Thursday, May 12, 2011

Is Capitalism Sustainable?

Business has created the environmental crisis and now the same capitalist system that was behind the industrial revolution, is beginning to play a vital role in solving the problems it created.

Despite the link between environmental practices and profitable, long-term business sustainability, many believe that capitalism itself is unsustainable. The Earth has finite resources, so their argument goes, but capitalism depends on ever expanding consumption. The truth is that dating back to the origins of our species, we have seen our use of resources evolve, from stone, to bronze and then iron. More recently we entered the information age which may prove to be the gateway to a more sustainable use of resources.

Although we should do everything we can to preserve finite resources, human ingenuity is infinite. In this way we are slowly moving away from finite fossil fuels to infinitely renewable fuels such as wind, wave and solar.

Market driven solutions can be incredibly powerful as they have the power to extend, promote and invest in sustainable innovation. Although new market based mechanisms like regulation, incentives and tradable permits are still a few years off, it is inevitable that the true cost of carbon will be made absolutely clear. As a tenant of the free market business should pay for the costs they incur.

Sustainability will continue because it is an unstoppable mega-trend that is destined to keep growing at even faster rates. With the rise of the green consumer, businesses want to cash-in on the steady and growing demand for green goods and services. Various partnerships are emerging to help in the development of sustainable best practices. One such arrangement involves the new partnerships between corporations and environmental organizations.

There are also other factors that make sustainability entirely consistent with capitalism. Renewable energy solutions are seen as a potent symbol of a new modernity. Numerous studies have shown that environment issues have a significant effect on workforce morale. A workforce seeing a forward-looking and responsible company is more likely to feel good about working for such a company and a happier workforce is a more productive workforce.

Increases to employee productivity and benefits to the brand are just two ways in which integrating sustainable practices serve a company's best interest. Avoiding public pressure and attracting customer loyalty are additional factors that add to the capitalist appeal of sustainability.

Factoring environmental considerations into economic equations makes sense and the profit motive is a powerful incentive. The marketplace is always looking for cleaner, cheaper, faster, more efficient and more effective solutions, and the market is better at identifying opportunities than most government planning. Although short sighted greed makes long term planning difficult, with the right long-term incentives it can be made to work.

The green market is now estimated to be worth $5.27 trillion (£3.2 trillion) worldwide and in the next couple of decades the clean energy market alone is expected to be worth more than$13 trillion. With that much at stake, businesses cannot afford to ignore the green market.

In the business environment of tomorrow, sustainable practices are a strategic priority. The Survey of America's Greenest Brands show that even companies with very poor environmental reputations can redeem themselves and go from environmental pariah to eco-superstar by incorporating sustainable practices.

If we are to make the changes within the time frames we have left we will have to make use of the mechanisms that are available to us today. We do not have time to reinvent our world. As Paul Hawkin once said, "business is the only mechanism on the planet today powerful enough to produce the chances necessary to reverse global environmental and social degradation."

With the appropriate incentives and disincentives we can integrate environmental and social issues into the economic equation. An economy based on fossil fuels can be replaced by a low carbon economy. Capitalism is our last best hope to manage the environmental crisis we are facing.

© 2011, Richard Matthews. All rights reserved.

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Cost Benefit Analysis of Sustainable Business
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Cooperation Between Environmental Organizations and Businesses
Response to Criticism of Cooperation Between Environmental Organizations and Business

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