System Revolutionaries

Monday, June 09, 2014

18:00 - 20:30

On the 9th June we celebrated the ultimate in the art of change, the ability of individuals or small groups to transform the wider world around them. 250 pioneering minds met at that crucible of scientific revolution, the Royal Institution in Piccadilly, to share their experiences, and gain deeper insights into what it takes to shift a system.

Our panellists had remarkable experiences of driving change. Jonathon Porritt, our host, has spent most of his career challenging the economic and political  systems and he was joined by;

  •     Santiago Gowland, Managing Director of Systems Innovation at Nike, which won the coveted Fast Company’s “Most Innovative Company Of 2013”
  •     John Steel, CEO of Cafedirect, the pioneering business that helped to revolutionise a global commodity market.
  •     Gail Klintworth, Chief Sustainability Officer at Unilever, the architect of Unilever’s drive to create social change on a global scale

We were proud to partner with Forum for the Future as our Changemaker for June. Together we crafted an experience – from afternoon discussions to blogs to roundtables – to highlight the systems that most need changing, share the techniques that work and hear the personal stories behind system revolutionaries.

Speakers

Gail Klintworth Unilever

See bio

John Steel Cafe Direct

See bio

Jonathon Porritt Forum for the Future

See bio

Santiago Gowland NIKE

See bio
Round Tables

Visioning system change

How can future visions galvanise system change?  How can the exploration of long-term trends lead to powerful coalitions and innovative collaborations that focus on real change? And what are the challenges and barriers that need to be overcome to make them work?

Write UP

Introduction from Sally Uren
Sally described how an understanding of long term trends, combined with a robust future vision that responds to these trends, are essential tools for organisations wishing to be sustainable and successful in the long term. A shared understanding of those trends, and the process of developing a shared Vision together, can be essential ingredients for effective coalitions and collaborations.
Forum’s “significant change curve” is attached below, to help put this into context with the wider process of change
How can long term trends lead to powerful visions?
We live in a dynamic world. But often organisational planning only considers the here and now – or known, short term futures. Long Term Trends allow us to look further – and can create a ‘burning platform’ – a compelling need to change that is simply not visible in most short term decision making processes.
Example: Forum’s Sustainable Shipping Initiative began in 2010 by looked at big challenges & trends that the shipping industry was likely to face over the next 30 years. Combined trends around energy prices, climate change, scrutiny from customers and governments and a number of other factors, demonstrated that the industry would need to change significantly in a relatively short period of time in order to survive and thrive.

Two types of trend were described:
- The macro-trends such as population growth, climate change, resource scarcity etc, and
- ‘weak signals’ – new ideas, trends and innovations that are currently small but could have a huge impact if they scale-up

Creating a Vision
Example: Sally described how Forum worked with the Shipping industry to produce a Vision of what a future sustainable industry might look like – principles that would address the future challenges identified through the Trends, which the industry could get behind and guide action in the future
Why are visions powerful?
- SHARED UNDERSTANDING: Creating change is complex, and you need to get different players in the room to have real impact. However everyone comes with their own understanding, prejudices and ideas – Creating Vision is a way of creating a shared understanding
- MAINTAINING MOMENTUM: Getting top level buy-in to the Vision, and keeping the eye on that Vision can be effective in maintaining momentum and holding that shared goal
What are the challenges and barriers?
LEVERAGE POINTS: Without identifying key leverage points, it’s difficult to have an impact. For example, in Forum’s tea project, this was about identifying the right Market Mechanisms, and engaging mainstream consumers
POLICY CHANGE: Corporate action is not yet translating into political action because MPs won’t act unless they feel their constituencies are engaged and motivated. There was some optimism that this is changing – eg social media is a useful tool in raising awareness. However there will never be votes in ‘sustainability’ – it’s too broad. But there are votes in the specific building blocks of sustainability – people care about economy, security, food prices etc – so we need to focus the conversation on these tangible building blocks rather than a generic concept.

