Green Swans: The Coming Boom In Regenerative Capitalism

PRAISE FOR

GREEN SWANS

John Elkington has once again proven his status as one of the great thinkers of our time.

—Paul Polman, from his foreword

"Once again, John has found the right words at the right time to help us make sense of what’s going on. The insight, analysis, and reflection in Green Swans is golden. So much of the storytelling and synthesizing resonates with my own experience imagining the enterprises that I want to exist to deliver vital public goods, and then building them with the help of others. Pioneers can see patterns early and have the courage, or naïveté, to just try to add to the design. They can be too early. They can find arrows in their back, too. On surviving and, if lucky enough to succeed, they know the impossible happens and that purpose helps. To those that thought renewables would always be small and expensive, for example, watch that beautiful Green Swan move! It’s time to make friends with the exponential."

—James Cameron, Chairman of the Overseas Development Institute, Founder of Climate Change Capital, and a former member of the UK Prime Minister’s Business Advisory Board

"The best leaders are willing to give up what is no longer working and commit to what is needed to succeed in a new, completely changed operating environment. When John Elkington issued a ‘product recall’ for his groundbreaking concept of the ‘triple bottom line,’ it was because he is that type of leader. If you want to be a leader that meets the demands of the 21st century, read Green Swans, and then become one."

—Jay Coen Gilbert, Co-Founder of B Lab, the organization behind the B Corporation movement

John Elkington is one of the true pioneers in the sustainability movement and has made a real contribution to the way business thinks about its role in the world. With this new book, John uses his exceptional creativity and insight to give us further food for thought on the challenges we face, and alternative and original ways of thinking about them.

—Dame Polly Courtice, Director of the University of Cambridge Institute for Sustainability Leadership (CISL). Also Founder Director of The Prince of Wales’s Business and Sustainability Programme, and Academic Director of the University’s Master of Studies in Sustainability Leadership

"Green Swans is a brilliant, challenging, and enchanting book. Its brilliance lies in the way John has synthesized and built on the thinking of so many others to put forward yet one more ‘Big Idea’—which he has done many times before. It challenges executives and investors to think and act at the system level. It is enchanting in the way John weaves autobiography into a compelling narrative to make all of us ‘qualified optimists.’ It is also brave. John puts his e-mail address in this book and invites all readers to engage in a conversation with him. I hope you do. It is always worth talking to John."

—Professor Robert G. Eccles, Visiting Professor of Management Practice, Saïd Business School University of Oxford, Founding Chairman of the Sustainability Accounting Standards Board (SASB) and one of the founders of the International Integrated Reporting Council (IIRC)

"Sustainable business legend John Elkington rightly declares that we have painted ourselves into ‘the mother of all corners.’ In Green Swans, his most important book yet, one can feel John’s clever mind and earnest soul wrestling with the ultimate Rubik’s Cube puzzle of all human history: How to transform capitalism to an economic system that is actually regenerative, like all other living systems on this planet. An essential guide for business leaders and a profound yet realistic dose of hope for the challenging ‘Exponential Twenties’ that lie ahead."

—John Fullerton, Founder of Capital Institute, author of Regenerative Capitalism: How Universal Principles and Patterns Will Shape the New Economy, and former Managing Director of JPMorgan

"Green Swans is a delightful, disturbing, and hopeful read. As we enter what John refers to as the ‘Exponential Decade’ of the 2020s, the stakes couldn’t be higher for humanity and planet earth. During these turbulent and promising times, I for one am extremely grateful for the steady guidance, wisdom, brutal honesty, and insights John shares here. Drawing on his decades of thought leadership on the role of business in creating a better world, John at once validates the vital role that business will have in innovating and scaling new solutions, but also gives a clarion call—indeed an imperative challenge—to shift from stakeholder value to system value. Green Swans offers a blueprint for the future-fit businesses of tomorrow."

