The decline of progress in sustainability and how to escape latent cognitive dissonance

Joel Makower is a great guy. Day-in day-out he pushes the agenda of sustainability & innovation forward bit by bit. Every day (except weekends ) I am receiving his GreenBiz newsletter and see his friendly face besides the text in which he explains to me that another success story could be told in sustainability, another great social entrepreneur has been found who has developed something of great value, or another company with unseen innovations that have the potential to make the world a better place. Change is here – let’s shout it out to the world!

Last week, on the occasion of the launch of the 2012 State of Green Business Report (click to download the report), for the first time since I follow Joel’s efforts, his head seemed to be hanging down. Yes, sure, a lot of good things were happenening (in the U.S. mainly, since the 2012 State of Green Business Report is U.S.- based), but he also alerted us that for the first time in five years there was a visble ’decline of progress’, and this phrase really touched me. His following words even hit me harder, let me quote some important parts here:

“Each year, we take the pulse of sustainable business through the lens of 20 indicators of progress, or lack thereof. [...] For the first time, we saw a significant decline in progress—not just in one indicator, but several. Cleantech investments, energy efficiency, green office space, packaging intensity, toxic emissions, and toxics in manufacturing — all of these trend lines leveled off or reversed course in 2011. Only one indicator — green power use — markedly improved. What’s to blame? Simply put, sustainable business is suffering a recessionary hangover.

For much of the past few years, many of our indicators moved in positive directions. Combined with the commitments we were seeing, as well as our surveys of sustainability leaders in large corporations — which told us that their budgets, staff, and goals were holding steady or growing during the recession — we concluded that the economic turmoil, at least in the United States, wasn’t putting a damper on companies’ efforts to improve their environmental performance. The results could be seen each year in the continued progress measured by the GreenBiz Index. We were, shall we say, irrationally exuberant.

The reality is this: Much of the progress we saw in our 2010 and 2011 reports were lagging indicators based on work done with pre-recessionary budgets. As the economic realities have set in, environmental progress has stagnated, or worse.[...]

It’s not all bad news. This year, like all years, we find many promising developments in the world of corporate sustainability, as more companies make more commitments related to their products or operations. As we have in the past four reports, we pick 10 promising trends, from the rise of sustainable consumption, to the growing engagement of chief financial officers in companies’ sustainability initiatives, to the fact that clean technology, contrary to the political narrative, is alive and well, even flourishing. There is much reason for hope.

Indeed, that’s where the cognitive dissonance sets in: We report on so many promising developments each week, so many companies that are engaging more thoughtfully and holistically than ever with what it means to integrate sustainability into their operations, products, and services. We watch as clean technologies become competitive, as markets for organic foods and efficient vehicles reach into the mainstream, as companies achieve zero-waste factories and replace toxic ingredients with safer ones.

But for all of the good work being done, it’s simply not good enough. Can we simply pass this off as a byproduct of a bad economy, and cross our fingers that progress will accelerate when times get better? Or is it time for companies to dig deeper, and for their employees and customers to get more engaged? What will it take to make real progress?” [End of quote]

So, what will it take to make REAL progress? Is work done SIMPLY NOT GOOD ENOUGH? Well, nobody really knows, that’s the blunt truth, we are all somehow muddling-through. Two factors keep us in the mist and not let us see the real challenge: huge amounts of debt money and lack of a good benchmark. A couple of words on both of them: 

Is Joel’s observation just true for the U.S.? Well, most likely not. We are still in a financial crisis that was only smoothened in 2008-2010 due to immense capital injections by governments around the world (2.400 billion USD was the last figure I saw) and that our kids for the rest of their lives will not be able to pay back (and don’t think that a currency reform or massive inflation will solve the issue as those have other severe knock-on effects). Some of the progress (or just the stagnation)  in the sustainability data landscape in 2010 and partially in 2011 was simply possible due to artificial growth, funded by taxpayers money, or should we better call it more socialized debt? Some of that money supported special infrastructural upgrades or repair in the energy and building sector and allowed for a continuation of pre-crisis programs, keeping jobs or even helped adding capacity. That was good for the moment, and for the data (with some of the environmental indicators looking of course better simply due to the decrease in economic activity and production). But this ammunition is more or less gone, and the decline of progress seems to now have started, the lack of additional plaster now reveals the open wounds. Governments have consequently turned around and spending cuts are becoming the new reality, which in fact will more likely lead to an increase of the decrease of progress. At the same time we also saw in 2011, although still quite a bit away from the peaks of earlier industrial production, the biggest increase of CO2 emissions ever measured and an the amount of natural disasters that were (partially) caused by human activity was at an all-time high. Social unrest in many parts of the world rounds up the picture. We are nearing a Catch 22 situation in which e.g. the shift to innovation on renewables can’t be given the necessary substantial support due to spending cuts, short-term repair and increasing social costs, while technologically being the only way out of the crisis, at least in the Western world. China already says thank you and India and Brazil might join the choir.

But then, how much is GOOD ENOUGH? How can we break through the latent cognitive dissonance that Joel’s observing so well? Well, we need to start defining our common success factors, both on macroeconomic level as well as on organizational level. We need to understand that no single industry can remain in their comfort zone (not even if enlarged by supply chain policies and product take-back arrangements) if they want to be successful, and by that I mean: survive. I do observe that only the best in sustainability have began to understand that the last 30% of climbing Mount Sustainability is much more dependent from developments in many other industries than what they can achieve themselves! Singular company programs or collaboration within an industry is not good enough since it undermines cross-fertilization between industries and still blocks unlocking the real potential of sustainable innovation. I love the example of what telecommunication has done for the agricultural industry and the social development of farmers and communities in many SEA countries (apart from democratization and education), and much more of this is needed, and quicker. However, in order to be able to achieve this cross-fertilization, way more synchronization of activity and adaptation planning is needed, and that will only work with a common paradigm to work towards. John Elkington’s Volans and myself at Deloitte Innovation are advocating for Zero Impact Growth as the minimum synch to work towards, with the Deloitte/Volans ZERO HUB as an open innovation platform to help us get there (starting this year). Defining the ‘Zeronautics’, working on a joint adaptation plan, discussing the roles and responsibilities of the different players for their individual adaptation plans, and working on the tools to measure what the implementation success of the joint roadmap really is, are the challenges we need to tackle. Only if we have a joint and accepted benchmark (with zero impact growth as the necessary ’North Star’) we can start doing and measuring what is at least GOOD ENOUGH. Sustainability performance must be measured in context, anything else keeps us in the mist!

Joel Makower is a great guy, I wrote in the beginning. His own answer to these challenges is VERGE, another platform to get sustainable innovation further aligned, with dots connected and the real needs discussed. It’s these kind of paradigm-oriented, outcome-oriented and muti-industry based (open innovation) platforms like the ZERO HUB and VERGE that we need to help deliver, closing the wounds and cure from the blindness! Plato already said: ‘The part can never be well until the whole is well’.

 

Where’s the compass for 2012 – what about Zero Impact Growth?

It’s been more than half a year since I last posted a blog on A|HEAD|ahead. I simply wanted to take a break because I wanted to observe for a while and not add to the wave of guessing about what all the incidents and movements that happened in the world (and in parallel) really meant. I had the idea that we seemed to have reached a crucial turning point for some of the most urging questions in our economic, environmental and social agenda. But have we?

So, what has happened in the last 6-12 months if you take a look at it from a sustainability perspective? Undoubtedly, too much went into the wrong direction:

• In North America, the ‘buck bug’ continued to infect the political leadership: a month-long soap opera about the national debt cap question was orchestated, with a result that was clear from day one onwards: a continuation of increasing the burden on future generations, and no questioning of the systemic flaws. It also made the rest of the world think how nuts the American political leadership went, using this debate already as a platform to start their election campaigns for 2012. As we’ve seen just recently, the ‘Super Commission’ that was tasked to find 1.200 billion USD savings potential – at least a soft try to also stop the ever growing national deficit – was just the continuation of that earlier super disaster. So this political soap (‘Take a sip with the Tea and the Coffee Party’) goes on to compete with ‘Jersey Shore’ and ‘the Kardashians’. Immensly unsustainable, full of systemic flaws!
• Europe didn’t do better with the discussions on how to save Greece, part of the Siesta-belt, by some called PIGS countries, expecting that Portugal, Italy and Spain would follow suite. The muddling-through, throwing more good money at already poisoned assets of banks and unrealistic country budgets has in the meanwhile at least led to the sudden epiphany that without a proper haircut the European currency union would now most likely officially be dead already, and that good governance and a financial and economic union are needed as well to support a currency union to work. But still a lot of questions remain and there is uncertainty if the capital markets will decrease pressure on the other PIGS countries, and let’s also not forget Ireland as well. The newly created superfund (a name that nobody can pronounce) has not yet given us any relief.It also became clear that relying on ratings by three (anything but independent) North American rating agencies (with the hidden agenda to see money transfers to North America) isn’t helping at all. Immensly unsustainable, full of systemic flaws!
• In Japan, it became just brutal reality that we are still vulnerable towards the elements and that whatever promises were made by corporations or the authorities around nuclear energy, Fukushima told us all the truth: Bluntly believing any of these promises can be deadly. The knock-on effects on corporations and the government from the Fukushima desaster are immense and have created a general feeling of distrust, not only in Japan. Many officials there already needed to step down. The swing towards renewable energies remains a difficult undertaking, and it needs governments to reassess and reverse their strategies towards renewables. I am particularly proud of my home country Germany that did reverse a big mistake that was made in the last political coalition-building and that now continues to shut down nuclear power plants by 2022. The cost to move on with nuclear and oil are in my view not overseeable, the risk too high, a total cost picture including all externalities does favor a shift renewables! For now, again, the current situation is immensly unsustainable, full of systemic flaws!
• The outcomes of the Durban COP 17 remind us that it will be business, and business alone, to proactively guide us into a sustainable environmental 1-planet balance, and simply because of one reason: survival of the companies will only be possible in a sustainable context. Whatever global governance can help us with on that transition is fine and welcome, but it’s simply always too late. The reality is that we now have another ‘empty shell’, at least an empty shell that is carried by all (am I sounding cynic?). Well, the WBCSD in their latest update said that the Durban platform content: a) does not have any ambition levels other than what came out of Cancun (i.e. + 2°C by 2050). Given the timeframe for the Durban Platform and what science and the IEA are saying, this makes the 2° target unrealistic; b) confirms the GCF (Green Climate Fund), but we do not know how it is going to be funded nor how the funds will be used; c) also confirms the Technology Mechanism, but its modus operandi is to be developed; d) is extending the Kyoto Protocol for a second commitment period, but with the EU, Norway, Switzerland, New Zealand, Ukraine and Kazakhstan as the only countries with targets, representing about 15% of global emissions (and let’s not forget the shameful step of the Canadian government two days after the closing of COP 17); e) The process of voluntary national pledges for emission reductions that were initiated at COP15 in Copenhagen will continue and follow up will be reported to UNFCCC and verified on a biannual basis. One more time: immensly unsustainable, full of systemic flaws!

