Gil Friend’s Blog

[This article was originially posted on LinkedIn August 23, 2019; join the discussion there.]

Walking the talk begins with the talk. But you’ve got to walk.

<tl;dr>

Milton Friedman was wrong. Purpose matters.

“The ‘it’s only business,’ profit-above-all focus misses significant, even game-changing, business opportunities.

181 CEOs have signed on to broader purpose. Skepticism is warranted, but this is potentially a BFD.

Walking the talk matters. But talk opens possibility…of where and how to walk.

Let’s applaud this first step, and watch them like hawks.

And let’s all put our money where our mouths—and our hearts—are.

</tl;dr>

An important provocation

For all the criticism from right and left that the Business Roundtable declaration on the purpose of business has rapidly garnered, this is potentially a very big deal.

Nearly 200 US CEOs have declared that their “Principles of Corporate Governance that…since 1997 has stated that corporations exist principally to serve their shareholders…does not accurately describe the ways in which we and our fellow CEOs endeavor every day to create value for all our stakeholders, whose long-term interests are inseparable.”

By doing so, they’ve broken with the governing myth of US business (explicitly affirmed by the Roundtable more than 20 years ago, and many times since) that the primary, or for some the only, purpose of business is to maximize return to shareholders.

It had the power of catechism—nine out of 10 people on the street will return the expected answer without hesitation. And yet this “truth” was barely 50 years old, only held dominance for a half century of capitalism’s three-century run.

The founding saint of course was Milton Friedman, who fiercely asserted that “one and only…responsibility of business…[is] to increase its profits.” In contrast, the Business Roundtable and its 181 CEO signatories (with, notably, only one or two fossil fuel companies on board) declared:

While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders. We commit to:

· Delivering value to our customers. We will further the tradition of American companies leading the way in meeting or exceeding customer expectations.

· Investing in our employees. This starts with compensating them fairly and providing important benefits. It also includes supporting them through training and education that help develop new skills for a rapidly changing world. We foster diversity and inclusion, dignity and respect.

· Dealing fairly and ethically with our suppliers. We are dedicated to serving as good partners to the other companies, large and small, that help us meet our missions.

· Supporting the communities in which we work. We respect the people in our communities and protect the environment by embracing sustainable practices across our businesses.

· Generating long-term value for shareholders, who provide the capital that allows companies to invest, grow and innovate. We are committed to transparency and effective engagement with shareholders.

Customers. Employees. Suppliers. Communities. Environment. And shareholders. (We laid out a similar provocation—and how to fulfill it—in the Declaration of Leadership for Sustainable Business in 2005, offering many of the themes picked up in the Business Roundtable declaration.)

Their declaration opens the possibility of a different capital-ism, of an historic shift from the mono-capital-ism of financial capital to a multi-capital-ism committed to natural, human, social and constructed capital as well as economic capital.

Its very vagueness opens an opportunity—to figure out what’s needed to make it real, to elevate the global aspirations of the past 50 years, since the first Earth Day, to a new level:

To transform the economy of an entire planet—this planet—within one generation.

Perspectives on purpose

Purpose in business is not a new Idea. Management cybernetics guru Stafford Beer declared “The purpose of a system is what it does.” Bank of America founder AP Giannini said, more than 100 years ago, that the purpose of the bank was not too maximize return to shareholders, but to provide credit to immigrant communities in San Francisco that couldn’t access any. “If we do that well,” he reportedly said, “our shareholders will make money.”

“A banker should consider himself a servant of the people, a servant of the community,” Giannini said. “There is no fun in working merely for money.” And he built the largest bank in the country.

Christine Arena, in The High Purpose Company, analyzed “extraordinary companies that are driven by purpose—and are making money _by_ being socially responsible, not in spite of it—whereas others simply pretend to be.”

And as I wrote in 2016,

“The ‘it’s only business,’ profit-above-all focus misses significant, even game-changing, business opportunities. In fact, it literally cannot even see them; they don’t show up on the profit & loss statement, the balance sheet and the other tools by which business steers. It’s not only that we emphasize profit to the exclusion of other things that are valuable to us – life, heath, community – but that we don’t even know how to accurately count even those few things that we acknowledge we value.

