Strategic CSR - True costs + prices

The article in the url below introduces the concept of true cost accounting:

"As pricey as a run to the grocery store has become, our grocery bills would be considerably more expensive if environmental costs were included, researchers say. The loss of species as cropland takes over habitat. Groundwater depletion. Greenhouse gases from manure and farm equipment. For years, economists have been developing a system of 'true cost accounting' based on a growing body of evidence about the environmental damage caused by different types of agriculture."

At first glance, I equated this to the lifecycle pricing that is a component of strategic CSR. But, on reading further, the article makes clear that the people at True Price (the Dutch nonprofit the authors worked with to generate the data in the article) do not want to alter prices (by embedding all costs), but instead want to place the 'true cost/price' next to the actual price (as a signal to impact behavior). In other words, they want to charge the current price and advertise the true cost, rather than charging the true price:

"Now, emerging research aims to translate this damage to the planet into dollar figures. By displaying these so-called true prices, sometimes next to retail prices, researchers hope to nudge consumers, businesses, farmers and regulators to factor in the environmental toll of food. The proponents of true cost accounting don't propose raising food prices across the board, but they say that increased awareness of the hidden environmental cost of food could change behavior."

The data is still imperfect, but is more comprehensive than I have seen elsewhere, demonstrating the extent to which costs we incur today are externalized onto future generations. Take beef, for example, where the retail price for 1lb is listed as $5.34, but the "estimated full price" is listed as $27.36 – an "estimated environmental cost" of $22.02 that is currently not being charged.

While I understand why they are proposing this less conflict-ridden approach, and agree the signal will have some effect, I also think the impact of this approach will likely be considerably weaker than directly changing the price.

Take care 

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (6e)

© Sage Publications, 2023

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler6e  

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The Hidden Environmental Costs of Food

By Lydia DePillis, Manuela Andreoni, and Catrin Einhorn

September 19, 2024

The New York Times

https://www.nytimes.com/interactive/2024/09/19/climate/food-costs-protein-environment.html

 

Strategic CSR - Decarbonization

The article in the url below examines the economics of decarbonization. In particular, it makes two arguments that are enlightening. The first is that any barriers to decarbonization do not include the amounts of money involved:

"If the world economy fails to decarbonise, it will not be because of the cost. The gross investment needed to achieve net-zero emissions by 2050 can seem enormous: a cumulative $275trn, according to the McKinsey Global Institute, a think-tank attached to the consultancy. But over a period of decades the world would have had to replace its cars, gas boilers and power plants anyway. So the additional spending needed to go green is in fact much smaller: $25trn. Spread that over many years and compare it to global GDP, and it looks significant but manageable, peaking at 1.4% between 2026 and 2035. And that is without counting the returns on the investment. British officials reckon that three-quarters of the total cost of the transition to net zero will be offset by benefits such as more efficient transport, and that the state may need to spend only 0.4% of GDP a year over three decades."

The second argument is that a carbon tax can only be effective if reasonable alternatives are already on offer. If they are not on offer or they are too expensive, then taxes do not have the same effect on behavior:

"Carbon prices do not alter people's choices much when there are too few substitutes for dirty goods, or when those substitutes are too expensive. High fuel taxes, for example, tend to provoke political backlash against environmentalism … but do not much alter transport emissions. Britain has had one of the highest levels of fuel duty in the rich world in recent decades, … but drivers' take-up of electric vehicles has been unremarkable."

The reasons economists favor a carbon tax, the article suggests, is because they have wrongly focused on externalities ("the damage done to society when carbon is emitted") when they should have also considered the elasticity of demand ("the extent to which prices change behavior"). As a result, rather than a carbon tax, the solution offered by the book that is being reviewed in the article to bring about decarbonization is "extreme positive incentives for change," or EPICS:

"[The book's authors] laud Norway for exempting electric vehicles from road tax, cutting their parking charges in half and giving them access to bus lanes. (More than 90% of cars sold in the country are now electric.) They propose big mortgage discounts for homeowners who retrofit their properties. And they want the state to generously subsidise lending to green projects while exempting them from a range of taxes."

Take care

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (5e)

© Sage Publications, 2020

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e 

Strategic CSR Simulation: http://www.strategiccsrsim.com/

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An EPIC challenge

By Free exchange

March 26, 2022

The Eonomist

Late Edition – Final

73

https://www.economist.com/finance-and-economics/2022/03/26/have-economists-led-the-worlds-environmental-policies-astray

 

Strategic CSR - Interface

Thanks to the late Ray Anderson's pioneering work, his company Interface (and more specifically its carpet tiles, Flor) is something I have noticed whenever it appears in the media (e.g., see Strategic CSR – Ecocide). Although I knew the company was doing good work, however, I recently saw what I think is a first for me – a carbon negative product. To repeat, that is not carbon neutral, but carbon negative. That is, Interface's release of its most recent product/innovation stores more carbon in its production and lifecycle use than it uses:

"This carpeting was a result of four years of intensive research and development, according to Interface. It incorporated a material made from recycled vinyl and processed vegetation; it was infused with a latex created from smokestack exhaust. It was topped and tufted with salvaged nylon. And it had been manufactured in the least environmentally demanding way possible. By Interface's reckoning, the carpeting had a carbon footprint of negative 300 grams per square meter. … carpeting a 10-feet-by-20-feet conference room, say, with these tiles can be seen as the equivalent of pulling roughly 12 pounds of carbon dioxide out of the atmosphere."

