The Sour Apple
The theory of externality is relevant in light of new environmentally-friendly corporate policies. Today, your favorite brands are racing to proclaim carbon neutrality by 20XX. It is a remarkable accomplishment, yet one that overshadows significant issues that are just beginning to become visible at the surface.
In 1920, a British economist by the name of Arthur Pigou published an 876-page book titled The Economics of Welfare. In it, he introduced one of the most revolutionary economic concepts of the twentieth century, and one remarkably relevant the twenty-first century in light of new environmentally-friendly corporate policies: the concept of externality.
In a nutshell, externality is the theory that industries rationalize costs associated with business, such as wages and taxes, while neglecting the “social” costs of business, such as environmental degradation and pollution. Therefore, the citizen is left to “absorb” the social cost of pollution for the advantage of lower costs and higher profits.
Recycling, for example, should be a policy of last resort for companies. Why shred the components of a totally reusable phone, watch, or computer, if it is possible to refurbish and resell those devices back to willing consumers? Environmentally, it does not make sense.
Except, it does economically: companies don't want the market to be naturally inflated with an alternative, cheaper supply of goods, which would in turn heavily reduce demand for latest-generation products – even if it’s not good “for you and the planet.”
Last fall, nearly a month after announcing its “carbon-free by 2030” initiative, Apple sued GEEP Recycling, a firm based in Canada. According to Apple, GEEP – which was hired to recycle Apple devices in November, 2014 – instead resold old phones and devices that the company intended to be dismantled to third-party buyers on the grey market. But what about Apple’s promise to refurbish “as many devices as we safely can each year”?
A Motherboard/Vice investigation that took place in 2017 uncovered that Apple is undermining the recycling industry’s efforts to improve environmental conditions. In environmental filings dated back to 2013, Apple explicitly stated that "Materials are manually and mechanically disassembled and shredded into commodity-sized fractions of metals, plastics, and glass... No reuse. No parts harvesting. No resale.”
As of October 2020, Apple only sells refurbished devices that are at least two years or older. This is not a coincidence; the company discontinues phones after two years. The cheapest refurbished Apple Watch is priced at $520. For perspective, the latest Apple Watch retails for $400. Under normal circumstances, environmentally-conscious consumers would choose pre-owned or refurbished goods over those that have a significantly greater carbon footprint.
Using economist Adam Smith's “invisible hand” metaphor (describing an economy in which consumers are free to act in their own interests), there is a clear choice that consumers will make. Companies are acutely aware of the fact that consumers are not willing to spend $120 more for last-generation products. Furthermore, many companies rationalize the environmental costs associated with constantly replacing outdated/unfashionable products by marketing them to consumers as the most sustainable choice to make. The opinions of marketing departments across the country are irrelevant to fighting against climate change: the most environmentally-conscious choice is to buy refurbished/pre-owned, or nothing at all.
Ultimately, consumer choices are designed by Apple, and other firms alike, to adhere to the company's mission for financial success. As more consumers see through corporate subterfuge and begin to scrutinize the sustainability of their choices, companies will be forced to reconcile with the social costs of doing business.
