In many ways, the Rio+20 Earth Summit is a huge distraction; with an estimated 50,000 participants, and so much time, money and energy spent on negotiations for something that, in reality, is non-negotiable. While the politicians and other interest groups debate and water down draft agreements, one wonders how we could ever think that our Planet might make concessions on carbon emissions, scarce resources, poverty, and so on; let alone the timescale for mankind to take meaningful action, and deliver real and lasting improvements? Does the planet care who started it all, who produced what in the past, or who wants growth going forward? We are dealing with finite limits right here, right now, and the political/negotiation model for change is simply not fit-for-purpose. That is not to diminish the good intentions carried by many that participate, but merely a comment on the flawed nature of the methodology. We need to get more scientific, more focused on reality, and worry less about seeking the illusory political consensus.
Rather than going to Rio, perhaps we had ALL just better get on with it. Or, as Simon Zadek, Senior Fellow at the Global Green Growth Institute, calls for green unilateralism: for countries and regional groups to deliver the necessary changes through pursuing their own economic interests. Presumably, by extension that also means businesses, communities and individuals taking action aligned with their own, albeit enlightened, self-interests? More work is certainly required on the enlightened bit here; greater levels of education and awareness on the real issues, choices and solutions are needed right across the population.
And why is it so difficult to make meaningful progress? The perceived stumbling block is always the apparent, yet false, dichotomy between the environment and economy. Everybody is happy to sign-up to the sustainability agenda, so long as we don't need to give up too much, such as our corporate, political and personal addictions to fossil-fuel-powered-economic-growth, or at least the illusion that this could somehow be maintained. As the Guardian's Jo Confino reminds us this week, there are also plenty of incumbents and vested interests that would keep us addicted for as long as possible, presumably right up until the last responsible moment? We will never get turkeys to vote for Christmas, so surely we shouldn't even try?
And in any case, this is false choice. These issues are not only inextricably linked, but the successful integration of sustainability and economy is essential to our future survival and prosperity. Without a sustainable planet, resources or energy, there is no economy, or business to worry about. The biggest risk is if we allow ourselves to get caught in an ideological trap defined by 20th century thinking of growth versus environment. Thankfully, the emerging models for sustainable business are powerful, as they elegantly manage to integrate all these dimensions, as well as long-term profitability. Becoming sustainable just makes good business sense, or as Ray Anderson (Founder and former Chairman of Interface, sadly no longer with us) put it "I never did see the business case for unsustainable".
Whether we all like it or not, the world is going through a process of creative destruction, and we must now adapt, rather than negotiate. What may have appeared to work reasonably well in the past is now looking less robust, in the face of real and fundamental challenges. It is becoming abundantly clear: the era of cheap energy, unlimited resources, and unfettered growth is over. There is a shift in power away from the West, growth is elusive, developed economies de-leverage their debts, commodity and energy prices are rising, and climate change is starting to impact. Economies, businesses, and societies are all going through massive changes and shifts in response to these and other dynamics.
Adapting to these changes could make the difference between prosperity and survival. And there is no hiding place; some large, apparently 'bullet-proof' names may yet be among the casualties. One cannot assume that just because you have a big-brand business, with many customers today, that want, and can apparently afford your goods and services, that they will be able to do so in the very near future.
Any business worth its salt will be watching the radar intently, and developing appropriate strategies to make sure they are suitably resilient, profitable and able to thrive in a 21st Century economy. In spite of the lack of clear and supportive policy direction, business leaders and boards everywhere need to be alert to the strategic icebergs on the horizon.
Sometimes it feels like we are in a time of 'peak everything'. It is highly likely that the combined impact of these strategic factors will be massive. For many of us, it can almost feel too big to get our heads around, at times. But we have to be aware and avoid the tendency for 'wilful blindness', and resist the vain hope that it will all go away and BAU will somehow return.
But that's not all. The next financial crisis is already predicted, mainly because we haven't addressed the fundamental weaknesses in our global economy. Will it be imminent, or perhaps as far away as 2015? Either way, as Umair Haque writes 'Ultimately the failure to create authentic economic value catches up with every company, country and economy'. It appears to be a question of when, rather than if we reach this point.
Perhaps we will see a great re-structuring? Many commentators, including Farrell, Gilding, Haque, Korten, Porritt, Stiglitz, Wolf, the New Economics Foundation, and others identify the need to restructure our economies: based on need, rather than consumption; on the generation of real wealth, rather than speculation; involving fair exchange, rather than abuse of power; and with new institutions to ensure our markets work properly: a more sustainable approach for the greater good.
