Connected Ecosystems: Climate and Agriculture

I have mixed feelings about #ClimateWeek, unfolding in NYC this week to coincide with proceedings at the United Nations General Assembly. It’s a little like the “patient safety” department in a hospital. A department? Isn’t patient safety the first responsibility of everyone?! A week? Isn’t preserving a stable climate everyone’s responsibility every day?

I get it. I work with a lot of the organizations that participate and wholeheartedly support taking advantage of UN conferences and meetings to draw attention to this global, species-level problem. 15 years ago, our film "Hope in a Changing Climate" premiered at Agriculture and Rural Development Day as part of the 2009 United Nations Framework Convention on Climate Change (COP 15).

Broadcast globally by BBC World, our award-winning documentary told the story of successful large-scale ecosystem restoration in China, Rwanda, and Ethiopia. It was the impetus for subsequent gatherings and guided discussions in more than 30 countries. The film remains one of the projects I’m most proud of leading because it took an almost impenetrably complex set of issues and made them understandable to non-specialists without oversimplifying. It showed what people around the world could do when working together. Yes, there are more than a few other ingredients in the theory of change, but figuring out how to bring people together is fundamental.

How people then exercise collective power to drive change becomes critical, especially if the goal is to alter or replace embedded systems. Early next month in Denver, as a guest of Canopy Farm Management, I’ll be with a group of investors and practitioners driving change through investments in regenerative food systems (Regenerative Food Systems Investment). Regenerative agriculture is not exactly the same as ecosystem restoration. But if we can appropriately scale regenerative agriculture now, maybe the sequel to “Hope in A Changing Climate” could be “The Promise of Regeneration?”

Watch the full-length version of "Hope in a Changing Climate"
(Courtesy of Plant for the Planet)

Middlemen or Distributors?

Council Fire *  

Now we all have personal experience with the collapse of supply chains: toilet paper, produce, meat, flour.  They are more fragile than we knew, for many reasons. Whether in conversation with my consulting colleagues at Council Fire or with my clients such as the Equitable Food Initiative, supply chains are front-of-mind – as they also are in many everyday conversations.

Supply chains manage ‘betweens,’ the spaces between activities that otherwise would be disconnected. They connect the farm to the packing house, packing to trucking, truckers to warehouses, and so forth. When working properly, these supply chains are tightly connected, like individual railcars that together make up a train.

While the couplings that keep a train together are obviously critical, do we need all the couplings in our supply chains? When families go berry picking on a local farm, there is no fresh produce supply chain. However, when a farmworker in New Zealand picks a kiwi for sale in Detroit, the chain is long and winding (more of a web than a chain, in fact).

Distributors and consolidators are either essential to keep supplies humming or they are middlemen squeezing growers or producers without adding enough value to warrant the cut they take. Especially today, they seem critically important. But as we rebuild, should they play the same traditional roles or not? Fishmongers are now making a go of it in the UK selling straight to customers at the dock; no distributors. Restaurants have become community pantries in the Washington, DC, area; new distributors.

Size and distance are dispositive. We can't have lobster in the winter in Oklahoma without a complex system of suppliers carefully coupled together. While most of us are not going back to the farm, or to lobstering, maybe the real innovation obscured by the much bandied about idea of ‘scale,’ is that smaller might be better than bigger. We misuse scale as a synonym for bigger, when it actually means proportional or appropriately sized.

As we rebuild better, size and distance must be central to planning. Going from the bedroom to the home office is a shockingly short commute for many people. And we don’t even need to embrace Small Is Beautiful as a principle to wonder; what really is the optimal size for the most efficient economic system?

Before we scoff at alternatives that emphasize regions and internalizing costs, sharing economic value more fairly and better alignment with our personal values, we would do well to remember that what is dismissed today as ‘unworkable,’ is tomorrow’s patent and next year’s most successful IPO.

Especially today, be careful betting against big changes.

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* Council Fire is a global management consultancy that helps purpose-driven organizations thrive by creating lasting economic, social, and environmental value.

A Peak Behind the Curtain

A Peak Behind the Curtain

Transitioning to an expanded role as “engine for change” in sustainability, environment, and energy funding, The Cynthia & George Mitchell Foundation invites external thought leaders to blog.

 (Full text below.)

When is it worth protecting a wetland or enacting a new safety regulation? Writ large, what is the role of government in promoting and protecting public welfare? Regardless of our political orientation in these divisive times, few would oppose basic government standards for electrical wiring in our homes or in the service of food safety, right?

But how much is enough or too much?

There is a nested suite of issues and assumptions that often go largely unexamined in the debate about the value of environmental protection and whether it supports or constrains economic growth. Let’s look at them one at a time.

On language

Since language both reflects and drives thinking, the words we use matter; they define the frameworks we apply to the world around us. And seemingly simple words such as “worth,” “value,” and “price” are often used interchangeably when they mean quite different things.

Price, an economic term, describes the numeric indicator of something for sale in the marketplace – a number that allows a buyer and seller to communicate. It is not, however, the same as value which brings into the equation ethical and moral considerations that might or might not be reflected in economic price.

