Why organizations should be less sustainble

A real problem

Mankind’s impact on our planet is an ever-growing cause for concern. Research has shown time and again that the consequences of our actions are already here, and if we don’t correct course we are heading towards a catastrophe. There is no doubt that something needs to be done.

So naturally we turned our attention towards the root cause of our issues: the unsustainable business practices of the corporations that are polluting and destroying our planet. We’re increasingly demanding that every firm needs to be sustainable, stop polluting, and start taking responsible care of the environment. And we label those that don’t do everything in their power to act in a sustainable fashion as evils that need to be shunned. But if we truly want what’s best for the environment, it’s not so clear this approach is the most effective one.

The right company for the job

Many of the roots of our current sustainability issues can be traced back to our capitalistic ideology. Under the premise that companies who don’t maximize their efficiency risk being outcompeted by those that do, sacrificing sustainability for financial gain is an almost natural outcome.

This drive towards maximizing efficiency is also reflected in the structure of organizations themselves. In the 1960s and 1970s the dominant paradigm used to be that organizations were at their most efficient when they were massive conglomerates, since this would give them massive benefits from economies of scale.

But over the past couple of decades, we’ve come to realize that this approach was actually terribly inefficient. Instead of increasing efficiency, large conglomerates actually lowered it, due to being incredibly cumbersome to manage, forcing managers to spread their attention too thin, and creating jacks of all trades that were masters of none.

The proposed solution to this inefficiency? Offshoring and Outsourcing. Two closely related concepts that described a new way of thinking about the optimal way to run organizations. Based on the classical idea of a division of labor, the premise suggests that organizations should be hyperspecialized, and focus primarily on the specific area where they have the largest competitive advantages. Meanwhile, all other aspects of the organization should be outsourced to other companies, who specialize in those specific areas. This would enable organizations to focus all their attention on exploiting their core competence, thereby maximizing their efficiency.

In response, corporations have started to employ other firms for a range of activities they previously executed themselves: from PR management, to capital investment decisions, logistics, sometimes even manufacturing or R&D. Organizations are increasingly being stripped to their core essence, in order to maximize the gains of whatever it is that they do best.

Whose job is it anyway

The only exception to this approach seems to apply to the activity of sustainability. For this specific area, we still expect organizations to demonstrate their commitment to sustainability directly. A simple Google search is telling here. Searching for the term “outsourcing sustainability“, provides a lot of results for whether the practice of outsourcing is sustainable or not, or how to make outsourcing more sustainable. But there are surprisingly few results for what the actual search term is: hiring an external party to take care of sustainability.

For some reason we have excluded sustainability from the activities that can be outsourced. Don’t get me wrong, more sustainability is undeniably a good thing, and of course we want organizations to behave in a sustainable manner.

“For some reason we have excluded sustainability from the activities that can be outsourced”

But if we’re being honest, it’s pretty rare for (especially large) organizations to act sustainably because they have an inherent motivation to do so. Instead, when they do it at all, it’s far more commonly due to consumer demand and/or outrage. In other words, their motivation towards sustainability is generally extrinsic, not intrinsic. This has two major implications: first, organizations have little reason to do more than the bare minimum that they can get away with. Second, it incentivizes organizations mainly to appear sustainable, instead of caring about actually being sustainable.

If we actually want organizations to cause as minimal environmental harm as possible, shouldn’t we favor more efficient ways of achieving sustainability? Just like all the other business activities that are commonly outsources to maximize efficiency, few organizations are well equipped to implement efficient sustainability practices themselves. So if we want to achieve the outcomes that are best for the environment overall, why do we insist on organizations being directly responsible for their own sustainability? Wouldn’t we be better off if organizations could outsource their sustainability to those that specialize in it?

Change incentives, not ideals

The ironic thing is that to some extent, we’ve actually implemented this practice already, in the form of carbon taxes. Carbon taxes address the core of the issue with sustainability practices: forcing corporations to make up for their actions that cause harm to the environment. Through carbon taxes, we make organizations pay a fee for the environmental damages they are responsible for, which can then be used to offset more sustainable practices elsewhere (such as further research into carbon capture technologies).

The main argument against that’s commonly used against carbon tax is that it allows organizations to do nothing, and just ‘pay off’ their obligations. But if that is really the main reason, the question is, “so what?“. We can’t force organizations to care about the environment, so why do we insist on making them pay lip service? Instead of demanding that they do implement tokenistic actions because they make us feel good, we should focus on diverting their resources towards things that actually have an impact.

The aforementioned carbon taxes essentially do just that. By giving corporations the option to ‘pay’ for the environmental harm they cause, they either find greener alternatives, or indirectly fund incentives that do help clean up the environment. In a way, carbon taxes are therefore nothing but a means for organizations to ‘outsource’ their sustainability practices. And carbon taxes are effective (even while they are arguably priced far too low).

“At times we get too hung up on things because they feel good, but forget to examine whether they actually are good.”

So why don’t we apply this approach to other areas of sustainability as well? Yes, banning single use plastics is helpful, but why not tax single-use plastics instead? This provides a direct competitive advantage for companies that already favored sustainability practices. And companies that care less about the environment have the option of either phasing out their plastics regardless because they can’t afford the tax, or they do pay the tax and indirectly fund more sustainable solutions that could solve the plastic waste problem altogether (such as plastic eating bacteria or caterpillars).

The same holds for other areas, such as energy usage. Instead of having a tokenistic day where companies turn down the heating in winter for 24 hours, why not tax companies when they consume non-sustainable energy instead. They’ll be incentivized to switch to greener sources, find structural ways to lower their energy usage, or cop the tax which can fund further research in renewables.

A more sustainable approach to our planet is sorely needed. But at times we get too hung up on things because they feel good, but forget to examine whether they actually are good. We need real change, not tokenism and empty symbolism. This is unlikely to happen if we don’t change the incentives of corporations.

So let’s stop demanding that every company creates the illusion of acting sustainably. Let’s stop forcing organizations to implement inefficient policies just to appease the perception of the general public. We should absolutely hold corporations accountable for the damages they cause, but let them outsource their sustainability. If we truly care about what’s best for the planet overall, why aren’t we prioritizing the measures that provide a maximum return on investment? Yes, the optics of a company doing nothing directly about their sustainability might be bad. But in the end it really is just that, optics.

Ron Maas
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