Co-creating a New Economic Mainstream

In whatever we do, each of us can contribute to co-create a New Economic Mainstream in which companies and economies are successful because they support the health of all interconnected systems of life – nature and the climate, people and societies.

© Simone TramonteAnything short of such ‘a new normal’ will not be enough. The WHY gets clearer by the day. We experience the world’s challenges in our own lives and on media screens, in our organizations and throughout our supply ‘chains’ – which de facto are highly interactive, global supply ecosystems. Our fundamental interconnectedness is not a nice philosophy but a fact that as we describe further down also business leaders can’t ignore.

Great Opportunity for Those Who Lead
The HOW is challenging yet full of opportunity for those who lead. It takes vision and a lot of pragmatic transitions. Fundamental change in companies and farms, economies and societies is not easy. Yet we can do this – again. We underwent fundamental transformations in the industrial and the digital revolutions. These large scale transformations were unthinkable before they became undeniable and the new normal.

Now we find ourselves in the next (r)evolution in which Regenerative Value Creation that serves all stakeholders is the new DNA. Call it what you wish as long as it fully integrates business success and regional economic development with the regeneration of people and the planet.

Sustainable Solutions & Business Success
In this image Kristinn Haflidason, CEO of Algaennovation, monitors one of their photobioreactors in the micro-algae production facility, at ON’s Geothermal Park in Hellisheidi. 

Iceland has successfully transformed its economy. In a span of a few decades, the country moved away from fossil fuels and shifted to 100% electricity production from renewable sources. This transition nurtured an ecosystem of innovation, creativity and entrepreneurship that generated new ways to make business with minimal impact on the environment. Algaennovation proprietary technology for micro-algae cultivation enables to have negative carbon footprints and use less than 1% of freshwater and land areas used by conventional small-scale algae companies. The plant uses water and electricity from the nearby Hellisheidi geothermal power plant and exploits carbon dioxide emissions in a process that turns waste to value in a sustainable manner.”

NOW's Walter Link and Merijn Dols speak at COP27 about the potential for a new economic mainstream. © Renske van GrinsvenThe good news is that it works already: Around the world, companies and farms of all sizes already base their economic success on sustainable solutions that can be adapted and scaled. They demonstrate across industries and sectors, geographies and cultures that a regenerative economy is not only possible but already the basis for concrete success in real markets.

These developments are accelerating because they are increasingly supported by all stakeholders. Clients along the whole value chain are asking for more sustainable products. Government regulations and market trends drive rapid growth in ESG and Impact investments. Bankers and insurers want to de-risk and charge more for less sustainable behavior. And according to a study by BCG, millennials have a 300% preference to work for companies they consider to be more sustainable.

Natura, Unilever, SAP
Natura became one of the world’s five largest beauty groups because it is committed to Regenerative Value Creation since its inspired beginnings as a small start up in the Global South. It constantly focused on creating value for all stakeholders, including shareholders and society, nature and indigenous populations. This generated so much profit that Natura could buy companies like The Body Shop and Avon that were failing because they had lost some of their earlier Regenerative Value Creation capacity. Of course, it’s not an easy path. But it has already been working for decades. And it can inspire and inform those of us who want to succeed within the new economic mainstream.

Unilever is another example of a global conglomerate that survived and thrived because of its shift to more sustainability. It overcame a hostile takeover attempt by Kraft Heinz because of smart leadership and Regenerative Value Creation-based outperformance in the market. Its ongoing success is also based on the preferences of younger generations that are reflected in what they buy and where they want to work. Unilever receives over 2 million job applications a year. Given the global shortage of highly motivated and qualified talent this gives Unilever a clear competitive advantage.

The CFO of high tech leader SAP that has become the most valuable company on the German stock exchange shared in the Financial Times that when SAP’s culture index increases by 1%, its profitability rises by 60 million Euros. The increasing importance of quality of life that includes diversity and the sustainability of nature and the climate is also reflected in the fact that the S&P Sustainability Index is outperforming the general S&P investment index. Research also demonstrates what is already obvious to many: Greater inclusion of women into leadership positions and more diverse teams increase innovation and productivity and therefore business performance.

Done right, regenerative agriculture outperforms the current mainstream of chemical agriculture in all regards whether it is being implemented at very large or very small scale. It’s a perfect example of Regenerative Value Creation that serves all stakeholders. Because it is more productive than conventional agriculture, it increases food security and the income of farmers and local economies. It regenerates the soil and water, biodiversity and the climate, the health of farmers and consumers.

How long will business as usual still be profitable?
Of course, business as usual still works. Many companies that are not yet aligned with regeneration are still very profitable. Because of the Ukraine war and other supply chain disruptions, coal was the most successful investment in 2022. Yet the high cost and the increasing recognition of the negative climate and health impacts of carbon energy are accelerating the expansion of renewable energy and efficiency solutions.

It is no accident that the sovereign wealth funds of oil producing countries from Norway to Abu Dhabi are already among the biggest investors in renewable energy. They should also become the large investors in regenerative agriculture and reforestation because so far, these are the only proven large-scale opportunities to sequester massive amounts of carbon and therefore contribute to carbon neutrality.

We live in a time between economic paradigms, in which the mainstream is only gradually moving towards Regenerative Value Creation. Real change is never easy. Many who call for change underestimate the challenges of transitioning from one success model to the next. Yet the question leaders have to ask themselves is for how long business models that contradict the necessary economy can be successful?

Bayer, a global blue chip chemical company that was part of many mainstream investment portfolios discovered this the hard way when their now retiring CEO bought Monsanto for 64 billion dollars. The intention was to create a global powerhouse of chemistry- and GMO-based agriculture. However, not only environmentalists but also US courts evaluate Monsanto’s impact as being harmful for people and the planet. Subsequently, global financial markets caused Bayer’s and Monsanto’s combined value to plummet below Monsanto’s purchase price, causing the largest destruction of shareholder value in the history of the German stock exchange. It’s a wake up call for the innovative engineers and business leaders who are at the heart of such companies.

Sooner or later this will happen to all companies that miss this metatrend towards Regenerative Value Creation. Such necessary trends don’t stop because we don’t see them and thus fail to act. Humans want to live. We have proven again and again that we are very good at surviving and thriving. For this we need many other species and climate balance, healthy environments and thriving societies. Eventually, we will do whatever is necessary to achieve that. Because evolution never stops even as it is hard to understand why it takes such painful detours.

We need to support the emergence of this necessary economic mainstream that is already successful across industries and around the world. We bring together those who have led this transformation for decades with those who still grapple to understand and implement it. Our focus is not on the past but on what we can do today and tomorrow to transition our own organizations and the overall economy that in one way or the other we all co-create.

Merijn Dols
Managing Partner, NOW. Former Head of Open Innovation and Circularity at Danone. Advisory board member, Ellen MacArthur Foundation and Future Food Institute. Regenerative Economy Fellow at Natural Capitalism Solutions. Facilitates the paradigmatic shift to a regenerative future that reconnects Economy and Ecology. Circular Economy scholar and lecturer.

Wirtschaft | Lieferkette & Produktion, 10.08.2023
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