018/original/file-20230301-16-tq9bgn.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=367&fit=crop&dpr=1 600w, https://images.theconversation.com/files/513018/original/file-20230301-16-tq9bgn.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=367&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/513018/original/file-20230301-16-tq9bgn.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=367&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/513018/original/file-20230301-16-tq9bgn.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=461&fit=crop&dpr=1 754w, https://images.theconversation.com/files/513018/original/file-20230301-16-tq9bgn.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=461&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/513018/original/file-20230301-16-tq9bgn.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=461&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Earth’s diminishing biodiversity is exacerbating climate change by inhibiting Earth’s ability to protect and regenerate itself.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Paul Chiasson</span></span>
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<p>Released in November 2022, this report represents the first comprehensive guide to using planetary limits as a reference point in business-oriented sustainability reporting. <a href="https://doi.org/10.1126/science.1259855">Planetary limits</a> set boundaries that humanity can safely develop and live within, without depleting Earth’s resources.</p>
<p>The report is the <a href="https://r3dot0.medium.com/unrisd-ushers-in-a-new-era-of-authentic-sustainability-assessment-with-the-release-of-its-84a1d6761927">culmination of more than four years of research</a>, consultation and advocacy for a new generation of accountability tools. It is, at its simplest, a commitment to bring organizational sustainability assessment into a new era of authenticity. </p>
<p>At its core, the report argues that current business practices are inauthentic and insufficient for achieving true sustainability.</p>
<h2>Sustainability indicators</h2>
<p>Central to the Authentic Sustainability Assessment report is the concept of <a href="https://sdpi.unrisd.org/platform/">Sustainable Development Performance Indicators (SDPIs)</a>. These indicators measure the sustainability performance of businesses, non-profits and other economic organizations using a new and improved approach.</p>
<p>These indicators move away from the old disclosure approach that relies on the idea of extracting infinite resources from a finite planet. Reports that contain this outdated approach include the <a href="https://www.globalreporting.org/">Global Reporting Initiative</a>, <a href="https://www.sasb.org/">Sustainability Accounting Standards Board</a> and the more recent <a href="https://www.ifrs.org/groups/international-sustainability-standards-board/">International Sustainability Standards Board</a>. </p>
<p>SDPIs take a new approach — one that addresses the underlying conditions that compromise sustainable development. It does this by respecting all planetary limits, whether social, economic or environmental.</p>
<p>Conventional disclosure involves comparing peers in the same industry or geography and disclosing one’s “good” performance in comparison to previous years. </p>
<p>SDPIs, on the other hand, involve comparing companies against a scientifically established, context-based sustainability threshold. </p>
<h2>Sustainability thresholds</h2>
<p>An organization’s sustainability performance is expressed in terms of the organization’s impact on vital assets, like planetary limits and social thresholds, compared to sustainability standards. This ensures the well-being of all stakeholders — human and nature alike — that contribute to social, economic and environmental balance.</p>
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<img alt="A crowd of people in suits look at a large screen that says 'S&P TSX composite index' on it" src="https://images.theconversation.com/files/513019/original/file-20230301-16-sfctap.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/513019/original/file-20230301-16-sfctap.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/513019/original/file-20230301-16-sfctap.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/513019/original/file-20230301-16-sfctap.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/513019/original/file-20230301-16-sfctap.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/513019/original/file-20230301-16-sfctap.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/513019/original/file-20230301-16-sfctap.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Stock markets are increasingly requiring publicly traded companies to disclose their sustainability performance.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/ Tijana Martin</span></span>
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<p>According to the report, it is by comparing <em>actual</em> impacts with <em>normative</em> impacts that true sustainability can be assessed.</p>
<p>Take water, <a href="https://theconversation.com/ipcc-report-half-the-world-is-facing-water-scarcity-floods-and-dirty-water-large-investments-are-needed-for-effective-solutions-175578">an increasingly scarce commodity</a>, for example. An organization reducing its water consumption by 35 per cent or saving the most water compared to its competitors does not actually tell us anything about the sustainability of that water consumption.</p>
<p>An organization could be the best at saving water in its industry and still perform poorly in terms of sustainability. Sustainability is not measured by effort, but by the capacity of ecosystems — like planetary limits, pollution and biodiversity — to avoid jeopardizing the resilience of the planet.</p>
<p>Instead, SDPIs recommend comparing water consumption to the capacity of ecosystems and to the actual water needs of living species. It is this balance between actual consumption and resource availability, in light of ecosystem capacity, that will determine the true sustainability of an organization.</p>
<h2>Achieving true sustainability</h2>
<p>As time goes on, businesses will be increasingly required to disclose their sustainability impacts. This will be the case for large European companies starting in 2024, following the enactment of the <a href="https://finance.ec.europa.eu/capital-markets-union-and-financial-markets/company-reporting-and-auditing/company-reporting/corporate-sustainability-reporting_en">Corporate Sustainability Reporting Directive</a>. </p>
<p>Stock markets are also moving in this direction, forcing publicly traded companies to disclose their sustainability performance in the <a href="https://sseinitiative.org/esg-disclosure/">United States</a> and <a href="https://www.cpacanada.ca/en/business-and-accounting-resources/financial-and-non-financial-reporting/sustainability-environmental-and-social-reporting/publications/a-primer-for-environmental-social-disclosure">Canada</a>. </p>
<p>The widespread and concerted adoption of SDPIs around the world can, as part of this growing momentum of disclosure of sustainability performance, foster authentic sustainability that will bring us closer to meeting the magnitude of the challenges ahead.</p>
<p>We must be collectively ambitious and take advantage of the relevance and originality of these new indicators, which offer a new trajectory towards achieving authentic sustainability.</p>
<p><em>Ghani Kolli, Managing Partner at Credo Impact, co-authored this article.</em></p><img src="https://counter.theconversation.com/content/197872/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Sofiane Baba's research projects are regularly funded by MITACS, the Fonds de recherche du Québec – Société et culture (FRQSC) and The Social Sciences and Humanities Research Council (SSHRC).</span></em></p>Recent advancements in the ways organizations measure sustainability performance could lead to a truly authentic approach to sustainability in the business sector.Sofiane Baba, Professeur adjoint en management stratégique, Université de Sherbrooke Licensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1438552020-08-17T10:20:28Z2020-08-17T10:20:28ZGoing green dramatically benefits businesses – it should be central to their coronavirus recovery strategy<figure><img src="https://images.theconversation.com/files/352523/original/file-20200812-22-19d8n1t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://unsplash.com/photos/yx5ecLK7Avw">Yoyo Dy/Unsplash</a>, <a class="license" href="http://artlibre.org/licence/lal/en">FAL</a></span></figcaption></figure><p>The onset of the pandemic and the ensuing lockdown have imperilled businesses worldwide. It will be <a href="https://www.nationalgeographic.co.uk/environment-and-conservation/2020/06/why-covid-19-will-end-up-harming-the-environment">tempting</a> for firms to put any commitment to the environment in the back seat as they attempt to recover, especially as some governments <a href="https://www.nytimes.com/2020/06/01/climate/trump-clean-water-pipelines.html?smid=tw-share">reduce</a> requirements and undermine environmental <a href="https://www.nature.com/articles/d41586-020-01261-4">protection</a>.</p>
<p>This is short-sighted: businesses do not have to sacrifice their environmental goals for protecting their growth. Greening initiatives like offering green products or services, introducing green processes internally, hiring employees to promote sustainable practices, or going beyond compliance requirements, can actually help firms. </p>
<p>Using data on 9,236 small and medium businesses in 35 countries across Europe and the US, <a href="https://link.springer.com/article/10.1007/s11187-017-9942-y">our research</a> suggests that on average, businesses benefit from going green, although the type of greening that gives the most significant benefit may differ between firms. </p>
<p>Here are four main ways that greening can benefit businesses.</p>
<h2>1. Innovative market niches</h2>
<p>By offering new green products or services, a business is more likely to cater to an emerging trend or niche market, which can make it more competitive. Frugalpac, a UK-based company that makes paper-based packaging for liquids that cut <a href="https://www.beveragedaily.com/Article/2020/07/08/Packaging-innovation-Paper-wine-bottle-cuts-carbon-footprint">carbon footprints</a>, received a <a href="https://www.foodbev.com/news/packaging-manufacturer-frugalpac-receives-2m-investment/">£2 million investment</a> during the pandemic – a time when most other companies <a href="https://www.theguardian.com/business/2020/apr/03/its-a-struggle-the-small-business-owners-trying-to-survive-coronavirus-lockdown">were struggling</a> for finance. </p>
<p>Already seeing widespread success for their recycled paper coffee cup, Frugalpac’s innovative <a href="https://www.packaging-gateway.com/features/frugal-cup-wants-to-eliminate-coffee-cup-waste-frugalpac-interview/">paper wine bottle</a>, also made from 94% recycled paper, has led to <a href="https://www.beveragedaily.com/Article/2020/07/08/Packaging-innovation-Paper-wine-bottle-cuts-carbon-footprint">new opportunities</a> and partnerships. </p>
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<p>Companies focused on sustainability can rapidly expand by catering to new niche markets internationally. Consider <a href="https://www.dlight.com/">D’light</a>, a company that offers <a href="https://www.forbes.com/sites/alejandrocremades/2019/04/02/this-entrepreneur-raised-100-million-to-provide-access-to-power-to-2-3-billion-people/#74cc87665d78">innovative lighting solutions</a> for <a href="https://www.strategy-business.com/article/11518?gko=9b3b4">people who do not</a> have access to electricity. The company has transformed the lives of more than 100 million people across 70 countries through its green product offerings while raising <a href="https://www.crunchbase.com/search/funding_rounds/field/organizations/funding_total/d-light-design">US$197 million (£150 million)</a> in investment.</p>
<p>Earlier this year, the Danish energy supplier Ørsted, formerly known as Danish Oil and Natural Gas, <a href="https://www.power-technology.com/news/orsted-named-the-worlds-most-sustainable-company/">was named</a> the most sustainable company in the world. This success followed from its transformation to a <a href="https://www.ft.com/content/74b377c8-4435-11ea-abea-0c7a29cd66fe">green energy supplier</a> – which went hand in hand with <a href="https://www.ft.com/content/6613773c-ddb0-11e8-8f50-cbae5495d92b">accelerated profits</a>.</p>
<p>By catering to new niche markets using green products and services, these businesses have emerged as future leaders in their sectors. Of course, not all companies are suited to finding such niches. But sustainability can be promoted in other ways like green <a href="https://www.nibusinessinfo.co.uk/content/make-your-business-more-sustainable-eight-top-tips">working practices</a> and <a href="https://www.nibusinessinfo.co.uk/content/process-efficiency-cut-waste">processes</a>, for example.</p>
<h2>2. Employee motivation</h2>
<p>Job seekers are <a href="https://www.theguardian.com/careers/2017/feb/15/job-seekers-target-companies-putting-sustainablity-into-practice">increasingly attracted</a> to companies that care for the environment. The employees of firms that promote sustainability are <a href="https://www.nbs.net/articles/three-reasons-job-seekers-prefer-sustainable-companies">more likely to believe</a> that their employer will care for them, and are <a href="https://www.inc.com/news/articles/2011/02/go-green-for-happy-employees.html">more satisfied</a> with their jobs. </p>
<p>Such companies create a higher sense of personal and organisational <a href="https://knowledge.wharton.upenn.edu/article/how-companies-tap-sustainability-to-motivate-staff/">purpose</a> that makes <a href="https://journals.aom.org/doi/10.5465/ambpp.2016.11489abstract">work meaningful</a>. A recent poll shows that millennials and Gen Z’s <a href="https://www.gallup.com/workplace/257786/millennials-worry-environment-company.aspx">are more concerned</a> about the environment than any <a href="https://www.fastcompany.com/90306556/most-millennials-would-take-a-pay-cut-to-work-at-a-sustainable-company">previous generation</a>. This means they <a href="https://uk.finance.yahoo.com/news/millennials-are-looking-for-greener-places-to-work-100130612.html">prioritise employers</a> who put sustainability at the forefront.</p>
