MIT’s Yossi Sheffi and sustainability expert and author Andrew Winston debate and discuss the role of for-profit businesses in supporting — and investing in — sustainability goals.
Climate change is widely acknowledged to be the existential threat of our time, but you wouldn’t know it from our government’s response. The Trump administration has eliminated a host of federal environmental regulations and intends to withdraw the United States, the world’s second-largest emitter of greenhouse gases after China, from the 2015 Paris Agreement. Given that government is abdicating its responsibility in regard to climate change, should business be taking the lead? On Nov. 1, 2018, MIT Sloan Management Review hosted a forum — Critical Questions Live: Is It up to Business to Save the Planet? — to explore that question.
The discussion, moderated by Paul Michelman, editor in chief of MIT Sloan Management Review, was both lively and especially timely: The United Nations Intergovernmental Panel on Climate Change had just released a momentous, alarming report warning that if greenhouse gas emissions continue at the current rate, the atmosphere will warm by as much as 2.7 degrees Fahrenheit above preindustrial levels by 2040. The results of such an increase — from flooded coastlines and the destruction of the world’s coral reefs to increased wildfires, droughts, and food shortages — would be catastrophic.
Michelman framed the issue by asking, “At this apparently pivotal juncture in human history, should a company’s top priority be serving its shareholders, providing jobs, or saving the planet? And are these priorities necessarily at odds?” Weighing in were two of the leading voices in the sustainability debate. Andrew Winston is a globally recognized expert on how companies can navigate and profit from humanity’s biggest challenges. He is the founder of Winston Eco-Strategies and the author of three books, most recently, Big Pivot: Radically Practical Strategies for a Hotter, Scarcer, and More Open World. Yossi Sheffi is the Elisha Gray II Professor of Engineering Systems at MIT and director of the MIT Center for Transportation and Logistics. He is the author of four books, the most recent of which is Balancing Green: When to Embrace Sustainability in a Business (and When Not To).
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Winston started things off by coming out strongly against the notion that fighting climate change is bad for business, arguing instead that the costs of inaction “round up to, I think, about infinite.” He added, “The IPCC report tells us very clearly that we are facing devastating losses to our economy — and our lives and our well-being — if we do nothing.” Additionally, he observed that green energy forms like solar and wind are growing sectors that employ millions of people.
Sheffi countered by stating unequivocally that businesses cannot and should not take the lead in sustainability until their customers demand it and are willing to accept the resulting costs and inconveniences. He said that the recent decision by McDonald’s to switch to paper straws in the United Kingdom and test plastic-straw alternatives in the United States is, in the scheme of things, insignificant and “doesn’t move the needle.” He explained that “if they really want to move the needle, they should stop selling beef” — something that McDonald’s, of course, won’t do.
Sheffi is sympathetic to companies that “do something minimal just not to be attacked so that they can communicate internally to their millennials that they’re being good citizens.” He noted that corporate sustainability reports tend to trumpet long-term goals, not goals for the coming year or two. “They say, ‘by 2030, we’re going to cut something by 30%,’ which means, ‘three CEOs after me, something will be done.’ It’s rational for them to say this.”
Winston pushed back, insisting again that investing in sustainability is not an irrational economic choice and arguing that businesses define ROI too narrowly. Companies should take steps to address climate change not because they want to save the polar bears or the rain forest, he said, but because such measures add “value to business in the intangibles, the things that are not on the books: employee loyalty, customer loyalty, innovation, resilience, risk reduction, etc.”
Sheffi wasn’t having it, maintaining that the added value Winston described was negligible. He returned to his point that the average consumer is unwilling to put her money where her mouth is, making it, in his view, immoral to expect companies to take actions that aren’t in their best interest. “Economics drive everything,” he said. “We can talk about what the world should be like, and on this we actually agree. But what I’m saying is, it’s utopia.”
Winston continued to steer the conversation back to the high stakes of inaction. “Do we want to have a thriving future and exist?” he asked, calling climate change “the perfectly designed problem for humanity to fail at. It is like the final exam, whether we can come together and find a way to incentivize individuals and individual organizations for what is a shared common-good issue.”
When the conversation turned to other possible steps to avert climate disaster, Sheffi offered that only technology has the potential to solve the broad challenges created by climate change. He proposed “an international Manhattan Project” or the equivalent of a Nobel Prize for climate research, with wealthy countries pooling resources. “I don’t see an alternative,” he said, calling Winston’s hope that business will take the lead “wishful thinking.”
Winston shot back, “So a group of universities doing an imaginary Nobel is not wishful thinking?” He argued again for market-based solutions: “Price the hell out of carbon and then all of those incentives that you’re worried about, the executive and the short-term shareholders, are in line. I believe in markets. You don’t believe in the markets on this, which is kind of fascinating. This is an MIT professor!” he said, to laughter.
During the Q&A period, an audience member pointed out that the discussion struck him as too focused on the activities of individual companies and consumers when we face a “collective-action challenge.” Winston cited groups like The Sustainability Consortium and the Renewable Energy Buyers Alliance to point out that industry collaborations, while difficult to incentivize and to manage, are increasingly recognized as a necessary part of sustainability efforts.
Sheffi responded by pressing his point that companies, in the end, will — and should —do only what’s in their economic interest, determined in large part by consumer demand. He returned to that argument in his closing statement, asking the audience members to raise their hands if they shop on Amazon. “Everybody raised their hand, and people who didn’t are lying,” he noted for the benefit of those tuning in to the live stream. He added that everyone clicks on free two-day delivery too, despite the environmental costs, “because it’s convenient. If it is such in Cambridge, Massachusetts, think about Peoria.” Wrapping up, he said, “So that’s where we are. In the end, it’s up to society, to consumers, to decide how to give the incentives to companies to react.”
Winston agreed that consumers ought to forgo conveniences and demand that companies act — that and much, much more. “Given what we know about where the climate is headed and our ecosystems, we need all of it. We need ‘moonshots,’ we need new technologies, we need to pour capital into getting in place the technologies we already have.”
Despite the gloominess of the current projections, Winston ended the event on a hopeful note. “Norms change,” he observed, citing the successful, early 20th-century movement to abolish child labor. “The clean economy is something I feel optimistic about. The costs of clean technology have plummeted at a pace nobody expected. The International Energy Agency keeps predicting that [there] won’t be as much [growth in] renewables as there is. They keep getting it wrong every year. It’s growing very, very fast. That’s the good news. We need all of these solutions. We need all of these factors and all of these players to change.”