- April 17, 2020
- Posted by: fedefiore
- Category: Blog
Here’s the 2nd of a series of 5 articles about the Dawn of a New World, i.e. the scenario that the Covid-19 crisis (really a Climate Change crisis) is preparing for the quantum leap of humanity in a completely new dimension.
The publishing plan is so structured:
- The context
- What it means for Businesses
- What about their Leaderships
- 15 Practical Priority Actions to survive and thrive
- What about management education
Part Two: Business
To try to understand what the Dawn of the “New World” will imply for companies and entrepreneurs, I shall start from a bit of theory, taking up in extreme synthesis what I wrote in my 2015 book “Sustainable Leadership“. In the book you can find the full illustration of the concepts and sources.
In short, every human being has four Basic Needs: Survival, Well-being, Identity and Freedom, which he or she perceives in a variable and individual way. “Basic” means that their lack of satisfaction causes suffering, with variable consequences: depression, illness, violence or conflict. The purpose of everyone’s life, of their activities and interrelationships is at all times to protect, and satisfy, these Needs.
Companies, as organized human activities, do not escape this principle: the purpose of their existence is to satisfy some of these Basic Needs of their community by organizing the activity of a group of people.
However, while human beings are natural elements of the ecosystem, enterprises and organizations are “fictitious” elements.
This means that in order to be entitled to exist they must meet certain conditions, otherwise the ecosystem will expel them, sooner or later. In short, the organization MUST meet one or more of its stakeholders’ needs, in part or in full, and at the same time MUST NOT harm or threaten any of them.
Organizations that do not meet some of their stakeholders’ Basic Needs in an appropriate way, that justifies their use of the ecosystem’s resources, or damage some of them, sooner or later lose their right to exist – i.e. their license to operate – and have to disappear.
The urgency of our times, i.e. the Climate Change underlined by its “pandemic symptom” Covid-19, takes this condition to the extreme, bringing the time of reckoning closer.
This is the first impact that the New World will have on businesses and organizations: a new vision of their “being in the world”, of the very reason for their existence, will be needed.
When I speak of Vision, I mean the kind that Adriano Olivetti had, or that of an Elon Musk. Let’s take Olivetti, who has been reviled in life, wiped from memory for fifty years by the Italian ruling class and today has become – in words so far – a model for the “new entrepreneur”.
What did Olivetti understand? Basically that the company, “the Factory” as he called it, was an instrument to satisfy the needs of Man, of the community. If not directly, by offering or facilitating opportunities for them to be satisfied otherwise.
Business was therefore not an end in itself, nor was profit for the shareholders the main purpose, but human and social development were.
In Adriano’s time, environmental issues were much less urgent, but in 2020 the need to preserve an ecosystem that supports human life becomes a priority.
The ecosystem is among a company’s stakeholders, since it is “a subject upon which the organization’s activities have an impact and that in turn is able to influence the organization’s activities”.
Therefore business is one of the protagonists of any future and contributes, willingly or not, to create it.
Having said that, a company operating at the time of Climate Change must have a completely different relationship with its own context than in the past: radically the opposite. The preservation of an ecosystem that is favorable to human survival will be an essential topic at the centre of the company’s strategic and operational objectives. The context will determine which activities are possible and what not.
Activities that will not be able to change their processes in such sense will have to stop: if in the immediate post-pandemic period closing will remain a voluntary option for some time, it will not take long for the Authorities to understand that it will be necessary to adopt restrictive provisions based on scientific knowledge (IPCC first of all) to contain the climate disaster, with its social, economic and geopolitical consequences. Likewise with Covid-19.
Any business activity at that point will be subject to the condition of providing for the satisfaction of real Basic Needs and of “not harming” anyone. How this will happen is still unclear; if I had to imagine a “simplistic” and brutal scenario I could think of a mandatory carbon neutrality for all activities within 2030. If I had to imagine a “soft” scenario, instead, I would say: mandatory, verified and sanctioned strict adherence to SBT (Science Based Targets – GHG emission reduction progression to achieve the objectives of the Paris Agreement) or similar. In addition to similar measures for the elimination or drastic reduction of waste, pollutants and harmful emissions.
How many companies are ready today, even for “only” such measures? How many have ever envisioned to deal with such a level of Uncertainty or to find opportunities in it?
Companies in the Climate Change era will need to manage this level of Uncertainty, i.e. negative and positive risks, and the vast majority of them are not equipped for this at all.
Does anyone think they can get away with a shrug in the face of this hypothesis?
Perhaps this could have been before the “pandemic” lockdowns, but now? How many people in January 2020 thought it was likely to live in a scenario like today’s? How many were actually equipped to do so? How many had a strategy, contingency plan, resources and infrastructure to ensure business continuity and service delivery? And yet, the pandemic risk had been widely announced by science for years.
Unlike temporary “pandemic” measures, it will take decades to stop and reverse Climate Change on a lasting basis, provided we move in time. After the drastic cure to reverse it, a new normality will have to be established, based on new rules and new references. Those who cannot adapt to the new environment will have to disappear: these are the Laws of Natural Evolution.
To achieve the new condition, circularity and sustainability of processes and systems will have to become the norm, as it is in natural systems and processes. This derives from the “closed system” nature of the planet that is our habitat. It will no longer be possible to discharge negative externalities into the context. Rather, all the impacts of business processes – and other systems – will all be “accounted for” in order to attribute the appropriate responsibility for neutralizing their harmful effects correctly.
Sustainability will cease to be a Nice to Have altogether, becoming the essence of survival and legitimacy to exist for human activities organized in business.
Far from being a depressive or renunciation scenario, the transition to global sustainability of the economy is not only an ethically desirable goal and a necessity to reverse Climate Change. It is instead a possible and attainable horizon of prosperity on the condition of putting in place the commitment that has been lacking so far, as it is well illustrated in the working paper “Unlocking the Inclusive Growth” 2018 of New Climate Economy (last consultation 14/04/2020).
Agenda 2030 will therefore cease to be a marketing exercise for most companies and will become the guideline for determining strategies and action plans, to which everyone must adhere in proportion to their capacity for positive impact (companies will certainly not be the only ones to have to evolve in this direction!). Sustainability thus integrated in all processes, from strategy design to decision making, to plans and actions, to metrics and compensations, will become the new paradigm of human activities and the generation of Value will be measured in parallel on its three key concepts: economic, social and environmental.
Innovation and development resulting from the radical transition to sustainability that I am talking about, and that will be necessary for the restart after the “pandemic”, are largely capable to sustain a robust growth in the QUALITY of people’s lives and in the global ecosystem. Perhaps there may be an initial contraction in the financial output of businesses, but that will be combined with greater generation of Value both for stakeholders – including shareholders – and for the system as a whole. This will also result in lower overall costs compared to those that we all bear today for the unhealthy system that is destroying us.
This is the general scenario in the New World for businesses and human organizations. But what of their leadership and management? What changes will have to occur? What people will have to lead the transformation? We’ll see in the next article.