Do prices count?

Subjects:
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Oil is cheap. New York’s main futures contract, light sweet crude for March delivery, traded at $41.63 a barrel today, while Brent North Sea crude for March fell 68 cents to $44.22. By almost any measure, it is just not enough. “We are not happy with $40 even $50 a barrel,” Abdalla Salem El-Badri, Opec Secretary-General, told a panel discussing energy security. And they are not alone. Tony Hayward, the chief executive of BP, told the panel that Opec countries needed a price of about $60-$80 per barrel to balance their budgets and invest in social programmes. “A price somewhere between $60-$80 would be appropriate,” he said.

Cheap oil, you would think, translates through to reduced eco-innovation, much as a low price on carbon would...but things are apparently not that simple. Attending a session about how consumer retail companies were innovating in pursuit of sustainability, I asked what I thought was an innocuous question, “at what level do energy and carbon prices drive innovation”...the answer, provided by two CEOs, was kind of a shock, “you don’t get it”, said the first, “sustainability is just part of the business, its not about energy prices”, and the second followed this up with the equally intriguing comment, “you might as well talk about rice prices, or the price of water, these are equally important”...well yes, but...hmmm.

Business leaders here, or at least some of them, seem to believe that the climate thing is beat...technology, innovation and business prowess is what it takes, and there is a lot of all three at play. Unfettered markets and Schumpeterian Umph has considerable cache, it seems, more than any talk of accountability...but to be fair, that is not quite true, one CEO in the same session declared, “we need to redefine our field of responsibility”, a view that received the nod-through assent of the assembled $500 billion a year worth of businesses...but in this world, responsibility is exercised through innovation, not any traditional view of accountability (I have a weird feeling I have written about this already today – have a look at the earlier blog on the NGO sector, here ).

It has to be said that edible packaging, collaboration to fill empty trucks, value chain redesign to reduce energy use, and product reconfiguration to deliver the ‘experience not the stuff’ has indeed moved from the movies to the mainstream...there is no doubt that many businesses have got it at a gut level, “we cannot expect to continue to provide body cleaning products unless we can secure a sustainable supply of palm oil, and the Rainforest Alliance can ensure that our coffee is fair bought” are the kinds of remarks that would have caused celebration at the Body Shop less than a decade ago, and it is a true development that it is increasingly part of business as usual. And there is little doubt that most civil activists under-estimate by a massive factor the power of business innovation to deliver meaningful solutions.

But why must innovation and accountability be at such odds, a sort of West Coast – East Coast thing, social entrepreneur’s and mega-businesses alike cannot, it seems, be constrained by mere accountability where innovation and values provide a heady blend that will lead us our of our current quandries.

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Comments

Tony Curzon Price
30 January 2009 - 1:50pm

I wonder how much the Davos crowd are basically happy as long as they are leading? I tried to get to this in oD's CNN Davos question -- Simon, perhaps you can pop into the CNN igloo and video an answer?

Here is the question:
http://edition.cnn.com/2009/WORLD/europe/01/07/davos.deardavos/#cnnSTCText

Here is the forum discussion around it:
http://forums.opendemocracy.net/node/47808

tony

Peter Johnson
30 January 2009 - 4:46pm

Tony, I'm sure there's something in that. And when you so manifestly did not know what you were doing before the crash, you obviously have to show that you know what to do afterwards.But on the question - at what point do prices stimulate innovation - the CEO may be right. Market prices help us select between innovations but don't cause innovation, which is unpredictable with all kinds of motivation. The businessman should have gone on to say that since the market is not the only determinant of his company's behaviour, he was therefore carefully incorporating social, personal, psychological, environmental, and other factors into his business plan...

Tony Curzon Price
7 February 2009 - 5:45am

Peter, Agreed on the price/innovation thing - here is Tim O'Reilly being frank about Silicon Valley on this question. 

On the "non market factors" point (I am not sure the link ...), presumably Simon would say that "the market _cannot_ deal with all these so-called externalities, so we need various non-market accountability mechansims in place". So, a business plan might have:

   A - engage in stakeholder consultation which is meaningful (ie do some micro-politics)

  B - if the outcome is m, do x, if it is n, do y ... etc

The plan, if the market really doesn't work, cannot be a directive plan but must be a procedural one. 

 

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tony

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