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  • 1. Zahringer   1   Critical  Analysis  &  Discussion:  Climate  Change  is  a  problem  of  Ethics       By,  Lauren  Zahringer       It  may  be  that  the  future  will  be  shaped  not  only  by  competitive  economic  growth,   but  also  by  potentially  disruptive  scarcities  and  the  consequences  of  human  induced   climate   change   (Atkinson,   2010).   The   fact   that   the   earth   is   heating   up,   or   that   resource  consumption  is  unsustainable  is  not  news.  Climate  scientists  have  noted   concerns   about   the   buildup   of   carbon   dioxide   in   the   atmosphere   and   the   consequences   of   this,   along   with   many   other   aspects   such   as   deforestation,   pollution,   etc.,   for   at   least   three   decades.   (Hulme,   2009).   What   is   news   is   how   devastating  and  rapid  these  changes  may  be.     David  Orr  (2009)  believes  we  are  looking  at  nothing  less  than  the  collapse  of  human   civilization.  As  Orr  sees  it,  the  cause  of  this  potential  calamity  is  our  refusal  to  live   with-­‐in   natural   limits,   our   political   negligence   in   the   development   of   and   dependency   on   an   economy   rooted   in   consumption,   and   our   gross   negligence   in   considering   the   well   being   of   future   generations.   The   conclusion   then,   is   that   we   must  act.    But  how  do  we  even  begin  to  think  about  this  situation?  The  ways  we  do   so  vary  greatly  and  they  shape  the  solutions  we  believe  are  possible.     There  are  many  proposed  scripts  outlining  solutions  to  climate  change.  This  essay   considers  one  proposal,  which,  although  not  formally  labeled,  will  be  referred  to  as   the  Benefit  Corporation  solution.  This  two-­‐stage  solution  argues  that  we  must  use   for-­‐profit  business  to  solve  social  and  environmental  problems  that  both  cause  and   are  caused  by  climate  change  and  conditions  stemming  from  climate  change.  The   first  stage  requires  creating  a  new  type  of  business,  one  that  is  legally  incorporated   to  maximizing  a  triple  bottom  line.  The  second  stage  is  the  increase  in  numbers  and   influence  of  this  new  type  of  business,  ultimately  producing  a  fourth  sector  of  the   economy  and  enabling  the  power  of  business  to  be  unleashed  for  the  betterment  of   society.     This   essay   evaluates   the   strengths   and   weaknesses   of   the   Benefit   Corporation   solution  in  the  context  of  the  United  States.  The  first  section  presents  a  discussion  of   the   theories   that   frame   the   problem   of   climate   change.   Building   upon   this   theoretical   foundation,   the   second   section   outlines   the   specific   components   and   assumptions   of   the   Benefit   Corporation   solution.   Section   three   identifies   and   evaluates   the   strengths   and   weaknesses   of   the   Benefit   Corporation   for   “solving”   climate  change.          