“The good news: getting it right opens a vast arena of opportunity – to build profit in its multiple dimensions, to reduce risk by building agility and resilience in the face of inevitable surprises, to align strategy with purpose – the true purpose of the company itself, and the purpose of the people who constitute it.

“The key: to orient – or reorient – your business to the pole star of purpose – whether the purpose that brought you to it in the first place, or the purpose there for you to discover now.”

Walking the talk

The Business Roundtable statement is not the solution to all our ills. Many commentators are skeptical and have challenged it as just talk. Will these companies actually _do_ anything differently? Will they shift their practices, their investments, their lobbying positions, to align? Will they put their policy commitments where their mouths are? Will they both reject and work to end the market-distorting and environment-damaging subsidies and unmonetized externalities that keep the fossil fuel and other toxic industries afloat? Will their boards push past short-termism and embrace strategic duty? Will they pay their taxes?

Will “investing in our employees” including sharing productivity gains and flattening pay scales?

Will “supporting the communities in which we work” include ending, not reducing, toxic emissions? Will it include the living world? Will they be transparent and specific and the actions and impacts?

Will protecting the environment include investing in the regenerative capacity of the living systems /economy of planet earth that undergird the financial economy and all we hold dear?

Bold declarations can be a distraction and a cover, an attempt to divert the rising skepticism about modern capitalism and the behavior of global corporations, both around the world and in US monetary/political system. But they can also be a banner, provide a rallying cry, a touchstone against which actions can be measured and the declarers held to account.

Because “walking the talk” begins with the talk. The statement is only words, and consistent action is needed. But words set the context for the actions people choose. We create worlds as we speak, and open or close possibilities for action. I hear these words as opening possibility.

Now let’s see if these companies deliver. And help them when they do. And challenge them when they don’t.

Some have questioned the motives of these CEOs and criticized their declaration as just a defensive reaction to the growing challenges about capitalism, exemplified by the Bernie Sanders presidential campaign. That is doubtless one of the factors, and least for some of these leaders-who-follow.

But just as the Sanders campaign has almost singlehandedly shifted the frame of acceptable political discussion in United States, this declaration has in a single moment shifted the frame of business discussion, perhaps in the world. “The purpose of business” is on the table, and that’s a good and powerful thing.

I’m certain we will see both unevenness and disappointment in how the rubber meets the road. But isn’t that true of everything? I predict a classic Gaussian distribution of rubber meeting the road—or not. Some signatories will do nothing, some the merest of lip service. Most will make limited—though largely superficial, wholly inadequate—moves. Some will grapple with the challenge, make serious efforts, and take meaningful steps. A few—perhaps a very few—will commit to the depth, power and potential of the declaration, and begin transform.

As for me, I’m inclined to place my investments on the latter group—and short the first group.


What to do? Put your money where your purpose is.

The CEOs themselves seem to agree, when they say, “we urge leading investors to support companies that build long-term value by investing in their employees and communities.” Sort of.

But for that to work, the signatory companies will need to get specific, and get transparent, about what actions will they take, chosen by what criteria, delivering what results.

I’ve worked closely with leading companies looking for ways to “make money while making sense.” I’m always willing to give both companies and people the benefit of the doubt, and judge them by their present and future as well as their past. But in the words of that noted radical, Ronald Reagan, “Trust but verify.” Back your good words with deeds.

This presents a challenge to asset managers as well as the companies we all invest in, work for, and buy from. There are well-established mechanisms for shareholder accountability, not for accountability to the other stakeholders (other than boycotts, labor action and the like). “Accountability to everyone means accountability to no one,” the Council of Institutional Investors rightly observed, in their rapid criticism of the Business Roundtable for putting shareholders last, seeing them “simply as providers of capital rather than as owners.”

To actually provide accountability to everyone, companies will need to provide a clear line of sight—to investors, customers and employees across their organizations, at every level—connecting purpose, actions, results and impacts.

