7. Implementing Life Cycle Assessments into Society

One important part within the studies of Industrial Ecology, thus sustainability, is to conduct a life cycle analysis (LCA) of a certain product. In this post I will give a brief introduction to the definition of LCA, and I will relate the application of a LCA to the influences of external control and certain boundary conditions.

An life cycle analysis is defined as the ‘compilation and evaluation of the inputs, outputs and potential environmental impacts of a product system throughout it’s life cycle’. It is a tool for the analysis of the environmental burden of products at all stages in their life cycle – from the extraction of recourses, through the production of materials, product parts, and the products itself, and the use of the product to the management after it is discarded, either by reuse, recycling or final disposal. A LCA is quantitative in character and where quantification is not possible, qualitative comes into place. The goal of a life cycle assessment is to environmentally compare products and choose the best alternative (Life cycle assessment: an operational guide to the ISO standards, 2001).

The method of LCA was founded in the eighties, as part of making the world more sustainable for us and our future generations. To make this tool useful and more practical for societies, a standard for the conduction of LCA was founded, called the ISO (International Organization for Standardization). These international standards ‘make things work’ and give world-class specifications for products, services and systems to ensure quality, safety and efficienty (http://www.iso.org/iso/home/about.htm).

To make the LCA tool a common and standard tool within our industries, to support a sustainable way of producing and consuming, external control and setting is needed. With the use of Sabater’s frameworks, I will suggest four ways to increase the use of LCA’s.

The concept of implementation is described by Sabater. He describes five dependent stages in the implementation process; Implementation, compliance, impacts, perceived impacts and revision. There are three general sets of factors affecting these stages, with sixteen independent variables influencing goal compliance within this framework (Making Progress: Essays in Progress and Public Policy, 2002). This frame can be seen below.

So how can the government increase the use of LCA’s? From the side of factors influencing the implementation proces, suggested positive influences on the implementation are:

(1) Defining the problems, which intervene the implementation of the use of LCA’s. If a clear protocol is made, for every industry and every product, that will be conducted. By setting clear protocols, problems in the implementation process will be avoided.

(2) Defining the target groups. For every industry/producer it needs to be clear what protocol needs to be used. An external controlling organization needs to start with certain target groups, who may need to implement and LCA. This can be controlled for example by setting up rules or sanctions.

(3) Create an organization who specializes in implementing LCA’s within industries. By setting this up, with the help of financial and allowing hierarchy, power and structure is created to guide the implementation of LCA’s.

(4) Policy implementation by setting up practical rules, results and sanctions. Next to that, the boundary conditions need to be created. This is the step that forces industries to conduct a LCA. An example can be, that a rule is created that companies need to show their score on LCA’s and that they can get sanctions if they not fulfill certain set standards.

6. Sustainable fishing-grounds

During the lecture series of Social System at the University of Delft, we played the game of Harvest. The game is based on the ´tragedy of the commons´ , this is a dilemma arising from the situation in which multiple individuals, acting independently and rationally consulting their own self-interest , will in the end deplete a shared limited source (http://www.princeton.edu/~achaney/tmve/wiki100k/docs/Tragedy_of_the_commons.html). In this case several teams acted as individually operating fisherman, every round they were allowed to decide how many fish they wanted to catch. One person acted as a facilitator, dividing every fisherman´s catch of a certain round randomly to the teams. It works with several conditions; (1) the amount of fish is 50, and every round the residual amount of fish are able to produce 1 more fish (2) there is a limited amount of rounds. The result of this game is that the harvest of each team during each round has an average of 25/#of teams. Every team is aware of the tragedy, but continues to harvest until the sea doesn’t supply fish anymore. This tragedy can be related to real time situations, where fisheries are not sustainable and continue to exploit the sea within their reach. Many news-items  are warning us for this unsustainable way of fishing. Already in many countries and in special in Asia, complete fishing ground are lost (http://www.greenpeace.nl/campaigns/oceanen-2/bedreigingen/).

The aim of this post is to think up a set of rules how to prevent this way of destroying the natural and sustainable amount of fish. A new set of rules will be suggested, under the conditions that communication now is allowed between the groups (fishers) and only the re-enacted groups can make up a new entity or actor that has an accompanying function.

