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the sustainable economy
         dialogue
      Report and Reflections
The Prince of Wales’s Business & the
Environment Programme (BEP)
BEP is the premier executive learning programme      BEP Programme Co-Directors
on sustainable business. The aim of the
                                                     Polly Courtice
Programme is to help organisations integrate the     University of Cambridge Programme for Industry
concepts of sustainable development into their       Jonathon Porritt CBE
business thinking and practice. Senior Executives’   Forum for the Future

Seminars run four times a year in different parts
of the world, and have helped over 1000 business     BEP Management Committee
leaders understand both the challenges and
                                                     Sir Nick Scheele KCMG
opportunities of sustainable development.            (Chairman)
The Programme’s active alumni network comprises      Elizabeth Buchanan LVO
some of the most senior decision makers in           HRH The Prince of Wales’s Office
                                                     Neil Carson
business and civil society worldwide and through
                                                     Johnson Matthey
its activities provides further inspiration,         Mike Clasper
encouragement, support and advice to those           BAA plc
wishing to help their organisations take a lead      William McDonough
                                                     William McDonough + Partners/MBDC
on sustainability issues.
                                                     Jeremy Pelczer
                                                     RWE Thames Water
                                                     Fred Phaswana
                                                     Transnet
                                                     Professor Alison Richard
                                                     University of Cambridge
                                                     Hugh Scott-Barrett
                                                     ABN AMRO Bank
                                                     James Smith
                                                     Shell International
Contents




Acknowledgements                                                           Contents
We would like to thank all those who took part in the
Sustainable Economy Dialogues (SED), either as participants
                                                                           Introduction
or as facilitators. The Core Faculty of the BEP helped us think              Polly Courtice and Jonathon Porritt                                                               4
through the idea and pilot the process, and then facilitated
many Dialogues in different parts of the world. Jorgen Randers             Setting the Context:
played a particularly key role in shaping the Dialogues and also           The Five Capitals Model                                                                             6
acted as lead facilitator on many occasions.
                                                                           Key Findings                                                                                      8
Other SED session facilitators are listed at the end of the report
alongside the Core Faculty see page 58.
                                                                             Question 1: Fundamental Goal                                                                    9
Editorial team:
                                                                             Question 2: Current Failings                                                                   10
Polly Courtice, Lindsay Hooper, Professor Jorgen Randers,                    Question 3: Business Action                                                                    12
Wayne Visser, Peter Willis.
                                                                           Reflections on the Outcome                                                                       14

                                                                           SED Failings as a Complex Causal System                                                          22

                                                                           What the SED Means for the Future                                                                30

                                                                           Appendix 1                                                                                       33

                                                                           Appendix 2                                                                                       34

                                                                           Appendix 3                                                                                       36

                                                                           Appendix 4                                                                                       41
                                                                           Core Faculty                                                                                     58


                                                               B u s i n e ss & t h e E n v i r o n m e n t P r o g r a m m e :   T H E S U STA I N A B L E ECO N OMY D I A LO G U E   3
Introduction
    If progress in society were measured purely in                        Growth Isn’t Working report states that between 1990 and 2001,
                                                                          for every $100 of growth in the world’s income per person, just
    terms of economic growth (as many seem to think
                                                                          $0.60 contributed to reducing poverty for those living on less
    it is) then the global economy over the past 30                       than a dollar a day – which is 73 percent less than in the 1980s.
    years has delivered a remarkable success story.
                                                                          The picture on the environmental impacts of growth is equally
    Since 1970, the world gross national product (GNP)
                                                                          sobering. According the Millennium Ecosystem Assessment,
    has more than doubled, and the average growth of                      conducted by 1,300 experts from 95 countries and released in
    around three percent per year seems set to continue.                  2005, approximately 60 percent of the ecosystem services that
                                                                          support life on Earth – such as fresh water, capture fisheries, air and
                                                                          water regulation, and the regulation of regional climate, natural
    But we need to ask the question as to whether this growth has
                                                                          hazards and pests – are being degraded or used unsustainably.
    been, to put it rather crudely, smart growth or dumb growth?
                                                                          Scientists warn that the harmful consequences of this
    Smart growth brings improved quality of life in a way that is
                                                                          degradation will grow significantly worse in the next 50 years.
    socially equitable and environmentally sustainable. Dumb growth
    brings prosperity to some at the expense of the world’s poor
                                                                          So, has economic growth of the past decades been smart
    and the planet’s life support systems.
                                                                          or dumb? The question is rhetorical. A more interesting and
                                                                          pressing question is what needs to happen to get us to switch
    So how does the global economy perform? Let’s look at
                                                                          from our obsession with dumb growth to a more sustainable
    quality of life first. All the evidence from national quality of life
                                                                          path of smart growth? Clearly business has a crucial role to
    indicators such as the Index for
                                                                                                           play, but it cannot act alone.
    Sustainable Economic Welfare          “We need to ask the question: Has economic Broader reforms – systemic
    and the Genuine Progress
    Indicator suggests that, in high growth been smart growth or dumb growth?”
                                                                                                           changes – in the global economy
                                                                                                           and global markets are needed to
    income countries like the USA
                                                                          facilitate this transition. In other words, the rules of the game
    and the UK, there has been an increasing divergence between
                                                                          need to change if companies are to respond effectively to the
    growth in income and growth in the quality of life, roughly
                                                                          challenge of smart growth.
    since the 1970s. The latter has stagnated.
                                                                          This has been the consistent message by participants in the
    What about social equity? Has recent growth helped the world’s
                                                                          Business & the Environment Programme’s Senior Executives’
    poor? According to the 2005 UNDP Human Development Report,
                                                                          Seminars over the past ten years. And it was this challenge
    the poorest 40 percent of the world’s population – 2.5 billion
                                                                          which led us to create the Sustainable Economy Dialogue -
    people, living on less than $2 a day – account for just five
                                                                          a rolling dialogue with the Programme’s delegates and alumni
    percent of all global income. And seemingly, this trend is also
                                                                          to discuss the nature of a sustainable economy, to examine
    in the wrong direction. The New Economics Foundation’s 2006


4
Introduction




failings of the current system, and to explore ways in which               Finally, there was no shortage of ideas for how business might
business might contribute solutions.                                       be part of the solution, ranging from proposals for improved
                                                                           leadership, the use of alternative metrics and lobbying for
The Dialogue kicked off in 2003, and by April 2006 had been run            policy reforms, to embracing ‘base of the pyramid’ strategies in
161 times, involving more than 400 people in five countries –              low income markets, adopting socially responsible investment
including Austria, Kenya, South Africa, the UK and USA.                    and making step changes in eco-efficiency.

                                                                           In addition to capturing the detailed findings, we have included
     Participants were asked to respond                                    two fascinating thought-pieces about what the results mean
     to the following three questions in                                   within the bigger picture of sustainability. Professor Jorgen
                                                                           Randers, a futures research specialist and co-author of the
     sequence:                                                             influential Limits to Growth study which challenged the
                                                                           wisdom of unchecked economic growth in the 1970s, critically
     I What is the fundamental goal or purpose of a                        reviews the findings in terms of prevailing sustainability
       good economy?                                                       debates and world trends. Professor Tom Gladwin, an expert
     I Why do current economies fail to achieve this                       in the application of systems thinking, then analyses the
       fundamental goal?                                                   results from the perspective of the economy being a complex
                                                                           causal network, nested within society and nature.
     I What can business do to help eliminate these
       failings?
                                                                           From the outset our intention was that the process itself –
                                                                           and the insights gained by those who participated – was as
The results show a remarkable consensus about what a smart                 important as the conclusions. And the overwhelming feedback
economy should be about – essentially, that a good economy                 has been that participants found the experience both stimulating
delivers improved wellbeing, now and in the future, in a way               and revealing. This report is presented as a platform for further
that is socially equitable, environmentally sustainable and                engagement, debate and, ultimately, action. We hope that we
based on effective participation.                                          will convince you not only that smart economic growth is
                                                                           needed, but also that it is possible.
Failure to achieve these high-level objectives was ascribed to
a variety of causes, including strategic issues such as a lack of
shared purpose, values and short-termism, structural issues                Polly Courtice and Jonathon Porritt
dealing with governance and incentives and operational issues              Co-Directors
in terms of what gets measured and costed. Underlying all of               Business & the Environment Programme
these was a concern about education and awareness.




                                                               B u s i n e ss & t h e E n v i r o n m e n t P r o g r a m m e :   T H E S U STA I N A B L E ECO N OMY D I A LO G U E   5
Setting the Context: The Five Capitals Model
    At the heart of the Sustainable Economy Dialogue                      Natural Capital refers to the natural resources (matter and
                                                                          energy) and processes that are required to produce and
    (SED) process was a recognition that the dumb
                                                                          deliver goods and services. They include renewable and
    growth of the recent decades needs to be replaced                     non-renewable resources, sinks that absorb, neutralise or
    with a much more sustainable development.                             recycle wastes, and processes such as climate regulation
                                                                          that maintain life. Natural capital covers such issues as
    This new direction must ensure a much less
                                                                          freshwater availability, land use and biodiversity, oceans
    one-dimensional focus (on financial capital).                         and fisheries, energy usage, climate and atmosphere, and
    It must seek balanced development taking into                         pollution and wastes.
    account various forum of capital.
                                                                       Human Capital consists of people’s health, knowledge, skills,
                                                                       motivation and capacity for relationships. All these things
    The Five Capitals Model provides a useful means for                are needed for productive work, and the creation of a better
    conceptualising sustainable development. In terms of this          quality of life. Human capital can be fostered through
    model, the crisis of sustainability                                                          improving opportunities for
    is seen to arise from the fact that   “In a sustainable society, we live off the             learning, creativity, stimulation and
    we are consuming our stocks of        income rather than depleting the capital” enhanced health. Human capital
    natural, human and social capital                                                            covers such issues as levels of
    faster than they are being produced. Unless this rate of           wealth and poverty, life expectancy and human health, hunger
    consumption is effectively controlled, these essential stocks      and food security, education, employment and housing.
    cannot be sustained over the long term. With this in mind,
    society should seek to identify and implement practices that       Social Capital concerns the institutions that help us
    either increase the stocks of these capital assets – by living off maintain and develop human capital in partnership with
    the income rather than depleting the capital – or (to a limited    others. It includes such institutions as families, communities,
    extent only) substitute one form of capital for another.           businesses, trade unions, schools and voluntary organisations.
                                                                          A critical component of social capital is the development
    There are five types of sustainable capital from which we derive      of trust. Social capital covers such issues as levels of
    the goods and services that we need to improve the quality of         democracy and good governance, corporate accountability,
    our lives:                                                            human rights, gender equity and urbanisation.




6
Setting the Context: The Five Capitals Model




  Manufactured Capital comprises material goods or fixed
  assets that contribute to the production process or the
  provision of services, rather than being part of the output
  itself. It includes, for example, tools, machinery, buildings
  and infrastructure. From a sustainability perspective,
  useful indicators of manufactured capital include
  levels of technology and innovation, the nature of
  the digital divide and current trends regarding
  the growth in transport and mobility.

  Financial Capital plays a critical role in our
  economy, enabling the other types of capital to
  be owned and traded, for example through
  shares, bonds or banknotes. Unlike the other
  types of capital, it has no intrinsic value itself,
  but is representative of natural, human, social
  or manufactured capital. Financial capital is the
  traditional primary measure – the ‘single bottom
  line’ – of business performance and success.
  Financial capital covers such issues as global
  economic growth, investment in developing
  countries, market access for developing countries,
  debt sustainability, socially responsible investment and
  micro-financing activities.

An overview of the Five Capitals Model 2 is given in Figure 1.
The rest of this SED report shows how various of these
elements of the five capitals interact as a dynamic system,                           Figure 1: The Five Capitals Model
and inform the ideal purpose of a good economy, the failings
of the current economy and possible actions to move towards
a sustainable economy.




                                                                  B u s i n e ss & t h e E n v i r o n m e n t P r o g r a m m e :   T H E S U STA I N A B L E ECO N OMY D I A LO G U E   7
Key Findings




                   Figure 2: Findings of the Sustainable Economy Dialogue Process




8
Key Findings




This chapter summarises the findings of the SED.                       Ten Goals of a Good Economy

More detailed information is presented in                                The economy should be:                 Focusing on:
                                                                         1.    Fulfilling                       Wellbeing, quality of life
Appendix 2 and 3.
                                                                         2.    Inclusive                        Sharing, global benefits
                                                                         3.    Farsighted                       Consequences, future generations
 Question 1: Fundamental Goal                                            4.    Developing                       Progress, improvement over time
 What is the fundamental goal or purpose of a                            5.    Equitable                        Fairness, even distribution
 good economy?                                                           6.    Sustainable                      Nature, life support systems
                                                                         7.    Participatory                   Engagement, stakeholder democracy
The various SED sessions arrived at numerous formulations of
                                                                         8.    Innovative                       Creativity, rewarding achievement
the fundamental goal of a good economy. Typically a subgroup
                                                                         9.    Diverse                          Variety, equal opportunities
of 5 – 10 participants would agree on a formulation within a
                                                                         10. Accessible                         Openness, providing opportunity
short hour of work. In some sessions the plenary group then
managed to agree on a common ‘aggregate’ formulation, but
often this was not attempted, and the session leader would             The list is tentatively sorted in descending order of emphasis,
then do so after the session.                                          and the ‘consensus answer’ to SED Question 1 can be
                                                                       formulated as follows:
Although there were a range of formulations and priorities,
the following concepts appeared time and again in the various          Purpose of a Good Economy (Consensus)
goal statements
                                                                         The fundamental goal or purpose of a good economy is
                                                                         to steadily improve the wellbeing of all people, now
                                                                         and in the future, with due regard to equity, within the
                                                                         constraints of nature, through the active engagement of
                                                                         all its participants.