  • 2. Zahringer   2   1.0:  Framing  Climate  Change     As  with  most  complex  problems  Climate  change  is  multi-­‐faceted  and  can  be  seen  as   problem   from   many   different   views   depending   on   the   frame   of   reference   from   which  it  is  being  viewed.  It  is  argued  here  that  the  Benefit  Corporation  is  a  social,   market  and  behavioral  solution  that  frames  climate  change  as  an  ethical  issue.    This   section   will   first   discuss   three   theoretical   framings,   ecological   agency,   the   stakeholder   theory   of   the   firm,   and   the   sustainable   economy   that   situate   climate   change   as   an   ethical   issue,   which   requires   both   a   social,   behavioral   and   market   response  and  elucidate  the  rationale  of  the  benefit  corporation  solution.   The   Benefit   Corporation   solution   calls   for   addressing   climate   change   through   rethinking  the  ideas,  values  and  actions  that  are  at  the  most  fundamental  level  of   modern   American   society:   capitalism,   and   for   profit   business.   Therefore,   it   is   proposed  that  climate  change  is  framed  as  an  ethical  issue.        The   dictionary   of   human   geography   defines   ethics   as     “that   part   of   philosophy   concerned  with  the  worthiness  of  human  actions  and  of  systems  of  belief  regarding   what   people   ought   to   do.   Questions   regarding   our   duties,   obligations   and   responsibilities  fall  within  the  purview  of  ethics.  Ethics  concern  not  only  the  actions   of  individual  people  but  social,  economic,  and  political  structures  and  arrangements   that   also   affect   human   and   non-­‐human   beings.”   The   framework   found   most   appropriate  in  understanding  the  grounds  for  the  Benefit  Corporation  proposal  is   normative   ethics,   and   specifically   utilitarianism.   It   is   through   this   lens   that   the   discussion  of  relevant  theories,  ecological  agency  and  the  stakeholder  theory  of  the   firm,   are   explained.   The   following   section   discusses   these   three   theories   to   show   how,  when  applied  to  the  larger  problem  of  climate  change,  the  particular  ethical   dilemmas  of  climate  change  can  be  engaged  through  businesses.       Ecological  Agency   Ecological  Agency  comes  from  the  field  of  Environmental  sociology  which  focuses   on   understanding   and   overcoming   the   separation   between   material   and   social   systems,   arguing   that   this   dividing   line   in   an   intellectual   construct   that   can   be   analytically   convenient   in   the   proper   circumstances.   However,   the   profuse   reification  of  this  illusory  divide  by  society  at  large  is  a  threat  to  the  planet's  life   support  systems  as  it  creates  a  division  of  false  perception  of  the  human  and  non-­‐   human  world’s  as  less  than  complementary.  The  pressing  importance  of  dispelling   this  illusion  is  that  the  maintenance  of  such  a  perspective  threatens  the  wellbeing  of   humans  and  the  environment.  (Redclift,  2010)     Presently,  human  beings  are  capable  of  altering  the  composition  of  the  atmosphere,   modifying  the  earth's  nutrient  cycles  and  causing  major  biodiversity  extinctions.  For   the  first  time  we  are  not  only  the  agents  of  social  change  and  ecosystem  change  at   the  local  level  but  also  the  main  agents  affecting  the  dynamic  evolution  of  the  global   environment.  In  the  International  Handbook  of  Environmental  Sociology,  Buzinde  
  • 3. Zahringer   3   and   Navarrete   (2009)   conclude   that   this   unprecedented   power   suggests   a   new   agency   that   goes   far   beyond   the   discussion   of   how   individuals   affect   social   structures;  this  task  of  transcending  the  human-­‐nature  divide  set  by  environmental   sociology  requires  thinking  in  terms  of  a  novel  form  of  human  agency  -­‐ecological   agency.  (Buzinde,  Manuel-­‐Navarrete,  2009,  Pg.  306-­‐336)       Stakeholder  Theory  of  the  firm   What   is   the   purpose   of   the   modern   corporation   and   to   whom,   or   what   should   business   be   responsible?   (Lawrence   and   Weber,   2010)   There   are   many   possible   answers,  but  whatever  the  answer  to  this  question  is  at  the  heart  of  the  relationship   between  business  and  society.  