3 Dot-com ethics: e-business and sustainability – Digital Futures

3 Dot-com ethics: e-business and sustainability

James Wilsdon

The myth of virtuality
or how Harry Potter contributed to climate change

It was like a carefully planned military operation. At strategic locations across America, a fleet of 9000 trucks revved their engines, 100 planes rolled down the runways. Their mission: to deliver Harry Potter and the Goblet of Fire to a nation hungry for instant fulfilment.

It sounds crazy, but it did happen. Back in July 2000, Amazon.com teamed up with Federal Express to deliver 250,000 copies of the new Harry Potter book to eager US fans. True to the spirit of 1-click™ shopping, no effort was spared in ensuring that the book hit people's doormats on the morning of publication. A press release issued the next day proudly declared it to be ‘one of the largest sales and distribution events in e-commerce history’. In just 24 hours, over 300 tonnes (188 million pages) of Harry Potter magic were transported to homes across the US.1

We've heard a lot about the wizardry of e-commerce: how it's rewriting the rules of business; how it's shortening supply chains; how it's changing the relationship between companies and consumers. The business pages have been full of little else; one study found that between 1 March and 31 May 2000, the dot-com phenomenon generated 2800 articles in 21 newspapers.2

However, at least one aspect of business remains strangely untouched by the revolutionary hand of the internet. Hardly anything has been said about the relationship between e-commerce and corporate sustainability. Take Harry Potter; individually wrapping 250,000 books and express air-freighting them overnight is about the most environmentally-unfriendly method of distribution imaginable. It seems likely that it not only broke all the records for e-commerce delivery, but also for the quantity of greenhouse gases and packaging waste generated by a single novel.

The lack of attention paid by e-commerce companies to sustainability issues runs counter to larger trends in the corporate world. It is widely acknowledged that business now has to meet a much broader range of expectations than in the past: governments are introducing new regulations; consumers are requiring higher ethical standards; pressure groups are becoming more sophisticated; and communities are demanding a stake in decision making. Corporate power is under scrutiny like never before. Five years ago, Bill Gates predicted that the internet would create ‘friction-free capitalism’.3 Today, reflecting on the wave of anti-capitalist protests in Seattle, London and Prague that has coincided with the dot-com boom, ‘friction-free’ is not a term that springs to mind.

The e-business community's response to these trends has been one of deafening silence. This chapter is a call for greater engagement. Its central argument is that alongside the economic opportunities being created by e-commerce, there are a host of social and environmental opportunities that must be seized if the new economy is to become more sustainable than the old; opportunities that apply not just to pure-play dot-coms, but also to established ‘clicks and mortar’ companies now engaging in e-business.

Over the course of the year 2000, the dominant narrative about e-commerce changed from one of explosive growth and limitless opportunity to one of investor caution and company failure. Yet despite the collapse of a string of start-ups, the underlying significance of e-commerce remains undiminished. High-profile firms such as lastminute.com are the most visible tip of the e-commerce iceberg. Beneath the surface, a far more profound transformation is taking place, as traditional sectors embed digital technologies in all aspects of their operations.

Beyond the hype, even the most sceptical of commentators concede that e-commerce is changing the way we live. This means, in turn, that it will change our society, and our relationship with the natural environment. It will create new problems, but it will also open up new solutions, new ways of doing things. Now, in the early stages of the e-revolution, is the right time to pose some IAQs (infrequently asked questions) about the potential of e-commerce to bring wider benefits to society.

Three dot-com myths

So why have e-businesses failed to grapple with sustainability? In large part, they haven't felt the need – there is a widespread belief that such issues are irrelevant to your average dot-com. This is based on some powerful myths about e-commerce that need to be understood and then debunked.

The first is the myth of virtuality; the idea that because dot-coms operate in the virtual space of the internet, their impact on the physical world is negligible or non-existent. As the case of Harry Potter shows, this is often not the case. E-commerce can have as wide a range of social and environmental effects as any other economic activity, and dot-coms – whether B2C or B2B – face many of the same dilemmas over ethics, supply chains, energy use, transport and waste as their bricks and mortar counterparts. Innovative applications of internet technology could help to solve some of these problems, but only if the e-world acknowledges its impacts, and devotes some of its energies towards managing and reducing them.

The second is the myth of immaturity; the idea that e-commerce is at such an early stage that it is unfair to expect it to meet the same environmental and social standards as the rest of business. Only when the sector grows up, it is argued, will it be able to devote time and resources to what are essentially peripheral issues. This argument might hold water were it not for the constant claims that e-commerce represents the most seismic shift in business since the Industrial Revolution. Whether or not such cyberbole is justified, e-commerce is now a sufficiently established feature on the business landscape for governments, NGOs and other stakeholders to start asking questions about its environmental and social performance. E-commerce may rewrite many of the rules, but this does not give it a licence to operate with impunity. With permanence comes power, and with power comes responsibility.

The third is the myth of techno-determinism; the idea that technology has a market-led trajectory of development that is unaffected by wider social and political factors. This view was well expressed by a recent editorial in The Economist which, under the headline ‘What the Internet cannot do’, mocked the idea that IT could help to ‘prevent wars, reduce pollution, and combat various forms of inequality’.4 Such scepticism is premature. The truth is that we don't know what the long-term effects of the internet will be. The mistake is to regard it as something ‘out there’ that cannot be shaped to fit a political vision. The internet per se may do little to advance the cause of sustainable business, but the internet together with enlightened management and effective public policy is another story entirely.

