Sustainability — Richer Earth

How Would You Redefine Growth?

September 19, 2010 By Eric 3 Comments

The Root Causes Idea Map

I had an invigorating and engaging day on Thursday at the Green Innovation in Business Network’s Boston Solutions Lab event. The event brought together about 100 people for a day of discussion and exploration through a largely un-conference format that favored peer interaction over droning speakers and PowerPoint slides. I made some great connections and learned a lot.

I served as a facilitator of a discussion about the root causes of resistance to sustainability. This post is a humble attempt to capture a day’s worth of conversation with some really smart, innovative people. There were three rotating brainstorming sessions followed by an extended design session. We were fortunate to have Peter Senge, one of the few formal speakers, join our small group for both brainstorming and design.

The Root Causes group began writing possibilities on a large piece of paper and then connecting the concepts. The result was a great idea map that guided the later work to design a solution. The brainstorming honed the the various ideas down to three major concepts:

- The retention of outmoded and inaccurate mental models such as the assumption, now several hundred years old, that natural resources are inexhaustible and should be free or extremely inexpensive. We have ample evidence to counter this but this assumption still underpins many people’s thinking and organizations’ strategy. Full lifecycle cost accounting, by contrast, is still in the infancy of its adoption;
- Social pressures and cultural norms around needs vs. wants, the desire for comfort, and the obsession with “more” that are the hallmark of our consumption-focued society;
- The challenge of balancing long- and short-term thinking to take into account far horizon impacts as well as near horizon returns demanded by the capital markets.

These, in turn, led us to a central cause and a possible solution: redefining growth.

The current empahsis on growth as principally a financial measure has come to prominence only over the past 40-50 years. It has been propigated by business schools with their focus on the internal rate of return on invested capital as the most critical metric to which managers must attend. In short, the mantra that the job of business is to make money. Senge pointed us back to Peter Drucker who said that profits are to business what oxygen is to human beings: profit is necessary for a business to survive but it must have a meaningful purpose just as we must breathe to survive but breathing is not our purpose. The purpose of a business is to meet some societal need through a product or service which it endeavors to deliver profitably. We seem to have lost the “meet a societal need” part along the way.

It was also noted that the mania for financial growth has largely subsumed the other types of growth that also have value: spiritual, intellectual, physical/health, and experience.

These sessions were meant to propose solutions as well as identify challenges and so the group that gathered for the afternoon design portion of the day undertook the daunting task of proposing a process through which growth could be redefined.

The outcome was an idea for an alternative capital market. The market would try to marry value and values by incorporating such features as term limits on capital (e.g. a share bought today cannot be sold for 30 days — building in some “strategic inefficiency” and discourage trading for trading’s sake) and reporting of the growth of positive social benefits (emphasizing doing good rather than just “less bad”). Companies choosing to list on this market would agree to greater transparency, accountability, and commitment to sustainability in return for more “patient” capital. The capital would be more patient because the enhanced standards to which companies would be held should lessen risk and volatility. The market would be open to, and would in fact encourage, alternative values-driven corporate legal forms such as B Corps and L3Cs which are being tried in Vermont.

Who would invest in this market? It was felt that this would need to be a mass movement. The slow money movement, for example, has an enthusiastic but small following. We felt that there is a large swath of the investing public that is unhappy with Wall Street and the alternatives it offers. Retirement investors, people with a built-in long horizon for their investments, would be a natural place to start. We would ask for pledges to get around the chicken-and-egg problem of not being able to start a market without money and not being able to attract money without a market.

Finally, it was agreed that this movement needed to borrow some tactics from the Tea Party: not being afraid to start small and build from the botttom up. We want to engage moms and their kids — people with a vested interest in a healthier, more responsible future. We need to construct a simple, compelling narrative that will bring more and more people into a discussion about redefining growth.

The next steps? Commenting on and forwarding the link to this blog post is one thing that you can do. Beyond that, we need to convene a group to move the discussion forward. Manyof the ideas around more responsible corporate governance already exist. What is needed is to begin to put our money where our mouths are. That will be hard…but fun.

What do you think? Would a market like the one described above be attractive to you?

The Solutions Lab was sponsored by the Environmental Defense Fund, Ashoka, Dig In, Net Impact, Society for Organizational Learning, and several others.

Filed Under: Conference Development, Featured Articles, Sustainability, Thought Leadership Tagged With: Ashoka, Boston, EDF, GIBN, growth, mental models, Microsoft, Peter Drucker, Peter Senge, Pew Center for Climate Change, profit, social purpose, Sustainability

Interviewing Irial Finan of Coca-Cola

September 7, 2010 By Eric Leave a Comment

I’ll be heading to Orlando in a couple of weeks to interview Irial Finan, head of Coca-Cola’s Bottling Investments and Supply Chain live on stage at InterBev 2010. Irial is a fascinating guy who has a long history with Coca-Cola having held a number of international posts with Coca-Cola bottlers before heading to Atlanta in 2004 to take on his current responsibilities.

