The Ethical Corporation Awards 2013
A celebration of sustainability and CSR best practice from around the world
Alternative capitalism: What’s the big idea?
There is plenty of talk about redesigning capitalism to make business sustainable, but nobody’s addressing the problem of scale, says Toby Webb
In preparation for reading Tim Jackson’s book Prosperity Without Growth, I’ve been watching his “economic reality check” Ted talk from a couple of years ago.
What worries me about this talk, especially given the popularity of Ted lectures, is the paucity of practical solutions within it.
Jackson talks of creating “an economics fit for purpose”. This is about “a more meaningful and less materialistic society”. Fine, I get that. On board. No problem.
He also talks of the need to create “community spaces to learn and collaborate”. I definitely agree.
And anyone who has lived though the development of certain parts of London in recent years can see that trend taking hold. It’s great to see and experience it (despite the slightly sterile design of modern community spaces in the city).
Scale up
But Jackson’s Ted talk, as with so many, seems to present various options without discussing how they might reach scale to the point where they can make a difference. And this goes for many causes championed in the name of sustainability and putative alternatives to conventional capitalism.
Search for “scaling social enterprises” on Google, and the top 15 or so links don’t show many solutions. That’s a worry.
Our best hopes for more sustainable change seem to lie with – according to many who talk about reforming capitalism – governments, community interest companies, “benefit corporations” (or B corporations), social entrepreneurs, NGOs and public institutions. All, of course, with longer-term investment cycles and new technology thrown in.
What no one seems to have addressed so far, leaving aside finance and technology for a moment, is how and whether social entrepreneurs, B corporations (which try to use business to solve social and environmental problems) and community interest companies can reach scale.
Currently, Patagonia, the sustainably minded outdoor clothing firm, is the largest B corporation out there – and it is by no means a giant of the clothing industry.
Does this matter, when so much of GDP and jobs in most countries come from small business?
I think it might, given how powerful large companies are, and given their ability to raise cash and roll out products and services at scale.
The key question to address is whether social entrepreneurs, B corporations and community interest companies can be managed in a way that enables them to reach scale. And how should they do so – is it best for each one to become big, or for small organisations to be replicated by the dozen?
Capitalism’s conventional command-and-control model has certainly proved itself when it comes to scaling up. But if our future does depend on the nascent forms of new companies, is scale a challenge we need to talk about?
Perhaps this question is something we ought to address urgently, alongside our constant conversations about technology, its roll-out and subsidies, and our long overdue hand-wringing over short-term financial markets.
All this is not to say that newer forms of more sustainable capitalist models cannot overcome the challenges. But we need to be talking about scale, both as a challenge and as an opportunity, rather than simply getting excited about new models.
How do we take these organisations from five to 50 to 500 people to 5,000 or 50,000 people? Or should we create 50 companies of 500 people instead, all doing similar work, but in different places?
These are surely questions worth asking that need discussion and research.
Any answers?
Of course, I am now open to the criticism I have levelled at others: more challenges than solutions. So here are a few solutions:
1) Let’s map which academics have tracked business models that have worked, and highlight their work so it is not lost in unread, unreadable papers (any of us could do this).
2) Let’s set smart young researchers the task of breaking down the challenges of scale and working out what the solutions are. These answers can be qualitatively researched and crowdsourced (a job for SRI firms, academics and media outlets, surely?) We need detail.
3) Let’s set some targets and reward alternative models that have demonstrated solutions to scale issues from within. (Create a foundation-funded or corporate-funded prize perhaps?)
4) Let’s start holding public events, to give to business people, entrepreneurs, students, investors, governments and anyone else who will listen, the key messages about beating the challenge of scale.
Toby Webb is founder and chairman of Ethical Corporation, and chief executive of Stakeholder Intelligence, a research and training firm. He blogs here.
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A celebration of sustainability and CSR best practice from around the world
Comments
Info correction and assumptions
First I'd like to clarify the difference between a Benefit Corporation and a B Corp. A Benefit corporation is a new legal entity and legal for of corporation that has values baked into it's articles of incorporation. A B Corp is a certification, part of which is achieved by changing article of incorporation to give boards of directors permission and legal protection to spend 'profit' on helping communities and the environment - it has nothing to do with the legal form of the business - I am an L3C and a B Corp.
Secondly, I would question if 'scale' is what we really want. a bit part of the problem with 'scale' is size and the non-locality of presence and responsiveness. It may be that we much better served keeping things local and seeing 'scale' as a big part of our misunderstanding of success. We need more diversity (many different solutions) not fewer. They need to be more responsive to local conditions not less. "Scale" undermines all of these.
Integrated whole-systems - both environmental + cultural
Of course, there are lots of solutions - some better than others. The difficulty is getting them considered and, if appropriate, implemented at both ecosystemic + cultural scale.