Our focus on technology at the expense of humanity has created an impoverished notion of what the new economy could become. Say the words ‘new economy’ to most people, and the image conjured up is of complex gadgets and dot-com millionaires. This may be enough to arouse the party faithful, the technophile readers of new economy magazines like Red Herring and Business 2.0, but it is hardly a mobilizing vision for the future of society. As Charles Leadbeater points out, ‘Knowledge about communications and computing … is erupting all around us, and yet the gleaming new economy born by virtue of all this knowledge seems empty, lacking a soul or animating values.’5

Some will argue that it is not the business of business to provide such visions; that e-commerce should focus on profit and growth, and leave the politicians to deal with the bigger questions. Such a view is mistaken. It ignores some of the threats posed by the explosion in e-commerce; and more importantly, it neglects the opportunities that could be created if e-business thinks seriously about sustainability.

Firstly, the threats. As e-commerce takes off and starts to have a more visible impact on communities, jobs, transport and the environment, e-companies will need to demonstrate that they are creating more than just economic value. Although the internet has been well received during the first few years of its existence, this may not always be the case.

The social impacts of the internet may not be a pressing issue right now, but it is still only six years since the birth of the digital economy. Things may look very different 16 or 26 years on. Already, prominent voices from within the industry, such as Bill Joy, Chief Scientist at Sun Microsystems, are warning of the threat posed by the convergence of IT with other emerging technologies. In a powerful essay published last year in Wired, Joy argues that, ‘The 21st-century technologies – genetics, nanotechnology and robotics – are so powerful that they can spawn whole new classes of accidents and abuses.’ As a result, he admits to feeling ‘a deepened sense of personal responsibility – not for the work I have already done, but for the work that I might yet do, at the confluence of the sciences.’6 The biotechnology sector, with its cloned sheep and genetically modified food, has shown clearly the dangers of introducing new technologies faster than the pace of public acceptance. Without an open, honest debate about the social implications of any new technology, sooner or later there will be a backlash, a crisis of legitimacy. The IT industry should not consider itself immune.

However, there are opportunities too. Unlike sectors such as oil and chemicals, which have had to retro-fit social and environmental concerns in response to stakeholder pressure, e-business is uniquely well-placed to incorporate such concerns at the design stage. The trick is to address these issues now, before they become a burden or a challenge to the existing way of doing things. A young, fast-changing industry can adapt far more easily than one that is trapped in established mindsets. With a mixture of vision, imagination and intelligent policy, it should be possible to splice sustainability into the DNA of the new economy.

3D entrepreneurs

‘Now that we realize e-commerce isn't a passport to untold riches, it's about time we gave some thought to something other than money’ Tim Jackson, founder of QXL7

In the digital age, entrepreneurs are the new rock ’n’ roll. One of the more bizarre consequences of the dot-com boom has been to make small- to medium-sized enterprises (SMEs) sexy. Teenagers who previously fantasized about becoming pop stars have swapped guitars for laptops, in a bid to become the next Jeff Bezos or Martha Lane Fox. What motivates this new breed of entrepreneurs? How do they see their business contributing to society?

In exploring these issues, a good place to start is with Louise Proddow's book Heroes.com, a recently-published tribute to 50 leading members of the digerati. Proddow suggests that e-entrepreneurs have a number of defining characteristics. Each of them:

  • passionately embraces the dot-com era;
  • recognizes that the internet changes everything and opens up new opportunities;
  • rethinks how they do things, and makes dot-com central to their strategy and life;
  • plays by new rules, and is more open, flexible and dynamic;
  • acts in internet time and makes things happen fast;
  • recognizes the value of partnerships and outsourcing; and
  • lives for today and enjoys the momentum and buzz of the internet.8

From a sustainability perspective, this is a bit of mixed bag. Thumbs up for flexibility, dynamism and recognizing the value of partnerships; but the emphasis on speed and ‘living for today’ gives some cause for concern. In fact, despite their much-vaunted creativity, what actually comes across from reading Heroes.com is a striking narrowness of vision. Few of the entrepreneurs profiled seem willing to raise their sights above the economic bottom line to say anything about the wider responsibilities of business. There is a lack of what we might call ‘3D entrepreneurship’, which uses technology to create environmental and social – as well as economic – benefits.

Perhaps this is to be expected. Several commentators have drawn attention to the free-market, individualistic ethos of the e-business world. For example, former Wired columnist Paulina Borsook has attacked the ‘scary, psychologically brittle, prepolitical autism’ that she frequently encountered in high-tech circles in the US.9 Similarly, the sociologist Manuel Castells has denounced ‘The illusion of a world made of Silicon Valley-like societies driven by technological ingenuity, financial adventurism and cultural individualism’ which is promoted by many cyber-gurus. Such a world ‘is not only ethically questionable but, more important for our purpose, politically and socially unsustainable.’10

Dot-com ethics survey

Rather than relying on these second-hand accounts, Forum for the Future decided to carry out some research of its own. Between July and November 2000, we conducted a survey of the attitudes of IT and dotcom companies to social and environmental issues.

From an original sample of 150 companies, we received responses from 103. Just under half of these were completed by the CEO, and the rest by senior managers. Companies were selected to represent a cross-section of the e-commerce marketplace. They ranged from large multinationals to small start-ups, and included a mixture of B2C, B2B, internet service providers (ISPs), software and hardware companies. The main criterion for inclusion was a business model based primarily around the internet. For this reason, we did not include traditional companies that are now involved in e-commerce.

