Show Notes
Join Tom and Andrew as they discuss the role of corporations in building sustainable businesses, misconceptions about China's impact and efforts in sustainability, and the challenges of building a sustainable future.
About Andrew Winston
Andrew Winston is a globally recognized expert on how companies can navigate and profit from humanity’s biggest challenges. Andrew’s first book, Green to Gold, was the top-selling green business title of the last decade, selling over 100,000 copies in seven languages. Inc. Magazine included Green to Gold on its all-time list of 30 books that every manager should own.
Transcript
"TK: Welcome to Foresight Radio. I’m your host, Tom Koulopoulos. On each episode, we explore the many trends that are shaping the way we will work, live, and play in the future. Our focus is on the disruptive and transformational trends that are changing the world in ways that are often invisible. Our objective is simple – to give you the knowledge and insights that you need to better manage the future.
Foresight Radio is sponsored by our good friends at Wasabi. You can learn more about them at Wasabi.com.
In this episode, we’re talking with Andrew Winston, a globally recognized expert on how companies can navigate and profit from humanity’s biggest challenges. Andrew’s first book, Green to Gold, was the top-selling green business title of the last decade, selling over 100,000 copies in seven languages. Inc. Magazine included Green to Gold on its all-time list of 30 books that every manager should own. His latest book, The Big Pivot, which was selected as one of the best business books of 2014 by Strategy+Business Magazine, provides a practical roadmap to help leaders build resilient thriving companies and communities in a volatile world.
Our conversation looked at everything from the role of modern organizations and society, to climate change, to how AI will address the pressing challenges of sustainable business. Here’s my conversation with Andrew Winston. [Pause]
So, Andrew, you wrote a book, The Big Pivot, a while back. I think it was 2014 actually when you published the book. Is that right?
AW: That’s right, 2014. Time flies. [Laughter]
TK: Time flies for us all. What a great title, The Big Pivot, but what the hell [Laughter] is a big pivot? Explain it to us.
AW: It’s funny when I came up with the title and went out there with it and my world, as we’ll discover in our conversation, is about corporate sustainability and really about the world’s mega trends and how companies kind of navigate these big environmental and social pressures. You probably know, from the tech and innovation world, there’s also a pivot discussion in tech companies, pivoting your strategies. So, there’s a couple of uses for it. I think I was maybe the first to try to talk about it in this way, about a fundamental shift in how companies operate, and how they think about their role in society, basically. So, the idea of it is, it sounds simple, but the big pivot is that, fundamentally, companies in the western world operate in the model that’s been prevalent for 30, 40 years that shareholder value is kind of the prime goal, and you’re trying to maximize short-term shareholder value, quarterly value, and then maybe get to some of these big share challenges like climate change and other social issues. If it fits perfectly or there are some cheap investments to make, or you’re getting enough pressure from outsiders, and the big pivot is, to say, we have to flip that, that the challenges are so large now and so systemic that we have to make solving the world’s challenges the core purpose of business, and then work back from there using tools of capitalism and markets and economics to do it most profitably. So, it isn’t about giving up profit, but it’s about starting from a different premise, and that’s what the big pivot is.
TK: I’ve heard you talk a number of times. One of the things that I find most refreshing is the practical approach that you take to this. We hear a lot, obviously, about sustainability and climate change, and the importance of doing this as global citizens, as a global society, but, yet, at the end of the day, a business has to find a reason to do it that is economic, fundamentally, right? There has to be a profit motive as well. Even altruism, to some degree, has a profit motive. “My brand is enhanced. People will understand that I’m doing more than just making money. I’m actually contributing back to my community and my society.” What pushback have you gotten from companies that just don’t see the economic side of this?
