Has ‘sustainability’ run its course?

For someone who built his reputation off the back of a book subtitled ‘the 55-minute guide to building sustainable brands,’ and who’ll wax lyrical about the Sustainable Development Goals to anyone who’ll listen, that may seem like an odd question to ask. Nonetheless, it’s one I’ve been pondering this week.

Why? Well, it’s largely the result of reading a report recirculated by McKinsey, as part of its Climate Week campaign, which analyses the kind of things that need to happen in order to achieve a 1.5^oC pathway. As the report is quick to emphasize, while technically feasible, the math looks daunting:

• Reforming food, e.g.
  • Halving our consumption of ruminant meat to just 4% of the global dietary mix
  • Adopting new cultivation methods to achieve a 53% reduction in the intensity of methane emissions from rice farming
  • Curbing waste to no more than 20% of global food output
• Electrifying our lives, e.g.
  • Halving sales of internal combustion vehicles by 2030 and fully phasing them out by 2050
  • Increasing the share of households with electric space heating almost three-fold from 10% to 26% (a tough ask when more than 1.1b people still lack any electricity supply)
• Reshaping industrial operations, e.g.
  • Reducing methane emissions by 60% by 2030, and 90% by 2050, across sectors such oil and gas, coal mining, agriculture and waste management
  • Abating one-third of emissions across heavy industry vs. 2016 levels by embracing the circular economy and boosting efficiency
• Decarbonizing power and fuel, e.g.
  • Decreasing coal-powered electricity generation by 80% by 2030
  • Ramping up solar and wind generation, to the tune of building out 8x more solar panels and 5x more wind turbines every year, vs. current levels
• Ramping up carbon capture and sequestration, e.g.
  • Multiplying the amount of CO₂ captured by carbon capture, use and storage (CCUS) technologies by more than 125 times by 2050, vs. 2016 levels
  • Potentially needing to reforest an area half the size of Italy every year, on top of halting current deforestation and replacing forests lost to fires

When you look at the magnitude of these shifts, and their interdependence, it feels increasingly like sustainability – however you choose to define it – just isn’t up to the job.

• Sustainability understood strictly in terms of environmental issues? Inadequate. This framing is simply too narrow to encompass the systemic level of change required – a collective root and branch transformation of entire sectors.
• Sustainability understood as the ability to maintain something at a certain rate or level (as in ‘sustainable growth’)? Inadequate. Against a backdrop of massive biodiversity loss, and global resource use still vastly outstripping what the planet can naturally absorb and replenish, any notion of ‘maintenance’ seems woefully insufficient.
• Sustainability understood in its broadest sense, as the capacity to survive and thrive over the long term? That’s certainly been my preferred framing over the years, but even this is starting to feel inadequate, raising more questions than it answers. The capacity of what to survive and thrive (communities, whole nations, the global economy?)? For whose benefit (a select few, all humans, all life on Earth?)? For how long (decades, centuries, in perpetuity?)?

The urgency of the challenges we face arguably requires a better conceptual framework – one that looks beyond merely sustaining the social, economic and environmental systems upon which all life depends and embraces the need to regenerate them.

It’s an important distinction – one that can be seen, for example, in the term ‘regenerative agriculture’ increasingly supplanting ‘sustainable agriculture.’ Whereas the latter tends to be understood in terms of the mantra of doing no harm – a system of production that doesn’t deplete or destroy the resource base it utilizes – the former emphasizes actively improving that resource base, such as by helping to restore soil health and biodiversity.

Writ large, a conceptual shift from sustainability to renewal and regeneration charges us with taking bolder and more immediate action to repair the damage we’ve done. To restore the health of our soil, our forests and our watercourses, rather than just allowing them to limp on in a degraded condition. To power human settlements and commerce efficiently with renewable energy. To reconnect cities to the regional hinterland, regenerating local communities and economies left behind by the forces of globalization. To create a circular rather than linear industrial metabolism, which recognizes symbiotic relationship between the health of human and planetary systems, minimizing waste, pollution and demand on virgin natural resources.

For me, the disconcerting feeling is crystalizing that the language of sustainability I’ve used for more than a decade is really the language of maintaining a steady state – of preserving and prolonging the way things are, rather than unleashing a thunderbolt of transformation. If we’re to truly build back better from this time of social, economic and environmental crisis, I can’t help feeling that we need something more – something that truly reflects the realization that continuous human development and prosperity for all cannot happen at the expense of the health of the planet; something that more explicitly expresses the criticality of establishing a restorative relationship between humanity and ecological systems.

So maybe it’s time to call time on sustainability and embrace regenerationinstead. What do you think?