The challenge in achieving this is amplified when you think about how dirty carpet making traditionally has been:

"Industrial carpet tile can be thought of as a kind of three-layer sandwich, made from tufting on top, filler in the middle and backing on the bottom. In the mid-1990s, Interface calculated the carbon footprint of these layers and concluded that a square meter of the sandwich was responsible for releasing about 20 kilograms worth of CO2 into the atmosphere. Most of these emissions — probably more than 70 percent — resulted from materials and processing, and a lesser portion from manufacturing, installation and maintenance (all that cleaning and vacuuming over the course of a carpet's life adds up to significant CO2 emissions)."

Of course, I have known the technology exists for carbon sequestration, but the challenge I thought (and the article makes clear still largely exists) is in its commercial application/scaling at the product level. For example, recently there has been a lot of innovation in the production of concrete using carbon-infused materials, but companies are nowhere near carbon neutrality with that, let along carbon negative (see Strategic CSR – Concrete). As such, any discussion about the technology tends to be on a company or societal level. The outcome is also usually storing or injecting the carbon dioxide underground, whereas this process involves storing the carbon in the product itself:

"The company began using recycled components for the backing, filler and yarns, and the factories were refitted with machines that were more efficient. Pushing an Interface product to below zero, at least in carbon terms, was not about a big breakthrough … . It was more like coming up with a recipe involving hundreds, if not thousands, of changes to ingredients and techniques. Over the next two decades, the company learned a couple of things. First, by reducing its emissions and using mostly recycled materials, its tiles could approach carbon neutrality. Second, by obtaining its materials from different sources — and using them in smaller amounts — Interface could further shrink its footprint. The CO2-infused latex, which is sprayed on the carpet's middle layer, was a helpful step. The key adaptation, however, was transforming the backing. Incorporating biomaterials — forestry byproducts and plants rich in absorbed carbon — locked in high levels of carbon and canceled out the emissions related to the rug's materials, production and life cycle. In essence, Interface was creating what we usually call a carbon offset in the lowest layer of its carpet sandwich."

This is the first time I think I have seen a company calculate the carbon footprint of a product and announce that it is negative. For the author, this story revolves around the larger issue of "carbontech," which he defines as:

"… trying to 'embed' large amounts of carbon within commercial merchandise. … Advocates of carbon utilization, or carbontech, as it's also known, want to remake many of the things we commonly use today. But with one crucial difference: No emissions would have been added to the environment through their fabrication."

The article provides multiple examples of different startups trying to develop technologies that will revolutionize some of the dirtiest industries and products we have developed (such as concrete), and also using market-based ideas to hasten the speed with which carbontech is advanced (such as pricing and trading carbon dioxide, rather than treating it as a waste product, at present). The article is also clear that this is not a silver bullet, but should be thought of more as an innovative means to help us transition from our current unsustainable, fossil-fueled economic system to a future (and as of yet undefined) sustainable economic system.

Take care

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (5e)

© Sage Publications, 2020

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e 

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Better Living Through CO2

By Jon Gertner

June 27, 2021

The New York Times Magazine

Late Edition – Final

27-33, 61

https://www.nytimes.com/2021/06/23/magazine/interface-carpet-carbon.html

 

Strategic CSR - Meat

The article in the url below raises the possibility of extending the idea of a Pigovian tax (a tax on an activity that causes a negative consequence – i.e., a sin tax) to eating meat. In other words, meat would be taxed as a 'sin' in the same way that cities and states are beginning to tax a range of products, from plastic bags (e.g., Strategic CSR - Kenya) to sugar (e.g., Strategic CSR – CSR Threshold):

 

"Meat could be a target for higher taxes given criticism of the industry's role in climate change, deforestation and animal cruelty. … The idea is still its infancy and faces a lot of opposition from farming groups, but it's emerging as a trend in Western Europe. … If taxes gain traction, it could encourage more people to switch to poultry or plant-based protein and help drive the popularity of meat substitutes."

 

Such a tax has been advanced as a way to address animal welfare, as well as reduce meat consumption:

 

"In Germany, some politicians have proposed raising the sales tax on meat products to fund better livestock living conditions. A poll … showed a majority of Germans, or 56.4%, backed the measure, with more than a third calling it 'very positive' and some 82% of voters for the environmentalist Greens in favor."

 

This article coincides with another report from the IPCC recently on climate change and the land (https://www.ipcc.ch/report/srccl/), documenting the waste and damage associated with our current farming/land-use methods:

 

"The loudest argument against meat at the moment is not based on health but climate change. In a report this month, the United Nations said agriculture, forestry and other land use contributes about a quarter of greenhouse emissions."

