Initially, my goal in putting this blog together was to help business leaders in developing sustainable workplaces, providing tips on how to encourage a change in the culture of the organization that would support such efforts, and sharing concepts of communication and psychology of the work place that would help workers adopt sustainable goals, become more productive and be more passionate about their work. It’s still about that, but in the process of studying the many issues related to creating sustainable businesses in a sustainable world economy, I’ve come to believe that there are other considerations that are perhaps even more important.

All the traditional business arguments still exist that sustainability is really about eliminating waste and reducing expenses and that this is ultimately good for the business and the environment. So keep up the good work if you are deploying LEAN processes, adopting LEED standards for your buildings, using renewable energy sources, developing green teams, encouraging recycling and doing what you can towards water and energy conservation. You’re on the right path.

But let’s look at the bigger picture!

The goal of our economy

We operate in an economy that is designed to promote development and encourage economic growth. You’ve heard the arguments for growth and you also probably know that growth is measured by GDP. Economic forces have elevated the measure of GDP to a measure for overall health of a nation and, in some ways, an overall measure of human progress. Whether this is a valid measure is still not very clear. As business leaders, this appears to be a sound political basis because it allows us to create businesses that strive for growth, productivity and innovation all of which lead to competitiveness and shareholder value. As business leaders, we tend to dislike regulations (i.e. someone else telling us what we need to do), we value freedom of choice, we hold a competitive spirit and somehow this translates to more and bigger is better.

From a resource perspective, most supporters of capitalism believe that the forces of supply and demand will eventually prevail and that any resource shortages will eventually cause the prices of scarce resources to rise thus causing competing alternatives to become more attractive and giving rise to new industries and approaches. Government regulation, it is argued, only interferes with this process.

And let’s be fair, I know of very few people or companies who will voluntarily give the government more tax money than they are required to pay by law just to help them increase services or regulations. Most companies and individuals try to minimize what they give, unbelievably even to their own detriment. We like to argue that less taxes make our businesses better and that we can hire more people, but at some point, we have to acknowledge that lowering taxes causes our public services and infrastructure to crumble. Just ask the government workers in California how excited they are to provide the same services to a demanding public for the minimum wage of just $7.00/hr. How many of the most qualified public servants are likely to stay in such an environment and which ones will be left to serve the public?

The impact of Resources on Business

At the same time, we live in a world which has limited resources, although from a short term perspective, they seem almost unlimited and exploitive industries will make sure that’s the message you get. You’ve heard arguments from environmentalists suggesting that growth is leading us to severe global shortages (e.g. peak oil) and you acknowledge the potential that such claims may have validity. You also agree  that certain shared natural resources, such as sea life, water and air, that have no one owner, are being used without recourse by whoever has access to them. Fish, for example, are being harvested faster than they are being replenished because lack of resource ownership discourages companies from spending money on research for replenishing stocks that might be developed, only be harvested by someone else. Such issues tend to encourage the easier option of finding better and more efficient ways of harvesting the scarce remaining resources.

You also recognized that the limited span of an individual in any one role discourages them from looking 50 or 100 years into the future, in favour of the next 5 years at most (and usually quarter to quarter). We suffer from short sightedness, not due to a fundamental disregard of environmental reality or a lack of care, rather due to day to day pressures and stresses, which as business owners and individuals, we try to eliminate not increase. We don’t want to have to worry about sustainability, an ambiguous issue at best, unless of course it’s profitable. Without being totally neglectful, of course, we spend most of our time trying to deal with today issues and so planning for tomorrow takes second place.

We complain about government interventions, regulations and taxes when they impact us, but when we really think about it, if it weren’t for those same taxes and regulations we wouldn’t live in the great countries we live in that provide us with infrastructure, roads, hospitals, health care, schools for our kids, and so many other benefits that we, our employees and even our shareholders and customers enjoy. Those schools educated our employees helping them become resources for our businesses, and helped other to become productive citizens that become our shareholders and customers. The transportation infrastructure help us to reliably get to work, get raw materials from suppliers and transport goods to our customers. The health care systems keeps our workers healthy and productive. All things we don’t have to worry about other than to follow a few regulations and pay some taxes.

True, many government services could be privatized and possibly done more efficiently, but in the end, someone has to manage the process of looking out for the common good, and someone has to pay for it. It is precisely the vision of our countries that we value and the money spent in implementing that vision that makes our countries so great. Ironically, even though we may have less than perfect governments, we tend to feel better when we live in a well structured world. 

The Downfall of Sovereign Government

While I won’t argue that bigger government is better, I will argue that government appropriate to the needs of the general population is ultimately better for the public and for business than governments which are too small. The question lies in what are the actual needs? Remembering that, as business leaders, we are only a small portion of the population, albeit a portion that has the responsibility of serving the needs of many stakeholders; employees, shareholders and customers. We have a disproportionate influence on society and therefore we need to think carefully about what we represent and what we hold as our values.

The question remains, what do we as business leaders truly need from our governments and what does the public need for their good? The dialogue begins in the form of our activity, what we say, what we encourage, what we market, who we support, what we lobby for, and how we vote.

To be fair, governments are far from perfect. They suffer, to some degree, from the same shortsightedness that businesses suffer from due to the fact that no one holds office long enough to pay for serious mistakes such as failing to set policies which prevent degradation of the global environment. They are also limited in a global environment from creating conditions which favour growth in a direction that considers a global vision. For example, independantly, a government can’t regulate air pollution because, while they can set mandatory standards in their own country, other countries will simply violate those regulations and cause polution anyway. The G8 and G20 try to deal with some of these issues but ultimately have no teeth. With weak and unfairly distributed regulation comes unfair competition. And while countries fundamentally agree about many of the issues, their governments, in the hope to increase their own GDP while preserving good relationships and free trade agreements with other countries, are reluctant to impose regulations on businesses which make them less competative in a global environment. And from a country’s perspective, they are correct. However, from a global perspective we need to take a different view.

The Evolution of Government

No business leader, from the perspective of their day to day business, would voluntarily advocate for more government. But business leaders also need to think strategically and long term. What will be good for the global business environment and global competition over the long run?

Historically, we can think of businesses as local enterprises that met the needs of very limited forms of society. As populations grew, it became necessary to settle arguments between nearby villages and slowly local, regional and national governments evolved. Each level of government assumed certain responsibilities and with each there was an improvement and expansion of the economy. The infrastructure and services provided to business leaders and  individuals in the society helped the society to progress. In the same way that invading forces, at the hands of wealth hungry tyrants,caused much pain to both friend and foe in former times, unregulated global businesses have the potential to cause problems not only for others but also for themselves. Just ask the President of Enron or BP. Eventually, we all have to pay the piper.

It is the organization of government and the regulations they impose that ultimately serve the betterment of the society. The fact that they force business to follow guidelines which are beneficial to the society as a whole actually helps good, ethical and relavent businesses to progress and become more competative. Some of the rights of local and regional governments were sacrificed in favour of national governments because it was appropriate at that time to legislate at the national level. And while economies functioned primarily on a national level, that approach worked reasonably well. But whether we like it or not, successful businesses are those which continue to provide products and services within the framework that is imposed, be it through national, provincial, regional or local regulations. Besides the regulation they may occasionally struggle with, they also benefit from the services provided from these various levels of government.

We happily give up certain freedoms to ensure our comfort, safety and security.

But what of the long term view of global issues?

The question is not whether a global government is appropriate at this stage in our planet’s evolution, the need for regulation of the planet’s resources and for serving the needs of all it’s inhabitants is clear. The question is, what role should a global government play, what powers should they have, and what powers and rights should sovereign national governments sacrifice to ultimately enhance life for all of us?

How would a global government impact business for the forseeable future? How do we encourage and support a transition that will create, not just better nations and a better global infrastructure, but also better businesses and a better world?

We may still argue that government slows the pace of business. But consider how businesses may have operated before national or regional governments existed. It is true that businesses were subject to less regulation, but it would be hard to argue that the world was a better place or that businesses were better off.  Businesses had to provide for their own protection from thugs and highwaymen, had to suffer from inadequate infrastructure, and had many challenges in addressing the needs of workers just as they do now in the developing world where mortality rates are much higher and finding skilled workers more challenging. There is little doubt that everyone had a more difficult life including the business owners.

But now, in addition to national issues, we have global issues. Global resources are being consumed at unmanaged rates and, while some companies are benefiting from short term profits, the long term benefits for other businesses is not so clear.