In  the  Unites  States  corporate  law  dictates  that  the   answer  is  profit  maximization,  as  explained  by  the  ownership  theory  of  the  firm.  In   the  ownership  theory  of  the  firm,  the  firm  is  seen  as  the  property  of  its  owners  and   thus   the   purpose   of   the   firm   is   to   make   the   most   amount   of   money   it   can   for   shareholders.   Under   the   ownership   theory   of   the   firm,   managers   and   boards   of   directors  are  agents  of  shareholders  and  have  no  obligations  to  others,  other  than   those  directly  specified  by  law.  (Lawrence  and  Weber,  2010)  In  this  view  owners’   interests  are  paramount  and  take  precedence  over  the  interests  of  others.     Yet  corporate  law  requiring  firms  to  maximize  financial  profits  has  been  a  catalyst   for   human   and   environmental   exploitation   by   business,   owing   to   the   fact   that   externalizing  as  many  costs  as  possible  is  a  time  tested  method  for  increasing  the   bottom   line.   (Chouinard   et   al.,   2011)   But   over   the   past   few   decades,   a   new   view   towards   the   relationship   between   business   and   society   has   emerged   called   the   Stakeholder   Theory   of   the   firm.   Under   the   stakeholder   theory   the   purpose   of   corporations   is   to   serve   a   broad   public   purpose:   to   create   value   for   society.   (Donaldson  &  Preston,  1995)  Still  firms  are  for-­‐profit,  and  must  make  a  profit  for   their  owners;  indeed,  if  they  did  not,  they  would  not  long  survive.       However,   corporations   create   many   other   kinds   of   value   as   well,   and   need   to   be   accountable  for  creating  value  for  people  and  the  planet  too,  a  perspective  known  as   a  triple  bottom  line.    This    theory    is    implemented    in    the    solution    of    presented    by     Benefit    Corporations.    The  stakeholder  theory  proposes  that  it  is  in  the  best  interest   of   business   also   to   consider   all   stakeholders   and   implement   self-­‐enlightened   management  perspective  to  protect  and  renew  the  global  commons.       Stakeholder  Capitalism  &  the  Sustainable  Economy     The  idea  of  stakeholder  capitalism  is  that  upon  reflection  of  the  nature  and  impact  of   shareholder  capitalism,  it  is  concluded  that  this  capitalist  system  does  not  seek,  or   oblige   itself   in   anyway   to   benefit   society,   it’s   only   loyalty   is   to   shareholders,   as   clearly  known  in  the  shareholder  theory  of  the  firm.  Stakeholder  capitalism  is  built   upon   the   idea   that   shareholder   capitalism,   in   light   of   growing   environmental   concern   and   social   inequality,   is   obsolete.   This   proposition   complements   Hulme’s  
  • 4. Zahringer   4   proposal   that   a   solution   to   solve   climate   change   should   include   an   alternative   to   global   capitalism   (Hulme,   2009).   Stakeholder   capitalism,   and   its   sustainable   economy,  is  an  example  of  one  such  alternative.     The  feature  article  of  the  October  2011  edition  of  the  Harvard  Business  Review  took   to  task  describing  its  Big  Idea:  Sustainable  Economy.  “Collectively  we  have  not  been   making   progress   on   reducing   the   damage   business   does   to   the   world.   Admirable   companies  have  launched  inspiring  initiatives,  but  the  negative  impacts  of  business   activity  continue  to  grow.  The  problem  is  simple.  It’s  generally  cheaper  to  buy  the   product   that   has   a   worse   impact   on   its   environment   than   the   equivalent   product   that   does   less   harm.     Higher   cost   to   planet   does   not   translate   to   higher   price   to   customer.”   (Chouinard   et   al,   pg.1,   2011)   The   sustainable   economy   3.0   as   it   is   termed,  would  be  one  where  prices  of  products  and  services  increased  as  the  price   of  negative  impact  to  the  environment  increased,  and  vice  versa.  The  Sustainable   Economy  system  would  self  regulate  by  market  demand.  The  sustainable  economy   would   be   the   economic   model   at   the   core   of   a   stakeholder   capitalism   system.   (Chouinard  et  al.,  2011)     The  Benefit  Corporation  solution  proposes  the  new  type  of  corporation  to  be  the   vehicle   for   developing   and   the   institution   compromising   a   new   sector   of   the   economy   that   is   built   upon   the   framework   of   Stakeholder   capitalism   and   the   sustainable  economy  model.    