The One Percent Solution?

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The One Percent Solution?

By: Jerry Johnson, D.A.
Posted on April 18, 2007 FREE Insights Topics:

In 1966, on a rainy summer day in the French Alps, Yvon Chouinard tested over a dozen ice axes to see if he could improve on the traditional design. He did, and with this innovation and dozens of others he transformed the outdoor recreation industry. If you own a pile coat, thank Yvon: he brought modern synthetics from obscurity in Norway to the global market with his company Patagonia. In 2001, Yvon and Craig Mathews, owner of Blue Ribbon Flies in West Yellowstone, continued innovating and together started 1% For The Planet — an alliance of businesses that donate at least 1% of their annual net revenues to environmental organizations worldwide. The cross section of participants is impressive — outdoor companies, high-tech firms, artists, publishers, builders, and a host of others fund projects from Nepal to France; some right here in Montana. So far, they have contributed over $12 million dollars worldwide.

One reason firms contribute to 1% is that successful business owners often simply do not know how to spend their donations effectively. 1% helps them pool resources and they trust the board of 1% to spend their money where it will do the most good. They delegate decision making to others and achieve efficiency as they do so. Individuals often face the same quandary.

Combating global climate change is a case in point; many feel hopeless given the scale of the issue. Climate change threatens to shift ocean currents, melt the ice caps, and dislocate whole cultures. What, if anything, is a person to do? Do you replace all the light bulbs in your home with compact fluorescents? If so, what brand? Should you buy a hybrid car, what technology is best, and what is the payback period? Maybe you should give to an international environmental group intent on saving the rainforest. Maybe you should contribute to “green” politicians. Or maybe you should let someone else do it for you...

Imagine a nonprofit that helps you spend 1% of your income mitigating the causes and effects of climate change. Their personalized website helps you make informed decisions and develop a spending strategy. Initially it might make sense to make your home more energy efficient, but clearly there is a point of diminishing returns. Later, helping others achieve lower energy use may be the best investment. Further down the road, you might pay to have trees planted in the Costa Rican rainforest as carbon sinks. Or you could invest in a “green” stock fund and save for that solar array for the backyard.

Decisions about purchasing environmental goods are complex and involve multiple tradeoffs. Individual decisions about energy use can make a difference, but only if purchase decisions are based on good information. The imagined nonprofit could pay consultants to inform consumers, and, using the Internet, widespread dispersion of this information would be fast and inexpensive. With more information, you will be able to make environmental investments that yield a high rate of return. This nonprofit could also negotiate deals with green manufacturers to deliver climate friendly products at discounted prices.

One of the wonderful things about nonprofits is they can operate quickly and efficiently to solve problems. Nonprofits can respond directly to the emergent public opinion to do something about climate change now. Energy policy in Washington, on the other hand, is shaping up to be determined by subsidies to privileged industries and politics-laden regulation; if we wait for the government to send us a signal, it could be too late.

Total personal income in the US in 2005 was over 10 trillion, or a little over $56,000 per family. If we subtract the 12% of the population at or below the poverty line that leaves a significant number of middle and upper class investors who could easily afford to invest 1% in addressing climate change. Consider that Americans spend almost $800 per year on gourmet coffee. Social and environmental entrepreneurs can help us mobilize our personal resources to achieve the best bang for the environmental buck. Let’s join the enlightened business community and start addressing climate change 1% at a time.

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