It is true that a global government would ad a layer of complexity to our current situation, but just as having local, regional, provincial and national governments takes away certain concerns from our businesses, a global government would also serve a specific role. We pay taxes now for needed services from other levels of government and a global government could be expected to share in these taxes to take care of the needs which are common to all just as national governments did in their time. And we wouldn’t necessarily pay higher taxes, but we would pay a tax which is more appropriate to the needs of the world we live in. Any world government would, no doubt, take into consideration the need to keep the world economy rolling and would therefore be mindful of excess taxation.

In the same way that we now have pride in our countries and how they function, isn’t it time that we begin taking pride in our world and how it functions? And just as some businesses were likely unable to make the transition when national governments evolved, it is equally true that some businesses will likely fail within a truly global economy.

For example, exploitive companies are mismanaging resources and, as a result, fail to make the transition to a more appropriately regulated approach, wouldn’t it be better for them to fail? In the end, what’s good for the world is also good for all the businesses that continue to exist, those that can compete and survive in a global environment.  Will such a change not provide the long term security that we now lack and the oversight of global development? Will a globally oriented infrastructure not benefit our globally workforce and our customer base and enable us to function more effectively as a human race, to compete without the worry of unfair or damaging practices, and without daily concern of how our future needs will be met?

Global government doesn’t necessarily mean bigger government, just more appropriate government for the time in which we live.

What can we do as Business Leaders?

We need to step back, look at things from a long term strategic perspective, decide what’s best for our world, for our children and their future, from the perspective of employment, food supplies, resources, research, innovation, infrastructure, security and, ultimately, the world that we will leave behind for them.

We need to adjust our values and make our voices heard to our national governments. Just as in the past when national governments became relevant and necessary, people spoke out. Now the time of global government and global regulation has become appropriate. Rather than resisting it, we should welcome and encourage it. As with every evolution, there are some rough patches, but every change starts somewhere.

Just as we now voice our concerns about current government issues, we need to voice our concerns with a view to the future. We voice our concerns through our votes, our participation, what we communicate to our governments, our workers and our friends and our families.

I’d love to hear your feedback even if you have other ideas. If you agree with these ideas or at least think them worthy of consideration, please feel free to spread them widely by sharing this link and letting others read them. You can share this link by clicking on the share button and choosing you favorite or by an e-mail link to this site.

All the best,

Garth Schmalenberg

Development has the potential to do harm but can also be used to do good if it addresses the local needs in a sustainable way. But even high standards such as LEEDs doesn’t guarantee that the results will be positive. On the other hand, using investment opportunities such as Yen Tu to encourage Sustainable Development and the use of LEEDs standards will certainly help to create skills for the future. It increases local expertise related to sustainable building practices, especially when the work is performed primarily by local developers. And it ensures that newly acquired expertise stays local and gets used on future building projects.

From an investment perspective, one way is to encourage sustainable development is to share methods and approaches through active program participation, collaboration and educational programs which allow for project participates to learn new sustainable techniques, always bearing in mind that we can also learn something from the local participants. Some investors are interested only in getting a good return on investment and less interested in how the development work actually gets done. Savvy investors recognize that sustainable building practices bring higher returns, especially when looking a long term value of the project. (If you happen to have access to a few hundred million you’d like to invest, feel free to call me and I’d be happy to direct you on how to invest in this or other projects in Vietnam. After all, there is a very satisfying feeling when you invest in a project that makes a difference in the world while earning you a reasonable rate of return.) Given a secure revenue stream, which the Yen Tu project certainly promises (see details below), long term profits will always be higher when operating expenses are reduced, a natural outcome of lower energy and resource costs. It’s simple math.

One of the natural consequences of Sustainable Development is lower energy and resource costs.  

Reduced expenses lead to higher long term profits. Short term profits are increased because the value of the development is based on long term profitability projections. Based on comments from LEEDs experts, short term costs on development are only increased in LEEDs projects as a result of inexperience. Once past the learning curve, the costs of LEEDs construction are not much different than standard approaches. In the case of such a large development, 700ha and spaning over many years, the overall costs of the development could actually be reduced through use of solar, wind and geothermal technologies which contribute energy to construction and operational efforts over the construction period.

If you create a sustainable infrastructure using solar and wind power, water recycling, geothermal cooling and other clean renewable technologies, the demand for consumable resources is removed or reduced, expenses are less, profits are naturally higher.

So is Yen Tu a good development? Absolutely, but with a little encouragement it could be even better. The Vietnamese Government has stated its goal of encouraging Sustainable Development in the region and is participating in the project by helping to develop better infrastructure around Yen Tu including highways, lakes, waterways and forest management. They are also bringing power to the area. This obviously has many positive implications. It also has some potential down sides.

The development company is introducing solar power for some aspects of the development such as water heating. Having said that, Vietnam gets a lot of sun and realistically could produce a 100% solar powered development with suitable designs. The developer has proposed that only electric vehicles will be used in the Yen Tu development area once completed. But this only helps if they also reduce demands on coal fired generators. The 700ha are will be a resort / tourist city with a convention centre, diplomatic area, several hundred villas, five star and other hotels, Buddhist Training centre, Buddhist cultural areas, theatres and museums, and commercial and retail buildings for development and sales of cultural memorabilia for visitors.

The Yen Tu area is being developed by a successful local company that has proven it’s cability through the development of many other office and hotel properties in Vietnam. Proposed designs recognize and incorporate the spiritual and cultural history of Buddism in Vietnam and incorporated important symbols such as the lotus flower in their architectural themes.

The development company has worked with the various Government Ministiries of Vietnam to ensure their support of the project and in acquiring the property. During our visit, we met with officials from the Ministry of Construction, Natural Resources and Religion. All of them described specifically how they were supporting the project. In the case of the Ministry of Construction, they are improving transportation corridors, water and sewage management and providing electrical connection to the grid.

Yen Tu itself offers a guaranteed stream of visitors that already ranges from 3,000-10,000 visitors daily in the low season and from January through March  has 30,000-60,000 visitors per day. Currently, there is nowhere for these visitors to stay once they arrive. The Yen Tu development promises increased employment in the area, increase revenues to the country, and, by encouraging a sustainable approach, it will lends itself well to a brighter future.

During our trip, we met with the Vietnam Buddhist Association’s top monks. The project not only received their blessings, but their encouragement and involvement. Besides serving a cultural and religious purpose, it provides a service to the many thousands of religious pilgrims and interested tourists.

The development company has also take care in consulting the local people and merchants who will ultimately be affected by the project to ensure that their needs have been addressed. They’ve also invited input from the local scientific and historical community who also support the project.

From a commercial perspective, there is both the long term employment related to the commercial and tourist elements of the town and medium term employment (about 5 years for the first phase of the project) related to construction. From a local and regional perspective, there are homes and local facilites for people who are being displaced from their current homes as a result of construction and for long term employees who will support the commercial and retail operations in the area.

It seems everyone’s happy with the plan. Now all that’s required is to get the investment capital fully in place. The project is already partially funded but there is more opportunity and interest investors are invited to participate. Please see http://hbi-investments.com  for contact information. 

The social view of Sustainable Development in Vietnam
Most governments of the world acknowledge, in some form, the need for Sustainable Development and the necessity to reduce carbon emissions. Vietnam as with other ASEAN nations, is certainly amongst those that recognize this need. Most also have an increasing understanding of the implications of development. However,  they often find the move to Sustainable Development difficult in the face of short term economic concerns of their countries. While having made significant economic progress in recent years, Vietnam continues to face the challenge of bringing 16% of their nation out of the grips of poverty and most of their population of 84 million continue to live at economic levels well below levels enjoyed by western nations. 

Vietnam’s developent from an Environmental Perspective
One of the shortfalls in Vietnam, as in many countries, is that, in the face of ever expanding need for power,  there is huge temptation to exploit readily available coal supplies which are relatively inexpensive to mine. Vietnam, along with other countries is making efforts to reduce it’s carbon emissions by expanding it’s use of nuclear power. Solar is also routinely used for water heating and further development is continuing.

Countries like Vietnam are directly impacted by climate change and are only too aware of the consequences of ignoring it. While it struggles to provide an economy more akin to the ones enjoyed by western nations, it faces increasing environmental challenges which might hamper it’s future prospects. Already they are experiencing some of the social implications of unsustainable development in the form of lost employment, crop failure and food shortage issues related to Climate Change (flooding, drought and severe typhoons) which is impacting inland fishing and farming in central Vietnam as well as the Mekong Delta and the Red River.