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<img alt="" src="https://images.theconversation.com/files/352498/original/file-20200812-24-16ci05p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/352498/original/file-20200812-24-16ci05p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/352498/original/file-20200812-24-16ci05p.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/352498/original/file-20200812-24-16ci05p.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/352498/original/file-20200812-24-16ci05p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/352498/original/file-20200812-24-16ci05p.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/352498/original/file-20200812-24-16ci05p.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Millenials and Gen Z’s are more worried about the environment than any previous generations.</span>
<span class="attribution"><a class="source" href="https://unsplash.com/photos/-AXDunSs-n4">LinkedIn Sales Navigator/Unsplash</a>, <a class="license" href="http://artlibre.org/licence/lal/en">FAL</a></span>
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<p>By some estimates, companies that follow green practices have a <a href="https://onlinelibrary.wiley.com/doi/abs/10.1002/job.1827">16% boost</a> in employee productivity. Although establishing a direct causal link can be difficult, some of the <a href="https://www.corporateknights.com/reports/2020-global-100/2020-global-100-ranking-15795648/">greenest companies</a>, such as Cisco, <a href="https://www.themuse.com/advice/20-companies-that-employees-seriously-love-working-for">Tarmac</a> or <a href="https://www.stantec.com/en/news/2020/stantec-one-of-the-most-sustainable-corporations-in-the-world">Stantec</a>, are also considered the <a href="https://fortune.com/best-companies/2020/search/">greatest companies</a> by employees.</p>
<h2>3. More engagement</h2>
<p>Greening initiatives signal to external stakeholders, such as investors and customers, that a business is committed to doing good. This can lead to increased investment, customers and stakeholder loyalty. This is pertinent in the aftermath of COVID-19 as there is <a href="https://www.bcg.com/en-gb/publications/2020/pandemic-is-heightening-environmental-awareness">heightened awareness</a> about the need to protect the environment. </p>
<p>For example, highly sustainable companies benefit from superior stock market performance in the long run, according to research looking at American companies in the period 1993-2009. Investors are increasingly <a href="https://hbr.org/2019/05/the-investor-revolution">questioning firms</a> on their commitment to sustainability, and expecting meaningful steps from them for integrating consideration of such issues into their investing criteria. This is reflected by the <a href="https://www.bloomberg.com/news/articles/2019-04-01/global-sustainable-investments-rise-34-percent-to-30-7-trillion">tenfold increase</a> in global sustainability investment to US$30.7 trillion by April 2019 since 2004. </p>
<p>More recently, Polysolar, a company that makes glazed windows that generate electricity, has secured <a href="https://www.crowdcube.com/companies/polysolar-limited/pitches/byJ1Nq">more than double</a> the investment it sought on crowdfunding platform Crowdcube. And large companies such as Unilever have benefited from increased stakeholder engagement and <a href="https://sustainablebrands.com/read/marketing-and-comms/marketing-for-social-change-how-to-profitably-use-your-brand-power-as-a-force-for-good">loyalty</a> by adopting <a href="https://www.foodbev.com/news/unilever-to-invest-1bn-euros-in-sustainability-projects/">greening practices</a> and <a href="https://www.campaignlive.co.uk/article/unilevers-sustainable-brands-grow-almost-50-faster-rest-business/1464443">products</a>, addressing a dark history of <a href="https://www.telegraph.co.uk/news/earth/earthnews/3340285/Unilever-accused-over-rainforest-destruction.html">environmental exploitation</a>. </p>
<h2>4. Increased efficiency</h2>
<p>Greening processes can result in efficiency gains by reducing energy costs, allowing businesses to secure <a href="https://www.gov.uk/green-taxes-and-reliefs">green tax credits</a>, improving operational efficiency, and embedding <a href="https://www.europarl.europa.eu/news/en/headlines/economy/20151201STO05603/circular-economy-definition-importance-and-benefits">circular economy</a> principles internally. </p>
<p>Such gains directly translate into commercial benefits. As many as <a href="https://www.sms-plc.com/insights/blogs-news/75-of-businesses-enjoy-commercial-benefits-after-investing-in-green-technology/">75% of UK businesses</a> that invested in green technologies subsequently enjoyed commercial benefits, even if financial concerns pose barriers to making these green investments in the first place. For large companies such as Proctor & Gamble, these gains can <a href="https://www.environmentalleader.com/2015/12/pg-saves-almost-2-billion-in-waste-energy-costs/">run into billions</a> of pounds.</p>
<p>Conversely, in cases where businesses harm the environment, they have to be prepared to incur significant costs. A prominent example is the famous case of Volkswagen, which has even <a href="https://knowledge.insead.edu/economics-finance/how-the-volkswagen-scandal-turned-made-in-germany-into-a-liability-12196">adversely impacted</a> the performance of other German car manufacturers like BMW and Mercedes Benz.</p>
<p>For all these reasons, time is ripe for business to go green.</p><img src="https://counter.theconversation.com/content/143855/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jagannadha Pawan Tamvada is affiliated with iPowerz, the Centre for India and Global Business at Cambridge, and India Global, a think-tank based in the United States and India. </span></em></p><p class="fine-print"><em><span>Mili Shrivastava does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>There are four main ways that greening can benefit businesses.Jagannadha Pawan Tamvada, Associate Professor in Strategy and Innovation, University of SouthamptonMili Shrivastava, Senior Lecturer in Strategy, Bournemouth UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1318172020-04-28T12:13:11Z2020-04-28T12:13:11ZCOVID-19 is a dress rehearsal for entrepreneurial approaches to climate change<figure><img src="https://images.theconversation.com/files/328148/original/file-20200415-153326-gy0vy6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Business closures and recent rain contribute to Los Angeles' recent uptick in air quality.</span> <span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Virus-Outbreak-Air-Quality/bebbd9180b7749c6ad0fa33f1736a75c/3/0">AP Photo/Chris Pizzello</a></span></figcaption></figure><p>As the U.S. struggles to control the COVID-19 pandemic, some experts have suggested that we can learn something about <a href="https://medium.com/@chuck.kutscher/the-coronavirus-and-climate-change-how-were-making-the-same-mistakes-2cd01cce2295">how to address climate change</a> from this crisis.</p>
<p><a href="https://medium.com/@green_stimulus_now/a-green-stimulus-to-rebuild-our-economy-1e7030a1d9ee">Climate and social policy experts</a> are recommending green stimulus packages to restart the economy. As a <a href="https://scholar.google.com/citations?user=Z3O4-EEAAAAJ&hl=en">professor of sustainability and entrepreneurship</a>, I see COVID-19 bringing the predicted future <a href="https://www.healthaffairs.org/do/10.1377/hblog20181218.278288/full/">human health implications</a> of climate change to horrifying life. Like COVID-19, climate change could increase respiratory illness and strain infrastructure.</p>
<p>However, just as with COVID-19, entrepreneurship can offer solutions to these challenges.</p>
<h2>Searching for a solution</h2>
<p>Saving <a href="https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources">small businesses</a> is a central part of recovering from the pandemic. At the same time, entrepreneurs are innovating to preserve their business and help <a href="https://www.cnbc.com/2020/04/15/hot-spots-of-innovation-as-a-result-of-coronavirus-pandemic.html">address the challenges of COVID-19</a>.</p>
<p>The same thing is already happening with climate change. When entrepreneurs offer solutions that create simultaneous ecological and economic benefits, it is called “environmental entrepreneurship.” My research shows that such entrepreneurship happens in three ways.</p>
<p>First, successful environmental entrepreneurs tend to see themselves as <a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/joms.12198">both environmentalists and businesspeople</a>. Because of this, they often recruit investors, employees and customers from a broader group than traditional startups. Some offer a hope of reducing carbon emissions through new technologies. Others are small business heroes, creating jobs and building new industries.</p>
<p>Second, environmental entrepreneurs are attuned to different signals than large firms are.</p>
<p>While they are encouraged by environmentalist beliefs, we have also found that the <a href="http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.183.4865&rep=rep1&type=pdf">importance of family</a> can predict the number of environmental entrepreneurs in a state. Our research shows that solar energy companies are more likely to form in states that value not only the environment, but also family relationships.</p>
<p>Further, while large firms tend to respond to government-driven policy and economic indicators, environmental entrepreneurs respond to more subtle signals, such as local values. In the green building industry, environmental entrepreneurs ignore economic indicators, but are encouraged by <a href="https://onlinelibrary.wiley.com/doi/abs/10.1002/smj.2187">local beliefs and activism</a>. In short, they move first, taking on risk before the evidence is in.</p>
<p>Third, environmental entrepreneurs make a difference. <a href="https://doi.org/10.5465/amj.2015.0769">We looked</a> at the effect of various policies, activism and business practices on the adoption of new technologies like green building and renewable energy. We then divided the U.S. into more politically conservative and liberal regions to see whether policies, activism or business practices mattered more under different norms.</p>
<p>We found that the only consistent factor that increased green building adoption in both types of political environments was the number of environmental entrepreneurs. These findings suggest that when a critical mass of entrepreneurship occurs, the political divide on climate change fades away, and <a href="https://pubsonline.informs.org/doi/10.1287/orsc.2014.0918">we see a rapid uptick in adoption</a> of environmentally beneficial practices.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/331066/original/file-20200428-110742-7dtn3i.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/331066/original/file-20200428-110742-7dtn3i.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/331066/original/file-20200428-110742-7dtn3i.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/331066/original/file-20200428-110742-7dtn3i.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/331066/original/file-20200428-110742-7dtn3i.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/331066/original/file-20200428-110742-7dtn3i.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/331066/original/file-20200428-110742-7dtn3i.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Solar entrepreneurship thrives in states that value the environment and families.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Affordable-Housing-New-York/dacaf25fec16417bb585d46571cc8382/1/0">AP Photo/Mark Lennihan</a></span>
</figcaption>
</figure>
<h2>Climate conclusions</h2>
<p>A variety of <a href="https://www.project-syndicate.org/commentary/covid19-green-deal-by-sandrine-dixson-decleve-et-al-2020-03">proposals before Congress would encourage a green recovery</a> by focusing on policy to simultaneously address climate change and the recession, but these plans will likely become mired in the political debate that <a href="https://www.huffpost.com/entry/green-new-deal-democratic-debate_n_5d40fc03e4b0db8affb01462?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAALJCf5SPRpxyBe5GgiLlybawJi31oXTcKQ22OcMgOQHozg17Abnv_Con27ps8xuLZ7E9VWeNIJ0aeLdzSVFcoHqruLYgJpbTRlqMhgIDP0pvd0VWyUhcUUHHrpf0y2NmdfJwwJAnZZXyT5ELx-i6OcLyUwGOASGhYSUtBfIBAxdC">entangled the Green New Deal</a>.</p>
<p>Here’s what I’d suggest. Laser-focus on the creation of new small businesses as a way to rebuild, offering consulting, technical training and tax incentives.</p>
<p>By focusing on new ventures, those on both sides of the political aisle can rebuild an economy focused on long-term environmental sustainability and economic stability.</p>
<p>[<em>Insight, in your inbox each day.</em> <a href="https://theconversation.com/us/newsletters?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=insight">You can get it with The Conversation’s email newsletter</a>.]</p><img src="https://counter.theconversation.com/content/131817/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jeffrey York does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The response to COVID-19 suggests how we can leverage entrepreneurial approaches to climate change.Jeffrey York, Associate Professor of Strategy and Entrepreneurship, University of Colorado BoulderLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/797282017-06-22T00:53:56Z2017-06-22T00:53:56ZGovernment action isn’t enough for climate change. The private sector can cut billions of tons of carbon<figure><img src="https://images.theconversation.com/files/174808/original/file-20170620-11735-xutxwh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Businesses can make up for inaction on climate by government by investing in energy and fuel efficiency. </span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/walmartcorporate/5367638998/in/photolist-9bjy4Y-9bjwuN-92a27m-91XoNQ-91GN2j-8ZUBSr-9dqSQ7-91XmwS-91HbMW-91XnQA-8ZUXsB-91XrvC-95HXC2-97Hn6K-91XnNq-926TrD-9wuwDM-926Tpr-8ZxKxw-91Xo9j-91UjyZ-91XqtE-8ZUXtM-9dyhnV-9dycKR-9dqUbd-92a1ZQ-8ZUXqi-9wxvJN-8ZY3Ru-95M197-8ZXPUN-926TsT-91Xt5q-91Mvvu-926Txi-91MvYs-9dnMfF-97Hfv8-9uPDV7-9wuwzn-92a1X5-91XrEY-91Xs2w-926Tjk-91UhPH-91HbV3-8ZUXhX-91GN1W-8ZUBcR">Walmart/flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>With President Trump’s announcement to pull the United States out of the Paris Agreement, many other <a href="https://theconversation.com/trumps-exit-of-paris-climate-accord-strengthens-china-and-europe-78653">countries</a> around the world – and cities and states within the U.S. – are stepping up their commitments to address climate change. </p>
