In this chapter we identify the primary challenges that affect our socio-economic systems in their constant interaction with the natural environment and other living systems on the planet. They can be (artificially) separated as systemic and organizational challenges, since the interplay between the macro- and the micro-level actors at planetary scale is precisely what makes this a âwicked problem.â3 At the end of the chapter we will present a set of key ideas that encapsulate our approach to tackle the âwicked problem.â They will be further detailed along with their conceptual, scientific, and managerial implications throughout the rest of the book.
The systemic challenge
â Perfection of means and confusion of goals seem in my opinion to characterize our age.â
Albert Einstein
Worldwide, July 2015 was the warmest month ever recorded. However, no one is impressed because such records are now broken with frightening frequency. The COP21 (Conference of the Parties) in Paris reminded us that the planet is already suffering from climate change and that conference-room resolve does not easily translate into action in the field. For example, the Arctic region is currently warming twice as fast as other areas; if the frozen organic matter in the permafrost soil thaws, the release of globally warming methane gas could accelerate the shrinking of polar ice caps with catastrophic consequences. As it is generally known, climate change manifests via extreme weather events, storms, and flooding, while also making drier areas drier, wiping out food supplies, and turning forests into kindling. Looking forward, we must anticipate tough times indeed. Sweeping adjustments are needed in such diverse areas as oil and mining industries, transport and energy, intensive agriculture, industrial production, and consumer behavior. The coping mechanism of corporations, which we recognize as key actors, will be a critical component of the collective response to these unprecedented systemic challenges.
On the social front, there are already sobering consequences associated with increasing social inequality within virtually all developed countries. According to recent Organisation for Economic Co-operation and Development (OECD) research,4 the income ratio between the top and bottom 10% of wage earners in OECD countries has reached almost 10 on average (18.8 in the US), from 7.1 in the 1980s. Of course, technology has been favoring the concentration of wealth; however, when a global corporation reaches a worth of $700 billion, it raises questions that a traditional mindset is not equipped to address.
For the top 1%, the growth in share of the total income is even faster and the super-rich are often feeding the intricate offshore âfiscal optimizationâ industry. This global macro-economic crisis has made things even worse by significantly weakening the bottom 40% of the population in most countries. Interestingly, one of the consequences of this increasing gap between the rich and poor is that the poor and the squeezed middle-class families tend to underinvest in education, which can weaken nationwide recovery and ensuing levels of prosperity.
On the political front, the impact of these trends in democratic countries, where the average voter continues to pay taxes, undermines societal consensus and faith in politicians and institutions at large. Large political parties are losing out to dark-horse contenders and fringe groups of discontent voters with untested policies and opaque agendas. Thus, concerns about environmental sustainability and the unequal distribution of income are threatening not only the quality of life on the planet but also the likelihood (and magnitude) of economic growth in countries across the globe.
Needless to say, the two global maladies are tightly linked to each other in a vicious spiral. Climate change caused by environmental pollution will likely worsen the loss of soil fertilityâdue to drought, land degradation, and overuse of pesticides and chemicals. The negative impact on the environment will force increasingly larger populations to flee their native countries and search for a future in the most advanced economies. The International Panel on Climate Change (IPCC) projects that as many as 150 million individuals may be forced to flee their native coastal areas due to the rise in ocean levels. When we also consider economic migrants who are trying to escape lives of misery, the result is an ever-increasing social, environmental, and economic pressure on higher-income countries to find new models of development. Such development models would need to satisfy the interests not only of domestic actors (citizens, companies, etc.) but of players in a constantly broadening sphere of interconnected socio-economic-environmental systems.
Let us emphasize two points. Firstly, we need to realize that the challenge before us is to invest in both economic growth and environmental sustainability in an integrated way. It is both logically and ethically wrong to address each dimension of the challenge independently, given the tight interdependencies among the social, economic, and ecological systems. If we think about it for a moment, we would be hard-pressed to name one business decision of significance that has only economic consequences and no social ones. Almost every business decision will, at a minimum, affect a companyâs economic and social environment; many will also affect associated ecological systems.
Secondly, there is no single actorâwhether the wealthiest country, the most powerful company or even cartel of companiesâwho can tackle the sustainability challenge alone. This âwicked problemâ requires by definition a large-scale, cross-sector (public, private, civil), cross-disciplinary collaboration in order to begin to make sense of its complexity and identify, experiment with and diffuse possible solutions.
Still, there is some good news. The global engine that may stand a chance of addressing the sustainability challenge is finally starting to move, after many statements of vision and commitments and several âfalse startsâ over the past couple of decades. After a long, multi-stakeholder process, at the 70th UN General Assembly of September 2015 the representatives of most countries of the world signed and committed to 17 Sustainable Development Goals (SDGs) broken down in approximately 170 specific sub-goals which capture the key areas of the sustainability problem.
The other major event in 2015 was the successful completion of a long-awaited agreement at the 21st COP in Paris that delineates the responsibilities of each country towards the stabilization of global climate change to capping temperature increases at no more than 2° Celsius above the average of the early â90s. This event is of historic proportions and not just for the sustainability agenda. However, we need to add that many keen observers of the climate change process are concerned by foreseeable loopholes in the necessary subsequent implementation of the Paris Agreement.