—Nicholas Haan, Faculty Chair, Global Grand Challenges, Singularity University

Capitalism is entering a new phase, as companies and investors acknowledge the need to address the interests of a fuller range of stakeholders. John Elkington, one of the pioneers of the sustainability movement, is a great guide to the changes under way. His critique is clear-eyed, but his underlying optimism about Green Swan solutions is inspiring.

—Adi Ignatius, Editor-in-Chief, Harvard Business Review

"Welcome to the new renaissance. John Elkington does not fall into the trap of painting a dystopian nightmare scenario that leaves us without hope. Instead, Green Swans makes us believe in miracles. Not metaphysical miracles, but those that seem impossible today because we look at their feasibility from a business-as-usual perspective, defined by the status quo. Like John, I am realistically optimistic. Like him, too, I also say ‘neutrality be damned.’ I hope this brilliant book kickstarts new and honest conversations in boardrooms around the world. Conversations about what side of history we are on, and what steps we will now take to become ‘future fit leaders’. Read on to get a sense of where breakthrough mindsets and innovation will take us as we work to deliver the Global Goals. It always seems impossible until it’s done."

—Lise Kingo, CEO & Executive Director, United Nations Global Compact, the world’s biggest sustainable business platform

"Our economy urgently needs re-orienting in a green direction, with governments, businesses and civil society taking on—together—ambitious green missions. John Elkington’s Green Swans, paradigm-shifting innovation breakthroughs, point the way to this brighter future."

—Mariana Mazzucato, Professor in Economics of Innovation and Public Value at University College London and Founder/Director of the UCL Institute for Innovation and Public Purpose. Author of The Entrepreneurial State and The Value of Everything

Japan is one of the most unsustainable advanced nations, with demographic, economic, and environmental challenges. John Elkington explains that all such countries now need to create new generations of Green Swan solutions, driving transformation and regeneration. This book is a perfect guide for a Japan that rose from the ashes and must now learn how to play a significant role in the regeneration of our planet.

—Hiro Motoki, President, E-Square, Japan

"When I produced my book 2052: A Global Forecast for the Next Forty Years as a report to the Club of Rome in 2012, I invited John to contribute an essay on the future role of the military in sustainability. Typically, he is more optimistic than I, although in this new book he balances that out with a clear-eyed view of the ‘Black Swan’ challenges we face in the coming decades. But then his ‘Green Swans’ fly in and we are back on track for rapid progress! I hope he is right, in spite of the fact that my mood in 2052 was more somber—and still is."

—Professor Jørgen Randers, Professor Emeritus of Climate Strategy at the BI Norwegian Business School, and science-based activist since co-authoring The Limits to Growth in 1972

"In Green Swans, John Elkington gifts us his wisdom, vision and experience to guide us through the business, social and environmental transformations we need en route to a regenerative future. An urgently necessary book."

—Cathy Runciman, Co-Founder, Atlas of the Future, and former Managing Director of Time Out International

All his life, John has been a pioneer in the environment movement and in his acute understanding of how capitalism has a central part to play in it. His insights have always been ahead of the curve and phrases of his coinage are the currency of our age—the ‘triple bottom line’ being just one of them. This book captures the passion of a man at the peak of his powers, drawing together a lifetime of observations into a manifesto for muscular humanism and capitalism with conscience. What shines through it all is a belief that now the time is at hand for proving that the future remains ours to make. No hollow intellectualism, just unfettered urging that we should bring out the best in ourselves . . . now. A hugely important book.

—Sir Tim Smit, Founder and Executive Vice Chair of The Eden Project and Co-Founder of the Lost Gardens of Heligan

"We need John Elkington’s optimism, and his insight, more than ever, and here he sets out a bracing and inspiring vision of the path we must take if we are to transform ourselves and secure the future for our planet. Green Swans is a welcome and well-researched manifesto and should be compulsory reading in every boardroom."

