Back to basics (11): Sustainability – the next Kondratiev supercycle?

The last edition of “back to basics” did focus on the ongoing discussion about managerial trends and was proposing that sustainability needs to get into the DNA of management practice, starting from the Board room and supported from bottom-up, which will of course only happen if management theory accepts sustainability as a principle that keeps the organization alive (license to operate) and embeds the opportunity to prosper (license to grow). It remains to be seen what the consequences will be for Weber-type demand and control hierarchy, for the ongoing increase of workload for less staff in efficiency driven management programs, the ongoing ‘parallel worlds’ corporate governance, strategy development and sustainability management, Taylor-style way segmentation of work packages and one-way communication to customers. The champions of the last decade, including Google, Starbucks, Yahoo, ebay, but also Gore, Timberland and others throw a lot of this over board, use seamless stakeholder engagement and web 2.0 technology to enable internal and external networking communities and shape their business models. The internet development marks the most important milestone of the 5th Kondratiev supercycle, and at the same time shapes the path into the 6th Kondraftiev cycle; maybe this next supercycle will carry the name “sustainability cycle”?

Here’s a quick Wikipedia explanation of the phenomenon of so-called Kondratiev cycles (http://en.wikipedia.org/wiki/Kondratiev_wave): “The Russian economist Nikolai Kondratiev (1892-1938) was the first to bring these observations to international attention in his book "The Major Economic Cycles" (1925). (…) According to the innovation theory, these waves arise from the bunching of basic innovations that launch technological revolutions that in turn create leading industrial or commercial sectors. (…) Most cycle theorists agree on five waves so far since the industrial revolution, and the sixth one to come. These five cycles are:

1. The Industrial Revolution—1771,
2. The Age of Steam and Railways—1829,
3. The Age of Steel, Electricity and Heavy Engineering—1875,
4. The Age of Oil, the Automobile and Mass Production—1908,
5. The Age of Information and Telecommunications—1971.”

All new supercycles are normally aligned by recessions, a tendency currently eminent. It is clear that from a technology perspective this next supercycle will focus on technologies that aim to sustain human life on this planet; health care, biotechnology (biomimicry etc.), next generation renewable energy and also – although conflicting - gene technology are subcategories. Even visionary concepts for the next generation internet is taking biological processes as the basis for further adaptation.

For all of us working in organizations and dealing with management issues one of the most important questions will be: will biology and its inherent logic of adaptation and communication also bring about a new mangement style? Will the next Kondratiev cycle include innovation in technology AND management? Will we see a continuous flow of newcomer organizations becoming big in short time just simply because the earlier cycle champions became to slow to adapt because of their structure and size?

You may aks ‘what does all of that has to do with GRI and is G3 Guidelines?’ Well, first of all the existence of GRI itself is a logic answer of interested stakeholders – like many other GAN’s (Global Action Networks) - to the slow adaptability of world trade mechanisms, governments and companies with regard to the overall transparency needs of a fair and successful implementation of globalization. The idea is that world markets can simply function better (and will survive) if sustainability is accepted as the roadmap and the necessary transparency needed is available. This will increase the speed into the next Kondratiev supercycle.

GRI’s G3 Guidelines purposefully ask in great depth what management’s reaction to these new challenges is. Is sustainability part of Board room discussions and is the organization aware about its impacts on sustainability issues? Vice versa, how do sustainability problem areas already affect strategy and business models? (see GRI G3 chapter on ‘Strategy and Analysis’). G3’s Disclosure on Management Approach then asks how the results of this analysis are translated into the management system implementation. Last but not least G3’s indicators ask about the performance achieved and the targets and objectives aligned to them. In that sense using G3 and implementing a proper reporting process are a useful means to increase the above described adaptability into an age of high speed change.

Back to basics (10): Sustainability - a new gene for the management DNA

If you compare the discussion in companies around sustainability with a decade ago one could agree that quite a lot has already happened. Tools that help to demystify the meaning of sustainability and decode its general principles into how-to guidance for operational management are available and regularly updated; adaptation to the deeper needs of specific industries, but also public authorities and NGOs are under development. The landscape for globally accepted and applicable tools (conduct principles, management system approaches and balanced scorecards, reporting guidelines, assurance standards, life cycle assessments, and the relevant IT tools supporting all this) becomes clearer. A new layer of internal transparency around problematic sustainability issues helps as an additional radar screen to reduce company risk and to foresee danger up on the horizon. And more often sustainability reports reveal that there is progress towards sustainable excellence and a closer understanding of the 3D reality surrounding these organizations; so far, so good.

But still two major obstacles prevent companies from moving faster: firstly, the difference between political talk and concrete political action in global and regional debates doesn’t give companies the feeling that they are able to act in reliable and fair market conditions; a “wait and see” attitude becomes logic. Well, we also know that some companies and their industry federations are often also causing or at least influencing these toxic environments in the political arena through their lobbying activities, very often to the disadvantage of the few proactive industry peers, some of them are quite disappointed that their industry companions are hiding behind their strong backs.

Secondly, maybe a reaction to the first obstacle, sustainability as a paradigm to come to new value creation opportunities hasn’t been taken seriously enough in board rooms; let the middle management struggle with it. What we miss are crystal clear top management commitments and related actions (top down) that could create enough trust at staff level (bottom up) to enthusiastically embrace the paradigm of sustainability as a fountain of youth for that sort of innovative products and services that would rapidly help solving the most burning problems of this planet. Some good examples are rather the exception to the rule and do not yet create the inspiration avalanches that are needed (how nice for the first movers!); most industries continue to fine-tune the existing product and service range and prefer to milk existing cash cows until the cow collapses. Simply, sustainability is not yet part of the management DNA. So here we are, rubbing our eyes and wonder why everything that has to do with sustainability happens in slow motion while the world is changing in rapid motion and our opportunities to pull the plug where the planet needs it reduces from day to day.

