Business, Interrupted: A look at business from the viewpoint of ecological economics
By Sophia Sanniti and Katie Kish
Published and posted on A/J Online
Text cross-posted from above link:
This year Earth Overshoot Day was the earliest ever, falling on July 29 as the day humanity collectively used nature’s resource budget for the entire year. Scientists, environmentalists, activists, and the world’s youth have made loud and clear demands for radical and progressive policies to curb humanity’s environmental footprint. The environmental crisis is a collective action problem that requires a response from a coalition of united actors including governments, NGOs, corporations, scientists, economists, and the like. Everyone has a role to play – but what that role entails is important to define.
We are responding to an argument made by our colleagues that businesses remain an unlikely ally in the climate movement. First and foremost, our article is an intellectual exercise that addresses the claims made and encourages thoughtful and evidence-based debate. Secondly, our response is a deep emotional reaction to the idea that corporations – bodies that have systematically shifted the risk, blame and responsibility for climate change from themselves onto the general public – could actually be considered allies. This argument incessantly perpetuates allegiance to market logic as the preferred (only) means for society to relate to each other and the environment; a perspective predicated on the belief that a free market is the most optimal and efficient way for humans to meet their needs. (Hint: only those with the privilege of financial means to exercise market demand may do so). As ecological economists, we recognize the need to reframe sustainability policy debates in a way that directly challenges the inevitability of the market, and reinstate the economy as a sphere of public and political life with inherently social and ecological dimensions. We need alternative economic approaches that unfailingly place the well-being of our environmental and social systems at its centre. Such a system grows out of policy guidance and community action – not from corporations that have long benefited from the outdated and destructive post-war industrial economies.
Standard economics and its corporate worshippers do not understand the relationship between exponential growth and the finite properties of our planet. Limits are seen as a hurdle for technology and innovation to surpass. Ecological Economists recognize the irreducible material and energetic dimensions of the global economy by acknowledging the finite properties of environmental resources as both sources (i.e., forests, water, minerals) and sinks (i.e., the ocean or atmosphere’s capacity to absorb carbon dioxide). We know our economy is demanding too much from the environment (i.e., Overshoot Day), prompting many sustainability scholars and environmental activists to demand an intentional contraction, or degrowth, of the global economy. This politically-charged movement responds to environmental limits by maximizing happiness through cooperative (rather than competitive) and non-consumptive options. These options include working less, sharing more, and spending more time on cultural, familial, and community-based activities. The result would be meaningful, long-term increases in human and environmental well-being.
Doesn’t sound so bad, does it? What this means for the economy is a shift away from productivity goals that encourage competition and alienate individuals, and towards an economy that is founded on cooperation, well-being as a measurement for success, and deep, meaningful community orientation and belonging. In this alternative kind of economy, humans and the environment thrive rather than corporations because ‘profit’ no longer functions as a determinant of success.
There is growing evidence and agreement that states are the only actors with both the capacity and legitimacy to organize and fund a large-scale sustainability transition. While this might be true, it is seen as problematic across the political spectrum. Grassroots, bottom-up activists on the left are uncomfortable with this assertion, as it calls for top-down solutions that can undermine democratic and community-oriented decision-making approaches. However research shows that while many proposals for an equitable degrowth emphasize localized, bottom-up and grassroots action, current literature on this work predominantly identifies governments as a crucial driver of change.
Right-leaning institutions like corporations are also uncomfortable with the assertion of state-led action on climate because environmental regulation has long been framed and viewed as a restriction on business practice and market behaviour. But as the climate crisis has made clear, business as usual is no longer an option, and is in fact the leading cause of environmental devastation. A multidisciplinary research unit in Finland published a report exploring the kinds of economic and political shifts required in the face of the climate crisis, again underscoring the critical role of proactive state-level governance. They argued further that should business as usual continue, current modes of economy will be directly undermined by resource shortages and climate change. The scale at which governments operate remain unrivaled – and unlike corporate counterparts, governments operate, at their core, in the defence and provision of public good(s).
Markets, in contrast, do not – and cannot – exist without political regulation and intervention. Let’s quickly recall the nearly $8 trillion committed to rescuing the financial system from the 2008/9 crash. The economic policies celebrated by the neoclassical model that liberalized the market and expanded public debt and private credit were the very policies behind the worst financial crisis in global history. These same policies of ‘deregulation’ (read: regulation in favour of corporate interests) privileged in today’s neoliberal economic regime prescribe a strict diet of internalizing profits and externalizing “costs”. These costs are continually downloaded on to local citizens, local ecosystems, and the future of a stable climate.