SYSTEM THINKING is not something that’s discussed on a wide scale – tends to be a small number of aware individuals. There is a challenge in widely communicating this through an organisation
BUSINESSES AND ORGANISATIONS TEND TO BE COPYCATS NOT INNOVATORS:
- How to make an organisation more innovative? Large corporations have standard business models that staff need to follow. It requires external innovators/entrepreneurs to disrupt the large companies and/or ‘show them the way’. However a lot of current activity is through the open/shared economy – which is difficult for the mainstream to replicate – clever companies will look at how to bring that in.
- Is there a danger that disruptive models, when brought/bought in to mainstream players, lose their essence? Eg Zipcar bought by Avis – will this destroy it in the long term?

HOW DO WE CREATE MILLIONS OF SYSTEM REVOLUTIONARIES, AND GET THEM ENGAGED?

- How can we build the conversation and create a critical mass of ‘followers’ copying pioneers like Unilever and M&S?
- Large brands act as ‘Superhighways’ – able to mobilise consumers therefore have very powerful role – it’s not just about niche entrepreneurs
- Innovation brings up unexpected challenges. Eg using recycled plastics in products raised issues of plastics chemistry that hadn’t been considered even by Wrap… this requires unexpected collaborations!
- There is a need for companies to share information on success and failure. Can you balance transparency, collaboration and crowd sourcing innovation, with exposing risks and secrets to competitors and to the public? Can large orgs such as kingfisher bring in talent and ideas through competitions (eg green dragons den) and other crowd sourcing? (the group consensus was: Yes!)
- Change tends to be stepwise as things are tested, expanded and normalised – putting a tight boundary around and experimental new ideas, departments or innovations within an organisation can allow new ideas to flourish without threatening the wider organisation, or being limited by organisational norms

SUMMARY
1. We need to harness the power of individuals
2. We need to experiment with current business models and invent new ones
3. Everyone has assets - and needs to use their assets effectively – whether it be a voice, physical infrastructure, cash, ideas, brand followers etc
4. Create unlikely partnerships to tackle new problems
5. Have more sharing, particularly on failings!

What’s the business case for the system revolutionary?

What are the risks & opportunities for a company seeking to change the system? Rewards might include brand benefit, employee engagement, innovation opportunities. Risks might include a backlash for “colonising our public life”, as Monbiot recently wrote of Unilever. What are the key factors that determine whether it adds value?

Write UP

1. Start by defining the system/s you are in
2. Need to identify the business case for systems change for it to be successful
3. Need step-by-step change to successfully change a system as going for a radical change will be resisted out of hand
4. Change at the moment is mainly achieved by responding to crises

5. Companies need to see themselves as a system and understand their place within the wider system
6. Crises are normally the best starting points for systems change

Q: Many companies do not arrive at crisis points which are the catalyst for change. How do these companies change? What do you present to the board?

1. Need to understand the pressure points within your business
2. You need to be able to leverage a crisis - be ready for it and have an answer ready
3. Need to be cautious about pairing a business model with a crisis
4. It's about building the critical mass needed to encourage change. Empower people and departments within an organisation so they get excited about change.

5. Before systems change, understand your purpose
6. Need to have a clear vision of what the outcome of systems change will be
7. Our business can achieve the same strategic goal of 'creating healthier lives and happier homes' without the use of products but this won't happen – too radical

8. Never propose anything to the board that is not in line with their goals

Q: How would your change your organisation around sourcing resources?

1. Want to sell the same benefit with a different product. You're actually asking the consumer to change - not the organisation.
2. Unilever selling off the highest impacts products it has which just shifts the burden to another manufacturer who won't change - not breaking something and starting anew
3. Need to get the whole system on board to change

Summary

(i) Relate everything to strategy
(ii) Understand your system/s
(iii) Change takes place at many levels
(iv) The answer is unique to each company, business, commodity...

Examples

1.) UK coal industry in 1978 - 14th largest industry in the world at the time but had to completely change the way it did business to survive
2.) Linux - completely open source development in the early 90s
3.) Adobe - giving away software for free to generate demand
4.) Kodak - opposing the switch to digital nearly ended their business. Lost a lot of market share by trying to oppose the change

From disrupted to disruptor

Your organisation, and its products and services face the prospect of increasing disruption within markets being shaped by sustainability challenges. But for some, this represents a great opportunity to create new markets or shift existing ones. How can you as an individual stimulate and sustain disruptive innovation within your organisation?

