Sustainability today and being a pioneer in your own right 2009Presentation Transcript
Sustainability Today and being a pioneer in your own right Getting the big picture. Understandingthat Economic Sustainability is still missing. Know where to Act This working paper is a preliminary presentation circulated in a limited number of copies and hosted privately on Scribd website at http://www.scribd.com/rickyci to stimulate discussion and critical comment. Seshie Richard Ahedor Change Agent and thought thinker on Sustainability
NO ONE IS FLOURISHING RIGHT NOW SUSTAINABILITY ECONOMY IS MUCH TO BLAME ACT ON WHAT’S MISSING
No one is flourishing right now: Key Dynamics Web of Life ongoing Total Natural Events Predator-Prey Chain Regenerative and assimilative capacities of the ecosystem… Over population Consumption of Novelty & Positional Consumption Loss of Values Education Governance, Human Rights, and Belief Systems Country Race for Supremacy… Financial Engineering Production of novelty Failure of holistic accounting from GDP Skills vs. Skills compensation curve Asset Allocation, Ownership, Maximization and Re-allocation Global + Economic Diplomacy…
No one is flourishing right now: Outcomes Depletion of Natural Resources Accelerated Decline or Loss of Biodiversity Degradation of the Environment Climate Change Degradation of Social Capital Social Unrest Total Social Service missing; especially in developing countries Degradation of Economic Base Capital Wealth for the few, Poverty for the many Other Perverse Effects ofGrowth as functional for Economic Stability (unemployment, de-growth effects)
Environmental Unsustainability Predator-Prey Chain The Ecosystem of Unsustainability Total Natural Events- Web of Life ongoing natural input/events Regenerative &/or assimilative capacities of the ecosystem Degradation of comprises the Environment Failure of holistic accounting from GDP and macro-economics Depletion of Over population Natural Resources capability exhaustion Other Natural/Human Events Accelerated Loss of next generation natural events Biodiversity Degradation of Economic Base Capital Climate Pressure + human carbon emission Consumption of Novelty Change Pursuit of Economic Success Restless Desire of the Empty self Economic Unsustainability Unsustainable Legend Positional Consumption Restless Starts here Drives (economic aspects) Barriers and Opportunities in Education Drives (social aspects) Other Negative Effects of Growth as functional for Economic Stability induces Drives (environmental aspects) Production of Novelty Results into Points to/comes from Block Profit Motive Skills vs. Skills remuneration curve Restless Innovation of the Entrepreneur Driven by one or all items Wealth Financial Engineering Block for the few, Poverty for the many Asset Allocation, Ownership, Maximization & Re-allocation comprises Restless Drivers not given or partially given Total Social Service missing in countries Country Race for Supremacy Global + Economic Diplomacy Social Unsustainability Weak Governance, Human Rights denial and Belief System Social Unrest Accelerated Degradation of Human & Social Capital Loss of Values
Implications of Unsustainability: Realities lived by milllions are just real Economy 40% of the world’s wealth is owned by 1% of the population while the poorest 50% can claim just 1% of the wealth. Wal-Mart annual turnover is equivalent to the GDP of 161 state-nations. The commodity price ‘bubble’, the credit crisis and the ensuing recession were part of a systemic failure in the current economic paradigm. Meanwhile, a staggering $7 trillion of public money used as a temporary fix, rewarded those responsible for the crisis at the expense of the taxpayer. Social The world now produces enough food for everyone, but over 850 million people still face chronic hunger every day. 1 billion people are illiterate and about 100 million children within emerging economies are not enrolled in primary education. 13 million deaths were caused by intra-state conflict that occurred between 1994 and 2003. Conflicts motivated by control of natural resources, social inequity… Environmental Our current resource use already exceeds the regenerative capacity of the planet by 30%. 60% of ecosystem services, such as fresh water and climate regulation, are being degraded or used unsustainably. Worldwide, more than 7,000 major disasters have been recorded since 1970, causing at least $2 trillion in damage and killing at least 2.5 million people.
NO ONE IS FLOURISHING RIGHT NOW SUSTAINABILITY ECONOMY IS MUCH TO BLAME AND MISSING ACT ON WHAT’S MISSING
‘The possibility that humans can flourish, achieve greater social cohesion, find higher levels of wellbeing and still reduce their material impact on the environment is an intriguing one.’ Excerpt from Prosperity without growth? SDC 2009, p.38.
