Green swans and the new economic order: an Earth Day conversation with John Elkington

ImpactAlpha Editor

Amy Cortese

ImpactAlpha, April 23 – Whether or not the COVID-19 crisis qualifies as a ‘black swan’ – global pandemics have been widely predicted for years – it is the kind of highly disruptive event that can enable radically new solutions and systems to emerge. Such ‘green swans’ can “deliver exponential progress in the form of economic, social and environmental wealth creation,” writes Volans’ John Elkington in his new book, “Green Swans: The Coming Boom in Regenerative Capitalism.”

The COVID-19 pandemic “will catalyze extraordinary shifts in the structure of our economy and the nature of the technologies that are used,” Elkington told ImpactAlpha in a wide-ranging interview. As we head into the depths of a historic “U-bend,” well beyond a single, normal recession, he says, these green swans are harbingers of “radically better times to come.” 

Elkington is a pioneer in the corporate sustainability movement, cofounding Environmental Data Services in 1978 and SustainAbility in 1987. He coined the term “triple bottom line” in 1994 – and then sought to “recall” it two years ago  because he thinks it lets CEOs off too easy. After 30 years of consulting to corporations, Elkington is convinced that real systemic change cannot happen without government and financial leadership on a global scale – especially to meet the looming threat of global warming. 

ImpactAlpha’s Amy Cortese spoke to Elkington from his home in London about green swans and the coming disruption that could accelerate the move to a more regenerative form of capitalism. Here is a lightly edited excerpt.

ImpactAlpha: What is the big idea behind your book?

John Elkington: For some years now we’ve been talking about the imminence of a series of different types of breakdowns – things like the climate emergency and everything that goes with that. When you get these systemic crises, after a period of time where things fall apart you get new solutions coming through. It’s as if the old economic order needs to begin to die before the new one can scramble through and find its feet. 

A few years ago we began talking about the coming “U-bend.” As that old order comes apart – it’s partly a set of technologies, many based on fossil fuels, as well as global governance and the Bretton Woods institutions – people become increasingly anxious, frightened and often angry. Our assumption is that we’re headed into that period. And these things do not clear in six months or 2 years. They very often take 12 to 15 years to work their way through, if you’re lucky. 

But, the good story is, you’ve got a range of exponentially positive solutions beginning to emerge. We’re moving into an exponential era where bad things go exponential and good things are going to have to go exponentially in the right direction as well. 

ImpactAlpha: What is the role of business in getting things moving in the right direction?

Elkington: The problem is, most of the sustainability industry I helped pioneer is focused on incremental programs, in the belief that if companies do a bit more of the good stuff [that will suffice]. The Business Roundtable statement – 180-plus CEOs signing off on a shift from shareholder to stakeholder capitalism – well, that’s wonderful, but what do they mean by it? Almost all the work that’s been done around CSR, sustainability, triple bottom line, shared value and so on is framed as a responsibility agenda. What we’re seeing now is that effort failing to properly address the nature and the scale of the climate emergency and now the pandemic emergency. 

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We’re hearing people talk much more intently now about resilience – why did we fail to ensure resilience? You can’t have long-term economic, social, environmental, or political resilience without regenerating the systems upon which that resilience depends. We’ve got to rebuild our economies, our societies and communities, we got to regenerate natural systems and the biosphere. Unless we properly embrace the regenerative change agenda, most of what is said and promised and delivered is misdirected. It’s not going to move the needle. 

Companies cannot do all of this on their own. After thirty-some years working with companies and feeling like we have to change them, I think it’s now much more a challenge of getting to the governments and getting to the financial markets and getting them to do the right thing. 

ImpactAlpha: Are you optimistic that governments will use this moment to step up? And what is the role of the financial industry? At ImpactAlpha we’ve been beating the drum that this thing needs to expand by 10x or 100x to have an impact… 

Elkington: It’s true. There are moments where digitization impacts a particular sector of industry and that sort of exponential evolution is possible. But for most people in incumbent industries, it’s difficult to get on that sort of trajectory. It’s not impossible. If you look, for example, at the automotive sector, at Elon Musk and Tesla. I worked for many years with Ford Motor Co. and we talked about electric vehicles – now suddenly that’s a reality. Disruption will hit virtually every aspect of the global economy.

In many ways the COVID-19 pandemic will catalyze some really extraordinary shifts in the structure of our economy and the nature of the technologies that are used. 

You asked me if I was optimistic. I don’t think people like me could do what we do without that belief in the improvability of people and the systems they create. We can do this, but one of the problems we face with a pandemic like COVID-19 is that people go on the defensive. One of the characteristics of U-bends and those periods in history is that you get populism. If you go back to the last major U-bend, which was in the late 1920s through the 30s, you had Mussolini, Hitler, populists. And here we are again. 

In the next 15 – 20 years I am massively optimistic. Whether or not we intended it or we yet see it, that older economic order is coming apart at the seams. That creates chaos, immense pain, and political detours, but over time it creates the market conditions and opportunities where very different types of ventures can come through. Elon Musk is one of these early pioneers of a very very different way of thinking about global challenges. 