Voluntary approaches such as industry-self regulation are viewed as promising alternatives to government inaction, situating corporations as a pivotal mobilizer for bringing about the shifts in investment we require to tackle climate change. It’s a typical approach from a business-oriented school of thought. The sentiment is that, left to their own devices, the face of climate risk combined with the promise of new market opportunities will drive corporations to ‘do the right thing’. But the demands of a destabilizing climate on our biotic, political, and personal well-being call for immediate action at time/space scales that markets are inherently incapable of facilitating. A recent report assessing voluntary policy-making approaches in the UK and EU found that voluntary schemes have extremely limited impact due to their inability to attract widespread participation and compliance, making them insufficient for tackling large-scale environmental and social issues. The report concluded that it would be inappropriate for voluntary approaches to take the place of regulatory or fiscal measures related to public policy, and further that self-regulation is not an evidence-based approach and “risks compromising the effectiveness and efficiency of public policymaking”.
Free markets don’t lead to socially and environmentally desirable outcomes on their own. Financially, corporate business models cannot afford to internalize costs of the various devastating environmental and social impacts left in their wake. A study conducted in 2013 by Trucost monetized the value of natural capital (i.e., water, biodiversity) consumed by primary production (e.g., forestry, mining) and processing (e.g., steel, petrochemicals) industries. The analysis found that, for over 1,000 global primary production and processing region-sectors, the total unpriced natural capital consumed was estimated at $7.3 trillion USD, or 13% of global GDP in 2009. The report concluded that none of the high-impact region-sectors are generating enough profit to adequately cover their environmental impacts, causing them to impose these costs on to their customers – as we bear witness today. That’s right – none of the world’s top industries would be profitable if they paid for their environmental impacts.
Legally, corporations are potentially restricted from considering environmental or social factors for fear of sacrificing a competitive rate of return. A 2015 report by Principles for Responsible Investment and others conducted an analysis of investment practices and fiduciary duty in eight countries including Canada. Canadian asset managers emphasized the importance of fiduciary duty as a defining principle of responsible investment practices – particularly by focusing on short-term financial interests – and thus remain conflicted as to whether fiduciary duty even allows for the consideration of non-financial factors in investment decision-making. This sentiment was identified as a significant challenge to integrating environmental and social issues into investment processes among the majority of the countries analyzed, including Australia, Japan, and the U.S. Expert economists have emphasized the role of the global investment industry in obstructing progressive climate policy and systemic change, highlighting various performance incentives that directly undermine long-term value creation and actively encourage the externalization of social and environmental costs.
If we want to achieve efficient markets, equitable societies and sustainable economies, functional markets require active political guidance, intervention, and regulation to restrict corporate power. Power is of particular interest here, as it is this very power that we argue limits government regulation and intervention by financial or political means. Oh where oh where can my government be? The corporations took it away from me. Let’s consider the fact that Canada is the largest provider of fiscal support to oil and gas production per unit of GDP among G7 countries, a sector that relentlessly lobbies the Canadian government to minimize “red tape” (i.e., environmental regulations) in favour of financial interests. Last year, every household in Canada contributed $234.51 of their tax dollars towards subsidies and tax breaks to the oil and gas sector. Everyday Canadians are paying for the continual development of an industry that has spent decades actively misinforming the public about the risks of climate change. The science is clear – there is no room for the expansion of Canada’s oil industry if our nation wishes to reach the goals of the Paris Accord. In fact, the evidence shows that existing infrastructure around the globe may need to be retired early to limit catastrophic warming.
The fossil fuel industry, among many others, carry distinctive responsibilities in shifting energy and material use, changing labour practices, and altering governance structures in the face of climate change. It will certainly be impossible to curb our emissions without the participation of corporations, but will the kind of progress we need to see in the next decade come about without active encouragement? A gold star for every reasonable environmental decision made is a very inefficient approach. Corporations don’t need our empowerment, they need a reality check. The best way to make them wake up and smell the fumes? Massive state regulations on market behaviour to curb emissions and begin the transition to a low-carbon economy.
The most important thing to stress here is magnitude. It is not a question of whether our societies and economies can adapt to a destabilizing climate, but whether we will choose to do so voluntarily. Minimizing the impact of climate breakdown “requires a whole-scale transition of the economy away from fossil-fuels”. If businesses (of all shapes and sizes) wish to have a role in the next economy, fundamental shifts in the architecture of the corporate sector must take place – and, as researchers argue, the severity of the issue must be taken at face value. This would mean corporations communicating, unequivocally, to the public, to shareholders and to policymakers, the risks of runaway climate change and the contributions of their products and activities to the environmental crisis. It would require corporations to encourage restrictions on emissions consistent with international climate targets, publicly reject claims from lobbying groups about climate change skepticism, and accelerate investment and training in the production of low-carbon energy. While all of these options are certainly possible, none of them are probable without a comprehensive vision and strong political governance.
