A quick review of sustainability trends reported on the internet shows (not surprisingly) that energy will stay a high priority. The focus is on alternative energy, energy efficiency  and solar energy. Within the green building movement, retrofitting buildings for sustainability is gaining momentum.

This poses a huge market opportunity for businesses. However, it helps if (local) governments create the environment that is beneficial for investing in clean energy. For rapid introduction of new technologies a so called ‘innovation system’- the needs to be in place. Innovation systems are networks of organizations that work together on diffusing new technologies. They are facilitated through entrepreneurial activity, knowledge development through collaboration with educational institutions, and knowledge diffusion through networks such as accelerators and business platforms. Governments can play pivotal roles in facilitating innovation systems.

A more recent trend is concern over water issues. Many places in the world don’t have access to enough water to meet agricultural, urban and industrial water needs. Large areas deal with droughts, and disruptive weather patterns caused by climate change  aggravate these issues.

Though this is important for business, especially in the food industry, it is even more important to governments. Water supplies are directly related to energy and food needs. The repercussions of water shortages in combination with an exploding world population cannot be underestimated – and may lead to water wars. Meriting this issue to be dealt with from a diplomatic point of view. For example: it is for a good reason that China does not want to leave Tibet: the country is the source of all the rivers in the region.

Thirdly, employee engagement is finally on the corporate agenda. Which is great, because the social side of the triple bottom line often gets little attention.  I often wonder why we have so few very successful cases for sustainability. In my opinion, engagement is the missing link – you can’t just roll out policies, or change light bulbs. Sustainability becomes a part of the organization when employees are engaged in the subject. Luckily for us, there is a strong business case for engagement, and links to sustainability within a company

The plastic bag has become the poster child of our wasteful consumerist society: after its short use, we throw it ‘away’ where it pollutes the environment and takes decades to degrade.

Different approaches have been used to eliminate plastic bag use. In the UK, it is left to the voluntary action of consumers and retailers. Ireland and Denmark prefer a tax. Other countries, such as parts of the U.S., South Africa, Bangladesh and India have installed bag bans. In the U.S. there are 24 communities with plastic bag bans, most of them in California. In Bangladesh and India bags were banned out of necessity: bags were clogging the sewer systems and exacerbating floods.

However, these campaigns are focused on large grocery bags. They leave out an important type of bag use: the single use HDPE bag. More simply put: those little bags you use to put your veggies and fruits in at the supermarket, or the bags that are wrapped around your favorite Thai takeaway dinner.

These bags are such a blind spot for municipalities that it is nearly impossible to find data about their use. Only Australians seem to record this information:

“In 2007, Australians used 3.9 billion lightweight single use high density polyethylene (HDPE) bags. 2.96 billion of these came from supermarkets” and “In 2005, Australians used 192 HDPE bags per capita.”

If these are the numbers for Australia, can you imagine the numbers for the US?

Not so long ago it was impossible to think that plastic grocery bags wouldn’t be a part of the supermarket scene. Currently many customers bring their own bags – and have fun doing it. The bag has become a fashion statement of a consious lifestyle.

If you can bring your own grocery bags to the supermarket, how about taking the small but revolutionary step of bringing reusable bags for fresh produce too?

….”[earth] has, or had, a problem which was this: Most of the people living on it were unhappy for pretty much all of the time. Many solutions were suggested for this problem, but most of these were largely concerned with the movements of small green pieces of paper… which is odd, because on the whole, it wasn’t the small green pieces of paper that were unhappy…”
— Douglas Adams

The recent financial crisis has been a credit crisis, and in response the government and the Federal Reserve have taken an active role in increasing the money supply to manipulate business cycles. The surges and contractions of the business cycles cause fluctuations in the economy, and thus in employment. In this way these fluctuations are felt in every aspect of society. We take these cycles as a given. However, in Ecological Economics Herman Daly and Joshua Farley (2008) put forward an interesting idea: the fluctuations in the economy are caused by the design of the monetary system, and not by law of necessity. By decoupling business cycles from the circulation of money these ups and downs can be avoided.

Currently the worldwide money supply is tightly linked to investment cycles. Business has its natural cycles, but the linkage of these cycles to the money supply by means of lending and borrowing causes a self-reinforcing feedback loop: when investment goes down, spending goes down, causing a decrease in the money supply, which will further decrease investments, and so on. Daly and Farley have a novel proposition: ‘there is no reason why the monetary system must be linked with the private commercial activity of lending and borrowing’.

