In Search of a Responsible Economy

Then in 2013 I was inspired by Patagonia, the company, and what they call the 'responsible economy'. This resulted in the following environmental-related piece, which also touched on collaborative consumption or the sharing economy.

Dec 2013

"Don't buy this jacket."

This is the last thing you would expect a clothing company to tell consumers on one of the busiest days in the year for retailers, but this is precisely what adventure apparel brand Patagonia did two years ago. This headline appeared on its Black Friday ads, which also explained the environmental impact of producing the jackets.

The ads were part of Patagonia's ongoing campaign to encourage consumers to buy less and to recycle, repair and reuse instead. The company also offers a clothing repair service, and recently started accepting trade-ins of used Patagonia apparel, which are then reconditioned and resold at some of its stores as 'Worn Wear'.

Such a campaign seems counter-productive to the accepted business model of selling more products and services to achieve company growth and profits.  So why would Patagonia tell us to not to buy more of its products?

The answer: to encourage us to reduce our environmental footprint. And Patagonia, well-known for its environmentalism as well as for making high-quality (and expensive) outdoor gear, is keen to push the sustainability agenda further with its latest campaign, known as The Responsible Economy.

Launched recently in September, this two-year campaign aims to encourage discussion about the need for new business and economic practices that are not solely based on growth-based capitalism and what Patagonia founder Yvon Chouinard calls 'insatiable consumerism'.

Since the onset of the global economic recession, more and more people have become disillusioned with the conventional understanding that relentless growth -- at the expense of everything else -- is necessary for business and economic prosperity. And Patagonia's Responsible Economy campaign is the latest in efforts to seek out alternative business and economic models, which has also given rise to the sharing economy or collaborative consumption.

In 2011, when Freelancers Union founder Sara Horowitz wrote in The Atlantic about the sharing economy, she described it as being driven by millions of Americans who recognised that 'endless and thoughtless consumption' was unsustainable both from an ecological as well as financial standpoint. Recession-hit consumers realised that they could no longer afford prop up their economy by continuing to spend relentlessly, to the point of getting themselves into serious debt.

Enter the sharing economy, which is based on the sharing of resources through online peer-to-peer marketplaces. Mobile and online technology has made it cheaper and easier for individuals to share underused assets by renting them, and this in turn is changing the way people think about the need to own goods. In other words, think access, not ownership. 

For instance, why own a car that you use only once a month, when you can affordably rent a car or a ride? This was the premise for car/ride-sharing businesses like RelayRides and Lyft. Have an extra bedroom in your home? Convert that into income by renting it out to tourists via peer-to-peer rental sites like Airbnb or HomeAway.  

By encouraging more efficient use of resources, collaborative consumption contributes to environmental and financial sustainability. It also fosters greater collaboration and community spirit as individuals come together to find viable, affordable solutions to their needs.  The sharing economy relies on shared needs, trust and the belief that the group is stronger than the individual, Horowitz writes.

This alternate economic model, what The Economist calls 'a post-crisis antidote to materialism and overconsumption', has undeniably struck a chord among consumers. Today, the sharing economy is said to have expanded to an estimated value of US$110 billion. But a sure sign of its potential for further growth is the fact that regulators as well as large corporations are now paying much closer attention to collaborative businesses.

Big companies are beginning to embrace these disruptions to their business by joining in. Automotive giant Daimler has introduced its Car2Go car-sharing service, while General Motors has invested in RelayRides. Rental business Avis has acquired Zipcar, a forerunner in the car sharing business. And the success of online textbook rental service Chegg.com has spurred established book retailers like Barnes and Noble and Amazon to offer similar services.

It is encouraging to see the effect of the sharing economy on incumbent businesses, as it can only spur the growth of more innovative, collaborative and resource-friendly business models. Yet, the quest for alternative business and economic models that can balance growth with the need for sustainability as well as social benefit is not an easy one.

Even Patagonia faces this challenge; despite spending the past two years persuading consumers to buy less, its annual sales have increased by almost 38% in the same period.  Patagonia vice president of environmental affairs Rick Ridgeway recently told BusinessWeek that the company's growth is overshadowing the benefits it is producing from sustainability initiatives.

Back in 1968, ecologist Garett Hardin wrote about the 'tragedy of the commons', a situation where shared limited resources are depleted by individuals acting independently based on their self-interest, in contrary to the long-term best interests of the group.

According the Global Footprint Network, humanity has been overspending ecologically since the 1970s and we are now utilising resources equivalent to 1.5 planets.  And given the world's current population and consumption trends, we will need the equivalent of two Earths to support us by the 2030s.

If we are to achieve a responsible economy, we need responsible companies and policymakers who are not just focused on growth at all costs, but who recognise the importance of balancing social, ecological and economic goals. We also need to become more responsible consumers ourselves, to be more reflective and thoughtful about what we buy, how and why we spend, and consider the impact of our consumption decisions.

If we are to circumvent the tragedy of the commons on our finite planet, we must remember that we're all in this together. We need to move out of our self-interested individual selves, and come together and work collectively for our long-term sustainability.

Lim Yin Foong does not own any Patagonia stocks or clothing, but would be happy to share with anyone who does. Now based in the UK, Yin Foong was the founding editor of Personal Money, a Malaysian personal finance magazine published by The Edge Communications.

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