<p>But one thing is clear: Even if all the remaining participating nations do their part, governments alone can’t substantially reduce the risk of <a href="https://www.epa.gov/sites/production/files/2014-12/documents/incorporating_catastrophic_climate-change_into_policy_analysis.pdf">catastrophic</a> climate change.</p>
<p>We’ve studied the role of the <a href="http://www.powells.com/book/beyond-politics-9781316632482">private sector in addressing climate change</a>, and we’re convinced that the next stage is going to require more than just political agreement. What is needed is a concerted effort to mobilize private action – not just corporations but also religious and civic organizations, colleges and universities, investors and households – to help narrow the gap that remains after the Paris Agreement.</p>
<h2>The Paris gap</h2>
<p>Under current policies, global emissions are on a path toward a world with temperatures more than <a href="http://climateactiontracker.org/publications/publication/154/Analysis-of-current-greenhouse-gas-emission-trends.html">3 degrees Celsius</a> (5.4 degrees Fahrenheit) above preindustrial temperatures. The Paris Agreement emphasized the need to keep warming “well below” 2°C and ideally reach a reduction of 1.5°C. The accord includes national pledges to reduce emissions, which are to be updated every five years to move the world closer to the temperature target. </p>
<p>Although the agreement takes a significant first step, without additional steps the world will fall <a href="http://climateactiontracker.org/assets/publications/briefing_papers/CAT_2017_Tracking_Progress.pdf">far short</a> of even the more modest goal.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/174809/original/file-20170620-2627-19dcdnc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/174809/original/file-20170620-2627-19dcdnc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/174809/original/file-20170620-2627-19dcdnc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/174809/original/file-20170620-2627-19dcdnc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/174809/original/file-20170620-2627-19dcdnc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/174809/original/file-20170620-2627-19dcdnc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=501&fit=crop&dpr=1 754w, https://images.theconversation.com/files/174809/original/file-20170620-2627-19dcdnc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=501&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/174809/original/file-20170620-2627-19dcdnc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=501&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Without faster cuts in the rate of carbon emissions, the chances of severe heat events, like the one in Arizona this week, will go up.</span>
<span class="attribution"><span class="source">AP Photo/Ross D. Franklin</span></span>
</figcaption>
</figure>
<p>This is the Paris gap – the difference between the goals of the Paris Agreement and what it will actually achieve over the next decade, even if all countries fully comply with their commitments. <a href="http://infographics.pbl.nl/indc/">A detailed scientific assessment</a> by the PBL Netherlands Environmental Assessment Agency found that by 2030 this gap would reach 12-14 billion tons per year even if all countries including the U.S. meet their targets.</p>
<p>The Paris Agreement sets up a process for countries to add new commitments for the period after 2025, but here’s the catch: The Paris gap is so large that waiting until then brings risks. Although no one can predict all the effects of a global temperature increase of 3°C or more, an increase in this range will <a href="https://www.nap.edu/catalog/21852/attribution-of-extreme-weather-events-in-the-context-of-climate-change">almost certainly</a> amplify the <a href="http://news.nationalgeographic.com/2017/06/heatwaves-climate-change-global-warming/">frequency and severity of deadly heat waves around the world</a>. It will also increase the likelihood of crossing tipping points that could make the consequences of climate change, such as sea level rise, much worse. Waiting a decade for additional national commitments is a <a href="https://theconversation.com/managing-climate-risk-in-trumps-america-67746?sr=8">risky option</a>.</p>
<p>So how should we close the Paris gap? Until now, global climate change efforts have largely focused on actions by national, regional and local governments – all of which will be <a href="https://theconversation.com/are-we-overreacting-to-us-withdrawal-from-the-paris-agreement-on-climate-78741">critical</a> to closing the gap. But governments are not the only actors that can make a difference: corporations, citizens and nonprofits can make an important, and perhaps essential, contribution, even if they cannot solve the entire problem.</p>
<p>We’ve already seen private actors respond to the U.S. withdrawal from the Paris Agreement. For example, the <a href="http://wearestillin.com/">We Are Still In initiative</a> is a coalition of businesses, colleges and universities, and cities and counties. And on June 20, the <a href="https://www.clcouncil.org">Climate Leadership Council</a> – a collection of big businesses, environmental advocacy groups and individuals – launched, calling for policy action on climate change. </p>
<p>Our assessment finds that private actions can close 10 percent to 30 percent of the Paris gap over the next decade. This can reduce the cost of climate mitigation and allow the politic consensus to catch up with the scientific consensus, although it is not a substitute for government action. </p>
<h2>Vast potential</h2>
<p>Private actors – including corporations, civic and advocacy groups, private citizens, and even the Catholic Church – played an important role in pushing nations to make commitments in Paris, but lobbying for government action is not the only role for the private sector. These private actors are sources of emissions that can reduce emissions directly and independently of government policies.</p>
<p><a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2533643">In an article published in the Columbia Environmental Law Journal,</a> we have shown how private climate efforts can deliver a billion tons of emissions reductions per year over the next decade from the corporate and household sectors. These reductions are not enough by themselves to limit global warming to 2°C or 1.5°C, but together with national and international efforts, they can improve the odds of preventing catastrophic climate change.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/174806/original/file-20170620-2627-oace3m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/174806/original/file-20170620-2627-oace3m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/174806/original/file-20170620-2627-oace3m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/174806/original/file-20170620-2627-oace3m.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/174806/original/file-20170620-2627-oace3m.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/174806/original/file-20170620-2627-oace3m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/174806/original/file-20170620-2627-oace3m.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/174806/original/file-20170620-2627-oace3m.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">All parts of society, including churches, corporations and advocacy groups, need to take steps to reduce emissions to meet temperature targets.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/mikecogh/14744726306/in/photolist-osWzr5-ouGeuT-bA3Sts-ceiq1J-b2cBTR-pJMTvz-ae6ETa-qHaEmM-pFukfu-b2cW8R-ceir5N-egdkmX-5nocvk-4gb4E1-qrWsu8-b2cwDn-qauZzM-6NYF7g-bv9Hyq-5nocAi-puXchb-6bsx9w-ceiodh-cxNdHu-pvbB6B-rnoN3b-qawr8g-bJ4tb8-6bojKa-6bojK4-n5D5th-rnp1as-qGXzbG-ceiqSq-ceipqw-rDRurm-ceiqY5-bWW1up-rnoMWE-rDXhfi-rnp2Qb-ceipco-ceipNy-ceipjG-ceioxu-bWW3kt-bWW2Pn-rkCLn8-qawqnP-bWW3EB">Michael Coghlan/flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<p>Corporations can make significant reductions in emissions by increasing energy efficiency, investing in research and development, and insisting on emissions reductions from suppliers. For example, Walmart’s recent joint initiative with the Environmental Defense Fund reduced Walmart’s cumulative supply chain emissions over the last five years by <a href="http://business.edf.org/files/2016/02/EDF-Walmart-10-Year-Journey-Case-Study.FINAL_.pdf">28 million metric tons of carbon dioxide</a>, and <a href="http://news.walmart.com/2017/04/19/walmart-launches-project-gigaton-to-reduce-emissions-in-companys-supply-chain">Walmart recently pledged</a> to reduce its cumulative emissions between now and 2030 by one billion tons, which would be equivalent to the entire emissions of <a href="https://www.energy.gov/sites/prod/files/2013/11/f4/energy_use_and_loss_and_emissions_iron.pdf">the U.S. Iron and Steel Industry</a> over that period. </p>
<p>At the household level, efforts to improve the energy efficiency of homes and provide households with feedback on their energy use, including real-time data on energy use, data in monthly bills and energy efficiency ratings for residential rentals and sales, can make a significant impact on emissions. As we have shown in <a href="http://www.pnas.org/content/106/44/18452">an article in the Proceedings of the National Academy of Sciences</a>, within the next 10 years, simple household energy efforts in the United States could reduce annual emissions reductions by more than 450 million metric tons of carbon dioxide, which is much more than the total emissions by the host country for the Paris Agreement – France.</p>
<h2>Speed of essence</h2>
<p>Nonprofits, such as churches, colleges and universities, hospitals and civic organizations, are also starting to get in on the effort to close the Paris gap, but they can do more. For example, Pope Francis has spoken eloquently about the <a href="https://theconversation.com/the-pope-climate-change-and-the-cultural-dimensions-of-the-anthropocene-44812?sr=1">moral and religious imperative of addressing climate change</a> and has supported the national commitments in the Paris Agreement. We have calculated that the Catholic Church has emissions comparable to a medium-sized country, such as Chile. If the Church made a major commitment to reduce emissions from its own operations, in addition to pushing governments to act, it could make a significant difference on its own. </p>
<p>With or without the United States, the Paris Agreement demonstrates that the international process can take important steps, but it will not yield emissions reductions with the speed and magnitude necessary to achieve its goals. What is needed now is a new focus on the private sector – a global effort by corporations, citizens and nonprofits.</p><img src="https://counter.theconversation.com/content/79728/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michael Vandenbergh receives funding for private governance research from the Vanderbilt Trans-Institutional Programs (TIPs) fund</span></em></p><p class="fine-print"><em><span>Jonathan M. Gilligan receives funding from the U.S. National Science Foundation and the U.S. Office of Naval Research. He is a member of the American Association for the Advancement of Science, the American Geophysical Union, the American Meteorological Society, the American Physical Society, the American Institute for Sri Lankan Studies, the Institute for Operations Research and the Management Sciences, the Union of Concerned Scientists, the Erdos Institute, the Electronic Frontier Foundation, and the American Civil Liberties Union.</span></em></p>Without the private sector cutting carbon emissions – rather than just lobbying the government for action on climate – the world will never reach the temperature targets of the Paris Agreement.Michael Vandenbergh, David Daniels Allen Distinguished Chair of Law, Vanderbilt UniversityJonathan M. Gilligan, Associate Professor of Earth & Environmental Sciences, Vanderbilt UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/701662016-12-12T03:39:59Z2016-12-12T03:39:59ZTrump, carbon neutrality and the next phase of business sustainability<figure><img src="https://images.theconversation.com/files/149478/original/image-20161209-31396-19d1ano.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Google last week announced that it is on target to power its operations 100 percent by renewable energy, an example of businesses trying to change the energy system.</span> <span class="attribution"><a class="source" href="https://pixabay.com/en/wind-farm-windmills-turbines-energy-538576/">Pixabay</a></span></figcaption></figure><p>The Trump administration appears to be moving in one direction on the issue of climate change with the appointment of climate skeptic <a href="http://www.nytimes.com/2016/12/07/us/politics/scott-pruitt-epa-trump.html">Scott Pruitt</a> to head up the Environmental Protection Agency (EPA) and a transition team led by and stacked with <a href="http://www.utilitydive.com/news/report-trumps-pro-fossil-fuel-transition-team-worries-climate-advocates/431943/">fossil fuel interests</a>. </p>
<p>Yet many within corporate America are heading in another direction. Consider Kevin Butt, <a href="http://toyotanews.pressroom.toyota.com/article_display.cfm?article_id=2195">regional environmental sustainability director</a> for Toyota Motor North America, and his charge to take the company “beyond zero environmental impact” by reducing and eventually eliminating CO₂ emissions from vehicle operation, manufacturing, materials production and energy sources by 2050.</p>
