Sustainability – the next Kondratiev supercycle?

One of the last editions of “back to basics” did focus on the ongoing discussion about managerial trends and was proposing that sustainability needs to get into the DNA of management practice, starting from the Board room and supported from bottom-up, which will of course only happen if management theory accepts sustainability as a principle that keeps the organization alive (license to operate) and embeds the opportunity to prosper (license to grow). It remains to be seen what the consequences will be for Weber-type demand and control hierarchy, for the ongoing increase of workload for less staff in efficiency driven management programs, the ongoing segmentation of work packages in a Taylor-style way and one-way communication to customers. The champions of the last decade, including Google, Starbucks, Yahoo, ebay, but also Gore (not Al, but the textile company ;-)), Timberland and others throw a lot of this over board, use seamless stakeholder engagement and web 2.0 technology to enable internal and external networking communities and shape their business models. The internet development marks the most important milestone of the 5th Kondratiev supercycle, and at the same time shapes the path into the 6th Kondraftiev cycle; maybe this next supercycle will carry the name “sustainability cycle”?

Here’s a quick Wikipedia explanation of the phenomenon of so-called Kondratiev cycles (see http://en.wikipedia.org/wiki/Kondratiev_wave) : “The Russion economist Nikolai Kondratief (1892-1938) was the first to bring these observations international attention in his book “The Major Economic Cycles” (1925). (…) Early on four schools of thought emerged as to why capitalist economies have these long waves. These schools of thought revolved around innovations, capital investment, war and capitalist crisis. According to the innovation theory, these waves arise from the bunching of basic innovations that launch technological revolutions that in turn create leading industrial or commercial sectors. (…) Most cycle theorists agree on five waves so far since the industrial revolution, and the sixth one to come. These five cycles are

1.    The Industrial Revolution—1771,

2.    The Age of Steam and Railways—1829,

3.    The Age of Steel, Electricity and Heavy Engineering—1875,

4.    The Age of Oil, the Automobile and Mass Production—1908,

5.    The Age of Information and Telecommunications—1971.”

All new supercycles are normally aligned by recessions and/or wars; both tendencies are currently eminent. It is clear that from a technology perspective this next supercycle will focus on technologies that aim to sustain human life on this planet; health care, biotechnology (biomimicry etc.), next generation renewable energy and also – although conflicting – gene technology are subcategories. Even visionary concepts for the next generation internet is taking biological processes as the basis for further adaptation.

For all of us working in organizations and dealing with management issues one of the most important questions will be: will biology and its inherent logic of adaptation and communication also bring about a new mangement style? Will the next Kondratiev supercycle include innovation in technology AND management? Will we see a continuous flow of newcomer organizations becoming big in short time just simply because the earlier cycle champions became to slow to adapt because of their structure and size?

When I worked for the GRI I realized that the GRI itself was part of this change towards a new supercycle: first of all the existence of GRI as an organization is a logic answer of interested stakeholders – like many other GAN’s (Global Action Networks) – to the slow adaptability of world trade mechanisms, governments and companies with regard to the overall transparency needs of a fair and successful implementation of globalization. The idea is that world markets can simply function better (and will survive) if sustainability is accepted as the roadmap and the necessary transparency needed is available. And that needed to be organized globally.

GRI’s G3 Guidelines purposefully ask in great depth what management’s reaction to these new challenges will be. Is sustainability part of Board room discussions and is the organization aware about its impacts on sustainability issues? Vice versa, how do sustainability problem areas already affect strategy and business models? (see GRI G3 chapter on ‘Strategy and Analysis’). G3’s Disclosure on Management Approach then asks how the results of this analysis are translated into the management system implementation.  Last but not least G3’s indicators ask about the performance achieved and the targets and objectives aligned to them. In that sense using G3 and implementing a proper reporting process are a useful means to increase the above described adaptability.

Four years after the launch of the G3 Guidelines – now working at Deloitte – I realize how little information is still published in sustainability reports to really answer these questions. There are many reasons for this phenomenon, the short-term thinking (also triggered by the financial crisis with many companies in ‘cocooning’ mode) being only one of them. The biggest problem I think is a mental one: the mountain is just to high to think standing on top is realistic, so let’s continue with the little steps and probably find a new base camp. In depth stakeholder engagement  is still too much seen as a threat, and not as an opportunity, hence a real integration of sustainablity into the DNA of an organization still not achieved. The reality of Kondratiev’s new cycle will show that ‘to be less bad is not good enough’ in this next cycle, so it’s worth climbing ‘Mount Systemic Change’, the current base camp will most probably be hit by an avalanche at some moment!