The Climate of Consumption

A few years ago, I was working at an NGO in Rajasthan where I was researching the incentive structures promoting human trafficking in the local villages. While I was working at the NGO, there was a group of students from the US who were developing a curriculum for school students in the villages on how to reduce their carbon footprint. One day, I simply posed the question: “Do you guys realize that the flight that you took over here probably created a higher carbon footprint than most anyone in this village would ever have throughout their entire life?”

That hit a nerve–and for good reason. The biggest problem that we face in confronting climate change is confronting our own unsustainable consumption.

Fun fact: The wealthiest 10% of society contributes over 50% of the world’s carbon emissions. The world’s poorest 3.5 billion contribute just a tenth of all carbon emissions.

There are many people that point their fingers at capitalism as the greatest evil in the fight against climate change. While I agree to some degree, I think we need to come to terms with the fact that our own consumption, our desires, our greediness is the fuel to the fire for the capitalist system that is exacerbating our climate crisis today. The system would not exist without us because it was built by us. This also means that we can redefine the system as well.

I may be crazy, but I’m not alone. Generation Investment Management is on a mission to shift the world towards “sustainable capitalism” (I’ll dig into this one later). The $18 billion dollar (AUM) fund, founded by the one and only Al Gore and David Blood, has been pushing this agenda for years. While their portfolio has seen above market-rate returns, they have been falling short on one of their most important goals: getting others to take up their mission and get their skin in the game. While Generation is ahead of the curve, it is imperative that the rest of us get on board, and quickly too.

I like to joke that the best way to confront climate change is for everyone to become buddhist monks, or for us to dramatically change the way we engage with capitalism.

Here are some starting points that I’m exploring:

  1. Public interventions to improve regulatory practices that promote–not inhibit–technological innovation and appropriately incentivize smart environmentally sustainable decisions for businesses and consumers.
  2. Greater cleantech penetration in high-carbon emitting businesses. This spans everything from shifting towards alternative energy, utilizing more sustainable construction materials, reducing inefficiencies in production processes in nearly every industry from agriculture and textiles to heavy metal mining. Cleantech innovation should become the most cost-efficient choice for any business. Mass disruption is on the horizon, but there is definitely an overwhelming degree of affordability and scalability obstacles in our path
  3. More efficient, streamlined supply-chain systems. Not only are the resources we consume unsustainable in process and quantity, there are massive gaps that must be filled in our global supply chains in order to improve sustainability. Some key sectors are agriculture, textiles, energy. Consumer-driven companies are the key drivers in supply-chain inefficiencies (McKinsey & Co).
  4. Sustainability integrated into urban design and mobility. 75% of carbon emissions can be traced back to our urban centers, and the “ecological footprint of the cities is tens to hundreds of times larger than the actual urban area occupied”
  5. Savvier consumer decisions. The most well-off in the world are the most wasteful because they can afford to be so. It is easy to ignore wasteful consumer decisions, especially when we hide our waste from ourselves. Consuming responsibly, reducing waste, improving capabilities for better recycling and being discriminating in the sustainability of consumer goods must become mainstream.
  6. A “come to Jesus” moment for the wealthiest 10% of society. The consumption patterns of the wealthiest people in society have spillover effects in terms of environmental impact, but also in influencing the consumption of the rest of society. Consumption is aspirational, so anyone coming into wealth naturally wants to consume in the same was as the wealthy do. This problem is exacerbated as wealth grows throughout the world.
  7. Making sustainable consumption desirable. This involves redefining what “success” looks like in society–which is happening, slowly but surely. Public policy can only go so far; people have to want to change and it has to be exciting and attractive for them to do so. Personally, I find this part of the problem the most important, and most interesting to solve.

Ultimately, in order to counter climate change, we need to confront the climate of our consumption. We need to make sustainable consumption desirable and wanted, versus looking at it like a burden and a restriction on people’s lives, desires and goals.

Personally, I think that #6 and #7 hold the key to unlocking big opportunities. There are some companies out there that are getting this done–and I’ll be exploring them in later posts.

If we can do this, the opportunities are boundless. We just need to focus on building our system correctly this time around.

The Benevolence of the Butcher and the Baker 

“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”

Adam Smith, The Wealth of Nations

“How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it, except the pleasure of seeing it.”

Adam Smith, The Theory of Moral Sentiments

Ayn Rand and Atlas Shrugged. Gordon Gekko and his infamous “greed is good” line from Wall Street: Money Never Sleeps. Profit over people. Efficiency above labour. These are the images, personas and principles that fuel our perceptions of capitalism and how we build businesses today. What if we got it all wrong? What if we’ve been building businesses on a flawed model that wasn’t the one intended in the first place?

Most people are familiar with The Wealth of Nations, which sets the framework for what today’s capitalist system has evolved into. It includes infamous passages about the invisible hand that guides the free market economy, the butcher and the baker’s self-interest and the efficiency of the division of labour. Smith’s five-volume work is about efficiency, pragmatism and the way that we as human beings interact with consumption and production.

Adam Smith­­, the Father of Modern Capitalism, was an economist, but at his core, he was actually a moral philosopher. Before he even set out to write The Wealth of Nations, he wrote another book––one that I believe is of far greater importance: The Theory of Moral Sentiments. The entire premise of this book is about empathy, compassion and how we treat one another as human beings.

It’s hard to imagine that the same person wrote such different books. But what if they were supposed to be read together? In that same sense, what if we were supposed to build our economic system by respecting both works––there is a place for pragmatism and profit, but the way that we treat the people around us matters just as much, if not more.

We are facing a crisis of epic proportions: inequality is on the rise as economies grow, our natural resources are quickly becoming depleted, sea levels are rising and are putting our major cities at risk of flooding, weather patterns are changing and are creating dire circumstances for agriculture-reliant communities, and our waste, especially plastics, are piling up with no efficient means for removal.

These are the problems that have been passed down to our generation, and they are the problems that we need to solve. The capitalist model is the core driver of many of these issues, but I caution people to villainize business. The fact is, the reason the capitalist system exists the way it does today is because of our own consumption habits, our desires, our greed and our wanting of a more comfortable world for ourselves and the people we love. Some of these things cannot change, but the question I pose is: how can we use business as a tool to solve these problems? How can we create businesses that reduce our consumption, our environmental impact and help to create a better world?

In the same way that a person needs to read both sides of Adam Smith to see the full picture of who this person was, we need to look at business holistically as well to understand what business can be. Business is one of the greatest tools we have to drive change, we just need to be wary of the changes that it creates.

I don’t have the answers today, but I have some ideas. This blog is a place where I am starting these conversations. I’ll be writing about capitalism, impact investing, entrepreneurship, climate change, design, moral philosophy and how all of these things fit together. Feel free to join in.

Can our butchers and bakers be benevolent in their actions? I believe so.