The Futures Of Business: Lessons from the Rainforest for the Future 500
Good afternoon. Thank you for the honor of presenting closing remarks to this, the 22nd annual conference of the World Future Society. I am acutely aware that I am a barrier – between you and you flights home.
But I would like to leave you with a STORY – that will take you from this room – so full of ideas and possibilities for the future – to a place in nature that is EQUALLY bursting with possibilities.
The characters of the story include people you might not expect to find in the rainforest. Hard nosed business leaders, impatient with theory, living in a world that demands PERFORMANCE – quarterly profits, ROI.
CEOs and executives who came to believe that the FUTURE of business lies in the rainforest – in the principles of complex systems that can enable them to be SUPER-ADAPTIVE, to serve DIVERSE INTERESTS in a world torn by the convergence of ENVIRONMENTAL limits, TECHNOLOGICAL possibilities, and SOCIAL tensions that occasionally explode, as they did on September 11.
Executives who knew that in a complex world like this, NATURE was not simply an object to protect – it is a MODEL to emulate.
One of those executives – our chairman, former Mitsubishi CEO Tachi Kiuchi – told you the FIRST chapter of this story 3 years ago in SF. I offer the SECOND chapter today.
The story begins eight years ago, on the other side of the world, when former Mitsubishi CEO Tachi Kiuchi, a small group of executives, and I boarded a helicopter in Kuching, Malaysia, lifted off, and flew out over the dense tropical rainforests of Sarawak, to begin an adventure that we are both still continuing today.
Looking over the miles of green that stretched out in all directions below us, it was easy to imagine the rainforest as a place of great resource abundance. But it’s not.
The rainforest is constantly short of resources. Its soils are thin. Minerals are leached quickly by the rain. Even sunlight and water are scarce at the forest floor, blocked by the dense canopy above.
Yet despite this scarcity – or because of it – the rainforest is the MOST EFFECTIVE value creating system in the world.
· It is home to two-thirds of our biodiversity
· It is a catalyst for breakthrough innovation and improvement
· And it is the kind of place that created ALL ADVANCED LIFE, even our own.
No smart business would ignore a system that had that capacity.
So during that first trip to the rainforest, we learned what companies could do to help save it. But we learned something more, something we hadn’t expected: We learned that the most valuable resource in the rainforest is not the trees we can extract. It is the lessons we can learn.
By taking LESSONS out of the rainforest, we can leave the TREES in the rainforest, and begin to run our companies and our economy on a more ABUNDANT resource, one that need never be in short supply: the creative capacities that we find inside ourselves.
So the MORAL of my story is that in today’s world, NATURE is the new model for business. Nature shows us how to CREATE value, GROW it, IMPROVE on it, and SUSTAIN it – not by consumption, but by design.
The nation’s business schools would do their students and the future a FAVOR by dropping the old MACHINE model used to describe business in the LAST century, and to teach tomorrow’s business leaders how to create value LIKE LIVING SYSTEMS, LIKE NATURE, LIKE THE RAINFOREST.
This is not mere theory. We put these ideas to practice. The executives most active in our alliance are ALL hard-nosed business leaders – and they have all found that, by applying SIMPLE TOOLS designed to embed principles of NATURE in their operations, they can begin to create companies that, in small ways, begin to reflect the creative, adaptive, and sustainable capacities of the rainforest.
How? It all begins with two core principles: FEEDBACK AND ADAPTATION.
- Bill Coors – after a hike in the woods with an ecologist – applied the ideas to his ACCOUNTING. He developed what he calls the “closed loop system” that channels the costs of pollution and waste to the units that create them. That drove the creation of new products and processes that saved millions of dollars, and created new profit centers.
- Anita Burke, of Shell, applied feedback to their OPERATIONS, to help turn an oil refinery into a simple industrial ecosystem, where wastes from one process are food for another.
- Doug Daft, the CEO of Coca-Cola, applied feedback to reverse a DECADES OLD approach to MARKETING, seeking to SERVE cultural diversity, not impose a one-brand strategy IN CONFLICT with it.
- Phil Berry of Nike, Linda Coady of Weyerhaeuser, Bill Green of the chemical industry, all learned to harness feedback to create triple bottom line profits in their companies.
- And I even applied feedback, when I designed better LAWS AND REGULATIONS, like California’s beverage container recycling law, which a new study says is the most cost-effective large-scale program anywhere to recycle containers.
