US bail out – the ultimate externality..?

It seems extremely ironic that in a time when we are hearing so much about pricing in the full ‘cost’ of any firm’s activity in a bid for greater transparency and more progress towards rewarding more sustainable business practice, we stand right on the brink of the US externalising one of the largest single costs imaginable. 

In effect, absorbing $700bn worth of toxic debt is akin to allowing the financial business to exclude this crippling cost. So in many ways, the bail-out could constitute the single-most efficient way to distort the market against more sustainable business practices. 

Is this the case?

G

Globalisation. Our greatest friend? Or our biggest enemy?

I remember from university and (much) later from my MBA, all the talk in economics was about growth growth growth. As if the Washington Consensus had taken over the syllabi of both courses, it seemed globalisation, free trade and the near-inevitable arrival of democracy as a result, was the best possible course of action. All economists were – or so we were told – in agreement. Everyone’s standard of living would improve, thanks to the West’s commitment to pursuing growth strategies left right and centre. 

Besides the fact that macro and micro economics fail to agree on one principle point (if MR=MC at the optimal point for micro, why does macro encourage the infinite pursuit of MR with no concept of MC – can a real economist please explain this to me??) it seems painfully clear that the utopia so keenly forecasted, is not with us. Nor likely to be. Because whilst everyone raved about globalisation being the great leveller for all national markets, we forgot one thing. Like water left to its own devices, business flows to the lowest point. In other words, where it is cheapest to extract value from sources of capital – be they human or natural in this case. And we all know where these things are cheapest – where governments (often not democratically elected) choose not to make business internalise externalities. 

So whilst globalisation may be bringing business to new markets, it is sadly not the type of business we all hoped for. And what makes it more painful, with the free flow of capital and business (to the lowest point) but within a framework still rigidly defined by national governments, it seems there is little chance of it changing in the near-term. Because no-one can co-ordinate the transition. This represents the purest form of the first-mover disadvantage scenario – any move by any market to fully internalise all of these costs would suddenly witness a mass exodus of activity. 

So maybe globalisation is the last thing we need when it comes to sustainable behaviour from firms? Maybe we need to go back to local businesses for local communities. Can you imagine such a thing? Actually, yes. And it is quite appealing. Because not only would national governments be finally able to construct the proper and consistent frameworks within which businesses can operate (with no loss of competitive advantage), but businesses would return to being properly connected to the communities within which they operate. For all the talk of stakeholder engagement strategies, nothing would be more powerful than being embedded within the actual community you are trying to engage. 

This may all sound a little naive and simplistic, but the truth is pretty inescapable – globalisation has enabled the ‘growth at all’ costs model to outgrow its own limitations at a market level and become some uncontrollable beast, too big for any one nation to bring down alone. It has rendered the majority of all business to seeking competitive advantage through cost. And – again at the risk of being simplistic – what we really need now is the right environment to really encourage competition through differentation – it is only this path that is going to yield the sorts of level of innovation we need, to justifiably claim business-sourced success in redressing the balance, from the pursuit of growth, to the pursuit of development. 

G

Enough of being a client…

As members of the advertising and marketing community, we spend our days preoccupied about keeping clients happy. Which invariably involves telling them what they want to hear and then slowly trying to bring them round to a different point of view. 

So what has this got to do with climate change? 

Quite a lot really. Because it strikes me our governments think of us in the same way. We are their clients. And after the best part of 20 years of glorious harmony, the truth is governments have forgotten that sometimes they need to tell us directly what to do. Enter climate change, stage left, Japan. 

Surely we are approaching the point where we have heard enough talk about tougher talk, enough rhetoric about harder rhetoric? 

This is nothing new – governments failing us. But it is worth mentioning, for two reasons. Firstly, we are placing so much pressure on business to find a solution, which risks letting government off the hook. Not that they will find a solution – all commentators now agree that capitalism – albeit a more sustainable, less brutal form – is needed to get us through this and without Mr Smith’s invisible hand, we are sunk. But – and here is the second point –  governments have to provide the robust, transparent and long term framework for business to operate within. In just the same way that governments have created the perfect breeding ground for the growth we have all benefited from over the last 15 years or so, so they also have to create the perfect economic incubator for a sustainable future. No-one can do this for them. Not even Coca-Cola or Nike. 

I am absolutely for the use of capitalism to see us through this. But no matter how sophisticated and dynamic a mechanism may be, if it cannot get purchase in a stable, adapted and solid framework, it will continue to spiral and twist like dervish whilst we all watch on in bemusement. 

 

G

Is Google killing our chances of a sustainable future…?

Some might say I am resorting to using the ‘G’ word to get people to take a look. It certainly seems my colleague, Umair Haque, considers Google our modern-day business-saving knight in brightly primary-coloured armour. 

