Offsetting and the consumption of social responsibility.

• Author: Rosser, Ezra

TABLE OF CONTENTS Introduction I. PRODUCTION AND CONSUMPTION EXTERNALITIES A. Market Pricing B. Market Failures II. Responsible Consumption and Offsetting A. Quasi Offsetting 1. Corporate Responsibility and Cause Marketing 2. Hybrid Vehicles 3. Fair Trade and Production Certifications B. Environmental Offsets 1. Factors Driving Environmental Offsetting 2. Environmental Offsetting Mechanisms C. Poverty Offsets 1. Motivating Factors 2. Institutional Improvements III. Offsetting and Structural Change. A. Capturing Guilty Wallets.. B. Acceptance of Consumerism and Structural Change CONCLUSION INTRODUCTION

Consumers today routinely pair their consumption with charity or subject their consumption choices to their social commitments. Whether in the form of offset payments or post-consumption charitable giving, individuals are linking their consumption to their sense of social responsibility. To some extent this has always been true: beggars have probably concentrated outside of stores since time immemorial and there is a lengthy history of boycotts being used as a tool of social change. But the explosion of end-of-the-checkout-line charitable options, together with the increasing prevalence of social marketing, attests to the rise of a new phenomenon as well. (1)

Americans are consuming social responsibility; that is, they are both attempting to ensure their consumption does not conflict with their sense of social responsibility and hoping consumption can be the means of meeting their social responsibilities. (2) This Article is about what I call "consumption offsetting." Although such language borrows from the environmental field, carbon credits and carbon offsetting are but examples on the leading edge of a larger trend.

This Article is part descriptive, part normative. The literature on offsetting to date focuses on environmental offsetting and has not explored offsetting in other contexts. As the first article to identify quasi offsetting behavior and consider consumer responsibility for other social harms, my conclusions are necessarily preliminary. Accordingly, although I argue that the consciousness-raising aspects of offsetting overwhelm the possibility that offsetting will crowd out other sorts of pro-social activity, my principal contributions do not depend upon answering such questions. Fully teasing out all the policy implications of the idea behind offsetting--that individuals should pay for their consumption externalities--is beyond the scope of this Article. Offsetting relies upon voluntary payments, but the underlying idea suggests that the law should work on the internalization of these externalities. Many readers will no doubt conclude that offsetting highlights the need for greater regulation and prevention of harmful production and consumption externalities. (3) But the goal is not to provide an account of the externalities that should be prohibited. This Article's ambitions are far more preliminary and modest: to introduce offsetting as a budding market phenomenon, to argue poverty is ripe for offsetting, and to suggest a few institutional improvements on current consumer offsetting practices.

I argue that there is a spectrum of offsetting, with pure consumption at one end and examples of institutional offsetting at the other. In the middle lie practices--most notably corporate social responsibility--that bridge consumption and social responsibility for the externalities of consumption. I resist a narrowing of the conception of offsetting because a reductionist account misses the richness of the current market phenomenon. The second half of the Article focuses just on institutional offsetting, but by first exploring quasi offsetting practices that occupy the gray area between consumption and third-party offsetting, we can better understand the origins and rise of institutional offsetting.

Part I focuses on market failures to help explain why consumers engage in consumption offsetting. After challenging the standard assumption that markets correctly price goods and introducing the idea of externalities, I focus on the role of governance vacuums and powerful commercial interests. There is a deep and rich literature on market failure and for those comfortable with the topic, Part I can be skimmed. For those who embrace the tenets of laissez-faire economics, Part I challenges blind faith in free markets. The central argument is that prices of goods do not reflect production externalities.

Part II tackles consumption offsetting. The defining characteristic of offsetting is the decision to make a supplemental payment that exceeds what the market demands in connection with consumption and to do so for charitable or socially responsible reasons. Parts on localism, corporate social responsibility, hybrid vehicles, and production certifications explore parts of the offsetting spectrum where the extra expense may or may not amount to offsetting. I then move to environmental offsetting. By decoupling offsetting from products and providing standalone offsetting institutions and options, the environmental field has taken the lead in developing mechanisms for consumptive offsetting. Environmental offsets are an example of an increasingly accepted and, in some circles, expected way to correct for consumptive externalities. And though the offset concept is more familiar in the environmental field, similar logic regarding externalities applies to the relationship between consumption and other social issues.

Part II ends by highlighting one particular social issue, poverty, where consumptive offsetting could be productively expanded and improved through unifying institutions. (4) Blending charitable giving, guilt-inspired donations, and deliberate lifestyle adjustments, "poverty offsetting" describes a species of activity that recognizes the need to ameliorate some of the negative effects of consumption. Behind these supplemental payments is the understanding that individual consumption is not a discrete, isolated activity, but instead relates directly to local and especially global poverty. (5)

The idea that social responsibility is something to consume or is connected with consumption will strike many as inappropriate or even dangerous. In Part Ill, I respond to concerns about capturing people when they have their wallet or charge card in hand. offsetting arguably serves to legitimize or support consumption and some people may treat offset expenses as the full extent of their societal obligations. An additional argument against consumption offsetting is that it reinforces capitalism's consumptive-driven structure, diminishing the possibility of radical change. According to this critique, offsetting sells cheap consumption licenses and co-opts the socially responsible who might otherwise demand more meaningful change.

I respond to such arguments by rejecting the necessity of radical change and assert instead that consumption offsetting can help individuals realize their obligations. Although offsetting is limited to righting consumption externalities, it does not displace non-consumption-based obligations. structurally, offsetting accepts the important role consumption plays in our society but does so in a way that awakens the social consciousness to the costs of consumption. Just as the conservative assumption that the market consistently prices goods appropriately cannot survive close scrutiny, the leftist assumption that market mechanisms should not be used to help with social issues is also overly simplistic. Improving the norms and institutions of consumption offsetting will make it more likely, not less, that people will appreciate and act upon their many obligations--those tied to their consumption and those not.

This Article makes two major contributions to how we understand the relationship between consumption and social responsibility. First, it identifies an emerging offsetting phenomenon in seemingly discrete and isolated market practices and gives suggestions for improving upon them. (6) second, it suggests that by taking seriously both consumption and externalities, progress can be made on everything from the environment to global poverty. offsetting, while not getting at all moral obligations, does root such obligations in the shared activity, and perhaps belief, of Americans: consumption. (7)

1. PRODUCTION AND CONSUMPTION EXTERNALITIES

   When we enter a store, rows of products are on display, but the work involved in creating and bringing products to market is typically hidden from view. our perspective on the production process is limited, with the only information readily available being what is presented by the nature of the product itself, by the packaging, and by the price. It is nearly impossible to know the conditions at factories where the products were produced, the wages paid to workers, or the amount of pollution created in the process. Given such ignorance, with a few exceptions, we simply pretend as if the production process does not matter.

   Our indifference, or at least inattention, to production processes helps ensure that negative externalities accompany the production of many goods. (8) Consumers tend to make purchasing decisions based on price; when sorting between near identical options, if a substitute good's price is low enough, we pick the substitute. (9) Producers, faced with the downward price pressures of competition and consumer inattention to production, rationally respond by keeping production costs low. one way to do this is to pass along production costs--to neighbors, to employees, to society, to the environment, etc.--as much as possible. "Passing along costs" sounds evil or nefarious, but it need not be viewed that way. Instead, it simply means--because the law does not require it of them--that producers do not have to take into account all the costs of production, in terms of effects on others or the world. (10)

   Economists call these costs "negative...