How does decision-making shape the system?

Could a better understanding of intangible risk and opportunity lead to a systemic change in the way that companies make decisions? This table will discuss ways of quantifying today’s intangibles, such as resource supply risk, employee engagement, brand benefits etc. Can tools such as SROI and Total Contributions make a difference?

The power of the social intrapreneur

The Head of Sustainability at H&M was named the most powerful business person in Sweden in 2014, recognising her “power that reaches far outside the limited boundaries of business." What are the ways that a sustainability expert at a large organisation can exert influence beyond their organisation?

Write UP

Using your circle of influence
• What role do you play within the system? e.g. well-respected voice of Richard Branson
• E.g. HSBC’s forestry policy is an important recognition of its role as a financier
o When companies got through the net, they were picked up by NGOs (playing their role) -> stronger policy & better NGO working relationship
• Quiet leadership – public figures are not the only ways to influence things
• What is the influence of a sustainability person? To break down internal silos?
• Use existing internal channels e.g. digital team in Virgin
• Change the system and create new channels (to not compete with other communications)
Empowering the leadership
• Need to understand the dynamics of the business and who its leaders are
• E.g. HSBC climate partnership with WWF turned into a sustainability leadership programme in recognition of the role leaders could play
o Training & embedded it into their objectives
• How do you achieve buy-in from CFO/CEO?
o Talk in a common language (using common values): look at company’s risk assessment or business objectives – can frame sustainability as the solution to minimising/achieving those
o Appeal to egos & create peer-to-peer relationships (helps to normalise behaviour, reducing the perception of risk)
o Several moments will build up to the ultimate ‘ahah’ moment
Innovation
• Empowerment to innovate e.g. 20% of time at Google for thinking & creativity
o Embed into job description
o Create the conditions for experimenting e.g. encourage people to ask ‘why?’
o Put a vision out there then crowd source the ideas
o Put money behind it e.g. perpetual funds
o Give the innovators a voice & support them to form a business case
o Link innovators into a community
• Risk taking is central to entrepreneurship but comes hand-in-hand with failure -> give space for failure so people aren’t risk averse e.g. digital innovation accepts failure as an essential part of the process
• How to scale up and get innovations past ‘prototype’ stage?
o Practical screening process required
Influencing beyond business boundaries
• Substantial spending in the supply chain -> potential for influence
• Procurement decisions also influence competitors’ behaviour
• Positive feedback to suppliers helps to give them marketing tools & benchmarking can spur on behaviour
• Suppliers get a clear mandate if they hear from a number of customers
• Push-pull: expectations and engagement should be flowing both ways along the chain
• Collaborative approaches?

What’s the role of business in a 2015 climate agreement?

With a possibility of a bilateral US-China agreement, Paris 2015 may be the best chance yet of a binding climate agreement. This table will discuss the practical steps that business can take to aid an agreement, from signing The Trillion Tonne Communiqué to communicating that progressive climate change policy is good for business.

Write UP

Key challenge: Fossil fuel companies are fighting to keep the status quo so those who want to change this will need to mobilise effectively.

Businesses’ campaigning strategy
The traditional role of business, for example at Copenhagen, has been working behind the scenes and/or public silence. In 2015, how can business step out the traditional roles? What is the smartest campaigning strategy for business?
Creating a unified voice – climate risk

One of the frustrations about the business voice being relatively silent is that it allows the ‘bad guys’ to frame the argument around regulation in negative terms – highlighting the supposed problems it causes for competitiveness. This is why the side of the economy that is most at risk from climate change must articulate the risks it faces from climate change and how they can be solved with one clear and common voice. A key thing that NIKE has done is to be part of creating this unified voice of business. The Trillion Ton Communiqué is part of a narrative and has high rhetorical value. Add to this all signatory companies mobilising all parts of their supply chain, and the impact would be exponential.

A systems innovations strategy depends on defining the future system ie. a low carbon economy. The fossil fuels industry has painted a negative picture of the future system without them. The other side of the debate must now paint a negative picture of a future if nothing changes (eg. the impact climate change is having on NIKE business due to the way pollution affects athletes), as well as offering a positive picture of a low carbon future. The first approach could be particularly useful to communicate to politicians – politicians can be motivating by fear to a certain extent, but this might not work for citizens.
Making the business case – political outreach

Persuading treasury ministers is key to change. Relationships of agreement with environment ministers are not as useful as relationships with treasury ministers, who are the ultimate decision-makers. This is part of making the business case.

