Frank Dixon is the founder of Global Systems Change and the former Managing Director of Research for Innovest Strategic Value Advisors, which is the largest corporate sustainability research company in the world. His perspective on corporate thought and sustainability is that flaws in our economic and political systems make it impossible for any company to become sustainable. In fact, Mr. Dixon managed to shake my belief in many of the fundamental “sacred cows” I learned in business school!
Frank attributes his revised perspective to his tenure at Innovest. He found that companies tasked with the holy grail of sustainability usually were able to mitigate no more than 20% of their negative environmental impact before starting to suffer financially. Profits could initially be increased by going green, but then most corporations hit a wall. Why?
Thinking deeper about how corporations could mitigate all of their impacts and thus become sustainable led Frank to the discovery of answers to this question. It became clear that current economic systems essentially force all companies to be unsustainable, in part by not holding them fully responsible for negative impacts. If competitors are not required to mitigate impacts, companies cannot afford to fully mitigate them either. This is a system problem, not a company problem.
Frank says that one of the main problems with modern systems is that they are myopic. In other words, they are based on what is best for the individual, and not what is best for larger environmental and social systems that support individuals. A higher level of thinking is required to improve our systems in ways that encourage rather than prevent companies from being sustainable. The higher level thinking needed is systems thinking, which essentially means focusing first on what’s best for the whole system, and then on individuals.
To illustrate one of the systems flaws that Frank talks about, take the concept of NPV or “net present value“ – which is taught to every MBA in the civilized world today. This basically states that money in hand today is worth more than that in the future, and future values are discounted using a calculated cost of capital to the present. This is fine when applied to relevant subjects such as project costs or the construction of a new plant. However, as it is the focus of every corporation, it is used universally for decision making.
Where this falls flat is when a corporation is making a decision on whether or not to use safe, responsible practices that can save human lives. There is no real way to place a value on human life, clean air, land, and water. If you use the commonly accepted NPV techniques, at a 7% discount rate (used for public regulatory projects) the value of these precious commodities including human life drops by 97% in 50 years.
This causes corporate officers to be under considerable pressure to sacrifice the quality of life of their very grandchildren through decisions made today to support the bottom line.
Likewise, in today’s industrialized world – deceptive marketing and advertising practices are the norm rather than the exception. Today’s American teens are taught that they can have self-confidence, happiness and assurance just by wearing the right jeans, using the right deodorant, and chewing the right gum. According to Frank, advertising should be factual, and not try to keep the population in a constant state of inadequacy as it does today.
What does Frank believe should be done about this? He developed a practical, collaborative system change process called Sustainable Systems Implementation. In it, he advocates a three step process to be followed by collaborative groups consisting of both global leaders and key industry leaders:
- Create a vision for what they want, which would begin with the sustainability of life
- Choose key metrics for how to measure this
- Develop detailed strategies to achieve these objectives and measurable metrics
Frank discusses the concept of Global National Happiness to illustrate how Bhutan is seeking to develop a better measure of social well-being than GDP. Frank’s point is that whatever we focus on tends to become the most important. In other words, what gets measured, gets managed. GDP essentially measures the well-being of capital, which generally does very well. But the well-being of society is not measured well. As a result, society is declining in many ways in developed and developing countries.
From Frank’s paper entitled Global National Happiness,
“It is critical that an alternative to GNP be developed in large part because society tends to manage what is measured. If humanity does not measure the state of it’s life support systems of the happiness of people, these issues will continue to be low priority (in relation to what is measured – GNP). Failing to measure environmental and social conditions will drive further declines and cause humanity to become even more unsustainable.”
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