<p>This type of effort is not as crazy as it may seem. Solutions to climate change require new types of aggressive thinking. While <a href="http://unfccc.int/paris_agreement/items/9485.php">global treaties</a> to reduce greenhouse gas emissions are important, they are not enough. Eventually society has to go carbon neutral, and then it has to go <a href="http://energy.umich.edu/research/projects/beyond-carbon-neutral">carbon negative</a>.</p>
<p>The ultimate responsibility for making this shift is falling first and foremost on business. Companies are developing the next buildings we live and work in, the clothes we wear, the food we eat, the forms of mobility we employ and the energy systems that propel them. With their unmatched powers of ideation, production and distribution, business is the only entity that can bring the change we need. Indeed, if there are no solutions coming from the business world, there will be no solutions at the necessary scale. </p>
<p>While business has been addressing sustainability challenges <a href="http://www.sup.org/books/title/?id=3692">since the 1990s</a>, and climate change since the 2000s, the focus of this effort is now at an inflection point, as Toyota’s “beyond zero impact” effort shows. Rather than looking to government for solutions, many businesses are taking responsibility for climate change seriously and changing the system on their own. </p>
<h2>Business sustainability 1.0: Enterprise integration</h2>
<p>Over the past quarter-century, companies have framed environmental sustainability as a market shift that fits into the existing ways of managing a business, an approach that we at the <a href="http://erb.umich.edu/">Erb Institute</a> call Enterprise Integration. The notion is that <a href="https://www.amazon.com/Competitive-Environmental-Strategy-Changing-Landscape/dp/1559637722">key business constituents</a> bring sustainability to the business through existing corporate functions, thereby making it a strategic concern. </p>
<p>For example, <a href="http://webuser.bus.umich.edu/ajhoff/books/2006%20Pew%20Report.pdf">Whirlpool</a> is innovating on appliance energy efficiency, not because of corporate social responsibility, but because it has watched energy efficiency move from number 10 or 12 in consumer priorities in the 1980s to number three, behind cost and performance. And it expects those concerns will continue to grow. Similarly, most auto companies are moving into hybrid and electric drivetrains because they see electrification as the <a href="http://www.aol.com/article/2012/01/26/how-the-chevy-volt-became-a-political-punching-bag/20157651/">future of the sector</a>. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/149481/original/image-20161209-31383-1pqxq9w.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/149481/original/image-20161209-31383-1pqxq9w.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/149481/original/image-20161209-31383-1pqxq9w.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/149481/original/image-20161209-31383-1pqxq9w.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/149481/original/image-20161209-31383-1pqxq9w.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/149481/original/image-20161209-31383-1pqxq9w.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/149481/original/image-20161209-31383-1pqxq9w.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/149481/original/image-20161209-31383-1pqxq9w.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Like Toyota and its hybrid Prius program, GM invested in electric cars such as the Chevy Volt (seen here in production) to be part of the auto industry’s move to electrification, not solely to meet government mandates.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/wiredphotostream/6302997579/in/photolist-aAYvA4-7ByCq8-6SbjWB-7ByCyk-9BZ8zC-7QscM4-aPgj5z-8fchRD-7x4DAf-7nXcqc-amUT74-amXrZd-5PX9GZ-8fcfRr-aEJnyj-ebVZSf-aEJmkw-aEEwLB-aEExAv-aEEvnV-9R27c2-yGSo6-4nj4Tz-cXmTxb-99JTzb-7A6YR1-7M1N7n-8hm4MK-9BWrSz-97MNdw-9BWrzB-7M5Lmh-ajT1qY-dxZFY3-7Le1P2-cXmTAL-ajQbyv-b76tU2-amXFxQ-amUDNn-6e5MXH-cXmTz3-ajT7jL-4zqdYA-6fcF7V-7M5LdQ-6Sfqh3-9pDB6N-bW3MrH-7oxrqX">Jim Merithew/Wired.com</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc/4.0/">CC BY-NC</a></span>
</figcaption>
</figure>
<p>To make the business case, companies turn to traditional sources and motivations. Once insurance companies apply sustainability pressures on the business, the issue becomes one of risk management. From competitors, it becomes an issue of strategic direction. From investors and banks, it becomes an issue of capital acquisition and cost of capital. From suppliers and buyers, it becomes an issue of supply chain logistics. From consumers, it becomes an issue of market demand. </p>
<p>Put in such terms, much of the specific language of sustainability recedes, being replaced by the core language of standard business strategy. As such, companies can remain agnostic about the science of particular issues (such as climate change) but still recognize their importance as business concerns. In doing so, they are turning the false dichotomy between the economy and the environment on its head.</p>
<p>Indeed, recent surveys show that <a href="http://sloanreview.mit.edu/projects/sustainabilitys-next-frontier/">85 percent</a> of business executives believe that climate change is real (well above the national average of <a href="http://www.gallup.com/poll/190010/concern-global-warming-eight-year-high.aspx">64 percent</a>) and more than <a href="https://www.unglobalcompact.org/docs/news_events/8.1/UNGC_Accenture_CEO_Study_2010.pdf">90 percent</a> of CEOs believe that sustainability in general is important to a company’s profits. This leads more businesses to develop sustainability strategies, create positions like <a href="http://www.forbes.com/sites/hbsworkingknowledge/2014/10/08/what-do-chief-sustainabilty-officers-do/#5ebdb2ef1a96">chief sustainability officer</a> to carry them out and publish <a href="https://www.globalreporting.org/Pages/default.aspx">annual reports</a> on sustainability to track and share the results. This is the first model of business sustainability and it would seem to be setting us on a path to becoming more sustainable.</p>
<p>But, not so fast.</p>
<p>As promising as these developments are, our world continues to become less, not more, sustainable, and the nature of the problems we face are markedly different than they were in the 1990s. To mark this shift, scientists have proposed that we have left the Holocene and entered the <a href="http://www.nature.com/nature/journal/v415/n6867/full/415023a.html">Anthropocene</a>, a new geologic epoch that acknowledges that humans are now a <a href="https://theconversation.com/an-official-welcome-to-the-anthropocene-epoch-but-who-gets-to-decide-its-here-57113">significant operating force within the Earth’s ecosystems</a>. </p>
<p>Recognition of the Anthropocene has broad implications for how we think about business sustainability. Rather than fitting sustainability into the existing models of the market, we must now recognize that the market is taking control of natural systems with potentially catastrophic consequences. Climate change, ozone depletion, droughts, wildfires, food insecurity, water scarcity and the social unrest that results all point to a fundamental system failure created by our market (and political) institutions. </p>
<p>As a result, the first phase of business sustainability – integrating these practices within core corporate functions – is inadequate for the scope of the issues we now face. Using this model, we are slowing the velocity at which we are approaching a <a href="https://theconversation.com/to-manage-earth-in-the-anthropocene-we-need-to-focus-on-systems-change-38452">system collapse</a>, but we are not averting that eventual outcome. A new model of thinking is emerging. </p>
<h2>Sustainability 2.0: Market transformation</h2>
<p>The next mode of business sustainability, which we call market transformation, involves corporations making <a href="http://yalebooks.com/book/9780300158434/sustainability-design">systemic changes</a> in the business environment. It sees the corporation as a positive force in society, ameliorating our legacy of harm and mitigating the impacts from a global population expected to reach nine billion by 2050. </p>
<p>We can already see some of the <a href="https://theconversation.com/capitalism-must-evolve-to-solve-the-climate-crisis-47338">elements of this shift</a> coming into view. Here are some core tenets of this change to creating sustainability: </p>
<ul>
<li><p>Focus on the <a href="http://www.sup.org/books/title/?id=22399">system</a>. The notion of an energy company installing a windfarm and calling itself sustainable makes no empirical sense. A more sustainable energy system incorporates the whole grid, encompassing generation, transmission, distribution, use and mobility. <a href="http://www.nytimes.com/2016/12/06/technology/google-says-it-will-run-entirely-on-renewable-energy-in-2017.html">Google</a>, for example, plans to run all of its data centers entirely from renewable energy by 2017. This goes far beyond a token commitment, creating a hedge against <a href="https://www.ceres.org/resources/reports/power-forward-why-the-world2019s-largest-companies-are-investing-in-renewable-energy/view">future energy volatility</a> by changing the overall energy system on which the company depends.</p></li>
<li><p>Involve the entire supply chain. Systemic approaches to business sustainability require a broader consideration of operations and supply chain logistics, using concepts such as <a href="http://css.snre.umich.edu/">life cycle analysis</a>, <a href="http://cie.research.yale.edu/">industrial ecology</a> and the <a href="https://www.ellenmacarthurfoundation.org/circular-economy/overview/concept">circular economy</a> to reduce material and energy use among all the constituents in the supply chain.</p></li>
<li><p>The government as collaborator. Since the days of Adam Smith, government has been the <a href="https://www.technologyreview.com/s/602490/capitalism-behaving-badly/">arbiter of the market</a>, helping to set the rules in the service of humans and adapting to changes as needed. You can’t price-fix, you can’t collude, you can’t sell drugs; we accept these as rules of the market. In the future, the market will restrict (or eliminate) the emission of greenhouse gases as a way to promote economic growth, not hinder it. Forward-thinking companies seek ways to constructively participate in policy formation.</p></li>
<li><p>Questioning our standard models and metrics. Ultimately, market transformation is prompting a reexamination of the models now used to understand and explain the market, such as <a href="http://www.mckinsey.com/global-themes/long-term-capitalism/redefining-capitalism">neoclassical economics</a> and <a href="https://www.brookings.edu/research/the-problem-of-corporate-purpose/">principal-agent theory</a>. Both of these are built on rather dismal simplifications of human beings as largely untrustworthy and driven by avarice, greed and short-term thinking. Anyone in business will tell you that their motivations and resultant strategies are far more complex. For example, some, like former GE CEO Jack Welch, are questioning the assumption that <a href="http://www.forbes.com/sites/stevedenning/2013/06/26/the-origin-of-the-worlds-dumbest-idea-milton-friedman/#205a8e58214c">the singular purpose of the corporation</a> is to make money for its shareholders. </p></li>
<li><p>As these models are questioned, new ones are emerging, from <a href="http://capitalinstitute.org/regenerative-capitalism/">regenerative capitalism</a> to <a href="http://www.collaborativeconsumption.com/">collaborative consumption</a>, from <a href="http://www.conflictfreesourcing.org/">conflict-free sourcing</a> to the <a href="http://www.economist.com/news/leaders/21573104-internet-everything-hire-rise-sharing-economy">sharing economy</a>.</p></li>
</ul>
<h2>Different from the Reagan years</h2>
<p>These are just some of the emergent notions of a new framework for corporate sustainability. Companies are altering the systems in which they operate, driving entire industries toward a set of market rules that bring us toward a sustainable future. </p>
<p>So, while President-elect Trump’s approach to the EPA bears similarities to <a href="https://theconversation.com/climate-change-and-the-presidential-race-lessons-from-the-reagan-years-66194">President Reagan</a>’s attempts to roll back environmental regulations in the 1980s, and likely faces a similar backlash, there is one big difference; some of that backlash will come from businesses who are leading on greenhouse gas reductions and renewable energy and not fighting government-led environmental policies as they did in the 1980s. To get a sense of the shifting economic landscape, <a href="https://www.bloomberg.com/news/articles/2016-05-25/clean-energy-jobs-surpass-oil-drilling-for-first-time-in-u-s">jobs in the clean energy sector</a> exceeded those in oil drilling for the first time in 2016 and continue to grow. Indeed, many within these and other sectors are <a href="https://www.theguardian.com/environment/2016/dec/01/climate-change-donald-trump-us-companies?CMP=share_btn_tw">already pushing back</a> on Trump’s dismissal of climate change and continuing with strategies of their own.</p>
<p>They will do this with, or <a href="http://www.nytimes.com/2016/12/08/us/politics/trump-climate-epa-coal-jobs.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=first-column-region&region=top-news&WT.nav=top-news">without</a>, the cooperation of governments and their political shifts back and forth on these critical issues. </p>