The unique advantages of business – innovation

Businesses have unique advantages in their ability to innovate eg. the Unilever green bond. Businesses can create an enabling environment, rather than trying to replicate Greenpeace - something they cannot achieve. Other examples of innovative enabling environments include community investment in energy systems, such as in Denmark.

Summary
Practical steps businesses can take:
Three levers for change:
- Innovation
• Increasing businesses’ sustainability innovation
- Incentives for a low carbon playing field
• Lobbying politicians – making the business case
• North / South agreement is crucial
- Campaigning and engaging citizens
• Painting a positive picture of a low carbon future

Rethinking the way we use water.

Water has the potential to become a major geopolitical issue by the middle of this century. This table will explore how we could change the way we look at water, from using a true cost to thinking strategically about watersheds, which could minimise the social and financial adaptation costs.

Write UP

System change

• splitting wholesale and retail about to happen with Anglia Water – this is changing the status quo

• Changes in messaging also important – e.g. no longer using the term ‘waste water’ but instead ‘water treatment’ and ‘water recycling’

• By packaging carbon, waste and water together, some orgaisations are getting firms to think about water, whereas they could not previously as a stand alone issue

• Customers are willing to accept change r.e. water as long as it doesn’t affect their experience – e.g. that of having a shower

• Importance of location on a firm’s overall target is key – while having a global target may help for simplicity, it may skew things where the countries they are operating in have vastly different water availabilities (e.g. UK v Qatar)

• UK water industry working towards in house displays of water use – may see water use drop as much as 1/3 as people ‘see’ their usage and the problem


True cost

• Some firms have a goal of not having any impact on biodiversity, but this is of course interrelated with water use – so therefore we cannot consider biodiversity without water

• Do businesses know their water source and the level of risk surrounding its certainty of supply? Seems many do not, nor know how close they’ve come to running out of water (as in UK in 2012)

• Having too much water can be a problem too (it’s not just about too little) – e.g. floods in UK 2013

• Interesting issues around water accounting and other resource uses – e.g. boiling water used in cotton clothes manufacturer – overlaps with CO2 via energy used

Rethinking the accountancy system

New ways of accounting and reporting are emerging among sustainability leaders, including natural capital accounting and integrated reporting. This table will explore its potential for systemic change, and what could result in mainstream adoption – from inclusion in company reporting to new policy initiatives.

Write UP

Obstacles
• The financial world takes a long time to get to a system of common metrics, as evidenced by the gap that still exists between the Generally Accepted Accounting Principles (GAAP) and the International Financial Reporting Standards (IFRS). Generally speaking they are slow to accept changes, e.g. natural capital reporting on annual reports. The hope is that there is sufficient value in reporting non-financial metrics to accelerate this process, especially when some of these non-financial metrics have financial implications.
• Difficult to deliver standardisation across the board; a lot of standards pop up here and there but often they are not centrally supported which impedes adoption.
• Traditionally this is a very ‘green’ space, not financial space, with the majority of language being sustainability oriented, not business oriented. The likes of GRI and CDP need to communicate to coordinate their frameworks and make it relevant for finance professionals, the financial director won’t understand, or apply these metrics unless they are mandatory. The board needs to see some value now,that resource scarcity is here now, else they won’t adopt.

Red Flags (warnings)
• Most EU directives and proposed standards get so watered down in the process of public interest consultations, that they are almost useless by the time they need to be used. It is difficult to achieve the scaled system change that’s needed.
• ‘If you push hard against the system the system pushes hard back’; the accounting profession is a slow one to evolve.
• A GHG accounting standard was being developed before the crisis, but some large stakeholders that are embracing sustainability now pushed hard against it at the time which impeded its development.
• You don’t necessarily need financial reporting to understand risk in supply chains.
• We talk a lot about risk but not enough about opportunity, and that in itself puts decision makers off.