                                                                       Purpose of a Good Economy (Variations)
                                                                       Despite the strong consensus on the purpose of a good economy,
                                                                       the following examples give a sense of the distinctive flavour
                                                                       of each of the 36 variants that were captured over the
                                                                       Dialogue process:




                                                           B u s i n e ss & t h e E n v i r o n m e n t P r o g r a m m e :   T H E S U STA I N A B L E ECO N OMY D I A LO G U E   9
SED 3 (Maryland USA 2003)
                                                                           Question 2: Current Failings
     The purpose of a good economy is to engage all of its
                                                                           Why do current economies fail to achieve this
     participants in order to continually improve the quality of
                                                                           fundamental goal?
     life for everyone, whilst preserving nature.

     SED 5 (Nairobi Kenya 2004)                                           Each subgroup in each SED session identified its own set of
     Group 3: To sustainably improve the quality of life beyond           failings. These are the failings that the subgroup considered to
     basic needs for all citizens, now and in the future through the      be the main reasons why current economies do not achieve
     creation of wealth, in harmony with the environment, while           their fundamental goal. Interestingly, no subgroup expressed
     respecting cultural diversity.                                       the view that current economies do (or are about to) achieve
                                                                          the fundamental goal.
     SED 6 (Cambridge UK 2004)
     The fundamental purpose of a good economy is to improve              The subgroups were asked to aggregate their failings under –
     and sustain the quality of life for all, now and in the future,      at most – 10 headings, but did not always follow this request
     with due regard to equity and within the constraints of nature.      rigorously. Furthermore, some SED sessions combined the
                                                                          results of the subgroups into one master set of failings, while
     SED 9 (Salzburg Austria 2004)                                        others left the original recommendations of their subgroups
     Group 6: An open social market economy that provides for             intact. In the latter case, the SED session leader combined
     basic human needs and a better quality of life by way of a           these results into a single output for the session simply by
     respect for human rights, open democratic government and             including those failings that were mentioned most frequently
     equality of opportunity with due regard for natural system limits.   by the subgroups.


     SED 12-16 (Austria, UK and South Africa 2005-2006)
     These more recent workshops reached consensus around
     similar themes, yet each with their own distinctive perspective.




10
Key Findings




                                          12                                                                 Ten Failings of Current Economies
                                                                                                               Failing                             Description
                                                                                                               1. Lack of education                There is a lack of education and awareness
                                          10                                                                                                       around the links between the economy and
                                                                                                                                                   sustainability
                                                                                                               2. Governance failings              Governments and institutions are ineffective
                                                                                                                                                   in providing good governance and
                                                                                                                                                   appropriate policies
Number of SEDs identifying this failing




                                          8
                                                                                                               3. Short-term focus                 Political processes, economic pressures and
                                                                                                                                                   financial markets prejudice against long-term
                                                                                                                                                   thinking
                                                                                                               4. Unfair distribution              The economy creates and maintains inequity
                                          6                                                                                                        in opportunity, power, wealth and wellbeing
                                                                                                               5. Human weakness                   Traits such as selfishness and greed are
                                                                                                                                                   encouraged and exacerbated by the capitalist
                                                                                                                                                   system

                                          4                                                                    6. Inappropriate                    Market failure and protectionist
                                                                                                                  incentives                       interventions create incentives for unjust and
                                                                                                                                                   unsustainable trade
                                                                                                               7. Cost externalisation             Prices fail to capture social and environmental
                                                                                                                                                   costs and therefore undervalue people and
                                          2                                                                                                        nature
                                                                                                               8. Divided purpose                  There is a lack of collective consensus on the
                                                                                                                                                   long-term purpose or goals of a good economy
                                                                                                               9. Unsuitable values                The values underlying the current economic
                                          0                                                                                                        system may be incompatible with sustainability
                                                                             on
                                                                             on

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                                                                                                               10. Misleading                      Current economic measures are poor
                                                                        ntiv




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                                                                       isat

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                                                                                                                   measures                        indicators of quality of life, social wellbeing
                                                                    rm




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                                                     Cost
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                                                                                                             Note: Other failings included weak leadership, external events, resource
                                                   Mis




                                                                                                             constraints, poor governance, economics focus and excessive consumption.
                                                Inap




                                                                                                             See Appendix 2 for details.



                                               Figure 3: Top Ten Failings of Current Economies

                                                                                                 B u s i n e ss & t h e E n v i r o n m e n t P r o g r a m m e :   T H E S U STA I N A B L E ECO N OMY D I A LO G U E   11
Failings of Current Economies (Variations)                            SED 12-16 (Austria, UK and South Africa 2005-2006)
     Once again, it is useful to illustrate the variety of responses       Once again, these more recent workshops confirmed similar
     identified by the different Dialogue sessions by selecting a          findings, yet with encouraging diversity.
     few examples:
                                                                           Further details on the main failings are included in Appendix 2.
     SED 1 (Calcot Manor UK 2003)
     Our present economy is failing because it: is too short-term in
     focus; does not sufficiently value nature; creates and maintains
     inequity; does not reflect the weighted interests of the people;
                                                                            Question 3: Business Action
     embodies no common understanding or shared purpose; and does           What can business do to help eliminate these failings?
     not properly prepare citizens to take wise (sustainable) decisions.
                                                                           Having defined the fundamental goals and identified the
     SED 4 (Cape Town SA 2004)                                             current failings, the SED sessions went on to produce ideas
     Current failings include: bad governance; no common purpose;          for business action that could contribute to a good economy
     inequity; inadequate economics; human imperfection;                   by addressing some of the failings. A summary of these ideas
     short-termism; no full costing; insufficient education; and           (several hundred in all) is presented below.
     inefficient labour markets.
                                                                           Business Actions for a Sustainable Economy
     SED 7 (London UK 2004)                                                Broadly speaking, business can take action to promote a
     Current failings include: unequal distribution; wrong economic        sustainable economy through its direct impacts – by aligning its
     model; lack of education and awareness; bad governance;               management and operational systems with sustainability values
     failing in human nature; pressure on natural resources.
                                                                           and aspirations – and its indirect impacts – by influencing
                                                                           governments and partnering with civil society to deliver policies
     SED 10 (Maryland USA 2004)
                                                                           and programmes that promote sustainability outcomes.
     Current failings include: corporate control of governmental
     decision making, lobbying; government and business corruption;
     ignorance or lack of education; inadequate global governance;
     short-termism, cost externalisation; self interest, greed, human
     nature; legacy, unequal starting points, unequal distribution of
     natural resources; prejudice; inadequate observance of human
     rights; and inadequate legal or property rights systems.




12
Key Findings




Ten Business Actions for a Sustainable Economy
 Theme               Action
 1. Education        Promote sustainability literacy and awareness
                     among company’s stakeholders
 2. Governance       Hold governments to account on sustainability
                     through lobbying and partnerships
 3. Long Termism     Educate politicians and financiers on the long-
                     term nature of sustainability risks and returns
 4. Equity           Promote diversity and equity at the corporate,
                     community, national and international levels
 5. Responsibility   Commit to an agenda of accountability, transparency
                     and social and environmental responsibility
 6. Incentives       Pressure governments to create a level playing
                     field for fair and sustainable international trade
 7. Externalities    Incorporate full cost accounting into long-term
                     investment decisions and begin to report on externalities
 8. Purpose          Engage in dialogue and partnership processes
                     to create a shared vision for a sustainable economy
 9. Values           Embed values consistent with a sustainability
                     approach into the company’s culture and operations
 10. Measures        Measure and report on the indicators of governance,
                     social, ethical and environmental performance


Further details on possible business actions are included in
Appendix 3.

In the next section of this report, Professor Jorgen Randers
reflects on the findings of the SED process.




                                                                           B u s i n e ss & t h e E n v i r o n m e n t P r o g r a m m e :   T H E S U STA I N A B L E ECO N OMY D I A LO G U E   13
Reflections on the Outcome

              Professor Jorgen Randers, lead SED process facilitator
              and member of the Business & the Environment
              Programme Core Faculty


              Jorgen holds a PhD in management from the Massachusetts
              Institute of Technology. He specialises in policy analysis, futures
              research and environmental issues. Jorgen has served as president
              of the Norwegian School of Management from 1981-89; worked in
              Norwegian business from 1989-93; and served as Deputy Director
              General of WWF International in Switzerland from 1994–99.
              Currently Jorgen is a professor at the Norwegian School of
              Management, where he teaches scenario analysis and corporate
              responsibility. He serves on a number of corporate boards in
              Norway and abroad, including the ‘sustainability councils’ boards
              of British Telecom and the City of Rotherham. He has co-written
              several books, including the well-known The Limits to Growth
              (1972) and Limits to Growth – The 30 Year Update (2004).



14
Reflections on the Outcome




The results of the SED represent one perspective on the global    early SEDs that the participants needed to partake in the whole
challenge at the beginning of the 21st century, namely a business process in order to enjoy it fully. They engaged much less fully
perspective on how to make the modern economy more helpful        when provided with a ready made set of fundamental goals,
in achieving the fundamental goals of society. Over the last      or a collection of failings pre-selected by someone else.
several decades, many similar outlooks have been produced by      Real engagement was only achieved when participants took
different groups worrying about the long-term future of humanity. the time to go through all three SED questions. There proved
Perhaps most famous was the Club of Rome’s musings over the       to be no direct route to a fruitful discussion on good ideas for
feasibility of unending economic growth on a finite planet in     future business action.
1972, and The Brundtland Commission’s effort in 1987 to push
sustainable development as ‘the’ tool to reduce world problems    Having completed 16 sessions of the SED, it is clear that there
of poverty and environmental degradation. More recently in        is a surprising degree of agreement among corporate executives
1997 the World Business Council for Sustainable Development       about the fundamental goal of a good economy. Of course
produced its three famous                                                                         there are differences, for instance
scenarios for the corporate            “These failings have one thing in common: a higher attention to corruption
environment toward 2050. And
                                       they are deeply embedded in the structure in areas where this corruption is
many nations and communities                                                                      widespread, and more emphasis
have produced their Agenda 21          of modern society”                                         on entrepreneurship in fledgling
reports: planning for a more                                                                      economies. But still the similarities
sustainable future for their section of the planet. These studies outnumber the differences. There is also widespread, albeit
all had less impact than desired, but they all contributed to a   somewhat less consistent, agreement on what keeps humanity
higher awareness about the future challenges of humanity.         from attaining the fundamental goal of a good economy.
                                                                  Participants identified 36 major failings, but 10-15 were
The SED design certainly helped increase awareness, since it      consistently prioritised. These failings have one thing in common:
had the special attribute of involving a large number of business they are deeply embedded in the structure of modern society.
leaders in the generation of the central content of the study.    It will take more than business action to resolve issues like
The almost unanimous feedback was that the business people        greed, corruption, short-termism and global inequity.
greatly valued the opportunity to take a broad look at the
ultimate purpose of an economy, and at potential means to
improve the way it functions. Interestingly, we learned from the




                                                             B u s i n e ss & t h e E n v i r o n m e n t P r o g r a m m e :   T H E S U STA I N A B L E ECO N OMY D I A LO G U E   15
But there is a lot business can do, and as we have seen, the          does not deviate significantly in ambition from the standard
     participants offered a rich palate of ideas of business actions       definition of ‘sustainable development’, for instance the one
     that could help to address current failings.                          provided by the Brundtland Commission in 1987 (page 43):
                                                                           Sustainable development is development that meets the needs
     The fact that the SED arrived at a relatively convergent set          of the present without compromising the ability of future
     of views, in spite of drawing on participants from many               generations to meet their own needs.
     parts of the world, is not surprising
     given that most were well-educated,         “The consensus goal does not               But the SED consensus goal is more
     middle income, business managers                                                       concrete in its specification of which
     (with a small minority of NGO and
                                                 deviate substantially in ambition          detailed values humanity should seek
     government representatives).                from the definition of sustainable to sustain into the future.
     Nonetheless, the results demonstrate        development”
     that there is a lot of common ground                                                   And the SED result is surprisingly similar
     across cultural and national boundaries.                         to the goal promoted by the American architect and systems
                                                                      thinker William McDonough in 2003:

     Fundamental goal                                                      Our goal is a delightfully diverse, safe, healthy and just world.
                                                                           With clean water, clean air, clean soil and clean power –
     As we have seen, the fundamental goal of a good economy               economically, equitably, ecologically and elegantly enjoyed.
     identified by the SED contains no real surprises. The only surprise
     is the high degree of alignment and consensus among business          Interestingly, McDonough highlights diversity, which was less
     people from Europe, North America and Southern Africa.                frequently mentioned in the SED.
     Which perhaps shouldn’t be a surprise given the increasingly
     agreed global values within the business sector of the world.

