Interested in sustainability? Then call the MIT Sloan Management Review, fall 2009 issue, a page turner – it includes a special report on sustainability and competitive advantage. Even better, an expanded special report is available, online, for free, thanks to sponsorship from SAS.
This report draws from in-depth interviews with more than 50 sustainability thought leaders and corporate CEOs around the world, including General Electric, Unilever, Nike, Royal Dutch Shell, Interface and BP. Shaped by the findings from those interviews, 1500 corporate executives and managers were surveyed about their perspectives on the intersection of sustainability and business strategy. Choose summary PDF or full E-Zine report (with PDF available within report – choose “Download” from the toolbar.)
Pundits interviewed in the print issue include Amory Lovins, Henry Mintzberg, Peter Schwartz, and Interface CEO, Ray Anderson. Online, you can also hear from John R. Ehrenfeld, Peter Senge and others…
¬© 2009 Gary Ralston
On December 30, 2008, the Long Term Future made a cameo appearance on the front page of the Wall Street Journal (WSJ) after a prolonged absence…
ROUND ROCK, Texas — Computer giant Dell Inc. said this summer that it has become “carbon neutral,” the latest step in its quest to be “the greenest technology company on the planet.” [full article]
The Dell article is remarkable not for its content, but that, as a story about a longer timeframe, it even made it to the front page. The bigger headline is that the recession of 2008 drove the discussion about the ramifications of the long-term future of the planet and its inhabitants off the table. Many in business and government¬† dropped the environmental agenda in an instant. In its place, a worldwide, short-term focus on the immediate crises. Clean-energy firms watched their stocks fall and funding dry up. Two days later, in the WSJ 2008 markets and finance roundup, the environment’s chief competitor, oil, is mentioned 15 or so times; the environment, two times:
April 17, 2008: Changing course on global warming, President Bush calls for halting the growth of greenhouse-gas emissions by 2025 but provides few specifics.
November 26, 2008: Greenhouse gases in the atmosphere reach record highs and show no signs of leveling off, a U.N. agency says.
So here’s a question: How many trillions of dollars will it take to restore the economy, short-term, while glossing over issues of food, air, water, population, climate and peace, long-term? What happened to our leaders? What happened to their stated aspirations? What happened to the future?
Reaction vs. Aspiration:
In this turbulent last quarter of 2008, we have seen the leaders we observe and interact with sharply divided into two camps:
- Reactive: What are we going to do about the crisis at-hand? Get rid of the problem.
- Aspirational: What are our long-term goals? How do we pursue them? Create the future.
This is not to say that those focused on their long-term goals do not also address the short-term crises. It is simply that the driving force is long-term, and their short-term actions are aligned with the longer goal. We are pleased to report that most of our clients are doing well, and pursue their aspirations while quite sensibly dealing with the current reality.
But we are most concerned that the reactive orientation seems to be ruling much of leadership in big business, government and the general public. At conferences, in boardrooms, and across dinner tables, the discussion has collapsed from years and decades to days, months and quarters. The 3-year plan (does anyone recall the 5- or 10-year plan?) has been replaced by the emergency / bailout plan. Even many whose hope for change is invested in President-elect Obama are shaken by the enormity of the circumstances his administration faces as they take office.
When the reactive orientation rules the day, the way OUT of the crisis is not necessarily the way FORWARD to our desired future.
Head in the Clouds; Feet on the Ground:
Leaders practiced in organizing around their aspirations in less-than-ideal circumstances have developed certain disciplines around envisioning a goal, assessing the situation and taking innovative action. Following are a few tips in each of these categories.
Focusing on the future goal:
- Start with the End in Mind: When it comes to discussing situation (present) and goal (future),¬† choice of sequence really matters to one’s ability to focus on true aspirations. This is doubly so when up to one’s hind-end in alligators. Talk about the present before the future, and we might as well launch the discussion saying, “Given the dire circumstances, what can we get away with, here??”. Start by talking about the future, and the tone is quite different: “What matters, here? Independent of circumstance, what do we truly want?”.
- Avoid Mixing: In a crisis, bringing up future goals can start a tennis match. The first speaker serves with: “We want to release a fully-electric car.” The second returns with: “But oil is $40 / barrel today, and the price fluctuates! That’ll never happen.”