Solutions
• We are at the ‘teething’ stage of standardisation, it is tricky and awkward and everyone comes up with their own way of doing things. What is required is for stakeholders to start coming together until standardisation happens and to keep talking.
• Environmental reporting/natural capital accounting is not a big jump necessarily, it just sounds like it. Businesses are probably already collecting most of the data.
• Making steps in the right direction is sufficient as there is no set requirement to date. We shouldn’t let perfect stand in the way of the good. If workable techniques emerge (of which there are quite a few) that make sense and provide valuable business results, they must be used.

Examples
• The Climate Disclosure Standards Board (CDSB) was set up at the World Economic Forum in 2007, and it is a consortium of business and environmental organisations, incl. CDP, WBCSD, WEF, Climate Registry, Ceres, etc. with standardisation in mind. International companies wanted to report in a synchronised way, and the CDSB was tasked to create a common framework on climate risks (not just carbon). It has one of the first frameworks in the world for mainstreaming non-financial information - the Climate Change Reporting Framework – which tries to draw global consistency.
• Under the newly proposed EU Water Framework Directive, water companies must not only recover the cost for supply, treatment and infrastructure outlay, but the price should also cover environmental and resource costs. This Directive must be transposed into UK law, however it will usually take a long time.
• In addition, the EU has mandated environmental reporting for 6000 companies by 2016, and the framework needs to be in place to enable them to do so, otherwise it will just create a bigger problem for companies.
• The Natural Capital Coalition, on the other hand, is creating a Natural Capital Protocol to standardise natural capital reporting.
• Yorkshire Water developed an environmental P&L, which gave them a slightly different view and enabled them to justify a large investment into a waste treatment plant in anticipation of future cost. They realised they had been heavily affected by carbon pricing and that they would have done things differently had they had this information in the past.

Rethinking the way we employ young people

With 24% of 16-24 year olds unemployed in the UK, it can be argued that our economic system is disenfranchising future generations. This table will explore how business can use enlightened self interest to solve this problem, from setting corporate skills targets to apprenticeship hubs.

Write UP

What are businesses already doing to help young people enter the workforce and address vital skills shortages?
• Some big businesses have a heritage in community action focused help for young people, eg. giving small grants to empower young people to gain skills.
• However, there is a sense that these skills aren’t leading into the world of work.
• Lack of experience is a major problem, so corporate programmes which offer in-house opportunities to young people to meet the skills gap and attract a more diverse workforce are essential.
• Apprenticeship and work experience schemes are being used by some employers to think outside of traditional ways of recruitment, getting away from relying on the graduate milk round, and leading to a more diverse and innovative workforce.
• Corporates are looking at recruiting the next talent, but they also want to reach consumers. Creating micro businesses can be really successful, if there is enough support.

Obstacles
• Lack of sustained contact with the young people involved. There need to be four touch points to really engage a young person with an organisation.
• Those furthest away from the job market need the most time, investment and effort to bring into the workplace.
• It’s harder for companies and brands who don't face young people to attract young talent.
• Lots of employee volunteering turns out not to be useful. There has to be a business case to get senior buy-in and really engage staff.
• Work experience and apprenticeship schemes tend to be the first thing to go if they start to fail.
• Sometimes the young people involved in the schemes aren’t adequately prepared for working life and may have problems at home that they need help with.

Red flags
• Schemes can go wrong if cultural differences aren’t addressed. One corporate asked employees to mentor students from east London, but failed to adequately prepare staff for the issues faced by young people from deprived backgrounds. The company had to pull out of the programme as it was unprepared.
• There is a danger of building up young people to be disappointed, because there aren't enough jobs in the market. There needs to be clearer progression from work experience to actual jobs.

Solutions
• Collaboration is key – look at what has worked for other companies and see how it can work for you.
• Employees need to be engaged in apprenticeship and work experience placements for them to be successful long-term.
• Important to help young people change their lifestyle to fit in with employment, for instance dealing with time keeping, problems at home etc.
• Corporate driven targets help engage the business in youth employment programmes. 'Enlightened self interest' is key, eg. trying to find talent to meet a skill gap.
• Engaging the supply chain, eg. asking SME suppliers to take on an apprentice each as part of their contract, can widen the opportunities available to young people.

How can we change consumer behaviour?

