Category Archives: CR & Sustainability

Discovering new-found respect for philanthropy

I’ve always had a bit of a downer on corporate philanthropy, having tended to equate it with first generation sustainability strategy and practice – a model based on ‘giving something back’ that often pays little or no heed to what the corporation takes in the first place. In so doing, I’ve always felt, it tends to perpetuate the framing of sustainability as a discrete agenda, separate from core business.

Reflecting further on the latest Acumen Debate hosted by EY earlier this month, however, I’m thinking it’s maybe time to revise that view.

The spur for this reflection is a thought-provoking comment made by Sam Parker, director of the Shell Foundation, in speaking against the motion that, “This house believes that impact investors don’t need to compromise between financial and social returns.”

He was following on from – and directly responding to – the argument made in favour of the motion by Diana Noble of CDC, the British government’s development finance institution. Her experience, she said, proved there was no compromise. CDC has achieved an average 6% return on investments in its portfolio of ‘base of the pyramid’ (BoP) enterprises over the last 20 years; and on her regular visits to Africa and South East Asia, she could not go anywhere without seeing the benefit of businesses, “that simply wouldn’t exist without CDC.”

The essential thrust of Parker’s retort was that’s grand, but how did those businesses get to a place where they became an investible proposition for the likes of CDC? “Somebody somewhere had to do the heavy lifting,” he said. “Somebody somewhere paid for that.”

And you know what? I think he’s right.

If you think about it in terms of something like Ichak Adizes’ famous corporate life-cycle model, impact investors like CDC might only really enter the fray once an enterprise has reached ‘adolescence’ and the risk of ‘infant mortality’ has passed.

Work backwards through the ‘go-go’, ‘infancy’ and ‘courtship’ stages – where ultimately the business idea is but the proverbial twinkle in the parent’s eye – and, chances are, you’re going to be looking at investors with a very different profile.

Go back one step, and you might be looking at investors prepared to work at breakeven; go back two and they’re maybe willing to put up with a 50% loss; go right back to the outset, and you’re probably looking at pure philanthropy – the, “early-stage patient grant,” as Parker put it, without which, “there would be nothing to invest in.”

For me, that logic felt hard to refute and, whereas the show of hands at the end of the event appeared to show several of the audience metaphorically crossing the floor from the ‘opposed’ to ‘in favour’ camps, much to my surprise, I found myself moving in the opposite direction.

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A more beautiful question

For a while now, I’ve been searching for what author and journalist Warren Berger calls ‘a more beautiful question’ – the kind of question that, with elegant simplicity, can encapsulate a wealth of ideas, concepts and possibilities; that can help to shift the way we perceive or think about something; and that has the capacity to spark breakthrough ideas.

While that kind of preamble almost inevitably sets me up to fail, I think I may finally have fashioned one worth sharing, and it goes like this:

What if business reoriented itself as society’s greatest problem solver?

I use the word “fashioned” advisedly, of course. I don’t claim any originality, save perhaps for the particular combination of words. The ideas and concepts that underpin it are many, varied and long-established – the self-same ones that have preoccupied me (and many others) for years now.

While people may choose different labels to describe the conceptual space here – be it sustainability, creating shared value, purpose-led business, inclusive capitalism or whatever – they are fundamentally united by a common set of assumptions:

  1. That, whatever your views on the role of business, and the capitalist system more generally, in creating many of the problems and inequities we see today, it’s also essential to solving them (as evidenced, for example, by the inclusion of business as a key partner in achieving the UN’s 2030 Sustainable Development Goals);
  2. That business, and again capitalism more generally, is perfectly capable of this kind of ‘reboot’ (indeed, as powerfully argued by some smart folks at McKinsey, creating and scaling solutions to human problems may always have been at the heart of how and why capitalism works);
  3. That the fates of business and society are interdependent and it’s in the best interests of both that business steps up to assume this role as a partner of choice in solving social problems (whisper it quietly, but business-based approaches are frequently more effective than government or charitable aid in reducing inequality).

What this all boils down to – what we arguably lost during the cult of maximizing shareholder value, and what we are now slowly rediscovering – is the understanding that the long-term prosperity of business and society go hand-in-hand. Business cannot, and should not, divorce its success from the health and resilience of the social and ecological systems that give it life.

Moreover – in line with Peter Drucker’s famous dictum that the only purpose of business is to create a customer – the idea of seeing business first and foremost as a problem-solving engine, rather than solely a vehicle for maximizing short-term shareholder gain, would seem a much better and broader reflection of what successful companies actually do.

