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[[This article was first posted at GreenBiz.com May 22, 2018.]

First in a two-part series on business risk and strategic duty.

My sustainability work over the past several decades has focused on value — discovering, generating and capturing the often-hidden value that can be revealed by looking at your business through the lens of 3.8 billion years of open source R&D (and not only the lens of a 500-year-old accounting scheme).

But there’s also risk. And just as most businesses are flying blind with regard to value, nearly all are flying blind with regard to risk.

The currently obvious (and perhaps least understood) one is climate — the impacts of rising temperatures and seas, increasingly destructive storms and increasingly unstable weather on everything from flooding and infrastructure functionality to human health and migration, from supply chain stability to the viability of agriculture and even outdoor work (think construction) in many regions.

And those are just the uncertain risks. There are also the certain risks — what Salesforce senior vice president (and co-founder of scenario planning at Shell Oil) Peter Schwartz once called “inevitable surprises” — and unmonetized externalities.

Odds are none of this shows up in your financial statements, little in your 10-K and even less in your management reports and incentive systems.

In fact, as sustainability data expert Trucost has noted, few companies would be profitable if these costs had to be booked. As they don’t have to be booked — neither under GAAP (the Generally Accepted Accounting Principles) or IFRS (the International Financial Reporting Standards) — most companies choose to ignore them and merely pay them lip service. Some, however (such as Puma and Unilever) choose to use this “second set of books” as an early warning system, a strategic guide that helps continuously identify where value and risk might appear, and continually develop flexible, adaptive strategies to prevent them — and, yes, profit from them.

But you know all that. Unfortunately, it’s worse.

As my colleagues and I wrote in The Wall Street Journal 14 years ago (“Wishing Won’t Make It So”): “The ‘train wreck’ [with regard to 40 percent of companies self-described as unready for WEEE] owing to many companies’ failure to keep up with increasing global requirements for environmental performance — was completely avoidable. It raises concerns about the level of fiduciary duty exercised by business leaders who should have done a better job of seeing it coming, and of preventing it.… The challenge to senior executives and boards is to steer away from the collision course with a set of global trends that many have evaluated incorrectly.”

That same year, Mark Van Clieaf and Janet Langford Kelly expanded this notion of fiduciary duty in “The New DNA of Corporate Governance (PDF),” highlighting the “‘strategic duty’ of directors for minimal process for good governance, and the all too common lack of robust, good faith, meaningful process for CEO selection, compensation and other issues.”

The following year, Delaware Chief Justice Leo E. Strine Jr. concluded that the ultimate role of the corporation is to create “durable, long-term wealth,” which he further characterizes as “societal wealth” and finally refines to “sustainable wealth.”

And this year, BlackRock CEO Larry Fink surprised markets when he wrote: “Today’s culture of quarterly earnings hysteria is totally contrary to the long-term approach we need. … We are asking every CEO to lay out for shareholders each year a strategic framework for long-term value creation.”

Van Clieaf and Kelly take Strine’s and Fink’s challenges further, asserting: “Compliance and oversight constitute only a portion of a director’s duty … The ultimate goal of corporations is to continue to create wealth as a viable and growing entity for the long term; directors have a proactive responsibility to ensure that the corporation they serve has those processes and metrics in place — including strategic and financial plans — that they believe will accomplish this end. In other words, they have a ‘strategic duty,’ not just a compliance duty.”

They observed more recently, “If you extrapolate from these documents and case law and the COP21 agreement, then some 90 percent of the world’s business models must be transformed to net-zero GHG business models by 2050.”

This major transformation for the planet also requires major transformation in the ways we do business. The demands going beyond compliance, beyond business as usual, beyond scenario planning, to rethinking fundamental business models and developing “transformation strategies” and plans, innovation roadmaps, R&D and capital investment plans, succession plans, long-term incentive design and more, to get to 95-plus percent “clean” — for power, mobility, food and fiber systems, buildings and cities — to both thrive and be agile in the carbon-constrained world that is likely to be upon us this century. And it demands to do so in face of unprecedented uncertainty in global technology, policy and financial landscapes.

This is not just geeky sustainability scuttlebutt, but a window into substantive/material economic weakness and risk. Consider:

  • 85 percent of listed companies’ longest strategic planning horizon is less than five years.
  • 85 percent of listed companies in the S&P 1500 have Long-Term Incentive Plans with performance periods of less than three years.
  • More than 85 percent of the S&P 1500 have no disclosed “line of sight” process metrics aligned to future value, such as innovation and related drivers. 

