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The transformation toward a more sustainable form of enterprise and development began in the 1990’s with the “eco-efficiency” revolution when, for the first time, it became clear that reducing waste, emissions, and pollution could actually save money and lower risk. Eco-efficiency was complemented by the Millennium Development Goals (MDGs) and corporate initiatives in “social responsibility” aimed at addressing some of the more obvious and egregious social inequalities resulting from globalization. But as important and groundbreaking as these innovations have been, they have succeeded only in slowing the inevitable arrival of the Reckoning…

In 1997, I published an article in Harvard Business Review entitled “Beyond Greening: Strategies for a Sustainable World.” The piece was among the first published by the journal on the topic of “sustainable business;” and much to my surprise, it won the McKinsey Award that year as the best article in the journal. The article stressed that while corporate “greening” strategies aimed at incrementally reducing negative environmental impacts and building social legitimacy (e.g. eco-efficiency, CSR projects) were important, they would not be nearly adequate to the challenge (and opportunity) of global sustainability in the decades ahead. Even then, it was clear that “beyond greening” strategies—innovative new clean technologies, and more inclusive business models that included and lifted the four plus billion poor at the base of the income pyramid—would be essential if we were to fundamentally change the course of the global economy, and set it on a path to sustainability.

Now, twenty years later, I write with some good news and some bad news. 

 First the good news: A growing number of corporations, entrepreneurs, multilaterals and NGOs have launched “beyond greening” business initiatives. Indeed, “clean technology” has become a large and growing investment category with more than a quarter billion dollars of investment each year. And, my 2002 article with C.K. Prahalad entitled “The Fortune at the Bottom of the Pyramid” helped to ignite a new business-led movement described variously as “social entrepreneurship,” “inclusive business,” “sustainable livelihoods,” “opportunities for the majority,” and most recently, “shared value.” And, most recently, the advent of the Sustainable Development Goals (SDGs) has served to reinforce the scale and scope of the social and environmental challenges we continue to face.

Now for the bad news: We have not yet begun to fundamentally change the unsustainable trajectory of the global economy. Instead, over the past twenty years, we have added nearly two billion more people to the global population and further intensified our ecological footprint on the planet. By 2030, the global “middle class” is expected to grow from the current 2 billion to more than 5 billion people, with the attendant increases in material consumption, waste generation, and greenhouse gas emissions. And while the quest to eradicate extreme poverty is necessary and important, the science is also clear: we have overshot the carrying capacity of the planet and serious repercussions are now inevitable.

To make matters worse, over the past twenty years we have added two new and foreboding crosscurrents to the global sustainability challenge: First, a growing number of people in the developed world that have been left behind by globalization have realized their plight and flexed their political muscles—witness BREXIT in Europe, the rise of Donald Trump in the US, and a growing hostility toward global trade pacts. And second, the global spread of information technology and social media has inadvertently helped to fuel extremist movements, information warfare, election hacking, and misinformation campaigns around the world. The result? Nativism, atavism, protectionism and isolationism are now on the rise at precisely the time that we need more cooperation and multilateralism to address the mounting transboundary challenges that we face—climate change, loss of natural capital, rising inequality, mass migration, and terrorism.

We have thus arrived at the Day of Reckoning for business—and the World. As recent missives from the likes of Larry Fink at BlackRock implore, the time has come for business to finally step up to the plate. With governments in retreat and civil society overburdened, the world is turning to the private sector to address the monumental challenges we now face. The time is now to move beyond “sustainability” as a set of separate but important company initiatives to one of core purpose. We are now past the point where even aggressive clean tech and inclusive, base of the pyramid “initiatives” enable us to change course rapidly enough. Business cannot long thrive within deteriorating environments and failing societies. This means nothing less than refocusing corporate mission and purpose on solving the world’s problems, and building the capabilities and partnership ecosystems to make it happen.