<p>For example, Toyota, in its effort to go carbon-neutral, must think systemically and include many partners, just as Tesla is doing as it challenges the calculus for electric cars sector-wide. To enact system-wide change, companies are also working with governments to <a href="http://www.nytimes.com/2016/10/17/business/how-the-chemical-industry-joined-the-fight-against-climate-change.html?_r=0">phase out heat-trapping HFC chemicals</a>, set <a href="http://www.nytimes.com/2016/08/17/business/energy-environment/epa-truck-emission-standards.html">new efficiency standards on trucks</a>, establish transparency <a href="http://wdi-publishing.com/casedetail.aspx?cid=1429411">rules on conflict minerals</a> or participate in negotiations on a global climate change agreement. Examples of companies doing it on their own include changes in the <a href="http://www.pri.org/stories/2016-08-24/michelin-isnt-reinventing-wheel-its-reinventing-rubber-supply-chain">supply chain on rubber</a> or the reduction (even elimination) of <a href="http://www.wsj.com/articles/meat-companies-go-antibiotics-free-as-more-consumers-demand-it-1415071802">antibiotics in chicken</a>. </p>
<p>In each of these cases, companies are stepping into, in the words of Unilever CEO Paul Polman, “<a href="http://www.managementtoday.co.uk/mt-interview-paul-polman-unilever/article/1055793">a very interesting period in history</a> where the responsible business world is running ahead of the politicians” and taking on a broader role to “<a href="http://www.mckinsey.com/business-functions/sustainability-and-resource-productivity/our-insights/business-society-and-the-future-of-capitalism%20%22%22">serve society</a>.”</p><img src="https://counter.theconversation.com/content/70166/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andrew J. Hoffman does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>With a Trump administration hostile to action on climate change, businesses need to go beyond just complying with environmental regulations and take on the whole system.Andrew J. Hoffman, Holcim (US) Professor at the Ross School of Business and Education Director at the Graham Sustainability Institute, University of MichiganLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/661882016-09-29T09:53:08Z2016-09-29T09:53:08ZIf Patagonia’s business model is a paragon of virtue, should more companies follow suit?<figure><img src="https://images.theconversation.com/files/139560/original/image-20160928-572-1lm351x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Michal Jastrzebski / shutterstock.com</span></span></figcaption></figure><p>“Buy Less; Choose Well; Make it Last” is a business philosophy long espoused by the doyenne of the British fashion industry, <a href="https://www.theguardian.com/membership/video/2014/oct/29/vivienne-westwood-capitalism-clothing-video">Vivienne Westwood</a>. As a remedy to rampant consumerism and the throwaway culture of fast-fashion, a few clothing brands actively encourage their customers to buy less. But can buying less be good business? </p>
<p>The renowned, outdoor-lifestyle clothing brand <a href="https://eu.patagonia.com/enGB/patagonia.go?assetid=8945">Patagonia</a> clearly thinks so. The origins of the brand lie in the entrepreneurial exploits of avid climber, <a href="http://www.newyorker.com/magazine/2016/09/19/patagonias-philosopher-king">Yvon Chouinard</a>, who made specialised climbing equipment in his back yard. In particular, he made reusable pitons – the small spikes that climbers hammer into rock cracks to attach safety ropes – out of hard rather than soft steel. As demand grew, small-scale, hand-made, craft production eventually gave way to small-scale, mechanised production.</p>
<p>However, Chouinard soon recognised that his burgeoning success in producing high quality, reusable pitons had a downside. On a climbing trip he noticed that the constant hammering in and removal of the pitons was causing the environmental degradation of the very mountains that he and his friends loved. Despite being market leaders, Chouinard and his business partner decided to stop making pitons.</p>
<p>Today, Patagonia focus on clothing rather than equipment, but this story is retold on the Patagonia website as part of the brand’s mythology. The story also gets to the nub of the problem facing any brand that supports consumption activities that take place in nature: how do you enjoy nature without destroying it?</p>
<h2>Cause no unnecessary harm</h2>
<p>When we studied <a href="http://opus.bath.ac.uk/32762/1/JCR_2013.pdf">surfing culture</a>, we identified what we called practices of redress. This means that companies like Patagonia are aware of the paradox implicit to their business, but rather than ignore it, they try to minimise their effects. </p>
<p>For Patagonia, redress is written into their mission statement: “Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis.” Practically, this translates into maintaining high ethical and environmental standards as a source of competitive advantage.</p>
<p>To this end, Patagonia engages in a range of innovative business programmes. Its <a href="http://eu.patagonia.com/enGB/footprint/">Footprint Chronicles programme</a>, for example, uses “transparency about our supply chain to help us reduce our adverse social and environmental impacts – and on an industrial scale”.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/139561/original/image-20160928-564-dlj645.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/139561/original/image-20160928-564-dlj645.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=344&fit=crop&dpr=1 600w, https://images.theconversation.com/files/139561/original/image-20160928-564-dlj645.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=344&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/139561/original/image-20160928-564-dlj645.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=344&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/139561/original/image-20160928-564-dlj645.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=432&fit=crop&dpr=1 754w, https://images.theconversation.com/files/139561/original/image-20160928-564-dlj645.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=432&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/139561/original/image-20160928-564-dlj645.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=432&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Patagonia allows you to track the carbon footprint of its products.</span>
<span class="attribution"><a class="source" href="http://eu.patagonia.com/enGB/footprint/">Patagonia</a></span>
</figcaption>
</figure>
<p>Harnessing technologies to develop new materials, and to recycle old materials is also fundamental to Patagonia’s production processes. Its wetsuits for surfing are made from <a href="http://yulex.com/">Yulex</a> a natural rubber produced from sustainable forests.</p>
<p>Its New Localism programme, is perhaps the most concrete example of redress: “We can no longer pass through or visit remote wild places and trust they will remain that way.” Patagonia supports a range of grassroots activists and campaigners in a range of environmental projects and, as such, is a member of another Chouinard initiative <a href="http://onepercentfortheplanet.org">One Percent for the Planet</a>.</p>
<p>Set against this range of sustainable, environmental and corporate social responsibility programmes, Patagonia’s <a href="http://eu.patagonia.com/enGB/worn-wear/">Worn Wear</a> programme represents an effort to tackle the throwaway culture. Patagonia’s aim is to produce well-made products that last a long time. Aside from repairing up to 40,000 items a year in its US factory, it is also committed to teaching people how to do repair jobs themselves, producing how-to guides for those of us who no longer know the basics of sewing.</p>
<p>As a company, Patagonia practices what it preaches. Its values guide product development, supply chain management and the way it treats its staff, too. Employees at Patagonia’s headquarters in Southern California head to the beach at lunchtime as part of the company’s <a href="http://www.independent.co.uk/news/business/sme/book-review-let-my-people-go-surfing-by-yvon-chouinard-516333.html">forward-thinking flexitime</a> policy.</p>
<p>This, of course, is reflected in its marketing. Brand ambassadors are shown <a href="http://www.huffingtonpost.com/christian-beamish/voyage-of-the-cormorant-sailing-part-two_b_1894424.html">striking out on adventures</a>, confident in their equipment; tough, prepared and practical.</p>
<iframe width="100%" height="450" src="https://www.instagram.com/p/BIpzupjgsvs/embed" frameborder="0"></iframe>
<p>Patagonia turns over around US$600m a year selling a range of gear for climbing, surfing, fly-fishing, skiing and snowboarding. Clearly its values strike a chord with millions of consumers around the world. But what effect does this really have on the environment?</p>
<h2>Cut from the same cloth</h2>
<p>On the one hand, by educating its consumers to think, to reuse and to fix well-made stuff, Patagonia promotes its values as a political act of resistance against rampant <a href="http://eu.patagonia.com/enGB/worn-wear/">consumerism</a>: “Repair,” the CEO claims is “a radical act”. On the other hand, this might just be an effective way of positioning a brand to boost consumers’ sense of self-worth.</p>
<p>In reality, Patagonia is cut from the same cloth as many other premium brands. Vivienne Westwood and Aigle have sourced more “natural” materials for decades. Tricker’s and Barbour, like so many other heritage manufacturers, have always offered repair services. </p>
<p>Equally, each Patagonia product comes replete with brand associations that help its consumers to feel like an ethical adventurer, at one with nature. In this way Patagonia’s products add excitement to affluent, middle class consumers’ trips to the back country – or just the back garden.</p>
<p>What’s more, these issues are beyond one privately owned company’s control. Patagonia can only do so much to change cultural patterns of consumption. The opportunity, however, is to scale Patagonia’s success. That means other businesses adopting its ethical approach. And not just creating a compelling marketing strategy for its own consumers.</p>
<p>Hence, rather like the decision to give up making pitons, perhaps the final ascent that Patagonia now faces is the prospect of giving up its consumer-oriented strategies of differentiating itself from its competitors, and instead helping others adopt its innovative business programmes to make them the industry norm.</p><img src="https://counter.theconversation.com/content/66188/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>As a remedy to rampant consumerism and the throwaway culture of fast-fashion, a few clothing brands actively encourage their customers to buy less.Avi Shankar, Professor of Consumer Research, University of BathRobin Canniford, Co-director Cluster For Organization, Society and Markets, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/504002015-11-10T19:22:24Z2015-11-10T19:22:24ZBusiness is picking up the pace ahead of the Paris climate summit<figure><img src="https://images.theconversation.com/files/101342/original/image-20151110-29309-di74ua.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Ahead of the Paris climate summit businesses have made pledges, including to purchase power from renewable generation. </span> <span class="attribution"><a class="source" href="http://www.shutterstock.com">Wind turbine image from www.shutterstock.com</a></span></figcaption></figure><p>Last week 12 Australian companies committed to strong measures to tackle climate change at the Australian Climate Leadership Summit in Sydney. Many of these companies are household names, including the National Australia Bank, Westpac, AGL and Origin.</p>
<p>The announcement followed the peak bodies’ <a href="http://www.climateinstitute.org.au/verve/_resources/Climate_roundtable_joint_principles_290615.pdf">statement</a> in June pledging their support to the global goal of limiting climate change to less than 2°C above pre-industrial levels, and acknowledging that this will require most countries, including Australia, eventually to reduce net emissions to zero or below. </p>
<p>The commitment by these companies is consistent with <a href="http://climateworks.com.au/sites/default/files/documents/publications/climateworks_pdd2050_initialreport_20140923.pdf">ClimateWorks Australia’s research</a> with ANU and CSIRO that shows Australia can substantially reduce greenhouse gas emissions – to <a href="https://theconversation.com/australia-can-stop-greenhouse-gas-emissions-by-2050-heres-how-44175">net zero</a> by 2050 – while still growing the economy. </p>
<p>These announcements signal the momentum of business action on climate change is increasing in the lead-up to the Paris conference. It also sends a signal to the Australian Government that even greater emissions reductions are possible.</p>
<h2>Businesses leading the way</h2>
<p>In Australia and around the world, many businesses are adapting to the challenges of climate change and moving towards a low carbon economy. These businesses are making the shift from seeing climate change mitigation as a cost, to seeing it as an opportunity.</p>
<p>Partly this is been driven by businesses wanting to mitigate risk, rising energy costs and respond to stakeholders’ concerns about climate change. Yet, the Paris climate process has also been a catalyst for many new groups of businesses taking action.</p>
<p>One such action group, <a href="http://www.wemeanbusinesscoalition.org">We Mean Business</a> started just 14 months ago asking businesses to sign up to its seven pledges including adopting a science-based target, putting a price on carbon, and purchasing 100% of electricity from renewable sources. </p>
<p>To date, over 250 companies and 144 investors have signed up to more than 600 commitments to tackle climate change. These companies represent US$5.7 trillion in total revenue and US$19.5 trillion in assets under management.</p>
<p>About 40 Australian companies have signed on to key climate commitments, including Australia’s largest energy retailer, Origin Energy, which signed up to all seven of the commitments.</p>
<p>Over 20 large multinational companies including Goldman Sachs, H&M, IKEA, Nike, Mars, Nestle, Unilever and Swiss have joined the <a href="http://there100.org/">RE100</a> initiative and have committed to going 100% renewable.</p>