So, to the signatories, to the thousands of CEOs who have not yet signed on, to their boards, shareholders and stakeholders—that is, to all of us—I offer three challenges:

  • Know that even though incremental steps are essential in large, complex undertakings, it wasn’t incrementalism that got humanity to the moon and back.

So ask: “Are my goals sufficient to the challenges, risks and opportunities we face? Is ‘sustainability’ a worthy enough goal, when the challenge perhaps is to nurture the regenerative capacity of the Gaian system on which all that we value depends?”

  • Know that the purpose of your business is not, as Milton Friedman said, to maximize returns to capital. It is, as Bank of America founder AP Giannini said, to do what the business is there to do.

So ask: “What business are we really in? What am I really here to do?”

  • Know that every time a company makes a capital investment or commits to a supplier, every time it launches a product or makes an offer in the marketplace, every time we buy a meal or a car or a t-shirt, every time we slap a dollar or Euro, a yuan or a dinar on the counter, we’re voting for a future. Not every four years. Every day.

So ask: “What future am I voting for?”

# # #

© 2009 Gil Friend. All rights reserved. Pay be reposted only unedited, with attribtion and link back.

Gil Friend is CEO of Natural Logic, where he has challenged and guided some of the world’s leading companies to build value and competitive advantage by applying nature’s 3.8 billion years of open source R&D to today’s biggest problems, and Founder of Critical Path Capital, applying those decades of experience to help “finance the future we favor.” Mr. Friend served as the first Chief Sustainability Officer for the City of Palo Alto, driving unanimous adoption of one the country’s most aggressive sustainability and climate action plans.

He was named “one of the top ten sustainability voices in the US” by The Guardian and an inaugural member of the Sustainability Hall of Fame by the International Society of Sustainability Professionals.

Mr. Friend served as advisor to the California Governor’s Office during Jerry Brown’s first term, and as co-founder of the Institute for Local Communication (an early internet company) and the Institute for Local Self-Reliance (and urban think-and-do thank).

He is author of The Truth About Green Business (FT Press, 2009) and numerous articles for GreenBiz, Sustainable Brands, and the LA times Syndicate. He began his professional journey at Buckminster Fuller’s “World Game” nearly 50 years ago.

On April 2, Nora Bateson and Gil Friend will meet at the Commonwealth Club in San Francisco for A Conversation at the Edge of Now, (the first in a new series from Natural Logic). It’s an honor to be invited to this venue of prestige and important conversations. So, what to do with a high level invite such as this one?

Use the opportunity to say difficult and dangerous things that desperately need saying.

We will do that at the Commonwealth Club (register here), and by popular demand we’re adding this deeper dive April 4 at the Institute for the Future in Palo Alto. (Space is limited, so register now—our mailing list members are seeing this before social media does!)

Here’s where we’ll begin:

The world is coming undone, all sort of chaos looms. It’s pitch dark. There’s no moon. You can’t find your map. The ground shifts beneath your feet. You grope tentatively to detect sure footing, or the edge of a precipice, and long for a hand to hold.

How we meet this era is critical. Are we going to soothe ourselves and pretend that business as usual is an option? No. There is no more time for trendy buzz-words or promises of getting rich on a green economy.

To meet the challenges of this era is to accept that, no matter how well intended, previous approaches to sustainable and just socio-economic solutions were not sufficient to meet the systemic nature of the problems. A paradigm shift is more than an incremental adjustment of existing institutions, more than a detailed strategy for silo-ed solutions to silo-ed crises that have been bought about by silo-ed thinking.

Climate, immigration, trade, innovation, wealth gap, AI, biodiversity, racism, acidification, mental health, urbanization, power, supply chains, exploitation of human beings and nature…all are connected, through similar blocks, similar blindness, and something that illuminates it all.

Underlying our dilemmas is the problem of how we think—“the difference between how nature works and the way people think,”as Gregory Bateson put it—and how we encounter the world, others and ourselves.

It is time to authorize another kind of description of the meta-crises we live in, another kind of response, and another kind of conversation, with each other and with ourselves—since we create worlds in these conversations, and open or close the possibilities we live into.

