Strongly Sustainable Business Models: A Personal Perspective on a New Field of Practice and Research

Submitted by Antony Upward on Thu, 2012/07/26 - 3:36pm | Filed under:

Welcome

This is the first post in the blog for the Strongly Sustainable Business Model Group (SSBMG), an applied research group within OCAD U’s Strategic Innovation Lab (sLab) in Toronto, Ontario, Canada. The SSBMG group’s convener, Dr. Nabil Harfoush, has asked me, as a cofounder of the SSBMG and the originator of the term “Strongly Sustainable Business Model”, to provide my perspective on this exciting new field of practice and research.

Flourishing – A New Goal for Our Times

For the first time in the Global North since the end of the 2nd World War, we are starting conversations about the goals for society and the economy embedded within it.  Ordinary people, the 99%, are beginning to ask: is this it?  Is this as good as it gets for me, my family, my children, my grandchildren, for other life on the planet?  Is there no alternative?[a]

Noted Industrial Ecologist John Ehrenfeld suggests, in a very positive way, that there should be a new collective goal – sustainability:

“The possibility that human and other life will flourish on this planet forever” 

He challenges us to set our goals high, not to be satisfied to merely scrabble and scrape on a rat race of survival.  He challenges us to use our understanding (albeit incomplete) to set an audacious stretch goal for ourselves and future generations: a goal of flourishing, proactively choosing to attempt to maximize happiness now and in the future.  

How inspiring is that?  How exciting to be part of the first generation that has the knowledge to proactively, albeit humbly, attempt such an audacious goal!  What an epitaph for future generations.

“In the early 21st Century C.E.
there lived a generation of humans
who humbly chose as their goal,
the flourishing of themselves
and all other life, forever”
– Future Historian

Flourishing and Strong Sustainability

But how to achieve this flourishing?  This is the realm of economics – literarally the “management of a household”. The last time there was significant discussions in the Global North about the how to achieve flourishing was in the period starting with The Great Depression of the 1930s and ending in the years following the 2nd world war.  The result was a broad consensus of economists that crossed the political spectrum: maximizing GDP growth (and hence per capita income) within a democratically regulated system of capitalism was the best approach to achieve flourishing.

What we now call neo-classical economists (i.e. the current main stream majority), still argue that this approach, based on models of the economy consisting only of firms and households, remains both necessary and sufficient. On the other hand, Ecological Economists disagree stating existing models and policies are neither necessary nor sufficient. Ecological Economists start by re-imagining the scope of the problem economics needs to address: The management[b] of the nested systems of the environment, society and the economy in order to achieve the flourishing of human and other life.

Further, to differentiate their understanding of what flourishing requires, Ecological Economists have coined the term “strong sustainability” [c].  This is defined as the impossibility of replacing natural capital with any other kind: human, manufactured, intellectual, social or financial.  This is felt to be particularly true in time frames which might help mitigate the worst effects of climate change and other anthropomorphic impacts as described by the IPCC and other bio-physical science.  [d].

Einstein suggested that new paradigms are required to solve problems created by old paradigms.  This would suggest that following the old-paradigm advice of neo-classical economists is unlikely to get us out of our current mess which has arisen as a result of pursuing that paradigm!  In other words it is unlikely that widespread flourishing will be produced by largely relying on technology (i.e. manufactured and financial capital) produced within a system with a singular goal of GDP growth[e].

But this discussion is at the macro-economic level – the level of the planet and societies. What about at the micro-economic or organizational level?  We know that it is the action of humans within the organizations we construct that plays a very significant part of achieving or failing to create flourishing.  And from ecological economics we now know that achieving strong sustainability implies that at the organizational level environmental, social and monetary goals must be integrated.  

The Leaders Co-Designing and Co-Creating the Future

What evidence do we have that it is possible for our organizations to undertake this integration; taking the steps to create the conditions for strongly sustainable outcomes to emerge, and hence proactively contributing to the flourishing of human and other life?

In places with sufficient freedom of thought and action, over the last 60 years an increasing and diverse set of individuals, communities and organizations has been working hard to figure out both the necessary and sufficient steps that will enable flourishing for all of us on spaceship Earth. These leaders are attempting to create strongly sustainable outcomes at all levels: globally, nationally; in our organizations and communities, in our homes and families.  And the early results are encouraging[f].

Challenge: Designing Strongly Sustainable Organizations at Scale

This is a good start but it leads to another challenge.  How can we broaden the work of these leaders?  How do we proactively ensure all our organizations are undertaking the integration of the environmental, social and monetary?

We do have a significant amount of knowledge of the conditions from which strongly sustainable outcomes emerge - although we need to humbly acknowledge that our knowledge is incomplete.  

But simply amassing even the existing knowledge and continuing the relatively small scale experimentation of leaders is clearly not enough to achieve wide spread flourishing.  We need to figure out how to “cross the chasm”.  I believe to achieve flourishing at scale we need the knowledge of strong sustainability to be put to widespread use.

One way that has repeatedly been shown throughout human history to scale the adoption of new knowledge is to embed that knowledge in well designed tools – tools which people want to use.  In this case we would be embedding the knowledge of strong sustainability in tools which help people design strongly sustainable organizations – organizations which contribute to flourishing.  

Goals for Tools to Design Strongly Sustainable Organizations

So if tools are a way of helping people to create large numbers of organizations proactively attempting to produce flourishing, what should be the goals for the design of such tools?

