Measuring Sustainability Practices

An important portion of my project includes asking my survey respondents to identify which of two companies in a pair manufactures its products in a sustainable way. Of course, an objective standard of "sustainability" is hard to come by, so how could I truly ask my respondents to differentiate these companies?

One of the best known sustainability measures is the Dow Jones Sustainability Index, which was launched in 1999 to enable people to track the financial performance of the leading sustainability-driven companies. Each year it releases a review of the companies in the index and ranks them based on their environmental, economic, and social performance. The companies, of course, use their nomination to get a little good PR about their eco-friendly behavior. Research suggests, however, that DJSI tends to have a large cap bias. In other words, it tends to be biased toward larger corporations. (Cerrin & Dobers. (2000). What does the Dow Jones Sustainability Group Index tell us?)

Joel Makower of GreenBiz.com notes that consumers shouldn't get too excited if a company is named to the DJSI because "it isn’t really a marker for 'green.'" Although he agrees that there may be some truth to DJSI claims that these companies are the "leading sustainability-driven companies," Makower also notes that being named as a component of the DJSI doesn't necessarily mean that these companies have comprehensive green policies and practices, let alone performance. (Is the Dow Jones Sustainability Index Worth a damn? @ grist.org)

In the absence of any truly objective measure of sustainability, I wanted to make sure the companies I chose for my pairings could reasonably be distinguished by their commitment to sustainability. In order to do this, I spent a lot of time reading through company reports like 10ks, sustainability & CSR reports, corporate labor codes, and annual reports to try to get an understanding of each company's practices in three areas, respectively: environmental impacts, labor standards, and community engagement.

In the following posts, I will detail the 6 pairs of companies I have selected for this project. By exploring each company's commitment to protecting the environment, upholding labor standards, and benefiting the communities they are located in, I hope to present an accurate picture of the company's sustainability efforts. Since the pairs were selected based on how differently the companies operated, the information should give the reader a good idea of which company should be voted the "most sustainable" of the pair.

Corporate Pairs

My last entry on research methodology noted that one portion of the survey I will administer is a series of six advertisement comparisons. After viewing each pair, the survey respondent will be asked to identify which product in the pair is likely to be manufactured by a company that operates in an environmentally and socially sustainable way and explain his reasoning.

Before I post an entry elaborating on which companies are which, I encourage all of you to look through the advertisements I have selected and think about these comparisons for yourself. Can you identify the sustainable product effectively?

Visit https://depot.northwestern.edu/adh712/Advertisements/?view=RSS to view the media files

Sun Chips vs. Kettle Chips

Green Mountain Energy vs. Clean Coal

American Apparel vs. Urban Outfitters

Haagen Dazs vs. Ben & Jerry’s

Chipotle vs. Chiquita

Adidas vs. Timberland

Research Methods

In Theory 101, we discussed greenwashing briefly. You were given the example of Royal Dutch Shell's advertising campaign, where the company boasted of its commitment to sustainability and investments in alternative energy while simultaneously selling off the majority of their alternative energy investments. The non-profit agency CorpWatch found this type of behavior so common that they created a bimonthly Greenwash award. Recipients are corporations that put more money, time, and energy into promoting their eco-friendly images than actually protecting the environment. The term “greenwashing” is used to describe the process whereby an environmentally destructive corporation attempts to preserve or expand their market share by posing as environmental stewards. In current literature, there does not seem to be a commonly accepted term for falsifying or omitting the negative social impacts of products.

This type of behavior on the part of corporations is probably detrimental to American consumers (Dragon, 1991, Carrigan & Attalla, 2001). Although there has been little research on the matter, it seems plausible that misleading or confusing information about the social and environmental impacts of company products prevent consumers from attaining the information they need to effectively purchase sustainable products. Indeed, there is some evidence that this is already the case. According to research by the National Consumer Council, although individuals seem to be concerned about sustainability and may want to buy responsibly made products, people are unsure of what sustainable consumption entails in practice (Holdsworth 2003).

My research seeks to investigate this phenomenon further by evaluating to what extent American consumers are able to apply their knowledge of sustainability to accurately assess the sustainability impacts of ubiquitous goods. If consumers have difficulty identifying sustainable products, then impacts follow. For instance, greenwashed goods could generate competitive pressures that may force down the price of high value goods. This effect would drive genuinely sustainable goods out of the market or at least prevent sustainable companies from growing their businesses, regardless of increased consumer demand.

