A few highlights:

Walt led off saying that business must have a “broader purpose in life” – employees and other stakeholders become much more excited if there is more to it than making money.  This is a natural human desire, for meaning – and it’s surprising in a way that somehow the “common sense” of business tells us to ignore something so fundamental. According to Walt, making money is great and essential, but – has to be a by-product of something bigger. Purpose really has to come first.

Lisa made the point that leadership includes understanding the full impacts of one’s decisions and actions, evaluating and driving reductions in negative impacts, and constantly engaging and communicating.  Ellen and Kim supported this with some very concrete examples of how they do planning, budgeting, and impact measurement in their respective companies.

I posed the question to the panel “In order to be sustainable, is a fundamentally different leadership style required?”

The consensus was that the style was not different, but additional.  Instead of thinking one quarter ahead, it’s having a longer term vision of the business in the world. It’s respecting the need to get buy in throughout the organization, to advocate for sustainability throughout the supply chain, and to act consistently from a set of sustainable values.

These are not in any way something antithetical to good business practice.  This deeper appreciation of time and complexity translates into concrete business results, including financial savings, brand protection, the ability to shape or avoid regulation, protecting resources needed in the supply chain, anticipating and meeting customer requirements.

Another question:  “Doesn’t this all make executive decision making much more complex, and thus more difficult?” The answers surprised me. Everyone said that it wasn’t actually more difficult, and in fact had very positive results. Walt felt that this approach increased employee involvement and satisfaction. Kim said it was hard to quantify but undoubtedly profitable. Lisa said it resulted in more integrated, deeper solutions.

Ellen described it as taking the process of due diligence deeper into the organization, including thinking longer term about potential impacts and risks.  She used the term “greater mindfulness” to describe this way of seeing.

In the end, culture is huge, the major driver of sustainable corporate behavior.  It means basing hiring decisions, rewards and incentives on consistent values – which in New Belgium’s case, includes a commitment to FUN.  (A simple concept they never taught me in business school!).  And Walt spoke of the most important skills for new employees being not technical – he says we can teach that stuff – but more fundamental attributes of passion, integrity and character.

Sustainable leadership is perhaps best seen not as huge and disruptive paradigm shift, but rather a more gentle and ongoing deepening of perspective.

Values are a key link between the “inner” and the “outer”. Values matter in an organization or a community, because they provide a consistent guide to decision making, in particular when one value may conflict with another.

In business, values are, too often, a set of nice sounding words on a plaque in the lobby.

Perhaps this is because we confuse values with ideals. People tend to think that values must represent the best of who we are, and of course must be positive.  But what if you work in a company where, for example, secrecy is a hallowed principle of management decision making, but we can’t admit to that without – well – violating that value?  Even if it doesn’t sound warm and fuzzy, isn’t that truly a value?

How do we incorporate values into the practice of strategic planning, and performance management?  The first step is to be able to actually measure values.

My friend and colleague Kathryn Alexander has developed a values assessment tool that links values to business behavior and performance outcomes.  This tool is the basis for a certification program she has developed, called Forever Green™, that provides a “maturity model” for business and other organizations working to improve ethical and sustainable performance.

Kathryn’s work over the years has demonstrated that the values that support sustainability correlate well with an organization’s  capacity for innovation and resilience. On the other hand, there are competing sets of values that will actively undermine a firms ability to achieve sustainability. These values also undermine the resilience and creativity of the firm. In the emerging business paradigm, a commitment to sustainability is just plain good business.

Why?  In a nutshell, sustainability thinking is inherently long term, acknowledges complexity, and addresses what are becoming key risk areas in an age of unprecedented transparency.

This is why tools for measuring values are critical.  How can these metrics be integrated into an overall strategy, using the Balanced Scorecard?

Here’s an example of how a values-based sustainability theme can be expressed in a Strategy Map.  In the Balanced Scorecard, the most foundational level – what we call Organizational Capacity – is intimately linked to leadership, culture and values.  And, thanks to the work of people like Kathryn, we can now measure the evolution of values over time in an organization.

For an organization to develop a sustainable business model, the most basic ingredient is a declaration by leaders that this will be so. This declaration is the basis of a culture that attracts and reinforces like-minded employees.  This builds a culture of people who enter creatively into the collaborative design and implementation of more sustainable products and processes.

This process also has an impact on branding – telling the story of the product, and of the way the company does business, in a way that attracts the attention of consumers whose values match yours.   This in turn results in enhanced customer loyalty and positive revenue results.

