Presentation to postgraduate students at Griffith University

1. Managing Sustainable Enterprise
GCSE 7508
Griffith Business School
Asia Pacific Centre for Sustainable Enterprise
January 2013
Jeremy Williams
jeremy.williams@griffith.edu.au
@jeremybwilliams
@TheGreenMBA
facebook.com/profjeremybwilliams
jeremybwilliams.net

2. Session 8:
Business Approaches to
Sustainable Development

4. 4
Capitalism is not the problem
• Sustainable development is not compatible with
mainstream economics thinking
• Capitalism is better than the alternatives, but a
new paradigm is required

5. 5
The crisis in mainstream economics
• Those who adhere to one
paradigm accept innovation
within the context of that
paradigm, but they strongly
resist changes that threaten
the fundamentals of the
paradigm
5

6. 6
Anomaly and crisis
• The first reaction to a state of anomaly is not to abandon the paradigm, but to
try harder to make it work

7. 7
‘Academic scribblers’
• ‘Madmen in authority, who hear voices in the air,
are distilling their frenzy from some academic
scribbler of a few years back. I am sure that the
power of vested interests is vastly exaggerated
compared with the gradual encroachment of
ideas. Not, indeed, immediately, but after a
certain interval; for in the field of economic and
political philosophy, there are not many who are
influenced by new theories after they are twenty-
five or thirty years of age, so that the ideas which
civil servants and politicians, and even agitators
apply to current events are not likely to be the
newest.’
Keynes, J.M. (1936)
The General Theory of Employment, Interest and Money,
pp. 383-84 http://www.jobsletter.org.nz/jbl04610.htm
John Maynard Keynes
(1883-1946)

9. 9
• Serious change in unlikely
in any society so long as
the people in the seats of
power (and their advisors)
continue to be the
products of the
mainstream paradigm
9

10. 10
People respond to incentives
• Human behaviour is such
that it only responds to
incentives, and so long as
the incentive to embrace
paradigm shift remains
weak (or non-existent),
the prospects of change
are remote.

11. 11
The most powerful institution within the
political economy
• Business is the only
institution powerful enough
to quickly foster the changes
necessary for ecological and
social sustainability
• The profit motive has an
important role to play
(something largely absent
within academe and state
bureaucracies)

13. 13
• John Stuart Mill (1806-73)
– On the notion of the stationary state:
‘If the earth must lose that great
proportion of its pleasantness which it
owes to things that the unlimited increase
of wealth and population would extirpate
from it, for the mere purpose of enabling
it to support a larger, but not a happier or
better population…
…I sincerely hope, for the sake of
posterity, that they will be content to be
stationary long before necessity compels
them to.’
John Stuart Mill, Principles of Political Economy, book IV, chapter
VI, pp 756-57, (1848), as presented in J. E. Cohen, How Many
People Can the Earth Support?, WW Norton, pp. 397-98, 1995.

14. 14
The rise of conspicuous
consumption
(1899)

15. 15
Oil-fuelled economic growth:
‘The Golden Age’

16. 16
http://www.youtube.com/watch?v=VWsHLNIobdI

17. 17
Defining the steady state
• Ecological Economic Efficiency (EEE) is
consistent with the notion of the steady state
economy
• This is where throughput* remains constant at a
level that neither depletes the environment
beyond its regenerative capacity, nor pollutes it
beyond its absorptive capacity.
* what flows through a system, entering as input and exiting as output

18. 18
• In summary, a steady-state economy may
continue to develop greater capacity to
satisfy human wants by increasing the
efficiency of resource use, but not by
increasing the resource throughput

20. 20
The key ingredient
• For business to take up the
challenge, sustainable
behaviour must be a source
of competitive advantage
• The vital ingredient is
education of business
leaders.

21. 21
The evolution of company environmental
performance
• Public pressure and stricter
regulations have changed the way
firms conduct business
• What started with compliance to
environmental standards, has
changed to environmental risk
management and, more recently,
to a focus on long term sustainable
development strategy.
Source: International Institute for
Sustainable Development
http://www.bsdglobal.com/sd_journey.asp

22. 22
Sustainable business strategies
• SD means adopting strategies that
meet the needs of the business and
its stakeholders today, while
protecting, sustaining and enhancing
the human and natural resources
Demand side Supply side
factors factors
that will be needed tomorrow
• Initially, sustainable development
strategies might be regarded as
costly
• Results include new business
processes with reduced external
impacts, improved financial
performance, and an enhanced
reputation among stakeholders.
Source: International Institute for
Sustainable Development
http://www.bsdglobal.com/sd_journey.asp

23. 23
Porter and Reinhardt (2007)
• "Companies that persist in treating climate change
solely as a corporate social responsibility issue, rather
than a business problem will risk the greatest
consequences”
• Porter and Reinhardt believe that businesses need to Michael Porter
look both ‘inside out’ (the company’s impact on
climate) and ‘outside in’ (how climate regulatory
change may affect the business environment in
which the company competes).
Michael E. Porter and Forrest L. Reinhardt (2007), A Strategic
Approach to Climate, October, Harvard Business Review.
Forrest Reinhardt

