Business leaders in every industry have a powerful interest in figuring out what the next big disruptive change will be. Will society move to e-books? Will voiceover IP dominate the telecommunications industry? Will CD collections be discarded in favor of digital?
Those are important issues, but they pale next to the real change that is coming. The clues to this change are literally all around us — in the air, under our feet and in our water. The single most important issue of our generation is not only threatening how we do business today, it is threatening our society, economy and health.
This looming issue is the environment.
Once a concern only for hippies and extremists, the environment has become a pressing issue for everyone living in our world today. In “Green to Gold: How Smart Companies Use Environmental Strategy to Innovate, Create Value and Build Competitive Advantage,” authors Daniel Esty and Andrew Winston write: “In today’s world, no company, big or small, operating locally or globally, in manufacturing or services can afford to ignore environmental issues.”
Some may argue about the causes of climate change and the role that humans play. But from a business perspective, there is no question that the environment is fast becoming a driving force behind public, governmental and economic activities around the world.
The interesting aspect is their emphasis (as I suggested in an earlier post) about the decline of CSR and rise of Sustainability in the downturn.
We see things differently. The downturn will produce more integrated, strategic and value-creating sustainability efforts in many companies. While traditional corporate responsibility and philanthropic initiatives may suffer, core elements of the sustainability agenda will survive or even thrive in a re-ordered economy.
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Changing economic and regulatory environments will lead more companies to adopt corporate strategies that include sustainability as a core issue. In their simplest form, such strategies will focus on helping a company’s customers to cope with their own sustainability issues.
In the past few years I have gone from not knowing much about climate change to believing that it will bring about the end of the world to being skeptical about what exactly all this is about. This does not remove the need for “sustainability” which is far more than carbon emissions but I am starting to question the amount of effort to be focused on this single issue.
As a non-scientist I have nowhere near the knowledge and skill level needed to understand the science. What I can do is understand basic logic and have a feel for how things work in the world. However, it is important to have a philosophy. A basic understanding of how various things will impact the world and what is important. History has taught us that we cannot really predict the future into 100 years. That is exactly what the climate change models do. Using current scenario, they take a linear model of growth into the future.
I am not saying this. James Lovelock, the celebrated author of the GAIA theory is saying this.
In The Vanishing Face Of Gaia, Lovelock argues that model projections of the climate a century ahead are of little use. The models of the Intergovernmental Panel on Climate Change (IPCC) extrapolate from a smooth trend of warming, yet the real climate system, complex and fully coupled to the biology of land and ocean, is unlikely to change in this simple way. It is more likely to flip from one state to another, with non-linear tipping points that the IPCC models are too simplistic to capture. Lovelock fears that the climate will shift to a new and considerably hotter regime, and that once underway, this shift will be irreversible.
Non-linearity and complexity are the hallmark of the world we live in. In this scenario, the predictions of IPCC, especially in terms of their timeframes are not relevant.
Lovelock paints a scenario where things go horribly wrong in terms of the social aspect of climate change due to this non-linearity. However, is this true?
To understand this I think a good example would be the work of Stephen J. Gould, the evolutionary biologist. His explanation of evolution is more complex than “natural selection”.
In his article, “The Evolution of Life on Earth”, Gould traces back to the history of the earth and explains the finer points of how we have come about.
Quoting Charles Darwin, “I am convinced that Natural Selection has been the most important, but not the exclusive, means of modification.”, he sees more to the evolution of life.
Theory, of course, is relevant to explaining the pathway (nothing about the pathway can be inconsistent with good theory, and theory can predict certain general aspects of life’s geologic pattern). But the actual pathway is strongly underdetermined by our general theory of life’s evolution. This point needs some belaboring as a central yet widely misunderstood aspect of the world’s complexity. Webs and chains of historical events are so intricate, so imbued with random and chaotic elements, so unrepeatable in encompassing such a multitude of unique (and uniquely interacting) objects, that standard models of simple prediction and replication do not apply. History can be explained, with satisfying rigor if evidence be adequate, after a sequence of events unfolds, but it cannot be predicted with any precision beforehand. Pierre-Simon Laplace, echoing the growing and confident determinism of the late 18th century, once said that he could specify all future states if he could know the position and motion of all particles in the cosmos at any moment, but the nature of universal complexity shatters this chimerical dream. History includes too much chaos, or extremely sensitive dependence on minute and unmeasurable differences in initial conditions, leading to massively divergent outcomes based on tiny and unknowable disparities in starting points.
He comments that“Humans arose, rather, as a fortuitous and contingent outcome of thousands of linked events, any one of which could have occurred differently and sent history on an alternative pathway that would not have led to consciousness.”