For me, what’s missing is an understanding about how we got here in the first place.  How are our behavior and our economic systems rooted in more fundamental assumptions about reality – the way we see, and who we think we are?  Most of the sustainability conversations focus on the level of matter and energy – we take stuff from the earth, do something to it to add economic value, distribute it, use it, and throw it away.  This is the stuff of life cycle assessment. This view of reality is incredibly valuable, and necessary.  And it’s not the whole picture.

It’s great to reduce energy use and reduce packaging, but somehow I doubt that’s going to be enough to achieve change at the level we need.

I attended a fascinating presentation the other night called Integral Sustainability in Action by a group of graduates from Naropa University’s excellent Environmental Leadership program.

They have applied Integral Theory to questions of sustainability, drawing on the work of Barrett Brown in particular.   I won’t attempt to describe Integral Theory here -  Barrett does a great job of it on his site.

In a very comprehensive paper, Barrett did a sentence-by-sentence analysis of the most popular books about sustainability, and found that, by and large, the semantic focus is almost exclusively on the lower right quadrant – that is, the large scale systemic economic, political, and technological issues that enable or hinder progress. The beauty of Integral Theory is that it gives us a framework to understand that this is a necessary, but not sufficient, way to understand, diagnose, and prescribe actions to resolve the large scale problems we face.

Why? Because it only addresses one aspect of the problem, albeit an important one. Beneath all the talk about reducing energy use, creating green businesses and a green workforce, respecting biodiversity, and having healthy communities, there are fundamental assumptions about who we think we are – our consciousness, what we pay attention to, our values, our motivations.  This is the domain of cosmology.

This is not the stuff of science and engineering, but  of philosophy, spirituality or religion.  Increasingly, spiritual leaders from a number of traditions have begun to address this.  Sakyong Mipham Rinpoche summed up the Buddhist perspective:

“Our precious planet and the innumerable beings who dwell here face an unprecedented crisis. The escalating threat to the world’s environment and climate stem from a profound predicament that affects all humanity. We are ever more rapidly losing our connection with the sacred nature of our world. This tragedy affects us in so many ways, but at its heart, it is a crisis of the spirit. We are harming our planet and fellow beings because we are losing touch with the basic goodness of our own sacred being.”

In the Christian tradition, Fr. Thomas Berry has been a leader in what is termed the New Cosmology. This begins with an inquiry into how our spiritual estrangement from the earth is intimately tied into our technological culture.  Fr. Berry proposes a reunification of science and religion through what he terms Earth Spirituality. This is a doctrine of radical respect for the ourselves as well as the other beings of this earth, with very profound implications for science, technology and law

We have lived with a utilitarian assumption that others are here for our own benefit, whether it’s animals, ecosystems, or other people.  This is both a spiritual, and a practical problem. There’s just not enough to go around anymore.

Next post:  Bringing it down to earth: how do we incorporate this thinking into the realm of practical business planning, performance, and leadership?

Building a Balanced Scorecard begins with the collaborative creation of a Strategy Map. The Strategy Map is a highly visual, and easily communicated, way to illustrate how the strategy of the enterprise translates into measurable objectives in each of the four perspectives – finance, customer, process, and organization – that together create a holistic view of sustainable organizational performance.

Sustainability is NOT a single objective with its own metrics.  Rather, sustainability is a theme that is reflected in each of these perspectives.

• From a financial standpoint, sustainability means staying in business.
• From a customer standpoint, sustainability means satisfying, even delighting, the sustainability-conscious consumer.
• From a process standpoint, sustainability means we manage materials, energy, and waste in the most eco-efficient way possible.
• From an organizational standpoint, sustainability means creating a culture that values sustainability, reflected in the choices that employees make every day.

The Strategy Map tells a story about how we will collaborate to achieve all these objectives:

• We will build new sources of revenue by creating positive branding and customer experience connected with how we design and build our products, and how our customers use and dispose of them.  This will be supported by appealing to emerging shifts in consumer tastes by pro-actively communicating our values, and our value, to targeted customers.
• We will reduce operating costs by improving efficiencies in the way we manage materials, energy, and waste disposal, and by the way we identify and manage enterprise risk. This will be supported by improved eco-efficiency of our products, supported by innovative product design, reduced product life-cycle impacts, and strong stakeholder partnering.
• We will reduce risk through a better understanding of the our environmental and social impacts, and through better  relationships with stakeholders including NGO’s, lawmakers, regulators, and members of the communities we impact.
• Underlying all these activities is a commitment to build and reinforce a strong sustainability culture in our enterprise, supported by the right employee skills and knowledge, as well as information systems that give us the capability to measure both sustainability impacts and customer sentiment via social media analysis.