For some time now I've been advocating ways for businesses, institutions, and individuals to heed the "Voice of the Planet."  Indeed, the future depends on it. Here's what we said a while back:

How do profit-seeking companies listen to the Voice of the Planet?  As my colleague, Sanjay Sharma and I suggest, start by drawing a clear distinction between "core" stakeholders--those visible and readily identifiable parties (like current customers and suppliers) with a stake in the firm's existing operations--and "fringe," or peripheral stakeholders.  Core stakeholders encourage us only to continuously improve what we already do.  Yet, answering the question of our time calls for disruptive, leapfrog innovation, which requires divergent thinking.  This means reversing the traditional stakeholder management model by learning to actively engage previously excluded voices from  the fringe-- the rural poor, urban slum dwellers, and advocates for nature's rights, just to name a few.

Twenty years ago, in 1992, the first Rio Earth Summit took place in Brazil.  While it was convened amid great fanfare and high expectation, the only really lasting legacy was the creation of the World Business Council of Sustainable Development (WBCSD) and the christening of "eco-efficiency"--doing more with less--as a key private-sector based strategy for sustainable development.  The governmental negotiations produced a massive volume--"Agenda 21" but little concrete action.

Next week, the Rio + 20 Summit will convene, again in Brazil.  The past twenty years has produced some good news and some bad news.  First the good news: Eco-efficiency has become standard practice in large corporations everywhere and is now spreading to the world's small and medium sized enterprises as well. This is a major accomplishment and has significantly reduced the impact per unit of output in economic activity. 

Now for the bad news: we have not yet begun to actually slow or reverse the level of human impact on the planet.  Indeed, over the past twenty years, we have tripled the size of the global economy, added nearly two billion people to the world's population, and further intensified our ecological footprint on the planet.  Growth swamped eco-efficiency.  Today, the science is clear: we have overshot the carrying capacity of the planet and serious repercussions are now inevitable.

In 1997, I wrote an article that appeared in the Harvard Business Review entitled Beyond Greening: Strategies for a Sustainable World. The piece won the McKinsey Award in 1997 as the best article in HBR.   The article stressed that corporate eco-efficiency (greening) strategies aimed at incrementally reducing negative social and environmental impacts, while important, would not be nearly adequate to the challenge of global sustainability in the decades ahead.  Even then, it was clear that "beyond greening" strategies--leapfrog clean technologies, and business models that included and lifted the four plus billion poor in the developing world--would be essential if we were to fundamentally change the course of the global economy, and set it on a course to sustainability.

In the 1990s, people spoke in terms of the need for fundamental change over the next decade or two.  Indeed, the title of the WBCSD's inaugural book was "Changing Course."  Unfortunately, all we got was continuous improvement through eco-efficiency. 

As I prepare to leave for Rio next week, my hope is that this Summit can plant a new stake in the ground--the Beyond Greening Stake.  I will do everything I can to drive this agenda.

We are running out of time.

Since the dawn of the Industrial Revolution, economies of scale have ruled the day, with massive investments in power plants, pipelines, factories, transmission lines, dams, and highways to more efficiently serve the burgeoning consumption needs of the rising consumer classes. Industrial-era technologies (such as electricity, petrochemicals, and automobiles) were also closely associated with mass production, the assembly line, and centralized, bureaucratic organization, resulting in the rise of organized labor, worker alienation, and growing social stratification.

As we enter the second decade of the new century, however, the "dark satanic mills" of the Industrial Revolution are giving way to a new generation of technologies that promise to change dramatically the societal, economic, and environmental landscape. The information economy powered by the microchip has already begun to revolutionize society by democratizing access to information and empowering the repressed. Indeed, You-Tube, Twitter, and the rapid emergence of the "blogosphere" have spawned a bottom-up revolution in user-generated content.



Increasingly, the technologies of tomorrow will be decentralized, distributed in character and disruptive to incumbent firms and institutions. It is much cheaper and more energy efficient, for example, to treat drinking water at the point of use, rather than transporting massive quantities of clean water through pipes from treatment plants only to have much of it leak out or be re-contaminated before it reaches its final destination.

