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Pinchot focus areas:

Climate & Energy
The Business of Sustainability
Gifford Pinchot III

Business is the dominant institution of our times. When I was a kid, nuns ran hospitals; now big corporations do. When I was a kid, idiosyncratic families owned newspapers; now a few big corporations own most of the media. When I was a kid, legislators wrote laws; now lobbyists do.

In the last 70 years, big business and the morality of profit above all else took over the direction of our society. Now that is changing. For civilization to survive, it must change. Thank God for Pope Francis.

Why Relating to Business Matters
Minnesota Solar Challenge CC BY NC 2.0 A revolution is beginning in the way in which society is addressing climate change and other environmental ills. This revolution is expanding to address poverty. These issues have traditionally been addressed by non-profits and government, with business reacting to the pressures put on them by regulations, protests, and customer preferences. Now coming from within business itself we see more intrinsic drive and proactive progress in addressing climate change and other ills.

Much of our way of life is unsustainable; it must be reinvented. Business has an important role in this reinvention.The volume of innovation needed to create a sustainable society cannot be accomplished without enthusiastic sustainability creativity within business.

The way business provides for human needs today produces pollution, global warming, and exhaustion of resources. Because production happens in business, change must occur there. But how is that to happen?
  1. Will it happen because non-profits beat on business and tell business how bad it is?
  2. Will it happen because government forces business to change by telling it what to do?
Pressure from both governments and non-profits is essential, but it is not enough.Those who would change business from the outside must understand what is going on inside. Inside every large corporation there is a struggle for the soul of the firm occurring between those who want their work to help conserve the vitality of society and the planet and those who believe their responsibility is solely to shareholders’ financial interests.

Many conservationists, social justice advocates and environmentalists underestimate both the amount of intrinsic motivation to work for sustainability inside business and the critical role of that motivation in solving today’s major problems.Wholesale condemnation of business is not helping. We need to distinguish between leaders and laggards in the move toward operationalizing a broader view of the responsibilities of business.

Sustainability Innovators
Manure lagoons can contaminate surface water and emit methane, contributing to climate change. Image credit Bob Nichols/USDA NRCS Pinchot University1 student Kevin Maas and his brother Daryl were concerned about family farms going out of business and the impact of farms on pollution and climate change. Farm Power, their company, addresses these problems by ending a major source of pollution and by generating electricity from cow manure instead of coal.2

In modern dairy farming,manure is flushed out of barns into artificial lakes called lagoons. Methane bubbles out of the lagoons, contributing to climate change. Pollutants in the manure percolate down into the groundwater, polluting neighbors’ wells. In heavy rains, the lagoons overflow, contaminating both shellfish and finfish downstream. The EPA fines the farmers and demands major capital improvement projects they cannot afford. As a result dairy farms go out of business.

Farm Power’s first project was a giant manure digester that took the manure from 2000 cows, collected the methane, and used it to generate 700 kilowatts of continuous power.This was enough to power 400 homes.The project was profitable and so investors put up another $5 million to fund a second manure digester/generator project.This time they added a greenhouse to use the waste heat from the generator.That one was also profitable and investors funded another. Farm Power has now finished their fifth and is generating 4.5 megawatts of continuous power.

Manure digesters are a source of renewable energy that reduce air pollution and greenhouse gas emissions and protect water quality. Image credit Stephanie Page/Oregon Department of Agriculture CC BY NC ND 2.0This story illustrates an important principle. The Maas brothers were inspired to address several social problems (farms going out of business, pollution, and climate change). They found out how to make it profitable to do so. The motivation that drove their creativity was to find a way to make a living that contributes to their community, their industry, and their planet. This is not the heartlessness that many see as the character of business. It illustrates an important role for business in transforming our society from unsustainable ways of providing what humans need to more nearly sustainable ones.

Sabrina Watkins, another of Pinchot University’s graduates, is the head of sustainable development for a major oil company. Each year her group orchestrates the reduction of greenhouse gas emissions equivalent to about a million tons of CO<sub>2</sub>. Most of those savings are permanent. It’s the equivalent of taking 470,000 cars off the road each year.This isn’t happening because of some government regulation. It is happening because people all over the company step forward with ideas for reducing the company’s climate impact. It is happening because many people inside the company care deeply about climate change, health, biodiversity, and poverty.

Will this be enough? Can we trust industry to self regulate?
Nothing that any one sector of the economy is doing is enough. We are headed toward a tipping point in climate change that will cause flooding and droughts that interrupt our food supply. We are poisoning the land and the ocean. We are letting the gap between rich and poor grow to the point where the social contract frays and civilization descends into internal conflict. We are not doing enough!

