How to do ‘Doughnut Economics’ as an entrepreneur?
How sweet would it be to loosen capitalism’s grip on our lives? It is no less ambitious what economist, Kate Raworth’s Doughnut Economics model promises.
The alarming fact that we, as humanity, have been overshooting our planetary boundaries is widely accepted by now. Today we have come to a crossroads. The ongoing Covid-19 crisis served as a wake-up call: The time to act is now. It may feel overwhelming, but it is possible to change course.
What can you do today? In this article, we will look at what the doughnut economics model is, why we need it now and what you can do as an entrepreneur, a policy-maker or a civil activist to contribute.
What is the ‘doughnut’?
A compass for human prosperity in the 21st century. “ism’s” are a hallmark of past economic thinking. This model is not proposing another attempt at communism, liberalism, or socialism, but rather adopting a holistic way of thinking about the health of our planet and humanity.
The doughnut consists of two concentric rings. A social foundation — to ensure that no one falls short on life’s essentials, and an ecological ceiling — to ensure that humanity does not collectively overshoot planetary boundaries.
Between these two boundaries lies a doughnut-shaped space that is both ecologically safe and socially just — a space in which humanity can thrive.
Why do we need the doughnut?
The 21st century is the era of climate breakdown and systemic errors. Endless expansion and growth are not sustainable. But how can we overcome these challenges? How can we ensure there is no one left behind while we are not overshooting our planetary boundaries?
This is the promise of doughnut economics: thriving within our means.
“Thriving in Balance” requires us to innovate. Innovate our existing business models and adopt new economic policies to support the goals of the doughnut.”
Impact Shakers & The Doughnut
We are extremely excited about the potential applications of the doughnut for impact businesses and our first experiment is linking our brand new impact awards to the social foundation of the doughnut. These are the first social impact awards inspired by the doughnut economics model. We use the doughnut economic model as a framework for the awards and focus on the 12 domains in the social foundation as 12 awards.
Our goal is to start tracking companies within the doughnut framework and share insights and build tools to support the application of the framework in impact ventures.
How can we contribute to the doughnut?
As a systemic model, the doughnut works best if used and implemented by different actors in society. You can contribute as an entrepreneur by adopting new business models, as a designer by helping to shape the economy of the future, as a policy-maker by drafting pioneering policies and as a community by coming together and raising awareness of the model. The point is, wherever you are, regardless of your profession, the doughnut needs all of us to thrive.
- As an Entrepreneur
How are we making a profit? Is it possible to create profitable business models within the doughnut?
To do so, doughnut economics recommend following these two principles:
- Regenerative by design
- Distributive by design
Regenerative by design
We inherited a degenerative model build on ‘take-make-use-lose’. To live and create within our means, we need to shift our way of thinking and start designing business models with sustainability at its core.
Sustainable business models thrive on circularity by focusing on renewables, repair-reuse-refurbish-recycle models, modular design and ownership to service. By capturing value at each stage of decomposition, companies can create new, regenerative value chains.
If you want to learn more about circular business models, we hosted an Impact Shakers Talks with Ana Espada about circular business models, read more in the recaps ‘Circular Economy is An Attitude’ and ‘Design Strategy Framework for Circular Business Models’.
Distributive by design
Your second option as an entrepreneur to build or redesign your business as ‘distributive by design’. Classic economic thinking propagates as much centralisation as possible to create the highest possible return for the shareholders of the company. It has been the dominant way of running the economy for decades, which led to soaring inequality around the world.
By switching from traditional centralized models to distributive ones, we can recharge our economy and create a fairer, more equitable distribution of goods.
To enable distributive design, we will need to adopt renewable energy, the use of networks and distributed communication and radically rethink how we handle ownership. By following open design principles, you can create shared value for the commons instead of creating closed systems through patents.
While designing a business model, the following principles help to determine and equalize who owns the company and who owns the returns.
- Employee ownership
- Open design
- Living wages and ethical purchasing (ethical supply chain)
- Fair tax commitment
The main question Kate Raworth’s model is asking is:
“Is the way we produce output and profit extractive or regenerative by design?”
