The United Nations Rio+20 gathering on June 20-22 provides an important opportunity to reflect on progress on sustainable business. 20 years on from the initial Rio ‘Earth Summit’, has the business contribution to sustainable development delivered more or less success than meets the eye; and what does ‘True North’ look like for the future?
The answer is that much progress has been made, but much remains to be done. The good news is that sustainability is on the top table agenda for business increasingly not as a nice to have, but as a business imperative that increasingly impacts revenue, cost, risk, brand and reputation.
In a recent study I led for the United Nations and Accenture, more than 93% of the 766 CEOs we interviewed told us that they saw sustainability as important or very important’ to the future success of their business, rising to 98% in Asia Pacific. We also see pioneering efforts in companies as diverse as Unilever, Natura, Diageo, SAB Miller, GE, Siemens, Alcoa, Patagonia, Desso, M&S and EcoLab – all placing sustainability at the heart of strategy, operations and supply chains. Not to mention collective efforts through organizations such as the Global Compact, WBCSD, GRI, CDP, and of course WEF and the YGL Forum.
But a look at the numbers reveals an uncomfortable truth. Sustainable business is not going to scale, and certainly not at speed. We are caught in ‘pilot paralysis’ with good incremental change and the signs of game changing innovation emerging at the margins. But not at the level that the science, stakeholders and a systems lens tells us is required. To illustrate the point, we hit another all-time record for global CO2 emissions last year according to the IEA. Similarly, WWF’s latest Living Planet study reports a 28% decline in global biodiversity since 1970, rising to an incredible 60% in the tropics.
Perhaps more worryingly, awareness across the board of the difference between the incremental and transformational pace of change required to transition to a sustainable global economy seems to be lacking. Of the 96% of CEOs who told us that they felt sustainability should be ‘fully integrated into strategy and operations’, 81% told us they were already doing so. If that’s true… Houston, we may have a problem…
I think we need to be clear on where ‘True North’ lies for sustainable development, and for sustainable business. I also think we need to be careful of the language used and to avoid negative descriptions and visions of austerity. There will be costs. There will be disruption. But the kind of innovation of products, services, business models and value chains can unleash an incredible wave of creativity and economic growth as we learn to do ‘more with less’.
The true north metaphor seems fitting. As any sailor, trekker or regular user of a compass knows, magnetic declination means that a compass will point in the direction of the North Pole, but that is not always the same as true north. If you are in Maine in the US for example the difference between true north and magnetic north would be twenty degrees. Not an issue on a short journey, but something that could send you way off course over a long distance, and that long distance is exactly the kind of journey we face on the pathway to sustainable development and sustainable business over the coming decades.
If you take reducing greenhouse gas emissions, we know that by 2050 we need to lower levels by about 2 to 2 ½ times to keep climate change below 2 degrees of warming as the scientists tell us we should. During that same timeframe the global economy is projected to triple, bringing with it economic development, growth and prosperity. So we need to decarbonise our global economy to the tune of 7.5 times in 40 years. Nothing short of a new industrial revolution. So we had better know the difference between true north (transformational change towards sustainable systems) versus magnetic north (incremental change towards examples of great progress).
Driving this kind of transition in sustainable cities is a case in point. Take transport systems. At first glance, you could look at exciting developments in fuel efficiency and light-weighting in automobiles, and the emergence of electric vehicles, as real progress. And it is. But in a world of 9 billion people, we will need to have not only a joined up clean and smart energy system and infrastructure to ensure that the electricity supplying electric vehicles isn’t from high emission fossil fuels, but given rising urban populations to also fundamentally rethink the concepts of personal and public mobility and connectivity to create usable and sustainable urban transport systems (as they are doing in places like Bogota or the new cities in Asia and the Middle East).
Put simply, this is about thinking products and services back to their fundamental purpose and utility to citizens, consumers and customers and looking at their connectedness across systems. Rather than asking traditional questions about how to manage the opportunities and trade-offs of sustainable business set on consumer demand, regulation, reporting etc, the transition to transformational change will require searing questions: on disruptive innovation – how can we shift from a product to a service-based model, how can we dematerialize; on circular economy principles – how can drive closed-loop or cradle-to-cradle approaches, how can we decouple growth and environmental impact; on convergence and collaboration – what new partnerships will we need or could be build to create new capabilities in our value chain and across sectors; on shared value – how can we create value for stakeholders hard-wired into our business strategy; and of course, on the leadership required to drive change towards business success.
That’s true north on sustainable business. We aren’t there yet. Indeed at times it feels a long way off and we shouldn’t overload Rio+20 with expectation. It simply provides a timely juncture to ask some tough questions. So as world leaders and executives gather in Rio later this month that is the future direction in which we need to travel – a new era of business that celebrates what it does best in creating wealth and economic development by providing the products and services that we all want, need and desire, and a sustainable and prosperous global economy, society and planet. Let’s hope we can get our bearings right.
Peter Lacy is a Senior Executive at Accenture and runs its Sustainability Services business across Asia Pacific. He became a YGL in 2010. He is Joint Chair of the YGL Taskforce on Circular Economy Innovation and Business Models and Project Advisor to WEF’s Tomorrow’s Consumer Initiative.
Image attributed to erikogan.