Welcome to the Chrysalis Economy
Our species often does its best work after being backed — or backing itself — into a corner.
For me, 2019 began with the sale of SustainAbility, the company I co-founded in 1987, to ERM, a longer established — and very much larger — consulting firm. Like our just-launched Tomorrow’s Capitalism Inquiry, which I will cover in a later post and which is due to report in January 2020, this set me thinking about where the sustainable business agenda is headed.
Read the business media and you might conclude that sustainability has landed. With investors such as BlackRock CEO Larry Fink acknowledging the climate emergency, the U.N. Sustainable Development Goals providing a global change framework, and major businesses appointing chief sustainability officers, surely it’s mission accomplished?
Hardly. The SDGs indicate what we must do, but are a wish list. And most formulations of corporate social responsibility (CSR) and environmental, social and governance (ESG) investing are incremental, nice-to have, but very unlikely to shift the wider system in ways that even some red-blooded capitalists are beginning to call for.
Welcome to the "Chrysalis Economy." Back in 2001, I published a book with this title — warning that the triple bottom line agenda I had introduced in 1994 called for system change, not endless trade-offs among different forms of capital.
I argued that the global economy was heading for a major meltdown. The financial crisis of 2007-08 could have been that meltdown, but governments moved quickly — and largely successfully — to prop up the old order. The old "Caterpillar Economy" continued to chomp on the biosphere, simultaneously creating technologies and wealth divides that corroded democracy.
So the meltdown is still out there, waiting to be had. And what will make it harder this time is that while macroeconomics are again in disarray, so, too, are geopolitics and national governance. Where there was once a degree of consensus on what outcomes we wanted, a growing number of the world’s most important economies now seem borderline deranged.
The Caterpillar Economy, profoundly destructive of natural, social and other forms of capital, cannot go on indefinitely. Reality will intrude, I forecast, as it has done recently with melting polar icecaps, searing droughts, flash floods and deadly fires.
Champions of economic change may use different terms — sustainable development, abundance, biomimicry, regenerative breakthrough capitalism, circular economy, doughnut economics, impact investing, system change — but the story is the same. As we move deeper into the Anthropocene epoch, key elements of a more sustainable economic, social and political order are starting to self-assemble.
Capitalism is in profound crisis, as communism was some 30 years ago, a thought very much in my mind some weeks back. A dozen of us were sitting on the 26th floor of Warsaw’s Spektrum Tower, in the offices of Paris-based supply-chain management firm EcoVadis. Outside, impenetrable rain clouds hung low across the city. The air outside tasted of burned coal. Inside, we were discussing how to illuminate darker corners of the global supply chains that feed today’s globalized economies.
All around, winking through the murk, were the lights of construction cranes. They were busily erecting a new version of a city largely levelled by the Nazis in 1944 — and then held in an iron grip for decades by Soviet occupiers. When the cloud began to clear a little, we could just discern the brutal shape of one of Europe’s ugliest skyscrapers. Originally known as the Joseph Stalin Palace of Culture and Science, it was stripped of every trace of the dictator during a later period of de-Stalinization.
Like those who toiled on the original Tower of Babylon, those who worked on the Palace of Culture and Science hardly could have imagined today’s transformed world. Yet when the Berlin Wall was breached in 1989, a previously unimaginable crack opened up in communist reality.
Capitalism, once the sworn and eternal enemy, ran rampant. All around the Spektrum Tower were new high-rise buildings, a fair few sporting the logos of international companies such as EY, Marriott and Mercedes.
But capitalism is also now under existential pressure. On the same day that we looked down on Warsaw, climate leaders were finding their way around the Polish city of Katowice. Many wondered why their annual climate summit had been parachuted into the city, the dark heart of the country’s coal-producing economy — one of the many dark hearts of the Caterpillar Economy.
But the urgent measures being tested to address air pollution and the climate emergency are not universally popular. On the same day that we were in Warsaw, France was rocked on its heels by popular protests led by the Gilets Jaunes, or "Yellow Jackets." The protestors’ immediate concern was that the government’s fuel tax, partly designed to help address air quality issues and climate change, was adversely impacting the poor.
The global unity that had been so striking at the 2015 Paris climate summit now seemed to be in headlong retreat. Indeed, when I asked one leading ESG analyst what he expected more of as we moved into the 2020s, his monosyllabic answer was, "Fear." Pushed further, he predicted continuing successes for populism, although with growing — and more effective — political resistance. Overall, however, he expected a continuing "shift to the right, with less interest in the ESG agenda," particularly in the most disturbed countries.
But I was born an optimist. Dark clouds, silver linings.
Our species often does its best work after being backed — or backing itself — into a corner. And here we are, facing the need to help drive forward the necessary, inevitable "metamorphosis of capitalism," a phrase coined by my colleague Peter Michel Heilmann. This is the theme both of our ongoing inquiry and of a major event we are co-evolving in the Netherlands.
As they say: If not now, when? And if not us, who?