The Value of Environmental Activists
With decidedly non-profit goals leading them on, how do environmental protection groups such as Greenpeace and World Wildlife Fund create value? Can it be measured? A Q&A with Harvard Business School professor Ramon Casadesus-Masanell and case writer Jordan Mitchell. Key concepts include:
- The challenge for a business student is how to put a quantifiable measure on whether Greenpeace and WWF are successful in reaching goals.
- WWF and Greenpeace create value by increasing the world's willingness-to-pay on environmental issues.
- Most scientists agree that the earth is deteriorating at a faster rate than during the 1960s and 1970s, but it would be worse off had it not been for the tireless campaigning of environmental NGOs.
There are many methods, most financial, to measure the success of companies in meeting goals. But the question becomes a lot harder at Harvard Business School when MBAs are challenged to measure the efforts of environmental organizations like Greenpeace and the World Wide Fund for Nature (formerly the World Wildlife Fund).
Greenpeace's goal is "to ensure the ability of the earth to nurture life in all its diversity" and WWF's is "to stop the degradation of the planet's natural environment and to build a future in which humans live in harmony with nature."
Has the world become better off environmentally since these organizations were formed? Have they created value in other ways?
"The challenge for a business student is how to put a quantifiable measure on whether these organizations are successful in reaching their goals," says Harvard Business School professor Ramon Casadesus-Masanell.
HBS Working Knowledge asked Casadesus-Masanell and Jordan Mitchell, a freelance case writer based in Barcelona, to to discuss the background of these cases and how his MBA students react to them.
Sarah Jane Gilbert: Your research focused on two prominent environmental organizations, Greenpeace and the World Wide Fund for Nature (WWF). What do these two groups have in common, and how are they different?
Ramon Casadesus-Masanell and Jordan Mitchell: The main affinity between Greenpeace and WWF is that both are trying to promote a "public good," which is the improvement of the natural environment. Public goods are those that are non-excludable and non-rival. No one can stop anyone from benefiting from a public good such as cleaner air or uncontaminated water.
By looking back at the history of how both organizations came to be, we can highlight some key similarities and differences.
Greenpeace was born in Canada out of an initiative to stop U.S. nuclear testing in Alaska in the early 1970s. The idea was to campaign for peace using an ecological platform; that is, nuclear tests are not only bad for warfare and human death, but testing does irreparable damage to species and landmass. From 1971 to 1974, Greenpeace's main push was on nuclear disarmament. Many early Greenpeace members were journalists and knew how to get across a compelling story. They used the media as their weapon against powerful governments in an attempt to drive policy changes. The Greenpeace methods of "bearing witness," "direct action," and creating a "media mindbomb" became their trademarks as the organization expanded into fights for other environmental causes such as the Save the Whales and the Seal Pup campaigns.
WWF was founded in response to the destruction of Africa's natural habitat when British biologist Sir Julian Huxley wrote articles in an English newspaper warning that large portions of wildlife would become extinct if no action was taken. The articles attracted attention from scientists, businesspeople, and nongovernmental organizations such as the International Union for Conservation of Nature (IUCN). The IUCN had been set up in neutral Switzerland in 1948 by 18 governments and 100 NGOs with the objective of coordinating activities to preserve wildlife. As of the early 1960s, however, the IUCN did not have sufficient resources to carry out its projects, which led to the idea to form a new organization focused on fundraising and conservation in coordination with the IUCN. The WWF was constituted in Switzerland in 1961 with the purpose of conserving natural resources by acquiring and managing land while coordinating and communicating the necessity of conservation to a wide number of stakeholders.
The challenge for a business student is how to put a quantifiable measure on these organizations.
In the organizations' histories, some differences are clear: Greenpeace has primarily been a campaigner while WWF presides over conservation projects. In class, we talk about Greenpeace trying to convince others to deliverthe public good while WWF works directly onproviding the public good.
Other key differences include the composition of the founding members and the methods in which the organizations gained public support. Greenpeace's early membership was made up of journalists, scientists, and activists, whereas WWF attracted the attention of scientists, businesspeople, and government officials. Greenpeace's beginnings were looselyknit and highly autonomous, since it started more as a movement than as a charity. It wasn't until nearly 10 years after the first campaign that consistent rules were developed on the use of the Greenpeace name and the opening of new offices. In contrast, WWF began as a centralized organization and closely controlled the growth of international sites.
