Zero-Impact Corporation, Part 2

Nearly 2 weeks ago, I posted something under the title, “The Zero-Impact Corporation”. I pointed out that under the popular “nexus of contracts” view of the corporation, corporations don’t really “exist” in many senses, they’re just the name we give to the mechanism by which consumers, managers, labourers, and shareholders exchange goods and services. By that hypothesis, I said,

Shell Oil has never emitted any pollution. Sure, smokestacks bearing its name have, but that’s just a short-hand way of saying that millions of car-drivers (and folks who heat their homes with oil or natural gas) have each contributed, incrementally, to that pollution.

Now, I was careful to point out that I didn’t intend this as a way of letting corporate managers off the hook for bad decisions. I’m just curious about to what extent, or in which circumstances, it makes sense to think this way.

But clearly, it’s not an either/or question: some corporate behaviours (e.g., basic production) are driven by consumers. And some behaviours (e.g., choice of production technologies) are determined by managers — that, after all, is what managers are for.

So, here’s an ethical hypothesis for discussion. I suspect that there are many cases the following ethical standard makes sense:

Hypothesis: If a company produces, by the most efficient means possible, precisely what its customers demand, then 100% of its emissions, water usage, etc., can be attributed to its customers. The company, itself (or management, perhaps), is only responsible for the difference between its actual levels of waste, emissions, etc., and the technically feasible minimum that a company of its kind could produce/emit/whatever. That is, a company (or its management) is ethically responsible for its inefficiency, which is the one thing that can’t plausibly be attributed to anyone else.

Thoughts?

9 comments so far

  1. nathe on

    I think that is a reasonable hypothesis and as a consumer it makes sense to me to take responsibility for the impact of production and fair that the producer of what I consume takes responsibility for their inefficiency in producing what I have demanded of them.

  2. Callicles on

    I agree with the idea the consumers bear some responsibility for what corporations do, but the way the hypothesis is formulated seems to wrongly conflate economic efficiency and technical feasibility. Suppose a power plant burns dirty coal. That may be economically efficient, meaning there’s no cheaper way to generate large amounts of power in this situation, but it’s obviously technically feasible to do much better. Of course a power plant is a monopoly, so that’s not the context you with thinking about.
    So imagine that in order to gain a competitive advantage, a company is able to cut costs and undercut the competition by being “dirtier,” pollution-wise, and suppose it is economically successful doing so. You’re saying the that the increase in pollution (relative to competitors) falls solely on the shoulders of the consumers? I don’t see this.

  3. Chris MacDonald on

    Callicles:

    Thanks for the comment. Yes, you’re right, I’m oversimplifying. Maybe the kind of inefficiency I was thinking of is apt to be driven to near zero by the market anyway.

    No, I wouldn’t lay the dirty production in your example at the feet of consumers: it’s not a necessary part of production, so by my hypothesis it’s “optional,” and hence the fault of managers.

    I’m trying (inelegantly) to capture the notion that part of environmental impact is unavoidably laid at the feet of consumers: if consumers buy a million cars from Honda, then consumers consumed a million times however much steel needs to go into a car. But, say, if Honda is using more steel than it needs to (say, through lazy design practices) the consumer won’t typically know about that and can’t control it, so they’re wouldn’t be responsible for it — lazy managers would be.

    Chris.

  4. Jeffrey on

    I’m not sure how this fits in – but what about the role of marketing in the generation of demand?

    (I think what I have to say connects up with Callicles’ comment.)

    Perhaps it’s impossible for GM to manufacture the Hummer any more efficiently than it does. Suppose no capital or labor is wasted. But still, it’s an incredibly wasteful vehicle, in the sense that few people need it for their daily driving.

    At least some people are persuaded that it would be a good idea for them to buy the Hummer based on clever marketing (along the lines of: buy this car to signal your status as a dominant male).

    On the other hand, firms can be clever about marketing — generating demand for — products that are good for the environment/society. Honda might try to get people jazzed up about buying hybrid cars, and Starbucks might get us jazzed up about free trade coffee.

    In short: companies can make efforts to create demand for ‘good’ products or ‘bad’ ones.

    I agree that consumers must be responsible for their purchases. But corporations aim to have a say about what consumers’ choices are.

  5. Chris MacDonald on

    Jeffrey:

    I mostly agree, though I’m uncertain how much stock to put in the notion of “generating” or “creating” demand. Clearly those are the right words in at least some cases, but I’m not sure how many companies have the kind of power to truly invent a new desire, as opposed to tapping into existing ones.

    But I find your Hummer example attractive. Maybe this starts to give more structure to the problem, or shows the limits of my hypothesis: maybe to make my hypothesis plausible, I have to limit it to resource consumption & emissions, and take the product under consideration as a given.

    Chris.

  6. Jeffrey on

    I think we are not too far apart, if at all.

    You said:

    “If a company produces, by the most efficient means possible, precisely what its customers demand, then 100% of its emissions, water usage, etc., can be attributed to its customers.”

    I’ll accept this statement. But the “if” is a big one.

    Do companies produce exactly what consumers want? It’s not like consumers have an idea in their heads of what they want, they communicate this to companies, which produce it. (I didn’t have the exact idea of the Hummer in my head which I emailed to GM.) But perhaps I did have in my head the idea that I would like to signal my status as a dominate male (why the hell else does one buy one of these things?!). Then, GM makes a car — The Hummer — that I can buy to satisfy my desires.

    Where does the responsibility lie? You might say me, because I bought the car. But we might also say GM — GM could have made a different, smaller car that satisfied my desire to signal my status as a dominant male, or perhaps they could have made no car that satisfied that desire. It would have gone unfulfilled — I’d put it in the giant pile of unfulfilled desires I have in my closet (which includes being an astronaut, brewing a quality batch of beer, playing golf well, and so forth).

    I might want to say that responsibility is shared here.

    Last thing: you can do this for “good” companies too. I had no desire for free trade coffee before Starbucks produced it. But I did have a desire to benefit people in poverty. This desire was going unfulfilled until Starbucks came along (it was in my closet again), but now I can fulfill. Where does the responsibility for this good thing lie? I wouldn’t say just me — I would give some to Starbucks too. (Just like I give some blame to GM for producing the Hummer.)

    OK, I’ll stop blabbing.

  7. Chris MacDonald on

    Jeffrey:

    Yes, I think we’re substantially in agreement.

    I now think my original hypothesis is best interpreted as a negative thesis: the inefficiences of a corporation are things that the company’s managers cannot in any sense attribute to consumers.

    Even interpreted this way, I think it has its limits. But I do think it’s useful to partition production, conceptually, into the bits that are more- versus the parts that are less-consumer-driven.

    Chris.

  8. DarryleHuffman on

    We, as consumers, do bear some of the responsibility. We place the producers of the product in a quandary. The consumer wants a product but we also want it done with the least amount of damage to the environment. As with any production their will be some damage to the environment. We want the companies to minimize our damage that we do by producing products which will make our damage seem less than what the company does. Then when the company by the production of the product does pollute we make them the bad guys.
    I will give this example. When we produce a vehicle their will be damage done to the environment. But which does the greater damage the production of the car or the consumer by driving the car.

  9. Kevin Goodman on

    I like that theory because it feels holistic and considers a broader spectrum of participant share holders. The only problem I see with it is that the consumer doesn’t have real or formal authority or structure in which to balance the relationship.


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