There is a new sustainability pioneer on the block – businesses with an ambition to be net positive. These businesses are absolutely critical for a sustainable future, as their ambition is not just to be a little less harmful, not even to get to zero, but to put something back.
Putting something back, when it comes to natural capital in particular, has never been more important. At Forum for the Future we use the Five Capitals Model as a framework for understanding sustainability. Essentially, there are five types of sustainable capital from where we derive the goods and services we need to improve the quality of our lives.
Natural Capital includes renewable and non-renewable resources, sinks, such as rain forests that absorb, neutralise or recycle wastes and processes such as climate regulation.
Human Capital consists of people's health, knowledge, skills and motivation. Enhancing human capital through education and training is central to a flourishing economy.
Social Capital describes the institutions that help us maintain and develop human capital in partnership with others such as families, communities, businesses, trades unions, schools, and voluntary organisations.
Manufactured Capital comprises material goods or fixed assets which contribute to the production process rather than being the output itself – e.g. tools, machines and buildings.
Financial Capital plays an important role in our economy, enabling the other types of capital to be owned and traded. But unlike the other types, it has no real value itself (despite what economists might tell us) but is representative of natural, human, social or manufactured capital.
Sustainability is the point at which the value of the stocks of each of these capitals is such that we can live off the interest alone. We are facing a sustainability crisis because we're consuming our stocks of natural, human and social capital faster than they are being produced. Unless we control the rate of this consumption, we can't sustain these vital stocks in the long-term. And, the bad news is that stocks of natural capital in particular, are perilously low. You’ve all heard the saying that ‘if nature was a bank it would have been bailed out ages ago’.
This is why rebuilding stocks of natural capital is essential. Just cutting carbon emissions, reducing waste, even going to zero, won’t necessarily rebuild the value of natural capital. We need to reverse in real terms the damage that’s been done. So, enhancing biodiversity, re-establishing eco-systems, switching supply of commodities to allow the non-renewable resources not to disappear completely. Social capital also needs some urgent attention. As social inequalities rise, as the chronic disease burden in society balloons, the value of social capital is rocketing at unprecedented rates. And we all know that right now, the stock of financial capital in developed nations is, well, not high (triple dip recession anyone?). Rebuilding the value of natural and social capital will help address this.
So a big hurrah for the net positives. From a sustainability perspective this all makes huge sense. However, the net positives operate in a wider system. One in which there are significant barriers to becoming a truly sustainable business.
Think mainstream investors not exactly falling over themselves to ask probing questions about a company’s sustainability endeavours. Which means capital markets have yet to figure out how to reward the sustainability pioneers. Think wider civil society not yet demanding sustainable products and services – which is a brake on product and service innovation. And let’s consider the global policy framework. Perhaps not, as a depressing picture of incoherence and perverse incentives reveals itself.
These barriers to mainstreaming sustainability require a new approach, one where business understands its role in the wider system, and works to create the conditions in which it will be successful. That’s where system thinking comes in – and system innovation - a set of actions that shift a system – a city, a sector, an economy – on to a more sustainable path (watch this neat animation to find out more) And in order to shift a system, and address barriers to change, the net postives will also need to be very deliberate about the change interventions they make. Some of the biggest breakthroughs in sustainability and in wider society have come from taking a systems view and being very deliberate about what change interventions to make when. Take for example the story of micro-finance.
Ultimately, the net positives will need to embrace a new model of collaboration. One where the pre-competive boundary has shifted to allow greater co-operation within sectors, and one where partnership characterises interactions along value chains. This in turn will mean a shift in mind set from tactical to strategic, from short to long term.
Aspiring to be net positive in today’s world will not only rebuild depleted stocks of natural, human and social capital, not only transform individual businesses, but help transform the wider systems in which the businesses operate. In turn, this will mean tearing up the business as usual manual, and crafting, in collaboration, a new one, with systems thinking at its heart.