When Sustainability comes into play as an umbrella and unifying term for everything flourishing Social Cohesion and Personal Wellbeing Social Sustainability = Economic Sustainability Environmental Sustainability = = Economic Stability and Prosperity Environmental Integrity and Quality When Sustainability can be regarded as the human comprehension of flourishing
NO ONE IS FLOURISHING RIGHT NOW SUSTAINABILITY ECONOMY IS MUCH TO BLAME ACT ON WHAT’S MISSING
What are the Human Constructions out there? Is it the Environment? We humans already have lot of trouble to decide where our species originate from, so getting the complexity enabling the web of life is a request beyond what our current knowledge can capture; nor did we design the ecosystem. The truth is that we wish to bring the unpredictable back to the unpredictable & the useful. Scientific disciplines are no longer so helpful to predict the climate, species migration and other natural events; We now realize natural resources are infinite and we were sure we would live as long as the planet goes round but we are now anxious with the next generation natural events emerging. Is it the Community? During the survival age, we discovered that a sense of togetherness can make us stronger. We discovered fire and agriculture; we settled down and build our societies according to different mental and later governance models. Whether we raise our children, care for our families, attend schools, churches, fan clubs or live in the same neighborhood; that sense of togetherness has proved resilient to the intrinsic nature of the human being. Through communities, we strive to fully participate in the life of the society. Is it the Economy? Economy has inhabitated all civilizations and the so-called Modern economy is less than three centuries old. At the heart of the market economy, the over-simplified concept of exchange looks basically sound: I exchange your labour for income; you exchange your income for goods and services I produce. Missing from this picture are aggregates such as savings, buildings and machinery; actors such as the public sector, the foreign sector and the financial sector. We have since introduced e-money and virtual currency; sophisticated different financial products and services; impose reserves; rate who is credit-worthy or not; structured global trade and much more. No wonder we have a Nobel Prize in Economics.
Clearly, the Economy is a human construction. A healthy dose of integrity may be required from the die-hards; but a simple look at the Ecosystem of Unsustainability captures how free-market capitalism; our current model of economic successis fundamentally flawed and is root to Unsustainability everywhere:
The want for novelty or the appeal for status through positional consumption push individuals to loosen values and morals; eroding trust – which in turn is essential for doing business.
Population increase or decrease is also a matter of economy. In certain developed countries, getting more babies done may ensure they pay for an aging population facing increased social and healthcare costs; when in developing countries, exporting the consumption-driven economic model based on natural resource pressure and carbon emissions to the billions aspiring and the millions yet to born may prove an engine of growth far from saturated markets that may require just more than a planet.
Country race for supremacy and financial engineering restrict the ability for ‘smaller’ countries to borrow on international markets, leave commodity prices at the volatility of markets, push for FDI at high discount rate, loosen legislation and tax structure, brings aid to maintain social infrastructure status quo, is silent to weak governance – follows i’m not shy capital flight and external debt servicing which leaves countries under permanent social unrest or even to bankrupted or failed states as is the case of many african countries.
The default assumption is that – financial crises aside – growth will continue indefinitely.
Consumption Growth is unsustainable – at least in its current form. Burgeoning resource consumption and rising environmental costs are compounding profound disparities in social wellbeing. ‘De-growth’ is unstable – at least under present conditions. Declining consumer demand leads to rising unemployment, falling competitiveness and a spiral of recession. So we should wonder if the benefits of our current economic model outweight these trade-offs and defficiencies? If harmdoing there is; are we doing anything to fix the economy? ensure flourishing? Are we providing any credible answers beyond bail-outs and concept-washing?