<p>Pledges are compiled by the United Nations’ <a href="http://climateaction.unfccc.int">NAZCA platform</a>, which registers all commitments to climate action by companies, cities, subnational regions and investors to address climate change. To date, more than 900 cities, 100 regions, 1,700 companies and 400 investors around the world have pledged over 6,500 commitments to reduce emissions.</p>
<p>In a similar vein, a group of international business leaders, running some of the world’s largest companies, established <a href="http://bteam.org">The B Team</a> to push for a better way of doing business that takes account of the wellbeing of people and the planet.</p>
<p>The organisation recently called on governments to commit to a global goal of net zero emissions by 2050 and will shortly be announcing companies pledging to be net zero companies.</p>
<h2>Putting words into action</h2>
<p>Progressive companies have begun setting ambitious emissions reduction targets, reporting emissions and shifting to low carbon technologies. Others are turning ideas into reality and delivering practical solutions on the ground.</p>
<p>For example, construction company SOM sculptured the 309-metre-tall <a href="http://www.som.com/projects/pearl_river_tower">Pearl River Tower</a> in China so it directs wind to in-built turbines that generate energy for the building. </p>
<p>Car and battery company Tesla is set on developing a mass market for electric vehicles. There is already a <a href="http://www.solarimpulse.com/">solar plane</a> travelling around the world. </p>
<p>Energy giant AGL <a href="https://www.agl.com.au/%7E/media/AGL/About%20AGL/Documents/Media%20Center/Corporate%20Governance%20Policies%20Charter/1704015_GHG_Policy_Final.pdf">announced</a> it will close down its coal-fired power stations in 2050 (still too slow but a strong first step from the sector), Shell is stopping drilling for oil in the Artic, and Australia’s major banks are also making overarching commitments to limit global warming to 2°C.</p>
<h2>Deeper cuts possible</h2>
<p>There is no doubt the momentum is building for businesses to go “green”. So too is the ability to do it, thanks to rapid advancements in technology. Businesses are putting themselves in the spotlight and willing to be held accountable to their shareholders for their environmental management. </p>
<p>However, Australia cannot just rely on business action if we are to achieve the substantial emissions reductions needed to avoid dangerous climate change. Leading businesses are making these pledges in good faith but they are only voluntary and not yet universal. </p>
<p>In addition, practical measures being adopted by businesses to reduce emissions are still in the early stages and there needs to be an acceleration of actions to reach even our 2030 emissions reduction target.</p>
<p>To beat the ticking carbon budget clock, the pace of business progress needs a policy nudge. A suite of policy and regulation is still needed to accelerate business efforts and ensure broad coverage of emissions reductions across the entire economy.</p>
<p>The real contribution these pledges can make is to show the Australian government what can be achieved. The ramping up of business action on climate change should give the government confidence it can achieve more emissions reductions and set policies that aim considerably higher than the current targets.</p><img src="https://counter.theconversation.com/content/50400/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Anna Skarbek is CEO of ClimateWorks which receives funding from The Myer Foundation and Monash University, and has undertaken projects funded by various federal and state government departments and agencies, peak industry bodies, corporations and philanthropic foundations. </span></em></p>What have businesses put on the table ahead of the Paris climate summit in December?Anna Skarbek, CEO at ClimateWorks Australia, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/477562015-09-24T20:16:41Z2015-09-24T20:16:41ZUnited Nations’ latest sustainability goals should show tough love to business<figure><img src="https://images.theconversation.com/files/96009/original/image-20150924-2455-1hmy0np.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Businesses should definitely be involved in sustainable development, but watch out for 'greenwash'. </span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/fotdmike/2674778713/">fotdmike/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span></figcaption></figure><p><em>On September 25 world leaders will meet in New York to formalise the new Sustainable Development Goals. These 17 goals will guide efforts to reduce poverty and increase well-being, without destroying the Earth. The Conversation is looking at <a href="https://theconversation.com/au/topics/un-sustainable-development-goals">how we got here, and how far we have to go</a>.</em></p>
<p>Within the rarefied world of the United Nations (UN) system, the year 2015 will hold special historical importance – it is the target year for the countries of the world to meet the <a href="http://www.unmillenniumproject.org/goals/gti.htm">Millennium Development Goals (or MDGs)</a> that were launched in 2000.</p>
<p>This self-imposed deadline has come and now member states are launching the next round of goals, termed the <a href="https://sustainabledevelopment.un.org/topics">Sustainable Development Goals (or SDGs)</a>. The latest exercise in high-level development planning attempts to learn the lessons of the MDGs, <a href="http://www.brookings.edu/research/articles/2013/02/21-millennium-dev-goals-mcarthur">which achieved mixed success but focused the world’s attention on global inequality at multiple levels</a>.</p>
<p>A noticeable feature of the SDGs is the strengthening of business and industry involvement in reaching the targets. For many activists <a href="https://medium.com/insurge-intelligence/un-plan-to-save-earth-is-fig-leaf-for-big-business-insiders-2b91c106bb03">this is perceived as a co-option of the development agenda by the private sector</a>.</p>
<p>Much of the distrust stems from past performance of corporations on social and environmental measures, justifiable concerns about their lack of democratic accountability, and the growing scale of financial dominance. </p>
<p>But is this fair?</p>
<h2>Does big money wield big power?</h2>
<p>The size of corporations in comparison with countries is often presented as a distorting influence. Under this claim, big businesses wield the same influence as countries of similar economic scale. </p>
<p>For example, the size of <a href="https://www.globalpolicy.org/images/pdfs/Comparison_of_Corporations_with_GDP_of_Countries_table.pdf">Walmart’s earnings is often compared to the gross domestic product (GDP) of Norway</a>. But these comparisons are inaccurate. </p>
<p>In an important <a href="http://www.rrojasdatabank.info/tncshowbig.pdf">2002 analysis</a>, Professor Paul DeGrawe and former Belgian senator Felip Camerman noted this comparative problem, but the message still has not caught on with activists. </p>
<p>GDP measures the value of good and services produced by a nation’s economy. A firm’s revenue represents sales. Directly comparing GDP and revenue implies double-counting the value of goods produced by firms (for instance, counting the value of steel produced and then the value of products made from that steel). A much better way to account for the value of firms is to look at value added, which avoids this double counting. </p>
<p>DeGrawe and Camerman noted in their analysis that by this more congruent measure, the value added by the 50 largest corporations represents only 4.5% of the value added by the 50 largest countries.</p>
<p>A subsequent more detailed study undertaken by <a href="http://www.ase.tufts.edu/gdae/education_materials/modules/corporate_power_in_a_global_economy.pdf">Tufts University in 2007 laid out the parameters of corporate power</a> in comparison with countries. It estimated that the 100 largest corporations account for 4.3% of world GDP.</p>
<h2>Monitoring business</h2>
<p>Once we move beyond concerns about corporate scale, we can consider genuine concerns about the private sector’s contribution and influence on development outcomes. No doubt the private sector is mandated to first serve its own growth interests. </p>
<p>However, even within the context of this self-interest there are clear development imperatives that can provide win-win opportunities, such as <a href="http://www.miningfacts.org/Communities/What-are-Impact-and-Benefit-Agreements-(IBAs)">community development funds that are part of impact-benefits agreements</a>. However, regulatory oversight must not be neglected. Even businesses recognise the role of regulators to ensure a level playing field for improved social performance costs being borne by businesses. </p>
<p>Activists are right to be concerned about “greenwash”, given the structural obligations of short-term profit maximisation under which the private sector operates. Therefore, what is crucially important is that the SDG engagement with the private sector not be used to moderate strict regulatory enforcement. </p>
<p>The activists are also correct to note that corporate tax evasion, perpetuation of unequal pay within corporate structures and revenue transparency must remain paramount concerns. </p>
<p>The SDG engagement by the private sector should be monitored with care. Lessons from the <a href="https://www.unglobalcompact.org/">UN Global Compact</a> with the private sector should be applied to ensure that clear metrics of improved development are measured. The compact has been successful at knowledge-sharing and showcasing development innovations by business. </p>
<p>However, as with other voluntary initiatives, it is limited in its impact on smaller companies with limited resources. Business engagement with international law, particularly <a href="https://global.oup.com/academic/product/environmental-diplomacy-9780199397990?cc=au&lang=en">the large number of international environmental treaties</a>, is an essential part of preventing greenwash. </p>
<h2>Forging a constructive partnership</h2>
<p>It is also important to note that some of the other critiques of the SDGs, exemplifying the <a href="http://www.economist.com/news/finance-and-economics/21640361-debate-heats-up-about-what-goals-world-should-set-itself-2030">“economics of optimism” and being Utopian</a>, could also be addressed through private sector engagement. </p>
<p>Businesses could inject essential pragmatism and prioritisation to address the critique that the SDGs neglect cost-benefit analysis (such criticisms are being presented by organisations such as Bjørn Lomborg’s <a href="http://www.copenhagenconsensus.com/post-2015-consensus">Copenhagen Consensus Centre</a>).</p>
<p>The United Nations is a behemoth bureaucracy which has to serve such a diverse range of national constituents that reaching consensus often requires dilution of any central message. Yet it is the most inclusive governance mechanism we have to address planetary problems and hence deserves our patience. </p>
<p>Inefficiency is often a cost to be borne for deliberative and democratic pluralism. Business interests must remain an important part of this pluralistic engagement by the UN. </p>
<p>However, the different incentives that inherently lead to divergence between the public and private sectors must not be ignored. Hence the metaphor of “tough love” is perhaps instructive. </p>
<p>The SDGs should embrace business but be willing to hold it to account, to admonish and to castigate where appropriate. Through such firm but fair means a more constructive partnership between the public and the private spheres of development can be forged.</p><img src="https://counter.theconversation.com/content/47756/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Saleem H. Ali receives funding from a wide range of public and private organizations for his research. He represents The University of Queensland in the Sustainable Development Solutions Network.</span></em></p>Have the Sustainable Development Goals been co-opted by big business?Saleem H. Ali, Chair in Sustainable Resource Development, The University of QueenslandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/474792015-09-20T20:10:45Z2015-09-20T20:10:45ZCreative self-destruction: the climate crisis and the myth of ‘green’ capitalism<figure><img src="https://images.theconversation.com/files/94944/original/image-20150916-29620-zuyl36.jpg?ixlib=rb-1.1.0&rect=0%2C48%2C1818%2C1257&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Corporate capitalism has locked humanity into a process of creative self-destruction</span> <span class="attribution"><span class="source">'Insatiable' by Theodore Bolha</span>, <span class="license">Author provided</span></span></figcaption></figure><p>The upcoming Paris climate talks in December this year have been characterised as humanity’s <a href="http://www.bbc.com/news/science-environment-32399909">last chance</a> to respond to climate change. Many hope that this time some form of international agreement will be reached, committing the world to significant reductions in greenhouse gas emissions. </p>
<p>And yet there are clear signs that the much-touted “solutions” of emissions reduction targets and market mechanisms <a href="http://www.washingtonpost.com/news/energy-environment/wp/2015/06/14/the-world-is-off-course-to-prevent-two-degrees-c-of-warming-iea-says/">are insufficient for what is required</a>. </p>
<p>In our new book, <a href="http://www.cambridge.org/gb/academic/subjects/management/business-ethics/climate-change-capitalism-and-corporations-processes-creative-self-destruction?localeText=United+Kingdom&locale=en_GB&query=&remember_me=on">Climate Change, Capitalism and Corporations: Processes of Creative Self-Destruction</a>, we look at reasons why this has come about. We argue that businesses are locked in a cycle of exploiting the world’s resources in ever more creative ways. </p>
<h2>Innovating environmental destruction</h2>
<p>The disconnect between business and climate action was symbolised by the <a href="http://www.theguardian.com/environment/2015/may/29/paris-climate-summit-sponsors-include-fossil-fuel-firms-and-big-carbon-emitters">announcement earlier this year</a> that a significant portion of funding for the Paris meeting comes from major fossil fuel companies and carbon emitters; a situation French climate officials admitted was financially unavoidable.</p>
