The Economic Perspective

Economic models, money & sustainable value, productivity & growth in a finite resource environment; tangible/intangible value, ownership & capitalism, resources, waste & product cycles,  GDP & economic indicators, criteria/indicators for poverty & thrivability, the issues of the commons and accounting of externalities, risks, measurements…

More on this here: UN call – Sustainability – Resources & Links

Myths and paradigms to revisit for a sustainable economy & capitalism with a moral conscience

• Redefine prosperity. Debunk myths. Theory of value… growth, self interest, survival of the fittest, role of business in society …

• Redefine value. Sustainable value:
  • The number and quality (the value) of opportunities to make a difference — for ourselves and for others — that are created or lost by our plans and activities now become a significant (partial) candidate for the alternative measure of performance we are seeking, for governments as well as private enterprise. Measuring and rewarding behavior that contributes to the improvement of the quality of the occasions of life, now and future, (incentives for doing good: ‘maximizing quality of life’) as well as preventing behavior that does not (sanctions for doing damage).
  • How do we equate value to society with value to corporations and value at home?

• Internalize externalities:
  • The fact that economic “bads” (offset to society/nature or future) are the price to pay for economic “goods” (immediate/accounted for)…
  • If the true cost of externalities in the production/consumption cycle were embedded, the decisions that the participants could make would reflect the true cost of things – such that they can do a personal cost/benefit analysis based on their own moral compass? Otherwise > bankruptcy: http://motherjones.com/politics/1997/03/natural-capitalism?page=2
  • More on the ‘externalities’ conversation is on http://www.embeddedsustainability.com with a two part interview with Chris Laszlo on http://www.management-issues.com/2011/3/22/podcast/the-competitive-advantage-of–sustainability.asp
  • Look at externalities from a risk/insurance perspective, or an amortization/depreciation for “reinvestment” or replenishment perspective.

• De-couple ‘economic growth’ – and its environmental impact – from the idea of ‘prosperity.’
  • ‘growth’ a term that is referential to the value system. If the value system is based on action directed to restoration and protection of life support systems, then ‘restorative growth’ has a different meaning from ‘destructive growth’, which is the current modus operandi. Including restoration of soil, water energy systems locally.
  • See Seed Magazine: rethinking growth http://seedmagazine.com/content/article/rethinking_growth/
  • See restoration economy: Rewealth http://rewealth.com/Documents/Rewealth-Front_Matter.pdf
  • Look at slow movements. Slow food. Slow money
  • Design for growth till maturity and equilibrium thereafter?

• Sustainability maturity levels actually reflect three forms of economy.
  • The first is the current “Waste economy” using Fossil fuel as its energy source (where improvements are sought in “waste” improvement efficiencies).
  • The second is a “Recycling economy” with closed loop value chains developed, where the energy sources are “natural” (solar, wind, water), and
  • The third is the “Regenerative economy” focusing on developing and supporting regenerative economic, social, and environmental systems, perhaps using biomimicry such a photosynthesis as an energy source for heat, water, oxygen and CO2 exchange (something to do with Biogeochemical cycles and Natural Capital comes in here somewhere).

  In between there are “hybrid” economic models in transition. Looking at futures models such as http://www.chforum.org/scenario2009/scenarios_final.shtml this might suggest that the world will not have one model, but a series operating at one time.

• Senge’s Natural Capitalism Solutions: use resources productively, redesign industrial processes for cradle to cradle, manage institutions to restore human & natural capital
• Hunter Lovins, president of ‘Natural Capitalism Solutions’ and co-author of “Climate Capitalism” Convincing Even the Skeptics to Go Green http://tinyurl.com/6fprpbr
• Living Economies: http://www.lietaer.com An interview with Bernard will be posted in mid-June on the Evolutionary Provocateur podcast. We’ll be talking about how nature’s principles apply to creating sustainable economies and to what small business can do to mitigate economic instability.
  http://livingeconomiesforum.org/great-turning-book. David Korten’s first book tracked the origins of income disparity and the beliefs and assumptions underpinning how we got to here,  also eloquently reviewed in Biosphere Politics by Jeremy Rifkin.

