We recently published a new working paper, The Elephant in the Boardroom: Why Unchecked Consumption Is Not an Option for Tomorrow's Markets. The paper addresses the tension between development imperatives and the limits of the planet's resources. It calls on companies to make transformative change. I often find myself saying to companies that a sustainability change they are proposing is great, but just not transformative. So, what defines “transformative,” if that is what I am calling for?
Our working paper shows that in order to tackle the twin challenges facing the global community to bring people out of poverty while staying within the bounds of the planet's resources, we need to address the challenge of consumption. That means finding ways to grow that do not depend on selling more stuff to more people. It calls on companies to move from “improve” to “embrace” by tackling that challenge of unchecked consumption. That, to me, is the test for transformative business models.
“Improve” describes models that continue doing what we do now, but do it better. An improved model makes the same product but with less virgin material and energy. Improvements are comfortable for companies. They are to be applauded, but they are not enough. “Embrace” describes models that break from the underlying assumption that we make more money by selling more stuff to more people and change the form of what a particular business does.
Let me give an example. Walk into most large retail stores today and it is immediately obvious that almost all the revenue is derived from selling new things to people as often as possible. This has been a great model for growth in the past, but it can’t define the economies of the future because of the planetary limits I’ve described. So what might a transformative model look like for Tomorrow's Markets?
Shopping in Madrid. Businesses everywhere must adapt to resource limits. Photo credit: Lee Martin/flickr
I envisage walking into a store and seeing that perhaps one-third of the space is selling me new things, one-third is stocked with previously used items and one-third provides circular services to fix and update things I already possess (likely providing gainful employment to skilled employees at the same time). By 2030, I have been conditioned through skillful marketing to be equally delighted by them all. The company is making just as much money as it was previously, but consumption of materials is reduced by two-thirds, and that is about the minimum order of magnitude improvement we need if we are to avoid runaway environmental destruction (we are on track to triple our use of natural resources by 2050). Together with efficiency improvements already underway, this stands a chance of keeping the private sector operating within planetary boundaries.
Transformational changes alter what we do, not just how we do what we do. They are by nature risky and uncomfortable. But transformation has always defined the pathway of business, and cycles of change in the business world are getting ever shorter. Those businesses willing to embrace changes in consumption by leading the conversation will be the ones I anticipate providing the services I need in 2030. They will be the businesses that have contributed towards bringing 3 billion people out of poverty without breaking the limits of the planet's resources to provide.