The Call for Papers sought submissions of unpublished working papers focused on business and sustainability issues (both social and environmental) from all disciplines and methodologies. Click here to register.
The Conference will be preceded on Mon. April 29th by the 2nd Annual ARCS Forum, a unique day of collaboration between business leaders and leading academic scholars.
]]>The deadline for papers and proposals is August 15, 2013.
Faculty hosting the Academy include:
Tima Bansal, Ivey Business School, Western University
Tom Lyon, Ross School of Business, University of Michigan
Deborah Rupp, Department of Psychological Sciences, Purdue University
Roy Suddaby, Alberta School of Business, University of Alberta
Information on past academies may be found here.
The deadline for papers and proposals is August 15, 2013.
Faculty hosting the Academy include:
Tima Bansal, Ivey Business School, Western University
Tom Lyon, Ross School of Business, University of Michigan
Deborah Rupp, Department of Psychological Sciences, Purdue University
Roy Suddaby, Alberta School of Business, University of Alberta
Information on past academies can be found here.
The ARCS Forum, hosted by the Haas Center for Responsible Business and the Berkeley-Haas School of Business will be held April 29th, 2013 at Haas. Why? Because business leaders and academics are often worlds apart. Academics rarely know the current needs of business leaders, and business leaders are seldom aware of just what is "known" from academic research. Pedagogically, the situation is not much better. We academics teach students material that is engaging and conceptually intriguing, but it may not be what's really needed. Business leaders, for their part, often don't know their options in business education and what could be done to better train new employees.
In the area of corporate sustainability, the problem is particularly egregious because the nature of sustainability changes rapidly as scholarship makes advances or new approaches emerge from business. Both sides could benefit from better interaction with the other, but common knowledge is still very sparse. Not long ago, a manager asked me if anyone had done work on the very subject on which I have spent more than a dozen years. I am sure I have caused equal consternation in many managers by asking questions which revealed how little I knew about how business is really done.
The common lack of familiarity often leads to misperceptions on both sides. Business managers often assume that scholarly research underlies the ideas in best-selling business books. Scholars often believe that high profile business leaders are the ones from which the most can be learned.
This must stop!
To bridge the communities of practitioners, researchers, and educators, in 2012 ARCS initiated a new one day program at our annual research conference, and we intend to continue this program each year. The academics in ARCS are some of the best researchers and teachers in sustainability. Unlike many prominent figures in sustainability, ARCS researchers do not have a set perspective for which they wish to advocate. They are a hard-nosed group with an eye to what the evidence really says. The business leaders that we have attracted so far are much the same. They are both inspiring and willing to make the tough calls on what works and what doesn't.
Our first meeting emphasized a discussion of sustainability education. Two important themes emerged during the course of the day: The first is the need for scientific and economic literacy. This was put most poignantly by Armond Cohen of the Clean Air Task Force: "Please don't send me any more dreamy students who think that energy solutions are cheap and quick." But excellent communication and influencing capabilities were also deemed critical. Managers like Mike Dean of Turner Construction pointed out the need for these soft skills: "We identify high potential people for positions of leadership; most often these high potential people are the ones with soft skills." Debate on these two perspectives proceeded throughout the day of panels, classroom cases, and open discussion. By the end, Frank O'Brien Bernini of Corning winkingly proposed a solution: "We need poets who then take master degrees in physics or economics."
The second important topic discussed during the day was what distinguished education on sustainability. Reflecting later, Alison Taylor (Siemens) summarized her thoughts: "We talked at Yale about education that includes an understanding of net future value. This concept resonates with me. If I had more managers who thought this way, and more corporate strategy consultants as well, I think I would make more progress in my role."
Of course, we reached no final conclusions, but participants rated very highly the opportunity to have "great discussion" between academics and business leaders, as well as the chance to see how to use new course materials in the classroom.
The 2013 Forum
This year we hope to spark a useful discussion on business models for sustainability. We will begin with an overview of the current status of business practice, and then consider the merits of emerging approaches. These will include New Market-Based Approaches such as mitigation credits. For example, is it really possible to bring property rights approaches to Bull Trout habitat? We will also consider New Customer Interactions. What makes OPower so effective in motivating energy efficiency? And finally, we will highlight best practices in motivating change toward sustainability in companies. What really works and what doesn't? As with last year, we will use some cases after lunch to keep the discussion lively.
To register, click here.
To view the ARCS Forum program, click here.
To view the ARCS Research Conference schedule, click here.
The ARCS Forum 2012 Participants included the following:
-Jim Roberts, Duke Energy
-Mark Vachon, GE Ecomagination
-Derek Yach, Pepsico Inc.
