This is the review I referred to on the Ashridge Sustainabilty Blog.
It is presented here by permission of the Ashridge Virtual Learning Resource Centre (VLRC). If your company is interested in joining the VLRC please contact Andrew Mechelewski via the Ashridge web.
The Necessary Revolution: How Individuals and Organisations are Working Together to Create a Sustainable World, 2010: Peter Senge, Bryan Smith, Nina Kruschwitz, Joe Laur and Sara Schley. Nicholas Brealey Publishing, London.
Reviewed by Edgar Wille. February 2010
This book offers a comprehensive survey of the issues involved in sustainability development. It is not a “Doom and Gloom” book. It has many encouraging stories of how companies are taking action to protect themselves and society from the disaster that could come through complacency. It sees society and therefore business as entering a new era which will be distinguished from the “Industrial Age” which is regarded as coming to an end. Market capitalism will still exist, but not in the uninhibited form which puts profits ahead of the needs of humankind as a whole. The bottom line of business will not be purely financial, but will have to be a triple bottom line, taking account of social and natural capital. We will have to live within the limits imposed by the renewable resources of Nature, not making demands upon Nature which leave it too little time to renew and avoiding wasteful use of non-renewable sources, such as oil and gas, which when they have gone will leave a serious void, unless we have moved to natural renewable energy. Furthermore, we shall need to tackle the problem of waste, either by using synthetic waste as raw material for recycling (eg new cars out of old ones) or natural waste as food to renew nature. These issues are global because nature and society are a system, where everything interacts with everything else.
These book reviews offer a commentary on some aspects of the contribution the authors are making to management thinking. Neither Ashridge nor the reviewers necessarily agree with the authors’ views and the authors of the books are not responsible for any errors that may have crept in. We aim to give enough information to enable readers to decide whether a book fits their particular concerns and, if so, to buy it.
There is no substitute for reading the whole book and our reviews are no replacement for this. They can give only a broad indication of the value of a book and inevitably miss much of its richness and depth of argument. Nevertheless, we aim to open a window onto some of the benefits awaiting readers of management literature and to encourage constructive debate.
This is an outstanding book covering comprehensively the environmental and related economic and social problems facing the world today which will undoubtedly change the way we do business in the future. Yet the book adopts a positive approach to the issues which we nowadays refer to under the heading of “sustainability”. It is not a doom and gloom book; neither do the authors, led by Peter Senge, take up an extreme position, though they certainly believe that the issues are serious. If they are not addressed globally in a determined manner we could be facing the collapse of civilization as we have known it.
The book gives many examples of a hopeful nature, where companies of all sizes are introducing revolutionary innovations to pre-empt such a fate. The authors also give us guidance on how we as individuals and as companies can make our contributions in a collaborative way.
Defining Sustainable Development
Sustainable development is defined in the words of the Report of the World Commission on Environment and Development, published in 1987, entitled “Our Common Future” and generally known as the Bruntland Report after the chairman):
“Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”
This definition came alive for me as I read one of the stories in the Senge book, where an active worker in the field of sustainability was asked why she was so involved and committed to the work. Her reply was “Because I’m a mom”!!
We are led to think of sustainability within the environment as embracing three main areas of concern: • Food and water
• Energy and transportation
• Overuse of earth’s resources, along with waste and toxicity.
Sustainability, or its erosion, radically affects people and therefore must include concern for their welfare. There is a social aspect, such as the problem of the ever growing gap between rich and poor countries, and between individuals within countries, which makes for an unstable world. And it also demands our active compassion, when we realise that two thirds of our fellow humans live below the poverty line.
Limits to Growth
Senge and his colleagues base their analysis on systems thinking, whereby we think in wholes, not looking at problems as individual fragments, but as all linked together, so that what happens in one field of activity in society or in nature can influence all the others. How we affect the natural world can have serious unintended consequences, both for nature and for ourselves. This is particularly so if we transgress the limits to growth and allow our Western consumer society to continue to grow. Less fortunate nations reasonably seek to share our apparent prosperity, and together we shall exceed the limits of the planet and be unable to sustain life as we have known it. This will be exacerbated by the growth in world population. We should need an extra planet and there is not one available to us. On the one hand, we have non-renewable resources extracted from the earth. They are largely based on fossil fuels which when extracted by humans cannot be replaced, being the products of millions of years of development. By the time gas and oil are exhausted we must have developed alternative sources of energy, and basic materials for manufacturing, ie the natural capital springing from nature under the influence of the sun and the process of photosynthesis, plus harnessing of wind, tide and other natural processes.