And “worth” adds yet another layer of complexity. My view of what something is worth may be quite different from yours. The higher price a hotel might charge for a room with an ocean-view versus one with a view of the dumpster might be worth it for you because you are going to spend a lot of time in the room. For me (since I am only sleeping in the room), I don’t care about the view. We value the same things differently.

Core Assumptions

The current paradigm for evaluating environmental (and other) public policy proposals posits market failure as the driver for government intervention. We typically presume that the market, while imperfect, will nonetheless generally serve the public interest with modest government interventions. Over the long arc of history, however, that is very much a debatable proposition.

That the “free market” is the greatest mechanism for generating wealth and prosperity may well be true. But when we put either an equity, ecosystem, or time lens on this proposition it becomes very much a hypothesis rather than a statement of fact.

Leaving aside hard questions of morality and accountability, how well is public welfare served when 86% of all the wealth in the world is controlled by 10% of its people while the other 90% control only 14%?

How is the public welfare of future generations being served by the spread since World War II of persistent organic pollutants into every corner of the planet?

Whether long-term social welfare, globally, is best served by a loosely controlled marketplace or a more empowered government that truly creates a level-playing field for all actors in the marketplace is very much unclear.

And, at an even more fundamental level, the market/government duality obscures that prosperity and economic growth might not be the highest aspiration of a society. Entertain for just a moment the thought experiment that identifies equity or spiritual fulfillment as our highest social goal. Or, even more radically, what our world might look like if ending poverty was our core social goal around which policy, capital, and intellect were all united?

As a Practical Matter

Proponents of conventional thinking will assert that “as a practical matter” we need to price clean air, carbon emissions, fishing stocks, the value frogs contribute to ecosystem stability, and the agricultural value of pollinators like bees. While inarguably useful and important, the danger here is in how we assign value, who the “we” is that does the assigning, and whether we lose something that is invaluable in our efforts to monetize nature in order to protect her.

Before we become too attached to current practice, let’s remember that before Copernicus it was the practical consensus that the sun rotated around the earth; and it seemed crazy to consider renting your apartment to a total stranger before AirBnB’s business model. What seems impractical one day can become commonplace the next.

Our thinking is not sometimes but almost always limited by our imagination and the intellectual and operational tools we deploy are very much time-bound. Whether measuring particulate pollution, designing QA (quality assurance) protocols for process engineering, or marveling at the expanding storage capacity of a chip, today’s KPIs (key performance indicators) bear little resemblance to those of a mere decade ago.

Declarations of what we “know” should be tempered with a large dose of humility.

Benefit/Cost Analysis

One of the most powerful tools in our measurement arsenal, benefit/cost analysis, is mandated across the government; it is the means by which we assess the value of the previously discussed government intervention to address market failure. It is, thus, an immensely powerful tool. And while as a tool it may be seen as neutral, “as a practical matter” it is subject to manipulation and misuse.

What goes in the benefit and what goes in the cost column when trying to devise a policy to address climate change? Closing high emitting coal-fired power plants sounds great—unless you are a coal miner. The benefits of fracking once seemed to obviously outweigh the costs—but that was before we understood the extent of methane leakage, water contamination and possible fracking-induced earthquakes.

In addition to the accounting challenge of capturing all the costs and benefits, there is also the equity/distributional challenge when deploying this widely used tool. When we provide agricultural subsidies in the U.S. to grow corn for ethanol or high fructose corn syrup, do we need to account for what impact this will have on smallholder farmers across the globe?

Even more challenging is the issue of how we account for unintended consequences and the passage of time. While economists and investors have a suite of tools for this, what is a reasonable time frame over which to calculate costs and benefits? If we are talking about the habitability of our planet, how far out should we look: a decade, a generation, one-hundred years? In agriculture, for example, what looks like a terrific plan for increasing short-term yields to feed a hungry population today may be disastrous a few decades from now—if it is predicated on mining the soil of nutrients until there are none left to mine.

Value of a human life

As noted at the outset, it is and should be a sense of public welfare that drives consideration of policy. And public welfare is about people, but what I do, singly, as an individual, may seem benign until 300 million other people do the same thing. Think littering. The public consequence of personal choice is at the center of many critical debates today: sugary beverages and public health, antibiotics and food, for example.

How we value human life is another critical element of this debate which rarely makes its way into the public discourse—because it is complex and ethically awkward. But it has implications for everything from wrongful death settlements in hospitals to the height of guard rails on public roads.

As part of cost/benefit analysis policymakers routinely assess the value of a human life and factor that in to how much we spend on safety. When a lawyer guides a client in a suit against a hospital for wrongful death, they will assess how much money a court might award the surviving family members. Analysts will look at indicators like lost earnings, the value of companionship, past and potential social contributions. And they will tell the surviving family members what they think is a reasonable “value” of the life just lost. It in no way represents the worth of the person. As a practical matter, it is nothing more than a price in the marketplace.

Risk

As with cost/benefit analysis more broadly, who bears the costs and who enjoys the benefits are central to the calculus.

The death of a patient is, for a hospital, a cost of doing business; it happens. It is handled by folks from “patient safety” who are tasked with “risk management.” For a family member, the patient and the risk are profoundly personal.

