Internalizing external costs

An interesting thought came to mind yesterday in discussion with a colleague of mine over coffee. He is pursuing a path in executive coaching and writing on healthy organizations and leadership. He made the point that, often, companies with poor organizational health and weak leadership don’t pay the price for quite some time – the financial numbers and reports often don’t reflect the long-term impact of the organizational dysfunction.

Our current environmental issues are very much about external costs not being recognized in the actual cost of the service or good produced – societal costs such as pollution, waste, greenhouse gases, and other human negative impacts. I’m a big proponent of allowing the market to find its equilibrium but only after such external costs have been internalized such that the cost of the good sold reflects ALL costs of its production, not just the direct and indirect financial costs. 

So this is where the interesting thought came up . It would be interesting to discuss and explore whether or not a price could be placed on the long-term impact of organizational dysfunction such that it could be reflected in the financial statements, and thus be integrated into the market judgement of the worthiness of the firm? Why must firms that focus on lowering their emissions, or supporting leadership development, or focusing on employee health and well-being, all at their own expense, face a penalty in the market because of lower profits than their peers?

By internalizing the external costs of bad management, could we see a scenario in which all of the costs of running the firm poorly are reflected in the market valuation of the firm? Over the long-term, the true costs are probably reflected in either corporate collapse or a buy-out, but in the short run, it would be more effective if the market valuation had a mechanism for taking external costs into account.

The next generation of electric lights

Continuing on earlier blogs about the next generation of lighting, a pet interest of mine, in “A brilliant new approach”  in this week’s edition of The Economist, there’s an update on the latest developments on LED lighting.  LED replacements for our most common residential light bulbs are likely to be in markets far sooner than some think, I believe.

Grab Bag Part 1

I’ve got an enormous backlog of items of interest I want to write about, and it’s hard to determine where to begin. Scanning over my list of items, many of them I’ve set aside to read, others are quick items of interest from the web and other blogs. With an eye to at least contributing towards my writing rhythm, here are a selection of interesting items that I’ve come across.

The Missing Piece Meets The Big O - This is an excellent bit of philosophical sketching that’s appealing in its simplicity, and the simplicity of its message. (Thanks to my friend and philosopher-extraordinaire Ray for passing this along.)

In September 2007, The Economist published their Technology Quarterly, always a good source of fresh reading and ideas. Although dated, and now accessible to subscribers only (sorry), the TQ included a piece on the ‘geoweb’ and the future of spatial data on the internet, the next generation of light bulbs without filaments, the state of development of electric cars (already dated now), the anticipated increase in demand for nuclear power, and Ubuntu and open-source operating systems.

If you haven’t seen any of the TED video presentations yet, please take the time to visit the TED site. The number and quality of presentations is remarkable, and it’s hard to beat TED for some thought-provoking content on the web. Beats watching TV anyday. In particular, on one of our favourite topics of food production, here’s Michael Pollan speaking on the omnivore’s dilemma.

My wife and I attended a summer party earlier this year, perhaps a Stampede party, and couldn’t help but notice the amount of waste produced in the process of celebrating a fine summer morning. It got us thinking that, at the very least, replacing all of the plastic cutlery with something biodegradable would be a start, along with paper plates. After not much digging on the web, we came across Tater Ware, bio-based products made from potatoes. Now, knowing how much food-for-fuel has distorted our food production recently, this may not be the best idea around, but imagine if we could take a lot of our waste food product and turn it into biodegradable products such as this.

Back in September, Guy Kawasaki posted the top three winners of the Slideshare World’s Best Presentation Contest, including this excellent presentation entitled ‘Thirst’ on our need to conserve and preserve our fresh water resources, and this one ’Foot Notes’ which inspired this shot.

Foot Loose

Another piece that caught my eye in the fall was this one on designs for an LED light bulb. I believe my interest in these new lighting technologies stems from my firm belief that we will see significant advances in many areas of energy conservation in our lifetime. If we reflect on the advances witnessed by our parents, we should be as excited as they were, but perhaps more pragmatic about considering the parallel impacts of new technologies.

How about another short piece from Michael Pollan from Newsweek May 2008 on the need “to grow food for people, not for cars or cattle.”?

I can’t recall where I read about this gem of online graphic collaboration from GE, but it’s enjoyable to experiment with. I am not an artist by any stretch of the imagination, even less so digitally, but for those who might collaborate online on a quick sketch of a process or new product, it could be a superb free tool.

