Climate change poses highly uncertain but potentially destabilizing costs on society!


Green Economy Macroeconomic Model and Accounts (GEMMA) framework.

One of the most important challenges facing economics today is the need for economic activity to remain within ecological limits. The rising threat of climate change, alarming losses in biodiversity and emerging scarcities in essential natural resources all represent a significant threat to the integrity of ecological systems and all who depend on them. They also threaten the stability of economic systems.

Developing a demographic sub-model and an Input-Output Structure for the Green Economy Macro-Model and Accounts (GEMMA) Framework

From the original article “Developing an Ecological Macroeconomics!” by Centre for International Governance Innovation (CIGI)

 

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a stock-flow consistent financial framework within GEMMA. This framework is an essential prerequisite for answering the difficult questions about financial viability raised by the investment needs of the transition to a green economy.

 

Climate change poses highly uncertain but potentially destabilizing costs on society. The cost of not acting against climate change could be equivalent to losing between five and 20 percent of GDP each year, indefinitely, according to the influential Stern Review. But the costs of addressing climate change are not inconsequential either. The International Energy Agency (IEA) estimates that the transition away from fossil fuels will require additional investment of at least US$11 trillion between now and 2030. Meeting climate change targets could render existing fossil fuel investments “stranded assets,” essentially worthless in financial terms. Some fund managers are already beginning to exclude such holdings from their portfolios.

Responding to the dilemma of remaining within ecological limits in a growth-based society has often been construed primarily as a microeconomic task — one that governments can address with conventional fiscal instruments of tax and subsidy. The “external” costs associated with environmental and social factors should be “internalized” in market prices, according to familiar axioms. Incorporating “shadow prices” for environmental goods into market prices will send a clear signal to consumers and investors about the real costs of resource consumption and ecological damage, and incentivize investment in alternatives, according to this conventional wisdom.

But this prescription has been hard to implement over the last few decades. Even before the crisis, it proved difficult either to forge agreement on fiscal measures to internalize environmental costs or indeed to stimulate appropriate levels of private investment in alternative technologies. The financial crisis has certainly made both of these tasks harder. Despite an early focus on “green stimulus” as a way of invigorating the global economy, subsequent responses have failed consistently to address the ecological challenges.

Fears of damaging economic growth have led politicians to shy away from both ecological taxation and green investment. In fact, fragile private and public sector balance sheets have slowed down investment in the real economy generally, let alone the additional (and less familiar) investment needed to make a transition to a low-carbon economy. Conventional responses have focussed instead on cutting public spending (austerity) and stimulating consumption growth (consumer spending) as the basis for economic recovery. Unfortunately, these responses tend to ignore the structural problems of the conventional paradigm and delay the investment needed in the green economy.

Climate change poses highly uncertain but potentially destabilizing costs on society.
The scale and nature of this dilemma suggest that the combined challenges of climate change and resource scarcity require macroeconomic as well as microeconomic responses. In fact, there is a need to develop a fully consistent “ecological macroeconomics” in which it is possible to maintain economic stability, ensure full employment and yet remain within the ecological constraints and resource limits of a finite planet.

This task — to develop an ecological macroeconomics — is the one we set ourselves three years ago. Working together from clear first principles, we began to build our Green Economy Macroeconomic Model and Accounts (GEMMA) framework. The fundamental building blocks of our approach were three-fold.

First, we wanted our model to reflect accurately the basic structure of the real economy — that is, to provide an account of incomes, spending, investment, taxation, demography and the structure of industry consistent with the United Nations System of National Accounts for any given country. Second, we wanted our framework to make a full and proper account of the ecological and resource constraints on the global economy — as they applied at the scale of the national economy. Finally, we wanted our model to incorporate a consistent description of the financial economy, including the supply of money from and to economic actors, and the effect of the money supply on both nominal and real demand. An ecological macroeconomics must show us not only how much investment is needed, for instance, in order to reach ecological goals, but also how that investment is to be financed.

This last goal was particularly important in the wake of the financial crisis. One of the main shortcomings of conventional economics was its failure to anticipate the impact of fragile balance sheets on the stability of the economy. In fact, most conventional economic models virtually ignore the balance sheet structure of the national economy, in spite of warnings by some far-sighted economists of its importance for economic stability.

