Serious Business (Wk2 Assignment)

Hello Reader,

This week we were asked the question: "Do you think business has a duty to promote sustainable consumption? If no, why not? If yes, what should they do and how far should the go?"
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Now, if you are an environmentalist, your answer to this question is almost certainly yes, but before I continue on to the second part of the question I want take some time to think about why and why-not. Before I do any of this, please note that it is my belief that people (and companies) should take responsibilities for their own actions to the extent that their actions are under their own control. Also, I am working under the assumption that it is someone’s duty to promote sustainable consumption. Thus, it is a matter of “who” and not “if”.

Perhaps Not

One important point that I picked up from reading The Role of Business in Sustainable Consumption by Michaelis is that individual businesses are not in control of the business culture as a whole.

Without much extra thought, I might be inclined to let businesses off the hook, but by that logic everyone could make similar claims. Relying on the idea that one person (or in this case one company) cannot make a difference is an acceptable excuse. If you are inclined towards this line of reasoning I encourage you to go watch a large number of after-school specials that were broadcast in the 80's and 90's. Go ahead. This blog will most likely still be here when you get back. Of course, there is more to it than after-school specials, to let's take a look at some of the reasons why.

Perhaps

The business culture consists of many businesses, but as pointed out by Annie Leonard in the Story of Stuff, "people live and work all along this system [of consumption]". That is to say that people are integrally involved in the processes of production and consumption and that companies are not intangible, nebulous entities. On the contrary, successful companies tend to have well defined structures of hierarchical decision-making, which constitute the business culture referred to by Michaelis. Thus, by the transitive property, people make up the business culture.

I take this to imply that the business culture does not exist in a vacuum and is influenced in much the same way that other groups and communities are influenced: by popularity. Similar to school-yard popularity, peer pressure can be a motivator for change in the business culture. Of course this means that the most popular members of the business culture will wield the most influence (and therefore control) over the business culture. However, unlike school-yard popularity, the titans of the business culture are determined primarily by financial success as suggested by Michaelis. This speaks to common sense, as it is the successful companies that are studied by those in business school and used as benchmarks by competitors.

Therefore, it seems the onus falls almost solely upon successful companies to champion sustainable consumption in order that others may follow. However, I would like to push a little further and extend the onus to encompass all companies.

As explained by Leonard Mlodinow in The Drunkard’s Walk (for a particularly good example of how successful business leaders and companies are susceptible to randomness in the market place, I recommend pages 11-16), while the odds of a company’s success are improved by the skill of its staff, the chaotic nature of the market place means it is not beyond the realm of possibility for a poor or mediocre company to suddenly be thrust into the midst of success. In fact it is equally likely that a currently successful business will fall from grace and/or need a good government bail out to stay afloat. Or even that either situation has been occurring for an extended period of time, which means that a fluke may not seem like one at all.

Of course, regardless of whether a company has arrived at success due to premier business practices or a hiccup of randomness, it will more likely than not be held in the same high regard as any other successful company (see pages 177-182 of Mlodinow’s book). The only practical way to avoid success and its associated responsibilities (e.g. championing sustainable consumption) is to not participate in the market place. Thus, I reassert that all companies should assume responsibility for championing sustainable consumption. Also, returning to Annie Leonard’s statement about people working within these companies, the onus of sustainable consumption is necessarily extended to people in charge of companies (and by the same logic as before, all of those attempting to become the people in charge of companies).

Who’s In Charge Around Here?

In a small business, it is very clear who is in charge, typically the owner and/or manager. However, in publicly traded companies, it becomes a bit more nebulous. At first glance, employees (and disgruntled customers) will point to management, but active shareholders may disagree, because they are in fact the owners. This point is further confused by the inclusion of the now common place existence of mutual funds, which exacerbates the disconnection between owners and the decision making process.

While I can see the merits of placing the responsibility upon both the shareholders and the managers, I am going to lean toward the managers. This is primarily based on my understanding that a shareholder is legally removed from liability with regard to a company’s actions. (Please correct me if I do not correctly understand this concept.) That is not to say that extremely active shareholders do not have the ability to monitor and influence the actions of their companies (I hope to address practice in a later post), but rather that as a general practice the shareholders pay the managers to do exactly this.

Thus, assuming that publicly traded companies do not wish to revert back to being private companies, it is the responsibility of the upper-level managers (and all who strive to be them) to promote sustainable consumption in their companies’ decisions and actions. In actuality the most senior business executives of companies have a lot of other concerns in addition to sustainable consumption, so it is reasonable for a responsible company to hire a surrogate (a sustainability officer or consultant or both depending on the size of the company) to act as a sustainability champion to keep itself on track as long as the surrogate has the de facto backing of the other managers in the company.

How Far Is Too Far?

To answer the question of how far managers should go to address issues of sustainable consumption, the scope of their impact must be taken into account, and by almost all accounts their impact is huge. To point to another tidbit of information that is supplied by Annie Leonard: 51 of the world's 100 richest economies are companies. While I have not seen it written explicitly, I can only assume that these companies are primarily based in and/or are being lead by people that went to school in the industrialized world and have operations than span the populated continents of the globe. I can also say with a fair degree of certainty that these companies are directly and indirectly impacting (extracting resources, utilizing labor, dumping waste, transporting goods, etc.) large parts of the globe as well.

Standing by my original belief, managers should go as far as their companies' reach allows. Not astoundingly, it becomes a matter of self-control and self-discipline for managers to ensure they are not reaching beyond their means. A lesson all of society could stand to learn… if only there were some success stories upon which to look.

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I hope you enjoyed this latest post. As usual, I look forward to any comments. In particular any clarifications regarding shareholder liability, pitfalls in my logic, or suggestions for related materials are appreciated. Later this week please look for my third assignment regarding Gross Domestic Product vs. Gross National Happiness.

Sincerely,
Sean Diamond