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Category Archives: Back to basics

Back to basics wants to get back to the core of sustainable development and indentify what’s needed to better understand the value of the concept. If we don’t know where we’re coming from, we don’t know where we’re going to, so what can we learn from the past to adapt to a sustainable future.

Davos2012.me – the (missed) great transformation?

The leaders are back at home. The powder snow of Davos and all the red eyes from getting up very early and going to sleep late given all the late night side events are now remembered by those who were there as a sort of romantic ‘extra mile to save the planet’. We saw all the video clips from the Davos and corporate marketing machinery that told us how useful it was to meet again, and that steps were made towards what was called ‘the great transformation’ – at least that was the bold title of the annual meeting this year.

But what did Davos 2012 do to me, or you? Now that all tweets and annual meeting blogs are written, initiatives were launched and reports got published, I do have to say that the annual meeting did give us a good description of the current status quo, but did not give us what it promised – to be the instigator of real change towards that great transformation. This would have only been possible through visible signs of leadership, so this urgent quest was the red thread through all the discussions – and unfortunately it remained an unanswered one.

Don’t get me wrong: every year hordes of experts from many industries discuss, develop, and prepare stuff that their proud CEO’s can carry with them to Davos or can jointly present to the world as another step forward. Reports are published that have good insight, like in every year the ‘Global Risks Report’, or the very interesting report by the Ellen MacArthur Foundation ‘Towards the Circular Economy’. Deloitte offered the ‘Business:Society – What is business for’ study, done in collaboration with the Economist Intelligence Unit and alerted us to the views of the so-called Millenials. And yes, the many side meetings of the CEO’s and Vice Presidents with likeminded and/or corresponding protagonists from politics and civil society will increase the understanding for each other. For sure, consultants again found an excellent fishing pond for new business and profiling for what they have done throughout the year, and for many specialized niche players Davos fills the 12 months pipeline until the next meeting and offers food for thought for surveys, training, facilitation and visualization.

And then there is the other Davos, the event that mostly always gets overshadowed by the short-term problems, this year the Euro Crisis, the Israel – Palestine conflict, the Iran and Syria agenda etc.. Angela Merkel and other heads of state orchestrate their yearly update, and at latest in these moments the idea of ‘the great transformation’ gets downsized to either ‘the great stagnation’ or for some ‘the great paralysis’, even more for those who were not physically taking part in all the Davos idea labs, workshops, interactive sessions, brainstorms, work studios, one-on-ones, and – not unimportant – the interactive dinner and lunch sessions (let’s hope it was all biofood) and simply missed the not broadcasted, by-inivitation only, closed-doors part of Davos. I was one of those out there that took the burden to listen and/or watch as much as I was able to to the livestreams. Now, three weeks after, and with some reflection, there are two main aspects in which I think Davos 2012 has missed important opportunities, and let me underscore them by some anecdotal evidence:

  1. Producing confidence through visible leadership: I listened to the World Economic Brainstorming session, led by BBC World Anchorman Nick Gowing. He tried to really carve out from some of the business leaders in the room what they would actually do the next day, taking leadership for sustainability issues (since this is what the great transformation needs to achieve, but somehow remained in the snowstorm outside), how they would confront perceptions and the scrutiny out there (refering to the latest Edelman Trust Barometer), and how they would work towards new models for our world in which they would need to acquire a ‘license to lead’. The session also included so-called ‘Global Shapers’, young and already successful entrepreneurs between 20-30. The remark of one the Global Shapers at the end of the session summed up what I also felt more and more while listening to the 90 minutes session: [quote] ‘You should be feeling my pulse right now. I’m not only impatient, I am actually angry. You asked the leaders if they feel the pressure? I can tell you that I DO feel the pressure, and not so far from now the next generation will hold me accountable, and I can tell you that they won’t be as nice to me as I still am right now. Everybody here is pointing with the finger at somebody else, to the investors, the corporations, the politics’ [end quote]. And Richard Edelman just added: ‘Business and governments are not telling the hard truth’. So the session ended with the advice that the young people should go out and look for those companies in which leaders are not hierarchical, and where mindset changes could be produced due to a willingness to accept the necessary tradeoffs. Or even better, found their own businesses! Does that leave you puzzled and nervous? Nick Gowing tried to cure the situation by remarking that that particular brainstorm was just the kick-off to more sessions in which more depth would be developed. 
  2. Hesitation to predict the future and help guide leadership: I was hoping to actually get more depth and clarity through an early sunday morning session called ‘Pundits, Professors & Predictions’, but that was just another example of leadership paralysis. I am a big fan of Thomas Friedman and I admire the candid stance of Nouriel Roubiny to go out and tell a straightforward story of how he interprets the world from his (financial market) perspective. But the comments both gave were more an interpretation of the existing status quo than predicting the future and by that missed the boat giving guidance for further discussion on what leaders need to actually lead towards. Prof. Bob Shiller from Yale University just added to the discussion that people tell him that they have no time to think nowadays, and that he still struggles what consequences that may have for leadership. Kishur Mahbubani repeated himself several times by saying that Asian optimism will overthrow European scepticism (the reason for the Asian century, so no news here). Gideon Rachman was there too and said that whatever governments there are, they all seem to somehow fail to rise to the occasion (no matter if democratic, technocratic like Greece and Italy, or authoritarian), but nothing that would help in the search for directions towards the great transformation and needed leadership. Actually, Nick Gowing, who also moderated this discussion, continuously reminded the panelists that they were invited to make predictions, but the panel refused to make some, and one panelist even remarked that he was possibly invited to that panel by mistake.