With specific regard to the third point above – and offering an inkling of what reorienting business as society’s greatest problem solver might look like – probably the greatest joy of my current role is the exposure I get to the work of some outstanding social entrepreneurs.

As a firm believer that the sustainability imperative represents the innovation opportunity of a lifetime, understanding and telling their stories (and EY’s role in helping them build the internal capabilities to extend their reach and impact) is something I find endlessly fascinating. After all, in many ways, social entrepreneurs are the purest incarnation of purpose-led business – a mash-up of the social mission of a non-profit with the market-driven approach of business to innovate new products, services or approaches to tackling society’s most pernicious problems.

Take Jibu, for example, a clean water franchise business in East Africa, conceived by brothers Galen and Randy Welsch as a better way to tackle the problem of affordable access to safe, clean drinking water. Its ingenious business model equips local franchisees with advanced, solar-powered filtration equipment that can clean locally sourced water and make it available at a fraction of the price of other bottled water – each franchise effectively becoming a water purification plant for the surrounding community.

More than the question of affordability, the structuring of the business as a franchise also neatly addresses the problem of sustainability (in terms of long-term viability). Whereas donor-funded water schemes often suffer from a lack of local ownership – as a consequence of which, around half of them fail within a couple of years – every Jibu franchise is run by a member of the community it serves.

This puts the very people who benefit from the service in charge of running it, combining their need for clean water with their desire to control their own destinies and build a more prosperous future for their families. It’s a virtuous circle that should see the growth of the business not only provide permanent access to safe water for more than a million people by 2020, but also create 8,000 jobs, in turn providing 8,000 families with a decent and reliable income.

What makes stories like Jibu’s more compelling still is the fact that, more often than not, social entrepreneurs are achieving this kind of success against a backdrop of massive resource constraints. These are master hackers, and you have to wonder what might be achievable if big business took the time to observe, draw inspiration and reverse innovate from their approaches.

Of course, encouraging business-at-large to do so is precisely the purpose behind searching for (and hopefully finding) that more beautiful question in the first place.

Screw AppleWatch. Give me LYF!

Lordy, is it really 4 months since I last posted? Shame on me!

Well, it’s only fitting that I should break such a prolonged period of radio silence with news from my favourite discovery of 2014: the brilliant LYF Shoes.

If you haven’t come across this little gem before, clear 15 mins in your calendar to watch LYF founder Aly Khalifa’s talk from the Sustainable Brands conference in London last November. Seriously, do it. The design – not only of the product, but also the entire ecosystem and customer experience it spawns – is genuinely breathtaking in its scale and ingenuity and, as you pause and reflect on it, you’ll wonder why shoes would ever be made any other way in this day and age.

That’s why I couldn’t be happier to be one of the lucky few to be involved as an LYF Pioneer, shortly to receive my ‘LYF Fit Kit’ and begin the journey towards my first ever pair of custom-fit, one-of-a-kind, made-to-be-made-again footwear.

This may be the first time in my life that I’ve ever truly been an Early Adopter. I couldn’t give a stuff about all the hype surrounding the latest gadgets, like the AppleWatch, but LYF is different.

You see, I’m a sucker for anything to do with sustainability-inspired innovation, and the chance to play some small part in the development an enterprise with the potential to disrupt an entire industry is simply too good to miss. I also happen to be 6’7″ with size 14 feet, which means I’ve struggled for pretty much all of my adult life to find clothes – and especially shoes – that fit.

LYF, with me at least, has hit the mother of all sweet spots!

I’ll let others rave about the opportunity to design their own uppers and create a truly individual fashion statement (I am, after all, a 42-year old straight white male, which makes me something of a fashion vacuum).

What really intrigues me is the chance, for the first time ever, to own a pair of shoes that has been individually customised to the length and width of each of my feet (that’s right, folks, different sized feet receive different sized shoes!); more than that, to own a pair of shoes that will actually capture biomechanical data on the way I walk, using a device embedded in the heel, so that the design of the next pair I buy will be refined to fit even better; and all serviced by a closed-loop, circular business model that eliminates harmful substances from assembly, uses 100% recyclable materials, and spurs local economic development by encouraging micro-enterprises to spring up and fulfil all parts of the value cycle from Original Equipment Manufacture to assembly and retail.

Normally it’s my missus who has the exclusive preserve on getting excited about a pair of shoes but, on this occasion, I’ll gladly buck the trend.

Holonomics: the antidote to reductionism?

