The current environmental and economic state of the world is the compounded effect of all the transactions we’ve ever paid for. To paraphrase Newton’s third law of motion, “for every transaction, there is a greater and opposite reaction”, or impact. Opposite in the sense that impact, like a ship’s wake, flows backwards towards people and places typically unseen by the buyer. Greater in the sense that the impact is never completely reflected by the transaction price.
Collectively, we’ve bought ourselves global warming and other problems: 65% of carbon emissions, 70% of land, 51% of material and 81% of water usage are driven by household purchases. By far, Americans are the biggest contributors. With just 5% of the world’s population, Americans buy nearly a third of all household goods, and 17% of all energy.
Global warming drives suffering by increasing the likelihood and strength of megafires, hurricanes and droughts. The damage thus far is the result of only a 1.1°C average global temperature rise. Global warming, like job losses due to automation, are consequences of uninformed buying and limited choices. So is the loss of 60% of the population of all wild animals since 1970. And, so is US economic inequality, which has risen to the point where the 3 wealthiest US families have more combined wealth ($248 billion) than the bottom 160 million Americans ($245 billion).
You may be reading this on your smartphone right now. Your experience depends upon an app, which depends on a database, which depends on Android or IOS, which depends on hardware. Engineers refer to this as a stack. Like temperature, it’s normally conceptualized as up (experience) to down (hardware). In reality, your experience also depends upon the experience of others, and a deep-stack, that descends down into the Earth.
To produce 100 grams of iPhone, 34,019 grams (75 1bs.) of rock, containing 60 minerals, from 43 countries, had to be dug, processed and transported. Got low battery anxiety? If you’re reading this on an OLED display, the black background of this page draws much less power to display these words than a white background would. Cobalt also helps alleviate anxiety by increasing your battery’s capacity and stability. Since the Democratic Republic of the Congo (DRC) holds 65% of the world’s supply, there’s a good chance the cobalt in your smartphone is from there. Both, harvest destroying pollution from Glencore, the worldâ’s largest cobalt mining company, and human rights violations by Chinese cobalt mining companies are ongoing in the DRC. Like a domino chain reaction (DCR), the deep-stack has the characteristic of cascading repeatability. Ask it to do a specific task, and it will repeat the same steps within each layer in exactly the same way to accomplish it. Buy a phone from the wrong company, and you may tip a negative DCR towards the DRC, and other countries.
Blah, blah, blah. Boom! That’s the sound of decades of governments dithering followed by disaster. Carbon emissions rose the last 2 years in a row a total of 4.3%, drifting us further away from the UN’s 2030 requirement to hold temperature rise to 1.5°C, by reducing emissions to 45% below 2010 levels. The clock is ticking. A 5°C rise awaits us if we continue to conduct business as usual. Detonation will likely occur as we approach 2°C. At 2°C we will likely unleash a tipping cascade – beyond our control – where feedback loops conspire to push average temperatures up by 5Â°C. Boom! But, it need not be.
40% of the world’s 250 largest corporations reference the 2030 UN Sustainable Development Goals (SDG) in their corporate reporting. 9000+ organizations total have signed on. An end to poverty, zero hunger, climate action, gender equality, responsible consumption and conservation are among the 17 goals. Achieving these goals will not only make the world better, but open an additional $12 trillion in market opportunities.
Impact investors, eager to own companies making the world better, have tools like the comprehensive Impact Reporting and Investment Standards (IRIS), which can be mapped to the UN SDG. IRIS allows companies to report their impact performance across all social and environmental impact categories in an apples-to-apples way. This makes it as easy for investors to compare impact results, as it is for them to compare financial results.
What about buyers? Who’s making it easy for us? Thankfully, there are many great organizations certifying and rating products and services. We see their icons on labels, but most of us don’t understand what they mean taken together, as a whole. Nor do icons reflect changes on the ground in real time, as stock prices and product prices can.
