In our first piece from the “Run up to SB’12” series, Hunter Lovins answers our questions around the economic implications of climate change, how organizations can use sustainability as an innovation platform, and how the business community can collaborate to create positive change.
Mike Hower: What do you think is the most pressing environmental threat facing our planet today? (and what do you foresee the implications being if these threats are not addressed?)
Hunter Lovins: Climate change. The OECD released a report this spring saying that if government leaders don’t take immediate action it will become impossible to prevent a global temperature increase of 6%. That’s not survivable.[i] If the OECD is saying this, it truly is a dire situation. Despite the fact that 80% of Americans believe climate change is real, and dire, and that it is urgent for us to take action to build an economy based on clean energy, the U.S. remains the only country that is denying climate change. We can’t even get a decent energy policy passed through Congress.
MH: What kind of revolutionary action needs to be taken to avoid global climate change devastation?
HL: Capitalism, properly practiced can solve the challenges currently facing the planet. My book, The Way Out: Kick-starting Capitalism to Save Our Economic Ass explores how entrepreneurs, companies and citizens can not only avert environmental collapse, but grow the economy. We have all the technology we need to solve both our economic and environmental woes. We can repair the environment while making a profit, unleashing the greatest era of prosperity the world has ever known. Many including New York Times columnist, Thomas Friedman, agree, noting that our current economic troubles are tied to the environmental break-down and that we cannot solve one without addressing the other. Failure to act on this would be the greatest market failure of all time.
HL: As Harvard Business Review states, “sustainability is not a burden on the bottom line; it’s the touchstone of innovation. Only those companies that make sustainability a goal will gain competitive advantage.”[ii] In the next decade, most companies will fully implement sustainability, or what we call Natural Capitalism, as the core of their business model. The first principal is to use all resources more productively to buy time. Doing this is profitable now. For example, energy efficiency programs help companies cut costs while reducing their carbon footprint. Companies can then focus on redesigning how they make things, using such techniques as biomimicry, and cradle to cradle to drive innovation. Finally, we should manage all organizations to be restorative of human and natural capital, the forms of capital that we are losing, but without which there is no economy.
Companies that are not following these principles are leaving money on the table because they are not counting the real value to them of behaving more sustainably or the costs of business as usual. Over 27 studies[iii] from the likes of those wild-eyed environmentalists at Goldman Sachs now show that the sustainability-focused companies have 25% higher value than non-sustainable companies.[iv] This is not philanthropy; it is better business. Many companies now understand that efficiency saves money. In the future the companies seeking to prosper will transform their business model to become authentically environmentally and socially sustainable. The companies that succeed in doing this will be the big winners.
Puma’s recent Environmental Return on Investment Report showed that uncounted costs of carbon emissions and water use were the same as the company’s profitability.[v] This discovery led PPR, Puma’s parent company, featuring such brands as Gucci, Stella McCartney and Yves Saint Laurent to implement this approach throughout its product line.[vi]
Similarly, Unilever released a report showing that that their carbon emissions are costing the company nearly $200 million euro a year. Paul Polman, Unilever’s CEO, announced in late in 2011 that he will no longer issue quarterly reports. because the short term focus this practice forces on his company prevents it from building long-term value. He will, instead, focus on delivering value to customers first, knowing that success in this will naturally deliver greater value to shareholders. Polman’s next annual report will be an integrated report, combining financial and non-financial information, specifically including sustainability.[vii] The International Integrated Reporting Commission is calling this approach to become the new business standard.[viii]
Natural Capitalism Solutions, as part of the Blue Earth Network,[ix] is working with companies to integrate sustainability into their reports.
MH: How can businesses take steps to be more innovative for sustainability?
HL: The greatest source of innovation in any business comes from its workforce. Given that 92% of all recent grads want to work for a company devoted to sustainability,[x] sustainability-focused companies are better able to attract and retain the top talent. Allowing that talent to participate in company programs to become more restorative and contribute to a healthy economy, turns out to be the best way to motivate and engage young people. This matters because a recent Gallup poll showed that engaged organizations have four times the average earnings per share as organizations that lack an engaged workforce.[xi]
Natural Capitalism Solutions helps companies engage their employees through sustainability. This inspires workers, turning them into your best marketers.
MH: What is sustainable consumerism? (and what role do you see brands playing in sustainable consumption — leader or follower?)
HL: The iconic brands will be the billionaires of tomorrow. Meeting customer needs in truly sustainable ways is the path to profitability. There is a difference between artificially creating desire and authentically meeting folks’ real needs. Many companies that are trying to badge themselves as green are really just greenwashing. What is needed now is a conversation between customers and companies as to how do we ramp down on an economy that is 75% based on consumption to a world that works for 100% of humanity. This is what companies like Patagonia are doing,[xii] urging consumers NOT to buy stuff, but if they must, to buy durable products that truly meet their needs.
We need to do this fast. If the science is right, we are losing. Just look at such recent studies as Biodiversity Outlook 3.[xiii] Excess carbon dioxide is warming the oceans and killing out our corral reefs. The Amazon is tipping into collapse. The oceans are acidifying. If you take the long view, this has all happened before on the planet. More than 90% of species went extinct. So, yes, the Earth will endure, but, on a timeframe of concern to most of us, as George Carlin says, it’s people that are in trouble.
The Blue Earth Network works with brands to help them become “iconic” This involves enabling them to meet people’s authentic higher needs in ways that are sustainable and that drive transformation within a company. We’ll have succeeded when we see branding focus on who is the most sustainable, not who buys more the most ad space. Transparency, authenticity, and a serious commitment to transformation will be key to a successful brand.
MH: How can the business community come together to make real, positive change? (and what are the risks or advantages for those who decide to collaborate with competitors to help drive change rather than try to go it alone?)
HL: The business community is the only institution really capable of driving the kind change our world needs. Collaboration is going to be required. No one can go it alone. I would like to see far more CEO’s taking the courageous stands Paul Polman has done. Together, we can break the back of the Wall Street Casino that makes its money gambling against our future.
Another force that will drive real change is the Occupy Movement. Businesses leaders ought to engage with Occupy and welcome an authentic conversation. They should invite in their fiercest critics and work together to come up with new business models that meets basic human needs in authentic, sustainable ways.
Hunter Lovins will speak about how companies can move beyond incremental innovation to become more sustainable at the Sustainable Brand 2012 Conference June 4-7 in San Diego, CA.
[iii] For a list of these studies see: www.natcapsolutions.org
[iv] GS Sustain 22 June 2007http://www2.goldmansachs.com/ideas/environment-and-energy/gs-sustain/index.html.
[v] Sustainable Plant Staff, “PUMA’s First Environmental Accounting Values 2010 Impacts at € 145 Million”, 28November 2011
[vii] Confine, Jo, “Paul Polman: ‘The power is in the hands of the consumers,” 21 Nov, 2012, The Guardian,http://www.guardian.co.uk/sustainable-business/unilever-ceo-paul-polman-…
[xii] Stevenson, Seth, “Patagonia’s Founder is America’s Most Unlikely Business Guru,” Wall St Journal, 26 April 2012,http://online.wsj.com/article/SB10001424052702303513404577352221465986612.html?mod=googlenews_wsj