Sustainability & ‘Profits’ – Part 2

January 9, 2013 by 1 Comment

So with all the festivities a week has turned into a month, but here is the second part of my blog on the practical application of sustainability values in order to support profitable business strategies. I’ve packed it with lots of examples to make up for the delay in getting to you!

In the last blog I described some of my findings with regard to businesses working more coherently towards common goals, bound by commonly held values. I also looked at the ways in which some companies were able to take a longer term approach to value generation, potentially delivering more resilient, less risky results.

Here I am going to look at three more sustainability-supporting values-inspired business strategies that can also lead to positive financial results and long-term business success.

The How: Broadening the corporate view of value

The main thing to point out from the start, is that ‘profiting’ from sustainability-driven values (indeed from any effort that a corporation makes) depends on what the company is spending money on, why, and when it expects a return. There is a difference between a measure resulting in a company profiting so owners can extract wealth from the company, and a company profiting from a measure in so far as it makes the company more resilient and able to continue about its purpose of business. Nonetheless, it is clear that a company profits from more than just its sales.

It is well known that there are intangible factors that affect the perception of a company. These in turn can affect its monetary worth, determined by, for example, the quality of its staff, or brand loyalty from customers. It is also widely accepted, that a narrow view of value can lead to catastrophic costs to a business (BP anyone?).

Broadening the corporate view of value allows a business to consider investing in activities that protect the business into the future, as well as resulting in indirect profits to the company. Cisco CEO John Chambers has said that “giving back to society brings benefits that far exceed any costs – whether it’s in terms of employee morale, or strengthening the brand name.”[1]

Sustainability can deliver more than just the oft-touted benefits of efficiency and reputation however. When private equity house Doughty Hanson decided to bring a sustainability competence in-house the function was placed within the ‘value enhancement group’, specifically to search out value creation opportunities in the portfolio. Getting the ball rolling on long-term challenges still generates ‘profit’ as future-preparedness, de-risking and opportunity exploration carry value when it comes to selling a company.

More and more, companies and investors are beginning to understand that corporate ‘profits’ might be no more than illusions, as so often businesses are only profitable because of the things that they don’t have to include on their balance sheets. Unilever’s Paul Polman argues that it is pointless trying to make a business case for sustainability – “How would you make the case that not doing this could help society and mankind? For proper long-term planning, you’ve got to take your externalities into account.”[2]

Society and governments can change their views rapidly – both Toyota and Interface reported taking action that they knew to be unprofitable at the time, but they predicted future scenarios where early action would pay off.

The driver for early action need not be legislation. Café Direct is a big believer in eschewing short-term fixes in favour of upfront costs in return for long-term benefits, both to themselves as well as their suppliers. Vitsœ doesn’t bother to measure success financially, concentrating instead on planting the seeds for the future success and safety of the business. This might mean investing in a customised customer relationship management system rather than taking profits, or devoting time to cooperating with academic institutions (an activity also mentioned as being important by Interface, Adnams and Toyota).

In order to succeed as a business you need to have some fundamental things in place, many of which can be classified as ‘intangible assets’. These include corporate credibility, trust in the company and its products/services and, these days, responsible long-term strategies rather than thinly concealed shallow short-term fixes. Toyota argued that the relationship that they had built up with their US customers was largely responsible for keeping the damage caused by the accusations that led to the recalls a few years ago to a minimum.

So, there are plenty of areas in which values beyond profit-creation can contribute to the resilience of an organisation. But it is also important to remember that some sustainability values may well go directly against profit. Values have financial limits: companies cannot support their values in the face of indefinitely continuing costs.

The How: Values-fuelled innovation

Companies with core sustainability values innovate in order to protect their values. These innovations go beyond mere product tweaks, occurring across all business functions, from marketing to accounting to corporate structure.

Well known examples include: Interface’s work on its journey up ‘Mount Sustainability’ and towards its ‘Mission Zero’ goal, constantly innovating to reduce the impact of its products and operations, or; Patagonia’s contribution to the creation of the organic cotton market. Toyota’s work on future products was brought to the attention of the public with the launch of the Prius (but this was the culmination of 30 years’ work). All three believe that setting big hairy audacious goals allows the whole company to push itself up, facilitating progress that everyone can buy into.

Adnams explained how innovations were most likely to be successful when they combined the requirements all parts of the business eco-system, from product development, to supplier or retailer and consumer demands. This can be pushed even further in order to have an effect beyond the business eco-system. Patagonia’s Footprint Chronicles and Puma’s EP&L have both thrown a gauntlet down within their industries – now Patagonia and Puma’s competitors cannot avoid being compared against these new ways of doing and measuring business. Other non-product innovations that companies are using to promote or protect their values include amending the very nature of their incorporation, using new legal structures such as the Benefit Corporation in the US, or the Social Enterprise in the UK legally to enshrine their values.

Nonetheless, many innovations are only ‘possible’ because the companies are willing to apply a long and broad enough lens to deem the extent and timeframe of return acceptable. In the absence of strong values, there might not be the conviction to lead or challenge the status quo. Instead, the sustainability leaders, taking into account their values and own measurements of what is important and constitutes success, are content that the responsible direction will eventually be a profitable one and in line with their sustainability values too.