On the other hand, we have renewable sources, which we are already overusing and are thus in danger of not giving them time to renew themselves.
Moreover, we fill the earth with the waste we create from our use, both of renewable and non-renewable sources, and we thus spread the by-products of our activity as pollution and toxicity into the flow of natural life.
Cradle to Cradle – Using waste positively
We therefore have to reduce drastically our use of non-renewable resources and at the same time ensure that our use of natural resources follows paths whereby any waste from our activity is used as food for them to perpetuate the cycle of nature, instead of piling up on landfill sites.
In order to avoid stacking up landfill sites with waste material from non- renewable sources, our authors give examples of how initiatives have been taken to work on a “cradle to cradle” basis. This means that any waste from manufacturing processes has to become the raw material for new manufactured items. Automobiles, for example, can be built so that at the end of their useful lives they can be easily disassembled and be re-used in the making of new cars. Examples are given of firms that are doing this in a big way and even collaborating in the shared use of facilities to take the new raw material (previously considered as scrap and waste) to nearby disassembly centres, rather than using transport, with its carbon emissions, to more distant single company central sites.
Much of the non-renewable mineral and other products used in manufacture and processing become an output of waste. Often only 10% of the extracted material finds its way into the actual product and the rest is waste. This is described as “material extracted from the earth for a brief visit to customers on its way to the landfill”. Witty but sobering! Millions of years creating the stuff, a small proportion of it is then turned into, say a car, which after a few years is scrapped and returned to landfill to join the 90% that is already there.
The EU has created a scheme to avoid this multiplication of waste by making this “cradle to cradle” approach mandatory within its territories. Under the EU directives on Extended Producer Responsibility(EPR), if you sell a new automobile in Europe, you, the producer, are responsible for taking the car back at the end of its lifetime. This legislation has been extended to setting phase out schedules for a variety of toxic materials.
The directives are based on the maxim: “if you make it, you own it forever”. This principle actually gave financially beneficial opportunities for manufacturers, who are increasingly pursuing a policy of leasing their products such as automobiles and other goods such as carpets (eg the Interface company). They keep control of their products’ life histories, replacing them in ways and times most suitable for recycling. The customer for an automobile, in effect, buys only the value of transport, enshrined in a temporary vehicle.
Carbon emissions as harmful waste
Waste also escapes into the atmosphere in the form of emissions from the fossil fuels that have been used in the manufacturing, processing and distribution processes. This then enters the processes which are responsible for global warming with all the dire consequences that can bring if we don’t wake up.
One of the current worries is that because there have been mistakes – and worse – made by some scientists, people will become complacent and become sympathetic to the climate change deniers. If only half of the worst prognostications come to pass we should be foolish if we had done nothing to reduce the dangers by firm action. It is interesting to note that the concerns of this book are not primarily with climate change, other than as one serious ingredient in our concerns, but rather with the whole business of the misuse of natural resources and the impeding of nature by our addiction to a consumerism that produces enormous quantities of waste and toxicity.
Two types of waste treatment
The renewable resources of nature do produce “waste” in the sense that not all the matter is used in the processes we are engineering. This happens in nature too, but what does nature do? It uses these wastes as nutrients to regenerate the natural products of the earth; the leaves and parts of fruit and vegetable not consumed as human and animal food, become compost which feeds new crops of fruit and vegetables. The authors of the book introduce us to bio-mimicry in which we imitate nature, so that what we don’t use directly provides nutrition to still growing produce.
So there are two kinds of treatment for waste:
• the technical recovery of material to be used as raw material in making new products, but remembering that the original material we extracted is a case of permanent depletion in the time frame of history
• the natural use of waste from employing natural material in regenerating the earth and its products. This applies to how we should be treating our water, soils, crops, forests and fisheries. It has to be accompanied by our not harvesting what nature provides more quickly than the time it needs for renewal. But unfortunately we have been failing to recognise this principle and we are running short by allowing our usage to operate faster than nature’s needed time for renewal.
The authors tell stories of companies which took action which reflect these principles and in doing so not only contributed to “saving the planet”, but also reduced costs and enhanced profitability for themselves.