 

Tim Jackson and Peter Victor’s final CIGI-INET report is Developing a Demographic Sub-model and an Input-Output Structure for the Green Economy Macro-Model and Accounts (GEMMA) Framework.

 

Tim Jackson is Professor of Sustainable Development at the University of Surrey and Director of the Sustainable Lifestyles Research Group. From 2004 to 2011 he was Economics Commissioner on the UK Sustainable Development Commission, where his work culminated in the publication ofProsperity without Growth.  

Peter Victor is Professor in Environmental Studies at York University. He is an economist who has worked on environmental issues for over 40 years as an academic, consultant and public servant. His book Managing without Growth was published in 2008. In 2011, he was awarded Canada Council’s prestigious Molson Prize.

 

From Ego-system to Eco-system – Leading from the Emerging Future!


The problem with capitalism originates between our ears!
– by Otto Scharmer of Theory-U and Presencing Institute brings the best-ever overview of requirements of the Transition Narrative (ecoNVERGE / @ Econologics) for humanity to evolve to a new Paradigm Shift.

Otto Schramer

The root cause of today’s global crises originates between our ears

 

Profound personal, societal and global renewal is not only possible; it is crucial for our planetary future. What is needed are change makers willing to lead from the emerging future; leaders who are willing to learn about and practice the journey from ego-system to eco-system economies. We have the places, living examples, frameworks and tools in hand. Now what we need is the co-creative vision and the common will to bringing it into reality.

10 insights from our new book Leading From the Emerging Future: From Ego-system to Eco-system Economies

We live in an age of profound disruption. Global crises, such as finance, food, fuel, water, resource scarcity and poverty challenge just about every aspect of society. Yet, this disruption also brings the possibility of profound personal, societal and global renewal. We need to stop and ask: Why do we collectively create results nobody wants? What keeps us locked into the old ways of operating? And what can we do to transform these root issues that keep us trapped in the patterns of the past?

1) The root cause of today’s global crises originates between our ears — in our outdated paradigms of economic thought

A structural disconnect between:

  • the infinite growth imperative and the finite resources of planet earth;
  • between the Haves and the Have Nots;
  • between the financial and the real economy;
  • between technology and real societal needs;
  • between institutional leadership and people;
  • between gross domestic product (GDP) and actual well-being;
  • between governance mechanisms and the voiceless in our systems; and
  • between actual ownership forms and best societal use of property.

 

Three Levels Symptoms Systemic Disconnects Paradigms of Economic Thought

Three Levels: Symptoms; Systemic Disconnects; Paradigms of Economic Thought

2) The blind spot of modern economic thought can be summarized with a single word: consciousness
3) The evolution of the economy and of modern economic thought mirrors the footprints of an evolving human consciousness

The stages of economic development that come with them:

  • 1.0 Organizing around centralized coordination
  • 2.0 Organizing around decentralized coordination
  • 3.0 Organizing around special interest group driven coordination
  • 4.0 Organizing around commons

4) To paraphrase Einstein, the problem with today’s capitalism is that we are trying “to solve problems with the same consciousness that created them”
5) Helping stakeholder systems shift their way of operating from ego-system to eco-system awareness is the central leadership challenge of our time
6) The shift from ego-system to eco-system awareness requires a journey that involves walking in the shoes of other stakeholders and attending to the three instruments of inner knowing: open mind, open heart, and open will

 

Theory U: One Process, Three Instruments (Open Mind, Open Heart, Open Will)

Theory U: One Process, Three Instruments (Open Mind, Open Heart, Open Will)

 

The effectiveness of accessing these three instruments depends on the ability to deal with the sources of resistance (“three enemies”):

  • VoJ (Voice of Judgment): The VoJ shuts down the Open Mind by habitually judging self and others. All creativity techniques start with somehow suspending the VoJ.
  • VoC (Voice of Cynicism): The VoC shuts down the Open Heart by offering an easy alternative to making oneself vulnerable. The problem with that easy exit is that it does the same thing as the VoJ: it blocks one’s opening process for accessing the deeper sources of creativity.
  • VoF (Voice of Fear): The VoF tends to shut down the Open Will by not letting go but holding on to old identities, ideologies, and Us vs. Them belief structures.

