Enough Is Enough

by Rob Dietz

  Along with values, business structures also need to change. In today’s business environment, higher labor productivity is almost always converted into higher production. This happens because business owners, who are beholden to the profit motive, have every incentive to increase sales, and little incentive to reduce working hours. Businesses with different, more democratized ownership structures, different criteria for making operating decisions, and different indicators of success (beyond financial returns) would be more likely to convert productivity gains into reduced working time. As we’ll see in the next chapter, new forms of business have the potential to meet societal needs while at the same time dampening the imperative for growth.

  The impetus for all of these changes—shifting values, reforming businesses, and adopting new employment policies—has to come from outside the economic establishment. After all, the establishment is what got us into this mess in the first place. In discussing how to secure well-paying, meaningful jobs for her generation of young workers, Deb Wren says, “We have to do it ourselves—it’s not going to be done for us.” But secure and meaningful jobs will only come as values change and economic policies change in response. Where Wren’s sentiment really applies is in the push to introduce such changes. When enough people across society demand meaningful work that is valued appropriately, the system of employment will adapt to get the job done.

  [CHAPTER 11 ]

  ENOUGH BUSINESS AS USUAL

  Rethinking Commerce

  Business is the economic engine of our Western culture, and if it could be transformed to truly serve nature as well as ourselves, it could become essential to our rescue.

  KARL-HENRIK ROBÈRT1

  WHAT ARE WE DOING?

  What’s the most influential book that takes a critical view of the environmental excesses of business? There’s an argument to be made for Henry David Thoreau’s Walden, Rachel Carson’s Silent Spring, and E. F. Schumacher’s Small Is Beautiful, but our award goes to The Lorax by Dr. Seuss. Seuss created a fanciful landscape and populated it with a technicolor forest of Truffula Trees, a menagerie of curious critters, and two main characters—a clever entrepreneur named the Once-ler and a tenacious environmentalist called the Lorax.2 In part, the book’s influence is due to Dr. Seuss’s legendary rapport with children (and adults who stubbornly cling to a childlike sense of wonder). His eccentric illustrations, lyrical rhymes, and inventive language give the book staying power, but its influence also stems from its universal storyline—a storyline that resonates with readers who have observed the downsides of modern business practices.

  The enterprising Once-ler, roaming the countryside to seek his fortune, arrives in the land of the Truffula Trees and senses a business opportunity. From the tuft of a tree, he knits a “Thneed,” and finds it hard to suppress his excitement:

  A Thneed’s a Fine-Something-That-All-People-Need!

  It’s a shirt. It’s a sock. It’s a glove. It’s a hat.

  But it has other uses. Yes, far beyond that.

  You can use it for carpets. For pillows! For sheets!

  Or curtains! Or covers for bicycle seats!3

  With a knack for selling Thneeds, the Once-ler grows his operation into a sprawling factory with dozens of employees. His meteoric rise is the stuff of corporate legend, but as his business grows, so do its impacts on the surrounding environment. These impacts, which include pollution and deforestation, provoke the Lorax to visit the factory and scold the Once-ler for causing a decline in the health of the forest and its endemic species:

  “Once-ler!” he cried with a cruffulous croak.

  “Once-ler! You’re making such smogulous smoke!

  My poor Swomee-Swans … why, they can’t sing a note!

  No one can sing who has smog in his throat.”4

  But the Once-ler, who built a business empire using only his wits and the resources of the forest, has no intention of pulling back. As the Lorax continues to reprimand him for shredding the forest, the Once-ler angrily reveals the essence of his business plan:

  I got terribly mad.

  I yelled at the Lorax, “Now listen here, Dad!

  All you do is yap-yap and say, ‘Bad! Bad! Bad! Bad!’

  Well, I have my rights, sir, and I’m telling you

  I intend to go on doing just what I do!

  And for your information, you Lorax, I’m figgering

  on biggering

  turning MORE Truffula Trees into Thneeds

  which everyone, EVERYONE, EVERYONE needs!”5

  Soon after, the last Truffula Tree falls, and the Once-ler’s business goes bust, the result of economic “biggering” beyond the capacity of the ecosystem. Having exploited the last of the available resources, the formerly bright-eyed industrialist is forced to shutter the factory. His employees, the pesky Lorax, and the forest creatures have no choice but to move elsewhere.

  Dr. Seuss’s story of collapse is just that—a story. But such occurrences are not confined to the make-believe land of Truffula Trees and Swomee-Swans. The story strikes a chord because it resembles real-world events. The aftermath of the Anaconda Copper Mine in Butte, Montana, is a good example.

  Miners began digging around Butte in the nineteenth century, but smaller mines gave way to large-scale strip mining when the Anaconda Copper Mining Company (later purchased by ARCO) opened the Berkeley Pit in 1955. Over twenty-seven years, the corporation removed 300 million cubic meters of rock and extracted over a billion tons of ore, mostly copper, but also lead, zinc, gold, and manganese.6 It produced so much ore that it became known as the “Richest Hill on Earth.”7

  Interstates 15 and 90 overlap for a few miles where they take an east–west route across the south side of Butte. If you drive this highway, you won’t see the “Richest Hill on Earth.” You will, however, see one of the biggest messes on earth. There’s no hill anymore. Instead, there’s a massive hole, defined by yellow walls of bare rock, that looks as though it could hold the entire city standing next to it. At the bottom of the hole is a dark blue lake that appears implausibly cool and inviting in this ruptured landscape.