-Hewson Baltzell, Risk Metrics
-Roberta Bowman, Duke Energy
-Armond Cohen, Clean Air Task Force
-Hilary Davidson, Duke Energy
-Michael Deane, Turner Construction Company
-Mark DeAngelis, Macro Climate Solutions, LLC
-Paulette Frank, Johnson and Johnson
-Bryan Garcia, Clean Energy Finance and Investment Authority
-Cary Krosinsky, TruCost
-Paul Ligon, Casella Resource Solutions
-Frank O'Brien-Bernini, Owens Corning
-Curtis Ravenel, Bloomberg
-Rick Reibstein, MA Office of Energy and Environmental Affairs
-Alison Taylor, Siemens
-Tima Bansal, Ivey School of Business
-Marian Chertow, Yale University
-Glen Dowell, Cornell University
-Dan Esty, Yale University
-Will Goetzman, Yale University
-Andrew Hoffman, University of Michigan
-Andrew King, Dartmouth College
-Michael Lenox, Darden School of Business - University of Virginia
The 5th Annual ARCS Research Conference will begin at the end of the ARCS Forum and will run through approximately 3pm on Wednesday, May 1st.
About ARCS
ARCS is a professional society of scholars studying the interface between business and sustainability. Faculty members, doctoral students, and researchers from any university or academically-oriented institutes and think-tanks are welcome to become ARCS individual members.
ARCS was established to provide data, tools and networking opportunities to researchers who are developing greater understanding of the opportunities and limits of policies and strategies to foster sustainable business. ARCS is also an alliance of schools and institutes at major universities that share a strong commitment to research on business and sustainability. Members include U California-Berkeley, Cornell, Dartmouth, Duke, Harvard, Indiana, INSEAD, U Michigan, MIT, Northwestern, U Pennsylvania, U Virginia, U Western Ontario and Yale.
Beginning around 1990, a significant transatlantic shift in the relative stringency of risk regulations of the United States and the European Union occurred. Between 1960 and 1990, the health, safety, and environmental standards issued by the United States were likely to be more risk-averse, stringent, innovative, and precautionary than those adopted by both individual European countries and the European Union. Examples include U.S. pesticide approvals and other food safety regulations to restrictions on ozone-depleting chemicals, automotive emission standards, chemical safety standards, and criteria for the approval of new drugs.
However, regulations adopted by the EU since 1990 are more likely to be more stringent and comprehensive than those adopted - or more frequently not adopted - by Washington. Examples include the banning of beef and milk hormones as well as antibiotics in animal feed, restrictions on the planting and consumption of GMOs, REACH - the EU's comprehensive chemical safety regulation, RoHS - the European ban on hazardous materials in electronic products, cosmetic safety standards, and global climate change regulations.
Global regulatory leadership has palpably passed from Washington to Brussels. While the U.S. previously played a leadership role in initiating and supporting new environmental treaties, more recently the EU has advocated and adopted several important new environmental agreements that have not been ratified by the U.S. Due to both the EU's relatively stringent regulatory standards, as well as its position now as the world's largest single market, the regulatory policies of many other nations are now based on those of the EU rather than the U.S. In many important policy areas, American risk regulations are now less stringent and comprehensive than those of many other countries.
What accounts for this dramatic regulatory policy change on both sides of the Atlantic since 1990? As identified in my new book, The Politics of Precaution, three, related causal factors explain the shift.
The first has to do with the extent and intensity of public pressures. Since around 1990, "alarm bells" identifying politically unacceptable risks have rung more frequently and loudly in Europe than in the U.S. Survey data since the early 1990s reveals that Americans have become more satisfied with the regulatory status quo. This, in turn, has made it more difficult for American consumer and environmental activists to mobilize effective public support for more stringent risk regulations. By contrast, many health, safety and environmental risks have become more salient among Europeans, and activist pressure groups more influential in shaping public risk perceptions.
The second factor stems from the preferences of policy-makers. Through 1990, there was often considerable bi-partisan support for more stringent risk regulations in the U.S., with some of the most significant expansions of federal environmental regulation occurring during the presidencies of Republican Presidents Richard Nixon and George H.W. Bush. But beginning in the 1990s, federal regulatory policymaking became more polarized along partisan lines. During the last two decades the national electoral strength of conservative Republicans has made it much more difficult for new risk regulations to be adopted by the federal government.
By contrast, beginning in the late 1980s, EU policy elites linked the expansion of the single market to the continuous strengthening of European regulatory standards. Each successive EU Treaty has strengthened the EU's regulatory authority and commitments. The EU's "greener" member states, namely Germany, the Netherlands, Denmark, Austria, Finland and Sweden, often with support from Great Britain and France, have effectively supported more stringent EU standards in the Council of Ministers, while the European Parliament has arguably become the world's "greenest" legislative body. In marked contrast to the U.S. regulatory policymaking in Europe has not become polarized along partisan lines. As was previously true in the U.S., influential right-of-center European policymakers at both the national and European level have often supported more risk-averse health, safety, and environmental standards.
