Upending Retail

  • Big Thinking

We need to think differently about consumption. When it’s a choice between green and growth, circular relationships are the goal, says Henry Leveson Gower.

A year ago I was on the hunt for examples of successful circular economy models for our economics magazine, The Mint. I was pointed in the direction of Tom Szaky of Terracycle, in the US, as one of the few real success stories.

 

He had set himself the goal of ending waste while still at school and now has a very successful business recycling products for multiple high street brands. His team is genius at finding ways to recycle any product thrown in their direction – however they were originally made.

 

There was, though, a big ‘but’. He admitted that the one thing he couldn’t get his clients to do was to rethink the design of their products, so they were more reusable and recyclable. That was a no-go area.

 

The result was that these big brands could provide their customers with the warm glow of recyclability to sell them more stuff, while the overall environmental impact from consumption and recycling continued to soar. Not exactly the point of creating a circular economy.

 

Luckily there now seems to be some more promising initiatives emerging. For instance, top jeans manufacturers are redesigning jeans so they are more recyclable. The manufacturers and designers are actually collaborating with sustainability experts to create an industry standard. They are also encouraging a second-hand market for jeans.

Another leading actor is Ikea. It is promising to buy back and recondition or recycle used furniture.

 

However there remains an even bigger ‘but’ – the elephant in the room. A clue is in the final sentences of the article on Ikea’s recycling initiative: “Ikea’s biggest franchisee said demand was rising after lockdown as people seek to do up their homes. Its latest figures showed sales in the year to August were €39.6bn (£36bn).”

 

Addressing the issue of curbing demand seems the ultimate no go area. Maybe the only real exception is Patagonia who famously took out a full-page ad in The New York Times, telling customers: “Don’t Buy This Jacket”.

He couldn’t get his clients to do was to rethink the design of their products, so they were more reusable and recyclable. That was a no-go area.

However it is increasingly becoming clear that the dream of continuing to grow the economy while reducing environmental impact is just that, a dream.

 

As Simon Kuper wrote in the Financial Times: “Our generation has to choose; we can be green or we can have growth, but we can’t have both together”. And of course, if we choose growth, we continue along the road to dangerous climate change, ecological collapse and likely civilisation collapse.

 

But of course, such a conversation is not easy. You only have to look at Shell’s recent experience of asking on Twitter what people were willing to change to reduce their emissions. Greta Thunberg and Alexandria Ocasio Cortez, supported by thousands of others, made it clear that Shell had no moral authority to ask such a question. The problem was not the question, it was the questioner.

 

Shell might be thought of as a special case. It has publicly admitted knowing the impending disaster of climate change, whilst seeking to sow uncertainty and prevent change.

 

But does any company have such moral authority? Ultimately all companies with shareholders are under pressure to grow by selling more – even if it is more of something that is recyclable, re-usable, low impact, energy efficient or even a service. And many have been influencing people to want more for decades through advertising.

 

So can business re-write the rules of the game, so they can focus on what humanity really needs rather than shareholder returns? Can they be truly good?

 

I think the answer is probably ‘not by themselves’. If they take on the financial institutions who are effectively the voice of shareholders, they are likely to lose – as Paul Polman famously did when he failed to move the Unilever head office.

 

However, businesses that truly want to serve humanity and prevent ecological collapse, have some potential allies: their customers and employees, who are also citizens and people with children and grandchildren; impact investors looking beyond financial return and governments who are being pressured to act to tackle the ecological crisis.

 

So the challenge and opportunity for good businesses becomes threefold:

  • Build shared purpose and mutual commitments to action with their customers and employees as citizens;
  • Seek impact investors who support that purpose, which could include their customers and employees; and
  • Convince governments that recognition and support for this type of initiative is a new more effective approach policy approach as proposed by Nobel Prize winner Elinor Ostrom (see box below).

Our generation has to choose; we can be green or we can have growth, but we can’t have both together.

Working through each of these elements would require more space than this article allows so I will confine myself to some further remarks on the first element, which suggests a radical upending of retail relationships, particularly when thought of in the context of developing circular economies.

 

Currently, retail is largely about mass transactional relationships. Customers only have the option to buy or not to buy. Shops are effectively dumb terminals of complex international logistics, supply chains and marketing strategies. This is the logical conclusion of the economies of scale of mass production and ‘take-make-waste’ linear economy.

 

If businesses are to treat their customers as citizen collaborators and work with refurbishers and repairers to create local circular economies, then retail would need to revolutionise. They would need to have the capabilities and power at a local level in order to have richer relationships with their local communities, government and businesses, required to co-create circular economies.

 

This sort of model is actually already developing in the food sector, where local growers such as Chagfood in Devon develop direct relationships with their customers around the shared purposed of ecologically sustainable food systems. But can incumbent centralised businesses make the organisational changes necessary?

 

What we could see emerge are local circular economy organisations that formalise the collaborations between the different business and other stakeholders around a common purpose of a low impact economy meeting local needs. These could be recognised and supported by government in a similar way to charities, while impact investors would find them ideal vehicles for their mission while providing low risk returns.

 

This might also seem like a dream, but at least it only requires a change in social organisation rather than green growth, which requires suspending the laws of nature.  Our current experience with Covid-19 has reminded us that the laws of nature cannot be wished away by people who find them inconvenient. Even if it’s just for Christmas.


Ostrom’s revolution in policy thinking

Elinor Ostrom won the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel in 2009, the first woman to do so since its creation in 1969. Her thinking is best summarised by a quote towards the end of her prize lecture:

“The most important lesson for public policy analysis derived from the intellectual journey I have outlined here is that humans have a more complex motivational structure and more capability to solve social dilemmas than posited in earlier rational-choice theory. Designing institutions to force (or nudge) entirely self-interested individuals to achieve better outcomes has been the major goal posited by policy analysts for governments to accomplish for much of the past half century. Extensive empirical research leads me to argue that instead, a core goal of public policy should be to facilitate the development of institutions that bring out the best in humans.”

On this basis, government should work with businesses and other stakeholders to create institutions that have public purpose. It is also reasonable that government should treat such institutions differently from ones that are focused on maximising returns to shareholders, perhaps by giving them preference in public procurement processes?


 

Henry Leveson-Gower is a pluralist economist who has worked to expand economic thinking in environmental policy for more than 25 years. He is also founder of Promoting Economic Pluralism and editor of their magazine, The Mint.

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