Caroline Rennie identifies the forces that will determine whether mankind has a promising future.
There are moments when we forget the daily jockeying of self-interest and come together as one to solve something that affects us all. Natural disasters galvanise not only those populations involved, but also the sympathetic world: think of the hurricane in New Orleans, the tsunami in Thailand, the earthquake in Haiti and now the two disasters in Japan.
The recent financial crisis demonstrated that banking activities in a single country can threaten banking systems globally. The crisis in Japan shows how a paralysing shock in one area can so limit parts supply that it shuts down manufacturing facilities globally. And China’s hold on rare earth metals, which it qualifies as a ‘strategic reserve’, enables it to hamstring manufacturing globally, as does Arab countries’ hold on oil.
So our interconnectedness ties us together as a global community. And nowhere is this more critical than in dealing with the environmental problems that threaten our ability to feed ourselves, live safely and ensure we bequeath a fruitful and healthy planet to our children. No country is independent of the economic and environmental effects of other countries’ actions. It seems evident that governments globally should be coming together to manage these issues.
But they are not. Or at least not successfully. Remember the climate change negotiations in Copenhagen? Failed. The follow-up in Cancún? Failed again, in the sense that events in the real world move faster than the negotiations.
If our governments fail us, are we doomed? To answer this, we’ll consider the various forces of sustainability.
When the world’s largest conglomerate, General Electric, states that it wants its ‘green’ business to grow at twice the rate of its conventional business, and applies investment to that end, Big Money is talking Big Time. Ten years ago there was one electric car at the auto shows and General Motors was making derisory remarks. Today every company has at least one electric model, and most have more. The organic/health food sections of shops that used to be relegated to dark corners now represent the only growing segment of the grocery sector.
Companies that insure insurance companies, like SwissRe, have been involved in sustainability and climate change issues for over 20 years. They calculate that, while average insured losses owing to natural catastrophe were $5 billion/year between 1970 and 1989, they increased five-fold between 1990 and 2009 to $27.1 billion/yr. And last year they doubled to over $50 billion/yr, thus raising the costs of doing business for those affected by climate change.
Such companies are also hosting conferences and representing governmental delegations to sustainability summits, because they understand that feedback loops and longer timescales are beyond our political cycle’s ability to manage.
Investors face the same issues. Many of the world’s largest banks and investor groups have come together to understand the impacts of climate change so that they can price investments accurately. The Carbon Disclosure Project (CDP) represents “551 institutional investors, holding US$71 trillion in assets under management and some 60 purchasing organisations such as Cadbury, PepsiCo and Wal-Mart”. Over 3,000 organisations report their impacts on the climate and its impact on their business, and increasingly their supply chains are reporting too. The CDP has broadened its reporting to include water and stimulated an equivalent forum for forests.
Reporting improves performance. The US Toxics Release Inventory required companies to report on their emissions and effluent in every factory. They weren’t required to limit or clean up those emissions, but the information enabled local community groups, national NGOs, the government and investors to see what was happening. Companies were embarrassed and reduced their toxic releases voluntarily.
Today’s international equivalent – the Pollutant Release and Transfer Register (PRTR) – includes Europe, Canada, Australia, Japan and Chile.
Transparency can be involuntary – think back to Nike and the sweatshop accusations or Greenpeace finding unusable electronics from Hampshire being shipped illegally to markets in Nigeria. Think of WikiLeaks!
But increasingly it is voluntary as brands use traceability to build trust and confidence. Examples include Timberland, which allows you to see online where your garments were made and how they were transported, and M&S, which guarantees customers its beef and lamb were reared by specific suppliers to exceptionally high welfare standards.
Brand value has driven most of the sustainability changes to date – first through marketing and talk (exposed by NGOs) and now through genuine action. Retailers like M&S, Tesco and Sainsbury’s are racing to ‘outgreen’ each other. They ask suppliers to provide products and services that lower climate impact, waste and toxics, while improving logistics, savings and efficiency. Key examples are detergents: now increasingly concentrated, in reduced packaging, refillable and effective with cold water.
Activism and goodwill
Brand value is a terrific lever for NGOs. Linking a particular brand (KitKat) to a particular effect (rainforest destruction and the extermination of orang-utans) is emotive, compelling and newsworthy. Greenpeace was successful in getting Nestlé to overhaul its procurement policy to ensure sustainable sources of forest products. Hugh’s Fish Fight has used this sensitivity to advantage by consistently naming names, ensuring accountability and exerting pressure.
Brand value also drives goodwill. Roberto Goizueta, former CEO of Coca-Cola, described goodwill as the key to ensuring he could afford to rebuild if every one of his plants burned down.
And we mustn’t forget the important role of staff, customers and labour organisations in influencing organisational behaviour.
Nothing focuses the attention like a successful product launch from a competitor. Industry leaders in particular can get paralysed by success. When Ecover was launched, Unilever laughed. Now Ecover is a global brand and Unilever is trying to copy it. The same goes for hybrid electric cars, ‘slave-free’ chocolate and most fair-trade products.
Loss of market focuses even more. When a disruptive technology like the iPod eliminates the need for thousands of CDs, entire industries are wiped out. Shai Agassi is introducing a ‘battery-swapping’ system so charging an electric car will take 30 seconds rather than hours. This applies to countries too: investing in infrastructure that decreases costs and increases efficiency makes them more competitive to talent and companies.
Let’s not forget the powerful drive of ethics, religion and morality. Humans typically respond extraordinarily well to a call to a higher purpose. Sustainability represents such a call – but the call has been muddled by contradictory claims and advice. Some religious leaders have taken to asking congregations and followers to steward the Earth in the name of social justice, future generations and caring for creation (tearful.org, Muslim Green Guide, Jews & Climate). Leaving the world better than we found it is a powerful idea.
To get sustainability right requires joined-up thinking – among sectors and countries. Recycling proves this can happen – local authorities work with collectors, investors support recycling operations, industry rewrites specifications for recycled materials, and materials travel across borders safely and legally. Twenty years ago recycling quantities were laughable. Today they represent a source of materials so important that even household names like Coca-Cola are investing in recycling capacity – to get material for their packaging.
So could it be that NGOs, businesses and citizen-consumers are sufficient to create a sustainable world? We’re strongly on the way. Ten years ago, the CDP didn’t exist. Today over 75 percent of its 3,000+ respondents have climate change strategies. Companies have moved beyond reporting on operations and are reporting on full supply chains. The transparency created by the web and projects like MIT’s TrashTrack increasingly enables us to follow where our stuff comes from, how it was made and where it ends up. So it’s no longer government that’s building accountability – it’s us.
We behave as if whoever has the most toys wins. But competing for increasingly scarce resources (a stable climate, oil, phosphorous, clean water, fertile and safe land) is too short-term a proposition to enable any single country to ‘win’.
Caroline Rennie is founder and managing partner of ren-new, working with people in organizations to make sustainability profitable. ren-new.com