The purpose pitfall

The Austrian President and former economics professor Alexander van der Bellen once said something along these lines:

If a trivial finding is coupled with
carelessness in interpretation,
collateral damage usually occurs
in the application.

At that time he referred to the myth of the Laffer curve. But the sentence has fundamental meaning. Because more and more companies today are paying attention to their purpose. This refers to the inner values according to which a company orients its business. Ideally, this purpose(*) permeates all areas of a company and should influence its actions positively („Business as a force for good“).

A practical example: every now and then we have had the idea in the company to plant a tree for every can sold. There are enough such examples, and sometimes a company even receives an environmental award for planting a tree for every T-shirt sold. Should we do that? Is this a „force for good“ or, on the contrary, to be seen critically?

A (trivial) finding

It is good when companies do good.

A (less careless) interpretation

However, the term „purpose“ is not unproblematic in practical application. Two examples to get you started:

  1. Starbucks, the U.S. coffee company, donates 1% of its revenues to children and society in Guatemala, where they get their coffee from. 1
  2. Each year, the European Union donates part of its overproduction of food (the so-called „butter mountain“) to Africa.2

It is […] with nature, as with everything profound […]: The deeper one penetrates seriously, the more difficult problems arise.

J.W. v. Goethe (Maximen und Reflexionen)

In this sense Purpose is connected with charity. But it is not immediately clear how charity itself is to be evaluated.

Is charity always good?

You have to think the Starbucks example basically. Combining the sale of a product with a social benefit (planting trees, wells for the 3rd world, etc.) structurally does two things:

  1. it combines consumption with charity and
  2. the consumption should get an additional ethical dimension from this connection, which charges the purchase morally.

The combination of consumption and charity

And this is where the first hurdle occurs. For when the right of an individual (e.g. to a life in dignity) is replaced by an arbitrary act of grace (e.g. donations), a relationship is created that is based on dependence on the one hand and on pure voluntariness on the other. To avoid this problem, for example, in Germany the state provides for the subsistence level of its citizens and not the Herbert-Quandt Foundation.

There is no need to formulate this like the Swiss pedagogue J.H. Pestalozzi, but his famous saying makes this possible unethical consequence of charity at least crystal clear.

Charity is the drowning of the right in the craphole of grace.

Johann Heinrich Pestalozzi (1746-1827)

If one thinks for instance of social welfare assistance, then that is in the conception of Germany and many European countries a requirement of the citizen in relation to the state. Just go to the Herbert Quandt Foundation and shout loudly in the entrance hall that you know exactly how things stood with Günther, Joseph and Magda back then. Pretty sure you will have to go home without support because you have insulted the donor. But if you do that in the entrance hall of the employment agency, you might get a nasty look, but you will still get welfare. This is exactly the difference between entitlement and voluntariness.

For this reason, too, charity is critically regarded in ethical philosophy. And as the US-American law professor Michael Sandel adds in his book The Tyranny of Merit3, a society based on the charity of the successful not only creates a class of the underprivileged that suffers under the social conditions; it also creates a climate in which success and failure are regarded as deserved or self-inflicted. In such a society, the poor and needy must be happy and grateful to be helped. It is a confrontation in which the rights of the individual in relation to society are being eroded.

Let us remember 10 years back. At that time it was common practice to export the overproduction of the EU agriculture (the so-called „butter mountains“) in the form of donations in kind or at subsidized prices. About 70% of this went to poor countries, mostly in Africa, and the consequences were abstruse. The cheap European agricultural products competed with the local farmers and pushed them out of the market. Is that a good thing?

Internal contradictions

The internal contradictions become particularly great when the plight of one is based on the economic success of the other. One criticized for example Starbucks for the fact that they firstly create difficult conditions in Guatemala by their business practices , secondly the profits then by donations and charity (e.g. to the training promotion) try to compensate these, thirdly the training of further potential coffee farmers still intensifies the emergency and fourthly the consumer finances this vicious circle also still gladly and with a good feeling of the charity.

But even if it does not happen as conspicuously as with coffee consumption. On a global level, it could be argued that the Western world is responsible for much of the impact of global warming. However, the consequences of a rise in sea levels, for example, are largely borne by the poor part of the world. Could one not argue that farmers in the Niger Delta are entitled to compensation – and do not have to be grateful for donations from the Shell Foundation?

Charging consumption morally

The message is clear: „Buy, dear customer, our beautiful products, then you can maintain your previous way of life with a clear conscience, because we from [insert any company] ensure that everything is fair and environmentally friendly and that you don’t have to worry about anything anymore“. This is the core of the charity business.

And it finds a grateful buyer in the consumer. While the actors of the consumer society used to be ashamed of their excessive consumption, today they can calm their souls because morally charged consumption has already built social compensation into it.

This leads on to the second major problem of a Purpose-centered debate. For even if one manages to successfully circumvent the charity pitfall, another problem with the purpose centered debate remains: the normative power of the time axis.