Contrary to some of the negative stereotypes about dot-com entrepreneurs, the results were overwhelmingly positive:

  • 65 per cent said that social and environmental issues are important or very important to their company (28 per cent said they were slightly important, 7 per cent unimportant);
  • 92 per cent said that environmental and social issues are important or very important to them personally;
  • 53 per cent thought these issues would be more important three years from now;
  • 79 per cent agreed that the positive effects of e-commerce on society would outweigh the negative (21 per cent neither agreed nor disagreed);
  • 58 per cent agreed that e-commerce will have a positive effect on the environment (29 per cent neither agreed nor disagreed, and 13 per cent disagreed);
  • 62 per cent agreed that e-commerce will enable companies to be more responsive to consumers’ ethical and environmental concerns (17 per cent neither agreed nor disagreed, 21 per cent disagreed); and
  • 57 per cent agreed that companies with good environmental and social reputations are likely to benefit from improved financial performance (30 per cent neither agreed nor disagreed, 13 per cent disagreed).

It appears then that dot-com managers are broadly supportive of the sustainability agenda, even if they do not articulate their concerns in precisely these terms. In some ways this is unsurprising; the majority of the companies we surveyed are run by highly educated, creative people aged 35 or under, who are likely to have a reasonable level of environmental and social literacy.

However, the survey also highlights a sharp gulf between theory and practice. On asking whether companies have any systems or policies in place to address these issues, we found that:

  • 79 per cent of companies do nothing to measure or manage their environmental impacts;
  • 66 per cent do nothing to measure or manage their social impacts;
  • 82 per cent do nothing to measure or manage their transport impacts; and
  • 83 per cent offer no staff training on environmental or social issues.

This suggests that IT and e-commerce companies have a lot to learn about the basic principles of environmental and social management. Other research supports this view. For example, a recent survey by consultants PIRC of 674 listed companies found that the IT sector performed worst in terms of environmental policies and reporting.11

When we asked why companies had no policies and systems in place, three reasons stood out, as shown in the table below:

Figure 3.1 Why don't you have any policies or systems in place?

  • Lack of perceived impacts. The myth of virtuality is very powerful, and the survey shows that many companies do not recognize that they have any significant impacts.
  • Lack of time. The e-world operates at breakneck speed, leaving little time to reflect or act upon these issues.
  • Lack of expertise and resources. Many e-commerce companies operate under considerable financial pressure, and cannot devote resources to these issues. Often there is also insufficient staff expertise to develop policies and put systems in place.

These obstacles are not to be underestimated, but with commitment from senior managers and effective systems, they can be overcome. Closing the gap between ideals and action is a priority for any e-business seeking to establish a reputation for good corporate citizenship.

The rise of the 3D entrepreneur

The trend is already starting to move in the right direction. Looking across the e-world, there are encouraging signs of a growing interest in social responsibility. In the US, groups such as the Seattle-based Digital Partners and the Silicon Valley Community Foundation have sprung up to direct entrepreneurs’ time and newly-acquired wealth into social and community initiatives.12 Several IT and e-commerce companies have set up charitable trusts, including eBay, which allocated 1 per cent of its shares to the eBay Foundation at the time of flotation. Individuals such as Bill Gates and Jim Clark, the founder of Netscape, have donated millions to health and education initiatives, with a particular focus on the developing world.

In the UK, fewer people had a chance to make their millions before the downturn in the market, but a handful have started to invest in social projects. In March 2000, Tim Jackson, the founder of QXL, established a UK£70 million charitable trust, saying that ‘it is important that entrepreneurs who have made a lot of money very quickly put some of that money back into the community’.13 More recently, under the banner ‘because innovation is about more than money’, the First Tuesday entrepreneurs’ network devoted one of its meetings to social ventures. Kate Oakley, a leading writer on the new economy, suggests that e-entrepreneurs will eventually make a contribution to the social fabric of our towns and cities equivalent to that of the great 19th century industrialists. Just as the Victorians built museums, libraries and universities, so these ‘new Victorians’ will seek to ‘channel their wealth into good works of all sorts, from soup kitchens to school programmes, AIDS hospices to playgrounds.’14

Nonetheless, the bulk of this activity still takes place in the realm of philanthropy, and it is less common to find e-businesses that deliver social and environmental benefits through their core activities. There are exceptions – mostly small start-ups – some pioneering examples of which are listed below. A handful of larger companies are now tackling the digital divide as a strategic business issue, for example Hewlett-Packard, which has announced a US$1 billion ‘e-inclusion’ programme designed to bring tele-medicine, e-learning, e-commerce and microcredit schemes to 1000 villages in the developing world.15

These examples illustrate some of the diverse ways in which e-commerce can achieve a successful blend of economic, social and environmental innovation. A lot more, though, could be done to foster 3D entrepreneurship:

  • There is a need for support networks for 3D entrepreneurs – perhaps as offshoots of existing ones such as First Tuesday – to assist with finance, advice and business development, and ensure that innovative ideas succeed.
  • Government and NGOs should join forces with progressive IT, telecom and e-commerce companies to establish a ‘sustainability incubator’, able to provide advice and start-up capital to 3D entrepreneurs.
  • New companies aiming for a stock market flotation should follow the example of eBay in allocating at least 1 per cent of their shares to a charitable trust.
  • Government and NGOs need to engage the venture capital industry in a more active dialogue on social and environmental issues, and give it incentives it to support sustainable ventures.