Looking at excising fishing industries, already a lot of measurement do exist. For example within the worldwide tuna fishery-industry, illegal fishers will be persecuted and there is an system introduced in 2007 to collect data about tuna. A next step is to set standards for the amount of fish that is allowed to be fished (http://nos.nl/artikel/60316-actieplan-voor-behoud-tonijn.html).  For most regions or oceans intercontinental organizations do exist , who are responsible for the conservation of tuna, for example the organization of ICCAT. Also within fisheries, there are improvements made to make the industries more transparent (http://agritrade.cta.int/Fisheries/Topics/ACP-EU-relations-FPAs/Third-country-flagged-Spanish-owned-tuna-vessels-to-abide-by-CFP-standards-for-control).

The measurements described above came together through external organizations of the fishing industry. Companies like Greenpeace became aware of the fact that too much fish was caught in order to maintain the fishing grounds. Within this article I will motivate how the fishers itself will take action to keep the grounds sustainable before the fish-species will extinct:

(-) An important condition I would give is that an initiative or set of rules probably will arise when the scale of the region and/or amount of fishers is small.

(1) When a certain amount of fishers fish too much within a small region, they will notice within a few year that the amount of fish will reduce. A consequence of this, will be that they will look for further grounds to fish and they will meet other fishers within their competition. When one or more actors notice that winning your grounds becomes a game of who has the fastest or strongest vessels,   I assume that they will create a set of rules or consequences based on where everyone is allowed to fish.

(2) Next to that, when the economy and transport-resources are sufficient,  competitions will arise within the sellers-community on a larger scale. If sellers from a region far away will offer cheaper fish, it will result in a loss of profit for others. So, in order to create honesty and safety in this process, I assume that providers from certain region will strive for a standard price.

(3) To continue with step number one, if a fisher in its own region is fishing too much and the recourses become scarce, they will have to strive for new fishing-grounds. If every possible fishing ground is taken, they have to come up with a sustainable system for their own assigned grounds.  This actor gains knowledge on how to maintain the amount of fish within its region and makes a set of standards or measurements to keep the amount of fish.

(4) Other fishers will have the same problems at one point, and they will get the already existing information on how to keep the fishing-grounds sustainable. An organization will arise to communicate these standards to the ones who need this, selling their service product on how to conduct sustainable (read: maintain profit).

I assume that the previous measures and standards written in bold letters will arise in order to sustain a business for every fisher. This begins from a smaller scale and spreads out to a bigger scale where all grounds are taken and cause new competitions.

5. The regional network of the production of chicken eggs in the Netherland.

In this post I will address the regional network for the production of chicken eggs in the Netherlands. Starting from the production of an egg until the consumption, many companies and actors are involved in this regional network. In the next paragraphs I am going to explain why this regional network caught my interest, I will give an understanding view on how the regional network works with its particular linkages and I will end up with an identification of what constraints or opportunities there are concerning closing material loops within this network.

The production of Chicken eggs.
We, as consumers in the Netherlands, are often not aware of how our food is produced. A few years ago, I saw a rather shocking video of rooster chicks that were separated from female chicks not long after their birth. Because these rooster chicks are superfluous in the production of eggs, they were being brutally euthanized by a grinding machine (http://boingboing.net/2009/09/01/baby-chicks-ground-u.html). This video was taped in the United States a while ago, and went viral over the internet. The way mass consumption works is unfortunately hardly known by the public, I think that most consumers are ignorant or unaware of the background when buying their food. And at the same time producers are of course not keen on showing their way of producing in a mass amount. With the current number of consumers it is probably not possible to produce in a small scale without harming any animals, but at least there should be room for improvement.

Several campaigns exist trying to make the consumers more aware of these production facts. For example in the Netherlands concerning these rooster chicks the campaign of Waardeloze Haantjes strives for a better life of these chicks (http://www.waardelozehaantjes.nl/campagne/). The last five years I also became more interested in the ethical way of how food is being (mass) produced. I try to conscious about what I buy and eat, but at the same time it is hard to understand every industry and their way of producing. The production of eggs in the Netherlands should be an interesting network to analyse concerning the previous appointed fact about male chicks. By analysing this network, I hope to discover some possibilities for the rooster hens or for any other process or material.

The Network
To give a simple example, there are two types of chicken used in the production of food: chickens for laying eggs and chickens for producing meat. The ones for laying eggs are suitable for this because they are small and the ones for producing meat are bigger and grow faster. The superfluous male chicks are being gassed in the Netherland and used as food for other animals (http://zakelijk.infonu.nl/onderneming/81823-haantjes-worden-vergast-alleen-kippen-gegeten.html). When the chicks are produced and grown they are transported to an egg producing company ( in this example Slingerland). In this case, the company of Slingerland also owns a distributing and a selling facility as can be seen in the image below. The distributing company of Slingerland transports its eggs to other distributing facilities owned by other selling actors like Albert Heijn.