Going back in the grabbag, here’s a piece on YouTube on Earth Hour 2008 – given the current firestorm in southern Australia, it’s apropo. Perhaps turning everything off for an hour once a year is symbolic, but perhaps we all need a little more symbolism in our lives these days to remind us of the course ahead. And while we’re on YouTube, if you haven’t seen this piece of excellent writing on the Lost Generation, take the time to watch it.

Do you believe that you have a strong grasp of world geography? Puzzled recently when you couldn’t remember where the Seychelles are? Try out this enjoyable and quick game from TripAdvisor, the Traveller IQ Challenge.

Banning Plastic Bags – Part 2

Further to my earlier post on banning plastic bags in Calgary …

Someone asked me recently why we should worry about disposable plastic bags when there are larger and graver issues of pollution and climate change. Although I appreciate that disposable plastic bags only amount to 2% of landfills, for me the importance is that it’s something that we can manage ourselves – it’s a behavioural change that we can implement and that will have a positive impact.

There’s also a note of self-interest here – I’d like to be sailing the high seas in retirement and I don’t really want to be awash in plastic while I do it. For evidence of how our plastic culture is impacting the oceans, and particularly amongst the Pacific islands, look here and here and here and especially here and here.

Clearly a ban on disposable plastic bags can work, with the required change in our shopping behaviour. For San Francisco and many other cities, it worked. For Ireland with a national ban, it worked very well, with a 94% decrease in the use of disposable plastic bags within weeks. Here especially the Irish environment minister went after the big motivator – people’s purses – by putting a levee on each and every plastic bag, passing effective and tough legislation including enforcement, and not allowing the retailers to swallow the costs on behalf of their patrons. This ensured that shoppers were actually seeing the full cost of their behaviour, something which is key I believe to the changes we’re going to need to make in our lifetimes.

In the end, it was cheaper for retailers who didn’t have to pay for disposable bags, a savings which in a competitive environment they passed along to their patrons. For shoppers, it meant that they had to develop a new habit (to make sure that they have their reusable bags on hand) which, from my own experience, takes a few weeks at most.

OK, Calgary City Council, do the study, look at the options, then get going and commit – find the 80% solution and take a stand.

Banning Plastic Bags

Calgary has recently joined the growing list of North American cities considering a ban on plastic bags by deciding unanimously to request a report on the alternatives, to be delivered in a few months. I salute the effort, but I fear that not much will come of it in the end. I encourage Calgary City Council to take this issue seriously and demonstrate leadership on this issue in Western Canada. Here’s what I just wrote to my city alderman, Druh Farrell.

I was disappointed that City Council deferred real action on plastic bags, choosing instead to strike a study on the impact of such a ban. 

From my perspective, alternatives are already available to disposable plastic bags in the form of reusable bags (of many forms) and biodegradable ‘plastic’ bags. Why do we as a society not remember that our parents and our grandparents managed just fine without this type of convenience? 

The impact of plastics upon our health and our environment is well documented and clearly unsustainable. Alternatives exist – which admittedly require changes in behaviour on our part – always the hardest challenge to overcome, human behaviour and habits. 

My two cents worth – let’s move forward as soon as possible, encouraging local industry to provide viable alternatives and new diversified business at a time of economic weakness, while educating the Calgary public on those alternatives and encouraging the required change in behaviours.

Striking images of challenging problems

From TED.com, watch Chris Jordan’s presentation of his striking imagery, http://www.ted.com/index.php/talks/view/id/279

It’s thought provoking (unless you’re insensitive to our societal ailments) and the quiet intensity of his presentation is admirable. I was struck by the end of the presentation that he had the audience in the palm of his hand – you could have heard a pin drop in that room.

He’s right – sometimes the sheer numbers involved in the problems we face globally are numbing, and we simply can’t grasp their scale, so we push them aside, out of mind. His attempt to make the scale of the issues graphical and familiar to us all brings the power of analogy to bear, aiding our comprehension of the issues.

Whole Grain Lucky Charms

http://www.michaelpollan.com/article.php?id=77

“When Whole Grain Lucky Charms show up in the cereal aisle, it’s time to stop paying attention to health claims.”

OK, so it’s a two-second sound-bite, but a good one. For more, take some time and do some reading at http://www.michaelpollan.com on the state of our food – if you’re interested in this area, it’s required reading.