This is a radical move, out of the standard accepted models of goals and deliverables into what it really takes to meet the trans-contextual complexity of now.

Register here to join Nora and Gil for an exploration of “Warm Data at the Edge of Now.”


Nora Bateson is an award-winning filmmaker, writer and educator, and President of the International Bateson Institute, based in Sweden. Her work asks the question “How we can improve our perception of the complexity we live within, so we may improve our interaction with the world?” Nora wrote, directed and produced the award-winning documentary, An Ecology of Mind, a portrait of her father, Gregory Bateson. Her work brings the fields of biology, cognition, art, anthropology, psychology, and information technology together into a study of the patterns in ecology of living systems. Her book, Small Arcs of Larger Circles, released by Triarchy Press, UK, 2016 is a revolutionary personal approach to the study of systems and complexity.

Gil Friend is a strategist, ecologist, author and businessman, named “one of the top ten sustainability voices inthe US” by The Guardian. As CEO of Natural Logic, he has challenged and guided some of the world’s leading companies to build value and competitive advantage by applying nature’s 3.8 billion years of open source R&D to today’s biggest problems. He served as the first Chief Sustainability Officer for the City of Palo Alto, and is founder of Critical Path Capital. Gil is author of The Truth About Green Business (FT Press, 2009) and numerous articles for GreenBiz, Sustainable Brands, and the LA times Syndicate. He began his sustainability journey at Buckminster Fuller’s “World Game” nearly 50 years ago.

Invitation #1: In just two weeks, I’ll be kicking off my new series of intimate conversations with some of the most provocative thinkers I know. We’ll start with the remarkable Nora Bateson and the Commonwealth Club of California. Please join us! And stay tuned for the recording—and the follow-on workshop, TBA! (And see below for a second invitation.)

Gil Friend and Nora Bateson: A conversation at the edge of now

It’s pitch dark. There’s no moon. You can’t find your map. The ground shifts beneath your feet. You grope tentatively to detect sure footing, or the edge of a precipice, and long for a hand to hold.

Welcome to the Anthropocene—perhaps the most uncertain era in the human evolutionary experience.

Underlying the climate crisis and other pressing dilemmas of our times is the problem of how we think, and how we encounter the world, others and ourselves.

“The major problems in the world are the result of the difference between how nature works and the way people think.”
Gregory Bateson

Join Nora and me as we explore warm data, the patterns that connect, the dilemma of purpose, and the ways our words shape the worlds we inhabit, and the possibilities we generate, in each other and in ourselves.

Nora Bateson is an award-winning filmmaker, writer and educator, and President of the International Bateson Institute, based in Sweden. Her work asks the question “How we can improve our perception of the complexity we live within, so we may improve our interaction with the world?” Nora wrote, directed and produced the award-winning documentary, An Ecology of Mind, a portrait of her father, Gregory Bateson. Her work brings the fields of biology, cognition, art, anthropology, psychology, and information technology together into a study of the patterns in the ecology of living systems. Her book, Small Arcs of Larger Circles, released by Triarchy Press, UK, 2016 is a revolutionary personal approach to the study of systems and complexity.

Gil Friend is a strategist, author and businessman, named “one of the top ten sustainability voices in the US” by The Guardian. As CEO of Natural Logic, he has challenged and guided some of the world’s leading companies to build value and competitive advantage by applying nature’s 3.8 billion years of open source R&D to today’s biggest problems. He served as the first Chief Sustainability Officer for the City of Palo Alto, and is founder of Critical Path Capital. Gil is author of The Truth About Green Business (FT Press, 2009) and numerous articles for GreenBiz, Sustainable Brands, and the LA Times Syndicate. He began his sustainability journey at Buckminster Fuller’s “World Game” nearly 50 years ago.

Invitation #2: I intend Conversations at the Edge of Now to be a continuing (if irregular at the start) series. You can help, by telling me: Who are the most provocative thinkers you know? People you’d like me to consider for a future conversation? People who haven’t been heard from widely in the sustainability/regeneration conversation, who bring a distinctive and challenging perspective to climate chaos, business innovation, ecosystemic vitality, reality-based finance, the power of words, and how to live creatively, powerfully, and well in this crazy world?