They are also facing international instability in the form of disputes with China with regards to conflicting land claims around the Paracell and Spratly Islands, spurred on to some degree by oil and other nearby resources, although talks have been proposed to address these concerns. 

There are also concerns related to mining in some regions. As participants in a global economy, one step we can take is to encourage, through our investment dollars, the participation of companies who make Corporate Social Responibility (CSR) a priority, who make the GRI (Global Reporting Initiative) part of their practice and who continuously seek input from local voices.

Please feel free to comment and share your ideas and share this with anyone you think might be interested.

Regards,

Garth Schmalenberg

Have you ever noticed how much the structure of Business Clustering and Global Innovation Networks resemble the formation of neural nets in the brain? Just as there is a certain randomness in the brain’s learning process where dendrites create random spikes to other neural paths, some of which survive and other of which don’t, businesses create collaborative ventures and, likewise, some of these serve the needs of the market and others don’t. Just as the brain has compartmentalized functions and specific neurons that play different roles in the functioning of the brain, businesses have specific roles which they play and each cluster serves a different market segment.

So what does this similarity teach business leaders about the creation of Sustainable Businesses?

While the brain expands by developing random connections, only those connections which are meaningful create lasting neural paths, lasting capacity and long term memory. The others are swept away over time. In addition, the sustainability of a circuit in the brain is related to repeation through some type of learning function, although the mechanisms of such loops are still the object of considerable research.

The question is, what aspects of this knowledge can we apply to create lasting businesses, developing collaborative connections, and acheiving sustainability from the perspective of the triple bottom line (people, planet, profit)?

In neural research, it has been identified that visualization strengthens neural nets in the same way that experience does. The difference is that experience is real and visualization is only real if it leads to a real result. An athlete visualizing must base their visualization on real experience. The sooner we are able to test a concept and experience the real results of an idea, the more quickly we are able to form neural nets that are lasting. Similarly in business, grand schemes and designs and even M&A activities which lead to the wrong results and wrong business collaborations ultimately fail, no matter how much we visualize them as succeeding.

Testing results early in business depends on using processes that are designed specifically for creating early and continuous value while incorporating a learning function as found in methodolgies such as OpenAgile. As one of the early Champions of OpenAgile and other earlier cyclic methodologies which combine the steps of planning and action with reflection and learning, it is easy to see the benefits to client organizations. Such processes focus on learning from early successes thereby strengthening real connections, building lasting capacity, and dispersing those activities and “Visions” which have little value.

In addition, while it wasn’t possible in the past for the business world to have an integrated view of the world, it is now. We are still early in the process of understanding our global connectedness and the negative impact that unsustainable processes have. While some business leaders are still in the very natural stage of denial or blaming, ultimately the world will impose itself and acceptance will be inevitable.

As we are in the process of developing a worldview (a global vision) which requires businesses and the society as a whole to be sustainable and which imposes principles of sustainable development, and as we hold that vision in mind, what does it tell us about the long term success of our own businesses and what does it suggest about Business Clusters and Global Innovation Networks that will achieve that vision?

For certain, at least part of the vision is a Global Innovation Network that sees every country as it’s market and the strengths of each nation as clusters. They are all part of that network and each of it’s members contribute their unique culture and values to the global wisdom which eventually results from such connections. The strength of such a network is in findng the unique capabilities and contributions that each country will bring. Only when each part of the world is fully functioning will the network achieve it’s fullest success.

What does this mean for your business? Only you know that for certain, but if you can’t visualize how your business fits into a sustainable future global network, you may wish to start thinking of new opportunities. No doubt this does not rule out local business. Each business plays a unique part and a vital role in the health of the overall network. And just as some neurons are connected only to those immediately surrounding them, and other cells and organs play other specific supporting functions, many businesses will provide for the health of the local clusters without much interplay on the grander scheme. But denying the need for these connections makes no sense. Outsourcing will happen and will only strengthen where it makes sense in serving human needs and the common good.

On the other  hand, businesses which create a toxic output for which there is no use or value, and which fail to deal with such outcomes in a sustainable way, ultimately don’t fit in a sustainable development scenario. Their days are numbered and the if the exponential rate of technological development is any indicator of human and global development, their end may be sooner than expected.

Forward thinking business leaders who work with their entire supply chain to create 100% sustainable results both from a product dedign and a product development perspective and which serve the betterment of human civilization are likely to be around for a long time. As the number of organizations serving the public good increases (Blessed Unrest by Paul Hawken), the collective wisdom of society will increase, and while this may be a generational issue, (i.e. perhaps in this generation behaviors of endless consumption may persist) our children are learning about sustainability and it’s implications very earl. They are becoming more conscious of social ethics at a younger age and, no doubt, in spite of their natural inclinations to go through challenging phases of self-indulgence (e.g. how many kids don’t have cell phones and computers?) still, they are learning at an earlier age the meaning of sustainable development and what it means to their future. Without a doubt, this will have an impact on their collective buying patterns as they grow older. Business leaders that overlook the implications of this transformative change are destined to drive themselves or their companies to extinction.

And perhaps what’s even more important is that the leaders of companies who, not only adjust their production and products to meet the criteria of sustainable development but also, meaningfully adjust their marketing message to increase the educational value of their message helping buyers to understand the human and global value of their products and the importance of sustainable efforts, will greatly widen the gap between them and archaic competitors who fail to heed the warning signs.

What advise do we take from this as business leaders? Image that future which will serve humanity in a way that is 100% sustainable, tell the world how you plan to get there, and actively work towards that end as quickly as possible. The more quickly you are able to make this transition, the more prepared you will be for future business.

All the best,

Garth Schmalenberg

Please feel free to share these ideas by referring others to this site or using your favorite book marking site.

In a quote from the report the author states that “Today private sector investments constitute the largest share (86%) of global investment flows and are expected to be essential to addressing climate change. A large additional flow of tens of billions of dollars will also be needed for adaptation.”

One of the most effective means of a government to weild it’s financial power is to influence the direction of Private Investment Capital. Rather than trying to “be” the investor as in many of the current government incentive scheme’s which directly invest, wouldn’t it be possible to take a different approach?

The challenge with moving huge amounts of investment capital to Greener Technology isn’t that these are bad investments, it is that most investors want secure returns. They are concerned about loosing money on risky, start-up ventures with unproven technologies. Yet, many of these start-ups, given sufficient infusions of capital would do just fine and would become the eventual market winners in a mature society. And given the current situation, we may only have a few years in which to reach maturity.

Due to lack of investor funding, Governments are forced to fund start-ups directly through Green Tech programs and provide incentives which infuse capital directly into Green Technology start-ups. But this rapidly drains the Government coffers and provides a very limited bang for the buck. Could the Governments instead create Green Technology Insurance programs which would provide some amount of relief to investors in the event that their chosen investment collapses? Since many will succeed with sufficient funding over a longer term, this approach might actually have the effect of providing the necessary security to investors and causing the infusion of sufficient private capital to help the company succeed. Mature investors already take advantage of put options and other hedging devices, but at a cost to them which makes investing in less mature technologies less interesting. And for the average investor, High Tech funds will not seem as interesting because of the issue of secure returns. And this is where Governments might step in to attract additional investment dollars. Obviously proper risk and cost / benefit analysis should be applied to take into account the maturity and potential long term benefits of the technologies.

For every government dollar spent on Green Technology Investor Insurance, hundreds or thousands of dollars of Investment Capital could be tapped. Certainly there would be a need to devise the approach in ways smarter than the AIG scheme of insuring investments without understanding the implication, but we also shouldn’t through out the baby with the bath-water. The fact that Financial institutions and Fannie and Freddy were essentially covered by Government also helped them to survive, albeit at a heavy cost. The concept of providing insurance to investment capital isn’t necessarily a bad one just one that needs to be carefully managed. Many proponents of market economy would argue that we should let badly run companies die. And in the case of mature companies, this is a fair approach. But fledgeling companies are a bit like babies. You have to nurture them and provide lots of love, protection and security. As in any market approach it would be better to see the Investors as the parents, and not the Government. But the it should be the Government role to encourage and assist the parents and provide them the means so that they can do the right thing. Does this have to be done through a branch of the Government? Perhaps not. Maybe a new role for AIG.

Is this already happening somewhere? Well all I can say is that I’m not aware of it so at best it isn’t being marketed as well as it might be.

