Once Again, A Lost Generation

Precisely one century ago, Ernest Hemingway was living in Chicago and attempting to readjust to civilian life after experiencing the horrors of service as an ambulance driver for the Italian Army in World War I. F Scott Fitzgerald was drinking excessively and wooing his future wife Zelda while attempting to transition from an unsuccessful career in advertising to a lucrative one in writing novels and short stories. And the United States, as a nation, was struggling to recover from its loss of human life during the Spanish Flu pandemic, its failure to permanently “make the world safe for democracy” in World War I, and its inability to prevent the economic collapse of the 1920 Depression.

Hemingway’s and Fitzgerald’s subsequent tales illustrated the plight of The Lost Generation, the demographic cohort that came of age at a time when national leaders and the general public were asking serious questions about the sustainability of American society and its capitalist economy. Although the 1920s are now remembered as a time of prosperity, the decade also represented a time of escalating income inequality, debt-fueled business transactions, racial and religious bigotry, and political turmoil.

Today, much praise is bestowed on America’s Greatest Generation, the demographic group that came of age during the Great Depression and World War II. Much less attention is paid to the Lost Generation, though, the preceding generation that (according to Hemingway) believed that “if you have a success you have it for the wrong reasons. If you become popular it is always because of the worst aspects of your work.”

What caused such a pessimistic, fatalistic, and almost nihilistic perception of American business and society to be adopted by an entire generation? It could not have been a mere single catastrophic event; after all, many American generations experience such events. Perhaps, instead, it was the impact of a wide variety of catastrophic events that generated such cynicism, catastrophes that affected many different types of institutions that supported American society.

And what of today’s youthful generation? What of Gen Z, the demographic cohort that was born after 1996 and is now entering the work force? Their collective memories encompass the national security failure of 9/11, the military quagmire of the Middle Eastern wars, the economic collapse of the Great Recession, the radicalization of contemporary political movements, and the social and medical convulsions of the coronavirus pandemic.

Today, some citizens are calling for dramatic new investments in national programs, arguing that the failure to make such investments will result in severe economic losses. Others reply that massive increases in federal debt will be required to finance such investments, and that excessive spending will impose even more severe economic losses in the long term.

But neither side is factoring the risk of the emergence of a new Lost Generation into its Return On Investment analyses. If we believe that the potential cost of a climate collapse must be factored into analyses of proposed environmental sustainability investments, perhaps we should likewise conclude that the potential cost of producing another Lost Generation must be factored into analyses of proposed social sustainability investments.

After all, a century ago, the Spanish Flu pandemic helped to produce a group of “Lost” authors who shaped the generation that stumbled into the Great Depression. What will the Coronavirus pandemic do today?

Sustainability Accounting

In my previous blog post, I described the history of sustainability accounting as a “fairly engaging tale (that) begins in northern Vermont on a Ben & Jerry’s dairy farm, segues over to the Alaskan shoreline on the doomed Exxon Valdez oil tanker, and then ends in the present with characters as diverse and colorful as former Mayor Michael Bloomberg of New York City and Charles, the Prince of Wales in Great Britain.”

And then what did I do? I segued into another topic! And I never returned to explain why these two places and two people played key roles in the development of sustainability accounting.

Although I can’t honestly say that I heard roars of protest over my segue, I did hear from several readers who expressed curiosity about these places and people. So I thought that I’d explain the references in this follow-up post.

First and foremost, please keep in mind that there is no universal consensus about what we mean by the word sustainability. Nevertheless, Merriam-Webster defines the word sustainable as meaning able to last or continue for a long time, and most other sources agree that it refers to the long term viability of a person, group, or organization. Or, on a very large scale, to the entire planet Earth.

So how did a dairy farm, selling milk to an ice cream producer, factor into the accounting for such a concept? In the business world, many individuals trace the discipline of sustainability accounting to Ben & Jerry’s annual issuance of Social and Environmental Assessment Reports (SEARs). Beginning in the 1980s, the firm has pioneered the process of establishing social and environmental goals and then publicly assessing its progress in achieving them.

Then, in 1989, the Exxon Valdez ran aground on the Alaskan shoreline, spilling massive amounts of crude oil onto pristine ocean beaches. As was the case during the BP Deepwater Horizon spill in the Gulf of Mexico two decades later, the clean-up activities were hampered by uncertainties over which organizations bore responsibility for various crisis management efforts.

