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Breakthroughs in Tomorrow’s Markets

by John Elkington 1 February 2017

Conclusions of an event held at WRI on January 11, 2017, in association with the United Nations Global Compact and Volans

 

2016 was a year of political disruptions to rival 1968 or 1989. This invitation-only event was subject to Chatham House Rule and was designed to convene a carefully curated group of business, government and civil society experts to assess the implications for change agendas. The event, which attracted senior participants from companies including BASF, Citi, Dell, DuPont, Google, Hilton, Intel, Michelin, Microsoft, Unilever, UPS and Sumitomo Chemical drew on WRI’s study of Tomorrow’s Markets and work by Volans, including both a recent report for the Business & Sustainable Development Commission called Breakthrough Business Models and a multi-year initiative being developed with the UN Global Compact, called Project Breakthrough.

 

Speed bump or retreat?

 

The political context for the event was outlined by WRI CEO Andrew Steer in his Stories to Watch 2017 session. The big question, he argued, is whether the disruptions signaled by the impending inauguration of President Trump, by the ongoing Brexit process and by looming national elections in the EU are merely speed bumps for progress toward a more sustainable, equitable world, or do they signal a much larger retreat? Participants in the ‘Breakthroughs in Tomorrow’s Markets’ event were in no doubt that the world outlook had changed profoundly since the heady days of late 2015, with the launch of the Sustainable Development Goals and the Paris Climate Agreement. But there was also a sense that on-going developments would provide both a challenge to, and an opportunity for, the growing sector of the global economy dedicated to creating forms of development that are more environmentally sustainable and socially equitable.

 

Project Breakthrough and Tomorrow’s Markets

The opening session introduced the nature and scale of the challenge.

 

  • Kevin Moss, Global Director of WRI’s Business Center, welcomed participants and noted that the imminence of disruption was signalled on the day of the event by the beginning of the Senate hearings on political appointees, including former ExxonMobil CEO Rex Tillerson. He also noted that there is only one degree of separation between any two attendees, since all were invited by one of the host organizations.
  • Andrew Steer, President and CEO of WRI, cited the global challenge of decoupling economic growth and environmental impact and reducing greenhouse gas emissions by 85% by 2050. He stressed the need for radically different energy, production and  consumption systems to get off our currently unsustainable path. He also noted the need to fight against vested interests in order to create breakthroughs.
  • John Elkington, Chairman of Volans, argued that the political discontinuity could be turned into a blessing in disguise by provoking the global sustainability sector to address some of the issues that too often leave it fragmented, internally competitive and uncomfortably incremental.
  • Lise Kingo, Executive Director of the UN Global Compact called on the need for responsible and innovative leadership to help turn the threats of globalization into opportunities by giving a human face to global markets. She noted that the Sustainable Development Goals provide a blueprint for how to address the complex challenges the world faces, and explained how Project Breakthrough fits into the Compact’s new strategy by emphasizing how critical breakthrough thinking and innovation will be to achieving the world we want.

Key Takeaways

  • We are facing a “tipping point of monumental proportions.”
  • The opportunity to connect the work of Tomorrow’s Markets and Breakthrough Business Models is critical.
  • There is a need for greater collaboration amongst organizations. They need to ‘lower their flags’, surrendering a degree of independence and control to participate in and.shape a change coalition.
  • The Sustainable Development Goals provide a powerful framework for business action, but greater levels of ambition, creativity and investment are needed.

Taking Stock

The second session heard from:

  • Liz Cook, Vice President for Institutional Strategy and Development, World Resources Institute
  • Leslie Dach, Campaign Director, Protect our Care
  • Mathy Stanislaus, Assistant Administrator, Environmental Protection Agency
  • Erika Karp, Founder & CEO, Cornerstone Capital

Key Takeaways

  • The political changes that are currently happening in the United States and Europe are more consequential than what most participants may have experienced in the past; there appears to be a clear agenda to roll back regulations.
  • Progress stalls when one sector—NGO, government or business—disrespects another sector.
  • Ideally, government is neutral. It can convene, aggregate data, and provide recognition to companies that take action. These functions help companies to improve. The government should also play a role in promoting refurbishing, reuse and other aspects of a circular economy. NGOs and the private sector must now fill the vacuum left by government.
  • Companies must resist the urge to stagnate or move backwards. We cannot lose sight of the common good but rather should see this as the time to step up.
  • In order to make continued progress, sustainability language must translate more fluidly to financial language. For example, “corporate excellence” may be a better phrase than “corporate sustainability.” Corporate sustainability professionals must be able to make a strong business case for their agenda internally.
  •  Increased volatility is expected in the near-term, therefore, sustainability investments for the long-term make sense.
  • There is a major backlash to globalization because the pain among those who are harmed is personal while the benefits of globalization are more diffuse. Defending globalization requires that the benefits be better illuminated.
  • For healthy societal systems, we need transparency. Without it, there will be distrust and insecurity, which is bad for markets—decisions won’t be made and capital won’t be deployed.
  • It is important that companies demonstrate authenticity so that they are able to recruit millennials.
  • Asset owners are increasingly concerned with sustainability (see recent research from WRI on the growth of sustainable investing worldwide).