—Tanya Steele, CEO, WWF UK

This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher and author are not engaged in rendering legal, accounting, or other professional services. Nothing herein shall create an attorney-client relationship, and nothing herein shall constitute legal advice or a solicitation to offer legal advice. If legal advice or other expert assistance is required, the services of a competent professional should be sought.

Fast Company Press

New York, New York

www.fastcompanypress.com

Copyright ©2020 John Elkington

All rights reserved.

Thank you for purchasing an authorized edition of this book and for complying with copyright law. No part of this book may be reproduced, stored in a retrieval system, or transmitted by any means, electronic, mechanical, photocopying, recording, or otherwise, without written permission from the copyright holder.

This work is being published under the Fast Company Press imprint by an exclusive arrangement with Fast Company. Fast Company and the Fast Company logo are registered trademarks of Mansueto Ventures, LLC. The Fast Company Press logo is a wholly owned trademark of Mansueto Ventures, LLC.

Distributed by Greenleaf Book Group

For ordering information or special discounts for bulk purchases, please contact

Greenleaf Book Group at PO Box 91869, Austin, TX 78709, 512.891.6100.

Design and composition by Greenleaf Book Group

Cover design by Greenleaf Book Group

For permission to reproduce copyrighted material, grateful acknowledgment is made to the following: For excerpt from The Best-Performing CEOs in the World by Harvard Business Review staff from Harvard Business Review. November 2015 issue. Copyright © 2015. Reproduced by permission of Harvard Business Review.

From Novo Nordisk CEO Lars Sorensen on What Propelled Him to the Top by Adi Ignatius and Daniel McGinn from Harvard Business Review. November 2015 issue. Copyright © 2015. Reproduced by permission of Harvard Business Review.

From The History of Antibiotics from the Microbiology Society website. Accessed October 2, 2019 at https://microbiologysociety.org/members-outreach-resources/outreach-resources/antibiotics-unearthed/antibiotics-and-antibiotic-resistance/the-history-of-antibiotics.html. Copyright © 2019. Reproduced by permission of the Microbiology Society. All rights reserved.

Publisher’s Cataloging-in-Publication data is available.

Print ISBN: 978-1-7324391-2-2

eBook ISBN: 978-1-7324391-3-9

Printed in the United States of America on acid-free paper

19 20 21 22 23 2410 9 8 7 6 5 4 3 2 1

First Edition

Dedicated to my father, Tim Elkington (1920–2019),

A pilot who helped me love flight and things with wings.

To my mother, Pat Elkington (née Adamson, 1922–2019),

Who encouraged my love for wildlife, women, and words.

And to their great-grandson, our grandson, Gene Lushington,

Born in 2018, into this world of Black Swans and Green.

Contents

Welcome: Upending Capitalism

Today’s capitalism is unfit for purpose—and it’s getting worse.

Foreword:

By Paul Polman

Introduction: Diving Into Tomorrow

The exponentially different worlds of Black, Gray, and Green Swans.

Chapter 1: Miracles On Demand

Miracles can be impossible within one paradigm, inevitable in the next.

PART I: THE BLACK SWAN BLUES

Key trends pushing and pulling us toward breakdown.

Chapter 2: A Wicked World

Why the world is becoming increasingly wicked, even super wicked.

Chapter 3: Black Swan Capitalism

Current capitalism robs the future to reward some of those alive today.

PART II: BLACK VERSUS GREEN

Black, Gray, and Green Swans are battling it out all around us.

Chapter 4: Swanning Round Boardrooms

How incumbent boards and C-suites view the relevant challenges.

Chapter 5: Getting Future Fit

A blueprint for Green Swans: How to create system value.

PART III: NEW PECKING ORDERS

Green Swans will upend current market realities.

Chapter 6: Incubating Ugly Ducklings

Why Ugly Ducklings seem ugly today—but won’t tomorrow.

Chapter 7: Green Swans Take Off

Politicians, governments, and markets must boost Green Swans.