Box 3.1 Top ten ethical dot-coms

  • www.greenstar.org – supports communities in the developing world through a network of internet-enabled community centres, which offer a combination of web access, education, tele-medicine, renewable energy and microfinance.
  • www.viatru.com – promotes fair trade and enables artisans and producers in the developing world to access global markets through e-commerce.
  • www.ethical-junction.org – a B2C portal for organic and fair trade products, with its own virtual ‘ethical high street’.
  • www.greenorder.com – a B2B site enabling public and private sector organizations to purchase environmentally-friendly products, ranging from building materials to office supplies.
  • www.flametree.co.uk – supports companies and employees seeking a better work–life balance, with web-based advice and consultancy on sustainable work patterns.
  • www.drparsley.com – an ethical incubator working to bring sustainable dot-com businesses to market. Currently working on projects with the Big Issue and a network of organic food producers.
  • www.publicsector.org – a news and consumer site for UK public sector workers that promotes green lifestyles, products and services.
  • www.goodcorporation.com – encourages companies to meet a set of social and ethical standards set out in the online GoodCorporation Charter.
  • www.ushopugive.com – enables consumers to donate a small proportion of the profits from online purchases to a charity of their choice.
  • www.youreable.com – a community and commerce site for disabled people, carers and healthcare professionals which scooped first prize in Channel 4’s ‘Who Wants to Be an E-millionaire’ show. Its vision is to become the first website that the disabled community turns to for information and services.

eBay environmentalism

It is often said that in the new economy, matter matters less. Ideas, creativity and innovation are replacing physical assets as the key to competitive success. This shift will go hand in hand with energy and resource efficiency. E-commerce and teleworking will reduce traffic congestion, and consumerism will evolve in an increasingly ‘weightless’ direction, as we come to value services and experiences more than the ownership of physical products.16

One influential report by the Washington-based Center for Energy and Climate Solutions suggests that e-commerce will create year-on-year reductions of up to 2 per cent in the energy intensity of the US economy. Joseph Romm, the report's author, is bullish about the potential for what he calls ‘e-materialization’. ‘The internet economy’, he argues, ‘can turn buildings into websites and replace warehouses with supply chain software. It can turn paper and CDs into electrons and replace trucks with fibre optic cable. That means significant energy savings.’17

At first sight, such arguments have a compelling logic. Shopping on the web should, with efficient logistics, mean that one truck can replace dozens of separate car journeys. B2B exchanges should improve the efficiency of the supply chain. There are some sectors – for example books, records and banking – in which e-materialization is already taking effect. Yet many remain unconvinced. The Economist has tackled Joseph Romm head-on, arguing that ‘doing things on-line is more energy efficient only if it genuinely displaces real-world activities.’18 So far, there are few signs of that happening, not least because most of us enjoy shopping for reasons that have precious little to do with obtaining goods and services in the most environmentally efficient way.

And as our Harry Potter example illustrates, e-commerce could create new forms of highly unsustainable consumption, as instant fulfilment becomes the norm. The worst case scenario is that we end up with hundreds of grocery delivery vans jamming up residential neighbourhoods, increasing congestion and pollution, while consumers, freed up from the time they would have spent in the supermarket, drive off in their cars to do, you guessed it, yet more shopping.

Other research themes in the Digital Futures project have looked in detail at the macro effects of e-commerce on energy use, transport and planning policy. The central issue for this chapter is how e-commerce companies can create environmental benefits through their core business activities.

Part of the solution lies in adapting existing tools and systems. As our survey results show, most dot-coms have a lot to learn about the basics of environmental management. Also, traditional companies involved in e-commerce need to ensure that the systems and policies they have in place elsewhere are carried over into their internet operations. It may be that in the rush to get online, some companies are cutting corners and treating their e-commerce activities as though they are exempt from wider environmental and social policies.

Beyond this, there are some simple steps that e-businesses could take to reduce their impacts. For example, one way to improve the environmental efficiency of e-fulfilment would be the inclusion of a ‘green delivery’ button alongside the ‘express delivery’ option on B2C sites, so that consumers could choose the greenest, as opposed to the fastest, mode of delivery.

Whole system innovation

However, as Leadbeater points out, wealth in the new economy flows from innovation, not optimization; from imperfectly seizing the unknown, rather than simply perfecting the known.19 The lesson here for dot-coms may be to not concentrate too heavily on conventional management systems such as ISO 14001– important as these may be – but to come up with creative ways of leapfrogging traditional sectors onto a higher plane of sustainability performance. The focus needs to be on whole-system innovation; identifying how e-commerce can contribute to more complex webs of sustainable innovation around energy, transport, production and consumption.

Perhaps the greatest potential for such innovation lies in the new technologies and market models emerging on the internet. To give just three examples:

1 Auction sites such as eBay, which allow consumer-to-consumer (C2C) trading of secondhand goods can prolong the useful life of products and reduce waste. The US$3 billion-worth of stuff that's been traded on eBay since it launched is $3 billion-worth less stuff in landfill. In the longer term, writers such as Jeremy Rifkin suggest that we may shift to an economy based on access rather than ownership, as the short-term leasing of many goods and services becomes possible online.20

2 New technologies such as MP3 will allow certain sectors such as music and software to be almost entirely dematerialized. While it is wrong to exaggerate the significance of this in environmental terms (a wholesale shift in the UK music industry towards MP3 would create carbon savings equivalent to just 0.1 per cent of national carbon emissions), improved access and broadband technologies are likely to encourage similar trends in sectors such as publishing and banking.

3 Ecobots. There are already many sites that use search engines or ‘bots’ to search the web for the cheapest product in a given category (for example, shopsmart.com). The ease with which the internet enables the searching and filtering of information should eventually lead to the development of ‘ecobots’ – green search engines capable of selecting products on the basis of environmental performance. The main obstacle to this at present is the same as for conventional shopping – a lack of comparable environmental data. Yet there are some sectors in which it should already be possible – for example fridges and washing machines, which are energy-rated; cars, which can be compared on the basis of fuel efficiency; and financial services, in which pensions and bank accounts can be compared according to ethical criteria.