ImpactAlpha: What are some examples of green swans that may emerge out of this? 

Elkington: As a potential green swan, impact investment is an intriguing phenomenon and it’s been building momentum over a period of time. I like what people such as the Impact Management Project have been doing to get the operating system simplified and agreed upon. But despite what you see with Larry Fink and BlackRock, despite what you see with some of the major institutions now talking about the need for some of this stuff to happen, the gap between where we are and need to be is vast.

Most people thinking about their pensions are not remotely thinking about that. That’s another malign trend: the aging trend. I’m a Boomer, I turned 70 last year. What happens to people as they get older is that they get more conservative in their investment policies and anxious about the state of the world. They’re going for shorter-term returns. That’s a potential brake on some of the very high risk investments we need to take. A lot of people are looking at younger people to sort this out, but this is a pan-generational project. Older people have to be part of it. They have the accumulated wealth, many of them, they have the willingness to vote and they have connections, networks and influence. 

ImpactAlpha: Other green swans?

Elkington: Renewables and battery technology and the downward trajectories of pricing is another.

For me, artificial intelligence in the right hands would be a green swan of immense power. Done the wrong way, it would be a screaming nightmare. I could say the same thing about synthetic biology, autonomous vehicles, the Internet of Everything – all of these things used in the right way with proper government regulation, with responsible engagement by business leaders and the right sort of investors – by God, we could achieve so much in relatively short order. But that’s not how the human brain works and certainly not how competitive markets typically work. That’s why I keep coming back to government. 

One of the characteristics of black swans is that we often find ourselves going in those malign directions without actually having planned to do so, it’s an unintended consequence. The thing about green swans is you really have to work on something for quite some time. It takes immense political will. 

Imagine 2 million to 3 million American truckers taken out by autonomous trucks. And factor into that farming communities being eviscerated over the next couple of decades by precision fermentation and synthetic meat.

As a vegetarian for 40 years, I think the synthetic meats, milk eggs and so on are green swans in the making, but the political consequences are huge. With green swans, even if we get on the right direction with the right sort of solutions, the shockwaves will be very considerable indeed

ImpactAlpha: Will the current collapse in oil prices accelerate things? 

Elkington: This isn’t peak oil. There’s still a lot of production there, potentially. But it will unsettle the industry and rattle people’s complacency. You already have major oil companies such as BP and now Shell talking about net-zero greenhouse emissions by 2050. You put all of these things together and shake them up and you’ve got a very different cocktail of consequences and priorities coming up. 

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The one wrinkle in this that I’m seriously concerned about is, in these periods of our history, the bigger, better funded companies tend to buy out the smaller, distressed ones. When you think about impact alpha and the way in which the economy does shift on its axis over time, it’s typically through smaller ventures which have a much higher appetite for risk. If we start to get the oil majors buying up many of the renewable companies –  I don’t know if that will happen – but that consolidation dynamic in capitalistic societies is something that you’ve got to not just  watch but do the trust-busting. 

ImpactAlpha: And we already have a great concentration of power and wealth. 

Elkington: Every time you have one of these periods of intense disruption, you also have radical wealth accumulation. You go back to Carnegie, Rockefeller, etc. back in the day. You’ve got to have political engagement to break that down and distribute again, and that is so far beyond the imagination of most political leaders today. 

You have people like Alexandria Ocasio-Cortez talking about green new deals. In the European Union we now have the $1 trillion green deal. We’re in one of those periods where governments will have to step up and signal that they’re committed to delivering a radically better society – at a moment when the populism trends in so many countries are corroding our ability to develop that sort of political critical mass. But I think it will come. It has to. 

ImpactAlpha: The coronavirus itself was predictable – and predicted – but not necessarily all of its consequences. What lessons do you take from that? 

Elkington: It was very clear to quite a number of people that pandemic risk was a No. 1 priority, yet as a collective we keep dropping the ball. We need that global level response to these sorts of challenges, whether pandemics or climate. I think we’ll get into more difficult and challenging circumstances before we’re forced to rebuild global governance mechanisms in the spirit of the 21st century. 

I look back at the Bretton Woods agreements – that took the Second World War to get political leaders to a point where they were prepared to sacrifice sovereignty in order to create the ground rules of a new system. I don’t know if it’s even possible again. But it is that level of system change that we’ll need if we’re really going to sustain ourselves for the rest of the century. 

The next 10 to 15 years are going to be by far the most exciting, challenging and dangerous years. But I’m really excited. Now suddenly stuff we’ve been talking about for years is increasingly evident to people, and we’ve all got to come out of our bunkers and silos and learn how to work together in very different ways. 

Winston Churchill said extraordinary times create extraordinary leaders, and I think in the next 10 to 15 years the world will be predominantly led by people we’ve never heard of now. You look at the countries that have done well with the COVID crisis and they’re largely run by women. We’ve talked until we’re blue in the face about the need to have more women in senior roles, I’d be very surprised if we don’t see a sea change, because women will be demonstrably better at coping with this new world of ours.