So too with climate change, sustainability, energy, water, and all environmental-related issues. Risk and the perception of risk is another critical element in this suite of issues that are submerged beneath so much of our public discussion.

Risk is the intersection of probability and consequence. Risk is where they meet. If you think you don’t make risk calculations, have you ever crossed the street against the light? You made a calculation at that practical and metaphorical intersection. Low probability and low consequence decisions are easy; not likely to happen and if it does, low consequence. No big deal. High probability and high consequence, like jumping into the ocean without knowing how to swim, also pretty easy. Bad idea.

The tougher challenges are obviously around situations where there is some probability and some consequence. And around those decisions, the underlying question of who bears the risk and who is protected from them is again central if overall public welfare is the goal.

As we continue to address the wicked complex challenges of our time, how we think about them may well determine the extent to which we can or cannot successfully address them. We are, like all civilizations before us, constrained by the tools and mindsets we have at our disposal. We are not, for example, well practiced systems thinkers; we have trouble envisioning alternative futures and pathways.

If we want different outcomes, we need to change the systems we have created. And that begins with expanding our thinking to embrace new paradigms and challenging our own most basic assumptions.

The Sustainability Trajectory

The Sustainability Trajectory

Transitioning to expanded role as “engine for change” in sustainability, environment, and energy funding, The Cynthia & George Mitchell Foundation invites external thought leaders to blog.

In 2012, a little bakery just north of New York City became the first business licensed in New York State as a Benefit Corporation.

Thus Greyston Bakery joined companies like Patagonia, Etsy, and Ben & Jerry’s in advancing a fundamentally new model for business that focuses as much on a declared social mission as on its business purpose. The advent of benefit corporations signal the beginning of a profound structural shift in the business of doing business—the first of four disruptive shifts discussed in this essay.

Far from being set and fixed for all time, the core structure of business is fluid and evolving.

In 1811, New York State enacted the first law in the United States providing for the formation of limited liability corporations. Since then we have enjoyed incredible benefits from a period of industrial production unsurpassed in human history. And while it may be seem inconceivable that this period could be winding down, it would be equally foolish to bet that it will continue forever. With this unparalleled productivity has come consumption on a scale that cannot be sustained, in part because the wealth produced in this 200-year stretch of human history has also generated inequality on a scale that is mind-boggling. The 85 richest individuals on the planet have amassed wealth equal to that of the 3.5 billion poorest people in the world.

Baking brownies in Yonkers is not going to close that gap. But as a benefit corporation, Greyston is not just, or even primarily, in business to bake brownies. Greyston does not hire people to bake brownies so much as it makes brownies in order to hire people. Greyston’s social mission is open hiring whereby it hires people on a first-come, first-served basis without asking for references or doing any type of background check.

They are in the business of hiring the structurally unemployable (those who have been in jail, on drugs, or homeless). Other benefit corporations have declared other social missions such as conservation for Patagonia or “re-imagining commerce” for Etsy. While there are about one thousand benefit corporations today, there were no limited liability corporations in the United States until 1811 (although business trusts and partnerships existed).

Benefit corporations are of course not the only mechanism through which a business can demonstrate its commitment to socially responsibly behavior. Corporate sustainability reports and corporate foundations often expound on the “good works” being done in the communities in which they operate. But these efforts are often isolated from business operations, relatively inconsequential to the business financially, and not factors in internal business decision-making.

The benefit corporation model pulls responsibility for the social and environmental elements of the triple-bottom line out of philanthropic giving and sets it squarely in the executive suite—embedding those considerations in the core product or service of the business.

Benefit corporations thus fundamentally shift the balance of business priorities. Shareholders become just one powerful group among multiple stakeholders—practically not just rhetorically. The need to run a profitable business remains critical; no money, no mission. But the reasons for running the business are significantly expanded, as is the timeline against which success is measured.

A second disruptive structural change on the sustainability horizon is a shift in the basis for executive compensation. While the data remains somewhat opaque around this issue, what is unmistakably clear is that many more Chief Executive Officers sign eloquent and heartfelt letters to introduce sustainability reports every year. But they rarely actually put their compensation on the line to achieve sustainability goals.

According to a new CERES report, a scant 3% of 613 large publicly traded American companies link executive compensation to anything more than mere regulatory compliance on sustainability related matters.

Sustainability reports have been central to disclosure and transparency; they have given investors and advocates a point of access and leverage; and they have enabled companies to benchmark against best practices. But they have not, generally, worked their way onto the C-suite decision-making dashboard. Sustainability data, painstakingly collected and analyzed, rarely forms the basis for core business decisions. That would change—and fast—if leadership compensation was as closely linked to sustainability metrics (from water and GHG emissions, to community investments and labor practices) as it is to ‘making the numbers.’

As much as we need to redefine leadership, and the compensation that goes with it, so too does the notion of “supply chain” need to be reconceived. And this too will be highly disruptive for leaders and investors who cling to an outdated and narrowly circumscribed definition of the role of business being exclusively about producing products to generate near-term profits for its owners.

