Roosevelt Institute | Cornell University

Buying Into Sustainability

By Hilary YuPublished March 24, 2014

The economy and environment are not as antithetical as many would believe. In many ways, the market provides a strong framework for pursuing long-term sustainability.

By Hilary Yu, 3/24/14:

Socio-ecological coherence is a complex, multidimensional system centered on finding an optimal balance among social institutions, human actors, and the environment. Although the system distinctly emphasizes material and ethical concerns, the dimensions do not necessarily operate separately. Rather, in seeking to achieve socio-ecological coherence, market relations should be tempered by ethical considerations.

 In The Great Transformation: The Political and Economic Origins of our Time, Karl Polanyi notes that it is dangerous to allow the market to grow endlessly  or to operate by self-regulation as there are "innumerable forms of private and public life that do not affect profits" (Polanyi 133). Because these aspects of society (such as, but not limited to, family life, pollution, and the arts) do not contribute to profit maximization, they are either ignored or overwhelmingly exploited in a laissez-faire, free-trade market, where profits are the goal. With a sole focus on maximizing profits, liberal economic models provide no incentives for businesses to account for such external concerns as providing health insurance to their employees or mitigating the carbon dioxide they release into the atmosphere. According to Polanyi's double-movement theory, societies will seek to counter unchecked market actions by pursuing government interventions that provide social protection. Thus, for Polanyi, there is a sort of natural co-evolution between economics and social protectionism.

 Polanyi's double-movement theory supports the idea that markets should not operate in isolation, unchecked. In terms of protecting the environment, while markets can bolster environmental governance, it is difficult and unlikely that markets will independently facilitate an environmentally-conscious corporate culture. For example, eco-industrial parks (EIPs) aim to "[minimize] waste produced by the larger system as a whole" by having the waste output of one company become another company's input (Gibbs et al. 173). In an EIP in Kalundborg, Denmark, "sludge from the fish farm and the pharmaceutical processes [became] fertilizers for nearby farms" (Gibbs et al. 174). In a competitive market, however, communication between businesses and corporations is often difficult to achieve. As communication is important in the integration of processes vital to creating an eco-industrial park, coordinating the creation of an EIP would be difficult in such a market. Even more generally, the competitive nature of markets also makes companies that practice sustainable management of their market resource more vulnerable to corporate take-overs.

 However, governments and consumers can mitigate markets' disadvantages to environmental governance through the pursuit of self-interests and profit by placing limits on markets. These limits foster sustainable societal-environment interactions by incentivizing corporations and businesses to pursue environmentally-responsible activities that are still profitable.

 Consumers are able to place limits on markets by tailoring their demand habits. If grocery shoppers demand products that are eco-certified or organic, businesses will be compelled to provide those goods to maximize their profits. Similarly, ecologically-minded consumers can exercise their influence by purchasing products from corporations that have achieved a triple-bottom-line certification. Businesses that pursue a triple-bottom-line commit to practices that are socially just and environmentally sustainable, as opposed to the more traditional goals of maximizing profits, investment returns, and shareholder value.

 The government can also place limits on markets to encourage sustainability. A popular method has been a cap-and-trade system for practices that generate negative externalities, such as pollution. In a cap-and-trade system, the government places a limit, or cap, on the level of pollutants that a firm can emit. Firms are then allotted a certain number of pollution permits and firms that produce fewer emissions can sell their extra permits to those companies that pollute above the imposed limit. At the federal level, cap-and-trade systems have effectively been used by the EPA as a market tool to reduce acid rain in the United States, with limits set on nitrous oxide and sulfur dioxide emissions. On a smaller scale, cap-and-trade has been used to limit greenhouse gases in California and, through the Regional Greenhouse Gas Initiative, by states along the northeast. Although there is yet to be a national cap-and-trade system for greenhouse gases, the EPA has more recently released a proposal for carbon pollution standards to limit carbon pollution from new power plants.

Markets are a key component of the basis for socio-ecological coherence and can help create a more coherent system if appropriately utilized within an "ethical" framework that is shaped by limits imposed by government and society. Individual demand drives market activity, which can be harnessed to minimize environmental destruction. Consumers can play a vital role by shifting their purchasing power in support of sustainably-oriented businesses.

Although limited markets can facilitate more environmentally responsible behavior, the most effective, yet elusive, solution would be a movement away from our society's current emphasis on consumption as the "key to happiness," and towards a paradigm that "more is less." As Einstein once said, "problems can't be solved within the same mind-set that created them."