The very nature of corporate capitalism stands in the way of Canada taking its place as a leader towards a post-capitalist and decolonized future. We must empower each other and our communities to stay politically engaged and normalize this conversation. Canada has a Federal election coming up, and if we vote business we are not going to see the kinds of aggressive environmental measures our climate emergency desperately needs. We will continue to see the systematic erosion of our environmental and social foundations in the name of a growing economy. We’re dreaming of a better future. A future where our success isn’t defined by comparing our wealth and success to our neighbours. Rather, it is a future teeming with meaningful work, civic participation, and community-driven change where we strive to see a better local and global world for ourselves, our children and our planet.
Image Credit: Adweek
It’s understandable if you’re not convinced that voting in a Federal election will result in sufficient change, or that you may be having doubts about the democratic process at large. The changes we hope to see in our economy certainly require responses in the organization of government structures and democratic processes as well. In the meantime, there are actions you can take to design and support the kind of future you want to see. While these actions are all approaches beginning with the individual, we should never let corporations and businesses off the hook; shifting the blame and burden of change onto individuals is very convenient for corporations. We know just 100 companies are responsible for 70% of the world’s emissions. Plus, years of campaigns to get households to recycle, compost and buy organic haven’t made a dent in the climate emergency overall. The only thing that can realistically change our climate trajectory is massive transitions in our energy production and economic patterns. Voting for candidates that prioritize small scale economies and energy transitions are our best over-arching shot at this change. If that leader doesn’t exist, demand that your political representatives take this issue seriously. Individual action is about supporting the kinds of post-capitalist and decolonized institutions and systems we want to see on a larger scale in our communities. It’s about creating a more resilient future by supporting innovative alternatives and empowering our communities and each other. Some powerful individual actions you can do:
- Attend the Youth Climate Strike in your area
- Quit the big banks and join your local credit union
- Frequent your local library – borrow books and tools, and attend their events
- Make, reuse, or repair something either on your own, at a local makerspace, or at a repair cafe in your town or city
- Help build and populate a community garden – particularly one with fresh foods.
- Shop at a local craft fair for gifts and home goods that you need. You’ll pay more, but you’ll get higher quality and more meaningful goods
- Find durable products that don’t follow the ploy of planned obsolescence
- Try out a ‘stay-cation’ instead of vacationing abroad
- Visit your local conservation area to learn more about your local biosphere. Learn about the kinds of plants or small animal houses you could add to your property or rental space to help out Earth’s smallest creatures
- Call your city and see about planting trees in areas that are treeless
- Eat a few meals per week that don’t contain meat – it’s healthier and cheaper!
- Learn more about and support decolonization efforts in your area
- Go car free as often as possible – try active transportation (bike, walk) or support your local transit system
- Talk to your neighbours, friends, family, and community about climate change and share your concerns with each other and your political representatives
- Educate yourself! Find out more about the problem and solutions
Book & Journal References
Cosme, I., Santos, R., O’Neill, D. W. (2017). Assessing the degrowth discourse: A review and analysis of academic degrowth policy proposals. Journal of Cleaner Production, 149, 321–334
Frumhoff, P.C., Heede, R. and Oreskes, N. (2015). The climate responsibilities of industrial carbon producers. Climate Change 132: 157-71.Georgescu-Roegen, N. (1975). Energy and Economic Myths. Southern Economic Journal 41 (3): 347-81.
Harvey, D. (2014). Seventeen Contradictions and the End of Capitalism. London, UK: Profile Books.
Jackson, T. (2017). Prosperity without Growth: Foundations for the Economy of Tomorrow, Second Edition. Abington, OX: RoutledgeKallis, G., Kostakis, V., Lange, S., et al. (2018). Research on Degrowth. Annual Review of Environment and Resources, 43: 4.1-4.26..
Qiang Zhang, D.T., Zheng, Y., Caldeira, K. et al. (2019). Committed emissions from existing energy infrastructure jeopardize 1.5 °C climate target. Nature 572: 373-77.
Victor, P. (2018). Managing without Growth: Slower by Design, not Disaster. Cheltenham, UK: Edward Elgar Publishing Limited.