The third causal factor focuses on differences in the legal and administrative criteria for making and approving risk regulations. In part as a response to influential claims by policy analysts that many previous regulations adopted in the U.S. were unnecessarily stringent, American administrative procedures and legal rulings have increasingly emphasized the need to subject new rules to stringent risk assessment criteria. While American regulatory procedures have focused on avoiding the risks of false positives, the EU, faced with a series of policy failures widely attributed to insufficiently stringent regulations, have made the precautionary principle into an influential approach to risk assessment and management. A critical purpose of the precautionary principle is to reduce false negative policy errors: it facilitates the ability of regulatory officials to impose bans on and to delay the approval of new technologies whose risks are perceived as "uncertain."
While the strengthening of European risk regulation has had little or no impact at the federal level, European standards have influenced those in the U.S. though two other mechanisms. First, faced with the paralysis of much regulatory policymaking at the federal level, many American states, most notably California, have adopted a wide range of risk regulations similar to, influenced by, and often modeled on those of the EU, most notably with respect to climate change and chemical safety. Second, many global firms have chosen to adopt European consumer safety and environmental protection standards for all their products, including those sold in the U.S. According to U.S. Department of Agriculture rules, food sold as "organic" in the U.S. effectively meets all European food safety standards, while the consumer products of many global electronic firms comply with European restrictions on the use of hazardous materials. Likewise, many of the products of global cosmetics brands sold in the U.S. comply with EU safety standards. Several state and local governments have followed the EU's lead by banning the chemical BPA, and many American companies have voluntarily phased out its use. State policy initiatives, along with these market responses, may have played a role in reducing public pressures for more stringent federal standards.
Many American activists would like the U.S. to change its regulatory policies to make them more similar to those of Europe, while many business firms on both sides of the Atlantic would like the EU to adopt more "scientific" American regulatory procedures. My new book is a work of analysis not advocacy, so I leave it to readers - and citizens of the U.S. and EU - to decide whose or which regulatory policies are more or less welfare enhancing. Those policies, after all, are the central focus of the politics of precaution.
David Vogel is a professor in the Haas School of Business and the Department of Political Science at the University of California, Berkeley. He is the author of The Politics of Precaution: Regulating Health, Safety, and Environmental Risks in Europe and the United States (Princeton University Press 2012).
This year's theme is Theories and Paradigms for Sustainability. We will explore, engage and encourage: the emergence, growth and diffusion of theories for researching and teaching sustainability; past, present and future paradigms for sustainability work in academe and practice; and ways to multi-dimensionalize our thinking and action for a more sustainable world. We will rethink sustainability using multiple lenses, push our understanding about systemic/intractable problems we collectively face, and enrich our theoretical and empirical analyses of individual, organizational, societal and eco-system life.
Browse the PhD Academy website to learn more about this year's guest faculty: Tima Bansal, Bobby Banerjee, Joshua Margolis and Andy Spicer. Also meet the faculty and alumni for the 2008-2011 ARCS PhD Sustainability Academies.
Full papers are due by August 30th, 2012. All submissions will be evaluated through a double-blind review process. The selection committee includes both ARCS and PhD Sustainability Academy Faculty and Alumni.
The Network for Business Sustainability sponsors a Best Paper Award and a $500 cash prize.
For additional information please contact the Ivey faculty and host, Dr. Oana Branzei.
]]>Part 1: A Statistical Synopsis
Part 2: The 75 Seminal Articles of the Field
Part 3: The Complete Dataset of B&NE Articles
.
]]>This focus on a central regulator represented a notable turn for the conference. In previous years, most research considered the motivations for (and effect of) unilateral action or communitarian self-regulation. Why the change this year?
One explanation for the shift might be that the ARCS conference was coordinated to overlap with the conference of its (older) brother organization (Strategy and the Business Environment). This may have shifted the discussion toward consideration of central control. Another explanation is that current governing administrations (at least in the US) are more willing to consider regulation. More likely, I think, the change represents growing frustration among ARCS scholars that voluntary action and communitarian self-regulation will get us anywhere near a sustainable future. This is not to say that scholars seem to expect old style command and control regulation to return at a large scale, but it does seem to signal a return to regulation as a primary mechanism of bringing about environmental protection.
Also evident this year was the growing sophistication and maturity of the field. The ARCS membership is larger, more global, and more demanding. Deep training in both economics and sociology is increasingly evident. Expectations for empirical rigor have also grown. The "identification revolution" (as Scott Stern calls it) has swept through the ARCS community. Words like endogeneity and unobserved heterogeneity are now raised in the discussion of many papers. Evident among the papers were the use of natural experiments, matched pairs, difference of differences, and instrumental variables.
