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Rethinking “Sustainability”

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Rethinking “Sustainability”

May 10, 2017

Environmentalists pressure firms to endorse positions counter to the interests of their shareholders, employees or the communities in which they operate.  Few businesses support central planning or back restrictions on economic growth. But fear of demonization, boycotts or legal action by government or advocacy groups has convinced many businesses to seek compromise by endorsing “sustainability.”

To many people, sustainability means simply thrift, resourcefulness, and long-term planning. In reality, the sustainability movement undermines human ingenuity and progress.

It is time for the business community to unwind corporate policies adopted by business under threat of persecution by bureaucrats, the plaintiff bar or aggressive advocates.

“Sustainability” began in a 1987 UN report, Our Common Future, presenting economics as a zero-sum game:  Using resources now means having fewer in the future, a dubious assertion. As sustainability spread in America, firms proudly showcased their sustainable practices. But much of what goes on in the name of sustainability is economically unwise or wasteful. Rachelle Peterson and her colleagues at the National Association of Scholars have shed light into the dark corners of the sustainability movement. 

How can firms satisfy public and financial stakeholders? By avoiding extortion and pulling back the curtains on the sustainability charade:

First, recognize that activists won’t be satisfied: many deplore private enterprise, shareholders owning energy resources or free markets. Appeasement invites attack.

Second, accept that consumers hate moral posturing by businesses. Just behave.

Third, understand that sustainability means support for the alarming climate agenda and the forced phase-out of fossil fuels.  Pretending otherwise is a losing proposition.

Fourth, showcase fundamentals to the right audiences: financial analysts and business journalists. We accomplish nothing by joining quasi-environmental groups like Ceres and the Paris Pledge for Action.

Fifth, lobby government officials openly and transparently, without crony rent-seeking. Resist legal persecution—don’t settle.

Many firms initiated programs, entered negotiated settlements and joined organizations, hoping to get along by going along with the sustainability movement.  To summarize one executive at a leading energy supplier, who prefers not to be identified, “We exercise discipline so projects flagged as sustainable really deliver operational benefits. There’s continuous pressure to go into areas where [that breaks down.]” The company ran high-profile experiments on air emissions, some priced in nine digits with no stakeholders’ benefits.  The environmental regulator and its activist backers once proclaimed that a normal operational improvement was actually punishment.

Regulatory and non-profit environmentalists don’t accept that sustainable means lean or energy-efficient.  Caterpillar, for example, issues a “Sustainability Report” every year, while selling billions to miners.  Komatsu joined the World Business Council on Sustainable Development and touts the low CO2 emissions of its factories. These companies earn honest profits through sales to the coal industry, the largest CO2 emitter in the world. Activists don’t want an efficient coal industry, they want it gone.

New leaders in Washington and the state capitals inspire us to rethink opportunities. Focus on the basics, enhance value, foster growth and provide society with resources to tackle real problems.

Mark Carr is a principal at the Channel Design Group and Bruce Everett is a professor at Tufts University.

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