“We are addicted to short term profit!”
Updated: Jan 29, 2020
I read this column and it totally resonated with me. From personal experience in the corporate fashion world, I remember that management always claimed the focus was on the long-term however reality often was very different and mainly short-term focused to please shareholders and investors. If we want to move to a more sustainable economy and ways of doing business, this will have to change! How? Including True Costs into our P&L’s and evaluations of the business we are supporting. True Costs include not only the cost of making the actual product but also the environmental and social costs involved in making it. For example, water use and pollution, CO2 emissions, decent wages for workers, etc.
“Nobody wakes up in the morning with the idea: ‘Let’s destroy our climate today.’ And yet, it still happens”, says Volkert Engelsman, number 1 in the Trouw Sustainable Top-100 (a Dutch news medium that publishes a Sustainable top 100 list every year amongst the Dutch population). Discover in this column what his trip to Bhutan taught him about our addiction to short-term profit and True Cost Accounting.
“Nobody wakes up in the morning with the idea: ‘Let’s destroy our climate today, put the toddlers in southeast Asia to work and poison our water with chemicals.’ And yet, it is happening. Every day on a huge scale.
How is it possible that our economy works in a way that nobody on this planet wants or desires? Our economy seems to be partially blind. Apparently, we forgot to incorporate something essential from ourselves within the system.
In this column, I would like to explain why my wife and I have a 21-year-old student from Bhutan in our house every weekend and how this is linked to economics, True Cost Accounting and the magic of human interaction.
Last summer I was in Bhutan, an isolated kingdom in the Himalaya, known for its National Happiness Index. We can make fun of this, however, in reality, it is a wonderful tool to measure wealth, which also includes ecological impact and social wellbeing. We could call it National Wealth Index or National Sustainability Index.
Being an economist at heart, driving through the valleys of Bhutan and seeing those untouched villages and temples, you cannot be anything else but excited about the ‘delivery room’ this country is for a new economy.
“Soon Wall Street will work with an amended version of the National Happiness Index”
In our Western tradition, profit is a measure of success. There is nothing wrong with profit, however, in our system, we have gotten very addicted to the short term. Long-term costs and benefits for mankind and the environment are being consistently ignored, even organized in laws and regulations. Not one essential part has been forgotten. No, all social values are excluded. We resemble junkies who, in their ‘short-term profit high’, abuse our own ecological (and also economic) vitality.
But that will not last! Standard&Poor’s recently bought the company Trucost and wants to use True Cost Accounting to include financial risks of climate change in their evaluations. Goodbye AAA rating! The logical next steps are to include the risks of loss of biodiversity, soil erosion and health risks.
Also, the Financial Stability Board installed a Task Force on Climate-related Financial Disclosures. Soon Wall Street will work with an amended version of the National Happiness Index!
In a restaurant in Thimphu, I started a conversation with a waiter on these matters. He advised us to talk to his little sister. She just graduated from her Actuarial Sciences studies at an Indian university and knew a lot about the National Happiness Index.
That’s how we met Cheozung Dolma Ngyamtso, a happy, very bright young lady with an extraordinary feeling for Math that matches her ideals. All the econometric unworldliness in Rotterdam fades compared to the vision and social skills of this 21-year-old girl from Bhutan. She had a unique experience growing up in a country that doesn’t measure its wealth in money but in happiness. She knows everything about risk modelling and she is looking for ways to convert this unworldly happiness-indicator into money because only then our outdated economy will be able to relate to it.
Now she is studying in Tilburg and she stays at our house every weekend. The magic of a human encounter can happen everywhere and anywhere. For example, during a short conversation with a waiter while having a quick meal. When this magic happens, treasure it and don’t let go!
Maybe the end goal of True Cost Accounting is to show us the things that cannot be calculated. But I know for sure that Cheozung will get pretty far!”
Volkert Engelsman, CEO of biological fruit and vegetable specialist Eosta, was selected number 1 in the Trouw Sustainable top 100 because of his pioneering work in True Cost Accounting.