Celebrating a major milestone for GARV

For me, few things are guaranteed to raise a smile quite like an unsolicited progress update from an impact enterprise that EY has previously supported. It’s always a pleasant surprise – a great reminder of why we do what we do, under the auspices of the EY Ripples program, and of the life-changing impact each of these enterprises can create for hundreds of thousands (sometimes millions) of people in marginalized communities.

Earlier this week, I received just such an update from GARV Toilets, which proudly announced a major milestone – installation of its 1,000^th IoT-enabled public restroom, which now collectively cover 118 locations across India and provide safe, dignified sanitation for 190,000 low-income customers daily.

Alongside other past and present innovators in the Toilet Board Coalition’s Sanitation Economy Accelerator program, GARV was called out in a major report I had a hand in writing earlier this year – Make way for the future of sanitation. And like other enterprises in that program, GARV has also benefitted from previous EY Ripples projects – in its case, using business modeling to help figure out how it might achieve profitability and impact at scale.

What’s cool about GARV loos is the way they tackle the issues of vandalism and poor maintenance that hinder the safe and effective functioning of public toilets. This includes not only the modular design of loos in vandal-proof stainless steel, but also how toilet cubicles are solar powered and integrate smart technologies such as sensors and RFID tags.

These sensors automatically activate LED lights, exhaust fans, and floor and toilet pan washing, for example, making for a much safer and more pleasant user experience – particularly valued in schools, where the absence of decent facilities is often a significant cause of kids (especially adolescent girls) missing or dropping out of school. Sensors also enable monitoring of the number of user visits and user behavior (e.g., how many times they flush and use the soap dispensers), providing a wealth of insights to inform development of more effective public health strategies and campaigns.

Especially when you consider the still-shocking statistics – e.g., 4.2b of our fellow human beings still without access to safely managed sanitation; more than 670m people still practicing open defecation; and almost 830,000 people in low-income countries dying each year from the preventable effects of poor water, sanitation and hygiene – it’s great to feel part of the story of enterprises like GARV and their continuing mission to transform the sanitation economy.

Stakeholder capitalism: for show vs. for real

Building on last week’s thought, two interesting pieces that came to my attention this week…

First, is a pretty scathing op-ed in the WSJ that would seem to support my nagging doubt that, for all the rhetoric about long-term value and stakeholder capitalism, the dominant goals of perpetual economic growth and shareholder value remain unchanged. The title of the piece says it all – “Stakeholder capitalism seems mostly for show” – a conclusion based on an investigation into who made the decision to sign organizations up to the Business Roundtable’s restatement of corporate purpose last year.

Were signing up to it reflective of a genuine shift in direction, the piece argues, it would be reasonable to assume that the board of directors would have approved the decision, or at least ratified it. Yet, asked who the highest-level decision maker(s) were, only 1 of the 48 signatory companies that responded said the move was approved by the board. The most plausible explanation, authors suggest, is that CEOs simply don’t regard the statement as a commitment to making major changes in how their companies operate. As the piece concludes:

Notwithstanding statements to the contrary, corporate leaders are generally still focused on shareholder value. They can be expected to protect other stakeholders only to the extent that doing so would not hurt share value. That conclusion will be greatly disappointing to some and welcome to others. But all should be clear-eyed about what corporate leaders are focused on and what they intend to deliver.

As for the case for a true paradigm shift – toward the transcendent goal featured on the right-hand side of my graphic last week – it’s well worth watching this Edie conversation with sustainable business guru, John Elkington.

In it, he makes a typically persuasive case that we face a “ferociously connected” set of systemic risks to the effective functioning of business and society, which should fundamentally change businesses’ mental model of sustainability – a shift I describe in my own book as moving away from equating sustainability with ‘green’ toward understanding it in terms of long-term business viability amid changing frame conditions (a return to the literal meaning of sustainability as ‘the ability to sustain’). As John himself puts it:

We’re in a very disconcerting period for people at the top of major companies because, suddenly, it’s no longer about making the business case for doing the right thing. Their very business models are under challenge. Now [sustainability] is actually about the business. And it’s not just about purpose. It’s about how do you create value and for whom.

His overriding advice for business at this crucial inflection point?

Don’t be an incumbent. Many companies that are incumbents, and have built very successful market positions and business models, are going to find themselves sorely disrupted by what’s coming. Even if you are an incumbent, try to think like an insurgent. Go and see the people who are in the process of disrupting their markets to get a sense of where this might take us all over time.

When no sector will be immune from climate disruption and its ripple effects, those seem like very wise words to me. And for a sense of what it looks like for an incumbent company to become an insurgent, it’s worth considering the example of Danish energy company, Orsted.

It’s great to see them continuing to gain recognition for their transformation from a black to green energy company. Ranked #1 in the Corporate Knights’ index of world’s most sustainable companies earlier this year, they’re now also ranked among corporate leaders in the 2020 GlobeScan/SustainAbility Sustainability Leaders survey, published earlier this week (alongside perennial favourites, such as Unilever, Interface and Patagonia).

