How Should Companies Approach Sustainability? — Steve Kennedy — TEDxErasmusUniversityCollege

[00:00:00] Speaker 1: VIRTUALLY ALL OF OUR WORLD'S LARGEST COMPANIES CLAIM THAT THEY'RE PURSUING ACTION ON OUR SUSTAINMITY CHALLENGES. ENCOURAGING. YET, DESPITE THIS, OUR BIODIVERSITY IS COLLAPSING, OUR GREENHOUSE GASES ARE RISING AND WE'RE HEADING TOWARDS A WORLD OF THREE DEGREES HOTTER AND SEA LEVEL RISES THAT COULD MAKE YOUR HOME IN ROTTERDAM THAT BEACH-SIDE PROPERTY YOU ALWAYS WANTED. SO IS THIS ALL JUST GREENWASHING, COMPANIES MAKING FALSE CLAIMS AND HOLO PROMISES, A BIT LIKE THAT DUTCH LANGUAGE BOOK YOU BOUGHT BUT NEVER OPENED. YES, OF COURSE, THERE IS GREENWASHING, BUT I ALSO BELIEVE THERE'S A LOT OF SINCERE COMPANIES WHO WANT TO MAKE A DIFFERENCE. THEIR PROBLEM IS HOW THEY'RE APPROACHING SUSTAINMITY CHALLENGES. IN THIS TALK, I WILL ARGUE THAT THE ORDINARY APPROACHES OF COMPANIES ARE FAILING AND WE NEED TO SHIFT TOWARDS SYSTEMS APPROACHES TO TACKLING SUSTAINABILITY CHALLENGES. ORDINARY APPROACHES OF COMPANIES ON SUSTAINABILITY CAN BE CHARACTERIZED AS INDIVIDUALISTIC AND FIRM-CENTRIC. SUCCESS IS MEASURED BY A COMPANY'S CARBON FOOTPRINT AND WASTE REDUCTIONS ACTIVITIES. FIRMS SEEK TO IMPROVE THEIR OWN SUSTAINITY PERFORMANCE BUT DO THIS IN ISOLATION FROM THE WIDER SYSTEMS THEY RESIDE IN. NOW, THIS IGNORES THE COMPLEX REALITIES OF SUSTAINMITY CHALLENGES. A COMPANY CAN IMPROVE ITS SUSTAINMITY PERFORMANCE YET NOT BE WORKING ON THE MOST PRESSING SUSTAINMITY CHALLENGES OF THE SOCIETIES THEY'RE EMBEDDED IN. THEY CAN ALSO IMPROVE THEIR PERFORMANCE BUT NOT AT THE SCALE AND PACE REQUIRED AND MAYBE ALSO DO THIS AT THE COST OF OTHER COMPANIES. A SYSTEMS APPROACH SEEKS TO FIX THESE PROBLEMS BY OPENING THE DOOR TO COMPLEXITY. FOUNDED ON SYSTEMS THINKING, IT CALLS ON COMPANIES TO UNDERSTAND HOW THEY'RE CONNECTED IN SYSTEMS WITH OTHER ACTORS. WHY DO SUSTAINMITY CHALLENGES EXIST AND PERSIST? AND WHAT MIGHT BE THE BEST WAYS TO TACKLE THEM? LET'S LOOK INTO THREE SHIFTS THAT DEFINE THIS APPROACH. THE FIRST SHIFT IS ON THE FOCUS AREAS OF ACTION. FIRMS COMMONLY USE REDUCTIONIST THINKING. THEY SEEK TO CREATE THEIR OWN COMPANY AS AN ISLAND OF SUSTAINABILITY. THE MINDSET IS ON BEING LESS BAD AND THE FOCUS IS INWARD, TRYING TO OPTIMIZE THE COMPANY'S SUSTAINABILITY PERFORMANCE. NOW IS THIS SO BAD? WE NEED COMPANIES TO IMPROVE THEIR SOCIAL AND ENVIRONMENTAL PERFORMANCE. ABSOLUTELY. BUT IS THIS ALWAYS THE BEST WAY TO PURSUE SUSTAINABILITY FOR SOCIETY? REDUCTIONIST THINKING CAN MEAN THAT WE HAVE BLIND SPOTS. A COMPANY ONLY ACTS ON SUSTAINABILITY IF IT IS DIRECTLY CONNECTED TO THAT SUSTAINABILITY ISSUE. FOR INSTANCE, PERHAPS WE HAVE A COMPANY OPERATING IN A WATER STRESSED AREA, BUT IT USES VERY LITTLE WATER ITSELF. WELL, IT MIGHT OVERLOOK THIS CRISIS, EVEN THOUGH IT'S GOT RESOURCES AND COMPETENCIES TO DO SOMETHING ABOUT IT. REDUCTIONIST THINKING MAY ALSO MEAN THAT WE OVERLOOK THE BEST