Archive for the ‘sustainability’ Category
Why Do (or Don’t) Companies Go Green?
Filed under: CEOs, corporate citizenship, energy, environment, NGO, sustainability, values |
Comments (5) Why do some companies “go green,” while others are satisfied to go grey? Why do some develop robust sustainability programs while others sit back and watch?
Yesterday, as part of my Business Ethics Speakers Series at the Ted Rogers School of Management, I had the pleasure of hosting Hamish van Der Ven, a Ph.D. candidate from the University of Toronto. The title of Hamish’s talk was “Big-Box Retail and the Environment: Why Some Firms Innovate and Others Stagnate.” His main contention was that the main factor at play is the socialization of high-level executives at multi-stakeholder sustainability networks. In other words, what matters is whether the leaders of the company in question make use of opportunities to sit down with a range of folks to talk about sustainability.
The main competing theory of why companies go green is the theory that it all has to do with profitability. Companies go green, on this theory, because they buy into the “business case” for sustainability. That is, they come to believe that reducing energy usage, minimizing packaging and waste, and so on, will be good for the bottom line. Alternatively, they come to believe that being perceived as environmentally-progressive will win them customers, and increase profits that way.
But as Hamish rightly points out, that explanation suffers from a serious defect. Every company is subject to those pressures — they all want to cut costs and reduce waste and attract environmentally-concerned consumers— but only some of them actually put much effort into sustainability programs that will do those things. If the business case is such an important motivator, why don’t all companies buy into it?
Much more significant, Hamish argues, are the opportunities executives take, or don’t take, to open themselves up to internalizing new social norms. The process of socialization involves precisely the process of internalizing social norms. And that happens through social interaction.
And when leaders change their thinking, they tend to do a lot to change corporate culture. As the head of CSR for one major corporation told me, “We talked a lot about going green, but then one day the CEO called and said ‘Make it happen,’ so it happened.”
Of course, this isn’t just just a story about how policy-makers and activists can influence companies by influencing leaders. It’s also a story about how leaders can implement change in their own organizations. As Hamish put it, “If you sit down with people who think differently, you start to see things in a new light. We cannot expect change to result from [instead] sitting around a table with people who think just like you.”
——–
Update, Dec. 14, 2013: Hamish has now published a paper based on this research. “Socializing the C-suite: why some big-box retailers are “greener” than others,” Business and Politics Ahead of print (Dec 2013)
Global 100: Sustainably Misleading
Filed under: accountability, awards, consultants, definitions, environment, greenwashing, rankings, sustainability |
Leave a comment Corporate Knights continues to mislead. Once again they’ve issued a list of the world’s “most sustainable” corporations — the Global 100 — and once again the metrics they’ve used have surprisingly little to do with what most of us mean by the word “sustainability.”
First, let’s get one thing out of the way. The organization is right to defend the fact that there are oil companies (including Enbridge, for example) and other producers of “sin” products on their list. There’s nothing in principle that says an oil company can’t, in some useful sense, be sustainable. And even if you think the fact that a company like Enbridge should be docked points because oil is a non-renewable resource, it still is a useful and interesting exercise to look at which oil companies (for example) are leading the field in terms of sustainability. So, CK is right to defend itself in this regard.
No, the problem with the Global 100 is not that they give kudos to a few unpopular companies. The real problem lies in the criteria used to measure what they refer to as “sustainability.”
Here are the 12 “key performance indicators” that get a company onto the Global 100:
- Energy productivity;
- Carbon productivity;
- Water productivity
- Waste productivity
- Innovation Capacity
- Percentage Tax Paid
- CEO to average employee pay
- Pension fund status
- Safety performance
- Employee turnover
- Leadership diversity
- Clean capitalism pay link.
These are essentially the same criteria they used (and which I critiqued) last year. The only difference is that they’ve added the bit about “Pension Fund Status,” the relevance of which may already have you wondering.
Hopefully the problem with those criteria is clear to most of you: only the first four — the first third of the criteria — actually have something to do with what most of us mean by “sustainability.” The rest are important issues, to be sure, but not relevant to the question of sustainable use of resources, or to the notion of sustainable economic growth that is compatible with environmental conservation.
