Sustainability With Green Swan Characteristics
Tags: Green Swan, Sustainability, Sustainable Development, Sustainable Business, Climate Change

John Elkington

Why the art — and science — of saving the world must go exponential.

As 2020 kicked off, sustainability was the global buzzword. Now COVID-19 has made it even clearer that business-as-usual — and even change-as-usual — strategies cannot deliver the future we want. The world is now headed toward multiple forms of breakdown — with our generational challenge being to shift our civilization, economies and business models toward breakthrough solutions (see diagram below).

Black Swans happen because we fail to think things through properly. Green Swans, in contrast, happen because we succeed in doing so. As I look back, my recall of the triple bottom line was an intuitive version of what Zen Buddhists call a kōan. This is a question, challenge, or paradox designed to disrupt business-as-usual — or, in this case, change-as-usual. Used at the right time, in the right way, such provocations can force us to rethink and, when truly effective, to move toward some form of enlightenment.

The further we dig into the relationships between capitalism and democracy, the more sustainability looks like the natural bridge between the two, focusing as it does on intergenerational equity and balanced, inclusive, and environmentally sustainable value creation and distribution over extended timescales.

Beyond today’s horizon

My decision to attempt the recall, even as a kōan, stemmed from my sense that the triple bottom line operating system I had helped create has an intrinsic weakness when used by people, however well intentioned, who are subject to incentive systems that powerfully focus on short-term Horizon 1 targets (see previous post).

Breakdown or Breakthrough? (source: Volans/Harvard Business Review)

Of course I am delighted to see growing numbers of businesses embracing elements of the TBL core agenda, whether by becoming B Corporations or producing integrated reports covering all three dimensions of value creation — or destruction. But most businesses are still thinking incrementally where they should be acting exponentially.

Take Apple, a company whose products I have used since the very first Macs, with Green Swans typed on one of the latest MacBooks. But that did not stop me on November 15, 2013, from asking Apple design guru Sir Jony Ive a challenging question about the working conditions at the company’s Chinese suppliers, particularly Foxconn. This was during a session at a Generation Investment Management event, with former American vice-president Al Gore in the chair. Ive became quite agitated, insisting there were no problems and that he had even slept in the worker dormitories at Foxconn: I left thinking there was more to this than met the eye.

How interesting, then, to see the media commentary around Ive’s announcement that he was leaving Apple. This marked a shifting in expectations of brands like Apple, as the Financial Times explained in a full-page article. Noting that it was no longer good enough for products to be beautiful and easy to use, the piece stressed, “The priorities of many consumers are changing. A new generation of environmentally conscious consumers may no longer fetishize a MacBook’s aluminum body or see the latest iPhone as less of a status symbol than their predecessors.”

The newspaper noted that it is impossible to change the batteries in Apple’s AirPods, its tiny wireless headphones, because the components are glued together to keep them as small as possible. The leading edge of the design profession senses that it must rethink its role. “The whole product durability issue is absolutely key here with our students,” RCA vice chancellor Paul Thompson was quoted as saying. Ironically, the RCA is the art and design university where Ive served as chancellor.

Thompson continued, “People want social purpose and they want to work with the circular economy — locally grown and sourced products, not shipping things backwards and forwards across the oceans.” Growing numbers of major companies are now taking the plunge and working on transformation strategies that would have seemed out of the question even a few years ago.

View from International Space Station. Source: Pixabay

Greening Black Swans

Elon Musk, for example, has so spooked competitors that an array of auto companies is now speeding to catch up with Tesla. BMW expects profits from its electric vehicles to match those from traditional cars by 2025. VW plans to roll out seventy fully electric models. Shell, meanwhile, aims to become the world’s biggest electricity company as the world plugs into green power.

Expect to see a growing number of such Black Swan contributors moving onto Green Swan conversion pathways. Denmark’s Ørsted, formerly a big player in the coal-fired power market, is another case in point. Ørsted may have suffered some pretty spectacular reverses along the way, but its recent share price performance has been spectacular.

