Gil Friend’s Blog

[This article was first posted at February 8, 2018.]

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.

Welcome to the Anthropocene. Now that you’re here, how will you navigate a landscape with no maps and with endlessly shifting features? Climate weirding. Head-spinning business and technology disruption. Disorienting and disturbing political turmoil. Culture wars. And the most unstable geopolitical situation since the heart of the Cold War. Or, in other words, “There be dragons here!”

If you haven’t heard the term yet, you will. The Anthropocene, Wikipedia tells us, “is a proposed epoch dating from the commencement of significant human impact on the Earth’s geology and ecosystems, including, but not limited to, anthropogenic climate change.”

The term evokes the rising human impact of biodiversity, species extinction, the health of Earth’s ocean and, of course, the challenge of climate change — not just on human well-being, but also on the living systems that undergird the human economy and all we hold dear.

What characterizes the Anthropocene — in addition to foreboding, despair and denial — is the unparalleled uncertainty of the landscape we will traverse this century. How much change? How fast? Exactly when and where? Planners, executives and investors want answers, but while the trends and directions are increasingly clear, the specifics are not.

In the face of this uncertainty come deep challenges — to enterprises, governments and just plain folk — of making plans and moves when the normal maps and guideposts no longer work. Traditional modes of extrapolative planning, which depend on projecting past trends into the future, inevitably fail. Normative planning — reverse-engineering the future from aspirations (as NASA did in developing the Apollo mission) — becomes essential, even though most institutions have little experience and little comfort with it.

A dozen years ago I wrote with Chauncey Bell, a master of business design, that “business is on a collision course with a set of global shifts that almost no one has adequately prepared for. These inevitable surprises (in futurist Peter Schwartz’s words) are coming fast. For those who are ready, these shifts will be platforms for change. For those who are not ready, they are traps.”

Some address this challenge by trying to bring “futures thinking” and forecasting skills into business leadership and initiatives. Futures thinking is at the heart of invitation — the ability to tolerate and even embrace uncertainty, and discern pattern in it; to imagine, accept and drive discontinuous change; to formulate compelling and sometimes unreasonable visions and develop strategies that can fulfill them.

But a focus on “forecasting skills” can be a trap of another sort. While it’s essential to imagine and explore possible futures (through scenario-planning and other processes) and often useful to calibrate those possible futures (with projections and simulations), it can be a fool’s errand to think we can forecast the future, any more than to think we can time the market. The past 10 years, 10 months, 10 weeks and 10 days should make that clear.

Yet it is possible to develop the appetite, ability and even serenity to navigate, anticipate and respond to — and perhaps even steer — the waves of change and tumult likely to characterize the rest of this century.

How? By cultivating new mindsets as a fundamental underpinning to deploying new tools. By developing a shared, principle-based understanding of the 3.8 billion years of open-source R&D that nature has gifted to us, and by learning to use the orienting compass it provides. By nurturing conversations that open possibility, forge commitment, ensure accountability and replace resignation with resolve. By providing a clear line of sight that connects purpose, goals, actions and impacts for every member of your organization, value chain and communities of interest, so everyone can see the impacts of their actions — including your CFO.

Why? To enable diverse teams to work with that magical balance of what cyberneticist Allenna Leonard has called “autonomy in a coherent whole.” And to include not just the “rear-view mirror” metrics of CSR and ESG reporting, but also the “radar” metrics that could disclose potential disruption and could identify disruptions to your metrics. (Blockchain, anyone?)

My wife and thought partner cautions that this may read as just some guy’s opinions. In fact, they are observations grounded in 45 years of observation, and in the unforgiving laboratory of close work with some of the most world’s most successful and innovative companies.

I’ll end this opening foray with a provocation, an invitation and a promise.

The provocation: Since the biggest competitive advantage this century will belong to those able to see through the fog, and to see the reefs and clear channels that the fog obscures for their competitors, how will you nurture your organization’s capacity to navigate the Anthropocene?

The invitation: Join me over the coming months for a grounded, pragmatic conversation together to explore this landscape.

The promise: Together we will discern the landmarks and milestones, find the ways of wayfaring, sketch the maps that you currently lack and chart a course for you to put these insights to work in support of purpose-driven impact.

[This article was first posted at Dec 17, 2017.]

We’ve come a long way since the first New Metrics conference seven years ago.

