There is a recent discovery of just how much of our real economic impacts are not traceable from the information we can find. The problem is caused by the nature of self-managing systems, that in working by themselves they also don’t “report” or leave traceable information about how they do it. It’s recently been shown to cause a major undercount for the energy demand of business products and services, and would seem to apply to all business impact assessment methods.(1)
There’s a very “fat tail” to the distribution of physical impacts of business, usually much larger than what is traceable, and that changes the rules of impact accounting .
Research shows that the individually untraceable environmental impacts of purchasing products are much larger than the individually traceable ones. It makes measuring only the traceable ones a highly inaccurate measure of the total.
This was proved and an alternate method of impact assessment proposed last year, in the research paper “Systems Energy Assessment (SEA)”(2). The implications are so unexpected, though, it has not been widely understood or responded to.
The untraceable impacts are very widely distributed, so estimating them as proportional to the average global impacts per dollar is fairly accurate for at least their true scale. If true, it changes the whole logic of CSR, making money the primary measure of the scale of the accumulating environmental liabilities of business.
If true, it also represents an important discovery of natural science, that all the little spheres of self-organization that businesses rely on, because they work creatively by themselves, also don’t leave traceable information on how they work. It might suggest where some of the magic of business organization is hidden, and bring into question deterministic models for needing to rely on what is now known to be very spotty sources of information on how businesses really work.
Since November when it was published in the peer reviewed online journal “Sustainability”, the basic principle involved seems to have been confirmed by all the scientists who have studied it. It’s the idea that we should change the “null hypothesis” for impact assessment, from assuming for lack of information that the impacts of things are “zero” to assuming they are “average”.
The effort to improve that estimate by tracing all the sources of all the essential services businesses use was found to quickly become prohibitive. At that limit the remainder of untraceable impacts unidentified was initially found to be 80% of the total, fully four times the scale of what was found traceable.
Then asking if this is even a reasonable estimate leads to the real answer. Every dollar of the price of any end product ultimately traces back to an exceptionally diverse sampling of end user consumption, from what is counted in GDP. That diverse sampling of the diverse kinds of spending that all consumers do, is possible to further study, of course, but does seems quite reasonable to consider as “average” within GDP.
No one else seems to have yet suggested what this change might mean for sustainability. It seems to ultimately mean it matters less than we thought what people or businesses buy, and much more than we thought how much one can afford to invest in reducing the scale of an economy already well beyond its sustainable limits of consuming non-renewable resources. The data on that seems very hard to shake too.(3)
1) Henshaw (2012) The Challenge for CSR & Sustainability Reporting. Reading Nature’s Signals http://www.synapse9.com/signals/2012/01/16/challenge-for-csr-sustainability-reporting/
3) Henhaw (2011) “A decisive moment for Investing in Sustainability”. New European Economy, http://www.synapse9.com/pub/ASustInvestMoment-PH.pdf
Initial version posted as a comments to:
to “Comprehensive sustainability reporting critical for companies”
The Nation November 30, 2011 4:55 pm