I would suggest the following.  We need tools that:

  • Are straight forward and attractive to use – so people want and can use them – i.e. low barriers to use, without over-simplifying: as simple as possible but no more so.
  • Enable people to design strongly sustainable organizations of high quality – i.e. consistently the organizations they design reliably and effectively produce flourishing.
  • Enable people who do this design work to be able to do so efficiently – i.e. the effort required to produce strongly sustainable organizational designs of high quality is reasonable

In my research I sought out such tools.  But I’ve concluded that tools which meet all these goals don’t appear to exist.

Existing Organizational Design Tools

However, before starting to design a new tool which meets all these goals from a blank sheet of paper, an obvious question to ask is: are there any existing tools which meet some sub-set of these goals that could be enhanced to achieve all of them?

Let’s step back for a second and look at the goals of an organizational design tool from the neo-classical economics perspective: i.e. a tool which enables the efficient design of profitable organizations of high quality - consistently, reliably and effectively producing monetary profit. The design, launch and operation of an organization which is “simply” attempting to be monetarily profitable over time is a complex task with 60% failure rate in the first 7 years in the larger OECD countries[g]. Looking at this high failure rate caused some applied researchers to ask what could be done to help business people reduce this failure rate – i.e. improve the quality of business model designs and the efficiency of their designers.  

Led by the ground-breaking work of Alexander Osterwalder, and the Business Model Generation community[h], in the past 8 years there has been a concerted effort to increase the likelihood for longer term financial survival of businesses.  Their approach to achieving this goal has been to embed our best knowledge of what leads to profitable business in practical tools that can improve the quality of the design of for-profit businesses, and the efficiency of those who design them[i].

The reception to Alex’s tool to help improve efficiency of the design of high quality business models has been amazing.  Nearly 500 people paid up to US$250 to be involved in a community which help create the book Business Model Generation based on Alex’s 2004 PhD[j].  As of this writing (July 2012) the book has sold over 350,000 copies in 23 languages since its launch just over 2 years ago!  This is one of the largest ever rate of sales for a business book.

Clearly a lot of people believe a well designed organizational design tool can help them!  This is also inspiring – change at scale is possible with a well designed tool!

A Gap to be Closed

But, as I noted, all of these tools are intended to help more reliably create financially profitable businesses[k]  As I’ve discussed this is legacy thinking.  At best, the macro-economic outcomes which emerge from organizations taking this approach can only be weakly sustainable.  It is highly unlikely that human flourishing, let alone planetary flourishing will arise from this approach – and certainly not in time frames which prevent a great deal of unnecessary suffering of humans and other life[l].  

We urgently need our organizations to be strongly sustainable, i.e. we need them to directly create the conditions under which flourishing can emerge.  The existing business model design tools aren’t up to this goal; we need tools which directly support this much wider objective. But let’s not throw the baby out with the bath water.  Assuming a monetary system of some sort will remain, the generation of sufficient monetary profit will remain vital[m].  

So I believe the existing organizational design tools are a good place to start; any strongly sustainable organization will still have to be concerned with its monetary performance.

A Big Gap to be Closed

I want take a moment and recognize what closing this gap implies: moving from tools which can help design profitable businesses to tools which can help design strongly sustainable organizations.  

I want to be realistic and humble about this size of this gap: How many additional concepts need to be considered to design, launch and operate an organization that is simultaneously and sustainably to achieve environmental, social and financial benefits?  Not least, how will success be defined and measured so it is possible to know whether or not an organization is actually strongly sustainable.

And it’s not just what needs to be considered as we design strongly sustainable organizations that is new.  I believe it is also critical to consider how we do this:  what new ways of designing, launching and operating organizations could improve the chance of sustainable success?  

A New Approach: Strongly Sustainable Business Models

Building on the work of Alexander Osterwalder and the Business Model Generation community, my research seeks to accomplish the goals set out earlier by developing a business model design tool that:

  • Is straight forward and attractive to use.
  • Embeds the best current natural, social and formal scientific knowledge of what conditions best enable strongly sustainable outcomes to emerge from human organizations.
  • Enables designs of high quality to be produced with reasonable effort.

I call this tool the “Strongly Sustainable Business Model Canvas” (SSBMC), and like Alex’s earlier work, it will be powered by a rigorously defined and academically evaluated “Strongly Sustainable Business Model Ontology” (SSBMO).

By meeting these three goals the use of the SSBMC increases the likelihood that high quality strongly sustainable business models can be more easily created,  i.e. using the tool will consistently create business models that, once instantiated, will reliably and effectively produce flourishing.  Further, the ease of use and reliability should enable strongly sustainable business models to be efficiently developed and implemented at scale.

Working with my colleagues in the sLab SSBMG we are undertaking a program of action research.  In this research we intend to collaborate to embed the SSBMC in a Strongly Sustainable Business Model Toolkit.  Ultimately it is hoped that Toolkit will include the SSBMC, a method for its effective and efficient use, along with diagnostic tools, case studies, and patterns of strongly sustainable organizational designs.

A Tool for Practitioners
For practitioners the SSBMC is designed to bridge the gap from a great idea to help achieve our transition to a more sustainable society to an organizational design to implement that idea. Today many people have ideas for products or services, for for-profit businesses, businesses with a social purpose, a mission based NGOs, community groups or charities.  Other people want to help existing organizations reduce risk and transition to more sustainable future. 