What are the solutions out there? Economic Sustainability
Inclusive Business Models
Shared Innovation (e.g;. Creative Commons, free open source software)
State Provision of Social Wage, Services and Infrastructure
Citizen Sector Provision of Social Services and Infrastructure
Strengthening Governance (Public/Corporate)
Business Standards and Certifications
Public-Private Partnership s(PsPPs…)
Measuring (holistic) Prosperity
Policies to stabilise population growth
Online and Distance-Learning Education
Child Girl Education
Education on Ethics, Morals & Etiquette
Employers flexibility and employee’ incentives
Carbon Capture and Sequestration
Micro generation of electricity + Smart Infrastructure
Other Clean Technologies
Green-led supply (cradle to cradle solutions, recycle-reuse-lease, biomimicry, organic food…)
and Green lifestyle
Sale of de-materialized services
Efficiency (energy, resource, technological)
Ecosystem maintenance and protection
Ecosystem and soils Restoration
Re-introduction of Endangered Species
Genetically Modified Organisms (GMO)
Worldwide Seeds Reservoir
Rainwater storm water and domestic gray water
State-to-State Land Rent
Notes – 1. This listing cover key traditional and recent solutions but do not pretend to cover all the solutions for Sustainability. 2. Solutions were classified as economic, social or environmental based on the bottom line impact where it is the most evident; and regardless of the stakeholder (government, private sector, citizen…) spurring the solution. 3. A solution classified as economic may impact social and/or environmental sustainability and vice-versa. 4. Well-known terms covering one or more solutions include: low-carbon economy, decoupling, corporate citizenship, carbon neutrality, biosequestration, climate mitigation, climate adaptation, alternative hedonism, work-life balance.
The Impact-Profit* Matrix: Assessing environmental solutions IMPACT Transformational Carbon conversion??? Sale of de-materialized services??? Carbon capture and sequestration??? Renewable Energy Other Clean Technologies Ecosystem maintenance and protection?? Ecosystem and soils Restoration Legend Carbon Emissions Efficiency Afforestation?? Micro gen. of electricity + Smart inf. Substantial Environmental Taxation Pressure on Natural Capital Environmental Legislation Green-led supply Both Nuclear Energy Cap-and-trade system? Green Building Impact unknown ? Livestock Reduction ?? Profit unknown Re-introduction of Endangered Species? Both unknown ??? Green Tourism Area of obvious competitive advantage Clean Coal Incremental ECONOMIC PROFIT None- Low High Moderate *Profit means short-term or immediate corporate profit
The Impact-Profit Matrix: Assessing environmental solutions IMPACT Transformational GMO? Water Desalination? Legend Rainwater, storm water and domestic gray water use Shared watersheds Food and Climate Substantial Efficiency Water-free sanitation Water-stress Land Productivity Impact unknown ? ?? Profit unknown Both unknown ??? State-to-State Land Rent Area of obvious competitive advantage Worldwide Seeds Reservoir Incremental ECONOMIC PROFIT High Moderate None- Low
The Impact-Profit Matrix: Assessing social solutions IMPACT Transformational Social Innovation Inclusive Business Models Legend Free Education Total Social Infrastructure missing Child Girl Education Reproductive Health State Provision / Strengthening Public Governance/Measuring Prosperity Social Legislation Barriers and Opportunities in Education Social Investments Socially Responsible Investment Citizen Sector Provision Substantial Online and Distance-Learning Education Overpopulation Policies to stabilise population growth Public-Private Partnerships Degradation of Human & Social Capital incl. Work-life imbalance Insurance Telework Employers flexibility & employees incentives Private Universities Stress Management Impact unknown ? Philanthropy ?? Profit unknown Education on Ethics, Morals & Etiquette Both unknown ??? Corporate Culture and Governance Area of obvious competitive advantage Corporate Giving Development Aid Business Standards and Certifications Entry-job Requirements Incremental ECONOMIC PROFIT High Moderate None- Low
The Impact-Profit Matrix: Assessing economic solutions Transformational Shared Innovation Inclusive Business Models Legend Macro-Economics for Sustainability Wealth Distribution Pursuit of Unsustainable Economic Success Wage; Tax Structure and policy Social Investing??? Substantial Women as Wage Earners Socially Responsible Investment Micro Finance Both Wealth and Pursuit Economically-motivated Migration Economically-motivated Community-groups Consumption of Novelty Fair trade Impact unknown ? Stakeholder Engagement ?? Profit unknown Not-for-profit/low profit corporation? Both unknown ??? Philanthropy Area of obvious competitive advantage Voluntary Simplicity Corporate Giving Intentional Communities Climate Risk Insurance Incremental ECONOMIC PROFIT High Moderate None- Low
