As economist Milton Friedman famously taught, the business of business is to make money for shareholders. Period. Some business minds, however, are now teaching a new concept. The ‘Triple Bottom Line’ is a focus on People, Planet, and Profit – Sustainable Business. So, who is right?
Argument for Profit
The traditional reason someone invests in a company is because the trust the management to make the best decisions to increase the value of the company. That increase in value leads to a capital gain.
In my recent exploration of whether or not you have to sell your soul for profit, I discuss economic concepts relating to supply and demand and competitive advantage. This is a standard framework for businesses and economies, and it is how the world really works.
If Company A is really good at producing Widget A at a low cost and selling it at a high cost, it will be successful. If Company B tries to compete and uses high cost environmentally friendly production methods, it will have to sell Widget A at a higher cost to earn the same profit. Of course, very few consumers would want to spend more for the same widget, so Company B, the sustainable business, will eventually go out of business.
Do you want proof that this is the case? One blogger recently did an analysis on “green” sunscreen and found that it costs more to use for a year than buying an “eco-friendly” car.
Does that make any sense? No. Would I spend more for sunscreen than a car? Hell no. That is just plain crazy. And I am not alone. About 65% of consumers would not pay more for an eco-friendly product. I might in some cases, but most of the time I would save the money.
Argument for Sustainability
Now that you think I am evil and want to murder trees and burn oil for the fun of it, let me turn the tables. We are totally destroying the planet. There is no question that global climate change is real and we are impacting it. Anyone who says otherwise is either stupid or ignorant.
The biggest cause of climate change is burning fossil fuels. We use coal as the primary source of power in most of the developed and developing world. China, at one point, was opening a coal power plant every day.
Sure, we use “clean coal,” but what does that really mean. To quote one environment activist, we will be able to power our country with clean coal the same day we can ride on a flying unicorn to work. That is just never going to happen.
So how are we going to save our planet from a future of rising ocean levels, melting ice caps, climate change, droughts, crop losses, starvation, eco-system breakdown, and an Easter Island like future? I have a solution.
The only way to power our planet without releasing horrible things into the atmosphere is with nuclear power for our base load needs. I wrote about clean nuclear energy as a sustainable solution extensively at my personal blog.
But how do we get there? Nuclear power, wind power, and solar power cost more than coal. No one wants their already expensive power bills to rise. But if businesses do not make a move away from coal, the world could literally come to an end. Sustainable business is now required, not just a dream state.
The Sweet Spot: Green Profit
While many environment activists hate Walmart because they think they are supposed to, they might read the fine print. Walmart is a hugely profitable company and the largest revenue generating company in the world. But they did not make it there disregarding the environment.
For example, almost all Walmart stores now have skylights. Those lights allow the stores to run without high powered lighting for most of the day. Less power use is good for the environment and the bottom line. Walmart stores pressure suppliers to use packaging that contains less material. That makes the packages lighter, and cheaper to transport. It also uses less fuel to transport and creates less waste.
On the other hand, investors want the company to put green on the back burner when profits are at stake. At the recent Berkshire Hathaway annual investors meeting, shareholders voted against a proposal to require Berkshire’s energy subsidiaries to have clear environmentally friendly guidelines. The company is, even without a rule, however, building the largest wind power capacity in the country. A sustainable business even without a specific mandate to act as a sustainable business.
Coca Cola and Coors are both known for their recycling programs. Those are both profitable and good for the planet. Mars Corporation has a huge sustainability program. It is not just out of the goodness of their hearts.
The Future and Our Impact
Taking the Friedman approach to business with our knowledge of the environment is irresponsible. Businesses should work hard to find profitable ways to cut waste and help the environment.
Where company’s cannot reach a viable business solution to meet sustainability needs, such as in the energy industry, the government must incentivize power producers to move away from coal and gas and toward nuclear, wind, solar, and hydro options.
What do you think? Who is responsible for the environment? Would you pay more to go green? Which sustainable business do you support? Please share your thoughts in the comments.
Before touting Walmart, Coca Cola and Mars you need to take a close look at the flip side of their business activities. From what i’ve read many companies use acts of sustainability for a variety of reasons. For instance, while Walmart has sky lights it does not treat its workers overly well and to keep costs down it supports mass transportation systems and unsustainable farming practices. Coca Cola has a budget for it’s “eco” side – which it uses heavily in marketing to sell products. The motives aren’t entirely genuine. It takes a lot of digging to find truly sustainable companies let alone those that participate in being “green” for anything more than public relations.