Let’s imagine a world where the monetary system is decoupled from the activity of lending and borrowing. Money will be treated as a public good that facilitates exchanges within the economy. The government can match the supply based on for instance, consumer price indexes. A beneficial side effect is that inflation will be easier to control. The reserve requirements of banks will be 100%. Banks will make money by charging for services they provide and by borrowing and lending real money instead of by creating it.

What effects will such a decoupling have? Currently, the financial sector has a disproportionate size compared to the real sector: the size of the real sector is roughly $30 trillion per year, whereas the trade in money, with no intervening commodity is almost $2 trillion per day. The financial sector should be in service of the real economy, and a decoupling of the money supply from investments will support this.

With investments recoupled to the real economy – making economic profit based on increased production capacity by means of investments- the focus on how to make economic rents will shift.  Currently profits are made by moving paper around. With the financial sector recoupled to the economic sector it will become more important to make profits in the real economy. Introduction of a 100% reserve requirement will bring investors closer to their investments. It is only make-believe, but it is interesting to think of what implications this will have for business. With rents primarily to be made in the real sector instead of the financial, how will this affect the organization and management of business?

The current design of the economy and its institutions, banks and business, make up a system that is unstable, unpredictable and uncontrollable. After the crisis in 2008 most agreed that things needed to change. Yet most has returned to business as usual. The necessity for change has not eroded. Exploring this possibility of decoupling the monetary system from private lending may be a perfect solution to many of our economic problems.

Based on:

Daly, H., & Farley, J. (2007). Ecological Economics. Principles and Applications. Dehli: Island Press.

An business’ objection to sustainability could be a practical one, that there still is not strong business case. Or one might object that it is not business’ responsibility to take care of social issues, which would get us in ethical territory.

The first argument is getting weaker by the year. The second argument can be sidestepped by showing that there is a relevant business case for sustainability. To give some examples:

• Ray Anderson contended that his company Interface survived several economic crisis because of savings caused by sustainability programs
• GE’s Ecomagination products added US$12bn to the bottom line in 2006, with expectations of $20bn returns by 2010
• For every one-tenth-of-a-point increase in employee engagement at Best Buy, each Best Buy store increased profits by $100,000 a year per store
• 15% of U.S. workers are actively disengaged, Gallup estimates that this costs the economy about $328 billion
• Companies that are considered sustainability leaders are outperforming traditional stock by an average of 25 percent
• Philips made sustainability an integral part of the company in 2009, since then, its sales of green products increased to $11.85 billion, making up 39 percent of Philips’ total sales

Though these are tangible bottom line results, often sustainability is linked to stakeholder groups and intangibles that are not on the balance sheet. Nevertheless, according to thought leader Bob Willard, they have a direct influence on the bottom line, for example: `

• customers are very sensitive to the brand image of a company
• ‘green’ companies have less difficulty in attracting and retaining talent
• governments are addressing sustainability issues with policies– with a focus on sustainability businesses can actively anticipate or co-create legislation

Furthermore, sustainability is related to risk, such as

• erratic weather caused by climate change,
• the possibility of a price on carbon
• resource shortages in water, oil, food, and metals.

Although all of these issues might be difficult to quantify, and perhaps do not show up on the balance sheet, each sensible business person  must acknowledge that they compose material risks and opportunities to the bottom line. Added to that, it proofs that we are working with outdated business models, since they do not incorporate what is relevant to the organization.

Classical economics as a discipline can be traced back to the publication of Adam Smith’s The Wealth of Nations in 1776. It is no coincidence that economics as a science emerged in the Era of Enlightenment, or ‘Age of Reason’.

Coming from an era where religion and concern about the afterlife dominated the lives of people, during the Enlightenment people started to explain and understand their world from a rational standpoint. This resulted in a flourishing of scientific discoveries. As a result the worldview changed: instead of God as the primary goal and end, reason was now seen as the source of ultimate knowledge. This new worldview was causal, mechanistic and deterministic.

Classical economics resonates with these ideas: humans are seen as rational actors, and the movements within the economy can be understood, explained and predicted by causal theories and mathematical formulae. In the last twenty years these assumptions have been challenged: economic theories have not been able to predict, explain or prevent any of the economic downturns we have been through. The theories seem to be less applicable to an understanding of an increasingly complex reality.

