GreenBiz, By Katie Thompson Levey, April 6, 2021
A flock of Black Swans is on our horizon. The unpredictable is becoming ever more predictable: global pandemic; climate change; inequality; and a rising demand for food, energy and water all threaten democracy, capitalism and our very lives.
In his book “Green Swans,” strategist and systems thinker John Elkington delineates between these existential crises and opportunities — described as Green Swans and Black Swans. Symbolized by an extraordinary bird that embodies grace and elegance, a Green Swan event catalyzes transformational change. Conversely, Black Swan events assume the same potential for transformation — however, these situations degenerate life on a systemic level.
Black Swans or Green Swans? It depends on your perception.
Leaders who see Green Swans — opportunity in these risks — move sustainability from the periphery of their business to its core. It requires both a shift in mindset and strategy.
Part one of this two-part article series focused on lessons I gleaned about mindset during Leading the Sustainability Transformation (LST), a virtual simulation that compressed 20 years of business transformation into 10 weeks, calling upon participants to practice building and executing a strategy transforming a corporation into a sustainable, circular and competitive business — and then to immediately apply those lessons to their own organizations.
This second part focuses on strategies for leading this transformation.
The dichotomy of creative destruction: embrace the paradox
All markets change. To survive and thrive, businesses must change. Creative destruction is the ability of a firm to destroy its current capabilities in favor of the innovations of tomorrow and create shareholder value. It’s a process of mutation that continuously revolutionizes the current structure from within.
With one leg in the present and the other in the future, businesses that lead through innovation embrace the paradox of creative destruction.
Creative destruction is the ability of a firm to destroy its current capabilities in favor of the innovations of tomorrow and create shareholder value.
These types of companies navigate a fundamental tension between the two realities — managing today’s business and its pressure to realize short-term results and often shareholder demands, while simultaneously creating tomorrow’s technology and markets and fulfilling expectations for future growth.
The sustainable value framework developed by Stuart Hart, offers a way to manage tension by breaking down this dichotomy into a two-by-two perspective: first examining time — today and tomorrow — and then considering the needs of the organization and the needs of its stakeholders (shareholders, customers, suppliers, communities, etc.)
Do more with less
The first area in the business of today is about doing more with less. To an extent, it’s the most straightforward approach in Hart’s framework. It’s about reducing waste and optimizing resources.
While not the sexiest of topics, the efficiency of doing more with less reduces cost and corporate risk. It also has the potential to both inform and fund a broader sustainability agenda.
Applying the idea:
- Taking the LST scenario as an example, our job was to transform a manufacturing plant that was operated with high waste, high carbon emissions and high-power usage into an environmentally friendly, circular business model. Doing more with less meant intentionally considered integrated investments in capital, products, processes and employee development, while also investing in farmers in the supply chain and the broader community workforce. It meant leveraging green technologies inside and outside of the fence line.
This integrated approach led to a virtuous upwards cycle: less expense; better reputation; and productive workforce. It led to new products to meet customers’ demands, authentically earned value in the community, and ultimately a return on invested capital to meet the investors’ expectations.
Lean in and listen to the unfamiliar
Product stewardship is another strategy for managing the business of today. It’s about integrating stakeholder views into business processes, transparency and new forms of governance. It’s about accessing the voices beyond a company’s immediate control — those who would not ordinarily have a seat at the table: local communities; NGOs; the environment; the economically disadvantaged; and in some cases, even the non-human (other species) — and engaging these voices in the product lifecycle.
Applying the idea:
In 2017, over 40 percent of Romanians were among the most exposed in Europe to the risks of poverty, social exclusion and stigmatization. Energy theft and fuel poverty in these groups was high. While many initiatives approached the theft through a punitive lens, renewables energy company, Enel, spotted opportunity. Why did these communities face persistent problems around energy access? How might Enel Romania engage them authentically?
Teaming up with local NGOs, Enel Romania took a customer-centric approach. It listened. Through dozens of community engagement meetings with citizens, an energy community mediator and a customer care team dedicated to solving energy access issues, the company immersed itself in the lives of people and voices beyond its immediate line of sight.