What can be done to stimulate the wider uptake of these sustainable models of e-business? Many of the solutions require more of the same in terms of environmental policy; an accelerated shift towards green taxation, measures to promote greener transport and distribution, incentives for recycling, and increased responsibilities of manufacturers and retailers for products throughout their life cycle. However, there are other things that government and business can do. A recent report from the government's Advisory Committee on Consumer Products and the Environment (ACCPE) calls for the establishment of a dedicated website to help consumers find out more about the environmental effects of different products.21 This is an excellent idea, which should be expanded to include the development of the world's first ecobot, as the result of a partnership between the UK government and a consortium of software developers, e-tailers and NGOs.

The Department of the Environment, Transport and the Regions (DETR) and Department of Trade and Industry (DTI) – together with businesses and NGOs – also need to revisit the existing tools and frameworks for environmental management, and ensure that these are made more relevant and accessible to new economy companies. As the leading department in this area, DETR should make a particular effort to ‘bring the Valley in’; to better understand dot-com culture and the opportunities that e-commerce creates to advance sustainability.

Stakeholders.com

‘In the dot-com era, trust – the direct result of integrity and reputation – remains critical… The only difference now is that reputations, which still take time to build, can be tarnished more quickly.’ Scott McNealy, CEO, Sun Microsystems22

How will e-commerce affect the relationship between a company and its stakeholders? Will it usher in a new era of transparency and accountability? One of the best descriptions of the changing nature of corporate power in the new economy can be found in The Cluetrain Manifesto (www.clutrain.com). Written by four web aficionados, this consists of a set of 95 theses designed to show how the internet has radically altered the rules of business. The first of these run as follows.

1 Markets are conversations.

2 Markets consist of human beings, not demographic sectors.

3 Conversations between human beings sound human. They are conducted in a human voice.

4 Whether delivering information, opinions, perspectives, dissenting arguments or humorous asides, the human voice is typically open, natural, uncontrived.

5 People recognize each other as such from the sound of this voice.

6 The internet is enabling conversations between human beings that were simply not possible in the era of mass media.

7 Hyperlinks subvert hierarchy.23

E-commerce enables these conversations to take place more easily. The internet is a perfect medium for promoting inclusivity; ‘[It] invites participation. It is genuinely empowering.’24 Traditional boundaries are dissolved, and companies can become more responsive to stakeholder needs.

Are all stakeholders getting a piece of the online action? A lot is said about the relationships between companies and consumers, far less about other groups. As part of our survey, we asked e-businesses to rank their stakeholders according to importance. The results are revealing. As Figure 3.2 illustrates, customers, employees and investors are regarded as critical; the media, online communities and suppliers as important; government, geographical communities and NGOs as fairly unimportant; and trade unions as totally irrelevant.

Figure 3.2 How important are the following stakeholder groups to your company?

Consumers

As The Cluetrain Manifesto suggests, the internet changes the balance of power between companies and consumers. The most obvious benefit of this is cheaper products and services, as consumers learn to compare prices at the click of a mouse. Yet this new wave of empowerment also offers the tantalizing prospect of an upsurge in ethical consumerism.

In the B2C market, as prices are driven ever lower, companies will need to find new ways to add value and differentiate themselves from their competitors. Focusing on ethical and environmental performance is one route to a rapidly expanding market. In recent years, ethical investment has grown at a phenomenal rate, and is now worth £3.3 billion in the UK. Sales of organic food are predicted to be worth £1.5 billion by 2003. Opinion polls show that 30 per cent of people take some account of ethical issues when shopping.25

Traditionally, the barriers to ethical consumerism have been the difficulty of accessing products and the limited availability of reliable information. The internet can overcome both of these problems, and it can only be a matter of time before a large retailer launches a green or ethical shopping site. At the moment, this market has been left to a handful of small players, such as ethical-junction.org, who lack the scale to move it closer to the mainstream.

For e-tailers, there is a strong business rationale for investing time and money in improving their ethical performance. As well as opening up new markets, it can help to build more meaningful bonds of trust and loyalty with consumers. Currently, debates about trust on the internet are focused on privacy and the security of transactions. As e-commerce becomes more sophisticated, consumers are likely to want assurance on a wide range of issues – including the social and environmental credentials of products and services – and companies will have to capitalize on their reputation to offer that assurance.

Employees

In the knowledge economy, human capital is a company's greatest asset. The importance of recruiting and retaining high-quality staff underpins many of the benefits – particularly stock options – that IT and dot-com companies offer their employees. Across the sector as a whole, employment practices and management structures are reasonably progressive. Yet in the e-commerce gold rush, some companies have taken advantage of their employees’ dreams of getting rich, and failed to apply the same kind of innovation and creativity to ownership structures and career development that they apply in other parts of their business. Andy Law, the founder of the advertising agency St Luke's, has drawn attention to this problem: ‘Dot-coms are terribly traditional. They're owned and managed absolutely conventionally and rather than redefine business, they exist to enrich a tiny few… You see the fallout every day. Employees are burned out, alienated and disillusioned.’26

It doesn't have to be this way. As Bill Thompson points out in a recent pamphlet on e-mutualism, the internet is the ideal environment for new forms of cooperative ownership and management.27 It is not an organization that anyone can join; it is a set of relationships, and should therefore lend itself to a more inclusive, stakeholder-driven model of capitalism.

Community

In its 95 theses, The Cluetrain Manifesto goes on to discuss the importance of community. ‘To speak with a human voice, companies must share the concerns of their communities. But first, they must belong to a community.’ As our survey shows, for many e-businesses, community is understood first and foremost in a virtual sense. This shift requires us to revisit traditional stakeholder models and tools for corporate accountability, and update them so that they remain relevant in the new economy.