2008 could become the year where we might see some change. There is obviously an appetite to increase the speed for clearer commitment from top management to wake up the sleeping beauty “sustainability” and shift from risk reduction to opportunity and sustainable value creation. Here are two examples:

The first wake up call came from the World Economic Forum’s “Global Risks 2008” report that was published shortly before the January WEF in Davos (see www.weforum.org). This report categorizes economical, geopolitical, environmental, social and technological trends, issues of concern and risks. The report concludes with a call to action: “Leadership on global risk issues will be an increasingly precious commodity”. It remains to be seen if this call will be understood by enlightened industry leaders to embed sustainability into their business models. Of course, this call also went to politicians, but that’s only a side note.

The second wake up call has been published in a white paper that tackles the needed change in the overall management DNA to create the “sustainability revolution”. This white paper, called “A new mindset for corporate sustainability” (http://www.biggerthinking.com/en/sustainability/innovation.aspx), was sponsored by BT and Cisco and summarizes the evident strategic opportunity for management and offers a 10-step program to turning the company into a sustainability-driven innovator. No wonder that BT and Cisco were the initiators of this approach that brought together academic thought leadership in a virtual discussion space (no travel was needed to bring them together; the ecological footprint of this project was close to zero). BT is a regular award winner for their proactive sustainability program that enables them to quickly adapt to market needs and simply “gets it”; Cisco is a major supplier to BT and a willing companion in this project.

I was especially pleased to see “bring your stakeholders on board (actively encourage them to participate in your innovation and encourage them to develop sustainable opportunities themselves)” and “use people power (ensure that sustainability is a clearly stated value at every stage of your people management process)” as two of the 10 principles. These two steps are the really difficult ones because they are so much against the current plan and control management mainstream and this surprising belief that one can have a highly adaptable organization while the majority of staff are actually de-linked from the products, customers, relevant management information, most of the other colleagues and last but not least also from the owners of these organizations. How much real passion for the company vision can be expected from these people?

I personally believe that the really innovative companies that are able to successfully implement sustainability into their DNA will be those with less hierarchy and that are closer to all of their stakeholders and allow them influencing decision making. Furthermore those companies will be rewarded that allow all staff a time buffer to create mental space for “crazy ideas” how to connect company value with social value; this means a huge step back from the lean management hype (or do you think that staff that already have difficulties to manage a work/life balance and suffer from the "overflow error" symptoms will be in the mood to think creatively?). Charles Darwin already warned us: “It’s not the strongest of species that survives or the most intelligent; it’s the one that is most adaptable to change.” It will be those that integrate sustainability into their DNA.

Back to basics (9): The world is a "polder" - a parable for sustainability today

Welcome back in 2008! One of the things that I have been thinking about a lot in 2007 was the question “what is it that really and most effectively drives sustainable change”? After many years in the sustainability business my list has actually boiled down to four major drivers: legislation (let’s face it), competition, cost advantages and – maybe most important - education. There are definitely more, but these seem to be the most effective and high level ones (please let me know if you think differently).

Fair market conditions and a high level of transparency are prerequisites that these four drivers can actually flourish towards a more sustainable world; GRI plays a major role in increasing transparency about sustainability issue areas and provides a major instrument to allow structured discussion through the GRI Framework. While legal compliance, competition and cost advantage are quite well-known and managed in the corporate world, the overall and most important driver for me is actually education, meaning awareness about the interconnectivity of many sustainability problem areas and the ability of people and organizations to reflect on what their own impact is and how a certain history, religion, regional or company culture is influencing behaviour.

During the Christmas break I took the opportunity to read Jared Diamonds book “Collapse: how societies choose to fail or succeed” (Penguin books). If I could recommend books to start education and raising awareness about sustainability, Diamond’s book would be amongst the top 3. He looks into the past and what emerges is a fundamental pattern of environmental catastrophe which still exists today, globally and at higher level. In the last chapter Jared Diamond analyzes today’s political and market interconnectivity and develops a fragile picture of the world and concludes that the risk we face is of a worldwide decline.

As somebody living in the Netherlands I was especially touched by a picture painted by Diamond that explains “the world as a polder”: 1/5^th of the Dutch landmass is reclaimed from the sea, is up to 22 ft. below sea level and a complicated drainage system is pumping water back out into a river or the North Sea. This is why the Netherlands had so many windmills in the past (replaced today to steam, diesel or electric pumps). He quotes one Dutch friend who said: “You have to be able to get along with your enemy, because he may be the person operating the neighbouring pump in your polder. And we’re all down in the polders together. It’s not the case that rich people live safely up on tops of the dikes while poor people live down in the polder bottoms below sea levels. If the dikes and pumps fail, we’ll all drown together”.

Diamond concludes that most of the needed technology to not drown together already exists. But what is crucial is to also make the right choices towards long-term planning, and willingness to reconsider core values. He finishes his book by saying: “Thus, we have the opportunity to learn from the mistakes of distant peoples and past peoples. That’s an opportunity that no past society enjoyed to such a degree”.

So, let’s learn from the past, understand the value of transparency and make a real difference! Educating sustainability and finding the right parables to make people understand what is at stake is probably the biggest challenge we need to solve. 99% of the people of this planet still don’t have a clue.