Category Archives: public policy

public policy

Video: Industrial Strategy for a Sustainable World (April 2017)

Back in April I did a two hour session for London Futurists, a group for people who are interested in the future and maybe want to help shape it.  David Wood, the smartphone entrepreneur who runs the group, asked me to run a session.

For me it was a chance to try out my latest thoughts on industrial strategy for a sustainable world. I speak for about an hour, and then there’s another hour of questions.

In a nutshell, the talk gives a wireframe which I believe you can use to organise all of the economic elements of the transition to a sustainable world. You can look at the slides here.

Doubtless the talk is wrong about lots of stuff – my aim was to be wrong in useful ways!

I’ve had lots of feedback from the people at the talk, and others to whom I’ve given (shorter) versions. I’d love your thoughts too. Please comment below or get in touch in the normal way.

It’s clearly a work-in-progress but so far people have been finding it useful, especially to see how their work is a contribution to the wider change.

Even so, I know it is far from the finished article. I’ve had thoughts since on where to improve and where to pivot. These will have to wait for another post! In the meantime, enjoy the talk and thank you again to David Wood for giving me the chance.

 

How will I tell if I have had a good sabbatical?

So, I’ve just started my sabbatical. I have three months ‘off’ — which I have chosen to be three months exploring how we can create systemic change in business for a sustainable future. This week has been about setting myself up. I’ve been trying to figure out what I want to achieve. When it finishes on Mon 16 May, how could I tell if I have had a good sabbatical?

The first evidence of a good sabbatical are the outputs associated with the different lenses I have: climate change, digital revolution, innovation policy, enabling business narrative and political economy (my meaning: the way we organise ourselves in society — the interplay of economics, law, politics and more that set the operating context for individuals and organisations, and are expressions of dominant beliefs in society).

On ‘bending the curve on climate change’ my hypothesis is that the ways we try to re-organise ourselves in the near-future to urgently address climate change are likely to become the vehicles we then use to address other sustainability challenges (like delivering the Sustainable Development Goals). For instance, much of the analysis of The Paris Agreement says that the surprisingly-ambitious outcome (working towards 1.5C) came from new forms in the negotiation process: Chinese appreciation of the impact of climate change; business-NGO-government high ambition clubs; a move from the negative framing of ‘burden-sharing’ to a more positive one of opportunity; and so on. Imagine if these continue, and start to be applied to other global, diffuse challenges like inequality.

So, I want to know more about:

– what features of a new political economy are emerging in order to address climate change?
– how could we nurture them, so they are stronger and more effective?
– what might the long-term consequences be, especially constraining our ability to address other important (but less urgent) challenges?

Also, as part of that I’d like to see what happens when I try to help a fabulous institution to act. I’m chairing a panel on the 17 March where various luminaries from across the university will be exploring the role of a university like Cambridge in the societal transformations required to bend the curve on climate. I’m seeing the university as a microcosm of the bigger picture. At the least, I’d like to know more about the barriers to prominent institutions playing a role that matches their potential with the scale of the problem, on the presumption that this will be useful data for others. Even better would be helping move the university forward at least a little how it helps society to address climate change.

When it comes to surfing the digital revolution to a sustainable future my hypothesis is that it is not possible to put the genie back in the bottle, that positive social, environmental and economic impacts are very possible, but will not just ‘magically’ appear. Instead we must be proactive in getting the best from the profound changes that come alongside the technological revolution. I have some handle on the hopes and fears (which will come out in an article in Forum’s annual compendium called The Long View in March). Less clear to me is what you would do to be proactive. What institutions, regulations, etiquettes, incentives and more would you use? How could you experiment with them starting now?

So, the output I’m going for here is a ‘concept note’ of what that programme of experimenting might look like, alongside more connections that can provide the insight into that concept note, and would be interested in using the analysis.

The output on pro-sustainability innovation policy is in many ways more straightforward. A friend of mine is a senior politician (not in the UK, and I’m not sure yet if I can say who). He has asked for an input into their manifesto. So, I’m going to be writing a report which is ready to use by at least that person, and I hope by other policy-makers plus others who are interested in fostering pro-sustainability innovation. My instinct — and we’ll see how true this is — is that many of the recommendations will also be applicable to large businesses, investors, technology transfer firms and more.

The enabling business narrative is a bit more uncertain because it depends on others. At the least I want to have a map of the different ‘narratives’ that are currently in plan (such as Volans’ Breakthrough Capitalism, or Alex Steffen’s Bottleneck Decade, or Forum-BSR-Shine’s Net Positive Project). Better would be to see if there is some coordination and connection between many of the different players to provide more coherence. But that means others wanting to play, which isn’t in my control.