1. How does the business appear from the perspective of an owner or investor?
2. How does the business provide value to customers, and how does that affect their buying behavior and attitudes?
3. How can we provide this value with maximum efficiency in terms of cost/materials/energy ?
4. What organizational capacities – both tangible and intangible – do we need to put in place and maintain?

Each of these questions answers the concerns of a particular constituency.

1. Owners, investors and analysts view the organization as a system that provides return on investment.
2. Customers see the business’ products and services as a way to satisfy wants and desires at an appropriate cost – and, less tangibly, may buy out of an identification with brand.
3. Efficiency, particularly sustainability metrics, is the concern of internal management and staff – as well as external constituencies such as as NGO’s, regulators, and the public at large that may not necessarily be investors or consumers.
4. Organizational capacity is the foundation of the others – the physical infrastructure, culture, skills, and information systems required to plan, design, and deliver products and services.

Taken together, the answers to the four questions build a holistic view of the enterprise that describes:

• How non-financial factors (the “intangibles” that make up 50-75% of market value, including leadership, values, culture, and relationships) influence financial performance
• How we get there – translating strategies into actionable, accountable and measurable objectives -that easily and visually communicate the strategy to everyone in the organization
• How sustainability performance impacts “conventional” measures of success like financial and market performance

The last point is why Balanced Scorecard is a useful addition to the big outcome measures found in frameworks like the Global Reporting Initiative.  The result is a collaboratively-developed “Story of the Strategy” that identifies the connection between sustainability performance and market and financial outcomes. This connection may be unique for every enterprise – although GRI identifies the important environmental and social outcomes that matter to all of us, each company has to do the heavy lifting of relating those outcomes to its own competitive differentiation.

These frameworks and certification standards are a huge step forward.  They have utilized extensive multi-sector collaboration to develop consensus about what sustainable business should look like.

What’s the matter with this picture?  Most of the measures employed tend to focus on big outcomes, or on very particular operational processes.  Like many first-generation approaches to performance management, we end up with a loose collection of measures, with no clue how they integrate to create business value. What’s missing is a link that lets the individual business make the connection between sustainability and business success.

The result?  Separate management systems.  Separate reports, one for the NGO’s, one for the financial analysts and investors.

To really take hold,  reporting must address the question of how  sustainability can contribute to the business’ need to satisfy customers and shareholders.

The Balanced Scorecard is an ideal tool for achieving this.  It answers the question “How do we get there?”

Development of a Balanced Scorecard translates your business strategy into a highly visual “Strategy Map” that shows  how sustainability goals interact with other operations, and in turn impact business outcomes like brand recognition, sales performance, cost  reduction, risk management, profitability, and share price.  Development of the strategy map gets everyone on the same page, building a shared understanding of priorities, measures and accountabilities.

To be continued…..

Dick has been a thought leader in the financial planning world for twenty-five years, including a stint as President of the Institute of Certified Financial Planners.  He is currently the editor of insidemoney.org, an online journal that addresses our personal and collective relationships with money.  Dick is also a regular columnist for Financial Advisor Magazine, and writes articles about money and what he terms “money forces” for various other publications.

He is something of an agent provocateur within the financial planning profession.  The conventional advice one gets from most financial planners is to save now for a comfortable retirement.  While this is undeniably good advice, it is based on an underlying assumption that money = security.  It evokes a paranoid mood, eg, “if you don’t save money now, you’ll be eating dog food in your old age”  The problem with the current financial meltdown is that you may have played by the rules, saved for a rainy day, and now your securities aren’t worth what you thought they were – so where’s the security? Money is not security. Money is one metric, along with happiness, health, and safety, in a larger idea of what “wealth” is.

So what does money have to do with sustainability?

When I was in school, we were presented with this concept of the “time value of money” as if it were an objective law of nature, equivalent to the law of gravity – ie decreed by God at the dawn of creation.  But money is actually a human invention.  And a very clever one at that.