A (simple) network of the production of eggs in the Netherlands

The network consist of main actors and secondary actors. The secundairy actors are briefly said the transporting companies, the machinery making companies and the chicken food delivering companies. Because these companies deliver to a great amount of buyers, they are probably working in an international or non-local market. The suppliers of food have a special influence on the quality of eggs, because –of course-  eggs are completely made of these products.

Closing Material Loops
Given this network, that exists out of far more actors and products that are showed, there are many possibilities to utilize more remaining products. For example, this model does not show what happens to chicken manure, what can be used for other industries. As well as for the millions of male chicks that are used for other industries. Maybe there is an opportunity to combine this industry with the meat industry, so that the male chicks aren’t superfluous. A closer relation or symbiosis between the meat producers and the eggs producers can make a more material closing loop. However the constraints are that the type of chickens that are used for both industries are not the same and it would costs a lot to implement another chicken species( http://zakelijk.infonu.nl/onderneming/81823-haantjes-worden-vergast-alleen-kippen-gegeten.html). The multiple selling actors are also a constraint, for example Albert Heijn works with its own distributing company. A single distributing company, delivering eggs to every AH, would simply be too expansive. Only with small scale specialized shops, who collect their own eggs at the Slingerland Distributor, could make a second distributor unnecessary. But again, on the scale off mass consumption, this ideal is hard to achieve.

Used companies:
http://www.boerderij.nl/Pluimveehouderij/Nieuws/2013/5/Vijf-miljoen-legkuikens-uit-Agromix-broederij-1249563W/
http://www.agromix.nl/legbroederij
http://www.pluimveebedrijfslingerland.nl/

4. A Decent Factory; the sustainability strategy of Nokia and its suppliers

Videostill of ´A decent factory´ (2004)

The documentary ´A Decent Factory´ (2004) shows the relationship between Nokia and one of its suppliers in China. The European based company of Nokia shows in this documentary their efforts to control the ethical way of producing their goods in foreign countries, by inspecting outsourced suppliers. In the video two inspectors, Hanna Kaskinen and Louisa Jamison, who were hired by Nokia to see how the labour conditions were in one of the regarding suppliers. In this post I will give a brief summary and background of the documentary, then discuss how the two key organizations in this case are striving for legitimacy, I will argue whether this approach by Nokia is an effective way of diffusing sustainability criteria and last, if there is another coordination strategy of Nokia to improve this system.
Nokia was one of the biggest mobile manufacturer in the world, based in Finland. Due to a lot of success, they expanded their activities to other countries like in this case, China. Countries like China are known for poor labour conditions, child labour and violations of human rights. The firms begin with a view on the relaxed and informal business culture of Nokia, and the continues with the visit to a factory in China. The goal of this visit was to improve their view on their ethical way of producing, by controlling their suppliers, and to get an impression how people work over there and how much the costs are compared to local labour costs (http://www.thomasbalmes.com/filmography/a-decent-factory/). During their visit, the temporary hired inspectors (Hanna Kaskinen and Louisa Jamison) discover several facts that indicate poor labour conditions: all employees are working over hours and six days a week, they are living next to the factory and are sharing their housing facilities with 7 others, they are not allowed to start a relationship or they are not allowed to get pregnant. One of the manager of the company seems to be careful or even misleading when he talks about how much time they employees work. When interviewing the employees, they seem to be afraid and suppressed by their managers. At the ends of the documentary, the result of the investigation is told to the managers. The inspectors point out that some small changes need to be made, but they are going into the right direction. Although the culture and legislation between Europe (Finland) and China is different, by this visit Nokia is doing an effort to get more insights on their own ethical way of doing business and sees opportunities to improve this.

Striving for Legitimacy
With this visit, more communication and insights are shared between these two businesses. By controlling the supplier, they become aware and focused on the fact that Nokia is asking for standards for their businesses. If they fail to meet these standards, they will risk to lose their buyer. Also for Nokia, who has a really big responsibility in not losing their corporate image, they are responsible for the suppliers they choose. Nokia was during this time part of the sustainability index, so any news item could have a big influences on their image, thus their sales. To sum up, both companies strive for legitimacy by communicating, settings standards and controlling the supplier side in order not to lose their turnover.