We have been working on the problem/opportunity of averting disasters ("natural," health and/or social) for years. Wish we could tell you we have succeeded... Still, we think we are at the right place, at the right time, with right ideas...
Be of good cheer. And, thank you for your work. T.
Illustrative Item
Illustrating one of the points in my earlier comment, the following from Inhabit.com on 5/31:
Germany fed a whopping 22 gigawatts of solar power per hour into the national grid last weekend, setting a new record by meeting nearly half of the country’s weekend power demand. After the Fukushima disaster, Japan opted to shut down all of its nuclear power stations and Germany followed suit after considerable public pressure. This seems to have paved the way for greater investment in solar energy projects. The Renewable Energy Industry (IWR) in Muenster announced that Saturday’s solar energy generation met nearly 50 percent of the nation’s midday electricity needs AND was equal to 20 nuclear power stations at full capacity!
Alternative Capitalism
It seems to me that scale won't come until we have a framework that standardizes assignation of value to intangible assets. The alternative GDP movement needs micro foundations at the enterprise level.
Alternative Capitalism: The Problem of Scale
While supportive of all efforts toward solution, some of us think it ultimately requires the inevitable onset of collapse of the current model, and with it many of the major corporations that operate pursuant to it. Some of us think the Q4 2008 financial crisis only the first of a series of failing girders that will cumulatively deliver the onset of collapse, whether in this decade or the next or the next. Many execs are oblivious to simple graphs showing a convergence of resource depletions in that time frame. I think you need some voices in the mix that speak forcefully to the risk of a radical plummet in the value of capital and assets if they are not deployed where the market for survival dictates. Discussions and analyses of capital formation and ROI falsely assume sustainability of the values that attend to financial variables and markets in a very-gradually changing status quo. In the context of collapse, markets and valuations will change profoundly and suddenly.
Response to Dan Olsen
Dan, you ask:
!Who should set young researchers the task of breaking down challenges? Who would do anything with their results? Who should set targets? Who's providing the rewards?"
I'd suggest the following actors could play a role here: Large companies, academics, think tanks etc. There are lots of people who COULD look into this, the issue is that virtually no-one does!
I am supervising 20-30 students in 2012-13 through my work at Birkbeck, University of London. I plan to set them this challenge and see if we can get some in-depth research done.
Toby
Whole System Change
Interesting post tony and I'm glad that you are looking for answers. We should talk. I am co-organizing the kind of events you mentioned in 4)
We also have designed a number of systems all scalable.
Talk Soon.
Luke
Yes!
Hi,
I agree that these are the salient questions, and am founding a think tank to deal with exactly these issues. I am similarly concerned that one of the biggest issues we are going to face is a plethora of solutions and confusion on which approaches work, and in which situations.
In the meantime, for existing companies I have a sketch presentation of how to approach the reform of Corporate Social Responsibility function (or any Organizational Design function) to become the centerpiece for longterm product and service development, essentially turning traditional business into social enterprise.
It's available at http://www.slideshare.net/Kitode/innovative-csr
Who should do the doing?
While I wholeheartedly agree with the major sentiment of this piece, what I find most challenging is not the vagueness of the proffered solutions, but the lack of associated agency. Who should set young researchers the task of breaking down challenges? Who would do anything with their results? Who should set targets? Who's providing the rewards?
I do not believe the primary missing link forestalling our transition away from this current unsustainable version of capitalism is a lack of alternative models. Rather, I suggest that the crux of our challenge lies with the lack of agency or responsibility for anyone to steward the transition.
While we can look to the individual successes of progressive businesses or orgs like Ethical Corp of B Corp pushing the boundaries - the majority of the economy continues to hum along oblivious to these efforts. Given the lack of social or political urgency - especially in the US - to admit (much less address) the unsustainable foundation of our current economic model, there is little chance of significantly changing anything about our economy, much less "reaching scale." We reach scale not when a small sub-set of the business community decides to push progressive business models, but when the people and leaders of civil society demand that businesses change the way they interact with communities.
Alternative Capitalism -The Scaling Question
Thanks for the analysis and bringing home the issue of scale spot on. People who work in this space understand very clearly what you are saying here. Some see this initiative as seeking local solutions for local problem. They hope to start their economic activities in the agriculture, food processing and lifestyle sectors (incorporating all the locally developable resources, namely: knowledge, iks, passion, social capital, social network, innovation, design and technology...), targeting local and external markets and later expand into education, training, health care, power, water, sanitation services and further into tourism, housing, property and infrastructure development. They also work with networks accross other regions, provinces and countries to replicate success stories. It is hoped that with initial success they will be able to influence other societies /communities to join them on this mission of creating a bottom-up economy.
We should also look for
We should also look for organisations who may already being doing these things. One very good example is Forum For the Future, who precisely target scaleability in their methods.
http://www.forumforthefuture.org/