Embracing regeneration: if not now, when?

“Sustainability is no longer our focus,” reads a LinkedIn post from Eco-Age CEO, Simon Whitehouse. “We’ve gone past that point. Our aim is restoration. Our urgency is regeneration.”

Reading the IPCC’s latest assessment report, published this time last week, it’s hard to argue with that view. Indeed, as I’ve argued myself in these pages, we’ve kicked the can down the road for so long that most definitions of ‘sustainability’ just ain’t up to snuff anymore when it comes to conceptualising and addressing the escalating climate emergency and its concomitant impacts on society:

• Sustainability understood strictly in terms of environmental issues? Far too narrow. This cannot and will not drive the major transformations required across multiple sectors to get the world on a 1.5^oC pathway – halving global consumption of ruminant meat, fully phasing out internal combustion vehicles, cutting coal-powered electricity generation by 80%, and increasing the amount of CO₂ captured by CCUS technologies 125-fold, to name but a few.
• Sustainability understood as the ability to maintain something at a certain rate or level (as in the oxymoron of ‘sustainable growth’)? Not nearly enough. 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’ is woefully insufficient.
• Sustainability understood in the literal sense of the ‘ability to sustain’ – the capacity to survive and thrive over the long term? Better but, while that’s been my preferred framing over the years, the disconcerting feeling has dawned that the language of sustainability I’ve used for more than a decade is really that of preserving and prolonging the way things are. It just doesn’t capture the urgent need to unleash a thunderbolt of transformation, rooted in a future-back approach to strategy.

So what’s to be done? I’d humbly suggest the following for starters:

Understand sustainability as a state of being

Stop framing sustainability as a discrete function, suite of services or program of activity. It’s about everything. The only meaningful way to frame it now is as the end state humanity needs to achieve – a state in which we can equitably meet the needs of current and future generations, within the means of a flourishing planet. Only by working back from this future state, and asking ourselves what would have to be true from this point forward to make that a realistic possibility, can we make sure change happens at the pace and scale required.

The best representation of this sustainable end state? Kate Raworth’s doughnut – still the only model I’ve seen that so clearly and simply encapsulates the interconnections between climate change and social inequality, and the need to solve for both if we’re to succeed in creating a socially just, economically inclusive and environmentally sustainable space for all of humanity.

Recognise regeneration is our only route to getting there

For all the promises, policies and programs of thousands of companies, these didn’t stop emissions reaching an all-time high in 2019. The pandemic-induced drop in emissions in 2020 (only by around 7%, mind you) belies an otherwise steady upwards trajectory, with business- and sustainability-as-usual leading us in entirely the wrong direction.

Doubt that? Draw a straight line from global emissions in 1972 to net-zero in 2050, as if we’d all paid attention to The Limits to Growth. Then plot the direction of actual emissions, up to the present day, and the level of emissions cuts the IPCC say is necessary from this point forward to be on a 1.5^oC pathway:

Anyone still think a few tweaks to BAU will do the trick? No? OK then. Time to stop thinking about how to make today’s business models a little bit less bad and, instead, embrace the need for radical business model innovation in pursuit of regeneration.

Understand this requires redesigning businesses and economies in line with universal principles of living systems

Originator – and subsequent recaller – of the triple bottom line concept, John Elkington, has argued persuasively that there’s no such thing as a sustainable company in an unsustainable economy. Improvements in performance at the level of individual companies does little or nothing to address systemic risks and failures; unless we update contemporary capitalism’s operating system, we’ll remain headed for the rocks, on a ship steered by the ghost of Milton Friedman.

What might a different set of design values/operating principles look like? What might we learn from nature’s laws and patterns of systemic health, self-organization, self-renewal and regenerative vitality to design of socioeconomic systems? Well, as good a place as any to start are the eight principles of a regenerative economy, outlined by John Fullerton and the Capital Institute (lots more on these here).