In garnering public support, Greenpeace encouraged people to protest against governments while WWF looked for ways to work with governmental representatives. For example, WWF gained the public participation of members of royal families such as Britain's Prince Phillip and the Netherlands' Prince Bernhard. In 1970, Prince Bernhard led the creation of an endowment fund, The 1001: A Nature Trust, calling upon 1,001 donors to contribute $10,000 each. The endowment permitted WWF to cover its administrative expenses through interest income. Another interesting example of governmental involvement was in the 1980s when WWF created a debt-for-nature swap, whereby indebted governments could trade debt for funds earmarked for conservation purposes. Debt-for-nature swaps were conducted around the world in countries such as Ecuador, Madagascar, and the Philippines.
Interestingly enough, Greenpeace also mobilized renowned although markedly different individuals to help with fundraising. For example, one of Greenpeace's early fundraising campaigns culminated in a benefit rock concert featuring Joni Mitchell and James Taylor. Greenpeace's early campaigns were in direct opposition to governments and mounted "direct action" crusades to confront what the organization believed were environmental wrongdoings.
In addition to involving high-profile individuals, throughout the histories of the organizations, both harnessed the power of the media by drawing attention to their respective activities. WWF garnered considerable media attention for Project Tiger, an initiative to set up tiger reserves in India, Nepal, and Bangladesh. For Greenpeace, images of protesters confronting Russian whalers provided a powerful media "mindbomb" that spread throughout the world. In appealing to the public, both organizations utilized symbols: WWF's use of a cuddly panda and Greenpeace's native Cree legend, Warriors of the Rainbow, both of which are still prominent.
Today, the campaigns of both entities have broadened to encompass a wide range of environmental issues. In carrying out its activities, Greenpeace maintains no allies or enemies and only accepts donations from individuals and foundation grants. WWF takes on a collaborator-lobbyist approach with governments and businesses. Unlike Greenpeace, WWF accepts donations from corporations and governments. It also licenses its distinguished Panda trademark to companies that follow certain environmental standards. WWF maintains public relationships with a number of multinationals. In the 1990s, WWF was instrumental in setting up certification societies in coordination with major companies-the Forest Stewardship Council (FSC) and the Marine Stewardship Council (MSC), for responsible forestry and fishing, for instance. In 2000, WWF worked with another NGO to develop the Climate Savers program. To date, the program has 12 major corporations, amongst which are Nike, Sony, and IBM. All have agreed to the reduction of quantifiable greenhouse gases by set dates.
Q: In general, how effective have these organizations been in achieving their goals? When it comes to climate change, evidence would suggest they have not had much influence.
A: This is one of the quagmires of the case series. Before delving into the organizations' achievement of their goals in class, we look at what is happening to the earth. I start by asking, Why do we use natural resources in the first place? Most students believe that population growth is one of the major reasons for consuming natural raw materials; the increasing earth's population leads to a greater need for food and resources. At the same time, it also, unfortunately, leads to conflict. From the need comes exploitation of natural resources, investment in food technologies, and investment in war technologies. In essence, this causes the earth's "vicious cycle."
Looking back, this cycle has existed in some form for over 2,000 years. Arguably, until the 20th century, it was not part of the public conscience. So, why now? One possible explanation is that the earth's vicious cycle spins faster than before because of new technologies; faster population growth; higher production of goods, which requires more energy and creates more pollutants; and war technology such as nuclear bombs, which cause overwhelming physical damage to the planet.
Having covered the earth's vicious cycle, we can then move into looking specifically at the organizations' goals. Greenpeace's goal is "to ensure the ability of the Earth to nurture life in all its diversity" and WWF's is "to stop the degradation of the planet's natural environment and to build a future in which humans live in harmony with nature." The challenge for a business student is how to put a quantifiable measure on whether these organizations are successful in reaching their goals. Clearly, financial statements do not suffice.
Q: What would other measures of value be?
A: Since Greenpeace's and WWF's goals are not linked to a profit-objective, in class we look at how the organizations create value. WWF representatives might say that value comes through increased awareness and conservation projects such as reducing the bycatch of turtles or increasing the use of alternative energy. Similarly, Greenpeace members might underscore the achievement of victories such as Apple's phasing out of harmful chemicals in the manufacturing of its computers or the government of New Zealand's decision to halt the development of a coal energy plant.
In the very general sense of the word "value," we can conclude that both organizations call people's attention to environmental issues, lobby business to change policies, and influence governments to put laws in place to improve environmental conditions.
However, looking at value from an economic point of view, we need to shift to the idea of comparing willingness-to-pay (WTP) to cost. In class, we work through a hypothetical example by asking students, How much are each one of you willing to contribute each year to protect the earth against degradation? While figures range, students are asked to imagine that every human being puts $1 toward the protection of the earth, which equates to approximately $6 billion per year. On top of that we hypothesize the WTP of major corporations. If we take the top 5,000 global corporations, we could ask how much each would be willing to pay. It would take $200,000 per company to come up with another $1 billion. For the sake of class discussion, we can say that governments will contribute another $1 billion to bring the total up to $8 billion.