For many, this is the holy grail of systems change.  IKEA, BT, Unilever and Nissan are all actively exploring ways of changing the behaviour of their customers, from crowdsourcing solutions to child poverty to creating markets for electric vehicles. Can the table identify a number of generic levers that work?

Write UP

Upfront, the crowd agreed that what they are ultimately trying to do is reduce the impacts of products and services.

The crowd identified a number of challenges engaging consumers in sustainable behaviour and products:

− Consumers want an ‘easy life’, so it’s important to ensure that innovation makes it as easy as possible for consumers – their time is a major factor
− The sense that one person cannot make an impact, so why bother?
− Greenwash – suspicion of the company’s practices.
− ‘If it isn’t broken, why fix it?’ – it’s hard to encourage people to change the way they live.
− It’s confusing – the topic is complex.
− Sustainability is irrelevant to most people in their daily life, people are driven by other factors such as tastes, cost etc. People buy into the brand and what it says about them, i.e. Nike – people buy it because it’s cool, not because of their CSR story.
− Consumers don’t just use one topic to determine how they make their decisions, they each have their own value chain – it’s like unpeeling the layers of an onion. There is no one size fits all model.
− Cost – financial considerations are a hugely important factor
− There is no currency of sustainability that everyone understands at the moment
− Consumers' behaviour and how they use the product is not in our [brands'] control (eg using too much water with shower gel or overheating ready meals, use of resources)
− Some tendency to apathy or sense of insignificance

Of the challenges, information, and how best to use it emerged as one of the most major ones, on which the discussion focused:

− There is too much data, consumers are inundated by it, but no one creates a relationship with it and too often it’s used to misinform, rather than inform – the context and relevance to the consumer is crucial.
− Consumers have a short attention and only ‘engage’ for a couple of seconds in the product/information. Therefore it must be concise, and impactful. This is hard to crack.
− Brands must carefully choose the stories they tell, otherwise it can be seen as too much. Think about what’ is important and why.
− There are over 250 sustainability labels out there, people don’t understand them or have time to learn about different ones – information overload. The ‘sustainability premium’, however, only works with certain types of consumers.
− There are many kinds of consumers with different motivations, generational differences, influenced by different kinds of information. Millennialists, for example, may be more conscious, though consumer citizens of ask ages have an impact. It's complex, many layers if what creates a sense of value and the decisions people make. Different things will turn them on and press their buttons.

How can consumers be better engaged?
The crowd acknowledged that there’s a slow shift; sustainability is increasingly on people’s agendas. Different things drive different types of consumers, however.

− Language and labelling is a major factor as well, people buy into values, words and stories
− Emotive stories can be important, especially if there’s a strong link to the product (e.g. Orang-utan conversation)
− Don’t say sustainability – the word puts people off
− Empower people – they care about themselves and their family and want to make their own choices
− Transparency - often lacking, yet a necessary factor. A Brand Trust Index was referenced, whereby there was a huge leap in trust within two years of transparency being improved.
− It needs to start at home – care about your consumers. An energy firm was referenced who refers to customers as ‘meters’ - they simply don’t care about them.
− ‘Data, information, communication’ – if you harness them together then you can influence people, but you need to use the data to draw together the right information, in order to tailor your communications.
− Using data in a relevant way, to turn information into intelligence and connect it with people, we can promote sustainability by stealth. It's what we can do early in the relationship that's likely to have more impact, while habits form.
− ’Storybooking’ – to provide relevance to consumers lives, so that its more empowering and they are not just receivers of information.
− Highlighting not just what the impact is, but underlining why it matters. Showing consequence, so that consumers/citizens can see how one person's small action or one brand's guidance can add up to a much greater cumulative benefit.

Examples of successful consumer engagement:

− Recycling – has witnessed a major change in the last 10/15 years, including among those that aren’t typically engaged in sustainable behaviour.
− Plastic bags in Ireland – charging has been very successful, especially as people were willing to give to charity but not a government tax.
− MacDonald’s – putting calorific content in stores enabled consumers make the choice about what they eat.

