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The capitalists calling for "market revolution"

A new report celebrates the work of a wave of reformist capitalists, pushing for a new kind of economics

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New York Air National Guard responding to Hurricane Sandy. Intelligence agencies are increasingly aware of the security threat posed by climate change (Image by DVIDSHUB)

The world must be in real trouble if even capitalists are beginning to call for “market revolutions”. 

Peter Bakker, President of the World Business Council for Sustainable Development, calls for a “revolution of capitalism.” What he means is that markets must learn how to value and manage multiple forms of capital, including the human, social and natural forms. Like-minded leaders include Richard Branson, founder of the Virgin Group, Paul Polman, chief executive of Unilever, and Jochen Zeitz, former head of German sportswear brand PUMA. 

It’s a trend our organisation, Volans, has been watching for some time. At our Breakthrough Capitalism Forum last year, speaker after speaker stressed that the inertia of that old economic order is now a massive constraint on the necessary system change. “The system is blind to potentially existential threats,” warned Jeremy Leggett, a leading solar energy entrepreneur. He argued that the current order is “dysfunctional almost to the point of being suicidal”. 

Others have reached the same conclusion. UN Secretary General Ban Ki-moon has stressed that our economic mindset and models increasingly look like
“a global suicide pact”. We “mined our way to growth,” he said. “We burned our way to prosperity. We believed in consumption without consequences.” 

The growing security challenge 

The UN, famously, is headquartered in New York. And more or less on the eve of America’s 2012 presidential election, Superstorm Sandy hit the country’s eastern seaboard and, most dramatically, New York City. One of the clearest voices for breakthrough change as the scale
 of the damage became clear was New York mayor Michael Bloomberg. 

“Our climate is changing,” he warned in his unexpected endorsement of president Obama just before the recent presidential election, insisted that Sandy “should compel all elected leaders to take immediate action”.

Unlike many leaders, however, he was able to report real progress in his home patch. “Here in New York,” he said, “our comprehensive sustainability plan has helped us to cut our carbon footprint by 16% in just five years, which is the equivalent of eliminating the carbon footprint of a city twice the size of Seattle. 
 
“Through the C40 Cities Climate Leadership Group – a partnership among many of the world’s largest cities – local governments are taking action where national governments are not.”
 
As these issues are increasingly framed as security challenges, intelligence agencies – among them the US National Intelligence Council (NIC) – are forecasting systemic crises that sound very much like those heralded by environmentalists a few decades back. By 2030, Shell forecasts, we will need 30% more water, 40% more energy and 50% more food than today.
 
By the same year, the NIC concludes, the world will be: “... radically transformed from our world today. By 2030, no country – whether 
the US, China or any other large country – will be a hegemonic power. The empowerment of individuals and diffusion of power among states and from states to informal networks will have a dramatic impact, largely reversing the historic rise of the West since 1750, restoring Asia’s weight in the global economy, and ushering in a new era of ‘democratisation’ at the international and domestic level.”
 
Rebooting the science of economics
 
These trends provide the context for Volans’ new report, Breakthrough: Business Leaders, Market Revolutions, published today. It spotlights the work of the first wave of breakthrough capitalists. Early breakthrough initiatives seek to address the systemic nature of many of our challenges, but most are as yet experimental, fragmented
and not in clear line of sight for key decision-makers – often because they fail to provide short-term pay-offs in terms of jobs, revenues and taxes. Worse, emerging solutions are often fiercely contested by incumbents, because they threaten their existing business models. 
 
To drive change at the level and scale now needed, breakthrough capitalists argue the need for various forms of system change, including a rebooting of the fundamental financial disciplines of economics and accounting.
 
If finance represents an economy’s bloodstream, think of economics as its genetic code. Critics have described economics as everything from the “dismal science” (the Scottish philosopher Thomas Carlyle) to a form of “brain damage” (Hazel Henderson, the sustainability-focused economist, who told us that she has often felt like an “extraterrestrial” among normal economists). But
the discipline has been central to the success of capitalism.
 
The problem with conventional economics was underscored in the first auction of 2013 in Tokyo’s sprawling Tsukiji fish market. At a time when many oceanic fisheries are being pushed to the edge of collapse, a single Bluefin tuna sold for a record US$1.67 million. The winning bidder said he wanted to give his country “a boost”, but the implications of such prices for already endangered tuna stocks are profound.
 
Among those working to reboot the science of economics is Pavan Sukhdev. His UN study on the economics of ecosystems and biodiversity concluded that an annual investment of US$45 billion into protected areas alone could secure the delivery of ecosystem services worth some US$5 trillion a year.
 
Business has to fill the gap
 
Paradoxically, there is no better time than 
a major economic crisis to push forward disruptive new policy and investments, once people recover from their early panic. This argument is underscored by Dimitri Zenghelis, Cisco’s chief economist for climate change, and the man who led 
Lord Stern’s UK government inquiry team on the economics of climate change.
 
The inquiry concluded that climate change will become our biggest market failure ever. As if that was not enough, Lord Stern announced early in 2013 that he was wrong – the picture, he now concludes, is even worse than he thought. We are on track for an almost unimaginable 4-degree Celsius global temperature rise.
 
“The world is on fire,” as WBCSD President Peter Bakker puts it. He is himself a former chief executive, of logistics company TNT. With governments too often failing to act, the question now is whether business can begin to fill the gap in a meaningful way? The main message of our report is that, ultimately, they will have no choice.
 
John Elkington is executive chairman at Volans and non-executive director at SustainAbility. Susie Braun is an associate at Volans.

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