AW: Look, I’ve been in this field for 15-plus years now. My first book was co-authored. It was called Green to Gold. The title was very basic and simple, but there’s gold in thinking about your business through an environmental lens. I’d say that basic case that there’s value creation in doing things like cutting energy use and being more efficient and designing products that help customers do the same, there’s a basic understanding of that across business. I don’t think we have to make the really basic case anymore, but there’s still pushback all the time from executives and companies about the kind of deep change I’m talking about, about making sustainability really core to business, and not something that’s kind of sits off in the side in the philanthropic part of the business or community affairs or something like that. I see that developed countries’ companies, again, I think are further along on this. I’m finding my businesses actually going even more international in the last couple of years as I’m getting calls from large businesses in countries that, maybe, for a long time could say, “Hey, we’re focused on growth and development,” South America, for example. Now, companies are saying, “Okay, we have to actually talk about this sustainability stuff as well. Our competitors are talking about it. Our customers are talking about it, and our employees are talking about it.” In the end, companies do this. As you said, even altruism has a business benefit. There’s just a deep conversation happening right now with the world’s largest companies about what’s the role of business in society and why do we have a responsibility, and not necessarily on some moral argument like, say, the polar bear, but just a responsibility as a member of society, as a citizen, as an organization. The pressure they’re getting is from a lot of different places, somewhat from customers, very much so from employees, and probably the most consistent thing I hear, talking to companies and working with large companies, is concerns about their employees, attracting talent, retaining talent. Millennials and Gen Z, in particular, they now make up half the workforce, and they have a kind of different attitude about how business should function and what its purposes. Now, we’re also getting it from investors. We’re starting to see that pool of very important [Laughter] stakeholder talking about this in a much deeper way, for the first time really, I think, in the last year or so.
TK: As I spoke with Andrew, I couldn’t help but think back to December 7th of 1972. It was the last man to mission to the moon, Apollo 17. Jack Schmitt, who was using the Hasselblad camera to take many of those iconic images from that era, had turned to face the Earth on the last orbit as they were leaving for the moon, and he snapped a picture, which has since been immortalized as what we call the “Blue Marble.” It’s that beautiful image of our planetary home floating in the blackness of outer space. If movements have a time and a place when they’re born, then that, undoubtedly, was the genesis of the sustainability movement that we are talking about today with Andrew.
When I think of the notion that businesses contribute back to society, to issues of the sustainability that take an interest in climate change, I think of Maslow’s hierarchy. In my mind - I want you to straighten me out here. If I’m not thinking about this correctly. In my mind, there is the pinnacle of self-actualization at the top of that pyramid. It seems to me that businesses that get this, that get what they’re talking about, that are most receptive to it, prior at that point where they’ve got an established business that works well, and they can now afford the luxury of thinking about sustainability and giving back, but I’ve got a sense that you’re actually putting that a little further down in the hierarchy. It’s not the pinnacle. It’s not just for the developed countries and the developed organizations that are doing very well. This is something that all of us should be looking at as a foundational principle of how they run their business. Am I right or wrong?
AW: No, that’s right. It’s an interesting point you’re making about putting the Maslow’s hierarchy on to an organization, not just a person, and we could spend some time going down that path about what that means. Yes, you’re getting a fundamental core theme and the principle in my work, which is that this sustainability stuff isn’t just a nice-to-have after you’ve gotten the basics down. It’s actually at the core. There’s a lot of reasons for that. [Laughter] Fundamentally, it’s a better way of doing business in almost every sector I can imagine, for the reasons I said before. There are just lots of ways to save money. There are lots of ways to be much more innovative because of it. What The Big Pivot is saying is that we’re facing these really existential threats to humanity and to the global economy and our society. Climate change represents a fundamental risk to the well-being of the planet. What’s, I think, a leap in some kind of strange way for companies to realize and for executives to realize is that actually, [Laughter] companies, they sit within the planet, not the other way around. We’ve kind of been taught through business school that dealing with the environment and compliance with regulations and what’s our footprint is kind of a part of the business, and it’s over in the Environmental Health and Safety Department. There’s a very weird kind of backwards view of that, because, fundamentally, you can’t have a business that thrives without having the planetary resources and the people, the people that would be your employees and your customers, living fairly thriving lives, so they’re a good market and provide good talent as employees. You just can’t have a business without a planet and a people that are thriving. It’s a really basic idea, but we struggle with it very much in business. The leading companies really, I think, get this and are starting to get it in a deep way, but it’s kind of against everything we’ve been taught. We’re fundamentally hitting planetary limits now in a way that, I think - if you’re, say, Gen Xer or boomer, the world was half the size when we were young than it is today.
TK: That’s a great way to look at it, by the way.