Enabling Breakthroughs

The third session began with a summary by Lorraine Smith, Senior Researcher and coauthor of the report, of the findings of the Breakthrough Business Models project. She noted the following four key business model characteristics:

Social: Breakthrough business models will be social, delivering both financial and extrafinancial value through positive impacts for people—in the present and in the future.

Lean: Breakthrough business models will be lean, optimizing the use of all forms of capital, from physical and financial through human and intellectual to social and natural.

Integrated: Breakthrough business models will be integrated, managing financial and extrafinancial value creation across economic, social and environmental systems.

Circular: Breakthrough business models will be circular, sustaining inputs and outputs at their highest value in both technical and biological cycles.

She shared examples of companies exhibiting these characteristics of Breakthrough, noting that there are many more that illustrate this emergent shift in business detailed in the Breakthrough Business Models report.

This was followed by three workshop rounds in three parallel streams, covering the following three themes:

  • Disruptive Technologies: Led by Justin Hughes, Managing Consultant at PA Consulting, the first stream concluded that:
    • Technologies are neither good nor evil—they are enablers that we can use to deliver the Sustainable Development Goals if we choose.
    • For many organizations, the challenge is not whether something is technologically feasible, it is the ‘soft’ factors such as a lack of motivation or a fear of complexity that have inhibited progress to date.
    • There is further work to be done on the ‘systems’ approach and the ‘law of unintended consequences’—the world needs a better understanding of the positive and negative effects of new technologies as well as unintended effects before embracing them too rapidly.
    • There is no lack of optimism about what technology can do or will be able to do in the near future; the concern is how this capability can be demonstrated and the case for change made in a clear and unambiguous way.

 

  • Breakthrough Business Models: Led by Samantha Putt del Pino, Director of Sustainable Business Initiatives at WRI, and Eliot Metzger, Senior Associate at the WRI Business Center, the second stream concluded that:
    • We must examine consumption through the lens of business model transformation because how we move, what we eat, and how we dress have profound consequences for the environment.
    • We need to do the math. Better to be proactive than reactive. Understanding the full environmental and social costs of current business models will help show the impossibilities of continued consumption. Public policy can address externalities and reveal costs of resources (e.g., carbon prices, water prices). Investors need to see the costs of inaction because business models are only going to shift if the risks are real, recognized and urgent. Fortunately, companies have seen others’ business models disrupted and there is openness to the argument that “others will make money in new ways and we are missing out.”
    • We must find and create precompetitive paths. There is potential for breakthroughs when industry leaders can make a leap together. The precompetitive spaces, which have yet to be fully explored and established, will be important in the next few years. Third parties can help create safe space for big change. This may involve joint ventures, pilot projects or targets for ramping up R&D. It is best to start with strategic customer segments and consider additional product functionality, as well as new payment models.
    • We must put the right mix of people in front of the board. Experts that can outline 3-4 potential realities in years ahead can set the stage for business model shifts. We need to emphasize the risk, the necessity to innovate, and the opportunity to “future proof” the company. Directors and C-suite will also be looking for the numbers and evidence from pilot projects. The best option for the sustainability teams will be to get others internally to buy/own the idea and run it up the chain to senior leadership.

 

  • Exponential Mindsets: Led by John Elkington and Lorraine Smith of Volans, the third stream concluded that:
    •  Mindsets are to individuals what cultures are to organizations and paradigms are to societies or eras—mental framings that powerfully shape how individuals perceive reality and assess priorities.
    •  The mindset required to reverse climate change represents a fundamentally different way of understanding the role of business, including how it is managed and how incentives are structured. Even for this engaged and committed group, significant barriers persist to reimagining business within planetary boundaries.
    • In spite of the challenges, a number of companies are seeing real shifts and a range of examples were offered—from subtle, behind the scenes efforts of significance, to more significant external-facing programs. Success was characterized as having a cross-industry element, drawing on multiple actors with influence on different stakeholders.

Panel Debate: Are MNCs, Cities or Entrepreneurs the Answer?

The event closed with a fast-paced and spirited debate moderated by Eric Roston of Bloomberg and featuring Sam Adams (Director of WRI United States and former Mayor of Portland), Robin Chase (founder of Zipcar, author of Peers, Inc. and WRI board member) and Andrew Winston (advisor and author of The Big Pivot). Despite energetic pitches from all three panellists, it was clear that entrepreneurs, major businesses and cities will all be crucial in terms of developing and deploying the breakthroughs needed to deliver the Global Goals and reboot tomorrow’s markets.

Concluding Remarks

While the challenges flagged by the Global Goals speak to a series of interlinked systemic crises, and while political uncertainties are likely to make the process of delivering the Goals even harder, both the event and the debate underscored the ambition, commitment and stamina of key parts of the sustainable business sector—and the playfulness of some parts of the debate suggested exactly the sort of creativity needed to turn adversity into opportunity to create the future we want.

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