Approaching Sustainability as a Commercial Issue Rather than a Moral Issue

The Journal of Sustainable Marketing today published my article in which I argue that progress on sustainability will be faster if we focus on creating the right commercial incentives than if we rely on appeals to the "better nature" of corporations and other economic actors.

This post is dedicated to those who had hoped for a better outcome from COP 28 in Dubai - an event at which commercial interests clearly prevailed over ethical interests.

In my JSM article, I argue that sustainability should be approached as a commercial issue rather than an ethical one. This is because the purpose of a corporation is to create a customer – and customers pay companies to produce the things they want to buy. I describe the three primary mechanisms (social incentives, regulation, and technology) that we as consumers, employees, suppliers, citizens and investors can use to "nudge" corporate behavior in a direction that better aligns the vectors of material prosperity and social progress.

My inner budgie (a reference that only fellow Brits will understand) was chirping "who's a clever boy then?" as I developed the two figures in the article that are reproduced as the header to this post. My belief is that they provide a pragmatic perspective on what it is and is not realistic to expect companies to do.

Figure 1 illustrates how the motivation for profit generation is a distinct vector from the vector of societal benefit. It clarifies why we need three types of organizations - corporations (to focus on material progress); public sector organizations (to promote and implement programs that serve the "greatest good of the greatest number"); not-for-profit organizations (to advocate for the needs of minority interests that public sector organizations will overlook).

The key takeaways from Figure 1 is that corporations are agnostic about social progress. They will "do good" when it is in their commercial interest to do so. A corporation is not a "moral actor" - it is a mechanism for brokering the interests of different stakeholders (investors, managers, customers, employees, communities, regulators) in pursuit of earning a commercial return.

Figure 2 speaks to the standards of behavior that we can expect from corporations. We like to think that corporations will conduct themselves in a socially optimal way. But - see above - corporations are not "moral actors" and operate in the zone of what is legally permissible. Regulation is needed to correct "market failures" (such as pollution and other cases where a business does not bear the cost of the externalities it causes) to ensure that "what is legally permissible" aligns as closely as possible with what is "economically desirable".

I know that many readers may be disappointed to see me frame sustainability as a commercial issue. The visceral nature of the topic (whether we are acting as decent stewards of the earth and of one another's wellbeing) means that sustainability is a moral and ethical issue - at the personal level.

The central tenet of my argument is that projecting personal values onto corporation is the anthropomorphic fallacy. "Higher purpose" is something that only people can have. We have to recognize that the sole purpose of a corporation is to ensure its own commercial survival and, if we want corporations to behave better, we need to create the incentives for them to do so. They respond to commercial motivations, not ethical motivations.