I admit that the WEF has made great improvements in the last years to open up the Davos sessions to a greater public. So yes, I was able to follow panel discussions and add twitter feeds. I also realize that there is an awful lot of work done between the yearly annual meetings, like regional meetings or the different industry-specific working groups. There is also a great aim to build an agenda around major sustainability issue areas. For all transparancy, I was actually involved in some of that work through my GRI and Deloitte affiliation in earlier years. But how has that helped to lead to the sort of joint and globally accepted leadership movement, so necessary for the great transformation?

Possibly, both Thomas Friedman and the young Global Shaper did in the end help me to find an answer I can live with for the moment: don’t wait for governments, don’t wait for the (still few) corporate leaders, and don’t wait for strategy professors. Thomas Friedman thankfully mentioned what he coined ‘Carlson’s Law’ (named after Curtis R. Carlson from Stanford Research Institute): The more hyperconnected the world becomes, the more top-down approaches become dumber and slower and everything bottom-up becomes smarter and chaotic. Necessary decisions that touch public interest in whatever way need a two-way conversation with stakeholders, otherwise they fail. SOPA, Mubarak, Putin were mentioned as examples of failure. The sweet spot for innovation is moving down and towards stakeholders! Effective leadership will occur where leaders unleash the power from below and meet it somewhere. And that laid the connecting to the Global Shaper from the earlier discussion I listened to, those social entrepreneurs that connected the purpose of their organisation with societal needs. So, the litmus test for real leadership is simple: prove the societal purpose of your organisation, innovate at the heart of the matter (my understanding of the Friedman’s sweet spot of innovation moving down), be transparent and report about achievements and be a vocal advocate around all needed political boundary setting changes, e.g. in financial markets, on taxation and subsidies, in education and innovation support.

What would then be my big themes for Davos in the next year? Here are some thoughts: 1) Cluster the existing bottom-up movements out there and invite them to a structured dialog, not all of them are or will remain leaderless movements; 2) Challenge existing top-down movements regarding their success towards achieved societal purpose and how more can be done if the sweet spot for innovation is actually moving down; 3) Discuss what our common success measures are globally, regionally, and on corporate level; if it’s not GDP or EVA, what is it then instead?; 4) Tackle the really needed areas for change: the unsustainable taxation and subsidies regimes, an adjusted curriculum in education, support for innovation, new levels of transparancy, governance and regulation in a bottom-up world in which natural conservation and well-being of humans are centerpiece; and 5) invite politicians into multistakeholder discussions.

The great transformation has surely already begun, but in Davos? Maybe next year.

 
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Posted by on February 19, 2012 in Back to basics

 

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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’.

 
 

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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.