Enough doom. Fortunately, at the same time as we see systems continue to derail, some positive developments happened as well, and partially as a response to the truly unsustainable situation described above:

• In the shadow of the financial crisis in Europe and North America, China earlier this year published its new 5 year plan, announcing drastic investments in leapfrogging technology and moves towards renewable energy. Is it just me, or does it also dawn on you, that (apart from many areas where we want to still see change in China), there is new sense of leadership that indeed does have a plan and will rigorously follow this plan? China is of course in a position to use currency reserves to invest heavily and now sees it’s one-in-a-lifetime opportunity to use the weakness of all the other blocks for development. If it continues like that it is just a matter of one decade until China will dominate the renewable energy market.
• In Germany, the government made a 180 degrees turn in nuclear politics, correcting a mistake that was made only months earlier as one of the compromises in the coalition-building with the Liberal Party and to please the energy lobby. It took Fukushima to make clear that the German population didn’t appreciate the earlier turn towards nuclear, so back to start. And the discussion in France, where 90 % of all energy comes from nuclear sources, has only just begun.
• The Arab Spring spread over many countries in Northern Africa and parts of the Middle East – and still ongoing in Syria and Jemen, now with first signals that Kuwait and Saudi Arabia will possibly be next? What will happen with Iran still remains to be seen, but one thing is for sure: the nuclear issue will be the trigger for change, in one way or the other. Still open are the developments in Iraq where the American armed forces just left the country and the coalition between the sunits and shiits is extremely shacky; the terrorism just returned to the streets of Baghdad (and elsewhere in the country). The Arab spring now seems to have a hot summer, where the basic democratic processes and parties still need to prove how much they are willing to be part and not dominate in the democratic setup. It will also be a crucial test in how far conflicts between tribes, religious groups and past economic opportunists of old regimes will embrace the developments.
• Although becoming a bit quiet again (due to financial dry-out), we saw the revelations of Wikileaks and the huge amount of effort of corporations and governments to stop the outflow of information. Whatever we all think about legal issues around Wikileaks, it’s clearly that there is an appetite of the global public that illegal, unethical and corrupt behavior of anybody anywhere is unacceptable and nobody can be sure that this sort of behavior won’t be discovered and publicized, so better not do it from the very beginning. Sunlight is the best desinfectant, it’s as simple as that.
• We saw the first moves of what emerged to be the ‘Occupy’ movement, starting at Wall Street, and spreading all over the world in the last couple of months. Seen as a leaderless movement (‘We are the 99%’), it is not yet really seen as a serious and lasting endevour by the remaining 1%, but as soon as a clearer frame for areas of change will emerge from Occupy and the collaboration between the different decentralized Occupy communities leads to spokesmanship, this can really become a serious counter-initiative to the crusted existing political community. It is great to see that ‘fairness’ as the underlying theme is starting to be addressed by economists and even some of the super-rich.
• 2011 also saw the birth of ‘Shared Value Creation’, a new direction for capitalisms, coined by Michael Porter and Mark Kramer in HBR 1/2011 (but didn’t I see this vocabulary at Nestlé before?). First presented as ‘CSR and sustainability are dead, long live shared value creation’, Porter has recently been more embracing and describes shared value creation as the logic next development step. I would have personally wished his shared value concept to be promoted as part of sustainable capitalism, and not describing shared value creation as something opposed to sustainability. A lot of discussion has started around this article and it’s time to thank the most heard strategy guru to have now embraced our global issues and giving hope that a new form of capitalism will help solve them. I am particularly thankful that the question of ’scope and purpose’ of business is now finally (back) on the table. The downside of this discussion for me still is that there is a certain notion that our current unsustainable growth paradigm isn’t addressed enough and that Porter’s new capitalism could be successful without working in parallel towards a jointly developed and globally accepted Zero Impact Growth paradigm. Part of this doubt led John Elkington and Deloitte Innovation to start the ZERO HUB (see below).
• The European Commission came up with their new communication on CSR in October in which they defined the the term CSR more broadly than in 2006, now it’s ‘the impact of an organization on society an the environment’. This definition now finally turns away from the earlier notion that CSR is what companies do beyond the legislative needs, which sounded too philanthropic and hasn’t achieved a lot more than endless discussions over many years. There are also signs that the EC would finally come up with ‘processes’ to demand sustainability reporting, following early examples of France, Denmark and Sweden. If that means regulation remains to be seen, but observing the developments towards integrated reporting and the overall transparency agenda the EC should be proactive instead of reactive now to allow for a smoother transition in the years to come.

As you may expect from me, many of the incidents and movements we saw and still see in 2011 are in my view just additions to the ever mounting evidence of the start into the ‘sustainability era’. Finally, you may say! However, our biggest problem is that sustainability is still an often misused and bulky expression of a general ‘sort of’ way forward, to live in harmony with planet earth as human race. I have to admit that interpreting all of the above without a more proper definition of what they really mean and if we were are to be successful on that path towards sustainability, is some sort of guessing as well. So, do we need a better and more reliable compass? I think we do!

Are we living in a world without compass? Well, at least a world that still doesn’t really understand sustainability as the only paradigm for the successful implementation of globalization and a possible route to bring into context and cluster the issues, the dilemmas, and the opportunities, allowing us to finally and fully analyze e.g.

• the scope and purpose of the financial markets in a real-world economy that strives towards a 1-planet economy;
• the role of governments in framing and supporting the markets towards a 1-planet world, in which the illusion of externalisation of effects of wrong-doing would be stopped;
• how corporations in all their industry sectors would understand and play their role and responsibilities according to a vision of what their sectors are really good for in a 1-planet world (while also understanding their issues and remaining life-span if they don’t change);
• the role of the totally underestimated, but in reality more and more forceful civil society movements that started to globally ‘vote with their feet’, while consolidating and building communities to effectively collaborate and co-create with corporations towards a 1-planet world. A world in which social entrepreneurship becomes the maxime and where making money while exploiting other capitals would be a complete no-go.
• what is success and how have we achieved it altogether, on micro level and on macro-level!

Seeing my kids grow up in more and more uncertainty and a dimension of externalities that is less and less manageable by them, 2011 has at least for me been a turning point: I am becoming more and more impatient about the slow level of speed towards needed systemic change, more radical in the focus of what I like to help develop (means making more choices towards a specific focus), and less willing to support ‘less bad’ muddling-through.

In that regard two new movements have gotten a lot of my attention this year: The Deloitte/Volans ZERO HUB and the KATERVA awards. We need ‘epic wins’, and both initiatives have the potential to instigate change, so 2012 will be an even more important year to see how far we can get – with all your crucial support!

The ZERO HUB

This is an open innovation platform by Deloitte Innovation and John Elkington’s sustainable innovation incubator Volans, to work with companies in six different industry clusters to develop a clear vision on zero impact growth. The Zero Hub is based on the methodological and sustainability know-how of Deloitte Innovation and the thought-provoking guidance that John Elkington publishes in his new book ‘The Zeronauts – Breaking the sustainability barrier’ in spring next year, also the starting point of season 1 of the ZERO HUB.

Based on a facilitated process, simulating a space flight, we will co-create a zero impact growth vision, the related zeronautics (how to measure success on micro- and macro level), a joint adaptation plan (how to get there altogether), company-specific adaptation plans (clarifying roles and responsibilities of the various cluster industries) as well as necessary tooling (measurement, communication, change, social media, advocation, etc.). By that the ZERO HUB builds on work that the WBCSD has started with their Vision 2050, and the work of existing Zeronauts like (the recently passed away) Ray Anderson or Gunter Pauli (ZERI). It is complementary to existing company-specific programs and will increase the evaluation of the effectiveness of these programs.

The time must come where all industries and companies have a North Star to follow and in which we finally have a good view on what a company does is actually ‘good’, or ‘bad’, or ‘good enough’, or ‘not good enough’. This is not to name or shame, this is to co-create and cross-fertilize between industries, with a clear focus on how certain sustainability issue areas are helped by their joint activities. I recently spoke with Thomas Rau, a leader in sustainable architecture, and he gave me the ultimate reason for the ZERO HUB: ‘If we don’t know altogether what to achieve, every step we might individually take could be wrong’.

Current GRI sustainability reporting doesn’t cut through this, and that is because there is a big gap between sustainability context as a principle, and the reported information through indicators. Too me this is also the biggest challenge for G4, a new version of the GRI Guidelines, to be published in 2013, and in place until at least 2020 (the time when we will have reached ‘peak everything’ if we don’t act very quickly). As a former GRI staff member I hope that my ex-colleagues and the working groups tasked with the new development will be able to close this gap, and that GRI’s governance bodies and its stakeholders will not accept a new version of the GRI Guidelines that don’t deliver here. My hope is that the ZERO HUB can create inspiration for this agenda point.

John Elkington has decribed his rationale for the ZERO HUB  this week in his latest Guardian blog, see bit.ly/vdl82L. Is your company willing to take this next necessary step, then mail me at rthurm@deloitte.nl. You will be part of a group of 8-12 companies, and while we see great takeup in the financial sector and the manufacturing sector, we still seek companies in energy, transportation/logistics, consumer business, waste management and IT.

To me, the ZERO HUB rollout process has so far been a litmus test in how far companies are either stuck with their leadership, culture, programs, short-termism, and excuses to keep on doing ‘less bad’, or their willingness to co-create, think out-of-the-box, and get senior management/board committment for intended cross-fertilization. There has been a lot of shadow and some light so far, the coming double-dip scenario again leads to corporate ’cocooning’, and all companies that so far committed to take part needed – amazingly enough – board resolutions for freeing the capacity.

The KATERVA Awards

Deloitte Netherlands has been a contributor and sponsor of Katerva, and my personal experience leading our team involved in the Awards – called already the ‘Nobel for Sustainability’ by Reuters – has been very enriching. The Katerva Awards (www.Katerva.org) are the pinnacle of global sustainability recognition. Through them, the best ideas on the planet are identified, refined and accelerated toward impact at a global level. Katerva Award nominees must undergo a rigorous evaluation process to be eligible for the grand prize. The practical, strategic, scientific, social and commercial aspects of each project are thoroughly analyzed through a meticulous eleven month review process. More than 600 individuals participate in the nominee identification and adjudication process including six filtering phases and twelve stages of focused review.

As the review process indicates, Katerva isn’t looking for ideas that will improve the world in small increments. They are looking for paradigm-busting ideas. Award winners don’t simply move the needle when it comes to efficiency, lifestyle or consumption, but rather they change the game entirely. This is a celebration of radical innovation and an acceleration of much needed change.

