I am delighted to welcome Robert Wyse Jackson (graduate of Trinity College Dublin and postgraduate student at the London School of Economics) as a guest contributor to Envirolarm:
Capitalism – the arch nemesis of Mother Nature! At least, that’s what environmentalists would like you to believe. Countless environmental NGOs and activists have argued that immediate and radical social change is imperative, or the environment will pay the price for excessive corporate greed. These assertions might have truthful elements, but it is increasingly apparent in modern business that large corporations are waking up to the financial and reputational risks of failing to go green.
On 20th April 2010 an explosion on the Deepwater Horizon drilling rig killed 11 men and sent millions of gallons of oil gushing into the Gulf of Mexico. The effect of the explosion has been felt on the coasts of Florida and Louisiana, where beautiful beaches have been swamped by black oil, causing huge environmental impact. Subsequently, there was widespread public and political outrage directed towards the rig’s owners, British Petroleum (BP). At the end of October, BP announced that it expects the crisis to have cost it over $40 billion dollars in clean up costs, financial penalties and legal costs. In addition, vast sums of money have been spent on repairing BP’s tattered reputation to consumers which threaten to harm BP’s long term profitability. The effect of the crisis was manifest in BP share prices, which had fallen by 35% on the FTSE.
What is evident from the BP crisis is that it makes good business sense for corporations to invest in the environment. Many corporate leaders have woken up to the loss of public trust in business, and are taking an active role in conducting their businesses in environmentally sustainable ways. This contrasts heavily with the failure of governments to agree new steps to cut greenhouse gases. Last month, Unilever launched an ambitious plan to halve the environmental impact of its products by 2020. Coca Cola has implemented a programme of water conservation to protect the most important ingredient in its production process. In addition, many banks have recently adopted the equator principles, a voluntary set of standards for determining, assessing and managing social and environmental risk in project financing. By signing up to this agreement, banks commit to not providing loans to projects where the borrower will not or is unable to comply with their respective social and environmental policies and procedures that implement the equator principles.
These are examples of voluntary initiatives by large corporations to address their corporate social responsibilities. They represent an increasing awareness by large corporations that it increasingly makes good business sense to conduct their operations in an environmentally sustainable manner. The BP oil crisis has demonstrated to corporate leaders the huge financial and reputational risks of conducting their business without due regard to the environment. The scepticism towards big business after the financial crisis will only increase corporate awareness of the need to be perceived as environmentally friendly by consumers.
As corporate responsibility increases in business, capitalism will increasingly be viewed less as an enemy to Mother Nature and more as a friend.
While I welcome initiatives which reduce the environmental impact of businesses' activities, I do not think that we should rely on them too much to address the problems we face.
ReplyDeleteThis is because the motivation for businesses to act is one of self-interest. It is a matter of reducing their "financial and reputational risks". As long as it makes "good business sense", corporations will invest in the environment. By implication, if it does not make good business sense to protect the environment, coporations will not alter their activities. It is not plausible to say that it will always make business sense to invest in the environment. Most of the time consumers will buy the cheapest product, irrespectve of its environmental impact.
As such, corporations are not a panacea to the problems of global warming. Their self-interest was at the root of these problems. Their self-interest, while it may have become less damaging to the environment, is not the solution.
Businesses, deserving of credit in many respects (I am certainly not anti-capitalist), should not be credited in this respect. They are trying to legitimise a situation where the "means justifies the end", a self-serving end. We should be aware of this and remain vigilant should the means needed to achieve the end no longer seek to protect the environment.
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ReplyDeleteYou’re right Emile. We should not rely exclusively on business to address the world’s environmental problems. It would be counter productive to do so. We all have a moral obligation to future generations to reduce our reliance on carbon additions. The most effective way of achieving this would be through our governments, but unfortunately they’ve bottled their obligations under Kyoto and Copenhagen and most recently, compromised at Cancun where no new legally binding treaty was achieved. It’s my hope that the world’s governments will get their acts together before it’s too late. (I’m still waiting to see the greener sides of this supposedly “green Tory” movement).
ReplyDeleteYou’re also right, up to a point, when you say businesses act with their self interest in mind. The businesses and industries documented in this article have found that it makes good business sense to invest in the environment (be it down to the legal or reputational costs of being perceived as “un-green” or to develop a business model that is sustainable in the long term). However, recent years have seen a dramatic rise in corporate social responsibility initiatives as businesses, like many citizens, have acknowledged their moral obligations to conduct their business activities in a more sustainable way. Projections suggest that this is likely to increase as the practise becomes more and more widespread.
I don’t think you are right when you say consumers will buy the cheapest product most of the time. If this was the case, there wouldn’t be a thriving industry in free range eggs, fair trade coffee or organic produce. People (albeit usually those with more disposable income) do take environmental factors into consideration when deciding which product to purchase. BP suffered a huge drop in sales in America and Britain after the rig disaster. Indeed, I still refuse to buy oil or any other goods at Esso after there successful lobbying of George Bush not to ratify Kyoto! It’s my hope that non price considerations will continue to influence (hopefully at an even greater level) both businesses and consumers.
The article does not seek to paint big business as the messiah to tackling global warming. As you noted, big business is the primary cause of global warming. However, it seeks to draw attention to the growing movement within business of the need to be perceived to be green to customers, and the growing acceptance in the management boardrooms of their moral obligations to the environment. Interestingly, I saw this advert on television last night which I think is a good example of oil companies trying to improve their image through greening initiatives (out of self interest or otherwise).
http://www.youtube.com/watch?v=-mAtvRA4MBA
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