The final lens — creating the political economy we need — is where the ends is the means and vice-a-versa. Given that I’m saying ‘political economy’ is the way we organise ourselves then how I go about my sabbatical is itself an expression of the potential political economy.

So, the second evidence of a good sabbatical, alongside these outputs, is that I have experimented with being the change I wish to see in the world. I want to try ways of creating those outputs that are the pre-cursors of the political economy we need. My starting point there — which I want to share soon — has already been well-articulated, I think, in ‘Embracing Complexity’. In one sentence the mindset is systemic, allows for emergence and therefore acting with and through others with a proactive attitude to change and learning.

The third and final evidence of a good sabbatical is that more change is happening. The outputs are being used (even if to say “not that, but this”). There are the first signs of impact One person reading, thinking, talking, connecting, writing is not enough — any more than 70 people. The impact will come being a catalyst with and for others.

Which leads to my invitation. If you are interested in any part of this — if you have insights, want to do something, are already doing something relevant, know someone I should connect with, have a suggested piece of reading, whatever — then do get in touch.

If you have better ideas on what I should achieve in the next 3 months then let me know. I’d love to help you, in our attempts to create a sustainable future.

“If I had £1m to spend on a more resilient economic system I would…”

A couple of weeks ago Friends Provident Foundation asked me to finish this sentence “If I had £1m to spend on a more resilient economic system I would…” in a filmed interview. That’s not out yet, so here’s the 10 ideas I gave them.

“If I had £1m to spend on a more resilient economic system I would…” do 2 sorts of things: (1) address shocks that we can anticipate, and (2) grow our ability to bounce back better from shocks we can’t predict.

(By the way, below are the 10 ideas, organised under those two headings. I try to preface each idea with a diagnosis (“Right now…”) to set up the rationale. The ideas are informed by The Community Resilience Lab and Global Dashboard’s Brookings paper “Confronting the Long Crisis of Globalization: Risk, Resilience and International Order”.)

 

Let’s start with the shocks we can anticipate.

There are price shocks: energy, raw materials, and food. For each of these there are more people, more prosperous in more places driving demand, while supply is constrained by the natural world and societal/industrial bottlenecks. What can we do?

Idea 1: invest in assembling s network of player who can address the financial barriers to investment for resilience in:
-clean, secure energy supply
-reducing energy demand through efficiency
-get more value from using less physical stuff by creating the infrastructure for a circular economy

Idea 2: scope out how to shift to a diet that is less exposed to price shocks and also healthier (probably – less meaty).

Another shock we can anticipate is extreme weather events. This is a big, big deal but I hope the recent floods mean that government will address this.

 

Now let’s look at growing our ability to bounce back better. Think of Detroit. Why did it struggle over the last few decades? Because of a lack of diversity. It relied on 3 big companies in only one industry. When the industry changed, the risk and resources for response were both too concentrated. Therefore, we need to distribute risk and the ability to respond more widely, in order to bounce back better.
Right now – complex challenges tend to go up to senior leaders because organisations are arranged in hierarchical silos. Therefore we need to create shared awareness of the need for resilience at a senior level.

Idea 3: a ‘Leaders for the Future’ course. Mix together top civil servants (especially from the Treasury) with business people and beyond. Help them push the ability to respond further down their organisation.
Right now – UK towns are at the whim of globalisation and the sheer economic density of London.

Idea 4: Pick a medium-sized town to pilot ‘being resilient’. Throw a lot of resources at it, as a pilot that you can learn from and then scale.
Right now – assembling the necessary coalitions for specific challenges is expensive and slow.

Idea 5: provide core funding for semi-permanent platforms that are ready for co-ordinated action when the need arises.
Right now – risk of failure is usually carried by the weakest member of a supply chain (e.g. the smallholder producers of tea, rather than the multinationals).

Idea 6: create financial products that distribute risk according to who benefits and has the resources to respond, not according to who can dictate terms.
Right now – investment professionals are blind to the systemic risk presented by climate change. Our pensions could be wiped out, unless we take action.

Idea 7: get behind the carbon bubble / divestment campaign.

Idea 8: invest in making climate change a consideration in the ‘macro-prudential’ analysis that financial regulators are now focussing on.
Right now – the UK does not have the requisite variety of industries. We’re too dependent on The City for economic growth and tax take,

Idea 9: get behind efforts to create more entrepreneurs, especially ones which are have ideas that could mean we have fun within environmental limits.

Idea 10: get behind efforts to grow the ability to adapt in the young and the less-skilled (and therefore, more exposed) worker.

 

Finally, it’s also worth bringing resilience into your investment decision.  In practice that means:
-create a portfolio that create medium-term options
-learn as you go, and kill what’s not working
-leverage in the resources of others

 

No idea if Friends Provident Foundation will take any of these ideas. We’ll see!

