Integral Thinking & True Materiality – Part 3/7: Purpose Defines Connectedness

This 7-part series has been first published on Sustainable Brands between late January and early March 2016 as a 6-part series and a follow-up by Bill Baue, co-founder of Convetit and the Sustainability Context Group. It captures the essence of my thinking I was able to gather through the extraordinary work of the Reporting 3.0 Platform, GISR and the ThriveAbility Foundation in 2015. What came out is a structure that I called a ‘new impetus embracing purpose, success and scalability for thriving organizations’. I am reposting the original 6 parts here and add a part #7 with reflections of others. This is part 3/7.

In Part One of this series, Diagram 1 showed an overview of the three main areas of the proposed change need for integral thinking and true materiality; Part Two explained why we need this new impetus. Part Three now tackles the upper section of the triangle – the need for chrystalizing purpose to better show connectness to the problems that need to be solved in interrelated ways.

Diagram 3: Integral thinking and true materiality need a renewed focus on the purpose of the organization and connectedness to the economy we want to live in.

It has been interesting to see how the discussion about ‚the purpose’ of an organization or an economy has moved into the forefront in the last 1-2 years. The 2015 numbers of the Global Footprint Network (GFN) or from UNDESA on population, consumerism and the environment [insert link] are just telling one striking story: as a species, we humans are on a slow death path.

The fact that the ‚human’ role in sustainability now gets back into the focus simply shows that it dawns on us that we forgot to take people on board of the sustainability journey, in companies as well as in private circumstances. Sustainability is not exciting for the majority of human beings. We see constant shoulderclapping about reports in which we are told how much less bad a reporting entity became, without any ‚North Star’ that could tell us what is ‚minimally good enough’, or what would lead to an envisioned future beyond just having a ‚zero negative impact’; this was sucked up by our frugality of installing sustainability departments that took care of policies, management systems, reporting and assurance. The ‚three gap problem’ as discussed in Part Two of this series led to a reduced understanding of sustainability in which essential aspects of sustainability like ‚people, planet and prosperity’ became ‚people, planet and profit’ and intergenerational equity fell by the wayside.

In consequence, Sustainability Context still remains the most neglected Content Principle of any GRI-based sustainability report. Seldom does a reader understand the ‚world view’ of a company, its leadership advocation to change the economic system towards serving a green & inclusive economy, and how the product & service spectrum offered makes a positive contribution (instead of less negative impact), alone or in collaboration / co-creation with others.

It is amazing to see how disconnected sustainability or integrated reports are with ‚the whole’ which we are contributing to (or not). Reporters typically claim it’s too complex to envision a different economic model, exploring a new level playing field in which market mechanisms can automatically work towards an aimed-at state of being regenerative and inclusive. Isn’t that what scenario analysis was invented for?

We developed our current economic model as one set of conventions, and it is up to us to change that for the better. Haven’t we already decided to aim for a green & inclusive economy at Rio+20 in 2012? So where are we with that? There are indeed some positive prompters here:

• There is a whole set of macro datasets that show the ‚global pulse’ of our continued negative pathway, which means a better understanding of the interconnectedness of our doing and its effects on the planet is more and more possible. Various IT networks, data providers and technology firms work on making ‚the whole’ visible, up to artificial intelligence (AI) approaches (see a variety of these in the Reporting 3.0 2015 conference report, http://www.reporting3.org). The main issue here is to translate that into data clusters that corporations can use for their ‚micro-macro’ impact interpretation.
• A variety of companies and development organizations work with the idea of Creating Shared Value (CSV) as proposed and vividly defended by Porter and Kramer for years. While definitely a good learning approach, CSV doesn’t yet prove to be able to either move the concept beyond the ‚feelgood’ areas of collaboration and co-creation; the nasty issues aren’t really solvable since they need new ‚rules of the game’, a normative approach to global change. And secondly, CSV aims at optimizing within an existent frame of economic system boundaries. We won’t get to a sustainable or regenerative economy without also tackling those economic system boundaries to create new level playing fields in which industries can transform. Porter and Kramer, it seems, remain in the 1990s thinking of enlarging competitive advantage with creating (extra) shared value.
• The Sustainable Development Goals are an interim step towards learning to understand thresholds in a context-based sense, leading to less-bad impact, probably a planet of ‚Zeronauts’ (to stress John Elkington’s brilliant book from 2012). The translation to apply and measure contributions in the corporate world, in local and regional circumstances as well as globally, is still to be developed. A plethora of initiatives are underway to find out, and hopefully it will be a training area to explore the possibility of thriveable, gross positive impact as the greatest innovation boost ever. Each company needs to define where they stay in the continuum that the ThriveAbility Foundation has offered, see the following diagram:

