COP26, global climate strikes, a damning report from the IPCC. All very clear signals that accelerating climate change and ecological breakdown pose an existential threat to life on Earth.
But the climate emergency is just a symptom of wider system failure which presents the greatest obstacles to meaningful climate action. This is the system which centres our economy on maximising profits for a small number of shareholders and beneficiaries, at the expense of people and the natural world. Just look at P & O Ferries for example, some financial troubles, and 800 staff dismissed without proper and legal consultation.
In this blog, we’ll be looking at the role of the ‘growth-at-all-costs’ mindset in this system, using WeWork as another example of the devastation that certain unicorn firms and huge corporations are wreaking on communities and the environment as a result of our current economic system’s influence.
We will then introduce to you Doughnut Economics, an economic model with potential to heal the broken system, the 7 Principle Practices that should be followed, and its role in pushing towards an economic regenerative transformation.
Business Has Lost Its Balance…
We’re all aware of the climate emergency.
Between the United Nations Climate Action Summit, youth-led Global Climate Strikes and COP26, I think it’s safe to say we’re all pretty aware of the threats our wonderful little planet and all of us on it are facing when it comes to ecological breakdown and climate change.
We believe that one of the main drivers of the climate emergency, and the greatest obstacle to meaningful climate action, is the system failure that centres our economy on maximising profits at the expense of people and the natural world. This leads to short-term decision making that places environmental and social costs on the margins, creating massive systemic risk and social unrest.
The reality is that business leaders are going to have to start questioning this system failure at every opportunity with the goal of moving toward a new economic system that requires them and the investors who own their businesses to operate with a first principle to preserve the natural and social systems upon which life and thriving markets depend.
Any meaningful response to the climate disaster should include not only strong climate action within individual businesses, but also courageous campaigning to overturn the systemic failure of shareholder primacy.
Ps. If you’re interested in finding out about alternatives to shareholder primacy, sign up to our newsletter and you’ll be one of the first to be notified when our next article is released where we’ll be discussing Steward-Ownership.
The ‘growth-at-all-costs’ mindset
The startup has become one of the world’s most influential organisations, but its growth-at-all-costs mindset isn’t bringing the benefits you’d expect.
For a business to survive and successfully thrive, it must grow. However, the problem with some start-ups is that they believe they require rapid growth, forever.
Growth is of course essential, especially considering that only around 5% of start-ups expand quickly enough and scale sufficiently to be viable. But should it be the main goal of a startup’s founders?
The end goal of quick growth for start-ups, particularly Unicorn Start-ups, is usually to raise as much cash from investors and to achieve that huge valuation. But to achieve that goal, they risk using all available resources, both planetary and human.
‘Unicorn start-ups’, according to Beauhurst, are private companies with a valuation of at least $1 billion (now around £760 million). Aileen Lee, Founder of Cowboy Ventures invented the term in her 2013 article ‘Welcome to the Unicorn Club: Learning from Billion-Dollar Startups.’ In our next blog piece, we’ll take a deeper dive into the startup scene, notably the zebra movement, which is an alternative to the unicorn; so sign up here to get alerted when it’s published.
Due to the difficulty of privately-held enterprises reaching this billion-dollar valuation, these businesses were dubbed unicorns, however unicorn companies are no longer so uncommon. Over 1,000 companies are considered to be on the unicorn list globally – over 1000 companies attempting to grow fast and achieve a one-billion-dollar valuation.
Imagine the speed at which our resources are being used to achieve this.
Although, it’s also not just unicorn startups that are wreaking havoc. It’s also these massive corporations which turn to us as individuals to make changes when they are the ones causing the greatest harm. They’ve already surpassed their billion-dollar valuation and are extremely valuable, yet they still want to expand and create more money for the few, regardless of how they get there.
This growth-at-all-costs mindset is evident in some examples such as the WeWork and P&O scandal. Uber’s treatment of staff, Facebook weaponising hate speech, Twitter trolls and AirBnB’s negative impact on communities are among some of the other examples we can look to for evidence.
But let’s take a deeper look at the WeWork scandal first to get a clearer idea of how the startup world in particular can cause business to be sick…
With big shot investors like Goldman Sachs Group and JP Morgan Chase & Co, WeWork was valued at 4.6 billion dollars in 2014. And although it was losing six million dollars a month, it was growing faster than ever before, with plans for sixty locations in more than a dozen cities. By 2016, there was growing doubt about the company’s ability to maintain its value, yet SoftBank, a Japanese multinational holding firm invested a further $4.4 billion into the company.