 
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Posted by on March 8, 2011 in Back to basics

 

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Schumpeter’s desequilibrum today

Another often quoted economist and political scientist is Joseph Schumpeter (1883-1950). He was actually born in Moravia, became Austrian and then left for the US where he taught in Harvard, an interesting career. In his book “Capitalism, Socialism and Democracy” (1942) Schumpeter introduced the concept of “creative destruction” in which the old ways of doing things are endogenously destroyed and replaced by the new. He described that the real driving force of capitalism is “disequilibrium”, opportunities coming up by new (today: global) demands, inspiring innovation, a recipe to also avoid monopoly power. He also warned governments not to protect certain markets or organizations that were unable to succeed in transformation processes. One could argue that this is pure Darwinism for economy dummies.

Those who understand sustainability as the roadmap to successfully implement globalization should nowadays find Schumpeter quite inspiring because his baseline for a healthy capitalism is very much in line with what is really needed now: we are facing the fact that we need to overcome several divides between the global North and South (e.g. market divide, digital divide, education divide, etc.), dematerializing by at least factor 10 until 2050, while another 3 billion people will join us until then, the majority of them in the developing and emerging market countries. The ecological footprint (a methodology to measure the planet’s biocapacity that is already used up, invented by several institutions now captured in the “Global Footprint Network”) tells us that we have already overstretched the global capacity by 20%, growing to 100% until 2050, meaning we would need TWO planets if we allow business as usual. What else than “creative destruction” can be the way forward to successfully integrate countries into the global world markets?

We already see first successful examples of creative destruction in countries like India, Mexico and Brazil, wonderfully captured by the recently died C.K. Prahalad in “The future at the bottom of the pyramid”, his legacy to global sustainability and a worthwhile challenge to companies to get their global business case act together; completely different business models that absorb the needs and adapting to the infrastructural shortages of differently developed markets. Some global companies are amongst these examples, but most of the innovative ones are rooted in developing or emerging market countries. The title of this book already indicates the failure of any “top down” approach, just exporting Northern business models to the global South in an attempt to just simply copy what has worked in the global North.

Interestingly, the year 2000 Lisbon EU strategy for innovation explicitly mentioned Schumpeter’s creative destruction as a way forward to foster innovation, enabling social and environmental renewal. It broadly aimed to make Europe the most competitive and the most dynamic knowledge-based economy in the world by 2010 (well, that didn’t work out, but still remains the right way forward). Not too much has been achieved since then, so one should not wonder that companies from developing and emerging markets that have successfully tested their business models in their local markets now start to also take over their Northern competitors that are stuck in a protective political climate, trapped in existing infrastructure and sunk capital investments. To sum it up, Schumpeter’s ideas today seem to better work in the bottom-of-the-pyramid context where opportunities are just simply taken when they arise, no foot on the brake. If Schumpeter would still be alive he might have again packed his bags, heading towards India or Brazil!?!

 
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Posted by on September 14, 2010 in Back to basics

 

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The world is a “polder” – a parable for sustainability today

One of the things that I have been thinking about a lot is the question “what is it that really and most effectively drives sustainable change”? After many years in the sustainability business my list has actually boiled down to four major drivers: legislation (let’s face it), competition, cost advantages and – maybe most important – education. There are definitely more, but these seem to be the most effective and high level ones (please let me know if you think differently).

While legal compliance, competition and cost advantage are quite well-known and managed in the corporate world, the overall and most important driver for me is actually education, meaning awareness about the interconnectivity of many sustainability problem areas and the ability of people and organizations to reflect on what their own impact is and how a certain history, religion, regional or company culture is influencing behaviour.

If I could recommend books to start education and raising awareness about sustainability, Jared Diamond’s book “Collapse: how societies choose to fail or succeed” (Penguin Books) would be amongst the top 3. He looks into the past and what emerges is a fundamental pattern of environmental catastrophe which still exists today, globally and at higher level. In the last chapter Jared Diamond analyzes today’s political and market interconnectivity and develops a fragile picture of the world and concludes that the risk we face is of a worldwide decline.

As somebody living in the Netherlands I was especially touched by a picture painted by Diamond that explains “the world as a polder”: 1/5th of the Dutch landmass is reclaimed from the sea, is up to 22 ft. below sea level and a complicated drainage system is pumping water back out into a river or the North Sea. This is why the Netherlands had so many windmills in the past (replaced today to steam, diesel or electric pumps). He quotes one Dutch friend who said: “You have to be able to get along with your enemy, because he may be the person operating the neighbouring pump in your polder. And we’re all down in the polders together. It’s not the case that rich people live safely up on tops of the dikes while poor people live down in the polder bottoms below sea levels. If the dikes and pumps fail, we’ll all drown together”.