The winner of this (inaugural) year’s award – Sanergy – will receive over $500,000 in in-kind services from a variety of top-tier global service providers, along with global media exposure and access to the global network of thought and business leaders, academics and institutes, political and celebrity figures, and activists the world over. The Prize Jury in 2011 was composed of a distinguished group of global leaders, including Jean-Michel Cousteau, Mary Robinson, Dr. J. Craig Venter, Marina Silva, Gunther Pauli, Jeremy Rifkin, Lord St. John of Bletso and John Elkington.

For the 2012 Awards cycle Katerva now looks for interested experts in the 10 Award categories to joining the so-called Global Spotter Network which plays the important role of helping to identify and nominate the best sustainability programs on the planet for recognition and award. All that is asked of the spotters is that they make Katerva aware of any ‘paradigm-busting’ sustainability ideas they come across. That’s it. No phone calls. No meetings. No real effort required. Just one or two emails a year informing of something that has caught their attention. Of all the sustainability-related ideas that you may be exposed to every year, you filter out all those that you may find interesting but not truly revolutionary, and then feed into Katerva the one or two that you feel has the potential to become a true ‘game-changer.’ Terry Waghorn, Founder and CEO of Katerva, would be happy to see your willingness to help, contact him [+1.619.618.0464 (direct), Skype: terry.waghorn, mail: terry@katerva.org].

2012 – a very important year

2012 will be a very important year. Not only do we see a series of key anniversaries, but Rio +20 as one of them will give us another summary of the state of the world and our ability to jointly solve them. ‘As the years teach me what the days never knew’ (to quote Ralph Waldo Emerson) I am hoping that 20 years after I decided that sustainability would be the focus of my business life, the recognition is finally there that we reached the point of no return. The slow death path that we are on is no solution any longer and we have only another decade (or two) to finally fix the damage.

I’d like to finish my 2011 review with Vaclav Havel, who showed us that change is possible, even in the worst of all possible system conditions: “Vision is not enough. It must be combined with venture. It is not enough to stare up the steps, we must step up the stairs!”.

How many steps of the staircase will you take in 2012?

 

Making the S.W.I.T.C.H. to the ‘ Age of Responsibility’ – Ralph Thurm recommends Wayne Visser’s new book

The cover of Wayne Visser’s new book ‘ The Age of Responsibility – CSR 2.0 and the new DNA of Business’ carries a quote of the famous Philip Kotler, saying: ‘ deserves to become an instant classic’. Clearly, such words by one of the marketing gurus raise both expectations and fears. For those of us who have been working in the CSR field in companies and advocating organizations for many years, such a book title and praise is normally heavily scrutinized, given the many contributions that haven’t delivered on what they promised before. In Visser’s case readers can be satisfied: this book is tremendously well researched and the main message is crystal clear: Corporate Social Responsibility as we know it has failed, but there is also no other way than to further develop CSR if we want to succeed as human race (therein business) on this planet, he calls it ‘ CSR 2.0′ . The book guides us to a set of principles and ingredients for change that should help develop the new DNA.

I have to admit that the book resonates very well with me because I am advocating for systemic change in the same way as Wayne Visser does, mainly saying that CSR as we know it hasn’t lead to the level of acceptance it deserves as a concept, basically due to the way it was managed, and therefore remained as a special add-on for those multinationals who felt scratched by some of their stakeholders. It will never be successful without being seen from a systemic, worldwide, integrated, transparent, collaborative and holistic perspective, in fact my idea of the necessary basics that allow a S.W.I.T.C.H. to a sustainable economy (developed and described on www.aheadahead.wordpress.com).

The first part of Wayne’s book describes the five ages and stages of CSR (the age of greed, the age of philanthropy, the age of marketing, the age of management, and finally the age of responsibility). All five stages are well described with examples and a lot of extra information that helps to understand the background and rationale of why and how these stages emerged. Only the last stage, the age of responsibility, opens the gate towards CSR 2.0 and the development of the new DNA. Honestly, I prefer the word stages above the word ages since all stages are still existing globally, depending on what part of the world one looks at, whereas ages tend to point to the past. We are for example still far away of having reached the ‘age of management’ globally, as one could imagine after more than 20 years of global conferences on sustainability. Furthermore we need to also bury the idea that CSR is top of the agenda of world leaders, politically and/or at corporate level. We are still on a slow death path, with only 2 % of the global multinationals that openly describe their moves in CSR reports and more than 2.000 companies that got delisted form the UN Global Compact earlier this year due to a complete failure to deliver a Communication on Progress. No more proof needed I guess.

Interwoven in the these chapters is the criticism around the financial crisis and the unchanging behavior of the financial market players, the externalities discussion, the effects of the standardization movement and the ever missing political will. Personally I would have hoped for a concise chapter that puts together all the macroeconomic malfunctioning that leads to failures on the micro-level, missing incentives and the slowed down motivation for company captains to move upfront in their respective industries. This would e.g. also include unsustainable taxation regimes, the politics around subsidies and world trade schemes, the failure on enforced anti-corruption measures, the missing moves in educational systems, missed opportunities to mandate transparent reporting, etc.. While there is a lot of logic in the 5 chapters describing the 5 stages and some of the macroeconomic failure, the micro/macro-link remains a bit loose.

The second part of the book describes the 5 principles of CSR 2.0, namely creativity, scalability, responsiveness, glocality and circularity. They all work very well in my mental ‘S.W.I.T.C.H. structure of future readiness’. These principles and the many examples that Wayne Visser is already able to present to the reader show what immense pressure and cry for help already exists by the growing wave of concerned advocates towards sustainable change. Individuals, (web-)communities, and to a certain degree the proactive companies have given up to wait for the political world to set the new boundaries, which is maybe also a reaction that they do not believe in organized change by a new design of the macroeconomics (even though there signals that this problem is at least understood, see e.g. the French initiative commissioned by Sarkozy and lead by Stiglitz and Sen, or the new German enquete commission dealing with the same issue) . The examples also show that there are always only a few multinationals in an industry sector that dare to take a leading role. The effect for those that will not implement the new DNA of sustainability is simply ‘no mercy’  from drastically changing future markets, the ‘ blessed unrest’ (as Paul Hawken describes) has lead to social entrepreneurship that will more and more compete with the shareholder driven business model (one of the reasons why management gurus like Michael Porter now advocate ‘ shared value’ creation as the new paradigm for business).

The last chapters of the book tackle our ability to change, in which Wayne Visser presents a ‘ matrix of change’ and the sort of change that is needed to succeed. While these chapters pull together some of the theory and newer literature of change management (no wonder you find Peter Senge and Otto Scharmer here), my feeling was that it all comes down to charismatic leaders (archetypes are presented actually in the last chapter of the book) and a new belief that there is – as they say at M&S – no plan B. Will we be able to reach a Malcom Gladwell sort of tipping point that the financial crisis was just the kick-off for a change in belief? Wayne Visser of course wasn’t able to foresee the Arabic spring and Wikileaks when he finalized the script, but he surely hoped for these indications of ongoing change!

I strongly recommend reading ‘ The Age of Responsibility’ to assess and complete your knowledge about WHY change towards a sustainable economy is needed and to understand HOW we might get there. Wayne lifted the curtain for us, let’s all take  a look, and then take a leading role in believing that we are doing the right thing, something our children will be proud of when they look back in 20 years.

 

New colums of Ralph in ‘Forum Nachhaltig Wirtschaften’ now online (in German language)

The latest columns of Ralph in ‘Forum Nachhaltig Wirtschaften’, the biggest quarterly magazine on sustainability in German language, are now also online.

GRI G3.1, G4 und IIRC – oder was?

describes the development continuum from the newest version of the GRI Guidelines towards G4 and integrated reporting. Whereas G3.1 just fulfils the requirements set out by the GRI board in 2006 (focus on materiality principle, gender, community investments, and human rights), G4 is a different game and needs to absorb new developments (being standard ready, define micro/macro links, adapt indicator design architecture that is ready for the new technical developments in  information transmission, e.g. XBRL, Bloomberg/Reuters, and diversified stakeholder group interests). The IIRC needs to first think about what scope and purpose reporting is actually good for before defining archtecture and design of requirements!

Sputnik Moments – Dem echten Wandel spielend einen Schritt näher kommen!

describes new ideas to tackle systemic change through serious gaming. Expecting 1.5 billion daily gamers by 2020 serious gaming promises to have the necessary prerequisites to help find out ‘epic wins’ (systemic change in gaming language). There are hopeful initiatives and a new platform to consolidate ideas of games that ‘help to save the world’, namely gameful.org. It seems like these new communication channels can excite more crowds than political vacuums. Game on and contribute to a better planet!

 

The S.W.I.T.C.H. Diamond Areas (2) – Behavioral Readiness

Why do we need to focus on behavioral readiness?

It was in 2005 that I first saw the diagrams produced by the now called Global Footprint Network(GFN) that showed in a very easy and understandable way the different sorts of needed transitions towards a sustainable world, differentiating between the developed world and the developing and emerging economies. On the side of the developed world a mix of ‘eco-efficient technologies and behavioral change’ was recommended  to get us globally back on track regarding resource use and absorption capacities of planet earth, while in the rest of the world building ‘development capacity and technological leap frogging’ were recommended as the necessary tactics. The latter was based on fact that at this moment 4 billion (and by 2100 potentially up to 7 billion) people still  live way below the allowed use of footprint hectares (if nothing changes), but if they all were about to simply adopt a western lifestyle and copying these consumption patterns, our overuse of planet earth would rise to 4-5 planets. While globalization in these parts of the world needs to continue to not risk migration waves, war on resources, uncontrolled effects of climate change, unfavorable dictatorship or other even worse alternatives of failure, at the same time drastic changes in the consumption and production patterns are unavoidable.  The set of tactics for the developed world was focusing on reducing our ridiculous footprints back to the ’1 planet line’, while the diagrams showed an existing overuse by 4-10 times of the allowed, depending where in the developed world people consumed. Also here, change in the consumption and production pattern are unavoidable. What an enormous challenge! While the message is so crystal clear and the tactics are generally undisputable, 6 years later we are still on the slow death path.

Reflecting on myself, 2005 was also the first time where it became clear to me that my own career was up to that point in time fully focused on helping to improve the technicalities’ side of sustainability – working on management systems, indicators, reporting, dashboards, target-setting, etc. – while somehow assuming that managing sustainability with all these partially new/partially adapted great tools would automatically lead to the enlightened leaders that will then understand that they need to make a S.W.I.T.C.H., inspired by the that new transparancy that so obviously showed that all together they have driven our global economy to unsustainable levels in which they simply alltogether risk the continuation of their businesses; wouldn’t there be anything more needed to really make them move? I couldn’t have been more wrong! There is of course nothing wrong with the development and digging up of the necessary IT, data, systems, governance, measurement, reporting and communication aspects of sustainability, and sure there are companies that have started the change, but we need to realize that it’s just one side of the coin, and that we have so far failed to give the other side of this coin the same level of recognition to be future ready: behavioral change!