This emphasis on the virtual can be very positive. As Chapter 5 shows, despite fears that the internet will erode social relationships, the trend is in the opposite direction, towards the creation of online communities as an addition to existing social networks. Yet it is still important to reflect on the lack of connection that many dot-coms feel with their local geography. Writers such as Richard Sennett have drawn attention to the corrosive effects of a wired workforce that fails to engage with its local community. Sennett describes how his home area of Clerkenwell, once home to printers and small manufacturers, ‘is now becoming a neighbourhood of lofts, sold to the young financiers working nearby in the City, or to the officer class in the army of graphic design, fashion and advertising which has occupied London.’28 These people use the city as a backdrop to their lives, rather than actively involving themselves in the community. They have few links to local people, local politics, and no understanding of the social capital that was ploughed into the parks, the cinema, the bookshop.

Suppliers

Most analysts agree that B2B e-commerce is where the real growth will happen over the next five years. Web research company Forrester predicts that while consumer spending on the internet will increase from US$7.8 billion in 1998 to $108 billion in 2003, B2B transactions will rocket from $43 billion to at least $1 trillion. The basic selling point of B2B e-commerce is that it cuts costs. Estimates vary, but the scope for savings in some sectors is thought to be 20–30 per cent.

Online trading exchanges are seen as a way of achieving these efficiency gains. In every sector, companies are joining forces with competitors to build huge trading hubs, in which all procurement can take place under one virtual roof. The volume of transactions that will pass through these exchanges is mind-boggling. For example, the auto-industry exchange Covisint, born from an alliance between Ford, General Motors and DaimlerChrysler, will bring together 35,000 component makers with an annual trading volume of $250 billion.

In sustainability terms, it is not yet clear whether B2B e-commerce will have positive or negative effects. Taking the supply chain as a whole, B2B undoubtedly has the potential to deliver gains in environmental productivity alongside economic efficiency. But the narrow focus on price in the purchasing protocols that govern many automatic transactions, particularly through online exchanges, creates the real possibility that environmental and ethical considerations will be downgraded or ignored altogether. The speed and volume of transactions through such exchanges may make it difficult to know who you are dealing with, and this creates risks to reputation that might have been avoided in traditional supply-chain relationships. There is a danger that what some have dubbed ‘stealth corporations’ use the anonymity of exchanges to sell low-cost, environmentally or socially destructive products.29

Currently, many e-businesses are flying blind, with few of the safety checks and systems that are required. Sooner or later, a dot-com will be hit by a high-profile sourcing scandal, similar to those faced by Nike and Gap in recent years. Dot-coms should be conscious that companies that live by the web can also die by the web. In recent years, NGOs have become extremely adept at using the internet to orchestrate campaigns against companies with poor track records (examples include shameonnike.com and mcspotlight.com). Dot-coms are more vulnerable than most to new forms of online campaigning.

To cope with these challenges, ethical audit and compliance systems need to enter the digital age. There are already several systems, such as Clicksure.com, which provide online assurance on issues of quality, and these should be extended to cover environmental and social issues. B2B exchanges will also need to require their trading partners to meet certain environmental and social standards. It will take time for these systems to develop, but eventually, as Chris Babcock suggests in a recent paper, it should become possible to click through from a supplier's website to review the quality, environment or social standards which that supplier holds. Another click should take you to the website of the auditing agency, and even allow you to exchange emails with the individual auditor.30

Trade unions

For every well-paid knowledge worker reaping the benefits of his or her intellectual capital, there is likely to be someone else working long hours for modest pay in a technical support centre or fulfilment depot. When dot-com share prices were riding high, employees accepted poor conditions and a lack of job security in return for stock options. Now that share prices have slumped, workers are turning to traditional forms of collective bargaining to prevent redundancies, and companies such as Amazon.com and eTown are facing calls for union recognition. The fact that only 1 per cent of our survey respondents consider unions to be an important stakeholder shows that there is still a long way to go before good employment practices are established across the sector.

Conclusion

‘We've been called everything – Amazon.con, Amazon.toast, Amazon.bomb – and my favourite, Amazon.org, because clearly we are a not-for-profit corporation.’ Jeff Bezos, CEO, Amazon.com31

After the roller coaster ride of 2000, it's time to take stock. It is not inevitable that the new economy will see the emergence of more ethical and sustainable models of business. However, amid the turmoil and change, there is everything to play for. We could use the opportunities we have in front of us – opportunities to combine technological and economic innovation with social and environmental innovation – to take a major leap forward in the pursuit of sustainability.

Our survey shows that e-entrepreneurs have a clear sense of their responsibility to society and to the environment. The challenge is to act on this, so that in future, e-commerce is about more than just ‘the soundless scrape of coins over the wire’.32 New economy business leaders need to take stock of their impacts, and of their potential to make a difference. As the social and environmental reach of a company extends, so does the opportunity for new, interesting and profitable ways of doing business.

Internet technology provides us with ample opportunity for ematerialization – replacing the real with the virtual, reducing energy use and increasing the efficiency of supply chains. The technology provides the potential, but nothing more. It will need to be realized through new business models; through channelling innovation toward environmental goals; and through rethinking whole systems of production and consumption.

As The Cluetrain Manifesto tells us, the internet also changes the way we relate to each other, and provides the potential for new forms of accountability. The responsible company can use the internet to let everyone know how well it is doing; the irresponsible company can be easily named and shamed. The web makes it easier to reach out to your stakeholders, and to source products and services that meet ethical standards. It also makes it easier to point out when companies have gone wrong.

How will all these opportunities be realized? In part through policies and systems – through measuring, managing and reporting on environmental and social impacts. In part through learning from others in networks which allow ideas and experience to change hands; and in part through the leadership of the most committed and the most influential, who set a standard for others to follow. Beyond these specifics, there are perhaps two principles we can apply in developing a richer sense of e-business ethics: ‘joining the dots’ and ‘taking time’.