Economy is root to Unsustainability everywhere…let’s have a critical regard of economic solutions spurheaded by the economic community itself. Transformational Shared Innovation Inclusive Business Models Legend Macro-Economics for Sustainability Wealth Distribution Pursuit of Unsustainable Economic Success Wage; Tax Structure and policy Social Investing??? Substantial Women as Wage Earners Socially Responsible Investment Both Wealth and Pursuit Economically-motivated Migration Micro Finance Economically-motivated Community-groups Consumption of Novelty Fair trade Impact unknown ? Stakeholder Engagement ?? Profit unknown Not-for-profit/low profit corporation? Both unknown ??? Philanthropy Area of obvious competitive advantage Voluntary Simplicity Corporate Giving Intentional Communities Climate Risk Insurance Incremental ECONOMIC PROFIT High Moderate None- Low
Climate Risk Insurance The nature of Insurance is about risk and compensation. As much as 80% of the global economic damage from natural events is not remedied through insurance but has to be borne by the victims or alleviated with ad hoc disaster relief; but the insurance industry is keener to address the environmental challenge. Climate Risk Insurance may convey this message to Businesses: ‘Whatever harm the environment can do, we would cover your back.’ Instead of confronting the environmental challenge; Businesses can opt to pay a premium and pursue business as usual (so degrading the economic base capital). True, the insurance industry may remove the fear factor and prevent some environmental damage - yet not the potential of environmental harm.
Corporate Giving Skip the stress-test of greenwashing; Corporate Giving is a business response to society on earning the right to continue operating “the largest legal accumulation of wealth in history.” Total corporate donations stood at $14 billion in 2008 in the U.S. when the business ecosystem of a single company such as Microsoft is worth over a trillion. Giving is absolutely vital in the face of an urgent threat; it does make a difference. Yet; Corporate Giving is highly volatile (both in monetary value and year-on-year loyalty to causes & partners), addresses the manifestations of poverty instead of the root causes that comes from within the economic system. Strategic philanthropy promises better prospects. But to take Giving on a standalone basis is no route to shared economic prosperity.
Stakeholder Engagement Involves how a corporation responds to the expectations of its stakeholders : shareholders, owners, investors, employees, suppliers, clients, consumers. Or in few words: keep them under check, busy or happy. It includes examples such as hiring people from economically distressed communities; providing training and development opportunities for lower-wage employees; purchasing from minority-owned suppliers; providing the necessary information, education, and training to suppliers and clients to ensure that a product or service can be effectively and safely used. Stakeholders expectations often conflict and the premium of consideration still goes to investors, shareholders at the possible detriment of more inclusive and just choices. Again, this is making a difference but not transforming the unsustainable economic landscape.
Socially Responsible Investment The SRI concept uncovers a dual nature: one should be socially responsible and one should be a responsible investor. One should be socially responsible is about one using their holdings to effect positive social change. Values-based social investors decide or not to invest in a company (e.g. prohibit tobacco) based on their beliefs and moral ground. This practice is largely un-welcomed into mainstream investing. One should be a responsible investor speaks to investors who are uncomfortable with moral judgments but consider the broader integration of social and environmental aspects of corporate performance to judge of a company long-term value with carbon accounting increasingly perceived as an element of mainstream investing . Shareholder activism is also delivering some promise on modeling responsible corporate governance. 1 in 10 dollars is said to go to SRI funds. SRI empowers asset owners to have their say on the kind of responsible behavior they want companies to exert; yet significant challenges remain: Reconciling fiduciary responsibility with the need for social & environmental screening Make Markets to send the right signals to punish or reward responsible companies Strenghtening the governance model of SRI rating firms as their clients are the ones’ they rate or rethinking the actors Fill the gap for improved accounting in terms of pricing extra-financial risk, comparison against screened benchmarks and linking the materiality of ESG issues to company valuation. Again, SRI impact is substantial but not transformational.
