‘Competition’ or ‘the market’… the word(s) frequently used when describing the desirability of decentralized decision making. Both of these utterances are short cuts to an assertion that deciding how to allocate goods and services is best left to each subjective individual or organization. Indeed, many decisions are trivial and best left to the marketplace of individuals aiming to satisfy their preferences, such as what color of shirt to purchase or artwork for the conference room. However, the fact that many have only a preliminary understanding of the assumptions underlying competition and the marketplace belies an very deep and pervasive problem in modern society, that of ignoring or undervaluing that which is necessary.
Stewardship of the environment is not contingent upon a successful organization, the organization is contingent upon the environment.
Revising how society views and values the environment that we live and interact with is the modern challenge of humankind. Natural resources were, and still are, viewed as inputs to a linear value chain of goods and services that result in end products to sell in the marketplace. When humankind harvested fewer trees than the forest regrew, there are few problems with use, however when we exceed the regenerative capacity problems arise. Furthermore, the methods by which these trees are harvested is also a concern, since clear cutting of forests inflicts harms that ripple out beyond just the capacity to regrow (the necessary topsoil may be washed away).
Paradigmatic change is slow and difficult, however noting that Tunisia is the third nation to include natural capital as an explicit value of the nation is encouraging, Ecuador and the Dominican Republic are the others. Entrenching environmental concern into a political and legal document is a significant step towards recognizing that the linear logic that characterized the First and Second Industrial Revolution is outmoded and must be replaced with a holistic approach. The First and Second Industrial Revolutions are periods to which the primary source of energy was coal, followed by petroleum, and the challenge of organizations was focused on increasing production, or supply, to meet a seemingly insatiable demand. The Third Industrial Revolution, currently underway, is the challenge to move beyond fossil fuels to renewables and strike a balance between the capacity of the biosphere to regenerate and the appetite of humankind’s consumption.
Encouraging signs of the transition are already underway with what is termed as the ‘collaborative economy’ of shared use over ownership, think Zipcar or Spotify music streaming. However, it is the production and distribution of energy that presents the greatest challenge. The entrenched interests of the Second Industrial Revolution, BP and other fossil fuel firms, fight to curtail and blunt actions that threaten their business interests. As more firms slowly begin to adopt concern for stakeholders beyond merely shareholders, managers, and employees the theory is catching up to increase effectiveness. Firms may aim to ‘make it big’ by reaching ever larger and distant markets, but it is frequently in their interests to acknowledge and embrace a principle of ‘localness,’ or a sort of reverse corporate “NIMBYism,” into their actions aimed at corporate responsibility. If successful companies have the capability to address, that is not to say solve, local inequities that occur in the immediate neighborhoods of their operations, then it seems implausible that it is not in their interests to make an effort to do so.
Ultimately, humankind must recognize that our flourishing is contingent upon a balance with the processes of the biosphere. To over harvest and deplete our natural capital harms both present and future people. As the world becomes ever more globalized, the harms externalized by harvesting the Canadian tar sands or oil spills in Nigeria increasingly affect everyone. Atmospheric pollution in one place is not localized, but harms all that rely upon the natural capital of a global commons.
If prices reflected the total cost to mitigate environmental harms from extraction and production, then claiming that ‘competition’ or ‘the market’ could sort out a prescriptive path forward would be defensible… but humankind has yet to fully embrace a view that the natural capital of the world is valuable and our future flourishing is contingent upon its health. Therefore, individuals and the state must advocate policies and actions that preserve and protect the global commons. Organizations, particularly corporations, are slowly recognizing that simply serving shareholders is becoming a reductio ad absurdum argument that justifies anything in pursuit of profit… or within the confines of the current laws of state, as Milton Friedman so narrowly advocated in the 1970s.
Prices within the marketplace must incorporate the values of society. As a result, it is praiseworthy that Tunisia has now codified the value of natural capital… that their natural resources have value and deserve consideration.
When we find that the prices of the marketplace conflict with our values, such as clothing made by child labor in sweatshop conditions, consumers spend elsewhere and shun the product. On one hand this is a good thing that consumers migrate away from the morally reprehensible players, but on the other hand it provides the basis to understand the incentive to outsource, to obscure, and to maintain ignorance. The manager that simply choses the low cost provider, but makes little effort to understand why or how that price came to be is rewarding the unjust, the corrupt, and/or the immoral.
Until one understands and acknowledges the assumptions underlying ‘competition’ and ‘the market,’ banish these from the vernacular. These cognitive short-cuts are doing more harm than good…