But in actual fact, I have got a genuine issue with Google in the context of sustainability.

Increasingly, I am reading more and more about the pressures that climate change and the sustainability issue are placing on us, being akin to the early 40’s as Britain hauled itself into war (apologies to any non-Euro readers to this particular post). Back then, it was all to do with rationing: food, clothes, heat and light.

If we forget the images of tube-station evacuees and disappointed housewives standing in near-empty butchers’ shops, the comparison should be striking. The pressures of war forced everyone to recognise the value in scarce resources and to adjust. These adjustments were harsh and resulted in a considerable constriction of standard of living. But it had to happen. I listened recently to Lord David Puttnam speaking about his memories of his mother during this time and something he said chimed with me: that his mother was able to survive this constriction, because ‘we were all in it together’.

How right she was – how strong the sense of collective behaviour, focused on overcoming a fearsome opponent, no matter what the short-term pain. 

There is no doubt, climate change is a fearsome opponent. It may not have the same blatant military arsenal but it certainly has the power to cause as much if not more damage – climate change will never run out of ammunition or have withdrawal plans forced upon it by strained governments.

But where is that sense of collective behaviour now?

Nowhere really. And I reckon Google is to blame. Or certainly the Google generation. 

With elaborate fanfare (digitally sampled without the use of expensive musician-union real horn players and mashed together on your iPhone), Google and its many prophets heralded a new era of civilisation: slashed search costs, brand redundancy, consumer empowerment, anytime primetime, web 2.0 communities…the list goes on. We have heard about the imminent utter implosion of conventional TV (surely that should have happened by now – or could it be that TV is actually still quite useful..?), the collapse of conventional business models (I mean, Google can  never miss its numbers on Wall St, can it..?), the death of marketing as we know it and the unbridled opportunity for every cyber-citizen to make friends with millions of others in the click of a mouse. 

Rather than banging on about all of these supposed ‘radical transformations’ (Patrick Barwise of LBS does it wonderfully with his ‘Bollocks 2.0′ interview), let’s return to the sustainability issue and how the Google Generation are arguably getting in the way.

My belief is that the notion of an online community is anything  but. I would love someone to point out what elements of an online community possibly simulate a real community. Where in a real community can I instantly search for similar individuals and then befriend through some hyper-efficient selection process? And where in a real community, can I instantly disengage when I get bored, or my new best friend shows some small trait that rubs me up the wrong way? Conversely, where on a virtual community can I develop loyalty, listen to different opinions, reshape my own? Where can I learn to like someone and develop as a person? In short, the “googlisation” of community has all but destroyed it. It is rapidly turning people into micro-megalomaniacs, hell-bent on ruling their mini-digital fiefdom with no real interest in others. Community is about recognising the greater good, not pandering to your inner whims at no cost. It is creating an uber-community of self-centred children who only want to play when the conditions are right. It is everything a real community isn’t.

It is too easy.

And that brings us to the title of this post. How on earth are we going to adapt to the fearsome foe that is climate change when we are too self-centred to engage at a community level and accept that co-existence is not always easy? How are we going to embrace the thorny issue of climate change and its myriad implications for carbon allowances, compromises in lifestyle and general constriction, when we are too easily distracted in ‘choosing’ friends on-line and effortlessly moving on to socially graze on another patch of fertile cyber-ground when we have got all we want from the last piece? 

We often talk about climate change being the Trojan Horse for the broader sustainability debate. But we often focus our efforts in this context on the role business and government needs to play in delivering this. Let’s not forget, individuals will always be the ‘limits to growth’ in this context – we are the building block of all of these institutions upon which we are all too quick to turn for guidance and onto which we project our blame.

In the context of climate change and sustainability, the value of real community is more important than ever. We cannot continue in praising the fragmentation of information, the ‘disaggregation’ of opinion or growing efficiencies in social process. We are humans – gloriously chaotic, profoundly imaginative and breathtakingly intelligent when we want to be. Efficiency has its place, but to restructure around this concept in the context of ever-increasing personal choice has to be a non-runner. Genuine community – with its inherent friction inertia and momentum, is the greatest context in which we can flex and demonstrate our collective brilliance in finding a win-win past climate change. 

Lord Puttnam’s mum was right – they succeeded through ‘all being in it together’. Not through passwords, log-ins and profiles.

 

G

Exxon Part II

Should also add two other names that one would never have imagined being involved in the greening of business – Schwarzenegger and Walmart. More to follow on the roles these guys have played in a moment…

Exxon marks the spot…

Anyone with a passing interest in the greening of big business will have stopped and stared at the looming issues for energy and oil giant, Exxon. Shareholders are demanding swingeing changes to the board as a result of what many commentators feel, is a commercially irresponsible approach towards eeking out innovative solutions for climate change and broader sustainability issues. 