Social Investing / The not-for-profit or low-profit corporation It is ironic to see what is happening. On one side, a certain number of NGOs (or civil society) are ‘fed up’ with consuming, restrictive and highly volatile philanthropy so they have called for flexible mainstream capital. Those NGOs are ‘evolving’ into social enterprises that offer a social return on investment as well as a financial return. A range of investment vehicles from the purely social to the purely commercial including not only grants, forgivable loans but also patient loans, equity, equity-like, social venture funds…is now coined as social or impact investing. The trade off: Mainstream capital can accelerate the scaling-up of profitable social services and bring in sound business practices VS. the risk of “mission drift”, “value drift”, tightened room for independence, social enterprises can make soft targets for a takeover by conventional investors once they grow to a certain scale and profitability (e.g. Body Shop, Ben & Jerry’s). The example of Micro-credit labeled as a pioneering case of social enterprise can speak to us. From a mere 0 to 5% interest rate in the early beginning, MFIs today charge between 8-15% at full market return as expectations from new investors brought in high interest rates for the ‘poor’ clients. On the other side, ‘conscious’ business entrepreneurs are setting up not-for-profit or low profit corporations, which surplus is re-invested solely in the business. Obviously; access to capital and the ability to re-invest are seriously limited so does the prospect to sustain the business. Nonetheless, a great deal of hybrid legal structure and hybrid financing is emerging and the horizon unveils a big question mark.
Inclusive Business Models Inclusive Business Models are business models that include the poor in ways that are profitable and promote human development. Dismissing the use of non-core activities such as corporate giving or stakeholder engagement; inclusive business models regard the poor as economic participants and look to engage them as producers, consumers or suppliers. Examples include Amanco (Mexico) integrated irrigation solutions for small-scale farmers or Tiviski Dairy (Mauritania) camel dairy sourcing from nomadic herders. The key here is Innovation applied to the business model and challenges are more of a technical nature. There is wide agreement that several inclusive business models have benefited the poor. However, the potential for misuse has been exerted with cases of micro packaged/highly priced personal care items or simply selling low-quality products. Inclusive Business Models cannot apply to the whole spectrum of the industry & services sector given the fact basic not sophisticated services constitute the immediate need for poor and profit margins/brand promise/…. would dismiss poor as ‘viable’ clients. Rare examples of inclusive + clean business models exist - as businesses which focus on ‘green’ products and services include a premium in the mainstream business model with few room to engage the poor. The notable exception would be the cleantech sector.
NO ONE IS FLOURISHING RIGHT NOW SUSTAINABILITY ECONOMY IS MUCH TO BLAME ACT ON WHAT’S MISSING
‘Prosperity for the few founded on ecological destruction and persistent social injustice is no foundation for a civilised society. Are ever-increasing incomes for the already-rich really a legitimate focus for our continued hopes and expectations?’ Excerpt from Prosperity without growth? SDC 2009, p.7.
Many dynamics in the Ecosystem of Unsustainability remain to be properly addressed: they are either not addressed through the glasses of Sustainability with the wider interdependence view not factored in OR are seen as delivering their narrower focus so are left unquestioned OR are not materiality issues. We have circled those dynamics and it’s up to you how you engage your fertile imagination, your heart and hands to bring to life geniune initiatives for a world with meaningful flourishing.
Environmental Unsustainability Predator-Prey Chain The Ecosystem of Unsustainability Regenerative &/or assimilative capacities of the ecosystem Degradation of the Environment Failure of holistic accounting from GDP and macro-economics Depletion of Over population Natural Resources Other Natural/Human Events Accelerated Loss of Biodiversity Degradation of Economic Base Capital Climate Consumption of Novelty Change Pursuit of Economic Success Restless Desire of the Empty self Economic Unsustainability Unsustainable Positional Consumption Barriers and Opportunities in Education Other Negative Effects of Growth as functional for Economic Stability Production of Novelty Profit Motive Skills vs. Skills remuneration curve Restless Innovation of the Entrepreneur Wealth Financial Engineering for the few, Poverty for the many Asset Allocation, Ownership, Maximization & Re-allocation Total Social Service missing in countries Country Race for Supremacy Global + Economic Diplomacy Social Unsustainability Weak Governance, Human Rights denial and Belief System Social Unrest Accelerated Degradation of Human & Social Capital Loss of Values
Inspire yourself from those new Pioneers and ACT!
Sustainability Amimi Ad infinitum (Sustainability at heart to infinity).