  The lake is actually an acidic stew of toxic metals. After digging up the economically viable ore, ARCO stopped mining the site in 1995, and now it’s part of America’s largest complex of Superfund sites (Superfund is a program of the Environmental Protection Agency designed to clean up hazardous waste areas). In the year the mine was abandoned, 350 snow geese made the mistake of stopping to rest on the lake. Needing a break on their annual southward migration, they died from burns and sores.8

  Not all businesses are involved in the inherently unsustainable practice of extracting nonrenewable resources like copper. And not all businesses that “mine” renewable resources, such as Truffula Trees, do so at a rate that wipes out the stock. But it’s clear that something is wrong with business as usual.

  The dominant form of business in the world today is the shareholder-owned corporation. A key feature of the corporation, which separates it from other forms of business organization such as privately owned companies, is that it is legally bound to maximize profits for its shareholders—an interest it must put above all others.9 Henry Ford had a plan for improving social conditions that famously ran up against the profit mandate in 1918. Ford had declared that he wanted “to employ still more men; to spread the benefits of this industrial system to the greatest number of people, to help them build up their lives and their homes,” instead of paying increased profits to shareholders. However, a court order forced the Ford Company to issue a special dividend to shareholders rather than reinvest the money as Henry Ford wanted.10

  Shareholder-owned corporations have become so dominant that, if you rank nations (by GDP) and corporations (by revenues), then forty-eight of the top one hundred economies in the world are corporations (Table 11.1).11 Walmart is a little smaller than Norway and a little bigger than Venezuela. The big oil companies, Royal Dutch Shell, Exxon Mobil, and BP, are all nestled together between Colombia
and Finland. And Toyota has put Ireland in its rearview mirror while it races toward Israel. Without judging the prudence of allowing corporations to control wealth on the scale of a nation, we can say that these companies have been spectacularly successful at growing revenues and concentrating power.

  Of course, not all businesses are shareholder-owned corporations. Other forms of business organization exist as well, such as privately owned companies and cooperatives, and these other forms are not explicitly mandated to pursue profits in the same way as publicly traded corporations. Nevertheless, most businesses chase profits to some extent. A key question, then, is whether the profit motive is compatible with a nongrowing economy.

  On the one hand, profit and growth are two different things. Profit is the difference between the money a firm makes (revenue) and the money it spends (costs), whereas growth is an increase in total production. Thus a firm can grow without increasing profits, and increase profits without growing. Furthermore, when looking across a collection of firms, it’s possible to imagine a situation in which some profitable companies grow and other unprofitable ones go out of business, such that the total size of the economy remains the same.

  On the other hand, even though they’re different things, there is certainly a connection between profit and growth. Companies must compete against one another for market share or simply to survive. The more goods a company produces, the cheaper its individual unit costs become, and the easier it can reach or surpass the financial break-even point. In addition, companies that earn profits are more likely to invest in equipment, research, and assets that spur growth and give them the potential to earn more profits. And within the current economic system, a company is more likely to attract funds from investors if it can demonstrate both profitability and the potential for growth.

  Much like the debt-based system of money creation discussed in Chapter 8, the profit motive appears to be one of the factors that drives economic growth. Other factors include population growth, the use of GDP as a measure of progress, the fear of unemployment, and the culture of consumerism. Taken together, these factors constitute something of a “growth imperative.” To achieve a steady-state economy, we need to find ways to diminish and eventually eliminate this growth imperative.

  In Chapter 5, we proposed a number of policies to limit material and energy throughput. Implementation of these policies would significantly change the rules of the game for business. National caps on resource use and waste emissions would force businesses to be far more efficient with materials and energy. Enacting such policies and letting businesses adapt according to their own means has a certain hands-off appeal, but there are at least three reasons to take a more proactive approach. First, if we’re serious about knocking the growth imperative out of businesses, it makes sense to set up business models and structures that work well in a nongrowing economy. Second, to give businesses a greater likelihood of achieving social and environmental goals, it’s important to align their operations with these goals from the start. And third, given the power that corporations wield, it will be difficult to enact throughput limits without business reforms—these two things must happen together.

  TABLE 11.1. NATIONS AND CORPORATIONS RANKED BY 2010 GDP AND REVENUE, RESPECTIVELY (CORPORATIONS IN ITALICS).

  WHAT COULD WE DO INSTEAD?

  Businesses have a critical and positive role to play in the transition to a steady-state economy. They will need to continue generating employment, creating new technologies, and fostering innovation, but within a framework that respects ecological limits and promotes human well-being. Three ways to align business practices with the goals of a steady-state economy are: (1) promote new business models that generate shared value, (2) create business structures that are less prone to growth, and (3) adopt new measures of success for business.