Diagram 4: The strategy continuum to assess a company’s position in a world that needs to leapfrog from surviving to thriving (Source: A Leader’s Guide to ThriveAbility, page 18).

• Kate Raworth’s ‚Doughnut’ model, showing environmental ceilings and social floors, has given us a 2-dimensional picture of interconnectedness, but only good enough to get us from suffering to struggling – it misses the ‚operating system’ to create real thriving. This model needs adaptation to become 3-dimensional, adding the component of human transformation to accelerate positive change. This is what the ThriveAbility Foundation recommends to get us from stage 1-3 of the above diagram to stages 4 and 5, and in consequence appeals to a change from an ‚ESG Push’ towards a ‚GSE Pull’, addressing authority, decision-making and accountability in one stringent approach. This needs leadership in ways that until now only a Ray Anderson (Interface), Paul Polman (Unilever), Sir Ian Cheshire (ex-Kingfisher) and some other corporate leaders have shown. Only through this advocacy will we get to economic system boundaries change addressing the ‚macro-micro change area’, mainly though the combined integration of external effects into cost accounting, translation into pricing mechanisms, and counterbalancing those effects by a drastically changed tax and subsidies regime on a global scale. The work of Trucost, the True Price Foundation, Ex’tax and others in this area are therefore essential to get this masterplan done over time, together.

So, imagine a sustainability and/or integrated report that showcases a reporting organization’s contribution through a chapter on purpose and connectedness. What would a reader expect to see answered? The below are examples of what I personally would find substantial in that area.

On Contextualization:

• Does the company have a ‘World View’ and a long(er)-term idea of positioning in the continuum from ‘Compliance’ to ‘Thriving’ when it comes to impacts and outcomes across the multiple capitals? Where does it want to be in the future?
• Is there one strategy, or does the company have a separate sustainability strategy (which should be avoided, as it signals sustainability as a side issue)?
• Is the corporate strategy based on affecting the root causes of global non-sustainability, or is the strategy just based on curing symptoms of non-sustainability (like the majority of companies do at this moment)?
• Are there various scenarios in which the company is testing its possibilities to impact and gets addional insight into its long-term positioning?

On Leadership:

• Is the socio-cultural leadership gap addressed (part of the three-gap problem)?
• Are company leaders assessing the transformation blockages in the sustainability gap (also part of the three-gap problem)?
• How is sustainability visible in the organizational hierarchy? Is sustainability integrated in strategy and governance so that the sustainability team could veto non-sustainable corporate decisions?
• To what extent is the leadership group aware about a responsibility for sustainability above and beyond the legal construct of the organization?
• What does the company contribute to asks or campaigns to change the unsustainable boundaries of our current economic system, e.g. trade barriers, unsustainable subsidies, political lobbying, testing new ‘level playing fields’ through the combination of true costing, true pricing, true taxation?

On Ambition Level:

• What’s the company’s view on growth? How does it differentiate sustainable from non-sustainable growth?
• How does the company define its ambition level and how are short-term targets derived from succeeding its long-term ambition level (e.g. through back-casting)?
• How are all employees included in defining the purpose and connectedness of the corporate strategy to sustainability?
• How does the company differentiate efficiency gains, productivity gains and their respective rebound effects vis-à-vis the need for sustainable innovation?

It is these questions that build the ‚glue’ and segway into the vision of performance beyond just doing the minimum needed. It would add to the idea that current approaches don’t add up altogether and that technology alone won’t cut anything without the humans on board. This is tough work in hierarchical structures and even tougher in multinational companies. But it honestly the only way we can deliver. It is time for new conventions.

 

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?