Back then, much of our focus was stuff — resource efficiency and the physical “metabolism” of our organizations; now, we focus more and more on value. Back then, we were very concerned with reporting; now, we’re increasingly concerned with how reporting contributes to strategic insight. Back then, we focused on the metrics of the tangible — the stocks and flows or both physical resources and traditional financial reports; now, we recognize the large and still rising value of the intangibles — from climate risks to human happiness. Back then, we were working to think about natural capital alongside financial capital; now, we’re working to bring five capitals into the management equation. Back then, we were focused on the numbers themselves; now, we’re beginning to understand the critical importance of context and the power of science-based goals. Back then, our conversation was on the fringes of the business world; now, it’s moved much closer to the heart of the mainstream.

But even the old is new again, as “traditional” metabolic metrics provide a foundation for value leakage discovery, which builds internal and external engagement, which fuels business and service model innovation. This has been a powerful center point of recent Natural Logic engagements — unlocking, in the words of one client, “massive” unseen business value that was literally invisible in standard management and financial reports. In other words, the new metrics disclosed value to which the old metrics were literally blind (see “10 Things You Need To Know About Your Value Stream”).

That’s not the only way we’re blind. Permit me to share a conversation that was eye-opening for me. About 15 years ago, I spoke with the CSO of a very large global manufacturing company, which had just released its first CSR report. The CSO was proud of this accomplishment, and was a little taken aback when I asked, “How will you use this report to help your people make better decisions, and manage the company better?”

“Well,” she responded, “we print several thousand copies” (uh-oh), “and distribute them to all our managers. They keep them on their desks (this is not going to end well, I thought), and when they get a relevant question, they can look up the answer in the CSR report.”

“Yikes,” I thought. “That’s not management at all, and certainly not better decision-making” (as I contemplated shorting their stock). And it certainly misses the opportunities that appropriate metrics, appropriately deployed, can open.

So, let me ask you the same question: How do you use your sustainability metrics and reports — as a rearview mirror displaying past performance, or as a radar system illuminating the path ahead? As a box you need to check, or as a tool to help your people and partners be smarter?

JM Juran (who, along with W Edwards Demming, was one of the founders of Total Quality Management) approached this question with great lucidity nearly 70 years ago, when he observed that “To be in a state of self-control, a person should be provided with knowledge about what he [sic]… is supposed to do, what he is actually doing, and what choices he has to improve results wherever necessary. … If any of these three conditions [is] not met, a person cannot be held responsible.”

I’ve polled audiences on these questions at nearly every opportunity over the past two decades, and I’m dismayed at the responses. Typically, barely five percent of people say that their company has all three. How can you manage an organization effectively and hold your people accountable in an organization that fails to provide these fundamental conditions (it polled at 30 percent at New Metrics ‘17 — great progress but still woefully inadequate)?

New metrics — properly contexted, deployed and used — can provide an opening to this dilemma. They can help organizations use sustainability reporting not merely as historical records but as tools of discovery, to help people be, think and act smarter — to cut waste, operate more efficiently, see pattern and disclose value, share insights and unlock opportunity.

And they can serve as a modern-day council fire. Think about it: For as long as we’ve been human, we’ve commonly gathered together in a circle at the end of the day, often around a fire, and shared the stories of the day, the imagined or hoped-for stories of the next day, and the other stories that would arise as we’d watch the dancing flames. I’ve observed the same pattern, as teams gather around the cool fire of a computer screen, gaze into charts displaying trends, ratios and context, and discover stories — and value, and hidden opportunity — in the patterns of the data, and share those stories as a way to open new futures.

My mentor, Fernando Flores (former Chilean minister and senator, businessman, writer, provocateur), has observed that we humans are strange monkeys — ones that have conversations, declare concerns, invent futures. And ones that freak out, duck responsibility and slip into resignation. But something else is possible, if we can enter into a different sort of conversation together.