An extractive company’s focus is solely on getting as much financial value as possible from the given enterprise, while a company built on regenerative principles thrives on creating benefits through the business. It is an important difference that can shape our entire economy.
To determine which category your business fall into or to design it regenerative from the start, you will need to look closely at the following and ask hard questions:
- Purpose:
What is the goal of your company?
Who do you serve?
What is the impact you’re making?
- Networks (customers, industry ecosystem, suppliers):
Which networks are you part of?
Who are the main customers you serve?
Who are your suppliers?
- Governance:
How is your company governed?
What principles do you follow?
Have you built in employee ownership and democratic decision-making from the get-go?
How would you describe your company culture?
How do you measure the impact you make?
Are you a B Corp or an equivalent in your country?
- Ownership:
Who owns the company?
Is the ownership structure fairly representative of who creates the actual value?
- Finance:
How is your business financed?
Who are your main funders?
What can you do today?
- Analyse your business model — is it regenerative or distributive by design?
- Go through the questions and determine if you are an extractive or regenerative business
2. As a Policymaker
Policy-makers around the world are also recognizing the urgent need for new economic policies.
Cities like Portland and Philadelphia in the US and Amsterdam and Brussels in Europe are the first pioneers reimagining their cities according to the doughnut economics model. In the US, Portland is preparing to roll out its own version of the doughnut, and Austin is following close behind. Not only cities, but there are ambitious countries like Costa Rica who would like to be trailblazers in the new economy.
As a practical example, take Amsterdam’s housing challenge. Amsterdam is a popular metropolis with an ever-growing population. Housing is becoming scarce and less affordable for many. Policy-makers decided to solve this problem by using the doughnut economics framework taking into account what’s the minimum level of services they need to provide to the inhabitants while not causing more harm to the environment. The solution is a circular housing model which is built environmentally-consciously from day one.
“Amsterdam’s ambition is to bring all 872,000 residents inside the doughnut, ensuring everyone has access to a good quality of life, but without putting more pressure on the planet than is sustainable. Guided by Raworth’s organization, the Doughnut Economics Action Lab (DEAL), the city is introducing massive infrastructure projects, employment schemes and new policies for government contracts to that end. Meanwhile, some 400 local people and organizations have set up a network called the Amsterdam Doughnut Coalition — managed by Drouin — to run their own programs at a grassroots level.”
What can you do today?
- ‘City portrait’ method
- DEAL platform
3. As a Community
Co-creation is at the heart of the doughnut economics model. Born from the need and popularity of the thought around the world, the Doughnut Economics Action Lab (DEAL) community platform brings like-minded people together to brainstorm and work on practical applications of the doughnut.
The DEAL platform allows anyone to connect with peers, get access to tools, events and resources and share stories about transformations in cities and communities.
A great example of citizen engagement, participation and transparent policymaking is Amsterdam’s grassroot ‘Doughnut Coalition’ allowing citizens to contribute and stay informed about the city’s latest developments.
What can you do today?
- Join the platform
- Start organising
Introducing the Impact Shakers Awards
With the ‘Impact Shakers Awards’, we celebrate and showcase impact businesses tackling complex societal challenges and help to build a better world.
Impact businesses create ripples that change millions of lives. It is time to celebrate those who make it their mission to empower as many people as possible to contribute to — and share in the benefits of — sustainable economic growth.
These are the first social impact awards linked to the doughnut economics model. We use the doughnut economic model as a framework for the awards and focus on the 12 domains in the social foundation as 12 awards.
For now, the awards focus on Europe, with over 40 impact ecosystem partners joining forces. With the impact awards, we offer a platform to showcase the businesses and founders that combine impact and profit. The goal is to strengthen the impact ecosystem and celebrate the solutions and impact these ventures have on a thriving humanity on a thriving planet.
Apply for the inaugural Impact Shakers Awards as an impact business or forward this call to someone whom you think fits the profile and should be recognised.
Be part of the movement shaping the new economy by connecting impact movers and shakers around the world!
