Companies and social activism: hypocrisy or "getting the job done"?
Consumers have become more socially-conscious and are expressing this through their spending habits. As a result, companies have responded to this by donating to good causes, making products with social and environmental benefits, and partnering with nonprofits for other charitable endeavors.
As the private sector becomes more involved in the mission to save the world, some people wonder whether this is done in earnest or if it's simply a case of companies mischievously jumping on the opportunity to get some nice and easy positive PR. However, does society really need them to get involved in activities that are technically the responsibility of governments? Are they doing this to "justify" some possibly morally-questionable business practices?
This topic was just too intriguing to pass on so I decided to take the challenge and write a blog post about it!
"Sex doesn't sell; activism does"
Although I cannot take the credit for that wonderfully provocative headline, it succeeded in tempting me to read this article by Alex Holder at the Guardian. It was this article that sparked my intrigue of the subject of corporate activism and philanthropy.
Holder talks about how (mostly big) companies are trying to outdo one another in acts of corporate generosity and, based on the data, he does seem to have a point. However, the catch is that "they’ll do good as long as they can make sure their customers know about it."
In spite of that, it's probably not very surprising to see companies engage in a sort of generosity arms-race. Research from Cone Communications found that 89% of consumers surveyed are likely to switch brands to one that is associated with a good cause, given similar price and quality. Better yet – and to elaborate on the #deleteUber episode – 88% of consumers surveyed said that if they learned of a company's irresponsible or deceptive business practices, they would stop buying its products.
This is where things get a bit controversial and people usually get a bit peeved off. Why? Because it seems like companies are contributing to the mission of saving the world not necessarily because they are society-loving beacons of social justice, but simply because they see that it is a means to a quite profitable end. Activism sells and research suggests that it also adds to a company's bottom line. That leaves us in a morally sticky situation that can be summed up in one (lengthy) hypothetical scenario:
Does it matter if company X creates products that have a terrible impact on the planet, has been found guilty of various scandals, and treats its employees poorly but donates tens of millions of dollars to a children's hospital or other charity?
Although I don't think charitable acts justify morally-questionable business practices or absolve the companies that do this of their sins, I do have the following opinion on the matter:
Give companies all the praise and adoration they want if that's what they need in order to continue investing in philanthropy and social activism.
Companies can declare themselves greater than Jesus himself as recognition of their charitable endeavors for all I care, as long as they continue to invest in social good and help people in need. Or do you rather have them spend hundreds of millions of dollars on 30-second Super Bowl ads?
If there's one thing I learned from studying economics (and, briefly, psychology) is that everything is about incentives. Companies maximize profits so they'll do anything that will achieve that goal. If charitable donations and philanthropy attract more customers because the majority of them are socially-conscious, then companies will dedicate more resources to doing these things. In other words, our actions as consumers incentivize companies to be more socially responsible, as the cases of #deleteUber, the Nike sweatshop controversy, and others demonstrate.
This means that all we have to do truly change the world for the better is incentivize companies to do the right thing by buying "responsible" products... right? Just buy organic food, ethically-sourced products, and environmentally-sustainable goods and all will be fine.
If only it were that black-and-white. I was completely convinced by this argument until I read the following (also quite provocative) article.
"Conscious consumerism is a lie: here's a better way to help save the world"
Alden Wicker throws a spanner in the works by completely going against this idea of changing the world through responsible consumerism. And she certainly doesn't mince words:
Told you it was provocative.
To be fair, she offers a very compelling argument that is impossible to ignore. She cites a 2012 study by Maria Csutora that found "no significant difference between the carbon footprints of green and brown consumers suggesting that individual environmental behavior does not always modify consumption patterns significantly. Consumers offset the impact of their environmental behavior by consuming more."
She even adds in a bit of humor by stating that buying ethical and sustainable products not only requires a sizable chunk of disposable income, but also arguably a "post-graduate degree in chemistry to understand the true meaning behind ingredient labels."
But let's return to her argument because I will admit that it disarmed mine so powerfully that it has left me with my tail between my legs. Heck, it even made me use an idiom as cheesy as that one.