Dick points out many positive, evolutionary aspects of money.  Money enables us to feed a high percentage of the 6.5 Billion people on the planet – not enough, to be sure, but astounding when you think about it. We have laws and rules about money that enable enemies to do business with each other.  Cross border ownership of resources, denominated with money, reduces the motivation for war.

So here’s the connection with sustainability:  Our debt-based money system inherently requires expansion and growth. Capital seeks the highest rate of return, at an acceptable level of risk.  That return derives from expansion of production and consumption. Economically, it’s a problem if we stay the same.  If we don’t get bigger all the time, we lose ground.

And, one of the results of our economic progress is that we actually become isolated from each other.  The elderly pay money to reside in an assisted living home.  Parents pay a third party to provide “child care” while they work, to earn money.

So debt has enabled a huge material benefit to many humans.  And, taken too far, it becomes an addiction. Financiers develop ever more sophisticated instruments to manage risk and squeeze out more returns – and sometimes it crashes, like recently.

I keep coming back to this theme about addiction – as a culture we are addicted to debt, to cheap oil, to novelty.  There’s a lot of good stuff there, but we have become immoderate, like a glutton who just can’t stop eating.

So how do we create an economic and monetary system that doesn’t demand endless increases in consumption?

I wish somebody would tell us the answer to that question right now.  But, just realizing that we created this system is a tremendous step in the right direction.  If we made it up, we can change it.

Here’s the interview:

And, that could be completely wrong.

I’ve been through several apocalyptic mood swings ever since I read The Limits to Growth in the run-up to the first Earth Day, back when I was in high school. Then, there were the two oil shocks of the seventies. Then the Harmonic Convergence. Then Global Warming. Now Peak Oil, taking us right up to 2012. The world hasn’t ended yet, and on the other hand, it’s a big assumption to believe that the past is a good predictor of the future.

So how am I holding the future now? The Buddha used the analogy of tuning a stringed instrument. He was talking about how to hold one’s mind. Not too tight, not too loose.

Too tight might be taking the worst-case scenario at face value. This attitude leads to paralyzing fear.

Too loose might be thinking everything will somehow work itself out and life will go on. After all, it has every time before, hasn’t it?

What does this analogy say about leadership, about the kind of leadership we all need to embody these days? One of the most important things leaders do is to create a mood.

Is it possible to act from a confident mood, without falling prey to either lame optimism or fearful pessimism? Can we be confident even while acknowledging great difficulty?

One of the biggest limitations of logical thinking is that it tends to be black and white. That’s why some of the smartest people I know are the most depressed. But are they right?

The quality I’ve observed in some of the best business and political leaders is the ability to embody paradox. Seen differently, paradox is a form of creative tension, the gap between the real challenges of our time, and a vision of what sustainable life might look like. And to act in that gap.

When the internet came along, I saw that as evidence that, at least on a crude level of text, pictures, music, etc, an infosphere was emerging. It opened communication, created a forum for dissenting voices, and made all kinds of products and ideas available. The internet is a miracle of innovation, and has made possible a whole new class of entrepreneurial, home based professionals, including myself. It’s not global consciousness, but it’s a step in the right direction.

When NAFTA came in, I was living in Halifax, Nova Scotia, Canada. After having lived in the US all my life, I found that products in Halifax were overpriced, of low quality, and limited selection. That was the late 1980’s. As NAFTA took effect, I had as much choice as I’d had in the States, at lower prices. I thought that was a good thing. And, it created opportunities for people in that somewhat out-of-the-way, but very creative, place to find new export markets for software, music, film, and other knowledge products.

There are lots of problems with globalization – but I’ve tended to think many of these could ultimately be fixed with sufficient attention to labor and environmental standards as part of international agreements.

Two years ago I met Michael Brownlee. Michael was the head of Boulder Going Local, now known as Transition Boulder County. The premise of Transition is that, with peak oil, the cost of transportating goods and people will become so high that we will have to create more economic and social value at the community level – the way humans have lived for most of our history.

I have to admit I was skeptical at first. Boulder County, Colorado is not a place that has supported a subsistence economy since the days of the Arapahoe. When my industrial age European-descended forebears arrived here after the Civil War, Colorado was already a commodity economy. The railroad transported immigrants and capital west, and gold, wheat and sugar beets east. Civil engineers like my great-grandfather Alpheus McNitt built irrigation ditches to bring water from the mountains into what had been called the Great American Desert.