The How: The extension of sustainability into the wider corporate ecosystem

No company is an island. In order achieve meaningful sustainability improvements, companies must extend their influence to their wider ecosystem of suppliers and customers. Sustainability is indeed “the mother of all collaborations”. Education was consistently emphasised by the companies interviewed as vital to their work to spread their responsible and sustainably profitable approach to business. Chipotle for instance, is utterly reliant on suppliers to provide it with the ‘Food with Integrity’ that it wishes to sell. A large part of its sustainability agenda is therefore educating current and potential suppliers. They take this education a step further to include customer education – Chipotle needs people to buy Food with Integrity too. The Chipotle Cultivate Foundation, amongst other things, educates the public about food, nutrition and sustainable agriculture. Chipotle’s marketing goal, in short, is to educate: as Sustainability Coordinator Caitlin Leibert says “Using purchasing power isn’t enough – you have to educate and empower, speak their language and help them see how joining us on the journey could benefit them too”.

For sustainability improvements to take hold in large multinationals, the inside of the company must be treated as an ecosystem in itself. Key individuals influence the culture within their ‘megasystems’. Large companies often emphasise the importance of finding sustainability ‘ambassadors’: these individuals need to be sought out and supported in their efforts to move their networks within these multinationals towards more responsible frameworks of business. Once there is a critical mass of people who are aware of these more responsible business frameworks, long term needs (financial, social and environmental), are easier to see and consider. Interface has a formal education programme for Ambassadors; the HR department at Coca Cola Enterprises actively seeks individuals out who have the talent and desire to take on this extra responsibility; and Cisco has found it far easier to find internal leadership support for sustainability since it embarked on its Circular Economy journey – switching to the language of business rather than environmental protection is helping to develop an organisational understanding of sustainability.

In the next blog, I will examine the role that sustainability values play in supporting incremental change in multi-national companies, and the importance of such innovation and progress alongside the far sexier concept of ‘radical innovation’.

[1] Businessweek. (2010) Cisco: Giving Back Is “Good Business” | BloombergBusinessweek. [Online] Available from: http://www.businessweek.com/stories/2005-08-10/cisco-giving-back-is-good-business [Accessed 01/09/12].

[2] Polman, P. (2012) In: Ignatius, A. Captain Planet | HBR. Harvard Business Review. 90 (6), p.114

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Sustainability & ‘Profits’ – Part 1

December 6, 2012 by 3 Comments

In my last post I looked at some of the theories that support incorporating core purpose and company values at the heart of a business. Below is a summary of what I found: whilst really just a teaser, I’m happy to discuss further with anyone who is interested in what they read!

The Who

Over the summer I interviewed leading sustainability-focused companies to investigate where and how the theories matched up against what was going on in practice. These companies included

  • Vitsœ, which makes shelving that de-clutters your house and your mind but doesn’t clutter the planet as it’s designed to adapt and last for a very very long time.
  • Café Direct, which supplies quality coffee directly from the growers, focusing on improving the lives of growers and creating environmentally and socially sustainable small-holder communities.
  • Adnams, which uses the power of its people to reduce or remove any negative impacts from brewing exceptionally tasty beer.
  • Chipotle, which aims to serve its customers food that has been raised or grown responsibly (naturally raised), as well as supporting family farms and their communities.
  • Interface, well known for its ambitious plans first to achieve ‘Mission Zero’ in its ascent of Mount Sustainability and then, ultimately, regenerative industrial processes.
  • Patagonia, the outdoor clothing company that created the organic cotton market, which uses corporate profits to support environmental activism and is challenging some of the systemic issues responsible for encouraging inevitably unsustainable business activity.

I also interviewed companies that are not so well known for having a sustainability focus, very large corporations where sustainability efforts are beset by the challenges inherent in scale or public ownership, and even a company with an explicitly focus on profit, usually thought to be in direct conflict with sustainability initiatives. These companies included Coca Cola Enterprises, Toyota, Cisco and private equity house, Doughty Hanson.

By looking at those companies doing the most that they possibly could, but also those that face operational and strategic situations often considered as barriers to sustainability initiatives, I hoped to get a wide overview of what can support sustainability as well as profitability.

The Why: Origins of corporate sustainability values

I touched on the origins of sustainability values in my last blog, but I think it’s worth mentioning it again. Sustainability need not be the focal point that ultimately leads a company to try to become sustainable or responsible. Many of the companies interviewed revealed that having strong non-profit specific values in place allowed them to evolve and more easily incorporate sustainability into their values. They began by developing the values that were core to their business offering, educating themselves as they worked at these, and growing their understanding of what was central to their success; financially and as what sort of businesses they wanted to be. Over time, these values developed to include a desire to be sustainable too.

The How: Corporate communities with common purpose

Values assist the corporate community in working towards a common purpose: like-minded individuals and investors are attracted, creating a community that is better equipped to achieve mutually desired and desirable goals.

Doughty Hanson reported a constant increase of investors approaching them with evermore sophisticated ESG queries – the fact that they had a dedicated team meant that investor requirements and business approach could align. Adnams CEO Andy Wood talked of investors with common values coalescing around Adnams and its values. Patagonia, Interface and Vitsœ all made special note of the importance of an individual’s values when recruiting new employees.