Come across a word like ‘holonomics’ (evocative as it is of systems thinking) and one might be forgiven for feeling a slight sense of scepticism. Fortunately, Simon and Maria Robinson, authors of Holonomics: Business Where People and Planet Matter, are very quick to dispel any whiff of ‘emperor’s new clothes’ surrounding their ideas. Holonomic thinking is not a “dogmatic annunciation” of a new methodology or toolkit, but rather a much more subtle and nuanced quest to expand our consciousness.

If all that sounds a tad esoteric, it really isn’t. It’s massively important, because our dominant mode of conceptualising the relationship between ‘parts’ and ‘wholes’ is broken – no longer fit for purpose in an increasingly complex and interconnected world.

Mainstream management and organizational approaches remain largely rooted in the industrial age, where reductionism made perfect sense. Physical tasks could be split into relatively independent parts, each optimised through the division of labour, and ‘reconstituted’ by means of workflow systems. Relationships are framed by the metaphor of ‘business as mechanism’ – a system of discrete parts that fit together as a whole, based on sequential processes and a clear, linear understanding of cause and effect.

Of course there’s only one problem with that. It just isn’t the world we live in any more.

So, what’s the alternative?

Simply put, it’s to view businesses as organisms, not mechanisms – as complex, living, dynamic systems, rather than fixed hierarchical structures. Remove part of a machine and it ceases to function. Take a cutting from a plant, however, and you can grow an entire new plant. As Simon and Maria explain, “There is something fundamentally different about the organization of a plant, whereby the whole is contained within the parts.”

While they certainly aren’t the first (and won’t be the last) to posit the importance of this metaphorical shift, what’s different about holonomics is the ‘both/and’ nature of its expression. The essence of holonomic thinking is to assert neither the primacy of parts over wholes (as per the industrial age paradigm above), nor to do the opposite (a common trap of systems thinking). Rather, in an Opposable Mind sort of way, it’s to hold both the parts and whole in mind at the same time – each part as an authentic expression of the whole, and the whole as an authentic expression of the belonging together of all the parts (no shoe-horns required!).

That the optimum word in all of this should be ‘authentic’ – and that the quality of authenticity becomes ‘known’ through feeling and intuition as much as sensing and thinking – is something that should harbour a natural appeal for anyone making a living in the world of brand and design.

The beauty of the book (at least from my experience of reading it) is that it provides the scientific and philosophical underpinnings for what you always felt to be true, but perhaps couldn’t put your finger on why.

For example, if you want to truly understand what it means to encounter an authentic whole, then you’d be wise to familiarise yourself with phenomenology (the focal point of Part One of the book). Unlike Cartesian philosophy, which rejects the subjective perception of reality as the source of untruth, phenomenology embraces it as inherent to understanding the totality of ‘lived experience’. Of course, this ties in to the well-established notion that brands must speak to our emotions, but it goes much further than that. It illuminates why a truly authentic brand is not some form of artificial construct – a ‘superimposed’ sum of the parts – but rather it is something that ‘comes into being’ through the manner in which we perceive and experience its DNA in each and every part. (As I say In my own book, that’s why literally everything you say and everything you do has the power either to enhance or erode it.)

Likewise, if you want to understand how your organisation really functions (as opposed to how you think it should)  – or if you’re one of those people who still harbours the notion that the environment (biosphere) is a sub-system of the economy (business) – then Part Two of the book is for you. Here, Simon and Maria take us on a guided tour of chaos theory, systems thinking and complexity science, gently nudging us towards the realisation of the nested interdependences between business, society and the environment.

Finally, Part Three seeks to make all this good theoretical stuff more tangible by illustrating evidence of holonomic thinking in practice – from the ‘chaordic’ and ‘latticed’ organisational structures at Visa and Gore Associates to the ‘dynamic way of seeing’ embodied in Toyota’s production system (including an interesting perspective on what caused Toyota to drop the ball a few years back).

If any of that sounds like your cup of tea, then you can take a proper peek inside the book here. While you’re at it, maybe take a look at Marty Neumeier’s Metaskills too – a slightly different, but equally compelling and highly readable guide to developing a ‘higher level of knowing’.

Sustainability-inspired disruption: LYF Shoes

Traditional shoe-making is a nasty business, explains a video from LYF Shoes.

Cheap raw materials, exploitation of foreign labour, toxic adhesives and mega-heat ovens used in assembly, wasteful packaging, long-distance shipping and distribution… That’s a very long list of negative effects for the making and use of a product that, in the vast majority of cases, is ultimately destined for landfill.

Of course, all of this makes it an industry ripe for disruptive innovation. There has to be a better way, right?