Influence Nokia on diffusing sustainable criteria
By making this documentary, Nokia is being open towards consumers about their way of doing business. Although this documentary is a bit outdated, I can appreciate their attempt to show their sustainable character or their efforts to improve their ethical way of doing business. A documentary is in my opinion a really influential type of media to spread out the business culture of Nokia, and to have an open and honest image. In order to stay competitive, other companies could have followed the actions to show an honest and open way of doing businesses. Not every documentary of other businesses will have to same influence, since it will be a lot of the same stories. But they will perform other action to create an open image. Next to this open image, it is important to strive for enhancement within the labour conditions in outsourced businesses. In my opinion, the documentary lacks in showing the adjusting actions of Nokia, to set standards in order to be more strict in implementing their sustainable business. Taken this in account, I do not think Nokia does fulfil the diffusing of sustainable criteria. They only create a view where this criteria should be implemented.

Suggestion how to improve this coordination mechanism
In order to improve the relation and cooperation between a company like Nokia and its outsourced suppliers, in my opinion the company with the biggest responsibility, Nokia, should continuously control their suppliers. During this documentary they used the help of external actors to control their suppliers, for only one controlling visit. What would be my suggestion is to create an internal team concerning these relationships, to strive for a more sustainable and responsible corporate image. Taken in account that this documentary is filmed a while ago, I would expect that this specialisation within the business culture has already arisen.

Note: Link to documentary: http://www.gemistvoornmt.nl/a.aspx/2730772/0

…

The Feedback Post

Comment assignment 1.1 Suzanne Dietz
(http://suusonthesocial.blogspot.nl/2014/09/sorry-what-do-you-actually-say-in.html)
Sorry, what do you actually say

I think in this post you succeed in defining the meaning of business and profit. You give insights on the different views on this topic, motivated from more than one field. I think you give a broad explanation to the question, which gives me and maybe fellow readers a new look on the topic.

However I found the intro a bit misleading, beginning about oil and graphs (without any links or images), I was a bit confused whether the post was about something else (oil). What also would help me understanding the story is a conclusion. And last, an easy spelling check in word can already make a difference in the amount of mistakes.

Comment assignment 1.2 Suzanne Dietz
(http://suusonthesocial.blogspot.nl/)

Missing

Comment assignment 1.1 Raissa Ulbrich (http://sspmbloginanawesomeautumn.wordpress.com/2014/09/18/puzzle-industrial-ecology/#comments)
Puzzle- industrial ecology

I think you made your arguments in this puzzle very evident, with also a clear introduction and conclusion. In the beginning I was experiencing some difficulties on what the puzzle exactly was (you spoke about both satisfaction or product endurance in relation to the increase of income), and what your statement was. Maybe a link to a graph would help? In argument number 2 I was missing a link to your statement of the puzzle, so the argumentation was not immediately clear to me. The conclusion helped me to convince me of your statement.

Comment assignment 1.2 Raissa Ulbrich
(http://sspmbloginanawesomeautumn.wordpress.com/2014/09/18/the-business-of-businesses-is-to-increase-its-profit/#comments)
THE BUSINESS OF BUSINESSES IS TO INCREASE ITS PROFIT”

I found your story very clear, you wrote strong stating sentences that give a convincing edge to your post. In the second part you give a short explanation how these profits can be increased, by efficiency and exploring new markets, in my opinion you provide a base for your opinion this way. I think your attitude of writing is quite convincing. But, I would maybe less generalize the types of businesses, so the post would give a broader and more convincing statement.

Comment assignment 2.1 Cenyang Tang
(http://cenyangtang.blogspot.nl/2014/10/the-primary-goal-but-not-for-profit-only.html#comment-form)
The primary goal but not for profit

Nice summary of your opinion to this topic in the beginning. Good referring to a movie and a following personal interpretation to this statement. And a good conclusion to sum up your story and relate it to the theory of Friedman. Be careful with your own statements, be clear that this is your opinion and not a common statement (‘it’s really Irresponsible’),. Next to that, your story is kind of shortly explained, and your opinion is not supported by any theories. I would have liked a more broad explanation of your opinion, seen from more views within the business industry. And please, do a spelling check:
‘if Friedman’s words is (are) totally right, why (are) people involved in(this)?’…?
‘quility’..? (quality)
and many more

Comment assignment 2.2 Cenyang Tang
(http://cenyangtang.blogspot.nl/2014/10/decisionmaking-in-site-selection.html)
Decisionmaking in site selection

It is a good example to use the allocation of a university center for his topic. You explained it clear and briefly, with a good introduction and examples. However I am missing a conclusion, and what would help your story is to give a better explanation of both concepts (rational and bounded ) and the referring literature, in special the rational decision making model. Overall, I would have written an more complex and expanded post, and would have done a spelling check in the end (‘i’ = I, ‘universitiy’, capital letters, ‘ alternates’, ‘fianlly’). I hope this will help you.

