Responsible consumerism. Sustainable companies. Ethical investing. What does it all mean? I buy local organic food! I even remember to bring my reusable bags! How much extra are you willing to pay to feel good and do good? When we look at our consumption choices what are we weighing up? How are we balancing financial cost against our values and the things we know to be "good?" It seems to be a question of "how much". How much does something cost against how guilty we may feel in supporting companies that are not behaving responsibly.
Our consumption decisions come down to deciding which companies we support (or don't support). What do you think of when you hear the phrase "responsible company"? For me it's any number of things. Fair wages to employees and workers across supply chain. Sustainable material choices. Minimizing transportation costs. Diverse and tolerant social policies towards employees and customers. No testing on animals. So many things to consider!
Consumption patterns show that most of us care. Take the company Patagonia as an example. Patagonia are having financial success by promoting anti-consumerism (what?!). Most of us care about sustainability. In addition to choosing sustainable products over competitors', many of us are willing to pay more to support both good products and the causes we care about. This is driven by a sense of responsibility - that is, we're happy to pay a higher price to feel like we're supporting the right business practices. If we are happy to spend $300 on a Patagonia vest -a premium for a responsible product - we need to consider the necessity of investing our collective billions (or trillions) of dollars in a responsible way.
But while we are often comfortable paying extra to support companies we believe are acting responsibly, most of us are not investing our money with that same social conscience. Something doesn't add up. The reality is that when it comes to investing, we don't even have to pay extra to do the right thing. A recent Harvard Business School working paper concluded that on a long enough time horizon, companies that care about the social and environmental factors actually outperform those that don't. And this makes sense - companies behaving well are performing well. So then why are so many of us investing in companies that we know are not behaving well? Is it because we are inherently greedy and think these are more profitable investments? I don't think so. My suspicion is that the majority of us are uninformed investors (or consumers).
Sustainability starts with and ends with responsible investing. We can enact true change at a company level by diverting our collective trillions of dollars of capital towards companies making responsible choices. If we invest and consume sustainably, our consumption decisions won't be weighed down by guilt and even the most uninformed consumer won't inadvertently be supporting causes they don't believe in.
Jay Lipman is a reformed Wall Streeter, an advocate for ethical investing and Co-Founder of Ethic. Find out more at WeAreEthic.com