Embrace the bad stuff: turning crisis into opportunity

December 20th, 2013|

First published in the Guardian, December 19, 2013.

My years of work as a radical environmentalist in concert with multinational business has inspired me to believe that we can change our mindset from “Why don’t they?” to “Why don’t we?” So many engineers and executives demonstrate courage, tenacity and creativity when faced with regulation or resource constraint in the pipeline.

Real opportunities for transformative change lie in preparing for crises. The National Academy of Science’s new report, Abrupt Impacts of Climate Change, states:

“To willfully ignore the threat of abrupt change could lead to more costs, loss of life, suffering, and environmental degradation … The time is here to be serious about the threat of tipping points so as to better anticipate and prepare ourselves for the inevitable surprises.”

Before Hurricane Sandy hit the US’s north-east in 2012, scientists and meteorologists warned of a likely devastating weather event on the eastern seaboard at some point. By day one after the storm, it was clear that we would spend more than $100bn on recovery. You didn’t need an expert to imagine the financial devastation. But you did need serious analyses and one helluva backbone to make smart, tough decisions on infrastructure, relocation and rebuilding.

So taxpayers (federal, regional and local), businesses and families spent this huge sum of money, and we will likely have to spend it all over again in the near future. These difficult expenditures were almost obligatory despite strong leadership from local governors and mayors. We were simply not prepared for this predictable event. We do not have our transition agenda in place.

We are already between a rock and a hard place and we have no Plan B. We must now have the hard discussions to identify what we would need to do – and what we would be prepared to do – under exigent circumstances in a global (or local) emergency. We talk about a world of increasing population and constrained resources, yet we continue our high-carbon lifestyles, with business as usual and poorly directed government subsidies.

This is not how we operate in other situations. In healthcare, for example, we immunize ourselves with vaccines (from tetanus to smallpox). The entire insurance industry’s business model is based on high-impact, low-probability events. But when it comes to climate change, we fail to consider a black swan event that will create significant trauma, as well as transformational opportunities. Nothing is more urgent than being ready to seize these opportunities.

In our everyday lives, we have grown accustomed to the face of environmental degradation, from air pollution (more costly than tobacco in healthcare dollars) to water pollution (the FDA advises against eating king mackerel, swordfish and more, because of heavy-metal contamination). We can and must realize a world with a thriving low-carbon and low-waste economy – despite how hard and costly the early investments will be.

These investments may not satisfy short-term earnings pressures or public budget cycles, but will absolutely lower costs in energy, waste, water and healthcare in the medium and long term. This high price seems a fair trade for a decent life for our children and a modicum of stability for our fundamental public and private institutions.

My fellow environmental activists and I always say, “Business as usual cannot continue.” And now, many businesses – and the National Academy of Sciences – say the same thing as fiercely and straightforwardly. Unfortunately, one or more of these events will likely happen within the next five to 10 years:

Extreme weather devastates 20% of the world’s wheat, rice, corn; an entire marine ecosystem collapses; major energy outages/shortages interrupt basic survival systems; social upheaval caused by lack of food, water, energy or financial security; another nuclear/oil spill/chemical event; water shortage ot drought causes mass migrations; large industries/economies collapse, a big resource war follows

Sorry, I’m not with you to buy you a drink after this list. What are our choices? We could do nothing new and pray for the best. This is a bad option.

But we have two choices that already have leadership, momentum and money on the table.

First, we can start radical transformation of business as usual to incentivize decisive action and investment for low-carbon, low-waste technologies.

Second, recognizing that science indicates that abrupt changes will arrive before we fix or even identify the problems, we can start scenario planning so that next time a major storm hits a coastal region, we prioritize the protection of natural systems along with the protection of people, property and profits in the rebuilding process.

I’d argue, of course, that we must do both. These steps make up the essence of a transition agenda that includes both resilience and an altered view of our landscape, both figuratively and literally.