     Interestingly, the consensus goal emerging from the SED




16
Reflections on the Outcome




Main failings                                                                One explanation is that the participants were attempting to dig
                                                                             beneath the surface of these issues, to something more akin to root
There is much more dynamite in the failings identified by the                causes and systemic pressures.
SED than in the fundamental goal. Taken together, the highest-
ranking failings constitute a fairly fundamental attack on the    This lack of worry about ‘science’ indicates that SED participants
current world order. It is not certain that the participants trulybelieve that the scientific community holds, or can rapidly
appreciated the fundamental change that would be necessary        obtain, sufficient information to ensure that lack of knowledge
if these failings were to be eliminated; or if they did, whether  would never become a bottleneck in the progress towards
they would feel free to express their views freely to colleagues  sustainable development. At the same time the participants
inside their organisations.                                       generally seem to believe that too little of the available knowledge
                                                                  is being communicated to the public, or enters into the
Furthermore, the ten main failings selected by the SED are        educational system (where, according to modern principles,
not necessarily the only, or even the real forces keeping society science should not be taught in an authoritarian manner,
from attaining the fundamental                                                                  but be blended into the world
goal of a sustainable economy.       “There is dynamite in the failings identified view of the students through a
The list of ten failings was com-    by the SED. Taken together, they constitute participatory approach).
piled by the simple combination
                                        a fairly fundamental          attack on the current               It is equally remarkable that
of output from the SED sessions,
and may well include biases and world order”                                                              ‘limited natural resources’ and
omissions. Still, the list of failings                                                                    other failings related to the
is of substantial interest, as it reveals what educated business             external physical world, did not make it to the top ten failings.
people currently believe is holding back societal progress.                  The grim fact of the finiteness of fossil fuel resources and of the
                                                                             absorptive capacity for greenhouse gases are not seen as prime
One surprise rests with what is missing from the list. It is                 reasons why current economies do not achieve their fundamental
noteworthy that the SED participants did not conclude that a                 goals. The reasoning may be that resource constraints have not
lack of scientific information is hampering the resolution of world          limited economic growth during the 1900s, and thus might not
challenges. Interestingly, the participants thought that lack of             be expected to do so in the foreseeable future. Or there may be
awareness of scientific knowledge in the public was of much                  a fundamental belief that future scarcity will be preceded by price
greater concern. Secondly it is interesting to note how rarely               increases, which in turn will trigger sufficient technological
topical issues like terrorism, high oil prices, climate change and           advance to solve the problem in time. This at least would be
religious strife were cited as fundamental problems, despite the             consistent with the lack of concern about sufficient science.
huge attention placed on these concerns in the media.




                                                                 B u s i n e ss & t h e E n v i r o n m e n t P r o g r a m m e :   T H E S U STA I N A B L E ECO N OMY D I A LO G U E   17
This low level of emphasis on science and natural resources     A final observation is that very few business leaders viewed the
                                                                     (internal) governance of the business sector as a main failing.
     as constraints reinforces the sense that the participants believe
                                                                     There were arguments that poor incentive systems encourage
     the main obstacles lie in the political arena. They see the current
     inability to move towards the fundamental goal as an            businesses and their leaders to move in non-sustainable
     organisational challenge in the broadest sense. It is not seen  directions, and there was some mention that the vested interest
     as caused by lack of resources or knowledge.                    of business is a problem, but there was no fundamental critique
                                                                     of the capitalist model. This is possibly because of a lack of
     In this context it is noteworthy that the possible failing      a better alternative, supported by an ingrained business
     ‘excessive obsession with growth’ did not emerge as important.  scepticism towards governmental interference (i.e. collective
     Actually it did not emerge as a suggestion at all. There may be solutions). Only a few viewed ‘excessive competition both
     several reasons for this. One may                                                             between firms and individuals’
     be that the participating business     “SED participants believe that the failings as a central failing.
     leaders actually do not see growth     are mainly human and solvable through
     as the root cause of several of the                                                           Indications that the fundamental
                                            human efforts”
     other failings that they highlight.                                                           goal is unachievable did not feature
     Another is that they may see unbridled growth as a problem,     highly. Failings like ‘system inertia is unstoppable’,‘global
     but view it as an unchangeable fact of life – closely linked to problem too big to manage’,‘natural and external forces could
     (and a consequence of?) the frequently mentioned human          overwhelm us’,‘the future is unknowable, so wait and see’ did
     imperfections of greed and self-interest. The term ‘over-       not find much support. Thus, in summary, the participants in
     consumption’ occurred a few times, but not often enough to      the SED basically appear to believe that the failings are mainly
     make this failing move much from the lowest priority.           human and solvable through human efforts – with particular
                                                                     efforts required in the area of global organisation.




18
Reflections on the Outcome




Business Action                                                   to higher investment, which leads to even higher GDP’ but a
                                                                  growing GDP has other effects: on energy and resource use,
In this vein, participants went on to propose many ideas for      on service availability and the level of ecological damage.
business action. Some ideas were mentioned infrequently, and      This illustrates the first systems conclusion: any action has
others were raised only as possibilities, rather than definite    multiple effects. The intended effect of this GDP-investment
solutions. It is also worth noting that numerous ideas were       loop is to increase disposable income and the level of education,
presented to reduce failings that                                                             health and awareness. But there are
were not given high priority when           “All change begins with the actions also unintended effects, such as the
answering SED Question 2. Fewer                                                               concomitant increase in humanity’s
                                            of individuals – often small numbers ecological footprint, which (if not
ideas emerged on how to solve some
of the thornier failings. Given that
                                            of people – with substantial levels of addressed and’repaired’) will ultimately
many of the failings are so deeply          passion and commitment”                           reduce the quality of the environment.
embedded in the structure of modern
society, they are unlikely to be resolved unless through the              The result will be a downward pressure on the quality of life,
most concerted process of transformational change. All change,            counteracting and possibly overwhelming the positive effects
however, begins with the actions of individuals, often small              of higher disposable income. This leads to a second systems
numbers of people, with substantial levels of passion and                 conclusion: the root cause of environmental damage cannot
commitment.                                                               be completely eliminated through increases in eco-efficiency.
                                                                          Something has to be done to regulate ever-increasing volumes.
                                                                          It can be hoped that in the long run higher levels of education
Causes and Effects                                                        and awareness will lead to broad acceptance of the benefits of
                                                                          a stable ecological footprint and higher levels of equity – benefits
Another way to review the SED findings is to place them                   that are particularly important when living on a finite planet.
within the closely knit web of causes and effects that makes
up the global economy, as illustrated in Figure 4. The central
self-reinforcing loop represents the fact that ‘higher GDP leads




                                                              B u s i n e ss & t h e E n v i r o n m e n t P r o g r a m m e :   T H E S U STA I N A B L E ECO N OMY D I A LO G U E   19
Figure 4:
     Dynamics of The Economy: Cause and Effect Relationships


20
Reflections on the Outcome




The web of causal links in Figure 4 finally illustrates a third                 Illustrated System Conditions
systems conclusion: the emergence of a solution is often
                                                                                1. Most actions have multiple effects
significantly delayed relative to the problem it is intended
to solve. For a long while (decades?) tradition and the                         2. The root cause of environmental damage cannot be
continuation of past trends tends to strengthen the problem                        completely eliminated through increases in eco-efficiency
faster than it strengthens the solution.
                                                                                3. Solutions are often significantly delayed relative to the
                                                                                   problem they are intended to solve.
“To get global society (including the economy)
onto a self-reinforcing positive track towards
                                                                              In short, solving the world problematique is not a question
sustainability, the whole world system                                        of identifying a simple set of business actions that will remove
needs to be redirected into a different                                       the obstacles to a good economy. What is needed is to take a
behaviour mode”                                                               number of ideas, and combine them into a ‘Work Plan for a
                                                                              Sustainable Economy’. The real challenge is to arrive at a
                                                                              plan which is acceptable to the majority – before crisis strikes.
This could happen either by discovering a sensitive leverage
point (e.g. planned increases in energy prices to trigger
necessary R&D which will often meet solid democratic
resistance) or through simultaneous parallel changes in a
number of sectors (e.g. changes in consumer preferences
away from gas guzzling cars, accompanied by changes in
zoning regulations to support more uniform geographical
blends of jobs and homes).




                                                                  B u s i n e ss & t h e E n v i r o n m e n t P r o g r a m m e :   T H E S U STA I N A B L E ECO N OMY D I A LO G U E   21
SED Failings as a Complex Causal System

               Professor Tom Gladwin, member of the Business & the Environment
               Programme Core Faculty


               Tom Gladwin is the Max McGraw Professor of Sustainable Enterprise,
               jointly in the Ross Business School and School of Natural Resources
               & Environment, at the University of Michigan. He is the Co-Director
               of the University’s new Sustainable Mobility and Accessibility
               Research and Transformation (SMART) Project, working with the
               US auto industry. Tom is also the Director of the Erb Institute for
               Global Sustainable Enterprise, which promotes innovative and
               transdisciplinary research and education on ecologically and socially
               sustainable business. He received a Faculty Pioneer Award for
               Lifetime Achievement in the Beyond Grey Pinstripes 2003 report,
               compiled by the Aspen Institute and the World Resources Institute.




22
SED Failings as a Complex Causal System




Introduction                                                                    This methodology is highly subjective and qualitative. It is
                                                                                typically employed to determine causal feedback loops worthy
For convenience, the Sustainable Economy Dialogue (SED)                         of further investigation, via more detailed and quantitative
captured the consensus failings (i.e. SED participants’ responses               modelling. The value of the approach lies in forcing the analyst
to Question 2: ‘Why do current economies fail to achieve this                   to show how behaviour or performance in a complex system
fundamental goal?’) as a vote-prioritised list of separate factors.             may actually be generated or produced.

In reality, of course, the main failings identified are highly                  Figure 5 provides a schematic summary of the possible
interdependent:                                                                 workings of 91 strong and direct causal relationships that BEP
                                                                                delegates suggested may be working interdependently and
    There is reciprocal causality between the failings and                      dynamically to produce unsustainable human economies.
    unsustainability
    The power or influence of different failings varies over time     The SED cross-impact results indicate that the delegates situated
    and space                                                         much of the blame for unsustainable economies on the human
    The impacts of the failings are typically non-linear (outputs are mind (i.e. cognitive, perceptual, emotional, values-based)
    not proportional to inputs)                                       and on institutions (i.e. goals, structures), the logical precursors
    Significant time and feedback delays                                                          of unsustainable behaviours and
    characterise most of the relationships    “SED delegates placed much of the                   conditions.
                                             blame for unsustainable economies on
With the assistance of BEP delegates                                                              Of the top ten failings, the five that
participating in ‘systems thinking’
                                             the human mind and on institutions” may be most influential in shaping
workshops at recent BEP Seminars, a                                                               the fate of the entire system were
cross-impact analysis was conducted in order to construct a        deemed by the analysis to include poor or, more precisely,
crude model of how the top 16 SED failings appear to relate to     undemocratic governance (considered the most frequent and
each other causally. A cross-impact approach shifts explanation    possibly most influential cause or effect at work in the entire
from a correlational (or ‘laundry list’) view of how things seem   system), followed by socio-economic inequality, cost/risk
to work to an operational one. The methodology requires the        externalisation, self-interest/egocentrism and illiteracy/unawareness.
analyst to ask: ‘If variable A increases, what happens to variable The last four variables have about equal causal power via their
B and for what reasons, in what direction, through what            appraised connectedness.
processes, with what strength and at what speed?’




                                                                    B u s i n e ss & t h e E n v i r o n m e n t P r o g r a m m e :   T H E S U STA I N A B L E ECO N OMY D I A LO G U E   23
Strong causal relationship
     Moderate causal relationship
     Weak causal relationship       Figure 5: Current Failings of the Economy:
     Long-time lag                        Cause and Effect Relationships


24
SED Failings as a Complex Causal System




Whilst this is a crude starting point, we can already suggest               Minds and institutions
that deep and long-lasting changes towards sustainability
will most likely necessitate transformations in all five of these           The red arrow in Figure 5 flowing from MINDS to INSTITUTIONS
most influential variables, which serve to control much of the              indicates seven strong and direct causal relationships. For
feedback behaviour at work in the whole system. Attempted                   example, citizen and consumer illiteracy allows vested interests
‘solutions’ that ignore these ‘big five’ system controllers are             to capture the political process, and to garner massive subsidies
likely to be superficial and short-lived.3                                  and tax breaks that perversely work against sustainability.
                                                                            Materialism and short-termism combine to shape performance
                                                                            metrics that emphasise getting bigger (as fast as possible)
Mental failings                                                             rather than better (at the right pace). We end up with an
                                                                            economic system that rewards actors for doing destructive
The cross-impact assessment indicates that mental failings                  things and punishes them for doing the right things.
appear to be very tightly interconnected: self-interest,
short-termism, materialism                                                                       Just below this flow is a smaller
and illiteracy support and         “Corporate and government leaders, handsomely one, running from INSTITUTIONS
feed off each other to create      rewarded by the ‘rules of the game’, which bring to MINDS, suggesting that
deeply entrenched                                                                                institutions (which are largely
‘unsustainable minds’.
                                   greater success to the already successful, have
                                                                                                 shaped by human thinking and
Mental predispositions are         very little motivation to change these rules”                 valuing) feed back to reinforce
deeply programmed and are                                                                        the unsustainable thinking
not easily or quickly changed. They serve to pit short-term     that allows corrupt or perverse institutional power and
individual rationality (of firms, consumers, citizens,          incentive structures to strengthen their grip on the economy.
governments, etc.) against long-term collective rationality,    For example, reward systems that emphasise expansionist
perhaps the core dilemma we face in pursuing sustainable        metrics reinforce a conception of the good life that is materialist
human development.                                              and novelty- or status-seeking. Lack of consensus on society’s
                                                                            purpose (i.e. whether this purpose should be to advance the
                                                                            common good) further justifies the rationality of maximising
                                                                            self-interest in the short or near term.