Beware positive progress masquerading as meaningful progress

There’s a world of difference between positive progress (i.e., anything that makes things better, however incrementally) and meaningful progress (i.e., hastening change at the pace and scale required to tackle the looming reality of the climate emergency). Learning to distinguish between the two is essential and, as an illustrative example, consider the current impetus behind all things ‘ESG’…

It’s worth reflecting on the comments of Blackrock-executive-turned-ESG-whistleblower, Tariq Fancy, who’s branded everyone jumping on the ESG bandwagon as a “dangerous placebo.” If you’re familiar with Bill Sharpe’s ‘three horizons’ model (nicely explained by UK COP26 supremo, Nigel Topping, here), you’ll understand why. In essence, Fancy’s account of ESG is a classic example of an ‘H2 minus’ trajectory – not a disruptive innovation, intended to accelerate meaningful progress toward the future we need, but rather catnip for incrementalists, co-opted by the forces of the status quo to prolong today’s dominant pattern.

Environment 3, Big Oil 0

If life were a football match, this is what the score might read after a bad couple of weeks for Big Oil…

It started on 13 May, when Harvard research fellow, Geoffrey Supran, published a searing series of tweets linked to peer-reviewed research on ExxonMobil’s climate change communications. Echoing Michael E Mann’s latest book, The New Climate War, they depict a strategy not just of downplaying the reality and seriousness of climate change, but also of attempting to shift responsibility onto individual consumers.

It then built on 18 May, when the Minderoo Foundation published a new Plastic Waste-Makers Index, which reveals 100 companies collectively responsible for producing 90% of all single-use plastic waste generated globally each year. No great surprise, if you cross reference that list with a Guardian report from 2019, showing the 20 companies collectively responsible for more than a third (35%) of all greenhouse gas emissions in the modern era, there’s a fair amount of crossover. Seven companies who appear in the Guardian list – Abu Dhabi National Oil Company, Chevron, ExxonMobil, PetroChina, Royal Dutch Shell, Saudi Aramco and Total – also appear among the top 50 or so in Minderoo’s (with ExxonMobil, PetroChina, Saudi Aramco and Total appearing in the top 20 for both).

Then came Wednesday last week, which must surely rank as one of the most cataclysmic days for the fossil fuel industry…

One-nil

Seven environmental groups and 17,000 Dutch citizens went up against Shell in court – and won. Their argument was that Shell has a duty of care to prevent the harm caused by climate change and judges agreed. They ordered the company to comply with Paris Agreement and reduce its emissions by 45% (vs. 2019 levels) by 2030.

Two-nil

A few hours later, more than 60% of shareholders at Chevron voted to demand that the company cut Scope 3 emissions, which include those caused by customers burning its products. As reported by Reuters, although the proposal does not require Chevron to set a target of how much it needs to cut emissions or by when, the move is indicative of growing investor frustration with companies they believe are not doing enough to tackle climate change.

Three-nil

More powerful proof of this frustration came shortly after, as ExxonMobil failed to defend its board against a coup launched by dissident hedge fund activists at Engine No. 1, which successfully replaced two Exxon board members with its own candidates to help drive the company towards a greener strategy.

While all of these developments are significant, the Shell court ruling feels like it could be the most telling of the lot – for reasons neatly set out in the ‘Net Zero Sensemaker’ email from those fine folk at Tortoise Media earlier this week:

1. It sets a precedent: Dutch law may not be applicable elsewhere, but human rights laws are. The fact that the complainants won with a human rights argument may empower other climate activists to bring similar cases.
   
2. It could have implications for other corporate polluters: big emitters will have been following the court case closely. The apparent choice they now face: think harder about how to slash emissions quickly or ready yourselves for litigation. 
   
3. It’s the first time a company has been ordered to comply with the Paris agreement: Shell tried to argue that the Paris climate goals only apply to countries, but the court found that there has been “broad international consensus about the need for non-state action” for almost a decade now.
   
4. It puts climate before profits: while the judgement acknowledged that dramatically cutting emissions might “curb [Shell’s] potential growth,” it found that the benefits would “outweigh the Shell group’s commercial interests.” In other words, climate targets are more important than Shell’s bottom line.
   