Many will surely defend these criteria, and will tell me that I’m working with too narrow a conception of sustainability. Sustainability, they may say, isn’t just a narrow environmental concept. It’s about the whole People-Planet-Profits nexus. Well, certainly you can draw a diagram with boxes and arrows that shows connections of various kinds between those three. But to say that the three are one is to make so many undefended ethical, conceptual, and factual assumptions that the only result must be unnecessary confusion.
No, the Global 100 really isn’t a sustainability index, at least in the way that word is used by normal folks. It’s a complex index of sustainability, fairness, and a bunch of other positive stuff. And if you’re interested in all that stuff, why not just say so? Why bury it in a word that most people take to mean something else entirely?
The kicker, in terms of misleading language, here, is the tag-line that completes the title of the Corporate Knights list: “The Global 100: World Leaders in Clean Capitalism.” The problem here is that “Clean Capitalism” is a term Corporate Knights uses to describe what others might refer to as “conscious” capitalism, or perhaps “corporate social responsiblity.” But when most of us hear “clean,” we think “not dirty,” or “not polluting.” The implication, here, whether intended or not, is that the firms on this list are clean ones, firms unlike the dirty, polluting, earth-pillaging firms of the past.
Now, it would be one thing if Corporate Knights wanted to turn the word “sustainability” (or “clean”) into a technical term, a term of art with a special meaning for experts in the field. But that’s not what’s going on. Instead, they’re turning the word into a brand, a buzzword, and it’s a buzzword with which 100 companies are today adorning press releases. A hundred firms are today bragging about being sustainable, and are doing so with Corporate Knights’ endorsement. But “sustainable,” here, simply does not mean what you think it means.
2012 Global 100 Greenwash
Filed under: definitions, environment, greenwashing, rankings, sustainability |
Comments (5) Corporate Knights has announced its 2012 list of the “Global 100,” its annual ranking of what are ostensibly the world’s most sustainable companies. And once again the list is deeply misleading.
The list is topped by pharmaco Novo Nordisk, Brazil’s Natura Cosmeticos, Norwegian energy company Statoil, the Danish biotech company Novozymes, and a Dutch company called ASML Holding, a manufacturer of photolithography machines used in the semiconductor industry. Some will surely express surprise at the list — after all, none of these companies is in an industry known for being squeaky-clean. But that’s not the real problem.
The real problem lies in Corporate Knights’ methodology. Like all similar rankings, this one has to choose some criteria. And the devil is in the details.
Here are their criteria used to determine the Global 100 — a sustainability ranking — for 2012:
#1. Energy productivity
#2. Greenhouse gas (GHG) productivity
#3. Water productivity
#4. Waste productivity
#5. Innovation Capacity
#6. % Taxes Paid
#7. CEO to Average Employee Pay
#8. Safety Productivity
#9. Employee Turnover
#10. Leadership Diversity
#11. Clean Capitalism Paylink
The problem is that more than half of these criteria — #5 through #10 — have nothing to do with sustainability. I do realize that the exact definition of “sustainability” is up for grabs at this point, and many people interpret it quite broadly. And yes, if you use your imagination and squint your eyes a bit, I guess you can conjure up a connection between “Leadership Diversity” and sustainability. But it’s a stretch. I mean, sustainability has something — something — to do with environmental issues, right?
One sustainability consultant who shall go unnamed recently told me that “sustainability doesn’t mean ‘sustainability’ any more — it just means all the good stuff that business does.” The problem is, that’s not what the term conjures in the mind of the public, the consumers of the headlines a list like this provokes. When they hear “sustainable” they think “green.” So a sustainability ranking that is only partly based on environmental performance fails in its basic functions, namely to reward companies for their green behaviour, and to educate consumers about which companies are performing well on issues that are important to them.
Environmental Profit-and-Loss
Filed under: accountability, CSR, environment, pollution, pricing, sustainability, values |
Comments (1) It’s attractive, but very dangerous, to try to calculate a ‘bottom line’ for a firm’s social or environmental performance. Attractive, because key stakeholders are increasingly interested in knowing those kinds of details. But the main danger should be obvious: there’s just no way to add up the disparate factors that make up a firm’s social or environmental performance. How do you add together litres-of-water-used plus hectares-of-habitat-destroyed? On the social performance side, how do you sum up number-of-women-in-senior-management plus fair-trade-contracts signed?