The challenges of answering “Does CSR matter?”

Good luck to a new research alliance looking at whether CSR can deliver competitiveness, jobs and environmental protection for EU policy makers. They’ll need it – their research has big challenges of definition and causation.

Yesterday I spent a day at the first stakeholder roundtable of the CSR IMPACT research project. The alliance of 16 universities and research institutions across the EU has 3 years to answer a simple question: does CSR matter? Or, as they put it:

  • what benefits and impacts does CSR actually bring beyond company borders to the economy and society at large?
  • How can managers, policy makers and stakeholders better measure and evaluate its impacts?
  • What does this mean for smart mixes of public policies and corporate strategy?

All of which is very laudable. Throughout the day I was struck by the immense challenges of definition and causation they face.

1. what is CSR? They chosen to use the European Commission definition, sensibly given they are the intended audience for policy recommendations. See if you can spot the problem with it:

the voluntary contribution of business to competitiveness, social cohesion, and environmental stewardship.

Well, the problems are legion. As Nobel prize-wining economist Amartya Sen says in The Argumentative Indian, ‘within the limits of feasibility and reasonable returns, there are substantial choices to be made.’ Isn’t very nearly everything a company does voluntary? Even with compliance, there many be many ways of complying with the law.

The researchers have tried to overcome this by creating a conceptual framework that proposes a combined definition and  causation: sustainability trends drive a CSR response (eg a motivation to do something about climate change), which drives a CSR strategy (“let’s do this”), which drives CSR performance in the firm (reduced carbon emissions, reduced costs), which in turn drives CSR impact on the rest of society (environmental protection).

But the problem of separating the voluntary CSR response from the involuntary response remains. You could take a narrow reading: the CSR strategy has to be called a CSR strategy at the time. But then you would miss out on lots of responses to sustainability trends that happen in the mainstream of the business without ever being labelled CSR.

Or you could take a wide reading: the CSR strategy is truly all responses to sustainability trends.  Then you’ve just changed the definitional challenge to ‘what counts as a sustainability trend?’ It could be everything the company does in response to an external stimulus. That would make CSR into good management. Good to have that validation, but not good if you’re trying to identify the particular impact of CSR.

2. what is competitiveness? A few years ago I published a booklet on sustainability and competitiveness for the ICAEW, Europe’s largest accounting institute. In the research I discovered that there is no agreed meaning for competitiveness. It is applied liberally for companies, cities, regions and countries but is very nearly meaningless. If you don’t believe me look at this FT article by renowned economist John Kay.

If you’re measuring a firm’s competitiveness, why not just measure its returns on investment or economic value add? If you’re measuring the competitiveness of a country why not just look at GDP growth? If you’re measuring the contribution of a firm to EU competitiveness, why not scratch your head a lot?

3. how prove causation? Finally, there is the challenge of causation. How can you prove that CSR has driven some aspect of corporate performance and that performance has created some direct impact and link that direct impact to a ‘meta-impact’ when your definitions of CSR and meta-impact are so fuzzy?

Obviously, the researchers are aware of these challenges. They may even overcome them. I’m struck that they will be reporting in March 2013. By then it will be 4 years since they first framed their research. An awful lot has happened in the last 4 years of CSR – not least, a shift to ‘sustainability’, not ‘responsibility’ (in my view).

As i say – good luck!

The battles over a UK Green Investment Bank

It looks like the UK government will create a  Green Investment Bank. But there are battles to come, as everyone wants it to deliver on their favoured area – at least, that is my take from last night’s Aldersgate Group event.

There are many financial barriers to the transition to a low-carbon economy. Most technological transitions happen because an old platform (eg steam trains) has diminishing returns which make exploring a new platform (cars) worthwhile. But we’re trying to do this ‘early’ when it comes to the move to a low-carbon economy: non-renewable energy would probably have decades to run if it wasn’t for this pesky problem of putting the prosperity of billions at risk. One mechanism is to invent a Green Investment Bank which can reduce the risk to investors, and so reduce the costs of the transition for us all.

Last night’s excellent Aldersgate Group event showed how much progress there has been in getting a Green Investment Bank to happen in the UK government. There is a consensus on the need from the private sector and the policy wonks. The government announced an intention to create one in the Comprehensive Spending Review (see here).

But battles remain. There are all sorts of rumours that the Treasury is fighting a rearguard action to make the bank into a fund – which would vastly reduce its ability to leverage in private capital or not an independent institution, which would expose it to the very political and regulatory uncertainties that a Green Investment Bank is supposed to overcome. Last night the Permanent Secretary from the Department for Business, Innovation and Skills (BIS) spoke as if all these battles had finished. Let’s hope so.