Formerly one of the most coal-intensive companies in Europe, generating 85% of its heat and power from coal and only 15% from renewables, instead of seeing climate change as a threat, Orsted has used it as an opportunity to reinvent itself as a global leader in offshore wind.

Recognizing the very different company it would need to become, and working back from there, Orsted’s leadership began diverting time and resources toward offshore wind as early as 2006, when it was still an immature technology. As a result of this bold move, it’s already succeeded in cutting coal consumption by 73% and halved its emissions vs. a 2006 baseline; and by 2023 it will have phased out coal completely, cutting emissions by 96%.

Between 2008 and 2012, this transition meant Orsted had to manage the challenge of losing up to two-thirds of operating income, offsetting this decline by growing new businesses and shifting renewable power from a sideline to core business. But now, as the climate emergency has risen up the global agenda, it’s reaping the rewards. Now valued at US$46b, its share price is up more than 70% since the start of 2019, and its forward price-to-earnings ratio has risen to more than 40, as those of traditional energy supermajors have fallen to less than 20.

Wanna understand what it looks like to truly jump onto a new S-curve? To truly think long term? For me, that’s a stellar example right there.

 

 

On S-curves and being a good ancestor

This week, I’d like to start with a picture – my adaptation of a graphic that appears in an excellent new book I’ve got my head buried in right now, The Good Ancestor: How to Think Long Term in a Short-Term World by Roman Krznaric (husband of Kate Raworth, she of Doughnut Economics fame).

Anchored in the eternal logic of the S-curve, for my money, it’s a great depiction of the crossroads we’re at – i.e., arguably already gazing over the precipice of the current curve, are we going to ‘stick’ and follow the inevitable path of decline and breakdown, or ‘twist’ and make the leap onto the new curve?

What’s interesting and useful about it isn’t just the obvious juxtaposition of design values/operating principles (consumption vs. sustainability, independence vs. interdependence etc.). It’s the setting of these values in the context of an overarching, transcendent goal for humanity.

This gets to the nub of a nagging doubt I’ve had about a lot of what’s said and written about long-term value. While all the right noises are made about sustainability etc., more often than not, the case for change remains rooted in statistics that assert, for example, how long-term oriented businesses exhibit stronger financial performance over time (X% higher revenues/profits vs. more myopic competitors), and how GDP could be boosted by Y% if all companies adopted a more long-term view.

The problem with such statistics is that they assume the overarching goal of long-term thinking is still all about financial returns and economic growth. They leave fundamentally unchallenged the notion that economies can only keep going if they keep growing, and that perpetual economic growth is the only route to human progress. They fail to recognize that the relentless pursuit of economic growth is the root cause of staggering levels of social inequality and environmental degradation. And they ignore the need for a radically different guiding purpose, which the analogy of jumping on to a new S-curve implies – one that Krznaric (and I and many others) would define as equitably meeting the needs of current and future generations, within the means of a flourishing planet.

Per the famous quip that anyone who believes in infinite growth on a finite planet is either a madman or an economist, I can’t help feeling it’s the underlying and unwavering faith in endless growth that poses the greatest threat to securing a long-term, prosperous future for all of humankind.

Are we squandering another opportunity for a Great Reset?

So, all this talk of new normals, building back better and green recovery. Is it just that? Talk?

That’s the disconcerting impression given by a new study of 17 major economies by UK consultancy, Vivid Economics, published earlier this week. It suggests that governments worldwide are largely failing to heed the calls of the UN, green groups, leading economists and energy experts to gear the estimated US$11.8t of COVID-19 stimulus packages towards supporting net-zero transition.

Only in 3 of the 17 economies studied do stimulus packages illustrate an overall positive effect on the environment. In the remaining 14, the lack of green stimulus – in particular, the lack of green strings attached to the flow of government support into environmentally intensive sectors, such as agriculture, manufacturing industry and transport – means that the perpetuation of damaging effects will outweigh any positive ones. Indeed, they will dwarf them in counties including the US, China, Russia, Brazil and India, with the US appearing worst when you combine both the size of the stimulus package and the absence of a green component.

It’s not all doom and gloom, though.

The report highlights several “significant improvements” over recent months – from South Korea’s US$48b ‘Green New Deal’ to Germany’s US$40b ‘Package for the Future’ to the EU’s US$750b ‘Next Generation EU’ stimulus package. There are nods, too, to green conditions attached to French bailouts for airlines and auto manufacturers, and to Canada’s move to make state-provided bridging finance for large companies contingent upon disclosure of climate action plans and sustainability goals.

Here’s hoping we see a lot more positive progress in the months ahead. Otherwise, it looks like we run the risk of squandering another golden opportunity for a Great Reset.