Chapter 8: Exponential Migrations

How we get from here to there—faster.

The Author

Acknowledgments

Annex: The Swanspotter’s Guide 1.0

How to distinguish between Black Swans and Green

Endnotes

Index

WELCOME

UPENDING CAPITALISM

Genesis of the Green Swan

The Green Swan is a symbol of radically better times to come. It’s also a template for exponential change toward the distant goal of a sustainable future for all. Getting from here to there will be no trivial task, however. Times of disruptive change upend market and political pecking orders, creating political shock waves that can last for decades—even generations.

As a decade, meanwhile, the 2020s do not yet seem to have sticky branding like the Noughties or the Teens, but they will, and that branding will likely reflect a period of exponential change. The Exponential Twenties? To paraphrase Dickens, this will be the worst of times for those clinging to the old order, yet potentially the best of times for those embracing and driving the new. Buckle your safety belt.

This book, my twentieth, has had an unusually long genesis. It has morphed and mutated considerably along the way. You can expect an often personal account of a learning journey that has taken me around the world and, at times, deep into the future. It’s an investigation, an exploration, not a definitive, unified field theory. It is intended as the beginning of a conversation, not the end.

Like the fictional Forrest Gump, played by Tom Hanks in a film of the same name featuring a slow-witted man who was witness to—and sometimes unwittingly had a hand in—major cultural events, I have been involved in many initiatives that have shaped the change agenda. In citing some of those experiences, I aim not to out-Gump Gump but to demonstrate that my conclusions and recommendations are based on real-world interactions, not just desk research.

I have also been profoundly influenced by what I have read. Most obviously here, I have been inspired by the work of Lebanese-American author, risk analyst, and former options trader Nassim Nicholas Taleb. In his 2007 book, The Black Swan, Taleb provides a series of timely lessons about the impact of the highly improbable, as his subtitle put it.¹ His timing was impeccable, as the global economy descended that same year into a financial meltdown few had seen coming.

Early on in his book, Taleb noted that he was sticking his neck out, in claiming that against many of our habits of thought [. . .] our world is dominated by the extreme, the unknown, and the very improbable (improbable according to our current knowledge)—and all the while we spend our time engaged in small talk, focusing on the known, and the repeated.² Nowhere is that more true than with the wicked and super wicked challenges we will explore later.

Rather than sticking tightly to Taleb’s definitions and methodology, though, what follows riffs off his metaphor of the Black Swan, referring to unpredicted—and generally unpredictable—events driven largely by negative exponentials, in whose wake nothing is the same. Just as the world’s most populous nation vaunts socialism with Chinese characteristics, we will explore aspects of capitalism, democracy, and sustainability with either Black or Green Swan characteristics—and sometimes a combination of both. Some working notes on how to identify Black and Green Swans can be found in the Annex (page 254). People also now talk of Gray Swans, which are predictable and may have been predicted, but which when ignored for too long erupt in ways that can rock the world on its heels.³ One of the most obvious is the trend of aging in modern societies. There are many benefits from our living longer lives, but it has been estimated that by 2020 the number of people over sixty-five in the world would outnumber, for the first time in history, children aged five and under. Again, there are many things to be said in favor of experience, but as Camilla Cavendish put it in her book Extra Time, an aging world will bring many systemic challenges that we have only just begun to think through.⁴

This growing color spectrum of Swans is where the riffing comes in. To the reasonably well-defined categories of Black and Gray Swans, I want to add two other emergent concepts: Green Swans, which are systemic solutions to global challenges, solutions that tap into positive exponentials, and Ugly Ducklings, defined as embryonic innovations and trajectories that can take us in various directions—good, bad, or ugly.