Diamond concludes that most of the needed technology to not drown together already exists. But what is crucial is to also make the right choices towards long-term planning, and willingness to reconsider core values. He finishes his book by saying: “Thus, we have the opportunity to learn from the mistakes of distant peoples and past peoples. That’s an opportunity that no past society enjoyed to such a degree”.

So, let’s learn from the past, understand the value of transparency and make a real difference! Educating sustainability and finding the right parables to make people understand what is at stake is probably the biggest challenge we need to solve. 99% of the people of this planet still don’t have a clue.

 
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Posted by on July 21, 2010 in Back to basics

 

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Sustainability – the next Kondratiev supercycle?

One of the last editions of “back to basics” did focus on the ongoing discussion about managerial trends and was proposing that sustainability needs to get into the DNA of management practice, starting from the Board room and supported from bottom-up, which will of course only happen if management theory accepts sustainability as a principle that keeps the organization alive (license to operate) and embeds the opportunity to prosper (license to grow). It remains to be seen what the consequences will be for Weber-type demand and control hierarchy, for the ongoing increase of workload for less staff in efficiency driven management programs, the ongoing segmentation of work packages in a Taylor-style way and one-way communication to customers. The champions of the last decade, including Google, Starbucks, Yahoo, ebay, but also Gore (not Al, but the textile company ;-)), Timberland and others throw a lot of this over board, use seamless stakeholder engagement and web 2.0 technology to enable internal and external networking communities and shape their business models. The internet development marks the most important milestone of the 5th Kondratiev supercycle, and at the same time shapes the path into the 6th Kondraftiev cycle; maybe this next supercycle will carry the name “sustainability cycle”?

Here’s a quick Wikipedia explanation of the phenomenon of so-called Kondratiev cycles (see http://en.wikipedia.org/wiki/Kondratiev_wave) : “The Russion economist Nikolai Kondratief (1892-1938) was the first to bring these observations international attention in his book “The Major Economic Cycles” (1925). (…) Early on four schools of thought emerged as to why capitalist economies have these long waves. These schools of thought revolved around innovations, capital investment, war and capitalist crisis. According to the innovation theory, these waves arise from the bunching of basic innovations that launch technological revolutions that in turn create leading industrial or commercial sectors. (…) Most cycle theorists agree on five waves so far since the industrial revolution, and the sixth one to come. These five cycles are

1.    The Industrial Revolution—1771,

2.    The Age of Steam and Railways—1829,

3.    The Age of Steel, Electricity and Heavy Engineering—1875,

4.    The Age of Oil, the Automobile and Mass Production—1908,

5.    The Age of Information and Telecommunications—1971.”

All new supercycles are normally aligned by recessions and/or wars; both tendencies are currently eminent. It is clear that from a technology perspective this next supercycle will focus on technologies that aim to sustain human life on this planet; health care, biotechnology (biomimicry etc.), next generation renewable energy and also – although conflicting – gene technology are subcategories. Even visionary concepts for the next generation internet is taking biological processes as the basis for further adaptation.

For all of us working in organizations and dealing with management issues one of the most important questions will be: will biology and its inherent logic of adaptation and communication also bring about a new mangement style? Will the next Kondratiev supercycle include innovation in technology AND management? Will we see a continuous flow of newcomer organizations becoming big in short time just simply because the earlier cycle champions became to slow to adapt because of their structure and size?

When I worked for the GRI I realized that the GRI itself was part of this change towards a new supercycle: first of all the existence of GRI as an organization is a logic answer of interested stakeholders – like many other GAN’s (Global Action Networks) – to the slow adaptability of world trade mechanisms, governments and companies with regard to the overall transparency needs of a fair and successful implementation of globalization. The idea is that world markets can simply function better (and will survive) if sustainability is accepted as the roadmap and the necessary transparency needed is available. And that needed to be organized globally.

GRI’s G3 Guidelines purposefully ask in great depth what management’s reaction to these new challenges will be. Is sustainability part of Board room discussions and is the organization aware about its impacts on sustainability issues? Vice versa, how do sustainability problem areas already affect strategy and business models? (see GRI G3 chapter on ‘Strategy and Analysis’). G3’s Disclosure on Management Approach then asks how the results of this analysis are translated into the management system implementation.  Last but not least G3’s indicators ask about the performance achieved and the targets and objectives aligned to them. In that sense using G3 and implementing a proper reporting process are a useful means to increase the above described adaptability.