But all these people are faced with a common challenge.  Once they have the initial idea there is little to help bring that idea to life in a way that increases the likelihood that the outcomes will be strongly sustainable: simultaneously creating meaningful environmental and social benefit while being sufficiently financially viable. The SSBMC is designed to help in these situations: guiding the process of designing strongly sustainable organizations by providing the designer with help to answer questions such as:

  • What do you need to think about to successfully bring your idea to life – to launch it – while ensuring the most strongly sustainable outcome possible in the circumstances is created?
  • Howcan the knowledge related to strong sustainability be applied to the design, launch and operation of a strongly sustainable organization?

A Tool For Researchers
There are benefits for researchers too. As I acknowledged earlier, huge amounts of new knowledge and the practices surrounding them need to be generated through a wide variety of research methodologies: descriptive, applied or action / design. Many researchers in many disciplines see the mess we’ve created and the urgency to address it.  They want to help generate theory and test new ideas that will help achieve our transition to a more sustainable society.

By collaborating to create the Strongly Sustainable Business Model Toolkit and then encouraging its use in the world, I hope that opportunities will be created across disciplines, using multiple research approaches, to increase the pace of relevant knowledge production.  In turn this will help us speed up the creation of the number of strongly sustainable organizations needed to create both local and planetary flourishing.

Closing Thoughts – An Audacious Goal

I believe that the Strongly Sustainable Business Model concept and sLab’s SSBMG are key contributions to a new field of collaborative practice and research: strongly sustainable business models. It’s natural when attempting something new, something significant, something important, to feel overwhelmed – certainly I’ve been visited by this feeling. 

But then I recall that Ehrenfeld’s challenge IS audacious: we ARE shooting for flourishing as the goal; we don’t want to do less harm, we want to do good while doing well – for ourselves, our families, communities, countries, and all life on this planet – and we want to do it for future generations too! Then I am reminded of and inspired by these words, which launched an earlier round of audacious exploration of what it means to be human:

“We choose [to do these things]
not because they are easy,
but because they are hard”
– J.F. Kennedy, September 12, 1962,
Rice University, Houston Texas, USA

Preferred Citation
Upward, A. (2012). Strongly Sustainable Business Models: A Personal Perspective on a New Field of Practice and Research. Retrieved 7/27/2012, 2012, from http://slab.ocad.ca/SSBMs_defining_the_field

This blog post is © Antony Upward / Edward James Consulting Ltd. 2012 and is licensed under an Attribution –Non-Commercial –Share-a-Like Creative Commons Attribution 2.5 Canada License.  Contact for permission to use commercially.
Creative Commons Some Rights Reserved
 

 

Notes for Further Reading

The following are a selection of sources which helped me form these conclusions and get excited by the opportunities and possibilities.  Clicking on the links in square brackets left of each note takes you back to the referring location.

[a] Margaret Thatcher famously said “There Is No Alternative” to maintain the historical approach to generating flourishing via GDP growth (usually via lowering trade barriers to international trade); this perspective is often labeled as “TINA”. 

But alternative has been proposed “Local Ownership, Import Substituting”.  This includes social as well as economic aspects to creating flourishing; this perspective is often labeled as “LOIS”,  and used in sentences such as “The alternative to TINA is LOIS”!

[b] This is management as applied ecology (cf. engineering as applied physics, chemistry, biology, etc.) – as suggested by Allen, T. F. H. (2003). In Hoekstra T. W., Tainter J. A. (Eds.), Supply-side sustainability. New York: Columbia University Press, p393.  See my summary of this work.

[c] See also Ayres, R. U., van den Bergh, J. C. J. M., & Gowdy, J. M. (1998). Viewpoint: Weak verses Strong Sustainability. Discussion paper TI, 98-103/3. Amsterdam, Netherlands: Tinbergen Institute. Retrieved from: http://dare.ubvu.vu.nl/bitstream/1871/9295/1/98103.pdf;

[d] Strong sustainability can also be defined in comparison to the “weak sustainability” as suggested by other economists.  Weak sustainability is often labeled “sustainable development” (as in the famous 1987 Report of the World Commission on Environment and Development: Our Common Future – The Brundtland Commission Report)

Brundtland suggested that flourishing will result from sustainable development: i.e. development which meets the needs of the present without compromising the ability for future generations to meet their needs.  John Ehrenfeld argues that the Brundtland combination of “sustainable” and “development” is oxymoronic; suggesting that putting these two words together is at best unhelpful and at worst damaging to the achievement of flourishing.

[e] A singularly technologically focused strategy (i.e. making weak sustainability is the goal) appears an even more risky approach to avoiding huge amounts of suffering created by the cumulative effects our existing profit-first paradigm when we consider population size and growth, the almost exponential increase in natural capital depletion, and the very short timeframes we have to change

Many authors have considered the unintended consequences of our existing choice to largely rely on weakly sustainability approaches.  The following authors also propose positive alternatives: Amory and Hunter Lovins (Lovins, A. B., Lovins, H. L., & Hawken, P. (1999). A Road Map for Natural Capitalism. Harvard Business Review, 77(3), 145-158), Charles Handy (What is a Company For?),  William McDonough and Michael Braungart (McDonough, W., & Braungart, M. (2002). Cradle to cradle: remaking the way we make things . New York: North Point Press), The Natural Step, Michael Porter (Creating Shared Value), Stuart Hart (Hart, S. L., & Sharma, S. (2004). Engaging fringe stakeholders for competitive imagination. Academy of Management Executive, 18(1), 7-18)