In the last decades various perspectives have emerged that have affinity with this increased complexity: complexity theory and systems thinking. It seems as if we cannot understand reality by understanding separate elements. Meaning emerges from the interactions between different elements within a system and between systems. The relatively new branch ‘ecological economics’ is congruent with the new complexity and systems paradigm, and takes a break from the mechanical worldview: it does not accept the pre-analytic version of the world assumed by mainstream economics. Within classical economics parts of reality, like the social or ecologic reality are excluded for the sake of theory. The basic tenets of classical economics, rational thinking and the market mechanism, do not stand firm when tested in reality. The comprehensive systems worldview of ecological economics is much better equipped to do so.

For instance, the market mechanism is supposed to produce efficient prices. However, in reality we seldom find perfect markets, resulting in various kinds of market failures, such as externalities, public goods, dilemma of the commons, and monopolies. A near sacred belief in the organizing power of markets has brought the global ecology to the edge of. Ecological economics places the economy within the natural environment, thereby searching for solutions for the abovementioned market failures.

Another example: The assumed rationality behind peoples’ choices found many antagonists, such as Herbert Simon. As a sociologist and economist, he instead proposed a theory of ‘bounded rationality’. The economist Neva Goodwin contests that people make individual choices: as social beings, much of our behavior and choices are governed by our social environment. Ecological economics relates economic theory to social perspectives – coming to a theory of economics that is much more credible and in line with reality than the ‘rational choice’ perspective.

Ecological economics will, just as classical economics, not be able to predict the future. However, because it has a more realistic perspective, it will be better able to understand the current developments in the economy. Placing the economy in relation to social and ecological realities puts boundaries to the shapes the economy can take, especially its size. Ecological and social laws are taken into account within this economic paradigm. More importantly, it is better equipped for addressing the problems that the rational and market view have caused.

Recommended further reading:

Daly, H., & Farley, J. (2007). Ecological Economics. Principles and Applications. Dehli: Island Press.

Hawken, Paul. (1993) The ecology of commerce : a declaration of sustainability.

Marketing can make people eat McDonald’s hamburgers, wear shoulder pads, and buy that new laundry detergent even though the old one is fine. It basically compels masses of people to run along with the latest fad. If marketing is so successful in changing our lifestyles, why is it so difficult to use it to promote more sustainable behavior?

We still leave lights on unnecessarily, let water run, use plastic bags, drive our cars instead of using public transportation, buy clothes made of cotton that leached into soils in India and were probably manufactured using child labor, and so on. Marketing campaigns aimed at changing these behaviors have not been very successful. What causes this lack of success, and how can we harness some of marketing’s power to change behavior for good?

The first reason is, of course, money. Global advertising spending was $531 billion in 2011, and most of this hasn’t gone to campaigns advocating behavior change for sustainability. The second reason is a fundamental difference between the “products” that are being promoted, and the difference between public and private goods. Individuals are quite good at making decisions that are gratifying for themselves, but aggregated choices can compound into situations where everyone collectively is worse off. In other words, individual choices cause social dilemmas that lie at the heart of most environmental problems.

In an intriguing article, Peter Kollock analyzes various types of social dilemmas, but more importantly, he lists ways to solve them. People who aren’t completely selfish can be motivated to behave in the best interest of the community by stressing group identity. More strategic or egoistic actors are primed by group reciprocity – they want to do what others are doing. In other words, keeping up with the Joneses. Lastly, Kollock recommends structural, “change the game” solutions. People feel powerless to take actions to improve the environment because they see so little effect. Making it easy to identify people who act, and making results visible, are ways to overcome this barrier.

Isn’t this what traditional marketing campaigns do? Make you feel like you belong, or that you need just as expensive a car as your neighbor. In addition, marketing through social media channels is perfect for displaying the effects of compound behavior.

Marketing campaigns promoting sustainable behavior often focus on the problems they try to solve, such as climate change, plastic in oceans, child labor, and environmental degradation. The horrific images they show invoke a fight-or-flight response, in tandem with a guilt trip. No wonder the effect of these campaigns is limited. Perhaps they can learn from Kollock’s recommendations and traditional marketing strategies.