Paul Romer, the Stanford economist has eloquently said, “A crisis is a terrible thing to waste.” Indeed, climate-change-accelerated devastation will yield newly fertile ground if we are ready. We should hope for strange bedfellows; patent-pooling frameworks that enable competitors to collaborate; decentralized and low-impact food and energy systems; accounting rules that prevent the biggest polluter from making the biggest profit and insurance that recognizes the value of ecosystems. In short, the rules of business must be harmonized with the laws of nature.

I have three Chinese cookie fortunes on my refrigerator. Here are their words of wisdom:

“Turbulence is a life force. It is opportunity. Let’s love turbulence and use it for change.”

“Struggle as hard as you can for whatever you believe in.”

“It is necessary; therefore, it is possible.”

Power, Love and Money

December 10th, 2013|

First posted in the Guardian, December 6th, 2013

As an environmentalist, producer and businesswoman, I have always thought that moving anyone to action takes either power (or money) or love (or sex). Sometimes it takes all two (or four).

In a revelatory few weeks of theater, many of my assumptions about power and money were sent packing. I saw a biting and brilliant all-woman production of Julius Caesar, Shakespeare’s ultimate power play. And I also caught a hysterically funny production (not Book of Mormon funny but uproarious nonetheless) of the Twelfth Night, Shakespeare’s funniest romantic comedy.

Hmm, the women got inside the very male power struggles of the Roman Empire (set in a modern prison) and the men were clearly as bewitched, bothered and bewildered as the most foolish of archetypal maidens. This is a new world of cross-gender understanding, and a very welcome one.

Now if women can also get hold of the money part of the equation that runs the world, we’d really have some social evolution going on. Therein lies the rub. We women are gaining power in many ways, but still, in the realm of the real power and money tables (corporate boards, CEOs and senior management, cabinet ministers and entrepreneurs of high-impact businesses), we disrupt the economic order less than we could.

And the world certainly needs disruption, both to alleviate the great environmental burden we are placing on the planet and our children and also to remedy the terrible income inequality that threatens every nation’s social fabric.

Here are some depressing statistics. Women who work full-time currently earn 77 cents on the dollar in the United States, a statistic that has remained static for 10 years. This pay gap exists in nearly every occupation, and is worse for women of color and older women. Two-thirds of minimum wage workers are women. According to the World Economic Forum’s Gender Gap report, the United States is ranked 67th globally in wage equality.

On the other end of the spectrum, women hold only 15%-20% ofleadership positions in the upper echelons of the professional world and only 18% of seats in the US Congress. (Not that I’d claim that women would have behaved better than the men did this summer.)

Love and power

But the most interesting place is where the love and money intersect. As Henry Kissinger so eloquently said: “Power is the ultimate aphrodisiac”. It turns out that’s not always the case; it depends on who has the power.

Take the Harvard Business School as an example. For men, the Harvard affiliation gives them a tool sometimes called the “H-Bomb” – according to conventional wisdom, when a man says he goes to Harvard, the women line up. But when a woman states she goes to Harvard, apparently, the men run away.

Women of the Harvard Business School say that they have taken to stating that they attend another school or do something less “powerful” when they go off campus – bars, parties or other settings where many of young people seek companionship that often involves heavy breathing – looking for a date.

The essence of this story is that for women looking for men, sex and power go together. For men looking for women, power is a turnoff.

So how did these two theater companies get so utterly inside the essence of power and love against their gender stereotypes in these 450 year-old Shakespeare plays?

Women are now seeking to plumb the depths of power and its interplay with violence, sectarianism, philosophy and politics in order to express themselves more fully in the world. So let it be with Julius Caesar.

As William Shakespeare proclaimed via his Julius Caesar: “Men at some time are masters of their fates. The fault, dear Brutus, is not in our stars, but in ourselves, that we are underlings.”

And as Viola in Twelfth Night notes: “Alas, the frailty is to blame, not we.” Men are relieved to finally accept their vulnerabilities and emotional fragility as a basic part of life.