Now, we can move to the cost side. If we take the expenses of the campaigns of WWF and Greenpeace in their last fiscal years, the total would come to about $677 million. Therefore, there is a very large hypothetical wedge between WTP and cost of about $7.2 billion. The point is not to argue on an exact figure for WTP, but rather to highlight that even though neither organization has a profit objective, both still strive to drive a wedge between WTP and cost.
Q: Do the organizations themselves capture any value?
A: In a purely economic sense, no, WWF and Greenpeace do not capture any value for themselves except maybe goodwill and credibility, which then leads back into their ability to fundraise. Nearly all of the value that is captured is for the public good. Here, we have the problem of free-riding, whereby people are able to enjoy the public good such as cleaner air and uncontaminated water without doing anything themselves.
From this, we can conclude that WWF and Greenpeace create value by increasing the world's WTP on environmental issues. It still leaves us with the original question of whether they are effective. How can we possibly measure their effectiveness? Some pundits point out that the earth should be in 'better shape' than when WWF and Greenpeace started in 1961 and 1971, respectively. In defense of environmental NGOs, most scientists agree that the earth is deteriorating at a faster rate than during the 1960s and 1970s, but it would be worse off had it not been for their tireless campaigning.
Q: Both cases look at these organizations as they attempt to influence the G8 meetings held in June 2007. Were they effective?
A: As we're entering into geopolitical territory, it is hard to determine how effective both organizations were during the June 2007 G8 meetings. From a media perspective, WWF and Greenpeace as well as other NGOs were mentioned repeatedly. Part of this was aided by the extensive media coverage of Greenpeace protesters entering into the restricted area in a speedboat. Aside from the media bravo, the organizations played an important role in providing an external opinion as to whether the climate change talks were substantive.
Upon conclusion of the G8 meetings, both organizations summarized the outcomes in slightly different manners. WWF's press release stated that the G8 leaders took important steps to reduce emissions in the longterm, even though no specific measures or time horizons were provided. Greenpeace called the meetings an outright failure given that no clear targets were set for emissions reductions.
Q: Do WWF and Greenpeace collaborate?
A: Yes, both directly and indirectly. Indirectly, there is considerable overlap in both organizations' programs. The one exception is the nuclear disarmament and nuclear power issues, which are more prominent in Greenpeace campaigns. The organizations' programs are:
Directly, WWF and Greenpeace have collaborated throughout their histories. Most of the collaboration is working together to campaign and lobby for change. The organizations sometimes team up with one another and other NGOs to offer joint press statements and apply pressure to governments and businesses.
Even though Greenpeace makes it clear that they have no permanent allies or enemies, Greenpeace and WWF are typically united on major environmental issues. For example, from the early Save the Whales campaign, WWF and Greenpeace were fighting on the same side for a moratorium on whaling. WWF even raised money so that Greenpeace could purchase its first ship, which was used to confront whalers.
Q: Are they complements or substitutes then?
A: The quick answer is that they are both. They complement one another since they are often able to campaign together and lobby for changes from several stakeholders.
Using the Save the Whales campaign as an example, WWF raised money, gave it to Greenpeace to buy the boat, and then both organizations campaigned for change at the International Whaling Commission. On many key issues, both organizations along with others like Friends of the Earth provide a unified front to campaign for change. With many of these efforts, we might conclude that Greenpeace's media mindbomb approach created urgency and a swell of public support, which in turn made governments and businesses listen to environmental organizations. This gets back to our earlier point about creating value by increasing the WTP for environmental issues.
At the same time, the organizations are substitutes for the simple fact that a donor may choose only one environmental organization to make a donation. WWF and Greenpeace compete for these donations, and from the perspective of the average individual donor, they may be viewed as substitutes.
Q: What organizational challenges lie ahead for WWF and Greenpeace?
A: As I previously mentioned, the major challenge for both organizations is that they are dealing with a public good. Considering that a public good is non-excludable and non-rival, it is difficult to make people pay for it. People will free-ride since they can access the improved environment without paying.
For example, if one government engages in a public initiative for the public good such as improving the air quality by reducing CO2 emissions, the benefit will likely flow to neighboring countries. There may be no incentive for the neighboring country to engage in a similar initiative, especially if it's able to free-ride off of the public good created by the other country. The Kyoto Protocol strives to limit this free-riding problem for CO2 gas reduction by getting the agreement from major polluting countries to publicly commit to a reduction. However, as we've seen in the last 10 years, certain countries have refused to sign the protocol, and other countries will not meet their targets.