7) Addressing the current global crisis at its root calls for a 4.0 update of the economic operating system through reframing eight “acupuncture points” of the global economic system

They are:

  1. Nature: Close the feedback loop of production, consumption, reuse, and recycling through “earth-to-earth” or closed-loop design.
  2. Labor: Close the feedback loop from work (jobs) to Work (passion) by building infrastructures that foster and ignite inspired entrepreneurship.
  3. Capital: Close the feedback loop of capital by redirecting speculative investment into ecological, social, and cultural-creative renewal.
  4. Technology: Close the feedback loop from technology creation to societal needs in underserved communities through needs assessment and participatory planning.
  5. Leadership: Close the feedback loop from leadership to the emerging future of the whole through practices of co-sensing, co-inspiring, and co-creating.
  6. Consumption: Close the feedback loop from economic output to the well-being of all through conscious, collaborative consuming and through new well-being indicators such as GNH (Gross National Happiness).
  7. Coordination: Close the feedback loop in the economy from the parts to the whole through ABC (awareness-based collective action).
  8. Ownership: Close the feedback loop from ownership rights to the best societal use of assets through shared ownership and commons-based property rights that safeguard the interests of future generations.
Eight Acupuncture Points of Transforming Capitalism to 4.0

Eight Acupuncture Points of Transforming Capitalism to 4.0

 

8) Shifting the system to 4.0 requires a threefold revolution

Inversion means turning inside-out and outside-in:

  • Individual inversion means to open up thinking (open mind), feeling (open heart), and will (open will) in order to learn to act as an instrument for the future that is wanting to emerge.
  • Relational inversion means to open up communicative relationships from downloading (conforming) and debate (defending) to dialogue (reflective inquiry) and collective creativity (flow) in order to tune as groups into the field of the future.
  • Institutional inversion means to open traditional institutional geometries of power from 1.0 and 2.0 forms of coordinating and organizing — centralized hierarchy and decentralized competition — to 3.0 and 4.0 forms of coordinating around co-creative stakeholder relationships in eco-systems that generate well-being for all.
The Matrix of Social Evolution (all system levels, all structures of attention)

The Matrix of Social Evolution (all system levels, all structures of attention)

the three transformations for the individual (column 1), the relational (column 2) and the institutional inversion (column 3 and 4) in the form of a Matrix of Social Evolution that integrates all system levels (micro-meso-maco-mundo) and all structures of awareness (1.0 to 4.0).
9) We need new types of innovation infrastructures in order to build collective leadership capacities on a massive scale

These infrastructures will include:

  • Co-initiating: Creating spaces for convening stakeholders around a shared eco-system
  • Co-sensing: Going to the places of most potential and observing with one’s mind and heart wide open
  • Co-inspiring: Creating spaces for connecting to the sources of creativity and self
  • Co-creating: Creating spaces for exploring the future by doing (prototyping)
  • Co-shaping: Creating spaces for embodying and scaling the new through practices

10) The shift from an ego-system to an eco-system economy requires a global movement that needs to be supported by a new leadership school. That school should create collaborative platforms across sectors, systems, and generations and work through integrating science, art, and the practice of profound, awareness-based change

Such a new leadership school would be a home base for the emerging global movement of 4.0-related transformation journeys. At the same time, it would prototype a 21st century action university that integrates three forms of knowledge:

  • technical knowledge (know-what),
  • practical knowledge (know-how) and
  • transformation knowledge (know-who: self knowledge).

 

An Ego-2-Eco Transformation Leadership School—A Set of Global Acupuncture Points

An Ego-2-Eco Transformation Leadership School—A Set of Global Acupuncture Points

 

Set of principles that are essential for this type of school and which are designed for global-local replication:

  1. Engage systems at all levels and states: Engage systems by using the entire Matrix of Social Evolution.
  2. Engage all levels of intelligence: Integrate open mind (IQ: intellectual knowledge), open heart (EQ: emotional and relational knowledge), and open will (SQ: self knowledge).
  3. Systems Thinking: Integrate methods and tools derived from 30 years of organizational learning research and practice. 
  4. MOOCs: Use massive open online courses that combine course delivery with interactive personal, small-group dialogue and the presence of a global community of change makers that effects transformative change.
  5. Deep immersion: Use deep dive learning journeys and generative listening practices in order to connect communities and places of most potential.
  6. Science 2.0: Use scientific methods that let the “data talk to you.” The challenges of this century involve extending the concept of science beyond looking exclusively at exterior data (third-person view). We need to bend the beam of scientific observation back upon the observer in order to investigate the more subtle levels of experience of the second- and first-person view.
  7. Presencing: Use practices that allow leaders to sense and actualize the emerging future and to clarify the two root questions of creativity: Who is my Self? What is my Work?
  8. Power of Intention: Focus on the capacity to connect with the deeper intention of one’s journey, connecting us more deeply with one another, the world and ourselves.
  9. Prototyping: Link head, heart, and hand in order to create living examples and prototypes that allow us to explore the future by doing.
  10. Power of Place: Complement the massive expansion of online learning with an equally massive global network of vibrant entrepreneurial hubs that focus on activating co-sensing and co-creating as a gateway for unleashing entrepreneurial potential. Great innovations happen in places. Learning how to design and hold spaces for reflection, generative conversation, and system-wide transformation is a mission critical capacity today.