Well, LYF Shoes (Love Your Fit. Love Your Fashion. Love Your Footprint.) looks like they may have found it – not just a product with a sustainable twist (a la Oat Shoes), mind you, but an entire sustainable system of design, production, distribution and consumption. A new and disruptively innovative business model.

Ready for the whistle-stop tour? Here are some of the headlines, viewed through the lens of the fundamental principles of design for sustainability, as described in my book

Clever!

Material inputs: How might you redesign products and processes to reduce the amount and types of materials used? Are those materials recyclable, so that waste is no longer waste, but the food for another process? Could your raw materials come from someone else’s waste (or your waste become someone else’s raw material)?

LYF shoes are designed from the ground up to use 100% recyclable materials – from the recycled rubber and plastics in the sole and ‘performance plate’, to the cork insoles (the cork coming from recycled wine bottles), to the all-natural uppers. What’s more, those uppers are precision-cut and printed on-demand, using an all-dry digital printing process, so as to minimize ink and material waste.

Very clever!

Modularity and longevity: What is the expected life span of your product? How easily can it be repaired, updated or put to alternative use? How easy is it to dissemble the product into its component parts to aid that repurposing/updating/re-use?

LYF shoes are specifically designed for ease of assembly and disassembly – five component parts that fit together entirely without glue. That makes it a doddle, either to extend the life of the shoe by replacing a single worn component (no need to throw the baby out with the bathwater) or, if the shoe has given up the ghost completely, to return it to source to be recycled and turned into a new shoe. 

Cleverer still!

Closing the loop: How can you make use of reverse logistics to reclaim discarded outputs and turn them into new inputs? How close are the points of production and consumption? Can these distances be shortened to further increase the efficiency of your value cycle?

Here’s where it gets cleverer still. The simplicity of design and assembly – no glue, no ovens, no screen printing – enables a decentralized model of production and distribution. It paves the way for local microenterprises to spring up to fulfil just about every part of the value cycle – whether that’s Original Equipment Manufacture (OEM – i.e. manufacture of the component parts) or the job of assembly and disassembly at retail.

What’s more, this model slashes the costs and impacts of distribution and packaging by synchronising the points of production and consumption. And with customers incentivised to return end-of-life shoes, by virtue of a buy-back scheme (those shoes easily disassembled at the point of return and their components sent back to OEMs for remanufacture), the LYF model creates a ‘closed loop’ at a local level.

Cleverest of the lot!

Imagine you had absolutely no knowledge of all this ‘under the hood’ stuff. Instead, just pause and reflect on the entirely different customer experience it creates:

  1. You get to design your own shoes – before they’re made! Initially choosing from a range of styles and textile patterns, as the business grows you’ll eventually be able to upload your own print for a truly individual fashion statement. And you get to watch those shoes being made – at the point of retail, in front of your very eyes, in a matter of minutes.
  2. The shoes you receive won’t only be more to your taste in fashion, they’ll be functionally superior too – custom fit, more comfortable (and only getting more comfortable with every subsequent purchase, as an embedded digital capture device tracks biomechanics and builds a user profile that can be used to refine the design).
  3. And if, for whatever reason, those shoes just aren’t doing it for you any more – hey, no problem! Simply return to the store and either have them ‘upgraded’, or trade them in for a new pair, safe in the knowledge that every ounce of materials will go towards make another pair of shoes for someone else.

Seriously, what’s not to love? And if this sort of business model innovation floats your boat as much as it does mine, don’t be shy – go forth and shout about it! Here’s a wee video worth sharing as an introduction to/summary of the LYF story:

Yet more evidence that sustainability pays

For anyone who’s ever questioned the business value of sustainability, a new study published by Oxford University and Arabesque Partners (as reported in Forbes on Monday) should make for thought-provoking reading…

How sustainability drives financial outperformance

‘From the Stockholder to the Stakeholder’ (a full copy of which can be downloaded from Arabesque’s website) is a meta-study of more than 190 academic papers, industry reports, newspaper articles and books, and it provides some of the strongest evidence yet of the positive correlation between good sustainability practices and corporate performance. For example:

  • 90% of studies show that sound ESG (Environmental, Social and Governance) standards lower the cost of capital
  • 88% show that they also result in better operational performance
  • 80% indicate that stock price performance is positively influenced by good sustainability practices

Short-termism is the enemy

The numbers above offer empirical proof of what most of us already know in our gut – that doing good is great for business – and their importance can’t be understated, especially in the context of four more very telling statistics quoted in the report:

  • 80% of CEOs view sustainability as a means to gain competitive advantages relative to competitors, and yet…
  • Only 33% of them think that business is making sufficient efforts to address global sustainability challenges; this is at least in part because…
  • 79% of them feel under pressure to deliver financial results in two years or less, and…
  • 86% say this is in contrast to their innate convictions

In other words, the vast majority of CEOs want to make business decisions over a longer time horizon and integrate sustainability more fully into their businesses, but feel hamstrung by markets’ narrow focus on maximizing short-term shareholder returns (an insight, by the way, that casts a very interesting light on Unilever’s abandonment of earnings guidance and quarterly reporting).