As this book went to press, I soft launched the Green Swan agenda at a major business summit in Copenhagen, hosted by Dansk Industri (Confederation of Danish Industry)—attended by the country’s new prime minister, Mette Frederiksen; various committed royals from Denmark and Sweden; and 1,300 CEOs and business leaders. I noted that this was highly appropriate, given that one of Denmark’s most famous sons had been Hans Christian Andersen, author of The Ugly Duckling. But what truly blew me away that day was the way that the Danish government, the country’s leading industry federation, and the wider business community are now working together to drive a wildly ambitious green transformation.

A Green Swan economy in the making? Certainly, their timing looks exquisite. For one thing I learned while working in Japan over the years is that successful businesses and economies invest into a downturn, aiming to emerge on the other side ahead of their competitors. My assumption in researching this book has been that the world is headed into some sort of historic U-bend, well beyond a single, normal recession, where the established macroeconomic and political order goes down the tubes, and new ones surface. As we head deeper into the bottom of the U-bend, we enter a period of maximum confusion and uncertainty. Historically, too, this is often the point at which major wars occur.

In the process, established ideologies and mind-sets are coming under intense pressure—among them capitalism, democracy, and sustainability (a concept I helped launch decades back). What follows is an investigation into the complex interplay of all three ideologies. In retrospect, I have been on a learning journey that has taken decades to date and, in some ways, feels as if it is only just beginning.

All three concepts—capitalism, democracy, and sustainability—represent fiercely contested territory. Don’t talk about capitalism, I was advised. It triggers visceral, uncontrollable reactions. True, though such reactions can take people in very different directions. Talk to some climate activists and you are told that capitalism can do nothing but harm. But talk to some Americans, even those abused by that country’s most exploitative forms of capitalism, and many will tolerate no criticism of their system—even when it does them little discernable good.

Figure 1: Into the U-bend

Such positions, quasi-religious in their reliance on faith over evidence, serve as a red-flag warning that we are stepping into a giant minefield. Still, the ways in which capitalism, democracy, and sustainability interact, for good or ill, is our subject here. The timing is particularly interesting, given that even some leading capitalists are now increasingly critical of today’s capitalist system, while many democratic leaders are warning that democracies are at greater risk than at any time since the 1930s.

Capitalism is partly in the spotlight because it has embedded pernicious forms of myopia in our economies, which now threaten to crash the global biosphere. These problems were massively accentuated by neoliberalism. Yet our default setting, neoliberal or not, is to deny the very possibility of collapse, as professor Jem Bendell argues.⁵ Denial, however, cannot mask the pace at which we are destabilizing the climate, unraveling the web of life, acidifying the oceans, and creating teeth-rattling wealth divides. Indeed, the evidence suggests that the next decade, the 2020s, will see flocks of those proverbial chickens coming home to roost—with the prevailing scientific and economic paradigms shifting at unprecedented speed.

American-style capitalism has opened up immense wealth divides that are spurring intense concern and criticism. As a result, newspapers like the Financial Times have been running full-page articles with titles like Capitalism Keeps CEOs Awake at Night.⁶ Ray Dalio, an American investor worth almost $17 billion by Bloomberg’s estimates, who has embraced capitalism since he was a precocious twelve-year-old, took to warning his followers on social media: I’m a capitalist, and even I think capitalism is broken.⁷ Capitalism is in crisis, concluded the economist Irwin Stelzer in The Sunday Times, under a headline reading, Save Capitalism from Capitalists.⁸

I am pessimistic in the short term, and there will be times when it shows, but I am a qualified long-term optimist. Our species may have backed itself into the mother of all evolutionary corners, but sometimes such moments are when our best work is done. The qualification of my optimism stems from the fact that we have to choose to evolve not only ourselves but also capitalism and democracy, none of them trivial tasks.

So what do I mean when I talk about capitalism? Don’t quote Wikipedia, authors are told, but what a wonderful resource it can be, thanks to its anti-capitalist business model. Yes, it’s true that I once discovered via my Wikipedia page that I had a Danish wife I knew nothing about—but more often than not I find it genuinely distills the wisdom of the crowd.

