rowth 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 tha