However, the business must provide the conditions for a reliable culture that supports these shared values, and be prepared that, at times, these conditions may appear to be supported at the expense of shareholder value (thought of narrowly, in terms of short-term profit).

The How: Long-term thinking

Companies existing for reasons beyond profit will use funds to keep doing what they believe they are there to do. Values-inspired sustainability strategies encourage cathedral-building mentality: sustainably minded companies plough earnings back into the business, cultivating rigour, resilience, and the ability to adapt to future conditions.

Vitsœ invests everything it can back into its business – it makes decision that it realises do not make ‘commercial sense’, except of course decisions must make commercial sense or the business wouldn’t exist anymore. No, they don’t make commercial sense within our current system, stripping everything that we can out of a company and still expecting it to prosper and grow. Café Direct also places emphasis on achieving its business goals (supporting small holder coffee growers) rather than profiting. Vitsœ and Café Direct can behave in this way, partly because their ownership structures allow them to. But what of much larger corporations with shareholders expecting returns on their investments, where the company is nothing more than a means of extracting wealth for themselves? As soon as they are able to think more than a year or two into the future, investors too can reap benefits similar to those of their more short-term minded colleagues. Toyota R&D cycles can run over decades. Development for hybrid vehicles began in the early 70s, and yet hybrid sales now make a significant contribution to maintaining Toyota’s position as the number 1 car manufacturer in the world. Cisco is betting on a future where resources simply cannot be wasted anymore and therefore putting the thinking work in now, working with the Ellen MacArthur Foundation to explore the ways in which a true circular business system can be set up. Even Doughty Hanson, with holding periods of between three and seven years for the companies within its portfolio, is able to generate sufficiently significant value enhancements from its sustainability efforts. Investors are able to see benefit from buying into this sustainability-incorporating approach to business building.

Sustainability values gave the companies I interviewed the opportunity to think about their needs as companies as well as those of society and the environment. Combining these values with audacious goals, these companies have created mindsets existing in the present, but with an eye always on the future.

Next Week

In the next blog I will look at three further strategies that values-focussed businesses seem to employ to support both sustainability and the bottom line.

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The Power of Purpose

November 8, 2012 by 3 Comments

In my last blog I looked at some of the problems associated with trying to become a more responsible company, particularly if a company is looking to profit from ethical behaviour.

But there are businesses that do ‘do well by doing good’ – so how do they succeed in the face of opposing market norms? I began my research by asking if companies that had strong core values could overcome financial barriers to sustainability initiatives. As I read around the subject another strand of thinking revealed itself: the importance of a core purpose. Values and purpose seem to support each other: whilst influential on their own, together they form a cultural framework that can guide corporate behaviour extremely effectively towards common achievement of agreed goals. I will look at theories of values and purpose – my next blog will look at practical examples of companies such as Toyota, Adnams, Vitsœ, Patagonia and Chipotle doing well by doing good.

Purpose and People

Charles Handy, writing after the accounting scandals of the early noughties – when public trust in business was at ‘an all time low’, underlined what remains true today: ‘We cannot escape the fundamental question, Whom and what is a business for?’[1]. It seems that businesses that lead in their fields today appreciate the difference between profit and purpose. Handy argued that this understanding has largely eroded to a belief that value can be created where none exists, success measured by share price alone: pride of possession and the responsibilities of ownership have given way to pure self-interest. And yet,

‘to turn shareholders’ needs into a purpose is to be guilty of a logical confusion, to mistake a necessary condition for a sufficient one. We need to eat to live… but if we lived mainly to eat… we would become gross. The purpose of a business… is to make a profit so that [it] can do something more or better.’[2]

Pioneering business leaders have backed this view – anyone in a supervisory position would benefit from reading HP co-founder David Packard’s eloquent speech to his managers in 1960.

Today more than ever before, much of a business’ worth is tied up in its intellectual property (i.e. its people) rather than its assets. Another practitioner academic, Arie de Geus, has written about Living companies[3]. These companies invert what has become the standard owner-manager view: they value people, not assets. A company expecting to span several generations ‘exists in a world it cannot hope to control’[4] and must be prepared change its portfolio completely to meet changing times and market conditions: such companies scuttle assets, not people, to survive. Assets and profits are a means to earn a living, but not the reason for it.

The argument is that by basing policies on the language and thinking of economics, companies forget that their organisation is a community of people in business primarily to stay alive. Longevity isn’t in itself sustainable, but it is an inalienable aspect of sustainability. Keeping a company (and its community) alive requires owners and managers to hand the business over to successors in at least as good health as when they were entrusted with it. Allowing people to grow within a community held together by ‘clearly stated values’ where managers ‘place the perpetuation of the community before all other concerns’[5] supports this: the community understands ‘who is us’, that it holds values in common and, importantly, understands what it values[6].