Companies covered under such a scheme could, as the company grows and begins to generate profits, be required to pay back some of the insurance premiums offered to attract early investors. Other premiums could be collected in the form of incremental carbon taxation that would encourage companies to adopt these green technologies.

While there may be many others ideas on how to move investment capital, finding ways to move it would provide short and long term benefits for companies, investors and our world.

That’s it for now,

Garth Schmalenberg

If you would like to share some ideas of your own, feel free to comment (I do monitor and approve non-spam material), or tell others about this site by book-marking.

The news item was about Canadian research on obesity and how the researcher was regarding obesity as an auto-immune disease which impacts T-cell production by reducing the so-called “Good” T-cells and increasing the “Bad” T-cells. The researcher indicated that already they had found ways of normalizing T-cell production in mice and that potential treatments for humans are on the horizon, the implication of which would be a potential for reducing obesity, type 2-diabetes, and the plethora of diseases associated with obesity.

From a health perspective, such a discovery has amazing potential for reducing the costs of health-care, especially in developed countries where obesity is prevalent. But that same discovery could be devastating for the long term and potentially even short term profits of drug companies that have invested billions in research for treating symptoms.

At this point, it is a hypothetical problem but leads to the old question: Do drug companies hide cures, do oil companies buy up technologies up like cold fusion, do auto companies crush electric cars to protect current investments? Do large multinationals buy up threatening new technologies in order to protect their original investments in outdated technologies at the peril of greater human interests?  What does or should a top executive pay the most attention to when they make decisions: personal reward, company profits, shareholder dividends, their own sense of power to make decisions, building a legacy or ethics?

Asked the opposite way: Can we make a better system of economics for propagating new ideas which uses profit potential in different ways? Can we create incentives in our economic system that would consistantly encourage executives to make decisions based on any one of the above motivations and still come up with the same decision, ideally the one that benefits human society the most?

I’ve pondered this question quite a lot and along with a few solutions proposed by others, I have a few ideas of my own.

There certainly have been instances in the past of executives making unethical decisions for the sake of profit. We only need to look as far as Enron, Union Carbide and the likes of Bernie Madoff to find examples of unethical decision making. And there are many others. On the other hand, there have been many recent examples of executives introducing sustanability into their organizations and, while we can argue it’s just smart business, at least some are motivated based on ethical grounds. 

It’s not hard to argue that people follow their beliefs, even when their beliefs are inaccurate. Executives who act unethically, form defensive beliefs that, in their own minds, justify their actions. Unfortunately, the current market system does little to provide incentives for those beliefs to change. It lacks sufficient incentives for increasing and sharing knowledge or for introducing new technology at rapid pace and, instead, provides profit incentives for protecting current infrastructure, (e.g. the carbon economy, the lead industry, use of plastics) and potentially outdated technologies because change is costly and delays in change provide financial opportunity to squeeze more rewards out of old research and investment dollars, even if these are damaging to the environment or human causes.

What can we change in our market system that will encourage and provide incentives for money to flow more quickly to those technologies and solutions which will best benefit humankind as a whole?

Scenario 1
If someone were to come up with the cure for all cancer in the form of a pill, what would happen if the cure were released?

1. Those afflicted with cancer would benefit immediately from better health.
2. Those with loved ones having cancer would be relieved of the burden of watching their loved one’s suffer and die prematurely.
3. Those who are burdened with the costs of health-care for loved ones would save massive amounts on their long term expenses.
4. Those who are currently spending their time on solving an age old problem would be free from that dilemma and could spend their lives on new and more productive challenges.
5. Government health-care costs would be drastically reduced, or at least in the area of cancer research and treatment.

This is all good.

But there are also some negative consequenses from a commercial perspective.

1. All the people who were involved in the development and administration of treatments, which incidentally probably numbers in the millions when we include pharmacutical, health workers, researchers and others, would be largely un-needed for the work they are most qualified to do, particularly after the cure had been administered to all who need it. Health workers, researchers and others would need to find new avenues of service. Not unfixable, but a major challenge.
2. Major Pharacuetical firms would find themselves having major investments in reseach, intellectual property and related production facilities with potentially no further use.
3. Investors equity and dividends are related to the on-going sale drugs for treating symtoms. Take the disease away and company revenues and profitibility would ultimately suffer resulting in a loss in equity and dividends.
4. With a decline in share price, executives may find themselves without the support of their shareholders and the lucrative profits which justify their salaries and bonuses.

As with all production, eventually the usefulness for a product comes to an end as it is superceded by another product. In this case, however, the requirement for many related products would be all but eliminated or drastically reduced from the market without any further production except by the one or two companies who are producing the magic pill. There would be no recurring revenue.

Most of us would look purely at the moral implications and realize that not sharing such a cure would be morally reprehensible. Some people feel cynical about executive salaries anyway and would hold little sympathy for the executive who lost their salary in the process of doing good. And since the greater good of the world would be served there is no question that such a cure should be shared, right?

But to just dismiss the issue isn’t the best solution. My personal belief, however erroneous or naive it might be, is that CEO’s, underneath their exterior drive for profits, also share in human nobility. Just as other human beings, they have weaknesses and they faulter at times and make decisions based on the wrong criteria. The incentives to hold a short term view are simply too strong to ignore.

So let’s ask the following:

1. Can we design a better market system that rewards changes, that encourages and rewards people for doing “the right thing” vs. the most profitable, that encourages and aids the movement of employees from positions which can or should be eliminated into roles which better utilize their talents on solutions that are actually needed for the common good and which may be more satisfying for them? Can we find better ways to pay them for completing their service sooner and help them to go on to new activities?
2. Can we reward executives for creating dynamic organizations that are designed to adapt technologies for new purposes and which benefit the future of the planet vs. continuing to drive bad behaviour?
3. Can we design a system to intice investors to flow money into organizations which are profitable because they are focused on the common good rather than companies which defend outdated technologies, those that encourage renewable resources vs. those that don’t, those that encourage partnership and mutual benefit vs. dependency of the customer base to prolong profits, and those that promote permanent solutions vs those that treating the symptoms and prolong issues to protect shareholder interests?

In a truly moral society, wouldn’t we want the best of both worlds?

Scenario 2
An accusation was leveled at the automobile manufacturers and oil producers the first time the electric car movement was crushed (Who killed the electric car?) Whether or not this accusation is true is irrelevant to the discussion. The simple matter remains that current market system fails to reward oil companies for transitioning to renewable energy sources. True, those changes are slowly coming anyway, but is it necessary to be forced to into making changes by the threat of global collapse and irrepairable damage to the planet?

Opposing drivers in the Market.
Whether we like it or not, the force that drives the continuation of behaviours, bad or good, is inertia. We continue to do the same thing unless another force is acting. Bad behaviours will continue until good behaviours have a driver. The most prevelent driving force is where the money flows (at least until our very survival is threatened).

The concept of sustainability is now proving that economic benefits can arise from sustainable behaviours (e.g. as identified in the IEDC Climate Prosperity Workbook and many other studies) yet the market forces are only changing very slowly toward this direction. Why? Because this is consumer and cost driven. If the consumers are convinced to spend money on sustainable products and they are available, they might buy them provided they are less expensive than alternate products. If there is a consumer need, CEO’s will ensure that their companies will meet those needs. Otherwise, they might not. If alternate energy sources are less expensive, they will change, otherwise it is doubtful.

What changes can be made to the market system that will cause all parties to benefit from change? 
How do we change our investment system so that new and better ideas are widely shared and investment dollars are rewarded when the new ideas are adopted and the old out-dated investments are retired? If a drug company or researcher actually did find a cure for cancer, how would we entice the CEO’s of major pharmacutical companies to do everything in their power to share these solutions while protecting them from negative financial consequences? Is there a way to funnel saved health-care dollars and other saved dollars back to companies and shareholders to reward ethical behaviors? Can governments make policy to award larger research dollars to companies who prove themselves as experts in discovering cures vs. those who merely develop treatments and tax companies heavily on profits especially after their initial investments have been paid off? Can they create policy to favour permanent solutions vs. repeatative solutions? Can we create more companies that investors back, not because they have intellectual property or create profitable products, but because they have learned to share ideas and developed expertise in reducing or eliminating consumption while continuing to serve the public need and are therefore better positioned for the future where certain resources become scarce or too expensive?

