Polemics

The comparative advantage of cooperation

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So many of our policies – economic, education, even welfare, are based on the notion of “competitiveness.” This is nothing new: Adam Smith wrote about the competitiveness of nations; while another English Economist, Ricardo, talked about the idea of comparative advantage in the early 1800’s. This isn’t just a policy direction. Of course corporate capitalism is also based on ensuring companies are as “competitive” as they can be.

When it comes to sustainability, the idea of adopting social or environmental policies within a company, are often also framed as helping companies to be more “competitive.” A business case may be generated, from showing lower energy bills, to reducing staff turnover.

The problem is, the business case for sustainability isn’t necessarily there. There are so many disincentives – green energy costs may be higher; higher labour costs reduce the profits made by shareholders, etc. At the national level, it may be in one country’s interest to do exactly the opposite of sustainability. Take Canada, they can take huge advantage of Tar Sands production, as oil prices rise; and they also stand to take advantage of melting glaciers – they can simply export their fresh water to drier parts of the world.

Anyone who has ever done one of those exercises at a management retreat to look at strategic decision-making, known as game theory, will have found out that your initial instincts – to leave your competitor to hang to dry – isn’t necessarily in your best interest over the long-run. They generally show that cooperation actually leads to stronger outcomes for everyone involved over the long-run.

How would this work in practice? One might see clusters of companies working together; mutual investment in shared low-cost energy solutions; moving away from lobbying that undermines government ability to protect the most vulnerable, or stronger alliances at the national level as well. As soon as we start to think about what’s in the interests of more than one party, we open up a host of innovation opportunities for business. CK Prahalad’s “Fortune at the Bottom of the Pyramid” is a clear case in point. He posited that companies who think of how to alleviate poverty through their business offering can also see new opportunities where previously there were none.

Companies looking to build the business case for sustainability in order to ensure their ‘competitiveness’ are looking in the wrong direction. Let “cooperation” or “cooperativeness” be the new foundation for the sustainability movement. It’s sure to produce better, and more longer-lasting results.


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