Posts Tagged ‘Green Movement’

The Story So Far

The idea that environment initiatives will systematically increase profitability has tremendous appeal. Unfortunately, this popular idea is also unrealistic. To anchor win-win situations as foundations of a company’s environmental strategy is dangerous because environmental costs in most companies are skyrocketing with no economic payback in sight. To achieve truly sustainable environmental solutions, managers must strike a balance between business and environmental concerns, recognising the fact that win-win situations only come few and far in-between.

Evolution of Environment Management

First Era (1970 – 1985)
Companies faced with new regulations of high technical specificity did little more than comply with the regulations and often fought them.

Early Second Era (1985 – late 1980s)
A shift in the regulatory context and the maturing of the environment movement created for managers to look beyond the narrow, predominantly technical approach.

Late Second Era (late 1980s – present)
The emergence of the win-win mind-set is a direct result of the extraordinary success that companies achieved in reducing pollution. Therefore, many jumped to the conclusion that continued environment action could more than pay for itself.

Why win-win won’t work

  • There is little specific guidance to managers. Proponents of the environment movement (e.g. Porter) argued their case on the macro level. What managers really need is specific guidance at the micro level.
  • Win-win situations are not easy and cannot be assumed that they can carry on indefinitely.
  • Win-win situations will become increasingly scarce as environmental challenges become increasingly more complex and expensive.
  • Even without additional regulations, however, progressively tighter standards within current regulations will push corporate environmental spending higher.
  • Distribution inequity of environmental cost among companies. There is a definite risk of the classic ‘free-rider’ problem.
  • The growing array of choices available to managers is only further complicating matters.

The Search for Solutions

Let’s look at the key problems corporations face today in terms of making environmental decisions.

  • Presently, there is a lack of framework for managers to follow.
  • There is a lack of literature that tackles the full range of issues. Present environmental text can only offer a one-dimensional prescription (i.e. effective environmental management) to achieve competitive advantage.
  • Companies do not take environmental issues into their ‘core’ business plans.
  • Other matured organisational functions (e.g. Quality Management, Accounting) have too narrow a focus to be able to encompass the whole range of environmental issues.

The Pragmatic Path – A Value-Based Approach

Instead of focusing on win-win situations, companies would be better off focusing on the ‘trade-off zone’, where environment benefit is weighed judiciously against value destruction. Within this framework, environmental issues can be broken down into three broad categories: strategic, operational and technical.

  1. Strategic issues

Some environmental issues are strategic because their impact on value is high enough to put core elements of the business at risk or to fundamental alter a companies cost structure, and because managers have considerable discretion about how to respond.

  • Decision type – lead or lag
  • Decisions to lead or lag are characterised by the Catch 22 irrationality.
  1. Operational issues

Management’s task with these issues is to ensure that minimum expenditures achieve maximum environment impact.

  • Step One – Understanding the what’s and the why’s of spending.
  • Step Two – Maximise impact with minimum cost.
  1. Technical issues

Systems should be created to track and disseminate emission information to managers so that they can make informed everyday decisions on trade-off between cost and environment.

  • A proactive role with a system in place versus a reactive one when one use an external audit.

Summary

For all environmental issues, shareholder value, rather than compliance, emissions or costs, is the critical unifying metric. The advantages are threefold, they are:

  • Environmentally sound
  • Practical, as it is formed with business experience
  • It is more likely to be truly sustainable over the long run.

The reasons are not only simple, but more importantly, sustainable. In short, as much as each shareholder wants to save the world, each environmental decision must ‘make sense’ for the business first. And as elegant as win-win might sound, in the real world… things are just not as simple.

Note: This paper was presented in a seminar.

Kenneth Boulding (1968) suggested that the problems that mankind is facing now results from humans acting like cowboys on a limitless open frontier, when in truth, we live in a finite world with a finely balanced life-support system.

The life of a cowboy in a borderless frontier is very different from that of an astronaut in an enclosed spaceship. Cowboys of the American Wild West lived in a scarcely populated world blessed with resources that seems to last indefinitely. Everything is there for the taking, if the cowboy needed something, he would just step out and takes what he needed. Even the presence of the indigenous native Indians with rights to their homeland would not deter the cowboy. Armed with a gun and some bullets, the cowboy would disregard these property rights and claim the land as theirs. In the modern concrete jungle, the survival of the fittest still rules, everyone would have to compete with one another in the search of fortune. Never mind the rich who deprive the poor of a decent meal because the poor are lazy and hopeless. Never mind the gain of one be the loss of another because they are myopic and lacking in vision. Never mind the increasing gap between the rich and the poor as long as we know our next meal will be on the table…who cares? If our position is in danger, we must be prepared to fight and defend; or better still, since offence is the best form of defence, we must try to take what others have so they cannot attack. The measure of well being of the society is the aggregated level of present consumption regardless of who owns what and how. I was once asked this question, ‘Well, which side do you want to be on?’ That struck me like a clap of thunder because one cannot choose who or where one is being born to. Therefore, whether one is born with a silver spoon or an empty bowl is really up to fate and where we end up depends on what we do along the way with fate. But since fate have dealt some with fortune and some with a raw deal, I do feel that simply by being more ‘fortunate’, that is a social responsibility towards the less ‘fortunate’.

The astronaut lives with other crewmembers in an enclosed capsule with finite supply resources. Everything within the spaceship has to be maintained in equilibrium and in balance. Nothing is thrown away and wasted because they will never get it back; everything is recycled or reused. The crew member function as a team, the team is weakened is when one member is weak. There is no competition, only co-operation within the team and each functions in the interests of others. Consumption of resources is done with the consideration of other members and the provision of future needs. The measure of well being in the spaceship is measured in the level of physical and mental health, the maintenance of resource levels, and the life-support system on which they all depend on.

The truth is simple; cowboys will not survive in a spaceship. The reality is, societies today are practising cowboy economics in this spaceship called Earth. We have treated natural resources like cowboys, free for the taking. Increasing our consumption level without regard of future provisions. Mother Earth has endowed us with her precious natural resources, but these resources are not infinite. Unless we respect what Mother Nature has given us, we will continue to live in fear that she will strike us with the fury of an angry mother of a prodigal son. For us, humankind, the prodigal son, we have to live in the tragic consequences of our wicked ways. Eventually, we will over-stress our life-support systems resulting in the breakdown of our lives and homes. There will be increased competition between crewmembers for the decreasing levels of resources that may very well lead to social breakdown and eventual violence.

The second truth is this, mankind must abandon their cowboy economics and come to terms with the fact that we live in a world with a limited frontier. If we stay on our present course, we will continue to plunder our land and seas while creating a bigger hole in the sky (the ozone layer). We will continue to weaken the foundation on what life is based on, non-market social relationships of love and care for every living person on this planet we call home. On this course, the human civilization will not be able to survive as long as a fraction of what the dinosaurs had (that is assuming we do not kill ourselves with weapons of massive destruction first). By deliberately altering our image of reality, we have the power to change the world…and change we must. We must protect nature from its worst enemy, us, even though it will be ‘uneconomic’.

Bibliography:

Boulding, K., 1968, ‘The Economics of the Coming Spaceship Earth’, Environmental Quality in a Growing Economy, John Hopkins University Press.