                                                                B u s i n e ss & t h e E n v i r o n m e n t P r o g r a m m e :   T H E S U STA I N A B L E ECO N OMY D I A LO G U E   25
Behaviours                                                           facilitating factors are associated with this ultimate consequence
                                                                          of the whole system, such as illiteracy about the ‘life-support
     The causal mapping suggests strong causal flows running              services’ of nature, subsidies encouraging destruction, metrics
     from both MINDS and INSTITUTIONS to BEHAVIOURS. Chasing              that ignore destruction or perversely count it as progress, and
     the dream of greater consumption to satisfy wants, and the           undemocratic governance that fails to prevent the destruction.
     concomitant growth in physical (energy and material)
     throughput, appears to be what human minds have been                 Socio-economic inequality increases as the beneficiaries of the
     programmed to pursue and what institutions are designed to           system are able to externalise the costs of their behaviours onto
     encourage. The externalisation of environmental and social           less powerful or more distant peoples. But inequality is also
     costs and risks, especially onto generations distant in time         greatly facilitated by mental discounting, selfishness, neglect of
     or space – perhaps the fundamental behavioural cause of              the common good, and expansionist metrics of societal success
     unsustainability – is supported, facilitated or rewarded by          that downplay matters of justice.
     virtually every mental and institutional variable on the SED
     list of main failings.
                                                                          Feedback on the system’s adverse consequences
     Why internalise in order to arrive at ‘prices that tell the truth’
     when consumerist minds don’t want (and captured governments        The causal mapping suggests that ecological destruction and
     don’t demand) such painful truth and higher prices? Corporate      instability, motivated by insecurity/inequality, feed back to alter
     and government leaders, handsomely rewarded by the ‘rules of       MINDS, INSTITUTIONS and BEHAVIOURS, but (perhaps typically) only

     the game’, which bring greater success to the already successful,  with very long time lags. Feedback on adverse consequences is
     have very little motivation to change these rules (indicated in    variously delayed, discounted, diluted, distorted and ignored.
     the diagram by very little causal                                                                 The system’s informational
     connectivity flowing from            “The system’s informational structure seems structure seems to encourage
     behaviours back to MINDS or                                                                       actors to deny unpleasant or
                                          to encourage actors to deny unpleasant or                    inconvenient information.
     INSTITUTIONS).
                                         inconvenient information”
     The causal mapping suggests that                                                                       Even when signs of ecological
     socio/economic/natural CONDITIONS are mainly shaped by               scarcity or social instability are acknowledged, the system
     BEHAVIOURS, along with some direct and considerable indirect         appears to encourage those who benefit disproportionately
     support from MINDS and INSTITUTIONS. Over-consumption,               from the status quo to perversely ramp up their behaviours,
     physical growth exceeding natural limits, and the capacity to        further increasing scarcity or instability (e.g. invading foreign
     shift costs onto distant humans and the rest of nature directly      countries to secure access to climate-changing fossil fuels,
     explain much ecological destruction. However, many other             extracting natural resources from ever more distant pristine




26
SED Failings as a Complex Causal System




ecological areas, blaming the victims of the system and                         the logic of growth as the answer to all problems, and the
reducing aid or welfare to them, converting communities                         acceptance of an elite plutocracy as the inevitable form of
and entire nations into ‘guarded compounds’ to reduce threats                   societal governance, remain intact. Those who believe that
of terrorism).                                                                  growth-oriented plutocracy can be easily undone through
                                                                                simple changes in metrics or rules are most likely fooling
These ‘denial and flight’ behaviours address only the symptoms                  themselves. Even attempts to change parts of thinking alone
of ecological and social unsustainability, not the underlying                   (e.g.‘We’ll solve this by making people more literate and
causes.                                                                         aware’) are doomed if they are disconnected from genuine
                                                                                changes in values and ethics.

Why we need a whole systems perspective                          All of this is not to deny the positive necessity and potential for
                                                                 restructuring institutions, modifying behaviours, or ameliorating
In the very tentative causal model presented here, BEHAVIOURS    social and ecological conditions. Rather, it emphasises the need
and CONDITIONS appear to derive largely from MINDS (mindsets)    for a ‘whole systems’ perspective that gives holistic and special
and INSTITUTIONS. This suggests that interventions focusing only attention to the underlying human motivational, cognitive,
on changing behaviours (e.g.‘We’ll solve this through more       perceptual, ethical, emotional and spiritual factors that ultimately
enlightened leaders or reduced                                   shape our institutions, behaviours and living conditions. The
advertising’) or on altering                                                                     SED results suggest that unless
                                  “The SED results suggest that unless we                        we change minds, we are unlikely
conditions (e.g.‘We’ll solve this
though greater redistribution     change minds, we are unlikely to significantly to significantly change much of
or more national parks’) are      change much of anything else”                                  anything else.
likely to have limited impact or
value. The more elemental and powerful motivational mental                      The whole systems perspective tells us that ‘there is no blame’.
and institutional programming will tend to work as hard as                      Our unsustainable economy is the result of countless ‘boundedly’
possible to resist, reduce and negate ‘deviant outcomes’ that                   rational decisions taken over many centuries by actors caught up
are incompatible with the explicit or implicit intentions of                    in systems that have made it almost impossible to act responsibly
the system’s deep-seated driving forces.                                        to all the affected stakeholders. The system encourages us to
                                                                                externalise costs onto nature and communities. It motivates us
We can also suggest that intervening to change institutions                     to pursue endless growth on this finite planet, and it tolerates
(e.g.‘We’ll solve this by substituting sustainability metrics for               the concentration of wealth and power.
growth metrics, or by eliminating corporate contributions to
politicians’) may also have limited transformational power if




                                                                    B u s i n e ss & t h e E n v i r o n m e n t P r o g r a m m e :   T H E S U STA I N A B L E ECO N OMY D I A LO G U E   27
The dilemma of free-market capitalism                                Our form of capitalism was intentionally and/or unintentionally
                                                                          designed to:
     The SED has produced a profound critique of free-market
                                                                              Boost returns by externalising costs
     capitalism, which has become the central organising principle,
     consuming passion and dominant imperative of modern                      Keep wages and prices low
     existence. The SED results implicitly acknowledge that this              Maximise the logic of accumulation
     form of capitalism was simply not designed to provide satisfying         Exploit the desire for conspicuous consumption
     lives for all, within the means of nature. That was not (and still       Generate the greatest wealth accumulation for the least possible
     is not) its aim or logic or justification. Thus, it should not be        investment
     criticised for failing to produce what it was not intended to            Dominate politics in order to reduce competition, uncertainty,
     produce. We have collectively and systemically invented and              redistribution and restriction
     adopted free-market capitalism to achieve efficient resource             Maximise the dynamic and creative recycling of capital
     allocation according to price signals from people with spending          Commodify as much of life as possible
     power – not to ensure just distribution or an optimal scale              Redirect wealth and power from the many to the few, and from
     relative to natural carrying capacity.                                   the future to the present
                                                                              Remain indifferent to the intangibles of life that have the greatest
                                                                              meaning
     “The SED has produced a profound critique
                                                                              Ensure freedom from responsibility
     of free-market capitalism, which has become
     the central organising principle, consuming
     passion and dominant imperative of modern                            This is a strong assertion, and surely worthy of much debate.
                                                                          Yet it is not a new discovery. We are still caught up in the
     existence”                                                           dilemma described by John Maynard Keynes many years ago:
                                                                          ‘[Capitalism] is not a success. It is not intelligent, it is not
                                                                          beautiful, it is not just, it is not virtuous – and it doesn’t deliver
                                                                          the goods. In short, we dislike it, and we are beginning to
                                                                          despise it. But when we wonder what to put in its place,
                                                                          we are extremely perplexed.’




28
SED Failings as a Complex Causal System




The ‘folk wisdom’ of systems theory                               may differ from its short-run response. High-leverage
                                                                  interventions may thus cause worse-before-it-gets-better
Coping with perplexity, complexity and the challenge of           behaviour, whilst low-leverage interventions may generate
sustainability is the central challenge of our time. We must be   transitory improvements, only to be followed by a deepening
extraordinarily humble in offering any wisdom concerning how      of the original problem. With a bit of luck, small interventions
to transform what is possibly the largest, most self-reinforcing, may create tipping points that induce large-scale cascading
and most seductive and addictive system ever invented.            changes. Slowing or weakening the positive feedback loops that
                                                                  drive a huge self-reinforcing system typically requires a mix of
As we collectively approach this                                                              informational, social and institutional
task, the ‘folk wisdom’ of systems
                                       “We must be extraordinarily humble in                  interventions. Transformational
thinking tells us that inertia,        offering any wisdom concerning how to change is unlikely to come from
                                                                                              within the current system;
momentum and rigidity in the           transform what is possibly the largest,
unsustainable economic system                                                                 exogenous shocks may be necessary.
are huge forces. Thus, expect
                                     most self-reinforcing, and most seductive
interventions to be delayed,            and addictive systemever invented”                            We need to concentrate on fostering
diluted and defeated by the                                                                           the adaptive capacities of the system.
system’s defensive responses to attempted interventions.                 There are no optimal solutions or best system designs, so we
Intuitively obvious solutions may do more harm than good.                must anticipate surprise and dynamic evolution. This dose of
High-leverage policies will be hard to discern unless we truly           humility, when confronting the most daunting transformational
understand the (typically, small number of) critical or controlling      challenge confronting humanity, may seem disheartening
processes that shape the dynamics of the whole system, which             and disempowering. We hope, however, that by emphasising
the appraisal above suggests lie above all in the realm of               the necessity for systemic wisdom we may all be a bit wiser,
mental models.There are no simple solutions. Substantive                 smarter and more effective in intervening to the best of our
change is rarely incremental or linear. Time delays in feedback          abilities to ensure a sustainable human future.
imply that a system’s long-run response to an intervention




                                                             B u s i n e ss & t h e E n v i r o n m e n t P r o g r a m m e :   T H E S U STA I N A B L E ECO N OMY D I A LO G U E   29
What the SED Means for the Future

              As will now be abundantly clear from this SED report, sustainability
              and capitalism do not automatically make natural bedfellows.
              Sustainability is all about the long-term, about working within
              limits, about making more from less, about accommodation with
              others to secure equilibrium – and it demands a deep and often
              disconcerting re-engagement with the natural world. Contemporary
              capitalism responds to the shortest of short-terms, abominates the
              very notion of limits, celebrates excess, accepts that its ‘invisible
              hand’ will end up creating as many losers as winners – and has no
              real interest in the natural world other than as a dumping ground
              and a store of raw materials.




30
What the SED Means for the Future




However, the bipolar challenges of, on the one hand, the                    That means working with the grain of markets and free choice,
biophysical limits to growth and, on the other, of the profound             not against it. It means working with capitalism as the
damage being done to the human spirit through the pursuit                   only over-arching system capable of achieving any kind of
of unbridled materialism, will inevitably compel a profound                 reconciliation between ecological sustainability and social justice
transformation of contemporary capitalism – and sooner rather               on the one hand, and the pursuit of prosperity and personal
than later if we want to avoid dramatic social and economic                 wellbeing on the other.
disruption. There is, therefore, a case to be made for a rapid
                                                                  That said, today’s particular model of capitalism is clearly
transition to a very different variant of capitalism: capitalism as
if the world matters.                                             incapable of delivering that kind of reconciliation, dependent
                                                                  as it is on the accelerating liquidation of the natural capital on
This notion of ‘capitalism                                                                               which we depend, and on
as if the world matters’        “Capitalism as if the world matters is an evolved,                       worsening divides between
is driven by a reform           intelligent and elegant form of capitalism that puts                     the rich and the poor the
agenda, however radical it
                                the Earth at its very centre (as our one and only world) world over.
may appear to some, not a
revolutionary agenda. For and ensures that all people are its beneficiaries in                           At its heart, therefore,
all that it’s a compromise, recognition of our interdependence on each other                             sustainable development
profound and urgent                                                                                      comes right down to one
                                and on the Earth itself”
transformation of the                                                                                    all important challenge:
worst dysfunctionalities of contemporary capitalism must          is it possible to conceptualise and then operationalise an
therefore constitute a more realistic strategy than urging people alternative model of capitalism? One that allows for the
to take to some anti-capitalist barricade.                        sustainable management of all the different capital assets
                                                                  we rely on (financial, manufactured, social, human and natural),
It must also do a lot more than threatening people with yet       so that the yield from those different assets, sustains us now
more ecological doom and gloom. The necessary changes have        as well as in the future.
also to be seen as desirable changes, good for people, their
health, their quality of life – and not just good for ‘the        The case for sustainable development must be reframed if that
environment’ or for the prospects of future generations. This is  is to happen. It must be as much about new opportunities for
a ‘here and now’ agenda, as well as an agenda for tomorrow.       responsible wealth creation as about outlawing irresponsible
                                                                  wealth creation; it must draw on a core of ideas and values
                                                                  that speaks directly to people’s desire for a higher quality of life,
                                                                  emphasising fairness, enlightened self-interest and personal
                                                                  wellbeing of a different kind.