 

In the face of the scale of the problem, a tax on red meat seems as though it will not get us all the way to there from here. The principle is important, however. If you believe that the market is the most effective means of allocating scarce and valuable resources (which I do), then sin taxes are the way to account for negative externalities in the pricing of products. Get the pricing right, and demand/supply will balance at the 'appropriate' level. In my opinion, this lifecycle pricing (together with technological innovation) is the only way we will combat climate change and have some hope of preserving a planet on which we can live.

 

Take care

David

 

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (5e)

© Sage Publications, 2020

 

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e 

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

Red Meat Could Be the Next Sin Tax After Sugar, Fitch Says

By Olivia Konotey-Ahulu

August 13, 2019

Bloomberg Businessweek

https://www.bloomberg.com/news/articles/2019-08-13/red-meat-could-be-the-next-sin-tax-after-sugar-fitch-says

 

Strategic CSR - Carbon Tax

I thought the article in the url below was worth bringing to your attention (it is an open letter), simply because of the people who have signed-onto it:

 

"Editor's note: This statement is signed by 27 Nobel economic laureates, all four living former chairs of the Federal Reserve, 15 former chairmen of the president's Council of Economic Advisers, and two former Treasury secretaries."

 

That is quite a group – and, if they can agree on anything, there is hope that the government can, one day, return to the job of legislating. The article opens with this statement:

 

"Global climate change is a serious problem calling for immediate national action. Guided by sound economic principles, we are united in the following policy recommendations."

 

It then goes on to list five policies. Here is the first line of each statement:

 

I. "A carbon tax offers the most cost-effective lever to reduce carbon emissions at the scale and speed that is necessary."

II. "A carbon tax should increase every year until emissions reductions goals are met and be revenue neutral to avoid debates over the size of government."

III. "A sufficiently robust and gradually rising carbon tax will replace the need for various carbon regulations that are less efficient."

IV. "To prevent carbon leakage and to protect U.S. competitiveness, a border carbon adjustment system should be established."

V. "To maximize the fairness and political viability of a rising carbon tax, all the revenue should be returned directly to U.S. citizens through equal lump-sum rebates."

 

There are more details to each policy in the article itself, but this is interesting stuff from an impressive group! A more critical response appears in the article in the second url below:

 

"A carbon tax is not a miracle solution. There aren't any. We will be living with some amount of climate change due to the highly uncertain effects of rising CO2 levels for the foreseeable future. The difference between a happy and unhappy outcome for humanity will come down to our ability to maintain economic progress in the face of our extraordinarily daunting debt challenges."

 

Perhaps, but this does not discount the fact that a carbon tax is widely acknowledged to be the best tool we have to make rapid progress on reducing the amount of carbon we emit into the atmosphere.

 

Take care

David

 

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (5e)

© Sage Publications, 2020

 

Instructor Teaching and Student Study Site: http://studysites.sagepub.comstudy.sagepub.com/chandler5e 

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The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/


Economists' Statement on Carbon Dividends

January 17, 2019

The Wall Street Journal

Late Edition – Final

A13

https://www.wsj.com/articles/economists-statement-on-carbon-dividends-11547682910

Big Names Bake a Climate Pie in the Sky

By Holman W. Jenkins, Jr.

January 19-20, 2019

The Wall Street Journal

Late Edition – Final

A13

https://www.wsj.com/articles/big-names-bake-a-climate-pie-in-the-sky-11547853413

 

Strategic CSR - Green New Deal

The recently announced Green New Deal (GND), fronted most publicly by Alexandria Ocasio-Cortez (the new congresswoman from New York), is receiving a lot of attention in the media. As The Economist puts it in the article in the first url below, the proposal is both popular and controversial, having "been met with surprising enthusiasm in Washington." In more substantive (i.e., non-political) circles, however, the GND has been received less enthusiastically. The theme that seems to unite the skeptical commentaries I have read is the accusation that the proponents of the GND misunderstand the fundamental nature of the problem and, as such, have responded with an ineffective solution. In short, if the goal is to tackle climate change, then the GND is unlikely to be successful. Rather than seeing climate change as a "straightforward … market failure" that can be fixed through pricing (i.e., including the externalized costs of carbon into the price we pay to consume it), the GND instead sees climate change as a social problem that must be fixed through government intervention. Given the nature of the proposed intervention (in particular, the scale), skeptics expect numerous unintended consequences:

 

"… the Green New Deal largely dispenses with analysis of the costs and benefits of climate policy. It would create large opportunities for rent-seeking and protectionism, with no guarantee that the promised climate benefits will follow. It might chuck growth-throttling tax rises and dangerously high deficits into the bargain as well."

 

You can read about the GND here. Suffice it to say, it proposes a substantial increase in government involvement in the economy, at the expense of market forces. David Brooks tackles the topic in the article in the second url below, highlighting the massive reorganization of government responsibility:

 

"[The GND] would definitely represent the greatest centralization of power in the hands of the Washington elite in our history. … Under the Green New Deal, the government would provide a job to any person who wanted one. The government would oversee the renovation of every building in America. The government would put sector after sector under partial or complete federal control: the energy sector, the transportation system, the farm economy, capital markets, the health care system."