Indeed, we are witnessing a dramatic reversal of the logic of scale--the new diseconomies of scale.

Think about it: Over the past decade or so, we have witnessed the rise of: distributed generation of energy, point of use water treatment, community supported agriculture, microbreweries, point of care healthcare, microfinance, and sustainable construction, to name just a few. Indeed, the term "nano" has become de rigeur.

Because existing players in the utility, energy, transport, food, water, and material sectors have so much to lose, however, it is enormously difficult for the entrepreneurs developing such distributed solutions to gain traction in established markets. Yet given their small scale and distributed nature, such clean technologies hold the potential to creatively destroy existing hierarchies, bypass corrupt governments and regimes, and usher in an entirely new age of capitalism that brings widely distributed benefits to the entire human community.

And rather than depending on national governments or paternalistic social engineers to design the future for the aspiring masses, these disruptive new technologies may be best brought forward through the power of capitalism--not the capitalism of the Industrial Revolution, which enriched a few at the expense of many, but rather a new, more dynamic form of global capitalism that will uproot established elites and unseat incumbents by creating opportunity at the base of the economic pyramid on a previously unimagined scale.

When Thomas Newcomen pumped water out of an English Coal Mine with a makeshift steam engine for the first time in 1722, little did he know that he was giving birth to the defining characteristic of industrial capitalism for the next two centuries--the relentless quest for greater labor productivity.  By substituting coal for manpower, the English textile industry drove the industrial revolution and established the template--and "rules of the game"-- for all industrial enterprises to come.  From cars to chemicals to computer chips, the very concept of "productivity" came to mean producing more product with fewer person-hours of work.

This metric made sense in the 19th century, when coal (and other raw materials) were plentiful and people were relatively scarce.  Now, however, exactly the reverse logic applies--fossil fuels and other raw materials are increasingly scarce and people are relatively plentiful.  We now live with the paradox that increasing business productivity means fewer jobs (especially when economic growth slows), precisely at the time that we need productive employment the most.

Occupy Wall Street, the Arab Spring, the corruption crisis in India, the rural revolt in China--all of these growing social protest movements originate from the same source--a growing "opportunity crisis" driven by unemployment, underemployment, alienation, and humiliation.  The time has come, therefore, to overthrow the tyranny of labor productivity and graduate to a new definition for what it means to be "productive" in business.

In the emerging economies of the world, this revolution has already begun.  ITC in India, for example, prides itself on creating livelihoods for the poor in the rural areas as part of its strategy for wasteland reforestation and agricultural productivity improvement.  Indeed, as commodity costs rise, it may make sense to redefine productivity--from capital intensity and labor efficiency to labor intensity and capital efficiency.  In the 21st century, "sustainable" enterprise must define success by the extent to which they create productive and fulfilling employment for the people of the world. 

Is business up the challenge?

My colleagues Amory and Hunter Lovins tell a wonderful parable:  In the early 1950s, the Dayak people in Borneo experienced an outbreak of malaria. To combat this terrible problem, The World Health Organization sprayed large amounts of DDT to kill the mosquitoes carrying the disease.  As expected, the mosquitoes died and the malaria declined.  Problem solved.

But wait--there were unexpected side effects:  The roofs on peoples' houses began to cave in.  It seems that the DDT was killing the parasitic wasp that previously controlled the thatch-eating caterpillars.  Even worse, these DDT-poisoned insects were eaten by geckoes, which were then eaten by cats.  The cats died, allowing the rat population to explode, exposing the local people to even more vicious outbreaks of plague and typhus.  To cope with these new problems, which were the result of the original solution, the WHO was obliged to parachute 14,000 live cats into Borneo...

