There is no conflict between business productivity and a healthy environment. In fact, the trend is that profit will soon be tied to corporate environmentalism.
On October 25, 2020, the Los Angeles Times released an investigative report about the hundreds of thousands of barrels of toxic waste that was dumped near the L.A. coast. Four days later, it came across my news feed and I read every word of the disheartening report. If you would like context for this post, then I recommend that you check it out.
While reading the article, a neuron in my brain fired and I thought of a movie that I haven’t seen since I was in elementary school. It reminded me of Men at Work, a 1990 movie starring brothers Charlie Sheen and Emilio Estevez about two garbage men who discover a secret corporate scheme to dump toxic waste into the waterways and decide to team up with a Vietnam Veteran to expose the scheme and take it down.
Then I thought about MacGuyver (original) Season 3 Episode 16 with a similar theme about illegal toxic waste dumping and pretty much every episode of Captain Planet. And, let us not forget the origin story of the Teenage Mutant Ninja Turtles who’s second major film release was literally subtitled The Secret of the Ooze. Yes, I’m a 90’s kid – and I thought that these bad guys had to be fake! There was no way someone in real life was this bad!
As a child I couldn’t believe that anyone in real life could have such little regard for the natural environment or the people and animals that inhabit it. Childhood ignorance is bliss.
It turns out that this recurring theme in the stories of the 90’s were all inspired by real world events and, yes, they were trying to teach us kids a lesson in environmentalism and Corporate Social Responsibility (CSR). Message received!
CSR is a holistic way to evaluate corporate actions by executive management/directors, investors, and consumers. It incorporates the business model and profits with the firm’s impact on the local community and the natural environment. In today’s business environment, if you are not taking up the mantle of a socially responsible firm, then you risk losing the favor of public opinion and being cancelled outright. It is, therefore, in a firm’s best interest to be a responsible steward to all stakeholders and it has more potential now than ever to increase revenue as consumers continue to vote with their dollars and continue the march to a more sustainable economy.
I, for one, believe that it is a false dichotomy that you have to choose between profits and the environment. Despite U.S. media portrayal, it is not a zero sum game in which for one to win the other has to lose. This is a theme that has resurfaced time and time again in my MBA coursework, especially in regard to the profitability of firms in the contemporary economy.
As a free-market advocate, I can assure you that it is not a conflict to expect firms to be aware of their environmental impact and take active measures to reduce or eliminate it. In fact, I am a full supporter of both the elimination of unnecessary regulations which unnecessarily reduce efficiency and a supporter of regulation that protects the environment. Let me explain…
The laissez faire economy is based on the idea that when you allow people to make their own economic decisions and bring their ideas/products to market, then everyone is better off. Naturally, proponents of a free market see any attempt to limit free economic decisions as creating unnecessary inefficiency and, thus, limiting how much prosperity will result from the market economy. This idea, while intuitively sound to some, misses one of the major points of a free economy or a free society: you may do as you wish as long as your actions do not negatively impact the freedom of others.
Take John Stuart Mill’s harm principle for example. The harm principle is stated most directly in his book On Liberty when Mill declares that “the only purpose for which power can be rightfully executed over any member of a civilized community, against his will, is to prevent harm to others.” Mill’s harm principle is one of the many forms of what is known as the nonaggression principle which has been repeated numerous times by various philosophical defenders of free societies, especially by contemporary libertarians.
Utilizing the harm principle as a framework for evaluating the legitimacy of environmental regulation on business can only lead to the conclusion that it is not only a just, but required use of the law to protect individuals and communities by eliminating incentives for firms to destroy our natural world. Why? Because we know that excessive pollution has a measurable detrimental effect on the health and wellbeing of individuals either directly or indirectly.
Does this mean that I support pulling the plug on the economy? Absolutely not. But, I do support penalties on firms which cause the excessive destruction our natural environment and want a push for a renewed economy based on renewables and nuclear power. Furthermore, it is less draining on the economy to deal with environmental issues on the front end than with cleanups on the back end. The establishment of Superfund sites limits usable land and requires heavy taxation on the population which may or may not have even been customers of the firms responsible for these toxic sites. My generation is literally paying for the mistakes of my parents’ and grandparents’ generation.
Fortunately, not every industry will be shackled with the need to pass on the costs of environmental regulations onto the consumer. There is a lot of money to be made in the circular economy with intermediary firms innovating creative ways to neutralize our impact on the natural world like sucking carbon from the atmosphere and using it to create diamonds. Companies like Close the Loop have developed ways to repurpose used printer cartridges and other plastics to create higher quality roads. Other companies like Renewable Energy Group, Inc. (REGI) have developed ways convert “animal fats, vegetable oils and recycled cooking oil” into lower carbon-emitting diesel alternatives. 1
Corporate Social Responsibility needs to quickly become one of the most important topics in boardrooms if the firms of the future wish to survive because CSR is a trend that is gaining traction among consumers and investors. The Business Roundtable recently renewed its Statement on the Purpose of a Corporation, bringing Stakeholders an CSR to the forefront. Additionally, the CEO of BlackRock (the world’s largest asset manager), Larry Fink, recently released his own Letter to CEO’s explaining the need for a fundamental business model change outlined in BlackRock’s Letter to Shareholders. In it, Fink acknowledged that “Over time, companies and countries that do not respond to stakeholders and address sustainability risks will encounter growing skepticism from the markets, and in turn, a higher cost of capital. Companies and countries that champion transparency and demonstrate their responsiveness to stakeholders, by contrast, will attract investment more effectively, including higher-quality, more patient capital.“
This brings to the forefront that there is a real acknowledgement from Wall Street that sustainability and profit will be intrinsically linked in the future. This is why when I graduate next month with my MBA from the University of La Verne, I plan on bringing these values into every organization I may affiliate with and continue my membership with and support of organizations like the Nature Conservancy.
There is no other option for the environment or for profitability.
(1) Full disclosure: I own stock in Renewable Energy Group, Inc. (REGI). I believe in the company’s mission and that it was undervalued at the time I purchased it earlier this year (most companies were undervalued earlier this year).
Christopher Padilla 
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