The answer of course is that you cannot. You can’t add up things that are represented in different units of measure. That’s not to say that you can’t or shouldn’t track and report these various numbers; but it casts a dim light on the prospects of arriving at a global assessment of a firm’s social or economic performance.
Unless, of course, you simply put a dollar figure on everything, in which case the math becomes quite easy.
That’s what shoemaker Puma has done, with its new Environmental Profit & Loss Account (E P&L). They’ve attached a dollar value to their greenhouse gas Emissions and their water consumption, and compared that to the dollar value of the shoes they produce. And, interestingly, they’re publicizing the fact that, environmentally, they’re in the red. They extract more from the environment than they provide to consumers. Environmentally, they’re operating at a loss.
Now, in standard terms, any firm that uses more (in dollars) than it puts out (in dollars) is going to go out of business pretty quickly. But as Puma’s Jochen Zeitz points out, that’s not the case for many environmental inputs because so many environmental inputs are unpriced — that is, they cost a company nothing. Pollution, for example, when unregulated, costs a company nothing, and when under-regulated costs the company less than the cost such pollution imposes on others. So what Puma has done is put a dollar value on these things so that they can figure out what their environmental bottom line would be, if they actually had to pay for all they consume and all they emit.
There are two key problems with such attempts to calculate an environmental bottom line this way. One is practical: there just aren’t uncontroversial ways to put a dollar figure on every unpriced environmental input. Certainly there are people who can provide methods for doing so; but that doesn’t mean there’s a clear right way to do it.
The other problem is, well, philosophical. It’s not at all clear that everything we want to say about environmental ethics can be summed up in terms of economic impact. What’s the dollar value of the loss of a species? Is the value of beautiful scenery really captured by summing up how much each of us would be willing to pay to preserve it?
Still, Puma deserves credit for this rather striking bit of transparency. Even though the “E P&L” is a pretty incomplete picture, it nonetheless does tell us something about the company’s overall environmental impact, and its commitment to doing better.
(Thanks to Andrew Crane for pointing me to the Puma story.)
Are they Competing, or Just Trying to Sell You Something?
Filed under: competition, complexity, corporate citizenship, CSR, definitions, sustainability, values |
Comments (2) Peaceful coexistence isn’t always a good thing. In the marketplace, competition is what drives different producers of a good to improve their wares, and having one producer explain the superiority of his or her product is — embellishment and puffery aside — how consumers learn to differentiate among products. When different suppliers fail to engage in competition, the consumer is left in the dark. Let me give you two examples.
Here’s the first example. One of the problems — or rather, one of the warning signs — about so-called “alternative” medicine is that there are dozens of different kinds of alt-med, all making different and presumably conflicting assumptions about how the human body works, and yet they all get along cozily together. Nowhere do you find homeopaths, for example, explaining why their methods are superior to those of acupuncturists. Nor do you find Reiki therapists dissing Ayurveda. Crystal therapy gurus are unlikely to tell you about the problems with Traditional Chinese Medicine. And so on. As Robert Park wrote with reference to alt-med, in his book, Voodoo Science (p. 65), “there is no internal dissent in a community that feels itself besieged from the outside.” Of course, the existence of different alt-med treatments isn’t in itself surprising or problematic. Mainstream medicine too uses different treatments for different illnesses. But the different treatments offered by mainstream medicine are all, without exception, underpinned by a single coherent body of theory: the heart circulates blood, germs cause infection, physiological effect varies according to drug dosage, and so on.
So the fact that various systems of alternative therapy, underpinned by very different understandings of the human body (and indeed of metaphysics), can get along so chummily is a huge red flag. It suggests that purveyors of alt-med either a) aren’t thinking critically, or b) are more interested in sales than in healing.
