Can We Afford Sustainable Business?
Taking a creative approach to pricing can benefit society, the environment — and your company.
“How are we going to pay for this?”
In that question lies the conundrum faced by the growing ranks of corporate leaders who recognize that business must, at the very least, stop contributing to the most urgent problems facing humanity and ought to, at best, help solve them. In mission statements and strategic plans, many companies are making commitments to improving sustainability and reducing inequity — but when it comes to meeting those goals, they are tripped up by the financial implications.
In reality, we have no shortage of ideas on how to provide greater and more equitable access to goods and services, use them conscientiously and more effectively, and leave the least amount of waste behind. But we are frequently held back in implementing those ideas because of the presumption that any sustainability initiative invariably leads to higher costs, higher taxes, higher fiscal deficits, and, ultimately, higher prices. “How are we going to pay for this?” becomes a killer question seemingly designed to stifle progress.
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Overlooked in the debate, however, is one factor that unnecessarily limits the scope that leaders in all spheres — whether business, politics, or nonprofit — need to implement solutions that can scale to meaningful impact.
That factor is the price mechanism. We contend that it’s possible to find creative solutions that rally all market actors around responsible behaviors that mitigate the negative externalities of commerce before businesses tally them up and price them in. In one sense, we argue that organizations act more as caretakers of markets than as simple producers, using the incentives and information embedded in the price mechanism to allocate the responsibility for broader and fairer access, for conscientious and effective consumption, and for handling waste more efficiently.
At the root of the problem is the premise that the only way companies can ease the burden of commerce on our society is to account for it properly and find someone to foot the bill. This premise corners businesses into what we call a taboo trade-off. A company can try to pass the incremental cost of environmentally or socially responsible practices onto customers, but they may not be willing or able to pay it and thus flee to cheaper competitors or leave the market entirely.
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