                                                                B u s i n e ss & t h e E n v i r o n m e n t P r o g r a m m e :   T H E S U STA I N A B L E ECO N OMY D I A LO G U E   31
It is only this combination (sustainable development seen as     It is only sustainable development that can provide both the
     answering the unavoidable challenge of living within natural     intellectual foundations and the operational pragmatism upon
     limits, providing unprecedented opportunities for responsible    which to base such a transformation. This is why sustainable
     and innovative wealth creators, and offering people a more just, development remains the only seriously ‘big idea’ that can bear
     balanced and rewarding                                                                                  the weight of that challenge,
     way of life) which is likely   “Sustainable development remains the only seriously and why the core values
     to provide any serious         ‘big idea’. It is only sustainable development that can that underpin sustainable
     political alternative to                                                                                development – interde-
                                    provide both the intellectual foundations and the
     today’s economic and                                                                                    pendence, empathy, equity,
     political orthodoxy.           operational pragmatism upon which to base the                            personal responsibility and
                                    required transformation”                                                 intergenerational justice –
     The politics of sustainability                                                                          are the only foundation
     makes change necessary: we literally don’t have any choice       upon which any viable vision of a better world can possibly
     unless we want to see the natural world collapse around us,      be constructed.
     and with it our dreams of a better world for humankind. The
     politics of wellbeing makes change desirable: we really do have  All things considered, what’s the alternative anyway?
     a choice in finding better ways of improving people’s lives than If not genuinely sustainable development, then what?
     those we are currently relying upon. Responding to both those    And if not now, when?
     challenges will generate extraordinary opportunities for the
     wealth creators of the future. When something is both            Jonathon Porritt
     necessary and desirable, and can be pitched to demanding         Co-Director, Business & the Environment Programme,
     electorates in terms of both opportunity and progress, then it   Founder Director, Forum for the Future
     becomes politically viable – and that’s the threshold that I
     believe we have now, at long last, reached.                      Based on extracts from ‘Capitalism as if the World Matters’
                                                                      by Jonathon Porritt, Earthscan 2005




32
Appendices




Appendix 1
Sustainable Economy Dialogue sessions –                                     SED 9:
                                                                            7-10 Sept 2004                  BEP Seminar, Salzburg, Austria                      41 delegates
When and where
                                                                            SED 10:
The dialogue was completed at the occasions shown below                     20-21 Sept 2004                 BEP Alumni Workshop,                                22 alumni
                                                                                                            London, UK
SED 1:
                                                                            SED 11:
7 July 2003        Pilot workshop, Calcot Manor,    34 alumni
                                                                            19-22 Oct 2004                  BEP Seminar, Wye River,                             36 delegates
                   Gloucestershire, UK
                                                                                                            Maryland, USA
SED 2:
                                                                            SED 12:
16-19 Sept 2003    BEP Seminar, Salzburg, Austria   39 delegates
                                                                            12-15 April 2005                BEP Seminar, Cape Town,                             34 delegates
SED 3:                                                                                                      South Africa
11-13 Oct 2003     BEP Seminar, Wye River,          37 delegates
                                                                            SED 13:
                   Maryland, USA
                                                                            12-15 April 2005                BEP Seminar, Cambridge, UK                          43 delegates
SED 4:
                                                                            SED 14:
3-5 Feb 2004       BEP Seminar, Cape Town,          45 delegates
                                                                            3-4 May,                        SLN Seminar, Cambridge, UK                          30 delegates
                   South Africa
                                                                            8-10 June &
SED 5:                                                                      25-27 Sept 2005
1-2 April 2004     BEP Seminar, Cambridge, UK       39 delegates
                                                                            SED 15:
SED 6:                                                                      13-16 Sept 2005                 BEP Seminar, Salzburg, Austria                      31 delegates
27-29 April 2004   Mini-BEP Seminar, Nairobi,       22 delegates
                                                                            SED 16:
                   Kenya
                                                                            28-31 March 2006                BEP Seminar, Cambridge, UK                          49 delegates
SED 7:
4-5 May 2004       Session for the Sustainability   34 delegates
                   Learning Networks Programme,
                   London, UK

SED 8:
29-30 July 2004    BEP Alumni Workshop,             26 alumni
                   London, UK




                                                                B u s i n e ss & t h e E n v i r o n m e n t P r o g r a m m e :   T H E S U STA I N A B L E ECO N OMY D I A LO G U E   33
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The Sustainable Economy Dialogue