Roughly the same concern arises with regard to different perspectives on how businesses should behave. Some will tell you that the obligations of business are all rooted in the notion of sustainability, with its indelible environmental overtones. Others will say no, it’s a matter of CSR — Corporate Social Responsibility. Still others say it’s all about values. Or leadership. Or citizenship. Or the (ug!) Triple Bottom Line. And each of those seems, at least, to be underpinned by a different understanding of the nature of the firm, its role in society, and what it is that makes an action right or wrong. And yet all kinds of folks seem to want to cleave to all of the above, or to glom onto one of them seemingly at random, as if it doesn’t matter which one you choose.
Again, this should be a big red flag.
I’m sure I’m going to be told that these different schools of thought don’t need to compete with each other — what’s really important, they’ll say, is that, you know, we focus on fixing the way business is done. But again, as with the case of alternative medicines, if someone tries to sell you some and isn’t willing to even try to explain why theirs is better than the other stuff, you should at least wonder whether they aren’t thinking critically, or are merely trying to sell you something.
‘Doing the Right Thing:’ A Brief Guide to the Jargon
Filed under: corporate citizenship, CSR, definitions, ethics, sustainability |
Comments (5) Everyone agrees that business should “do what’s right,” even if they disagree over what the right thing is. One significant barrier to even talking about doing the right thing is vocabulary. The vocabulary applied to “doing the right thing” is messy and varied. Here’s a brief critical guide to the most common terminology:
- Business Ethics. This is the most general term, and the one that can be defined more or less uncontroversially. As a field of study, business ethics can be defined as the critical, structured examination of how people & institutions should behave in the world of commerce. There are two problems with the term. One is that the word is too often associated with scandal. I once had a business group ask me to come speak to its members, but could I please not use the word “ethics.” The second problem is that people sometimes (wrongly) associate the word “ethics” with a narrow range of questions about personal integrity, or about professional standards.
- Corporate Social Responsibility (CSR). This is an incredibly popular term, but generally poorly defined. Most definitions you’ll find don’t actually look like definitions. If you look around online, you’ll find that CSR is generally thought to have something to do with giving back to the community, and making a social contribution. But it’s too narrow a term to cover the full range of issues involved in doing the right thing in business. Not all businesses are corporations. Not all business obligations are social ones. And we’re interested not just in the responsibilities of business, but also permissions, duties, rights, entitlements, and so on.
- Sustainability. The word “sustainability” has roots in environmentalism, where it nicely picks out the issue of how we as a society can continue to make use of resources in a way that makes sure there continues to be enough, especially for enjoyment by future generations. But the term is badly abused in the world of business. Sometimes it just refers to the ability to sustain profits, which is pretty far from its original meaning. Other people try to pack too much into the word. I recently had a sustainability consultant tell me that the word “sustainability” no longer means, you know, sustainability…it just means “all the good stuff.” But lots of “good stuff” in business has nothing to do with sustaining anything. It takes tortured logic and wishful thinking to say that all matters of doing the right thing in business can simply be boiled down to sustainability.
- Corporate Citizenship. Citizenship is essentially a political notion, having to do with the relationship between the individual and the state. The term “corporate citizenship” is evocative. It reminds us that businesses aren’t free-floating; they exist in a social and political context, and that context brings obligations. But just as all of your obligations are not citizenship obligations, not all of a corporation’s obligations are obligations of corporate citizenship.
- Triple Bottom Line. Luckily, this one seems to be dying out. The Triple Bottom Line (3BL) is rooted in the very sane idea that business managers should manage not just the financial performance of their companies, but also their social and environmental performance. Unfortunately, the term implies something much bolder, namely that each of those areas of performance can be boiled down to a “bottom line.” And that’s simply not true. (Just try asking a company what their social “bottom line” was last year.) The result is that the term sounds tough-minded, but usually ends up being just the opposite. For more about the problems with 3BL, see here.
So choose your words wisely. We shouldn’t be scared off by the varied terminology. But we ought to recognize that each of these terms has its problems. Different constituencies will find different vocabularies attractive, and perhaps congenial to their interests. And also keep in mind that each of these terminologies is promoted by a different set of consultants and gurus, all eager to tell you that thinking in terms of their favourite vocabulary is the key.