Price works. Price clarifies, cuts through and captures all the costs incurred to make the product or service available to you. Price. It’s me. It’s transactional. It’s core. It’s Leonardo Di Caprio. Impact? It’s we. It’s relational. It’s edge. It’s an extra.
You are assigned a credit score, whether you want it or not. It changes every time you make a payment or fail to. Similarly, products, services and businesses can be assigned a numerical, higher-is-better, comprehensive, impact score, constructed by integrating IRIS with data from rating companies, non-profits, governments, journalists, and other authoritative sources. Levels of pay ratio inequality, fair worker treatment, pollution, carbon emissions, renewable energy use, habitat management, and more …, to the extent there’s verified data to support claims, can be reflected in the score.
Price is signal. If it’s not the last data point you see before you buy, it’s often top of mind. For us to buy better, the impact signal must be as loud and ubiquitous as the price signal. Like Janus, the Roman god who originated time, and saw the past (price) and the future (impact) simultaneously, we can unify the duality of price and impact to help make the world whole.Pricepact noun
price·pact| \ pris – pakt \
Definition of pricepact
1 : the impact associated with the price of a transaction
2 : a commitment to display a standard, comprehensive, numerical impact score for a product, service or business next to price, with equal prominence, everywhere price is displayed.
3 : a display of price and standard, comprehensive, numerical impact score side by side.
69 of the top 100 largest economic entities are global corporations, not countries. By revenue: Toyota is larger than India. Apple is larger than Saudi Arabia. Amazon is larger than Denmark. Through their supply networks, large corporations impact people, livelihoods and ecosystems across the Earth in a way many nation-states do not. For example, the Coca Cola logistics network is being used to distribute medicine in remote parts of the world where governments are unable to reach.
In a sign that global corporations may be attaining parity with nation-states, Denmark is the first country to respond to the new political-economic reality, by appointing an ambassador to Silicon Valley.
The decline of nation-state power, as evidenced by their frequent inability to address global problems, precipitates the intriguing question of who has the greater impact on the world, the average US voter or the average new car buyer?
Putting aside the fact that states have a monopoly on violence, since physical violence against people is, thankfully, on the wane, and focusing only on the money American voters control through voting and new car buying, it turns out that on average, the voter controls $16,680 and the new car buyer $31,737. A buyer paying $35,000 for an electric car pays more than she would for the average gas car, but her pricepact is significantly higher. For the additional $3,263 she spends, she creates much more positive impact, proportionately, than the gas car buyer. She helps steer her child’s future, and yours, away from the cliff. And that’s just cars. Tally up food, clothing, electronics, energy, etc. and it’s clear that the pricepact buyer’s control in the world is multiples of what voters control.
Of course, actual control depends on informed choice and leverage . As in elections, effective buying requires at least two alternatives, where one is better than the rest. Choosing not to choose is also a choice. Arguments in favor of buying nothing at all, or buying substantially less have merit. These acts are also part of the solution, at the cost of eliminating or reducing the trade that keeps many employed and has helped lift billions out of poverty.
In 2016, the $6.5 billion raised for congressional and presidential races roughly equaled the $6.6 billion invested in seed stage startups that year. Approximately, 50% of general election congressional or presidential candidates and 79% of seed startups fail to go on to the next stage. Which was the better spend from a people empowerment perspective?
Despite the collective action of voting, protesting, and letter writing. Despite billions of dollars in media spent to inform voters. At the federal level, researchers have found over 21 years and 1779 policy issues, that in the US’s representative democracy, average voters have little to no influence over public policy. Citizens only got the policy outcome they desired, when it happened to coincide with what elites lobbied for.
At the state level, data journalists have found 10,000 copycat bills that were authored, not by elected legislators, but by industry (43%), conservative (40%) and liberal (16%) groups. Tens of thousands of bills have been found with identical phrasing.
So, while there is voter choice, often, there is little average voter leverage. The political industrial complex that drives government, responds to partisan primary voters, special interests, and donors, not to us.
