New Business Alternatives for Obama’s Climate Change Program

September 9th, 2013|

First published in the Huffington Post, September 9, 2013

President Obama’s emphatic stances on climate change during his inaugural address were indeed welcome words. Most analysts are focusing on the administration’s ability to use new regulatory powers, largely through the EPA. But there are two other options that are currently underused and under-imagined.

First, patent pooling has been used since the 19th century to spur innovation in industry to support either a wartime emergency or a financial debacle. I believe that climate change qualifies on both counts. And the Securities and Exchange Commission has new rules that require public corporations to disclose their climate change risk. These rules are new (2010) and currently vague, but have the potential to begin the incorporation of external costs as well as long-term impacts into corporate P&Ls and balance sheets.

Farmers, most businesses, victims of recent extreme weather events (drought, heat wave, fire, flood), and the taxpaying citizens forced to cover the costs of these weather events all understand viscerally that something’s gotta change. And quickly. President Obama appears to concur.

It is time to change intellectual property rules so that competitors can cooperate and also retain financial protection. When President Franklin Roosevelt took America into WWII, he set tremendously audacious goals for industry and also called for national sacrifice to support the military effort. Many Americans and car companies especially bristled at this. However in hindsight, it is clear that this wartime effort not only enabled the Allied defeat of fascism but laid the foundation for America’s post-war technological and industrial dominance. If current government policy (all governments, not just American) prioritized renewable energy as the U.S. government prioritized military manufacturing in 1941, the world would quickly see a revolution in renewable energy technologies. And it’s exactly this revolution in storage and dissemination we need in order to more easily transition out of fossil fuel dependence. (We could do it without today’s technology, but it would be harder than it needs to be.)

Many iconic American corporations have invested billions of dollars and hired many of the world’s best scientists to work on renewable energy breakthroughs. But these scientists, from IBM, General Electric, Cisco and many others are sworn to secrecy in order to protect their companies’ investments. Why shouldn’t they? That’s the current business framework. Patent-pooling, an agreement between two or more companies to cross license patents, has been around since the 19th century, and has spawned numerous technological breakthroughs since then. For example, ten companies share the patent rights for the DVD — Hitachi, JVC, Matsushita,  Mitsubishi, Philips, Pioneer, Sony, Thomson, Time Warner, and Toshiba.

And without much fanfare, there is a revolution brewing in the world of accounting. Puma, the sportswear company, released the first-ever Environmental P&L in 2011 and showed that if it actually paid the true costs of its environmental impact it would have reduced its profit by 75 percent. (Currently, this money is paid by taxpayers and unwitting victims of this pollution.) PricewaterhouseCoopers with environmental data experts TruCost  led this effort and many other corporations are beginning to incorporate Lifecycle Analysis into their annual reports in anticipation of the SEC’s next move. All of the large financial service firms are ramping up their climate change divisions and the Global Reporting Initiative and many other financial groups are designing a new accounting paradigm that includes environmental and social costs into plain vanilla financial reporting.

The SEC and the IRS can catalyze this work to give it both bite as well as incentives. Accelerated depreciation or a price on carbon could be levers that move an investment decision from dirty manufacturing and fossil fuels to clean technology or renewable energy. New SEC rules would protect senior management at many corporations from Wall Street’s short-term purview and instead reward smart long-term technological change.

These are just two options. If President Obama is serious about averting the worst effects of climate change, it is time to think big. Nothing except for nature can transform the world as swiftly as can business — for better or for worse.


What’s Going On. Business and History

September 1st, 2013|

First published in The Guardian, September 9, 2013

Stevie Wonder and Marvin Gaye at a Motown recording studio in Detroit in 1965. What other businesses have changed the world? Photograph: Gilles Petard/Redferns

I recently had the pleasure of seeing Motown, The Musical on Broadway. Besides marveling at how great the music (still) is, I realized anew the importance of business to the continuum of history.

As a black-owned business featuring mostly black music, Motown dominated large swaths of the cultural agenda in the late 1960s and 1970s with hundreds of hit records. Although some white people joined blacks on the front lines of the civil rights movement in the early 1960s, the first time non-activist whites socialized with blacks as peers was to Motown soundtracks – on the radio and on the dance floor.

The earlier jazz bands of Duke EllingtonCount Basie and Louis Armstrong were obviously extraordinary and influential too. But these great musicians mostly played to segregated clubs and concert halls, whether legally separate in the South or de facto separated in the North.

Motown’s crossover success was one of the cornerstones of massive changes in politics and society carved by the civil rights movement. Smokey Robinson, a Motown star and vice president, described this transformation to The Times-Picayune reporter Maria C. Montoya in 2009:

“Into the ’60s, I was still not of a frame of mind that we were not only making music, we were making history. But I did recognize the impact because acts were going all over the world at that time. I recognized the bridges that we crossed, the racial problems and the barriers that we broke down with music. I recognized that because I lived it. I would come to the South in the early days of Motown and the audiences would be segregated. Then they started to get the Motown music and we would go back and the audiences were integrated and the kids were dancing together and holding hands.”

From my perspective, Berry Gordy‘s brilliant business was largely responsible for most of my white generation’s exposure to black culture – and it began the process of tearing down some of our parents’ racism. Without his breakthrough music empire, Barack Obama arguably wouldn’t have been elected as president because, without the integration that resulted from the music, too many white people wouldn’t have voted for a black man.

Motown, the company, popularized and delivered black music into the center of white popular culture – globally. In addition to its music, this is Motown’s legacy.

What does all this have to do with sustainable business and history? Plenty.

Motown is not only a delight (of course, it’s playing now to inspire me), but also showcases the power of business to change culture. And it’s not alone. Other businesses also altered the zeitgeist and, in turn, history.

When Apple introduced its first iPhone, it revolutionized our communications patterns, technologies and access, as well as the business model for both the computer and communications industries. And speaking of history: no smart phones, no Arab Spring.

When Searle offered the first birth-control pill for sale in the US in 1960, the company paved the way for the revolution in women’s rights of the second half of the 20th century. The business of medical contraception, worth $5 billion in 2011 just in the US, made childbearing a choice. That’s definitely a key milestone in history.

And sometimes, a business’ influence is more cultural than financial. How many of us know the actual dealings of the Medici political and banking dynasty? Some of us might know that it controlled the papacy and several regions of what is now Italy and France for several centuries. But more of us know it sponsored art, architecture and science by way of Michelangelo, Brunelleschi, Galileo and other great Renaissance artists and scientists.

The power of businesses to change the world extends beyond supply chains, beyond working conditions, beyond their carbon footprints. Cultural impact is just as important and the long reach of this impact can be heard when you listen to your favorite Motown music later today.

What other businesses that have affected the world so potently and distinctly, for better and for worse? What other businesses have fundamentally altered history? I’d love to hear your ideas.