WAYS IN WHICH WE CAN DEPLOY OUR RESOURCES. A COMPANY MIGHT SPEND LOTS OF MONEY TO REDUCE ITS OWN GREENHOUSE GAS FOOTPRINT, AND THAT'S GREAT. HOWEVER, IT MIGHT OVERLOOK THAT IT COULD USE THE SAME FINANCES TO DRIVE NEW INFRASTRUCTURE FOR GREEN HYDROGEN THAT COULD LEAD TO MUCH LARGER REDUCTIONS IN GREENHOUSE GAS EMISSIONS ACROSS INDUSTRIES. REDUCTIONIST THINKING MAY ALSO IGNORE POTENTIAL REBOUND EFFECTS. AN ENERGY COMPANY COULD BECOME MORE SUSTAINABLE BY SELLING ITS COAL PLANT. BUT THIS IS JUST LIKE THROWING YOUR TRASH OVER TO YOUR NEIGHBOR'S BACKYARD. THE EMISSIONS ARE SHIFTED AND NOT REDUCED. THE COAL PLANT IS STILL BEING OPERATED, BUT JUST BY A DIFFERENT COMPANY, AND ONE WHICH PROBABLY DOESN'T CARE ABOUT SUSTAINABILITY. THE SYSTEMITY OF THE SYSTEM HAS NOT IMPROVED. A SYSTEMS APPROACH CALLS FOR USING SYNTHETIC THINKING, TRYING TO UNDERSTAND HOW THE SYSTEM TOGETHER FUNCTIONS OR FAILS. THE MIND-SET HERE IS THINKING ABOUT WHAT ARE THE MOST PRESSING SYSTEMITY CHALLENGES TO SOCIETY, AND WHAT CAN THE FIRM DO ABOUT IT? MEANING THAT THE MIND-SET CHANGES NOW TO BEING THINKING ABOUT BEING MORE GOOD, AND THE FOCUS IS OUTWARD. THE COMPANY CONSIDERS HOW CAN WE HELP TO CO-DEVELOP ECOLOGYS OF SOLUTIONS, WHICH MIGHT HELP TO TRANSFORM OUR INDUSTRIES. IT'S LIKE A JIGSAW PUZZLE, WHERE PIECES HAVE TO COME TOGETHER IN THE RIGHT PLACES. FIRMS CAN ASK HOW DO OUR ACTIVITIES CONNECT WITH THOSE OF OTHERS? HOW ARE WE ACCELERATING OR HINDERING OTHER COMPANIES AND GOVERNMENTS TO TAKE ACTION TO TRANSFORM INDUSTRIES? WHAT ARE THE MAIN BARRIERS STOPPING THESE INDUSTRIES FROM TRANSFORMING? A SECOND SHIFT IS IN HOW COMPANIES ARE TREATING PROBLEMS. FIRMS COMMONLY TAKE A REACTIVE APPROACH TO PROBLEMS. A BIT LIKE WHACKAMOLE. WE DEAL WITH THE SYMPTOMS OF PROBLEMS, BUT NEVER CHANGE THE UNDERLYING DYNAMICS, WHICH CAUSE THE PROBLEM FROM OCCURRING IN THE FIRST PLACE. TAKE A SMARTPHONE COMPANY. THEY MAY RELEASE A NEW RECYCLING INITIATIVE, BUT AT THE SAME TIME, KEEP ON RELEASING A NEW PHONE EVERY YEAR, COUPLED WITH AGGRESSIVE MARKETING CAMPAIGNS LEADING TO OVERCONSUMPTION. RECYCLING HELPS, BUT THEY'RE NOT QUESTIONING THE RELIANCE UPON BUSINESS MODELS, WHICH NEEDS EVER-INCREASING GROWTH OF PRODUCT SALES. A SYSTEMS APPROACH CALLS FOR THINKING ABOUT DISSOLVING PROBLEMS. DISSOLVING PROBLEMS CONCERNS RECONFIGURING THE DESIGN OF SYSTEM, SO THAT THE PROBLEM NO LONGER OCCURS. WE MOVE FROM REACTING TO PROBLEMS, TO NOW GENERATING A NEW BEHAVIOR IN THE SYSTEM. IT CAUSED US TO LOOK INTO THE SYSTEM, LOOK FOR THE MULTIPLE CAUSALITIES OF THE PROBLEMS, AND TRY AND DETERMINE WHAT ARE THE ROOT CAUSES. FOR OUR SMARTPHONE COMPANY, WELL, PERHAPS NOW THEY DECIDE TO REALLY LOOK INTO THE ROOT CAUSES, AND TRY TO FUNDAMENTALLY CHANGE THEIR BUSINESS MODEL. TO REDUCE RESOURCE USE, PERHAPS NOW THEY CAN DO LONG LIFE DESIGN, MODULARITY OF COMPONENTS, AND SELL ACCESS, INSTEAD OF OWNERSHIP OF THEIR PRODUCT. A THIRD SHIFT IS ON