Can Boycotts and Divestments Deliver Sustainability Goals?

Universities are at the epicenter of a broad debate about the use of boycotts and divestments as a social change strategy. As a professor, I have been following these debates for years and have been alarmed by many presumptions about the linkage of finances to behavioral change. Recently, a colleague told me that she would not collaborate with a research center if there was to be acceptance of any funds from fossil fuel companies in its operations. The presumption there was that such donations would impact the research trajectory of the center or its perception with the public.

Private sector funds, specially from fossil fuel companies, have long been viewed with suspicion by activists . Academics who are willing to accept such research funds are summarily stigmatized. Yet, what should matter instead is the terms of any funding and the contract that is negotiated. Public sector funds, or those from supposedly nonprofit or nonpartisan foundations can also take strong political stances. For example, the U.S. National Science Foundation has prohibited any research collaborations with Russian organizations and monitors Chinese collaborations for “national security interests.” Most scientists agree that such limitations can impede quality science. Turning to philanthropists, particularly in the environmental arena, may also lead to idiosyncratic agendas as documented by Yale sociologist Justin Farrell in his award-winning book Billionaire Wilderness.

While universities consider “conflicts of interest” policies for receipt of funds and their impact on the behavior of faculty, students are calling for boycotts and divestments of particular donors or endowments to spur policy changes. The question we need to ask is how effective are such boycotts and divestments one way or another and what is the opportunity cost for society at large?

Industry funding comes in many forms. There is good evidence to suggest that research completely undertaken by industry can be biased towards particular commercial interests. However, this does not mean that good science has not occurred in industry labs. Indeed, Nobel prize-winning work in products like developing the lithium-ion battery , the revolutionary PCR analytical technique and the CAT Scan was done by industry scientists. Nokia-Bell Labs can take credit for ten Nobel prizes and dozens of other ground-breaking accolades. We should thus look at individual projects rather than summarily stigmatizing industry research.

Now let us consider the impact of divestments. Financial investment vehicles are now so diffuse and with such a wide range of options in portfolio profile that divestment needs to be of a massive scale to have an impact. A smaller company might suffer from investment withdrawal, but most major multinationals would be able to weather the storm quite easily (as they did in South Africa during the apartheid years). What worked in that case were targeted trade sanctions. At the same time, research on fossil fuel divestments shows that university endowments would not suffer from divesting since there are lots of comparable performing socially responsible investment funds available.? Thus, the point of divestments is largely to stigmatize and create reputational loss.

Boycotts are quite different from divestments in terms of efficacy. The evidence of the effectiveness of boycotts in hurting antagonists is much greater. This has been observed even in the current Middle East conflict, where McDonalds and Starbucks have been hit hard by consumers in the region. Boycotts and their legal ramifications for anti-trust policies have been weaponized by both ends of the political spectrum. In particular, the anti-ESG movement has used this tactic to incite public resentment towards sustainability activism.

The right of sellers to refuse sales of particular products and services or to exclude certain buyers is a more complicated matter that has been litigated all the way to the Supreme Court. However, the right of consumers to choose whether or not to buy products is at the very heart of a free capitalist society. Corporate behavior and indeed public policy can potentially change with consumer boycotts far more so than divestments. Activist students and their detractors should consider this empirical evidence, just as much as strident academics with presumptions on funding source bias. Human behavior is far too complex to be relegated to generalizable assumptions on such multifaceted financial dealings.

A version of this article was published on Forbes online as part of my regular columns on Sustainability and Innovation