Gas Prices, Criticism, and Ethics
Filed under: consumers, economics, energy, media, pricing, protest, sustainability |
Comments (3) There’s more than a little unseemly about the pervasiveness of complaints about the high price of gas. Of course, you can’t really expect anybody really to like high gas prices, at least from a consumer perspective. But disliking something is not the same thing as getting irate and pointing fingers.
Here in Toronto, gasoline prices hit an all-time high this past week. Talk radio jocks and editorialists were all over it. In the US, politicians are railing against oil companies. Of course, this is not the first time that high gas prices have spurred a populist pile-on. It’s a predictable phenomenon in response to perceived price-gouging. (And lets not forget the not-unrelated but misguided calls to boycott BP in the wake of the Deepwater Horizon blowout last year.)
But whining about the price of gas just might be unethical — or at least unseemly — in a couple of circumstances.
One such circumstance is if you really, really ought to know better. And lots of people, including most people editorializing for major newspapers, ought to know better. In fact, most of us ought to know better. We all ought to understand, as citizens, voters, and consumers, the basic interrelationship between supply and demand, and the factors that make price-gouging likely or unlikely, as well as something about how hard it is to anticipate the effects of the price controls some people favour. But I realize that that’s asking for a quantum leap in economic and financial literacy. (Ever notice that no one ever compliments gas companies or stations when their prices happen to be relatively low? This suggests that people think the low price is the right price, a the notion of a “right” price for a commodity is utterly at odds with any reasonably sophisticated view of economics.)
Another problem is when the gas-price complaints are aimed at gas stations themselves. Most of those are actually independently-owned small businesses, with precious little control over the price of gas. And as James Cowan recently wrote for Canadian Business, high gas prices don’t mean big profits for station owners. Picking on small businesses to express displeasure at the effects of fluctuations in worldwide commodity prices is thoroughly shameful.
Finally, I’ve heard surprisingly few people, in all this, bother to challenge the notion that high gas prices are a bad thing in the first place. What happened to everyone’s zeal for going green? Economics 101 says that when prices go up, demand goes down. And we all want demand for gas (i.e., consumption of gas) to go down, right? Now demand for gas, in particular, doesn’t change much when prices go up, but it does go down a bit. So if we want gas consumption to go down (as most of us agree would generally be a good thing) then we should be happy, in our less-selfish moments, to see gas prices going up. Now, admittedly, high gas prices don’t affect everyone equally. But nor do the high price of anything else. One of the few sane voices in all this is The Economist. A recent editorial there pointed out that the most effective thing that governments can do to take the sting out of high gas prices isn’t to do anything directly about those prices, but rather to insist on higher fuel-efficiency standards for cars. This suggests that the bad guys in this story, if you need to point fingers, are more likely to be found among the big auto makers than among the big oil companies. But even that is pretty lame. Car companies only make the cars that people show a preference for buying. Like it or not, not every unhappy story has a villain.
Are Girl Scout Cookies Evil?
Filed under: activism, boycott, environment, food, health, protest, snacks, sustainability, values |
Comments (4) 
Is nothing sacred? What could be more pure and innocent and hard-to-object-to than delicious bite-sized cookies sold, door-to-door, by happy-faced young girls trying to raise money to support a wonderful not-for-profit organization?
Well, apparently nothing is safe from criticism. Girl Guide cookies, as it turns out, are under attack for being made with palm oil, a tropical oil the production of which has been blamed for deforestation and for endangering the habitat of orangutans. Girl Scout cookies, in their current form, are apparently evil.
Dammit.
Here’s the story as reported by Tara Kelly, blogging for Time: Do Girl Scout Cookies Harm the Environment? Renegade Scouts Fight Against Palm Oil Ingredient
…now two renegade girl scouts are lobbying the Girl Scouts of America to remove the ingredient from the cookies.
Rhiannon Tomtishen and Madison Vorva, who are high school sophomores, stopped selling Girl Scout cookies in 2007 after they began working on a public service project to bring attention to the plight of endangered orangutans in Borneo. To ramp up their efforts, Rhiannon Tomtishen and Madison Vorva, natives of Ann Arbor, Michigan, have teamed up with Rainforest Action Network (RAN) to make the change a reality….
