The Big Sustainability Illusion – goodbye ‘ESG LaLaLand’ and hello to the ‘New World’ of a regenerative & distributive economy!

 

 

This is the last part of this mini-series. The links to parts 1-3 can be found at the end of the article.

Welcome to part 4 of this series that started out last month to showcase how the ESG performance information food chain, the bubble behaviour of proponents and the mental mindset got stuck and are deeply flawed, creating a major cognitive dissonance in the ESG echo chamber, and in consequence irrevocable damage to sustainability if not attended to. Part 1 described the problem, part 2 deepened it and part 3 was offering opportunities for those so-called ‘ESG experts’ that are willing to take advice on how to broaden their perspective and reposition the corridor in which they are active, arriving at greater clarity which steps they could actively take to work on not being part of the problem, but becoming part of the solution. That part 3 also offered quite a rich variation of documents and tools from the r3.0 work ecosystem to work with alongside the ‘pure ESG’ view, with the idea that they will help ESG experts to enhance their horizon and step-by-step switching over from less degeneration to the edge of regeneration, where sustainability actually begins. It was stretching towards a future outcome, or ‘steps in the right direction’, as many were asking for. 

This final part will take to opposite route and will be more transformational. It looks at what’s necessary from the perspective of what the title of this part calls the ‘New World’. It starts from the other side of the bridge and invites you over. This part is for the ‘positive mavericks’, a term that we at r3.0 adopted from Preventable Surprises Founder Raj Thamotheram, that understand that breakthrough needs a breakout first. Here’s what positive mavericks stand for:

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At r3.0 we have seen individual cases of ex-bankers, ex-managers, ex-C-Suite and even ex-NGO representatives leaving highly paid positions to start working on what deemed ‘necessary’, simply because they felt the strait jackets of incremental budgeting, targeting, hierarchy and fast delivery weren’t cutting it for real progress towards sustainability, and by that overcoming the cognitive dissonance of ESG. And guess what? They’re still well paid!

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But it’s a hard job getting there individually. Why would any consultant advocate for big transformative changes in an organization when the small incremental steps secure their budgets for many years to come and make it nice and cosy (they call it ‘practically possible’) for clients that already feel overwhelmed by the many things they are asked to do? The fact that many of those things could become obsolete in a ‘New Normal’ doesn’t cross their client’s minds either since they have perfectly cultivated that incremental approach. A typical case example of career risk that we described in part 3.

What makes the current economic system a slow suicide pact?

In part 3 I already presented the ‘regenerative & distributive economy in one page’, let’s memorize that again as a starting point what this ‘New Normal’ will be about, and contrast it with what we have right now:

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When r3.0 filtered its research into this clustering from 2013 onwards (and still continue to do so), we started off with a set of principles. This was needed as we scanned hundreds of reports that were available in the aftermath of the Rio+20 Summit, all pieces of a non-systemic patchwork of lobbied ideas towards green, social, circular, open, etc. These principles still guide us as ‘boundaries’ and a way of reminding us of the interconnectedness of this ‘New Normal’ that we aim to achieve:

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Now let these two graphics sink in a bit and then reflect what this would mean for the given stereotypes of our current economic thinking and how to characterize it. The more we reflected upon it the more we found our current economic system (still) to be

  • colonial-style and oppressive by design;
  • mainly racist and ignorant to minority groups;
  • mainly masculine by design, ignoring feminine patterns of managing;
  • mainly nationalistic (while intended to be global), something that even trade treaties, and all sorts of international clubs can’t salvage;
  • dependent on perpetual growth and perpetual debt, ignorant to planetary boundaries; 
  • sick from privatisation and the idea of owning common goods;
  • using philanthropy as palliative care to a cancerous system.

In addition to those characteristics, let’s also not forget the taper ration of neoliberalism, so greatly explained by our partner Joe Brewer. Quoting from our 2019 Medium article, a transcript of his keynote speech at the 2019 r3.0 International Conference.

Let’s clarify one thing: the economic system logic and mechanics are doing exactly what they were supposed to do in the so-called neoliberalism as designed by the Mont Pelerin Society. Here’s what Joe Brewer from the Design Institute for Regenerative Cultures had to say:

“Starting in 1947 a group, that most of you may not have heard of, the Mont Pelerin Society, named after a small village in Switzerland where they first gathered, began an agenda that has come to achieve global consequences. The Mont Pelerin society was formed around the book “The road to serfdom” written by Friedrich Hayek. These men wanted to recover the unpopular idea that deregulated markets lead to freedom and prosperity. Hayek’s initial motivation was noble but his knowledge was limited. The ideas in the Road to Serfdom were an articulation of what he had observed growing up as a teenager in Austria while neighbours in Germany were forming the Third Reich. He watched how popular democracy in Germany and also with Mussolini in Italy could give rise to fascism and totalitarian states. So, he had a very important reason to be concerned about centralized government. He lacked the tools of ecology or complexity science to help him understand how regulation and management structure is necessary for handling complex systems. So, Hayek articulated the need to avoid too much concentration of power within government which was an important and fair point.