Charged Up – How the Fracking Industry’s False Promise of Plenty Imperils Our Future!


 

February 2013 report by retired geo-scientist J. David Hughes and published by the Post Carbon Institute which claims to debunk the possibility that unconventional fuels might turn the United States into an energy-independent petro-state.

The report forms the foundation for Heinberg’s new book, Snake Oil: How the Fracking Industry’s False Promise of Plenty Imperils Our Future

Heinberg 0

 

He talks about the implications of a fracking-fueled petro-boom from North Dakota to Pennsylvania that’s got U.S. energy executives crowing about abundant fossil-fuel-derived energy to last the next century or two.

It’s a claim that directly flouts the concept of peak oil—the point at which global petroleum production goes into terminal decline—and Heinberg’s assertion that growth (as we know it) is headed into irreversible decline.

“We’re really being sold a bill of goods,” Heinberg says, handing over a copy of the Hughes report, “Drill, Baby, Drill: Can Unconventional Fuels Usher in a New Era of Energy Abundance?” Using data provided by a Texas company called DI Desktop, which analyzed production data for 65,000 fracked wells from 31 shale plays, the report examines natural gas as a commodity. According to their findings, production rates at many of these sites are already in decline. Operators then must drill more and more to keep overall production steady, and with that comes increased energy needs, making the whole endeavor more expensive.

Aside from fracking, methane hydrates—the trapped natural gas molecules currently being scouted by Japanese research vessels and found in abundance on the sea floor—have been heralded as the next frontier. The speculative fossil-fuel goldmine forms the basis for Charles C. Mann’s May 2013 cover story for The Atlantic with the headline that declared, with the impact of a lightning storm in summer, “We Will Never Run Out of Oil.”

But then there’s the problem of net energy, Heinberg points out. “The vast majority of those resources we won’t burn for economic reasons,” Heinberg says, “because it just costs too much—not only investment capital, but it costs too much energy to get the stuff out of the ground to use it.” It’s a concept defined as EROEI—energy return on energy invested.

 

Heinberg 1

 

“As time has gone on and as I’ve studied the data, I’ve come to realize that it’s more of a process, not just falling off the cliff,” he explains.

Part of the process, for those not involved in the higher echelons of government and society where policy decisions are decided, is to live consciously.

Heinberg looks to be a man in his element, negotiating a careful balance between the heavy realization that life as we know it is headed for irrevocable change, and the simple joy of everyday living.

If humans look honestly at the crisis at hand, begin sharing, using less, being nice to each other, there’s no reason we can’t have a perfectly acceptable future, he tells me. But that means facing facts. To make a true transition, the technical piece would be relatively easy, he explains; it involves building lots of solar and wind, prioritizing electric rail and redesigning cites for walking and bicycling. Heinberg mentions his admiration of the Transition Town movement, which started in the United Kingdom and uses permaculture concepts to build resilience in communities to weather gracefully the coming economic and environmental upheavals.

Heinberg 2

 

Of most concern is whether the “fossil fuel” industry is successful in making people believe that there’s enough oil and gas to keep us going for another century, in the style in which we’ve become accustomed, he emphasizes. The oil boom in North Dakota (and elsewhere) is going to be short-lived, but it’s bought us some time—a few short years—to get to work on renewables.

“If we use that time—maybe it’s five or 10 years—to really invest in renewable energy and conservation, than so much the better,” he says. “But if we just take those five or 10 years and delay what we ultimately have to do anyway, at the end we’ll be in a much worse position than we already are.”

