Capitalism's Green Evolution?

The Great Depression of the 1930s revolutionised the political and economic world, having followed a period where libertarian economic ideology reigned, Franklin D. Roosevelt’s series of economic “New Deal” policies involved much greater market regulation, an exponential growth in social programmes and an increase in power for labour unions. In 1936 John Maynard Keynes' General Theory greatly changed the way people thought about the role of the state in employment and economics. Economic collapse produced a profound political shift, leaving the old ideas to be discredited for over a third of a century.

Once again we find ourselves at the mercy of a great recession. Our politicians are denouncing Capitalism's flaws at every opportunity and the recent "Occupy" Movement shows widespread discontent with the system at most levels of society. People aren't spending as much as they used to and business’ are therefore struggling. However, this time there has been no radical ideological revolution. Economic ideology appears stuck. Instead, Capitalism is seemingly undergoing a green evolution. The question is, to what extent is this an ideological shift in Capitalism, or is it merely an alignment between Capitalism and the green movement?

There are many reasons for this, the first of which is the profit motive. It is often cheaper to invest with a view of decreasing costs than to try and increase income. The rapid increase in energy costs has greatly impacted on corporate profit and has hence become a target for cost reduction. Energy efficient light bulbs, programmable thermostats, energy efficient doors and windows are all effective, and businesses have taken notice. For example, Marks & Spencer’s is now incorporating energy saving LED lights and other energy saving features into the company's standard store build specifications (the first of which opened last year). There is also the "closed door movement" where retailers are shutting their doors to minimise energy usage, rather than keep them open and look more inviting. Businesses are also taking advantage of the carbon trading laws which allow the buying and selling of "carbons credits," each of which allow them to produce one ton of carbon dioxide or an equivalent gas. Therefore, if a business produces less carbon dioxide than its quota as set by Carbon Credits, it can sell the spares to other companies, creating a new income stream. Another option is to stockpile excess credits, meaning they don't need to purchase as much in the future, thereby reducing costs. Finally, Companies are not only saving by producing less waste like carbon dioxide, but by recycling and re-using, as sending waste to landfill can be very costly. Therefore many companies like Unilever are recycling waste instead, with the un-recyclable waste being converted into usable energy.

The second reason for Capitalism’s green evolution is that the buying decisions of consumers and their perception of "green" brands is based on of how environmentally responsible a brand. Thanks to advances in measurement technology and the flow of information, we now have much greater knowledge of the environmental costs of production processes, or the social cost of sourcing practices. Take the recent example of Apple, whose supply chain recently came under scrutiny by a social-justice watchdog and was found to be lacking. This growing factor in the consumer’s spending has been highlighted by the recession, in which many people’s faith in the capitalist system was rocked. People became angry at the “vulture-capitalists” that they perceived as only taking, and started to demand they “give back”. Businesses that are seen to voluntarily give back, such as Starbucks, are incredibly popular, and are mostly doing well despite the hard economic times. However, a strong environmental brand not only attracts customers, but investors also. For example, the Co-operative bank will only invest in ethical companies.

Sustainability in business isn’t just a moral cause; it can be a business benefit too. In the current climate, economics needs to take on a new idea…and it is. Capitalism may be evolving, into a greener, hopefully better form.

However, can we be sure this is a genuine change of corporate thinking? Or is it just companies recognising an increase in sales and an opportunity to cut costs, that happens to align with green thinking?