Instead, split the discussion into two short rounds. For the first couple of minutes, focus on the goal. If someone (or the devil’s advocate in our brain!) tries to counter the goal with details of the current situation, assure them (or ourselves!) that it will be up for discussion momentarily.
- Be Concrete, and use Dates and Measures of Success: It won’t work be vague about goals that matter to us. What if we are moved to “do something about US residential carbon emissions”? That’s vague, and even smacks of problem-solving. Consider instead:¬† “By 2050, all homes in the US are heated and cooled with renewable energy, and require 60% less energy, overall, than in 2009.”William O’Brien, former CEO of Hanover Insurance once said, “At the end of the day, you ask yourself, ‘How did our vision influence our actions?’ If the answer is ‘It didn’t,’ the vision is just words.” [pp331-332, The Necessary Revolution]
- Choose Where to Focus: In good times, it’s easy to pursue what we want. In our minds, the outcome can seem virtually guaranteed. But when times are tough, and we remove the guarantee, we often learn where our focus has been – and that we now have a choice.If our senior motive was not reaching the goal, but instead achieving the Return on Investment if the goal is reached, but we now lack a guaranteed ROI, we are apt to abandon the goal. If, on the other hand, we find we are focused on realizing the goal for its own sake, we have a different relationship with the goal, and are more likely to follow through.Please don’t read a value judgment about pursuing ROI. The essential question is: which motive is dominant in driving our involvement with the goal? If our dominant focus and motivation is to realize the goal, rather than reap its benefits, the goal is more likely to be realized. It’s a key choice.
Focusing on the current situation:
Since we led with the goal, we now can take a different tack with our situation assessment:
- Keep it Relevant: Given a clear goal, one has a new, more efficient way of organizing the discussion about reality – facts relevant to achieving the goal, and facts that are irrelevant to the achievement of the goal (and now don’t need to be discussed past the test of relevance).
- Keep it Real: Separate fact from opinions and assumptions, and be vigilant for deeply-held assumptions and beliefs masquerading as fact. Identifying what we don’t know is every bit as useful as confirming what we do know. Brain expert, John J. Medina points out that the brain isn’t interested in reality. It is more interested in survival, and as a consequence, [unattended] memory is not reliable. The brain will change the perception of reality to stay in survival mode. The key to reliable memory is to consistently reexpose oneself to the information. [HBR May, 2008, reprint R0805B]. So stay grounded in the facts of reality.
- Don’t Navigate by Emotion: There is nothing wrong with emotions. They simply don’t happen to be a reliable indicator of the situation, or of progress toward long-term goals. As heretical as it might sound, you might well benefit from ignoring yourself in this department, and refocus on the goal and the situation.
Taking action in complex times:
- A Time for Learners: When presented with smooth trends, the human mind is good at guessing what will happen next. In times of great and rapid change such as these, it is not nearly so good at prediction. Experience and formulas and best practices fail us. Students of Complexity suggest a different strategy for effecting change where past performance has proven unreliable for predicting future outcomes: Probe, Sense, Respond. It is virtually the same process used to find one’s way across a dark bedroom without stubbing a toe.
- When At A Loss: When we don’t know what to do next – and it happens to all of us – what DO we do? Focus on the goal. Locate current reality. Study the difference between the two. Then invent a set of actions to move from reality to the goal. The result of any action can be evaluated and learned from, and our action plan adjusted.But when disruptive forces hit a company, all processes are up for re-evaluation. Why are we still executing this process? Is the goal still valid? Is the current situation different from the circumstances under which the process was created and refined? Given a clear goal and accurate current reality, we can determine what to keep of the process, and what to change.
Two points of light:
While we realize that times are truly challenging everywhere, we are inspired by the human capacity to transcend circumstance and envision a desired future. At its simplest, to organize around aspirations is to focus on not just one, but two pictures at once: current reality and the goal. Reconnect with what matters. Treat the current situation not as an adversary, but as a starting point on the journey. Continually test the actions in relation to the goal. By doing so, we improve the odds that the way out of the present crisis is also the way forward.
¬© 2008 Gary Ralston and the respective copyright holders.
Companies spend huge amounts of money to be ‘socially responsible.’ Do consumers reward them for it? And how much?