But several very wealthy business people assembled at the time, saw it as a justification for their own ambitions — namely creating extractive policies that would exploit the weaknesses of other people to gather wealth for themselves and hoard it. Those people supported the Mont Pelerin Society and its agenda and their goal became to conflate and confuse the ideology that they called “neoliberalism” with the science of economics that was called neoclassical. One way that they did this was by paying for endowed faculty positions at universities and business schools, economics departments and finance departments so that they could place in them people who had their ideology. For example, people like Milton Friedman, who really advanced his ideas in powerful ways in the 1970s.

This was how, starting in the mid 20th century, as economics was scrambling to become scientific and basing itself on some flawed assumptions that really weren’t its fault, its ability to self-correct became compromised by the growth of an ideological agenda with a lot of powerful financial interests supporting it. Beginning in 1947 and achieving their first political success in 1980 with the election of Ronald Reagan in the United States and Margaret Thatcher in the UK. So basically, the reason that economics has protected itself from being scientific is because a massive global propaganda machine has been built up.There are now about 800 think tanks in the United States alone. They have been growing a collaboration between the US and Western Europe over a 50-year period of time with the goal of buying up and consolidating media to control and influence the trajectories of higher education and to shape the policy environments for economics.

In short, what we call mainstream economics today is actually a development agenda that I call the global architecture of wealth extraction with an apparatus for setting up deregulation policies and the capture of institutions to enable those who have wealth to influence political outcomes in order to give themselves more wealth. Which is why eight people/eight families now have half of the world’s private wealth. That’s not an accident. The market is doing its job. The economy is functioning as designed.”

None of this you can read in the classical economic textbooks. And would that really be the economic system we want in which ESG is complicit of arranging the deck chairs on the Titanic? Folding all this into an assessment, I now normally use these two graphics, describing what I call the ‘Triple-E-Failure’ of economics, ecology and education: 

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The second slide then looks at the consequences of this ‘meltdown’:

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Let’s now turn to the other side of the bridge.

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How to create a regenerative & distributive economy that works towards the wellbeing of all?

A fundamental mindset shift needs to start with the idea that wealth for just a few and the trickling down of that wealth to all of us is the biggest lie to humanity that neoliberal economics ever invented. Instead, a regenerative & distributive economy starts with the idea that the Greek philosopher Plato stated as: ‘The one will never be well unless the whole is well’. Well, he’s not talking about wellness or welfare (as we often think of as making us happy), he talks about what we at r3.0 call ‘thriving’. 

Some characteristics of that economic system that will help us to get there were already addressed in earlier parts of this series, e.g. 

  • context-based information that allows for a proper sustainability judgment (measuring ESG performance against thresholds & allocations);
  • a multicapital-based approach that broadens a definition of success from just financial capital to a ‘Total Contribution’ to multiple capitals;
  • together they allow for a proper assessment of ‘System Value Creation’ in which all organisation’s activities are ‘gross-positive’, avoiding any negative impacts (which by the way also sends another buzz – ‘net-positive’ – back into the ESG camp as ‘nice try, but no.’

At r3.0 we think this information infrastructure (all nine parts of the r3.0 Blueprint Work Ecosystem) will help to unlock more insights into the qualities of a regenerative & distributive economy, including e.g.

  • a generic setup that will be based on the idea of bioregions, meaning that the New Normal is in its majority place-based (just think what that means for the unit of measurement towards describing success and creating System Value, or for another ESG-cultivated idea, called ‘global sustainable supply chains’, another myth that will need to be unraveled). r3.0 is collaborating with our Advocation Partner, Capital Institute, on its Regenerative Communities Network (RCN) at the meso (bioregional) and macro (global) levels. On the bioregional level, r3.0 Senior Director Bill Baue serves as Systems Convener of the newly-launched Connecticut River Valley Bioregional Collaborative.
  • the idea of learning from each other needs to develop evolutionary learning and weaving into completely different governance structures (just think what that means for today’s institutional setup and what becomes obsolete), using techniques like Prosocial or Sociocracy. r3.0 is currently working on an Educational Transformation  (forthcoming) and prepares steps towards a Systemic Governance & Funding (forthcoming).
  • the idea of ownership will need to potentially change to ‘lendership’, something that includes duties and obligations to the land given for a certain amount of time. This gives aspects like exploitation and biodiversity conservation a new load above and beyond from ‘don’t destroy’, making all of us becoming safeguards of the Commons. 
  • a potential jubilee of all debt of the old monocapitalism and letting go of growth expectations that destroy natural capital. Of course, we want growth of social, human, intellectual or reputational capital, or to say it differently, ‘Regrowth’, which includes degrowth of natural capital exploitation beyond carrying capacity and financial capital explosion unconnected to the real economy. This area is also steering innovation towards new currencies and true sustainable finance, worked out in more depth in the r3.0 , Sustainable Finance Blueprint.

