Rewiring our economic system needs new "plus" not just new costs
Many agree that we need a fundamental rethink of our economic system. But what do we actually mean? Some thinking out loud
A lot of the debate is focused on input cost. The cost of things that are ignored by (every) economic system. This lovely diagram courtesy of Commonland is great at pointing out the uncounted costs.
But this is only one side of the equation - the cost side.
What about the "plus" side - the revenue and wealth creation? The problem with the current "plus" side is that is unmoored from planetary constraints - it's all about pulling ever more stuff out of the ground and "adding" value to it.
The language of "raw materials" reflects this idea. We take something that has (within the logic of the system) no value and add value to it through an industrial process. But in reality that "raw" material is not some kind of valueless blob - it comes from a place and an environment and a community that really matter. (Wine gets this, cheese gets this, clothing doesn't get this).
This extractive unconstrained mechanism is the same for technology - the energy and the metals that power the tech have to come from somewhere. AI is hoovering up both to an extent that in the US we'll need 7X the energy of NYC every year just to power the data centres. That's bad news.
Unfettered volume growth is an unsustainable output. So how do we grow bottom lines whilst producing (extracting) a lot less?
Monetising intangible value requires a combination of brand and sustainability strategy*
Here are some ideas for a value system - a new kind of plus - that can create financial value that is absolutely not dependent on infinite volume growth.
A new value system will - and should - be a combination of hard measurable science-y tangible things and slippery hard to measure heart warming things.
Head and heart.
And that's why the practice of value creation is where the two worlds of brand and sustainability come together.
When worlds collide
I'm fascinated by what happens when different worlds collide. Berlin in the 80s, Cyprus, the commercialisation of public services, the attempted purpose-ification of out-and-out commercial enterprises.
The way in which these worlds come together matters. The outcome can be a lot of destruction or a lot of good.
The work we have been doing in landscape restoration has given us an unfiltered view of the impact industrialised business has on our natural environment. We humans have extended industrial thinking and practice into landscapes with devastating effect.
We industrialised the landscape. But what makes industry tick - doing one thing repetitively at massive scale and minimal cost - is the opposite of what makes environments healthy - diversity and adaptability and symbiotic growth.
I'm struck by how similar the science-y world of environment and nature is to the techno-industrial world of business. It's all about metrics. And occasionally business and nature science come together in a metrics-fest, which is why there is so much enthusiasm around Nature-tech.
But what business metrics have never been good at capturing is intangible value - the value that comes from connection, the magic that comes from impossible-to-measure stuff like beauty and soul. The stuff that actually matters. The stuff that brand strategists get (and 'business management consultants' don't).
And equally what nature science misses - to its detriment - is the simplicity and value of the story of a place. Soil samples, satellite sensing, e-dna, NDVI etc might shed a lot of light on the health of a place but they won't build connection in the same way a story will. Telling the story of a regenerating place through the lens of the wildlife or the community that live there forges a powerful connection.
The three pillars of a redefined value system
Taking this notion of head and heart helps to point towards how our intuitive, instinctive sense of value might be extended into a revised economic system.
We've been working on Mongolian rangelands (nomadic herders earning a living from animal fibres - cashmere (mostly)). Starting from that landscape perspective uncovers all sorts of opportunities for business to become regenerative. (Normally - and problematically - business only looks at natural environments through the lens of their own supply chains. It's hard to understate how impoverishing (in every sense) this practice is).
Landscapes are rich places. There is value in nature, in origin and in the connection between 'buyer' and the regenerating place. Each of these three are related but also different. There's more depth on each of them in other articles but for now the is focus is on how they might work to generate economic value.
Nature
Asset: land stewardship - delivering on various aspects of nature uplift.
Value mechanism: put nature uplift on the balance sheet. Treat it as a wealth creating activity. Fostering biodiversity and biomass, improving soil health etc. The indicators will vary by landscape (you can't standardise nature) but the class of "nature uplift" will become wealth creation.
We could also bring in some kind of biodiversity or carbon products - but we think both need further development (and offsetting is not OK for us - offsetting isn't committing - and we need commitment).
Origin
Asset: the story.
The story of the community, the story of the place, the story of the wildlife, the story of the living system.
Mechanism: origin value reflected in commercial terms. Pricing for sure but crucially long term commitment. The value is created in and for the landscape.
Brands commit to the landscape. Brands get attribution rights to the story of the landscape. There is further potential for story telling businesses (streamers) to co-invest in the right to the story (nature docos etc).
Stories are powerful. The people living in these communities are in the front line of the climate and biodiversity crises. Their stories really matter.
Identity
Asset: kudos
Mechanism: product sales; investment ROI. The value is created at the product brand level.
Being associated with a demonstrably regenerating landscape with a ton of story value is something businesses increasingly want. The attribution rights to that association can only come through commitment, but those rights are worth a lot in the corporate stories they deliver. These associations amount to a tangible (re)connection between business and planet.
Individuals also love that connection back to natural landscapes and get not just inner satisfaction from it but also reputation uplift. Being able to 'show off' about your connection to places is worthwhile. This could extend to Patreon style adoption of landscapes that enables privileged access to the stories and the place (kind of like exclusive eco tourism but done virtually and without the airmiles).
What it all adds up to
These value levers are clearly interrelated. Developing financial mechanisms around them is work we are now embarking on. There are numerous exciting opportunities:
commercial organisations with a direct interest in the health of the landscape can invest into it (through bonds for example)
land stewards are recognised as wealth creators (until now they only get paid when they extract)
areas full of nature (e.g. much of Africa) will be able to put a $ number on their natural wealth
In total what this larger concept of value adds up to is the opposite of an over optimised industrial process focused only on taking raw materials and churning out product.
This is Regenerative Value
Value that goes beyond the narrow metrics of volume, efficiency and scale. Value that recognises financially the instinctive sense of value that has no place in the current system.
Distinct and different from the industrial model - but no less powerful.
Regenerative is not about sourcing, it's a fundamental shift in strategy.
Less stuff. More prosperity..
Diversity of activity. Diversity of income. Diversity of value creation. (Compare and contrast with industrial scale)
Fundamentally collaborative. Collaborative investment organisations for landscapes. Multiple supply chain owners have a shared interest in the health of the ecological system on which they depend. Collaboration is essential for success.
Picking up where Hickel gets to in the first part of his book, this is a shift away from a system built on taking, and a shift towards a system built on co-operation and replenishment. Crucially it is a system that generates prosperity without extraction.
There is a long way to go in developing all these concepts. But we are now finding the right collaborators and experts to help us build working demonstrations of how this works.
The path is created by walking it. Come for a walk.
*plus some super smart non-orthodox financial and economics brains
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