[f] In the U.S. notable examples include: Business Alliance for Local Living Economies (BALLE, http://www.livingeconomies.org/); crossing the boarder with both US and Canadian presence are Benefit Corporations (B-Labs) including the MaRS Centre for Impact Investing Certified B-Corporation Hub).  In the Toronto region notable examples include: GreenTBiz, Canada’s largest eco-business zone Partners in Project Green, and the ground breaking and currently being revived Green Enterprise Toronto (see this video http://www.videographerservices.ca/green-enterprise-ontario/chris-lowry.html ).  In Canada organizations such as LocalFoodPlus, The Centre for Social Innovation (CSI) and the huge number of organizations hosted by CSI.  More generally: Impact Investing (http://giirs.org/about-giirs/what-is-impact-investing, http://www.thegiin.org/cgi-bin/iowa/aboutus/history/index.html), the various Stewardship Councils which have been created over the past 15 years, e.g. for Forests and Fisheries, The Natural Step, NetImpact, The Transition Towns Movement, Blue-Green Alliances, etc.

[g]For example OECD data suggests around 60% of firms in the manufacturing and service sectors in 6 of the larger OECD countries cease to exist within 7 years of founding.  I believe anyone starting a for-profit enterprise, which from this data we can see is audacious undertaking, should be admired and empathized with.  See Organization for Economic Co-operation and Development (OECD). (2001). Productivity and Firm Dynamics: Evidence from Microdata Workshop on Firm-Level Statistics, 26-27 November 2001 - Session 1: Determining the Entry and Exit of Firms. ( No. DSTI/EAS/IND/SWP/AH(2001)21). Paris, France: Organization for Economic Co-operation and Development (OECD),  p.14, Figure VIII.5

[h] Examples of Osterwalder’s inspiring and ground-breaking work include:

  • Osterwalder, A. (2011). Business Model Canvas. Switzerland:
  • Osterwalder, A., Smith, A., Business Model Foundary, & Hortis - Le Studio. (2011). Business Model ToolBox (http://businessmodelgeneration.com/toolbox ed.). Apple AppStore / Switzerland
  • Osterwalder, A., Pigneur, Y., & Clark, T. J. (2009). Business model generation : a handbook for visionaries, game changers, and challengers. Amsterdam: Alexander Osterwalder & Yves Pigneur
  • Osterwalder, A., & Pigneur, Y. (2005). Clarifying Business Models: Origins, Present, and Future of the Concept. Communications of AIS, 2005(16), 1-25.
  • Osterwalder, A. (2004). The Business Model Ontology: A Proposition in a Design Science Approach. (Ph.D., l’Ecole des Hautes Etudes Commerciales de l’Université de Lausanne). , 1-172.
  • Osterwalder, A., Pigneur, Y., & Clark, T. J. (2009). Business model generation: a handbook for visionaries, game changers, and challengers. Amsterdam: Alexander Osterwalder & Yves Pigneur

[i] As Alex explains we wouldn’t expect the designer of a new car to start by actually building a car and trying to drive it – so why do we expect entrepreneurs and business people to attempt to do the same?  But yet, when a business plan is written, funding obtained and a new business launched that’s pretty much the same as driving an untested car off the lot!  For a business it usually involves spending a lot of money, and avery often this fails to create a business that becomes profitable over even fairly short periods of time.  Clearly the old process wasn’t efficient at yielding business model designs of high quality. 

See Osterwalder, A. (2011). The new business models: designing and testing great businesses. Lift 11, Geneva, Switzerland. 1-87. slide 19 [minute 3.00-3.30] (http://liftconference.com/lift11/program/talk/alex-osterwalder-new-business-models and http://www.slideshare.net/Alex.Osterwalder/lift11-presentation)

[k] i.e. the macro-economic assumption embedded in this tool is that profitable organizations, contributing to GDP growth, will lead via Adam Smith’s invisible hand to individual and collective flourishing!

I refer to this as the “profit first” world view.  One of the strongest advocates of this world-view is Milton Friedman, who wrote “There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as its stays within the roles of the game, which is to say, engages in open and free competition without deception or fraud.”  p. 133, Friedman, M. (1962). Capitalism and freedom.  Chicago: University of Chicago Press.

[l] For an example that supports this analysis see Turner, G. (2008). A Comparison Of The Limits To Growth With Thirty Years Of Reality in Socio-Economics and the Environment in Discussion CSIRO Working Paper Series, 2008-09 Edition http://www.csiro.au/files/files/plje.pdf, Canberra, Australia:

[m] For example, some of our most environmentally and socially sustainable organizations are NGO’s: they generate sufficient profit ($0); they spend every dollar of revenue on achieving their social and / or environmental missions!

On Profit and Sustainability

Submitted by Nabil Harfoush on Sat, 2012/08/04 - 12:53pm.

I am glad to finally see some of our work at the SSBMG shared with others, so we can widen the discussion and enrich the research been undertaken. Thank you Antony for taking the initiative and thank you for all who are commenting and contributing to the discussion. I'd like to add a few thoughts to the conversation.
Gabe's observation about the tendency of discussions about this topic to rapidly degenerate towards something like: "without profit there is no sustainability of any kind" is correct. A few thoughts on that and to Antony's response:

Profit (or at last no-loss) is critical for the survivability of business, so it is easy to equate:
Profit = Economic Sustainability (1)

Yet, fundamentally the majority if not all of businesses generate profits  through activities depleting our limited natural capital. So it is fair to equate:
Profit = Depletion of Natural Resources (2).