Alcoa, the large aluminium corporation, became aware of the large amount of water they were using and the vast quantity of waste. So, first a small group of their employees of all levels were invited to come up with ideas, in which there were no holds barred. This search was then thrown open to thousands of employees. They asked questions previously regarded as having no answers. They asked “what if?” questions. What if we could send no waste to landfill sites, use no water and create no emissions of greenhouse gases and toxic chemicals? Water usage and greenhouse gases fell by large percentages, and landfill usage by fifty per cent in five years, with a 2015 target of a 100% reduction over the year 2000. Among the ideas implemented were closed loop rinsing and cooling processes, where the same water is used repeatedly within a self-contained system. And the reduction in operational costs was phenomenal. In their thinking they decided to ignore boundaries and also to get on with pre-empting possible future dangers without getting involved in scientific debates about the figures. If something could go wrong, let’s be ready, by doing something now. They began to design aluminium plants that required no water and waste systems based upon complete recycling.
Coca-Cola – Coke – set themselves the goal in 1997 of zero net water discharge. They were initially concerned about internal efficiency of water usage in their bottling plants, but realised that they must take note of the feelings of local people in India who were suffering from drought while Coke were using water prolifically. True, they were using it from a deeper source and were not worsening the local situation, but it was not perceived that way and therefore it became an urgent PR issue which could be met only by engagement with the whole water problem. So they resolved to give back to nature the water they extracted, and became involved in a worldwide study of watershed systems. In this they formed an alliance with the World Wildlife Fund (WWF) and discovered how working with knowledgeable NGO’s could be valuable to both sides. Coke’s water activities have been revolutionised. The value of working with well informed, but cash strapped, NGOs became visible to other organisations and has caught on.
In both the above cases the companies discovered for themselves the value of systems thinking, where one makes advances when one thinks in wholes. The relationship of one part of nature and human activity links with many others and action has to be comprehensive, instead of looking for quick and limited solutions to problems. Then problems actually create opportunities.
Nike resolved to get dangerous chemicals out of their shoes, and got their designers on course by the approach that they were not merely trying to avoid something bad, but actually to do something which would be permanently good. Nike people liked innovating as part of their business philosophy and through the impact of sustainability they advanced to new design approaches. They designed a totally re-cyclable shoe and a running shirt that was completely compostable. Conversations raged throughout the company, which from a poor reputation due to labour conditions in their supply chain, now moved to being one with long range goals of “zero waste, zero toxicity and 100% closed loop products”. This involved influencing suppliers and the creation of networks which spread the message and the opportunities.
The Building Industry. Other stories are told of energy being used innovatively, such as using the sun on hot sunny days to maximise, by solar panels, the provision of power for air conditioning in homes – harnessing the sun to help when combating its effects was most needed. Building design is now introducing ways of capturing heat which previously used to go to waste, and to do this by the positioning of windows and solar panels, diverting kitchen heat into other parts of the house, and generally taking a systems thinking view of a building so that everything is designed to support everything else in terms of energy usage. In the US this has led to the formation of LEED (Leadership in Energy and Environmental Design) and the Green Building Council, which now has counterparts in many other countries. These bodies have influential rating systems.
The book also has encouraging information about what many other companies are doing, including General Electric, Xerox, DuPont and BP.
The Tragedy of the Commons
Some of the stories we have been re-telling illustrate the importance of collaboration even among organisations that as competitors tended to frown on close relationships with their peer companies, but who are now finding themselves networking with them. This takes us back to the story of the “Commons” and forward to the development of a new model of capitalism.
In “the old days” villages were centred round shared pasturelands. Anyone was free to drive their cattle and sheep there to graze. These “commons” were important to the welfare of the villagers. However, there were limits to how many animals could be accommodated; to exceed this would diminish the value of the commons for everyone. But of course some were greedy and took more than their fair share by driving more of their animals on to the pasture than was fair. Others would then take the attitude that “if he can do it then so can I” and so the land was overgrazed as the villagers competed to put more and more animals on to the territory. Short term, the greedy might prosper, but it would not be long before everyone would suffer as the quality and, finally, the quantity of available pasture declined. The grassland became parched, brown and weed infested until it was useless, a mud patch in winter, a dust bowl in summer. That is exactly what we have been doing with the planet as a whole. It is a parable of the issue of sustainability.
The parable of the Fisheries
We don’t have to go back into history for a similar parable, several times discussed in the Senge book. It is the story of fisheries.
