12 October 2012

What Adam Smith Said About Making Businesses Sustainable

Adam Smith said many insightful things in his book An Inquiry into the Nature and Causes of the Wealth of Nations. He didn't have a great deal to say about what we currently call "sustainability", the efforts of companies to be more "green". But he did point out what motivates businesspeople to do things, and these motivations also apply to getting businesses to reduce their (and thus our) environmental impacts.

Green is nice, but the real reason companies do it is to save money.

Unless you are a hermit or a subsistance farmer disconnected from all commerce, most of your environmental impact is due to things you buy. That includes food, shelter, electricity, gas, water, stuff (like cars, clothes, books, or electronics), services (like travel, education, entertainment, cloud computing, waste disposal, or health care), food, motor fuel, public services, and all sorts of other purchases. Thus your environmental footprint is essentially the environmental footprint of the producers and deliverers of those products and services--mostly businesses. They affect the environment as they produce and deliver those things you demand.

You can reduce your environmental footprint by buying and consuming less of those products and services. For example, you could probably cut your carbon footprint in half by taking fewer car and airplane trips (if any) and using a bicycle or telepresence instead. Or maybe you could eat less beef.

But those businesses (or public agencies) that provide those products and services could also help you reduce your environmental footprint by becoming more efficient in their own operations. And they have a very strong motivation to become more efficient: it can save them money and thus increase their profits.

Self-Interest Gets Things Done

We can try to urge businesses to be more sustainable for the good of the planet, or we can try to force them to be more sustainable with laws and regulations. But as Professor Smith perceived, the strongest motivation for any business is its own self interest. And if you look at what businesses are actually doing that results in reduced environmental footprints you can see that saving money, increasing sales, and remaining competitive is exactly what is driving them.

(For some examples and more discussion of why and how businesses can be more efficient, and more green, and more profitable, you are welcome to access the free Talearnt Green Tech Basics of Business Sustainability mini-course.)

You can read this famous passage of The Wealth of Nations here.

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