Sustainable growth: changing the frame

Therein (as the Bard once wrote) lies the rub and, as a growing number of influential business leaders are arguing with considerable passion and conviction (notably the likes of Richard Branson, Paul Polman and Arianna Huffington, under the auspices of The B Team), it’s precisely this narrow definition of value that needs to change if business is to succeed in building a better working world.

  • From share value to shared value – leaders make it their business to be a force for good in the world, not just through philanthropy, but by delivering core products and services that tangibly contribute to the wellbeing of people and communities. They do so on the understanding that businesses with ideals of improving lives at their core are substantially outperforming the general market (by 120% according to Havas Media’s Meaningful Brand Index).
  • From next quarter to next generation – what it means to be a successful business is judged by the capacity to create and sustain value over the long-term, including innovating new business models that decouple growth from environmental degradation. This is on the understanding that, among other things, there’s an estimated US$1tn in economic value to be unlocked by transition to a circular economy.
  • From financial accounting to true accounting – businesses illustrate their capacity to create value in a way that reflects the commercial, social and environmental context within which they operate, i.e. fully accounting for their impact on (and stewardship of) not only financial but also human, social and natural capital. They do so on the understanding that a business gets the investors it deserves and that, if they want to attract long-term investors, then they need to offer a more systemic view in order to build trust and confidence in their ability to create and sustain value over the long-term.

Purposeful. Enduring. Real. These are the watchwords that, for me, define sustainable growth.

Are people tiring of ‘sustainability’ (and, if so, what should we do about it)?

Some time ago, I received a tentative approach from Kogan Page about turning my 55-minute guide to building sustainable brands into a more substantive tome. A few weeks of enthusiastic discussion was sadly brought to a halt, though, when the verdict came down from up on high that the ‘S word’ doesn’t sell.

Earlier this week, I stumbled across a blog post citing architect, Michael Pawlyn, who apparently gives some fantastic talks on biomimicry (using design principles evident in the natural world as inspiration for innovation). In these talks he points out that, if someone asked you how your marriage was going, and you answered that it was ‘sustainable’, that would tend to suggest something missing from the relationship!

It’s a fair point and it highlights a very real problem…

As a father, the son of designer parents, and a self-styled purpose-driven strategist, my idealistic attachment to an exciting future – one that offers an elegantly, ecologically and economically enjoyed existence for us all – is so part of my being that I have to consciously remind myself that that’s not where most people live.

In their worlds, were you to play a game of word association, ‘sustainability’ would most likely spark the word ‘green’ (narrowly framing sustainability in the context of environmental protection), rather than ‘longevity’ (opening up a much richer and broader narrative around our capacity to survive and thrive over generations).

Whereas the former is essentially pessimistic and suggestive of limits on business as usual, the latter is inherently optimistic, challenging us to re-envision constraints as an opportunity to design something better, more lasting and truly fulfilling – in balance with (not opposition to) the needs of wider society and the world’s natural systems.

For my money, it’s the absence of optimism and innovation from most people’s mental model of sustainability that saddles the word with its (undeserved) reputation for dullness and moral rectitude.

So what should we do about it? Well, three options spring to mind…

  1. Make a conscious effort to reframe sustainability in our own minds. One of the great weaknesses of the term (its context specificity and openness to interpretation) is simultaneously its biggest asset. As Humpty said in Through the Looking Glass, “A word means just what I choose it to mean – neither more nor less,” and we can choose how to define it – less about soft moral principles and more about hard business logic; less about peripheral philanthropy and more about core strategy and culture; less about risk and reputation management and more about innovation and value creation.
  2. Talk less about sustainability in the abstract and instead focus on being clear about specific outcomes and practical results. For example, everyone wants lower their energy bills and an architect can talk to clients about how adopting Passivhaus planning tools can help them to accurately predict (and reduce) their energy consumption.
  3. Abandon ‘sustainability’ altogether and call it something else. Here, unfortunately, I run out of ideas. Much like the word ‘brand’, if ‘sustainability’ were stripped from my lexicon, I’d be at a total loss as to what to replace it with.

If anyone out there has any suggestions, I’d be genuinely interested to hear them!