John Elkington argues that the sustainability industry has to reinvent itself in this edited excerpt from a report for the Business and Sustainable Development Commission
Tomorrow’s business leaders understand that truly sustainable development is becoming a mainstream priority for a growing number of markets and, in the process, for an ever-extending list of major companies. They sense that this is no longer “simply” a matter of reputation and trust, but of long-term competitive advantage, security and survival.
Some watch in growing trepidation as market insurgents launch new offerings in the sustainable development opportunity space, with the potential to disrupt incumbent companies and value webs. And the best among them now tell their colleagues and their investors that they must learn to think differently, and act accordingly.
There is still much cherry picking, of course, with self-serving tokenism and, among politicians, much kicking of cans down the road. Meanwhile, too many business leaders still claim to have “embedded” the sustainability agenda, when at best they have taken on board elements of the closely linked corporate social responsibility and shared value agendas. All good, as far as they go, but with system change now on the agenda they do not go nearly far enough.
Business case to business models
One reason for the relatively slow progress is that the first-mover advantage in this field has been consistently overrated, with many companies choosing to shelter behind their sector leaders or adopt a moderately fast follower approach.
Iconic companies like Interface, Natura or Novo Nordisk may now make significant percentages of their premium revenues in this space, but these are still extraordinary companies doing extraordinary things. They have brought unusual levels of imagination, ingenuity, courage and stamina to bear where most companies have only begun to scratch the surface.
But if capitalism is to survive and thrive, today’s extraordinary must become tomorrow’s ordinary. How quickly will this happen? Quicker than most of us imagine. Why? Because the sustainability agenda is beginning to push into the commercial mainstream. But, even more importantly, an old economic order is now coming apart at the seams, with a new one struggling to be born.
Economic historians know that such periods are very tough on incumbents, whether they be companies, industries or even entire economies. Whichever sectors they may operate in, all businesses now need a much clearer sense of the direction of market travel, followed by access to the best available people, technologies and above all business models. The old approach of simply signing sustainable business charters or producing annual sustainability reports is a baseline activity, the entry tickets to playing by the new rules. As a result, the spotlight is shifting from the business case for action to the business models needed to deliver against the new market priorities.
A radical growth agenda
Breakthrough Business Models was written by Volans and commissioned by the Business and Sustainable Development Commission, which was launched last year with the aim of accelerating market transformation and advancing the world’s transition to a more prosperous, inclusive economy. The commission’s aim is to make a powerful case – supported by sound evidence, rigorous research and compelling real-world examples – for why the private sector should seize upon sustainable development as the greatest economic opportunity of a lifetime. Its flagship report, launched this week ahead of the World Economic Forum’s annual meeting in Davos, show how the United Nations’ Sustainable Development Goals (SDGs) provide the private sector with the framework for achieving this market shift.
The SDGs are a more radical agenda than most business leaders yet realize. They imply a shift from incremental to exponential mindsets and ambitions; from our current focus on the negative impacts of economic activity to the deliberate generation of positive impacts; and from the business case for action to a reconsideration of business models that ensures industries are fit for tomorrow’s very different market and geopolitical realities.
Leaders know that the rules of the game are about to change faster than at any time in their working lives. Simply parroting the latest sustainability jargon won’t make the cut: the entire sustainability industry must undergo a radical reinvention, involving defragmentation and re-capitalization, if it is to tackle its current weaknesses, including intense siloing, internal competition and a Babel-like confusion of terminologies.
As leaders learn to think sustainably, they will also need to learn to think X, shorthand for think exponential. In the same way they once looked to activists and social entrepreneurs for evidence of where markets were headed, they must now engage a very different set of players. These new players are not happy with 1% or even 10% year-on-year improvements, instead pushing towards 10X — or 10-fold — improvements over time. The leaders spotlighted in the Breakthrough Business Models report are not simply letting go. They are playing into, and helping build, the new order. And, in the process, they are evolving new forms of value across our four key domains: social, lean, integrated and circular.
This is not simply about embracing social media and networks, but positioning business for a world pushing from 7 billion to 10 billion people within a few short decades. This builds on the work of social entrepreneurs and intrapreneurs, and impact investors, moving us all into areas like behavioural and cultural change.
The triple bottom line agenda, now also embraced by the burgeoning global B-Corp movement, expanded the focus from eco-efficiency to new forms of value creation and destruction. Now there is a need to pull together movements working on lean production, lean start-ups and frugal innovation, and those aiming to create new forms of efficiency across all major capitals (eg physical, financial, human, intellectual, social and natural capital).
There is growing interest in integrated reporting, with sustainability accounting and disclosures converging with financial accounting and disclosures. But integrated accounting and reporting across multiple forms of capital is only part of the challenge. To break through, we need to evolve solutions that are integrated across, and impact, every level of the system. In tomorrow’s capitalism, this will mean seamless data flows from farms, fisheries and factories right out to the biosphere, oceans and atmosphere. The result: new forms of market intelligence that most business leaders do not yet know that they will soon find indispensable.
Going — or thinking — in circles used to be seen as a bad thing, but now concepts like the circular economy and cradle-to-cradle design are gaining real traction. This aspect of the sustainability X agenda runs directly counter to the linear take-make-waste model of capitalism, but the accelerating push towards a low carbon economy—with the new emphasis on carbon productivity—will catalyse closed-loop value webs and business models.
As we begin 2017, which marks the thirtieth anniversary of the Brundtland Commission report, Our Common Future 2, we have a timely opportunity to critically reflect on what has worked, and what hasn’t. Achieving exponential progress will require a scale of collective effort rarely seen outside wartime conditions. We call on business leaders, and the wider sustainability industry, to embrace this agenda.