So, the challenges of New Metrics go beyond the metrics themselves. Here are several:

  • Consider context: Metrics not as numbers, but as numbers in relation to other numbers and other concerns. This gets to the heart of a human economy coupled with nature’s economy, tied together through reality-based accounting — what Jahn Ballard calls “G!d’s balance sheet.”
  • Include externalities: Our accounting systems are blind to these explicit impacts of our value chain on both the regenerative capacity of earth’s ecosystems to sustain our economy, and on us (Trucost has determined that most major companies would not be profitable if they had to bear the true costs of their activities. How exposed is your company?).
  • Stop (or at least see and shift) subsidies. Include the exposure of your business to explicit & implicit subsidies (explicit, as in tax credits and transfer payments; implicit, as in unpriced externalities.).
    Get the prices right. Markets may be a better way to allocate resources, but as Adam Smith once observed, perfect markets depend on perfect information. Markets can’t work well with the market-distorting lies of unpriced externalities.
  • Open everything. Resist the automatic temptation to play your cards — whether IP or performance data — close to the vest, since the value of shared learning can dwarf the value of control.
  • Include everyone. Since none of us is a smart as all of us.
  • Find pattern without resorting to the easy escape of mechanistic reductionism — obsessing on things rather than systems — in a complex, interconnected and emergent work.
  • Embrace and navigate uncertainty (which, if you haven’t noticed, will be a central feature of the rest of our lives), and nurture emergence.
  • Ground that uncertainty in the stable science that underlies all we value and do (we’ve found The Natural Step framework an unusually powerful tool for getting everyone in an organization aligned around consensus science, shared commitments, big goals and systematic action.).

For the sake of what? Why does this matter? In order to:

  • Nurture our capacity to “navigate the anthropocene.” The biggest competitive advantage this century will belong to those able to see through the fog, see the reefs and clear channels that the fog obscures for the competitor.
  • Provide a clear line of sight that connects purpose, goals, actions, impacts for every member of your organization, your value chain and your communities of interest, so everyone can see the impacts of their actions…including CFOs.
  • Enable the self-control that Juran identified 70 years ago.
  • Enable diverse teams to work with that magical balance of what Allenna Leonard has called “autonomy in a coherent whole.”
  • Include the metrics that could disclose disruption, and identify disruptions that could disrupt your metrics (Blockchain, anyone?).

There’s one more challenge — one that can’t be measured: Courage. Literally (or at least etymologically), “strength of heart” (I and other capable sustainability coaches and advisors can help you with many things; this is one you’ll have to bring forward on your own!).

Finally, let me leave you with this guidance from William Bruce Cameron, who challenges us to remember, when thinking about metrics, that “not everything that can be counted counts, and not everything that counts can be counted.”

Shana Rappaport, Director of Engagement of the VERGE conferences at GreenBiz Group, asked a group of sustainability leaders (including Tamara Barker,Rob Bernard, John Elkington, Krista Huhtala-Jenks, David McConville, Ramez Naam, Laura Schewel, and many others) for their perspectives on the year past and years to come. I was honored to be included. Here are their questions, and what I had to say. (You can find the collected responses here, here and here.)

What impressed you most, positively or negatively, in 2016, and why?

I’ve been impressed and excited by the unrelenting ride down the price/performance curves for photovoltaics, electric vehicles, battery technology, sensor technology and so much more. These represent the foundation for profound technical, business social disruption ahead.

Most people can’t see it; legacy industries will fight it; but the shift is clear. Fossil is over, renewables win; the only question is how long the transition will take to play out, and with how much pain and struggle along the way.

What technology makes you hopeful about the year hear because of its potential impact?

In addition to the rapidly falling price of renewable energy, and the almost unavoidable advent of autonomous vehicles (my hopefulness is tempered with mixed feelings), I’m surprised and delighted by the growing attention to the potential role of living soil as the ultimate carbon sink, and therefore the potential role of sustainable agriculture, forestry and range management as macro, not niche, strategies.

Imagine it’s 2030. What technology, trend policy or other development made the biggest difference?

First, the key was putting a price on carbon; that provided market signals that reflected the real costs of energy alternatives, which in turn guided investment, drove innovation and fueled market capture across almost every economic sector. Those who were able to read the signs early and bet on proxy prices before they became “real” prices led the transition, and benefited greatly from it.

Second was the emergence of the blockchain and its descendants, providing complete, end-to-end, supply chain transparency and capture of embedded energy and externalities. These provided visibility into the invisible “wastes” in the global economy, and a pathway to massive profit for those who could see them.

Third was the constellation of distributed energy, storage and management systems, which drove the deep disruption of the utility industry, transforming it from a slow-moving commodities and infrastructure industry to a data, financing and services industry. This was not an easy transition, and was battled over in courts and legislatures for decades, but ultimately it was compelling business logic (supported by “getting the prices right” that won the day). (P.S.: I offer another possible 2030 vision here.)