Once upon a time not so very long ago, what happened inside distant plants or on fields in far away lands, managed by layers of absentee investors, employing isolated workers with limited voice and even less political clout, seemed safe to ignore. But over a ten-year period, that changed dramatically.

In 1984, chemicals leaking from a Union Carbide plant in India killed thousands, and Bhopal became a household name. Five years later the Exxon Valdez ran aground and poured crude oil into Prince William Sound, tarring Exxon with the stain of corporate irresponsibility that has been impossible to remove. And for years in the 1990s, Nike was dogged by claims, and then acknowledged, that children in impoverished nations were making its shoes.

In a little anticipated shift, global businesses were forced to expand their horizons and exercise responsibility not just inside factory walls but also up and down global supply chains. But those “chains” were, and to a great extent still are, conceived of as circumscribed bands of direct inputs that flow vertically upward into products of ever increasing value.

We are now entering an age in which that band is bulging and the myriad horizontal connections at each point along the chain have also become of concern to global manufacturers. The flow of supplies is a web, an ecosystem—not a chain. The plant that makes cotton t-shirts relies on cotton grown in fields, picked by workers, sustained by nutrients and water and moved to market in myriad ways. And while a textile manufacturer may not perceive itself as being in the water business, that mindset exposes the business and its investors to immense risk if the price for cotton skyrockets due to competing demands among farmers, bottlers, other companies and citizens for access to limited water resources.

Managing the interconnected web of resources for multiple users is going to push buyers and procurement teams and their senior leadership to develop whole new skill sets and layered systems to ensure access to resources. Brute market power and dominance may temporarily forestall the day of reckoning for some corporations that cling to the notion of limited supply chain responsibility. But those that grasp the web-like quality of modern supply will likely prove more resilient and capable in the face of future challenges.

And finally, perhaps it is not really sustainability that holds the key to future prosperity across the triple-bottom line. Despite all the reporting, the deeply dedicated sustainability teams, and the efforts to build systems and software and better metrics, perhaps at the end of the day what we really should focus on is neither financial performance, nor integrated reporting, nor even the growth of the benefit corporation. Perhaps we are heading into an era in which we will begin to package these indicators into something vastly more than the sum of the parts to assess the overall health of a corporation. Whether organizational or personal, it is health that really tells us how we are doing, what we should be doing more of or less of, and how we stack up relative to others of similar type and size.

It is not a simple metric, but corporate health or wellness may be the elephant whose individual parts we have been poking at for some time without being able to fully see it for what it truly is—the underlying measure of a company’s capacity to generate value over time.

Sustainable Living or Survival of the Fittest?

This year’s CERES conference in Boston was provocative and challenging -- as it should be in celebration of 25 years of creative, innovative, and collaborative advocacy to bring greater openness and accountability to corporate behavior. And it is behavior, of course, that needs to change; openness and accountability are only the tools of the trade in modifying corporate practices.

Paul Gilding, perhaps the speaker who made the audience most usefully uncomfortable, painted two competing visions of the future. One, the Unilever Sustainable Living Plan, champions collaboration, aggressive sustainable agriculture practices, and a fundamental reorientation toward attempting to do more with less, continuing to grow and expand but with an increasingly limited footprint. Gilding also celebrated the clarity with which ExxonMobil has now articulated a different vision of a global economy driven by aggressive use of fossil fuels, where lack of climate stability is seen as a cost of business as usual, and within which ExxonMobil’s rightly vaunted discipline in execution is seen as its competitive trump card in a go-it-alone world.

While perhaps overstated a bit, I concur with his fundamental view, having served as a consultant to both Unilever and ExxonMobil -- although the engagement with ExxonMobil was abruptly ‘paused’ due to differing visions of what constitutes responsible behavior around climate change. Unless the most esteemed international scientists have it all wrong, the two competing visions of the world are pretty stark. If we push past an overall global increase of temperature beyond 2°C, the natural ecosystems that have evolved into a relatively stable and hospitable climate for our species are going to shift dramatically. And if the work commissioned by the US Department of Defense some years ago from the Global Business Network (run by Peter Schwartz, long-time scenario planning chief at Shell) is right, then we may be looking at abrupt rather than gradual changes in the global climate.

As with much change, wealth provides insulation. Resources can be mobilized to plan, defend, and identify alternatives when threats present themselves. But walled castles, cities, communities, and nations have a way of failing over time. While perhaps splendid in their isolation during their halcyon days, they also are brittle. Sea walls may be the Maginot line of the 21st century.

But there is a point at which the dynamic of “growing concentration of wealth and increased dispersal of political power” sends tremors through both markets and governments. And this was articulated well at CERES by Mary O’Malley from Prudential, an insurance company that knows a thing or two about risk.

While no one at the CERES conference was counseling the need to abandon ship, many stressed that business as usual is no longer tenable. From Roderick Morris at Opower to Rob Olson, Chief Financial Officer at IKEA US, the resounding message was to get ready for rough sailing into a vast sea of change. And those outfitted properly for the voyage stand to reap vast rewards. As Morris rightly noted, it is an invitation to innovate when the market presents a situation where “energy and water are cheap and saving them is boring.”