The programs we implemented, based on the lessons we learned, have saved more than .25 billion, helped preserve four million acres of old growth forest, recycled 100 billion cans and bottles, and harnessed the buying power of hundreds of corporations to drive consumption down and innovation up.
AND THAT’S JUST WHAT WE HAVE DONE WITH A FEW PROGRAMS. OTHERS COULD DO SO MUCH MORE
How can FEEDBACK AND ADAPTATION improve our economic, AND social, AND environmental well-being at once?
Because they can topple a series of dominos – trigger a series of events – that in nature AND in business cultivate greater diversity, efficiency, interdependence, cooperation, AND innovation. Rather than seeking to enhance those qualities ONE AT A TIME, the old mechanistic way, systems of feedback can trigger them ALL, in a single stroke.
How? Picture this. Two years ago, Tachi Kiuchi and I brought a group of corporate executives to the Caribbean coast of Costa Rica, and boarded these little boats for a journey downriver.
Around every turn in the winding river, birds were standing, perched almost like statues, in the mangrove swamps along the edge of the water.
Mangroves are pioneers. Ecologists call them r-Strategists – r for reproduction. Their survival strategy is simple: high fertility, and fast growth.
To support that growth, the mangroves have voracious appetites. They are highly consumptive. In fact, pioneers are among the least efficient plants on earth. But they are effective – they do their job: the mangroves create a swamp.
Now, oddly enough, a mangrove SWAMP is not a very friendly place for a mangrove PLANT. As they grow, they build a nest of limbs and leaves that grow, die, and leave debris. The debris builds up to form soil, which strands the mangrove plants high and dry. There they die, atop the very soil they created.
But the mangroves have served their ecological purpose. They lay down a web, an outline – they create homes, niches, secure places where myriad creatures begin to appear. Insects, fish, plants, and the birds we saw along the river that feed on them. These remain even after the mangrove move on.
The mangrove to me is a bit like today’s industrial economy. The pioneer industrial economy exploded across our landscape, consuming resources voraciously, according to the classic r-strategist system: fast growth, high fertility. Economies of scale, to replicate identical products by the billions.
Like the mangrove, industry’s pioneer phase will be short-lived. But if we learn the lesson of the mangrove swamp, we can now harness the fabric laid down by industry, and begin to cultivate a richer, more diverse and resilient human ecosystem as well.
What does this mean for business?
Consider the story of Enron. In one way, it’s like the mangrove.
It’s DEAD.
But actually, ENRON SHOWS WHAT HAPPENS WHEN YOU STAND IN THE WAY OF A VERY POWERFUL NATURAL PRINCIPLE: FEEDBACK AND ADAPTATION.
Enron pioneered the new niche of energy management. It captured this solid business niche, and sales and profits exploded.
Soon, Enron found it wasn’t alone in its niche. Other companies copied its business model, but improved on it, shaving costs.
AT THIS POINT, IF ENRON HAD BEEN OPEN, THEY COULD HAVE AVERTED THE DISASTER OF THEIR LATER COLLAPSE.
INSTEAD, IT MADE A CRITICAL ERROR.
Instead of adapting to its competition, Enron shielded itself from the feedback. It created its now-infamous off-the-books partnerships, and hid its losses there.
That enabled the company to report profits and sales growth EVERY QUARTER.
Investors loved the company’s consistent performance. Never before had a trading company been able to overcome the inevitable ups-and-downs of commodity markets. They voted Enron the BEST MANAGED company on Fortune’s most admired list.
So the deception continued. Quarter after quarter, for five years straight, Enron’s income rose. And so did its share price. At its peak, its market capitalization was over billion – 70 times earnings.
At 70 times earnings, Enron’s stock value gave it plenty of room to cover its off-the-books losses.
Until it stumbled in August 2001. We all know what happened then: The stock price fell, the company collapsed. Within months it was bankrupt, and so were many of its employees.
THE SIZE AND SCOPE OF ENRON’S COLLAPSE – AND THE DEVASTATING IMPACT IT HAD ON THE WHOLE ECONOMY – IS DIRECTLY RELATED TO HOW LONG IT STOOD IN THE WAY OF THE NATURAL PROCESS OF FEEDBACK.