What changes in the market would reward the behaviour of oil industry executives and their workers to wind down dirty operations in the oil patch in favour of clean and sustainable production, including in the development of bio-fuels, hydrogen, and other renewable energy sources and using oil only for creating a sustainable world? No doubt consumer demand is a part of this scenario but how do we create other drivers in market so that investors and CEO’s will take a leading vs. lagging role? In other words, how do we provide a better world view or paint the picture of a future that they actually want to invest in and which is self-fulfilling? Let’s face it, under the current market economy, no one want’s to create a product or service that people won’t buy because it is still too expensive, and no one wants to get rid of infrastructure that is profitable, even if it is outdated.

A few thoughts that came to mind while pondering this dilemma:

Encouraging long term thinking
Yvan Allaire’s – Black Markets Business Blues book suggests that one of the main problems with the current economy is the short term thinking. He goes on to suggest re-regulation and revision to the multi-tiered stock structure (i.e. common and prefered stocks) to reward and encourage long term investors. Longer term thinking in terms of capital investment not only helps to stablize economic markets and encourage long term industry growth, it also provides an opportunity for company executives to re-think their production in light of the need for a sustainable future with reduced consumption of resources and energy. But would executives take the opportunity, knowing that investors would not abandon them over additional spending on renewable energy sources such as geothermal, solar and wind, in order to yeild long term savings? True there are some who would still focus on short term numbers but there are many savvy executives of good conscience who would most certainly take the opportunity.

A Bleak Outlook
Eric Janszen, in his I-tulip.com column, paints a strong argument for a potentially bleak future in the US economy after the initial rush back into the market begins to settle. The only potential saving grace he sees is the urgent need for sustainable development, although he sees this potential bubble as something different than the high tech and housing bubbles of recent past. Driven by the urgent need to adopt alternative energy and green products, this bubble is likely to have less intensity than previous bubbles that were more greed and speculation driven. Consequently he contends that it needs to be supported by Government stimulus in the green sector until the secondary driver (i.e. combating rising oil prices) starts to kick in again. Alternative energies are already becoming competitive but not yet at a very compelling price point. And Janszen argues that it doesn’t create enough jobs to put everyone back to work which means that taxation won’t cover the massive US debt. This being the case, Janszen poses the question of where the money will come from for the next round of stimulus. Some countries have already downgraded the US. In what I’ve read so far, he offers no long term solution, only an insightful warning of what is to come.

A Shift to Services
I’m an optimist who is convinced that the world will eventually figure it all out. It’s human nature to find solutions to address current problems. The only question is, how large do we allow the problem to become before we act on it and how much will we suffer as a result of waiting before fixing it. I’m convinced that there must be a better way to help us see a new light at the end of the tunnel and make sure that we’re out of the tunnel before that light becomes the train. I also believe that part of the solution is in helping Executives to understand their own nobility and spiritual nature. It’s always a sensitive subject in bringing spirituality into the work place, but after all, when we are dealing with the need for transformation, we need to impact all elements of the human being, not just the physical and emotional drivers.

What can executives, business owners and investors do to change the current outlook and what opportunities are arising?

Many of us are familiar with open-source software approach. The concept involves sharing ideas (in this case through freely distributed source code) and making revenues off providing specilization of associated products and related services. With a need to reduce consumption of material for the sake of sustainability, perhaps a service oriented, idea sharing market vs. a product and intellectual property oriented market place would be a key to both rapidly increasing the spread of new ideas, decreasing material consumption and enhancing the quality of life.

When we think about the Great depression, we think primarily of the negatives. What were people doing? We recall pictures of men hopping rail cars wandering from place to place hunting for jobs where-ever they could find someone with money or food and a need. Perhaps people didn’t have as much, but they did survive and they did so by offering services to each other. Now we have the internet. Searching for needs can be done on-line if provided we have good sites for listing and finding these needs. E-lance and other simlar sites are examples of where you can bid on work that people and companies list. But these sites need more exposure and refinement and, in this time of needing to reduce fuel consumption, better sites need to be designed to help us geographically match needs. Google, e-lance, workopolis and collaborative software tools could be used together to get more employers and private individuals with needs communicating with more independent suppliers. No need to hop on a train-car anymore to find the next job. We could get local listings of long and short term jobs, talk to the employer, get hired, do the job, get rated and move on to the next job. And many of these services can be provided without even moving from our homes.

During the Great Depression, consumerism dropped considerably because consumers had very little money. The ironic upside to this period from the perspective of the planet was a drop in consumption of resources which most likely gave the planet a chance to rest. According to positive pschology findings, it turns out that people actually adjust to their economic situation fairly well. In other words, if you’re generally optimistic and happy, your going to be happy if you have less “stuff” and even if your economic situation isn’t all rosy. Researchers have found that getting your first 3 series BMW is just as likely to make you unhappy because you quickly adapt and now want the 5 series BMW. As it turns out, lower expecations lead to easier fulfillment and greater happiness.

If we plan ahead for more a more service oriented model and market where information and service opportunities are more visibly shared, perhaps we can avoid severe down turns and increase GDP while reducing consumption. If we optimize service linking technologies we may also have a new place for investors to invest, (i.e. in people), perhaps even our own sort of micro lending system (like Kiva.org) were we invest in people’s training and get some return from their revenues.

If we get used to paying each other reasonable rates for services that we don’t want to do anyway and get paid reasonable rates for services that we do want to do and are good at, we would have a greater opportunity to survive by doing what best utilizes our strengths.

What is it about an economy that actually serves us well and how do future looking investors and executives capitalize on that?

Basic needs must always be met. Agriculture, building homes, infrastructure, education, health will always be part of the long term equation and industries serving those needs are bound to survive. But they are also likely to change. Agriculture will need to feed more people per unity of energy and water but may need more human resources. Homes will need to consume less space, less material, eventually almost 100% recycled and live with NetZero energy and water and CO2. Mining, at some point, will need to decline immensely and recycling will need to address almost all of our resource needs. Infrastructure may look more like the cars in Cuba from the 1950′s that have been cut off from parts suppliers almost forever but continue to function. We will need to learn how to take existing infrastructure and find creative ways to care for and update it almost entirely through reduction, recycling, rebuilding, re-using adding only what is required for additional population. Education will need to shift so that sustainability is built in. Similarly with health care.

My guess is that there will be a growing role for CEO’s and companies who specialize in adapting their respective companies to new commercial realities and investors will benefit if they can find those CEOs and follow them with their money.

What should executives focus on?

For one, they need to focus on becoming more agile in the way they work. If you can’t provide a “thing” to make someone happy due to shortage or expense of raw materials, instead, provide a “service” that makes them happy. As new materials and energy resources become more expensive, those who have learned to reuse old materials in creative ways will be ahead of the curve. Executives who creatively adopt NetZero policies and rapidly move toward them will be the recognized leaders of the future. As with products, services also need selling. Sell a product and you make money but may also damage the environment. Sell a service and you use human resources to provide for human needs and wants with little or no damage to the environment, particularly if you can sell that service locally.

Establishing an approach based on sharing of ideas, collaborative ventures and providing more value added services accomplishes a few things. First, idea sharing in the public domain means that more people can work more quickly to enhance those ideas. Second, ideas don’t come in such large increments because projects are known in advance. This leads to a more progressive but smoother learning curve. As future ideas are anounced before todays developments are even complete, we can better plan for the full product lifecycle.

Taking a more agile approach to development wiill get the highest value activities done first. Executives skilled in agile approaches will win because they provide better value and are first to the market and first to new markets when they arrive.

Profits currently protected by patent rights are always at risk. Profits from shared information in the public domain doesn’t suffer from this risk. Companies who base profits on rapid adaptation will always be ahead of the curve. The key resource of such a company is not what comes out of the ground, rather what comes out of the imagination, thoughts and experiences of the employees and leadership.

CEO’s that focus on the plight of humanity have a much bigger market to sell to and it’s growing daily even with the economic downturn.

As an open service oriented market evolves, progress would involve: a) registering new ideas if you have them or b) registering new needs if you have them, identifying projects you are working on, involving others who wish to work on it and selling to a ready made consumer base who have previously identified the need.

While I don’t claim to have it all right, I hope there are a few useful ideas.

Garth Schmalenberg

As always, feel free to share these ideas by e-mail, with proper attribution or through your favourite bookmarking site.

Conflict, by it’s nature, signals a need for change. But underlying the existance of conflict is a deeper and more distressing issue. The fact that we accept conflict as a tool and allow conflicts to flourish signals a lack of maturity in human creativity and development. If not handled with extreme care, conflicts are destructive, either physically, spiritually, emotionally, financially, socially or environmentally. The larger the dispute, the more destructive.