 

Unfortunately, as he notes, the proposal is both lacking in detail ("Exactly which agency would inspect and oversee the renovation of every building in America? Exactly which agency would hire every worker?") and is highly implausible. After all, "This is from people who couldn't even organize the successful release of their own background document":

 

"The authors of this fantasy are right that we need to do something about global warming and inequality. But simple attempts to realign incentives, like the carbon tax, would be more effective and more realistic than government efforts to reorganize vast industries."

 

Ultimately, Brooks concludes that the consequence of greatly expanding the role of government in society is that it just replaces one elite (capitalists) with another elite (politicians). And it is not clear that a political elite would generate better outcomes than a capitalist elite:

 

"But the underlying faith of the Green New Deal is a faith in the guiding wisdom of the political elite. The authors of the Green New Deal assume that technocratic planners can master the movements of 328 million Americans. … They assume that congressional leaders have the ability to direct what in effect would be gigantic energy firms and gigantic investment houses without giving sweetheart deals to vested interests, without getting corrupted by this newfound power, without letting the whole thing get swallowed up by incompetence. (This is a Congress that can't pass a budget.)"

 

Unfortunately, if we are looking for the efficient (and, for that matter, fair and ethical) allocation of resources, the empirics side with the market. Recent corruptions have produced the distorted outcomes that many are justifiably angry about. But, the solution is to eradicate the corruptions; not to get rid of the whole system and replace it with something that has been proven to be less effective. Any proposed solutions have to grapple with this complexity, rather than resort to unrealistic ideals. This brings me to the article in the third url below, which reviews a recently published book on climate change and brings a little more realism to the debate. In short, it relates how complicated it is for a society to shift from one dominant energy source to another:

 

"Some years ago, while studying how societies transitioned from one energy source to another over the past 200 years, the Italian physicist Cesare Marchetti and his colleagues discovered a hard truth: It takes almost a century for a new source of primary energy — coal, petroleum, natural gas, nuclear power — to command half the world market. Just to grow to 10 percent from 1 percent takes almost 50 years."

 

Rather than technology, the main barrier to progress is usually related logistics and infrastructure:

 

"You would expect suppliers to switch quickly to a better (more abundant, cheaper, cleaner) source. But infrastructure has to catch up: In America, natural gas needed long-distance pipelines to go national; electric cars need still-scarce charging stations. People have to adapt: Elizabethan preachers condemned coal as literally the Devil's excrement; some Victorian homeowners comfortable with gaslight thought Edison's light bulbs too bright. Competition from heavily invested older sources has to be overcome, as with fossil fuels today. These and other changes take time."

 

As the article continues, we do not have that much time to switch to a non-carbon-based energy. While the GND is important in terms of raising awareness, therefore, it does little to demonstrate an appreciation of the scale of the problem we face. It also fails to grapple with the realities of any necessary changes, such as which energy sources can possibly provide the supply we need in the available time-frame. To the authors of the book being reviewed, there is only one answer (logically and technically)—one that many environmentalists will find unacceptable:

 

"… worldwide energy consumption 30 years from now is projected to be about 50 percent higher than it is today. If that number sounds exaggerated, think of four billion Asians installing air-conditioning. For [the authors], the only possible solution to this double dilemma is a rapid, worldwide expansion of nuclear power. No other source or collection of sources of energy, they argue, is positioned to meet these challenges in time."

 

I am not sure how that would be possible (since nuclear power stations take time to build, largely because they are subject to political oversight) but, from everything I have read, there is no escaping the fact that nuclear has to be a big part of the solution. However, you won't find this sort of nuance in the GND.

 

Take care

David

 

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (4e)

© Sage Publications, 2017

 

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/


Brave new deal

February 9, 2019

The Economist

https://www.economist.com/finance-and-economics/2019/02/07/a-bold-new-plan-to-tackle-climate-change-ignores-economic-orthodoxy

How the Left Embraced Elitism

By David Brooks

February 12, 2019

The New York Times

https://www.nytimes.com/2019/02/11/opinion/green-new-deal.html

Nuclear Option

By Richard Rhodes

February 10, 2019

The New York Times Book Review

https://www.nytimes.com/2019/02/05/books/review/bright-future-joshua-s-goldstein-staffan-a-qvist.html

 

Strategic CSR - Electric cars (I)

The article in the first url below sheds some light on the economics of the electric car:

 

"Electric cars have come a long way. They are no longer ugly, impossibly expensive and impractical, thanks to technological advances that have slashed battery storage from $1,000 per kilowatt-hour in 2010 to $273per kwh last year."

 

In particular, it highlights the extent to which Tesla (and other car companies) have so far relied so heavily on government subsidies – a prop that will soon come to an end:

 

"Nonetheless, … a 75 kwh battery (about 250 miles of range) still adds about $20,000 to a car's cost. So how do the cars sell? Public largess helps a lot. The federal government offers a tax credit of up to $7,500 each for the first 200,000 electric or plug-in hybrid cars a manufacturer sells. Throw in state tax credits, subsidies for recharging infrastructure, relief from gasoline taxes, preferential lanes and parking spots and government fleet purchases, and taxpayers help pay for every electric car on the road."

