Recently a lot of my writing has focused on the issue of externalities, and how they contribute to a corporation’s profitability. What I’ve neglected is the flip side: that just as corporations should pay the full costs of their activities, so should you and I.
Not sure what I’m on about? Well in essence the issue of externalities is about paying for what you use. In business, externalities result from a fairly simple relationship between costs and profits: minimal the former in an effort to maximise the latter. However things get messy when those costs aren’t “minimised” so much as conveniently left off the balance sheet.
A neat illustration? BP’s 2007 decision to invest in extracting oil from the Canadian wilderness. Producing oil in this manner generates two to four times more greenhouse gas emissions than the production of “conventional” oil1. Furthermore processing the oil sands involves clearing vast areas of wilderness and topsoil. It takes about 2 tons of the raw sands to produce one barrel of oil. BP has reportedly said that it will use a method that is less invasive, and has accepted that an increased carbon footprint is unavoidable.
The question is whether the pollution, soil degradation, habitat destruction, and greenhouse gas emissions will be included in the production costs of each barrel, or simply ignored. Will the increased carbon footprint be paid for, or just left behind? Because if these costs to society and the environment are left off the balance sheet, then this oil looks a whole lot more cost-effective than it should.
According to a recent United Nations study, if the world’s biggest companies actually paid for the environmental harm they cause, the bill would come to $2.2 trillion a year and profits would be reduced by one-third.
But companies such as these are only part of the problem.
I say this because it’s important we keep in mind that while costs directly affect profit margins, ultimately we consumers keep companies in business. Every purchase we make is a tacit vote in the market place, a signal we send out about what we are willing to pay for, and what we aren’t. Choosing to buy pesticide-ridden veggies over the organic option simply because they are cheaper, says that you aren’t willing to pay for sustainably produced food — or that you don’t mind what the chemicals are doing to the ecosystem. Similarly, when you choose cheaper clothes produced in a sweatshop over those with a fair trade endorsement, you condone sweatshop practices and wages. Externalities generated in production, become our own through consumption. Our purchases legitimate what went into (and came out of) what we buy.
Obviously I’m simplifying things here. Often we aren’t entirely aware of the externalities we encourage through our purchases. There are also cases where buying responsibly is almost impossible (buying shoes springs to mind). In such cases, however, it’s important we speak up and inform ourselves about our purchases; choosing not to know is plain cowardice.
It’s time we realise that our lifestyles are costing a whole lot more than simply what we spend each month. Driving and flying around only cost what they do money-wise, because so much of the total cost is being left out (like the pollution and carbon emissions caused). Calculating the true cost of flying, for example, is tricky — and where to pay, or even what to pay with, is a problem in itself. But the point is that we need to be more aware that these costs do in fact exist — and they are accruing, regardless of whether we acknowledge them or not.
So while it’s imperative we pressure corporations to start paying for their externalities, we also need to become more aware of, and start paying for our own. If we want “being green” and “saving the planet” to mean more than catchy marketing phrases or token gestures, we need to start living up to what we expect from corporations. And if paying the full cost for something means that it becomes too expensive, perhaps it’s time you asked yourself if it’s really worth having at all.
1 Joseph J. Romm (2008). Hell and High Water: The Global Warming Solution. New York: Harper Perrenial. pp. 181–82. ISBN 9780061172137
2 http://www.independent.co.uk/environment/the-biggest-environmental-crime-in-history-764102.html
Ever considered that a hell of a lot of people cannot afford the ‘green’ option? Coming from a middle-class white family (i.e. comparatively well-off), my mother could never, and still cannot, afford the prices of organic foods. I am assuming that only stores like Woolworths sell these kinds of things.
Now consider the millions of people who are living on the most basic of foods. Are they supposed to feel guilty for abusing the environment (bearing in mind they are consuming far more then anyone else)?
So when your staple diet is pap, rice, or something similar, get back to me about deciding if it’s ‘really worth having it at all.’
I’m probably just being paranoid, but every time someone looks down their nose at me for not being green enough, they often seem to have a fairly expensive solution close to hand.
@ Stephen
I hear what you are saying completely – and I wonder the exact same thing.
What gets me though are the people who can afford to live more responsibly, but would rather save the extra cash for another flat screen TV. Or those who can’t be bothered to recycle or walk somewhere because their time is too precious.
I also firmly believe that as more people start to live responsibly, the price of doing so will come down. There are numerous ways in which one can live more sustainably that don’t cost a whole heap.
Recently there has been an interesting project launched here in the cape where RDP houses are being fitted with solar panels. These are able to heat a geyser and supply lighting for each household. The initiative means that greener power is being used, and the danger of fires caused by paraffin lamps is also reduced.
Mike,
You raise some interesting points. I agree with Stephen above that ‘being green’ isn’t so simple when you are poor. I think we need to take some time to consider what being green means in Africa.
