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Archive for March, 2010

Every description of sustainability that I’ve heard includes some element of “live and let live”, translated into “live with a smaller ecological footprint”.

In the business world, if you look at annual reports of the largest publicly traded corporations, nearly all dedicate some portion of their reports to proving that they are good corporate citizens, that they walk lightly on the planet, or at least as lightly as is possible in their field. BP, Alcoa, GE, Google, Cisco.

As a new business school faculty, and somewhat as a new “scholar”, I’ve been struck by the hoped for congruence of sustainability and profitability, that the most profitable approach at delivering a good or service from concept to design to manufacture to delivery to service is to be the least wasteful (including the least wasteful to others and to nature).

At the same time, I observe that FEW organizations and few individuals accomplish or even seek simplicity, contentment with enough.

Our fixed costs of living are too high, and we continue at that. Some is beyond our control. The high cost of housing is a disaster for the young. In most locales, the prevailing salaries and wages paid don’t provide enough income to support mortgages required.

The bubble in housing prices remains. To those that own, increasing housing prices are their primary financial investment for retirement. They need housing prices to increase. The norm of highly leveraged mortgages remains, and leaves the S & L type banking world and securitized mortgage investment banking world still very vulnerable, more than vulnerable.

Food costs are still inflationary, prices also still buffered by a large component of their “value” resulting from speculative money chasing commodities in addition to functional money.

People at least can simplify their food needs. Even buying organic and fair trade, it is possible to spend really a small amount on food by using food staples that one prepares themselves, rather than packaged convenient foods. It is possible to garden, to sprout.

But, if you only shop at grocery stores, 90% of the shelfspace is dedicated to relatively highly processed, highly packaged, highly branded foods.

Transportation is an odd one. There are VERY FEW options for simple vehicles in the US. There is very little ride-sharing, and outside of a few metropolitan areas, very insufficient mass transit. Sprawl compels auto use. Verticle competition for eye lines in traffic motivates big auto use. For those with means, driving small vehicles is thought of as dangerous, not a virtue.

So, on cars, families with annual incomes of $50,000/year may spend $10,000/year on transportation, and $8,000 of that to own the vehicles (financing, insurance, taxes).

I’ve organized a few frugal economy discussions in my hometown. Everyone that comes believes in saving. But, going around a circle of 20 people at one occassion, when asked “what are you saving for?”, a quarter stated “for a better car”. OK, its a personal choice.

The tragedy though is that few entrepreneurs have formed proposals for businesses that succeed by achieving savings in miles driven. The transportation business models are still based on growth, growth of number of cars sold, growth in size and profit margins of cars sold.

Not “demand-side management”.

It is a business opportunity, but involves cultural shifts of common attitudes towards cars. For an innovative car rental operation, there is market opportunity for a “break-out”.

And, finally energy remains expensive. Even if the majority of the costs of housing and of transportation are ownership costs, the operating costs of gasoline and other fuels and energy sources, are very expensive.

The interesting characteristic of gasoline prices in particular, is that it is information that individuals confront daily (even walking). Changes in ownership costs of a vehicle is seen at most once a month in a car payment and as a fixed cost is understood as “there is nothing I can do about that”. But, operating costs are seen daily, and effects thinking if not behavior so much.

Simplifying happens by plan, by design,  not by reaction. High gasoline prices might stimulate a person to purchase an energy efficient car, a capital investment. Or, better yet, the recognition of high ownership costs of vehicles, might stimulate a person to car-share in a neighborhood perhaps. Or, by moderate capital investments in own’s home, significant energy savings (80%) are possible.

The art of a real sustainability advocate, a real simplicity advocate, is to structure paths by which the capital investments are possible.

Currently, to make energy improvements on a home requires funds that are nearly always subordinate to other mortgages, even though the energy mortgages actually generate the income to pay for them, while first and second mortgages are paid for relative to the ups and downs of market prices. Its an additional obstacle to the decision to adopt energy efficiency. (Tax credits can’t support it forever.)

Either homeowners take all of the risk and are entitled to all of the benefit, or innovative financial entrepreneurs can define mortgages or externally funded paths in which homeowners take only some of the risk, but then are entitled to only some of the benefit.

“Demand side management”.

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