 

Anecdotal evidence suggests that, when this support is taken away, the cars are not so competitive, at least in terms of the mass market:

 

"When Hong Kong slashed a tax break worth roughly $55,000 fora Tesla in April, its sales ground to a halt. In Georgia, electric vehicle sales plummeted 80%the month aftera$5,000 tax credit was repealed."

 

The future for the market for electric cars, as envisioned by Tesla, also relies on certain assumptions that, while not impossible, are also far from guaranteed:

 

"… such scenarios hinge not just on the cost of batteries but on the price of oil and the efficiency of competing vehicles. [Economists] estimate that if batteries cost $270 per kwh, oil would have to cost more than $300 a barrel in 2020 to make electric and gasoline equally attractive. If battery costs fall to $100, as Tesla Founder Elon Musk has targeted, oil would have to average $90. … in an optimistic scenario, where battery costs fall 10% a year starting now and gasoline begins at $5 a gallon, electric vehicles will be competitive in five years. If battery costs fall just 5% a year and gasoline starts at $2.25, it will take more than 20."

 

At a more fundamental level, the author questions the extent to which electric cars have helped reduce climate change. This is principally because they are recharged at night, which is when electricity is more likely to be generated by coal:

 

"Economists … estimate electric vehicles account for more carbon dioxide per mile than existing cars in the upper Midwest, where coal-fired plants are more prevalent, and more than comparable hybrids in most of the U.S."

 

While I recognize that the oil companies and traditional car companies also get their fair share of government subsidies, it is instructive to realize that electric cars (at least using current technologies) might not be the silver bullet that Elon Musk often suggests. Strategic CSR, of course, argues for a level playing field – remove all subsidies, impose a lifecycle pricing that accounts for all costs incurred during production (in this case, a carbon tax for carbon-based fuel consumption), and allow the market to determine where to invest to optimize returns. In the meantime, we are stuck with government subsidies and, as a result, distorted market outcomes. As the author concludes:

 

"These subsidies have clearly accomplished one goal: They've accelerated innovation when the private market had little incentive to invest. Yet they may not be the most efficient way to combat carbon emissions. A carbon tax, for example, would incentivize conservation and alternative fuels regardless of oil prices."

 

In short, as summarized in a recent report by Morgan Stanley on impact investing:

 

"… the carbon emissions generated by the electricity required for electric vehicles are greater than those saved by cutting out direct vehicle emissions."

 

The article in the second url below suggests additional possible additional harm caused by electric cars -- this time in terms of e-waste:

 

"The number of electric cars in the world passed the 2m mark last year and the International Energy Agency estimates there will be 140m electric cars globally by 2030 if countries meet Paris climate agreement targets. This electric vehicle boom could leave 11m tonnes of spent lithium-ion batteries in need of recycling between now and 2030, according to Ajay Kochhar, CEO of Canadian battery recycling startup Li-Cycle."

 

Take care

David

 

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (4e)

© Sage Publications, 2017

 

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

 

 

Electric Cars Are the Future? Not So Fast

By Greg Ip

July 13, 2017

The Wall Street Journal

Late Edition – Final

A2

https://www.wsj.com/articles/electric-cars-are-the-future-not-so-fast-1499873064

 

The rise of electric cars could leave us with a big battery waste problem

By Joey Gardiner

August 10, 2017

The Guardian

https://www.theguardian.com/sustainable-business/2017/aug/10/electric-cars-big-battery-waste-problem-lithium-recycling

 

Strategic CSR - Natural capital

Ensuring all costs (and benefits) are included in the final price that is charged to consumers for a product is essential if we are to take full advantage of the market forces that can allocate resources so efficiently. A big challenge for this lifecycle approach, of course, is the pricing of natural capital -- assets from the natural environment that, to date, have either been free or close-to-free and, as a result, have been taken-for-granted and over-consumed. The article in the url below illuminates this challenge by attempting to value the National Parks in the US:

 

"According to the National Park Service (NPS), over 300 million visitors collectively spent over a trillion hours at U.S. national parks in 2015. … Attendance numbers are often provided as a crude measure of how much people like and value America's national parks. But that is only a rough proxy for determining the parks' economic value—a number that could have implications for how the parks are managed and funded. So a group of researchers recently looked into that question: How much is the NPS—the parks and the services it provides—worth to Americans?"

 

The challenge, of course, is to quantify this value (beyond mere public popularity):

 

"[The researchers] estimate that NPS parks and programs are together worth about $92 billion. They arrived at this figure by using methods similar to those that federal agencies use in analyzing proposed regulations. First, they sent a survey to about 4,000 U.S. households asking how much residents were willing to pay in additional federal income taxes in order to keep America's national parks. An estimate was then made based on the answers of the 700 households that responded, and those who didn't respond were ascribed a value of zero. The $92 billion number breaks down into $62 billion for National Park lands and $30 billion for NPS programs, which include recreational activities, efforts to protect landmarks, and educational programs."