What’s worse is that conflicts tend to be destructive long after the disputing parties find a way to stop the dispute. They continue to cause challenges as long as bad feelings linger, until learning occurs, mindsets change and reparations are completed. Some disputes unfortunately last centuries.

But there are better and more creative solutions that using conflict to find solutions. Let’s look at a few impacts of conflict and consider alternatives.

The Impact of Conflict on Organizations
Although organizations are emotionless in one sense, the individuals and leaders who make up those organizations are not. They can be directly injured by the events surrounding a conflict and they may sustain those injuries over a very long period. This impacts both internal team work and relations with external community interests. Perspectives may be severely impacted. Leaders who take a stand for their organization may find themselves repeating “the company line” and be grounded in a sense of righteousness even if the justifications for their perspectives have long since been proven false.

The organizational approach often reflects the attitudes and emotions of it’s leaders. Effective leaders communicate their perspective with influence and those who are influenced support and reflect the concepts of their leaders whether they are worthy of such reflection or not. Such is the nature of organizational culture.

The power to influence gives leaders both the capacity to do tremendous good when openess and learning are encouraged, or to inflict tremendous harm and stunted progress as when conflict arises. It is this fact that compels organizational leaders of all types to rethink the concepts surrounding conflict.

Conflict on the World Stage
Another interesting potential for conflict is how we think about national sovereignty.

An interesting case in point is the recent over-flights of Russian planes in Canadian territory. From the perspective of a Canadian, and what I have always personally held as true, according to the history that I’m aware of, the waters and islands north of Canada’s main land mass to the North Pole have always been considered part of Canada. I hold a specific bias. Now that there’s less ice, this perspective is being challenged by Russia and other countries. Until there are more compelling arguments presented, or a contrary decision by the UN (or another universally recognized voice of the international community), I will continue to believe this area to be Canadian and hold a “Canadian” perspective. That is the view that our sovereign leadership would want us to hold as well, so they make bold assertions on their “ability” and “willingness” to “defend” their territory and engage in conflict if necessary.

The reality, however, is more complex. Land and resource claims are rarely simple. Many wars have proven that they are seldom solved by unilateral declarations of one party over another. While Canada may very will have a valid claim, it is highly unlikely that engaging in conflict would actually benefit us as a solution. 

And while it is true that all nations must guard against putting the world in the hands of individuals who would usurp the human rights of others, in the end, it is the world at large that must decide on issues of sovereignty by international mechanisms of justice. If these mechanisms were to decide against Canada’s claim we would ultimately be forced to comply.

A friend of mine who is a foreign diplomat once told me that his country makes firm claims of sovereignty on disputed lands, not necessarily because they are unwilling to share the resources in a fair and equitable way, but that if they fail to make that strong claim, there would be questions at the very start of negotions regarding their right to share anything, even though from their own perspective, the land is historically theirs. While he saw defense of his country as an essential right, he acknowledged that, ultimately, what’s best for the world is also what’s best for his country and his hope was that an international tribunal would be held to facilitate an equitable outcome.

Another case in point is the Spratly Islands, Pratas Islands, Paracel Islands and Macclesfield Bank in the South China / East Vietnam sea which are all claimed by several countries. The Arabian / Persian Gulf and disputed Israeli/Palistinian territory are also hotly contended. As long as there are no strategic advantages, these situations tend to remain somewhat dormant. But as soon as countries become aware of valuable resources (e.g. oil under the northern ice cap) or where these claims represent strategic military positioning, they are hotly disputed and these disputes can be exceedingly distructive.

So we have to ask the question: Has the time for independent claims of sovereignty passed? Are we not at a stage where the world would be better served by creative negotiation around what is best for the world?

New Problems demand New Thinking
In the world of business, claims are eventually settled in courts, but even there, there are many companies that engage in conflict against local interests simply to satisfy their shareholders. Rather than seeking reconciliation and creative solutions, they deepen their rehtoric and strive to influence their own agenda even when it is widely accepted as harmful by those who are directly impacted by their actions.

As we face an ever worsen global situation, engaging in conflict as a means of solving problems is out-dated.

In a world that is struggling under the massive influence of climate change, accelerating population growth, destruction of oceans, potential threats to food, water and energy supplies and which possess almost limitless destructive capacity, the future of leadership demands that we re-think our methods, that we strive to find common solutions and that we avoid conflict at all costs by learning how to systematically build understanding and act based on global wisdom vs. individual or group interests.

If we want to reach a world which has all the attributes we want, clean, carbon neutral, abundant with food and clean water, equitable for all people, peaceful and which provides an opportunity for each individual to reach their ultimate development, we need to start thinking bigger.

Reflective Consultation and Discourse as an Alternative to Conflict
People are fundamentally good at heart but often find themselves trapped in their own mental patterns. We repeat endless retoric to ourselves and create neural pathways which help us decide right from wrong and good from bad. So when it come time to submit to a higher authority, we find it difficult because we like to believe that we know better. But our thoughts are always incomplete and most likely one-sided.

In a world of competing interests, the leader of vision is the one that encourages discourse and consultation to solve claims and document agreements and then abides by and supports the majority decision, not for the good of the country or their business or shareholders, but for the good of the world.

The irony is that, as the world begins to slowly accept fundamental human rights and is slowly forced to address the enormity of the global issues we are all facing, all countries will begin to converge on the same methods, approaches and realities anyway. In the end, our choices will be limited to those that will ensure our survival.

We see this convergence in the global economy, how all nations work together on policy, and how all nations are involved in some form, albeit not enough, in thinking about how to address issues like climate change.

While making threats of  “ability and willingness to defending sovereignty” or defense of business interests may be necessary when we feel threatened in the light of no clear decision mechanism, we also need to recognize that such threats are ulitmately idle until all claimants have been heard and decisions are made in the court of international opinion or, even better, by international tribunals created for the settlement of all important claims. The UN and world court are a start but education is required.

Learning the skills of frank and respectful consultation coupled with an attitude of detachement are essential in today’s businesses and political environments. Let’s hope that our leaders begin to appreciate the benefits of this approach and strive to educate themselves and their organizations accordingly.

All the best,

Garth Schmalenberg,
Web: http://hbi-leadership.com
Blog: http://sustainabilityculture.com
E-mail: garth@hbi-leadership.com
Twitter: http://www.twitter.com/gschmalenberg
Linked-In:
Phone: 1-416-919-6598

Ideas are to be shared. Please feel free to comment or to share these ideas through your favourite bookmarking site or by e-mail.

The question now is, how will the world be impacted and how will businesses respond? Although there is still far too much rhetoric, even the world leaders at the UN Summit on Climate Change preceding the Copenhagen meeting, most notably Obama noting that “the old habits, the old arguments are irrelevant”, are beginning to speak seriously about the issue. Even China, which understandably refuses hard targets in the light of excessive energy usage and emissions from developed countries, is taking a leadership role in developing solar, wind and other renewable energy sources.

 The question is not about whether changes in business will occur: the question is, what will drive business the most? Will there be sufficient agreement on policy and limits at the global or national government levels or will the change in the earth’s environment itself be the greatest imputus for business to adapt and what will that mean for business?

For example: Policy on climate change will almost certainly lead to cap and trade systems for carbon emissions in North America and other developed and developing countries which will require businesses to begin measuring their outputs and create a new market. Gas mileage targets will help to reduce the fuel consumption and overall emissions, incentives for the expanded use of electric and plug-in hybrid vehicles along with incentives for generation and installation of renewable energy sources and development of carbon capture technologies, will no doubt, continue to expand so called “green” markets.

But all the policy change in the world will likely fall short of the rapidity of change based on observable events and an even larger market is likely to emerge in the business of climate change mitigation. The difference in this market is that it will call upon business leaders to make considerations that they have never made in the past. A global demand for ethics will demand that business leaders begin to consider the personal impact of their leadership upon the environment and humanity as part of their business model. What was previously accepted as common place business practice, even what we now consider acceptable carbon emissions, will begin to be viewed as irresponsible and possibly even criminal from a retrospective view. Just as many people were fooled in war-time situations to ignore their sense of ethics and adopt unacceptable and inhumane behaviours, and then were later charged for crimes against humanity, I have little doubt we will begin to see an increase in cases where business leaders who ignore what is now becoming blatently obvious and who continue to lead the worst poluting businesses and possibly even political leaders who fail to act in the face of clear scientific evidence will eventually be held responsible for criminal behaviour and jailed for not taking more steps to mitigate circumstances which have already lead to disastrous results for millions but which only continue to increase. Those who committed crimes against humanity in the past also falsely convinced themselves of the efficacy of their actions until after they were eventually called to account.