  • Some 75 percent of companies have no balance sheet or capital efficiency metrics in their long-term incentive plan design.
  • On the positive side, the use of performance-based incentive vehicles in long-term incentive plan design has increased every year since 2009 — from 52 percent in 2009 to 76 percent in 2013.

So what? The short-term, myopic focus of “quarterly capitalism” fails. Its financial impacts are already visible — and are not small. Despite their narrow focus on generating total shareholder return (TSR):

  • Only 35 percent of S&P 1500 companies generated both five-year positive relative TSR and five-year (2008-2012) positive cumulative economic profit (ROIC exceeding cost of capital). 

  • 18 percent of companies over five years (2008-2012) had a negative relative TSR, while at the same time achieving a positive cumulative five-year economic profit (ROIC exceeding cost of capital). 

  • 17 percent of companies over five years (2008-2012) had a positive relative TSR, but a negative five-year cumulative economic profit (ROIC less than cost of capital). 

  • 30 percent of companies over five years (2008-2012) had negative relative TSR and negative five-year cumulative economic profit (ROIC less than cost of capital). 


Who cares about this? Well, your shareholders do. Or will. (Especially allegedly long-horizon shareholders such as pension funds and insurance companies.) Investment managers — starting with those responsible for the $15 trillion of assets under management (AUM) with an ESG focus — do, and more will. Your employees, your customers and your family do — as does your own heart and soul, if you dare to tell yourself the truth and dare to drop the pervasive myth that values and value need to be in conflict.

As do the recent — and thus far voluntary — recommendations from the Task Force on Climate-related Financial Disclosures (TCFD). “As of Dec. 12, an estimated 237 companies from 29 countries — with a combined market capitalization of more than $6.3 trillion (PDF) — publicly had committed to supporting the TCFD recommendations. Among them were 150 financial firms responsible for assets of $81.7 trillion, such as Bank of America, BlackRock and Citigroup.”

TCFD is a big step in the right direction, as is its call for 2 degrees Celsius scenario analyses. But as Preventable Surprises and Reporting 3.0 argue, the urgency of the climate crisis demands more decisive action, such as “transition plans” to new business models aimed at net zero GHG emissions by 2050.

AEP is one company that has built a Business Model Transition Plan Report. But as Preventable Surprises CEO David Murray summarized at a recent international dialog hosted by Reporting 3.0’s New Business Models Blueprint Working Group (of which I’m a member): “It’s possible that AEP’s transition plan will be held aloft as ‘best in class,’ but sadly it also seems that on some critical points — e.g. no commitment to net-zero emissions — ‘best in class’ [is not]…good enough to sufficiently tackle the systemic risks associated with the climate crisis.”

Here’s the bad news: The risks and uncertainties that will confuse and misdirect most companies will provide significant business, innovation and investment opportunities to those who understand and embrace them. As Chauncey Bell and I wrote nearly 10 years ago: “Your business is on a collision course with a set of global shifts that almost no one has adequately prepared for. These ‘inevitable surprises’ are coming fast. For those who are ready, these shifts will be platforms for change; for those who are not ready, they are traps.”

Van Clieaf and Kelly go further: “Lack of governance processes for most of this will be a ‘systemic breach’ of duty of loyalty, duty of care and the Strategic Duty of Directors. The Directors could be at risk of having to be personally be liable for any shareholder losses.”

Here’s the good news: “Thar’s gold in them thar ‘ills.” McKinsey and Co recently estimated the financial impacts of short-term-ism. “From 2001 to 2014 the revenue of long-term oriented firms cumulatively grew on average 47 percent more than the revenue of other firms, and with less volatility. Similarly, on average, the earnings of the long-term firms grew 36 percent more over this period than those of other firms, and their economic profit was 81 percent higher by 2014.”

What then is to be done? How will you and your organization build these platforms and strategic leadership capacity for change and business model transformation, and then build and execute effective strategies on those platforms? How will you build the transition and transformation plans that will be required of your company and your industry? How will your leaders begin to understand their barely recognized strategy duty, their known but poorly understood fiduciary duty, as well as their familiar compliance duty?

I’ll address these questions, and offer specific suggestions for action, in the weeks and months to come.

[This article was first posted at GreenBiz.com 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.

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,
purpose
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.