  • 1. the sustainable economy dialogue Report and Reflections
  • 2. The Prince of Wales’s Business & the Environment Programme (BEP) BEP is the premier executive learning programme BEP Programme Co-Directors on sustainable business. The aim of the Polly Courtice Programme is to help organisations integrate the University of Cambridge Programme for Industry concepts of sustainable development into their Jonathon Porritt CBE business thinking and practice. Senior Executives’ Forum for the Future Seminars run four times a year in different parts of the world, and have helped over 1000 business BEP Management Committee leaders understand both the challenges and Sir Nick Scheele KCMG opportunities of sustainable development. (Chairman) The Programme’s active alumni network comprises Elizabeth Buchanan LVO some of the most senior decision makers in HRH The Prince of Wales’s Office Neil Carson business and civil society worldwide and through Johnson Matthey its activities provides further inspiration, Mike Clasper encouragement, support and advice to those BAA plc wishing to help their organisations take a lead William McDonough William McDonough + Partners/MBDC on sustainability issues. Jeremy Pelczer RWE Thames Water Fred Phaswana Transnet Professor Alison Richard University of Cambridge Hugh Scott-Barrett ABN AMRO Bank James Smith Shell International
  • 3. Contents Acknowledgements Contents We would like to thank all those who took part in the Sustainable Economy Dialogues (SED), either as participants Introduction or as facilitators. The Core Faculty of the BEP helped us think Polly Courtice and Jonathon Porritt 4 through the idea and pilot the process, and then facilitated many Dialogues in different parts of the world. Jorgen Randers Setting the Context: played a particularly key role in shaping the Dialogues and also The Five Capitals Model 6 acted as lead facilitator on many occasions. Key Findings 8 Other SED session facilitators are listed at the end of the report alongside the Core Faculty see page 58. Question 1: Fundamental Goal 9 Editorial team: Question 2: Current Failings 10 Polly Courtice, Lindsay Hooper, Professor Jorgen Randers, Question 3: Business Action 12 Wayne Visser, Peter Willis. Reflections on the Outcome 14 SED Failings as a Complex Causal System 22 What the SED Means for the Future 30 Appendix 1 33 Appendix 2 34 Appendix 3 36 Appendix 4 41 Core Faculty 58 B u s i n e ss & t h e E n v i r o n m e n t P r o g r a m m e : T H E S U STA I N A B L E ECO N OMY D I A LO G U E 3
  • 4. Introduction If progress in society were measured purely in Growth Isn’t Working report states that between 1990 and 2001, for every $100 of growth in the world’s income per person, just terms of economic growth (as many seem to think $0.60 contributed to reducing poverty for those living on less it is) then the global economy over the past 30 than a dollar a day – which is 73 percent less than in the 1980s. years has delivered a remarkable success story. The picture on the environmental impacts of growth is equally Since 1970, the world gross national product (GNP) sobering. According the Millennium Ecosystem Assessment, has more than doubled, and the average growth of conducted by 1,300 experts from 95 countries and released in around three percent per year seems set to continue. 2005, approximately 60 percent of the ecosystem services that support life on Earth – such as fresh water, capture fisheries, air and water regulation, and the regulation of regional climate, natural But we need to ask the question as to whether this growth has hazards and pests – are being degraded or used unsustainably. been, to put it rather crudely, smart growth or dumb growth? Scientists warn that the harmful consequences of this Smart growth brings improved quality of life in a way that is degradation will grow significantly worse in the next 50 years. socially equitable and environmentally sustainable. Dumb growth brings prosperity to some at the expense of the world’s poor So, has economic growth of the past decades been smart and the planet’s life support systems. or dumb? The question is rhetorical. A more interesting and pressing question is what needs to happen to get us to switch So how does the global economy perform? Let’s look at from our obsession with dumb growth to a more sustainable quality of life first. All the evidence from national quality of life path of smart growth? Clearly business has a crucial role to indicators such as the Index for play, but it cannot act alone. Sustainable Economic Welfare “We need to ask the question: Has economic Broader reforms – systemic and the Genuine Progress Indicator suggests that, in high growth been smart growth or dumb growth?” changes – in the global economy and global markets are needed to income countries like the USA facilitate this transition. In other words, the rules of the game and the UK, there has been an increasing divergence between need to change if companies are to respond effectively to the growth in income and growth in the quality of life, roughly challenge of smart growth. since the 1970s. The latter has stagnated. This has been the consistent message by participants in the What about social equity? Has recent growth helped the world’s Business & the Environment Programme’s Senior Executives’ poor? According to the 2005 UNDP Human Development Report, Seminars over the past ten years. And it was this challenge the poorest 40 percent of the world’s population – 2.5 billion which led us to create the Sustainable Economy Dialogue - people, living on less than $2 a day – account for just five a rolling dialogue with the Programme’s delegates and alumni percent of all global income. And seemingly, this trend is also to discuss the nature of a sustainable economy, to examine in the wrong direction. The New Economics Foundation’s 2006 4
  • 5. Introduction failings of the current system, and to explore ways in which Finally, there was no shortage of ideas for how business might business might contribute solutions. be part of the solution, ranging from proposals for improved leadership, the use of alternative metrics and lobbying for The Dialogue kicked off in 2003, and by April 2006 had been run policy reforms, to embracing ‘base of the pyramid’ strategies in 161 times, involving more than 400 people in five countries – low income markets, adopting socially responsible investment including Austria, Kenya, South Africa, the UK and USA. and making step changes in eco-efficiency. In addition to capturing the detailed findings, we have included Participants were asked to respond two fascinating thought-pieces about what the results mean to the following three questions in within the bigger picture of sustainability. Professor Jorgen Randers, a futures research specialist and co-author of the sequence: influential Limits to Growth study which challenged the wisdom of unchecked economic growth in the 1970s, critically I What is the fundamental goal or purpose of a reviews the findings in terms of prevailing sustainability good economy? debates and world trends. Professor Tom Gladwin, an expert I Why do current economies fail to achieve this in the application of systems thinking, then analyses the fundamental goal? results from the perspective of the economy being a complex causal network, nested within society and nature. I What can business do to help eliminate these failings? From the outset our intention was that the process itself – and the insights gained by those who participated – was as The results show a remarkable consensus about what a smart important as the conclusions. And the overwhelming feedback economy should be about – essentially, that a good economy has been that participants found the experience both stimulating delivers improved wellbeing, now and in the future, in a way and revealing. This report is presented as a platform for further that is socially equitable, environmentally sustainable and engagement, debate and, ultimately, action. We hope that we based on effective participation. will convince you not only that smart economic growth is needed, but also that it is possible. Failure to achieve these high-level objectives was ascribed to a variety of causes, including strategic issues such as a lack of shared purpose, values and short-termism, structural issues Polly Courtice and Jonathon Porritt dealing with governance and incentives and operational issues Co-Directors in terms of what gets measured and costed. Underlying all of Business & the Environment Programme these was a concern about education and awareness. B u s i n e ss & t h e E n v i r o n m e n t P r o g r a m m e : T H E S U STA I N A B L E ECO N OMY D I A LO G U E 5
  • 6. Setting the Context: The Five Capitals Model At the heart of the Sustainable Economy Dialogue Natural Capital refers to the natural resources (matter and energy) and processes that are required to produce and (SED) process was a recognition that the dumb deliver goods and services. They include renewable and growth of the recent decades needs to be replaced non-renewable resources, sinks that absorb, neutralise or with a much more sustainable development. recycle wastes, and processes such as climate regulation that maintain life. Natural capital covers such issues as This new direction must ensure a much less freshwater availability, land use and biodiversity, oceans one-dimensional focus (on financial capital). and fisheries, energy usage, climate and atmosphere, and It must seek balanced development taking into pollution and wastes. account various forum of capital. Human Capital consists of people’s health, knowledge, skills, motivation and capacity for relationships. All these things The Five Capitals Model provides a useful means for are needed for productive work, and the creation of a better conceptualising sustainable development. In terms of this quality of life. Human capital can be fostered through model, the crisis of sustainability improving opportunities for is seen to arise from the fact that “In a sustainable society, we live off the learning, creativity, stimulation and we are consuming our stocks of income rather than depleting the capital” enhanced health. Human capital natural, human and social capital covers such issues as levels of faster than they are being produced. Unless this rate of wealth and poverty, life expectancy and human health, hunger consumption is effectively controlled, these essential stocks and food security, education, employment and housing. cannot be sustained over the long term. With this in mind, society should seek to identify and implement practices that Social Capital concerns the institutions that help us either increase the stocks of these capital assets – by living off maintain and develop human capital in partnership with the income rather than depleting the capital – or (to a limited others. It includes such institutions as families, communities, extent only) substitute one form of capital for another. businesses, trade unions, schools and voluntary organisations. A critical component of social capital is the development There are five types of sustainable capital from which we derive of trust. Social capital covers such issues as levels of the goods and services that we need to improve the quality of democracy and good governance, corporate accountability, our lives: human rights, gender equity and urbanisation. 6
  • 7. Setting the Context: The Five Capitals Model Manufactured Capital comprises material goods or fixed assets that contribute to the production process or the provision of services, rather than being part of the output itself. It includes, for example, tools, machinery, buildings and infrastructure. From a sustainability perspective, useful indicators of manufactured capital include levels of technology and innovation, the nature of the digital divide and current trends regarding the growth in transport and mobility. Financial Capital plays a critical role in our economy, enabling the other types of capital to be owned and traded, for example through shares, bonds or banknotes. Unlike the other types of capital, it has no intrinsic value itself, but is representative of natural, human, social or manufactured capital. Financial capital is the traditional primary measure – the ‘single bottom line’ – of business performance and success. Financial capital covers such issues as global economic growth, investment in developing countries, market access for developing countries, debt sustainability, socially responsible investment and micro-financing activities. An overview of the Five Capitals Model 2 is given in Figure 1. The rest of this SED report shows how various of these elements of the five capitals interact as a dynamic system, Figure 1: The Five Capitals Model and inform the ideal purpose of a good economy, the failings of the current economy and possible actions to move towards a sustainable economy. B u s i n e ss & t h e E n v i r o n m e n t P r o g r a m m e : T H E S U STA I N A B L E ECO N OMY D I A LO G U E 7
  • 8. Key Findings Figure 2: Findings of the Sustainable Economy Dialogue Process 8
  • 9. Key Findings This chapter summarises the findings of the SED. Ten Goals of a Good Economy More detailed information is presented in The economy should be: Focusing on: 1. Fulfilling Wellbeing, quality of life Appendix 2 and 3. 2. Inclusive Sharing, global benefits 3. Farsighted Consequences, future generations Question 1: Fundamental Goal 4. Developing Progress, improvement over time What is the fundamental goal or purpose of a 5. Equitable Fairness, even distribution good economy? 6. Sustainable Nature, life support systems 7. Participatory Engagement, stakeholder democracy The various SED sessions arrived at numerous formulations of 8. Innovative Creativity, rewarding achievement the fundamental goal of a good economy. Typically a subgroup 9. Diverse Variety, equal opportunities of 5 – 10 participants would agree on a formulation within a 10. Accessible Openness, providing opportunity short hour of work. In some sessions the plenary group then managed to agree on a common ‘aggregate’ formulation, but often this was not attempted, and the session leader would The list is tentatively sorted in descending order of emphasis, then do so after the session. and the ‘consensus answer’ to SED Question 1 can be formulated as follows: Although there were a range of formulations and priorities, the following concepts appeared time and again in the various Purpose of a Good Economy (Consensus) goal statements The fundamental goal or purpose of a good economy is to steadily improve the wellbeing of all people, now and in the future, with due regard to equity, within the constraints of nature, through the active engagement of all its participants. Purpose of a Good Economy (Variations) Despite the strong consensus on the purpose of a good economy, the following examples give a sense of the distinctive flavour of each of the 36 variants that were captured over the Dialogue process: B u s i n e ss & t h e E n v i r o n m e n t P r o g r a m m e : T H E S U STA I N A B L E ECO N OMY D I A LO G U E 9
  • 10. SED 3 (Maryland USA 2003) Question 2: Current Failings The purpose of a good economy is to engage all of its Why do current economies fail to achieve this participants in order to continually improve the quality of fundamental goal? life for everyone, whilst preserving nature. SED 5 (Nairobi Kenya 2004) Each subgroup in each SED session identified its own set of Group 3: To sustainably improve the quality of life beyond failings. These are the failings that the subgroup considered to basic needs for all citizens, now and in the future through the be the main reasons why current economies do not achieve creation of wealth, in harmony with the environment, while their fundamental goal. Interestingly, no subgroup expressed respecting cultural diversity. the view that current economies do (or are about to) achieve the fundamental goal. SED 6 (Cambridge UK 2004) The fundamental purpose of a good economy is to improve The subgroups were asked to aggregate their failings under – and sustain the quality of life for all, now and in the future, at most – 10 headings, but did not always follow this request with due regard to equity and within the constraints of nature. rigorously. Furthermore, some SED sessions combined the results of the subgroups into one master set of failings, while SED 9 (Salzburg Austria 2004) others left the original recommendations of their subgroups Group 6: An open social market economy that provides for intact. In the latter case, the SED session leader combined basic human needs and a better quality of life by way of a these results into a single output for the session simply by respect for human rights, open democratic government and including those failings that were mentioned most frequently equality of opportunity with due regard for natural system limits. by the subgroups. SED 12-16 (Austria, UK and South Africa 2005-2006) These more recent workshops reached consensus around similar themes, yet each with their own distinctive perspective. 10
  • 11. Key Findings 12 Ten Failings of Current Economies Failing Description 1. Lack of education There is a lack of education and awareness 10 around the links between the economy and sustainability 2. Governance failings Governments and institutions are ineffective in providing good governance and appropriate policies Number of SEDs identifying this failing 8 3. Short-term focus Political processes, economic pressures and financial markets prejudice against long-term thinking 4. Unfair distribution The economy creates and maintains inequity 6 in opportunity, power, wealth and wellbeing 5. Human weakness Traits such as selfishness and greed are encouraged and exacerbated by the capitalist system 4 6. Inappropriate Market failure and protectionist incentives interventions create incentives for unjust and unsustainable trade 7. Cost externalisation Prices fail to capture social and environmental costs and therefore undervalue people and 2 nature 8. Divided purpose There is a lack of collective consensus on the long-term purpose or goals of a good economy 9. Unsuitable values The values underlying the current economic 0 system may be incompatible with sustainability on on ngs s s es es ion ose s nes focu sure 10. Misleading Current economic measures are poor ntiv valu buti cati isat purp faili eak mea measures indicators of quality of life, social wellbeing rm ince edu istri rnal ble nce an w rt-te ded and environmental integrity air d uita ing of exte riate erna Divi Sho Hum Lack lead Uns Unf prop Cost Gov Note: Other failings included weak leadership, external events, resource Mis constraints, poor governance, economics focus and excessive consumption. Inap See Appendix 2 for details. Figure 3: Top Ten Failings of Current Economies B u s i n e ss & t h e E n v i r o n m e n t P r o g r a m m e : T H E S U STA I N A B L E ECO N OMY D I A LO G U E 11
  • 12. Failings of Current Economies (Variations) SED 12-16 (Austria, UK and South Africa 2005-2006) Once again, it is useful to illustrate the variety of responses Once again, these more recent workshops confirmed similar identified by the different Dialogue sessions by selecting a findings, yet with encouraging diversity. few examples: Further details on the main failings are included in Appendix 2. SED 1 (Calcot Manor UK 2003) Our present economy is failing because it: is too short-term in focus; does not sufficiently value nature; creates and maintains inequity; does not reflect the weighted interests of the people; Question 3: Business Action embodies no common understanding or shared purpose; and does What can business do to help eliminate these failings? not properly prepare citizens to take wise (sustainable) decisions. Having defined the fundamental goals and identified the SED 4 (Cape Town SA 2004) current failings, the SED sessions went on to produce ideas Current failings include: bad governance; no common purpose; for business action that could contribute to a good economy inequity; inadequate economics; human imperfection; by addressing some of the failings. A summary of these ideas short-termism; no full costing; insufficient education; and (several hundred in all) is presented below. inefficient labour markets. Business Actions for a Sustainable Economy SED 7 (London UK 2004) Broadly speaking, business can take action to promote a Current failings include: unequal distribution; wrong economic sustainable economy through its direct impacts – by aligning its model; lack of education and awareness; bad governance; management and operational systems with sustainability values failing in human nature; pressure on natural resources. and aspirations – and its indirect impacts – by influencing governments and partnering with civil society to deliver policies SED 10 (Maryland USA 2004) and programmes that promote sustainability outcomes. Current failings include: corporate control of governmental decision making, lobbying; government and business corruption; ignorance or lack of education; inadequate global governance; short-termism, cost externalisation; self interest, greed, human nature; legacy, unequal starting points, unequal distribution of natural resources; prejudice; inadequate observance of human rights; and inadequate legal or property rights systems. 12