<p>While perhaps unsurprising, this announcement hints at a deeper problem we now face — the global economic system of corporate capitalism appears incapable of achieving the levels of decarbonisation necessary to avoid dangerous climate change. Humanity is locked into a process of “creative self-destruction”.</p>
<p>Our economies are now reliant upon ever-more ingenious ways of exploiting the Earth’s fossil fuel reserves and consuming the very life-support systems we rely on for our survival. This is evident in the rush by some of the world’s largest companies to embrace deep-water and <a href="http://www.theguardian.com/environment/2015/aug/18/shell-gets-final-clearance-to-begin-drilling-for-oil-in-the-arctic">Arctic oil drilling</a>, <a href="http://www.reuters.com/article/2015/01/20/canada-oil-costs-idUSL1N0UU30O20150120">tar-sands processing</a>, new <a href="http://www.theguardian.com/environment/ng-interactive/2015/may/15/carbon-bomb-australia-the-new-coal-frontier">mega-coalmines</a>, and the <a href="http://www.bloomberg.com/bw/articles/2013-11-14/2014-outlook-shale-fracking-goes-global">“fracking” of shale and coal-seam gas</a>. These examples highlight both the inventive genius of corporate capitalism, and the blindness of industry and government to the ecological catastrophe they are fashioning.</p>
<h2>Incorporating critique</h2>
<p>Our book shows how large corporations are able to continue engaging in increasingly environmentally exploitative behaviour by obscuring the link between endless economic growth and worsening environmental destruction. They achieve this by challenging perceptions of the climate crisis; invariably framing it as a topic of partisan debate rather than a serious social, economic, and political issue to be addressed. But, more importantly, by reinventing the daily ritual of “business as usual” as a perfectly normal and ecologically sound process.</p>
<p>Through the narrative of “green” capitalism, corporations and the market are portrayed as the best means of responding to the climate crisis. In this corporate imaginary, “green” products and services, increased “eco-efficiency”, and the ingenuity and technological mastery of business entrepreneurship will save us from catastrophe. </p>
<p>Lobbying and <a href="http://influencemap.org/page/Measuring-Corporate-Influence-of-Climate-Change-Policy">corporate political activity obstruct</a> more meaningful proposals for emissions reductions. </p>
<p>Moreover, citizens are enrolled as <a href="https://climatepeopleorg.files.wordpress.com/2013/02/org1301.pdf">constituents in corporate campaigns</a>, and as consumers and “ecopreneurs” in the quest for “green consumption”. We are the brands we wear, the cars we drive, the products we buy; and we are comforted to find the future portrayed as “safely” in the hands of the market.</p>
<p>The sparkling image of corporate environmentalism and business sustainability promises no conflicts and no trade-offs. Here, it is possible to address climate change while continuing the current global expansion of consumption; there is no contradiction between material affluence and environmental well being.</p>
<p>In proposing that corporate initiatives are enough, such a vision also fits well within <a href="http://public.econ.duke.edu/%7Eerw/190/Mirowski%20Defining%20Neoliberalism.pdf">neoliberalism</a> - the dominant economic and political system of our time. Alternatives, such as state regulation and mandatory restrictions on fossil fuel use, are viewed as counterproductive and even harmful. It seems there is no alternative to the market.</p>
<p>Echoing <a href="http://newleftreview.org/II/21/fredric-jameson-future-city">Fredric Jameson</a>, “it is easier to imagine the end of the world than the end of capitalism”.</p>
<h2>Business as usual</h2>
<p>So this is how the environmental destruction built into our economic system is concealed. Dealing with this epic contradiction of capitalism would require material trade-offs that challenge identities and interests. </p>
<p>This is why the alternative to “business as usual” is much harder to imagine and much easier to dismiss as the enemy of social well being – what critics so often characterise as going back to living in caves or a <a href="http://www.spiegel.de/international/business/richard-branson-discusses-climate-change-business-opportunities-a-839985.html">return to the “dark ages”</a>.</p>
<p>Such is the supremacy of our current capitalist imagery that it exacts a powerful grip on our thinking and actions. It is a grip strengthened by the promotion of every new “green” product, a grip tightened through the establishment of sustainability functions in business and government, a grip defended with every “offset” we purchase for a flight to a holiday destination.</p>
<p>Ultimately, the “success” or otherwise of the Paris climate talks appears unlikely to challenge the fundamental dynamics underlying the climate crisis. Dramatic decarbonisation based around limits upon consumption, economic growth, and corporate influence are not open for discussion. </p>
<p>Rather, global elites have framed the response around an accentuation of these trends. Until this changes, the dominance of corporate capitalism will ensure the continued rapid unravelling of our habitable climate.</p>
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<p><a href="http://aom.org/">Christopher Wright is a member of the Academy of Management</a></p>
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<p class="fine-print"><em><span>Christopher Wright has received funding from the Australian Research Council. Christopher Wright is an Academy of Management scholar.</span></em></p><p class="fine-print"><em><span>Daniel Nyberg has received funding from the Australian Research Council. </span></em></p>To make a meaningful difference to climate change, businesses will have to break out of a cycle of exploiting the earth’s resources in ever-more creative ways.Christopher Wright, Professor of Organisational Studies, University of SydneyDaniel Nyberg, Professor of Management, Newcastle Business School, University of NewcastleLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/473382015-09-16T15:46:29Z2015-09-16T15:46:29ZCapitalism must evolve to solve the climate crisis<figure><img src="https://images.theconversation.com/files/95069/original/image-20150916-6260-184lyuj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Time for new thinking. </span> <span class="attribution"><span class="source">man in woods via www.shutterstock.com</span></span></figcaption></figure><p>There are two extremes in the debate over capitalism’s role in our present climate change problem. On the one hand, some people see climate change as the outcome of a consumerist market system run rampant. In the end, the result will be a call to replace capitalism with a new system that will correct our present ills with regulations to curb market excesses. </p>
<p>On the other hand, some people have faith in a free market to yield the needed solutions to our social problems. In the more extreme case, some see climate policy as a covert way for bigger government to interfere in the market and diminish citizens’ personal freedom. </p>
<p>Between these two extremes, the public debate takes on its usual binary, black-and-white, conflict-oriented, unproductive and basically incorrect form. Such a debate feeds into a growing distrust many have for capitalism. </p>
<p>A <a href="http://www.economist.com/news/finance-and-economics/21632602-capitalisms-reputation-has-been-damaged-bankers-all-it-needs-love">2013 survey</a> found that only 54% of Americans had a positive view of the term, and in many ways both the Occupy and Tea Party movements share similar distrust in the macro-institutions of our society to serve everyone fairly; one focuses its ire at government, the other at big business, and both distrust what they see as a cozy relationship between the two. </p>
<p>This polar framing also feeds into <a href="http://www.sup.org/books/title/?id=25621">culture wars</a> that are taking place in our country. <a href="http://www.tandfonline.com/doi/abs/10.1080/13669877.2010.511246#.VeijRPlViko">Studies</a> have shown that conservative-leaning people are more likely to be skeptical of climate change, due in part to a belief that this would necessitate controls on industry and commerce, a future they do not want. Indeed, <a href="http://eab.sagepub.com/content/38/1/48.short">research</a> has shown a strong correlation between support for free-market ideology and rejection of climate science. Conversely, liberal-leaning people are more likely to believe in climate change because, in part, solutions are consistent with resentment toward commerce and industry and the damage they cause to society.</p>
<p>This binary framing masks the real questions we face, both what we need to do and how we are going to get there. Yet there are serious conversations within management education, research and practice about the next steps in the evolution of capitalism. The goal is to develop a more sophisticated notion of the role of the corporation within society. These discussions are being driven not only by climate change, but concerns raised by the financial crisis, growing income inequality and other serious social issues.</p>
<h2>The market’s rough edges</h2>
<p>Capitalism is a set of institutions for structuring our commerce and interaction. It is not, as some think, some sort of natural state that exists free from government intrusion. It is designed by human beings in the service of human beings and it can evolve to the needs of human beings. As <a href="http://www.nationalaffairs.com/publications/detail/recovering-the-case-for-capitalism">Yuval Levin</a> points out in National Affairs, even Adam Smith argued that “the rules of the market are not self-legislating or naturally obvious. On the contrary, Smith argued, the market is a public institution that requires rules imposed upon it by legislators who understand its workings and its benefits.”</p>
<p>And, it is worth noting, capitalism has been quite successful. Over the past century, the world’s population increased by a factor of four, the world economy increased by a factor of 14 and <a href="http://www.wbcsd.org/pages/edocument/edocumentdetails.aspx?id=143">global per capita income tripled</a>. In that time, average life expectancy increased by <a href="http://www.wri.org/publication/world-resources-1994-95">almost two-thirds</a> due in large part to advances in medicine, shelter, food production and other amenities provided by the market economy. </p>
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<a href="https://images.theconversation.com/files/95070/original/image-20150916-6284-1jf31qr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/95070/original/image-20150916-6284-1jf31qr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/95070/original/image-20150916-6284-1jf31qr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=503&fit=crop&dpr=1 600w, https://images.theconversation.com/files/95070/original/image-20150916-6284-1jf31qr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=503&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/95070/original/image-20150916-6284-1jf31qr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=503&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/95070/original/image-20150916-6284-1jf31qr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=631&fit=crop&dpr=1 754w, https://images.theconversation.com/files/95070/original/image-20150916-6284-1jf31qr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=631&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/95070/original/image-20150916-6284-1jf31qr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=631&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Some view capitalism as the primary cause for environmental degradation, part of growing concerns over economic inequality and other social issues.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/stephenmelkisethian/9381338494/">stephenmelkisethian/flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span>
</figcaption>
</figure>
<p>Capitalism is, in fact, quite malleable to meet the needs of society as they emerge. Over time, regulation has evolved to address emergent issues such as monopoly power, collusion, price-fixing and a host of other impediments to the needs of society. Today, one of those needs is responding to climate change.</p>
<p>The question is not whether capitalism works or doesn’t work. The question is how it can and will evolve to address the new challenges we face as a society. Or, as <a href="http://www.aspeninstitute.org/video/anand-giridharadas-thriving-world-wilting-world-you">Anand Giridharadas</a> pointed out at the Aspen Action Forum, “Capitalism’s rough edges must be sanded and its surplus fruit shared, but the underlying system must never be questioned.” </p>
<p>These rough edges need be considered with the theories we use to understand and teach the market. In addition, we need to reconsider the metrics we use to measure its outcomes, and the ways in which the market has deviated from its intended form.</p>
<h2>Homo economicus?</h2>
<p>To begin, there are growing questions around the underlying theories and models used to understand, explain and set policies for the market. Two that have received significant attention are neoclassical economics and principal-agent theory. Both theories form the foundation of management education and practice and are built on extreme and rather dismal simplifications of human beings as largely untrustworthy and driven by avarice, greed and selfishness.</p>
<p>As regards neoclassical economics, <a href="http://www.mckinsey.com/insights/corporate_social_responsibility/redefining_capitalism">Eric Beinhocker and Nick Hanauer</a> explain:</p>
<blockquote>