Starting points

It all starts with the understanding that sustainability is first and foremost a set of beliefs! Top managers really need to BELIEVE that the economy will never be a superior way to manage the ecology; it’s vice versa: economy needs to adapt to the rules of ecology. I’d like to quote from Gregory Unruh’s insightful book ‘Earth Inc.’, in which he says: ‘While Joseph Schumpeter is credited with coining the term “creative destruction”, nature is the inventor of the concept … in a sense, nature is the world’s most efficient market. When a particular participant in the natural world is failing to use available resources efficiently, nature will, without sentiment, evolve a replacement that will.’ The economy will also need to adapt to society’s new rules of transparancy, community building and crowdsourcing as well as co-creation of intellectual capital. Again, Gregory Unruh can be quotes here: ‘No company or product is an island. Even the most vertically integreated business depends on a huge number of relationships with customers, communities, regulators, and suppliers of energy and other needs … As a consequence, no company can be sustainable by itself.’

If the vision, mission, values, the corporate culture and strategies are absorbing those beliefs, if management is consequently walking the talk and no ‘shadow realities’ exist in the recognition of what an organization stands for, there is a fair chance  to achieve a consistent appearance that can really lead to a sustainable organization. And this is where the development of role model behavior is barely needed.

In the last 15 years I have seen some attempts of companies that tried to get to an understanding of the behavioral change side of sustainability, and as a result implemented codes of conduct, installed ethics officers and whistleblower procedures, imposed e-learning courses or ran stakeholder dialog sessions. They did this while they continued to deepen the technicalities side of sustainability even more. But how much have they really developed a good understand of the needed role mode behavior? How much has top management really started to BELIEVE?

Unfortunately most of the successful concepts came out of those board rooms that were confronted with really severe cases of unsustainable behavior and practices – with the potential to completely ruin the reputation of their organizations, and where it really neeeded radical transformation and often also new staff and top management representatives to make the necessary progress, think of Nike’s case as the ‘mother of all case studies’ or more recently Siemens and their complete turnaround after the corruption scandal. On the other side of the continuum we saw organizations that simply started out of deeply societal motives, mostly driven by one charismatic leader that saw the urgency. Just in recent years the examples of Interface (with a complete shift of mindset of ex CEO Ray Anderson) or more recently Unilever (with CEO Paul Polman introducing societal targets to define how the company wants to be perceived and held responsible for) gives some hope that the huge amount of companies in the middle mass of the continuum also start their turnaround, away from the slow death path.  

The 4 ‘L’s’ that enable behavioral change for sustainability

If one looks at the common patterns of the (supposed-to-be) successful cases, I found the following ‘four  L’s'  a useful cluster of recurring enablers; they describe basic areas of attention to trigger behavioral change and none of them can be in my view left out in order to develop a holistic perspective on this part of the S.W.I.T.C.H. Diamond and an overall sustainability approach at all:

• Learning: understanding sustainability well is very much a translation challenge of how macro-trends will effect the micro-cosmos of an organization and what the answers of the organization towards these challenges actually are. Only from there you will be able to see if an organization is part of the problem, part of the solution, maybe both. Of the roundabout 70.000 multinational organizations on this planet only a small percentage (20% if I remember right) uses scenario planning or visioning, and those who do often don’t plan longer than 3 -5 years.  The argument that the world is changing that quickly so that a view beyond that time-frame doesn’t make sense is just a bad excuse and caused by reactive motives. Be the change you want to see in the world! All change starts with one thought! Consistent awareness raising taking into account the macroeconomic realities and their long-term effects (using a North Star approach), while consequently translating them into the micro-economic boundaries of the organization is therefore as crucial to sending the right signals regarding urgency and importance on all levels of the organization. If people understand they will also start to BELIEVE!

• Leadership: sustainability needs consistent leadership behavior that doesn’t allow any question about the intentions of management to maintain and grow an organization short and long-term. Is it visible that the organization is a conglomerate of excellent skills existing to create economic value that can visibly be linked with shared value for stakeholders that relate to the organization’s value cycle? Responsibility and authenticity are the keyword here, and a clear commitment is needed to do everything possible that there are no ‘losers in the value cycle(s)’. One can often observe cases of what in medical terms would be called ‘split personality’, meaning a split between what top managers say and what the organization than really does (externally) or how their talks are perceived at the shop floor level, if recognized at all (internally). I am getting really nervous when a CEO tells the world that sustainability would be so much part of the genes and DNA of their organization. How do they know? What measures tell them that this is actually the case? Sustainable leadership needs to be lived from the top and needs to find its way into the organization through the right messaging and behavior on all management levels. Islands of non-believers, wrong incentives, different beliefs of part of management are in my view the reality, and a clear idea of the needed role model behavior hardly exists anywhere.

• Legitimacy: when it comes to test the real level of understanding of sustainability within an organization, try to find out their understanding of the difference between what is legally right and what is legitimately feasible. The financial crises has given us so much case studies about the failure of an organization to develop this little, but very fine difference between the two. It is exactly that same fine line of understanding that is needed to enable and explore if economic value added created can indeed also create shared value added or not – think about it for a moment! In order to develop these antennas organizations need to consistently synchronize with stakeholder perceptions, it’s this fine line where the primary focus of the business intentions really come to light: is the organization a vehicel to make as much money as possible and stakeholders should just swallow whatever the company says and does or is there a social purpose that enables the organization to thrive economically as well and therefore not everything that is legally possible is also legitimate? The upheaval about bonuses given to top management of banks while they are still dependent on tax payers money after the fiancial crisis is just one example. Not seeing that there is a need to take fuller responsibility for the human rights and labour rights abuses in supply chains is another, taking money for call center calls to enable customers make a complaint about the malfunctioning of a product or service (if that possibility exists at all!),  not seeing the powers of social media to collectively advocate against unsustainable practises and then be surprised about the waves of unrest - on top of many other examples – is where the rubber hits the road. Let me say it that way: a company that just needs the articles of law to commence with a certain practice takes a quite questionable path. A company that absorbes the reaction of stakeholders and can make the difference between what is legally right and legitimately appropriate has made big steps in becoming a sustainable organisation and building reputational buffers.

 • Legacy: I have spoken to many top managers and have often asked them how they would describe what they think their organization is famous for and how they would decribe their own contribution to this legacy. I observed that most of them have no problem to go to the past, describing some of he motives of their founders, but there is often radio silence when asking about the future. While having a certain legacy from the past is great since you need to know where you’re coming from in order to describe where your heading towards, developing a future legacy is in my view an absolute must to move to a sustainable path. It offers a way to shift a mindset since it is a way to anticipate how the outside world will look at your organization in let’s say one generation from now. It forces you to connect to the macrotrends and their influence on global environmental and societal changes, how stakeholder perceptions might change and what the actual positioning of the organization will be towards stakeholder influences. It is a difficult task and there is no absolute thruth, but isn’t that where radical innovation starts?

The link to the 5 other S.W.I.T.C.H. Diamond areas of readiness

Let’s again pick up the idea of the diamond and see what glue behavioral readiness can contribute to the future readiness of an organization. In how far are learning, leadership, legitimacy and legacy aspects that should be supported through the right level of attention in the other 5 areas.

System readiness: in general I think it merits to remark that all that we do is or remains an outcome of the work of people, even if they often use tools and think they CAN leave responsibility to tools. How often have you all heard things like ‘the system doesn’t allow me to make that change’ or ‘I don’t have access to the system right now’, or ‘in order to serve you well I would need to change or bypass the system’.  In our IT driven world you can already say: ‘if it’s not part of or IN the system, it doesn’t exist’. Using systems as an excuse or inability to change, or responsible acting is not possible because the system takes over, is awfully wrong (being a ‘slave to the system’). One of the biggest challenges though for system engineers is really to create systems that are adaptable, able to learn, and easy to use. Regarding sustainability, systems support should enable change and not block it!

Let’s now look at some of the other subsystems and how they need to be designed to support behavioral readiness

• Governance: A company’s governance describes roles and responsibilities and allows people to take ownership for themes relevant to the functioning of an organization. The development of especially corporate governance codes in the last decade have shown a path to generally open up to reputational aspects and sustainability, King III of South Africa being the leading code. For the first time sustainability has been adressed and it has been  recognized that ‘sustainability is the primary moral and economic imperative for the 21st Century and it is one of the most important sources of both opportunities and risks for businesses’. Most corporate governance codes at this moment haven’t absorbed sustainability aspects explicitely or at least beyond thinking of remuneration of top management, a viral discussion at this moment. The development of codes should enable the 4 L’s, not restrict them, so enabling the macro-micro thinking, intergenerational aspects of the effects of an organization’s doing, the development of a view of legitimate action and an idea of a company’s legacy in the light of a sustainable world should be enabled.
• Management system: Using the standard plan-do-check-act management systems approach is generic enough to capture sustainability in its totality. The use of ISO 9000, ISO 14000, ISO 26000 and other standards of the ISO family and policy, reporting and assurance standards, aggregated towards an integrated management system approach, has all ingredients to manage sustainability. The fluidity to absorb new stakeholder signals and to react to them is partially dependent on how smooth the management system works, meaning the ability to adapt the system to a changing environment. 
• Risk management: Sustainability and its variuous aspects need to be absorbed in the risk management evaluation of a company. How much that is done is dependent from the way the company breathes the 4 L’s and is willing to constantly question its own view of the world and its ambitions therein. Aspects like carbon risk, biodiversity loss risk, water risk, human rights risk, corruption risk (amongst others) need to become part of the risk holistic.
• Strategy development:  The development of future scenarios, taking into account the big macroeconomic shifts and work on long-term strategies that absorb the idea of creating shared value instead of focusing on just pleasing shareholders is dependent on the 4 L’s level of maturity. The same is of course true for innovation and the ability to radically transform. Working with the right visioning tools, like e.g. the Natural Step funnel, need to become standard tools of the strategist.
• Data management, internal audit and management information systems are the quality and information backbone to assemble, aggregate and inform about the existing situation, in order to be able to anticipate the future. The spectrum of data available needs to cross the company borders and go further than just the usual inhouse software solutions. The willingness to benchmark and to assure data by professional service firms is a sign of the seriousness and prioritization of sustainability within the organization. Not really astonishing is the fact that organizations that realize the 4 L’s do not question those needs.

Stakeholder readiness: There is a clear symbiosis between behavioral readiness and stakeholder readiness. The more the 4L’s are living within an organisation, the more value stakeholder dialog and interaction will develop. Ignoring any of the 4 L’s will cause stakeholders to react and will lead most likely to reputational issues or damage.

Product and service readiness: The most direct contact to the outside world is through the products and services offered, often through direct company representatives (workers, consultants, sales people) or through intermediates (goods or services sold in shops or by third parties). They all represent part of the identity as well as the products themselves and the way they have been produced and by whom. More and more of this information is available today and supports buying or contracting decisions, relationships, or simply gutt feelings. Anyone in an organization should be able to explain in how far a certain service or a certain product helps supporting the specific needs of a client, but in the same way should be able to raise awareness about additional benefits created in sourcing, production, delivery or takeback. Again, the 4L’s can be a good focus point to create the right messaging.