This parable illustrates one of the most difficult challenges facing the initiators of any purposeful human action:  That any new solution or innovation will always create new problems.  Sociologist Robert K. Merton identified this phenomenon in the 1930s as the "Law of Unintended Consequences." While unintended consequences can be positive (e.g. taking aspirin for pain also appears to reduce the risk of heart attack), it is the negative ones that necessarily concern us the most--precisely because they are unforeseen!

Thus, a key criterion for determining if a given human endeavor is "sustainable" (or not) is whether or not the problems it solves are more significant than the new problems it creates.  Tragically, many of our most notable technological and industrial innovations of the past century do not appear to have passed this test.  

Take, for example, Fritz Haber's invention of synthetic nitrogen in 1909.  Until Haber figured out how to "fix" nitrogen from the atmosphere into a form useful to living things (i.e. plants), all the useable nitrogen on earth was fixed by soil bacteria living on the roots of leguminous plants.  Before Haber's invention of synthetic fertilizer, the amount of life earth could support--crops and humans, for example--was limited by the amount of nitrogen fixed by natural processes.  


Today, it takes more than a calorie of fossil fuel energy to produce a calorie of food. 

In fact, industrial agriculture accounts for nearly one-quarter of all greenhouse gas emissions to the atmosphere.  In addition, most of the synthetic fertilizer applied to crops is wasted--it either evaporates into the atmosphere (acidifying the rain, and further contributing to climate change), or it runs off into streams, ultimately ending up in estuaries like the Gulf of Mexico, where it stimulates wild growth of algae that then dies and smothers marine life, creating "dead zones," and adversely impacting coral reefs and other fragile life forms critical to marine fisheries and ecosystems.



Haber's process for manufacturing synthetic nitrogen is also what enabled less humanitarian industrialists to create the industrial munitions for modern warfare and terrorism--high explosives, defoliants, and poison gases.  Might it be that the new problems created turn out to be bigger than the problems solved?

Or take the case of nuclear power.  In the years following the Second World War (which was ended with the use of nuclear weapons), nuclear power was hailed as the solution to our future energy problems.  "Electricity too cheap to meter" was the slogan in those days.  Throughout the 1960s and 70s, the world pursued nuclear power with great vigor.  Until the accidents at Three Mile Island and Chernobyl put the brakes on.  

But these accidents only exposed part of the "new" problem--the potentially devastating consequences of a nuclear meltdown.  With the increased scrutiny these accidents brought, it also became clear that there really was no long-term, permanent, or safe way to manage the waste from spent fuel rods.  So, today we continue to store the material above ground in growing numbers of radioactive pools, which are potentially vulnerable to terrorist attack.  Even worse, the failure to secure all existing nuclear weapons presents the real danger that "loose nukes" will fall into the wrong hands, with potentially horrific consequences.

In recent years, the growing specter of climate change has brought nuclear power back to the forefront, since it produces no greenhouse gas emissions.  And then came the earthquake and tsunami in Japan and the Fukushima disaster.  In June, at the Tokyo Power Board Meeting, livid shareholders told the executives at the utility to "jump into the reactor and die."  

Might it be that the new problems created turn out to be bigger than the problems solved?

In the years ahead, we will face unprecedented challenges to design and develop "sustainable" solutions to our growing food, energy, water, and other problems. Of necessity, we will be forced to take action before we completely understand all of the unintended consequences.  The "precautionary principal" dictates that we pursue only those solutions that minimize the potential for massive negative unanticipated consequences.  

Experience over the past century teaches us that large-scale, centralized solutions typically fail the test for unanticipated consequences--most end up creating bigger problems than they solve.  Better instead to pursue the emerging wave of small-scale, distributed, point-of-use solutions such as distributed generation of renewable energy, point-of-use water treatment, and multi-crop agriculture.  Such solutions can "fail small and learn big," enabling technologists and entrepreneurs to fine-tune and perfect the model on a small scale before seeking wider application. In so doing, we can finally begin to create smaller problems...and begin the transformation to a sustainable world.