Is It Up to Business to Save the Earth?

Throughout the past century, economic acceleration has run faster than the ability of any of the environment ministers and activists to protect the planet. Today, we are in the midst of a major environmental crisis, with some of the biggest threats being: climate change, deforestation, pollution, loss of biodiversity, melting polar ice-caps and rising sea levels, oceanic dead zones, explosive population growth, and etc.

Where do we go from here? And more importantly, who is responsible for taking the lead in the systemic changes required? Several “candidates” could be responsible, but also held accountable for it; governments, activists, scientists, customers, citizens, and finally, companies and corporations. How much can we expect business to lead in this change? What should be its biggest priority: serving its shareholders, providing jobs, or addressing the health of our planet?

Many argue that it is not up to the business to lead the way. The arguments supporting this claim are:

Moral issue

Corporate Social Responsibility and sustainable business practices often come at the expense of not only growth and business but also jobs. Is it ethical to sacrifice the well-being of humans in favor of saving the planet?

Small business economics

The main driver in business in general, and especially in small businesses, is still economics. Companies are not likely to act against their own benefit, by increasing the costs and/or investing in sustainable practices, particularly if that will drive their profits down.

Skepticism regarding green growth

Green growth means fostering economic growth and development while ensuring that natural assets continue to provide the resources and environmental services on which our prosperity relies. In the recent years, major empirical studies have challenged the possibility of achieving green growth, finding that even under the best conditions, absolute decoupling of GDP from resource use is not possible on a global scale.

Consumers are not ready to pay more

Even consumers from the Developed Countries are not putting their money where their mouth is. They claim to be willing to pay more for products produced by sustainable practices, however, the reality shows a different story. Until they will be willing to demand it, pay for it, and sustain some inconveniences because of it, nothing major will happen, as the business will continue to supply their demand in the same way as it has done so far.

Managers do not believe in socially responsible practices

Some managers do not believe that the cost of implementing socially responsible practices justifies the numbers. The cost of sustainable practices is still high, especially for small business owners and not on the top of their priority list.

Shifting the responsibility

Companies have been shifting the responsibility to the next generation of management for decades now and it has been working since they are not held accountable. Annual Corporate Social Responsibility reports tend to trumpet long-term goals, but not goals for the coming year or two. For example, a company can say that by 2030, they are going to cut something by 30%, which basically means: ‘three CEOs after me, something will be done’.

On the other side, there are strong arguments supporting the thought that business should be the superhero saving the Earth. Some of them are:

Moral issue

There is a moral issue on this side of the case, as well. Is it moral to have the next generation pay for our wrongdoings? If the business does not act today, it is going to be at the expense of our successors.

Business is the main contributor to environmental threats

This argument simply states that business should take responsibility and own up to it, as they did this in the first place. Business operations and the results of previous industrial revolutions have been the main polluter of the environment.

The “cost of doing nothing” is too high

At this stage, this is a systemic risk for the economy, and no longer a threat to one particular industry, country or market. If the business does not do anything about it, the natural resources that our entire economy is based on will become more and more limited, which would push the global business operations (and the mankind) to the edge of their existence.

Insurance mentality

Similar to the moral issue mentioned in this case, it is part of the insurance mentality to make sure the future generations will be well-off. In addition to this, the business is also required to ensure growth in the long-term, and without significant changes done today, this will not be possible.

Redefining ROI

Return on Investment (ROI) is a performance measure used to evaluate the efficiency of an investment. To calculate it, the benefit of an investment is divided by the cost of the investment in the simple mathematical way. Nowadays, there is an attempt to move away from the traditional measures of return on investment (cash) and add determinants such as employee loyalty, innovation, social return on investment, etc.

Norms improvement

It appears that the work ethic of millennials incorporates the goal of working for socially responsible and green companies. Therefore, it should be up to the business to attract the best talent to them, by improving their operations to be more sustainable.

There are no easy fixes to the leading environmental issues. Even the possible solutions that have been suggested by the leading experts require cooperation between multiple sectors and industry players. Some suggested strategies are:

• Innovation on a massive scale
• Market-based solutions (pricing carbon through direct taxes on fossil fuels or cap-and-trade programs)
• Fourth Industrial revolution and Society 5.0

The fact is, it seems that it is up to the business to save the Earth as much as it is up to anyone else. Given the current situation and predictions, we need it all and we need everyone.

 

Author: Ena Fejzagic, lecturer at LIGS University