The concept of Governance thus joined the concepts of the Environment and Society as key considerations of sustainability. As the operational complexity of the discipline grew more dense, the qualitative measurements of the SEAR reports evolved into more quantitative metrics.

Nevertheless, the two types of sustainability reporting have survived to the present day. Whereas the Ben & Jerry’s qualitative process now tends to be known as Corporate Social Responsibility (CSR) reporting, the Exxon and BP quantitative process now tends to be known as Environmental, Social, and Governance (ESG) reporting. Nevertheless, there is a significant amount of overlap between the two styles.

So where do we stand today? Well, the production of social and environmental metrics to supplement financial (or economic) profit measures has led to the development of Triple Bottom Line (TBL) reporting. Using standards and measurements promulgated by organizations like the Sustainability Accounting Standards Board (SASB), now led by Chairman Michael Bloomberg, a TBL report provides three sets of summary measures that collectively express the holistic performance of an entity.

And what of Prince Charles? He has led an effort to integrate these three distinct bottom line measures into a single integrated framework of holistic performance. His efforts helped launch the Integrated Reporting project, which created a framework called the Six Capitals model.

Here is a pictorial representation of that model. Can you see why it is colloquially called the Octopus framework? There are six tentacles on each side of the proverbial head of the octopus, with each tentacle representing a Capital, i.e. a type of resource that an entity must utilize while conducting its operational activities.

So what will come next in this history? In all honesty, who knows? With climate change causing massive disruptions to global economies, societies, and environments, many other colorful locations and charismatic personalities are sure to enter the story.

Hey, you didn’t know that the history of sustainability accounting is so interesting, did you? And given the volatility of our modern world, it’s a future that hasn’t yet been written.

A Story Teller’s Choice

Last week, at the annual Next Gen conference, I delivered a presentation about the history of Sustainability Accounting to the young professionals of the New York State Society of CPAs.

Scintillating stuff, eh? Well, believe it or not, it’s actually a fairly engaging tale. It begins in northern Vermont on a Ben & Jerry’s dairy farm, segues over to the Alaskan shoreline on the doomed Exxon Valdez oil tanker, and then ends in the present with characters as diverse and colorful as former Mayor Michael Bloomberg of New York City and Charles, the Prince of Wales in Great Britain.

But that’s a tale for a different day! Today, I’d like to convey an anecdote about a key choice that any story teller must address while planning to regale an audience. Namely, the decision is: do I describe the climax of the tale at the beginning of the story, or do I wait until the end?

The traditional approach, of course, is to tell a story in chronological order and then describe the climax at its conclusion. Most theatrical plays, films, television shows, and books flow in this conventional manner.

And yet certain authors have enjoyed great success by beginning with the denouement and then “flashing back” to earlier scenes. In the Oscar winning film Titanic, for example, it makes perfect sense to begin in the present and then flash back to earlier times because the audience already knows the fate of the doomed ocean liner. And in other works, such as in Mary Shelley’s classic Frankenstein, the flash back technique is effective because it grabs the audience’s attention immediately with a dramatic burst of energy.

Nevertheless, there are times when a story teller’s intentions are betrayed by his own audience. William Shakespeare, for instance, undoubtedly wanted viewers of Romeo and Juliet to be stunned senseless when his young lovers struggled and persevered right up to their moment of imminent freedom and bliss … only to be slaughtered by their own foolish misunderstanding.

That moment of astonished shock would have been impossible to convey if Shakespeare had revealed the ending in the first scene of the play. But regrettably, over the ensuing centuries, the public’s growing familiarity with the work has forever ruined the Bard’s final horrible surprise.

Fortunately for me, though, my Sustainability Accounting audience had relatively little knowledge of the history of the discipline. So did I lead off my story by discussing His Royal Highness, the Prince of Wales? Or did I end with him?

I decided to play it safe and tell my tale in traditional chronological order, beginning with dairy cows and ending with the British Crown Prince. And my presentation was fairly well received, although a member of the audience did subsequently observe that I “could have grabbed the attention of the crowd immediately” by beginning at the end of the story.