For me the event last night  brought out two further battles: speed and focus. The CSR announcement commits the Coalition Government to having the £1bn in place by 2013/14  – which feels a long way away. The Perm Sec hinted that government asset sales might provide capital earlier. As I mentioned in an earlier post, The Met Office publication on Informing Choices last year said we need to have a peak of global emissions in 2020 and 5% reduction each year to stand a 50:50 chance of avoiding dangerous climate change. There was lots of expressed concern on speed in the hall.

My own concern was more about focus. At one point the Aldersgate Group chair said a public bank should have a public mission and so must also address – and I confess I couldn’t write them down fast enough, so I may have got the specifics wrong – rural development, the balance of the economy, competitiveness, high-tech manufacturing and more. Others with questions from the floor wanted the bank to focus on providing venture capital, corporate financing, community investment,  infrastructure and more.  Everyone wants the bank to deliver on their favoured area.

Any organisation that has 5+ foci does not have focus. There is a great risk of forcing the bank to solve all problems, and so solving none. Surely creating a lower risk, higher return path to a low-carbon economy is public mission enough.

The next battle is going to be defining a focus which gives bang for buck (for effectiveness) and quick wins (for credibility). The heavy implication last night was that the focus at first would be infrastructure. Lots of people are going to be disappointed.

Stephen Green on Corporate Philanthropy: cynical conservative or careful radical?

At Monday night’s inaugural Pears lecture, HSBC Chair and UK government minister-in-waiting Stephen Green argued for a revitalised form of Corporate Philanthropy, where all companies asked themselves “how do we contribute to the common good?”. I came away not sure if he is a cynical conservative or careful radical.

The first day of November was also the first Pears Business School Partnership lecture at London Business School. The lecture was given by Stephen Green, chair of HSBC, lay preacher, author and soon-to-be UK Minister of State for Trade and Investment. He gave a subtle speech on how companies need to respond to shifts in their operating environment. I agreed with the shifts he described, but was troubled by how he framed how to respond.

Anyone who has to frame the business case for sustainability should pay attention to how he explained the shifts in operating environment following the financial crisis.

– Public opinion has changed, so companies need to acknowledge wider social needs and expectations.
– Global challenges have a radically different nature and vast scale, so no one stakeholder group can solve them alone
– The financial crisis exposed short-term thinking in boards and investors.

The implication behind the specifics is  that the context in which business makes money has changed. It is not a question of taking on responsibilities for moral reasons. He is arguing for an enlightened self-interest, where companies create a better future so they can be more successful. This confirms the notion of a leadership business case I developed as part of Better Decisions, Real Value – companies can lay the foundations for a sustainable business context by aligning the drivers of business success with the needs of society. In this way they can create more ‘win-wins’ where sustainability and profitability go hand in hand.

What I found strange was Green’s proposed response: we must create a new vision of corporate philanthropy. He wants business to expand move philanthropy beyond just giving to the favoured charity to a new mode of thought that considers “how the company contributes to the common good through its business model”. At various points he equated this with corporate sustainability, community investment, social investment and a few other buzzwords (so companies must “integrate community investment into the core business model”, whatever that means).

What troubled me was  making corporate philanthropy do all the work.  Why bother giving a well-worn phrase such a radically different mean from the one in current use? Yes, the original Greek meaning had something about a love of humanity for greater production. But that was a long time ago. Today’s mainstream business commentators would at the least be sceptical, especially ones who believe the business of business is business. Why bother using “philanthropy” when sustainability is coming to mean a lot of what he said?

My immediate reading was not generous. One critique of philanthropy is that it addresses the symptoms but not the cause. Indeed, the reason why some people and companies have such concentrations of resources and power is because of the status quo. Why should we expect them to change it? So, at first I concluded Green is cynical conservative: here’s is a banker and future minister appropriating just enough of the language of change to be convincing but doing so in a way that leaves the fundamentals untouched.

But on the way home I realised there is a second reading: careful radical. Let’s take a generous reading of his motivation. He knows business people are a sceptical bunch. The evidence of environmental crisis and failure of social systems just bounce off their cognitive frames. If he comes out with all guns blazing sustainability his peers will just put pigeon-hole him as ‘gone dotty’.

Could using corporate philanthropy be a wise and far-sighted attempt to use ambiguity to create longer-term change?

Even if he does have that intention, I’m afraid that I don’t like it. The Met Office publication on Informing Choices last years said we need to have a peak of global emissions in 2020 and 5% reduction each year to stand a 50:50 chance of avoiding dangerous climate change.

That’s a lot to do in a short time.  Using ambiguity for longer-term change is simply not enough.