Joining the dots

Dot-coms are no strangers to partnership. Web success depends on forging alliances – with suppliers, technology firms and content providers. But as e-business begins to tackle sustainability, these networks must expand to include meaningful partnerships with government and NGOs. We need, literally, to join the dots. Dot-coms, dot-orgs and dot-govs need to share ideas and work together to embed sustainability in every area of the new economy.

The barriers to these alliances are not as great as one might imagine. Dot-coms and dot-orgs have a surprising amount in common. Both seek to challenge the established conventions of the old economy, and are prepared to take risks and push for change. E-commerce blurs the old boundaries: it brings the high street into our homes, and brings government out of its Whitehall corridors. The web is a neutral meeting point for new partnerships and new alliances.

It's not just a matter of asking business to adapt. NGOs are good at pressuring companies, but they also need to build trust, identify common ground and support companies to get things right at the design stage. Government needs to work hard to counter its image as a barrier to be leapt over, an obstacle to innovation. It needs to seek out good practice and use its influence to encourage it elsewhere. It should not shy away from intervention, but should intervene creatively, to foster innovation, not stifle it. Both NGOs and government can learn from the models of cooperation and fluid alliances that sustain the dot-com world. In a sense, the Digital Futures project is an experiment in these new ways of working; it draws different sectors together to explore the sustainability challenges and opportunities of e-commerce in a collaborative way. Such models will need to be replicated throughout the new economy.

Taking time

In the new economy, speed is critical to success. Technology moves fast, and because first-mover advantage is so powerful, internet companies have to move even faster. There are said to be three or four internet years to one calendar year. Yet slowness can also be a virtue. The e-business community does sometimes need to think in longer time horizons, which span not just the next investment decision, but also encompass the social and environmental changes that those investment decisions bring about. We need to learn to cope with the different cycles of time that operate in this debate: cycles of investment and innovation on the internet, which are measured in weeks and months; cycles of investment in the physical infrastructure of energy systems, roads and towns, which are measured in decades; and cycles of change in the natural environment, in the biosphere on which all economic activity ultimately depends, many of which are measured in centuries or millennia.

The way we view time is key to creating a sustainable digital economy. It doesn't mean abandoning the hectic pace of e-life. It means switching lanes occasionally. Things look different from the slow lane. You can pause, reflect, consider your wider responsibilities. Unless we occasionally stop and pause for breath, it's hard to think about the long-term issues that really matter. We need a bolt of inspiration to ease us into the slow lane every now and then. The Long Now Foundation (www.longnow.org) is one such attempt. Initiated by some of the biggest names in Silicon Valley, including Kevin Kelly (co-founder of Wired magazine) and the musician Brian Eno, the foundation aims to build a clock that will keep time for 10,000 years. It will tick once a year, bong once a century and, once every millennium, the equivalent of a cuckoo will come out. Such attention-grabbing reminders of the long-term implications of our actions are essential.

Taking up the sustainability challenge requires creativity, innovation and alliance building. It requires a different way of thinking; but this is what the dot-coms are so good at. There's everything to gain from channelling the dynamism of the new entrepreneurs into a force not just for economic good, but for social and environmental good too.

Notes and references

1 Federal Express press release, 10 July 2000. This example is discussed at greater length in Scott Matthews, H, et al ‘Harry Potter and the Hole in the Ozone Layer’, IEEE Spectrum, November 2000

2 Marbles/Echo Research (2000) Dotcomment: How the Press See the Dot-com Boom, London

3 Gates, B (1995) The Road Ahead, Viking, New York

4 The Economist (2000) ‘What the Internet Cannot Do’ 19 August

5 Leadbeater, C (1999) Living on Thin Air, Viking, London

6 Joy, B (2000) ‘Why the Future Doesn't Need Us’, Wired, April

7 Tim Jackson speaking at First Tuesday, 5 December 2000

8 Proddow, L (2000) Heroes.com: The Names and Faces Behind the Dot Com Era, Hodder & Stoughton, London

9 Borsook, P (2000) Cyberselfish, Perseus Books, New York

10 Castells, M (2000) ‘Information Technology and Global Capitalism’ in Hutton, W and Giddens, A (eds) On the Edge, Jonathan Cape, London

11 Pensions Investment Research Consultants (2000) Environmental Reporting 2000, PIRC, London

12 www.digitalpartners.org; www.siliconvalleygives.org

13 Guardian, 28 March 2000

14 Oakley, K (2000) The New Victorians, unpublished article

15 www.hp.com/e-inclusion

16 See eg Coyle, D (1997) The Weightless World, Capstone, Oxford; Leadbeater, C (2000) Mind Over Matter: Greening the New Economy, Green Alliance, London; Pine, J and Gilmore, J (1999) The Experience Economy, Harvard Business School, Boston

17 Romm, J (1999) The Internet Economy and Global Warming, A Scenario of the Impact of E-commerce on Energy and Environment, Center for Energy and Climate Solutions, Washington

18 The Economist, op cit

19 Leadbeater, op cit

20 Rifkin, J The Age of Access Tarcher/Putnam, New York

21 ACCPE (2000) Choosing Green: Towards More Sustainable Goods and Services, DETR, London, October

22 Interview in Wired, April 2000

23 Levine, R et al (2000) The Cluetrain Manifesto, Financial Times, London

24 ibid, p17

25 Cowe, R and Williams, S (2000) Who Are the Ethical Consumers?, The Cooperative Bank, Manchester

26 Interview in Harvard Business Review, September–October 2000

27 Thompson, B (2000) E-Mutualism or the Tragedy of the Dot-commons, The Cooperative Party, London

28 Sennett, R (2000) ‘Street and Office: Two Sources of Identity’ in Hutton and Giddens, op cit

29 SustainAbility (1999) The Internet Reporting Report, SustainAbility, London

30 Babcock, C (2000) ‘Ethical Sourcing in a Wired Economy’ in Thamotheram, R Visions of Ethical Sourcing, Financial Times/Prentice-Hall, London