This list could go on, but I’ll finish with two examples through which we start to program in elements into r3.0’s work ecosystem, namely the idea of ‘rightsholdership’ (nano/personal level) and the idea of the ‘5 Ts’ for creating necessary measurement that helps a market mechanism that is agnostic to politics and just reacts to pricing signals and incentives to work towards a regenerative and more distributive outcome (macro/systems level).

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Rightsholdership

Rightsholdership connects directly to the idea of wellbeing as the ultimate end, if approached right and really processed through from the individual (nano) level of understanding, through the micro (organizational) level, meso (industry, portfolio or habitat) level, macro (economic, ecologic, social) level, up to what we at r3.0 call the ‘supra level’, that’s where the wellbeing of all is manifesting itself. As mentioned earlier, I am a deep believer of Plato’s ‘The one will never be well unless the whole is well’. That ‘whole’ includes all species on planet Earth, including us humans. 

Rightsholdership also exposes the flaws of shareholder and stakeholder primacy as remarked in earlier parts. Over the last years I was trying to better grasp how a basic understanding of rightsholdership would help to enable wellbeing, and what came out is a cause-and-effect feedback loop. The starting point actually is the nano/personal level, by which the awareness of a bigger whole changes a dominant leadership attitude (competition) to the idea of stewardship (collaboration). The impacts then develop into the micro, meso and macro level and then create accountability feedback loops up until the supra level. The visualisation I came up for that is the following:

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The 5 T’s of a regenerative and distributive market mechanism

If rightsholdership functions on a nano level, what would be the corresponding effects in macroeconomics, and how would it help to create System Value? At r3.0 we summarize it as the Five Ts: True Costing, True Benefiting, True Pricing, True Compensation, and True Taxation. 

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We believe it is the interplay and simultaneous effects of these five fundamental shifts

that allow markets to steer in the direction of a System Value Economy. Here’s how:

  • True Costs cover the actual impacts on nature and humanity, eliminating the perverse “externalization” of negative effects only and “internalization” of positive effects only;
  • True Benefits: balances “depreciation” with “appreciation” of positive effects;
  • True Prices: Price aligns with sustainable impact, with unsustainable products and services rising beyond affordability;
  • True Compensation: Link incentives to sustainable outcomes, including sustainable levels of income and benefits;
  • True Taxes: Levy adverse impacts (resource overuse, pollution) and liberate positive impacts (labor) from taxation.

It is already remarkable that discussions on all those five elements exist, with actual organizations dealing with these topics, mostly also non-profits, like the True Price Foundation, Ex’tax or Reward Value. What is missing so far is the combined application from the perspective of a fully functioning market mechanisms.

The start has been made and the direction is clear. What needs to happen is the willingness of humans to jump into the unknown and discovering their very own role.

At r3.0 we follow both paths as explained in parts 3 and 4, offering entries for all of you that are willing to explore further. We believe that every single problem we were unable to solve needs to be systemically approached from various directions, namely science, behaviour, finance, regrowth, value definitions, fractal economy design, education and governance.

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That is also the reason why our yearly conferences follow this structure and look at yearly progress on these areas, the next one to be held 7/8 September 2021, fully online. Let me end this series by inviting you all to join, the 2021 conference website just went live. I hope to see you all there, early-bird-tickets are now available. The future is already here, and we are all invited to join the right side of history.

Earlier parts of this series:

Part 1: https://www.linkedin.com/pulse/big-sustainability-illusion-how-whole-crowd-esg-progress-thurm/

Part 2: https://www.linkedin.com/pulse/big-sustainability-illusion-how-limited-esg-progress-ralph-thurm/

Part 3: https://www.linkedin.com/pulse/big-sustainability-illusion-how-escape-esg-bubble-finally-thurm/?trackingId=r9x0Y52rTo%2BnnvB96dnk5w%3D%3D

The pictures used in this part were made by Randall Krantz and Reidun Westvik Lauritzen, which allowed their use in this article, plus freely available stock pictures from Pixabay.

 

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