In fact, according to him “Bacteria represent the great success story of life’s pathway” and “We cannot even imagine how anthropogenic intervention might threaten their extinction, although we worry about our impact on nearly every other form of life.”
We should be rest assured that life in its many forms, foremost being Bacteria will survive the climate change doomsday scenarios. The earth does not need saving at all, if anybody it is us humans need it. Life and Earth will be fine.
Being a young father I am amazed at the fact that humans have been actually successful as a species. My daughter needs amazing amount of caring, love, attention and resources to stay alive and grow. She needs a myriad of things to be taken care of till she is about 18 years old and is “free” to live on her own. In evolution terms, that is a big negative for success. However, we have developed complex relationships of marriage, family and community to help in this process. We have developed agriculture to solve the problem of food. We have invented tools like fire and wheel to become productive. We have developed complex institutions like hospitals, schools, democracy and banks to sustain this long march of development of 18 years.
As Gould says, “History includes too much chaos, or extremely sensitive dependence on minute and unmeasurable differences in initial conditions, leading to massively divergent outcomes based on tiny and unknowable disparities in starting points”; it is even amazing we are alive as a species leaving aside the bit about thriving in this world.
Combining these two aspects, the non-linearity of the world, the way humans have adapted and are successful I believe that we will develop the solutions to solve the problems that we will face in the coming 100 years. As the problems are non-linear, so will be the solutions.
All the doomsday predictions believe that we will not make a evolutionary jump in the development of clean and cheap energy from the sun or that we will not develop low resource intensive and recyclable products or that we will have another jump in agricultural productivity which will solve all our food problems.
History however, shows us that this is possible. We can make this jump. When and how is not that clear.
All this brings us to the question, what should we be doing.
The first thing is what can be do now. If climate change is non-linear and unpredictable, what is the basic thing that we can do to be well adapted to its consequences.
Thomas Schelling, the nobel prize winning economist, suggests that economic development is the biggest solution to climate change. He says, “The sooner Malaysia can become like Singapore, the sooner it can worry less about the impact of climate change on health, comfort, and productivity.” Read more about his views here.
The second thing is about the basic economic question of allocation of scarce resources.
Bjorn Lomborg, another economist, is the director of the Copenhagen Consensus. He argues that “the Third World suffers more from malnutrition and H.I.V./AIDS than it is likely to suffer from global warming.”
He argues to relook and understand our priorities. Check out this video from TED.
Global Warming is not at the top of the list in terms of benefits from solving it. An updated version is the 2008 list – here or PDF version.
Concluding the post, the climate change problem is non-linear, so are the solutions. Humans are highly adaptable and will change and manage.
The focus should be on economic development and there are other priorities above climate change that can bring in better benefits now.
Sustainability is a better focus overall than simply climate change.
AuSSI is the Australian SAM Sustainability Index. This is a index which highlights the performance of organizations in Australia which are relatively better in terms of their performance in the planet, people and profits area.
The latest update shows that the performance of this index mimics the performance of the ASX 200, the general stock index perfectly over many years.
This is quite interesting. What does this tell us?
Is Sustainability a better corporate strategy in general? May not be.
Sustainability has no extra cost, best case is that it is performance neutral. In essence, FREE.
My conclusions could be wrong. However, this graph clearly highlights that there is an opportunity here. If a sustainability strategy which is better for the company, community and the climate creates a long term share performance which is on average same as a non-sustainability startegy (for a lack of a better word), then in essence the costs of sustainability are free and derive benefits which match the costs atleast.
In total, this is a good result. More investigation is require.
It is evident that ICT can provide solutions which help in providing flexible work practices in turn having costs, energy and carbon savings.
Telstra, the large Australian telecommunication provider has created a whitepaper on ICT and Sustainability. Their PR agency contacted me by e-mail and provided the details.
This paper (which can be downloaded here by registering) co-authored with the World Wildlife Fund or WWF as it is generally called has inputs from CapGemini consulting on ROI.
Basically, this is a paper which highlights the use of video conferering, tele communiting and web contact center using Telstra solutions and its impact on savings in terms of cost and carbon. Even though it is a sell for Telstra’s solutions (and there is nothing wrong with that), I especially liked the Return on Investment tool provided in the Appendix.
This ROI tool is quite comprehensive and provides a detailed cost benefit analysis of the solutions. And in a time span of 5 years for large organizations there is a clear case of investing in these solutions.
For example, the Teleworking solution for a 1800 member organization starting with 200 teleworkers and increasing 5% every year in Sydney or Melbourne has a Net Present Value of $2 million in a span of 5 years. That is a good return. This is based on a lot of assumptions in terms of costs etc however, one such assumption is a work from home of 3 days a week.
I think this is not feasible for many organizations and a more typical work week may be 3 days at the office and 2 days at home. I will be interested to check out the excel or webbased calculator to work with my own assumptions.