So, isn’t re-localization just wishful thinking? Seems not. Last week Michael and partner Lynette-Marie Hanthorne held a workshop outlining the ideas of David Holmgren, one of the Australian founders of the Permaculture movement. Holmgren makes the argument that we are still living in the post-Enlightenment culture, based on a fundamental belief in human brilliance. The whole modern worldview, with its belief in progress and innovation, is based on this assumption.

But what if all the marvels of 21^st century life as we know it, are in fact more the product of cheap oil than of human brilliance? I resist this idea. It sounds Marxist, the idea that our consciousness is determined by our material circumstances. I believe that thought generates our world. I’m not new agey about this. I recognize there are limits – the inevitable cycle of birth, old age, and death we all live through. The influence of parents, schools and other cultural institutions on the stories we tell ourselves, stories about who we are and what we are capable of.  Nonetheless, we create the world we live in.

But the evidence for peak oil, as a constraint that we’re colliding with at 90 miles an hour, is compelling. Holmgren makes the connection between cheap oil and social breakdown. Our ability to drive many miles to our private home with our automatic garage door opener, where we don’t talk to our neighbors. Each in his/her own unit, with its own toaster. Our isolation, our addictive behaviors, which are epidemic. The fear we have of each other. Maybe life’s not so good with cheap oil after all?

Holmgren lays out four possible future scenarios of post-peak oil “Energy Descent”:

Techno-Explosion: In which we discover a new source of limitless energy and blast off into a science fiction future of no material limits. Given the dystopian view of social breakdown he lays out, it also sounds like a recipe for Timothy Leary – inspired psychosis. Perhaps we could colonize space, and humans will multiply infinitely through the galaxy and beyond. Hopefully the pharmaceutical industry will keep up and they’ll get that Holodeck invented after all.

Green-Tech Stability: After a little bumpy period, we learn to replace fossil fuels with renewable energy sources. We don’t continue our Evel Knievel – like jump into space, but settle down into a stable, slow/no growth pattern, in which we relax into an abundant, but less frenetic lifestyle. This is the point of view advocated by many of us who believe in innovative, capitalist solutions, eg Al Gore.

Creative Descent / Earth Stewardship: Using permaculture principles, we descend gently but steadily into a localized, subsistence economy that features greater value in community and ecological harmony. Population subsides from the current level to something that respects the earth’s carrying capacity – maybe 1 billion or so?

Collapse: Think end of the Empire, Dark Ages, warlords, barbarian hordes, moats, only with automatic weapons. Not a pretty prospect.

Michael challenged us, not to believe one idea or the other necessarily, but to take a hard look at what idea we were holding of the future. And to examine the basis for that view.

I come down in the Green-Tech Stability camp. But, I wonder, can we recognize the challenge and change the system and our own worldview fast enough? And what kind of hard-facts slap in the face will we need to get moving?

]]> http://www.resilient-strategies.com/2008/09/transition-localization-and-%e2%80%93-gulp-%e2%80%93-energy-descent/feed/ 2 http://www.resilient-strategies.com/2008/08/lean-and-green/ http://www.resilient-strategies.com/2008/08/lean-and-green/#comments Tue, 19 Aug 2008 19:00:02 +0000 admin http://sustainableleadership.wordpress.com/?p=13 Last month I had the good fortune to help my colleague Susan Skjei facilitate the Lean and Green Summit in Boulder, Colorado.  The big message for me was how much the field of “lean thinking” offers for companies thinking about sustainability.  One of the nagging issues with sustainability is defining what it actually would look like in your organization.  There are all kinds of competing and/or overlapping “green” standards out there, some of which are well founded, and some of which may be based on PR more than measurable facts.

Lean thinking offers a powerful combination of “hard” and “soft” management techniques that have been proven by Toyota and many other organizations.  The answer to the question “what would green look like?” is a specific set of metrics, against which current performance and future goals can be benchmarked.  The metrics are the reference point for all conversations about continuous improvement.  The (so called) “soft” side is the level of collaboration, trust, and honesty in the culture that allows those conversations to be effective. Combining the two, there can be a realistic assessment of what is,  creative imagination of what could be,  collaborative prototyping of new tools and practices, and ongoing performance improvement.

Included in a well designed performance measurement framework, such as a Balanced Scorecard, sustainability initiatives can be linked to impacts on costs, revenues, and profits.  More and more companies, like Dell Computer are actually saving money by reducing their carbon footprint.  With the right metrics, sustainability efforts are going beyond idealism and becoming just good business practice.