AW: I remember learning in school that, “Hey, we’re getting to 5 billion people.” I remember when I was younger. Now, we’re at 7.3 billion. We’re heading to 8 million or 9 million. We’re not just more, we’re richer. These are good things that business and the economy have accomplished. A billion people entered the middle class in the last generation, mostly in China. That means more stuff, right? We’re about to see this massive increase, for example, in using air conditioning around the world. Here’s the irony. Because it’s getting hotter everywhere, cities are going to need more and more days of air conditioning for people to stay safe and healthy. So, you’re going to see more and more people have the wealth to do that, and it’s going to create this enormous amount of energy use and more climate emissions. [Laughter] We’re kind of on a vicious cycle that we need to break through deep technological innovation and carbon-reducing technologies, and we’ve got those, but we’re going to have to accelerate how fast we do this.
TK: I want to come back to that point a little bit later on, because every time I turn around, it seems as though the window of opportunity to correct some of the damage that we’re doing that’s resulting in climate change is becoming shorter and shorter, smaller and smaller. Let’s come back to that in a minute. Paul Romer recently got the Nobel Prize in Economics for doing some fantastic work, a long-overdue Nobel Prize.
AW: With William Nordhaus.
TK: Exactly. They both talked to us about how we’re entering this post-industrial world. I know Nordhaus has great relevance to what you’re doing and especially with carbon offsets and carbon credits. I want to focus a bit on the combination of both of their work, because we’re entering an era of ideas, where innovation is so much more important than we even give it credit for. It seems to me that much of what you talk about - and you have a term for it. You call it “heretical innovation.” It’s how we innovate our way into the future. I’m not sure that companies understand innovation, much less heretical innovation. [Laughter] Be a heretic for a minute. What is heretical innovation? Give us some examples.
AW: Sure. Yes, it’s a word I really like, because it actually has this ancient religious meaning, I suppose, of being a heretic and really challenging orthodoxy. It’s not radically different than disruptive innovation that’s been out there for a while, but I wanted to push the idea a little further and say that, again, the challenges we’re facing, they’re so systemic that we need to ask really different questions about the way we do things at a, I think, profound level. I have a lot of examples ranging from even little things, little operational decisions about a product, or how we do things, how we manufacture things, up to the purpose of a business. So, I’ll give you an example that I’ve used many times over the years, and it’s kind of a favorite of when I speak a lot. Audiences always kind of remember the story about UPS, the package delivery company, and they stopped, at some point, taking left turns in cities, grid-like cities like New York. They used GPS software and rerouted the trucks. They’re not the only fleet to do this, but they kind of made some hay about it, and put it out there, and say, “Hey, we’re not taking left turns anymore.” They’ve cut through this telematics technology of routing software, something like 100 million miles out of their routes.
TK: A 100 million?
AW: Yes, every year.
AW: It’s not just the no-left-turns. There are other things going on to optimize. Obviously, that saves a bunch of money and a bunch of fuel. It’s millions and millions of gallons of fuel, but there’s kind of a deeper cultural thing. I always joke, imagine that first meeting where someone said, “Hey, why don’t we stop taking left turns?” That’s, to me, a classic heretical question. There are other examples I really love. Like a former client of mine, Kimberly-Clark, makes Scott paper towels and toilet paper, and they started doing the paper towels and toilet paper without the cardboard rolls. I don’t know if you ever bought the coreless version. It’s a really great example of something very specific. It wasn’t just, “Let’s see if we can reduce the cardboard reuse by 20%.” It was saying, “We can actually do this with zero.” That’s the kind of leap that you need. We’re seeing, I think, more and more companies ask really fundamental questions about their business. One of my favorite bigger stories I guess is CVS, the big pharmacy and drugstore chain, $120 billion in sales, and they, a couple of years ago, said, “Hey, we’re moving to be a health company. That’s part of our vision for how we build a thriving future,” which is I think is a kind of big pivot. That’s the kind of example of like, “If our job is to help people be healthier, then that changes what we sell and how we operate,” and they decided to stop selling cigarettes and tobacco in the front of the store. That was a really big decision actually. It was portrayed in the press office, “It was only a couple of billion ($2 billion) in sales out of $120 billion.” I thought, “A lot of those writers have never worked in a company, because [Laughter] that’s a lot of money.” So, there was kind of a visionary choice there and heretical question like, “Could we stop selling something that doesn’t fit our mission, doesn’t fit building a more thriving healthy world?” These are the kinds of questions we need, especially now that we’re facing climate change that is very quickly becoming a runaway climate change. We are almost out of time. There was a new study that just came out, right, the day before we’re recording this that we can talk about when you’d like, that’s saying that the world is very short on time, and is going to require very big leaps in technology and in rolling out technologies [Laughter] into the world at a pace that we probably have never done before.