In  a  TEDx  talk  on  December  1,  2010  Jay  Gilbert,  the   brainchild   of   the   Benefit   Corporation   movement,   and   founder   of   the   nonprofit   B-­‐ Lab,   explained   to   the   audience,   “The   new   sector   of   the   economy   exists   in   B   Corporations,   the   manifestation   of   stakeholder   capitalism   in   a   new   type   of   corporation  that  we  can  build,  invest  in  and  work  for.    Whether  its  micro  finance,   organics,  sustainable,  clean  techs,  to  buy  local...it  is  all  the  same  idea,  how  do  we  use   business  as  a  tool  for  social  change?”       2.0:  Benefit  Corporation  Solution     This  details  the  structure  and  components  of  the  how  the  Benefit  Corporation  can   solve  climate  change.  The  solution  presented  rests  upon  specific  assumptions  on  the   nature   of   business   and   the   environment,   and   the   relationship   between   the   two.   Therefore   it   is   necessary   to   first   identify   the   assumptions   inherent   in   the   proposition.       Assumptions:  Responsibility  of  Business     The   Benefit   Corporation   solution   proposes   specific   accountability   of   business   defined   in   the   words   of   David   Korten,   “Business   has   become   the   most   powerful   institution   on   the   planet.   The   dominant   institution   in   any   society   needs   to   take  
  • 5. Zahringer   5   responsibility  for  the  whole.  Every  decision  that  is  made,  every  action  that  is  taken,   must  be  viewed  in  light  of  that  kind  of  responsibility”  (Korten,  1996).       Surveying  recent  history,  the  oil  industry’s  environmental  disasters  from  Alaska  to   the  Gulf  of  Mexico,  the  pulp  and  paper  industry’s  deforestation,  or  agro-­‐business’   degradation   of   arable   land,   it   is   clear   that   business   has   long   been   part   of   the   problem  in  the  relationship  between  society  and  environment.  Benefit  Corporations   are  turning  this  image  on  its  head  and  are  proposing  now,  that  business  be  a  leader   for   the   solution   of   environmental   and   social   problems   on   the   assumption   that   governments   and   nonprofits   are   necessary   agents   for   change   but   are   insufficient   and   thus   the   power   of   business   must   be   used   to   address   society's   greatest   challenges.  (Lawrence  &  Weber,  2010)         (Accessed  from  www.Benefitcorp.net)       The  about  section  of  the  Benefit  Corporation  website  outlines  the  specific  meaning   of  and  goals  of  benefit  corporations.  There  are  two  specific  and  different  ways  that   Benefit  Corporations  engage  with  business.  Each  will  be  outlined.     The  first  strategy  is  introducing  Benefit  Corp  legislation  that  creates  the  option  for   legally   incorporated   Benefit   Corporation.   As   specified   in   the   publically   accessible   White  Papers,  “the  Benefit  corporation  has  three  important  features:  1)  creates  a   material  positive  impact  on  society  and  the  environment;  2)  expands  fiduciary  duty  
  • 6. Zahringer   6   to  require  consideration  of  non-­‐financial  interests  when  making  decisions;  and  3)   reports  on  its  overall  social  and  environmental  performance  using  recognized  third   party   standards.”   Through   this   strategy   Benefit   Corporations   aim   to   redefine   corporate  accountability.     The   second   strategy   is   the   B   Corporation   certification   scheme.   A   “certified”   B   Corporation   is   in   a   sense   synonymous   to   a   certified   LEED   building,   the   process,   qualifications,  and  terms  of  certification  are  detailed  but  overall  the  features  of  the   Certified   B   Corp   are:   1)   Certified   B   Corporation   must   meet   transparent   and   comprehensive   standards   of   social   and   environmental   performance;   2)   be   committed   to   amplifying   the   voice   of   sustainable   business   and   for-­‐profit   social   enterprise   through   the   power   of   the   unifying   B   Corporation   brand.   Through   the   second  strategy  the  benefit  corporation  movement  is  influencing  society  by  building   support   for   businesses   to   be   better,   and   consumers   to   be   able   to   distinguish   between  green  washing  and  marketing,  and  actual  truth  in  business  claims.       