But all that glitters isn’t actually gold. It was revealed during filings for an IPO that Neumann had been charging the company for personal expenses such as credit card debt secured by WeWork stock, raising further doubts about the company’s true value and corporate governance.
Neumann’s ultimate goal was to become the biggest office-space provider in the world. And there was the problem. Neumann wanted to be the world’s biggest office-space provider, stopping at nothing to achieve that.
This is evidence of a startup entrepreneur putting profit maximisation first and doing everything he can to make his firm look appealing to investors so that he would be able to reach that goal of becoming the world’s biggest office space provider. Growth at all costs actually cost these entrepreneurs their whole firm. WeWork downplayed losses and overhyped its business plan, an all too common story in the unicorn world.
And it’s not just real life, we are consuming the poison of growth at all costs on our screens. Billions, Succession starring Brian Cox, WeCrashed starring Jared Lato which actually tells the story of Adam Neumann and WeWork, and The Dropout with Amanda Seyfried.
But, we can’t put all the blame on unicorn startups and forget about those bigger corporations out there…
A larger scale example of ‘profits at all costs culture’
The P & O Ferries affair is a perfect illustration of this ‘profits at all costs’ attitude in these larger businesses to maximise shareholder profits and its genuine detrimental implications.
Having £100 million in losses year on year, P & O stated ‘our survival is dependent on making swift and significant changes now’. They subsequently fired 800 employees without warning, telling them that this was their last day on the job and that they would be replaced with new crew hired by a third party.
It now seems apparent they have broken the law. When making substantial layoffs, an employer must a) give 45 days notice to the necessary authorities and b) consult the employees, usually through unions. P & O acknowledge that they did neither.
In a shockingly frank statement to MPs in March, chief executive Peter Hebblethwaite said: ‘There’s absolutely no doubt we were required to consult with the unions. We chose not to do that.’
Hebbelwaith indicated he was ‘saving the business’ because it ‘otherwise had no future’. But at what cost?
As a business decision, his unrelenting quest of profit has driven him to break the law. `We now have a future. We don’t have to shut down the company,’ he said. Hebbelwaithe may believe he still has a business, but profit took precedence over people’s livelihoods, and look at the damage that was done. He no longer has his business.
Although some unicorn businesses are leaving a trail of devastation in their wake, we’re starting to see with these large scale examples that it’s really not just the businesses, it’s actually the system that they’re operating within that is pushing these companies to fall off the ethics wagon. The reality is that we need an economic regenerative transformation that will allow financial stability and social and environmental impact to be on the same level of importance.
You’re probably starting to think ‘why do such toxic cultures exist in the first place? Why have we accepted systems that prioritise profit over all else for so long? Why have we accepted a system where rapid expansion is seen as the key to success?’ Especially when looking at the examples of P & O and WeWork, we know that the growth-at-all-costs mindset leads to the eventual downfall of your business. So, how can we shift our economy to allow for anything other than shareholder primacy?
And you know, you’re right. These are burning questions that we too are asking ourselves and that need to be addressed to dig deep into a possible economic regeneration.
Introducing Doughnut Economics – A model to heal the system
So, how do we ensure that corporations, and the investors who own them, operate with a first principle to preserve the natural and social systems upon which life and thriving markets depend?
Drum roll please…
Introducing the Doughnut Economy. According to the Doughnut Economics Action Lab (DEAL), ‘the Doughnut Economy presents a vision of what it will take for humanity to thrive in the 21st century, and Doughnut Economics delves into the mindset and ways of thinking that will lead us there’.
We’d like to note here that although we’re a huge fan of doughnut economics, there are limits to it, just like all frameworks. Business is sick and the doughnut economy is one of the best fundamental solutions. Of course there are other models that are useful but this is the one that is gaining the most popularity. Essentially, it’s a nice way of explaining an economy that helps people to thrive rather than extract.
The doughnut is made up of two concentric rings:
1. A social foundation that ensures no one is left falling short on life’s essentials. The social foundations 12 dimensions are developed from the social concerns set out in the Sustainable Development Goals.
2. The second ring serves as an ecological ceiling ensuring that humanity does not collectively exceed the planetary boundaries that protect Earth’s life-sustaining systems. The ecological ceiling has 9 dimensions, which are identified by Earth-System Scientists as 9 planetary boundaries.
The doughnut-shaped area between these two sets of boundaries is both ecologically safe and socially just: a space where humanity can thrive.
As a result, the goal is to meet the demands of all people while remaining within the limits of the living planet. But, if that’s the goal, you’re all probably thinking we’re a long way from achieving it.