Although greater empirical rigor was immediately apparent, the most notable change in the tenor of this year's conference was in the focus of the papers. This change was evident from the first session. Tim Simcoe (Boston U.) and Mike Toffel (Harvard Business School) presented research evaluating whether or not government procurement could influence the spread of LEED service suppliers and certifications. Kira Fabrizio argued that business response to government-mandated renewable portfolio standards was conditional upon whether regulators had reversed course on previous regulations. If firms had reason to doubt that regulations would be ongoing, they were slower to adjust. Kristin Wilson and Stan Veuger (both Harvard U.) argued that physical proximity to regulators increased the degree to which they were able to influence behavior of bankers.
Other researchers considered when the leviathan can be influenced by the surrounding society and encouraged (or discouraged) from taking action. Desiree Pacheco (Portland State U.), Jeff York (U. Colorado-Boulder), and Timothy Hargrave (U. Washington) considered how regulators combined with social actors from civil society and industry members to jumpstart the creation of the wind industry in Colorado. Wren Montgomery, Jacqueline Corbett and Tina Dacin (all Queen's University) presented on the ways in which institutional entrepreneurs and social movements can combine in the creation of new social-benefit markets. Shon Hiatt (Harvard Business School) and Sangchan Park (National University of Singapore) argued that reputational concerns of regulators allow firms to influence how regulators enact and enforce regulation.
Several researchers also considered what could be done when regulators fail to act. Daniel Matisoff (Georgia Tech U.) investigated and compared the influence of two voluntary programs, the Chicago Climate Exchange (CCX) and the Carbon Disclosure Project (CDP). He found that the late CCX had a larger effect in reducing carbon emissions than did the still thriving CDP. Andrea Prado (Stern School of Business) considered how managers choose which voluntary program to join. She found evidence that they were influenced by a practical desire to reach important customers, and a cynicism regarding whether those customers could really distinguish the meaning between different standards. Jiao Luo (Columbia Business School) demonstrated that firms consider the degree of consensus or polarization in the media with respect to carbon markets. The more polarized media opinion, the less likely that firms will participate in carbon markets.
Research on stakeholders and stakeholder groups continues to be an area of growing importance. Tom Lyon (U. Michigan), Yao Lu, Xinzheng Shi and Nan Wang (all of Tsinghua University) reported evidence that Chinese investors tend to expect that voluntary environmental excellence is linked to poor financial performance. N. Craig Smith and Luk Van Wassenhove (both of INSEAD Social Innovation Centre), and Leena Lankoski (U. Helsinki and INSEAD Social Innovation Centre) applied prospect theory to produce a new theory of how stakeholders would respond differently to potential gains and losses.
Although many papers considered the effect of regulators or pressure from other institutions and regulators, a large number considered the motivation and efficacy of voluntary action. Olga Hawn, Aaron Chatterji, and Will Mitchell (all Fuqua School of Business) evaluated the conditional financial effect of listing on the Dow Jones Sustainability Index. Their work could suggest which firms will be motivated to engage in voluntary environmental protection. Sinziana Dorobantu, Witold Henisz, and Lite Nartey (all The Wharton School) investigated examples in extractive industries and concluded that investments to reduce conflict with stakeholders enhances the financial valuation of a firm. In a powerful demonstration of the value of voluntary action, they showed that investments in improved stakeholder relations could dramatically multiply firm value. Brian Richter (Richard Ivey School of Business) evaluated whether investments in lobbying and voluntary action were substitutes or complements. His evidence clarified when and where firms might choose one or the other option. Elizabeth Connors (Northeastern U.) and Lucia S. Gao (U. Massachusetts - Boston) provided evidence that environmental performance is positively associated with both leverage and voluntary environmental disclosure, and that leverage is negatively associated with disclosure.
The conference also included research which dug into the critical issue of how firms respond to internal and external pressure to improve environmental performance. Cary Coglianese and Jonathan Borck (U. Pennsylvania Law) reported on research attempting to identify the characteristics of facilities that are more likely to exceed regulated environmental performance and/or participate in voluntary programs. Nilanjana Dutt (Fuqua School of Business) and Andrew King (Tuck School of Business) reported research on when operators tend to learn from chemical spills. Pete Tashman (George Washington U.) shared his research which attempts to understand when firms choose to invest in climate change adaptation. Anil Doshi (Harvard Business School), Glen Dowell (Johnson School of Management), and Michael Toffel (Harvard Business School) investigated how firms responded to mandatory disclosure requirements.
The last paper served as a fitting close to the conference. It showed (as did the totality of this year's presentations) that research on sustainability must consider the full life cycle of institutional change. How do new institutional regulations come about? How do firms shape regulation? How do firms respond to institutional rules? When will they avoid, comply, or exceed new rules? And most important of all, how can we create a world which maintains an efficient economy while sustaining our natural resources?
]]>Buildings and their associated construction activities account for almost a third of world greenhouse gas emissions. The construction and operation of buildings accounts for about forty percent of worldwide consumption of raw materials and energy. For this reason, important analyses of climate mitigation policies have identified the built environment as an important target for greenhouse gas abatement and have noted that small improvements could have large effects on their current and future energy consumption. Energy also costs money - about thirty percent of operating expenses in the typical office building in the U.S. On average, this cost is the single largest and most manageable expense in the provision of office space. Thus, building and managing better buildings is a critical part of both environmental and economic well being.