Comment assignment 2.1 zhongveer
(https://weiwenzhong.wordpress.com/2014/10/04/turn-off-your-shop-lights-at-night-please/)
Turn off your shop lights at night please

The topic you have chosen is a good example for the decision making models, in my opinion. Everyone could relate to this topic, and the link to the article helps to make your post to be more clear and interesting. I think you wrote an obvious explanation how it was a rational decision making process, but maybe you could have given a legit reason why it was rational:

suggestion:
“The news says this law can save about two terawatt hour of electricity a year, which equals to the annual consumption of 750,000 households, and is expected to save 250,000 tonnes of CO2. From these we could say this is a rational decision-making. “…….. + , because the best alternative is chosen (= link to theory of the rational model)

The second part where you explain that the decision is bounded, is very clear to me. It relates back to the statement that the original goal was to change attitudes and be a pioneer in reducing light pollution, and change the culture. Although I think the statement that says that it is not really significant, relates more to the overall energy consumption . I do think it has an influence on the culture in France, because everyone can notice the difference with- and reason behind turning of the lights during the night. Off course, this is my opinion and not yours, but maybe you could have been more precise in your argumentation. And why do citizens expect the government to do something with the environment?

And I like that you give your own opinion about this topic, it is good to be a supporter of this rule and that for that reason you choose to write about this.

Hope it will help you

Comment assignment 2.2 zhongveer
(https://weiwenzhong.wordpress.com/2014/10/01/everything-is-connected/)
Everything is connected

Your introduction is in my opinion very good, it really is written to introduce the problem in an interesting way. The example you give helps to strengthen the problem you address. I think you relate it very well to the theory of Friedman, and what your opinion is about this. You dove into the article because I see you relate to several points in his theory. What I would prefer is that the story would have been a little bit longer, with addition of theories to support your opinion. Because if so short, I am missing a broad view on the topic

Comment assignment 3. Koen Kuipers
(http://koenjjkuipers.wordpress.com/2014/10/08/assignment-3-09-10-2014/)
Assignment 3

After reading your blog, your story is very clear to me. The first part about the Ostrom´s framework is very well explained with the theory and an it is an example everyone can relate to. The conflicting interest in this case are written down and also every system of Ostrom´s framework  is explained. To only thing I would add to this part is a brief explanation, link or image of his theory. The second part on the Friedman position is very well explained, but maybe you could have repeated the theory behind it.

Comment assignment 3.  Özkan Larçin
http://olarcin.blogspot.nl

missing

Comment Assignment 4. Elke
https://anieperspective.wordpress.com/

Missing

4. Comment assignment 4. Kjell Wansleeben http://kwansleeben.wordpress.com/2014/10/10/legitimacy-in-organizations-the-nokia-case/#more-145
‘Legitimacy in organizations, the Nokia case ‘ 

Dear Kjell Wansleeben,

You give a good introduction to the documentary and a summary of the different interests, or goals, of nokia and its supplier in China. Both actors are explained and the different in types of legitimacies between China and Finland become very clear. In this story you see the ‘shady’ type of business by te supplier as accepted by the Chinese society. However, who says the society is accepting this situation. In my opinion, the ‘shady’ way of doing business is shady for another reason besides showing it to Nokia. Maybe because it is not accepterd by the society.

In the end, you give a summary to what you have seen in the docu, saying that nokia is not able to make a difference. Maybe you could have given a broader view, besides what you have seen in the documentary, using other examples and theories about supply and demands. I would say, Nokia does have a certain power to influence its supplier.

Comment assignment 5. Jason Kiem
 http://sspm-ie.blogspot.nl/

Missing

Comment assignment 5. Stephany Lie
http://stephanysspm.blogspot.nl/2014/10/assignment-5.html
‘Assignment 5’

Dear Stephany Lie

The beginning of the post consist of a good explanation and visualization of the concerning company and its related actors. The actors are visually divided in their influences on the central company and you give a good explanation to their goals and dependencies. What I miss in the introduction, is the goals of the article, what do you want to provide describing this network? However in the conclusion you give a good summary, making clear if a closed loop is possible with several examples. You make good use of excisting theories, providing as well as explaning in relation to your topic.