Irial Finan of Coca-Cola

We’ll be talking about sustainability: How do you meet the mandate for significant business growth while also reducing its carbon footprint? Supply chain: What are the most vexing challenges of running one of the world’s most global and complex supply chains (the company has more than 300 bottling partners worldwide) given resource scarcity, price volatility, and local market expectations? And leadership: What qualities are most important for a leader in an high visibility, international organization like Coca-Cola today — and in 10 years time?

I find Coca-Cola to be an interesting company as they have embraced end-to-end life cycle responsibility for their product. They also operate locally through their bottlers around the globe and have one of the most diverse management teams I’ve come across; they may be headquartered in Atlanta but they are truly global. We’ll have a lot to talk about.

What questions would you like me to pose to Irial? I’ll be writing a summary of our conversation upon my return.

Filed Under: Featured Articles, Leadership, Speaking, Sustainability Tagged With: Coca-Cola, global business, interviews, Irial Finan, Leadership, supply chain, Sustainability

Extraction vs. Cultivation: The Tension to Manage Now

July 20, 2010 By Eric Leave a Comment

I spend a fair amount of time thinking about sustainability, social enterprise, and leadership. One of the lenses that I’ve found useful in this regard is the tension between value extraction and value cultivation as I find it is at work in most economic endeavors.

A greatly simplified view: Extraction, like mining, focuses on finding and capturing value and then moving on to do it all over again. Cultivation, like farming, seeks to harvest value in a way that makes it possible to replant and harvest again from the same land. Extraction has a more short-term focus than does cultivation. Extraction is based on the assumption that there are finite value in each activity and the goal is to glean as much as possible as fast as possible. Cultivation rests on the idea that, with proper stewardship, there can be a virtuous cycle that allows almost infinite value to be created over time.

Investors tend to be extractors and the market rewards executives (who, these days, tend to be major shareholders as well if they work for public companies) for short-term results. Market players don’t care if your firm falls off a cliff tomorrow — so long as they sell the stock today. In an interesting snapshot of how equity analysts can drive short-term mania, McKinsey Quarterly recently published a chart showing that these analysts have consistently over-forecast earnings growth over the past 25 years. Analysts expect 10 – 12% but companies have delivered 6% — an over-estimation of about 100%.

Owner-operators, executives at private firms and social enterprises, and employees tend more toward cultivation: they are in it for the long haul and so don’t want to reap value to the detriment of future performance. They can be more prudent in their forecasts and profit-taking. This is a generalization in both cases but “making the quarterly numbers” is a do-or-die exercise in many public companies.

The rise of social enterprise and a heightened attention to sustainability issues, in my view, reflects a desire to reset the balance between these two forces. Cultivation was the norm in business for many years. Investors looked for income from dividends and steady growth of share price over time. This changed somewhere around 1980 with the growth of leveraged buyouts, arbitrageurs, private equity, and other variants on financial “services” that promised spectacular returns by unlocking value that was supposedly languishing in firms. Buy them up, tear them apart, lay off as many people as you can, and sell them off — the ultimate goal was to deliver immediate shareholder returns. The big shareholders, as you’ll recall, are short-term players (as opposed to average 401K-type investors saving for retirement and often using mutual funds rather than individual stocks). These weren’t activities focused on making things or delivering services but rather were pure financial plays.

There is a place in markets for quick-turn artists but it can’t be a dominant one. This isn’t an anti-profit rant; profits are essential to financial sustainability. However, just as the Earth can’t support a global population that consumes as ferociously as do Americans, our economy can’t thrive when too many people are more focused on taking out than putting in. In case you hadn’t yet guessed, I’m a fan of cultivation and I think that it is in our collective best interest to support those companies that “farm” rather than “mine” for a living. More and more firms seem to be recognizing this — and that their environmental and social impact is as significant as their financial returns. So, too, are consumers and that’s good news.

How does your organization manage the tension between extraction and cultivation?

Filed Under: Featured Articles, Leadership, Social Enterprise, Sustainability Tagged With: cultivation, extraction, financial services, markets, Social Enterprise, Sustainability

Public and Private Roles in Sustainability

June 24, 2010 By Eric Leave a Comment

Introducing Rep. Markey

I had the pleasure of introducing Rep. Edward Markey for his opening keynote at the recent Executive Council Sustainable Cities leadership forum. Markey has been at the forefront of the Congressional response to the Deepwater Horizon oil spill in the Gulf of Mexico, is the co-author of the Waxman-Markey climate change bill, and author of the bill that increased auto mileage standards for the first time in three decades. The League of Conservation Voters calls him the environment’s best advocate in Congress.