• A resource-based (currency free) economy: http://www.thevenusproject.com/en Can we do without politics? Which institutions?

Sustainable productivity: Transform economy through industrial/corporate transformation

• A Sustainable Productivity Model is a prerequisite to a Sustainable Economic Model: Improving organizational Productivity by adding sustainability using ST approaches:
• Value must be measured (creation and destruction) both in terms of internal efficiency and effectiveness of outcomes, adding social productivity (employee well-being), environmental productivity, operational productivity. Measuring the intangible (Value network Verna Allee). A new conception of value (including the productivity of ‘doing nothing’/resting/slow) – Re-generation slow/rest.

• Haque’s “New Capitalist Manifesto” built around socio-effectiveness –social return on investment- and engagement: Renewal of resources vs depletion, responsiveness through stakeholder participation, resilience through philosophy and meaning, creating value for all, making a difference. This ties in with Michael Porter’s notion of shared value, and Carol Sanford’s business as a re-enlivening rather than a value-absorbing force.

• How to measure corporate sustainability:
• Many key words for similar concepts: ESG (Environmental, Social, and Governance), TBL (Triple Bottom Line: Profits, People, Planet), SEE (Social, Environmental, and Economic)
• TBL reflect the means of measuring how an organisation impacts on (risk exposure), and gains value from (value adding) the System Categories of Social (people); Human Designed (processes); and Natural environment . How about the three “R”s:
  • Restorative improvement in social systems –networks, relations, culture
  • Recyclable improvement in human designed systems – waste, material, processes
  • Renewable improvement in environmental systems – energy, natural resources.

• There is a “carrot & stick’ approach:
  • ‘Carrot’ elements: Addressing risks and “waste” more efficiently and effectively puts the organization in front both in profit performance and Public Relations (the weakness of this argument comes from a short term -unsustainable- perspective where cost savings by operating in a higher risk environment increase profit).
  • ‘Stick’ elements: whether you want to or not there is progressive government regulation, penalties, and litigation in not adequately addressing the three areas. Plus the downside of poor public relations. If your business focuses on the short term and you want to minimise/ignore regulation then you may not be interested in a “sustainable” approach – just short term survival.
• Develop a Systems Dynamics model of the economy to indicate what needs to change (?).

Measuring value, productivity, sustainability & prosperity

• New measures & indicators are needed.
• “Measurement IS the key to changing the system”. “what gets measured gets done”.

• Productivity is seen as maximizing value, originally viewed as an efficiency measure as productivity models started out only looking at maximising value by minimising “waste” in the use of resources (such as “lean” in minimising time waste in a process value flow).
• Subsequently productivity models evolved to include effectiveness – outcomes meeting stakeholder requirements. So efficiency can be conditioned by effectiveness in meeting stakeholder requirements.
• Productivity can include (but not limited to):
  1. Process Activity value/waste measured in time terms, as propounded by Toyota Production System (TPS); “lean”, Six Sigma, and Vanguard (this can be/is customer driven). A Human Designed System perspective.
  2. Human interaction value/non value in terms contribution value (intangibles), as exampled by Verna Allee in Value Network Analysis, and Patti Anklam’s Net Work. A Social system perspective.
  3. To this could be added a natural environment system, for instance:
  4. Sources value/waste in terms of volume, and possibly impact measures in some form.

• The Grattan Institute (a Think Tank): exemplification of traditional concept of productivity http://www.grattan.edu.au/programs/productivity.php

• There are many ways to measure productivity. For example minimising emergy, as a productivity measure, could mean demonstating measurably that the organisation has the lightest (efficiency) emergy “footprint” in the use of resources, therefore the least impact on resources and (indirectly) maximising the sustainable use of those resources. Evaluating “emergy”  http://dieoff.org/page170.htm# hierarchy Howard Odum’s neologism for embodied energy or energy memory, the total energy used in the production or preparation of a product or process, whether natural or artificial. evaluating life cycle aspects and sustainability. Example of emergy North Carolina: : http://openwetware.org/wiki/Ecost

