Will Radical Transparency Save the Earth?

Joel Makower posts:

There's a growing school of thought that unfettered information about the environmental impacts of our world will smoke out the bad guys and help the good guys win.

I wish it were that simple.

I've just finished reading Ecological Intelligence, the new book by Daniel Goleman, whose 1997 bestseller, Emotional Intelligence, helped broaden our thinking about what it means to be "smart." (It's not the IQ test, stupid.) Now, he's turned his sights on the environment - specifically, the quantity and quality of information available about the environmental impacts of the things we buy. His highly readable book describes how the lack of good information belies the hidden impacts of our purchases - the way they are sourced, manufactured, used, and disposed of when they are no longer of use.

Goleman calls for "radical transparency," a term I've been hearing increasingly lately, one of those coinages that sneaks up on you en route to becoming a full-fledged meme. Goleman didn't invent the term - it's been around for some time - but it is a central theme of his book: the virtuous circle that develops when companies, voluntarily or not, lift the veil of secrecy to reveal the ingredients and sources of their products, enabling consumers to make smarter choices, thereby moving markets toward less-harmful products. That cycle, argues Goleman, can occur only when we fully exploit the full arsenal of technologies and human networks:

Psychologists conventionally view intelligence as residing within an individual. But the ecological abilities we need in order to survive today must be a collective intelligence, one that we learn and master as a species, and that resides in a distributed fashion among far-flung networks of people. The challenges we face are too varied, too subtle, and too complicated to be understood and overcome by a single person: their recognition and solution require intense efforts by a vastly diverse range of experts, businesspeople, activists - by all of us.

I can't argue with the premise, but my 20 years of watching the green marketplace leaves me, well, unsold.

Like Goleman, I am a steadfast believer in the power of transparency: the more we know, the smarter decisions we can make. But I'm more skeptical than Goleman about how willing and able consumers are to actually harness such information to make changes in the way they shop and live. At least, not at the scale and speed needed to transform the marketplace toward one that embraces sustainability, in all its many forms.

Here's what I see as the central flaw in Goleman's case: While he is correct in stating that the complexity and sheer number of products and manufacturing processes requires the collective intelligence of the global village, actual shopping choices are still made at the individual level. And it's here that saving the Earth often takes a back seat to simply saving the day.

It's been almost exactly 20 years since the first-ever survey of Americans' attitudes toward making green purchases, by an outfit called the Michael Peters Group, told us that a whopping 89% of shoppers said that they were concerned about the environmental impact of the products they purchased. And nearly as many - 78% - said that they were willing to pay as much as 5% more for a product packaged with recyclable or biodegradable materials compared with its conventional counterpart.

Since that August 1989 survey, dozens of market researchers have unearthed similarly tantalizing findings describing consumers' interest in aligning their purchases with their environmental concerns. But behind those impressive numbers are some conditionals that aren't always picked up. They sound something like this: "Yes, I'd happily pick the greener product - IF it comes from a brand I know and trust, IF I can buy it where I currently shop, IF it is at least as good as the product I'm currently buying, IF it doesn't require me to change habits, IF it doesn't cost more, and" - this last one is significant - "IF it is somehow better - for example, that it lasts longer, performs more effectively, saves money, is healthier for my family, or will be perceived by others as cool."

That's a pretty high bar to clear. The result is that while the research data haven't changed much over the past 20 years - neither have most consumers' purchases.

Can radical transparency change this? Admittedly, things are different now. Companies are opening up - some voluntarily, others less so - disclosing more about their ingredients and supply chains than ever before. Technology is helping too: the myriad blogs, widgets, websites, and apps, and the networks they enable, are allowing more information to be shared faster and more effectively than ever before. An emerging era of Environmental Product Declarations is upon us, using an ISO-blessed standard for reporting life-cycle impacts. Everyone from Washington to Wal-Mart are demanding companies to provide more information about the environmental (and health) impacts of what they do, and much of the information that results is being made public.

Says Goleman: "These new approaches to managing information herald a coming flood of data about the heretofore unnoticed consequences of a host of common ingredients in everyday products. What had previously been successful brands may be in danger of becoming tainted in our minds."

But content is of little use without context. Goleman and I are both fans of a website called GoodGuide, in which a team of researchers and credentialed experts have pulled together millions of data points about thousands of products, on everything from toxic ingredients to the climate policies of its manufacturer. It makes comparing products easy, providing a high-level view for those who want to know simply "Is it good?" and a deeper dive for those wanting the gory details. GoodGuide's growth trajectory during its roughly 14 months of operation suggest that there's a hunger for this information, and that's encouraging.