As the days once again begin to lengthen,
and the candles nearly fulfill their promise,
and the possibility of rebirth dawns,
and the rising of the light
lifts our souls
and rekindles our hopes,
we wish for you,
in the very challenging time before us,
a year full of days
of courage,
and love.

TornadoRainbowHappy holidays,
from all of us at
Natural Logic
to all of you.

What if Bloomberg, Branson and Grantham came together to buyout the coal industry, close and clean up the mines, retrain workers and accelerate the expansion of renewable energy?

(That’s the subhead for the slightly abridged version of this provocation that ran in the Finance Hub of Guardian Sustainable Business Tuesday. Here it is intact.)

Would you make a one time $50 (£31) investment to save $100-500 each year? Sound good? Add nine zeros to each of those numbers. In other words, invest $50bn once over the next decade, and generate $100-$500bn in benefits every year.

That’s the surprisingly low price to buy up and shut down all the private and public coal companies in the US, breaking the centuries-old grip of an obsolete, destructive technology that threatens our present and our future. It’s a compelling high-return opportunity available now in the US if some farsighted investors merge purpose and private equity in a new way.

How would it work? The deal would phase out coal companies over 10 years, close and clean up the mines, write down the assets, retrain and re-employ some 87,000 workers, and create job opportunities and prosperity for coal-based communities. If at the same time the US accelerates expansion of renewable energy sources and transmission facilities, this could be accomplished with no interruption to electricity supplies, adding only about a penny or two to each kilowatt-hour on electricity bills.

This one-time transaction would generate multiple benefits. It would eliminate US’s largest single source of greenhouse gases: carbon dioxide from coal plants. What’s it worth to cut out at least one quarter of US carbon emissions? To assign a dollar value, we’d need to put a price on carbon.

Even without that number, though, we can already tally the direct health and environmental benefits of ending coal: the sulphur dioxide that causes acid rain, the nitrogen oxide that becomes smog, the particulates that provoke asthma, and the toxins like mercury, lead and cadmium that harm human brains, animals and fish. Estimates range from $100bn a year in a 2010 National Academy of Sciences report to $345bn a year in a 2011 Harvard Medical School study.

This buyout could come at a deep discount, rescuing the beleaguered owners, shareholders, and workforce of a dead-end industry. Coal has a dark future, already foreshadowed in declining stock market prices and abandoned plans for new construction. It faces competition from natural gas and renewables. And public opposition has led to hundreds of coal plants closed or blocked by the Sierra Club and its allies.

The industry’s market valuations could plunge further as it faces more taxation or regulation. As what’s now being called a “carbon bubble” deflates, insurance companies, markets, and elected officials may all conclude that, of all fossil fuels, coal’s deadly poisons put our world most at risk. Institutional investors that don’t recognise these risks are already failing in their fiduciary duty to shareholders. And coal company directors and executives may come to see a buyout as the best way to protect shareholder value.

There’s an inspiring precedent: When slavery was abolished in Britain’s colonies nearly 200 years ago, the British government paid out 40% of its annual budget to compensate some 3,000 slave-owning families for the loss of their ‘property’.

Who can make it happen? In normal times, we’d expect government to take the lead, since everyone, not just investors, would enjoy the savings by avoiding damaging coal emissions. But that’s not on the cards right now, neither from Congress nor the White House. Can we figure out a way to inspire third parties to remove what economists call “negative externalities?”

What if a few shrewd and enlightened investors step up to “do the right thing” – through the marketplace? Leadership could come from the 114 billionaire families who, encouraged by Bill Gates and Warren Buffet, have already committed through the Giving Pledge to donate half of their assets to charity. What better investment could they make to protect their families, future generations, and their assets? They would be recognised forever as pioneers in responding to climate change.

Savvy climate hawks like Michael Bloomberg, Richard Branson, John Doerr, Jeremy Grantham, and Tom Steyer know all about buyouts. These financial superstars could figure out the best way to structure a Coal Buyout Fund – maybe even at a profit. Private equity firms could get management fees for the deals. A crowdsourced component could become the biggest kickstarter ever.

A coal industry buyout could then become the inspiring foundation for a global financial strategy to get us off fossil fuels, head off the worst consequences of climate change, and rewrite our future.

Gil Friend is founder and former CEO of Natural Logic, Inc., author ofThe Truth About Green Business and is the chief sustainability officer of the City of Palo Alto, CA.

Felix Kramer founded The California Cars Initiative in 2002; he spent a decade in the campaign to bring plug-in hybrid cars like the Chevy Volt to market.