Much of our INDUSTRIAL economy has been operating on an accounting system much like Enron’s. Or Global Crossing. Or Vivendi. Or WorldCom.
BECAUSE WE TOO ARE BLOCKING FEEDBACK. AND WE TOO FACE THE PROSPECT OF A MUCH MORE CATACLYSMIC DECLINE AS A CONSEQUENCE, UNLESS WE CHANGE.
FUNDAMENTALLY, THAT’S BECAUSE WE ARE NOT GETTING FEEDBACK ABOUT HOW QUICKLY WE ARE DEPLETING OUR ECOLOGICAL RESOURCES. WE ARE NOT PAYING THE COST OF CREATING ENERGY.
Think about it: we run our industrial economy on hydrocarbons. But when we buy hydrocarbons, we don’t pay the cost of CREATING them. We just pay the cost of EXTRACTING them, ready made, from the bank.
That’s like valuing our life savings according to the cost of driving to the ATM to withdraw them.
What is the difference between ENRON’S habit of hiding losses in off-the-books subsidiaries, and our ECONOMY-WIDE practice of hiding the loss of NATURAL capital by keeping THOSE off the books?
The IMPACT is the same as with Enron. There’s no feedback.
No feedback, no adaptation. No adaptation, no innovation. We slow our response to change. We make ourselves vulnerable.
From the early 1900s to 1973, every time GDP rose, energy consumption rose too, in an almost fixed amount. The relationship between GNP and energy consumption was so tight that economists called it the IRON LAW of energy and GNP.
The point is: we didn’t think we could adapt. We thought we could not SURVIVE with less energy.
Then came FEEDBACK, in the form of the PRICE SHOCKS and POLITICAL SHOCKS of the 1973 ENERGY CRISIS.
Suddenly, we BROKE the so-called Iron Law. We adapted. In the space of a single generation, we were getting 40% MORE economic value from every unit of energy we used.
Not only that. The energy shock waves helped grow a WHOLE NEW SECTOR. The INFORMATION sector. Information technologies gave us the MEANS to save energy. We didn’t even have to CONSCIOUSLY use information tech to save energy. It happened automatically. It was triggered, by feedback.
And so the information sector grew, so fast that within a generation, it SURPASSED traditional industry as the chief stimulus for growth here.
THE KEY MESSAGE is that, when we DON’T get feedback, we suffer the fate of ENRON. But when we DID get feedback – our success was EXTRAORDINARY. We adapted. Created new industries. Unleashed a whole new sector. Brought the biggest increase in productivity of the century.
Not only was the limit NOT a deterrent to success – IT WAS WHAT TRIGGERED THE SUCCESS. But only because of feedback.
The SAME process happens in the rainforest – only the success is even MORE EXTRAORDINARY, BECAUSE THE PRINCIPLE OF FEEDBACK IS MUCH MORE DEEPLY EMBEDDED.
Remember the mangroves. Pioneers like the mangroves are some of the MOST WASTEFUL species. The mangroves in Costa Rica waste 99% of the sunlight that reaches them. They are only 1% EFFICIENT. So when the energy supply is cut off – when the sunlight is blocked – the plants begin to stagnate and die.
But – even in the places where the mangroves were dying, the FOREST was coming fully alive. As soon as the mangroves fell, they were set upon by DOZENS of varieties of mushrooms, by insects, by bacteria., that tore them apart, into nutrient molecules.
Then, those liberated nutrients were drawn up into the roots of a diverse array of NEW plants just springing up around them. And into the root systems of TREES, which ran along the ground, acting like giant vacuum cleaners, sucking up nutrients, and delivering them to the canopies above, where 90% of the life of a rainforest resides.
That’s because – like Bill Coors said – WASTE IS FOOD. THE GRADUAL DECLINE OF THE MANGROVES PROVIDES FOOD THAT NOURISHES THE GROWTH OF THE WHOLE FOREST.
So, as we floated down the river, if we looked back BEHIND the mangroves, this is what rose up in the distance: miles and miles of rainforest, which NEVER WOULD HAVE COME INTO BEING without the energy crisis that brought an end to the dominance of the pioneers, like the mangroves and others.
THAT rainforest, the one BEYOND the mangroves, had ALL the qualities I talked about before:
- it was DIVERSE – one of the most diverse ecosystems on earth
- it was INTERDEPENDENT –
- it was EFFICIENT –
- and it was INNOVATIVE.