Thanks for a good read – lots to think about over the weekend.
An easy cheap way to go green is to become vegetarian; the production, manufacture and transfer of meat contributes HUGELY to global warming. Meat producers also WASTE millions of gallons of water. We can feed more people on veggie diets, so giving up meat also means caring about the poor. Mike – I hope you’re a veggie.
I fail to understand why the logical conclusion isn’t drawn: if corporations are forced to pay the full cost of production, including externalities, do you honestly believe they won’t pass that cost along to the individual consumer?
If they do as corporates do, some other bright spark will come up with a similar product or service with reduced total costs and deliver a price war that serves environmental interests.
“Green hypocisy” is ramapant, I admit. Nevertheless, your starting point holds the solution implicitly.
@Stephen Brown
A fair point, which is why it’s important that pesticide laden food production includes the externalities that Mike is talking about – cleaning up the pesticides instead of letting them run off into the rivers and the ocean. Basically all the things provided by Big Business is too cheap.
A fantastic way to address your concern, of course, is to grow at least a portion of your own food, which has all sorts of add on benefits like reducing food transportation impacts, improving food security, etc.
I’m not a green hyprocrite. However, I drive big trucks (what they call 4X4′s here in the States) and don’t recycle. But then again, I can afford it – I didn’t have children ….
Recommended reading for the guilt-ridden in this area, The Real Cost by Richard North. Practically everything we consume, from hamburgers to peanuts to fizzy drinks has a hidden cost that is to the detriment of our planet and/or our fellow human beings. At some point, you have to take personal responsibility for what you consume. As you say, Mike, choosing not to know is cowardice
I think that poor people where I live, in the outer suburbs of Shanghai, are the greenest. They don’t drive or fly anywhere, they walk or ride bicycles. They seem to be solely responsible for sorting through rubbish for recyclable packaging (I don’t think I have ever seen a truck loaded with material for recycling, but I have seen many tricycles with huge loads). They would buy all their vegetables and probably meat and fish as well at the markets, where they are not packaged at all. Bicycle rickshaws are also a common sight in my area.
@Mike
Great article. I am one of those ‘greenies’ (as far as possible), and I get very irritated with people who throw the unaffordability for the poor in your face. I honestly do not mind paying a few rand extra because the cost of a new planet is going to be far higher (well actually you can’t buy one not with all the money in the world), than my few extra rands to encourage farmers to go organic by my purchases. There are plenty of wealthy people who CAN afford it, instead of paying ridiculous prices for imported food luxury foods, caviar, champagne, etc, and all loaded in tons of plastic because they can’t bother to use a cloth bag or recycle. I am generalising but I do find that a lot of well-to-do people who can make a difference just don’t give a damn – because they are not affected directly.
And I agree that as the demand increases, so the prices will decrease.
@Stephen
Organic veggies are now available in PicknPay, Checkers, Woolies, and there are plenty of affordable ‘box-of-the-week’ ethical co-op type ventures out there. Woolies now also has organic veggies at no extra cost.
Money still shouts loudest, and we should use our rand to vote in favour of the planet. The more rands you have the louder you shout, and then maybe the poor can benefit from it.
Living in a sustainable way does not just involve changing one or two things that we do. As our culture has never had such an idea in its collective mind many of the things that our forefathers have handed down to us are problematic, such as in South Africa previous generations have designed cities for cars rather than people and this makes cycling very difficult for us now. Thus we first need to become environmentally conscious and then try to apply that consciousness to everything that we do, making adjustments as we think of them and trying to pressurise in a sustainable direction the organs of wider society wherever we can.
I really detest the environmental practices of large multinationals such as BP, but I disagree that consumers should have to ‘foot the bill’ for their continued profitability, unless we devise a short-term measure (i.e. we carry some green costs whilst policy, institutional and market reforms are carried out for our long-term benefit). However, I don’t think that such reforms will ever be to our benefit. Companies like BP have their interests; handing over the economic costs of their unsustainable practices is within their interest – their operating expenses are kept low whilst product demand may continue relatively unaffected. I worry that such a consumer-oriented fix would ultimately serve to cotton-wool some of these companies and burden the poor to an even greater extent. Stronger political and institutional measures are needed – ethical guidance on the issue of green technological development as well – although whilst writing this I realise the unlikelihood of reforming a global politico-economic system governed by the logic of corporate profit.
On a different point, is the middle-class ‘Woolworths’ green lifestyle really sustainable, or is it merely an effective way of making sure that consumers ‘vote’ the right way (i.e. a marketing ploy). What are the externalities of the organic foods and high-end health products we often find so attractively packaged? Are they even worse? I think we should deal with these issues before claiming some people are hypocrites, because let’s face it, ‘greenies’ are often massively hypocritical hippies.