OK, OK. So I’ve long realized that Girl Scout Cookies (a.k.a. “Girl Guide Cookies,” here in Canada) are evil, but only in roughly the same way that any addict realizes that the object of his desire is evil. Every year I buy quite a few boxes of GG Cookies (the mint wafer kind, thank you very much) and hoard them, hiding them from family and friends, to enjoy them one-by-delicious-one.
A few random thoughts about the ethical issues here:
1) This is a lovely example of why not-for-profit organizations fall squarely within the bailiwick of business ethics, even if they’re not “businesses” as that term is traditionally conceived. (According to Time, by the way, the Girl Scouts annually sell nearly three quarters of a billion dollars worth of their delicious baked goods.) I suspect that Kathy Cloninger, CEO of Girl Scouts USA, is finding out that even a not-for-profit cannot hide its head in the sand when faced with criticism of its supply chain.
2) Sometimes (but only sometimes) evil comes from trying to do good. Time notes the reason for the existence of palm oil in the cookies:
In 2006, the U.S. Food and Drug Administration began requiring unhealthy trans-fats to be listed on the Nutrition Facts labels on food products. Two official Girl Scouts bakers worked to make its cookies healthier in light of the changes, said Tomkins. “In order to rid cookies of trans-fats, you had to find another alternative.” That alternative is palm oil.
So, the cookies are less-environmentally-friendly because of efforts to make them better for your arteries. Is there a win-win alternative out there? Maybe, but that cannot be assumed. It may well be that some sort of tradeoff is going to be required. So, ask yourself: which do you care about more…your arteries or the orangutans? (“Pssst! You’ve got cookie crumbs on your tie!”)
3) The main reason that Girl Scouts USA makes such a good target for criticism (in addition to its prominence) is of course precisely the organization’s clean-cut, do-gooding image. In other words, the organization is vulnerable to criticisms that would simply be shrugged off by whatever anonymous company makes the cookies sold in the bulk-food aisle of the grocery store. The Girl Scouts have an image to protect, and, other things being equal, this means they are more likely to be responsive to pressure. But then, that image has been earned, and critics may well find that the public would rather continue to support a favourite charitable organization than learn about a new set of ethical issues focused on the effects such support could have in far-away lands. That doesn’t mean that the anti-cookie campaign can’t get traction. It just means that when the battle is good cause versus good cause, the outcome is hard to predict, and it’s not clear whether there can even be winners.
—–
Hat tip to NW, for pointing me to this excellent story.
Who Else is Too Big to Fail?
Filed under: banking, complexity, corporations, disaster, economics, finance, government, risk, sustainability |
Comments (13) The notion that some companies are “too big to fail” — too large and too interconnected with the rest of the economy for their failure to be permitted by government — is lamentably familiar to most of us in the wake of the 2007-2010 financial crisis. The term has most famously been applied to the biggest American banks (e.g., Bank of America) and insurance companies (e.g., AIG), and it motivated the multi-multi-billion-dollar government bailouts of 2008/2009. In some ways, it’s a radical notion: for most of modern economic history, the assumption has been that the economy could operate according to something like survival of the fittest. If a company is so mismanaged that it fails, so be it. That’s life in a competitive market. Of course, governments have from time to time propped up companies seen as particularly important employers, but such moves are always divisive. There has seldom been such widespread agreement that certain companies really are so big, and so important, that they cannot be allowed to fail.
But outside of the financial industry, what companies might reasonably be thought of as “too big to fail?” Are there companies the failure of which would be truly catastrophic? What companies are there such that, if they suddenly ceased operations, the result would be disastrous not just for individual customers, employees, and shareholders, but for society as a whole?
I’ll mention a few possibilities, and then open the floor for discussion:
BP, Chevron, and the other very large oil companies. As unpopular as they are, it’s hard to deny that their product is utterly essential, at least for the time being. Any one of the biggest companies going out of business would, I suspect, have a terrible impact on the reliability of supplies of gasoline and heating fuel, and would most certainly result in increased prices. On the other hand, most of the world’s oil supply flows through the big state-owned oil companies of the middle east, rather than through private companies like Exxon and Shell the others, the ones that come most readily to mind for North American and European consumers.