  • 13. Key Findings Ten Business Actions for a Sustainable Economy Theme Action 1. Education Promote sustainability literacy and awareness among company’s stakeholders 2. Governance Hold governments to account on sustainability through lobbying and partnerships 3. Long Termism Educate politicians and financiers on the long- term nature of sustainability risks and returns 4. Equity Promote diversity and equity at the corporate, community, national and international levels 5. Responsibility Commit to an agenda of accountability, transparency and social and environmental responsibility 6. Incentives Pressure governments to create a level playing field for fair and sustainable international trade 7. Externalities Incorporate full cost accounting into long-term investment decisions and begin to report on externalities 8. Purpose Engage in dialogue and partnership processes to create a shared vision for a sustainable economy 9. Values Embed values consistent with a sustainability approach into the company’s culture and operations 10. Measures Measure and report on the indicators of governance, social, ethical and environmental performance Further details on possible business actions are included in Appendix 3. In the next section of this report, Professor Jorgen Randers reflects on the findings of the SED process. B u s i n e ss & t h e E n v i r o n m e n t P r o g r a m m e : T H E S U STA I N A B L E ECO N OMY D I A LO G U E 13
  • 14. Reflections on the Outcome Professor Jorgen Randers, lead SED process facilitator and member of the Business & the Environment Programme Core Faculty Jorgen holds a PhD in management from the Massachusetts Institute of Technology. He specialises in policy analysis, futures research and environmental issues. Jorgen has served as president of the Norwegian School of Management from 1981-89; worked in Norwegian business from 1989-93; and served as Deputy Director General of WWF International in Switzerland from 1994–99. Currently Jorgen is a professor at the Norwegian School of Management, where he teaches scenario analysis and corporate responsibility. He serves on a number of corporate boards in Norway and abroad, including the ‘sustainability councils’ boards of British Telecom and the City of Rotherham. He has co-written several books, including the well-known The Limits to Growth (1972) and Limits to Growth – The 30 Year Update (2004). 14
  • 15. Reflections on the Outcome The results of the SED represent one perspective on the global early SEDs that the participants needed to partake in the whole challenge at the beginning of the 21st century, namely a business process in order to enjoy it fully. They engaged much less fully perspective on how to make the modern economy more helpful when provided with a ready made set of fundamental goals, in achieving the fundamental goals of society. Over the last or a collection of failings pre-selected by someone else. several decades, many similar outlooks have been produced by Real engagement was only achieved when participants took different groups worrying about the long-term future of humanity. the time to go through all three SED questions. There proved Perhaps most famous was the Club of Rome’s musings over the to be no direct route to a fruitful discussion on good ideas for feasibility of unending economic growth on a finite planet in future business action. 1972, and The Brundtland Commission’s effort in 1987 to push sustainable development as ‘the’ tool to reduce world problems Having completed 16 sessions of the SED, it is clear that there of poverty and environmental degradation. More recently in is a surprising degree of agreement among corporate executives 1997 the World Business Council for Sustainable Development about the fundamental goal of a good economy. Of course produced its three famous there are differences, for instance scenarios for the corporate “These failings have one thing in common: a higher attention to corruption environment toward 2050. And they are deeply embedded in the structure in areas where this corruption is many nations and communities widespread, and more emphasis have produced their Agenda 21 of modern society” on entrepreneurship in fledgling reports: planning for a more economies. But still the similarities sustainable future for their section of the planet. These studies outnumber the differences. There is also widespread, albeit all had less impact than desired, but they all contributed to a somewhat less consistent, agreement on what keeps humanity higher awareness about the future challenges of humanity. from attaining the fundamental goal of a good economy. Participants identified 36 major failings, but 10-15 were The SED design certainly helped increase awareness, since it consistently prioritised. These failings have one thing in common: had the special attribute of involving a large number of business they are deeply embedded in the structure of modern society. leaders in the generation of the central content of the study. It will take more than business action to resolve issues like The almost unanimous feedback was that the business people greed, corruption, short-termism and global inequity. greatly valued the opportunity to take a broad look at the ultimate purpose of an economy, and at potential means to improve the way it functions. Interestingly, we learned from the B u s i n e ss & t h e E n v i r o n m e n t P r o g r a m m e : T H E S U STA I N A B L E ECO N OMY D I A LO G U E 15
  • 16. But there is a lot business can do, and as we have seen, the does not deviate significantly in ambition from the standard participants offered a rich palate of ideas of business actions definition of ‘sustainable development’, for instance the one that could help to address current failings. provided by the Brundtland Commission in 1987 (page 43): Sustainable development is development that meets the needs The fact that the SED arrived at a relatively convergent set of the present without compromising the ability of future of views, in spite of drawing on participants from many generations to meet their own needs. parts of the world, is not surprising given that most were well-educated, “The consensus goal does not But the SED consensus goal is more middle income, business managers concrete in its specification of which (with a small minority of NGO and deviate substantially in ambition detailed values humanity should seek government representatives). from the definition of sustainable to sustain into the future. Nonetheless, the results demonstrate development” that there is a lot of common ground And the SED result is surprisingly similar across cultural and national boundaries. to the goal promoted by the American architect and systems thinker William McDonough in 2003: Fundamental goal Our goal is a delightfully diverse, safe, healthy and just world. With clean water, clean air, clean soil and clean power – As we have seen, the fundamental goal of a good economy economically, equitably, ecologically and elegantly enjoyed. identified by the SED contains no real surprises. The only surprise is the high degree of alignment and consensus among business Interestingly, McDonough highlights diversity, which was less people from Europe, North America and Southern Africa. frequently mentioned in the SED. Which perhaps shouldn’t be a surprise given the increasingly agreed global values within the business sector of the world. Interestingly, the consensus goal emerging from the SED 16
  • 17. Reflections on the Outcome Main failings One explanation is that the participants were attempting to dig beneath the surface of these issues, to something more akin to root There is much more dynamite in the failings identified by the causes and systemic pressures. SED than in the fundamental goal. Taken together, the highest- ranking failings constitute a fairly fundamental attack on the This lack of worry about ‘science’ indicates that SED participants current world order. It is not certain that the participants trulybelieve that the scientific community holds, or can rapidly appreciated the fundamental change that would be necessary obtain, sufficient information to ensure that lack of knowledge if these failings were to be eliminated; or if they did, whether would never become a bottleneck in the progress towards they would feel free to express their views freely to colleagues sustainable development. At the same time the participants inside their organisations. generally seem to believe that too little of the available knowledge is being communicated to the public, or enters into the Furthermore, the ten main failings selected by the SED are educational system (where, according to modern principles, not necessarily the only, or even the real forces keeping society science should not be taught in an authoritarian manner, from attaining the fundamental but be blended into the world goal of a sustainable economy. “There is dynamite in the failings identified view of the students through a The list of ten failings was com- by the SED. Taken together, they constitute participatory approach). piled by the simple combination a fairly fundamental attack on the current It is equally remarkable that of output from the SED sessions, and may well include biases and world order” ‘limited natural resources’ and omissions. Still, the list of failings other failings related to the is of substantial interest, as it reveals what educated business external physical world, did not make it to the top ten failings. people currently believe is holding back societal progress. The grim fact of the finiteness of fossil fuel resources and of the absorptive capacity for greenhouse gases are not seen as prime One surprise rests with what is missing from the list. It is reasons why current economies do not achieve their fundamental noteworthy that the SED participants did not conclude that a goals. The reasoning may be that resource constraints have not lack of scientific information is hampering the resolution of world limited economic growth during the 1900s, and thus might not challenges. Interestingly, the participants thought that lack of be expected to do so in the foreseeable future. Or there may be awareness of scientific knowledge in the public was of much a fundamental belief that future scarcity will be preceded by price greater concern. Secondly it is interesting to note how rarely increases, which in turn will trigger sufficient technological topical issues like terrorism, high oil prices, climate change and advance to solve the problem in time. This at least would be religious strife were cited as fundamental problems, despite the consistent with the lack of concern about sufficient science. huge attention placed on these concerns in the media. B u s i n e ss & t h e E n v i r o n m e n t P r o g r a m m e : T H E S U STA I N A B L E ECO N OMY D I A LO G U E 17
  • 18. This low level of emphasis on science and natural resources A final observation is that very few business leaders viewed the (internal) governance of the business sector as a main failing. as constraints reinforces the sense that the participants believe There were arguments that poor incentive systems encourage the main obstacles lie in the political arena. They see the current inability to move towards the fundamental goal as an businesses and their leaders to move in non-sustainable organisational challenge in the broadest sense. It is not seen directions, and there was some mention that the vested interest as caused by lack of resources or knowledge. of business is a problem, but there was no fundamental critique of the capitalist model. This is possibly because of a lack of In this context it is noteworthy that the possible failing a better alternative, supported by an ingrained business ‘excessive obsession with growth’ did not emerge as important. scepticism towards governmental interference (i.e. collective Actually it did not emerge as a suggestion at all. There may be solutions). Only a few viewed ‘excessive competition both several reasons for this. One may between firms and individuals’ be that the participating business “SED participants believe that the failings as a central failing. leaders actually do not see growth are mainly human and solvable through as the root cause of several of the Indications that the fundamental human efforts” other failings that they highlight. goal is unachievable did not feature Another is that they may see unbridled growth as a problem, highly. Failings like ‘system inertia is unstoppable’,‘global but view it as an unchangeable fact of life – closely linked to problem too big to manage’,‘natural and external forces could (and a consequence of?) the frequently mentioned human overwhelm us’,‘the future is unknowable, so wait and see’ did imperfections of greed and self-interest. The term ‘over- not find much support. Thus, in summary, the participants in consumption’ occurred a few times, but not often enough to the SED basically appear to believe that the failings are mainly make this failing move much from the lowest priority. human and solvable through human efforts – with particular efforts required in the area of global organisation. 18
  • 19. Reflections on the Outcome Business Action to higher investment, which leads to even higher GDP’ but a growing GDP has other effects: on energy and resource use, In this vein, participants went on to propose many ideas for on service availability and the level of ecological damage. business action. Some ideas were mentioned infrequently, and This illustrates the first systems conclusion: any action has others were raised only as possibilities, rather than definite multiple effects. The intended effect of this GDP-investment solutions. It is also worth noting that numerous ideas were loop is to increase disposable income and the level of education, presented to reduce failings that health and awareness. But there are were not given high priority when “All change begins with the actions also unintended effects, such as the answering SED Question 2. Fewer concomitant increase in humanity’s of individuals – often small numbers ecological footprint, which (if not ideas emerged on how to solve some of the thornier failings. Given that of people – with substantial levels of addressed and’repaired’) will ultimately many of the failings are so deeply passion and commitment” reduce the quality of the environment. embedded in the structure of modern society, they are unlikely to be resolved unless through the The result will be a downward pressure on the quality of life, most concerted process of transformational change. All change, counteracting and possibly overwhelming the positive effects however, begins with the actions of individuals, often small of higher disposable income. This leads to a second systems numbers of people, with substantial levels of passion and conclusion: the root cause of environmental damage cannot commitment. be completely eliminated through increases in eco-efficiency. Something has to be done to regulate ever-increasing volumes. It can be hoped that in the long run higher levels of education Causes and Effects and awareness will lead to broad acceptance of the benefits of a stable ecological footprint and higher levels of equity – benefits Another way to review the SED findings is to place them that are particularly important when living on a finite planet. within the closely knit web of causes and effects that makes up the global economy, as illustrated in Figure 4. The central self-reinforcing loop represents the fact that ‘higher GDP leads B u s i n e ss & t h e E n v i r o n m e n t P r o g r a m m e : T H E S U STA I N A B L E ECO N OMY D I A LO G U E 19
  • 20. Figure 4: Dynamics of The Economy: Cause and Effect Relationships 20
  • 21. Reflections on the Outcome The web of causal links in Figure 4 finally illustrates a third Illustrated System Conditions systems conclusion: the emergence of a solution is often 1. Most actions have multiple effects significantly delayed relative to the problem it is intended to solve. For a long while (decades?) tradition and the 2. The root cause of environmental damage cannot be continuation of past trends tends to strengthen the problem completely eliminated through increases in eco-efficiency faster than it strengthens the solution. 3. Solutions are often significantly delayed relative to the problem they are intended to solve. “To get global society (including the economy) onto a self-reinforcing positive track towards In short, solving the world problematique is not a question sustainability, the whole world system of identifying a simple set of business actions that will remove needs to be redirected into a different the obstacles to a good economy. What is needed is to take a behaviour mode” number of ideas, and combine them into a ‘Work Plan for a Sustainable Economy’. The real challenge is to arrive at a plan which is acceptable to the majority – before crisis strikes. This could happen either by discovering a sensitive leverage point (e.g. planned increases in energy prices to trigger necessary R&D which will often meet solid democratic resistance) or through simultaneous parallel changes in a number of sectors (e.g. changes in consumer preferences away from gas guzzling cars, accompanied by changes in zoning regulations to support more uniform geographical blends of jobs and homes). B u s i n e ss & t h e E n v i r o n m e n t P r o g r a m m e : T H E S U STA I N A B L E ECO N OMY D I A LO G U E 21
  • 22. SED Failings as a Complex Causal System Professor Tom Gladwin, member of the Business & the Environment Programme Core Faculty Tom Gladwin is the Max McGraw Professor of Sustainable Enterprise, jointly in the Ross Business School and School of Natural Resources & Environment, at the University of Michigan. He is the Co-Director of the University’s new Sustainable Mobility and Accessibility Research and Transformation (SMART) Project, working with the US auto industry. Tom is also the Director of the Erb Institute for Global Sustainable Enterprise, which promotes innovative and transdisciplinary research and education on ecologically and socially sustainable business. He received a Faculty Pioneer Award for Lifetime Achievement in the Beyond Grey Pinstripes 2003 report, compiled by the Aspen Institute and the World Resources Institute. 22
  • 23. SED Failings as a Complex Causal System Introduction This methodology is highly subjective and qualitative. It is typically employed to determine causal feedback loops worthy For convenience, the Sustainable Economy Dialogue (SED) of further investigation, via more detailed and quantitative captured the consensus failings (i.e. SED participants’ responses modelling. The value of the approach lies in forcing the analyst to Question 2: ‘Why do current economies fail to achieve this to show how behaviour or performance in a complex system fundamental goal?’) as a vote-prioritised list of separate factors. may actually be generated or produced. In reality, of course, the main failings identified are highly Figure 5 provides a schematic summary of the possible interdependent: workings of 91 strong and direct causal relationships that BEP delegates suggested may be working interdependently and There is reciprocal causality between the failings and dynamically to produce unsustainable human economies. unsustainability The power or influence of different failings varies over time The SED cross-impact results indicate that the delegates situated and space much of the blame for unsustainable economies on the human The impacts of the failings are typically non-linear (outputs are mind (i.e. cognitive, perceptual, emotional, values-based) not proportional to inputs) and on institutions (i.e. goals, structures), the logical precursors Significant time and feedback delays of unsustainable behaviours and characterise most of the relationships “SED delegates placed much of the conditions. blame for unsustainable economies on With the assistance of BEP delegates Of the top ten failings, the five that participating in ‘systems thinking’ the human mind and on institutions” may be most influential in shaping workshops at recent BEP Seminars, a the fate of the entire system were cross-impact analysis was conducted in order to construct a deemed by the analysis to include poor or, more precisely, crude model of how the top 16 SED failings appear to relate to undemocratic governance (considered the most frequent and each other causally. A cross-impact approach shifts explanation possibly most influential cause or effect at work in the entire from a correlational (or ‘laundry list’) view of how things seem system), followed by socio-economic inequality, cost/risk to work to an operational one. The methodology requires the externalisation, self-interest/egocentrism and illiteracy/unawareness. analyst to ask: ‘If variable A increases, what happens to variable The last four variables have about equal causal power via their B and for what reasons, in what direction, through what appraised connectedness. processes, with what strength and at what speed?’ B u s i n e ss & t h e E n v i r o n m e n t P r o g r a m m e : T H E S U STA I N A B L E ECO N OMY D I A LO G U E 23