Research Methods:

I have devised an experiment designed to test a respondent’s ability to distinguish between the sustainability impacts of two products. Respondents will be asked to differentiate these products by thinking about the general sustainability practices of the companies that produce the respective products. The survey will be administered electronically but in a central location Northwestern’s campus. Currently I intend to obtain permission from SESP faculty to utilize conference rooms in Annenberg Hall to administer my study (See Appendix A for an example of the survey instrument). Because the definition of “sustainability” can be tenuous, I will present a definition of sustainability at the outset of the survey[1]. In order to keep respondents thinking about this single, coherent definition of sustainability, I will provide respondents with this definition along with other key definitions for the duration of the survey.

The first eight questions of this survey are intended to segment respondents based on how much they know and care about sustainability as a general concept. They will be asked about their own purchasing habits as well as about their objective knowledge of sustainability, like knowledge of eco-labels. After this portion of the survey, respondents will view 6 pairs of advertisements that have appeared recently on television or in print. Survey respondents will be shown one pair of these advertisements initially, but will proceed through all six pairs in time, one after another. If the advertisement is a short video, the pair will be shown one clip at a time, but these two clips will be displayed next to each other on the screen, inviting the respondent to make use of the provided material in answering the final question.

The pairings consist of two companies that manufacture similar products. One company in each of these pairs has been identified as committed to sustainability, while the other had taken almost no decisive action in favor of these principles, although they may have advertised that they have. Companies are said to be committed to sustainability in that they are making conscious efforts to reduce waste, maintain the natural world, benefit the communities they are located in as well as enhance the livelihoods of those individuals include in their supply chain like farmers, subcontractors, and factory laborers. I have extensive notes on these six companies and corporate practices regarding human rights, environmental protection, and community engagement. These notes will serve as a way to establish a sort of objective standard about the sustainability commitments of these companies.

One would assume that individuals who exhibit more knowledge of and commitment to sustainability during the initial part of the survey would outperform other respondents in successfully identifying sustainable companies during the advertisement paring. Indeed, if individuals are clear about what sustainable production entails, they should be able to distinguish relatively easily which company is which. I hypothesize, however, that all respondents, regardless of their score on the first portion of the survey, will have a difficult time sorting companies into the binary provided, and they will also have difficult time delineating arguments as to why they feel the way they do. This may lead to short, vague responses on the open response question following each advertisements pair.

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[1] Sustainability (n): The potential for long-term maintenance of Earth’s ecosystem, which depends on making trade offs between the economic, social, and environmental spheres to meet the needs of the present without compromising the ability of future generations to meet their own needs.

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Carrigan, M. & Attalla, A. (2001). The myth of the ethical consumer – do ethics matter in purchase behavior? Journal of Consumer Marketing, 18(2), 560-578.

Dragon International (1991). Corporate reputation – does the consumer care? Dragon International, London.

Holdsworth, M. (2003). Green choice: What choice? London: National Consumer Council.

Sustainability = Social + Environmental?

I’ve already dedicated one entry to the definition of sustainability as I intend to use it. Upon meeting with my advisor, however, I realized that this definition perhaps requires further explanation. Namely, why does sustainability entail both the welfare of environmental systems as well as the welfare of creatures living within the ecosystem?

This argument really turns on the development of social capital, so I will introduce the concept first. Social capital is a neutral term for naturally occurring social networks. The concept comprises relations of trust, reciprocity, common rules, norms and sanctions, as well as connectedness in institutions. These networks are vital because, in the words of Robert Putnam, these long-term, face-to-face relationships are what “enable participants to act together more effectively to pursue shared objectives” (Putnam 1995).

To what extent, then, is social capital a prerequisite for long-term improvements in the environment? It seems apparent that natural capital can be improved or protected in the short-term without any attention to social capital. Indeed, regulations and economic incentives could be used to encourage a change in behavior, or strictly protected areas could be established along with regulations regarding environmental maintenance (Pretty et al, 2000). Although these regulations may change behavior, regulation and economic incentives do not be the stuff that really changes hearts and minds in favor of environmental protection.

Jules Pretty and Hugh Ward argue that social capital, rather than regulation, is necessary for sustainable and equitable solutions to natural resource management. To prove their point, they evaluate how rural communities have dealt with the task of improving and distributing natural capital. They note that these local groups do seem to manage and preserve resources more efficiently and effectively than external agencies like governments, companies, or NGOs, although these agencies may assist the community groups by increasing their skill set or training leaders. Examples include micro-finance institutions, forest protection groups in India and Nepal, and groups designated to equalize water use in the Phillipies and Sri Lanka (Pretty and Ward 2001).