Vision and Values

Jim Collins, author of the well-known Good to Great and Built to Last – describes this as a company’s ‘core ideology’ – what the company stands for, the reason it exists – core ideology is unchanging over time[7]. Together with an ‘envisioned future’ (what the company aspires to, which can change), it makes up an overall vision, which is closely linked to a company’s ability to manage continuity and change. Core ideology consists of core values (a system of guiding principles) and core purpose, which is the organisation’s most fundamental reason for existence. These values need no justification: they are enduring and intrinsically important to all. The important factor is not what the values are, but that they exist and are understood by all. If a company might be penalised for holding a core value and would consider changing it, then it is clearly not a core value: ‘a company should not change its core values in response to market changes… it should change markets… to remain true to its core values’[8].

This theory proved particularly interesting with regard to sustainability values during my research. Many of the companies that participated, now amongst the most sustainability-focused businesses in the world, did not start out with core sustainability values. They just started out with values or purpose. As Patagonia CEO Casey Sheahan has said, if you don’t stand for something, you stand for nothing[9]. Chipotle wanted to serve great tasting burritos: it just so happened that the best tasting pork came from naturally raised pigs. Caring about where to get the best tasting meat led the company down a path that made it ask other questions beyond just getting the best tasting food. Similar stories exist at Patagonia and Adnams. If a company really cares about something it is much quicker to question how it will secure its long-term survival so it can keep doing what it does, which then perpetuates an ever-growing concern for sustainability issues.

Values and Purpose at Scale

Research has linked the success of certain large multinationals to agility deriving from shared sets of values guiding individual and group choices and actions[10]. Supported by standardised management practices, ‘values turn out to be the key ingredient in the most vibrant and successful of today’s multinationals’[11]. These ideas of values-improved collaboration, decision-making, innovation, motivation and community, have been developed to propose a theory of ‘institutional logic’ that is ‘built on a foundation of purpose and values, [serving] as a buffer against uncertainty and change’[12].

Thinking of companies as social institutions and communities as well as profit making entities can open up the possibility of short-term financial sacrifice in the interests of future success. Institutional logic refocuses companies beyond money generation and re-envisions them as ‘vehicles for accomplishing societal purposes and for providing meaningful livelihoods for those who work in them’[13]. Values become embedded in tasks and goals, further encouraging motivation and self-regulation. More and more, leading companies are thinking about ‘building enduring institutions’[14] with society and people at the core: using societal value and human values as decision-making criteria, enabling investment in the future of the business and the society on which they depend.

An understanding of purpose and vision throughout the community that forms the business, coupled with core values that are instinctively applied to decision-making, facilitates positive individual traits such as autonomy, flexibility and self-expression, which in turn catalyse clear standards and processes in operations[15]. Investing in the community reduces the problems of agency and reactivity that are traditionally associated with increasing organisational scale.

Bringing Purpose and Values Together to Form Culture

Culture is the sum total of past and present values, interests, and behaviours. It builds up over time, and is continually evolving. Corporations also create culture: they develop language, attitudes, ways of solving problems, paths of action, values that they protect as well as those they ignore. Promoting community, protecting and reflecting corporate culture, provides an element of predictability free from of command-and-control. A self-organising corporate community of individuals acts as a whole, more able to uphold common behaviours and values.

Companies are succeeding in spite of their focus on non-traditional drivers[16], such as community engagement, labour relations, environmental protection, corporate governance and supply chain accountability[17]. There is an increasingly broad range of organisational principles and practices that have been shown to support the creation of sustainable businesses.

Of course, it isn’t as simple as the theories might suggest. Sustainability incorporates all of these non-traditional drivers: just as a tobacco company can put excellent corporate governance measures in place to good bottom-line (risk-mitigated) effect, there is no evidence that a core purpose won’t serve bad interests just as well as good. A belief that any of the ideas discussed will reveal win-wins in every situation is delusional: businesses must understand (just as people must) that their interests do not trump all others. It is only through a deep respect of other people’s interests and an understanding of the importance of community that a company can escape the manacles of realism and absolutism, and embrace success deriving from the relativism that is the very essence of life. What Collins calls the ‘genius of the And’[18].

[1] Handy, C. (2002) What’s a Business For? Harvard Business Review. 80 (12), 49-56 – p.51
[2] (ibid.)
[3] De Geus investigated the life-expectancy of corporations, questioning why ‘mortality’ was so high, and why so many seemed to die in their infancy – the maximum life-expectancy being hundreds, maybe even thousands, of years, and yet the average being less than 50. ‘If this species were Homo sapiens, we could rightly say that it was still in the Neanderthal age – that it had not yet realised its potential.’ (de Geus, 1997: p.53)
[4] de Geus, A. (1997) The Living Company. Harvard Business Review. (March-April) 51-59. – p.54
[5] (ibid.) p.54
[6] (ibid.) p.58
[7] Collins, J. C. & Porras, J. I. (1996) Building Your Company’s Vision. Harvard Business Review. (Sept-Oct), 65-77 – p.66.
[8] (ibid.) p.67
[9] Sheahan, C. (2010) Patagonia CEO Casey Sheahan Comes Clean to Alex Bogusky | FearLess Cottage. [Online] Available from: http://www.youtube.com/watch?v=hGy_Addk5I0&noredirect=1 [Accessed 8/2/2012].
[10] Kanter, R. M. (2008) Transforming Giants. Harvard Business Review. 86 (1), 43-52.
[11] (ibid.) p.45
[12] Kanter, R. M. (2011) How Great Companies Think Differently. Harvard Business Review. 89 (11), 66-78 – p.72
[13] (ibid.) p.68
[14] (ibid.)
[15] Kanter, R. M. (2008) Transforming Giants. Harvard Business Review. 86 (1), 43-52.
[16] Beard, A., Hornik, R., Wang, H., Ennes, M., Rush, E. & Presnal, S. (2011) It’s Hard to Be Good. Harvard Business Review. 89 (11), 88-96.
[17] Respectively; Royal DSM, Southwest Airlines, Broad Group, Potash Corporation and Unilever.
[18] Collins, J. C. (2005) The HP Way. [Online] Available from: http://www.jimcollins.com/article_topics/articles/the-hp-way.html [Accessed 8/15/2012].