Or take Umicore, a company that two decades ago was an old-school smelting company, but today is a leading-edge player in the circular economy, having transformed itself into an “urban miner,” recycling waste metals. In some cases, too, it may not be the company that survives but the underlying business model, spreading to other companies and other sectors. Consider Uber’s dynamic pricing model, which is likely to spread from companies like Uber to very different sectors.

The impact of such changes will be profound, particularly in countries like Germany, whose national business model depends on the automotive sector. Its high-end engineering skills may become less relevant as the role of software and imported batteries grows. Elsewhere, we could see “fire sales” of carbon intensive assets as the risks of stranded assets in the fossil fuels sector grow, destabilizing the financial system.

So, whether they are designing cars or economic and political systems, tomorrow’s innovators will need to take sustainability considerations into account to a far greater degree than in the past. In the process, they will increasingly prioritize resilience, regeneration, and, the very essence of sustainability, intergenerational equity.

They will need new icons, models, and gurus. One serial entrepreneur I have long admired in the regeneration space is Sir Tim Smit of the Eden Project, which is why we awarded him a Green Swan trophy during our Tomorrow’s Capitalism Forum early in 2020.

When the Eden Project team say that sustainability is at the heart of everything they do, they mean it — and have done their level best to make it part of the Eden reality. The project restored a massive china clay pit. It pumped over £1.5 billion into the regional economy. And, having been expected to attract perhaps 750,000 visitors, by its tenth birthday in 2010 it had attracted 13 million people. By the time of this writing, that number was over 20 million. And the irrepressible Smit beavers on, launching a new company in 2017 to develop new Eden projects around the world, including in China.

A vortex of change

Back in the economic mainstream, meanwhile, today’s global challenges are so far beyond our collective experience that they demand a radically different kind of engagement from senior leadership teams in the private sector. Most dramatically, the threats that the climate emergency poses to business, markets, and, indeed, capitalism are still peculiarly hard for most top teams to spot, let alone act on.

Our brains evolved to respond reflexively to immediate threats but ignore or downplay systemic crises that creep up on us. Such market dynamics behave like vortexes — a whirlwind in the air, or a whirlpool in water. When a vortex is just beginning to form, it is virtually invisible unless you have extremely good peripheral vision and happen to know what you are looking for. At this stage, things move at a deceptively slow pace. But even the best-designed vessels — or ventures — can find themselves drawn inexorably into the danger zone. Then, suddenly, you reach a point of no return.

Such slow — but ultimately exponential — dynamics characterize what I think of as the carbon vortex. Recall the three major hurricanes photographed from space in the autumn of 2017 in a single, unparalleled NASA image. Think, too, of reports that carbon dioxide emissions, instead of declining, have been growing, in part because much economic growth in places like China and India is still fuelled by coal.

But as the carbon vortex gains momentum, there is also evidence of an equal and opposite vortex pulling us toward risk mitigation — and breakthrough innovation. Remember Siemens explaining that the major job cuts planned for its gas turbine business have been partly triggered by the renewable energy boom? GE, in contrast, decided to double down on coal, despite its much vaunted “Ecomagination” platform, and was then caught in the same market riptides, finding itself forced to eliminate thousands of jobs from its power division.

The octopuses are waiting to take over

It is clear that much of the world is at a market inflection point, where issues once seen as peripheral are surging into the mainstream. As Generation Investment Management put it in The Transformation of Growth, their 2017 white paper:

The Sustainability Revolution appears to have the scale of the Industrial Revolution and the Agricultural Revolution — and the speed of the Information Revolution. Compared to these three previous revolutions, the Sustainability Revolution is likely to be the most significant event in economic history.

Emerging technology will certainly challenge us in new and profound ways. AI will eliminate or squeeze a huge number of jobs and careers. Synthetic biology promises a fundamental reprogramming of life itself to bend it to human needs and wants. But our central challenge, as I argue in Green Swans, now is to create new forms of capitalism, democracy and sustainability that can close the gaps between the generations — and ensure that we hand over a world that is progressively better than the one we inherited.

If we fail, Tim Smit concludes, “The octopuses are waiting to take over from us.”