Each   of   these   strategies   is   autonomous,   yet   in   union.   Taken   together,   these   initiatives   define   the   overarching   mechanisms   and   proposals   of   the   Benefit   Corporation   solution.   The   Benefit   Corporation   movement   is   just   two   years   old,   making  it  quite  new,  and  aside  from  blog  and  mainstream  news  coverage,  there  has   been  no  rigorous  academic  research  on  the  meaning,  impact,  or  feasibility  of  any   aspect  of  its  operations,  evaluations,  or  analysis.  However,  the  system  works,  so  to   say.   To   date   there   are   over   500   companies   that   are   either   certified   Benefit   Corporation,   or   incorporated   as   a   Benefit   Corporation.   Twelve   U.S.   states   have   passed   legislation,   and   many   are   in   the   process,   (Benefit   Corp.   Website).   But   the   question  remains,  how  does  the  Benefit  Corporation  stand  as  a  solution  to  climate   change?       3.0:  Strengths  and  Weaknesses     Strengths     Overall   the   strength   of   the   Benefit   Corporation   as   a   solution   for   solving   climate   change  is  that  it  is  in  that  it  goes  ‘beyond  climate  change’  (Hulme,  2009,  pg.  361).  In   the  concluding  thoughts  of  ‘Why  We  Disagree  About  Climate  Change’  Hulme  (2009,   pg.   361-­‐362)   writes,   “The   idea   of   climate   change   should   be   used   to   rethink   and   renegotiate  our  wider  social  goals  about  how  and  why  we  live  on  this  planet.  We   need  to  harness  climate  change  to  give  new  expression  to  some  of  the  irreducible   and  intrinsic  human  values  that  are  too  easily  crowded  out…We  need  to  use  climate   change  to  rethink  how  we  take  forward  our  political,  social  and  economic  systems.”   Climate  change  is  dynamic  and  complex,  and  if  nothing  else  represents  in  the  most   simple  terms  an  imbalance.    
  • 7. Zahringer   7   The  strength,  then,  of  the  Benefit  Corporation  solution  is  that  it  calls  for  a  further   evolution   of   systems,   and   an   inclusion   of   new   ways   of   thinking   and   acting,   and   organizes   a   road   map   for   change   that   is   reasonable,   accessible,   and   feasible.   It   is   logical  and  proposes  rewarding  practices  that  are,  well,  worthy  of  reward,  such  as   creating   measurable   benefits   for   people   and   the   planet.   It   creates   a   standard   of   practice  that  can  catalyze  investment  and  support  for  better  ways  of  doing  business   across   industries:   manufacturing,   production,   retail   and   services,   for   example.   However,   whether   it   can   “solve”   climate   change,   or   whether   it   will   gain   enough   support  to  be  of  significance  is  another  question  all  together.       Weaknesses     The  weaknesses  of  the  Benefit  Corporation  solution  for  solving  climate  change  are   that   it   is   highly   unlikely   that   the   most   concentrated   and   influential   power   of   business,  which  is  held  by  multi-­‐national  corporations  and  oil  companies,  will  be  a   force  for  good,  or  would  take  the  task  of  reincorporating  to  a  triple  bottom  line.  In   addition,   the   lower   returns   will   most   likely   stall   or   cripple   true   large-­‐scale   investments   because   the   financial   industry   and   financial   reporting   is   in   its   own   nature  short  term  oriented.       Summary     Introducing   new   legislation   and   expanding   the   legal   protection   of   business   that   choose  to  commit  to  a  triple  bottom  line  may  very  well  be  what  makes  the  Benefit   Corporation  proposal  a  viable  solution  for  climate  change.  All  in  all,  the  breadth  of   meaning  developed  and  effect  in  action  from  the  people  behind  the  conception  of   the   Benefit   corporation   movement   is   admirable   in   the   least.   It   is   suggested   that   further  research  is  needed,  even  if  only  to  bring  the  subject  and  ideas  the  benefit   corporation   proposes   into   current   discussions.   All   in   all   in   content   the   solution   proposed  by  the  benefit  corporation  is  a  strong  one  for  solving  climate  change,  if  it  is   to  be  ‘solved.’  However,  in  practice,  it  is  unsure  whether  the  ideals  and  motives  will   survive  the  test  of  time.                          
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