Big pharma. Again, not a popular industry. And much of what they produce — treatments for baldness, erectile dysfunction, etc. — is far from essential. But some of their more important products, including things like antibiotics and vaccines, truly are essential and an interruption in their supply could have catastrophic consequences, from a public health point of view. But then, that industry has enough players in it, with overlapping product lines, that it’s unlikely the collapse of any one company would have a huge impact. But really, I’m guessing here. Perhaps the collapse of the maker of whatever the single most antibiotic is would be catastrophic. (Does anyone know?)
What about UPS? That one may surprise you, but the company handles something over 5 million packages per day, which I’ve heard adds up to a non-trivial percentage of American GDP. If UPS disappeared tomorrow, of course, Fedex and the USPS would take up some of the slack, but the short-term effect on American business (and hence consumers) would be significant.
Locally, surely, there are lots of companies that might be considered essential. Companies involved in ensuring the quality of municipal water supplies might count (including the ones that provide the chemicals needed for water purification). And in places where fire departments are privately-run, those would obviously count. But really, I’m looking for examples of companies the failure or disappearance of which would have widespread effects from a social point of view.
Of course, the phrase “too big to fail” isn’t just descriptive. In the world of finance, it is seem as having immediate policy implications. In 2009, Alan Greenspan, the former chairman of the US Federal Reserve (and no fan of government intervention in the economy), said “If they’re too big to fail, they’re too big.” Are there companies outside of finance where such an argument could be made?
Ethics of Inefficiency
Filed under: consumers, corporations, energy, productivity, quality, sustainability, technology |
Comments (13) 
The current way of thinking seems to imply that small-scale production is the way to go. Of course, for much of the 20th century, small-scale production was a sign of affluence: only the wealthy could afford to have a craftsman dedicate hours, perhaps days, to the task of custom-making an item just for them. Today, everyone from yuppies to hippies is clamoring for just that, in their rush to grab for things perceived as local and green and anti-commercial. We don’t want multinationals to get between us and the skilled hands that make our loafers, and we want no agrifood giants mediating our relationship with the farmer who lovingly raised the goats that gave the milk that made the cheese. We want our business small, and indie. We want our consumer goods “bespoke,” and “artisanal.”
And the reason for this seems to be some vague impression that those kinds of businesses, and those kinds of products, are somehow more ethical. And in some cases, along some ethical dimensions, that may be true. But if anyone thinks that products produced by a small, local artisan are likely to be environmentally superior, well excuse me for being just a tiny bit skeptical.
This vague association of the small with the ethical misses the fundamental truth that, when it comes to production methods, size brings efficiency. Mass production tends to be efficient in its use of energy, materials, and labour. There are of course tradeoffs and exceptions: it’s entirely possible for a factory mass-producing something to be highly efficient in the use of labour, but to be highly inefficient in the use of, say, water — especially if water is had at no cost. But generally, mass production is efficient; that’s its raison d’etre. Consider: a local tailor spending an entire day hand-stitching a jacket has to use, to begin with, an entire day’s worth of energy to light and heat his workshop. Alternatively, the same jacket could be made in a garment factory in a matter of minutes, using a few minutes’ worth, rather than an entire day’s worth, of energy.
Now that’s not a blanket endorsement of all mass production. It’s entirely possible for production processes to be set up so that they are highly efficient in their use of whatever resource is particularly costly, and highly inefficient in its use of whatever happens to be cheap, regardless of the ethics of doing so. Note also that mass-produced goods tend to cater to the lowest common denominator. It should also be noted that assembly lines may tend to result in repetitive strain injuries among workers — and, if you believe some critics, in feelings of alienation as the worker whose job is reduced to some trivial aspect of production is effectively cut off from any connection with the product as a whole.
But (generally) efficiency is good. Certainly no one is in favour of inefficiency, with the possible exception of those of us who revel in a well-earned “inefficient” weekend. At any rate, the very reason we engage in mass production is that it is efficient: it produces the most output per unit of input. And that’s a good thing. So while there may be reason to value the small, the local, the artisanal, we ought at least to be aware that such goods are liable, at least in general, to be the product of highly inefficient — and hence environmentally unfriendly — production methods.
The Business Ethics Blog 