Amazon spent $23 billion on R&D, more than any other company. It has more staff lobbyists (28) than Google (13) and JP Morgan (11), the largest bank in the US, combined. It has made Seattle the US’s fastest growing city. When soliciting bids for its second headquarters, it promised to create 25,000 jobs. Great for the winning city, but likely paid for by losses in your town. In 2018, because of little to no spending on R&D on behalf of communities, Amazon was able to displace 62,000 stores, 900,000 retail jobs and avoid $5.5 billion in taxes. Amazon. Great convenience. Great selection. Great prices. Great for your community? Not so much. Great for inequality? Yes. Buying from Amazon makes its CEO, the world’s richest person, richer and your community poorer.
What goes around, comes around. Like the carbon cycle , the continuously reactive nature of the buy cycle puts buyers in the driver’s seat, making them more powerful than voters or investors.
Power too, is cyclical. Because all companies respond to demand, buyers effectively participate in a direct democracy. Provided there’s meaningful choice, they exert their agency through buying and feedback. Effectively, exerting more control over companies than investors. Companies, through their lobbies and revolving-door appointments, exert more control over US federal government and its agencies than voters. For this reason, buyers must be as informed of the impact of their choices, as voters are about candidates, politics and policy.
A whopping 70 of the most mentioned people across 10,000 media sources in 2018 were from politics, 18 were from sports and 4 from business. While earnings related stories featuring CEOs appear quarterly in the financial media, where’s regular coverage of their company’s impact? Where is investigative reporting on the progress that Apple and Tim Cook are making on using only recycled metals to make iPhones? How about a docuseries on how Unilever and their CEO Paul Polman are executing on their Sustainable Living Plan, that helps farmers reduce waste, water, energy, and raw materials usage? Better still, let’s have election-like, horse race coverage on which CEOs and global corporations are walking the talk on their UN SDGs, so we can buy from those who are serious about their 2030 commitments, and avoid those who are not.
At the product level, Proctor & Gamble, the world’s largest advertiser, understands that 80+% of buyers feel better about a brand if it supports a social or environmental cause, and are pioneering impact story telling for brands.
Repetition makes reality. Verified impact scoring, frequent news coverage and story telling, in tandem with the creation of more pricepactful products and services alternatives, will drive the culture not left or right, but forward. Impact investors can fuel the trip.
Most impact investors seek investments consistent with their values that also minimizes their portfolio risk. Accordingly, 88% of impact money is invested in low risk, mature and growth stage companies, owing to the tendency of investors see lack of a track record (73%) and untested business models (66%) as problems. Counterintuitively, what this strategy misses is the need for active mitigation of the systemic, deep-risk on which all portfolios depend.
Deep risks such as failure to adapt to climate, ecosystem collapse and extreme weather are the most likely risks to occur and most harmful. Some models suggest we have already past the point of no return for limiting temperature rise to 1.5°C, at which point cascading risks to health, livelihoods, food security, and economic growth are all projected to increase.
Nature herself is instructive in regard to what our best response should be. When temperatures warm, nature invests in rapid genetic divergence. It has been observed over 15 years among plants as an adaptation strategy. Likewise, if we take mature companies as normative, then the human-equivalent adaptive response would be to invest in the divergent; impact oriented seed startups, as rapidly as possible. Today, just 1% of impact investment is all seed startups receive. While 1% may be portfolio risk smart, it’s not deep-risk wise.
Given that social and environmental shareholder resolutions, when not quashed by management, only receive average support of around 21%, it makes sense for impact investors to ally with buyers to increase pressure on mature companies. Invest in startups that amplify buyer power and choice! Force larger companies to compete on pricepact, acquire startups or lose.
Investment is how it begins. A buyer friendly impact standard will catalyze a virtuous cycle of pricepact competition, enabling design and manufacture for the highest impact score at the lowest price to, inexorably, go mainstream.