A SIMPLE INSIGHT INTO WHY BUSINESSES MUST CHANGE THEIR PHILOSOPHY OF PRODUCTS AND SERVICES

Sustainable Future Summit November 2019 – Brussels

Last week, I was in Brussels for a very interesting and inspiring Sustainable Future Summit 2019 organised Politico.

The summit brought together policymakers, business leaders, entrepreneurs, investors, researchers and consumers to debate the hunt for sustainable growth.

There were many interesting discussions and debates about the urgency of the climate emergency and how to make economic changes without leaving people behind.

A key take-away for me was a simple insight and a philosophy which Janez Potočnik, co-chair of the UN International Resource Panel, shared with the audience.

Mr Potočnik spoke about a wealth inclusive index, which goes beyond the single GDP wealth index, that we have today.  He proposed to measure three things, namely productive capital (synonym for GDP) and human capital, as well as natural capital.

These indicators can better reflect actual progress being made in the world. By way of example, during the past 20 years the productive capital of the world has increased 100-fold whereas the social capital only by 8-fold, but sadly the natural capital has decreased by 40-fold.

This shows how our generation has seriously indebted future generations.  It also shows that Productive capital is over-valued and over rewarded; that human capital is under-valued and under rewarded and that natural capital to a large extent is not valued or rewarded at all.  In other words the society in which we live today is socialising the costs and privatising the capital.

These issues need to be addressed.  The fundamentals are wrong.  The Incentives are not right.  The compass that we have set ourselves is clearly wrong.

Mr Potočnik went on to say that the challenge we have to get out of this bleak reality is that consumers and producers don’t want to pay more than they do currently.  However, this thinking is flawed.  The social and environmental costs are already present today, but someone else is paying for them.  Often it is the health system and silent future generations that pay.

The true meaning behind the SDGs is to provide an inter-generational contract to safeguard the future of society, the environment and production.

Mr Potočnik did also offer a solution, or rather a change in philosophy and a shift in the way we view products and services. He gave the example of light bulbs.  He argued that humans don’t need light bulbs per se, rather humans need light.  Similarly he argued that humans don’t need cars, they need mobility.  Nor do they need a refrigerator, but rather they need cool and fresh food; they don’t need pesticides, they need to protect plants. And the list goes on.

Whereas today we care about profits and the future of companies and the well-being of the consumers, we need a system change that also values resources and environmental footprint.

When a company produces and sells light bulbs to consumers, the consumer has the problem of deciding which one to buy, how to use it and how to dispose of it. The producer on the other hand is incentivised to sell as many light bulbs as possible, as he is making profit on quantities. In today’s world the producer is not incentivised to care about the environment or resources.

If tomorrow the consumer can pay for a year of light at the same cost as he pays for light bulbs today, he will be happy.  The producer on the other hand will be selling light, not light bulbs and the number of light bulbs he uses to provide light would be at his cost.   Therefore, he would be incentivised to use fewer light bulbs.

Products under this model would look and be designed differently, because the owner of materials would remain their owner at their end of life.  Therefore, producers would be incentivised and would care which resources are used and how they can be recycled. 

This is the systems change that the world needs.  This is a system which saves resources, environmental footprint, as well as cares about economic interest of the Company and the wellbeing of the consumer. 

This philosophy is applicable to all products across all industries. I thought Mr Potočnik message was very clear and easy to understand, with great examples of how we need to collectively start to view how we provide products and services to consumers and how we need to make business more sustainable.  A very inspiring day leaving me feeling a sense of urgency, but also a sense of opportunity.

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