My colleagues and I have written two new papers that provide the first systematic analysis of economic effects of some recent trends in green buildings. We concentrate on commercial property, and we investigate the relationship between investments in energy efficiency, effective rents (that is, rents adjusted for building occupancy levels), and selling prices. We analyze a large sample of office buildings, some of which have been certified for energy efficiency by the U.S. Environmental Protection Agency (EPA) Energy Star program, or for sustainability by the U.S. Green Building Council (USGBC) Leadership in Energy and Environmental Design (LEED) system.
The results, which rigorously control for quality differences among buildings, clearly indicate the value of certifications in the market for commercial buildings. The results suggest that an otherwise identical commercial building with an Energy Star or LEED certification will rent for about three percent more per square foot; the difference in effective rent is estimated to be about six percent. The increment to the selling price may be as much as 13 percent.
Most importantly, our analysis supports a detailed investigation of the sources of the economic premiums embedded in the individual rents and asset prices of several thousand green buildings. This investigation relies upon internal documents made available by the EPA and the USGBC. For buildings certified by the Energy Star program, we obtained the data on energy efficiency (i.e., kBTU usage per square foot) as measured and reported in the certification process. For the buildings certified by the LEED program, we obtained the raw data on sustainability as evaluated in the certification process. Within the population of certified green buildings, we find that variations in rents and asset values are systematically related to the energy efficiency of the buildings, and also to other indicia of sustainability which are measured in the certification process. We also find that, within the population of certified buildings, variations in energy efficiency are fully capitalized into rents and asset values.
Last, we investigate the price dynamics of energy efficient and sustainable commercial buildings during the recent period of turmoil and of unprecedented decline in U.S. property markets. We gather and analyze a panel of certified green buildings and nearby control buildings observed in 2007 and again in 2009. The results show that large increases in the supply of green buildings during 2007-2009, and the recent downturns in property markets, have not significantly affected the rents of green buildings relative to those of comparable high quality property investments; the economic premium has decreased slightly, but rents and occupancy rates are still higher than those of comparable properties.
Our findings have implications for investors and developers of commercial office buildings. Green building now accounts for a considerable fraction of the market for office space, and in some U.S. metropolitan areas certified office space extends to more than a quarter of all commercial space. Measured attributes of sustainability and energy efficiency are incorporated into property rents and asset prices, and this seems to persist through periods of volatility in the property market. These developments will affect the existing stock of non-certified office buildings. The findings already suggest that property investors attribute a lower risk premium for more energy efficient and sustainable commercial space. Rated buildings may provide a hedge against shifting preferences of both tenants and the capital market with respect to environmental issues. Increasing market awareness of climate change, and rising energy costs can only increase the salience of this issue for the private profitability of investment in real capital.
Our findings may also have broader implications for current considerations of energy conservation policies and of measures to reduce global warming and climate change. It appears that modest programs by government and by nonprofit organizations to provide information to participants in the property market (i.e., "nudges") do have a large payoff. Buildings certified by independent entities as more energy efficient or sustainable command economic premiums in the marketplace. Energy savings in more efficient buildings are capitalized into asset values, and this is not affected by the recent volatility in the U.S. property market.
These results suggest that more aggressive policies - in the U.S. and elsewhere - of certifying, rating, and publicizing buildings along these dimensions (including, perhaps, those buildings that score low on measures of energy efficiency) can have a large payoff in affecting energy use and maybe the course of global warming.
References
Eichholtz, P., Kok, N. and J.M. Quigley. "Doing Well by Doing Good: Green Office Buildings." American Economic Review, forthcoming, 2010.
Eichholtz, P., Kok, N. and J.M. Quigley. "The Economics of Green Building." Working Paper, UC Berkeley, September 2010.
]]>To make the discussion more concrete, let's consider a classic case from the early 1990s. An independent energy corporation was building a power plant in Connecticut which would produce some additional greenhouse gasses - mostly CO2. To offset this effect, the company decided to invest in protecting or reforesting some areas in Guatemala. To do this, they spent a few million of their stockholder's dollars. They took money from the pockets of their investors. How could one justify this, I asked my students? Commonly, the answer I hear is that buying trees creates goodwill among customers, employees, and regulators, because the purchase of the trees reveals something about the nature of the company. The purchase of trees could reveal to regulators, for example, that the company is run by responsible managers and, thus, any facilities the company constructs and runs will be done so in a safe and responsible manner. As a result, these regulators will be more likely to grant permission for construction and extension permits to the company. This easing of regulatory oversight will provide a financial benefit, and thus there is no conflict between profits and protection of nature. The argument seems to make a lot of sense.