Comment assignment 6. Anne van Bruggen
socialsystemsinperspective.wordpress.com

Missing

Assignment 6. Bob Dubbeldam
http:\\bobindustrial.wordpress.com

Missing

Comment assignment 7 (8?). Hans Peter Honkoop
https://hanspeterhonkoop.wordpress.com/2014/11/19/the-car-game/
The Car Game

In this post you describe the game and give an improved version of the firstly played gamed played during class. I think you give a better and improved version of the first one. However i am missing the reason why an improvement is made and the relation to social systems.

Comment assignment 7. Marie-Louise de Kruiff
https://sspmblog.wordpress.com/2014/11/19/its-all-in-the-evolutionary-game/
It’s all in the evolutionary game

You give a very enthusiastic and practical approach to the game played in the lectures op SSPM. And next to this, you give a relation to the term of evolution. This is explained by two parts, one related to this class. Every concept is very well explained to provide a better understanding of all of the related terms. In the second part, you are explaining the game very well, the part of every group/actor is written down, so together they can form a dynamic game. The part which I’m missing a bit, is a more expanded and practical view on how the game will evolve and result according to you.

3. The Social Economic System of deforestation in Brazil, according to the Ostroms Framework

Deforestation in Para state, Brazil ‘www.goodplanet.info’

In this post I want to address the problem concerning the implementation of improvements, in order  to support a sustainable way of using resources.  This problem will be explained by using the example of deforestation in Brazil. This deforestation occurs because wood is needed for the built environment (also for western European markets) and for creating spaces for cattle. Everyone in these western European countries is aware of the deforestation, thanks to organizations like World Wide Fond. But the question is, who is responsible for making changes in the way and extent we use these forests in Brazil?

When we decide to buy a piece of tropical wood, we take part in a complex social ecological system with many (responsible) actors like private companies, the local and foreign government, the people who actually execute the deforestation and many more. When the problem of deforestation became known, it is hard to say who would will be the one that would stand up for the existence of these forests. First with the help of the Ostrom framework, I will analyze this complex system, and second I will relate this problem to the theory used before of Friedman.

The Ostrom framework
The Ostrom framework is a theory proposed by Elinor Ostrom in the article of ‘A General Framework for Analyzing Sustainability of Social-Ecological Systems’, published in SCIENCE  vol. 325. The framework given provides a way to analyze a (complex) social ecological system. Within this framework several levels, units, variables, actors, theories, solutions are described regarding the system. In the image below, there is an overview of the framework which is showing the relationships of the four first level subsystems of a SES.

The core subsystems in a framework for analyzing social-ecological systems, by Ostrom

Using the framework on a system of deforestation brazil (http://www.goodplanet.info/en/news/2014/08/28/amazon-deforestation-gang/), I wrote down the four first level subsystems:

(i)  The resource system: a protected forest, in this case an area in the Para state.
(ii) Resource units: trees, plants, biodiversity, water.
(iii) The governance system: The government of Brazil, the government of the smaller state of Para, the policemen.
(iv) The users: Local farmers, the gang that executes the deforestation, the people collecting and selling the wood.

For each of these subsystems, multi second level variables can be written down using the table below. Filling in all these variables in the table, helps to specify variables and helps to organize studies of similar SES’s.

Second level variables table, by Ostrom

Friedman’s view
Using the theory written in the post ‘The businesses of business is to increase profits: reconsideration’ about Friedman’s theory, I will give a view on this SES and the motivations behind referring businesses.  Regarding this social ecological system, I will write about the example of a business connected with the consumption of wood. For example a distributing company of wood, connected to western European countries. According to Friedman, a business cannot be seen as a set of individuals and therefore cannot facilitate a sustainable and corporate social responsibility way of performing. The mindset is focused on making profits, and as long as it does not have any influence on this profit, the production will continue. In relation the de deforestation in the state of Para, the business will not be concerned about the fact that gangs are active to collect wood. As long as consumers are buying this kind of hard wood, probably without any sustainable label and cheaper than other types of wood, the business thus the deforestation will continue. When the mindset of the consumers is influenced in a way that it changes their buying behavior into buying more local, and sustainable labelled woods, the profit of a company will decrease. In order to sustain this business, the resource wood will change to a labelled, or local wood.