Infrastructual readiness: A lot of what a company represents is visible through buildings (production sites or office buildings), logistic equipment (planes, trucks, carpark) , IT infrastructure (data centers, individual IT equipment, phones), and other visible ways representing itself (from shops to cantinas to gyms) and shows a special recognition for sustainability – or even not! Each move an organization makes will be recognized by some stakeholders in one way another. The integration of the 4 L’s allows for a greater  awareness on how an organization will be perceived, represented and profiled.

Summary

Behavioral readiness is an essential area of the S.W.I.T.C.H. Diamond. It cuts through all other areas and simply needs the open-minded and caring credentials of people who see their role in society partially realized through the work they do. It is a visible trend that younger people do not want to work for and identify themselves with an organization that can’t tell what their specific role in the intra- and intergenerational development challenges are, independent from size of the organization or market(s) the organization interacts with. The 4 L’s is a set of focus areas to tackle holistic behavioral change in a world of creating today’s and tomorrow’s shared values. Using the 4 L’s will lead to a change on how we see systems serving us, stakeholders collaborating with us, and how we understand the use of our products, services and infrastructure.  It helps to position a company from inside out and outside in, taking intra- and intergenerational aspects into account.

See earlier posts on the S.W.I.T.C.H. paradigm, diamond and dimensions:

1) So what is S.W.I.T.C.H.?

2) The S.W.I.T.C.H. Diamond – an analogy for success in sustainability and becoming future-ready

3) The S.W.I.C.H. Diamond Areas (1) – Stakeholder Readiness

 

Save the planet? No – we need to save ourselves!

You have most likely heard the joke about the two planets that meet each other, and one of them looks really awful. “Hey, what’s the matter with you?”, says the good looking planet. “Oh my dear, I’m really sick, I got homo sapiens!” responds the other. The good looking planet starts to smile and says: “Don’t worry, that bug will go away soon!”

When I first heard this joke, I found it really funny and I was reminded of it quite often in discussions with friends or at conferences, panel debates etc., especially when the issue was how we could ‘save the planet’. The problem that I have with these discussions is just simply that it makes ‘the planet’ an object, causing an immediate feeling of us being somehow detached, and that it would just be a matter of the right management of sorting out that our spaceship earth would continue to serve us as it always did. I think this way of approaching the problem is a mistake!

So back to basics: Planet Earth doesn’t need to be saved, it will continue for a couple of more billions years if it’s not hit by a comet or something goes awkwardly wrong with eruptions on our sun and its magnetic fields. Our doing will not catapult it out of the milky way, even if we use all of our nuclear weapons power in whatever devastating situation. Our planet will follow the cold logic of biological and chemical rules and in the end doesn’t care what we human beings are doing. Planet Earth doesn’t sit around the negotiating table, willing to make compromises, following a consensus path (that in the way we do it so often has led to least common denominator agreements). Planet Earth doesn’t care of ice time or dry areas, floods or storms.

In an attempt to give Planet Earth a voice advocating bodies like Greenpeace, WWF, Friends of the Earth and many other NGOs have emerged to ensure that our planet indeed sits around the table, giving all of us the nice idea there would actually be something to negotiate. To the many it signaled ‘great, so these guys take care, and I just need to do either nothing or just follow the rules that will come out their actions or negotiations; and by the way: as a single person, what can I do? I need to take care of my own life, my job, my family, etc. etc.’ So, in consequence we are still as detached as we always were, the majority has delegated the problem to those who declare to be representatives, spend some change every year either through direct donations or our spending in lotteries (that donate part of our money back to the good-doers). What sounds like a west/north view is even less prominent in developing and emerging markets where billions of people focus on what to do and eat in the next couple of days and hopefully have an opportunity to send their kids to school (which is more or less the minimum they can do for the environment and the society).

For me personally two people have given me additional inspiration to not stop where the majority normally stops. One was Anita Roddick who said ‘If you think you are too small to have an impact, try going to bed with a mosquito!’, and the other was Mahatma Ghandi who said ‘ Be the change you want to see in the world!’. So let’s anyway stop to think that one person can’t change the world; the opposite is true, it was always one person that started a change, invented something great, found out something incredible. Or as Hannah More once said ‘One kernel is felt in a hogshead, one drop of water helps to swell the ocean, a spark of fire helps to give light to the world. None are too small, too feeble, too poor to be of service. Think of this and ACT!’. So, what’s the consequence then? Stop Greenpeace and WWF from what they are doing? Stop the lotteries from abusing our greed to win the big pot? Well, of course not, they have been and remain constant reminders of the steps to be taken and deserve to be supported still, but more is needed from a systemic perspective!

If we ever want to get out of this trap, we need to tackle it through 1) education, 2) technology and 3) the right stimuli. Regarding technology developments I think we are basically already on the right track, structured and useful education and the right stimuli are the big laggards. In technology developments we actually have invented all the survival technologies we need (renewables, biotech, nanotech, gentech, and in combination with ongoing IT developments even bigger steps seem possible), we are just awkwardly wrong in managing the transition towards them. We have started the 6th Kondratief cycle with the survival technologies we need, the question now is how long it takes us to be fully into it. And again, planet earth does not negotiate, so the clock ticks. And that is where education and stimuli need to play the trick.

I am arguing that education for behaving sustainably needs to start as soon as possible! Only if we capture the full breadth of the opportunity at home, kindergarden, primary and secondary school and integrate sustainability in university education, the feeling of not being responsible and allowing to be detached (others will take care) will disappear. My plea is that education in all natural and human sciences as well as basic economic education need to be holistically included in the curriculums of primary and secondary school already. The kids need to understand the purpose of why they are learning this, which is to ensure our survival on this planet, and also that economy is only a subsystem that needs to adapt to the ecological and social systems. Furthermore I would argue for a mandatory sustainability semester in whatever sort of university education. No matter what sort of specialization someone chooses afterwards, all disciplines need to be set up in the understanding to be of service to society and the planet. What would be better than to place the forthcoming specialist education into the broader context first? This is in my understanding what the ‘shared values’ concept is all about. Let’s make sure that the curriculums following after the sustainability semester consequently also need to go through an impact assessment, hopefully also sparkling changes in the ‘box thinking’ that the whole move towards BAs and MBAs has already caused and in which professor’s haven’t served this planet well by strongly focusing on securing their terrain only. Any reason why so little holistic and overarching thinking is coming out of the academic world? Well, covering and securing own space is one reason, and again – look above – there are others that care. I think that ‘the lack of education is the real poverty’ we need to tackle!

Additional stimuli are also needed that go up to the level of the individual. While we also urgently need a complete overhaul of the existing tax and subsidies regimes (that are partially cause to the problems we are in, think e.g. of the fact that we are taxing the highest good we have – the work force of our people -, while we more or less do not tax the most critical doing – resource depletion and air pollution), tax cuts for sustainable behavior or investments in sustainable technologies are urgently needed to simply make individual people understand the effects of wrongdoing! Being constantly reminded through the purse works! This rather bold approach is of course criticized by those that remind us of local or regional competitive disadvantages, and there is truth in that if we only argue from a static perspective of today, but loses its rationale if we think mid-or long-term. Only those economies that will take bold steps will be the successful ones the day after tomorrow, others will take the thorny path understanding that the economy is in fact only a subsystem of the society and the ecology. This insight is again a consequence of the better education. The educational loop and the stimuli loop are urgently needed to support the technological loop if we want to remain in that little window of opportunity that remains. If these three loops close in sync, we have a chance to enjoy the beauty and services of planet earth for another couple of centuries. If we fail in just one of those three I fear we’ll get in deep trouble.

 

The S.W.I.T.C.H. Diamond Areas (1) – Stakeholder Readiness

The need for an interlinked stakeholder dialog approach

Over the last 15 years I’ve been involved in many multi stakeholder dialog sessions, including the GRI Guidelines development processes from G1 up to G3.1 and have been going through quite a metamorphosis myself. Being used to present a certain pre-cooked opinion deriving from a primarily hierarchy-based approach from my corporate employer (call it more lobbying for a certain outcome and being more involved to control the dynamics of early collaborative approaches than to really advance them), to learning how to open up in safe space environments under Chatham House rules (in which the person becomes more important than the function and title) up to being involved in the tremendously enlightening movement to create ‘the new’ in co-creative spaces, I developed into the personality I am today, independent in my vision, mission-driven towards our common sustainable future and further developing specific expertise while keeping an open periferal 360 degree view. What happened to me happened to millions of others as well; we took advantage of new technological developments to communicate and are able to let our voice heard everywhere around the world through the internet, using smartphones and laptops, and are curious about the feedback we get. We write blogs, make films and post them, tweet with the speed of light, and connect ourselves to even bigger networks of like-minded. Often we agree (and build relationships) or agree to disagree (and will continue to find new common  ground). I am employee, father, husband, neighbour, activist, customer, consultant, blogger, book author, and a fan of several people or groups. We all have been empowered to define ourselves as multi-connected networking people and hear the echo of ourselves through the relationships we have.

For companies this new fluidity is often still difficult to understand. Whatever happens in the world caused by a company – positively or negatively - will sooner or later be aired and could be spread as news all over the world within seconds. Whatever happens within a company is not completely secure if anyone feels a moral or ethical uneasiness with the matter and either uses whistleblowing procedures or dives into the protected sphere of e.g. Wikileaks or Openleaks. As Daniel Goleman recently said we need to get used to live in an era of ‘radical transparency’.

More and more innovative solutions or products are not developed by one company alone (either because of a lack of innovative capacity, a lack of knowledge of the real needs of customers or simply because it’s too expensive), but in networks, partially within an industry, partially cross-industry, sometimes using co-creation or open innovation processes. We also know of examples where new ideas were also designed completely out of an expected industry scope due to the non-willingness to open up.  It is indeed a challenge to understand that the whole set of stakeholders could be seen as the best R&D and sales potential any company has – if the company wants to connect.

Looking at how stakeholder dialog has emerged over the last 15 years it can be concluded that there is a visible development from scattered, patchwork-like, single-focus dialog (issue-specific) towards a more holistic, inclusive and multi-focus dialog (mission-specific). This is partially caused by the growing level of responsibility that is attributed to the increasing amount of multinational corporations (app. 70.000 worldwide) and the notion that these have way more exit option (=scenarios for decision making) than governments. The latter are often limited in their decision making power due to the lack of such exit options, e.g. a corporation can move its production from country A to B, leaving country A with more unemployed people, less national income and increased social security expense carried by the existing social system and paid by those that do have work. Also, as value chains are way more globalized and outsourcing is common practice, corporations are expected to internalise ‘shared value creation’ thinking into their business case deliberations, overcoming the perception that capitalism is antisocial and destroying out planet. There is a public expectation that corporations need to safeguard that there is ‘no loser in the value chain’. Proactive companies try to use this through exploring adaptations to their business models through ‘cradle-to-cradle’ and ‘bottom-of-the-pyramid’ strategies that even go one step further and try to enhance business opportunities and to win new market shares in regions of unmatched needs.