24. 24
The business case for
sustainable development
• WBCSD's 2001 publication The Business Case for
Sustainable Development suggests new
governance strategies to accelerate the
transition toward sustainable development in
the form of 10 building blocks
24
http://www.wbcsd.ch

26. 26
Creating the next industrial revolution?
Paul Hawken, Amory and L. Hunter Lovins
propose 4 central strategies of natural
capitalism:
• Radical resource
productivity
• Biomimicry
• Service and flow
economy
• Investing in natural
capital
See, also by Paul Hawken, (1994) The Ecology of Commerce
www.naturalcapitalism.org

27. 27
Radical resource productivity
• Using resources more efficiently in ways that can already be achieved; e.g.
process redesign (disembodied technical change) or energy efficient
buildings, passive solar heating.

28. 28
Reorient to a service
and flow economy
• Focuses more on selling and
purchasing services rather than
products
• Makes manufacturers more
ecologically responsible as it
reduces unit cost

29. 29
Invest in natural capital
29

30. 30
Research biomimicry
Spider silk Abalone
shell
Stenocara 30

31. 31
31

32. 32
Case study:
• Interface is the world’s leading commercial carpet and
interior fabrics manufacturer
• Sales in more than 100 countries and manufacturing
facilities at 23 sites on four continents
• For the first 21 years of Interface’s existence, no thought
was given to ecological implications of their production,
except to obey laws and regulations
• Things changed after Ray Anderson read The Ecology of
Commerce (Paul Hawken, 1993)
http://www.interfacesustainability.com/

33. 33
http://www.youtube.com/watch?v=D9hetZuPzS4

34. 34
A model of sustainability?
“Not one company on earth is
truly sustainable.”
Ray Anderson, CEO, Interface, and author of Mid-
Course Correction: Toward A Sustainable
Enterprise
Interface’s Commitment
“Climbing Mount Sustainability”

35. 35

36. 36

37. 37
The role of government
• Unfortunately, governments are often motivated by
the political cycle
• For this reason, command-and-control solutions are
not expedient
• At the very least, governments need to provide the
legislative framework to change behaviour; e.g.
ecological tax reform

38. 38
The role of business
• Business is more dynamic than government
• There is a competitive advantage to be
gained from developing a business strategy
based on sustainable development
• Supply-side: reduce costs
• Demand-side: attract environmentally-
conscious customers

39. 39
The role of the individual
Time to have
a rethink
39

40. 40
Optimal macroeconomic scale
• In a ‘full world’, the maximisation of EEE will
produce a theoretical optimum for an
economy; its optimal macroeconomic scale
• This optimum position will be consistent with
the notion of the steady-state economy
• Operationally, arriving at this point and staying
there – even with a sound understanding of the
science – is most unlikely in a complex and
increasingly dynamic world

41. 41
Operational objectives
• In practical terms, therefore, a workable goal is to
stay below known thresholds and aim to keep
‘shocks’ small and local, (rather than large and
global)
• It is evident that the health of many of the world’s
ecosystems are already at (or close to) critical
points
• An apt ‘operational’ rule would be to attempt to
preserve and (where possible) restore the
integrity of all natural capital so as to protect its
vital ecosystem services … raw material inputs,
waste assimilation services, life-supporting
functions, etc

42. 42
Business continuity
• Ecological economists have suggested that one way
to manage the transition is to pair a non-renewable
mining project with a renewable project
• A part of the net receipts from liquidation of the
non-renewable resource can be dedicated to
finance investments in renewable natural capital

43. 43
Cross-subsidisation
• The net receipts from the exploitation a non-
renewable resource need to be divided into
two components
– an income component
– a capital to be set-aside component
• The capital set-aside is invested in a
renewable substitute so that, by the time the
non-renewable resource is depleted, the
stocks of the renewable resource will have
the capacity to replace the non-renewable
resource

44. 44
The three principles of sustainability
1. Limit use of all resources to rates that ultimately
result in levels of waste that can be absorbed by
the ecosystem
1. Exploit renewable resources at rates that do not
exceed the ability of the ecosystem to
regenerate the resources
1. Deplete non-renewable resources at rates that,
as far as possible, do not exceed the rate of
development of renewable substitutes

45. 45
Closing statement
• ‘Capitalism, as practiced, is a financially profitable,
non-sustainable aberration in human development.
What might be called ‘industrial capitalism’ does not
fully conform to its own accounting principles. It
liquidates its capital and calls it income. It neglects to
assign any value to the largest stocks of capital it
employs – the natural resources and living systems,
as well as the social and cultural systems that are the
basis of human capital.’
Hawken, Lovins and Lovins (1999), Natural Capitalism, p. 5.

46. 46
Questions and
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