“The ultimate, hidden truth of the world, is that it is something that we make, and could just as easily make differently.” —David Graeber, RIP
Happy new year, and welcome back—to a year that we all hope is really new—and that is already busy shaking us up! (I love all the hopes and wishes for a better year in 2021, but I’m reminded that history is not driven by calendars. It’s driven by human actions, and the contingencies the world offers up to us. The assault on the US Capitol is just one reminder.)
It’s been along time since I last posted at length, so let me give you a quick update on an unquiet year, let you know what I’m up to now that I’m back in saddle (after an extended hiatus focusing on personal matters), and share a few reflections on the year and decade. Not a top 10, but some perspectives on this year, on what may lie ahead, and on the promise—and problem—of purpose. (We’ll be rolling out some new offerings this year, so be sure to stay on—or join—this list to make sure you get the word.)
RECENT WORK (in a “quiet” year)
SUSTAINABILITY TRENDS
In the world around us, the fossil fuel industry appears to be entering terminal (though slow) decline, with renewable energy and distributed energy resources in the ascendent, and EVs gaining momentum as country after country bans internal combustion vehicle. But the sustainability catechism has taken some hits:
THE CERTAINTY OF UNCERTAINTY
I wrote this fully recognizing the folly of writing anything these days—since anything I write may be overtaken by events by the time you read it!—certainly until the US political theater settles down on January 20. Hopefully. But one of the lessons of this crazy year is that
“Uncertainty is the only certainty there is, and knowing how to live with insecurity is the only security.” -John Allen Paulos
A deep realization rippled through society as we came to terms with Covid last spring: the profound uncertainty that we are living in as the pandemic era emerges. The joke is that we’ve always lived in a world of uncertainty; we’ve just acted lived and acted as though we could count on the ground beneath our feet not shifting, as though we could predict what is to come. That’s how we’ve interpreted personal experience; but it’s not what history tells us. So we’re challenged to consider:
THE PROBLEM WITH PURPOSE
Living with purpose, having purpose at the heart of your business’s core commitments, seems to be one answer. It’s a way to keep all eyes on the prize, on a longer time horizon that buffers you from the addiction of quarterly earnings reports, the crisis du joir, and seemingly constant stream of “breaking news” (which seems to be the only sort of news there is these days).
The purpose-driven organization is, arguably, more adaptive—able to operate with a more flexible notion of what business it’s really in, able to “float like a butterfly, sting like a bee,” able to shift its near-term focus in service to its long-term purpose, able to maintain a steady gaze on the horizon while riding out the storms of the moment?
“A visionary company carefully preserves and protects its core ideology, yet all the specific manifestations of its core ideology [from strategies to products] must be open to change and evolution.” -Jim Collins and Jerry I. Porras
But there’s a problem with purpose, one that the brilliant anthropologist and cybernetician Gregory Bateson wrote about more than 50 years ago in a chapter titled “The effects of conscious purpose on human adaptation,” in his seminal Steps to an Ecology of Mind. Purpose, for all its focusing and generative power, risks narrowing our field of view, risks losing the perspective and context that we so desperately need in order to be wise. Especially in tumultuous and historic moments like these.
So here’s another challenge:
TALKING THE WALK
How? Well, that’s worth a conversation, don’t you think? There are no playbooks, no checklists, no algorithms that can figure it out for you. The path comes alive as we walk it, as we talk together about our journey, our commitments, and what we’re learning.
Traveller, there is no path. The path is made by walking. -Antonio Machado
I’ve learned this year that people are hungry for meaningful conversations. Conversations that move worlds. Shall we have one?
Those are the conversations I piloted in the spring, and which we’ll resume early this year with series of new offerings—courses and discourses that I promise will open new worlds and opportunities for you, your businesses, and your communities.
“The old idea was not simply to turn the page or change a number on the calendar and simply start over again; that way leads to the next world being just like this one. Rather the world had to be symbolically dissolved before it could be created anew. Time has to be not just stopped, but broken open in order to break the spell and the hold that the dying year has on life.” – Michael Meade
THANK YOU!
Thank you, as always, for all you do. Watch for the announcements about what’s to come.
Meanwhile, stay resolute, stay safe—and stay tuned!
In solidarity,
Gil
PS: Is there something for us to talk about, or possibly to do together? Drop me a note or give me a call!
Gil Philip Friend
CEO, Natural Logic Inc.
Founder, Critical Path Capital and the Critical Path Academy
The task ahead (if we were to really tell the truth about it):
Reinventing the economy of an entire planet.
This planet. In one generation.