We recommend this article, written by Remi Trudel and June Cotte of University of Western Ontario’s Ivey School of Business, and published in both the Wall Street Journal, and the MITSloan Management Review, and its related podcast.
In the study, the researchers set out to determine how much consumers were willing to pay for a commodity (in this case, coffee and t-shirts), when presented with the ethical track record of the company behind the product. They found that while consumers will pay a premium to a company with at least some socially responsible practices (25% organic cotton, for instance), they wouldn’t pay much more for a company using 100% organic cotton. On the flip side, researchers discovered that consumers punished clearly un-ethical companies (i.e. lacking ethnic diversity, hurting the environment, sweatshop labor), only buying their products at a steep discount.
The findings set up an interesting tension between the economics of the business (invest only enough in ethical practice to change perception and benefit from higher margins), and the values and principles of the company (operate in a socially-responsible manner in every way we can, within our business model). Nonetheless, the conclusion is that the consumer will reward socially responsible behavior and punish unethical behavior through their buying choices.
How do your customers rate your company?
– illustration: Rob Shepperson, wsj.com
As a global community, we have until 2015 to cap carbon dioxide emissions at 400 ppm, and 2 degrees Celsius average warming, or reach a tipping point leading to an unstoppable, runaway overheating of the planet.
That’s pretty much the bottom line from this extremely well-researched and well-written book by journalist and National Geographic Emerging Explorer, Mark Lynas. In Six Degrees, Lynas paints six scenarios of how the planet will be different – one for each degree Celsius of average global temperature increase. I’ve read the summaries for policymakers published by the Nobel Award-winning Intergovernmental Panel on Climate Change, and as clear as they are, they simply don’t give you the same gut-level grasp for just how much our current way of business – and of life – will be overturned.
National Geographic thought so, too, and used Mark’s work as the basis for their television special: Six Degrees Could Change the World. I suggest that you click on the Video tab, and work all the way through the various video clips. Consider, for instance, this chilling SFX shot of a New York subway car abandoned in a tunnel flooded by rising sea levels. Many of us reading this blog will easily live long enough to experience this possible future. And many of us will not want to look. Heck, I had trouble completing my research for this article because I felt overwhelmed by the scale and immediacy of the problem. But look, we must.
In strategy, structure and systems, we are always on the lookout for feedback loops. Well, our planet has some enormous temperature-triggered positive feedback loops – tipping points or points of no return – just waiting for some species to trip them.
The first threshold, for carbon-cycle feedback, is around 3 degree Celsius of warming – 450 ppm of Carbon Dioxide (CO2). Large amounts of Carbon Dioxide are predicted to be released from “reservoirs”, among them the burning forests of the Amazon and Malaysia, and the thawing Arctic icecaps and tundra.
The second threshold, for Siberian methane feedback, is around 4 degrees Celsius of warming – 550 ppm of Carbon Dioxide (CO2). Large amounts of methane (23 times as potent as the same amount of Carbon Dioxide) are predicted to be released from “reservoirs”, such as those in Siberia, and methane hydrate in deep sea deposits.
So where are we now? In 2007, Carbon Dioxide (CO2) was at 382 ppm (parts per million), and we currently increase about 2 ppm per year.
Lynas concludes, based upon his review of the available research, that in order to have even a 75 percent certainty of keeping temperatures below the magic 2-degree threshold, we have seven years to reverse the buildup of greenhouse gases globally and hit a safety target of around 400 ppm of Carbon Dioxide (CO2). Greenhouse Gas (GHG) emissions must peak by or before 2015, and decline by 85 percent by 2050. If we let it get to 3 degrees (as early as 2050), feedback cycles kick in, and we risk a one-way ticket to 6 degrees of global warming and mass extinction on a scale not seen since the End-Permian age.
The numbers ought to chill us all to the bone, and then fire us into immediate re-thinking of all parts of our business and lifestyle, and the prospects for our descendants.
As Lynas put it:
“We humans, one species of animal among millions, have now become de facto guardians of the planet’s climate stability – a service that used to be provided free (given a few ups and downs) by nature. Without realizing it, we have appointed ourselves janitors, our sweaty ape hands resting heavily on the climatic thermostat. A more awesome responsibility can scarcely be imagined.”
