Have you ever thought about the negative impact your business or industry has on the environment or community? Pollution, waste, over consumption of limited resources, habitat destruction, improper disposal practices, time away from families, standards of living declining, etc all effect our world. You want your kids to thank you, not blame you, for the world you leave them. Don’t be a part of the problem, be part of the solution.
Many companies are seeing these negative externalities as opportunities to position themselves against them which can bring about good press and increase sales.
For example, Patagonia, a sports and outdoor clothing and gear manufacturer, was growing tons of raw materials with pesticides, contaminating the earth, reaping the soil of its nutrients, and polluting the air just like any other clothing manufacturer. Patagonia was aware of these negative consequences of production and began to take steps to minimize their impact on the environment.
Their “The Footprint Chronicles” section on their website tracks the environmental footprint of their products, to create awareness about the consequences of consumption to encourage consumers to consume wisely and reuse. They also publish detailed instructions on how to repair and take care of garments to aid in lasting longer to keep them out of the landfills.
They inducted environmental sustainability as part of their core mission and began several initiatives to support their new position. Their “Product Lifecycle Initiative” program minimized consumption by encouraging customers to repair or donate their old clothing to get more use out of it. If it was beyond ever getting worn again then Patagonia paid the postage for its customers to mail them their garments so that they could be properly recycled. They used up less raw materials than their competitors by making their garments multi-functional and eventually decided to source organic cotton to reduce the use of pesticides. They donate
about $3 million every year to environmental causes through their “One Percent for the Planet” program and only source from suppliers that also commit to their cause by volunteering on an environmental project every year. They offer their employees a paid sabbatical leave for anyone wanting to volunteer for an environmental organization for a month. More radically, they donated $10 for every picketer outside their doors who didn’t support their Planned Parenthood stance to anti-organizations in the name of the picketer because overpopulation leads to overconsumption. They also own and operate “green” facilities, set with solar panels and natural heating and cooling systems to conserve energy consumption.
Numi Tea has also taken strides in reducing their environmental impact. They only source organic teas to discourage the use of pesticides and “use recyclable cardboard outer packaging made of 85% post-consumer waste and printed with soy-based inks” as well as “biodegradable filter-paper tea bags rather than nylon or GMO-orgin tea sachets.” For their gift boxes they use bamboo grown primarily by women as it grows back faster.
Starbucks follows their self created C.A.F.E. Practices which are a set of guidelines to achieve product quality, economic accountability, social responsibility and environmental leadership.
The Body Shop, considered a pioneer of modern corporate social responsibility, was one of the first companies to publicize its efforts and initiatives in a report. It champions animal rights by petitioning against animal testing, an unfortunate practice in its industry. By leading by example and being profitable, The Body Shop has paved the way for other business to follow suit. They also started a “Bio-Bridges” project which restores 1 meter of rainforest for every purchase made. This supports sustaining bio-diversity, protect endangered species, and allows local communities to still thrive. Additionally, they ensure that at least 70% of their packaging materials doesn’t contain fossil fuels which is said to contribute to global warming.
Following these social and environmental business leaders, here are
15 Ways to Turn Your Negative Externality into a Positive Impact:
1. Educate yourself on the negative impacts or externalities that your industry or businesses having.
2. Create awareness in others through employee programs and consumer facing publications.
3. Subsidize or reward socially responsible practices.
4. Create multi-functional products that use less raw material.
5. Donate a portion of your proceeds to a cause.
6. Repair. Reuse. Reduce. Recycle.
7. Create “green” buildings and practices.
8. Source from socially and environmentally responsible suppliers.
9. Partner with 3rd party organizations that set and audit process and production standards for social responsibility.
10. Source organic.
11. Use recyclable packaging.
13. Replace what you destroy.
14. Use renewable resources over fossil fuels.
15. Encourage no more than 40 hour work weeks to support family time by only planning work that can be done in that time frame and acknowledging that work when completed on time.
Reinhardt, Forest et al. “Patagonia.” HBR Case Study. October 19, 2010.
“Eco-Responsibilty.” Numi Tea. 2017.
“Ethical Sourcing: Coffee.” Starbucks. 2017.
“Bio-Bridges.” The Body Shop. 2017.
“Deforestation” photo. Angela Marie. Flikr. 2011.
4 thoughts on “Negative Externalities Can Be Opportunities”
Rebecca, nice effort in putting what we learned in MBA classroom into something meaningful in business world!
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