Going green at what cost

Going Green, at What Cost?

A few days before the thought of writing this article came to my mind, I and my friends visited a sun optics shop near to our office. In the middle of trying and testing a variety of models, the lady in the shop gave us one fancy glass with one company brand on it (a company which is a global leader in production of environmentally friendly products). I was the first to try it and it fitted me well. My friends also liked it. Then came the price deal with the lady. After she complimented that the glass looked nice on me, she quoted a very inflated price for it. I was surprised because I have never imagined I would pay that amount for a solar eye glass. While I was searching for the justification of the exaggerated price, my friend joked on me that sparked the main idea for this article. In his own words, he says “you are an environmentalist, you have to live by what you are preaching. You should buy this brand as it is produced in an environmentally friendly way and the material is 100% recyclable.” Later in that day, this satire came to my mind so repeatedly that I reflected on it deeply to give it a shape. Out of this process one big question arises: “why are people not motivated to act on environmental and climate issues while the consequence of inaction seems so evident?”

Big why? People find comfort in uncomfortable inaction for many reasons. To highlight some of them: first, climate change mitigation involves a trade-off between present and future benefit which is one of the hardest choices to make for consumers. At an individual level, for instance, this may involve changing the car they drive, the product they consume and the house they live on. At an organizational level, on the other hand, the act to commit to climate change mitigation may demand investing on new technology and process which aim to reduce emission at a considerable amount. On a much bigger scale, a government that tends to commit to climate change initiatives may invest on green source of energy and avoid combustible sources of energy, which may not help to win the voters heart in the short term. Second, climate change is a non-linear problem which is difficult for human to comprehend its effect (a function which increases slowly at the beginning but then accelerate). A simple analogy to this effect is to think why some people continue to smoke for a long time while they know smoking is detrimental to their health. Through time the effect of smoking builds exponentially until the individual become conscious of it and by which time it may be too late to reverse the negative health effect. Third, the effect of climate change is too distant for many people to consider it tangibly. Studies on construal theory level suggest that when things are psychologically distant (socially, in terms of time and space) people consider it at an abstract level than when things are psychologically close to them. Fourth, the future is always associated with high uncertainty than the present, thus people value the present much more than the future. What if human activity will not have dire consequence on climate as commonly believed?

As a matter of fact, is climate crisis really distant and abstract for an individual consumer to consider it in his/her buying decision? I highly doubt it. Haven’t we witnessed recently how our weather has changed so drastically that sometimes we become confused to tell precisely which season we are in? Haven’t we witnessed drought in places where talking about it used to be a fairy tale? Haven’t we witnessed severe rain and flood in places where these issues were not used to be a problem? In fact, some of the evidence regarding the impact of climate change is so daunting that an average person cannot afford being inactive and ignorant about it. For instance, in its latest report the Intergovernmental Panel on Climate Change (IPCC) argues that if Greenhouse Gas (GHG) emission continues at the current rate, the atmosphere will warm up by about 2.7 OF (1.5 OC) in 2040 above the preindustrial level, which is just enough to inundate coastlines and intensify poverty and drought. If the temperature rise reaches 3.6OF (2OC) (the previous threshold for estimating climate change damage), the IPCC report predicts a disproportionately rapid evacuation of people from the tropics and in some parts of the world national borders will become irrelevant because of flood.

Here one point should be clear. The climate issue is a systematic and interlinked problem which is very difficult to define in one single way. At the very least it encompasses society, business, government and the whole world. For instance, my purchasing decision at the sun glass shop on that day is affected by a multitude of factors including climate awareness, budget, personal values, group norms, society values, business provisions, government incentives, and local and world climate politics

The interlink between government, business and society can best be depicted by my experience in one of the Scandinavian cities. During my stay in the city I have come to know one individual who has a cleaning company with about 4 employees. His company provides cleaning services to individuals and small companies. In one of our conversations, I raised a question about the city’s environmental regulation. To my surprise he told me that the government regularly has given environmental training free of charge to companies even as small as his. Moreover, the city administration also occasionally consults with him to see whether employees are working in a safe and healthy working environment. This imply that abiding to the city’s environmental regulation is not only a requirement which is nice to have, but also provide him business opportunity. This is so because no companies who doesn’t pass the environmental criteria can participate in the cleaning bid (most individual consumer also demand this requirement).

Research also highlights that part of the reason for pushing the corporate world in that direction is the ever-higher expectations from the society that business should be part of the solution in the recent global challenges. The other subtle reason is that in some instances regulatory changes leads to direct commercial benefits by creating new market that does not exist before or giving competitive advantages for those companies which are able to capitalize on the new regulations. Nevertheless, does this mean business go green just for the sake of good public perception even if that does mean short term loss?  Research on this line maintain that corporate initial statement of climate leadership is eventually degenerated into the usual business activities (through three stages). That means climate change initiatives begin with executives presenting it both internally and externally as an urgent social and strategic business issues (framing stage). But, through time (localizing stage), the climate change initiative will wound back, and the blatant sales issues will prevail again. At this stage (normalizing stage), corporate executives who have been committed to climate change will try to realign climate initiatives with the basic logic of corporate shareholder value maximization. Hence, the initiative to go green ultimately boils down to the question of “does this contribute to the bottom line (profit)?” As one senior manager in an insurance company acknowledged “Look, that was all a nice thing to have in good times but now we’re in hard times. We get back to core stuff.”  Hence, in order to save our planet from climate crises, we should imagine the future that goes beyond corporate self-regulation and market forces.

The good news is that in agreement with business leaders’ action (framing stages), company employee conversation about sustainability and climate change is also rising. Hence, businesses can use this in their advertising, social media and in their product package to directly talk to their consumers. This is exactly what I faced in that eye glass shop. I saw the product logo and a description of its production process, but I still acted in the contrary. I did choose a cheaper one irrespective of its relatively higher carbon foot print, a behavior which may best be explained by “the tragedy of the common goods” theory. According to this concept, an environment is a non-excludable but rival good which falls under the common resources. In this context, a rational consumer who want to act in a socially desirable way (like me) needs to bear the societal cost while the benefit of it will spread to the whole society. Marginally speaking, the cost is higher than the benefit implying that the consumer will be better off acting in his own interest, disregarding the societal benefit.

Therefore, the most important question is, what can we (Ethiopians) learn from the world best practices? On individual level we need to be aware of the climate crisis and be motivated to consider company’s environmental record when making purchase decision, even if that means paying slightly higher for environmentally friendly products. Policy makers on other hand should aim to establish environmental priorities in investment approval and build a system which will recognize and incentivize environmental champions. This in turn lowers the cost of production and prices for these products. Finally, businesses have to rethink their traditional investment decision criteria in order to change climate change risks (including regulatory risks) into opportunities. In other words, if businesses are able to find opportunities within those climate related risks, both the business and environment can win. Thus, it is possible to going green profitably.

Abiy Getachew is a consultant at HST consulting p.l.c.

You may reach him at  [email protected]