Example for Jaguar Land Rover

JLR have undertaken recent research among their consumers, it taught them 3 things:
1. Make a product greener
2. Make your manufacturing footprint greener
3. If you do 1 and 2 you have permission to work on 3 – implement actions that benefit people. How you drive your car, for example, has an impact on fuel consumption. JLR are trying to ascertain what will motivate a driver of their car to drive a bit better and more efficiently. They’re introducing an in-car eco-data tool, giving drivers a % efficiency rating while driving, with donations made to a water aid project if over a certain threshold.

The crowd summarised the discussion with 10 standout points/levers from the conversation

1. Language – make it easy to understand.
2. Storytelling – small points or large, consider the impact
3. Transparency is important (although there are mixed feelings about whether consumers really use information)
4. Don’t use the word ‘sustainability’
5. Brand Trust Indexes are great, (if reliable)
6. Positive changes – because consumers want to
7. Negative changes – because they have to (plastic bags)
8. Make choices easy for people
9. Data - use information to inform message
10. Make the product ‘cool’
11. Be willing to fail - push boundaries: see this as part of commercial development, not just the cost of 'being good'
12. Incentivise change - help people see the positive impact: some means of measuring around this, or governance, so you can see where your good efforts go

Final thought... The biggest challenge of all is the one that is hardest for consumers and brand-owners to face: ultimately, we need to use less. We need to deal with the 'L' challenge: Less, of everything.

Challenging short term thinking

The prioritising of the short term is one of the biggest challenges faced by those building social businesses, and this table will explore whether it is possible to challenge thinking that is seemingly entrenched in our system. Does stopping quarterly earnings guidance help?  Can the personal remuneration system be adjusted? Can this be taken to a systems level?

Write UP

The group addressed the subject under two headings – a company’s ownership structure, and its remuneration practises.

Ownership
Although there was some recognition that privately owned companies might be able to implement longer term thinking than their publically owned peers, the group felt that all businesses suffered from the pressure for short term financial returns. This was felt to be a problem of expectation and language, particularly from analysts and the media – short termist questions ultimately generate short term thinking.
By contrast, membership organisations were cited as a potential solution, with businesses like Arup and John Lewis Partnership identified as having higher productivity and longer term perspectives.
Participants suggested that investors can be key to driving longer term thinking, though it is crucial to get them bought in on ‘the right basis’ – for example, explicitly investing in the expectation of generating social good with lower or slower financial returns, as per the Café Direct model. More generally, expanding decision-making to broader stakeholder groups was seen as a necessity – though the group acknowledged that this can be highly complicated for major companies.
The group discussed quarterly guidance at some length, and agreed that Unilever seems to have taken a sensible step – however, there was no consensus as to whether doing away with forecasting would make a material difference to entrenched behaviours.

Remuneration
On the other hand, the group was unanimous that making bonuses contingent on sustainability performance would be a hugely positive step – incentivising socially and environmentally good behaviour rather than focusing solely on financial returns. This was identified by the group as the most practical and immediately actionable solution.
The main challenges related to measurement. Since disciplines like carbon footprinting and social impact analysis are relatively young, it is potentially difficult to make this argument to CFOs. Some participants therefore suggested tying bonuses to an independent sustainability index – though again there were concerns that this approach could be inflexible, and not responsive to an organisation’s specific needs.

Financial mechanisms to rewire systems

How can companies create mechanisms that enable all actors to benefit from innovative financing of sustainability? Forum will profile the new  'Save As You Sail' funding mechanism that overcomes the split incentives prevalent in shipping and other sectors, whilst representatives from the Climate Bonds Initiative and Social Finance will talk about the rise of corporate green bonds and social investing - leaving plenty of time to explore how businesses can use these types of mechanisms to overcome traditional barriers to significant change.

Sustainable Shipping Initiative’s ‘Save As You Sail’ shipping efficiency model summary: http://ssi2040.org/what-we-do/work-streams/finance/

Climate Bonds Initiative: http://www.climatebonds.net/

Social Finance: http://www.socialfinance.org.uk/

Write UP

EXAMPLES

We talked briefly through the Save As You Sail model. Through the Sustainable Shipping Initiative collaboration there was a split incentive problem (which was even more difficult with the international scale of shipping).