Linking both equations gives us:
Economic Sustainability = Profit = Depletion of Natural Resources (3)

Given the imperative of business survivability (Economic Sustainability) the discussion turns rapidly towards trade-offs between the profits and the depletion of resources.

But the assumption in equation (2) is not necessarily true. Profit conceivably could be achieved by regenerating natural capital instead of depleting it. Think for example about regenerating clean water, reclaiming farming land through permaculture, restoring species diversity etc. So the issue really is less about profit and more about the impact on natural capital of the activity generating the profit .

There is a reason priority should be given to the natural capital over all others. We all speak and some of us perhaps practice concepts similar to the triple (or quadruple) bottom line. Antony speaks about Tri-profit. In all of those we seem to put the three dimensions of sustainability on equal footing: economic, social, environmental. But David Suzuki in a recent speech (http://www.cpac.ca/forms/index.asp?dsp=template&act=view3&pagetype=vod&h...) at the Empire Club, presented a convincing argument that these three elements are not equal. He used a model consisting of 3 concentric circles: The smallest is the economy, embedded with society, which in turn is embedded in the environment.

He remarked that the environment is the one with most finite resources and over which we have virtually no control. Human society requires the environment to exist and survive; we may be able to influence society a little, but the truth is we have not much control over it either. The economy is actually a human construct living within human society and hence it is the only one we could possibly change.  Suzuki's model makes clear why priority in any serious sustainability effort must be given to environmental sustainability. This of course intersects naturally with the long-term vs. short-term view in decision making in all organizations.

It is relatively easy to describe a desirable future. The challenge is always in finding a practical transition between the current state and that desirable future. Antony wrote about "degrowth" and pointed to the work of Peter Victor on no-growth economy. I would like to add to that the work by the Sustainable Development Commission and British economist Tim Jackson, in particular his book Prosperity Without Growth (http://books.google.ca/books/about/Prosperity_Without_Growth.html?id=jar...), in which he debunks the myth of "decoupling" but also describes the elements of a no-growth economy and the fundamental steps to transition to it.You can also watch a lecture by Jackson at The Deakins 2010 conference (http://www.youtube.com/watch?v=dZ3Rnfg8oUE).

Jackson describes a transition led primarily by new government policies at national and global level. In the G8 countries (and increasingly in the G20 countries) the valuation of democratic freedoms and individual initiatives makes the implementation of any such wide-ranging new policies usually difficult and controversial. For these centrally initiated policies to succeed, they must be met with a broad movement by many organizations to chart individually a new path to a truly sustainable future. Achieving the transition to the new economy in time, before the environmental change imposes its own more violent and painful restructuring of human economy, will require both the central measures and that decentralized movement.

The creation of the Strongly Sustainable Business Model Group (SSBMG) and our emphasis of applied research, targeting the lower half of the organizations' pyramid, and creating links between sustainability and the core decision making processes of each organization, are but elements of our ambition to contribute to the creation of such a scalable decentralized sustainability movement among small and medium sized organizations. We welcome collaborations towards the same goals.
 
Nabil

Prioritizing the Environment + Putting SMEs on Top

Submitted by Antony Upward (not verified) on Tue, 2012/08/07 - 11:56am.

Nabil, thanks for your comments... wanted to add / reflect a little on a few of your points.

Profit conceivably could be achieved by regenerating natural capital instead of depleting it.

One of the key outstanding questions, and one I hope the SSBMG work on patterns of strongly sustainable business will address, is whether this is indeed possible for most existing business models? Or do most businesses have to do some (very) dramatic transformations. Certainly this latter position is what Giles Hutchins seems to be arguing in his new book - The Nature of Business: Redesigning for Resilience (review forthcoming in Zygote Quarterly http://zq.sinet.ca).
 
In all of those we seem to put the three dimensions of sustainability on equal footing: economic, social, environmental. But David Suzuki in a recent speech at the Empire Club, presented a convincing argument that these three elements are not equal.
 
I would definitely be agreeing with David Suzuki! I think this is why The Natural Step system conditions are so key. The first three of the four are focused on the biophysical environment - and unless you fulfill these conditions it is hard to see how you can really address the fourth (social and monetary).
 
Ultimately, as Prof. David Keith, Canada Research Chair in Energy and the Environment UofC recently argued (http://bigideas.tvo.org/episode/141079/david-keith-on-technology-energy-...) destroying, preserving or enhancing the biophysical environmental is a moral choice - it is one of our individual and collective intention.
 
This was the key argument in McDonough and Braungart's Cradle to Cradle - whether not the "design brief" we're currently following was conciously constructed as a designed whole or not (of course it wasn't) - we are now consciously following that brief despite knowing its implications. But I am not convinced that the reverse isn't also true - i.e. is it Ok to protect or enhance the environment at the expense of creating or prelonging unhappiness or failing to create sufficient collective economic prosperity to avoid significant social and health implications?
 
So, while I agree with the science that says very clearly the biophysical world in very "real" and practical ways is more important, I find it hard to see a way of suggesting that its morally OK to consciously design and undertake activities which while protecting or enhancing the biophysical world the will have negative or neutral impacts socially and (macro) economically.
 