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The Responsible Company

October 5, 2012 by 3 Comments

It’s been a few months since I last ‘shared’ on 6heads – the thesis writing process left little time for anything else. Now that it’s all handed in, I thought I would publish a series of excerpts from my research over the next few weeks, summarising what I learnt. Exploring the role of values in business and their ability to support sustainability and business success, the posts will examine what a responsible company is, why companies should be responsible, and offer a wide overview of values-inspired strategies that can deliver business improvement and sustainability gains.

In this first excerpt, let’s consider what a responsible company is, which also requires that we think about what responsibility actually means…

The definition of responsibility is wrapped up in notions of autonomy, accountability and obligation, but at its base are two fundamentals of humanity: compassion and time. Responsibility requires us to prevent others from being harmed, and as a result of our innate fascination with time, moral consensus holds us responsible for an action’s effects, even when the impact is felt only far into the future. Most sustainability definitions follow a similar line of argument.

Sound moral reasoning does not always find its way into practical decision making. Whilst preoccupied with time (beyond our control as it is), we struggle to understand it – to accept our existence as part of a continuum rather than a series of epochal snapshots. Few businesses subscribe to Ray Anderson’s logical stance:

‘Sustainability means survival… What business strategy could be more important than that?’ (Anderson & White, 2009: *l.555)

The ultimate implications of the future being so inescapably full of absolute certainty as well as insoluble doubt, lead us to act as if we could make time stand still – that time beyond our lifetimes has no meaning and therefore no relevance. Arguably true; more likely a denial strategy, given our obsession with what has come before us.

‘Corporation’ derives from corpus, signifying a body (of people): the original purpose was to create a structure that could last in perpetuity, beyond the life of any one individual – companies were designed specifically with sustainability in mind. Fate, it seems, is not without a sense of irony: human civilisation had at its disposal but two tools with which to supervise corporations, the law and economics, disciplines that speak entirely different languages. Law’s vocabulary, concerned with responsibility, rights, fairness, justice, and community, has no place in the lexicon of modern economics (Sharp Paine, 2003).

Having inevitably failed to maintain corporate activity in the service of civilisation’s best interests, a third institution has stepped forward to act as a corporate steward on behalf of humanity: society itself. Either through special interest groups, or wide-spread (and widely spread) public sentiment, society is again finding its voice, determined that corporations, like the rest of us, play by the rules we have set ourselves. Some members of society have taken these beliefs and applied them directly into their own businesses. If “corporations are people” (Romney, 2011), then why shouldn’t they be responsible people?

A responsible company is an organisation on the path towards becoming a sustainable company. It accepts the need for compassion and its associated temporal qualities, and does what it can to minimise its negative impacts and maximise its positive impacts, even though it most likely has too many of the former and not enough of the latter.

Those companies willing to reflect on what lies beyond the next quarterly investor update and take responsibility for both their operations and the people and resources that allow them to operate, face a high-wire that disappears over an infinite horizon, along which they must walk. They must balance current imperatives against future requirements on their journey above a not-so-silent abyss: beneath them financial ruin on one side; immorality, manifested in social and environmental decline, on the other.

Companies of all shapes and sizes across the planet are beginning to take note of the brave leaders up on the high-wire, realising that their actions appear to have benefits, both ethical and economic. Some have even ventured onto it, behind the pioneers, heading for ‘sustainable business’, the 21st century frontier; hoping to find settlers’ riches waiting for them on the far side of the valley of change.

The pioneers realise that such an expectation is unrealistic. The other side might not even be there by the time they get close – certainly, it will have moved. And yet their journey is vital to civilisation: we must explore and innovate new ways of tending to the needs of humanity on our finite vessel, alongside those of our fellow passengers and the ship itself.

In his introduction to The Responsibility Revolution (Hollender & Breen, 2009), Peter Senge describes what it takes for companies and their employees to stay on the high-wire: leaders at every level of a business that never stop questioning who they are and who they want to be, at the same time finding common ground with those who view the world differently; admitting when answers cannot be found to problems that must be addressed; confessing responsibility if they created them; and, realising that there are no final answers or formulas, as the problems or requirements will themselves have changed.

‘Building a responsible company’ he writes, ‘takes, literally, forever’ (l.160).

———————————————————

*l. – refers to the Kindle location where no page number is given.