  Promote New Business Models That Generate Shared Value

  Businesses are organizations that create value, but that value does not need to be limited to producing consumer goods and services; it can (and must) also include generating social and environmental value. New business models will be needed to accomplish this shift.

  A business model refers to the plan a company follows to generate revenue and earn a profit—it’s about how the business creates, delivers, and captures value.12 Today’s most common business model involves selling physical products to customers. In a steady-state economy, however, more businesses would probably focus on providing “service solutions.” Instead of trying to sell a product (such as a washing machine, car, or heating oil), businesses would aim to provide customers with a particular result or function (such as clean clothes, mobility, or warmth).13

  Businesses following a service solution model generally maintain ownership of the equipment that provides the service, and take responsibility for supplying, maintaining, and recycling this equipment. This arrangement helps businesses deliver the desired result while economizing on material and energy use. The U.S. firm Interface is one of the best-known companies that uses this business model. Interface provides a “floor-covering service.” Rather than buy a carpet from Interface, customers may lease the service of keeping a space carpeted. As individual carpet tiles wear out, they are collected, broken down, remanufactured, and replaced by the company, greatly reducing resource use.14

  A business that provides a service solution may also reduce resource use by encouraging product sharing. For example, several companies supply transportation services through car sharing or bicycle pooling. These companies offer customers the convenience of vehicle ownership while eliminating the need to purchase a vehicle. Such sharing can reduce resource use in other ways, too. Researchers studying a local vehicle rental service in the Netherlands found that participants reduced their car mileage by a third on average. Besides reducing resource use, such schemes also share the cost and risk of introducing new technologies (such as electric cars), and thus provide a market for environmental innovations.15

  It’s encouraging that firms are already demonstrating the benefits of service-based business models, but the transition from selling products to selling service solutions is not enough. Businesses need to operate with a much broader understanding of value. In an influential article published in the Harvard Business Review, Michael Porter and Mark Kramer argue that companies have become trapped in an overly narrow approach to value creation that emphasizes the short-term and ignores people’s real needs. They claim that “the solution lies in the principle of shared value [emphasis added], which involves creating economic value in a way that also creates value for society by addressing its needs and challenges.” The purpose of the modern-day corporation, they go on, “must be redefined as creating shared value, not just profit per se.”16

  The idea of creating shared value goes beyond the conventional notion of “corporate social responsibility,” in which a company might donate some of its profits to charity or adopt a fair-trade purchasing policy, but still pursue activities that are fundamentally damaging to the environment or society. Many companies now have social responsibility programs (and it’s worth cheering genuine attempts), but such programs have been criticized for focusing mostly on reputation, and having only a limited influence on a company’s core business.17 As Brad Parrish, a business researcher and entrepreneur, explains, there is “an important distinction between those enterprises that are driven by a sense of duty to act responsibly towards society and the environment as they pursue their private interests, and those enterprises that are driven by a sense of purpose to contribute to the sustainable development of the social-ecological system of which they are a part.”18 In a steady-state economy, more businesses would be driven by purpose rather than duty.

  Many firms, generally referred to as “social enterprises,” embed social or environmental goals into their business model. An example is The Big Issue, a U.K. company that addresses the problem of homelessness by providing homeless people with the opportunity to earn an income selling newspapers.19 Jus
t as shareholder corporations have become the principal agents of the growth economy, social enterprises could become the principal agents of a steady-state economy. But to open space for the rise of social enterprises, alternative ways of organizing business need to be supported.

  Create Business Structures That Are Less Prone to Growth

  Certain business structures can de-prioritize the pursuit of profit and dampen the growth imperative found in shareholder corporations. One such structure, the cooperative, has been around for a long time. Another structure, the public interest company, has emerged recently. These legal structures permit, and even encourage, firms to pursue social and environmental goals ahead of financial returns.

  Cooperatives, which were first formalized as legal entities in eighteenth-century Europe and North America, predate the modern corporation by about a hundred years. Significant early examples include the Rochdale Society of Equitable Pioneers (a food and consumer-goods cooperative in the United Kingdom) and the Philadelphia Contributionship (a fire insurance cooperative in the American colonies). A cooperative has two defining characteristics: (1) it works to achieve a goal that is beneficial for its members, and (2) it equitably distributes decision-making responsibilities and earnings to its members.20

  Economic theory suggests that cooperatives are less expansionist than conventional businesses, and, although some cooperatives have grown quite large, they have shown themselves to be less growth-oriented than corporations in practice. The main reason for this difference is that the two types of organization have different markers of performance. The corporate indicator of performance is profitability. Corporations typically increase their size and number of employees in order to achieve targets for profitability. In contrast, cooperatives measure performance by tracking the flow of benefits to members. Since growth may or may not increase benefits, cooperatives have a weaker incentive to increase their size.21 Furthermore, comparisons of cooperatives in several countries show that they tend to use inputs more efficiently than corporations.22