We can use the prisoner's dilemma problem to understand the choice that a government must make between lax and stringent environmental policies. By forming a hypothetical 2x2 matrix comparing the benefits and costs of two countries, both countries would be better off by moving to stringent environmental policies. However, if one country moves to stringent policies, the other is better off by staying with lax policies because it will incur less cost and accrue more benefit. There are some generic strategies to change the equilibrium from lax to stringent policies:
- Increase the cost of current policies. In the example, if the cost of current policies increases, the dominant strategy switches to stringent policies.
- Increase the benefit of astringent policy. Firms can perhaps get customers to pay for the stringent policies. There is evidence of this with Fairtrade and premium electricity programs based on renewable energy. If the benefit increases by a certain amount, the dominant strategy becomes a stringent policy.
- Encourage governments and companies to move away from maximizing their own benefit and make them look to the greater good. In the game, this corresponds to playing stringent policies, no matter what.
The under-provision of public goods is an important problem societies face. Greenpeace and other similar NGOs have been formed to make sure that the public good is supplied by changing the payoffs of those who can supply it. Although it may seem obvious, it is important to point out that no one firm, organization, or government can "produce and distribute" the public good, since the natural environment cannot be owned outright.
When we look specifically at the models of both organizations, each faces particular challenges. Greenpeace's success lies on continually creating new media mindbombs to reinforce its message and lobby for change. Naturally, the question is whether Greenpeace can continue to develop media-worthy mindbombs. Furthermore, by refusing to accept donations from governments and businesses, Greenpeace has only two sources of income: individual donors and foundation trusts. Its membership has been relatively flat at 2.8 million people over the past five years. Unlike WWF, which has 5 million supporters, Greenpeace does not have any trusts, and therefore, the organization's existence relies on the willingness of its individual members to continue donating every year.
For WWF, a particular challenge might be publicly challenging the practices of governments and businesses if it is receiving donations from those parties. In the past, WWF has returned donations from businesses when it has disagreed with the donor's environmental practices. Fortunately, WWF has several avenues for income given its 1001 Trust Fund, licensing revenues from the Panda trademark, and its broader fundraising policy.
Q: Do you see the strategies of these organizations changing? Are they taking advantage of the current global focus on climate change?
A: It is hard to tell how the organizations will adapt to the future. Let's suppose that in the next few years, the G8 governments commit to major quantifiable reductions in greenhouse gases. If this were to occur, we may see the organizations focus on watchdog activities to ensure that the governments' commitments are indeed being upheld.
As the future unfolds, it is very possible that the organizations may adapt their programs' focus. For example, the issue of electronic waste has grown tremendously in the last 10 years and will inevitably continue to register as a high importance subject as more of the world becomes connected. We might see specific programs launched to addresse-waste.
In the late 1990s, it looked as though Greenpeace was going to divert more resources to developing environmentally safe technologies. While Greenpeace still has a research and development arm, we have not seen recent examples of new green products such as the Greenfreeze refrigerator or the SmILE car, which were developed in the late 1990s. Greenpeace may revive its focus on green products to build up another revenue stream.
I imagine that WWF will continue its collaborator-lobbyist approach by working with a broad range of companies, businesses, and other NGOs.The specifics of the campaigns might change-for example, the Climate Savers program will undergo alterations as more companies join and as existing companies' targets are met.
As far as taking advantage of the global focus on climate change, yes, both organizations are attempting to conduct meaningful campaigns that bring about changes to policy and behavior. They have good momentum through their own activities and can benefit from the efforts of thousands of other NGOs and activists. For example, Al Gore's documentary An Inconvenient Truth has undoubtedly increased the profile of climate change as a serious environmental challenge.
With all of these efforts on climate change, we can use the economic terminology that I discussed earlier: Through several efforts by a widerange of entities and individuals, the WTP for climate change is increasing.
Again, we get back to whether any economic value can be captured. The value creation and the capture angle is but one perspective; most environmentalists would be quick to point out that the debate extends far beyond economics-breathable air is a basic requirement for human life.
Q: How do your students respond to these cases?
A: The reaction has been quite varied. Nearly all the students were aware of both Greenpeace and WWF but did not know the specifics of the organizations' histories and activities. Most agreed that the organizations play an important role in society, although opinion about certain methods was widespread. Many were thankful that we discussed Greenpeace and the environment in a course devoted to business models. There were only a small minority that believed human activity did not affect the natural environment.