The ties that bind people, profit and planet

According to my college professors (and Wikipedia), a market failure “is when the allocation of goods and services by a free market is not efficient.

That is, there exists another conceivable outcome where a market participant may be made better off without making someone else worse off.”  This concept stuck with me, and motivated me throughout my career — where there is a market failure, there is an opportunity to do well by doing good.

Another concept that stuck with me is the notion of “sustainability.” I like the Brundtland Report’s definition from 1987, which says: “Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”

Formally known as the World Commission on Environment and Development, the Brundtland Commission’s mission is to unite countries to pursue sustainable development together.

When I read this, my interpretation was not just environmental sustainability, but also economic and social sustainability. Environmental sustainability is not sustainable if it’s not economically sustainable, or if it doesn’t work for people.

Economic growth is not sustainable if it destroys the environment, or leaves the bulk of the population behind. One notion cannot persist without the other two.

Missed opportunity?

When there is a $520 billion investment opportunity that could eliminate more than $1.2 trillion in wasted energy expenditures, hedge climate risk, enhance our national security and create jobs, why is it not happening?

That’s a major market failure, and a major opportunity to drive sustainable economic growth. At least for a while.

As the energy efficiency and conservation market begins to mature, what does a sustainable business model look like? Is it manufacturing solar panels? Selling solar panels? Financing LED lighting?

For now, my company works as an “enabler,” helping to connect property owners with technology, capital and expertise to modernize their buildings.

At the same time, we’re working to develop and promote standards that will enable these building owners, property managers, engineers, contractors and project financiers to act rationally to achieve a mutually beneficial and sustainable outcome.

Is it a sustainable business model to try and solve the market failure that created the opportunity for us to exist in the first place? For a while, but not forever — and that’s my goal. It’s a contradiction I’ve become comfortable with.

Not every CEO shares my belief in the so-called triple bottom line — people, profit and planet — but I know we all believe in doing all we can to ensure the future success of our businesses.

What is the next opportunity? Do we keep the same business model and move to a different geographic market? Develop a new product? Improve on an existing product? Develop a new sales channel?

We are trying to understand and prepare for the next opportunity, while at the same time executing a business model today that lays the groundwork to capitalize on it — whatever we think “it” is.

We have a long way to go before we solve the energy efficiency market failure, but until we achieve sustainability, there will be plenty more market failures to tackle. ●