• “sustainable performance measurement for sustainable organizations” scorecards such as the Triple Bottom Line (TBL) http://www.ep.liu.se/ecp/033/005/ecp0803305.pdf http://en.wikipedia.org/wiki/Triple_bottom_line
• UNEP Finance Institute and the World Business Council for Sustainable Development: “Translating ESG (Environmental, Social, and Governance) into Sustainable Business Value” http://bit.ly/f8NPc4
• “Leadership and Corporate Responsibility: Metrics for Sustainable Corporate Performance” at http://bit.ly/g4slFT Center for Responsible Leadership and Sustainable Futures
• European School of Management and Technology, Berlin
• “Inquiry into raising the productivity growth rate in the Australian economy April 2010″ http://www.aph.gov.au/house/committee/economics/Productivity/Report/Final%20Report.pdf remain. For example, the application of a cost benefit analysis approach, and “value” as the basis of measuring productivity.
• UN Dept of social affairs: indicators for sustainable development: http://tinyurl.com/6ygjstf
• Co-dependencies of suppliers & customers supply chains difficult to keep track of making the aggregation of supply chain information very difficult,

• Use assessing officers to incorporate environmental assessment into their job descriptions

• GDP excludes sustainability measures. Need to add externalities (“true costs” movement), a Time Magazine article -Paying for Nature- on attempts to quantify the value of nature’s “service” in the view of internalizing externalities: http://www.time.com/time/magazine/article/0,9171,2048324-1,00.html
• UN survey: cost of externalities: http://bit.ly/e3Ofp9
• UN Survey: the world’s top 3000 firms cost 2.2 trillion USD in environmental damage. More on the UN’s Principles for Responsible Investment: http://www.unpri.org/
• chart of cost of damage to the environment by business sector: http://www.guardian.co.uk/environment/2010/feb/18/worlds-top-firms-environmental-damage
• Nature’s service cost of externalities. Idea of bankrupcy. http://motherjones.com/politics/1997/03/natural-capitalism?page=2

• Need to measure Human Development Index – HDI (Amartya Sen) &  wellness/wellbeing: Based on a basket of “capabilities”. Sen won’t define one universal basket on methodological grounds, but Nussbaum and others try. ( http://en.wikipedia.org/wiki/Capability_approach ) + Martin Seligman’s idea of Flourishing based on a psychological model of “well-being”: : “Today’s societal constructs may be taking us away from that which we most desire: our own individual and collective psychological flourishing.” http://www.lvsconsulting.com/?tag=seligman Seligman states ‘universal’ aims positively. Then you can derive a different economy that really pays off. It will be one that more naturally steers away from destruction because it is more finely tuned toward flourishing.
• Human development project USA example: http://www.measureofamerica.org/wp-content/uploads/2010/11/AHDP-INCOME-FACT-SHEET-11.08.10.pdf

• A second-generation Global National Happiness concept, treating happiness as a socioeconomic development metric, was proposed in 2006 by Med Jones, the President of International Institute of Management. The metric measures socioeconomic development by tracking 7 development area including the nation’s mental and emotional health. GNH value is proposed to be an index function of the total average per capita of the following measures:
  1. Economic Wellness: Indicated via direct survey and statistical measurement of economic metrics such as consumer debt, average income to consumer price index ratio and income distribution
  2. Environmental Wellness: Indicated via direct survey and statistical measurement of environmental metrics such as pollution, noise and traffic
  3. Physical Wellness: Indicated via statistical measurement of physical health metrics such as severe illnesses
  4. Mental Wellness: Indicated via direct survey and statistical measurement of mental health metrics such as usage of antidepressants and rise or decline of psychotherapy patients
  5. Workplace Wellness: Indicated via direct survey and statistical measurement of labor metrics such as jobless claims, job change, workplace complaints and lawsuits
  6. Social Wellness: Indicated via direct survey and statistical measurement of social metrics such as discrimination, safety, divorce rates, complaints of domestic conflicts and family lawsuits, public lawsuits, crime rates
  7. Political Wellness: Indicated via direct survey and statistical measurement of political metrics such as the quality of local democracy, individual freedom, and foreign conflicts