 

An important takeaway from the study was that the National Parks are valued not only by those who use them, but also as an idea that shapes the nature of the country:

 

"Sure, people who use national parks for hiking or camping value them, but what this estimate suggests is that for those who don't use the parks, it seems that just the idea of having national parks around is attractive enough to be worth tax dollars. Additionally, … $92 billion is a conservative estimate, since those who didn't answer the survey were given zero values and a post-survey audit found that most of those who didn't respond didn't have time to fill out the survey—so it's likely not the case that the parks are worth nothing to them. Separately, the demographics of park attendance could hurt the NPS's long-term valuation given that the majority of its visitors are older white Americans, even as the U.S. becomes increasingly diverse."

 

The conservative approach of valuing non-responses as zero likely makes up for the gap between what respondents say they are willing to spend and what they would actually spend if they had to part with their money. At a minimum, however, the $92 billion number puts the annual budget for the parks in greater context:

 

"[Last year] the Obama administration [submitted] a budget of $3.1 billion for the NPS for 2017—an amount that includes a bump for restoration and upgrades."

 

Take care

David

 

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (4e)

© Sage Publications, 2017

 

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

 

 

How Much Are America's National Parks Worth?

By Bourree Lam

July 19, 2016

The Atlantic

http://www.theatlantic.com/business/archive/2016/07/us-national-parks-worth/492044/

 

Strategic CSR - Natural capital

For those of you out there who are relying on scientific and technical innovation to get us out of our environmental challenges, the article in the url below offers some hope. In this case the problem is a lack of water:

 

"San Diego County is in a drought. San Diego County sits next to the Pacific Ocean, which contains 187 quintillion (that's 187,000,000,000,000,000,000) gallons of cool, fresh, completely undrinkable water."

 

The solution is desalination on an industrial scale:

 

"This vexes San Diego County, vexes them enough to build a $1 billion (that's only $1,000,000,000) state-of-the-art desalination plant that will filter out the salt and provide up to 50 million gallons of drinking water a day."

 

This is not particularly new technology, but applying it to solve a state-wide problem is an important step in the effort to introduce meaningful change. It also is an important step in being able to value our natural resources. While we would hope we could do this without the need to monetize everything, in reality it is when we create a market for something that we are able to understand the extent to which we value it:

 

"While the new Carlsbad desalination plant will contribute only about 10 percent of San Diego County's drinking-water supply, … If the plans succeed, they could convert the Pacific from a really nice thing to look at into a vital natural resource."

 

Have a great weekend

David

 

David Chandler & Bill Werther

Strategic Corporate Social Responsibility: Stakeholders, Globalization, and Sustainable Value Creation (3e)

© Sage Publications, 2014

 

Instructor Teaching and Student Study Site: http://www.sagepub.com/chandler3e/

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

 

 

California's Costly Solution to Make the Ocean Drinkable

By Sam Grobart

November 10, 2015

Bloomberg Businessweek

http://www.bloomberg.com/news/articles/2015-11-10/california-s-costly-solution-to-make-the-ocean-drinkable

 

Strategic CSR - Natural goods

In the blog post in the url below, Mallen Baker (Foreword, pxxiv) questions the value of monetizing environmental resources, such as the oceans:

 

"According to a recent report by WWF, the monetary value of the world's oceans is US$24tn. That's the asset value. If you valued the annual 'goods and services' it provides, you come up with a figure of $2.5tn. No doubt that's meant to sound a lot. No doubt, there may be some people who only pay attention to an issue if it's put into monetary terms. As far as I'm concerned, it's completely irrelevant."

 

I am a big fan of Mallen's work (http://www.mallenbaker.net/csr/), but disagree about this. Quantification helps define the extent of a problem; it also puts it in a context to which most of us can relate (even if the numbers are very large). In contrast, Mallen sees the effort to monetize oceans as a plot orchestrated by, gasp, "the economists":

 

"Putting a cost on the ocean is not that helpful. If you look at how many of the world's processes depend on life in the oceans, how much of the world's protein comes from there, and what might be the knock-on ecosystem consequences of the collapse of the oceans. … [It should not] be defined by the financial value of what the services of valued at during a time of plenty … [but] by the catastrophic consequence of their absence. Sometimes you've got to avoid playing the economists game and keep it real."

 

I am not so sure. Often, the best way to keep something real is to put a price on it. Money seems to have a disproportionately motivating power over humans that other drivers, such as altruism, lack. For whatever evolutionary reason, we are incredibly materialistic beings who are willing to do many things for money that we would not otherwise consider. Such a proclivity produces distorted behavior. Either way, I am not convinced everyone would price oxygen in the way that Mallen suggests:

"Suppose you were going to be denied that oxygen unless you paid for it. What would it be worth to you? Obviously, every penny you owned because without it you die. The financial value of something is, after all, defined by what someone is prepared to pay."

Valuation is a complex process. Some people might not think it is worth living only to be destitute. Moreover, you could apply the same approach to valuing human life in general. In other words, if you ask the question 'What price would you put on your own life?,' Mallen's logic would answer "every penny you owned." Nevertheless, this does not prevent actuaries at insurance companies producing very specific values for life-related premiums that are considerably less than every penny you own. The benefit, of course, is that this process enables certain economic transactions via insurance products that can price the different levels of risk we are all willing to take. I suspect that we will be able to do something similar to help preserve the environment. 

