4 Reasons our Current Business Model is Unsustainable


Sooner or later, there is a tough message that sustainability champions need to deliver to harried business leaders—the business game they are playing can’t continue. It’s been fun, but if they keep playing the game the way they are, everyone will lose. The rules need to be updated— quickly. That contention is probably not the best conversation-opener with a senior business leader. But, at some point along the line, sustainability champions should be ready to gently help them see that their current model of doing business is not sustainable.

In my July 27, 2010, blog , I described the 5-stage journey that a business follows as it moves from being an unsustainable enterprise in Stages 1, 2 and 3, to being a sustainable enterprise in Stages 4 or 5 (see the above slide). Labeling companies in the first three stages as “unsustainable” deserves further explanation, especially for Stage 3 companies. We will use the 3-nested-dependencies model of sustainability, described in my July 20 blog , to show four reasons why today’s take-make-waste model of commerce is unsustainable.

1.  Nature is depletedToday’s business model encourages companies to relentlessly deplete our natural capital, which companies and communities require for their food, water, energy, and materials. Today’s business rules contribute directly or indirectly to systematic over-extraction and degradation of nature by physical means, such as deforestation, over-harvesting of fish stocks, and depletion of farm lands. Nature cannot regenerate itself fast enough to recover from this abuse. This corporate behavior is unsustainable economically and environmentally.

2.  Excessive waste accumulates from the things we dig up

Extractive companies like mining and oil-and-gas companies notoriously leave “tailings” and other waste behind. Business schools use case studies from around the world that highlight the destructive effects of mining and drilling operations on the environment and communities. Refineries and smelters create more air, water and soil pollution. When we use / burn these natural resources for fuel, further waste is produced. So, most companies contribute—directly or indirectly through their supply chains—to the systematic increase in concentrations of waste from substances extracted from the earth’s crust. This is especially alarming when the concentrations of heavy metals, fossil fuels and byproducts get too high. These days, companies can acquire permits to pollute so that their actions comply with regulations (Stage 2). But, these legal actions are still not sustainable. Sooner or later, we are in danger of drowning in our own waste, poisoning ourselves to death, and upsetting long-standing, essential natural equilibriums, like our climate.

3. We create excessive waste from things we make

Similarly, the current rules of the business game allow companies to pollute the air, water, and soil as they make things. Through the production and use of chemicals and toxic synthetics, companies directly or indirectly contribute to the relentless increase in concentrations of hazardous and non-hazardous waste. Today, there are over 70,000 chemicals, dioxins, and PCBs. A century ago, this wasn’t a problem because we didn’t have these man-made pollutants. Now, there are thousands of these health threats. We need to change the rules that allow companies and consumers to externalize the environmental and social costs of this pollution.  Such excessive and dangerous polluting is simply unsustainable.

4. Peoples’ needs are prevented from being met

Many business models today contribute—directly or indirectly—to abuses of political or economic power, resulting in unmet human needs for clean air, potable water, nutritious food, adequate shelter, and quality of life. According to Metrics 2.0, the richest 1% owned 40% of global assets in the year 2000, and the richest 10% accounted for 85% of the world’s total assets. In contrast, the bottom 50% of the world’s adult population owned barely 1% of the total global wealth. This chasm has grown in the last ten years and is continuing to widen. Such disparities create social unrest and violent desperation as basic living needs become harder and harder to meet. Something’s got to give. The business models that encourage over-consumption by the haves at the expense of the have-nots is unsustainable.

To recap, today’s take-make-waste business model is no longer feasible. It violates all four of The Natural Step’s systems conditions for a sustainable society.

The old business model was created during the Industrial Revolution. As described by William McDonough and Michael Braungart in their 2002 book, Cradle to Cradle, companies with this system of production are designed to do the following:

  • “Put billions of pounds of toxic material into the air, water, and soil every year.
  • “Produce some materials so dangerous that they will require constant vigilance by future generations.
  • “Result in a gigantic amount of waste.
  • “Put valuable materials in holes all over the planet where they can never be retrieved.
  • “Require thousands of complex regulations—not to keep people and natural systems safe, but rather to keep them from being poisoned too quickly.
  • “Measure productivity by how few people are working.
  • “Create prosperity by digging up or cutting down natural resources and then burying or burning them.
  • “Erode the diversity of species and cultural practices.”

Those practices and consequences are what companies were designed to do for the last 150 years. Perhaps, for a minority, that business model worked fine at first, but it’s no longer sustainable. The Earth’s ecosystem is in crisis. It threatens 100% of us. Over-consumption and poor management have resulted in unsustainable use of natural and social capital. Climate change will add further pressure on the natural systems—upon which all of our social systems and economies depend. Our time is limited to prevent a global “tipping point” that could impact all of humankind, including future generations, adversely and permanently.

Stage 3.0 companies slow down their degradation by releasing fewer pounds of toxic wastes into the air, soil, and water every year and producing smaller amounts of useless waste. Stage 3.0 companies are better—“less bad”—than Stage 1 and 2 companies; but, they are still locked in an unsustainable economic paradigm that causes too much collateral damage in the environmental and social spheres. We need a more responsible game plan.

Next week, we will propose a more sustainable business model.

Please feel free to add your comments and questions using the Comment link below.

Bob

 

3 replies
  1. Tess Frost
    Tess Frost says:

    Hi Bob,

    It is a delight to find someone talking sense for a change. Most people ignore the issue – as you say externalise the costs of consumption – or cop out on the basis that “the effect of one person changing is negligible.”

    I look forward to you alternative business models and economic systems. This is an issue that, since I have so little knowledge of the entire subject, has been plaguing me. It is frustrating that I see no way out of the “supply and demand” model, but I don’t. Except perhaps charging the true cost of goods – ie including the cost of cleaning up afterwards, up to and including the final stage of a product, where it is discarded because it is no longer functional (not to mention “out of fashion” or “obsolete”). Given that people, unfortunately, are only human, one has to make a system that will be driven to some extent by individual and/or group self-interest. I look forward to being enlightened!

    Keep it coming!

    Tess

  2. Bob Willard
    Bob Willard says:

    Tess, it’s easier to identify what’s wrong with the present business model than to design a sustainable one, but I will take a crack at that in next week’s blog. You have touched on an important criteria for a more responsible model—ensuring that the producer is responsible for looking after the responsible disposal of its products at the end of their useful life. This Extended Producer Responsibility (EPR) is more the norm in Europe than in North America, but it is gradually getting traction in some sectors, like IT. Another approach by responsible enterprises is to lease their products rather than sell them, so that they still own the products after their services are no longer required or desired by consumers. This closed loop system would go a long way to addressing the waste issue. Stay tuned …
    Bob

Trackbacks & Pingbacks

  1. […] my August 3, 2010 blog, I described four critical attributes of today’s way of doing business that make it […]

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *