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Wednesday, 3 September 2014 00:03 - - {{hitsCtrl.values.hits}}
“The first thing I have to say is that Sri Lanka, despite its complicated recent history is very likely well placed. The game of sustainable development is not yet totally decided. The rules are still being developed. I do think there is an opportunity for Sri Lanka to leapfrog what other people may have been doing in this space,” said Elkington, also the Co-founder of the corporations Environmental Data Services (ENDS), Volans and SustainAbility.
Taking the example of the recent developments in Colombia in this regard, he said Sri Lanka can learn from the country that was affected with a longer war of 50 years, where currently its excitement, opportunity and possibility is evident through the enthusiasm of its people to be a member of the Organisation for Economic Cooperation and Development (OECD) by 2030.
Pointing out it is mostly expected of governments to drive the way forward for this purpose, Elkington stressed they simply cannot deliver alone and it is imperative for businesses together with organisations such as Global Compact and World Business Council on Sustainable Development to come into play.
Opining there is an opportunity for Sri Lanka to leapfrog what many other people have been doing in this space, he said there is a need to adopt new methods.
“Although corporate citizenship, corporate social responsibility and the emerging discipline of shared value remain important, there is a need to jump into a different level, which is breakthrough. So the timing of this in my mind is quite good,” he expressed.
Explaining his area of work, Elkington shared he has set up or co-founded three businesses since 1978. Having set up ENDS, Volans and SustainAbility, the latter two are B corporations that started in the US and have an exciting set of criteria that the businesses have to embrace.
“We thought we could meet the standards quite easily and it proved to be quite a challenge. If you are looking for a set of guidelines for a set of principles on how to run a business in this space I do recommend a B Lab as that focuses on the notion of breakthrough capitalism,” he shared.
While breakthrough capitalism has different definitions, fundamentally it is about changing the economic system. It is also about tomorrow’s bottom line and top line but it is about changing accounting rules and economics, which sounds like an immense stretch for many busy CEOs.
The world is already changed
Sharing a quote from his favourite science fiction author William Gibson, ‘The future is already here. It’s just not yet evenly distributed,’ Elkington stressed the need for one to know where they have to go to find the future, just as it starts to bubble.
Part of Elkington’s work is help top people in business to go out and meet social entrepreneurs and some of the venture capitalists and innovators who are doing new things. The idea is about trying to bring in some big incumbent players in the system in contact with insurgents.
“Many young people who come to us have asked that while they want to change the world, how they can get about it. The answer to that is that we have already changed the world whether we have intended to do it or not. Global warming and climate changes are the most conspicuous examples of that,” he said.
Having served seven years on the faculty of the World Economic Forum, he noted that in the earlier part of this century it was extraordinary to observe the resistance and denial there was in the area of sustainability. However, bodies such as the World Economic Forum have now started talking about the nature of the systemic crisis the world is facing.
According to him, the world is faced with pressures around the area of population where it is headed towards nine to 10 billion late this century. Environmental pressures are in the range of all sorts and in the middle it is almost like a “pressure cooker” where there is a range of different security issues that are not tightly interlinked. While the energy-water-food circle is going around faster, at the top there is a series of weaknesses in the international system.
“There is the failure of global governance. The United Nations is the best we have but it is not adequate for our needs in the 21st century. Somehow at some point we are going to have to reinvent the global governance mechanism,” asserted Elkington.
There is also the wealth divide that is increasingly becoming problematic even in countries such as the United States, and this leads into conflict of one sort or another. “I am an optimist. You have to understand these processes, but they can be reversed. This can only be done if companies, investment markets, governments and civil society work together,” he added.
The new normal is debugging the 21st century, a notion Bill Gates expressed at a Rolling Stone interview on 13 March 2014 where he said the world is a giant operating system that just needs to be debugged. “Well, good luck on that. This is a world economic system and debugging is going to be done in a few years or even a decade,” he said, while adding he has huge admiration for Bill Gates and the work of his foundation, which is an example of showing some of the ways which leaders can drive system change over time.
Language matters
Part of his career he said was to invent new terms. Environment excellence was in the 1980s, the green consumer in the late 1980s, and more recently in the mid 1990s the triple bottom line, and in 1995 People, Planet, Profit, a concept that was taken in as three different lenses in sustainability.
“I like the idea of the tripe bottom line, but at the same time none of us like looking at the world through three lenses at the same time. Somehow we have to convert all of these into a consolidated single bottom line at some stage,” noted Elkington.
He recalled what he called a “really painful wakeup call” some years back where Global Compact and Accenture published a survey, where they interviewed 766 CEOs around the world on sustainability. Of the whole sample, 93% said they see sustainability as important to a company’s future, 88% said they should integrate through supply chains and 81% said they have already embedded sustainability.
He shared the CEOs meant that they were talking about reporting, stakeholder engagement and might even be talking about balanced scorecard and internal incentives. They were talking about what many people would now see sustainable business as evolving. Most of the businesses were within individual businesses and supply chain and had very little to do with the greater picture.
The following year they went from talking about the very real implementation gap. “Companies are promising to do these interesting things, but have not yet delivering against that. The shift is then to the transformation gap. Even if every member of the UN Global Compact was to do what they have pledged to do, that would still not bridge the gap, and there is a transformational gap,” asserted Elkington.
On the language of shared value, he noted it is only possible when one delivers sustainability. One of the things Professor Michel Porter said a number of times in public was that shared value has replaced corporate social responsibility and sustainability.
“I think it is very clever rebranding and the professionalisation of the CSR agenda but I don’t think it replaces the sustainability agenda which is about a much bigger world. You can have win-win outcomes in various economic systems. If you talk to various sustainability experts around the world, the overwhelming majority think the system needs to change for significant progress towards sustainability and there should be an intergenerational task of winding down obsolete economic and business models and creating new ones fit for C21.”
The breakthrough challenge
On embracing the breakthrough challenge, as confidence in the old order erodes, those with an eye to the future are looking for radically-different solutions. A growing number of business leaders are beginning to notice innovations they had previously ignored. They are starting to consider new ways to perform not only against today’s measures of success but also against tomorrow’s bottom line.
Drawing key pointers from his upcoming book ‘The Breakthrough Challenge,’ co-authored with Jochen Zeitz and featuring a foreword from Sir Richard Branson, Elkington shared the ‘10 Steps for Breakthrough Change’. They were: 1. Adopt the right aspirations; 2. Create new corporate structures; 3. Apply true accounting principles; 4. Calculate true returns; 5. Embrace wellbeing; 6. Level the playing field; 7. Pursue full transparency; 8. Redefine education; 9. Learn from nature’s model; and 10. Keep the long run in mind.
Noting he has also been asked the question as to what is done with big incumbent companies since they have been in the space for some time and don’t know how to change to meet the new requirements, Elkington narrated in brief the Ben and Jerry’s story.
In 1999 the company was in discussion to decide if it should sell out and if it does, to whom. The company, which was well known for its triple bottom line approach and social environmental economic approach to business, was brought by Unilever. He opined that he didn’t think initially that was a big success but overtime some of those elements reinforced the age-old principle.
“They set extremely ambitious targets through the Unilever sustainability plan and some of its senior people were prepared to admit that they didn’t know how to meet the critical arms of this target. But they recognise the value of how they stretch targets. Change agents within organisations are immensely important. Although it can be frustrating, it can help move the needle over time,” he said.
Breakthrough decade
In terms of where the world is in the OECD, there are four consecutive waves of societal pressure on governments and on businesses and where the ripple effects have spread out.
The first wave is the ‘environmental wave’ which has a lot to do with governments where they enforce laws for businesses to comply. The second is the ‘green wave’ where companies had to go back to their supply chain to ensure that material obtained and produced are eco friendly. The third wave is the ‘anti-globalisation wave’ that came about in 2011, and was cut back shortly after. Then the fourth wave, the ‘sustainability wave’ came up and was greatly around clean technology. The latter was not because people were doing sustainability but because they were increasingly talking about it and feeling they needed to do that.