Four years after the launch of the G3 Guidelines – now working at Deloitte – I realize how little information is still published in sustainability reports to really answer these questions. There are many reasons for this phenomenon, the short-term thinking (also triggered by the financial crisis with many companies in ‘cocooning’ mode) being only one of them. The biggest problem I think is a mental one: the mountain is just to high to think standing on top is realistic, so let’s continue with the little steps and probably find a new base camp. In depth stakeholder engagement  is still too much seen as a threat, and not as an opportunity, hence a real integration of sustainablity into the DNA of an organization still not achieved. The reality of Kondratiev’s new cycle will show that ‘to be less bad is not good enough’ in this next cycle, so it’s worth climbing ‘Mount Systemic Change’, the current base camp will most probably be hit by an avalanche at some moment!

 
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Posted by on June 13, 2010 in Back to basics

 

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Sustainability and the ‘invisible hand’ of the market

The critics of the concept of sustainable development and CSR always argue with Milton Friedman’s famous quote that “the business of business is business” and also refer to Adam Smith’s metaphor of the “invisible hand” that would guide the markets. They see especially CSR as an attempt to more regulation through the backdoor and a way to restrict the market power and the players within their specific markets; overall CSR is bad for modern capitalism. Even worse, one could interpret this combination as a permit for amoral behaviour and a plea against regulation that restricts ways to pursue self-interest.

But wait a minute! When Adam Smith published “An inquiry into the nature and cause of the wealth of nations” in 1776, partnerships were the dominant form of enterprise in which ownership and management meant the same thing. In this context is also useful to understand that Adam Smith was against chartered corporations and joint stock companies that were formed by Act of Parliament or by Royal warrant as ‘exclusive’ monopoly entities. Adam Smith did not oppose all joint stock companies (he recommends such arrangements for such as banks, insurance, viaducts, and canals, provided they were not awarded monopolies). His main complaint about the chartered trading companies were their monopoly status, their lack of supervision (18 month’s round trips of messages from London and back via India) and their integral part in the mercantile political economy of the day which he criticised severely in Book 4 of Wealth Of Nations.

Sad but true, most lobbyists of the “invisible hand of the market” metaphor are not aware that Adam Smith did also publish “The theory of moral sentiments” in 1759, where he explains that the self-interest of the market players (buy and sell side) needs to be pursued by people of conscience and with a clear moral capacity; he argues that sympathy is required to achieve socially beneficial results. The self-interest he speaks of is not a narrow selfishness that allows whatever market transaction, but something that involves sympathy. He regards pure selfishness as inappropriate, if not immoral, and that the self-interested actor has sympathy for others. He continues that the self-interest of any actor includes the interest of the rest of society, since the socially-defined notions of appropriate and inappropriate actions necessarily affect the interests of the individual as a member of society.

I would argue that Adam Smith’s idea of the self-interested market player that has developed a moral capacity and can make informed market decisions with the aim to achieve socially beneficial results will find a lot of merit in integrating sustainability thinking and CSR as a tool to implement that thinking into his/her understanding of necessary fair market conditions: a better understanding of the needed changes in legislative frameworks (and its enforcement) to support sustainability as a means for fair markets (so no monopolies), a changed mindset about the basic role of a company (counterpoint to Milton Friedman), the need for broader education on sustainability issues in all economic curricula (to disable amoral behaviour and enable Adam Smith’s concept of “sympathy”), and a broadly developed set of indicators of economic, environmental and societal impacts of the transactions of the organization and of the individual (to increase the available information to make good market decisions).

Adam Smith, a sustainability activist more than two centuries ago – a very different take on his legacy? At least he was somebody sustainability advocates of today can lend more credit from than the narrow-minded lobbyists of modern capitalism who haven’t got the whole story about Adam Smith.

[Remark: this blog entry benefited from an earlier remark based on an blog that I posted during my time at GRI in late 2008, from Prof. Gavin Kennedy, who writes a great blog called “Adam Smith’s lost legacy”, see http://adamsmithslostlegacy.com/BlogBlog.htm]


 
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Posted by on February 21, 2010 in Back to basics

 

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