The Sustainable MBA

Here's the long view on the impact of Trump's presidency

A tourist telescope in Manhattan.

This is part 1 of a 2-part series.

At the beginning of 2017, with the political experiment of a Trump presidency about to unfold, it is critical to take the long view. Collectively, we still have to figure out how to meet the needs of soon-to-be 10 billion people where everyone is aspiring to a better quality of life but are already fighting over water and oil. There is an erosion of topsoil, fish, forests and biodiversity; the oceans are rapidly acidifying and it is getting hotter all the time.

Sustainability offers a powerful way to see humanity and the creatures of the earth safely through this bottleneck towards a just and prosperous future. Across the world, we have been making rapid and surprising progress in service of that vision.

To see this, consider the simple version of the sustainability roadmap laid out by Paul Hawken in his seminal 1993 book "The Ecology of Commerce." Hawken argued that sustainability requires business systems to mimic natural systems. He emphasized three particular imperatives.

He said that nature 1) runs on solar energy (including wind power), 2) processes all waste as food and 3) depends on diversity and thrives on difference.

The first two ideas — the clean energy imperative and the circular economy imperative — are now well understood. In the third idea, Hawken was talking in part about the rising business monocultures of the late 20th century: the offshoring of manufacturing and the big-box assault on local economies of retail and supply.

The hollowing out of rural and smaller-town America due to globalized supply chains in turn became fertile ground for candidate Trump. So let’s call this idea the regrowth of local and regional economic ecosystems, or community revitalization. Sustainability requires inclusive prosperity. Unless we create conditions within our business and political system for all to thrive, then the collapse of those systems will return to affect us all.

Progress and possibilities

How have we been doing on these three fronts since Hawken wrote about them 25 years ago? On clean energy, amazing. Just 10 years ago, the vision of a de-carbonized economy powered by renewable energy and an electric vehicle fleet was just that, a vision.

Today, wind and solar are the fastest growing energy sources on the planet. On a good day, Germany, the biggest industrial power in Europe, gets 90 percent of its electricity from renewables. The German government just called for the end of the internal combustion engine by 2030.

The renewable transition has been truly remarkable. To transform a global economy powered by cheap fossil fuels required a tag-team, 40-year push from the U.S., Germany and most recently China. Government research and support for nascent industry drove the cost declines that finally have pushed solar and wind (and soon electric vehicles) into dominant competitive positions in the market. While the revolution will continue regardless of what the U.S. does, the pace at which it advances — and the places in which it advances most rapidly — still will be affected by regional and national policy.

Circular challenges

By contrast, achieving a truly circular economy is largely a business challenge. Ultimately, businesses must pioneer a set of radical redesigns that dramatically reduce ecological footprints and creates profits from these approaches. If they are not profitable, the new techniques will not spread rapidly and sustainably across the global economy.

In the last two decades, the remarkable rise of the business sustainability movement has driven these changes. Hawken’s book famously inspired Ray Anderson of Interface Carpets to become the first major CEO convert to building a "purpose-driven" firm. When Anderson died in 2011, the company was half-way to "Mission Zero" of no negative environmental impact. The daily stories featured on GreenBiz illustrate the business case for sustainability and the wealth of examples illustrating the path towards a profitable circular economy.

This year, in rating their top 100 CEO’s worldwide, the Harvard Business Review added an environmental, social and governance (ESG) component to help determine the ranking. In the Review’s accompanying interview with the leading three CEOs (all European), each said that social and environmental purpose was central to strategic thinking and core to competitive advantage. Maybe this is "purpose washing," but it is nevertheless a dramatic ideological departure from the recently dominant Milton Friedman dictum that the sole mission of business should be to maximize shareholder value.

In very short order, every major global company and many smaller ones, as well as large non-profits such as universities and hospitals, have teams whose job it is to promote the circular economy. They are pursuing strategies consistent with Hawken’s vision of radical redesign along principles laid out by nature. At the same time, thousands of start-ups driven by social entrepreneurs are pioneering new business models focused specifically on solving social and environmental challenges. Are we there yet? No; this will be the work of a century. But we have made a lot of progress in a short time. 

Local business, strong community

There is also promise around Hawken’s third revitalization. Just prior to the election, a New York Times article argued that the "Walmart era is over." After rising for years, global trade volumes are flat. The article stated:

The automation of factory work is making it harder for other nations to follow [China]. Dani Rodrik, a Harvard economist, calculates that manufacturing employment in India and other developing nations has already peaked, a phenomenon he calls premature deindustrialization (PDF).

If the technology underlying robotics is undermining globalization, it is now also laying the foundation for a new wave of locally and regionally-based economic activity. IT-enabled production is a key factor helping to overcome the economies of scale and global wage differentials that drove the creation of global supply chains.

Consider community supported agriculture. Small farms have seen a resurgence as the web dramatically has lowered the cost to farmers of customer acquisition. Solar panels, wired into the increasingly smart grid, now support both local energy production and installation and maintenance jobs. Also, the gig and sharing economies are full of new independent contractors, precarious as those jobs may be.

The IT economy has its own immediate problems, including monopoly control over the platforms, reinforcing inequality in wealth and power. In terms of re-localizing production, it is allowing individuals to develop new forms of livelihood, even as the old ones have collapsed. The key will be to channel these opportunities into community revitalization with inclusive local health, education and welfare policies. The places that are making the most out of new economic opportunity are cities, small and large, where public engagement and private-public partnership are strong. These include progressive cities in conservative states, such as Nashville, Austin and Salt Lake City.

The IT revolution is also a double-edged sword for local economies, as the robotics innovation soon will displace not just manufacturing jobs in India but also health care workers and lawyers in the U.S. One of the fundamental challenges to community health will be the need to adapt to a continuous loss in jobs as the pace of labor-saving IT accelerates. This process again will require resilient communities, not simply a collection of lone-eagle, gig-economy workers.

The upcoming Trump administration will affect these processes. I’ll explore the potentials in next week’s article.