Sustainability and the Changing Hearts and Minds of Consumers

Financial Time’s columnist Gary Silverman isn’t directly commenting on sustainability in his piece “Activists in the Boardroom” (http://tablet.olivesoftware.com/Olive/Tablet/FTUK/SharedArticle.aspx?href=FTU%2F2015%2F05%2F09&id=Ar01403 ), but he comes pretty close to it and presents a way of considering the role of sustainability in the face of the “Millennial Economy”. His premise is that the leaders of Starbucks and McDonalds are adopting an Obama 2008 approach to governance – a mix of social activism and unbridled optimism. I think the direct connection to Obama is a bit of a reach and really just a hook for the article. But the indirect linkage makes sense: millennials make consumption choices according to a broader array of preferences — and in response to new channels of communication — than previous generations. Starbucks is driven in part by Schultz’s personal agenda, but its high profile social agenda aligns with the need for the brand to stay relevant with millennials. It’s a natural evolution. For McDonalds, it’s different and more along the lines of a revolution. The company is struggling, has changed CEOs and is looking at a weakening position as millennials make up a larger and larger share of their target customer. McDonald’s problem is twice as hard as Starbucks — it has a brand/image problem and a product problem. Starbucks really only has the former (millennials like coffee). But there is a common lesson for any consumer product company: talk to consumers via channels they rely on and respond to, and talk to them about not just your products, but the larger array of factors that impact consumer decision-making.

 

For sustainability, arguable the lesson here is somewhat of a mixed bag (but overall good news). Targeting very real consumer decision making factors via information about corporate sustainability actions helps where sustainability has sometimes struggled within companies – drawing a line from sustainability to the top line. I have no problem with a company investing in sustainability for no other reason than because it increases sales – if that is what it takes. The only downside to this approach is that it reinforces the misconception that at its core sustainability is just about marketing. But arming sustainability advocates with an argument for top line value creation — to go along with the easier to prove bottom line value of sustainability actions like energy or supply chain efficiencies and the more inchoate but no less real “brand value” creation argument – is undoubtedly a good thing.

 

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Scene Setter: Where I’m Coming From

The world needs another blog like a hole in the ozone layer. Add to that the fact that hardly anyone may ever read this (Hi Mom!), and there are good reasons to keep one’s thoughts to oneself. On the other hand, given that there are vastly more bloggers writing about fashion, celebrities, or dating than there are writing about environmental sustainability and climate, there might be room for one more.

You will not find blind partisan fealty or ideological rigidity here. In fact, hyper partisanship and ideological dogma have been perhaps the greatest obstacles to rational public policy progress commensurate to the challenge and primacy of an issue like climate change. In my quarter century in Washington DC I have seen the honesty and quality of intellectual discourse deteriorate along with the traditions of bipartisan engagement on the issues of the day. Our so-called “think tanks” have largely ceased to be fonts of ideas and forums for debate – except as constrained by a pre-determined ideological or partisan set of sidebars (and outcomes) which drastically limit any actual “thinking” that might otherwise occur.

But while contributions to discourse from the far left or far right have served only to calcify the unproductive intensity and hostility of debates around sustainability and climate change, the answer is not mushy centrism – at least in the form of modest ambition or an unwillingness to aggressively take on opponents of progress. I believe that climate change and the threats to healthy and functioning ecosystems are perhaps the greatest challenges we face as a society.

Putting a livable climate, adequate water and intact ecosystems at risk is immoral in every secular and theological sense of the term. We should expect policymakers to consider such intergenerational morality in their approach to these issues. It is also breathtakingly bad economic policy from anything other than an extremely short term and first-world oriented perspective. It is at this resultant intersection of morality, environmental policy and smart economic policy where these problems need to be solved.

Perhaps further blurring traditional ideological lines, I believe that market forces and even profit incentives are among the most powerful tools we have to address climate change – if we can fix the market failures that make it more profitable to pollute. The incentive of profit and unenlightened self-interest were extremely effective in getting is into this problem; they would be great allies in solving it. When Walmart decides (as it has) that it can save money by instructing its suppliers to reduce packaging, track greenhouse gas emissions and improve energy efficiency, it has arguably a bigger impact on the environment and the climate that the top dozen environmental groups together could accomplish on their best day.

The private sector and the government both have a critical role. The history of the relationship between government and business in the environmental context is one of antagonism. Government sets standards and enacts prohibitions. Good companies focused their energy on complying and bad companies tried to cheat – and when caught, the government appropriately punished them. But in either case, the “environment” was merely a cost to be managed. This system led to great environmental progress in the areas of clean air and clean water. But it has not worked well enough for the climate. Imagine, instead, a market where out-performing one’s peers on environmental values yielded competitive advantage. Then companies would innovate and do what they best in an effort to improve their environmental performance – not just to avoid fines or enhance “reputation” or to attract “green” investors – but because it is the way to be a better and more profitable company. Then the remarkable power of the profit incentive will be aligned with broader goals of fighting climate change and preserving natural resources.

We are actually beginning to head in that direction and in this blog I will talk about many good examples. Milton Friedman famously mocked “corporate social responsibility” (CSR) by saying that “[t]he ‘social responsibility’ of companies is to increase profits”. The evolution of corporate sustainability – which is NOT the same as CSR – is leading us to a place where Milton Friedman is being proved to be both right and spectacularly wrong. Increasingly, companies are realizing that the way to increase profits is by being a sustainable company, reducing environmental impacts, and minimizing climate risk.

But the private sector left entirely to its own devices will not get us where we need to go to address climate change and related environmental challenges in a way that will ensure that our children inherit a an economically and environmentally sustainable world. Policy does matter. Policy must define the guideposts of the marketplace that ensure that social and intergenerational priorities are incorporated into market feedback loops. But policy must also be informed by and encourage the efficiencies that the market can deliver in driving to the mutually attainable goals of economic growth, preservation of natural capital for future generations, and the mitigation of the effects of climate change.

This space will explore these issues and highlight both laudable and wrongheaded practices in the public and private realms as we inexorably seek to reconcile our economic, social, environmental and moral objectives.