This is what I like about Peter Victor and Tim Jackson's work. Peter in particular has modeled the policies which Tim suggests for the Canadian economy and shown how, at the macro economic level, we can have it all - improved biophysical environment, improved happiness, and higher collective economic well-being. They both argue following these policies globally would solve our major source of social strife (massive economic distributional in-equity both inside all countries and between North and South) and improve the environment; all this without bringing existing economic systems (like supply chains that feed people) to their knees.
 
The challenge for SSBMG is how that's going to work at the micro-economic level - i.e. for the SME firm! I've done a little work exploring one aspect of this question in my paper for Peter Victor last year - How Will Firms Research to Limits on Bio-Physical Flows (The primary key policy suggestions of the Ecological Economists in order to protect and enhance the biophysical environmental). http://www.slideshare.net/AntonyUpward/upward-antony-envs6115-term-paper....
 
Much more work is required - which perhaps is also within the purvue of the SSBMG: hopefully we can attract some micro economic focused ecological economists to the group! Finally on the topic of SMEs...
 
Nabil wrote:

Targeting the lower half of the organizations' pyramid, [i.e. Small and Medium sized organizations]

Given SME's are by far the larger part of economies world wide - in terms of numbers of organizations and total number of employees (anyone got pointers to research about comparison on SME revenue vs. large and MNO revenues worldwide?) I wonder if we need to rethink how we talk about SMEs vs. large organizations? 
 
While the "bottom of the pyramid" (the "lower half") is the foundation, the basis of the pyramid - the point is still at the top and in many people's minds that's the important bit - it is after all the top. Certainly in most places there is an inherent assumption that "bigger is better" when it comes to business.
 
An inordinate amount of time and energy is spent pandering to the big boys - by government, the press, popular culture - when very often less effort for larger results can be obtained by working with SMEs (e.g. increasing full time employment for less subsidy per job in SMEs cv large/MNCs - ask me for the reference for these conclusive studies).
 
And of course the increasing corporatization of business schools, which are increasingly funded by the big boys, is skewing their research towards those funders (money talks even when in theory there is academic freedom). For example in a conversation with a leading sustainable business school prof recently he'd never heard of major SME initiatives in the field of sustainability like B-Corporations or the Business Alliance of Local Living Economies. Other business school profs I spoken with heven't been intersted in even understanding what ecological economists might have to say about micro economics for firms. But if you wanted to talk about what MNCs were doing both Profs had study after study (many funded by those same MNCs).
 
In closing... there is nothing I know that says bigger is inherently better. Para-phrasing Newton wouldn't it be true to say: For every economy of scale there is a equal and opposite challenge of scope?
 
So can we re-imagine a way of talking about SMEs that make them the most important component of our economy in everyone's mind?
 
Thanks for your thoughts Nabil,
 
Cheers Antony

The Strongly Sustainable Business Model Project

Submitted by Shirely Segev (not verified) on Tue, 2012/07/31 - 4:33pm.

Great undertaking, probably the most urgent of our time for business, and if Green Enterprise Toronto can be of help, let us know. It is as important for SME's as for larger organizations, and we would like to present it, test it, embrace it when asked.
 
Shirely Segev

Support from Green Enterprise Toronto (GET)

Submitted by Antony Upward on Tue, 2012/07/31 - 11:18pm.

Shirley, many thanks.  I would welcome the opportunity to speak at a future Green Enterprise Toronto GETSmart event... perhaps in early 2013?  Let's talk!

Cheers
Antony

How can others contribute?

Submitted by Bob WIllard (not verified) on Tue, 2012/07/31 - 4:09pm.

Nice work, Antony! Your blog provides an excellent overview of the Why, What, and a bit of the How of the effort. Well done! My only thought is to close with a bit more guidance for readers who get excited about the effort and would like to contribute to it. Do you have a preferred way for them to do so? Bob WIllard

Contributing to the SSBMG Action Research Program

Submitted by Antony Upward on Tue, 2012/07/31 - 11:37pm.

Bob,
Thanks for taking the time to read and respond; and thanks for the praise - means a lot to me and the group to have you involved.
 
To your great question on how people can get involved.  Some off the cuff thoughts, definitely for further discussion:

  1. We need people to help us clearly articulate what being strongly sustainable means for an organization - a definition unconstrained by current issues (legal, social norms, economic) and focused on what the natural, social and formal science tells us (incomplete though this is).  Then we'll have a real target against which we can backcast long term plans for companies to achieve strong sustainability - a la Ray Anderson / Interface.  Interface's Mission Zero was a 20+ year project and Ray knew it wouldn't be over at the end of the 20 years.
  2. We need people in companies who would like to document their existing business models and work on designing new (strongly sustainable) business models to get involved.  If group members can work with these people and their organizations this will help prove the tool and the method for its use, as well as starting on the case study and pattern catalogue.  At the same time we hope these organizations results will improve as a result of their improved understanding of their current and desired future business models.  Specifically:
    • We need people from a companes at different stages of their sustainability journeys:
      • Companies like Certified Benefit Corporations, who are already well on the way to being strongly sustainable
      • Companies who have implemented ISO14000 and wondering what to do next
      • Companies who haven't done much other than "business as usual" but are keen to learn how they can do good and do well
    • We also need people from other types of organizations involved - some of the most managerial / operational experience we have around strong sustainability today is in NGOs - afterall they've been trying to be sufficiently profitable while delivering their mission for years!
  3. We need people who are interested to help us refine the tool (the Strongly Sustainable Business Model Canvas - SSBMC), develop the method, and document case studies and start identifying the patterns.  This will take time and effort.
  4. Work on figuring out how we're going to get the Strongly Sustainable Business Model Toolkit into the hands of all the SME's world-wide is also a major task.  Is it a book (a la Alex Osterwalder et. al.'s Business Model Generation)?  Is it an app?  Is it a website?  Is it all or none of the above?
  5. Last but not least we need people who are interested in planning and subsequently manageing this program of action research including developing funding / research grant proposals. 