I welcome your nominations. 

Sent to the CalPERS Board, with regard to the 3/18/19 meeting discussion of: Sustainable investment & CalPERS Divestment Overview. If you want to send your own, the address is [email protected]
 
Dear CalPERS Board,
 
I am a CalPERS member, based on my service in the Governors Office and as Chief Sustainability Officer for the City of Palo Alto.
 
I question the Wilshire conclusion that fossil fuel divestment would be economically disadvantageous to portfolio performance. Many other analyses have reached different conclusions, including:
– https://www.sciencedirect.com/science/article/pii/S0921800917310303
– https://impactalpha.com/how-divestment-from-fossil-fuels-can-benefit-your-investment-portfolio-9421f3e44c13/
– http://ieefa.org/research-finds-fossil-fuel-divestment-not-a-drag-on-investment-returns/
– https://www.ussif.org/climatereinvestment
 
to name a few.
 
I’m concerned that maintaining a significant investment in fossil fuels exposes our retirement asses to unwarranted risk—notably the rising monetization of the cost of carbon emissions, the growing impact of “climate chaos,” and the concomitant risk of stranded fossil fuel assets (whether for economic, regulatory or political reasons, or all three).
 
I urge you to broaden your consideration of fossil fuel divestment to substantively address the concerns. I suggest that it is your fiduciary duty to do so.
 
Thank you,
Gil Friend

Now that I’ve wrapped up my five year “secondment” as the first Chief Sustainability Officer for the City of Palo Alto, I’m back in the saddle at Natural Logic (with a little side gig as Expert in Residence at Presidio Graduate School), and ready to resume a regular communications rhythm with you. And we have some exciting new things underway. There’ll be a websiite update soon—with new offers for companies, cities, leaders and investors—but let me give you an early preview first!

(Before I do, check out my new keynote speaker “sizzle reel”!)

Natural Logic helps companies and communities prosper—building economic and strategic advantage, reducing risk, and enhancing their capacity to navigate the uncertain landscapes of this strange and challenging century. As you probably know, most of the companies that come to us are already well down the road—far enough to realize that something substantial is missing—and come to us for re-set.

(This year, we’re choosing to focus on deeper work with fewer clients, and we’re setting a higher bar. You can expect us to challenge you on lost value, hidden risk, fiduciary duty, and your organization’s capacity to deal with contingent futures it faces—and a new opportunity for your CFO.)

Our typical individual client is a business, political or sustainability leader (or emerging leader) ready to significantly increase their effectiveness, impact and well-being.

We’re building on the Palo Alto work to help smart and sustainable cities—which are on the front lines of the climate crisis. (As a reminder, here’s where I started with Palo Alto, and here’s where we wound up—with a carbon neutral utility, an advanced “new mobility” strategy, and perhaps the toughest green building code—and most aggressive climate goals—in the country.)

And now, after decades of advising some of the world’s best companies, we’re opening a new channel of activity focused on impact investors. (I don’t particularly like the term, since all investment has impact—it’s just a matter or what kind of impact!—but it does seem to be the term of art these days.)

So: Companies. Cities. Leaders. Investors. (And some surprises still to come.) Watch for more details in upcoming mailings—or call or contact me to share your journey and concerns, and to explore how we might help you deliver more value with less stuff.

Coming up:

  • My new Conversations at the Edge of Now series kicks off with the remarkable Nora Bateson at the Commonwealth Club of San Francisco April 2.
  • Hear me speak at the Environmental Leader and Sustainable Brands conferences (with others to come), and book me to shake things up at your next conference or corporate retreat.
  • Follow me on LinkedIn and Twitter for previews of my latest thinking and my comments on breaking events.
  • And join me to celebrate my 70th birthday (!)—and nearly a half century at the front lines of sustainability, regeneration and value discovery—in Berkeley, CA March 13!

I’m grateful we’re connected, and for all you do, and I’ll send you off to your day with the quote of the week: “I am always doing things I can’t do—that’s how I get to do them.” —Pablo Picasso.