Stuart McLachlan and Dean Sanders, co-authors of ‘The Adventure of Sustainable Performance: Beyond ESG Compliance to Leadership in the New Era’, reflect on the risks and opportunities arising from the transition to a new economy.
- The emerging era demands that leaders reconsider their responsibilities towards all stakeholders and operate across their entire business ecosystem.
- To ‘pivot and perform’ will require something much more transformational, like what companies such as LanzaTech and Made of Air are doing.
- As the ‘business as usual’ era fades, we have the opportunity now to be part of something that is as exciting as it is hopeful, where we can create business ecosystems within nature’s ecosystems.
The environmental and societal challenges we face today are like nothing we have ever seen.
As we face the implications of transforming our businesses to the world of net zero, many of us now know that business as usual is no longer an option. But the alternative paths of action seem unclear, likely expensive and difficult.
A new business era is emerging
The trend among businesses, cities, and governments is to set carbon reduction targets as the embarkation point to the climate transition. We see this as the shaking loose from a business era that is passing, with all the potential chaos that will arise as global forces and philosophies collide.
Of course, there will be some businesses, ideologies, and institutions that pass more peacefully from one era to the next, but many of our prevailing governance and finance structures will not withstand the shifting tides of change with which businesses must grapple. The emerging era demands that leaders reconsider their responsibilities towards all stakeholders and operate across their entire business ecosystem.
Our concern is for the leaders who choose to ignore this, miss this, or – worse still – attempt to stretch past truths into a place of future fantasy, a tendency driven by the desire to survive a short-term tenure. The longer the fantasy realm continues to be the perceived reality, the more explosive the potential destruction is likely to be.
In The Adventure of Sustainable Performance, our message to leaders is clear. You have to move. Transformational change is inevitable, and if you don’t respond to the imminent danger then the organisation that you lead will likely perish. For this, you will need to embrace the reality of adventure, and the likelihood of having to leave business as usual behind.
Those that see the ESG agenda just as a cost of compliance issue will buy some time and earn their licence to operate, but ultimately this will not be enough. To ‘pivot and perform’ will require something much more transformational.
Pivot from linear to circular
Perhaps the greatest disruptor of traditional value chain thinking is the move from linear to circular business models. A circular economy or business model is a model of production and consumption which involves sharing, leasing, reusing, repairing, refurbishing, and recycling existing materials and products with the aim of eradicating waste.
To meet our climate targets we need to move from the wasteful model of the linear economy to a circular one. But going circular is not just about climate impact and the associated use of energy in the linear economy, it’s also about biodiversity loss, pollution, and the suffocation of our oceans.
Sean Simpson, founder of LanzaTech (NASDAQ:LNZA), believes it’s all about laying fresh eyes on a problem and considering it from a different angle. Reflecting on LanzaTech’s ambitious vision, he told us that “we need to take those emissions, take all the waste carbon from that industry and turn it into a resource. And so our business model is to partner with other groups to complete a circular economy where above ground carbon just goes round in a cycle”.
LanzaTech uses bioagents to bio-convert carbon emissions to a range of different substrates that can be further refined and introduced into new material streams. LanzaTech is already selling its products and services to companies such as Unilever (NYSE:UL) and L’Oreal (EPA:OR). In 2022 it announced a pre-IPO on the Chicago Stock Exchange with a valuation of $2.2 billion.
Pivot to pilot and scale
Many companies on the transformation journey are having to become adept at the calibration of piloting and scaling.
We have worked with many organisations that have set up specific internal labs or funding mechanisms to encourage and invest in pilots designed to address challenging and complex externality-related issues. Guillaume Le Cunff, chief executive of Nespresso, told us that Nespresso wanted “to make each investment in sustainability a new business opportunity.”
We’re witnessing impatience both from leaders within the organisations and external stakeholders to see how quickly successful pilots can be scaled at pace. The ability to rapidly incubate new solutions, usually co-designed with stakeholders, learn from them, and rapidly deploy them at scale will be a determinant of the success of companies in the transition to the new business era.
Recently we have been working with larger companies grappling with SBTi net zero ambitions for 2050 to help identify new technologies and ventures with whom they can partner to accelerate their decarbonisation programmes, realising that they need to start now to achieve the required reduction and removal milestones in 2030 and towards 2050. This is particularly important for organisations with large and complex scope 3 emissions universes. In this work, we are already seeing interesting hybrid connections between the longer-term horizons of the corporations and the speed and agility of new era businesses.
Enterprising in the new era
New-era visionaries, such as LanzaTech, create value as an outcome of the purposeful and impact-driven way that they found and guide their enterprises and they will understand the inputs and outputs to value creation differently.
Made of Air, for example, is a cutting-edge business making carbon-negative materials to transform products in mobility, consumer goods, and the built environment. For Made of Air, planet Earth is a key stakeholder in the business. Allison Dring, chief executive and co-founder told us that “contrary perhaps to expectation, this clause, which even in a climate-friendly business is bound to come into conflict with economic decisions, not only didn’t put off potential investors, but for some it was the part that sealed the deal”.
As the ‘business as usual’ era fades, we have the opportunity now to be part of something that is as exciting as it is hopeful, where we can create business ecosystems within nature’s ecosystems that will enable us to experience a safe, harmonious and prospering future.
The opinions of guest authors are their own and do not necessarily represent those of SG Voice.