<p>“Behavioral economists have accumulated a mountain of evidence showing that real humans don’t behave as a rational <em>homo economicus</em> would. Experimental economists have raised awkward questions about the very existence of <a href="http://www.investopedia.com/university/economics/economics5.asp">utility</a>; and that is problematic because it has long been the device economists use to show that markets maximize social welfare. Empirical economists have identified anomalies suggesting that financial markets aren’t always efficient.”</p>
</blockquote>
<p>As regards principal-agent theory, <a href="http://www.brookings.edu/%7E/media/research/files/papers/2012/6/18%20corporate%20stout/stout_corporate%20issues.pdf">Lynn Stout</a> goes so far to say that the model is quite simply “wrong.” The Cornell professor of business and law argues that its central premise – that those running the company (agents) will shirk or even steal from the owner (principal) since they do the work and the owner gets the profits – does not capture “the reality of modern public corporations with thousands of shareholders, scores of executives and a dozen or more directors.”</p>
<p>The most pernicious outcome of these models is the idea that the purpose of the corporation is to “make money for its shareholders.” This is a rather recent idea that began to take hold within business only <a href="http://www.brookings.edu/%7E/media/research/files/papers/2012/6/18%20corporate%20stout/stout_corporate%20issues.pdf">in the 1970s and 1980s</a> and has now become a taken-for-granted assumption. </p>
<p>If I asked any business school student (and perhaps any American) to complete the sentence, “the purpose of the corporation is to…” they would parrot “make money for the shareholder.” But that is not what a company does, and most executives would tell you so. Companies transform ideas and innovation into products and services that serve the needs of some segment of the market. In the words of Paul Pollman, CEO of Unilever, “<a href="http://www.mckinsey.com/insights/sustainability/business_society_and_the_future_of_capitalism">business is here to serve society</a>.” Profit is the metric for how well they do that. </p>
<p>The problem with the pernicious notion that a corporation’s sole purpose is to serve shareholders is that it leads to many other undesirable outcomes. For example, it leads to an increased focus on quarterly earnings and short-term share price swings; it limits the latitude of strategic thinking by decreasing focus on long-term investment and strategic planning; and it rewards only the type of shareholder who, in the words of <a href="http://www.brookings.edu/%7E/media/research/files/papers/2012/6/18%20corporate%20stout/stout_corporate%20issues.pdf">Lynn Stout</a>, is “shortsighted, opportunistic, willing to impose external costs, and indifferent to ethics and others’ welfare.”</p>
<h2>A better way to gauge the economy</h2>
<p>Going beyond our understanding of what motivates people and organizations within the market, there is growing attention to the metrics that guide the outcomes of that action. One of those metrics is the discount rate. Economist <a href="http://mudancasclimaticas.cptec.inpe.br/%7Ermclima/pdfs/destaques/sternreview_report_complete.pdf">Nicholas Stern</a> stirred a healthy controversy when he used an unusually low discount rate when calculating the future costs and benefits of climate change mitigation and adaptation, arguing that there is a ethical component to this metric’s use. For example, a common discount rate of 5% leads to a conclusion that everything 20 years out and beyond is worthless. When gauging the response to climate change, is that an outcome that anyone – particularly anyone with children or grandchildren – would consider ethical?</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/95071/original/image-20150916-6302-qq2dys.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/95071/original/image-20150916-6302-qq2dys.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/95071/original/image-20150916-6302-qq2dys.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=896&fit=crop&dpr=1 600w, https://images.theconversation.com/files/95071/original/image-20150916-6302-qq2dys.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=896&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/95071/original/image-20150916-6302-qq2dys.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=896&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/95071/original/image-20150916-6302-qq2dys.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1125&fit=crop&dpr=1 754w, https://images.theconversation.com/files/95071/original/image-20150916-6302-qq2dys.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1125&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/95071/original/image-20150916-6302-qq2dys.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1125&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Adam Smith: a lot has changed since he captured the notion of the liberal economy in the 18th century.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/surfstyle/272576639/in/photolist-q62xe-9pKZYu-oguxXi-21wSQ-4tafv6-3DTNUE-app33-cuuHrW-9nmpuU-bQWXdD-5gUdZc-hJou-89Y3NY-8tvpMW-pQj3PB-k1V5dV-k1TnpV-4amzsz-k1TS46-tTm76-k1UCaH-k1Wx2U-5tett-6icPNa-dkVsCu-521jwh-bzPhpc-i74bFh-85xKdu-cAFpG9-832dva-85uAqR-9nimpX-85xKe9-85uAx8-bofMoG-6APAve-9nmpuq-9nmpsE-q7viHa-9nmpsf-nrdgbi-7NoqHx-21wSv-85xKcY-6RveYH-a5bwyF-3VYQx-5EHyYa-paTxUf">surfstyle/flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>Another metric is gross domestic product (GDP), the foremost economic indicator of national economic progress. It is a measure of all financial transactions for products and services. But one problem is that it does not acknowledge (nor value) a distinction between those transactions that add to the well-being of a country and those that diminish it. Any activity in which money changes hands will register as GDP growth. GDP treats the recovery from natural disasters as economic gain; GDP increases with polluting activities and then again with pollution cleanup; and it treats all depletion of natural capital as income, even when the depreciation of that capital asset can limit future growth. </p>
<p>A second problem with GDP is that it is not a metric dealing with true human well-being at all. Instead, it is based on the tacit assumption that the more money and wealth we have, the better off we are. But that’s been challenged by numerous <a href="http://www.forbes.com/sites/daviddisalvo/2015/02/28/does-anyone-really-know-if-money-can-buy-happiness/">studies</a>. </p>
<p>As a result, French ex-president Nicolas Sarkozy created a commission, headed by Joseph Stieglitz and Amartya Sen (both Nobel laureates), to examine alternatives to GDP. Their <a href="http://thenewpress.com/books/mismeasuring-our-lives">report</a> recommended a shift in economic emphasis from simply the production of goods to a broader measure of overall well-being that would include measures for categories like health, education and security. It also called for greater focus on the societal effects of income inequality, new ways to measure the economic impact of sustainability and ways to include the value of wealth to be passed on to the next generation. Similarly, the king of Bhutan has developed a GDP alternative called <a href="http://www.grossnationalhappiness.com/">gross national happiness</a>, which is a composite of indicators that are much more directly related to human well-being than monetary measures.</p>
<p>The form of capitalism we have today has evolved over centuries to reflect growing needs, but also has been warped by private interests. <a href="http://www.nationalaffairs.com/publications/detail/recovering-the-case-for-capitalism">Yuval Levin</a> points out that some key moral features of Adam Smith’s political economy have been corrupted in more recent times, most notably by “a growing collusion between government and large corporations.” This issue has become most vivid after the financial crisis and the failed policies that both preceded and succeeded that watershed event. The answers, as <a href="http://www.greenbiz.com/article/getting-beyond-intentional-futility-climate-movement">Auden Schendler and Mark Trexler</a> point out, are both “policy solutions” and “corporations to advocate for those solutions.” </p>
<h2>We can never have a clean slate</h2>
<p>How will we get to the solutions for climate change? Let’s face it. Installing efficient LED light bulbs, driving the latest Tesla electric car and recycling our waste are admirable and desirable activities. But they are not going to solve the climate problem by reducing our collective emissions to a necessary level. To achieve that goal requires systemic change. To that end, some argue for creating a new system to replace capitalism. For example, Naomi Klein calls for “<a href="http://www.thenation.com/article/capitalism-vs-climate/">shredding the free-market ideology that has dominated the global economy for more than three decades</a>.”</p>
<p>Klein is performing a valuable service with her call for extreme action. She, like Bill McKibben and his <a href="http://350.org/">350.org</a> movement, is helping to make it possible for a conversation to take place over the magnitude of the challenge before us through what is called the “<a href="http://irasilver.org/wp-content/uploads/2011/08/Reading-Movement-funding-Haines.pdf">radical flank effect</a>.” </p>
<p>All members and ideas of a social movement are viewed in contrast to others, and extreme positions can make other ideas and organizations seem more reasonable to movement opponents. For example, when Martin Luther King Jr first began speaking his message, it was perceived as too radical for the majority of white America. But when Malcolm X entered the debate, he pulled the radical flank further out and made King’s message look more moderate by comparison. Capturing this sentiment, Russell Train, second administrator of the EPA, once <a href="http://www.earthisland.org/index.php/aboutUs/legacy/">quipped</a>, “Thank God for [environmentalist] Dave Brower; he makes it so easy for the rest of us to be reasonable.”</p>
<p>But the nature of social change never allows us the clean slate that makes sweeping statements for radical change attractive. Every set of institutions by which society is structured evolved from some set of structures that preceded it. Stephen Jay Gould made this point quite powerfully in his essay “<a href="http://chuma.cas.usf.edu/%7Epinsky/texts/Creation%20Myths%20of%20Cooperstown.pdf">The Creation Myths of Cooperstown</a>,” where he pointed out that baseball was not invented by Abner Doubleday in Cooperstown New York in 1839. In fact, he points out, “no one invented baseball at any moment or in any spot.” It evolved from games that came before it. In a similar way, Adam Smith did not invent capitalism in 1776 with his book The Wealth of Nations. He was writing about changes that he was observing and had been taking place for centuries in European economies; most notably the division of labor and the improvements in efficiency and quality of production that were the result.</p>
<p>In the same way, we cannot simply invent a new system to replace capitalism. Whatever form of commerce and interchange we adopt must evolve out of the form we have at the present. There is simply no other way.</p>
<p>But one particularly difficult challenge of climate change is that, unlike Adam Smith’s proverbial butcher, brewer or baker who provide our dinner out of the clear alignment of their self-interest and our needs, climate change breaks the link between action and outcome in profound ways. A person or corporation cannot learn about climate change through direct experience. We cannot feel an increase in global mean temperature; we cannot see, smell or taste greenhouse gases; and we cannot link an individual weather anomaly with global climate shifts. </p>
<p>A real appreciation of the issue requires an understanding of large-scale systems through “big data” models. Moreover, both the knowledge of these models and an appreciation for how they work require deep scientific knowledge about complex dynamic systems and the ways in which feedback loops in the climate system, <a href="http://jsterman.scripts.mit.edu/docs/Sterman-2011%20Communicating%20Climate%20Change%20Risks%20in%20a%20Skeptical%20World.pdf">time delays, accumulations and nonlinearities</a> operate within them. Therefore, the evolution of capitalism to address climate change must, in many ways, be based on trust, belief and faith in stakeholders outside the normal exchange of commerce. To get to the next iteration of this centuries-old institution, we must envision the market through all components that help to establish the rules; corporations, government, civil society, scientists and others.</p>
<h2>The evolving role of the corporation in society</h2>
<p>At the end of the day, the solutions to climate change must come from the market and more specifically, from business. The market is the most powerful institution on earth, and business is the most powerful entity within it. Business makes the goods and services we rely upon: the clothes we wear, the food we eat, the forms of mobility we use and the buildings we live and work in. </p>
<p>Businesses can transcend national boundaries and possess resources that exceed that of many countries. You can lament that fact, but it is a fact. If business does not lead the way toward solutions for a carbon-neutral world, there will be no solutions. </p>
<p>Capitalism can, indeed it must, evolve to address our current climate crisis. This cannot happen through either wiping clean the institutions that presently exist or relying on the benevolence of a <em>laissez faire</em> market. It will require thoughtful leaders creating a thoughtfully structured market.</p>
<p><em>For all of Andrew Hoffman’s previous articles and columns, click <a href="https://theconversation.com/profiles/andrew-j-hoffman-36976/articles">here</a>.</em></p><img src="https://counter.theconversation.com/content/47338/count.gif" alt="The Conversation" width="1" height="1" />
Many people consider capitalism the cause of climate change. Can leading thinkers in business and academia make business the primary means to tackle the climate crisis?Andrew J. Hoffman, Holcim (US) Professor of Sustainable Enterprise, University of MichiganLicensed as Creative Commons – attribution, no derivatives.