Lots and lots of ways to contribute... and lots of benefits from getting involved...
People interested in contributing should contact the SSBMG convener Prof. Nabil Harfoush...
Great to have you involved in all the above Bob! cool
Cheers
Antony
 

This sounds like a great

Submitted by Gabe Sawhney (not verified) on Mon, 2012/07/30 - 11:45am.

This sounds like a great project! I'm far from being expert, but I spent some time thinking about some of the ideas for my SFI MRP. One of the issues I had to confront was that financially sustainability is a prerequisite for organizations to have *any* ongoing impact. (If a company ceases to operate, it can no longer help us flourish.)
 
That's why these discussions inevitably turn to questions of tradeoffs between financial and social/environmental benefit: What values guide an organization's activities? And how do these values accommodate increasingly volatile economic conditions?
 
(In 'Value Maximization, Stakeholder Theory, and the Corporate Objective Function', Jensen highlights the need to distinguish our criteria for value maximization from that for performance measurement, in a way that I found helpful. It doesn't, however, bring us closer to solving the problem of tradeoffs.)
 
I think it's important to distinguish between "profit first" and "profit only." Only the most literal (mis)interpretation of Friedman would support a "profit only" approach. A qualified "profit first" approach seems to offer the best path for transitioning from our present state to a more sustainable future. (To contrast, the degrowth people reject "profit first," but consequently they have to reject a lot of other things.) I'm excited to see how your research progresses!
 
Gabe Sawhney

Let's Not Let Current Constraints Stop Us

Submitted by Antony Upward on Wed, 2012/08/01 - 12:49am.

Gabe,
Some great points - and thanks for sharing your MRP with us - it was very helpful at providing the details behind your points above:
 
Sawhney, G. (2011). Exploring concious capitalism: identifying barriers to creating socially-desired value (SDV). (Unpublished Masters). Ontario College of Art and Design University, Toronto.
 
Tradeoffs
Your comments highlight a key reason why I decided to take an Design Science approach to my research to construct the Strongly Sustainable Business Model Ontology and Canvas.  Traditional science can only "discover" based on what already exists - Design can attempt to create new previously unimagined solutions!  With the urgency of our current situation I wanted to use a research method which has the potential to accelerate finding solutions.
 
The first points you raise are real constraints today based on events in the recent and distant past: legal, social, moral, environmental.  They cannot be argued if one is acting today.  Further, these are all things which in short timeframes we think of as fixed - hence your comment about needing to be financially profitable first.  Certainly that's current legislation and social norms.
 
But none of these things is fixed in the medium / long term.  Thank-goodness - otherwise we know we'd really be in trouble!
 
As an example the B-Labs folks are sucessfully getting legislation past in US states that changes what officers and members of company boards are legally required to do re: attempting to maximize short term monetary profit.  Clearly changing this legislation is key if we want a lot of people to attempt to truly integrate environmental, social and monetary benefit creation - there by creating the conditions for flourishing - without risk of going to jail or being sued by shareholders!
 
So your point about trade-offs is vital - but I am arguing strongly that we mustn't assume in defining strong sustainability that the constraints that drives trade-offs today will be there in 10, 20, 30 years.  After all Ray Anderson from Interface said after reading Paul Hawken's book words to the effect that he realized what he was doing today would be illegal in the future. 
 
One of the things the SSBMG wants / needs to provide people like Ray is the target for them to aim for; the target from which they can can backcast their Mission Zero plan.
 
BTW I know Nabil is passionately interested in this aspect of the problem - decision making.
 
 
Maximization
Also we need to be careful about "maximization" as a goal. 

  1. We never know enough to know whether or not we have in fact understood what is, let alone achieved, maximization - even of monetary profit. 
  2. You can't maximize more than one varables - now we have three we care about: economic, social, monetary! 
  3. We need new concepts to help us measure.  The B-Corporation Impact Assessment is a good start as a transparent and inter-firm comparable GAAP / IFRS for the social and environmental, and I have started thinking about something I call "Tri-Profit" (more on that in a future post I think).

Many people have started talking about "optimization" as the goal - which again brings us back to trade-offs of all kinds;  since these are humans making the trade-offs empathy becomes very very key (again more on this in future blog post)
 
 
Profit First...Strongly Sustainable - a Continum
Totally agree with your point about a literal reading of Friedman.  Its very rare for anyone to agree with the literal reading (although I've met a few).  As but one example - which nearly all "business as usual" people will agree with - ensuring you have happy customers now doesn't always give you maximum profit now.  This is in opposition to a literal reading of Friedman.
 
In one of the scales I developed in my field research I asked people to rate both for themselves and their organizations, in the past, present and future, where they would place themselves on a 7 point scale from "1. Profit First - Achieving monetary profit must always come before any other consideration" to "7. Strongly Sustainable - Integrating achieving monetary, social and environmental goals must always be the objective".
 
