Profit and Purpose

In the movie Other People’s Money, an exciting debate between Larry the Liquidator (Danny Devito) and Andrew Jorgensen (Gregory Peck) highlights the current discussion of the trade-offs between profit and purpose. Larry the Liquidator insists that the prime objective of business is to make money, while Andrew Jorgensen stresses the needs of the stakeholders.

Companies are increasingly being pushed to change – to tone down the single-minded pursuit of profits and pay closer attention to the impact on stakeholders (employees, consumers, communities and the environment.

While the term profit is easily understood, the term purpose is relatively ambiguous. An article in HBR suggests that purpose can be construed in three ways
Competence: the function that the company’s product serves
Culture: the intent with which the company runs its business
Cause: the social good that the company aspires

While the cause-based meaning is most commonly implied the other implications are equally valid. The purpose should come from the mission statement and get translated into long-term goals and finally into actions that drive the company. Purpose is implemented by companies in many ways. Some companies have a convenient purpose – talk about purpose but act on it only in superficial ways. Another is purpose on the periphery – act on social causes but keep it separate from the core business. Yet another is the win-win purpose that aims to find the sweet spot between purpose and profit.

Business leaders decide based on their commercial orientation (profit maximisation) or social orientation (support stakeholders — purpose). A quadrant illustrates how business leaders make trade-offs between profit and purpose. In the diagram, these choices are shown. At the top left are leaders who are solely concerned with profits (remember, Larry the Liquidator). At the bottom right are leaders that focus exclusively on social outcomes – doing good for the world but not for the business. The top right quadrant highlights leaders who aim to achieve a win-win on both profit and purpose. The bottom left quadrant is where they lose out on both profit and purpose.

Business leaders need to take a hard look at how they create the right balance between profits and purpose.

IPCC Report: How to bring a change?

IPCC has released three reports in rapid succession. These reports cover:

August 2021: What is the problem?

February 2021 How serious is the problem?

April 2022: How can the problem be solved?

The latest report titled “Mitigation of Climate Change” focuses on three key aspects:

The target of 1.5 degrees is almost out of reach: The target of net-zero by 2050 appears to be almost unachievable. Carbon emissions have continued, and there is not much time left before temperature limits are breached.

Understanding what to do and the tools for doing it are there: Many countries have experienced shrinking emission rates and are a model. Cost-effective ways of tackling climate change now exist. Solar and wind power costs have declined rapidly – 85% between 2010 and 2019. Low carbon technologies Nuclear and hydroelectric power have gained ground. Digitalisation through robotics and the internet of things will increase the efficiency of renewable power.

Carbon removal is inevitable: Unless the overshoot of emissions is clawed back, the situation looks dire. Removal of carbon is unavoidable. There are many time tested methods of reduction, while several embryonic methods need attention. Newer techniques such as direct air capture face difficulty in attracting investment.

Behaviours are important: Given the report’s focus on prevention, the report looks at the demand side of reduction. Behavioural and cultural change can reduce emissions significantly. Social science now forms part of IPCC report. 

IPCC Report, April 2022

This IPCC report is an important step in helping countries and companies achieve their net-zero goals.

The Scrouge of Chemical Pollution

Chemicals have been instrumental in bettering our lives, and their use is ubiquitous. Chemicals are found in fertilisers used in agriculture, household appliances, soaps and detergents, clothes we wear, cars, packaging materials, sports shoes, helmets, hand sanitisers, medicines, computers, undersea cables, aerospace, mobile phones and many more products.

Photo by Stormseeker on Unsplash

While chemicals have benefitted humankind immensely, ey have several harmful effects. Unfortunately, the recent focus on greenhouse gas emissions has obscured the equally important issue of chemical pollution. So, what is chemical pollution? Chemical pollution is the presence or increase in our environment of chemical pollutants that are not naturally present or found in amounts higher than their natural background values. Chemical pollution comes from three primary sources – Persistent Organic Pollutants that come from fertilisers; oil that comes from urban-based runoffs, operational fuel discharge and oil spills; and toxic metals that come from industrial activity and waste dumps

There are many sources of chemical pollution. For example, fertilisers and pesticides used in agriculture can seep into the soil and contaminate it. Ships containing crude oil can cause oil spills and cause chemical pollution. Everyday household cleaner released in water carries several polluting chemicals. In industries, chemical pollution results from human activities like the manufacturing, handling, storing, and disposing of chemicals. Thus, chemical pollution pervades all human activities.

The impact of chemical pollution can be severe. In seas, rivers and lakes, many areas suffer from low levels of oxygen due to chemicals from land running off into the sea. As a result, there is a mass killing of fishes and destruction of water body ecology. As a result, fishing communities are finding it difficult to survive – the boats are getting spoilt, and their catch is reduced. On land, the effects are far-reaching. Fields poisoned by chemicals may become unusable. Crops may contain higher than permissible levels of chemicals. Contaminated water sources add to the problem. Compared to CO2 emissions, toxins in the soil remain for centuries. In humans, chemical pollution causes damage to the liver, kidneys, nervous system, blood, cardiovascular system, immune system, or reproductive system. Certain pollutants can also be carcinogenic.

