Are you ready for the Sustainability Revolution?

A recent white paper by The Generation Foundation argues that we are on the brink of a Sustainability Revolution. This blog picks out five key themes.

1. Sustainability and growth

It’s perfectly possible that those who have long warned about “limits to growth” will eventually be proven right. As the economist Kenneth Boulding once put it: “anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist.”

And yet, a growing number of people — not all of them madmen or economists — seem to think the circle can be squared. The very title of The Generation Foundation’s latest white paper — The Transformation of Growth— hints at this.

The paper argues that, at both a company level and a macro-economic level, we’ve reached a point where sustainability is fundamental to growth. As our old growth model sputters to a standstill, runs the argument, addressing our sustainability challenge is no longer a cost to the system. Instead it’s an opportunity: our only viable route to future growth (for more on this, see my previous blog on the subject).

Irrespective of whether sustained GDP growth is plausible at the macro level, at a company level the logic for action is clear. For individual companies, the opportunities associated with “the Sustainability Revolution” (Generation’s term) ‘do not come at the expense of profits, but have been the basis for identifying new business initiatives… sustainability is a tool for growing revenue and profitability while strengthening their competitive position.’

2. Like it or not, a revolution is coming

According to the white paper, the rise of a more sustainable form of capitalism is now inevitable, thanks to a combination of technological change and societal pressures. Dissatisfaction with the old order has reached such a fever pitch that there is, in effect, no turning back. (There is, of course, an irony and a danger in the fact that this dissatisfaction is manifesting itself in the form of support for populist politicians who promise to turn back the clock to some imagined halcyon past, but that’s another story.)

The impending Sustainability Revolution, it argues, ‘appears to have the scale of the Industrial Revolution and the Agricultural Revolution — and the speed of the Information Revolution. Compared to these three previous revolutions, the Sustainability Revolution is likely to be the most significant event in economic history.’

Philipe de Loutherburg, ‘Coalbrookdale by Night’, 1801

These are bold claims and it’s probably advisable to take the arguments about pace and scale with a pinch of salt. There will be a lot of unforeseen and unforeseeable speed bumps along the way. But the underlying logic seems pretty compelling to me.

If you accept this much, the question for investors and companies is simple: do you have a strategy for success ‘in a world where growth is transformed to be more inclusive, and where prosperity is decoupled from the consumption of finite natural resources’?

As a guide for those looking to get on the right side of the Sustainability Revolution, the paper highlights three strategic pillars that all companies should focus on: decarbonisation, circular business models and the creation of good jobs and thriving communities.

3. Politics matters, but business matters more

This isn’t an ideological perspective; it’s a simple statement of economic fact:

‘The majority of the world’s 100 largest economic entities are no longer nations, but companies… the 10 biggest corporations now manage more wealth than most nations in the world combined.’

At a time of political dysfunction, this reality is, perhaps, heartening. In the US, we are already seeing that corporate and municipal leadership can make the federal government’s abdication of its responsibilities on climate change largely irrelevant.

But we shouldn’t feel too relaxed about this shift of power towards the private sector. Of course, it’s still important that citizens, journalists and NGOs hold governments accountable. But at a time when a relatively small number of very large corporations hold the future of humanity in their hands, it is incumbent on all of us to keep the heat on those companies to ensure that environmental and social vandalism doesn’t pay.

4. Environmental and social issues have to be tackled in tandem

Here’s what the white paper says:

‘The Sustainability Revolution will affect both people and planet in equal measure. It requires confronting the inextricable links between environmental and societal issues and acknowledging that we cannot solve for one without solving for the other.’

The good news is that in many instances there are win-win opportunities (or even win-win-win if you add in the economic impact). For example, ‘in 2016, employment in the US solar business grew 17 times faster than overall job creation in the US economy, accounting for 2% of all jobs created that year. To contextualize this data, more Americans now work in solar power than for Apple, Facebook and Google combined. As a further example… the single fastest growing job in the US in wind turbine technician.’

Another example of a win-win-win comes from Drawdown: The Most Comprehensive Plan Ever Proposed to Reverse Global Warming, edited by the sustainability writer, Paul Hawken, who spoke at our Reimagining Carbon event in June. Hawken and his team have “done the math” on more than 100 solutions to climate change — from planting new forests to investing in solar power — and come up with a ranking of those solutions based on the reduction in atmospheric CO2 each can achieve between now and 2050.

The research has thrown up some surprising results. I doubt many people would have guessed refrigerant management would come out as the top solution to climate change, for example. But perhaps the most important lesson of the exercise is that, in our fixation on shiny new technologies, we tend to underestimate the profound impact of social solutions. Educating girls and family planning are, respectively, the 6th and 7th most powerful solutions to climate change. Combined, they would be 1st.

Highlights from Paul Hawken’s keynote at the Reimagining Carbon event, June 2017

5. Rethinking externalities: from waste to resource

As one of the participants at our recent Breakthrough Money event pointed out, capitalism has traditionally been a very effective ‘cost-externalising engine.’ But what if, rather than avoided costs, some externalities represent missed profits?

This is the intriguing — and truly revolutionary — question some companies are starting to ask themselves. The emergence of circular business models is a key driver and Generation’s white paper points to IKEA as one example.

The company’s zero waste to landfill policy has meant that much of what would previously have gone to landfill has been recycled and incorporated into its products instead. The result: rather than costing money, IKEA actually made a profit out of the policy.

Now, ‘realizing the financial gains from turning waste from a cost to a resource, IKEA wants more. The company has announced that “the next step is not just about recycling, but it’s about using waste in our own operations.”’

It’s not just material waste that can be re-imagined as a resource. As was highlighted at the Reimagining Carbon event, it’s now possible to capture atmospheric CO2 and convert it into new materials and products. That’s right, the stuff that comes out of your smokestack could actually be turned into a valuable input for your business.

Those pioneering carbon capture and use (CCU) technologies include Carbon Clean Solutions, Covestro, Climeworks, Carbon Engineering and Carbon Upcycling UCLA. The $20 million NRG COSIA Carbon XPRIZE is helping to incentivise further innovation in this fast-developing field.

For decades, the sustainability movement has argued that companies’ ability to avoid paying the true cost of their social and environmental externalities is capitalism’s fatal flaw. What these early examples of circular business models or CCU technologies demonstrate is that it’s no longer necessarily a zero-sum game.

Imagine the impact when thousands more companies wake up to the fact that the stuff they send to landfill, or up into the atmosphere, is money they’re letting slip through their fingers.

Now that’s what I call a revolution.

Carbon Engineering: capturing CO2 direct from the atmosphere