In addition, as changes in the climate begin to impact businesses and people world wide, it is likely that we will all be called upon to take actions that we now consider unlikely or even unthinkable.  Considering the fact that glaciers which supply billions of people with life giving waters are disappearing at alarming rates and are likely to be gone within 10 to 15 years, we can be relatively sure that we are facing mass migration, increased pressure on global water supplies and increased charges for the energy required in attempts to alleviate disasterous changes and human suffering.

While we find it difficult to consider this as a necessity at this juncture, projects developed from the perspective of 100% sustainability (off the grid) will, when looking back 20 years from now, tell us which of our current industry leaders are foresighted and which fail to understand and plan for the future. In the worst case scenario, the additional costs of using LEEDs building standards and installing renewable energy systems which may seem challenging at this stage, will seem like not only a good investment but as the primary decisions that save companies. Given that ocean waters are expected to rise and that current models of warming are proving to be far too conservative, properties which are well above coastal waters and out of the path of potential floods are likely to be better choices for major facilities than those which are designed on or near the coastal properties or near rivers or low lying plains. Companies which strive to take themselves completely off the grid by coupling facilities with solar or wind powered generation, which recirculate collected rain water for processing, and which adjust their working models to take advantage of high power generation periods, which sell off excess energy as part of their business model and which strive to work with other similar companies will be far more successful than those organizations who pay no attention to changing conditions. Since we don’t know exactly where the impacts of climate change will be worst, organizations that choose numerous smaller facilities in locations nearer to their markets rather than larger facilities in one location will be better set to adapt in the event that any one area is confronted with massive flooding, severe storms, drought or forest fires. Just ask the hotel owner in Taiwan who watched helplessly as his hotel fell into the flood waters, companies in New Orleans and Houston impacted by hurricanes, owners of companies in California who have been impacted by brown-outs and fires, and companies in Australia which have been impacted by a lack of fresh water.  

As much as we would like to pat ourselves on the back for taking a few steps at a time to improve our environmental and social records, we may not have that opportunity. The very definition of leadership is changing. No longer is it sufficient for business leaders to be individuals who are business smart. Business leaders increasingly need to be aware of what’s going on in the world and to prepare for contingencies which are increasingly likely to occur. They can no longer afford to ignore the complexity of a world in change. They need to be wise enough to recognize their inability to prepare without consultation and help from outside consulting firms, they need to include Climate Change as a consideration in their business plans, just as they did Y2K, and they need to expect that some there will be a greater need to sensitive to the needs arising from human suffering , potentially even with their own employees, and to provide flexibility in their response to assisting in world events.

My son and I were having a discussion on the subject of climate change and the timing of actions. My comment to him was that the time for action was actually about 20 years ago when the problem was first recognized. But we can’t go back. We can only hope that going forward we will begin to see everyone, including our business and political leaders to begin acting as though there really is a new challenge.

As much as we may feel hopeless at times or see far too little actually happening to preserve our future, I have learned to have faith in the human spirit, I believe that people are fundamentally good, and I full believe that business leaders will, as they begin to become more informed, begin to take more extreme action, even if for no other reason than to protect the future profits of their businesses. It turns out that smart planning and foresight always pays off. 

All the best,

Garth Schmalenberg
web:  http://www.hbi-leadership.com
e-mail: garth@hbi-leadership.com
Phone: 416-919-6598
twitter: http://www.twitter.com/gschmalenberg

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But are they helpful or hurtful to global development?

Supporters of high compensation would argue that a good CEO can make billions for their company using their own experience and by hiring and consulting a qualified executive team. They embody the vision and passion for the company. They know when to sell outstanding shares in their company or unprofitable divisions to raise cash, and when to buy back shares to increase their value. They also know when to buy failing companies with good potential for pennies on the dollar, thereby taking advantage of floudering economies and improving poorly run businesses. And they outsource jobs in order to utilize a less expensive workforce and increase profits. Does this justify a 400 x salary? Obviously, those who have the voting power think so.

Dissenters argue that much of the success attributed to CEOs is more related to trends, like tides, that raise all boats. Certainly economic downturns would support this theory because just as all boats rise with the tide, many get grounded when the tide goes out.

In my personal experience as an Executive Coach, I can only say that I haven’t met a CEO I didn’t like. To be fair, most CEO’s I’ve met and worked with, while well compensated, probably don’t fit in the 400 x average salary category. Most are good people who care about the welfare of their workers, who care about their families, and who are relatively philanthropic in there outlook. And, of course, they have a responsiblity to earn profits for their shareholders, and they are justified in enjoying the fruits of their labours and experience. There are some CEOs that have taken a $1/year salary simply because they didn’t need more wealth and prefered to bestow those earnings on others in the company. There are those like Bill Gates (a former CEO) who have used their wealth to benefit others. But as in every facit of humanity, there are some CEOs who choose to exercise their best qualities, and others who choose to exercise negative qualities. Wealth is ultimately a test of one’s humanity and character.

In the same article, Senator Webb describes the loss of American jobs to outsourcing and illegal immigration as being a serious challenge. No one can dispute that loss of jobs and high unemployment in any country poses a problem for those who are affected. And his concern over the possibility of protectionism has been partly realized in recent US policy (the recent tariff on Chinese tires is an example).

Ironically, it is our limited and localized view of humanity which is both the source of the protectionist attitudes that Senator Webb warns against and the root of many global issues, including environmental challenges, foreign policy, international security, and extremes of poverty in the world.

One might pose the question, is it any more wrong that a CEO (putting into perspective that this is 1 individual per company) should earn 400x what an average American earns, than it is that an average American worker earn 50 x more than 3 billion people in the world who survive on less than $2.50 / day or less than $1000 /  year? The point here is not that there’s anything wrong with earning a reasonable living, rather that everyone deserves that same opportunity.

It is in this light that the obscenity of extreme CEO salaries which are 10,000 x the income of the majority of humanity become even more apparent, excepting where it is spent primarily to benefit others. It is also in this light that we need to re-think our global position on wealth distribution. Is it right that we casually accept abject poverty and hunger in the world simply because it exists outside our home boundaries? And it is in this light that we need to give credit to policy makers and business leaders who demonstrate their concern through enabling and encouraging global investment and even more so when it is done ethically and with concern for the environment and the local inhabitants rather than purely for profit-motivated reasons, even though there’s nothing wrong with a win-win scenario.

It is also in this light that I question concerns about outsourcing. Is it really a problem that jobs are created for people and economies where wealth is so desparately needed? It is, of course, a problem if you are an average American or Canadian who has lost their job and you need to pay for a home and to feed your family. Clearly, their are some who will need support through a period of global adjustment. But outsourcing is arguably good for the long term world situation. Giving jobs to poorer economies like China, India, Vietnam, Philipines, Russian, Malaysia, Indonesia and the many underdeveloped African nations, in the broader scheme, is nothing more than the market economy’s way of adjusting salaries on a global scale. True, just as in North America, there are some individuals who will suffer in the short term, and some who will take advantage and gather for themselves an inequitable share of the wealth through positions of power or inequitable pay practices. Yet the average salaries in these countries will continue to rise through outsourcing and global trade with the net result of creating new wealth and many new jobs. As the wealth of these countires and their average salaries continue to rise, so does the power of their workforce to spend on foreign products and services. And as the average salaries increase, outsourcing will become less attractive and jobs will return to where they are most profitable, ideally, where they are local and where transporation costs are lowest, all other things being equal. In this sense, I view outsourcing as a relatively short term trend that will have the long term implication of making everyone better off and limiting outsourcing only prolongs the inevitable pain of a world with major gaps in the distribution of wealth.

Current political systems are designed to address local problems first and global problems second. From this perspective, Senator Webb’s comments are thoughtful and show a great concern for the Amercan populus he is sworn to represent. His more recent role in international affairs and recent visit to Asia also demonstrate a concern for stability in the world. In a world that is ultimately so interconnected, we can only hope that more of our politicians begin to think globally first, then locally. It is only when decision making begins to take the form of addressing global policy first but informed by the multitude of local issues that we will start to make real progress on the larger issues of sustainability, world food production, climate change, and, ironically, gaining employment back at the local level.