References

Anderson, R. C. & White, R. (2009) Business lessons from a radical industrialist. Kindle edition. London, Random House Business Books.

Hollender, J. & Breen, B. (2009) The Responsibility Revolution: How the Next Generation of Businesses Will Win. 1st edition. , Jossey-Bass.

Romney, M. (2011) Mitt Romney – Corporations Are People! | C-Span. [Online] Available from: http://www.youtube.com/watch?v=E2h8ujX6T0A [Accessed 8/8/2012].

Sharp Paine, L. (2003) The Thought Leader Interview | strategy + business. [Online] Available from: http://www.strategy-business.com/article/22047?pg=all [Accessed 8/5/2012].

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It’s not easy being Green (Frog, K.T. 1970)

July 5, 2012 by 7 Comments

A few weeks ago, fellow 6heads contributor James P and I had an amazing meeting with Mark Adams at Vitsoe. I use ‘amazing’ without any hint of hyperbole – the thinking employed by Mark at Vitsoe to manage the needs of his business is a thing of wonder, and surprise. To give you but one example, Mark had been a keen cricketer at school: cricket games have a ‘scorer’, there to observe and keep track of what is going on, but never to get involved. They aren’t even allowed on the pitch. This is the sort of participation that Mark thinks a finance department should have in a business – keep track of what’s going on, but never get involved. In Vitsoe’s business process flow chart, there is indeed a function, quite separated, marked as ‘Keeping the Score’. Finance’s involvement in a business, “is a sure sign of the beginning of the end” says Mark.

I popped in to see Auntie Oracle (Mike Tennant – the one that likes to “bake our noodles”) afterwards to gush incoherently about how I’d seen the future, and the future was shelves! Mike was having a rare Eeyore moment. Although normally a fan of all things Vitsoe, I think the cheerful optimism was too much to take – or he really didn’t want me in his office any more: “But why do we need shelves? OK great they’re made as efficiently and durably as possible with the absolute minimum of waste, but wouldn’t a Kindle just solve this? Maybe that’s the best that we’ll ever be able to manage. Maybe extreme efficiency is as good as it’s going to get.”

This was not the first time that Mike had dropped a bomb on me that could, potentially, render the entire course and all of his teaching over the last year, well, pointless. As you can imagine, I was a tad troubled, and after stewing on it for a week I felt up to task of challenging him (on Friday evening when he might have had a beer or two and would be a bit less likely to scramble my head again).

I thought it would be novel to post the exchange as a dialectic piece – it’s rather a fun insight into what happens when you scratch the surface of sustainability problems.

From: Hill-Landolt, Julian
Sent: 29 June 2012 17:41
To: Tennant, Mike
Subject: Vitsoe conundrum

I’ve had a few thoughts regarding our brief conversation the other day – with you getting upset because people don’t need shelves… and maybe the best that we can hope for is extreme eco-efficiency.

Well, let’s imagine what that would look like. 100% recycled materials. 100% renewable energy in production and delivery processes. High levels of skilled manual and knowledge labour. Localised business that supports skill in the community. A basic human requirement is met – I don’t think you could make a better argument for our “need” for coffee over shelves for instance. Zero waste is created. So where is the problem?

We know there’s no need for profit other than to pay basic bills, staff and suppliers. Wealth distribution is admittedly limited due to size and need, but equitably spread where possible and to foreign partners where they exist. Vitsoe’s actually a company that might conceivably be able to reach these goals. More likely them than any of their customers. So is that the problem? That the system as a whole won’t allow them to achieve it? Because we know they would if they could. Of that I have no doubt.

So I’m wondering where the issue with extreme efficiency is – because I think all we mean by “extreme” is reaching the point where we create similar levels of byproduct and waste to a natural system. The issue, as always, is one of time and scale. Isn’t it that the level of cooperation required for us to achieve extreme efficiency is out of reach, as are the business cases (most wouldn’t pay off), as is the technology, and so too the “need” – there’s simply more need to get rich quick, or generate “sustained” growth (did you see Tim Jackson’s betrayal article in the Guardian? Genius quote: “It makes no sense to get the London Philharmonic Orchestra to play Beethoven’s ninth symphony faster and faster each year.”), or pay for the mistakes that we’ve already made, let alone the ones we’re locked in to making as we add another billion people to the roster…

I would genuinely appreciate a response on this (“no” is not an appropriate answer the above questions…). This is sort of key isn’t it? What is it that we are actually aiming for? I suspect that the problem is either utterly insoluble, or it is as simple as “Do no Evil. Strive for Equity. Take Nothing that can’t be put back in a reasonable time frame. Do no harm.”

Thoughts?

On 29 Jun 2012, at 18:03, Tennant, Mike wrote:

Upset about shelves? Never – what would I put my books on?!

A couple of observations:

I think there’s nothing wrong with efficiency if it can be shown to be effective. It may be that the “extreme efficiency” example is the best we could ever do, short of cutting our noses off to spite our faces. An argument could be made for this, but in lieu of a better functionally equivalent solution (I guess the Kindle would be functionally, but not aesthetically, equivalent), I’m not sure how useful cutting noses off is. So efficiency as effectiveness becomes a viable model (albeit dynamic – a thing that just struck me is that efficiency is relative while effectiveness is absolute (“partially effective” could still be toxic)).