From Olson at IKEA, we were reminded that preparing for this new era requires flexibility and leadership to change traditional thinking. For decades companies have forsworn adjusting hurdle rate (return on investment targets) to accommodate viable sustainability projects that will bring long term value to stockholders, but by definition take longer to mature. IKEA has wisely adjusted hurdle rates outward from 8-10 years or in some cases to as far out as 25 years for critical sustainability investments.

Twenty-five years is 100 quarterly statements and 100 calls with Wall Street analysts. Few business leaders here today will be on those calls – and we generally lack bandwidth, systems, governance, and management capacity to manage out twenty-five years. But who among our business leaders today is planning for their companies to be out of business in twenty-five years? To survive, business leaders need to stop waiting for analysts to ask questions on those quarterly calls about the painstakingly compiled sustainability reports – and instead start actively presenting sustainability as core to the long-term generation of value for investors.

Leaders hesitant to make the case for sustainability as a core business mission and companies with a culture of complacency about their market position would do well to remember the fate of iconic brands that also “missed the memo” on change: Blockbuster Video, Borders, Polaroid. Who’s next?

Dismayed by one IPCC report after another (each showing with ever increasing certainty that the global climate is become more and more unstable), reading a steady flow of nerve-racking news from Ukraine, wincing at the stories of horrific abuse in Nigeria and Sudan, and still hoping for a more robust economic recovery -- it is useful to reflect on the powerful examples where hope and hard-work have combined to overcame seemingly overwhelming odds. Mary Robinson, the former President of Ireland and no longer the youngest member of the The Elders organized by Nelson Mandela, reminded us all of how Archbishop Desmond Tutu response to a question from a journalists about how he remains an optimist in the face of crushing hardship: “I’m not an optimist. I am a prisoner of hope.”

2014 A Happy New Year

I am comforted by the awareness that changes we dismiss today as inconceivable are often viewed by historians as having been inevitable.

A Happy New Year might thus include news of the following momentous changes.

• Following in the reconciliation footsteps of Nelson Mandela, President Salva Kiir of South Sudan and his former Vice President Riek Machar reach an accord to prevent this newest of nations from sliding into tribal anarchy.

• Noting that even Al Queda can apologize and take responsibility for being in the wrong for allowing one of its own to attack a hospital in Sanna, Yemen, George W. Bush and Dick Cheney apologize to the American people, admitting that they were in fact grievously wrong about the existence of weapons of mass destruction in Iraq.

• In a surprise announcement in Davos, CEOs Paul Pohlman (Unilever), Lloyd Blankfein (Goldman Sachs), Larry Page (Google), Mark Parker (Nike), Sam Walsh (Rio Tinto) and Norbert Reithofer (BMW) confirm rumors that beginning in 2016 they will base executive pay, including their own, not only on financial performance but also on sustainability achievements.

• Following copy-cat revelations in China and Brazil from whistle-blowers like Edward Snowden, the permanent members of the UN Security Council announce that they have begun implementation of a global intelligence gathering consortium to combat terrorism; and in a stunning move Republican leadership in the Senate vows to push for quick passage in the U.S.

• Finding common purpose in sustaining the long-term vibrancy of American democracy, Bill Koch, Bill Gates, George Soros, and Robert Reich (Board Chair of Common Cause) call for an end to all private funding for U.S. political campaigns.

• Recognizing the immensity of the self-inflicted economic damage that ripples through the economy from hunger and poverty, Mitch McConnell, Harry Reid, John Boehner and Nancy Pelosi announce a determined bi-partisan effort to raise the minimum wage to $15/hour.

• In an equally unexpected outpouring of bipartisan concern for the future of the country, House and Senate leaders pass of a carefully constructed carbon tax that is progressive, avoids stranding assets, and creates a truly level playing field; the US Chamber of Commerce and ExxonMobil push for passage, arguing that a stable climate is essential for long-term business investment.

• In response to questions posed to President Putin at the Sochi Olympics, he admits knowing next to nothing about the other twenty thousand prisoners he released along with Mikhail Khodorkovsky and the members of Pussy Riot.

• In a continued effort to introduce competition in the energy sector, House Energy Committee Chair Fred Upton (R-MI) and his fellow Michigan Representative, Democrat, John Dingell, propose legislation to repeal the Price-Anderson act, which indemnifies the nuclear power industry for any losses exceeding $12.6 billion.

• And in a stunning announcement cheered by consumers around the world Samsung, Apple, Google and Microsoft agreed to provide their unique mobile applications and services via a common platform and with fully compatible plugs, cords, and charging devices.

Hope springs eternal. Happy New Year!

Regulating the Playing Field

As Hurricane Sandy shifted the national conversation in the closing days of the U.S. 2012 presidential campaign, so too has the rampage at Sandy Hook Elementary School interrupted the partisan machinations over government spending and taxation. As we look forward to 2013 and beyond we thus have a rare moment to reflect and observe that these issues share a common root: the respective roles of government and business to shape our future as people and as a national community.