But that is well covered nearly everywhere else. One thing has struck me clean between the eyes with this story. And it is the most concrete example – proof – that sustainability is now well and truly at the top table of capitalism.

The proof is just one word.

Rockefeller.

The Rockefeller family – who founded Exxon (as Standard Oil) in the 1870’s – have led this assault on the current management of Exxon. Arguably the family most closely associated with the development of capitalism has stepped forward and demanded greater focus on innovation around sustainability. Surely it is only a matter of days before business schools the world over start citing the ‘Rockefeller Moment” as when everyone really sat up and took notice?

The Eco-Iconic Pt II…

OK, just read the article. Started to think it was off the mark as it argued the need to make green goods distinct from normal goods. This goes against the general idea that green will only get accepted once it feels and looks normal. But the article agrees with this idea – Eco-Iconic may only be around for the next 18 months. So a narrow window for marketers. Beyond that, they argue we are into the realm of Eco-Embedded – the protocol that everything is green and consumers have no choice. And then we get Eco-Boosters – products or services that not only have a zero-environment impact but actually benefit the environment. Really not sure we will see those – or certainly not beyond an impossibly small niche. 

It also feels as if this article is missing an important area we have started to explore – the move beyond the win win. Eco-Iconic, even Eco-Embedded are all about the brand selling more and possibly at a premium. And the examples given are in sectors that lend themselves to this type of initiative.

But what happens when the win win efficiency argument fades? What happens when brands have to actually make less stuff? It will happen at some point. Commentators talk of new levels of innovation and we often refer to the rise of sustainability being similar to the rise of the Internet – something that spawned countless new business models. But just like the Internet, sustainability will cause more businesses to fail that inspire new ones to start. By definition, innovation – seen as the key in the development of sustainabile business, even by the UK Gov’t last week – cannot be available for everyone. Then it wouldn’t be innovation.

To play at developing Eco-Iconic goods and then re-positioning to offer Eco-Embedded smacks a little of rearranging deck chairs on a famous White Star cruiser that left Southampton in April 1912. It is arguably reckless and missing the importance of genuinely reassessing and possibly re-designing all processes and assets within the business. In fairness, the article does talk about green architecture and even green cities. But it needs to go even further than that. 

G

The rise of the Eco-Iconic

Came across an interesting briefing note from trendwatching.com a day or so ago, that talks about the rise of the eco-iconic good (get the briefing note here).

To quote the note;

ECO-ICONIC | “Eco-friendly goods and services sporting bold, iconic markers and design, helping their eco-conscious owners show off their eco-credentials to their peers.

At the heart of ECO-ICONIC is a status shift (isn’t there always?): many consumers are eager to flaunt their green behavior and possessions because there are now millions of other consumers who are actually impressed by green lifestyles.”

This is absolutely our Active Self-Seeker profile, detailed in our research from last week. And not surprisingly, the Eco-Iconic brands seem to be getting most traction in the two markets that are most heavily populated with Active Self-Seekers – the US and UK.

I haven’t had a chance to go through the full briefing note yet, but it will be interesting to see how strong a correlation there is between the Eco-Iconic brand and a price premium. Within our research, we found a significant disconnect between the two. 

Will post again once I’ve got through the briefing note.

WSJ Experiment…

Today in the WSJ, there’s an interesting article on the issue of consumers paying more for green goods. This follows on very well from our work on various markets being willing to pay a premium.

Their experiment supports the broader findings we have in our global research, but in addition, they find an interesting detail: that although green goods will attract a premium, non-green goods will receive a more substantial reduction. I am not sure I have explained that very well, but to be clear, the message seems to be that consumers will potentially punish poor performers more than they may reward good performers. Reflecting on this in the context of our sector stretch argument in our research and suddenly the loss of the halo effect means even more.

Interestingly, the article also details an experiment to see where consumers reach green saturation on goods. Selling T-shirts with various degrees of organic production, it seems the the initial foray into being green delivers the greatest return – 50% or 100% organic T-shirts did not attract much more of a premium than 25%.

Whilst this may seem depressing, it may not be so. This is all down to perception and understanding. Maybe consumers cannot yet clearly assemble the organic argument for T-shirts other than organic must mean good. If this is the case, then there is a huge incentive for the more proactive brands to educate consumers that 100% means better than 50%. Once again  that education can only happen with convincing, legitimate communication.

G 

Here we are…

Welcome to Meltwater. 

Not much here at the moment, but am about to bring across many of the comments from the other blog. Should be over here in a few hours.

G