TK: Let’s talk about that, because when you bring up CVS, for example, and the tremendous courage that it took for an organization to do that, because you’re talking about significantly eroding your bottom line by removing an entire line of product from your stores. What you’re also doing is setting a social and a cultural context in many ways, in some ways, by the way, better than even a government can. Policies just may not have as much of an impact in today’s world as a global business can have, right? So, let’s talk about climate change and the window of opportunity that we have to change things, because my sense is that the government can do whatever it needs to do, but without businesses making a concerned and a very intentional effort to turn things around, it’s going to be very difficult to do anything significant about climate change. So, what does our window look like, and what do we need to do to avoid the apocalyptic scenarios that we’re being presented with?
AW: Let me actually first answer one part of what you just said about the CVS thing and just close that story up, because you said it erodes the bottom line. This is a really, I think, critical conversation to have, because that example of heresy, the reason it’s so heretical is it is a painful leap to the future of the business, because you are immediately cutting out a piece of your sales, but I would argue that they must have very much believed, in the company, that it was good for business, that they were moving into other areas like the clinics in the back of the store, that are a different source of revenue, and that it fit their brand increasingly. So, was it a hit to sales in the short run? Absolutely. Was it a smart choice for the business for the longer run? They must have believed that, and I believe that. So, the distinction in that kind of story is the short and long term. I think this is the critical gap in the way business runs today, and it’s the critical hurdle to the big pivot, which is the short-termism that drives business, which I think is not just the sustainability issue, or it’s just an innovation issue. Are you positioning your company for the long term, and are you doing the things that position you for the long term and long-term value? I think we’ll come back later maybe to the industrial community that’s starting to ask those questions as well.
Let me answer the climate question. The study that just came out as we’re talking is from the Intergovernmental Panel on Climate Change, the IPCC. They’re the guys that have put together these models and estimates for a number of years now. What came out of the Paris climate accord in 2015, the agreement that now the US has said that it’s leaving, but, literally, every other country in the world is signed in for, was an agreement that we would hold the world to 2 degrees Celsius warming, roughly 3.8 degrees Fahrenheit. In that meeting, there was a serious discussion about how 2 degrees of warming, which is double the warming that we’ve done so far, was potentially still very, very dangerous for the planet, and there was some pretty solid science and predictions about what that would do. Then there were the people representing island nations, low-lying nations and low-lying coastal areas that said, “At 2 degrees, our world is gone. It’s underwater.” So, we have to talk about 1.5 degrees. We have to slow down even more. So, what happened this week was the IPCC released a report, after basically three years of analyzing this, and what would it really take to do that. In essence, they said, “It is still technically possible to slow down warming. We’re really almost out of time. We have to drastically reduce carbon emissions starting right now.” 2020 is kind of the drop dead for really peaking and saying, “This is the most we will ever emit,” and then radically come down from there. This new assessment, I think, pushes the ball and really encourages [Laughter] companies to think more radically than we have. The progress on carbon reduction within corporate America and the corporate world has been pretty good over recent years, because the clean economy technologies, solar wind, efficiency technologies, a whole range of things like battery storage have all gotten so much cheaper, 80%, 90% cost reductions in the last decade, that companies are accelerating in that arena, and they’re buying a lot of renewable energy, for example. This pace that we’re talking about, this kind of change in the way the world works, how we get around, how we eat, how our buildings run is even faster. There’s a lot we can say about this, but I think one critical point is that going even faster means greater investment, true, but we always just talk about the cost of doing something, and kind of miss that there’s also this massive opportunity. Any change in industry, and these are huge changes, means multitrillion dollar business opportunities. There are people selling the solutions that help us go as fast as we need to, and they make a lot of money on this. [Laughter] So, there are winners and losers in this. That gets into a more political and social conversation about how do we manage that best.
TK: Without getting overly political about this, one of the things that we tend to do very well in the US is to demonize the rest of the world on a variety of dimensions. We certainly have done that a great deal with China. Yet, I heard you talk about China and that much buildup going on there, which I think we don’t have a real appreciation for in this country. We often talk about how China is a contributor to climate change because of this enormous buildup. On the other hand, however, I’d like to get your opinion on this, because you’ve talked about this, and you’ve experienced this firsthand. I haven’t. It would seem that the Chinese government wanted to take a longer term view, a much longer horizon, on their development in just the next decade, or the next two decades. Do you see anything going on there that gives us some cause for optimism, as opposed to the sort of demonization that we constantly seem to hear about when we hear talk about how China’s contributing to climate change?
AW: Yes, absolutely. The role of China on this is fascinating and complex, obviously, for a country that big and growing as fast as its grown, but the idea, the story you hear often from the forces saying we shouldn’t do anything about climate change, or maybe it’s not so bad, or it’s not humans, or whatever, they’ll say, “Why should we do something if China’s not going to? It won’t matter.”
TK: Exactly, that’s right.
AW: There are multiple things wrong with that argument. Let’s imagine for a second that China was just the problem. It still doesn’t change that we should do something about it for a couple of reasons. If you say, “My house is on fire, but why should I try to put it out when the guy next door is not putting his out?” That’s just ridiculous, but it also is just fundamentally good for business and for our health to move to a clean economy, solar and wind, cleaner forms of energy. The cost to our society of just asthma and air quality from things like coal and fossil fuels has been immense, hundreds of billions of dollars a year.
TK: The cost that Andrew mentions are staggering. A few years back, The Lancet Commission, a 200-year-old medical journal, issued a report that talked about the global impact of environmental pollution. Some of the numbers were outstanding. In 2015, for example, diseases that were caused by air, water, and soil pollution, according to the journal, were responsible for 9 million premature deaths. That’s 16% of all global death, exposure to contaminated air, water, and soil kill more people than smoking, hunger, natural disasters, war, and AIDS or malaria combined. That same journal pegs the total cost of global pollution to about $4.6 trillion. That’s over 6% of global GDP.
Andrew went on to talk about some of the misconceptions with respect to what China is doing to help mitigate the problem.
AW: So, there’s this cleaning of the economy that gets us to a much healthier place, and these technologies are now cheaper. So, we should do it, because it’s just better, but the premise of the argument that China’s doing nothing is also like at least a decade out of date, and I think willfully so, the people making this argument, they know better. China is spending well-over half of all the money going into the clean economy every year. They’re putting hundreds of billions of dollars. They committed $350 billion I think a couple of years ago by 2020 just to clean economy buildout. In the course of a decade, they created the world’s largest solar and wind industries from nothing, while we kind of sat still, and they also became the biggest buyers of those technologies. People say, “They’re building a coal plant every week.” They’re building everything, because they’re growing so fast. So, they build nuclear. They’re building coal, but the pace of buildout of the older technologies is radically slowing. China, because of these twisted benefits of being an autocratic society, they can do things like just shut down technologies, not worry about asset lives quite as much. They’re just going to be shutting down coal plants. They can also just build highspeed rail, which they now have thousands and thousands of miles of, because they can move people. I’m not recommending this path, but I’m saying they’ve done it. We have zero miles in the US of highspeed rail. They are building the modern economy and the modern society. Again, there are many reasons. It is just better, but the real [Laughter] driver, I think, is that, if you’ve been to Beijing and you’ve been to some other cities, it’s hard to breathe. They’ve got just very real tangible pressure on their own people and from their people to clean up their economy. So, they’re doing it. They’re moving faster than anybody in the world. We should be trying to go as fast as they’re going in our own way.
TK: You had mentioned that 2020 was a milestone, a breakpoint in trying to deal with the future of climate change. What are the technologies that are going to get us there? What can we do? What are businesses doing already?