2. ‘The business of business is to increase profits’ reconsideration

As an addition to the previous post about ´The business of business is to increase profits´, I will to reconsider what I have written after reading the article  The Social Responsibility of Business is to Increase its Profits of Milton Friedman, published in the New York Times Magazine, on September 13^th, 1970.

In my previous post, my opinion about this topic what that the business of business was not to make profits but was to gain experience for the individuals or contributing to the society. In this statement I see a business as a set of individuals who share their responsibilities. In the article of Friedman, a business cannot have responsibilities. The responsibilities only relate to corporate executives and their aim is to conduct the business in according to aim the desire of the works; make as much profits as possible. The manager is the agent of individuals, and covers their opinion and decisions, he can have ´social responsibilities´ but covers this in his own time or money.

In my opinion his statements are not proven, thus not accepted as a proven theory. Although also not with a provided theory, my opinion about a business that consists of a set of individuals that together do have other motivations behind a business next to increasing profits.

First the fact that Friedman states that a business is not a set of individuals and decision only rely on the corporate executives can already be unproven by the theory of participative decision making. This theory about the participation of every individual members in decision making, show todays influence of members of a business next the corporate executives. So, a company does indeed exist where members of a business have a saying. The theory can be found in many literatures. For example the book of Global Leadership, Change, Organizations, and Development, written by Michael Ba Banutu-Gomez, on page 238.

Part of being satisfied as an individual is the upper part in the pyramid of the theory of Maslov, where individuals feel the need of self-actualization. According to Friedman, the individuals that do not have an executive function, do not have an influence on decision making in a business. I believe that if you don’t give them influence or the possibility of self-actualization, individuals cannot sustain their needs and this can result in a higher degree of resignation and dissatisfaction, leading to an unsustainable business.

Next, to give an argument why a business is a set of individuals, is when you have a start-up company, mostly this is the act of one individual. This individual can make its own decisions and incorporate its own values. A business can exist out of one individual, and I believe that this individual, related to myself and others, can be driven by more reasons other than the increase profits. Many examples can be found, one of my favourites is the business of ocean sole (found at: http://www.ocean-sole.com), where a business is started to create job opportunities and clean up the environment. I am not convinced that the opinion in Friedman can match with these kind of businesses.

Maybe Friedmans position is already outdated, because his statement seems to be unproven at this moment in time. I believe there is enough evidence that the business of business of not to make profits, because a business cannot be seen as solid system only based on making profits.  The only possible way to believe Friedman is by rethinking the definition of a business.

2. Rational decision making versus Bounded rational decision making; The Pinto Case

In this article will write about the classic example of the Ford Business Case, a cost effective but an unethical and more lethal way of producing cars in order to maximize profits. The action to implement their way of producing will be explained by two different decision making models: the rational decision making model and the bounded rationality model. First I will write about a more comprehensive background of this case and then I will motivate both decision making models.

In 1968, Ford executives decided to produce the Pinto. The design of the car was created to compete with other low cost international brands. Due to a compressed schedule to produce this model, every change could only be implemented after the production line tooling. During crash tests, the Pinto model was not safe enough; even at low speed, a crash on the rear of the car represented a serious fire hazard. Another Pinto that had been modified with a rubber bladder in the gas tank, passed the crash test. The estimated costs of this safety improvement ranged from 5 to 8 dollar and would prevent more lethal accidents. However Ford decided to continue with the production without adjusting the fire hazard of the gas tank. This is the result of a cost benefit reasoning that the companies used for cars like this. (http://philosophia.uncg.edu/phi361-matteson/module-1-why-does-business-need-ethics/case-the-ford-pinto/)

The first decision making model I am introducing in relation to this case is the rational decision model. This model explains that decision making is a result of analytical steps, where several options are reviewed and the optimal and cost effective decision is chosen. For this case, Ford has chosen the most cost effective option; the decision not to adjust the line of production for the ford Pinto to pursue the maximization of profits. An analytical consideration of costs and possibilities resulted in this decision, the fatal injuries and the associated (longterm) costs are less than adjusting the gas tanks. For the decision makers, after careful considering costs alternatives, this was the most obvious satisfying option.

Secondly the choice to produce this way was a result of bounded rational thinking. This theory explained by Simon (1972) states that decision making is limited by the information and finite time that individuals and organizations have. Decisions are not optimal, but a result of organization routines. In relation to the case, Ford did not make an optimal decision for the way of producing this car. On short term, this car was the most cost minimalizing option, however they did not considered the impact on the long term of this unethical decision. On the long term, the outcome of this case, could have resulted in less turnover, thus more costs. Due to a limited amount of time in decision making, they could not oversee this outcome, resulting in a not optimal decision.