 

In short, I agree with Mallen that, in terms of the oceans, the "consequences of absence are catastrophic," but that does not mean it is a waste of time to try and monetize them. In fact, it suggests to me that we should hurry up and get on with the process. If we are to prevent their complete destruction, our past suggests that a market solution will be most effective and, in order to begin that process, we need to start with how much these natural goods are worth!

 

Take care

David

 

David Chandler & Bill Werther

Strategic Corporate Social Responsibility: Stakeholders, Globalization, and Sustainable Value Creation (3e)

© Sage Publications, 2014

 

Instructor Teaching and Student Study Site: http://www.sagepub.com/chandler3e/

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/


What price would you put on the oxygen you breathe?

By Mallen Baker

June 8, 2015

mallenbaker.net

http://www.mallenbaker.net/csr/post.php?id=496

 

Strategic CSR - Cheeseburgers

There has been some internet buzz about a recently released documentary, Cowspiracy: The Sustainability Secret (http://cowspiracy.com/). The documentary deals with the environmental impact of the meat industry, which is accused of being the leading cause of environmental destruction, carbon dioxide emissions, deforestation, and species eradication. The producers argue that the 'conspiracy' (from which the documentary gets its name) is constructed by the meat industry, which doesn't want anyone to know about these costs, but is enabled by environmental activists who avoid talking explicitly about the issue in order not to offend the meat industry. This is partly to avoid potential lawsuits from well-financed lawyers, but also partly because of the financial support the meat industry provides directly to the most well-known environmental groups.

 

Anyway, I noticed this documentary after a rebuttal appeared in The Wall Street Journal – the article in the url below:

 

"The documentary film 'Cowspiracy,' released this week in select cities, builds on the growing cultural notion that the single greatest environmental threat to the planet is the hamburger you had for lunch the other day. As director Kip Andersen recently told the Source magazine: 'A lot of us are waking up and realizing we can choose to either support all life on this planet or kill all life on this planet, simply by virtue of what we eat day in and day out. One way to eat takes life, while another spares as many lives (plant, animal and otherwise) as possible.'"

 

A large part of the documentary's argument focuses on the issue of externalities (Chapter 8: Case-study – Lifecycle pricing, p473). Externalities are important because they constitute the costs that are not counted for in the price that is paid for a product:

 

"Environmental nutritionists argue that the social and environmental costs of meat production—obesity, chronic disease, the production of green-house gases such as methane, etc.—are not reflected in prices at the grocery store or restaurant. 'The big-ticket externalities are carbon generation and obesity,' New York Times columnist Mark Bittman recently wrote. He argues that beef prices don't reflect these externalities and that 'industrial food has manipulated cheap prices for excess profit at excess cost to everyone.'"

 

In other words, society is essentially subsidizing the meat industry, sustaining companies that either wouldn't otherwise exist, or would exist only at lower levels of profit than they currently earn. While ignoring this point, the WSJ response focuses on consumer access to affordable meat, rather than on ensuring that the price of meat reflects the costs incurred in producing it:

 

"That the price of meat is too low might come as news to food consumers who, according to data from the Bureau of Labor Statistics, paid 14% higher prices for ground beef this June than they did in June 2013 and 29% more than two years ago. Recent droughts and high corn prices—due in part to Washington's support for ethanol—are largely to blame. It is unclear how high prices must rise to overcome the view that meat is 'too cheap.' Some industry critics have even called for new 'meat taxes' to discourage consumption."

 

In emphasizing the benefits meat offers, the author of the WSJ article misses the crucial point that the market for meat, at present, is heavily distorted:

 

"Let us also not gloss over what is beef's most obvious benefit: Livestock take inedible grasses and untasty grains and convert them into a protein-packed food most humans love to eat. We may be able to reduce our impact on the environment by eating less meat, but we can also do the same by using science to make livestock more productive and environmentally friendly."

 

In short, the author of the WSJ response argues, somewhat unconvincingly, that all the fears raised in the documentary are overblown. The more interesting question, of course (in contrast to the article's headline), is 'What if cheeseburgers do melt the ice caps?' and, if so, 'Do we care enough to do anything about it?'

 

Take care
David

 

David Chandler & Bill Werther

Strategic Corporate Social Responsibility: Stakeholders, Globalization, and Sustainable Value Creation (3e)

© Sage Publications, 2014

 

Instructor Teaching and Student Study Site: http://www.sagepub.com/chandler3e/

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

 

 

Cheeseburgers Won't Melt the Polar Ice Caps

By Jayson Lusk

August 18, 2014

The Wall Street Journal

Late Edition – Final

A13

http://online.wsj.com/articles/jayson-lusk-cheeseburgers-wont-melt-the-polar-ice-caps-1408317541

 

Strategic CSR - Free markets

The article in the url below highlights the inefficiencies of markets—in particular, the market for energy and the government subsidies that distort it to such a great extent. A more enlightened approach to government support for this market, the article claims, would help correct federal deficits as well as begin to address important social challenges, such as climate change:

 

“The International Monetary Fund, in a comprehensive critique of the subsidies released Wednesday, wants to change that. Energy subsidies, it says, aggravate budget deficits, crowd out public spending on health and education, discourage private investment in energy, encourage excessive energy consumption, artificially promote capital-intensive industries, accelerate the depletion of natural resources and exacerbate climate change. Other than that, there is nothing wrong with them.”