Tel: 1-510-248-4940 | Cel: 1-510-435-6346 | Blog | LinkedIn | Twitter | Facebook | YouTube
Please join me Tuesday June 16, 12:30p-2:00p Pacific Time for the fifth in our series of online conversations, exploring how we all might live with grace, calm and power in this VUCA world—and help guide what Dr. Fernando Flores calls the “reconfiguration of everything.” (The prior calls are available on my YouTube channel, linked in the sig below.) NOTE: Because of Zoom’s new security protocols, you must pre-register to attend.
When I began this online discussion series in March, connecting the coronavirus and the climate crisis was an edgy idea. But now those seems just a hint of the disruptions we face—economic turmoil, racial injustice, US/China tension, the collapse of globalization, and, oh yes, the next pandemic.
We’re all overwhelmed, confused, afraid, indignant—and many of us are resolute, determined and energized by a once-in-a-lifetime opportunity for change. (And only 9% of us (according to one poll) want to go back to what used to be called “normal”.)
Which leads me to wonder:
How does the impossible happen, in a world of concatenating, co-evolving, contingent, crises? How does it happen blazingly fast?
We’ve all heard the almost automatic chorus of “It’s always been this way.” “It’s impossible.” “We couldn’t possibly.” “Certainly not quickly.” “We can’t afford it.” And yet…
As we and a dozen of our favorite competitors challenged 80+ leading companies last week (in “The Covid Covenant”),
“…the pandemic has shown that we can take action at speeds we did not think possible, with coordination we didn’t believe possible, and on a scale we did not believe possible. All without hearing cries for predatory delay, such as ‘how will we pay for it?’ and ‘we need to take things slowly.’
“What if we could we bring the speed, scale, scope and coordination of their pandemic response to the other mega-issues looming before us?”
That’s some of what we’ll explore on this week’s call. Yes, we’ll record it, but it won’t be the same without you there! I hope you can join us.
Thank you, in any case, for all you do. Be sure to register for next week’s call, stay safe, and stay tuned!
Right now, when you can’t do what you usually do—or at least not in the same ways—what will you do? Where will you focus? What capacities will you—and your company—build, in this time of reflection, reset and redesign? How will you learn to plan—and execute—in a world where the rug might be pulled out from under you at any moment? What conversations will you initiate and nurture in your organizations? Who will you invite to join you in these conversations? What are you—and your organization—really here to do? How will you resist the pervasive pressures for short term gain? Who do you need to be to do what your’e really here to do?
Do these questions and this thread provoke you? Unsettle you? Inspire you? Do they raise questions you hadn’t thought to ask—or hadn’t wanted to ask? Then let’s schedule a personal conversation to explore how I can add value to you or your organization—whether as strategic advisor, coach, thinking partner, or board member—as you reset, and cultivate the NEXT “normal”.
Just call or drop me an email—including a brief idea of what you’d like to discuss—and propose two or three potential times (including your time zone). I’ll do my best to respond promptly.
THANK YOU!
Gil Philip Friend
Founder & CEO, Natural Logic Inc. | Founder, Critical Path Capital
The task ahead
(if we were to really tell the truth about it):
Reinventing the economy of an entire planet.
This planet. In one generation.
Tel: 1-510-248-4940 | Cel: 1-510-435-6346 | Blog | LinkedIn | Twitter | Facebook | YouTube
How shall we live, in the midst of what Equilibrium Capital CEO Dave Chen calls “a live-fire rehearsal for climate change”?
While Covid grips our minds, the climate crisis looms not far behind. They may seem different on their face but they share common roots, common dynamics and perhaps common strategies.
Both reflect a blindness to living systems, to the dynamics and distinctions of systems the failure of management systems to reflect/dance with physical and biological reality, to the “financialization of everything in these days of late capitalism, to the nature of power, and to the shredding of the substance-of-we-feeling and sense of commitment to solidarity of Terrans on Terra.
Please join me for our continuing online conversation, Friday May 8, 12p-1:30p Pacific Time. NOTE: Because of Zoom’s new security protocols, you must pre-register to attend.
In our prior calls, we’ve explored: the parallels between the covid crisis and the climate crisis; the three curves that rule our lives, and pervasiveness of “predatory delay”; the hypotheses and lessons of our vast, planetary experiment; stress testing complex planetary systems; the priorities of urgent political action. (You can view the prior videos here.)
In future sessions, we’ll dip deeper into the matter of solidarity, including a visit with Bruno Latour’s provocative Down to Earth: Politics in the New Climatic Regime; the ways our words shape our worlds, and the moods and power we can cultivate in ourselves and our commitments; the nature of power, and we might nurture, wield, fight and dance with it; and the specifics of what to do and how to live in these times—in ourselves, families, communities, businesses, and social and financial action.
I look forward to seeing you next week. Please register now, and feel free to share this invitation with others you think belong in this conversation.
In solidarity,
Gil
[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:
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?”
So ask: “What business are we really in? What am I really here to do?”
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?
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:
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.
[[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:
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):
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.
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