Marketplace economics could help to build a greener world

A greater level of transparency regarding the ecological background of consumer products is being driven by two main factors: the emergence of new technologies that track supply chains and a move amongst a diverse range of companies to increase the sustainability of their products.

Within the sphere of economics it is widely acknowledged that a certain level of transparency allows markets to work more efficiently. Conversely, the ecological background of many consumer products is currently relatively opaque – sellers are much more knowledgeable than buyers.

However, certain companies have disclosed plans to tackle this problem. Last summer, Walmart announced the development of a 'sustainability index', a ratings system aimed at analysing the life-cycle of its products. Both Unilever and Google have also announced their own steps towards transparency in an attempt to enhance the sustainability of operations.

Now, several international companies are looking to form a 'group of ten' to develop a supply chain system called Earthster and upgrade it to 'E2 Turbo'. Rather then investigating the full life-cycle, the new system only analyses the 20 per cent of the cycle that accounts for around 80 per cent of its impact on the environment.

The software will allow companies to understand which points in the production process are having the biggest impact. It will then suggest viable alternatives drawn from a database provided by the Department of Commerce (DoC), facilitating environmentally friendly business to business relations.

The larger the number of companies involved in systems such as E2 Turbo, the greater the overall number implementing sustainability strategy into wider business plans.

It is crucial that resulting information becomes readily available. According to consumer surveys, only 10 per cent of customers will actively pursue ecological information while a majority say if that information were easily accessible, they would take it into acocunt.

The positive effect that marketplace transparency can have on consumer and company decision-making has been coined a 'virtuous cycle' by Archon Fung at Harvard University. Website GoodGuide.com facilitates such transparency. The free smart phone app allows a consumer to swipe a product's bar code and then aggregates over 200 databases to provide information on the environmental and social impact of that product.

While such sites are still in the testing phase, they offer a blueprint for a means of increasing ecological transparency. This could, in turn, cause businesses to take further environmental factors into account and start rethinking products to align with new, greener values.

Such information could contribute towards the emerging metric designed to replace Gross Domestic Product. The General Progress Indicator (GPI) would include resource depletion, pollution and long-term environmental damage into its analysis, thus offering a more rounded evaluation of national growth than the conventional GDP.

 

Author: Tom Watts | Climate Action

Images: Tim | Flickr