Sunday Brunch: Who pays matters
Funding sustainability cannot just be a debate about which funding source - we also need to understand how willing the end consumer is to foot the bill. Or putting it in simple terms, who pays. Because someone has to. And who gains? Is it always the same 'person' that pays?
The linear strategy fallacy says that if things aren’t working we just try harder. But reality is not like that - Glenn Geffcken (author and strategy consultant)
A conversation I have had more and more often is about where the money we need to fund the sustainability transitions will come from. This cannot just be a debate about which funding source - we also need to understand how willing the end consumer is to foot the bill. Or putting it in simple terms, who pays. Because someone has to. And who gains? Is it always the same 'person' that pays?
And this difference, when combined with the different timings of the costs and the gains, has become a material barrier to change. Especially at a time when politicians are happy to justify inaction by saying that 'they are helping people at a time when cost of living pressures are high'.
Does this mean we need a different approach? A number of the more advanced transitions (renewables and EV's) show that where we expose consumers to the full cost of the new technology, the practical support for it is low. But when governments bridge the financial gap, until the new technology becomes more cost competitive, the uptake is greater.
Which brings us back to the Glenn Geffcken quote. In a world of incremental change, with companies and consumers directly bearing the full costs but not seeing a material benefit, our sustainability strategies are more likely to fail. By that I mean we don't achieve the outcomes on the ground that we want or need. So, rather than trying harder, doing to same things but with even more intent, let's change the model.
To quote Einstein "the definition of insanity is repeating the same mistakes and expecting different results".
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Who pays matters
I started off my working life as an engineer. Someone who built things that didn't fall down in earthquakes. I was 'lucky' in that I did most of this work in New Zealand. We had c. 20,000 earthquakes a year, of which c. 250 were big enough to be felt. So, not many people said 'this earthquake engineering stuff is expensive, building the traditional way is a lot cheaper, lets not bother'. We knew who suffered if we were unprepared when a big earthquake hit, we all did.
And we knew that by spending now, we made people safer, and we saved money in the future. And every now and then we had a reminder of the cost of failure. The Christchurch earthquakes of 2010 and 2011 cost c. "NZ$30 billion when ‘business disruption and additional costs from inflation, insurance administration or rebuilding to higher standards than before the earthquake’ are included". This is close to 10% of the countries GDP.
Many people present sustainable investing as being a bit like preparing for a major disaster such as an earthquake. It's a disaster that we 'know' is coming. The pressure is building up along the fault lines, giving us warning signs via a series of small quakes. And we know that one day the earth's crust cannot cope any more, and the fault line ruptures in a big one. The message is we should prepare for a major earthquake, rather than ignoring those warning signs.