I have witnessed how the GRI-based stakeholder dialog process undertaken to come to a material issues based sustainability report has – at least with someproactive companies – developed into a community-building, research and target-oriented joint visioning process that supports reporting. This  includes developments to co-create and test new product ideas, developing communities of ambassadors/advocats for certain products, shifts in business models that embrace stakeholders as essential part of the business model, up to new dashboards (internal) that define success not only on financial KPIs, and ongoing reporting (external) that sees dialog as on ongoing process, not focused on that one survey or workshop per year for the report. There are companies that know that the shareholders will not be happy if the stakeholders are not happy, as those are the ones that create the revenues, either directly by buying goods or indirectly by influencing the reputation of a company.  The performance of an organisation is defined by a reputational mix in which success of products and/or services are the most visual part, but other parts play a massively important role as well as we know from many examples (including e.g. social investments, governance and authentic leadership). Let’s boil it down to one essential fact: without its stakeholders a corporation is – guess- nothing.

The maturity of a stakeholder dialog process

A lot has been published on how to perform a good and holistic stakeholder dialog process, take for example UNEP’s and Accountability’s ‘From word to action: the stakeholder engagement manual’ (2005) or Jeff Senge’s latest book ‘The necessary revolution – how individuals and organizations work together to create a sustainable world’ (2008), or recently the publication of the Accountability AA1000 Stakeholder Engagement Standard (Exposure Draft). Several maturity models are available, some have three stages, e.g. the Accountabililty1000SES Exposure Draft mentions three – an emergent organisation, a strategic organisation and a civil organisation; they mirror the quality of those three stages with the three principles of the AA 1000AS (namely materiality, responsiveness and completeness), others have four, like the one developed by Deloitte (see below)

Image 1: Stakeholder dialog maturity levels (Source: Deloitte: Minding your stakeholders’ business – A strategic approach to stakeholder engagement)

The GRI G3 Guidelines mention ‘Stakeholder Inclusiveness’ as one of the four guiding principles to define material issues to be included in the report and the forthcoming G3.1. edition of the Guidelines will present a  more plan-do-check-act-oriented reporting cycle in which stakeholder inclusiveness becomes even more prominent.

The link to the other 5 S.W.I.T.C.H. Diamond areas of readiness

Let’s come back to the need to align stakeholder readiness to the other 5 areas of readiness in order to make an organization as brilliant, shiny and hard as a diamond. How will the atoms of this part of the diamond link to the others and make it unique? My comments will definitely not offer a 100% complete atomic grid and I will mainly focus on system readiness and behavioral readiness for this blog, but I think I can capture the  most important ones – you get the idea!

System readiness:  Any organisation consists of people, but their effectiveness as a group is dependent on the way they are organized to work together. In the last couple of years I got inspiration from both the environmental science (esp. the systems thinking work of Donella Meadows and Janine Benyus’ work on biomimicry are leading in my view) as well as the integrated management design (the work of Fredmund Malik of University St. Gallen and his kybernetic thinking are very enlightening). One important way to stabilize an organisation’s systems is by closing feedback loops, so I applied this as the glue that keeps the diamond’s atoms together. With regard to the aspect of stakeholder readiness and the most important systems and subsystems one can think for example of:

• Governance: does the organization have processes in place to allow stakeholders to offer their views to the right level of people, at the right moment in time (to drive effectiveness and change) and in the right format, e.g. is there a stakeholder expert panel that can directly report to the decision-makers (like e.g. at Shell)? Is there a process in place to define stakeholders, map their material issues and mirror it with the company’s interests? Is there a screening in place that supports finding the right stakeholders (their level of influence, sort of representation, skills to engage)?
• Management system: Are processes defined to infuse stakeholder feedback beyond the usual cutomer-product centricity of an ISO 9001/9004 approach? How do the ISO 14000 series standards and the new ISO 26000 play into a larger scope of stakeholder interests and how is information fed back in the organzation’s knowledge system? How deeply are stakeholder interests really interwoven in EFQM or Malcolm Baldridge enabler and results parts, are the necessary feedback loops in place?
• Risk management: is there a risk mapping process in place that puts all stakeholder interest into a risk and organisation’s specific context and do these also absorb feedback from stakeholder dialog? How do the issues impact legal, financial and reputational risks and do stakeholders have the same view? Are any of the company risks discussed with stakeholders at all?
• Strategy development: is there a strategy in place how to increase the level of maturity of the stakeholder engagement process? Will different stakeholder groups be approached differently? In how far will stakeholders be instrumental in the deliberations on business models?
• Innovation: how will the results of the stakeholder engagement be communicated to product/service development? Will stakeholder be included in the development process? Is there a view how far the organizations wants to move in what part level of maturity?
• Data management: Good stakeholder engagement will be underscored by factual data coming from surveys, questionnaires and independent studies. Has the organization systems in place to have this information collected, aggregated and anlyzed as a basis for further informed stakeholder engagement?
• Management information system: Are there dashboards that take into account overall stakeholder satisfaction? Is there a balanced scorecard approach, is there integration in customer satisfaction, employee satisfaction or an overall reputational assessment in place that feeds back into the scorecard?
• Other system readiness indications that merit laying the right links to stakeholder readiness: internal auditing, investor relations, finance and investments, knowledge management and communication

Behavioral readiness: A major threshold that organisations need to overcome is to understand the value of stakeholder readiness and that the organisation’s advocates actively be involved in stakeholder engagement need to understand the value of transparency and the awareness of the context (understanding and being ale to respond to changes in the external environment), complexity (having the skills to survive and thrive in situations of low certainty and low agreement) and connectedness (ability to understand actors in the wider political landscape and to engage and build relationships with new kinds of external partners). EABIS and Ashridge College already pointed this out in their study ’Developing the global leaders of tomorrow’ in 2009. The stakeholder readiness therefore needs to find its echo in:

• The paradigm under which Human Resources need to continue to build future readiness: Elaine Cohen’s mentions in her book  ’CSR and HR’ that Human Resources need to move away from focussing activities  ON the impact on employees towards the impact OF employees (in the workplace, marketplace, community and the environment)’, with consequences for
• Employee training and development to be stakeholder-ready, e.g. through widening the concept to ‘employability’ (broadening the scope to help build value-adding members of society and by that already implicitely build so-called  ’shared value’), implementation in personal development plans, talent management processes, career counselling, mentoring, etc.) and implementation in transition management. Each employee is also a stakeholder and needs to be trained on the variety of stakeholder views and techniques how to react to them. These people may remain ambassadors for the compay even after they left!
• Employee communications: learning to use the power of social media for CR 2.0 stakeholder dialog (blogs/vlogs etc.), accepting the benefits of co-creation, crowdsourcing (e.g. take a look at the PepsiCo Refresh Program), train people on stakeholder dialog skills, convergence of internal and external communications. Each employee is both loyal and activistic and is a potential change catalyst.
• Ethical business: employees need to be very well trained and ‘live’ the organisation’s Code of Ethics and underlying correspnding systems, structures and staffing for remedy activities in case of non-compliance.
• Leadership Development: If leaders don’t actively take part and claim responsibility in stakeholder dialog the authenticity is at stake. I have personally seen approaches where top management thought they could delegate this to staff. These approaches  will create a disconnect as top management responsibility for stakeholder dialog cannot be delegated. If the board members of a corporate are not the most authentic protagonists in their stakeholder dialog process, something is wrong with their approach!

Product and service readiness: Closing feedback loops from stakeholder dialog carries an enormous potential for the development of products and services. A lot of specific research is done to assess clients needs and new strategies are tried out, including cradle-to-cradle strategies, bottom-of-the-pyramid strategies (to also expand into new markets) and strategies that put functional perspectives upfront (e.g. product lease). In normal situations life cycle analysis takes into account the full product-specific footprints including suppliers, product use and takeback. New and in combination with these approaches are open innovation platforms, co-creation networks, cross-industry learning and exchanges that allow enlarged and new perspectives. Stakeholder dialog can be linked to these approaches as well, some of them may want and should be involvd in these new appoaches. There is no one size fits all to closing that gap, but it would be a mistake not to lay the link.

Infrastructure readiness: A company’s assets are essential for the delivery of products and services. They are a visible and factual representation of parts of an organisation’s environmental and social footprint. Many stakeholder relations, but also issues, are caused by local or regional infrastructural assets, think of soil contamination, noise reduction needs, social dependencies of worker’s families, worker’s rights issues, local supply chain dependencies, community investment, philanthropic asks, etc. It is amazing to see how much corporate officers often fully neglect these infrastructures and the signals these assets send on local level. How many people from corporate procurement, marketing & sales, investor relations, PR and even strategists have never seen one of their company’s sites from near or inside – I can tell you that you will be astonished. But stakeholder dialog happens there as much as on corporate level, so stakeholder readiness needs to take that into account and think about the different sorts of dialogs on various levels.

Summary

A systemic, worldwide, integrative, transparent, collective and holistic approach needs to be designed, taking into account all stakeholder needs. Well-designed stakeholder dialog on various levels of the organisation and using the best feasible means per stakeholder group are both a safeguard of the needed responsiveness to be a trusted societal partner as well as exploring completely new business ideas in times of growing disruption on energy, resources and food. The common stakeholder dialog processes normally do not connect all the dots and often fail to increase the value of a corporate knowledge management approach. Stakeholder readiness however will go that one step further. At minimum there will be a close connection to reporting and communication, lobbying and other networking. The S.W.I.T.C.H. Diamond recommends a deeper layer of connections, glueing the many other atoms together and let the diamond shine.

My next blog will focus on the S.W.I.T.C.H. Diamond from the behavioral readiness side.

As always I appreciate responses to this blog, as well as additions and concerns. Have I missed anything, do you have examples to support or disagree with my views? Simply let us all know!

Stay tuned !

See earlier posts on the S.W.I.T.C.H. paradigm and diamond:

1) So what is S.W.I.T.C.H.?

2) The S.W.I.T.C.H. Diamond – an analogy for success in sustainability and becoming future-ready

 

CS’HR’should focus on impact OF employees instead of impact ON employees to help integrate sustainability – a reflection of Elaine Cohen’s book ‘CSR for HR’

If one looks at the development steps of CSR in the last decade it became painfully clear that the paradigm change towards sustainability needed to be implemented in all company’s functions. Overcoming the silo thinking to empower better and a more holistic awareness-building and integration of CSR was/is obviously needed if an organization will also thrive in the future. All in all we need to admit that we have been extremely busy with the technicalities part of this task, often forgetting the people part of the story. It is so easy to believe that if an organization has done its homework on management systems, data systems, governance, reporting and measurement, one could wait for the outcomes to simply come as a given. One of most often forgotten pieces in the puzzle was the Human Resources function of an organization.