Over the course of my more than 40 years of work on sustainability issues in business, government, and the civic sector, one challenge has remained central, reappearing again and again as a make-or-break element of all we are trying to accomplish. I’m encouraged to see that it is now moving to center stage.

It’s the challenge of getting the prices right—of ensuring that the workings of the market reflect the physical reality of, well, physics, and the living systems that sustain the human economy. Meeting this challenge is critical to the health of economies, enterprises, and ecosystems.

Some businesses are beginning to expand their focus beyond the surprisingly recent, single-minded obsession with maximizing shareholder value. Yet we haven’t solved the core problem, because the game is fundamentally defined by its rules. And markets, for all their agility and elegance, are massively distorted in several critical ways:

  • Values that are difficult to monetize or quantify—like social welfare, the regenerative capacity of living systems, and the economistic fiction of “externalities”—just don’t get counted.
  • The future doesn’t matter—and even if it does matter, it isn’t worth anything.
  • One person’s subsidy is another person’s investment. Perhaps most endemic—sober assessment of investment opportunities is too often distorted by historic ROI-blindness.

What is to be done?

  1. Drive persistently and systematically to full-cost accounting that factors in all five capitals—financial, natural, human, social, and manufactured—and that uses all these perspectives to inform and guide decision-making. Puma and other companies exploring ecological profit & loss accounting are finding significant and potentially game-changing weaknesses in their financial statements and assessments of material risk when these other capitals are taken into account. As Paul Herman observes, people are your biggest asset. So how can you manage effectively when your biggest asset is listed as a liability on your books?
  2. Replace the practice of discounting the future with financial tools that value the future—metrics that realistically compare the enhanced future value of trees, intact forests, or topsoil with net present value. The medieval practice of demurrage, for example, interpreted the time value of money in the opposite way than we do today, “creating an incentive to invest in assets which lead to longer-term sustainable growth.” This practice is what enabled the construction of the great cathedrals that would arguably be impossible to justify under today’s schemes. Money in the future may not be as valuable as money in the present, but natural capital will be.
  3. Understand and eliminate your company’s exposure to subsidies. Yes, exposure. Just look at the ratio of subsidy to profit (or subsidy to market cap) of the coal industry. What are those ratios for your company? Subsidies may seem to provide benefit, and in some cases reflect social investment in activities outside the reasonable risk/reward landscape of individual enterprises. But they are fragile at best, subject to shifting political winds, and the inevitable public revulsion at bought-and-paid-for government. Because iIf your business depends on subsidies— whether they be unmonetized non-monetized externalities like carbon emissions, or direct transfer payments like welfare to make up for in adequate wages—if it’s not able to carry its full weight, then maybe you don’t really have business.
  4. Drop the obsolete, knee-jerk, unsupported-by-the-data assumption that better necessarily costs more, because it’s not supported by data. This long-held habit of thought distorts investment processes  by otherwise capable and intelligent people. Sure, Cadillacs cost more than Chevys, but what’s the ROI when “net-zero-energy” buildings can be built with no incremental capital cost at all?

This is challenging territory. It will require new tools, new mindsets, and new alignments of very significant financial interests. But conquering this territory is indispensable to meeting the challenge of reinventing the economy of an entire planet. This planet. In one generation.

Originally published on the EcoInnovator blog at Corporate EcoForum.

Cities are uniquely positioned to drive the sustainability revolution—whether in concert with national governments (as is possible in some countries) or on their own (which is necessary in some countries).

Cities lead the way in greening transportation, the built environment, food production, procurement, economic development and more, with impacts far beyond their borders. What can cities—and regional clusters of cities—do to create a living model of the green economy?

What do cities do?
Cities perform four key roles, each of which can have significant impact on quality of life, economic prosperity, and environmental sustainability, and provide powerful leverage for change.

Cities express and leverage the public will.
Government, though out of fashion in some US circles these days, is simply “what we do together”—a collaboration to create viable communities and the systems that sustain them. Through general planning processes, zoning and building standards, and economic development policies, cities define the landscape of the rest of our lives—for example by building distributed generation into it.

Cities collect and spend money.
By operating eco-efficiently, in facilities and fleets, cities act as skillful fiduciaries of the public trust and set examples for other developers and operators. By establishing green procurement standards—perhaps in collaboration with local universities, hospitals and businesses to provide economies of scale—cities provide consistent market demand for the businesses of the new economy. By using their bonding authority, cities can guide capital formation and investment to accelerate the new economy.