5. It targets emissions by suppliers and customers: the judgement encompasses Scope 3 emissions – aka Shell is responsible for the emissions produced by its petrol station patrons, not just those of its own business operations. Cutting those would require them to change what they sell to consumers.

The times they are a-changing? Certainly looks that way.

What if big business reverse innovated from impact entrepreneurs to create systems change?

A blog from Mighty Ally caught my eye, this week, for its very readable and insightful treatise on the need for focus if social enterprises are to achieve game-changing scale. It struck a chord with me for a couple of reasons…

Firstly, one of its most interesting insights is that, rather than pursuing the conventional advice of going after multiple sources of funding, apparently 90% of the social enterprises that have managed to scale to >US$50m in annual turnover have done so by raising capital from a single type of funder. That started me to thinking – what if more big businesses applied their considerable knowledge and resources to helping build the capacity of the kind of impact entrepreneurs EY supports through the EY Ripples program? Wouldn’t that be one of the most powerful ways at their disposal to evidence their commitments to building more just and sustainable businesses and societies, and to position business as a solution rather than a cause of the immense global challenges we face?

Secondly, while reading the blog, I heard echoes of Getting Beyond Better – an excellent 2015 tome, sub-titled ‘How social entrepreneurship works,’ co-authored by Roger Martin and Sally Osberg (respectively the former dean of the Rotman School of Management and the former CEO and President of the Skoll Foundation).

In it, they present (for me) one of the most compelling descriptions of the DNA of impact entrepreneurs. In effect, they pitch impact entrepreneurship as a verb – i.e., what distinguishes it from merely advocating for social justice, or building a business that just so happens to help the world while driving profit, is its steely focus and deliberate action to systemically and permanently transform a socially inequitable condition:

• Impact entrepreneurs explicitly set out to do this by…
  • Identifying an unjust equilibrium that causes exclusion, marginalization or suffering
  • Developing, testing, refining a scaling a proposition with the potential to disrupt that status quo
  • Forging a new stable state that unleashes new social value and builds the ecosystem to sustain it
• To achieve all that, they generally have to maintain a very specific focus, and know their fields and communities really well, which…
  • Makes them great sources of market intelligence on unseen opportunities – to address the unmet needs of low-income and marginalized groups that generally go unnoticed by conventional businesses
• Because they’re primarily motivated by social impact, not profit (profit is still important but, by and large, only as a measure of financial sustainability and capacity to scale), they…
  • Have greater freedom than most to take risks and try out bold new ideas and business models
  • Are consequently more likely to come up with genuinely disruptive innovations – ones that may eventually end up spreading across more mature markets as well

To that last point – building on the questions above – I’d venture to suggest that another incredibly powerful thing big businesses can do is to think and act more like impact entrepreneurs – to take inspiration them as sources of product, service and business model innovation with the power to create lasting and systemic change.

Too often, it seems to me, big business innovates in the context of more mature, high-income markets, then tries to hack lumps off what they create to make it fit in emerging, lower-income settings. IMHO, there’s much to be said for doing the exact opposite, recognizing that stuff done out of necessity in low-income markets is a desirable direction of travel in more developed markets too.

Consider, for example, the ‘paygo’ technology platforms that underpin the business models of many of the impact entrepreneurs we work with through Ripples – technology that enables low-income customers to finance the purchase of life-changing products, such as home solar systems, via mobile micropayments spread over several years; also to fund those payments from savings generated through the actual use of those products, e.g., vs. buying dirty, dangerous and expensive kerosene to light their homes.

How different is that approach, really, from the concept delivering products-as-a-service – considered an essential component of a new circular economy? How many people in the markets we live in would be quicker to install solar panels on their own rooftops if they didn’t have to stump up the cost up front and worry about how long it might take to recoup their investment? How many more similar parallels and opportunities for ‘reverse innovation’ might we think of?

Questions worth noodling on, I reckon.

Energy transition: one of the most epic ****ing business opportunities of all time

Words matter. As a linguist by background, I would say that wouldn’t I? But it’s true. With words we shape our world.