 

The Role of Business in Building Sustainable Organizations and Society! – by Peter M. Senge


We will either ALL make it or NONE of us will make it !

The essential difference between CSR and sustainability, and how businesses have to urgently think long-term strategy in order to sustain existence!

 

Senge 1

 

How people can live in harmony with their environment has always been an issue.

People start to see that we will not be able to continue to live the way we have been living!

The way we live and in a time we are so connected, we are actually so disconnected from the reality.

 

For the first time in history of humanity, we are starting to be part of the earth system, people are shaping the planet!

 

Not only people but also the corporate world is accepting that a swift change is mandatory!

More and more businesses and societies are awakening to this historic challenge.

 

Senge 4

 

The big 3 systems that shape civilization:

– Food and water

– Energy and transport

– Materials footprint

 

 

Industries like the food sector will have to strategically change their story and adapt their strategy to remain in business.

The social and environmental imbalances are essential for strategic inclusion in business strategy.

 

Senge 3

 

When looking at water, the issues are even far greater then we can imagine. By 2030 overpopulated regions in China and India will not be able to provide clean water to 30 to 80% of their population in those regions.

 

Senge 5

 

Relative to the energy sector, we are facing a much tougher situation.

– Conservation and energy efficiency are not sufficiently to get our carbon footprint down

– Current RE-mix use is not enough to bring down the CO2 level from 400 to 300

– Reducing energy intensity (e.g.: China’s commitment 40% by 2020 and a reduction to growth expectation)

 

 

The material footprint of our consumer world is an embarrassment!

 

To support the lifestyle of an average person (US) it takes about 1MT of earth materials

95% of what we consume is wasted in the production process and in the end the product itself will get wasted as well.

We need to get away from the industrial linear economy to a circular economy – We need to look at how nature works. There is no waste in nature.

We need to generate value and reuse everything we take from Mother Nature

 

 

Senge 2a

 

Most companies look first at Cost & risk reduction and process efficiency (energy, waste, …) to enable improved shareholder value

Next came – or is in process of realization – Reputation and Legitimacy: re-branding (greening the economy), CSR and sustainability reporting

 

But there is more we can do and we need to look at tomorrow – the future and the sustainability of our businesses, through:

 

Innovation and Repositioning:

– Innovators don’t always have a full business plan ready. They are driven by passion and know there is a business opportunity down the line

– To make progress companies and their leaders need to join together in collaboration

– spearhead the technology and bring to market with a long-term profitability strategy

 

Growth push and Trajectory:

– Collaborative Competition: competition = (from Latin) striving together

– Being involved and at the forefront guarantees companies for long term sustainability / existence (competitive market share)

– Think more long-term to be and remain competitive

 

 

We will either ALL make it or NONE of us will make it into the next century!

 

We will not just have to collaborate amongst competitors and industries, but also across borders.

End the use of fossil-based industry and consumer market!

To achieve the goals, we need to be or have an:

– Open mind

– Open heart

– Open will

 

Inspire in balance and harmony with nature!


 

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Transformational changes in social values, resource needs & technological advances.
Realizing Sustainable Balance in Our Social and Economic Circle of Life! – WE are Unlimited!

We change the way we LIVE! – We change the way of LIFE!
Assimilate sustainable growth! Join our CoPs / Think-Tanks.
Be part of the CHANGE! – PARTICIPATE your change!

 

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Distributed Capitalism through distributed collaborative knowledge!


Jeremy Rifkin on global issues and the future of our planet!

Jeremy Rifkin2

“This is not a financial crisis or a banks crisis or a deregulated market crisis … that are just the results of the real problem: the delusional debt-based culture of America is the underlying problem and has global impact on production, consumption and welfare. The American consumption behaviour may never come back as the 3rd industrial revolution is on life-support!”

We are going through 3 crises which are feeding from each other:

  • the economic meltdown
  • the energy crisis
  • the real-time impact of climate change: not being able to feed the world

“We may experience a potential demise of our species in 30, 40 years or within a century at the most … and we are really asleep, all across the world!”

Industrial revolutions have been marked through the combination of improvements in knowledge and technology in energy and enhanced means of communication.