AW: That’s a really interesting question. I wrote an article today about this new report. I basically say, look, there are the things that companies are already doing, and there’s a pretty well-established list of those actions. They’re getting more efficient, right? They’re finding efficiencies that’s been practiced for a long time, but they specifically target carbon and energy, and all the big companies in the world do this, and almost all have goals now. I track corporate goals on environmental and social issues. In particular, we gather data on the world’s 200 largest companies. Basically, all of them have goals now in sustainability, and, basically, all have some energy or carbon goal. So, there is reduction going on in operations. They do things like engage their employees to find these things and to innovate and create products that help their customers reduce their footprint. They do internal carbon pricing. They play with tools internally to affect their investment decisions. There’s a range of things going on. They talk to their suppliers as well. I believe that given this new report and the pace of what’s happening to our climate - and, in particular, the last couple of years, the extreme weather has been incredibly dangerous and very expensive. Again, the cost of climate change is starting to very quickly outpace any potential cost for spending to avoid it. This is an easy economic decision. I think the things that companies need to do next are tougher, are harder for them to get their head around including getting much more active politically and lobbying for climate policies like a price on carbon, an aggressive price on carbon that rises every year everywhere. Every country needs something like this to change the market and incentivize companies to move faster. They also, I think, need to even think about the politicians they’re supporting. Are they supporting people that support climate action? If they don’t, then they’re not really an ally. This is such a large issue. They need to do more than just the political side. I think they need to have conversations with some of their customers in a way that they maybe haven’t in the past and even consumers and talk to them more through advertisements, through packaging, and talk about this issue, and get them thinking differently about their consumption habits. I think they have to invest differently and take a hard look at the way they use things like return on investment and hurdle rates and all those things in companies, and really shift them to heavily bias toward carbon reduction. Basically, I think, taking to account all the value that isn’t measured very well in our normal investment return calculations, all the value from resilience and having a solid future and appealing to employees and customers, and all these things that affect the company’s value, but we don’t put numbers on very well. So, those are some of the things that I think we’re going to see more and more, and then we’ll have to if we want to go at the pace that science is demanding. [Pause]
TK: You’re listening to Foresight Radio. We’re taking a quick break to thank our sponsor of this episode, Wasabi Technologies, the leader in the next generation of cloud storage. Find out more about Wasabi at Wasabi.com. [Video Presentation] Now, back to my conversation with Andrew Winston.
As I listen to you and as I read your articles and The Big Pivot, I get this very distinct sense that we’re moving into an era where business has, not only so much more responsibility, but, frankly, so much more influence over policy decisions, over how we shape and architect the future. Part of that is due to globalization of companies, I’m sure, but part of that, I believe, is also due to leadership in these organizations. You’ve been at this for a while. Have you seen a shift in leadership, that the ethos that leadership brings to the organization, somehow, the decision-making process is tilting more towards organizations having a true global conscience. That might sound somewhat pollyannaish, but I think it’s tangible. Have you seen that?
AW: Absolutely. I’ll say that, just on a tactical level, it isn’t imaginary that companies have more influence over policy. There is, since the Supreme Court’s Citizens United decision, companies and lobbying groups have actual more power. They can give more money. That has been a clear force.
TK: The Citizens United Supreme Court decision that Andrew refers to goes back to a 2008 decision by the United States Supreme Court, but effectively overturned a 2002 finance reformat that was intended to prevent corporations from funding political campaigns. In its five-to-four decision, the court said, “Were the court to uphold these restrictions, the government could repress speech by silencing certain voices at any of the various points in the speech process.” What this means, simply put, is that corporations have an enormous ability, because of their resources and advertising, to influence public sentiment and opinion.
AW: Companies, I think, have been loathed maybe to use that lobbying power to push in the way I’m suggesting two things, like the carbon price are push towards climate action, because there’s been this knee-jerk thing that the role of a company’s lobbying efforts of government affairs is just to try to hamstring the government and defang it and reduce regulations. That’s been kind of the theme, but we are seeing now something really interesting as CEOs – some of them talk about conscious – there are people who have written about conscious capitalism, but the word that most are using more and more is “purpose” and “finding your purpose.” That’s really not actually a leap. It’s in keeping with the business. I write in The Big Pivot a"