In violation of the investing maxim that past results are no indication of future returns, many business leaders cling to the shibboleths of the past to secure their future. They argue vehemently against regulations, and against government spending more generally, insisting that industry can best police itself and that regulation stifles growth, innovation, and job-creation. And in the same breath these lobbyists for the past ride in elevators, work in offices, eat food, drive on roads, and use communications bandwidths regulated for the public good by none other than the government.

Businesses large and small also regularly evoke the notion of a level playing field – and insist that the only role for government in the market is to level that field. But level for one party can be decidedly sloped for another. So this is generally nothing more than a cover for seeking or maintaining competitive advantage from government support – from tax breaks in the energy sector to federal support for medical research.

From fabrics to firearms, the question of how to allocate responsibility across the value chain is central to the success both of private enterprise and governments not only in the US but also around the world. See especially “From Triangle to Tazreen: A Century of Lessons,” by Francesca Rheannon in CSRwire on the recent plant fire that killed 112 in Bangladesh, and Nicholas Kristof in The New York Times on the carnage in Connecticut (“Do We Have the Courage to Stop This?”).

Beyond these two issues, here are four more crying out for resolution – and resolution that would benefit business, people, and the national and global community.

Nanotechnology, long out of the barn, is now being chased by various regulatory agencies. Like GMOs before it, nanotechnology holds great promise but is fraught with risk, both known and unknown. Although late to the table, government can help businesses drive down that risk with a smart regulatory framework that directly addresses both short-term needs and potential long-term consequences.

Fracking, hydraulic fracturing of the earth’s deep rock formations, holds out the potential to drive down American energy costs and thus boost production and on-shore manufacturing while creating jobs and billions of dollars of revenue for private companies as well as debt-ridden governments. But the risks associated with the vast quantities of water used to crack the rock, the chemicals used in the fracking, and the global consequences of an energy independent America are poorly understood. While state governments are awakening to this opportunity/challenge, the federal government needs to engage and drive a robust discussion about what level means in the field of fracking.

The search for climate stability, of course, continues to cry out for U.S. and global leadership. As politicians dither, the ice caps melt opening new shipping routes across the Arctic, storms increase in intensity, coral reefs bleach, dustbowl conditions return to the U.S. Midwest, sea-levels inch upwards, scientific panels affirm and re-affirm that the changes are real and man-made, and yet many business leaders continue to act as if this greatest risk to their ongoing operations can be handled by committees and pronouncements. (More soon in another dispatch on the “up the middle, up the middle, up the middle” approach to climate stability.) But there are some companies (see the signatories to the Prince of Wales’ Climate Communiqués) looking forward and as leaders they also are calling on governments to step in and … level yet another playing field.

And last, it is time to again eliminate hunger in America. More than 50,000,000 people in this nation of plenty do not know from where they will get their next meal; fully 49,000,000 receive government assistance through the prodigiously named Supplemental Nutrition Assistance Program (SNAP). While this national outrage persists, elected officials in Washington vote against the hungry and even now have begun to seek to balance the budget on the backs of these least fortunate Americans. See the Food Policy Action report card to see who voted how on key food legislation in the 112th Congress.

Hungry Americans, many of whom vote and have real reason to vote, are not even on the traditional playing field and thus have no interest in whether or not it is level. But for some of those who tend the fields on which we play, the pure pursuit of self-interest seems to be all that matters. While enlightened self-interest can be a huge and beneficial incentive, self-interest as the singular guiding principle makes for a dog-eat-dog world. It also makes predicting the future much easier; as Garrett Hardin explained in 1968, it leads with grinding certainty to the destruction of the global commons upon which we all depend.

We have some important choices to make in 2013.

Markets, Governments and People

The notion that “what’s good for General Motors is good for the country” is actually a misquote of more complex 1953 testimony from Charles Erwin Wilson; “ …for years I thought what was good for the country was good for General Motors and vice versa…" At the time, Wilson was president of General Motors and President Eisenhower’s nominee for Secretary of Defense. Fifty-nine years later, 25% of General Motors’ stock is held by the US Government as a result of the financial crisis. But even absent crises, the neat dividing lines between governments and free markets is more dotted than it is bold. And it is likely to become even more squiggly in coming years. That shift, though needed, is fraught with risk and there are very diverse ways of re-blending responsibilities, markets and government.

At the just concluded Global Philanthropy Forum in Washington, DC, there was much talk of the need to harness the power of markets to improve the world (see the full agenda and video of the proceedings).

A terrific panel on impact investing (see "A Different Kind of ROI: The Role for Private Capital" to the right) championed this as a mechanism for blending and integrating charitable missions and investment strategies. The question being posed, rightly, is why focus so much on grants (generally 5% of foundation assets in the US) but not on the assets themselves as a means of driving change?

The lure of the market, with all its attendant risks, is strong. And as articulated by Jed Emerson, Executive Vice President of ImpactAssets, to have impact foundations need to stop “acting like trout,” mostly hovering motionless in swirling water and only occasionally jumping to catch a bug as one passes overhead. Impact investing is needed, is a good idea, and is sure to expand in coming years.