We are at the stage where both components are ready for the 3rd industrial revolution:

  • distributed communication is available through all the new technology at the hands of almost everyone on earth
  • distributed energy is ready to withstand the energy crisis

“We continue to underestimate the speed of climate change, because we continue to mis-acknowledge the aftermath of what is happening today and that triggers the next stage. We have to radically change civilization!” – Jeremy Rifkin

The third industrial revolution has to be based on 4 pillars:

  1. the production of renewable energy
  2. the refurbishment of the buildings so that they are responsible for their own energy consumption and reduce their carbon emissions
  3. energy storage to sudden failure of the power grid to prevent
  4. the distribution of energy through smart grids where each user becomes a supplier.

To make this 3rd industrial revolution happen, we need to take the burocratic red tape off, stop investing in stuck 2nd revolution industries and enable financial incentives which stimulate the direction.

“We need to move from geopolitics to biosphere politics, through global consciousness, involving and engaging true global humanity as we are all interdependent and connected, creating an emphatic civilization!” – Jeremy Rifkin

Breakdown, Change-as-usual, Breakthrough! @BreakthroughCap


Breakthrough Capitalism: Business Leaders, Market Revolutions!

 – by John Elkington and Susie Braun – Volans

 

biz of biz is more then biz

 

 

“There’s not one business school with a total grip on this.”

 – Gabi Zedlmayer, Vice President, Sustainability and Social Innovation, HP

Business is increasingly critical in tackling the world’s great environmental, social and governance challenges. And at the heart of business sits the C-Suite, the grouping of senior executives who direct the enterprise. Breakthrough is addressed to them – and to those who advise them.

This report reveals both real frustration in business about government failures, and a growing appetite at the leading edge to drive systems-level transformations.

Breakthrough draws on over 100 interviews with key people in the field to sketch a Manifesto and linked agenda to help us move towards that change.

from denial to breakthrough

Three scenarios of how the future could unfold

  1. Breakdown: the almost unremittingly bleak scenario where early experiments fade in the face of wider incomprehension and resistance to change.
  2. As Usual: where earnest efforts are made but overall the outcome is little more than a set of patches of the existing, dysfunctional system.
  3. Breakthrough: Here innovators, entrepreneurs, intrapreneurs, investors and policy makers dare to create ventures with ambitious targets and then, over time, drive them to change the market and political systems within which they operate.

To push towards Breakthrough outcomes, initiatives need to be:

  • Future ready: Able to work well in a world of 7-going-on-9 billion people, providing affordable access to key products or services, while respecting planetary boundaries
  • Ambitious: Aims to transform key aspects of capitalism, and drive radically better outcomes across the triple bottom line
  • Fair: Helps tackle equity issues, including the transfer of intergenerational debt created by public borrowing, natural resource extraction and environmental destabilization
  • Disruptive: Has potential to constructively disrupt the current economic and/or governance orders, moving the needle from incrementalism to system change.

5-stage model Pathways To Scale

Running from the ‘Eureka!’ moment through to the point where a new way of doing things is endemic across the entire ‘Economy

Pathways to scale

Disruptive change is needed

Some problems can be treated with sticking plasters or acupuncture; others require radical surgery. Too many twentieth century institutions—and even models of activism — are now increasingly unfit for purpose. Among challenges that top the current agenda are new forms of accounting, integrated reporting, and incentives to drive longer-term investment, but disruption will involve many other vectors of change.

Global C-Suite in the three Scenarios:

  • Breakdown: Retrospective or short-term focus: Past priorities; how things were done; preservation
  • Change-as-Usual: Short- to medium term focus: Pragmatic accommodation to current realities; incremental change
  • Breakthrough: Focus on past, present and future: Long-term framing; ‘unreasonable people’; how things will be done; disruption

How to convert the CXO?

It is clear, however, that most CSOs start off in a difficult position. Even where they enjoy direct backing from the CEO, they must cajole different members of the C-Suite to implement relevant ventures within their own functions.