Issues became immediately apparent. As an example, in just one geography, families used improvised electrical heating during the winter that was dangerous and inefficient. Many found it difficult to navigate a large utility company such as Enel Romania. Buildings weren’t connected to the district’s heating and gas and were poorly insulated. All this resulted in a significant portion of the Romanian population in need of energy yet disengaged in electrical services.
In response, Enel Romania came up with a series of development initiatives that contributed to solving problems for these communities, ranging from energy efficiency and safety trainings to debt restructure to enable payments, better access education and medical services. This built trust in the community. Today, Enel Romania has a new and loyal customer segment, increased revenues and more effective business processes based on direct feedback from these communities.
Product stewardship requires managers to immerse themselves in perspectives they may not ordinarily encounter. While this sounds straightforward, it is challenging when managers’ view beyond a core set of stakeholders is limited. These perspectives are in many ways opposite of many managers’ current business context. It’s hard to see what you cannot see.
Invest in the future: It comes slowly – yet suddenly
The second axis — investing in tomorrow — is, in part, about acquiring the skills, competencies and technologies to position an organization for future growth. It’s about embracing new kinds of logic.
Weak signals, indicators of an emerging issue that may become significant in the future, can grow strong over time, building into trends can be blindsiding if one isn’t listening for them. A company that invests in the competencies and technologies for the future is positioning itself to develop these nascent signals into high-value opportunities and capitalize on them as they mature.
Applying the idea:
Patagonia created a corporate venture capital fund, Tin Shed Ventures, to invest in startups that offer solutions to the environmental crisis, and technologies for the future.
Bureo, a social enterprise and Patagonia grantee, has made a business of introducing plastic fishing nets into the company’s supply chain — as a raw material. Fishing supports a way of life across South America. Yet, hundreds of millions of pounds of nets live in the ocean, killing the marine life where fisherman continue to fish.
Bureo discovered that these nets are often highly recyclable. With Patagonia’s support, Bureo is partnering with fisheries across South America and has pulled 3.1 million pounds of plastics out of the ocean. These nets are in the raw material for Patagonia’s hat brims, previously made from virgin plastics. (Watch the story here.)
The mainstream pivot towards circular economy processes is still young. Bureo is just a couple of years old. Patagonia is investing in a scalable infrastructure by which it can reimagine some of its most iconic products. It’s also setting a standard that companies can model to remove exponentially more plastics from the ocean.
Co-create future markets with historically marginalized stakeholders
Managing tomorrow’s business is about building future markets through co-creation with stakeholders, many of whom have been overlooked or exploited by capitalism. It is about building business models in ways that reconstruct the current economic system to be more equitable and inclusive.
Similar to the Enel Romania example, it’s about understanding the context of different communities and then building future competitive business models, and new products and services in collaboration with these stakeholders.
Applying the idea:
The Circular Cities Coalition, facilitated by PYXERA Global is one approach to this. This coalition of organizations is working together with U.S. and global city governments to create a new way of operating for urban and regional economies.
Underpinning the coalition’s approach is that of ownership and circularity — enabling economic transformation among historically marginalized and Black, Indigenous and people of color (BIPOC) communities by co-creating regenerative business models. Along with comprehensive landscape assessment in critical areas such as materials flow, impacts and policy gaps, Coalition members are conducting community engagement workshops in areas such as Nome, Alaska; Lake County, Montana; and Takoradi, Ghana, to design the needs, problems and opportunities encountered by these groups into the circular economy roadmaps.
The coalition is working with these communities to co-create a host of profitable and regenerative business models that will reset their economic foundation for years to come and leave ownership in the communities. These models range from repurposing and selling used plastics to standardizing re-sell and repair shops to investments in entrepreneurs who are creating and owning the next regenerative business model in their communities.
A Green Swan can emerge from a Black Swan
It takes insight, tenacity, vulnerability and a lot of experimentation to find the opportunities hidden in Black Swans. Shedding light on Black Swans turns them to Green.
By helping your company see what other companies may be missing — managing for today, while building the future — you can identify opportunities inclusive, equitable business models that create disruptive change and redefine your industry.
For more information on GreenBiz’ Leading the Sustainability Transformation program, visit this link. The next two sessions run April 19-June 27 and Sept. 13-Nov. 21.