A Journey in Search of Capitalism 2.0

Sustainable Capitalism?

There is a systemic crisis affecting most countries on the planet. It is not restricted to capitalism and in fact extends far beyond it. It is a crisis that has been in the making for decades and one that results from our disregard for nature and one another.

The crisis is one of unsustainable business and it is most easily explained by the systemic thinking of Karl-Henrik Robert, Founder of The Natural Step. Twenty years ago, Robert defined four basic rules of engagement with mother earth:

1. Substances from the Earth’s crust cannot systematically increase in the biosphere.

This means that fossil fuels, metals, and other minerals can not be extracted at a faster rate than their re-deposit back into the Earth’s crust.

2. Substances produced by society can not systematically increase in the biosphere.

This means that substances must not be produced at a faster rate than they can be broken down in nature. This requires a greatly decreased production of naturally occurring substances that are systematically accumulating beyond natural levels, and a phase-out of persistent human-made substances not found in nature.

3. The physical basis for the productivity and diversity of nature must not be systematically deteriorated.

This means that we cannot harvest or manipulate ecosystems in such a way as to diminish their productive capacity, or threaten the natural diversity of life forms (biodiversity). This requires that we critically examine how we harvest renewable resources, and adjust our consumption and land-use practices to fall well within the regenerative capacities of ecosystems.

4. In order to meet the previous three system conditions, there must be a fair and efficient use of resources to meet human needs.

This means that basic human needs must be met with the most resource-efficient methods possible, including a just resource distribution.

Today, huge sectors of commerce and industry completely ignore these fundamental principles. However, some progressive CEOs embraced these four rules and successfully redesigned their businesses to be sustainable and profit-making. In 1990 for instance, Leif Johansson at Electrolux started the process of completely removing CFC gas (1993) from his fridges. This was ten years before this greenhouse gas was prohibited for its damaging effect on the Earth’s atmosphere. In a similar feat, the late Ray Anderson at Interface reduced the company’s greenhouse gas emissions by 35% and ensured that the company use 30% of renewable energy in its energy mix.

These examples, and my own experiences working closely with The Natural Step, showed me that Robert’s four principles were entirely achievable in business. I was inspired to set up a values-based consultancy that could expand on his thinking and encourage long-term change. I founded RESPECT in 2000 and its mission is to promote the much-needed dialogue between business leaders, politicians and the environmental sector.

Such conversations are imperative if we are to prevent systemic failure from becoming systemic collapse. But whilst impending crisis may seem like a cause for pessimism, the work of Respect and the various initiatives that it spawned give me great hope. With the right guidance and motivation, even the largest companies can obey Robert’s basic rules and build sustainable corporations.

Upon formation, our team was made of some leading figures in the field including Tom Cannon, who previously led the British government initiative on sustainability issues and wrote the first long-term sustainability strategy for a government, Per Uno Alm, who worked closely with business leaders during his time as a Secretary General of The Natural Step, and John Morrison who developed the Body Shop’s global human rights agenda. They helped Respect establish programs that addressed the three pillars of a new economic paradigm: sustainability, low carbon economy and human rights. Most notably they launched Business Leaders’ Initiative on Climate Change (BLICC) and Business Leaders’ Initiative on Human Rights (BLIHR), two groundbreaking programs that encourage stakeholder dialogue between CEOs, politicians and NGOs and define how they can together implement this new approach to business.

BLICC focused on creating sustainable company models. Its first program worked with CEOs of companies including Ikea, Interface, Birka Energy, DHL, Inveco,McDonalds and Stora Enso, as well as politicians such as the EU’s Environmental Commissioner, Margot Wallstrom. They met, found a common agenda and collaborated to develop it. The results have been remarkable (see here for yearly reports). Through a variety of pioneering schemes, from transporting waste by rail to manufacturing plastic bottles with shorter neck rings, BLICC companies reduced emissions by approximately 30% between 2004 and 2009.

Organizations in the initiative also reported increased efficiency and reduced costs as a result of the program, demonstrating that profitability and sustainability can go hand in hand. This is a view that has gained increased traction in business and is perhaps best articulated by Michael Porter, a leading academic at Harvard Business School who said: “For thirty years, I have been preaching to corporations that what is good for business is good for society. However, times have changed and so has the logic. What we need to understand is today is that what is good for society is good for business.”

But as well as encouraging sustainability and a low carbon economy, there is a third pillar of our new economic paradigm. It is the responsibility of our other initiative, BLIHR, which concentrated on the human factor. It counted amongst its patrons the former UN’s High Commissioner in Human Rights Mary Robinson and it too has worked with leading CEOs from companies including ABB, Barclays, GE, Ericsson, Gap, Coca Cola, MTV. Again, the results have been hugely impressive (see full reports here). By incorporating human rights responsibilities into their business agendas, from improving workplace safety to guaranteeing maternity leave, our partners significantly improved conditions for their global workforces and their communities.

To support this, Respect worked with the Global Compact, Global Reporting Initiative and the World Resource Institute to develop the principles, policies and tools to be reported on and addressed by both programs.

The success of these initiatives came about because they value the distinction between actors in the political and market arenas. They also recognize the genuine desire for collaboration between the two, and most of the companies we have worked with strongly favor close relations with policy makers. They see them as a way to foster what is often termed as “smart” legislation that promotes sustainable community development. Contrary to what one might expect, green tax has also always had strong support in our discussions with businesses as well as heavier penalties for those who do not do enough.

The call for incentives that promote greener development and procurement actually has broad support within the corporate sector. Respect’s experience suggests that the business community is progressing down the road to change. With the right guidance, companies are beginning to realize that unless Robert’s four systemic conditions of engagement are fulfilled, they cannot build a sustainable businesses or create lasting wealth, peace or prosperity for the communities they operate in.

I believe that the BLICC and BLIHR models have a great deal to offer to the world at this moment in time, especially in the emerging world where rapid growth often comes at the expense of long-term solutions. The initiatives promote environmental and social sustainability, offering examples that can and should be replicated.