And you’re not wrong.
All of the red in the doughnut represents the extent to which individuals are lacking in basic necessities of existence. According to DEAL, we must remove all red from the diagram, and we have to do so from both sides at the same time.
We know all this talk can be a bit disheartening, but according to Nasa, the ozone layer is finally closing up because we humans are doing something about it. This makes us think ‘wow what we’re doing is actually working’. What better motivation!
Essentially, we should all look at this doughnut and think to ourselves, ‘This is my company badge; we’re in business to help achieve these objectives; that’s why we’re here – we’re here to protect and preserve our natural and social systems’.
To address the degradation of the living environment and inequities in human communities, we need to develop businesses that are both regenerative and distributive by design.
But wait. What makes it possible for an organisation to become regenerative and distributive so that it helps bring humanity into the Doughnut?
We should be concentrating on the design of a business’ organisation rather than the design of their products and services. According to Marjorie Kelly, a renowned theorist in next-generation enterprise design, an organisation’s mission, networks, governance, ownership, and finance are the five main design qualities that influence what it can accomplish and be in the world.
DEAL has developed the 7 Doughnut Principles of Practice that businesses should follow to ensure they’re truly bringing the world’s economies into a secure and just space for humanity, and to maintain the integrity of any business concepts when they’re put into practise –
- Embrace the 21st century Goal – Meet the needs of all people within the planet’s resources. Aim to align the mission, networks, governance, ownership, and finance of your organisation with this aim.
- See the big picture – Recognize the possible roles of the household, the commons, the market, and the state in reforming economies, as well as their many synergies. Ensure that money complements rather than dominates the work.
- Nurture human nature – Diversity, participation, collaboration, and reciprocity should all be encouraged. Strengthen community networks, collaborate with a high level of trust and be concerned about the team’s well-being.
- Think in systems – Experiment, learn, adapt, evolve and aim for continuous improvement. Be alert to dynamic effects, feedback loops and tipping points.
- Be distributive – Work in an open design spirit, and share the value you generate with everyone who helped you make it. Recognize power and work to disperse it across stakeholders to improve equity.
- Be regenerative – Aim to work with and within the cycles of the living world. Be a sharer, regenerator, steward. Reduce travel, minimise flights, be climate and energy smart.
- Aim to thrive rather than to grow – Don’t let growth become a goal itself. Know when to let the work spread out via others rather than scale up in size.
The reality is that businesses need to be built with this economy in mind. Again, we’re not saying that doughnut economics is the answer to everything, but it’s a good place to start. Genuine, purpose-driven businesses that are allowed to balance environmental and social needs with their financial stability are what we need. And that’s what Zebra Growth is all about.
The examples of WeWork and P&O show how they were falling short on providing income and work, health, and social equity. For both of these companies, the growth-at-all-costs mindset took over. But again, the problem lies with the influence from our current economic system to maximise profit above all else.
Our whole mission here at Zebra Growth is to help genuinely purpose driven brands scale their impact, and so shifting towards a doughnut economy is vital to allow these mission driven scale-ups to thrive in an economy that isn’t built to push them to create as much profit as possible at whatever cost. We need to have this doughnut system as the underpinning economy/philosophy moving forward – ensuring that corporations, and the investors who own them, actually operate with a first principle to preserve the natural and social systems upon which life and thriving markets depend.
Look, we really do understand the need for a paradigm shift and that’s why we’re here; to be that helping hand in communicating your purpose.
Okay, so let’s go over everything we just covered. We know that accelerating climate change and ecological breakdown pose an existential threat to life on Earth, and we know that this climate emergency is just a symptom of wider system failure which presents the greatest impediment to meaningful climate action.
In this blog, we looked at the critical role not only the startup plays in this system, but also larger corporations, and the pain and suffering the growth-at-all-costs mindset is causing. We then gave practical examples of the destruction these companies are causing to communities and to the environment.
Doughnut Economics (one of our faves) was proposed as a potential solution to heal the broken economic system with the following 7 principles of practice to be followed according to DEAL to ensure businesses are truly bringing the world’s economies into a secure and just space for humanity:
- Embrace the 21st century Goal
- See the big picture
- Nurture human nature
- Think in systems
- Be distributive
- Be regenerative
- Aim to thrive rather than to grow
So what are you waiting for?
If you’re an entrepreneur or marketer, and something in your gut is telling you that the current system and the destruction it’s causing isn’t right, then join our mailing list and be the first to receive exclusive event invites, new blog posts like these, and a bunch of free resources you can start using with your team straight away.