  • Breakdown: CSOs absent — or used as camouflage
  • Change-as-Usual: CSOs pursue incremental targets
  • Breakthrough: CSO stretch agenda, standard for all CXOs

Domains of system change

  1. Changing the numbers: subsidies, taxes and standards: Counter-intuitively, the least effective approach to system change can be trying to change the numbers. Numbers do matter. We must change the financial incentives, across markets and across businesses.
  2. Changing buffers, stocks, flows, delays and feedback loops: Meadows warned us that if you dramatically cut the information and money-transfer delays in the financial system, as IT and dark liquidity pools have done, you would be asking for exactly the sort of wild gyrations we ended up with.
  3. Changing information flows: In many markets, a key problem is that information flows via price signals. By contrast, information flows can help where they feed back into system dynamics in ways that help conserve stocks or maintain flows.
  4. Changing the rules: The rules of a system define its scope, boundaries, and resilience. Rules are often high leverage points, which is why constitutions (which set the rules for writing the rules) are so powerful — and why so much effort is put into lobbying politicians and legislators.
  5. Changing the system’s genetic code: The purpose of a system is crucial in determining its behaviour: if profit maximization is the sole purpose, the results will be very different than if there is a balanced scorecard, shared value or triple bottom line orientation. Leaders who can redefine the purpose of a society or a corporation potentially have a very powerful lever at their disposal. We must now pay much more attention to the genetic code that dictates how organizations and cultures operate. And a key part of that coding is the discipline of economics. Meadows again: “Any system, biological, economic, or social, that gets so encrusted that it cannot self-evolve, a system that systematically scorns experimentation and wipes out the raw material of innovation is doomed over the long term on this highly variable planet” — and, we would add, in fast-changing markets.
  6. Changing paradigms: Ultimately, this is the level at which the potential leverage is greatest, but where the resistance to change is often most intense. From our shared social agreements come our system goals, information flows, stocks, flows and feedback loops. Paradigms can be slow to change, because all those “infected” with an earlier paradigm must retire or die, but they can also flip almost overnight when incontrovertible new evidence crashes in. Ultimate power, however, flows from the ability to stand outside current systems and paradigms. And the ultimate characteristic of system mastery, Meadows concluded, is the capacity to “dance with the system.”

System Change 101

1. Science Breakthrough = new knowledge — and new routes to knowledge

  • Change Breakdown: 6 planets – endless resources assumed
  • Change-as-Usual: 2–3 planets – limits understood, but exceeded
  • Breakthrough: 1 planet – paradigm shift, anthropocene

2.   Activism Breakthrough = taking stands — lobbying for change

  • Change Breakdown: Intergenerational debt – Decreasing returns, debt cascaded
  • Change-as-Usual: Intergenerational equity – Intra- and intergenerational rights
  • Breakthrough: Intergenerational wealth – Creation of increasing, sustainable returns

3.   Institutions Breakthrough = old institutions changing, new ones evolving

  • Change Breakdown: Outsiders – activists shut out, ignored
  • Change-as-Usual: Outliers – activists engaged as lead indicators of change
  • Breakthrough: Insiders – global C-suite calls for market revolutions

4.   Access Breakthrough = an end to systemic inequities

  • Breakdown: Producers – Building a world for the super-rich 1%
  • Change-as-Usual: Consumers – Building a global middle class
  • Breakthrough: Prosumers/Makers – Building better futures for ourselves

5.   Finance Breakthrough = a shift to new types of impact investment

  • Breakdown: Negative externalities – Financial capitalism kills other capitals
  • Change-as-Usual: Reported externalities – Accounting goes multi-capital
  • Breakthrough: Positive externalities – Multi-capital, impact investors

6.   Economics Breakthrough = that economists must recalculate

  • Breakdown: Physics as model – Mechanical view of value creation
  • Change-as-Usual: Internet as model – Growing focus on network effects
  • Breakthrough: Ecology as model – Economies seen as living systems

7.   Culture Breakthrough = experimentation and a willingness to fail

  • Breakdown: Obsessed with past – Works for wealthy 1% of 1-2 billion people
  • Change-as-Usual: Driven by present – Works for 30–40% of 7 billion people
  • Breakthrough: Future focused – Works for growing majority of 9-10 billion people

Breakthrough - a revolution of Capitalism

The question now is whether CEOs and other business leaders will be content to remain part of the problem—or whether they have the will and the audacity to ride the rising Breakthrough wave. It must be our business to ensure they have little choice in the matter.

Breakthrough: Business leaders, market revolutions is available for download.

www.breakthroughcapitalism.com/breakthrough-video.html

Breakthrough Capitalism

Current models of capitalism are failing economically, socially and environmentally. As global governance structures weaken, can business be an effective force for change in ensuring a healthy, fair and affordable world for 9 billion people? The Breakthrough Capitalism program explores how business leaders can change the rules, and aims to catalyze the conversations that will make it happen.

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Breakthrough Capitalism

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