There is a worldwide trend toward overfishing, which could lead to the end of the fishing industry, for large companies and local fishermen alike. Some experts suggest that by the year 2050 there will be no fishing industry, unless decisive action is taken. Fishing boats go out and catch as much as they can. They and their competitors make as much profit as they can, assuming that bigger catches mean more profit. And so they may for a while. But the more they catch and the more their profits boom, the more disastrously are the fish stocks being depleted. Senge produces a graph to illustrate this. Unless they cooperate and agree to stop limitless fishing there will eventually be no fish to catch.
Our whole society is like the fishermen, overusing every kind of resource until we breach the limits of most resources beyond repair. If society is to avoid ultimate disaster there has to be cooperation and even the word “competition” has to return to what Senge et al tell us was its original meaning, “to strive together”.
We have to take our example from what the authors describe, quoting Jared Diamond in his book, Collapse, about the behaviour of the inhabitants of the remote Pacific island Tikopia. It comprises only 1000 acres. It supports 1200 inhabitants, with a population density of 800 people per square mile of arable farmland. They have survived, thanks to an intensive knowledge and management of their environment. “To ensure continuous and varied food production they practice sustainable forestry and use of freshwater swamps; they limit seafood catches by means of tribal taboos, and they forgo slash and burn agriculture practiced elsewhere.” They had been practicing birth control long before the West. They have a high degree of collective decision making and a networked power structure.
The Fish banks simulation
There is a computer simulated game, called Fish Banks. It is not unlike Monopoly. Teams run imaginary fishing companies. Each begins with a small fleet of boats and a positive bank balance. They can buy new boats and can choose the kind of fishing they want to do. They also have information about how quickly fish regenerate. The aim is to make profits by maximising their fish catch and keeping costs low. One hour of the game is the equivalent of ten years.
In two decades of running the game, almost every game “results in early overfishing, continued overfishing, catastrophic overfishing and eventual collapse. Even teams that start out fishing wisely and sustainably, usually yield to competitive urges, as they assume that they must add boats and fish harder in order to keep up with other fishing businesses that are growing.”
Once a Harley Davidson team insisted on a greater sharing of information, before they would play. With this approach even the team lowest in assets and profits made more than any in the normal way of playing; and the carrying capacity of the fishery was increased.
Examples of attempts to learn from these experiences are given and include the way in which many companies have cooperated to develop and live by certification processes, such as those operated by the Marine Stewardship Council (MSC) and the Forest Stewardship Council (FSC), in the development of both of which Unilever was much involved. Fair Trade schemes to give small farmers at the bottom of the economic pyramid a fairer price is being supported by many large retailers and gives hope that the need for the world to pull together is beginning to make a little impact.
A new model of capitalism
The book by Senge and others still believes in the interplay of markets, but calls for greater transparency and collaboration between businesses in order to avoid the dangers of raw competitive capitalism, which Milton Friedman described forty years ago. He declared that the sole responsibility of a company was to maximise wealth for the shareholders. It had no responsibility to Society beyond complying with the law. If doing something for Society beyond the provision of goods and services in exchange for profitable income, happened to serve society, then that was acceptable because it meant a reputation that might be good for shareholders, but to provide direct service to society was no goal of business. The fishery parable shows what happens when Friedman is followed.
Senge et al say, in contrast, that “there is no more basic confusion that pervades the business world than the idea that the purpose of a company IS to maximise profit”. They go on to speak of a growing number of businesses whose philosophy and activity is based on the concept that “the future in which business operates (is) more and more like the other living systems of nature”. These businesses are not just charities, but they “do not exist in order to make a profit, but make a profit in order to contribute”.
Such companies take decisions on the basis of the common good, while following prudent business principles. For example, one company enabled customers to make great savings of energy by developing a vegetable based washing machine detergent which worked effectively with cold water – a small action which could make an enormous difference, while making money for the business and saving it for the customer. Some automobile companies bucked the trend to require heavy vehicles as safer and more powerful, and instead offered lighter vehicles, which were cheaper, both to buy and to run.
Similarly there are companies which stay small, through building networks of “self extending developmental relationships” (SEDRs), creating partnerships which are “networks of symbiotic relationships”, such as exist in a forest, where no one tree is in charge. One such company has sales of over $100 million, with fewer than 100 employees. They claim to be growing the company without becoming “another unwieldy big corporation”. They say that such a partnership is built steadily by paying attention to relationships. It is no longer about doing deals, but about “networks of common purpose”. Real interactions with customers are discussed, largely replacing advertising, which often seeks to persuade people to consume what they do not need, or even want, until the advertiser creates the want and increases the pull on the earth’s resources.