Markey gave a fiery address about the need for the U.S. to become the leader in alternative energy. What I found interesting was his view that regulation can be a catalyst to those efforts. While many business leaders think that regulation in anathema to innovation, Markey disagrees. He pointed to his prior work on the Telecommunications Committee that shifted a segment of the broadcast spectrum into commercial use for cellular and other wireless communications. Without that regulatory move, the cell phone and broadband revolutions would have been greatly slowed or might never have happened at all.

The lesson is that the private and public sectors can be catalysts for each other. The private

: Markety advocates for clean energy

sector organizations pushing for adoption of a carbon cost bill (either a carbon tax or cap-and-trade) are hoping that it will spur another revolution. They are also, to be honest, hoping to seek regulatory advantage by getting a bill that aligns with their competitive position. Public players have their own interests, too. They are hoping to get jobs created in their districts, contributions from companies that do well as a result of the legislation, and have something to point to as accomplishment in the next election cycle.

These self-interests can, however, become enlarged interests that can have an impact far greater than the sum of the interests of the parties. Sustainability is a system-wide challenge that effects all sectors of society and will require efforts across all of those sectors. Climate change does not respect national borders nor is it particular about the tax status or brand image of the entities on which it has impact. Our response must be equally broad in its view and intention. Sustainability professionals and advocates must have great peripheral vision.

Legislators must keep citizens’ interests first and foremost and there are times when Congress needs to give both businesses and regulatory agencies a whack in the back of the head (see: oil spill, Deepwater Horizon). But at other times they must give the free market a nudge to get nascent industries off the ground. They shouldn’t micromanage but they can open macro possibilities.

I found Markey’s message to be hopeful and constructive in that it spurred my thinking on how public and private leaders can be complementary as well as adversarial. Each has a role to play in the sustainbility revolution and each can spur the others toward productive action.

Filed Under: Conference Development, Experience, Featured Articles, Speaking, Sustainability Tagged With: clean energy, Edward Markey, Executive Council, green economy, private sector, public sector, Sustainability, sustainable cities, telecommunications

Sustainable Cities: Taking a Broader View

June 15, 2010 By Eric 2 Comments

Second in a series on the Executive Council’s Sustainable Cities leadership forum.

One of the more intriguing themes that coursed through the dialogue at the Sustainable Cities forum was the importance of a holistic view of corporate impact. IBM, the event’s co-host promotes such a perspective through its Smarter Planet and Sustainable Cities work. Rich Lechner, IBM’s Vice President of Energy & Environment, spoke with Fortune’s Brian Dumaine about the infrastructure challenges ahead for electric vehicles. The cars themselves are simply the beginning and any solution must incorporate myriad considerations for recharging, battery exchange and disposal, and other issues that will involve auto manufacturers, utilities, city planners, and many others. IBM is embracing the complexity as the first step to simplifying the solution.

He also spoke about the famous example of UPS eliminating as many left hand turns as possible for its drivers. Yes, the move saves fuel and time — but it also improves public safety as left-hand turns result in more accidents than do right- hand turns. Public safety is a critical component of a sustainable city and not one that should be relegated solely to law enforcement or public health officials.

Scott Vitters (Coca-Cola) and Harry West (Continuum) also addressed the broad view during the Sustainable by Design panel. Vitters noted that Coca-Cola believes that its accountability goes from the acquiring the raw materials for its products through the fate of its containers after use. Vitters’ charge is packaging and he explained that the company is engaged in everything from developing bio-plastics to the recovery of used cans and bottles.

West, CEO of the design firm Continuum, offered the example of the Preserve toothbrush, a product his firm helped design. The toothbrush is made from recycled yogurt containers and other #5 plastics which saves significant amounts of water and energy when compared to virgin polypropylene. Its package is also a postage-paid return envelope that lets the brusher easily return the used toothbrush for recycling.

“Preserve doesn’t just help consumers think differently about toothbrushes,” West said. “It helps them see new possibilities in all products and product life cycles.”

In the afternoon, Relina Bulchandani of Cisco spoke about an “ERP (enterprise resource planning system) for a city,” which expressed the idea of enabling transparency and usability for the vast reservoirs of data being generated in cities. Cisco’s work with client companies involves improving decision-making by improving data flow and unlocking discreet pockets of data that might exist in a single department so that a broader number of users can benefit from them. A city is like this only with more players and more fixed boundaries between entities as some data exists with public sector agencies and some with utilities and other private sector organizations. Bulchandani, participating on the Data-driven City panel, discussed the importance of bringing all of this data together to optimize system performance, minimize environmental impact, and maximize benefits to citizens.

Each of these perspectives was distinct yet, refreshingly, acknowledged that for cities to be sustainable, organizations and individuals must think and act across a broader purview that takes externalities and full life-cycle impact into consideration.