Cities gather and dispense information.
Cities collect lots of data—their spending, building permits, infrastructure, and more—and can provide open access to most of it, as Palo Alto is doing, both to support transparency and democracy and to fuel the innovation with open APIs. Cities—and regions—can track the resource “metabolism” of energy and materials, and make those and other community sustainability indicators available in interactive scoreboards that let people see progress and compete to do better—in real time.

Cities provide shared services.
In addition to formal educational services, cities can provide technical assistance to support entrepreneurship and the green evolution. In addition to the operating infrastructure of urban life, cities can convene conversations about what we want that future infrastructure to be.

The key:

  • Set compelling goals—not just energy efficient buildings, but net zero buildings. Not just an iconic project or two, but requiring all new buildings to be net zero, all renovations, or, over time, the entire city?
  • Streamline policies, programs and practices. The biggest problem with regulation isn’t that it demands better—or safer— performance; it’s that too often its burdensome or unpredictable. But it doesn’t have to be; design thinking can make it better/faster/cheaper—and more effective.
  • Integrate. Commit to systems-based, multi-stakeholder and trans-disciplinary approaches. Traffic isn’t just a transportation problem; it’s a planning and design problem. Land use isn’t just a planning problem; its a water and hence energy problem. Addressing these issues systemically can challenge existing habits and turf but drive leapfrog innovation and orders of magnitude greater financial benefits.
  • Encourage engagement and open feedback. Giving people a clear line of sight that connects their needs, actions and impacts—and that lets them see how theirs connect with those of others—is one of the most effective drivers of innovation and improvement we’ve seen.

Cities face the challenges we all face: Do we try to slow the damage? or build the regenerative capacity of the living systems that sustain the human experiment. Do we apply band-aids? or build lasting solutions? Do we leave money on the table? or define the markets of the future? In each of these challenges, cities will be pivotal players.

—Gil Friend, Chief Sustainability Officer, City of Palo Alto

This post is a submission to Masdar Engage.

When I learned of Nelson Mandela’s passing earlier this month, I spent the afternoon in tears.

Not tears of grief alone, but of love, admiration, awe, inspiration at the contribution this one man has made—both to the people of South Africa on their long path to freedom, and to the people of the entire world in our daily challenge to understand what it means to be a human being.

There is no passion to be found playing small—in settling for a life that is less than the one you are capable of living.
― Nelson Mandela

Thank you, Madiba.

This month I began serving as the Chief Sustainability Officer of the City of Palo Alto.

As many of you know, I’ve been dedicated for the last 41 years, since cutting my teeth with Bucky Fuller’s World Game in 1972, to connect the human economy with the laws of nature—the time-tested, open-source principles that govern the living systems that underlie the human enterprise and all we hold dear.

After more than 20 years advising corporations and governments, I’ve found myself hungry to shift from an external advisory role to bringing all my experience to bear in one place—as a responsible executive with his ass on the line. This is a great opportunity to do that—in a remarkable community with a passionate citizenry, a tradition of innovation, a geyser of entrepreneurship and, I’m told, a pretty decent university.

Their question to me:

How can we make Palo Alto the greenest city in the country?

My question to them:

What can one small, innovative city contribute to the sustainability revolution?

It’s a thrilling opportunity—one that opens many new possibilities on innovation and influence, and that hearkens me back to my earliest labors in the sustainability vineyards, back at the Institute for Local Self Reliance in the early 1970s. But that’s a story for another time.

Natural Logic will continue operating under the leadership of my remarkable colleagues, notably Natural Logic principal (and long time friend and colleague) Michael Kleeman, senior associate Shripal Shah and others. My own role in client engagements will be much more limited and leveraged, after fulfilling current commitments. I’ll of course continue to speak, blog, tweet, podcast, etc., actively, as well as support a very small portfolio of individual coaching and thought partner clients.

There’ll be more details to come over the coming weeks—and hopefully a chance to speak directly, if that makes sense! Meanwhile, you’ll be able to follow my exploits on my  CSO twitter site and a blogging venue TBA, as well as my usual social media coordinates.

My new contact information for City of Palo Alto business and “sustainable city” matters: gil dot friend; the domain is cityofpaloalto dot org; 1-650.329.2447. For all other matters, please continue to use my Natural Logic coordinates.

My friend Jonathan Koomey‘s invited perspective article, “Moving beyond benefit-cost analysis of climate change”, was just posted by the open access on-line journal Environmental Research Letters.  Here’s the abstract and the introduction.