The Sustainable Value Matrix
One of the pleasures of our work for Ashridge has been the opportunity Kevin Barham, my reviewing colleague, and I, have had to get to know Stuart Hart of Cornell University, who wrote “Capitalism at the Crossroads”, and his colleague Mark Millstein, who has visited Ashridge. Their model of how a company can go through a series of steps on the way to sustainability is illuminating and offers a theory on the basis of which good practice can follow. (S.Hart & M.Milstein: Creating Sustainable Value, Academy of Management Executive:17,2 (2003)) Peter Senge and his colleagues use this model in their book as one of its central pillars.
The model follows the usual two axes to create four quadrants. The horizontal axis represents the direction of activity to create shareholder value from internal sources on the left to external sources on the right. The vertical axis represents time, with today at the base and tomorrow at the top. Quadrant one is the bottom left; quadrant two is the bottom right; quadrant three is the top left and quadrant four is the top right. The four stages are then as follows:
Quadrant One. Sustainable activity is awakening, but concentrates on steps which will reduce costs and attract minimal risk. This will be driven by reduction within the organisation of pollution, waste, harmful emissions and quantity of material employed. It is concerned with current activity.
Quadrant Two. The activity begins to incorporate activity outside the company with benefit to reputation and perceived legitimacy. This will integrate stakeholder views and interests into the business process. It will be driven by the beginning of networking, concern to be transparent and to liaise with civil society, such as NGOs. Like Q1 this is concerned with today.
Quadrant Three. This is moving on to concern with the future and developing tomorrow’s competences internally. It is driven by the need to disrupt some of the present ways of operating, by the increasing use of clean technology and reduction of the company footprint on the environment. It repositions where it sees itself in the market and expands its innovation activity within the company.
Quadrant Four. Still looking to the future, but now involved externally, outside the company it develops its sustainability vision. It creates a roadmap for the future which it shares with others, who may become partners in the effort to meet unmet needs. It is driven by such factors as climate change, the depletion of the earth’s resources and the gap between rich and poor which creates threats to security, opportunities for a new business approach and recognition that we are all one human race, sharing the same planet. The social aspects of sustainability begin to assume a greater significance.
The four stages are presented in a way which will be less neat in practice. One stage will not cleanly follow another. Different elements of the four stages may be taking place simultaneously, but it helps to keep them conceptually separate. Together, they have a cumulative effect on the way a company does business and its effect on the planet. “A balanced portfolio of investments in all four quadrants is necessary to maximise value creation.”
DuPont and the sustainable value matrix
DuPont used this model to describe the history of their involvement in sustainability, which caused them to strike out in a new direction, from their previous concentration on petrochemicals toward becoming the world leader in plant based chemicals. They recognised the demands to come from the environment and saw a more profitable route to the future in bio-technology, chemistry and natural systems, rather than synthetic ones. This meant a radical transformation and one which has enhanced a reputation which at one time had suffered by its involvement in ozone depletion through refrigeration chemicals.
For them Q1 represents their move toward organising themselves internally to reduce harmful emissions, to reduce water consumption, ensuring their transport fleets became more energy efficient and reduce air carcinogens.
Q2 saw their reputation growing as they began to work with NGOs, who could help them in showing their concern for the community, and as they engaged with various stakeholders whose feedback was invaluable. As Hart and Millstein point out, they also began to reach out to the four million people in the developing world at the base of the economic pyramid (BoP).
Q3 saw wider transformational processes taking place, including moving from fossil fuels to bio-fuels and toward doing things the way that nature does them. The CEO
said that his title could also stand for Chief Environmental Officer. This quadrant was notable for progress in producing substitutes for oil based products. (On bio-fuels there is, of course, the need to ensure that it is not taking up land which is required for food production, thereby causing price rises which would hit the poor hard. Using plant waste is being explored as one way of making bio-fuels and meeting the problem.)
Q4 sees energy efficiency, emission reduction and reaching out to the poor of the world really taking off and revolutionising the core of the DuPont business, moving from polymer chemistry to biology.
The DuPont CEO says that it is not a matter of “what is good for the environment can be good for the business”, but that what is good for the business MUST be good for the environment, implying that if it is not good for the environment then it will not be good for the business. DuPont declares that it sees value creation through sustainability as a central goal, not simply an add-on.