Except that according to economic theory it shouldn't. The students are proposing that the investment is a "signal" about something unobserved about the company - for example it is run by good-hearted people. This signal (the visible buying of trees) reveals something invisible (good heartedness). So far everything seems to be working, but now let's consider what "bad hearted" managers of other companies should do. If buying trees provides value and they can do it for the same cost (and there is no reason to think they can't) they should buy trees too. By extension, everyone - the good, the bad, and the ugly hearted - will decide to buy trees. It seems like this would create a good deal for society, but one last step in logic destroys that hope. If everyone will buy trees, then it will no longer provide evidence of who is good hearted and, sadly, if actors are rational and recognize this, no one will choose to buy trees.
What the students want to believe is that buying trees is what economists call a credible market signal. But what students often do not consider is the issue of credibility. Why did the purchase of trees reveal anything new and credible about the firm? There was no reason that a good company rather than a bad one hadn't decided to take on this action.
One might be tempted to think that this story actually has a happy ending. After all, trees were purchased for Guatemala and the company received a lot of very favorable free press for its actions. Perhaps, but I am much less sanguine. I see in this story a real concern that stakeholders are not very good at distinguishing the credibility of market signals. Why is this important? Because if they are not, the door is left wide open for greenwashing. Firms can offset consumer pressure with all kinds of actions that provided no real social benefit AND reveal nothing about the nature of the firm. Think back for a minute to my story of the LEED building. Why exactly did the company that purchased the wasteful LEED building gain the support from the local government? Was such support a good thing?
I am very worried that stakeholder inability to distinguish the credibility and meaning of environmental actions could dissipate much of the pressure by the environmental improvement. Under pressure to improve the environmental performance of your vehicles? Don't improve their gas mileage, but instead make "flex fuel" vehicles. Need to respond to stakeholder concerns about pollution? Invest in solar panels. Under pressure for profiteering on exotic drugs? Build a LEED building.
I guess there may be some good news in this story for scholars anyway. Perhaps our credulousness and acceptance of greenwashing reveals something interesting about human decision making. Perhaps we find people and companies credible when they claim they are doing something good for the tribe. Perhaps we want to believe good news about things out of control. And perhaps we can learn. That could be the most important question of all. What would help stakeholders distinguish between greenwashing and real action?
Finally, there is one more way of thinking about the examples above. That is that firms are actually selling a bundled good - some products/services and some charity. For example, when we buy electricity from the power company discussed above we are actually spending some money on power and giving some money for reforesting. When we buy a coat from Patagonia, we are paying something for the garment and giving something to their charities. If so, then we don't need to infer that the charity reveals anything about the company. They are just coordinating our joint purchase of a good+altruism. But if this is so, is this really the right role for business? Are they really better at altruistic protection of the environment than say the Environmental Defense Fund?
Scholars inside and outside of ARCS are trying to untangle when corporate actions are philanthropy, signals, or just plain greenwashing. Off the top of my head I can identify names like Lyon, Maxwell, Prakash, Patoski, Rivera, Prado, and Toffel. Anyone else out there working and thinking on this important problem?
According to the information we could obtain, several of the credits needed to boost the LEED certification from Gold to platinum came from additional steps to conserve water and use green power. Although water and energy conservation seem praiseworthy, the real question that should be asked by anyone interested in sustainability is: "do these investments improve total human happiness?" And according to our calculation, in the case of this building the answer was an emphatic "NO!" The building's carbon reductions were obtained at a cost more than double that required to purchase carbon offsets. Similarly, the water savings turned out to cost a little less than $4 per thousand gallons - a number comparable to the most inefficient means of producing fresh water. By our calculation, the drug company could have achieved the same energy and water objectives at a lower cost and had some money left over to give back to its investors - many of whom have been upset by the firm's recent poor financial performance.
If the managers of this company really wanted to spend the same amount of money in improving social welfare, how should they have spent it? By using their comparative advantage in drug discovery to find drugs for neglected diseases, we concluded. For example, they could have invested more money in programs to find cures for diseases like Malaria or tuberculosis which are of growing concern worldwide. In fact, the company has a program to do just this, but its annual budget is a fraction of the money required to push their building over the LEED platinum threshold.
My class and I concluded that just as we should criticize firms for inefficiently failing to seize profitable ways to reduce their effect on the environment, so should we castigate them for spending money wastefully to reduce their environmental impact. A firm deserves praise, we concluded when it tries to maximize human happiness, and not when it acts not to reduce energy consumption at any cost.
Unfortunately, not all stakeholders respond as economists think they should, and as I mentioned earlier, the building was widely praised. When I asked a local elected official about this at a recent dinner party, her response was "But being the first platinum building made a big difference to city officials. The company got a lot of good will." I said, "But wouldn't they have gotten as much good will for using the money to work on drug-resistant TB or malaria?" Her response was "No, they [local elected officials] don't care at all about that." This surprised me because drug resistant TB is already a health problem, and malaria may become one - particularly in low lying areas like my home town.
