Mirror Mirror on the Wall

Mirror mirror on the wall, who’s the greenest of them all?

Eco-conscious consumers are increasingly trying to make decisions based on a company’s green credentials. But beneath all the marketing rhetoric, how can we really tell the environmental heroes from the villains?

I’m not very good at recycling. Quite frankly, I struggle to see the point of rinsing out baked bean tins (aren’t we meant to be saving water?) when a single transatlantic flight emits several hundred tonnes of CO2 – and I used to fly a lot! However, I would consider myself to be “environmentally concerned”, and I’d be keen to find ways to really make a difference through my day-to-day behaviour. While I may not be willing to spend my days wearing hemp shoes and flushing the loo with rainwater, I would like to be able to choose the least bad option when booking a flight or filling my car with petrol.

Unfortunately, that’s not an easy thing to do in today’s marketplace. A properly functioning market depends on consumers having access to all of the relevant information necessary to make rational decisions. Currently, however, while it’s fairly easy for consumers to compare prices across different companies, and while sophisticated advertising campaigns can encourage us to see a brand through green-tinted glasses (see the current BP London 2012 campaign for a prime example), as consumers we have almost no access to the facts and figures that we need to make decisions that are rational from an environmental perspective. As a result, we’re unable to use our purchasing power to encourage environmentally responsible corporate behaviour, and eco-unfriendly companies continue to receive our hard earned cash, wisely (from their perspective) spending their operating budgets on expensive green marketing campaigns rather than solar panels.

This is madness. Policy-makers have long been trying to bring the climate change debate into the economic arena, with publications such as the 2006 Stern Review purporting to prove that “the benefits of strong, early action on climate change considerably outweigh the costs”. But the reality is, for most companies, as long as consumers have no visibility of their green credentials (or lack thereof), treading the long road to environmental sustainability is unlikely to bring many immediate rewards.

A key issue here is the disparity between economic and environmental timescales. Environmental change occurs slowly, over many generations. But, for us, life is short, and we tend to prioritise the needs of today over the risks of tomorrow. Thus, while consumers are increasingly aware of the ethical imperative to protect the Earth, when it comes down to it, most people aren’t willing to make major sacrifices, either in cash or quality of life. Moreover, companies are run by people who, on the whole, think just like you or I (News International notwithstanding). Company executives incentivised through on a three-year performance plan will almost certainly prioritise current revenue over long-term sustainability, unless specific eco-targets have been put in place.

The markets operate in a similar way, prioritising the benefits of today over the risks of tomorrow, and neglecting to account for future generations not currently represented in the marketplace. In addition, the current economic system fails to recognise the inherent value of natural assets, typically treating them as both infinite and cost-free. These are pretty major flaws, and, given that climate change doesn’t seem to be going away, it’s no exaggeration to suggest that the inability of the current economic system to tackle these issues fundamentally compromises its legitimacy and long-term viability.

Luckily, I’ve had an idea that goes some way towards tackling all of these problems, and hopefully, if I’ve managed to think of it, some clever person in the upper echelons of power will soon come up with something fairly similar.

The idea is very simple. Large companies should be required to include in their audited financial statements a “sustainability score” that indicates to both consumers and investors the company’s relative sustainability, as compared to other large companies.

This score – calculated as, say, anything between -100 and +100 – could take into account a range of factors impacting a company’s overall environmental sustainability, from emissions levels to resource depletion, or impact on local biodiversity, with different factors weighted according to the relative importance that we, as a society, assign to particular behaviours at a particular time. Consider, for example, the case of energy. Given current concerns about CO2 emissions, we may, as a society, choose to heavily weight fossil fuel use such that high CO2 emissions would lead to a high negative score, even if the company performed well in other, less heavily weighted areas, such as pesticide use. Use of nuclear power may be assigned a more moderate negative score, to reflect our greater current concern about CO2 emissions than nuclear contamination, while use of renewable energies may generate a positive score. If, at some point in the future, carbon sequestering offered a solution to global warming, these weightings may alter, with nuclear power potentially becoming the big bad wolf.

This type of system would have a number of advantages. In addition to providing consumers (and investors) with a valuable point of comparison between companies, it would be very flexible and highly sensitive to society’s changing priorities over time. In the longer term, assuming that consumer power is insufficient to mitigate the effects of global warming – which, let’s be honest, it almost certainly is – the sustainability score could also provide a basis for alternative policy instruments. For example, instead of trading CO2 emissions, companies could trade sustainability points, or, if more heavy-handed regulation is required, sustainability scores could be used as the basis for environmental taxation.

Maybe my brainchild is idealistic. I’m certainly not claiming that a single, preferably global, system of sustainability scoring would be simple to implement, either practically or politically. It could also only ever provide an indication of relative sustainability – the science is simply too complex to speak in terms of certainties or absolutes. But complexity is no excuse for apathy. There may well be no easy solution, and the fact remains that market capitalism has so far failed to meet the challenge of environmental change. If environmental sustainability is to be achieved within the current economic system, it’s essential, to my mind, that sustainable behaviour is recognised and incentivised. Measuring relative performance is a crucial first step.

Image: flickr | * starrynight1

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