@Oscar
I agree with you. The simplest way to make a big difference is going veggie, or even better – vegan. It has a bigger impact than giving up cars, planes, buses etc. It’s also a great middle finger to meat/dairy industry which is responsible for untold environmental damage.
In another “relative” minute mankind will just be a minor sub-sub-eon in the geological record. Future coackroach palaentologists will speculate whether the Dodo (through a devastating bird-flu) or the tiger was responsible for our demise – the latter then dying out through a lack of prey.
oH so true, your article is a truth we all know but we foget to question our actions most times. The trouble is that we think its up to world leaders to take care of all the big stuff.
I think much of the problem does lie in the fact that “going green” has become a fashion symbol. You almost dont take note of the REAL ISSUE.
THANK YOU FOR THE REMINDER
!
This is a great article. There is a base in law which goes along the lines of “good faith”, which, when between 2 men, seems fair, but when you are dealing with a corporation is neither fair nor reasonable.
Comparing our moral “debt” with theirs is also not tenable.
I however do vote with my rands, and hopefully send the message that social responsibility, and environmental awareness is essential to any company competing in today’s market place.
Sadly most of my fellow joburgers don’t care, BP’s are just as busy as any others.
@Mike Baillie – great article again. Hopefully it will sink into the mass concience if repeated often and long enough. I started advocating “vote with your purse” last year but probably simplified it too much so as to make the concept into a catch frase.
@Stephen Browne – I don’t follow your argument. I am one of the poor and live much greener than you do, so does my poor buddies. Ever noticed how healthy most of the refugees from other countries appear? They all live on home grown, not shop-bought pap as the economists thought. I never shop from Woolworths since I find their prices as obnoxious as their packaging but, Clara Bauer, Foom and clarus all points out one facet of cost-free or low cost green living which is not too difficult to achieve:
- have only the children you can afford to give a healthy life
- grow your own organically
- shop local, and take your own container.
To that I can add:
- recycle AND reuse. Do not throw away jars, sterilise and use to preserve extra crop, all types of dairy containers make great seedling starter pots.
- Separate waste at source, it is really much more energy efficient than trying to deal with a messy bin later and the organic waste helps to grow new veg.
- Buy good quality clothes that last longer and sell this to 2nd hand shops when you are done, we poor people will give them another 5 years live.
@Oscar Melomed – NO!
PROBAC does it for me. We now have a cleaning chemical that actually does the work of biodegrading and is mostly bacteria based. Actually good for the environment. Find it in Pick n pay and Checkers. Works like a bomb.
I recommend it wherever I go, but people (even those who are greenies), tend to allow big brands to overwhelm their senses.
Corporates may green their buildings and production facilities, and educate their employees with ‘green’ initiatives, but their nasty products are still being pushed onto their customers (and the environment) with BS ‘greenwashed’ ad campaigns.
I absolutely agree that the externalities need to be priced into our services. But that cost is very hard to quantify. There is no easy formula that determines the cost of the CO2 released.
However, I think you must agree that when there is a way to directly pay for mitigating the effects of the externalities then the only reasonable way is to charge the producers directly rather than relying on the conscience of the greenie consumers.
What really irritates me is the superior, “holier than thou” attitude displayed by many greenies. What right to you have to question my having children or eating meat just because environmental concerns override everything else in your life?
The logical implications of this thinking if taken to the extreme, involves living in a cave, naked, with no kids growing one’s own food – all to avoid being the victim of patronising environmentalist comments.
In the long term green living is cheaper and provides a better quality of life.
It is very short sighted for some to claim it is not possible to be able to afford green living, all we are doing is destroying our planet for short term benefit to the detriment of future generations.
Good article Mike.
Everyone must be responsible for their own externalities, from individual citizens to global corporations.
Fair enough, things do need to change. I just find the average green basher so incredibly annoying because they cannot grasp the idea that an extra R1.50 for something means a hell of a lot to some people. Even if its ‘cheaper in the long run.’ Please, do you really think you would be worrying about the long run if you had no money for school shoes. Maybe if we threw our (very) upper class power (i.e. money) at forcing real social change rather then putting our shopping in hessian sacks things would be different. Being green is a great cause because no-one will ever know if it was worth it.
By and large green living comes across as woefully image-driven, and bears all the hallmarks of a (successful) marketing angle. Like so many other good ideas, its been turned into the next hipster must-be.
I expect a string of vicious replies, and I don’t mind. The funny thing about these kinds of people is that they won’t even admit to themselves that they’re doing something out of anything other then goodwill.
Sure, look after your environment – my dad taught me how to do that, and he doesn’t know what a carbon credit is.
I like the way you think that these evil companies can simply pay to be more ‘green’. You can’t eat or breath money, so I’m not sure why you think that the use of it can create sustainable living.