As economists and management scholars, we often assume that firms are acting in response to well-reasoned stakeholder demands. The resulting give and take between firms and stakeholders, we hope, brings about a situation where both parties are better off. But the story of this particular LEED building suggests that such interactions can also lead to wasteful outcomes. Under what conditions do good outcomes emerge from interactions between stakeholders and firms, and when and how do things go wrong? ARCS scholars like Tom Lyon (Michigan), John Maxwell (Indiana), Mike Lenox (Darden) and I are working on exactly this issue. We are beginning to understand when stakeholder pressure leads to good outcomes and when it leads to green washing and waste. More on that in my next post.
It is the responsibility of all parties storing materials on the ARCS web site to ensure that such material does not violate other parties' proprietary rights and does not otherwise violate law or any applicable university policies relevant to the submitted materials. ARCS reserves the right to delete or make inaccessible any files in its sole discretion. ARCS is not responsible for any errors or omissions in the material provided on the websites and shall not be liable for any damages of any kind arising from the use of any material found on any ARCS web sites. DO NOT copy or adapt the HTML that ARCS creates to generate pages or any other object code, source code, programming code, data, information or HTML script, as these are also covered by ARCS' copyright.
Links to Other Sites
Provision of links from official ARCS web sites to sites located outside of the ARCS domain does not imply endorsement or credibility of the service, information, or product offered through the linked sites. Web developers should avoid the following: creating links to other websites that the developer knows contain infringing or defamatory material; inserting from other web sites inline images or graphics into ARCS HTML documents; and framing as a means of linking web sites.
Respect for Copyrights of Digital Materials and Software
It is the policy of ARCS to respect the intellectual property rights granted under Federal law to owners of digital materials and software. It is against ARCS policy for anyone to use ARCS websites to access, use, copy or otherwise reproduce, or make available to others any third party copyright-protected digital materials or software, except as permitted by the respective owners.
Pursuant to 37 CFR 201.38, ARCS has designated the following person to receive notification from copyright owners of claimed infringement of copyright:
Erika Herz
Managing Director
Alliance for Research on Corporate Sustainability (ARCS)
Darden School of Business
P.O. Box 6550
Charlottesville, VA 22906-6550
Phone: (434) 982-2656
Fax: (434) 924-7104
E-mail: herze(at)darden.virginia.edu
Privacy Notice
Commitment to Privacy
Individuals' privacy is important to ARCS. To better protect your privacy we provide this notice explaining our online information policy and practices.
Notice About the Information We Collect
This notice applies to all information collected by, or submitted to ARCS web sites. The following information explains the Internet privacy policy and practices that ARCS has adopted for its official web sites. In legal terms, it shall not be construed as a contractual promise, and ARCS reserves the right to amend it at any time without notice.
When you access our web pages, the client information and the essential and nonessential technical information listed below are automatically collected -- we refer to those categories collectively as "access" information. No other information is collected through our official web sites except when you deliberately decide to send it to us (for example, by clicking on a link to send us an e-mail). The information you might choose to send us is listed below as "optional information."
Automatically Collected Access Information
Client information: the Internet domain and Internet address of the computer you are using.
Essential technical information: identification of the page or service you are requesting, type of browser and operating system you are using; and the date and time of access.
Nonessential technical information: the Internet address of the web site from which you linked directly to our web site, and the "cookie information" described below.
Optional information
When you send us an e-mail: your name, e-mail address, and the content of your e-mail.
when you complete online forms: all the data you choose to fill in or confirm, including credit or debit card information if you are ordering a product or making a payment, as well as information about other people if you are ordering a gift and want it sent directly to the recipient's address.
ARCS uses web traffic analysis tools to analyze patterns of use on the www.corporate-sustainability.org web site. These tools do not create individual profiles for visitors and only collect aggregate data.
The Way We Use Information
Client information is used to route the requested web page to your computer for viewing. In theory, the requested web page and the routing information could be discerned by other entities involved in transmitting the requested page to you. We do not control the privacy practices of those entities. Essential and nonessential technical information helps us respond to your request in an appropriate format (or in a personalized manner), and helps us plan web site improvements. Optional information enables us to provide services or information tailored more specifically to your needs or to forward your message or inquiry to another entity that is better able to do so, and also allows us to plan web site improvements.
We may use non-identifying and aggregate information to better design our web site. For example, we may report that X number of individuals visited a certain area on our web site, or that Y number of men and Z number of women filled out our registration form, but we would not disclose anything that could be used to identify those individuals.
We may keep client information from our systems indefinitely after the web page is transmitted, but we do not try to obtain any information to link it to the individuals who browse our web site. However, on rare occasions when a "hacker" attempts to breach computer security, logs of access information are retained to permit a security investigation and in such cases may be forwarded together with any other relevant information in our possession to law enforcement agencies.