There are significant benefits to Vitsoe’s model, as you describe, and when looked at from multiple dimensions e.g. beyond materials & concomitant CO2 reductions the definition of efficiency becomes somewhat intractable. Going beyond either/or trade-offs and looking at optimisation within a both/and system means we have to re-think what we actually mean by efficiency. Achieving efficiency in multiple inter-related dimensions simultaneously may not be (is not?) the same as achieving efficiency in multiple inter-related dimensions individually.

Extending that to the Kindle example, we have a thing that is an artefact that combines both books and shelves (well, gets rid of shelves, but I’m using it creatively…) so looks at the larger system. Maybe a thought experiment would be to think of what a shelf actually means (e.g. a way/thing to stack books) and then think how to make a single thing that fulfils all of those functions. Efficiency would then be different for that new combined system than for the shelves or the books themselves.

Hmm – that all sounds really interesting… could be fodder for a dissertation :-)

Mike

From: Hill-Landolt, Julian
Sent: 29 June 2012 18:09
To: Tennant, Mike
Subject: Re: Vitsoe conundrum

I hate you.

Quick clarification. First para last line. Do you mean partially effective? Or do you mean partially efficient? Because in the sense you’ve described aren’t they both relative?

The rest I’ll have to think about properly. My head’s going to explode.

On 29 Jun 2012, at 18:22, Tennant, Mike wrote:

Yes, I meant partially effective. I think that things can be partially efficient – all that means is that it’s easy to see a way forward e.g. 30mpg -> 40mpg.

It’s confusing terminology though as that could imply that “fully efficient” would be “effective”, but I don’t think that’s necessarily the case. Effective could have many more dimensions e.g. what’s “fit for purpose”?

From: Hill-Landolt, Julian
Sent: 29 June 2012 21:31
To: Tennant, Mike
Subject: Re: Vitsoe conundrum

OK I think I get it now – I’ve had a chance to read in silence and think.

The confusion was in that you were saying “partially effective is toxic” which is relative, as opposed to “effective is not toxic” which is, of course, as you said, absolute. I also agree that something that is 100% efficient would not necessarily be effective. You could for instance have an internal combustion engine that is 100% efficient at converting stored energy into drive train power (at the moment it’s about 18% for petrol I think) but it would not be effective by any means, unless it weighed nothing and was attached to your bum – the effectiveness disappears with the unnecessary weight that the engine has to transport along with the person and their things.

I think that I get what you mean between the individual and simultaneous multi-dimensional efficiencies – so you might be able to get every aspect of a human system to operate efficiently on its own, but getting aspects to operate efficiently on their own as well as operating efficiently with each other and all at the same time might be too much to ask for. If we know anything about our ability to control systems, we know that it’s beyond our reach. And to be fair, that might not be that much of an admonishment. I’m thinking of Suzuki’s salmon example – how long did nature have to sort that system out – to arrange for all the different cycles to sync with each other? Was the continent of North America even in the position that it is in now when the process began? When beating ourselves up about our destructiveness and stupidity it would be wise to remember the unpredictable arbitrary serendipity with which natural systems as we see them now have come about. Framing again. Time invariant systems thinking is not possible. Systems are snapshots, relatively speaking…

The only thing I don’t get, is the final bit about the Kindle. Are you saying that there might be something that combines (and/also) what we want from a book and a shelf? But without a book why would we want a shelf? Or do we need an artefact “minority report”-style, that projects the books we have on virtual shelves and upon being picked transfers them wirelessly to our digital paper book? OK fine then efficiency is different for that system, but the shelves no longer exist so of course it would be.

I think that there are bigger questions to be answered than “do we need shelves”. Surely we get through the ‘do no evil’ set of questions first, the low hanging fruit. Address these whilst changing the industrial system as we know it along the way so that we are ready for the final push when we get to start asking the bigger questions such as “Is there a better way?” Or do you consider that defeatist…?

Did I understand – or still missing the point?

Can I use any of this in my thesis by the way?!

On 29 Jun 2012, at 22:01, Tennant, Mike wrote:

Yeah, that’s pretty much it. I think that the efficiency/effectiveness needs more clarity (for me also) as it’s not easy to think of examples that are “effective” (sort of the “no such thing…” trope)

Absolutely right about the salmon cycle. Evolution didn’t have agency to worry about though – we’ve got another layer of constraints to adapt or adapt to, as opposed to just the physical that nature has.

With the Kindle thing, which again needs a better example, that’s generally the idea. If we can combine two things that were reliant on each other (books + shelves) into one co-constitutive thing (“books-are-shelves”, or some such) then the combined thing would have different properties than the bits on their own. I need to find examples of non-obligate symbionts (basically, things that work on their own, but form a super-organism when together – just cooler words) to illustrate properly.

The challenge, as you say, is working this into something other than a trite example, but I think there’s some mileage to be had (in the future) in seeing whether we can describe these simpler systems and then scaling the descriptions up.

I guess the “do no evil” problem is captured well here:

“Some believed we lacked the programming language to describe your perfect world, but I believe that, as a species, human beings define their reality through misery and suffering. The perfect world was a dream that your primitive cerebrum kept trying to wake up from.”