From another vantage point, markets can undermine governments and cripple their ability to serve citizens. Privatization of government assets in the former Soviet Union was largely a massive transfer of wealth from the public trust into private hands. As a businessman in The Soviet Union throughout the 1980s and 1990’s it is clear to me that (despite some very serious efforts at fairness) the give-away of state assets was wholly corrupt, took place in a modern economy and resource rich country on a scale never before imagined, and will continue for generations to undermine public trust in state institutions while enriching a small elite. So while communism was vanquished, the structure of political and economic power in Russia today is perhaps more akin to what it was in Tsarist times than to that of a European or North American modern state.

Beyond the Russian experience, devolving public goods such as water into the hands of private firms, with the positive intention of attaching prices to increasingly scarce resources as a means of protecting them, have also run into major problems in countries around the world.

Markets may well be the most finely tuned mechanism we have for allocating resources efficiently around short-term costs and prices. But absent a robust framework of social and cultural values and priorities to channel market operations these efficient markets will lead to vast inequity and depletion of critical resources. That markets alone will protect and allocate scare resources such as water in a manner that is equitable and socially acceptable is a pernicious fantasy. When we dislike the role of government we refer to it disparagingly as the regulatory morass, command and control, and bureaucracy. When we favor it, we champion the level playing field.

But as we reorganize the social contract – changing the dynamic relationships between governments, markets and societies – the need for sound policy and effective government intervention is central to effective strategies for change. We live in a time where it is fashionable to trash government (bureaucrats, all), mock politicians (idiots, all), and demand that leaders be entertainers.

Through their terrific work with social entrepreneurs, organizations like Ashoka, The Skoll Foundation, Acumen and many others are empowering individuals to harness markets to meet pressing social needs. The winners of the Vodafone Wireless Innovation awards  presented at the Global Philanthropy Forum were inspiring to all of us. Who would imagine mobile phones as a key imaging tool in diagnosing cancer? But to empower entrepreneurs and harness market forces is not to delegitimize government from its still central role in ensuring opportunity, freedom, and dignity for everyone -- regardless of the extent to which anyone can or cannot participate in the marketplace.

Mining the Planet

I’ve had occasion to have some in-depth conversation with Achim Steiner, head of the United Nations Environment Programme. In the following clip below we discuss the unique role of humans play in both degrading and repairing the natural environment. And as part of that we review the conundrum of humans both as a species within that natural environment, and as the only species that can act on that environment in potentially catastrophic ways.

As I suggest to him, we are at a unique moment of species responsibility as we have a triad of technical capacity unknown to earlier generations:

• geographic information systems that let us see and analyze data in place;

• knowledge management tools and techniques that enable us to handle massive quantities of data; and

• a deepening understanding of resource and environmental economics that help us see market failure and the richer value of fully functioning ecosystems.

As Achim explains, we can and must do so much better than “simply mining the planet.”

(For more video of Jonathan Halperin presenting and interviewing on the theme of ecosystem restoration, see Hope in a Changing Climate.)

Forests and Food

As the elderly and aggravated Chinese gentleman said in Hope in a Changing Climate, “my grandchildren can’t eat trees!”

Reading the long piece in the New York Times (With Deaths of Forests, a Loss of Key Climate Protectors) this week it appears that across the world trees are being eaten not by children but by beetles and other insects at such an increasing rate that the role of forests in sequestering carbon need to be recalculated.

Here in Vermont, at the Dana Meadows Sustainability Institute, amidst the intentional community she inspired the maples and oaks and sycamores are beginning to shift colors; the smell of fall is in the air, and the grass has a sheen of just frozen water atop it so that it crunches when compressed under a boot.

In Aspen, at the Ideas Festiva l over the summer, trees were a focus as well – emblazoned with environmental information about their important and varied roles – as the life support systems of the planet.

When I present next at the James Beard’s Foundation annual conference in New York City, on the theme of money and media in the food sector, yet again trees will not be on the menu. But they will be on the agenda – as they should and must be.

(On the first day of the conference [Oct. 12] I will be showing an excerpt from Hope in a Changing Climate in a session entitled "The Power of Effective Leadership." On the second day [Oct. 13] I will be part of the panel "DIY: Cooking up a Better Food System -- Perspectives on How We Can Affect Change" leading a session entiteld "What We Can Do with Messaging". The conference will be broadcast live and video will be available at the conclusion of the conference. For more information on the conference, see the preview in the Huffington Post--James Beard Foundation Food Conference: How Money and Media Influence the Way America Eats and the Full Conference Agenda

The Sustainability Principle

In my closing remarks at the Sustainable Food Laboratory Summit I explained that I did not think sustainability was a goal, a metric, or even an approach to doing business. Rather, it is a principle. And it has at its core a fundamental rethinking of space and time.

Intergenerational equity – using resources today such that we don’t impair the rights of future generations to also meet their needs – is deeply in conflict with what we have come to see as the normal behavior of short-term profit maximizing corporations. That conflict is real and should not be smoothed-over or avoided.

However, for companies seeking to generate long-term value for investors, employees and the communities in which they operate sustainability is absolutely essential to success. It is in recognition of this, as I have noted elsewhere, that Unilever recently announced it was no longer issuing the seemingly sacrosanct quarterly financial report.