Immediate Business Implications:
Business Carbon Emissions WILL be regulated: We all know that business has had a free ride, not having to account for the global cost of releasing Greenhouse Gases. In the following decades, financial statements and regulatory reports will also account for credits and debits of these gases. If your supply chain is carbon intensive, your costs will climb.
Consumers and regulators are demanding that business be accountable for the Total Lifecycle of products and services: Large business is already having to do this. Smaller businesses should be scrambling to figure out how to manage the cost of policing their entire supply chains, and extend their financial models to include liability for disposal. Learn more at sites such as The Climate Conservancy, a non-profit created by scientists from Stanford University.
There will be a social backlash against conspicuous consumption and the disposable economy, fueled by the climate crisis: As with so many of us, our parents grew up during the depression, when recycling went by another name – survival. In my case, our family began formally recycling about the time man first landed on the moon, and has never stopped. Fast forward 40 years. In my home town of Vancouver, BC, Canada, recycling is required, and garbage is spot-checked for infractions. Yet here in Central Ohio, Ann and I must pay for the privilege of recycling. Only two families do so on our street.
Today, US consumers have trashed ninety-nine percent of all goods they buy within six months of the date of purchase. Only one percent is still in use. The US – five percent of the world’s population – consumes 30 percent of the world’s resources and creates 30 percent of the world’s garbage. It is horrifying to think that much of the world’s population would be clamoring to emulate the US. Visit this website – www.storyofstuff.com – for a brilliant animated presentation sponsored by the Tides Foundation, and others.
Bottom line – if your business model depends on rampant consumerism, planned and perceived obsolescence and depends upon externalized costs, your free ride may run out, really soon. Which brings us to the next issue…
Public companies will be at even worse odds with the people leading them: As a system, the stock markets (i.e. Wall Street, stockholders, 24-year-old analysts in cubicles, news media, etc.) wants public corporations to focus short-term to produce unending growth of revenue and profit. As humans, the presidents and CEO’s go home to their families – children and grandchildren – whom they care about very much. It is natural that they would want to use all their supposed influence to give them a better future – say, reversing global warming. But to do so, they must go back to work and focus long-term – whereupon they are promptly fired for not keeping their eyes on quarterly profit performance.
In the end, we as a global community must institute a new definition of success for public companies. We must create markets that value planetary stewardship in addition to ROI in setting the share prices on the daily exchange.
There will be no silver bullet: There is no single thing that will reverse global warming, nor two, nor three. There will likely be seven to fifteen major initiatives, and thousands of minor ones. Of these options, conservation – using less in the first place – should be at the top of the list. This is great news for business, both large and small, because it means that no one will have a monopoly on the business opportunities presented by this crisis / opportunity. In the next decade, there will be a flow of funding and resources to this megaproject that will be measured in percentages of our planetary GDP.
A suggestion for how to build momentum to change:
Ann and I are acutely aware of our own immense discomfort in relating to this issue. Yet, we want to know reality even more, and that lets us take one more step. Here’s what you might consider:
- Go watch the video footage at National Geographic’s ¬†Six Degrees Could Change the World site, then read the summary for policymakers at the Intergovernmental Panel on Climate Change site.
- Watch The Story of Stuff.
- At the very least, read the last chapter – Choosing our Future – of Six Degrees: Our Future on a Hotter Planet, by Mark Lynas.
- Browse The Climate Conservancy site.
- For your business, schedule reviews of business strategy and process. Research what your suppliers are doing. Evaluate your liability for disposal of your products. Re-think how you generate wealth, and realign your strategy to mitigate, and even profit from reversing global warming.
- In your personal life, take inventory on your progress toward reducing your environmental footprint. There are thousands of sites to help. We Can Solve the Climate Crisis, a project of the Alliance for Climate Protection, founded by Nobel Laureate, Al Gore, is a great site recommended by our colleagues. National Geographic launched The Green Guide, where I found this excellent article on switching to green power through our existing public utility. Google “Carbon Footprint” for many more options.
The biggest change in the business and social climate in our time will be the change from a society of consumption and competition to a society of sustainability and cooperation. Plan to be part of leading this change. And if it wouldn’t be too much bother, please start today. Seven years will pass in a blink of an eye.
¬© 2008 Gary Ralston and the respective copyright holders – all rights reserved