Abstract

The conventional benefit–cost approach to understanding the climate problem has serious limitations. Fortunately, an alternative way of thinking about the problem has arisen in recent decades, based on analyzing the cost effectiveness of achieving a normatively defined warming target. This approach yields important insights, showing that delaying action is costly, required emissions reductions are rapid, and most proved reserves of fossil fuels will need to stay in the ground if we’re to stabilize the climate. I call this method ‘working forward toward a goal’, and it is one that will see wide application in the years ahead.

Michael Totten‘s comment:

Outstanding article, Jonathan Koomey. I particularly liked this passage, “Delaying action eats up the emissions budget, locks in emissions-intensive infrastructure, and makes the required reductions much more costly and difficult later. The IEA, using the ‘working forward toward a goal’ approach, estimated the costs of delay at about $0.5 trillion US for every year we put off serious climate action [13].

Conversely, early action through technology deployment brings the costs of technologies down through learning-by-doing, which is one manifestation of increasing returns to scale [19]. Because of these and other factors, our choices now affect our options later, which is known in the technical literature as path dependence [19, 20]. Luderer et al highlight the importance of such effects to the economic outcome on climate mitigation, but most conventional models of the economy ignore them [19, 21], with the likely effect of overestimating the costs of reducing emissions.”

My comment:

It’s so clear. Who wants to waste half trillion a year?

Which means the only obstacles are (1) those that profit from the delay, and (2) those that are disinformed by those that profit from the delay.

[I fully intended my recent posting, 5 things I’ve learned in 8 weeks of sustainability conferences, to be provocative. (No surprise there. You may have noticed that I’m inclined to challenge familiar thinking and push the boundaries of what’s possible, profitable and purposeful.) But some readers were more incredulous than provoked, and challenged or at least questioned some of the claims and data I reported. I’ll provide clarifications—and some corrections—next week—once we recover or rewrite the draft that vanished last week. Until then, here’s my sustainability briefing for this week. (You can also listen to me read it to you—and while you’re at it you can subscribe to my new Sustainability Briefing podcast.]

There are two big conferences I’ve been tracking this week. They’re worlds apart, and not just geographically.

The first: the UN Climate Talks in Warsaw, where the global community, as we call it, continues to struggle to find a deal to prevent the gathering storm of climate change. It’s not looking good.

“The talks,” as Reuters reports, “have stuttered over several issues, particularly whether rich nations should pay developing countries for losses suffered due to the effects of climate change, and the lack of ambitious pledges to cut emissions.” In fact 800 people from Greenpeace and WWF & other groups walked out of the talks—the first mass this has happened—to protest lack of progress towards a global deal.

Meanwhile in Philadelphia, some ten thousand people have gathered for Greenbuild, focusing on the $100b green building industry—an industry reportedly doubling in size every three years. Hillary Clinton keynoted last night (and Bon Jovi performed!), but what particularly stands out for me is the growing movement toward “net zero”—not just less damage, but no damage.

Integral Group, a Bay Area design and engineering firm, has, for example, designed 41 net zero energy buildings at last count—buildings that use no more energy than they generate. But what’s notable is this: they didn’t cost a dime more to build, and in some cases less that “normal” or even energy efficient buildings! What’s the ROI of lower operating costs gained through less capital investment? It’s a deal so good that you can’t do the math. In fact it’s an offer you can’t refuse.

It’s not a niche phenomenon—net zero will be required the goal for all new homes in California in 2020 (and for all new commercial (and 50% of existing commercial) structures by 2030).

And it’s not just buildings. Companies as diverse as BT, Dell and Thrive Natural Care are talking about delivering “net good.” Dell has set its target at 10x—delivering ten times more energy savings and climate benefit from their products as it takes to produce and operate them—and while it’s not completely clear how that will be calculated, it’s a commitment worth watching.

At one level, the difference between the climate talks in Warsaw and Greenbuild in Philadelphia is the difference between seeing a vast problem or seeing a vast opportunity. It’s both of course—I don’t mean to downplay the seriousness of the climate tumult ahead. But in my view a primary focus on the opportunity—what Jigar Shah calls building creating climate wealth—a trillion dollars worth of it—is what will let loose the creativity to build a new economy—one that nurtures nature, that makes investors very, very happy, and that uplifts humanity—all seven-going-on-ten billion of us.