Classic lease model on ships is currently similar to tenants and landlords. With the lack of trade charterers, they are leasing for less time. Fuel prices continue going up at time when retrofitting is seen as the problem for charterers. There was no incentive to make retrofits on the vessels. This model arose from working across the entire shipping value chain, with partners including Maersk, ABN AMRO, Unilever. The model was decided as a route to thrive in a sustainable future and took about 3 years form the conception of the project.

We heard about the leasing example Wrap had been working on – eQuip. eQuip is a leasing scheme that helps companies secure financial assistance for new and second hand recycling plant and machinery. From the scheme £400,000 was made, and about £6,000,000 worth of low carbon tech is no in the sector. This scheme split the risk, as soon as the banks saw this they were much more inclined to invest.

We looked for examples where different teams have different financial rules. A great example is Interface – the innovation team have a budget specifically for breakthrough innovation, and this team influences the whole organisation.


RED FLAGS (warnings)

We explored the need to turn to the big institutional investors, pensions etc who have all the resources but are actually very risk averse. How do we blend the early stage, who can take the blow at the start for initial funding? In the current landscape we have those with the least tolerant capital doing the innovation and those with the most not bringing anything to the table.

It’s about risk and time. We need a short term solution to protect against risk for those who want to take it. Bonds are for more long term solutions for everyone. The biggest barrier is the time of investment you will be able to get.

OBSTACLES

We looked at how we can scale the game changers. We are currently playing within the system we are trying to change. How do we fund the smaller people who are making the difference, we need the game changers shifting things in a way we could never expect. This needs to happen in parallel with normal finance also.

Whether this is in examples like Abundance Generation, Cafedirect, or in other new tech and climate kick initiatives, this needs to be scaled.

Consumer/citizen market is low on funds, but big on its ability to change. This is key, the financial mech is key; the market is working in their favour. In terms of being able to turn up the consumers to influence and change the investment horizons from 3-5 years – into something more like 5-7 would make a structural difference to the market. Taking it out of green bonds could free up capital for social impact.

Consumers don’t know where to go, in terms of building interest and fighting the big investment institutions. We need to give the consumers the info we need, they want to do something, but don’t know what to do. We must make it less scary; people are quite naturally concerned talking about their pensions.

The market as it is now will not challenge new capital to markets. Unilever’s green bond worked ok but did more for Unilever’s brand than anything. We need momentum; more politicians are listening to us this year. When bonds go further down the rating scheme, then we use momentum to grow this market. Everything needs momentum to push – without that you don’t have anything.

Any kind of change is hard, system change is very hard. The risk with what this could be against return is not a linear representation at all. What would be the best way to set you up with ambition? Small social enterprises, take 5 years or so to change. Has the private sector got the patience I don’t think this happens quickly enough? We have options to bring people in from the fringes, but we aren’t doing it quickly enough.

Solutions

To finish we looked at what how you could inspire citizens to overcome the ‘what can I do’ feeling and what can they do
• Don’t assume that if you’re not in the finance sector you can’t understand it (lots of people within don’t!)
• Pick an area you want to know about and immerse yourself
• Don’t believe that significant change can happen through the current mech
• Telling people that they have the power with investments, pensions, money etc to make good choices all the time
• Finance is a means to an end, not an end in itself. We need patient capital offset.
• Openness and transparency, it’s not about money it’s about the people. Need to give people an understanding.
• We need people on the journey, this is crucial
• Think about consumers as citizens

Venue Detail

Royal Institution of Great Britain

21 Albemarle St, London W1S 4BS

Directions

By tube
The closest tube station to the Royal Institution is Green Park on the Jubilee, Victoria and Piccadilly lines. The Royal Institution is a five minute walk from the station. Also within a ten minute walking distance is Piccadilly Circus tube station, on the Piccadilly and Bakerloo lines, or Oxford Circus tube station on the Victoria, Central and Bakerloo lines.

By bus
There are numerous bus stops along Piccadilly which runs along the entrance to Albemarle Street.

Bus numbers: 9, 14, 19, 22 and 38 By bicycle
There is parking for bicycles located around the corner from the Ri, on Bond Street.

By car
Travelling to the Ri by car is inadvisable as there is only limited and expensive parking available nearby. Please note that the Ri is located within the Congestion Charging zone.

Who's Attending