  • 24. Strong causal relationship Moderate causal relationship Weak causal relationship Figure 5: Current Failings of the Economy: Long-time lag Cause and Effect Relationships 24
  • 25. SED Failings as a Complex Causal System Whilst this is a crude starting point, we can already suggest Minds and institutions that deep and long-lasting changes towards sustainability will most likely necessitate transformations in all five of these The red arrow in Figure 5 flowing from MINDS to INSTITUTIONS most influential variables, which serve to control much of the indicates seven strong and direct causal relationships. For feedback behaviour at work in the whole system. Attempted example, citizen and consumer illiteracy allows vested interests ‘solutions’ that ignore these ‘big five’ system controllers are to capture the political process, and to garner massive subsidies likely to be superficial and short-lived.3 and tax breaks that perversely work against sustainability. Materialism and short-termism combine to shape performance metrics that emphasise getting bigger (as fast as possible) Mental failings rather than better (at the right pace). We end up with an economic system that rewards actors for doing destructive The cross-impact assessment indicates that mental failings things and punishes them for doing the right things. appear to be very tightly interconnected: self-interest, short-termism, materialism Just below this flow is a smaller and illiteracy support and “Corporate and government leaders, handsomely one, running from INSTITUTIONS feed off each other to create rewarded by the ‘rules of the game’, which bring to MINDS, suggesting that deeply entrenched institutions (which are largely ‘unsustainable minds’. greater success to the already successful, have shaped by human thinking and Mental predispositions are very little motivation to change these rules” valuing) feed back to reinforce deeply programmed and are the unsustainable thinking not easily or quickly changed. They serve to pit short-term that allows corrupt or perverse institutional power and individual rationality (of firms, consumers, citizens, incentive structures to strengthen their grip on the economy. governments, etc.) against long-term collective rationality, For example, reward systems that emphasise expansionist perhaps the core dilemma we face in pursuing sustainable metrics reinforce a conception of the good life that is materialist human development. and novelty- or status-seeking. Lack of consensus on society’s purpose (i.e. whether this purpose should be to advance the common good) further justifies the rationality of maximising self-interest in the short or near term. B u s i n e ss & t h e E n v i r o n m e n t P r o g r a m m e : T H E S U STA I N A B L E ECO N OMY D I A LO G U E 25
  • 26. Behaviours facilitating factors are associated with this ultimate consequence of the whole system, such as illiteracy about the ‘life-support The causal mapping suggests strong causal flows running services’ of nature, subsidies encouraging destruction, metrics from both MINDS and INSTITUTIONS to BEHAVIOURS. Chasing that ignore destruction or perversely count it as progress, and the dream of greater consumption to satisfy wants, and the undemocratic governance that fails to prevent the destruction. concomitant growth in physical (energy and material) throughput, appears to be what human minds have been Socio-economic inequality increases as the beneficiaries of the programmed to pursue and what institutions are designed to system are able to externalise the costs of their behaviours onto encourage. The externalisation of environmental and social less powerful or more distant peoples. But inequality is also costs and risks, especially onto generations distant in time greatly facilitated by mental discounting, selfishness, neglect of or space – perhaps the fundamental behavioural cause of the common good, and expansionist metrics of societal success unsustainability – is supported, facilitated or rewarded by that downplay matters of justice. virtually every mental and institutional variable on the SED list of main failings. Feedback on the system’s adverse consequences Why internalise in order to arrive at ‘prices that tell the truth’ when consumerist minds don’t want (and captured governments The causal mapping suggests that ecological destruction and don’t demand) such painful truth and higher prices? Corporate instability, motivated by insecurity/inequality, feed back to alter and government leaders, handsomely rewarded by the ‘rules of MINDS, INSTITUTIONS and BEHAVIOURS, but (perhaps typically) only the game’, which bring greater success to the already successful, with very long time lags. Feedback on adverse consequences is have very little motivation to change these rules (indicated in variously delayed, discounted, diluted, distorted and ignored. the diagram by very little causal The system’s informational connectivity flowing from “The system’s informational structure seems structure seems to encourage behaviours back to MINDS or actors to deny unpleasant or to encourage actors to deny unpleasant or inconvenient information. INSTITUTIONS). inconvenient information” The causal mapping suggests that Even when signs of ecological socio/economic/natural CONDITIONS are mainly shaped by scarcity or social instability are acknowledged, the system BEHAVIOURS, along with some direct and considerable indirect appears to encourage those who benefit disproportionately support from MINDS and INSTITUTIONS. Over-consumption, from the status quo to perversely ramp up their behaviours, physical growth exceeding natural limits, and the capacity to further increasing scarcity or instability (e.g. invading foreign shift costs onto distant humans and the rest of nature directly countries to secure access to climate-changing fossil fuels, explain much ecological destruction. However, many other extracting natural resources from ever more distant pristine 26
  • 27. SED Failings as a Complex Causal System ecological areas, blaming the victims of the system and the logic of growth as the answer to all problems, and the reducing aid or welfare to them, converting communities acceptance of an elite plutocracy as the inevitable form of and entire nations into ‘guarded compounds’ to reduce threats societal governance, remain intact. Those who believe that of terrorism). growth-oriented plutocracy can be easily undone through simple changes in metrics or rules are most likely fooling These ‘denial and flight’ behaviours address only the symptoms themselves. Even attempts to change parts of thinking alone of ecological and social unsustainability, not the underlying (e.g.‘We’ll solve this by making people more literate and causes. aware’) are doomed if they are disconnected from genuine changes in values and ethics. Why we need a whole systems perspective All of this is not to deny the positive necessity and potential for restructuring institutions, modifying behaviours, or ameliorating In the very tentative causal model presented here, BEHAVIOURS social and ecological conditions. Rather, it emphasises the need and CONDITIONS appear to derive largely from MINDS (mindsets) for a ‘whole systems’ perspective that gives holistic and special and INSTITUTIONS. This suggests that interventions focusing only attention to the underlying human motivational, cognitive, on changing behaviours (e.g.‘We’ll solve this through more perceptual, ethical, emotional and spiritual factors that ultimately enlightened leaders or reduced shape our institutions, behaviours and living conditions. The advertising’) or on altering SED results suggest that unless “The SED results suggest that unless we we change minds, we are unlikely conditions (e.g.‘We’ll solve this though greater redistribution change minds, we are unlikely to significantly to significantly change much of or more national parks’) are change much of anything else” anything else. likely to have limited impact or value. The more elemental and powerful motivational mental The whole systems perspective tells us that ‘there is no blame’. and institutional programming will tend to work as hard as Our unsustainable economy is the result of countless ‘boundedly’ possible to resist, reduce and negate ‘deviant outcomes’ that rational decisions taken over many centuries by actors caught up are incompatible with the explicit or implicit intentions of in systems that have made it almost impossible to act responsibly the system’s deep-seated driving forces. to all the affected stakeholders. The system encourages us to externalise costs onto nature and communities. It motivates us We can also suggest that intervening to change institutions to pursue endless growth on this finite planet, and it tolerates (e.g.‘We’ll solve this by substituting sustainability metrics for the concentration of wealth and power. growth metrics, or by eliminating corporate contributions to politicians’) may also have limited transformational power if B u s i n e ss & t h e E n v i r o n m e n t P r o g r a m m e : T H E S U STA I N A B L E ECO N OMY D I A LO G U E 27
  • 28. The dilemma of free-market capitalism Our form of capitalism was intentionally and/or unintentionally designed to: The SED has produced a profound critique of free-market Boost returns by externalising costs capitalism, which has become the central organising principle, consuming passion and dominant imperative of modern Keep wages and prices low existence. The SED results implicitly acknowledge that this Maximise the logic of accumulation form of capitalism was simply not designed to provide satisfying Exploit the desire for conspicuous consumption lives for all, within the means of nature. That was not (and still Generate the greatest wealth accumulation for the least possible is not) its aim or logic or justification. Thus, it should not be investment criticised for failing to produce what it was not intended to Dominate politics in order to reduce competition, uncertainty, produce. We have collectively and systemically invented and redistribution and restriction adopted free-market capitalism to achieve efficient resource Maximise the dynamic and creative recycling of capital allocation according to price signals from people with spending Commodify as much of life as possible power – not to ensure just distribution or an optimal scale Redirect wealth and power from the many to the few, and from relative to natural carrying capacity. the future to the present Remain indifferent to the intangibles of life that have the greatest meaning “The SED has produced a profound critique Ensure freedom from responsibility of free-market capitalism, which has become the central organising principle, consuming passion and dominant imperative of modern This is a strong assertion, and surely worthy of much debate. Yet it is not a new discovery. We are still caught up in the existence” dilemma described by John Maynard Keynes many years ago: ‘[Capitalism] is not a success. It is not intelligent, it is not beautiful, it is not just, it is not virtuous – and it doesn’t deliver the goods. In short, we dislike it, and we are beginning to despise it. But when we wonder what to put in its place, we are extremely perplexed.’ 28
  • 29. SED Failings as a Complex Causal System The ‘folk wisdom’ of systems theory may differ from its short-run response. High-leverage interventions may thus cause worse-before-it-gets-better Coping with perplexity, complexity and the challenge of behaviour, whilst low-leverage interventions may generate sustainability is the central challenge of our time. We must be transitory improvements, only to be followed by a deepening extraordinarily humble in offering any wisdom concerning how of the original problem. With a bit of luck, small interventions to transform what is possibly the largest, most self-reinforcing, may create tipping points that induce large-scale cascading and most seductive and addictive system ever invented. changes. Slowing or weakening the positive feedback loops that drive a huge self-reinforcing system typically requires a mix of As we collectively approach this informational, social and institutional task, the ‘folk wisdom’ of systems “We must be extraordinarily humble in interventions. Transformational thinking tells us that inertia, offering any wisdom concerning how to change is unlikely to come from within the current system; momentum and rigidity in the transform what is possibly the largest, unsustainable economic system exogenous shocks may be necessary. are huge forces. Thus, expect most self-reinforcing, and most seductive interventions to be delayed, and addictive systemever invented” We need to concentrate on fostering diluted and defeated by the the adaptive capacities of the system. system’s defensive responses to attempted interventions. There are no optimal solutions or best system designs, so we Intuitively obvious solutions may do more harm than good. must anticipate surprise and dynamic evolution. This dose of High-leverage policies will be hard to discern unless we truly humility, when confronting the most daunting transformational understand the (typically, small number of) critical or controlling challenge confronting humanity, may seem disheartening processes that shape the dynamics of the whole system, which and disempowering. We hope, however, that by emphasising the appraisal above suggests lie above all in the realm of the necessity for systemic wisdom we may all be a bit wiser, mental models.There are no simple solutions. Substantive smarter and more effective in intervening to the best of our change is rarely incremental or linear. Time delays in feedback abilities to ensure a sustainable human future. imply that a system’s long-run response to an intervention B u s i n e ss & t h e E n v i r o n m e n t P r o g r a m m e : T H E S U STA I N A B L E ECO N OMY D I A LO G U E 29
  • 30. What the SED Means for the Future As will now be abundantly clear from this SED report, sustainability and capitalism do not automatically make natural bedfellows. Sustainability is all about the long-term, about working within limits, about making more from less, about accommodation with others to secure equilibrium – and it demands a deep and often disconcerting re-engagement with the natural world. Contemporary capitalism responds to the shortest of short-terms, abominates the very notion of limits, celebrates excess, accepts that its ‘invisible hand’ will end up creating as many losers as winners – and has no real interest in the natural world other than as a dumping ground and a store of raw materials. 30
  • 31. What the SED Means for the Future However, the bipolar challenges of, on the one hand, the That means working with the grain of markets and free choice, biophysical limits to growth and, on the other, of the profound not against it. It means working with capitalism as the damage being done to the human spirit through the pursuit only over-arching system capable of achieving any kind of of unbridled materialism, will inevitably compel a profound reconciliation between ecological sustainability and social justice transformation of contemporary capitalism – and sooner rather on the one hand, and the pursuit of prosperity and personal than later if we want to avoid dramatic social and economic wellbeing on the other. disruption. There is, therefore, a case to be made for a rapid That said, today’s particular model of capitalism is clearly transition to a very different variant of capitalism: capitalism as if the world matters. incapable of delivering that kind of reconciliation, dependent as it is on the accelerating liquidation of the natural capital on This notion of ‘capitalism which we depend, and on as if the world matters’ “Capitalism as if the world matters is an evolved, worsening divides between is driven by a reform intelligent and elegant form of capitalism that puts the rich and the poor the agenda, however radical it the Earth at its very centre (as our one and only world) world over. may appear to some, not a revolutionary agenda. For and ensures that all people are its beneficiaries in At its heart, therefore, all that it’s a compromise, recognition of our interdependence on each other sustainable development profound and urgent comes right down to one and on the Earth itself” transformation of the all important challenge: worst dysfunctionalities of contemporary capitalism must is it possible to conceptualise and then operationalise an therefore constitute a more realistic strategy than urging people alternative model of capitalism? One that allows for the to take to some anti-capitalist barricade. sustainable management of all the different capital assets we rely on (financial, manufactured, social, human and natural), It must also do a lot more than threatening people with yet so that the yield from those different assets, sustains us now more ecological doom and gloom. The necessary changes have as well as in the future. also to be seen as desirable changes, good for people, their health, their quality of life – and not just good for ‘the The case for sustainable development must be reframed if that environment’ or for the prospects of future generations. This is is to happen. It must be as much about new opportunities for a ‘here and now’ agenda, as well as an agenda for tomorrow. responsible wealth creation as about outlawing irresponsible wealth creation; it must draw on a core of ideas and values that speaks directly to people’s desire for a higher quality of life, emphasising fairness, enlightened self-interest and personal wellbeing of a different kind. B u s i n e ss & t h e E n v i r o n m e n t P r o g r a m m e : T H E S U STA I N A B L E ECO N OMY D I A LO G U E 31
  • 32. It is only this combination (sustainable development seen as It is only sustainable development that can provide both the answering the unavoidable challenge of living within natural intellectual foundations and the operational pragmatism upon limits, providing unprecedented opportunities for responsible which to base such a transformation. This is why sustainable and innovative wealth creators, and offering people a more just, development remains the only seriously ‘big idea’ that can bear balanced and rewarding the weight of that challenge, way of life) which is likely “Sustainable development remains the only seriously and why the core values to provide any serious ‘big idea’. It is only sustainable development that can that underpin sustainable political alternative to development – interde- provide both the intellectual foundations and the today’s economic and pendence, empathy, equity, political orthodoxy. operational pragmatism upon which to base the personal responsibility and required transformation” intergenerational justice – The politics of sustainability are the only foundation makes change necessary: we literally don’t have any choice upon which any viable vision of a better world can possibly unless we want to see the natural world collapse around us, be constructed. and with it our dreams of a better world for humankind. The politics of wellbeing makes change desirable: we really do have All things considered, what’s the alternative anyway? a choice in finding better ways of improving people’s lives than If not genuinely sustainable development, then what? those we are currently relying upon. Responding to both those And if not now, when? challenges will generate extraordinary opportunities for the wealth creators of the future. When something is both Jonathon Porritt necessary and desirable, and can be pitched to demanding Co-Director, Business & the Environment Programme, electorates in terms of both opportunity and progress, then it Founder Director, Forum for the Future becomes politically viable – and that’s the threshold that I believe we have now, at long last, reached. Based on extracts from ‘Capitalism as if the World Matters’ by Jonathon Porritt, Earthscan 2005 32
  • 33. Appendices Appendix 1 Sustainable Economy Dialogue sessions – SED 9: 7-10 Sept 2004 BEP Seminar, Salzburg, Austria 41 delegates When and where SED 10: The dialogue was completed at the occasions shown below 20-21 Sept 2004 BEP Alumni Workshop, 22 alumni London, UK SED 1: SED 11: 7 July 2003 Pilot workshop, Calcot Manor, 34 alumni 19-22 Oct 2004 BEP Seminar, Wye River, 36 delegates Gloucestershire, UK Maryland, USA SED 2: SED 12: 16-19 Sept 2003 BEP Seminar, Salzburg, Austria 39 delegates 12-15 April 2005 BEP Seminar, Cape Town, 34 delegates SED 3: South Africa 11-13 Oct 2003 BEP Seminar, Wye River, 37 delegates SED 13: Maryland, USA 12-15 April 2005 BEP Seminar, Cambridge, UK 43 delegates SED 4: SED 14: 3-5 Feb 2004 BEP Seminar, Cape Town, 45 delegates 3-4 May, SLN Seminar, Cambridge, UK 30 delegates South Africa 8-10 June & SED 5: 25-27 Sept 2005 1-2 April 2004 BEP Seminar, Cambridge, UK 39 delegates SED 15: SED 6: 13-16 Sept 2005 BEP Seminar, Salzburg, Austria 31 delegates 27-29 April 2004 Mini-BEP Seminar, Nairobi, 22 delegates SED 16: Kenya 28-31 March 2006 BEP Seminar, Cambridge, UK 49 delegates SED 7: 4-5 May 2004 Session for the Sustainability 34 delegates Learning Networks Programme, London, UK SED 8: 29-30 July 2004 BEP Alumni Workshop, 26 alumni London, UK B u s i n e ss & t h e E n v i r o n m e n t P r o g r a m m e : T H E S U STA I N A B L E ECO N OMY D I A LO G U E 33