Interestingly, I am developing a new initiative to research and establish a teleworking solution within my organization starting in May. This will be quite handy.
Ceramic Fuel Cells has developed a small $6,000 home generator that has an 85 per cent power/heat conversion rate. A normal large power station has a 40 per cent power conversion rate. Ceramic’s high conversion figures have fascinated a whole range of European and Japanese power utilities who can see that the units can slash greenhouse emissions and halve the amount of gas required to generate home/office electricity and heating. And as the energy is produced in the home or office there is no transmission waste, although surplus electricity can be sold back to the grid.
Rural India and parts of urban India need local electricity and cooling facilities and lack continuous electricity. AUD6000 is about Rs 200,000 which is not a large amount for a business or a small shop. Depending on the operating costs and fuel required, this could be a good replacement to the millions of diesel generators used across India. Same will be true for a number of developing countries.
I think there is a good market and a business plan can be developed.
This totally makes sense. Why not green the massive infrastructure program?
THE Greens have begun pressing for the thousands of new school buildings and public houses planned under Kevin Rudd’s $42 billion economic stimulus package to include green features like solar hot water systems and ceiling insulation.
“Why has it worked?” Johnson asked, especially in the face of all the press and analysts’ criticism. “I think it’s all about Apple’s grounding in design, being applied to a different business from products–to a retail strategy.” He said he’s taken a lot from his experience with Graves and, “How you take one tea kettle, and change a company like Target.” He said it’s about how one store with the right concept can not only change a company like Apple, “but can also start to influence retailing all over.”
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“So fundamentally, we think what’s made our stores successful is the design decision to put the customer at the center, but not the buying experience– the life experience– and to really make it all about, in a larger experience, that’s even better than what happens when you buy, ” Johnson said.
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“But I think the one thing that sets apart our stores and Apple, is fundamentally two types of people in the world, in my view. There are believers and there are skeptics,” Johnson said. “Apple is filled with believers. And believers tend to think of what can be, and they just go do it, and they don’t spend time asking why not. They go and make it happen.”
Trendwatching has some amazing examples and ideas for Eco-business for 2009.
When designing your 2009 eco product line, don’t mirror what’s already out there in the non-eco world, but make it bold, original, distinguishable, and yes, iconic. Whether it’s cars, shoes or detergents. Find your own Jonathan Ive (by engaging in a bit of CROWD MINING perhaps?) and give your customers something that will yield them instant respect and status from other green-minded consumers.
Quick exercise: name three ECO-ICONIC products in your industry? And how can you do better, learning from ECO-ICONIC leaders in other industries (hence this briefing)?
Prepare for much more regulation in years to come as it is the only way to embed sustainability into mature and emerging economies. (China, anyone?) Which means new markets for anything and everything. So joining in, instead of fighting the inevitable, may be a smart move. Why wait until something becomes mandatory—especially if you can see it coming for miles and miles—to then (yet again) be lumped in with the laggards?
Quick exercise: come up with at least three products and services in your portfolio that are most likely to be replaced with ‘embedded’ alternatives in the near future. Are you in any way prepared to make money from those alternatives?
Count on merely being sustainable, or merely being carbon-neutral to soon be the starting point, not the end goal. So start thinking about how your brand can actually boost the environment instead of just limiting the damage. Call it PR or responsibility or both. As long as you’re going out of your way to do something extra, everyone wins.
Quick exercise: come up with at least one headline-worthy (and honest!) ECO-BOOSTER to be implemented before the year is over, learning from the examples in this briefing.
Land is the basis of wealth, change, prosperity and environmental impact. Land is also the basis of connection for humans as it provides a home.
Building a home is fundamental to human existence. More importantly, living in a good community is critical to a satisfied life.
We know that construction is not eco friendly and a home or a house is a highly resource intensive activity in terms of energy, water, waste, land degradation etc.
How do we get both of these things together in a sustainable way.
Greenedge Ethical believes that it has found a way to do this. Starting with their pilot eco-village called Somerville they have now working towards a replicable model of eco-village where the the community is self sufficient in energy, water and manages its waste a sustainable way.
Greenedge is a Perth, Australia based company which will be raising $12m in a IPO closing November 12th on the Australian Stock Exchange. It will use this to create a market for eco villages, targeting the right customers and helping them build their homes in a sustainable community.
They are in a way property developers who have a ecological model of development. More importantly for me they make this happen with a business model in hand.
I talked to Alex Hyndman from Greenedge and he mentioned an interesting model where they license their model and knowledge with any interested property developer and helping them build an eco community.
I think these guys have a great opportunity to be successful here. If they can figure out a way to create their eco-villages faster, sustainable and at a reasonable cost to normal development model then they have a winning combination.