Finally there is help! Elaine Cohen, one of the most active bloggers in the field, living in Israel, and running Beyond Business Ltd., a small CSR consultancy there, has created an enormously useful baseline through her book ‘CSR for HR – A necessary partnership for advancing responsible business practices’, a must read for everybody who either works in the HR function and wants to develop a view on how to support CSR in their daily life, or for everybody outside the HR function looking for arguments why the HR function has an important role to play and needs to overcome some genuine mental stereotypes.

Elaine uses a nice plot for a whole array of protagonists that would argue for and against a role of HR in CSR: her main protagonist Sharon is actually one of those. Over a couple of weeks Sharon goes through a metamorphosis from being an HR Manager and more and more becoming a CSHR Manager. The nice way of telling the story in a plot like this is that more or less all arguments that one could run against in this challenging metamorphosis comes back in the book, and in that sense delivers refreshing yet convincing arguments any reader can use from the next day onwards.

Another important point to make about Elaine’s book is that she has interwoven the plot with a lot of readymade materials (slides, checklists, book summaries and articles) that can be used as blueprints for readers to start their own pilgrimage. In essence, reading Elaine’s book saves the reader a lot of time reading other articles and books.

One of the main takeaways also having read Michael Porter’s newest article ‘Creating shared value’ in HBR 1/2011, is how the book already plays very well into the needed change that HR also needs to make, namely the shift form ‘HR as an impact ON staff’ towards using the HR function to ‘create an impact OF staff’.

To sum it up: Elaine Cohen’s book is the right book at the right moment, written in a very useful way that makes it ‘ready to use’ from day 1 onwards. There is no excuse any longer for HR practitioners to ignoring CS’HR’ due to the lack of a ‘cooking book’ of recipes. The roadmap how to embed is included in the book as well – of course!

 

The S.W.I.T.C.H. diamond – an analogy for success in sustainability and becoming ‘future ready’

The first blog in 2011 is the already announced continuation of my earlier blog in which I explained S.W.I.T.C.H. – my view of the essentially needed ‘paradigm dimensions’ to understand sustainability; in total I described six of them (http://aheadahead.wordpress.com/2010/11/13/so-what-is-s-w-i-t-c-h/). Whenever I am assessing the sustainability approach of an organization I am more or less looking at the ‘future readiness’ of this organization and the way they have given shape to an operationalized approach on how to follow the six S.W.I.T.C.H. paradigm dimensions. After many different trials and having seen many different existing assessments, the ‘S.W.I.T.C.H. diamond’ crystalized as a visual expression of my assessment, a hexagon shape that carries ‘six areas of readiness’.

Why a diamond?

Well, the hexagon shape of my early drawings automatically made the impression to look like some sort of a diamond. But the more I thought about it the more I loved the idea, simply because a diamond is also an expression of desires, value and longevity. ‘Diamonds are forever’ as they say, and isn’t that what we want to achieve in sustainability as well – seeing our planet as a precious, beautiful and long lasting home for all species?

There are a couple of additional remarks to make about the diamond idea. First of all a rough diamond will only reveal its full beauty when all sides of it have been grinded and polished to perfection, an attraction, a seduction, a must-have. It will not absorb and reflect light as it could if parts of it are left untreated.  The same is true for the S.W.I.T.C.H. diamond: just dealing with one or the other ‘area of readiness’ will leave patchwork and the approach towards sustainability will be ineffective, in danger to be seen as greenwashing, and most likely not understood.

Secondly, there is the art to present a nice diamond, the genius jeweller’s touch to find the right symbiosis to create a mounted jewel and therewith making it a complete artwork, together with the ring. I see the parallel  with the S.W.I.T.C.H. diamond in that the ‘areas of readiness’ are surrounded by the six ‘paradigm dimensions’, giving it the necessary embedding.

Thirdly, there is the ring itself which enables the owner to develop the personal bondage with the diamond, this unbelievable feeling of care and the pride to wear the precious ring, becoming ONE and in the end BECOME part of the artwork. Without the ring, the diamond would remain simply something to look at, but will remain somehow ‘disconnected’, a pure investment in a bank safe or under glass in a museum. Translated to the S.W.I.T.C.H. diamond idea it means that the ring represents all of us who bond with the idea of a holistically implemented sustainability identity in an organization, meaning that those organisations will be more ’attached’ to us, and BECOME part of our wanted identity as a people. We support them by our willingness to buy their goods, support them through governments through the right sort of recognition (including financial and tax support), support them from society urging for more transparency and better education, and support them through the academic and professional institutions that will help to translate sustainability into new measures of success and standards.

Fourthly, diamond is the hardest natural material known, where hardness is defined as resistance to scratching, which is graded between 1 (softest) and 10 (hardest) using the Mohs scale of mineral hardness. Diamond has a hardness of 10 on this scale.  Therefore, whereas it might be possible to scratch some diamonds with other materials, the hardest diamonds can only be scratched by other diamonds. Related to S.W.I.T.C.H. the parallel is clearly that those rock-solid approaches by the proactive companies are those that can’t be scratched by the short term lobbyism and interest of others. These organizations have it ‘crystal clear’ given the holistic approach towards sustainability they took, an atomic strucure which connects the areas of activity in which people unfold the robustness of the approach.

One last point, let’s say a disclaimer: I am very aware that diamonds have a bad connotation in the sustainability community given the shameful abuse of mine workers, producing what is called ‘blood diamonds’. It has taken the mining industry a long time to approach this shameful practice, but examples like the ‘Kimberley Process’ show that there is willingness to address necessary change. Let’s park this here, o.k.?

The six ‘areas of readiness’

Back to the six ‘areas of readiness’ of the S.W.I.T.C.H. diamond, which you can see in the image below; they are surrounded by the six ‘paradigm dimensions’, forming the ‘mounted jewel’. Working on all six areas of readiness is necessary to adhere to a systemic, worldwide, integrated, transparent, collaborative and holistic approach to achieve ‘future readiness’ and being sustainable. Working on these six areas doesn’t have to happen in parallel, but logical through a well thought-through roadmap approach. The idea is that the S.W.I.T.C.H. diamond can be applied to generically all kinds of organizations, but surely best practice in different sorts of organizations is just natural – something that needs to be further explored later on this blog.

Figure 1: The S.W.I.T.C.H. diamond with the six ‘paradigm dimensions’ and the ‘ six areas of readiness’

Product and service readiness directly relate to the purpose of the existence of the organization, meaning their direct output to clients and society, so how an organization serves us all. Infrastructure readiness covers the material assets and additional throughput needed to be able to produce outputs; those have their own footprints and impacts, and many of them are not subsumed in the assessments of wanted output. Behavioral readiness has to do with the way human beings treat and respect each other inside the organisation, but also how to relate with all other human beings outside the organisation that have a stake in the organisation, may it be direct or indirect. System readiness and stakeholder readiness are partially the outcome of behavioral readiness, but vice versa can also contribute to increased behavioral readiness. System readiness, stakeholder readiness and behavioral readiness are the enabling areas that help structure the other three areas of readiness and make sure the result is ‘a diamond’. They are the sort of coding how all the atoms have to be placed to produce the shiny diamond that is so extremely hard. Finally, future readiness is the outcome of the teamplay of all the areas of readiness.

The following blogs will cover each of the six areas in more detail: what are the issues that need to be covered in all of them to make an organization sustainable and what work programs derive from them? Many of them are by far not new, but they will only work if they are logically interlinked with each other (again the analogy to the atom structure of the diamond). For example: how to think about a cradle-to-cradle strategy if the overall need of it is not clear to top- and mid-management and not rewarded. How will this work if the organization has no proper view of the needs from stakeholder involved? How will it be possible to manage such a program if the right data are not available, not organized, or simply not right? And finally, how should this work if the infrastrucure of the organization has a high ecological or social footprint?

A note of caution at the end: While the S.W.I.T.C.H. diamond tries to accurately capture the different areas in which an organization needs to move (and remain open-minded at any moment, securing progress at any time) the next question normally is ‘but where do I start’? Many top managers will prefer the product and service area because that’s where the money is made and where in their view ‘ the rubber hits the road’! My view is different: I learnt myself that sustainability has so much to do with trust and authenticity that I recommend to first look at the enabling areas: system readiness, stakeholder readiness and behavioral readiness. The better they have been managed, the quicker and more effective the organization will in the end make steps towards infrastructure readiness and product and service readiness. I’ll therefore start with stakeholder readiness, so stay tuned!

If you like to comment on the idea, the areas, the logic so far presented, please do so! I do see my blogging as an open discussion in which all of us can learn and an invitation to contribute!

 

‘Al-Gore-ithms’ revisited – things to speed up in 2011!

Three weeks ago I met Al Gore at a dinner meeting organized by Deloitte. He was speaking to a group of around 30 CEOs at Schiphol Airport Amsterdam. For me it was the third time meeting him in person; the first time I saw Al speaking live was at the 2006 GRI Reporting & Transparency Conference (at which the G3 Guidelines were officially launched). It was this event that triggered Al to start his European tour of ‘inconvenient truth’ speeches in Europe. I was wondering in how far his style of presenting has changed over these 4 years and in how far he now made the switch from awareness-raising to solution-oriented storytelling. It ended up to be a great evening, but honestly I again heard many of the quotes from 4 years ago; it seems that the repetition of the (I admit: updated) facts still works and also seems to be still needed, at least with that group I was with that evening.

Al doesn’t call himself an expert on specifically the ‘transparency agenda’, but many of the real problems that we need to solve and that he’s talking about – environmental degradation (esp. climate change as an outcome thereof), demographic changes, poverty alleviation – are also partially caused by systemic intransparancy, and I strongly believe they can only be solved by getting over these thresholds. A couple of those he already captured well in 2006 at the GRI G3 launch conference, so I digged back into some of my older files, see if I could make a compilation of those pieces of text, enrich them where needed with own ideas and come up with a compendium of steps towards a transparency agenda that could help speed up our most urgent problems. This was the moment when I stumbled over the wordplay Al Gore/Algorithm. In mathematics and related subjects, an algorithm is an effective method for solving a problem expressed as a ‘finite sequence of steps’. An algorithm is a list of well-defined instructions for completing a task. Starting from an initial state, the instructions describe a computation that proceeds through a defined series of successive states, terminating in a final ending state. Bare this wordplay with me, I simply like the idea . So, here are some of my ‘Al-Gore-ithms’:

1) One of those phrases that I think is the boldest of all statements to make for transparency is: ‘Sunlight is the best desinfectant’. Former US Justice Louis Brandeis coined this marvelous phrase in praise of transparency and honesty in public policy, but for me it really works best for sustainability overall. What’s strange to me is how few companies and organizations actually practice this in an effective manner. In this interconnected internet age, it is most astonishing how a company thinks it can “manage” its way out of a crisis without stating the simple truth (and I don’t have to repeat the list of companies that again tried it this year, right?), mostly reacting in slow motion or full hibernation until realizing that ‘if you’re not around the table, you’re most likely on the menu’. Clearly, this is naive and reflects an old understanding of the role of business in society (‘us and them’), and the step to take now is just simply to give in to the fact that if an organization is not fully transparent, somebody else will. The loyalty of staff is limited to what is personally felt as justifiable.  The whole movement of whistleblowers up to today’s global Wikileaks movement is a cry for help from (focused representatives of) society, a wake-up call to old-age politics and behind closed doors decision-making of those who impact every person’s life circumstances, some of them reaching hundreds of millions all over the world. If 52 out of the 100world’s biggest economies are companies, special responsibility comes with it, full transparancy is the logic consequence and ethical (business) behavior a must.

