Contribution to GTI Roundtable "Limits to Investment"
John Fullerton’s piece is the best I've read on the topic. His observation that where money is spent is even more important than what purchases are made is blindingly obvious now that he’s said it. So is his point about how a company invests is more important than how it manages its supply chain.
That said, I want to raise a few quibbles.
Fullerton says that most CSR, SRI, etc., is really just risk mitigation. Serious implementation of sustainability by corporates is a lot more than risk management. Just as mainstream economists are having existential crises, so, too, are corporate leaders. A growing number recognize that they had a hand in creating the crises and that they are the last man standing to deal with them. As Unilever CEO Paul Polman puts it, “If business is to regain the trust of society, it must start to tackle the big social and environmental issues that confront humanity, especially at a time when governments seem increasingly to be caught in shorter and shorter election cycles and have a hard time internalizing the global challenges in an increasingly interdependent world....Stepping up to the plate is not only the right thing for business to do from a moral perspective, but it is also in our economic self-interest.” He’s right. Fifty-one separate studies from the likes of those wild-eyed environmentalists at Goldman Sachs show that the leaders in environmental sustainability, social responsibility, and good governance are financially outperforming their more unsustainable competitors.
And if behaving sustainably is better business, then Fullerton’s first and second strategies are both more attainable and, as he acknowledges, insufficient. Yes, internalizing externalities is important, but we need to do more than just full cost accounting. We should use every bit of leverage we have in the existing system, and with business leadership to drive change. Yes, policy matters. Yes, government has a role. But Fullerton has taken the refuge of every disillusioned businessman: oh, government will solve it. No, it won’t. If we could get the sorts of policy prescriptions he puts forth, we would not need them because we would already have a functional government. We don’t. Congress is deadlocked. The EU is in a panic - rightly so, as the German bankster-driven austerity is a recipe for ruin. World leaders took a pass on Rio+20 and are unlikely to put in place a post-Kyoto climate agreement any time soon.
What we really need, as Fullerton has written and spoken of elsewhere, is the Regenerative Economy. So he should do us all a favor and kindly finish writing that paper. Then we can really have a conversation about solutions to the issues he raises here. These issues require a rethinking of essentially every part of business as usual.