According to Elkington the world is now entering into the ‘breakthrough decade’, 2015-2025, where immense changes can potentially happen. He added that next year will be a crucial milestone with the UN working towards updating the Millennium Development Goals (MDG).
Sharing a tweet by Alex Steffen of worldchanging.com posted on 10 May, he said: “What happens in the next 40 years critical for all humanity for centuries to come. What happens in next the 10 years sets the range of what’s possible.”
Compete or collaborate
Talking about sustainability leadership, the mapping of developments from 1997 to the present day shows a series of companies, where some have shot up and some have gone out. Then there are new ones such as Unilever that have come into the sustainability plan following Puma, which shot up.
“When I first came into this space, most of the NGOs said the only way to deal with business is to tie them down with regulations so they can almost not move. While some of the companies although having followed the rules set out, at some point something ignited and realised it is about competition and creating value over time,” he noted.
Another example is ‘Interface’ where Ray Anderson was in a privileged position where he founded this carbon company decades ago. Like many other companies it is still a work in progress. Earlier this year, something that most people even in Interface thought was impossible happened. Interface in Europe got to zero in carbon, they got to zero in waste landfill and they got close to zero on after use. “This shows that when there is commitment from the very top, such goals are achievable.”
Old, new and breakthrough
The world is starting to observe that smaller businesses are showing much more interest in sustainability. On transparency, old is the standard sustainability report that companies churn out year after year. It had a useful impact in the early days in enforcing the evolution of the management systems. However, at some level people just get to the point where people want to know what is being done. With the new being integrated reporting, it essentially attempts bring in multiple forms of capital and not just measure and report on them but to put that into the fundamentals of what businesses do.
“That is just great as far as it goes. What we have got to do is vertical integration. It is no good if lots of companies simply produce reports. You have got to have these reports to be linked to the environmental footprint.”
The area of accounting is changing greatly, he said. Looking at Puma’s supply chain as an example, the degree to which most of the impact was concentrated right at the end of the supply chain. While most wouldn’t want to involve in that area, Puma stood firm that it has to engage even in that level of the supply chain.
On energy, old would be fossil fuels but the world keeps finding new sources of fuel. Renewable energy is coming fast and it is exciting. The really exciting element to come is the way energy is managed through very complex systems, he said. “It is time for business, whether through the Global Combat or other organisations, to stand up and start talking about these issues. Governments need to hear about those agendas.”
Keys to breakthrough leadership
For both firms and nations, Elkington shared 10 keys to achieve breakthrough in sustainability. They were: 1. Aim to do the apparently impossible; 2. Be accountable to stakeholders, including future generations; 3. Take the lead – don’t wait for NGOs and governments; 4. Be truly ambitious in terms of People, Planet, Profit; 5. Create high potential partnerships and platforms; 6. Be bold, but seek simple, practical solutions; 7. Redefine what business success will look like; 8. Help build a movement of movements; 9. Provide an authoritative voice for change; and 10. Engage and mobilise young people.
Sri Lanka’s three-string pearl necklace
Attempting to provide solutions on how the nation can fit a ‘breakthrough’ thinking methodology into its agenda, Elkington presented the country’s scope as ‘Sri Lanka’s three-string pearl necklace’.
He stated the first string should be the pearl of ‘sustainability’ for tourism, the second is the pearl of ‘sustainability living plan’ for the tea and rubber sector, and the third is for the apparel sector to join the Sustainable Apparel Coalition (SAC) and Zero Discharge of Hazardous Chemicals (ZDHC) coalition.
This, Elkington said, should be coupled with solutions for green growth by the ICT industry along with using nanotechnology, which is tomorrow’s technology, and talent management.
“Sri Lanka is already implementing some of those elements with tourism. I wonder if you might think of doing your own version of the sustainable living plan such as that of Unilever and if the apparel space could get involved in new initiatives that are trying to drive the agenda in this space. The question is how you develop the rules for your own talent and technology. This is for me a great agenda. It is not a no-growth area; you have to continue to do new things to move forward,” he told the audience.
– Pix by Lasantha Kumara