The two decision models are based on different assumptions; in the rational decision making model I assume that Ford was aware of the possible (financial) outcome of this unethical decision, and for the bounded rational model I assume that the Ford was not aware of this fact. Either way, if this was the best considered choice for minimalizing costs on the short term or on the long term (taken in account that this decision would be known by its customers and resulting in less turnover), the decision has been unethical and a famous example on how not to make decisions.

Note: after writing this post, I saw an interesting discussion about this topic, including the opinion of Milton Friedman.

1. Ex-Ante: “The business of business is to increase its profits.”

In this article, I will give my opinion about the following statement:  “The business of business is to increase its profits.”. This statement was given during the lecture of Social Systems class of Industrial Ecology.

The Business of a business is, in my opinion, related to a lot of motivations and definitely not only to increase its profits. For example, my personal main reason to create my own business right now is to improve my experience in entrepreneurship. The fact that my business should make profits, or even increase its profits, is more related to the sustainable character of the business. Many start-up began with an specific or personal goal.

Furthermore, I believe that there are many other missions and goals behind start-ups or behind a business. For example not only to simply providing customers in their needs, but also to create a better environment for the people involved.  Many  larger companies have a corporate social responsibility mission, and even other companies are established to maintain and provide for a society.

I believe that the profits of a business can provide them a sustainable character, but maybe for a few companies their business is to make even more profits. To have this as a main mission for a business, doesn´t give a sustainable character to the business. It will not be enough to maintain a business if the only goal is to increase the profits.

1. A puzzle of Industrial Ecology

Tags

Consumers, economy, GDP, innovation

The studies of industrial ecology covers many disciplines, from social sciences, politics and economics to engineering. An issue can be analysed from these angles and from different related scales. The various disciplines and scales lead to a puzzle when understanding an industrial ecology related issue. In this article, I will write about puzzle related to the economical behaviour of a country.

An puzzling issue I want to address is the simultaneous growth in energy consumption per capita in relation to the rise of the GDP per capita, as shown in the figure below. The figure shows a strong correlation between the two variables, it states that the higher a GDP per capita correlates to a higher consumption in energy.

Figure: Annual GDP and Energy Consumption, per capita
(http://www.aps.org/units/fps/newsletters/201204/manheimer.cfm)

GDP per Capita = The Gross Domestic Product per capita is a measure of the total output of a country that takes the GDP and divides it by the number of people in the country. The per capita GDP shows a relative performance per country, a rise in GDP per capita refers to a growth in the economy and productivity. It is sometimes used as an indicator for standards of living, where a higher GDP per capita indicates a higher standard of living. (http://www.investopedia.com/terms/p/per-capita-gdp.asp)

To give an explanation for this correlation, the two variables need to be explained. The GDP per capita indicates the economic growth of a country per person, the amount of annual energy consumption per capita refers to  the use of primary energy in GJ before transformation to other end-use fuels per person. (http://data.worldbank.org/indicator/EG.USE.PCAP.KG.OE)

Three possible explanations can be given for this correlation:

Economic growth can be explained by the increase of productivity in a country. So, there is a direct relation to an increase in productivity resulting in an increase of energy consumption. Apparently a  higher production rate, doesn’t directly indicates on a more efficient use of energy.

The first argument about the increase of the productivity can be explained the shift in the needs of people. When a certain need is fulfilled, the need for another and newer product increases. This is explained by the theory of Maslow, in the hierarchy of needs. This grow in demand, made possible by a growing economic environment, increases the needs, thus the production and energy consumption.

When an economy is growing, it results in a better educational system. This will lead to more industries and innovation within a society, making new inventions, demands and productions possible . Apart from the new (educative) industries of a country, in my opinion, the new innovations could partly also lead to a more sustainable way of producing, decreasing the use of energy.

Related to innovations and the shift in needs, trade becomes a more attractive alternative for providing needs and goods. The possibility of trading results in a higher energy consumption because of all the transportation. Because of the shift in needs, a demand for foreign products or raw materials grows.

The puzzle of a higher consumption pattern can be explained by the increase in production, education and trading. Hopefully, at an certain point in the growth of an economy, the basic needs of consumers will shift towards more sustainable product  demand with higher efficiency rates made possible by the innovations of the educational system.