 

Governments use subsidies to placate their citizens and the large businesses that produce energy:

 

“The most obvious way that governments subsidize energy is by charging households and businesses less than it costs to produce and distribute gasoline, cooking fuel and electricity. Taxpayers, now or later, pick up the tab. The IMF says these subsidies added up to $481 billion in 2011. Globally, this amounts to 2% of government revenues, but about 22% of revenues in the Middle East and North Africa. … Globally, holding down energy prices increases consumption of fossil fuels. Eliminating those direct subsidies, the IMF estimates, would reduce energy consumption enough to bring the world one-fourth of the way toward the goals set at the climate-change conference in Copenhagen in 2009.”

 

This graphic that accompanies the article demonstrates how these subsidies, on a global scale, add up to $1.9 trillion a year:

 

http://si.wsj.net/public/resources/images/NA-BV653_CAPITA_G_20130326180304.jpg

 

Ultimately:

 

“‘The question is whether a country should choose to let someone buy something for $1 when the total cost—both of producing it and the costs imposed on society—are $1.25,’ says David Lipton, the IMF's No 2.”

 

This conversation feeds into the idea of lifecycle pricing (Chapter 8, Case-study: Lifecycle Pricing, p473). What should be clear from the example above, and others cited in the third edition, is that markets do not currently do a good enough job of accounting for the true costs of production in the prices that are charged to consumers. The reason for this is that the markets we have created are riddled with inefficiencies (what economists call externalities and politicians call subsidies, tax breaks, loopholes, etc.). These inefficiencies introduce costs into the system that prevent the final price reflecting a product’s true value (i.e., its total costs).

 

As such, we need to reform our market system. The goal should be to work towards a model in which all inefficiencies are eradicated and all costs are included in the price that is charged for each product and service. In other words, the price of a product should not only include the cost of production, but also include the costs associated with replenishing the raw materials used and disposing/recycling of the waste after consumption. Attempts to put a price on carbon reflect this process (either through a carbon tax or cap-and-trade program), while firms’ efforts to develop carbon footprints (Chapter 8, Figure 8.4, p538) provide a possible means of implementation.

 

An economy where externalities are internalized, and embedded within a moral framework (see the CSR Filter, Chapter 4 and Conscious Capitalism, Chapter 5) moves us closer to the economy Adam Smith envisioned and wrote about in his classic treatise The Theory of Moral Sentiments—truly free markets filled with values-based businesses and vigilant stakeholders (see: Strategic CSR: Free ‘free markets’).

 

Take care

David

 

David Chandler & Bill Werther

Strategic Corporate Social Responsibility: Stakeholders, Globalization, and Sustainable Value Creation (3e)

© Sage Publications, 2014

 

Instructor Teaching and Student Study Site: http://www.sagepub.com/chandler3e/

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

 

 

Rethinking Energy Subsidies

By David Wessel

March 28, 2013

The Wall Street Journal

Late Edition – Final

A2

http://online.wsj.com/article/SB10001424127887323361804578386033482868260.html

 

Strategic CSR - Distributors

While we have done a better job within the CSR community of holding firms responsible for their supply chain, there is much less discussion about distribution. But, if we are going to say a firm is responsible for actions taken by firms that precede it in the supply chain, why are we not willing to say the same about actions taken by firms that come after it?

 

This does not diminish the good work done in terms of lifecycle pricing and the post-consumption obligations of the business to consumer relationship. In fact, it is all part of the same discussion—it is all a matter of where to put the emphasis. In particular, I have not heard any discussion of responsibilities further up the distribution chain for businesses.

 

This issue emerged in a discussion I had with a colleague recently while we were talking about the mining industry. Why are extraction firms not held accountable for subsequent uses of the raw materials they take out of the ground? While there has been some discussion of conflict diamonds/minerals, responsibility for the supply chain appears to rest with the firm that sells the finished product, rather than the firm that sold the component parts. Take e-waste, for example—Why are we willing to hold a firm like Dell responsible for recycling those parts of the computer that are toxic (precious metals and minerals), but not the firm that was responsible for extracting those metals and minerals and selling them to Dell (and others)?

 

This is an issue that has yet to emerge for extraction companies, but it is not difficult to imagine a day when that happens. If we want to hold GAP, Nike, and Walmart responsible for the actions of other firms far removed from them closer to source, we will one day surely hold extraction firms responsible for the actions of other firms and consumers closer to consumption.

Given this, the progressive extraction company that is sensitive to the relationships it has with its stakeholders, broadly defined, will act now to get ahead of this issue and prevent the future risk to business that it could well become (see: A Rational Argument for CSR, p16).

 

Take care

David

 

Bill Werther & David Chandler

Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)

© Sage Publications, 2011

http://www.sagepub.com/strategiccsr2e/

 

Instructor Teaching Site: http://www.sagepub.com/strategiccsr/

The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/