Ask Wikipedia to define capitalism and it mentions private property, capital accumulation, wage labor, voluntary exchange, a price system, and competitive markets.⁹ A useful starting point, though most of us would add other things to the list. However long your list may end up being, pretty much everything on it must now evolve at warp speed if capitalism is to survive the twenty-first century and deliver on well-intentioned slogans pledging a better world for all.

As a long-time student of economic cycles, I sense that the likeliest outcome is a future in which key elements of capitalism crash and burn, and some then rise again from the ashes—something that has happened many times before. A future of dark and bright phoenixes, you might say, rising from the smoking debris of our economies, societies, and, most tragically for the deep future, our natural environment.

Establishing this point does not make an individual either pro- or anti-capitalist, but rather an observer of what it is that capitalism actually does, how it behaves, and how it impacts the wider world. Like nature, capitalism goes through energetic cycles, what popular economists would call booms and busts. In our economies, these are periods of intense excitement shading into irrational exuberance, driven by new forms of innovation that ride up and down the hype cycle, with a rising backbeat of investment and growth. Typically booms are followed by various forms of bust, profound unravelings, triggering adaptation, and, if things go well, recovery.

Talk about capitalism, then, and you’re talking about a high-octane and extremely volatile form of wealth creation and destruction. Over the decades, I have explored capitalism and its alternatives, using a wide range of lenses and metaphors, such as green capitalism, the triple bottom line, the chrysalis economy, and breakdown and breakthrough. As I look back, the aim throughout was to compare and contrast two different trajectories in our world: Black Swan dynamics that (in malign cases) led to chaos and even extinction, and the Green Swan dynamics that potentially lead, via evolution and adaptation, to a better place.

As F. Scott Fitzgerald concluded, The test of a first-rate intelligence is the ability to hold two opposed ideas in mind at the same time and still retain the ability to function. I make no claims for my intelligence, or for my brain’s ability to function under stress, but this book is evidence of a lifelong and ongoing struggle to make sense of two radically opposed ideas.

The first idea is this: We are headed into a hellish world of systemic breakdowns. Key elements of our climate, our biosphere, our economies, and our societies will come apart at an accelerating rate. Start-up entrepreneurs talk of their burn rate, the speed at which they spend other people’s money. Viewed as a start-up, the subspecies of post-industrialization Homo sapiens that some call Homo economicus¹⁰ and others Homo industrialis has burned through the planet’s resources at a dizzying rate—and is now entering a very different reality, what some call the Age of Consequences,¹¹ others The Anthropocene.

This future, where a single species has a global impact akin to geological forces, is a world first. As the process continues, the world will be plagued by malign flocks of Nassim Nicholas Taleb’s Black Swans, understood here to be challenges that get exponentially worse in ways that most of us struggle to understand, let alone tackle and solve.¹²

Black Swans are dramatic events that are outliers—beyond the realm of normal expectations—have a major impact, and yet are often inappropriately rationalized after the fact with the benefit of hindsight.¹³ In simple terms, that means we fail to learn from our mistakes, unwittingly heading into the jaws of the next round of disasters.

Think of the plight of oil-rich Venezuela, once described as the Switzerland of South America. As I wrote these words, the country’s central bank published statistics showing that the economy had shrunk by half since President Maduro took office. Venezuela’s construction sector had shrunk by 95%, manufacturing by 75%, oil production was lower than at any time since the 1940s, and the official inflation rate was reported to be an inconceivable 130,060%.¹⁴

Was Venezuela’s meltdown a true Black Swan event, though? With standard economics predicting such outcomes if economies are mismanaged to such a degree, some might question whether this was truly unforeseeable. They would probably use the same arguments with the 9/11 attacks and the collapse of the World Trade Center towers.¹⁵ In the same way, they might say, the Chernobyl nuclear disaster was not a true Black Swan, because