Convincing others within and outside your company
In the latter part of the book and woven throughout the book Peter Senge and his co-authors give guidance on how to approach the mobilising of others, inside or outside your company, to see sustainability as a key business issue in the future and to influence them to take relevant steps.
The role of leadership is discussed, being seen as the creating of space in which everyone in the company may find voice and hand to do things which support sustainability and in effect share in the role of leadership in this respect.
The role of conversations is emphasised, whereby the company becomes a buzz of shared excitement at the challenges and successes. The word conversation derives from a Latin word meaning “to turn together”. This involves the spread of sound knowledge of the areas involved and the sense that permission exists to push in a sensible way for understanding and action.
This may be by the formation of internal groups to advance the cause of sustainability within a company or between companies by networking. Such groups will have their own learning curves, especially in dealing with conflict. They may begin by smoothing over differences to preserve harmony, but then miss opportunities for developing new understanding. Next, they may start to move in the opposite direction and engage in plain speaking. Ideally this gives way to careful listening to each other, culminating in true dialogue, where there is a stream of ideas, as suggested by the Greek origin of the word (flow of meaning).
The authors consider that a good team will at least have:
• a mover, who gets things started, initiates a discussion of possible action
• an opposer, who can always see the flaws in an argument and at least prevents hasty groupthink
• a follower, who listens intently and follows what everyone is saying; wants to keep the team finding compromises and avoiding stalemate
• a bystander, who sees the whole picture, says little until he or she is ready to bring ideas together with a degree of cohesion.
Compared with the Belbin model of eight managerial types in a team, this is a less precise division of labour, being concerned with four mindsets, which, with reasonable tolerance, can keep a group on the road to progress. The same people may switch between the roles depending on the situation.
Strident advocacy is discouraged. It is better to ask open questions to get people thinking. And a number of examples are given of such conversations and the most appropriate entry points. Being straightforward about your assumptions is recommended, but expressed in a non-dogmatic way which will engage others. Thus rather than implying that your view must be accepted, appropriate words could be: “This is what I think and this is how I arrived at it. What do you think?” A gentle query, such as “If your assumption should prove to be wrong what would you suggest be done?” might encourage revisiting a topic. “Can you help me to understand what you mean here?” is better than an abrupt “Where’s your proof?” And, of course, do make sure you do understand what the other is saying: “Am I correct in understanding that you are saying…?” It is better to say “Have you considered…?” rather than going on to the attack for what you see as serious omissions.
Of course there are plenty of books giving this kind of advice, but here it is offered in the context of a particular mission, to win commitment, rather than just an argument. The book itself is a good study in how to be persuasive.
No half way measures
There is room for disagreement on the detail of how sustainability should be tackled. In fact a healthy degree of debate is one of the ways in which progress is made. However, there can be no compromise between two fundamentally diverse points of view which, though listed early in the book, provide a suitable reminder of its whole theme.
The first list represents the perspective which applied when the industrial age was still in full bloom; it has not yet disappeared in favour of the mindset represented in the second list.
The first perspective holds that:
• Energy is really infinite and cheaper than some of the alternative suggestions • We shall always have enough room to dispose of waste • The climate is relatively stable
• Humans have developed to the point where they are entitled to use all other forms of life to meet their own needs • Globally the supplies of water and topsoil are unlimited • Productivity and standardisation are the keys to economic progress
• Economic growth and increasing GDP are like a rising tide which lifts all boats.
In contrast to this, the human economy is said by the authors to be a wholly owned subsidiary of Nature. In this mood the second list broadly parallels the first by expressing what sound sustainability development aspires to.
The second perspective thus holds that:
• Energy is to be sought ultimately only from nature’s renewable resources
• The aim must be zero waste to landfills; anything less is rather like the airline industry saying that they aim to reduce fatal crashes to two a year
• If we do not approach sustainability policies with vigour we are borrowing from our children’s and grandchildren’s future
• We are not entitled to assume that we are permitted to dominate and exploit nature for our own purposes
• We should treasure the earth’s resources and preserve its capacity to continue to renew itself within its own time frame
• We should embrace diversity in nature and among humankind, seeking to live on the basis of cooperative communities
• There is only one boat; if it has a large hole in it we shall all sink to the bottom.
Attitude to compliance with the law provides one view of the progress of companies toward a sustainable ethos, expressed frequently throughout the book. It used to be thought that if a company complied with the law on the environment it was doing all that was necessary. Compliance was sufficient. So five stages are presented as representing how companies might develop.