HRH The Prince of Wales also called this week for "A new economic framework that puts nature's own ingenious economy and social well-being at the heart of our thinking." In short, a call for Capitalism 2.0 - a vastly upgraded operating system. This also builds on Al Gore's definition of Sustainable Capitalism; a model that seeks to maximise long-term economic value by reforming markets to address real needs, while integrating environmental, social and governance (ESG) metrics throughout the decision-making process.
We have the opportunity to act, but this would mean a massive change to the way in which our economies would work. Some might say it would be getting back to the 'roots' of capitalism, with more emphasis on free trade, local economies, re-localised production, owner-managed businesses, and less about rigged markets and unhealthy corporate domination. Whatever the outcome, these dynamics and the next crisis will have a profound and lasting impact on our economies, along with the goods and services we all decide we want, and how much we can afford to pay for them.
As well as affecting the demand side, a restructuring of our economies will impact on the supply side, too. But with such change, there also comes opportunity; it is not all about downside risk. In a re-localised economy there could be a wealth of opportunities, especially for new business start-ups and for SMEs. There may be less emphasis on the virtual, and more on real needs. Not to put too fine a point on it, when faced with the dilemma of whether to buy food, heating, a new car, or even the latest video game, the answer for 99% of the population will be painfully easy to reach.
This unprecedented combination of events means we are in completely new territory, and the ability to deal with all this needs vision, leadership, and courage; to be able to look beyond the current system, beyond the difficulties, and to take on the real challenge of transformation, to take our businesses to a better place, another model we have not seen before. We of course need the politicians to do their bit, but there is so much that businesses can just get on and do, right now.
First of all, business leaders, and their sustainability advisors, need to get brutally strategic, and honest, about what is really coming up and the likely impacts on the business, its customers and how money is to be made. It is time to look at that big picture, think the unthinkable, and consider the real impacts (however painful) on our business models and operations, and start developing some creative solutions. This is a time to be radical, really radical.
Simply embarking on an eco-efficiency programme is not necessarily a guarantee of success, either. It is entirely possible to be making great strides in carbon, energy and waste reduction, but still go out of business. Aligning sustainability with operational cost reduction is still a good idea, but it is not necessarily sufficient.
No. The icebergs on the horizon raise too many questions about the efficacy of our products and services, and how we will continue to make money in the 21st century economy. We need to understand these dynamics, and identify how business models will need to evolve, or in some cases even radically change, to make sure we are still around and earning reasonable returns. We need to ensure our products are both economically and environmentally sustainable.
Approaching this challenge requires all of us to look through a new lens, as conventional fixes are shown to be lacking. This is where circular economy principles can help, not just in terms of optimising the level of resources we retain in productive use, but also in terms of the flow of money in a productive economy. But even this doesn't provide all the answers, especially around socio-economic issues, but does at least go some way to enable economic growth in a resource-constrained world.
In delivering sustainable business, it may also be necessary to review our ownership models. If we are too heavily reliant on external shareholders, not only are we constrained in our ability to take long-term decisions, we could also be fatally exposed when a further stock market crisis hits. Is the conventional PLC format adequate, with its relentless expectations on short-term profit only? I'm not so sure. Alternative formats, such as worker-owned cooperatives and the more ethical PLC models pioneers by organisations like Triodos Bank and Café Direct could offer greater flexibility, resilience and a more equitable distribution of real wealth.
What we need is wholesale realignment of business strategies, towards a new economy and Capitalism 2.0 based on values, sustainable business models and strategy, innovative shareholder ownership models, and enlightened approaches to working with and reinvesting in the supply chain.
There is no doubt this will mean a major economic transition, and what comes out the other side may not look much like the economy we have, on the whole, enjoyed over the last few decades. Whether we like it or not, capitalism will need to evolve, either by design or by the impact of events, and this will have direct consequences for all businesses.
Whether we have a smooth transition, or something akin to Paul Gilding's 'great disruption', will largely be down to our collective response. Time will tell. As businesses aspiring to become more sustainable, we need to make sure our business models are sustainable first, and then to deal with the thorny issues of transition. This is a time to be bold.
And coming back to Rio+20, perhaps the next Earth Summit should be repurposed? Let's face it, we know we ALL have to achieve at least 80% reduction in carbon emissions by 2050 (only 37 years away). We had best just get on with it, and report back on how we are all doing, share our challenges and solutions, and collaborate to find our lasting sustainable future in this beautiful planet of ours. I know this is perhaps naïve and simplistic, but surely now, more than ever, we need to keep it simple? And let's remember, the window of opportunity is limited. As Joel Makower said back in March 2009, we have only 5,000 days left. By now it must only be around 3,800 days. Time is short - best we get on then.
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