Courage and the modern business

December 3rd, 2013|

First posted on the 2degreesNetwork on November 28th, 2013. 

The laws of nature and the rules of business are currently in direct collision. Today, the biggest polluter makes the biggest profit. Short-term earnings govern financial analysts’ worldview, and a company that spends smart dollars for a healthy return within five years — both in profits as well as savings in energy, waste and water — well, that just doesn’t cut it with Wall Street. Short-term earnings trump long-term value. Therein lies the rub.

To counter this, confoundingly complex integrated reporting and natural capital accounting efforts are being led by both the giants and upstarts of the financial service industry, myriad trade associations and civil society organizations as well as the World Bank. But some of this work has already reached the shore.

Puma was the first company to create an Environmental Profit & Loss Statement (EP&L) that measured and accounted for both its 2010 profits as well as the company’s toll on the environment. This statement showed that Puma’s environmental costs would have eaten 72% of its annual profit, €145 million. Adding to its astonishing transparency, Puma convened experts across the spectrum to review and improve its EP&L methodology. Although the EP&L, with the aid of both PricewaterhouseCoopers and TruCost, went four levels down the supply chain, this new accounting is an imperfect science.

But all accounting is imperfect. One day your coal assets look hardy on your books, and the next year they look like stranded assets. As I note in my book, Environmental Debt: The Hidden Costs of a Changing Global Economy, “Ratan Tata recently admitted that the energy from his company’s new massive coal power plant in India will bring energy to market at roughly the same price as new solar. Tata actually described this plant as a ‘non-performing asset’ due to the increasing unavailability and high cost of coal.”

But today, the oil companies actually represent the highest risk for dangerous levels of stranded assets. Climate scientists are clear that our greenhouse gas emissions must remain under a two-degree scenario if we are to avoid climate catastrophe. However, the oil companies have over $20 trillion on their books that will be “unburnable” if we are to stay within emission levels that keep our planet habitable. This is how the rules of business and the laws of nature are in direct collision. The oil companies claim $20 trillion of unburnable reserves as an asset, and current accounting rules accept this as true. Sounds kinda like a subprime mortgage to me. Investors and institutions as varied as HSBC, Standard & Poor’s and the Grantham Institute have all weighed in on this high risk numbers game.

Back to Puma’s EP&L. The first ingredient of integrated reporting is courage. The courage to note a company’s shadow. KPMG computed that “In 2009, the 3,000 largest public companies were estimated to be causing $2.15 trillion of damage.” And China recently estimated that its environmental degradation was responsible for 3.5% of its GDP. (Wanna bet it’s more?) Clearly, something new in accounting is afoot. And one asset that cannot be overstated is courage.

Puma is now developing a more current and refined version of its 2010 EP&L. Actually, it’s going further. Puma’s parent company, Kering (Yves St. Laurent, Gucci, Stella McCartney, etc.) is creating an EP&L for all of its brands. So far, this is extraordinary courage, but besides the computation costs (not inconsiderable), the company is not yet alleviating or preventing the environmental damage it creates. Clearly, Kering’s intention after all of this extraordinary bother is to change its manufacturing, sourcing, transport, and operations to lessen its loadon the environment. Accounting rules and environmental policy should incentivize every company to do exactly this. The data that Kering is gathering is the key to creating these new rules, so that the rules of business respect the limitations of the laws of nature. And the biggest polluter then makes the smallest profit — or doesn’t operate at all!

Each of us, as businesspeople, citizens and individuals, are responsible for the rules of business, the policy that govern these rules, and the consumption that drives the overall economy. Courage is needed to change the profit paradigm and the quest for true profits is upon us. This is civilization’s most daunting challenge, and we must leave our comfort zones and rise to the occasion.

“Our most basic common link is that we all inhabit this small planet. We all breathe the same air. We all cherish our children’s future. And we are all mortal.” – John Fitzgerald Kennedy, June 10, 1963