Take yesterday’s Tortoise climate summit for example. Of all the many wise words that were spoken, one phrase in particular has now permanently tattooed itself in my memory. That was Dale Vince (founder of UK renewable energy business, Ecotricity) characterizing fossil fuels as “single-use fuels.”

Maybe it’s just me, but I’ve never heard that framing before – non-renewables, yes, but not single-use – and it struck me as incredibly powerful.

First, of course, it’s a very apt description. Once you’ve burnt ‘em, that’s it. And from a long-term value perspective, the single-use framing does seem to throw into sharper relief the waste of paying to burn fossil fuels vs. investing in renewable energy infrastructure that, once built, can continue to generate energy at little or no marginal cost. Second, and just as powerfully, it evokes obvious comparisons with single-use plastics and the huge focus for action that that has been over the last few years.

And when it comes to the case for accelerating energy transition, I have a new big fat hairy number to quote, thanks to EYQ chum, Ben Falk. A couple of weeks back, he shared with me a mind-blowing blog post from UK tech investor, Ian Hogarth, which draws upon a passage from Kim Stanley Robinson’s hard sci-fi masterpiece, The Ministry for the Future, which I’ve duly begun to bury myself in. Against the backdrop of a crippling heatwave in India, Robinson writes:

Humans are burning about 40 gigatons of fossil carbon a year… Scientists have calculated that we can burn about 500 more gigatons before we push the average global temperatures over 2 degrees higher than it was when the industrial revolution started. [Meanwhile], the fossil fuel industry has already located at least 3000 gigatons of fossil carbon in the ground. All these concentrations of carbon are listed as assets by the corporations that have located them and they are regarded as national resources by the nation states in which they have been found… The notional value of the 2500 gigatons of carbon that should be left in the ground, calculated by using the current price of oil, is in the order of 1500 trillion US dollars.

US$1.5 quadrillion! That’s an inconceivably large amount of money. No wonder Hogarth counts accelerating the transition away from fossil fuels as “one of the most ****ing epic business opportunities of all time.”

Are headline carbon targets meaningless?

Granted, the phrasing of this question is deliberately hyperbolic, but it’s the essential one at the heart of an interesting research paper published last week – one that bears thinking about amid the usual flurry of big climate-related announcements on or around Earth Day.

This week, among other things, we’ve seen McKinsey launch a new sustainability platform for helping clients innovate to net-zero and EY UK announce a new Climate Business Forum to help turn the UK government’s ambition for a green industrial revolution into action. We’ve also seen the UK government itself accept the Committee on Climate Change’s recommended target of reducing emissions by 78% from 1990 levels by 2035 (building on the previous target of a 68% reduction by 2030), the EU and the US announce targets to reduce emissions by 50% and 55%, respectively, by 2030. 

But here’s the thing, says the research paper: there’s more to assessing the ambition of targets than the headline figures of ‘X% reduction by Y date.’

The crux of the problem with such headline targets, and accompanying approaches to carbon accounting, is the idea that a ton of CO₂ should be treated as functionally equivalent – irrespective of how, where or when it’s emitted, avoided, removed or stored. While a ‘ton is a ton’ may be a useful abstraction for creating and apportioning carbon budgets, it’s a poor guide for the design of climate policy and the accurate assessment of commitments and action plans, because the conflation of carbon emissions and removal risks obscuring whether or not meaningful progress is actually being made.

As an illustrative example, the paper cites arguments for why the use carbon sinks on land to offset emissions from burning fossil fuels is scientifically flawed. When we burn fossil fuels, we move carbon from inert, permanent storage into the active carbon cycle, causing an aggregate increase in land, ocean and atmospheric carbon. Once added, this additional carbon cannot be removed through natural sinks except over a much longer timescale, hence leading to increased warming in the short term.

The paper’s proposed remedy? Essentially, the disaggregation of big carbon neutral/carbon negative targets into separate objectives for both carbon emissions and removal, so as to provide for greater transparency as to whether the latter is truly capable of balancing out, or outweighing, the former on a timescale relevant to avoiding catastrophic climate change.

No doubt there will be others out there with a much more informed view on this than me, but I reckon that sounds eminently sensible. What do you think?