31 Red Herring, August 2000

32 Levine et al, op cit

Response

by John Browning

FromJohn Browning <jb@poplar.com>
SubjectDot-com ethics

Something big has changed in the relationship of business to society. While James Wilsdon acknowledges this, he fails to carry his analysis to its logical conclusions, or to offer any real understanding of the new dilemmas and opportunities for business and policy makers. If someone like Wilsdon has come so adrift, maybe the revolution that is the new economy really is bigger than most of us now think. Wilsdon ends up with policy recommendations that threaten to not so much take advantage of the new opportunities being created, as crush them.

Part of the problem is that Wilsdon does too little to question the traditional assumptions of the left – that business is bad and government and unions are good – even when they are contradicted by his own evidence. Wilsdon starts with the assumption that ‘e-businesses have failed to grapple with sustainability’. Yet his survey of e-businesspeople shows that two-thirds believe social and environmental issues to be important to their companies; the same two-thirds also believe that the advent of e-commerce will better enable companies to respond to environmental and social concerns. While executives could probably do more to act on their convictions, this hardly feels like failure. Indeed, if the survey of consumers cited by Wilsdon later in the article is correct, only 30 per cent of consumers take ethics into account when buying products. Executives may be leading the social and environmental agenda rather than resisting it.

The same unexamined assumptions cloud many of Wilsdon's recommendations. The fact that only 1 per cent of e-businesspeople consider unions to be important stakeholders in their business does not mean that they are a long way from good employment practices. Perhaps unions have simply become irrelevant. And while it may be a good idea for dot-coms, dot-orgs and dot-govs to ‘share ideas and work together’, Wilsdon begs all of the interesting questions about how or why. It would certainly be nice if government could, as he suggests, ‘seek out good practice and use its influence to encourage it elsewhere’ and ‘intervene creatively, to foster innovation, not stifle it’. But government doesn't do these things, as Wilsdon tacitly acknowledges. And it's hard to see how it can bear the burden of expectations that his agenda puts upon it.

So how could government use the capabilities of communications technology to become more responsive? And what alternatives are there to regulation to promote social and environmental responsibility? These are key questions that Wilsdon never entirely answers, in large part because he doesn't seem to accept his own analysis of the new possibilities created by the changing nature of business.

At the heart of the novelty of the new economy lies a change in the nature of competitive advantage, and thus in the nature of companies themselves. When machines formed the core of companies, management didn't have to worry much about attracting higher-quality workers, or about improving how their people worked together. Workers could only produce where there were machines, so competition for talent was relatively limited. Government, in turn, focused largely on protecting people from the power of the machines – both by helping them to organize into unions, and by regulations that forced the capitalist owners of the machinery to think beyond maximizing return on their investment.

When people form the core of companies, however, attracting people and constantly improving the ways in which they work together is management's daily imperative. Notions of trust, community, shared values and shared goals move to the centre of the management agenda. Competition for talent intensifies and the balance of power shifts from manager to employee. (Imagine Microsoft, for example, trying to mimic the 19th-century millowners’ tactic of locking workers out.) Along the way, what might once have been a relatively clear distinction between worker, consumer and citizen has becomes irretrievably blurred – and with those distinctions also disappear the relatively clear roles that once separated companies, voluntary groups and governments.

As distinctions fade, newly empowered consumers can nimbly step into areas where governments once clumsily trod. Thanks to the ability of communications technology to bring them information about all aspects of everything, people can now vote on many issues with their chequebooks every bit as effectively as they do at the ballot box. If people really oppose, say, genetically modified food, they don't have to buy it. If they really care about the wages paid to foreign workers, they will pay a bit more for goods made by companies that pay better. They can refuse to lend their talents to companies that pollute, or that violate their own code of social ethics.

Perhaps ironically, pushing the power and responsibility for ethics into the marketplace could well prove more democratic than leaving it in the hands of government – for markets, when functioning efficiently, provide a constant plebiscite on the public's concerns, while governments can only enforce diktat shaped by lobbyists and politicians. But while Wilsdon enthusiastically describes the possibilities of stakeholder activism, he never seems to take them seriously. Having listed a variety of new, sustainable business models, he asks ‘What can be done to stimulate the wider uptake of … sustainable models of e-business?’ The answer: ‘more of the same’ – that is, regulation, government control and manipulation of markets.

Surely this misses the point. If there has been a revolution in business, then it makes little sense for everybody else to go on behaving as they did before. Instead of requiring people to do the right thing, perhaps it's time for government to look harder at how they can empower people to decide what is right for themselves. Instead of directing their energies at government policy, perhaps it's time for NGOs to turn more of their attention to educating and lobbying the public directly. Instead of worrying about how they can improve business, perhaps it's time for government and NGOs to turn their focus to how they can learn from it.

Of course there are limits to the forces now pushing companies to behave more ethically. But there are also real opportunities – at least for activists and politicians willing to admit that they hold neither a monopoly of righteousness nor even a monopoly on the forum for deciding what is right. Now is the time to grasp these opportunities. To fall back on ‘more of the same’ risks smothering the best of the new under the worst of the old, simply for lack of imagination and initiative. And that would be a shame.