2) Al Gore often quotes the great psychologist Abraham Maslow, best known for his hierarchy of values, who had an aphorism: “If the only tool you have is a hammer, every problem begins to look like a nail”. What we can we learn from that: if the only tool we use to measure what is valuable and important is a price-tag, then those things that don’t have price-tags begin to seem unimportant. Al: ‘It is a very basic characteristic of our human nature that we identify ourselves with the tools we use, and we use them as short-cuts to focus our consciousness and understanding. We conserve energy and attention by ignoring those things that are outside the boundaries of the tools that we have decided are the appropriate focus for our attention’. What steps are necessary? Clearly both sides of the economic perspective need our support, meaning the macroeconomic perspectice and the microeconomic perspective. We should strongly support the ‘beyond GDP’ movement, which got a strong boost this year through the Stigliz/Sen/Fitoussi report (commissioned by the French president Sarkozy), but also the great work of the Global Footprint Network which serves as an easy-to-understand dooropener to shift our mental stereotypes away from our devastating  consumerism. On the microeconomic side we saw the start of the IIRC (International Integrated Reporting Committee) and the announcement of he GRI G4 development, both need our attention and buy-in. It will in my view be the combination of both the macroeconomic and the microeconomic perspective that will give us the context for good statistics, reporting and success measurement. My hope is that this will then also help to address the fundamental malfunctioning of our global taxation and subsidies regime and systems. Thought through from a sustainability perspective the tax mechanisms and subsidies are often just desastrous for our overall guidance towards making the world a better place.

3) I also like Al’s oftenly used analogy to the spectrum of light: the spectrum goes from ultraviolet to infrared and it has all these different wave lengths and there is a little tiny slice in that huge spectrum that represents visible light. All that information and all that reality is outside that little, narrow slice, confined in those thin boundaries. He tells the story that during the eight years he served in the White House as Vice-President, he began every morning with an hour-long report from the intelligence community, and every day the pictures – the visible light  - were supplemented by infrared imagery and ultraviolet imagery; all combined they painted a fuller picture and a more accurate view of the full reality that was being looked at.  Al continues ‘…and in just that way, the full spectrum of value that is represented by a corporation’s activities can only be understood if one looks outside the narrow confines of the financial reports as they have been constructed.  Because the information relevant to their impact  - on the environment, on the communities in which they operate, on the employees -  will affect the brand-value affected and autheticity to their commitment to ethics. In fact, one could say that those who focus only on the narrow financial reports are becoming just a niche. The old way of measuring value is becoming irrelevant to the more complete approach to what we really need to understand and track’. What to take away from this? I have seen many positive and proactive moves of companies this year to be involved early in some of the explorations to discover what additional areas of success measurement are feasible in the future: water footprinting, biodiversity (involvement in TEEB), human rights due dilligence (the Ruggie-Framework), integrated reporting (IIRC), etc. This appetite to learn is now more and more visible, often together with some of the major stakeholders (and amongst them important NGOs). Pushing stronger to be part of those developments and using own stakeholders as the best R&D potential one could think of, initiatives of ‘co-creation’ and collaboration, are enlightening, will become even more important in the next years. Be in it to win it!

4) Herman Daly wrote years ago: “We are managing our planet as if it were business in liquidation”. Al Gore uses this to explain our need to fundamentally shift away from short-term analysis to long-term analysis. ‘How our modern world has become so fixated on the short-term consequences of our actions and the short-term performance of corporations is in some ways a mystery, because it has shown to be self-destructive and self-defeating if you are really interested in ’investing’. We use the word frequently, its been a long time since we’ve really tried to examine its essential meaning. Corporate Finance 101 teaches that the bulk of a company’s value builds up over a business cycle at normally five to eight years. So, if you put money into the purchase of a share of ownership in a company, you are placing a bet that the value of that company will increase over time.  And as a result the value of your investment will increase along with it. If that process takes a period of years and you withdraw your investment after thirty days – are you then investing? If the entire market place is so focused on a short-term pattern of putting money in and taking it out, according to a time horizon that no longer bears any relationship to the build-up of genuine value, that’s not really investing, it’s speculating. In the U.S. thirty years ago the average holding period for equities was seven years.  Today, thirty years later, the average mutual fund dominant in equities turns over a hundred percent of its portfolio in eleven months, which means the average holding period for each stock is a fraction of that’. At the meeting in Schiphol three weeks ago Al complemented that trend with the example of value propositions from software system providers that are focusing on the millisecond differences in share prices and buying/selling based on the diffences that occur at the blink of an eye.  What to take away here? Well, the entire market is short on long and long on short.  And the consequences are quite profound.  We have become accustomed to the critique of CEOs managing their companies according to the next quarterly report.  Consider a CEO who also knows that brief, who understands it fully and still makes a commitment to look beyond the next quarterly report. If the company in question is not strong enough and secure enough in its finances to be independent of large investors, that CEO will normally face serious consequences if he or she misses the next quarterly projection.  We should be thankful to CEOs like e.g. Paul Poolman from Unilever who just recently proclaimed that shareholders need to understand that long-term value creation is his focus, embedded in a strategy with reducing footprints by 50 % while doubling turnover. In the same way we should appreciate the work of all the movements that build awareness and strategies with financial markets players, like e.g. UN PRI, Equator principles, CDP, or Effas’ work on sectoral sustainability indicators. They need more of our help next year!

5) Our current system for accounting is derived in significant measure from approaches that were created by a group that was led by Lord Keynes in the 1930s between the two World Wars. Those accounts are very precise in measuring the impact of capital, but they are not very accurate when it goes beyond capital goods.  Capital goods are depreciated. Al Gore rightly says: ‘Labor is dealt with less reliability and accuracy and the environmental consequences are hardly dealt with at all.  Maybe one reason that this giant of economics made a category error is that he worked in an era that was during the last decades of the colonial era, when the perception particularly in Europe was that natural resources were effective limitless. Joseph Stiglitz wrote a book focusing on the consequences of failing to apply that one measure – depreciation – to natural resources.  If a developing country with a million acres of rain forest decides to clear-cut that rain forest this year the consequences, according to the financial reports, are terrific, what a windfall!  The fact that its future has been destroyed is not reflected in the ledger’. So, what steps to take away from here? Well, where is the major movement in the accounting world to cure the negative side-effect of the the old accounting rules? Maybe I’m not fully up to date (and would therefore welcome reactions!), but I am not seeing or hearing this movement loud enough. I have been involved in environmental managerial accounting already a decade ago, and see it continues to work hard (e.g. carbon accounting, supply chain accounting, water and biodiversity accounting), but still it isn’t picked up on necessary scale. Clearly, the accounting practice and especially the academic fraction has more homework to do in getting this issue high-up on the agenda, not just  into curriculums, but also piloted and implemented in the real world. If companies and governments embrace it, changes to the existing accounting stereotypes can happen.  This would just fit in well into the macroeconomic and microeconomic developments described above and would be a timely exercise.

6) Al Gore also tackles the issue of externalisation: ‘An externality means something that is external to the system, but what is external to the system? We actually internalize air regularly. Similarly, we regularly internalize water.  The beauty of a sunset.  The habitability of the planet.  All are labeled externalities.  Really the word means: ‘we don’t want to think about it, so don’t bother us with it.’ The ‘Polluter Pays’ principle is just one example of ways to internalize externalities. Some countries already do this and I think that we ought to reduce taxes on employment and make it up with taxes on pollution, with CO2 at the head of the list.  There has been concern with free riders in this reporting system, but the biggest free riders of what we are doing are the governments’. Again the question of steps needed: we need these  changes in public policies, clearly in governments, around the world. We need to continue to demand public policy that works to allow the market forces to help us solve these problems. My personal prediction is that we will be globally  successful in 2012 when the world gathers for the Rio + 20 conference and the next climate negotiation round in South Africa will have made progress (COP 17) and paved a way for the global political leaders to be in the limelight again. I am saying this out of two reasons: firstly, many corporate leaders have stopped waiting for the governments to agree, taking the current insecure situation as it is (namely as a business risk) and already moved forward. But they will constantly increase the pressure on governments to agree on the long awaited level playing field to reduce their respective business risk. Secondly, China is then two years into their new five years plan, in which climate change leapfrogging is a key pillar; China is currently working on thousands of standards to implement this leapfrogging, they will be ready to move in 2012, leaving the US with no choice but to move as well.

7) Let me finish with the last saying that I like very much: ‘The stone age did not end because we ran out of stones’, as far as I know this quotes dates back to Sheikh Yamani, a former OPEC council member and oil minister.  The fossil fuel age will not end because of peak oil, it will end when we move on to something better. That something better will be more efficient. Al Gore, when asked about the future of nuclear power recently also used this quote. To him, nuclear power providers simply aren’t able to fully explain the zero ecological footprint over the full value cycle (mostly the waste management part is ‘externalized’ into the future without a real solution yet). But the biggest problem is the insecurity to get buy-in to the cost calculation of these megaprojects. In these times of insecurity and limited budgets, who is really willing to sign a more or less open cheque? So, it seems the lower scale, better predictable, grid-oriented sustainable solutions will also be the pragmatic way to go forward, and we should be supporting and demanding these developments with more enthusiasm.

The Chinese often express the word crisis with two symbols joined together back-to-back. The first means ‘danger’, the second means ‘opportunity’.  Those companies that make the shift to a full spectrum approach and a longer-term horizon over time generally perform better for their shareholders. But there is an even greater opportunity since while we rise to meet this challenge and improve shareholder value, we also come to new survival technologies and realize improvements to the quality of life. And that is the largest opportunity: to come to an overall shared common moral purpose of our human nature, compelling enough to lift us above and beyond our current mental limitations.

To all my 2010 readers: A happy New Year 2011, may we all continue to add our pieces to the puzzle of making 2011 a successful year and this world a better place. Thanks for all the great responses to my blog entries, please continue doing so in 2011.