28 July 2015

How B-Corps (and China) can save the world

I've criticized "social welfare maximizing" B-Corps as a solution in search of a problem, but I think I've found a problem worthy of them.

First, let's set the (slightly contrived) stage as a world where for-profit corporations are willing to rape and pillage in a race to the bottom in terms of their social conduct. Let's also acknowledge that non-profits are lovely, but limited in their impact in many industries.

B-corps are thus welcomed as intermediate "social-profit" enterprises that pursue sustainable practices (i.e., balancing the "needs" of all stakeholders) in many lines of business.

Many people assume that B-Corps are thus beneficial, but most are in niche businesses (e.g., green design, vegan chocolates) --- not the "unethical industries" (oil, fast food) that do most of the damage.

I thus propose that B-Corps enter those industries as competitors, where they will make a profit due to the combined advantages of smaller dividends, higher sales to ethical customers, and lower costs from fewer fines, lawsuits, etc.

B-Corps will also, as a form of competition, issue sustainability benchmarking reports (SBRs) on themselves and their competition (like these), thereby clarifying which companies pursue sustainable practices, which consumers support them, and where regulators should apply more interest. These reports will be far more useful and critical than the bland platitudes put out by most CSR marketing departments.

This is how B-corps might transform entire industries in a race to the top, but what about international markets, where cutting rainforest or spilling oil is profit-maximizing?

In the absence of a world government, it's hard to bring regulatory oversight onto errant companies or industries. The only choice, then, is to remove the profits of sin.

A little while back, I concluded that China may be the only country capable of saving the world, because its rulers pursue a policy of totalitarian popularity. Taking this interest in mind, this is how China Inc. can B-Corp the world:
  1. China orders its SOEs to switch to B-corp status. (They are owned by the people, so they should surely benefit the people!)
  2. Those B-corps change course to pursue social welfare and issue SBRs within their sectors.
  3. Due to China's market power, those B-corps (and their SBRs) will affect world markets
  4. If B-corps are really useful at clarifying or making it easier to achieve social sustainability, then this strategy will succeed. China's leaders, people and businesses will win, but so should we all.
Bottom Line: The fastest way to a corporation's heart is thorough its profits.

27 July 2015

Monday funnies

This is true, but...

... it's ALSO important to spend time (fixed cost/sunk cost) when the decision will give long term rewards, e.g., touch typing, LaTeX or financial literacy :)

25 July 2015

Flashback: 20-26 Jul 2014

A year old but still worth reading...

24 July 2015

22 July 2015

Water Smarts: pricing, regulation and water sources

There are VERY FEW people following the "Water Smarts" learning campaign. This is disappointing to me, because I am pretty sure that MOST readers of this blog do not know as much as they should about their local water conditions. Worse, there are FAR MORE people who don't read the blog (or know this stuff) because they don't care.

If "education is the solution" then we are going to have trouble because nobody is in class!

In this post, I will comment on some "closed" activities and invite you to ongoing and new activities.

NB: Questions/activities are based on chapters from Living with Water Scarcity, and you can download the 2015 WaterSmarts Calendar here.
  • March: How much do you pay? (Chapter 2)
    One person filled this in with data from Colombia. The interesting points are (1) the tariff (US$2.55/m3, combined water and sewer) includes a cross-subsidy from higher- to lower income families and (2) that this family used roughly 250lcd (65gcd), which is less than California's (poorly measured) average of 88gcd. If you want more data, read my paper on global water tariffs [pdf] or this post on low charges in Europe's fiscally mismanaged countries
  • April: Who's your regulator? (Chapter 3)
    From Colombia, I learned that the regulator targets full cost recovery with a cross subsidy from rich to poor. This method is sound in terms of efficiency as well as equity. It is not found in many countries where, for example, full costs are not recovered (deferred maintenance, cheap energy, pollution discharges) or the poor are left without service. I'm guessing that the US and Canada deliver service quality on par with southern Europe. This paper describes how Southern California managers (but true for managers in the West) underprice their systems, thereby screwing current customers for new development. This beautiful map app offers data on wastewater coverage and treatment (yay Netherlands!)
If you want to improve future posts (giving me more material to work with), then PLEASE take 10-20 minutes to answer questions on these topics:
Dates for July: Americans celebrate the foundation of the EPA and NOAA (by Nixon!), English and New Yorkers celebrate the opening of their important canals, Greece opened its Corinth Canal (not before bankrupting a few), and several other anniversaries passed. Check it out!

20 July 2015

Monday funnies

Travel sites do seem to be going in this direction...

Papers worth reading

  1. Hsu [pdf] examines water/air pollution from the hog CAFO system in the US, as well as market concentration. He establishes that large farms lobby for weak regulations to eliminate small farms. What would be the cost of complying with the Clean Water Act (over 40 years of exemptions)? About 30 cents 3 cents/kg. This outrageous environmental rip off probably applies in chicken and cow industries.

  2. Hernández-Mora and Del Moral [pdf] give a critical examination to the establishment, operation and impact of water markets in Spain. They conclude that the markets serve elites over the public. This is a problem of governance, not markets, i.e., Part I vs Part II in my book. Pay attention to the "space" in which markets operate!

  3. Coleman [pdf] finds that "oil companies send inconsistent messages to their two audiences -- warning regulators and reassuring investors." Surely there's some scope for regulators to pay attention to (or integrate) other information into their oversight?

  4. Goeschl and Jarke [pdf] use experiments to examine HOW people trust others in exchanges. One pattern is to verify a few times to make sure the other is honest, before lapsing into trust without verification. These results match real-world examples such as spouses who cheat, auditors who fail to double check clients, teachers who trust "good students" etc. Countermeasures: renewed romance, rotation and random checks, respectively.

  5. van den Bergh and Kemp [pdf] apply many economic ideas (path dependency, institutions, business cycles, etc.) to economic-social-political "transitions." I am going to use this paper for my growth & development class :)

  6. Sinden, a law professor, gives a useful overview of the (mis)application of cost-benefit analysis in environmental regulations. This paper [pdf] discusses the environmental protection act. This one [pdf] reviews the US government's "dirgiste" approach to CBA. (She's working on another paper that measures the degree to which bureaucrats ignore "unquantifiable but important (to them) data" in a process that results in poor decisions.