Would Companies Voluntarily Go Green?

Gary Johnson recently started talking about supporting a CO2 fee, although he even more recently took it back.

Of course when he first supported it I called him out on social media, but some of my less economically literate friends insisted it might be a good idea. Specifically I was asked whether companies would voluntarily go green. So here’s my answer.

Sometimes, yes, and I expect those voluntary occasions to be far more appropriate then any regulatory rule produced by government.

I expect companies might voluntarily go green for a few reasons:

  1. To make their customers happy. Starbucks voluntarily engages in fair trade practices for this reason.
  2. To improve productivity. If I am running a popcorn making factory and my employees keep dying of popcorn lung, a coal mine and black lung, or so on, I may not be able to optimize profit. So I need certain environmental quality and safety standards even for a purely internal production reason.
  3. To incentivize employees into taking a reduced wage. Even if employees don’t die, they will demand high pay if their working environment is not comfortable. By creating high comfort working areas, employers can substitute comfort for wages to employees. When employees feel they are working for a company with a commitment to their personal values, they may accept even lower wages. This is one reason some folks will work for non-profit companies at lower wages. So if a company supports sustainability they might obtain certain internal gains.
  4. To protect or improve reputation. In connection with making customers and employees happy, firms care about reputation. If a company if ruining the local water system, they are not likely to have a wicked cool reputation. Some companies already do the opposite of polluting to incur local reputation benefits. Corporate adopt-a-highway sponsorship is super common.
  5. Due to leadership preference. Companies are people believe it or not.
    1. As the leadership company obtains divergent interests, then the company operates effectively on the profit incentive.
    2. However, no company has perfectly divergent ownership interests, and many companies have quite the opposite: Leadership with a specific commitment to key values is a standard practice.
    3. Specifically, I would expect SMBs to advocate for values more strongly than large, publicly traded corporations.

So in some sense “going green” could be viewed as a component of consumer product or employee income. I would suggest perceived moral goods are commonly treated this way, as supplemental components in a larger income or consumption bundle. For example, Christians tending to consume from and work at Chick-fil-A or Hobby Lobby can be partly explained this way.

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