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Key Events
 

Business for the Environment Global Summit

GBS Bindra, Global Innovation Director, Logica, chaired the session - “Leading the way – Innovating new business models for a changing world” – that had distinguished presenters and panellists. This an extract of the Chair’s notes for/from the B4E summit that was held at Paris from 22-23 April 2009. Key Events


Over the millenniums, mankind has looked towards nature for their needs, be it for food, shelter or clothing. In the very initial phases it meant hunting for food, using wood for making houses and using the hide of hunted animals for clothing. As we evolved and fire was discovered and wheels were invented, more wood was used to fuel the fire and other metals were consumed to make the tools by melting them. With the advancement of mankind’s intelligence and corresponding comforts, we have seen various inventions like steam, electricity, transport, gasoline etc. leading to more and more contraptions being developed for use in our daily lives. All of these have one common factor – dependence on nature, rather usage of natural resources in the belief that there will be a never ending supply of these resources.

Alas, that is not the case. Natural resources are limited and the tap will dry one day. Be it the vast amount of forests that we have cut down for making our paper, or the coal that we have mined to fuel our power plants, or the iron ore that we have extracted to construct our magnificent structures, or the petroleum that we have drilled to power our vehicles, ships and planes; all have a limited life span. We may feel secure when we read that coal reserves of the world will exist for the next 140 years but while 140 years may be twice an individual’s average life span it is but nothing more than a speck in the overall measure of time. Our dependency on natural resources for our needs have their causes as well as effects on our lives and that of our future generations.

Current consumption based models

Almost all of the current economic models revolve around consumption and production. The underlying assumption in all of these is that the resources needed for producing various goods is available perennially while that is not the case. The models focus on price, volumes, production rates and inventories but not on the limited resources available. All participants in the discussion agreed that the subject of economics which was created around unlimited resources needs to be revisited now, as resources in the planet are indeed limited.

The current mindset where human beings are seen as consumers should change and consumption in general should not be a sign of progress and must be replaced with another set of measures. There is a need to move from current consumption (and by extension, ownership) based models to usage based models. The subject of economics which was created around unlimited resources needs to be revisited now, as resources in the planet are indeed limited.

The carbonisation conundrum

Currently more than half of the world’s population survives on an income of 2–3 dollars which is less than the price of a cup of Espresso in the developed world. This set of people has to acquire their food, shelter, clothing and medicines within this earning. They live very frugal lives and hardly contribute anything to the carbon content of the world. In the developed world, there are lots of industries that produce various products which make our lives comfortable. The plants and factories that produce the goods are highly hydrocarbon dependent, inefficient in terms of control of carbon emissions and the products they produce are not designed to leave a lower carbon footprint.

There is a certain standard and comfort in lifestyle in the developed world which the developing world aspires for and they cannot be denied this. However one thing is certain. If the 4 billion plus people in the developing world adopt the same methods and models adopted by the developed world to become ‘developed’, it will be catastrophic for the planet. There is an urgent need to invent and evolve methods and technology that leave a far less carbon footprint in its wake.

The developed world meanwhile chugs along with very little concern. Imagine if in a fully developed world, all humankind were to become equal consumers of carbon at levels currently existing in the developed world. There is a need also to change people’s mindset in the developed world at all levels – investors, businesses, governments, policy makers and the people at large. There should be a sustained effort to recognise and reward lesser carbon footprint by everyone. In other words, it should cost less to be ‘green’ than not to be.

Non-inclusive growth

Till the first half of the past century, most parts of the current developing world were colonised by the developed world. These developing countries served as no more than places where vast amounts of natural resources can be drawn upon by the developed countries for their growth. With the achieving of independence for most of these countries, they started receiving a monetary benefit for the natural resources they exported. However, this perceived monetary benefit is miniscule compared to what they missed out due to the exclusivity of growth in the various phases of development.

A whole lot of the population had missed out for most part the various phases of development namely:

  • The advent of steam powered equipments and vehicles from the sixteenth to eighteenth centuries.
  • The advent of electricity powered equipments and vehicles for the past one and a half century. Still, vast swathes of populace do not have supply of electricity for their use.
  • The use of petroleum for development activities and to transport people and goods. The benefits of the diesel or petrol engine are still very limited in the developing world.

While with the globalisation of business, the situation is definitely changing, the point I wish to emphasise is that during the various phases of growth, the producers and consumers remained the same set of population that today constitute the developed world. This is changing now and businesses across the world have turned their attention to the potential that exists in the developing world. The catch is they have to re-engineer the goods they produced. Instead of gasoline guzzling vehicles, better alternatives need to be designed; instead of coal powered plants to generate electricity, more cleaner ways need to be invented; recycling of papers, cartons and other material have to be taken up in a large way. The developed world cannot afford to ignore the developing world and should take them along in this phase of ‘green’ growth that we are likely to witness over the next few decades.

What are the solutions?

There were various solutions that were put forward by the participants.

  • In a resource constrained economy, price and volume should not be the only objectives of business and there is a need for a new set of objectives. There is a need to educate the investment community about this and make them accept this.
  • The current mindset where human beings are seen as consumers and consumption is seen as a sign of progress should change, and progress indicators should be measured differently.
  • There is a need to move from the ownership based models to usage based ones.
  • The subject of economics which was created around unlimited resources needs to be revisited now, as resources in the planet are indeed limited.
  • All new business models need to sustain the standard of life in the developed world while maximising prosperity in the developing world. The developing world cannot be left out of the next phase of growth which will be driven by sustainable technologies.

In order to facilitate the above there are a lot of changes that need to happen in the way we do business. Governments should make it attractive to businesses and individuals by passing on incentives. Policies of governance should reward compliance rather than penalise non-compliance. There should be something for an individual or a business to produce, sell, use or buy a product or service that has a lesser carbon footprint. In short, as John Doerr, the American venture capitalist who invests in various sustainable businesses says, "It has to cost less to be green than not to be green, and the only way to do that is with a cap on carbon."