Under current legal framework, business will not make all the changes needed. There are many things that need to be done that are too expensive and have too little benefit to the company for a publicly traded company to do them. They are required by law to maximize profits.3

The fact that under the current circumstances business will not do enough to self-regulate does not mean that a blanket condemnation of big business will produce the changes environmentalists and social justice activists desire. Rather, environmental and social justice organizations need to find their allies inside corporations and work together to find ways that corporations can do more good. They need to push businesses to lobby not against sustainability, but for it.

Governments need to find ways to create “force fields” that push corporations to innovate in the direction of sustainability without telling them exactly what to do. Too much regulation can freeze innovation at the level of technology that existed when the law was framed. A good “force field” simply rewards steps toward sustainability and punishes continued waste, pollution, and contributions to poverty.

A carbon tax
Those who work for more sustainable practices within corporations desperately need a stiff carbon tax to make doing the right thing more profitable or more nearly profitable.More and more companies back a carbon tax because they know any additional costs they face will also be faced by their competitors.

Every major publicly traded oil company now has an internal carbon tax. When an investment decision is made a project is credited for any carbon emissions reduced and charged for any increases. As a result, they are making investment decisions as if a government- imposed carbon tax already exists. They are getting ready for government to act. A carbon tax is the most obvious way in which government can act to speed progress toward a sustainable world. Taxes on other harmful emissions also make sense.

Benefit Corporations
pull quoteStandard corporate law mandates that corporations must manage to maximize profit, and the perspective tends to be short term. Clearly this is not in the interests of sustainability. If we are to build a sustainable world, profit should be one, but not the only, objective of a business.Without creativity in the business sector motivated not just by money but also by a desire to solve the big social problems of our times, civilization is doomed. Now there is a new form of business organization that gets around the legal requirement to manage only for profit.

Benefit corporations put their social purposes in their bylaws and advise investors in advance that the management will guide their decisions toward a mix of benefits including both profit, the environment, and the well-being of society.4 Yvon Chouinard, founder and CEO of Patagonia, says that the benefit corporation creates the legal framework for firms like his to remain true to their social goals.5

Thirty states and the District of Columbia now have enacted legislation to allow benefit corporations to form and to make decisions on what is called the triple bottom line, to benefit people and the environment as well as to make a profit.6

The B-Corp is a type of benefit corporation certified by the non-profit B Lab. B Corps have a specific social or environmental mission and pass a rigorous 3rd-party test of their contribution to causes other than profit. This movement is growing rapidly. According to B Lab, there are now 1,442 “certified B Corporations” across 130 industries in 42 countries.”7

Business is changing
Business was not always guided only by profit. Many family-owned businesses have always had broader objectives. The sense of broader responsibility declined in the 1980s and profit became king. Now that belief is in decline.

Thus far thirteen of the largest companies in the US have made the Obama Administration’s American Business Act on Climate Pledge: Alcoa, Apple, Bank of America, Berkshire Hathaway Energy, Cargill, Coca-Cola, General Motors, Goldman Sachs, Google, Microsoft, PepsiCo, UPS, and Walmart. Change is happening.8

Let’s all help business to change even more rapidly—sometimes by protesting, sometimes by legislating, but also by celebrating the progress they make. Let’s work together to find solutions. Sure, let’s create better laws and fix the economic system, but also stop blaming business for doing what the system demands.We all have work to do.

Gifford Pinchot III is the founder and president emeritus of Pinchot University, formerly the Bainbridge Graduate Institute, in Seattle, Washington.
Sustainably managed forests enhance the resiliency of ecosystems and can stimulate local economies in timber country while sequestering carbon in long-term wood products. Image credit: Tony Hisgett CC BY 2.0

1 Pinchot University, an independently accredited degree-granting institution, is not affiliated with the Pinchot Institute for Conservation.
2 http://farmpower.com/
3 eBay Domestic Holdings, Inc. v. Newmark, 16 A.3d 1, 11 (Del. Ch. 2010).
4 http://boss.blogs.nytimes.com/2014/06/ 13/assessing-the-benefits-of-a-benefit-corporation/
5 http://www.economist.com/node/ 21542432
6 http://socentlawtracker.org/#/bcorps
7 http://bcorporation.net
8 https://www.whitehouse.gov/the-press-office/ 2015/07/27/fact-sheet-white-house-launches-american-business-act-climate-pledge
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