How did all these qualities emerge? How did all these dominos fall?
Fascinating process.
AS FEEDBACK HAPPENS, SPECIES ADAPT. THEY BECOME SPECIALISTS. BECAUSE THERE ARE MORE SPECIALISTS, THE FOREST IS MORE DIVERSE. AND, BECAUSE SPECIALISTS ARE FOCUSED ON A NARROW FUNCTION, EVERY SPECIALIST IS DEPENDENT ON OTHERS. SO THEY BECOME INTERDEPENT. INSTEAD OF COMPETING, THEY COOPERATE.
FOR EXAMPLE, as the mangroves spread, they create between them an array of niches. Each niche is different. One niche, for example, has conditions that invite a particular species of tree. THAT tree provides a home for seven different species of lizard, all of which inhabit a different part of the tree. The droppings from those lizards help fertilize the soil of seed-bearing plants. These provide food for three species of birds, who live side-by-side, one feeding on hard black seeds, another on soft green seeds, the third on insects.
So INTERDEPENDENCE increases. And COOPERATION begins to co-opt competition as the dominant form of relationship in the forest. Species begin to DEPEND on one another for specialized services. We saw Acacia plants, for example, that were also homes for a species of ant, which feed on the sugars from its nectarines, and did the pruning that keep the Acacia healthy.
Thus the rules of survival shift –
From the survival of the fittest – to the survival of all who fit.
The survival of all who have a place, who serve a function, in the forest.
THIS HAS A MAJOR IMPACT ON THE CREATION OF VALUE IN THE FOREST. A FOREST WHICH USED TO BE WASTEFUL – NOW CAN INCREASE ITS EFFICIENCY MANY TIMES OVER.
Simple food CHAINS – like the sunlight-mangrove-insect chain that is just 1% efficient at each level – now fan out into much more complex food WEBS. The 99% of resources once WASTED are now SENT ALONG THE STRANDS OF THAT FOOD WEB. Every species in the rainforest typically network with more than 1,000 other species, to provide food and other services. Each specialist is better than any other at performing the function of its niche. Thus individual efficiencies rise – and the overall efficiency of the web rises even more.
LESSON FOR BUSINESS: INSTEAD OF SUPPLY CHAIN MANAGEMENT – LOOK AT SUPPLY WEBS.
Occasionally, species join together in ways that lead to more than an increase in EFFICIENCY. They produce whole new QUALITIES – different from anything that existed when they were apart.
THAT’S CALLED SYNERGY – BREAKTHROUGH INNOVATION, WHERE SOMETHING COMPLETELY NEW IS CREATED. New species, new qualities, new capacities that come into existence only through these unique combinations.
Unique combinations.
Six years ago, a unique combination of 60 corporate leaders gathered together at the Rocky Mountain Institute near Aspen, Colorado, to discuss how we could create more innovative, adaptive, sustainable companies.
From that meeting emerged the Future 500, to develop tools based on feedback and adaptation, to improve the adaptability and sustainability of BUSINESS.
Interestingly, LONG BEFORE today’s scandals at Enron and WorldCom, we called our tools ACCOUNTABILITY tools. Because accountability is how companies get feedback.
Accountability is not a penalty, and it’s not just self-discipline. It’s enlightened self-interest. So enlightened thinkers from Coca-Cola, Coors, Deloitte & Touche, ERM, H-P, Mitsubishi, Nike, Pitney Bowes, and WSP helped us develop or apply the tools.
We all agreed that the tools had to capture feedback NOT just from shareholders, but from ALL FIVE of a company’s core stakeholders: shareholders, employees, community, marketplace, and environment.
We also agreed that we needed to work together – AND WITH SUPPLIERS AND CUSTOMERS THROUGHOUT OUR SUPPLY WEB – to accomplish objectives we couldn’t achieve on our own.
For example, often it was IMPOSSIBLE for us to change things in our OWN industries. Unless our competitors changed too, it might put us at a competitive disadvantage.
But paradoxically, we COULD change EACH OTHER’S industries IN OUR WEB.
Example: the timber market. Greenpeace had been battling Canadian timber companies for years, trying to force them to stop harvesting old growth trees. But the market wouldn’t let them.
Mitsubishi Electric simply declared that it would NOT BUY any timber product with old growth content. It used its position not as a MANUFACTURER but as a CUSTOMER, to drive change.
