Anurag Deherkar |
The large economies of today are consumer driven, meaning consumption of goods and services by its inhabitants’ (albeit consumer spending) account for most of the country’s GDP. In the USA, for example, consumer spending accounted for 68% of its GDP in 2018. In layman terms this implies that the goods and services provided in a country, are significantly influenced by consumer spending in that country. While this is true for the quant, it raises a question whether consumer preferences also influence the nature and quality of supply. Let’s think this through.
The most recent example of a well marketed ‘save the planet’ product which the automobile companies never saw coming; is the electric car. Car manufacturing companies like Mercedes and Volkswagen, despite seeing a rising demand for electrics, admitted to have ignored their consumers on account of their vested interests (The Guardian, 2019). Banking on the changing preferences of consumers, who craved the idea of doing something good to the environment or at least showing that they are, Elon Musk, and his revolutionary Tesla motor company, pioneered an all electric car. 10 years later, Tesla is the second largest car company in 2020 (Business Insider, 2020), still riding on a changing preference in the market. Of course, there are other aspects to consider in this transformation such as Tesla’s pioneering concepts, the fact that decisions on purchasing cars are more emotionally driven than intelligently etc (Logan Chierotti for INC, 2018). Nevertheless, it can be considered that consumer preferences can compel companies to change their products, as seen with Mercedes now launching a range of electric cars (Daimler, 2019).
The theory is also true for a case other way around. Consider a market, such as potato chips, a vast majority of companies (little over 90%) use palm oil for their production. Despite the recent upheaval by environmentalists on the exploitation of rainforests in Indonesia and Malaysia, the consumption of these 90% palm oil fried chips is expected to increase with a compound annual growth rate (CAGR) of 3.6% (Statistica, 2020). This is unfortunately also despite the fact that options such as baked potato chips exist. The demand does not switch to the baked version of the potato chips and that’s just the way it is.
Seeing the number of cases of this supply following demand phenomenon, when consumers are not responsible while spending, it is incredibly naive to expect companies to be responsible when producing. Afterall, the purpose of establishing a company is serving demand and maximizing profit . Profit, which is not just pocketed by individuals but is also spent on innovating technology; known to foster public welfare.
If that is the way of today, then it helps to answer the question whether it makes sense to appeal to institutions to change or appeal to the general public to change. While the former is a more convenient or rather easier way to achieve climate responsible behavior from corporations, is it correct to expect it out of them? Given the fact that we ourselves are not ready to change. This question would not be very important had there been enough time. If we had the time to focus on both, and ensure a comprehensive approach to change, then it would be the most efficient. However, since time is of the essence, we need to make the right choice; convince corporations or people? Macro or Micro?
Micro-level change is so difficult, and yet the only way forward. Only if we change our consumption patterns, will the governments and corporations change their policies towards production. Macro-level change will thus follow Micro-level change, and not the other way around. Instead of spending our time influencing a million who run corporations and governments, our focus should be on influencing the 6 billion that these million serve. However difficult it might be, this is the right approach to change. As words of Gandhi come to mind “Be the change you want to see in this world”, I close this topic sharing the fact the way to influence 6 billion people exists, but will be revealed to you in the next edition.
Stay tuned to find out…
About the author
Anurag Deherkar
Sustainable Energy Technology student
As a strong believer of Individual action, he likes to write about never-thought-before ideas to propagate large scale behavioral change. He often likes to use social psychology and economics as lenses to think of strategies to combat climate change.
Sources:
(Business Insider, 2020)
(The Guardian, 2019)
(Logan Cherotti for INC, 2018)
(Daimler, 2019)
(Statistica, 2020)