Collateral damage in application

An example: if we want to limit global warming to „well below 2 degrees“ with a probability of 50% (not very ambitious), as agreed in the Paris Climate Accord, then humanity has a global CO2 budget of about 540 gigatons („Gt“) until it has to arrive at complete CO2 neutrality. Germany is responsible for an amount of possible CO2 emissions of about 6.3 Gt. The current climate package of the German government envisages (with doubtful assumptions as to whether the measures taken will lead to CO2 neutrality at all) a residual emission of approximately 13 Gt by 2050. That does not only mean that the set measures are possibly not sufficient, Germany has for itself also the set CO2 budget simply doubled. If all countries do so, the climate protection that is being aimed for can simply be forgotten.

Germany currently emits about 800 million tons of CO2 per year. If we take climate protection seriously, we still have 8 more years as before, then we have to be CO2-neutral at a single stroke. Alternatively, a linear reduction over twice the time period could be implemented. But in any case, time is critical.

Experts agree that this goal can only be achieved through a drastic transformation of economic production methods. In particular, it is already clear today that compensation measures (planting trees, etc.) will be far from sufficient to achieve the goals set. It is estimated that 80% of the savings will have to be achieved through emission avoidance.

But for companies that have a genuine interest in sustainability – and fortunately there are already many and more of them – it is crucial that their own strategy is viable in the long term (otherwise it would hardly be sustainable). For companies, this means concretely in this example:

  1. The CO2 footprint must not scale with increasing output (for example, every additional cup of coffee sold must have a zero footprint without compensation)
  2. The basic footprint must be reduced by at least 80% within 8 years. The rest must be compensated.

And here is a crucial difference to the moral recharging of consumption. Self-deception, as Zizek would call it, does not work for companies. Companies create footprint and the problem does not disappear just because we seek a different ideological or spiritual approach. Only practical action can reduce our impact.

Evaluation and open questions

The combination of consumption with charity through Purpose obviously produces unintended side effects:

Side effect 1: no consumption = no charity

his cannot be a future model for a sustainable society.

Side effect 2: more consumption = higher negative footprint

Even if one could overcome the pitfalls of the first equation, this would not be a solution either.

For a purpose driven company, this means a clear obligation: since the overall welfare that a company creates cannot be higher than the footprint that it generates, this means, conversely, that a charitable purpose cannot be neither primary nor sustainable in the long run.

Different companies can have different models for this, which can mean long-term sustainability. However, for the handling of Purpose/Charity one can certainly demand:

  1. The sale and use must not create the problems that they try to alleviate through charity (internal consistency)
  2. The charity must not create serious problems in other fields of environment or society (no cross-infection)
  3. The charity must not bring the recipients into arbitrary dependence and must not crowd out the tasks of the society (no crowding-out)

Back to our original question, should we plant trees or not?

For us, planting trees is not free of contradictions in itself. We definitely do not want to be a company that „saves a child’s life in Fantasialandia“ for every can sold. This seems to us ludicrous in the sense of side effect 1 and thus ethically untenable. But also in terms of ethically less reprehensible charities, our business model should depend as little as possible on how many products we sell. Either something is morally good, then you have to do it, or you don’t.

As for side effect 2, our first social task is not to create a scaling footprint (and not just to compensate for it). Advertising with charity of the „one tree per can“ type seems rather difficult to us.

Our focus is firstly not to create a scaling footprint and secondly to continue to reduce base emissions. We have also deposited and validated these reduction targets with the UN.

We plant trees where we still have to compensate – regardless of whether we had a good year or not. We are well aware that this supposed independence actually has economic limits. It is simply a question of weighing up the pros and cons.

Further read:

  1. Bäume pflanzen zur CO2-Kompensation: Sensation oder Irrweg? (DE)
  2. Wer zu spät kommt, den bestraft das Leben (Teil 1) (DE)
  3. How social innovation can lead to technological breakthroughs (EN)

Notes:

*) The actions resulting from the purpose refer to the connection of products (or services) with environmental protection and/or a positive contribution to the common good. The purchase of the products (or services) by their customers enables the companies to do so.

  1. Please see Zlavoy Zizek: The Feel-good ideology of Starbucks. https://www.openculture.com/2013/12/zizek-on-the-ideology-of-starbucks.html
  2. taz: Der Butterberg ist wieder da. https://taz.de/Ueberproduktion-in-der-Landwirtschaft/!5431560/ bzw. ZDF: Der Irrsinn mit der Milch. https://www.zdf.de/dokumentation/zdfzoom/der-irrsinn-mit-der-milch-100.html
  3. Michael Sandel: The Tyranny of Merit: What’s Become of the Common Good? Allen Lane, 2020.

Author:

Dr. Marcel Pietsch is an economist and philosopher. He runs a B Corp. certified family business that focuses on the production and life cycle of sustainable products.

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