Which approach was the correct one? Even in retrospect, I’m still not sure what decision I should have chosen. And yet I have no doubt that the choice itself wielded a dramatic impact on how the audience perceived the story.

Environmental Economics, Walmart Style!

Tired about talk of the Producer Price Index? Depressed about the sad state of the Consumer Confidence Index?

Cheer up! We can now look forward to analyzing a brand new index, currently under development by a group of statisticians at …


Huh? Walmart, purveyors of tube socks and toothpaste, issuing socio-econometric statistics? Yep, and more than just sales data. Earlier this week, Walmart’s President and CEO proudly announced the retailer’s development of a worldwide Sustainable Product Index (SPI). Environmental economists, meet the Walmart Smiley Face!

Walmart and the Economy

Walmart shoppers may be surprised to learn that the store produces economic data that can rock the financial markets. Nevertheless, as the world’s largest retailer, it makes sense that business performance at Walmart would greatly influence the world economy. And with most of its operations based in the United States, it is also reasonable to expect that Walmart’s growth or decline would dramatically impact the health of the American business community as well.

More interesting, though, is the manner in which the evolution of the American economy has led to changing perceptions about the economic relevance of Walmart’s performance data. Years ago, when Walmart was pursuing Sears and Kmart for the title of America’s Largest Retailer, growth at Walmart was perceived as a bellwether indicator of the growth of the New Retail Economy. It’s difficult to recall the world of one dollar gasoline in the United States, but at the time that it flourished, economists actually believed that Americans would become more productive by driving their SUVs to stand alone warehouse stores in the suburbs to purchase massive quantities of household items at cut rate prices.

During the temporary affluence of the Great Bubble Economy, Walmart’s growth was perceived as a contrarian economic indicator, as its stores became destinations for shoppers with limited means while wealthier consumers flocked to upscale shopping malls. Chains like Macy’s and Bloomingdale’s boomed; heck, even Target became a more popular destination for the fashion conscious than the stores of the Walmart chain. But then the Great Recession torpedoed the American economy, and frugality once more became en vogue.

Today, any business activity is considered noteworthy, and Walmart revenue has held up far better than the revenue of its rivals. Walmart has also moved successfully into electronics and other higher end product lines; it is once more perceived as a bellwether of the American economy.

The Sustainability Initiative

Considering Walmart’s central role in American society and the U.S. economy, it should thus come as no surprise that the retailer has responded to spreading social concerns about environmental sustainability. A significant portion of its corporate web site is now dedicated to projects concerning climate protection, energy efficiency, waste elimination, and green product development and sales.

Nevertheless, last week’s announcement of Walmart’s socio-economic SPI did raise a few eyebrows. Why would Walmart feel compelled to develop its own socio-economic index? And why didn’t it simply use one of the existing indices that surely must be in place throughout the corporate world?

The answers to these questions are quite simple.  There aren’t any universally agreed upon indices of environmental sustainability in the corporate world. In fact, there aren’t even any commonly accepted or government regulated definitions about what it means to be environmentally friendly. Thus, Walmart simply stepped forward into this vacuum to announce its own index.

Calculating The SPI

In a refreshing burst of honesty, Walmart acknowledged that it doesn’t possess the econometric expertise to create a statistically valid and reliable SPI. And yet, in its press release, it defined fifteen questions across a quartet of categories addressing: (a) energy and climate, (b) material efficiency, (c) natural resources, and (d) people and community. And it promised to obtain answers from its top tier of American suppliers by October 1st, and to request answers from the remainder of it’s 100,000+ global suppliers shortly thereafter.

What happens after that? How does Walmart intend to move from a data base of survey responses to a published socio-economic index? Well, its implementation plan is admittedly a little murky. Walmart proposes to create a “consortium of universities” with the expertise to maintain a data base and define an index; it also promises to translate product information into a “simple ratings for consumers” about the environmental sustainability of specific products. But there are no timelines or deadlines for these activities, and there are no guarantees that other organizations will partner with Walmart for the long term.

Nevertheless, any business economist would agree that one needs a data base in order to create a statistical indicator, and that (in turn) one needs quantitative research questions in order to gather sufficient answers to populate a data base. And thus, although Walmart may not yet be close to achieving the goal of a meaningful SPI, one cannot help but admire their willingness to step forward and lead an initiative to do so.