Says Goleman:  Radical transparency promises to create a marketplace mechanism that takes the consequence of shoppers' choices to scale: each individual purchase, aggregated with all the others, becomes tantamount to votes on the nature of the goods they buy. As businesses respond by making more of the improvements that shoppers want, shoppers can feel empowered by seeing that their ethical choices matter.

In reality, this positive feedback loop hasn't worked very well. On the one hand, when it comes to green business practices, many companies are walking more than they're talking - that is, they're making more green improvements than they're taking credit for. One reason is that many of their green achievements are about "doing less bad" - using fewer toxic ingredients, creating less waste - which are tough stories to tell. Moreover, a lot of their most significant efforts don't end up directly in the products or packaging - they're embedded in their suppliers, perhaps far upstream - or aren't part of the value proposition for those products. (If I'm buying potato chips, should I care that the potato processors are recycling their rinse water, thus saving millions of gallons of water and hundreds of thousands of dollars a year? Or do I just want a salty, crunchy underpinning for my guacamole dip?)

Moreover, these things aren't being done so much for the planet as for profits; the fact that it has a positive environmental impact (or, at least, a less negative one) is a happy outcome. Does consumer power born of radical transparency play a role in spurring companies to make such changes? Likely not.

The same is true with one of the stories Goleman tells, about how Procter & Gamble did a life-cycle study of several of its products, measuring their impacts at seven stages, from materials selection through manufacturing, use, and disposal. When they plotted the various impacts on a 3-D bar chart, one of the bars loomed far longer than any other: the home-use stage of liquid laundry detergent - specifically, the energy used when people do their wash in hot water. The result, Tide Coldwater, has significant potential: if everyone in the U.S. used it, we'd reduce household energy use by about 3 percent.

Neither radical transparency nor consumer concerns about hot-water use had anything to do with this move. No one told them to do it. It was simply good business: a win-win-win for the company, their customers, and the environment.

That's where Goleman's thesis falls short, discounting that change happens fastest when there's something in it for everybody. Sure, increased information will get some consumers to change a little, prodding manufacturers and markets along the way, but unless companies make products perceived to be better, however that's defined or measured, and can make money doing it, we won't see wholesale change at the scale required. And all of the data in the world won't get mainstream consumers - the 80% or 90% who aren't true-blue green consumers - to become part of the solution.

Daniel Goleman responds:

Joel, I can see how twenty years of watching the green marketplace would leave you a skeptic about the potential of radical transparency to move the green agenda in a substantial way. But I don't believe the last twenty years offer apt data points for projecting the next 20. It's the future I'm talking about, not the past.

The information systems that will bring about radical transparency for ecological impacts are disruptive innovations, advances that change the game in ways the market does not expect. Ecological Intelligence is a heads up about what's coming, and how disruptive applications of information systems like GoodGuide can trigger an entirely novel green agenda with fresh rules, one where a product's overall ecological impacts become intrinsic to the value proposition.

Can a mass of shoppers, each making individual decisions based on ecological transparency, bring us to a tipping point where true eco-impacts are routinely weighed into a product's value? As you point out, the last 20 years suggest not. But remember, I'm not talking about today's shoppers - I'm pointing to the tweet-and-text generation, particularly the 13 to 23 year olds who are growing up in constant digital touch with each other. For them individual action merges into the collective, especially with digital data.

But think of the tipping point from another angle: the moment that a shift in market share catches the eye of an alert brand manger, who extrapolates into the future and sees competitive advantage in upgrading that brand's ecological impacts. Such metrics occur when a system like GoodGuide operates in a well-defined, trackable space - say, along with Yahoo product searches or a within the aisles of a national retailer - and market share shifts due to these ratings.

Here the tipping point can be in the low single digits. Take what happened at Maine's Hannaford supermarkets, when the retailer posted nutritional ratings (done at Yale and Dartmouth) next to the price tag of the items on their shelves. Poorly rated brands dropped as much as 5 percent in sales, with the three-star brands up to 7 percent. Brand managers started contacting Hannaford to ask what they needed to do to get higher ratings.

The more mental and behavioral effort demanded to get info, the higher its cost. At Hannaford the effort cost dropped to zero - and four in ten shoppers used the ratings to guide their decisions. The forest of green labels for products have all suffered from high cognitive costs: shoppers cannot tell at a glance how a labeled item compares to others; they may not understand the meaning of the label; they may have to go online and seek it out; they might need to do some computation of their own to use it to compare products.