It is normally perceived that eco-friendliness comes at a price. An organic farmer has to invest time and money into solutions to replace quick-and-easy fixes; an upper-middle class conscious consumer scratches her head in the supermarket, to select the cheapest product from the pricey eco-products; a small business man thinks twice before switching to a renewable source of energy.
One explanation that is often given for high prices of goods is that of “internalisation of externalities”. According to this notion, “cheap things” will not be cheap if the cost of mining, production, packaging, distribution and disposal is incorporated into the total price, as it harms the environment. However, as it usually isn’t, this creates externalities (negative effects) which the larger community and the biosphere carry, and not the producer and the consumer of these goods.
However, this explanation is no longer convincing, especially after we see a number of excellent business models built around the concept of conservation and eco-friendliness.
Delta Pure provides clean drinking water to their clients by leasing out water purification equipment, which allows the clients to cut the water-heating costs by half. Another example is that of Next Gen PMS, who set up biogas units, based on the concept of BIOT (Build, Operate and Trade) and charge their clients a fee for waste management and reduction of gas bills. These models show that clients do not care to go green per se, or buy expensive technology; rather, they want accessible and affordable services that allow them to enjoy things at a decent price. And smartly designed green solutions provide exactly that. Having studied the transition of economy into the green economy for the last five years, I have seen some very successful models where saving the environment has been a pragmatic choice.
Even more so, if we go beyond the short-to mid-term profitability, we will see that maintaining your business over time is inconceivable without thinking sustainably. Can you envision your business in 20 years, given the pressure of planetary boundaries?
What about 50 years?
And if you cannot, perhaps you should question the nature of what you are doing; and quit, and do something else instead, something that will benefit the generations to come.
And yet, faced with a choice, what will you prefer?
Many have switched to organic food, after realizing that it is better for their health, but not everyone can afford it.
Definitely not the poor consumers, who only want food for survival. But why is organic food more expensive?
From one point of view it should be cheaper, because organic agriculture does not require chemicals, and allows you to produce everything you need (compost, herbicides, etc.), all within the agricultural cycle itself – given that you know how to do it and what to plant.
The other point of view is that, organic food production cannot deliver the economies of scale. In one way, it is true; why would I bother diversifying my crops and creating an organic farm, if I can simply plant cash crops which will require just one type of chemical and one technique. However, this argument outlives itself.
“Small is Beautiful”, a book by E.F. Schumacher, taught us a few decades back that there is an optimal scale for everything. The same thing was predicted by mainstream economics, too: the law of diminishing returns. And yet, everyone wants to expand.
If I receive returns on my money today, I will not be satisfied, and tomorrow I will want to sell more. No matter what the community says; I will strive to expand, increase my market – either by hard selling, or by going far beyond my locality.
This is how we end up with unstable global economic system, where the prices of cash crops in Brazil affect subsistence farming in India and vice versa. This is how we end up with a global system of consumerism where, no matter what, more and more has to be produced, and more and more demands have to be created, such that if people don’t want to eat my samosas any more, I will have to shove them down their throats – all for the sake of selling, and earning my premium without worrying about the nature and communities that are destroyed in the process.
So, economies of scale only make sense up to a certain optimal level. Organic farming can achieve that level – this is my strong belief – and provide enough food for the local market, given adequate demand and fair prices. And as for externalities – in case of farming they are offset by low input and a relative independence of a farmer from supply sources. Therefore, there is no reason why organic food should be more expensive than conventionally produced food.
The culprit is marketing and distribution costs, but in future, with organic farming becoming a more routine enterprise, and with good mechanisms of creating a trust-based supply chains, these costs will reduce to a minimum.
If we have to make changes in consumer choice, being green should not hurt the pocket.
Real economic miracle for the world lies in being eco-friendly and resource efficient.
New green economy is here.
Let’s start identifying products and business models which work for the bottom line and ecological principles.
We don’t need artificial subsidies; we just need to think long-term, make wise choices, and create a critical mass of the same, so that tomorrow we needn’t think back about what we could have done in a different way.
Rishab Khanna and Tatiana Sokolova