Over the longer term, it also becomes essential for business to manage, protect, and restore critical assets without which business will most assuredly collapse. Ecosystem assets are vital to long-term profitability.

And we now possess the tools needed to exercise this responsibility in ways that were unimaginable a few short years ago. First, the fields of resource and environmental economics have come into mainstream thinking. We understand that there is a price associated with using the carbon sequestration capabilities of the natural world. We recognize that it makes sense to pay more for the room with the ocean view than for the one overlooking the dumpster.

Second, knowledge management tools enable us to collect, analyze, understand, and share vast amounts of information about what is happening in our world – from the depths of the ocean, to ice caps, to soil moisture.

And third, we can now place this knowledge in concrete physical space, using geographic information systems.

With vast knowledge comes commensurate responsibility. As Prince Charles states at the opening of Harmony, "I don’t want my grandchildren, or yours, to come along and say to me ‘Why the Hell didn’t you do something about this?  You knew what the problem was.”

(Visit TheHarmonyMovie.comfor more information on the film -- and view the Harmony Movie Trailer from Balcony Films -- courtesy of Vimeo)

Geology and The Bottom-Line

Hannah Jones, VP of Sustainable Business and Innovation at Nike, had the most memorable lines among dozens of speakers at two recent conferences, the “Ceres Conference 2011: Igniting Innovation, Scaling Sustainability” and The Conference Board’s “Corporate Citizenship and Sustainability” gathering in Washington, DC. Hundreds of senior executives from America’s leading corporations exploring urgent questions of climate stability, water resources, sustainable agriculture, and innovation and entrepreneurship. But Jones stole the show with two powerful remarks. Knitting together transparency, a key metric for responsible corporate reporting, with core business performance, she quipped that “if you’re going to be naked you better be buff!”

At a more granular level, we learned why SAP, in a small but significant shift, now releases financial results with its sustainability report, forcing a common language across the NGO and financial communities. If you want to see SAP’s carbon footprint you cannot escape their profit and loss statement; and if you are looking for their operating margin you also come face to face with “total energy consumed.”

We also reengaged what I see as an increasingly tired question -- is there “a business case for sustainability?” Do companies ‘do sustainability’ to make money, to reduce costs, or to enhance license to operate, brand equity, and to retain new and younger employees who want to feel good about their work every day? We heard powerful examples of business growth, market opportunities created, and profits generated from embedding sustainability in corporate DNA and also using it as a lens to drive innovation.

But – and it is a big but – it seems to me that the way we have framed this debate diverts us from the core sustainability challenge. And that is how we think about time. There is a disconnect between the incentivized behaviors of short-term profit-maximizing corporations and the increasingly bold proclamations by corporate leaders that their organizations will increasingly act with the interests of intergenerational equity at the forefront of strategy, planning and business operations.

Whether the fossil fuels we use to generate electricity, water to make myriad food products, or trees for desks and paper; all of the natural resources (including atmospheric gases) that we use to make products (or hold industrial “wastes,” like carbon) exist across a geologic time-scale measured in hundreds of millions of years. Three-year ROIs and quarterly earnings reports are but microscopic specks of dust across, for example, the 350,000,000 million years during which coal was formed from giant plants that died long before the dinosaurs.

When we ask (and ask and ask!) that sustainability justify itself on the altar of modern-day market capitalism, is this not a bit like arguing with a lump of coal over its own formation? We, rather than the coal, are the newcomers; who says it needs to explain itself to us? Coal is surely not going to adjust to our short-term needs. The core question is thus not about the business case for sustainability but rather the lack of a sustainability case for short-term profit maximizing behavior.

Done right, over a time-scale that accommodates both geology and the bottom-line, human ingenuity and nature’s incredible diversity and robustness can likely find a harmonious synergy. But this will take real leadership.

Who among the leaders of the Fortune 500 wants to tackle this issue of time and link his or her compensation equally to sustainability performance and profits by insisting that compensation be reviewed on a three-year basis across an integrated bottom line? Who at the SEC wants to lead the charge to bring corporate oversight out of the 19th century and into the 21st century by moving beyond limited reporting of climate risk to helping figure out how to bring trillions of dollars of environmental externalities onto the books of our nation’s corporations?

Hannah Jones also noted that at Nike, “we are measured against our potential.” Who among our corporate leaders today has the courage to just ….?

Are you Handling or Mishandling the Climate Challenge?

The issue of our time is framed for failure. Climate change is the norm and everyone experiences it daily; the weather changes. Climate stability, however, is the goal – for people, business, and global ecosystems. We need predictable climatic conditions to make good decisions – whether to make major capital investments or whether to carry an umbrella.

And the climate is not an environmental issue but rather the connective tissue that ties energy together with business, development and poverty with agriculture, and health with the environment. No mere question of semantics, the fundamental definition of the challenge has immense impact on how we work to develop solutions.

The challenge is not fundamentally science, finance, or even policy. Rather, we lack the thinking and the institutions capable of effectively responding to an issue that cuts across so many traditionally distinct areas of expertise – especially when compounded by issues of risk allocation and intergenerational financial equity.

Are you handling or mishandling the climate challenge?