Under the Virginia Freedom of Information Act, any records in our possession at the time of a Freedom of Information Request might be subject to being inspected by or disclosed to members of the public for any purpose they may desire. As indicated above, client information may be retained after transmission of the requested web page and might be available for inspection.
We use the information you provide about yourself when placing an order or request only to complete that order or request. We do not share this information with outside parties except to the extent necessary to complete that order or request. Similarly, we use the information you provide about someone else when placing an order or request only to complete that order or request. Again, we do not share this information with outside parties except to the extent necessary to complete that order or request. Information you provide may be used for internal ARCS purposes.
We generally use return e-mail addresses only to answer the e-mail we receive. Finally, we never use or share the personally identifiable information provided to us online in ways unrelated to the ones described above without a clear notice on the particular site and without also providing you an opportunity to opt-out or otherwise prohibit such unrelated uses.
Use of Cookies
Some web sites use "cookies." Often a cookie enables web sites to tailor what you see according to the way you entered the site. For this kind of cookie, the information stored in that cookie might include the following (formatted for legibility):
Name: UVA_cookie Session: 973016679.175537
Timestamp: 973021258
Portal: 0
Expires: Tue, 01-May-2001 19:40:58 GMT
Domain: virginia.edu
Path: /
Providing Information is Your Choice
There is no legal requirement for you to provide any information at our web site. However, our web site will not work without routing information and the essential technical information. Failure of your browser to provide nonessential technical information will not prevent your use of our web site but may prevent certain features from working. For any optional information that is requested at the web site, failure to provide the requested information will mean that the particular feature or service associated with that part of the web page may not be available to you.
Alliance for Research on Corporate Sustainability (ARCS) 3rd Annual Conference
May 9-11, 2011
The Wharton School
Philadelphia, PA
Data Sources
The Toxics Release Inventory (TRI)
is a publicly available EPA database that contains information on toxic chemical releases and waste management activities reported annually by certain industries, as well as federal facilities. A new analytical tool called TRI.Net is available to analyze TRI data.
University-Based Sustainability Centers and Institutes
Arizona State University Global Institute of Sustainability
Columbia University Center for Environment, Economy, and Society
Cornell University Johnson School Center for Global Sustainable Enterprise
Dartmouth College Allwin Initiative for Corporate Citizenship
Duke University Corporate Sustainability Initiative
Harvard University Center for the Environment
Initiative for Global Environmental Leadership at Wharton/Penn
Network for Business Sustainability
Stanford University Initiative on the Environment and Sustainability
University of Arkansas Sam M. Walton College of Business Applied Sustainability Center
University of Michigan Erb Institute for Global Sustainable Enterprise
University of North Carolina Kenan-Flagler School of Business Center for Sustainable Enterprise
Yale School of Forestry and Environmental Studies
Corporate Sustainability Web Sites
NGOs and Industry Organizations
Aspen Institute Business and Society Program
Green Chemistry and Commerce Council
ICLEI-Local Governments for Sustainability
United States Climate Action Partnership
World Business Council for Sustainable Development
Teaching Materials on Sustainability Topics
Aspen Institute Center for Business Education Caseplace.org
Darden Business Publishing, University of Virginia
Harvard Business Publishing, Harvard University
Richard Ivey School of Business, University of Western Ontario
Articles
Environmental right-to-know data such as the Toxics Releases Inventory (TRI) are used by regulators, NGOs and other organizations to prioritize their efforts to protect communities and natural systems. However, right-to-know regulations are complicated and not all information about environmental performance are required to be disclosed by all facilities. Understanding the value of right-to-know data for decision-making requires a clear understanding of the exactly what information the data convey. Using data from a state program, the Massachusetts Toxics Use Reduction ACT (TURA), this paper assesses what may be accurately concluded from frequently used environmental right-to-know data. The author examines the effect of reporting thresholds--levels of chemical use and manufacture below which a facility does not need to disclose releases of a chemical--on policy inferences that are frequently made with right-to-know data. She finds that the reporting thresholds create artificial declines in toxic chemical releases and can result in serious errors in comparing facilities' relative environmental performance. Environmental right-to-know data continue to be a critical source of information but must be reviewed with an understanding of how reporting thresholds impact conclusions drawn from these data.
]]>This year's theme is Passion and Compassion for Sustainability, which will explore: theorizing, researching and teaching sustainability with passion and compassion; new constructs and processes that can bring about positive change in business and society; and new methods for studying sustainability in positively deviant organizations and/or under extreme adversity. Learn more about the guest faculty and review the Call for Papers here.
All submissions will be evaluated through a double-blind review process. The selection committee includes both ARCS and PhD Sustainability Academy Faculty. The Network for Business Sustainability sponsors a Best Paper Award and a $500 cash prize.
For information contact Dr. Oana Branzei at obranzei@ivey.uwo.ca.