In addition to solving some of the serious global inequities, the balance that will eventually be established through the current outsourcing trend will also resolve some of CEO salary issues. The huge profits earned through outsourcing to lower cost countries, will eventually becomes a thing of the past although this may take a few years.

As for CEO’s considering outsourcing, it all depends on  your time horizon and your need. We can already see Chinese companies building vehicles in the price range of about 1/2 the North American market, and India building a basic vehicle (the Tata Nano) at about 1/6th the cost of a small North American car. As these and other products become global, I suspect that global equalization of pay will become increasingly rapid. And as production continues to increase in developing countries, demand for energy will impact the cost of oil, thus further equalizing the cost of production in other countries and creating more opportunties for development of alternative energy sources.

If establishing your organization over the long term is your goal, you may wish to consider improving local productivity first, finding energy savings, and deploying new technologies and renewable energy sources such as solar and wind, assuring longer term cost reductions as an alternative to outsourcing to what will be an increasingly organized and expensive  labor pool.

Both approaches have their uses and their benefits.

Does investing in other countries make sense? Definitely, however, it should be done with the view in mind of first serving the country where the investment is made. If hiring local people for local production makes sense in North America, the same model should be anticipated in other countries.

I invite your comments, and positive additions.

All the best,
Garth Schmalenberg

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e-mail: Garth@hbi-leadership.com
Web:     http://www.hbi-leadership.com
twitter: http://www.twitter.com/gschmalenberg
Phone: 1-416-919-6598

When the “clunkers” are submitted in exchange for a $3500 or $4500 rebate, depending on gas mileage improvement over the clunker, (4 and 10 mpg improvement respectively), a black liquid is poured into the engine of the clunker to render it useless, never to be driven again. However, there may be many Americans, (or for the border states, perhaps even people in Mexico) who are driving even less efficient cars than the one’s being turned in, and who simply don’t have the resources to be able to purchase something more efficient. I understand the concept of disabling older less efficient cars to get them off the road, I’m just not so sure that we couldn’t do even better. Why not let them have a chance to exchange for something more efficient than theirs.

For example, someone may have an old Corolla or Chevette or other 4 cylinder model that may not be worth much as a trade-in. If they buy a new hybrid, they are still eligible for the $4500 rebate. But their previous car may have been much more efficient than many other cars still on the road. If we truly care about the environment, why not keep those cars turned in which are still reasonably efficient and make them available for people who drive even less efficient vehicles. Then disable the worst ones so they don’t end up back on the road.

Secondly, one of the things we need to begin doing is changing our concept of transportation to a concept of mobility.  We know that smaller cars, on the whole, are lighter and more efficient. We know that size and weight does matter in terms of energy consumption, and CO2, resource usage (steel, plastics, etc.) and also require more energy in the recycling process after the fact. Sometimes we do things simply because we are accustomed to doing them. Our parents drove larger cars so we also drive larger cars. We don’t necessarily need them but we are comfortable with them. Once we shift our thinking we become familiar with a new way, (i.e. driving smaller vehicles), we start learning about other benefits like easier parking, manuverability in tight spaces and even better efficiency than newer vehicles of the same size as our older ones, and our children also learn a new way of thinking. If you’re going to provide incentives, why not give incentives for reducing size as well.

Thirdly, I gather that the incentive is partly environmental and partly to stimulate the economy. Otherwise, giving $3500 for only a 4 mpg improvement doesn’t make much sense. Why not make the whole stimulus based on building a sustainable economy rather than just a robust economy and set the requirement much higher for the $3500 to say 8 mpg and only $2000 for 4 mpg. Then give an extra $1000 if they reduce the size of the vehicle as well.

As for myself, none of these suggestions will benefit me because I live in Canada. I’m one of those individuals who’s caught in the middle of vehicle purchases. When I last bought a vehicle, the environment wasn’t at the top of my list of issues. I went from a smaller cars initially to a 6 cylinder vehicle because I wanted something quieter for the highway and I still have this size vehicle. Even though it’s relatively efficient, I have changed many of my driving habits, e.g. I car-pool when I can, do more phone meetings rather than face to face and I am also very aware that most of the time my car is empty and just carrying extra weight so I make many less unnecessary trips. Still when I change vehicles, I know that I’ll be looking for something smaller and with a four cyclinder, hybrid or electric powerplant. Most are quieter than the older vehicles I used to drive, so sound quality is not a good reason anymore, and like many of us, we just don’t have the need for a larger vehicle once our children leave the nest or have their own transportation.

As always, ideas are for sharing. If you like these ideas, share them with someone who can make a difference by e-mailing them or through your favorite sharing site by clicking on the share button and feel free to comment.

All the best,
Garth Schmalenberg
Web: http://hbi-leadership.com
Blog: http://sustainabilityculture.com
E-mail: garth@hbi-leadership.com
Twitter: http://www.twitter.com/gschmalenberg
Linked-In:
Phone: 416-919-6598

Wal-Mart and others companies cooperating in this initiative should be commended and recognized for the positive work they do. As leaders in the world from a commercial perspective, they have an enormous ability to influence change throughout their value chain and consequently the ethical responsibility to do so. We can only hope that one of the out-comes of this initiative is the adoption of new standards globally for sustainablity of products and recognition from globally recognized organizations such as the WBCSD, IEDC and others.

The Market Response

A question remains whether or not investors will continue to reward these moves as a sign of strong leadership and forward thinking. They should because these kinds of initiatives represent creativity and critical long term thinking, a hallmark of leadership for companies which do well over the long term.

The Consumption Question

A question that still needs to be asked is “How do we help Wal-Mart and it’s competitors to begin encouraging an even bigger shift in mindset, (i.e. how do they do encourage consumers to consume less)? For a company that has it’s basis in serving the customers wants and needs, this is an interesting challenge.

And I’m not necessarily suggesting that Wal-Mart provide less products to it’s customers, although that may be an end result of such a strategy. I’m certainly not suggesting that they loose market share. What I am suggesting is that truly forward thinking executives will be taking a long hard look at the long term global perspective and, if they are truly creative influencers of change, which I believe they are, they will start asking the questions about how to design their business models and strategies around global equity as well as sustainability.

If every human being, in a growing global populuation were to be treated equitably, could they all be sustainably supplied with the numbers and types of products that we currently enjoy from companies like Wal-Mart? I ask this question, suspecting that we all know the answer (i.e. “not likely”) while conceding that I’m not personally an expert on the topic of resource consumption. I’ve heard statements from experts suggesting that we would need three earths in order to supply everyone with the amount of goods that we currently consume in developed nations. If  CO2 per capita production is indicative of resource use, and is already far too high in developed countries, I think we can conclude that we can’t continue on the current path of resource use for very long.

A Whole New Approach

While the current initiatives toward sustainability are laudable, will they go far enough to meet the future needs, or do we need our business leaders to create a whole new approach to business?

My question is “What do we need our business leaders to learn from our past behaviours and results; current market reward systems, business strategies and production and consumption patterns, that will ensure their success long into the future and ensure that our future behaviours will be both sustainable and equitable?” We might also have our business leaders ask themselves, “How long do they have to effect the changes that need to be made and what actions do they need to take immediately to make these changes before additional irrepairable damage is done?”

What ideas might they then come up with that will change their entire business model, encouraging cooperation and knowledge sharing, rewarding learning rather than imposing punative measures, incenting investors to consider the triple bottom line as mandatory vs. a nice to have, and considering the world as the market but in ways that allow sharing and distribution when necessary for equity while striving to preserve diversity, local use of resources and preservation of the global and local environments? 

What will allow our retailers to satisfy our needs and wants while giving us less “stuff” and reducing the net consumption of non-renewable resources to zero?

Who’s Responsible?

What responsiblity do we place on the market system, the investor, the consumer, the suppliers, business leaders and the policy makers?

The reality is that if we all wish to have a good world, and we all want to our children to have a good world, and their children, we all must play a part. But for those in influencial positions, let’s reward and encourage them when they take the lead and continuously challenge them to do even better.

HBI Leadership (Building Sustainable Organizations and Communities)
Garth Schmalenberg, B.Eng, CPCC
Founder / Executive Coach
Web: http://hbi-leadership.com
Blog: http://sustainabilityculture.com
E-mail: garth@hbi-leadership.com
Twitter: http://www.twitter.com/gschmalenberg
Linked-In:
Phone: 416-919-6598

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