WHAT DRIVES THE ACTIONS OF COMPANIES. MOST FIRMS USE A FINANCIAL FILTER. THEY ASK WHAT ACTIONS ON ENVIRONMENTAL AND SOCIAL PERFORMANCE WILL BRING US MAXIMUM SHORT-TERM FINANCIAL GAIN. FOR INSTANCE, A COMPANY CAN REDUCE ITS ENERGY USAGE AND IMMEDIATELY SAVE COSTS. THIS IS USEFUL, BUT IT NARROWS THE WINDOW FOR INNOVATION. AND ACTIONS THAT CAN LEAD TO VERY STRONG SOCIAL ENVIRONMENTAL BENEFITS CAN BE LEFT ON THE SHELF IF THEY DON'T RETURN THE DESIRED AMOUNT OF PROFIT. THE MOST POLLUTING ACTIVITIES OF FIRMS CAN ALSO BE LEFT UNTOUCHED AS A SEEMINGLY NO BUSINESS CASE. IMAGINE YOU WANT TO GET HEALTHY. SO YOU START WORKING OUT AT HOME BECAUSE THAT COSTS YOU NOTHING. BUT AT THE SAME TIME, YOU BUY THE CHEAPEST JUNK FOOD FROM THE SUPERMARKET. IT'S UNLIKELY THAT YOU'RE GOING TO GET GOOD IMPROVEMENTS ON YOUR HEALTH ANYTIME SOON. A SYSTEMS APPROACH, INSTEAD, IS IMPACT-DRIVEN. FOCUSING FIRMS ON HOW CAN THEY MAXIMIZE THEIR POSITIVE IMPACT ON THE SYSTEM. IT CALLS THEM TO LOOK INTO THE SYSTEM TO TRY AND FIND OUT THE LEVERAGE POINTS. THE POINTS WHERE THE SYSTEM IS MOST SUSCEPTIBLE FOR OUR ACTIONS AND CAN REALLY CHANGE ITS DYNAMICS TO DRIVE SYSTEMS TRANSFORMATIONS. FINANCES AREN'T FORGOTTEN. BUT FIRMS INSTEAD, THEY LOOK FOR FAIR AND EQUITABLE RETURNS AND FINANCES DON'T DRIVE THE INNOVATION PROCESS. TAKE THE OUTDOOR CLOBING COMPANY PATAGONIA AS AN EXAMPLE. PATAGONIA CONSIDERED ONE OF THE MOST EFFECTIVE WAYS TO ADDRESS CLIMATE CHANGE AND THEY IDENTIFIED RIDG RENITIVE AGRICULTURE. TO SUPPORT THIS SOLUTION, THEY CAME UP WITH A NEW PRODUCT LINE FOR PATAGONIA PROVISIONS FOOD, FOR HIKING AND FOR CAMPING. SO NOW WE HAVE A CLOTHING COMPANY NOW HELPING FARMERS TO TRANSFORM. A SYSTEMS APPROACH CAN TAKE COMPANIES INTO EXCITING NEW BUSINESS AREAS. TO CONCLUDE, I'VE ARGUED THAT THE CURRENT INDIVIDUALISTIC APPROACHES OF COMPANIES ARE FAILING TO HELP US TO ACHIEVE OUR GLOBAL SUSTAINITY GOALS BECAUSE THEY'RE WRONGLY FOCUSED ON FIRM LEVEL OPTIMISATION. INSTEAD, AS AN ALTERNATIVE, WE NEED TO SHIFT TOWARDS A SYSTEMS APPROACH TO TACKLING SUSTAINITY PROBLEMS, WHICH IS FOCUSED ON SYSTEMS LEVEL TRANSFORMATIONS. IN DOING SO, COMPANIES MAY TRANSFORM THEMSELVES WITH NEW BUSINESS MODELS, NEW MARKETS, AND NEW PRODUCTS. USING SUSTAINMITY AS A LENS FOR INNOVATION TO CREATE MAXIMUM POSITIVE SOCIETAL IMPACT. NOW, THIS SHIFT WILL NOT HAPPEN OVERNIGHT, BUT IT NEEDS TO HAPPEN URGENTLY. MANAGERS NEED TO EMBRACE SYSTEMS THINKING SUPPORTED BY OUR EDUCATION INSTITUTES. WE NEED TO REALIGN OUR INCENTIVE SYSTEMS FOR OUR MANAGERS AND OUR FIRMS TO CREATE SYSTEMS CHANGE, SUCH AS RETHINKING HOW OUR SUSTAINITY RANKINGS WORK. AND FINALLY, WE NEED TO ADOPT AN EMERGENCY MINDSET. WE NEED TO REACONITION THAT THE CURRENT APPROACHES ARE FAILING AND THAT THE STATE OF OUR WORLD IS AT STAKE. NOW IS NOT THE TIME FOR SMALL FIXES. WE NEED FIRMS TO STOP WORKING WITHIN BROKEN SYSTEMS AND START WORKING ON TRANSFORMING THEM. THANK YOU.