What can be done? First, we need to create effective regulations with robust monitoring mechanisms. Awareness and education for responsible behaviour are essential. Companies need to take urgent steps. Chemical pollution is a scrouge that needs to be stamped out.

Deep-Sea Mining, Renewables and Sustainability

The ocean bed holds the key to many of the world’s challenges. For example, some of the materials used in clean-energy technology come from the deep sea bed.

The world population is increasing and likely to reach 9.6 billion by 2050. The increased population will have higher energy requirements. The climate crisis that we face leads us to reduce our dependence on fossil fuels. Renewable energy sources have to fill the gap left behind by fossil fuels. Renewable energy will require significant amounts of ethically sourced materials.

Deep-sea mining refers to retrieving mineral deposits from the deep sea – the area of the ocean below 200 m which covers about 65% of the Earth’s surface. With terrestrial resources depleting, deep seabed mining has received increasing attention. 

Materials like nickel, copper, manganese and cobalt are found in the deep sea bed and must be mined sustainably. Marine biologists believe that the deep seabed is part of one of the least-understood environments on Earth. It holds the key to the health of the oceans. Oceans are a vital carbon sink. They absorb up to a quarter of all global emissions. Deep seabed mining may reduce the ability of the ocean to act as a carbon sink. Oceans are a living ecosystem, and extraction activity is likely to disturb the ecosystem leading to significant changes in the seabed. Oceans are home to thousands of species of tiny invertebrates fundamental to the ocean food web. Some scientists believe that the mineral nodules may also play a role in the ocean processes.

Apart from disturbing marine ecology, deep-sea mining can also lead to increased pollution, noise and vibrations from mining activity, leaks and spills of fuels and toxic products.

Deep-sea mining stirs up fine sediments on the seafloor consisting of silt, clay and the remains of microorganisms, creating plumes of suspended particles. Depending on how long they take to disperse and resettle on the ocean floor, the impact of mining could be severe.

Thus, deep seabed mining could have long-term and potentially devastating impacts on marine life. To minimise the impact, we need to do the following. 

  1. Baseline studies: Prepare extensive baseline studies to assess the impact of deep-sea mining. 
  2. Environmental impact assessments: Undertake assessments to determine the extent and duration of environmental damage and the impact on marine biodiversity.
  3. Mitigation: Invest in R&D and technology development to produce better ways of extracting these minerals.
  4. Increased regulation: Regulation will ensure that mining is undertaken properly. It will also ensure that measures are taken to minimise environmental impacts. This will also eliminate mining in fragile ecologies. The International Seabed Authority is tasked with organising, regulating and controlling all mineral-related activities.
  5. Circular economy: Enhancing product design to use less or alternative materials can also reduce the demand.

A comprehensive approach to deep-sea mining is critical. While we push for net-zero targets and their achievement, we have to keep in mind the impacts on the oceans covering 71per cent of Earth’s surface. 

Regenerative Agriculture for Fashion

Fashion consumers are increasingly becoming inclined towards sustainable fashion. This trend requires designers, product developers, merchandisers and buyers to decide on sustainable origin materials. Regenerative agriculture provides a solution.

Source: Gaertringen/Pixabay

Regenerative agriculture is a system of farming principles and practices that seeks to rehabilitate and enhance the farm’s entire ecosystem by placing a heavy premium on soil health, with attention also paid to water management, fertilizer use, and more.

 You may wonder how is this different from organic farming? Organic farming is a prescriptive standard for agricultural production. On the other hand, Regenerative agriculture is about principles, not practices. Regenerative agriculture is output driven. In addition to omitting chemicals, regenerative agriculture replenishes and strengthens the plants, the soil, and the nature around it.

While one sees rows upon rows of a single crop in a typical farm, in a regenerative farm, one would see multiple corps planted strategically next to each other, helping each other grow and nourish. For example, on a cotton farm, one may find snap peas planted as a cover crop that provides more shade and helps retain water and grow more microbiomes. Regenerative farms also implement pollinator strips of crops to attract bees and butterflies. In addition, farmers add trap crops to divert pests, reducing the need for chemical pesticides. Regenerative farms mimic nature.

Regenerative agriculture helps meet emerging industry guidance – Greenhouse Gas Protocol, the Science-Based Targets, Net Zero Standard and Convention for Biological diversity. Regenerative farms if implemented the world over has the capability to sink all the carbon in our atmosphere. With regenerative agriculture, the fashion industry can help revive the earth through the process of making clothes. Recently, brands like Kering ( owner of Gucci, Saint Laurent and other brands) and J Crew have pushed for regenerative agriculture. Patagonia is also supporting regenerative cotton farmers with a pilot program in India. Merino company, Allbirds, Icebreaker and Smartwool have joined hands to create a platform for regenerative wool. The fashion industry is moving towards a fundamentally new economic paradigm and reconfiguring its business model. An acceleration of the change is of the essence.