Kurt Teichert, my thesis mentor, asked that I write a statement of purpose as part of early research into my thesis. What follows will, after some more refinement, serve as a kind of calling card for what I hope to do. In other words, whenever I contact someone that might be a valuable resource, I will attach this 1 page essay so that the person can get a sense of what I am looking to do and what kind of framework I am looking to make use of.
Statement of Purpose
Sustainability has shifted in recent years from the fringes to the core of corporate strategy, planning and implementation. Whereas in the past companies had undertaken green initiatives under the guise of altruism, some of today’s leading corporations are recognizing that “going green can green the bottom line.” Wal-Mart has, for instance, set an aspirational goal of “[creating] zero waste, [being] supplied by 100% renewable energy, and [selling] products that sustain resources and the environment.” (1) Wal-Mart CEO Lee Scott has not done this for altruistic reasons; rather, he has realized that his company’s poor environmental and social record is turning away 2-8% of his customers, and going green means a competitive advantage in a carbon constrained future. (2)
Companies will invest in, implement and promote green initiatives to the extent that they are profitable. Once a cap on carbon is established in the United States, companies will also be forced to ramp up their investments and initiatives, as well as purchase offsets either through the voluntary market or the clean development mechanism of the Kyoto protocol. Whether or not these activities turn a profit will -depend on the future cost of carbon, as well as how aggressively corporations prepare themselves for coming regulations. But with countries like China and India developing at a frenetic pace, profitability under business-as-usual is insufficient. For while this development is undoubtedly raising the standard of living for millions of people, (3) rising GDP is still highly correlated with rising greenhouse gas (GHG) emissions, a trend that will have to be reversed. It is therefore critical to ask how to reverse that trend while increasing the number of people being raised out of poverty and assuring a more equitable distribution of opportunity in developed and developing countries alike.
The limitations of conventional business models highlight the need for new ones adapted to the demands of the 22nd century. These new models have the potential to bring the efficiency and financial leverage of the corporation to problems that have traditionally fallen under the purview of the governmental and non-profit sectors. By deriving profit from products and services with objectively verifiable social benefits, corporations can refute the “growth is bad” mantra, and become effective forces for positive change. For example, while Wal-Mart has taken strides on the environmental front, it is still harshly criticized for its labor and other practices. A new business strategy for Wal-Mart could mean increased revenue for its shareholders and better communities around the United States and the world.
The William J. Clinton Foundation has taken the lead in market-based approaches to social issues. For instance, the “Light a Million Lives in India” project, which rents “solar lanterns” to people whose lives ordinarily would stop at dusk, has the potential to establish a business model that makes money, is easily replicable, and has positive societal and atmospheric implications. Exploring a similar model will enable me to understand its possibilities, pitfalls and limits, as well as the feasibility of applying it to entities both large and small. In order to do so, I will need to develop a metric for defining and measuring social benefits in terms of “social returns on investment” for projects. What constitutes success, replicability and cost effectiveness in this context? How can a price on carbon and other regulations/policies incentivize meaningful investment under this framework? What happens when steps need to be taken to address climate change that go beyond what is profitable? And lastly, given the tremendous flow of capital that climate change mitigation unleashes, how can an entity direct those flows so as to maximize social benefits while minimizing carbon emissions?
1) http://www.walmartstores.com/Files/21st%20Century%20Leadership.pdf Page 5 Accessed 11/16/07
2)Wal-Mart’s Sustainability Strategy, pg. 3 Stanford Graduate School of Business
3)If I.T. merged with E.T., Thomas Friedman, NY Times, October 31st, 2007