From: “Hill-Landolt, Julian”
To: “Tennant, Mike”
Subject: Vitsoe conundrum
Date: Fri, Jun 29, 2012 10:19 pm

So we’ve reached that stage…

Just as a last word though, the combination concept might be a fool’s errand. It’s simply another form of efficiency – we’re still using stuff, just differently. What you do get from the combination is the unknown. The ability to discover un-thought-of new activities and uses deriving from products that couldn’t possibly have been figured out until we’d combined the constituent parts, probably by accident…

We’re effectively back to the ‘first, do no evil’ position, then, simply ‘do it better’.

“I’m trying to free your mind, but I can only show you the door. You’re the one that has to walk through it.”

Hehe

On 29 Jun 2012, at 22:24, Tennant, Mike wrote:

Don’t try to out-geek me…for some immensely sad and inexplicable reason I know most of the lines from the Matrix.

From: “Hill-Landolt, Julian”
To: “Tennant, Mike”
Subject: Vitsoe conundrum
Date: Fri, Jun 29, 2012 10:26 pm

I was being insolent. I would never try to outgeek you. Wouldn’t that be futile? ;-)

I still think I have a point on the combinations thing though.

On 29 Jun 2012, at 22:31, Tennant, Mike wrote:

You do have a point. It needs to be expanded though. The salmon cycle brings in ideas where animals and the environment and geography are a system, so thinking outside of the confines of just artefacts and looking at how to combine with the environment may be useful. Or futile :-)

From: Hill-Landolt, Julian
Sent: 29 June 2012 22:36
To: Tennant, Mike
Subject: Re: Vitsoe conundrum

Dammit. You win. Again. Hit by my own ammo. Again.

Filed under longevity, Radical Innovation, Systems change Tagged with , , , , , , , , , , , , , ,

Long May She Reign

June 26, 2012 by 3 Comments

A couple of weeks ago, along with the rest of the population, I headed in to London to catch a glimpse of whatever was to be seen at the Jubilee celebrations. Not much, as it happened. After hotfooting it down the river from Hammersmith to Chelsea Wharf and just missing the Queen’s embarkation, we decided to snatch a lead on the muscle-powered pageant and jumped on a tube to Tower Hill. What we hadn’t counted on was the bridge being barricaded and raised, not to mention the small monsoon which had decided to prove to Her Majesty just whose rain had the upper hand. Soaked through, we retreated to a nearby church café and joined the mass of damp patriots who were belting out a shrill anthem and insisting on the utter Britishness of the whole occasion.

Just so. But what in the name of St George does the Jubilee have to do with saving the planet?

For a few months now I have been mulling over the correlation between sustainability and longevity.  Ever since the Brundtland Report enunciated the needs of silent future generations whilst reporting on Our Common Future back in 1987, pundits from all corners of the world have been jumping on the bandwagon of legacy – and indeed the 2012 London Olympics pre-Games sustainability report has whole chapters dedicated to the economic, social, sporting and environmental benefits that will be brought to the East London community for many years to come.

Royalist, republican or bemused bystander, we would be hard pressed to deny that the British monarchy has a knack for endurance (Charles I being the exception that proves the rule). The talk from the BBC on Jubliee weekend was all about tradition versus modernisation – the Kate and Wills effect through the ages, as it were – and the tenacious ability of the Royals to weather the storms of office. A perfect example of Darwinian evolution? Perhaps; certainly one could ascribe the same description – ‘descent with modification’ – to the family Firm, and although opportunities for direct competition have been limited in recent years, it has managed to survive the death of the People’s Princess and the 21st century explosion of celebrity culture by realising that if it couldn’t beat ‘em, it could certainly join ‘em. Kate is now the darling of the people with her ‘ordinary girl’ background and high street fashion sense, whilst even the not-so-bonny Prince Charlie has risen in public estimation. The Queen’s extraordinary experience has earned her global respect (she has known 12 British prime ministers and 6 American presidents in her time, and visited over 100 countries worldwide), yet she retains the affections of the vast majority of her people – and the Horse Guards even admit to calling her ‘Granny’! Democracy is of course an enviable state, but all too often the decisions of governments are predicated on victory in the next general election rather than on ensuring long-term prosperity. Endurance, longevity and the ability to survive and adapt are essential features of constitutional monarchy, and those of us interested in looking to the future could do worse than learning from it. To borrow from Patek Philippe, we never actually own the Earth – we merely look after it for the next generation.

Home and dry after the river debacle, that set me thinking of other things that we might associate with longevity: an heirloom? Radio 4 (particularly the shipping forecast) perhaps? The works of Shakespeare? On the whole, the things that survive the test of time are not so much things but ideas, stories, traditions, customs: intangibles that make life worth living, and that can be passed from one generation to the next, remoulded, and passed on regardless of wealth, power or worldly success. Imagination is not subject to the laws of entropy and nor is generosity degraded through thermodynamics. There may one day be an end of shopping for stuff, but for as long as we remain human there will always be a source of information, inspiration and ideas. And it is the longevity of the human race that sustainability seeks to address.

Filed under longevity

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