Of course, the signing of such agreements is one thing; however, the ability to ignite and significantly accelerate the speed of behavioral change at the individual or corporate level is quite another. The latter is a large-system-change challenge involving consumers, employees, investors, voters, and other stakeholders across sectors, value chains, and national boundaries.5
Thus, sustainability as commonly understood in terms of reduction of harm to environment and society is not sufficient. In order to ensure the lasting benefits of sustainability-as-flourishing we need a deep transformation of individual and organizational mindsets.6 Otto Scharmer appropriately paraphrased Einsteinâs famous dictum: we cannot solve problems with the same consciousness that created them.
This is the essence of the proposal we qualify as the evolutionary leap to the level of individual and organizational consciousness that can generate flourishing socio-economic and ecological systems. Such a leap aims at attaining an individual and collective awareness of the systemic nature of any business context. At this level of consciousness, business decisions spontaneously (as a natural reflex) aim to positively enhance the state of the system in its economic, social, and ecological dimensions rather (vs. serving solely personal or organizational interests).
The organizational challenge
Do individuals and organizations have sufficient willpower and capacities to assume the proactive role of enablers and eventually as champions of the solutions to the aforementioned systemic challenges? This is a complicated question.
One of the main reasons for the slow system-wide progress has to do with the difficulties encountered by policymakers and regulators in stimulating, facilitating, and imposing significant behavioral changes on business organizations. These challenges require the development of an integrative mindset (on the part of business leaders, managers, and employees) and a transition to conceiving the role of the business as a source of value creation for all contributors (employees, customers, suppliers, communities, and investors). The relative voice and power distributed to each of them might vary significantly across time, sector, and institutional context and among competitors within the same contexts; however, they are all taken into account in relevant decision-making contexts (where their interests are at stake). This is sometimes referred to as the âgreat transitionâ: it links the challenge of shifting individual mindsets and values with the changes necessary at organizational levels, so that system-level changes can be enabled.
When companies are committed to this transition, they must attempt to ensure adequate returns (for invested capital) and quality-of-life enhancements for the citizens in their communities and final consumers of their products. Such challenges might revolve around the design and creation of innovative products to satisfy true customer needs (vs. needs imagined by product managers) without taxing the quality of the environment (via closed-loop logistics and circular-economy solutions). Of course, the needs of internal stakeholders are somewhat different. The challenge, here, is for organizations to meet the goals of staff members who have dedicated their own professional aspirations and talents to their long-term success; this is to be achieved by changing performance evaluations, incentives, and career management systems to reflect relevant sustainability goals and translate them into individual and collective targets.
The flourishing individual. âIndividual flourishingâ refers to a transformation in human awareness whereby we are able to perceive ourselves and others at a deeper level via the cultivation of collective consciousness (explained in Chapter 5) and fully manifest the inbuilt qualities that exist in a potential form in every human being.
In Chapters 4 and 5, we will further examine the principles and attitudes that underpin the concept of individual flourishing, which are all embedded within us in a more or less active state. Of course, an important dimension of this challenge is the development of a diffused leadership (enacted by employees at large rather than only top managers) which promotes via its actions the identity and values of a flourishing organization.
Flourishing at the individual level: the development of aptitudes (or virtues) to the fullest potential and realization of a state of completeness in the way we perceive (and connect to) ourselves and the rest of the world.
The flourishing organization. A Copernican revolution in the way we think of (and act as members of) socio-economic systems requires much more than just an understanding of sustainability and of the conditions for our collective long-term survival. John Ehrenfeld (MIT) and Andrew Hoffman (University of Michigan)âtwo of the thought leaders and early contributors to the nas-cent field of corporate sustainabilityâclaim in their âfrank conversation on sustainabilityâ that the key to the systemic crisis we are living in lies in our capacity to âflourishâ7 as individuals first, which will then generate flourishing organizations and ecosystems.
Flourishing organization: an organization whose members have reached a state of collective consciousness where decisions and actions are geared to nurture and realize the development of the fullest potential for all the actors in the socioeconomic and natural system.
By âflourishingâ they refer to the development of the well-known aptitudes or virtues, realizing a state of completeness in the way we perceive and connect to ourselves and the rest of the world. It is about being as wise as we can and caring as much as possible for othersâ wellbeing, achieving satisfaction while reducing the urge to have and consume, controlling the drive to appear and command. It is about Being rather than Having.8 These are all ethical, laudable, personal development goals that could very well transform businesses and societies as we know themâif taken seriously and achieved by at least a qualified minority of people worldwide (e.g., citizens, managers, politicians).
The reason why this type of transformation is such a âwickedâ problem, not only at a system level but also at the organizational one, is that it requires the individual members of the organization to radically rethink virtually everything they learned in business school and in their professional experience thus far. It requires a complete reset of the way we think about what a business is, its purpose, and the way it should be runâall d...