This summer has seen a relentless wave of severe weather events: prolonged periods of high temperatures combined with heavy rain and hail have caused droughts, fires, crop failures, floods, glacial melting in the Alps, as well as countless damage to property and loss of human life. Climate change, at the root of all this extreme weather, is perhaps the planetary boundary that is now beginning to receive most attention.
However, according to the Stockholm Resilience Center, there are eight additional boundaries we need to consider, and reaching the limits of these boundaries can trigger a cascade of natural processes that are difficult to predict and manage as a result of the feedback effect. For example, rising temperatures and multiple fires have started to thaw the permafrost, releasing large amounts of greenhouse gases that were previously trapped underground. These gases drive climate change, creating a positive feedback loop in which the ice melts faster.
Good praxis from the business world
The realists from the legislative, financial and corporate worlds mention the model of planetary boundaries when contextualising the urgent environmental actions that need to be taken at different horizons (2025, 2030, 2050). In the private sector, however, it is encouraging to see that the number of companies seeking out genuine change is increasing exponentially. A growing number of companies understand that our carbon budget is being wasted in a very short amount of time and are therefore looking to capture more carbon than they emit within their supply chain (rather than resorting to the simple but controversial off-setting that does not guarantee lasting impact).
Companies are increasingly looking for solutions to our use of plastics because they understand that the micro- and nano-plastics associated with the eight million tonnes of plastic that ends up in our oceans every year directly affect our health. There are more and more companies seeking to regenerate the soil, which contrasts with current practice whereby every year an area the size of Portugal undergoes deforestation, with current logging practices and the use of chemical fertilisers unable to guarantee the provision of food or the capacity of the land to assimilate our emissions.
An increasing number of companies are promoting biodiversity because they understand that it forms the basis of human health; that the extinction of 200 species a day cannot continue and that it is unacceptable that 11.5% of global biodiversity is now in danger of extinction. More and more companies understand that the extraction rate of renewable resources (fish, forests, soil and groundwater) is greater than their replenishment rate, and that the extraction rate of non-renewable resources (fossil fuels, radioactive elements, minerals) is greater than the rate of introduction of their renewable substitutes, and therefore focus on extending the life of their products, components and materials through circular business models.
Keys to the paradigm shift
With co-author Dr. Knight, we have recently published the results of a study in the Business Strategy and the Environment (BSE) journal on successful companies that have undergone genuine environmental change. These companies share the common denominator of internalising the social and environmental impacts of their economic activities. They understand that to manage the triple bottom line, they must firstly ensure that their financial bottom line is not negative, or in other words, they are financially viable. They subsequently apply the same strategy to their environmental and social accounts, extending the scope of their analysis from their own company to the entire supply chain.
These companies are producing a paradigm shift because they (a) do not carry out impact trade-offs between the three accounts as if one substituted the other; (b) do not maximise their financial account at the expense of their environmental and social accounts; and (c) maximise their environmental and social account once financial viability has been guaranteed. These companies embrace multi-capitalism; they do not drive the growth of financial capital at the expense of everything else, but instead foster natural, social and human capital.
It is only by leaving behind myopic, incremental thinking and moving towards systems and transformational thinking that companies can redesign value for an increasingly well-informed customer who is becoming increasingly concerned by the limits of the planetary boundaries. The rules of the game for companies to maintain their legitimacy and social licence to operate are changing at an alarming speed. Systems thinking enables them to regenerate their supply chains and become leaders of a profound transformation.
Written by Dr. Desirée Knoppen, Director of the Department of Marketing, Operations and Supply Chain