Soon, 400 other companies followed their lead. The market began to shift.
Then, the largest Canadian timber company, MacMillan Bloedel, came to us. They said that now that the market was shifting, THEY wanted to gain advantage.
And so we developed a tool – we call it a CAP SCAN – to identify and plan to capture profit opportunities in sustainability.
Soon, M-B became the first Canadian timber company to agree to PHASE OUT old growth in five years. Almost immediately, its COMPETITORS began to fall in line behind them.
Four million acres of forest have been saved so far.
Since that time, we have applied the CAP SCAN at Procter & Gamble, Maytag, and other companies to create value sustainably.
But the most TIMELY tool – the one I want to emphasize most today – is called the CAP AUDIT.
THE CAP AUDIT BEGINS THE PROCESS THAT HELPS TRANSFORM MACHINELIKE COMPANIES INTO LIVING COMPANIES – RICH, DIVERSE, EFFICIENT, COOPERATIVE, AND CREATIVE.
What drove the development of the CAP Audit was that our member companies were confused by the ARRAY of demands made by ALL their stakeholders.
THEY WERE RECEIVING AN OVERLOAD OF FEEDBACK SIGNALS – AND HAD NO WAY TO LISTEN TO THEM ALL.
You’ve heard of the Domini Social Index, Dow Jones Sustainability Index, Malcolm Baldridge Award, Working Assets criteria, Global Reporting Initiative, Accountability 8000 etc.
Companies like Mitsubishi, Nike, Coke and others needed a COMPREHENSIVE way to MANAGE THIS FEEDBACK, TO see how they scored against ALL these criteria.
The CAP Audit consolidates 14 assessments into ONE TOOL – a 170-point assessment that gives them a grade – from A to F – on all of these OTHER indices, and makes it easy to decide how to improve performance.
The CAP Audit is also ADAPTIVE. For example, because of Enron, Andersen, and WorldCom, it has the new GOVERNANCE and ACCOUNTING standards, from the New York Stock Exchange, NASDAQ,and Goldman Sachs.
Now, in the face of the corporate-accountability-scandals of the week, it is time for every major company to perform independent, third party audits, to give confidence to their INVESTORS, the media, and ALL stakeholders that they are living up to the highest standards of accountability.
Again, it’s not just theory. Accountability generates feedback. Feedback drives adaptation. Adaptation solves problems – early on, before they build into explosive forms.
In the aftermath of September 11, that ought to be of compelling interest to us.
Today, the richest 20% of the world consumes 80% of its resources. Within 50 years, the U.N. estimates that today’s rich will be no more numerous than now. But today’s poor will have virtually doubled in number.
How in the year 2050 can we provide 9 BILLION people with a quality of life enjoyed by just ONE BILLION today?
We’re not going to do it with a 98 or 99% wasteful, mangrove-style economy.
But growing a truly CREATIVE economy will take more than political or technological change.
Fundamentally, it requires a change in BELIEF SYSTEMS. A change in the way we THINK about value.
The materialist belief system – the idea that everything of value comes from material consumption – is deeply planted inside us. It is even hidden in our language.
When something is important, we say it “matters.”
When something is significant, it is “substantive.”
Even when we talk about people in our economy, we use the generic term “consumers.”
When we think of ourselves as consumers, we wonder how we can DIMINISH ourselves on the earth, have LESS of an impact, leave LESS of a mark.
But when we think of ourselves as CREATORS, we wonder how we can create something of lasting value – how we can innovate, improve.
When we awaken from our own MACHINE self-concept – the idea that we are consumers – and see OURSELVES as creative living systems, we will have moved beyond the old economy, and taken our biggest step toward sustainability. The rest is just implementation.
But we have just begun. THE MISSION OF BUSINESS today – is to awaken fully from the MACHINE model, and to become a LIVING part of a rainforest economy that nourishes a rich array of diverse cultures, peoples, and values, one enriched by this diversity and complexity.
What we learned from the rainforest is easy to understand. As our chairman Tachi Kiuchi says, we can use less, and have more. Consume less, and be more. It is the ONLY way. For the interests of business, and the interests of environment, are not incompatible. They are east and west, north and south, Islam and Christendom, nature and nurture, economy and ecology, mind and spirit -- two halves.
Only together can we make the world whole.