Interestingly so far everyone I've spoken to rates their personal position on this scale more towards 7 (and past the half way mark) and their assessment of their companies position - a finding which confirms the results of the excellent survey work in: Wirtenberg, J., Russell, W. G., Lipsky, D., & Enterprise Sustainability Action Team (Eds.). (2009). The sustainable enterprise fieldbook: when it all comes together. New York: AMACOM ;|aSheffield UK :|bGreenleaf Pub.  BTW even people I expected to rate 4 or lower rated 4 or higher!
 
 
Degrowth
Finally a few words on this topic which you raise at the end of your comments. 
 
Here's my basic problem with people who say sustainable development can include even a small amount of growth at the planetary level: Ecological Economics situates the economy in system,  the planet,  which is (almost) closed re: matter and largely open re: energy.  Our current path has been consuming ever greater quanities of matter in the form of technologies and as sustinance.  At the same time we're pushing more of this matter through various natural systems faster and at higher volumes (as one example think of all the matter being moved in ever greater quantities to grow the food to feed more and more people and the result of the consumption of that food ).
 
Continuing this approach, assuming that everything is going to be ok is, IMO,  the same as being diagnosed with a cancer and not seeking treatment. (Cancer is also uncontrolled growth in a finite system - in this case a human body - and is fatal if not treated).
 
Further the idea that somehow taking more matter from the planet to make ever more sophisticated technologies is going to save us seems very very risky - do we really want to make this assumption? But yet this is the assumption of people who say growth and technology can save us.
 
That's like saying we'll introduce new cancers to kill the old ones!  As Einstein said - you can't solve todays problems using yesterdays ideas since its yesterday's ideas that created todays problems!
 
Some well thought out and well modelled macro-economic policy solutions are the focus of Prof. Peter Victors work at York.  He explicitly sets out to answer the question you asked: can we have no growth without a economic and social disaster.  The answer is yes - which of course isn't surprising - after all most organisms do quite well thank-you after they stop growing at the end of childhood!  Why would our economy be different?
 
Strongly recommend:

I'm not saying Peter is right in detail - but if our current unlimited growth economy is a cancer - then surely we should get some informed 2nd opinions before its too late?
 
 
On this topic Peter debated a number of other economists (both neo-classical and ecological) on  the CBC Idea's program last year:

It was interesting that even the neo-classical economists didn't contest the idea that a minimum a different sort of growth - the "green growth" in the program's title was required.  This is very much what neo-classic economist such as Steiglitz and Stern  have been saying, i.e. in:

  • Stiglitz, J. E., Sen, A., & Fitoussi, J. (2009). Report by the Commission on the Measurement of Economic Performance and Social Progress. Paris, France: Commission on the Measurement of Economic Performance and Social Progress.
  • Stern, N., et. al. (2010) Stern Review on the Economics of Climate Change.  HM Treasury, London.

 
But of course all this applies at the planetary / macro-economic level (or in the case of these report the socially constructed national economic unit);  what does all this mean for firms?  Clearly we want a firm which is more strongly sustainable than another to grow and put the less strongly sustainable firm out of business, and we want them to grow as quickly as possible!    At the same time we don't want all firms in  total using more resources than the carrying capacity of the earth can supply - see these works for some early thinking on how to define these limits (and where we are in terms of exceeding them):

  • Rockström, J. (2009). A safe operating space for humanity. Nature, 461(7263), 472. 
  • Lawn, P. A. (2001). Scale, prices, and biophysical assessments. Ecological Economics, 38(3), 369-382. doi:10.1016/S0921-8009(01)00172-0

(Aside: we also need to think carefully about the social dislocation which happens when firm's fail - how does that contribute to collective and individual human flourishing?)
 
Frankly this, the application of the macro-economic ecological economic ideas on degrowth, to individual firms is an area which my ecological economics profs have told me is very very under-rsearched (i.e. no one is doing anything they know about).  Who normally does research on micro-ecomics?  Business Schools.  But so far very very few of them have qualified profs in Ecological Economics to start the micro-economic work required.  I could say more on this frown
 
I made a very very small start to this work focusing on one important aspect of the problem - see this term How Will Firms React to Limits on Bio-Physical Flows - An Exploration of Possibilities which I wrote for Peter Victor.  But its clear much much more needs to be done.  
 
FYI: The SSBMG in our work to define organizational strong sustainability will do some more work in this space; and we'll need to reach some conclusions to proceed with the SSBMToolkit.  But we'll have to recognize that until others do much more fundamental research in this space our conclusions will of necessity be tentative.  That's the risk of attempting to lead through deisgn!
 
 
OK that's it for now! smiley
 
Thanks for asking such thought provoking questions - and please respond with comments / additional questions.
 
Antony

Thanks, Antony, Nabil, and SSBMG group

Submitted by Greg Van Alstyne on Fri, 2012/07/27 - 3:40pm.

Thanks and congrats on inaugurating the multi-user post and comment possibilities of sLab's web site! Yours is our first guest blog, in fact one of the first posts outside a few "proof of concept" efforts a few of us have made, and we look forward to more.
More importantly, the ideas and issues you raise are substantive and thought provoking. I look forward to seeing this thread grow and evolve.
Lastly I am adding this comment to inaugurate comments altogether. I hope this feature works as intended, and welcome comments from others. Let the discussion begin!