1. Non-compliance: evading legal requirements with subtle reinterpretations and legal sophistication; seeking to get the law reversed or amended, with considerable expenditure on lobbying.
2. Compliance: doing just what the law requires, with no interest in its underlying intention, except under public pressure and the threat of reputational damage.
3. Beyond mere compliance: A move from mere reaction; going further than the present law requires in order to pre-empt the bringing in of tighter regulation; concern about PR; the first steps toward eco-efficiency.
4. Integrated Strategy: a more proactive approach where sustainability is fully integrated into the company as businesses embrace the positive opportunities which may emerge.
5. A vision and mission in line with sustainability principles: they come to express the core values of a company. There is a “proactive integration of sustainability factors into every dimension of their business strategy and into the core of their investment and decision making processes across the organisation”.
The Boston Conference
The issues that have engaged the authors of the book under review are vividly brought together by a short report they give of a conference held in Boston (MA) at the historic Faneuil Hall, attended by 200 delegates in November 2007. The meeting was convened to discuss challenges to the taken-for-granted arrangements concerning institutional power and privilege; to understand better the evolution and fitness of the modern corporation and how far it diverges from democratic principles. Several management “gurus” were key speakers, not known as extremists.
Charles Handy opened the proceedings with a talk which traced the evolution of the modern corporation to a series of important ideas with unintended consequences. These were
• The private stock corporation pioneered by the British East India Company in the 16th century
• The limited liability corporation established in England and the US in the 19th century
• The executive stock option developed in the second half of the 20th century.
All produced material benefits but in the end created abuses that have proved impossible to control.
Arie de Geus concentrated on the limited liability company which had been created to meet a shortage of financial capital needed by the growing business sector at the time. It aimed to protect the thousands of potential small investors from personal financial disaster. He disputed whether there was the same need for it at a time when the small investor was very much in the minority and most equity funds came from the giant capital funds which hardly needed such protection. In the modern situation, the growth in financial capital was unmatched by growth in physical and productive capital and the system had become a vast casino sitting atop the real economy.
De Geus said “In a world of constrained natural capital, social capital and human capital, optimising only return on financial capital, imprisons business in the shadow of a distant past.” The 21st century corporation was a machine for making money and was not fit for life on earth.
Henry Mintzberg addressed the “profound imbalance between the business sector and the social sector”, characterised by virtually unbridled shareholder rights and extravagant executive pay scales. Steve Lydenberg, a veteran investment analyst, declared that excessive focus on short term profits caused corporate managers to misallocate assets and meant that “society must divert productive resources to repairing environmental and social damage done in the headlong pursuit of profits”.
Jason Clay of the WWF, a world authority on agricultural supply chains, spoke from the perspective of eco-systems and said that at present we were using “one and a third earths”.
An impressive array of sober minded speakers contributed. Amongst them was David Korten, a founder of the Business Alliance for Local Living Economies (BALLE). He spoke of the era we were entering as one which would produce negative returns on financial capital. This statement caused the many investment experts present to prick up their ears. He was asserting that the Industrial Age had been an era marked by the harvesting of natural and social capital to produce physical and financial capital, and the time had now come to reverse that process and build a regenerative economy.
This conference was a call from mature and well respected thinkers from across the world business stage, for a complete reappraisal of the way we do business. It therefore had a deep relevance to the appeal enshrined in the title of the book we have been reviewing: “The Necessary Revolution”.
The list David Korten offered of activities that were essential to meet the challenges of the times summarised much of what this book is saying: 1. Reduce aggregate consumption
2. Invest in the regeneration of living, social and natural capital, the foundation of all real wealth
3. Accelerate social innovations, adaptation, and learning by nurturing cultural diversity
4. Redistribute financial power from rich to poor to achieve equitable distribution of earth’s life-sustaining wealth
5. Increase economic efficiency by reallocating material resources from harmful to beneficial uses.
A final thought from the authors of this book
“Control is a simple word with very different meanings. Machines are controlled by their operators. Living systems are different. No one is in charge in a forest. Living systems control themselves based on webs of relationships – such as the relationships between the myriad species in an eco-system or among the diverse individuals in a family. In neither is someone in control, in the sense that you or I control our cars or managers are assumed to control their industrial Age organisations. Building enterprises based on cultures of relationship – organisations that not only work like nature, but are more harmonious with nature, be it a forest or you and me – may prove a defining feature of a regenerative society.”