This dovetails very smoothly with Csutora's research because it shows that because the system is configured to maximize consumption, any environmentally-conscious purchases that we make are offset by the fact that we want more, bigger, and '2-hour-shipping' faster. Therefore, Wicker argues that to achieve the dramatic, society-defining change that we so strongly desire, we need radical systemic rather than individual change. This systemic change cannot come from individuals merely buying organic food or products made from recycled materials; it has to come from higher up the social system.
Specifically, Wicker's suggests the following:
In fairness, I think we can accomplish profound societal change through changes in individual consumer behavior. Wicker seems to agree with this when, towards the end of her article, she urges people to not just stop making positive consumer purchases and say "well, I guess I give up then!"
Nevertheless, I do agree with her that individual consumer change is probably not as effective at changing the world as supporting/passing legislation that bans harmful chemicals or the use of plastics is. To say it simply, one solution relies on each individual going out of his/her way to do the right thing every day while the other (rightfully) doesn't trust people to do this and thus uses legislation to do the hard work for them. This way, they don't face the psychological test of willpower of having to make these decisions every day.
Conscious consumerism isn't a panacea then. It's merely one piece of the very large and challenging puzzle.
The Norwegians: HYPOCRITES?
As you may know, I'm a big fan of the Freakonomics podcast. One of their more intriguing episodes was about the mystery of how tiny, lovely Norway – with a population of just over 5 million – is the second-biggest market for Tesla cars. Yes, teeny, tiny Norway is the second-biggest market for those outrageously beautiful and futuristic $70,000 Tesla cars.
Norway's government, at the time of the podcast recording, heavily subsidizes electric vehicles through income tax breaks, free parking, free toll roads, and waived registration fees for Tesla owners. Hence, when all these benefits are factored into the equation, Norwegian citizens end up paying almost the same for Teslas as they do for gasoline cars.
But you don't care about Teslas, so you're probably wondering why on earth I'm telling you this and what it has to do with this blog post. I can answer that question with one simple sentence from one of the Norwegian citizens interviewed for that podcast episode:
This is very similar to my earlier point regarding how upset people are with companies that pledge allegiance to social activism and charity with one hand but sell products that have a terrible impact on the environment with the other. Norway's situation caught my eye because this alleged hypocrisy is at the governmental instead of merely the corporate level. How much can Norwegians reconcile the fact that while their government proudly and heavily subsidizes planet-friendly initiatives like Teslas, it is only able to do so because it is one of the largest distributors of extremely harmful fossil fuels? Do their ends justify their means?
Once again, I'm inclined to shrug my shoulders and say "who cares?" The truth is that Norway is investing in a greener future for its citizens. Therefore, if the country's "hypocrisy" of washing its fossil fuel-stained sins clean with green initiatives rubs people the wrong way, then so be it.
Is the pursuit of profit immoral?
This is a question that, as an economist, has been bothering me for years now, mostly due to the Great Recession and its devastating impact on society. Today we see the so-called Big 5 – Apple, Amazon, Alphabet (Google), Facebook, and Microsoft – sitting on absolutely mind-boggling amounts of cash. Although data from various sources don't agree on the exact figure, estimates suggest that these five firms have close to half a trillion dollars (+/- $500 billion) in cash reserves which, after deducting for debt, comes down to approximately $330 billion.
As the great Wu-Tang Clan once said, Cash Rules Everything Around Me.
However, the most important lesson I learned from writing my thesis last year is that the greatest social good a company can do is to be profitable. Why? A profitable company creates jobs, pays taxes (most of the time?), and spurs economic activity; so as much as I love to viciously criticize these firms (believe me, I really do love to) for hoarding ungodly amounts of cash, I do have to recognize that they are creating huge prosperity in society.
Yet in spite of my gratitude for the societal prosperity that these companies create, I am still compelled to ask this question: is the pursuit of this much profit – to the point where one wonders whether it is to the detriment of society – an immoral endeavor? Given this, is it still fine that these companies use charitable donations to "justify" these profits?
I don't think I've ever posed so many unanswered questions in a blog post so I leave it up to you, dear reader, to answer them for me. What do you think? Is social activism and corporate philanthropy by the private sector honest, opportunistic, a necessary evil, or none/all of the above? Has the pursuit and accumulation of profits gone too far? What about those Norwegians and their Teslas?
See you, Space Cowboy.