Because natural capital is a public good, the market tends to overuse and under-invest in it. Indeed, the market effectually signals that natural capital is valued at $0 until it is turned into something. Most companies operate for profit, which means it is always in their best interest to chop down that forest and turn it into products for sale. In this way, a company receives the economic benefits that come from selling a product made from a natural resource, while society at large would split the (yet unidentified) cost of losing 1 forest. Social institutions based on trust and reciprocity, as well as agreed norms and behavior can mediate this sort of unfettered private action, preserving natural capital.

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Pretty, J and Frank, B.R. (2000). Participation and social capital formation in natural resource management: achievements and lessons. Paper for the International Landcare 2000 Conference, Melbourne, Australia. 2-5 March 2009.

Pretty, J. and Ward, H. (2001). Social capital and the environment. World Development, 29(2). 209-227.

Putnam, R. (1995). Tuning in, tuning out: The strange disappearance of social capital in America. Political Science and Politics.

Klein, N. (2000). No Logo. NY: Picador.

What is sustainability?

I know what you're thinking... what is sustainability?

That's a good question. After all, the concept of sustainable development has become increasingly relevant in the past few years, which means its underpinnings have been affected by a wide variety of groups, interests, and policy decisions. As a result, sustainability has remained a relatively ill-defined concept. Indeed, this obtuseness makes it difficult for many to comprehend what it means to live a sustainable life. In order to proceed with my project, however, I must settle on a precise definition. Thus far I have chosen this one:

Sustainability: The potential for long-term maintenance of well-being, which depends on ensuring the welfare of the natural world and its inhabitants as well as using natural resources responsibly. It implies the integration of economic, social, and environmental spheres to meed the needs of the present without compromising the ability of future generations to meet their own needs.

Theory 101

This blog is designed to chronicle my progress as I work toward completing my senior thesis at Northwestern University. So, let's jump right in to the theory. ///

Research suggests that the demand for sustainable products is on the rise, and in response companies have increasingly taken to marketing their products as "green." For instance, you may have seen some of Royal Dutch Shell's advertising, where the company boasts of its commitment to sustainability and investments in alternative energy. The company, however, does not seem to be dedicated to these concepts and has sold off most of it's solar and wind energy investments. Shell CEO Jeroen van der Veer recently stated that "His company will continue to be primarily an oil and gas company."

When companies spend money to propagate faulty information about their sustainability efforts, they mislead and confuse consumers, which causes cynicism about all corporate sustainability claims regardless of their truth. Indeed, according to research by the National Consumer Council, although individuals seem to be concerned about sustainability and may want to buy responsibly made products, people are unsure of what sustainable consumption entails in practice. (Holdsworth, M. (2003). Green choice: What choice?).

Products created in a sustainable manner are exceptionally vulnerable to the harms of misleading information because they are credence goods, so the utility of these products is difficult to ascertain. Say, for example, you want to buy a pair of shoes that were produced without child labor and under fair working conditions, so you head to the store. Upon perusing the shelves, you notice that it is impossible for you to tell who produced those shoes and under what conditions they worked. The best you can do as a buyer is rely on third-party judgments or seller credentials.

When a company or regulating agency deludes consumers by providing misleading, incomplete, or confusing information, an information asymmetry exists between buyers and sellers. George Akerlof first identified the problems inherent to information asymmetry in a market when he argued that bad quality ultimately drives out good quality from the market when information asymmetry is present between buyers and sellers. The impact? As a result of insufficient information, consumers may not be aware of the low value of greenwashed products. This means competitive pressures will force down the price of high value goods, which will drive genuinely sustainable goods out of the market or at least prevent responsible companies from growing their businesses, regardless of increased consumer demand.

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Helpful definitions:

Sustainable product: A good or service that minimizes its impact on society as well as the environment at each stage of the product's life. These goods may be associated with environmental sustainability -- often called green products (CFC free aerosols, hydrogen powered cars), social justice issues (fair trade coffee, sweat free clothing), or both.

Credence good: A good whose utility impact is difficult or impossible to ascertain (as opposed to search goods or experience goods).

Greenwashing: The practice of companies disingenuously spinning their products and policies as environmentally friendly.

Utility: A measure of the relative satisfaction derived from various goods and services