Companies that Mimic Life

Leaders of the Emerging Corporate Renaissance

Joseph H. Bragdon

• Publisher: Routledge
• Year: 2017
• Print ISBN: 9781783535439
• eBook ISBN: 9781351283748
• Topic: Business
• Subtopic: Business General
• Index: Business

Industrial capitalism is broken. The signs, which transcend national ideologies, are everywhere: climate change; ecological overshoot; financial exhaustion; fraying social safety nets; corporate fraud; government deceit; civic unrest; terrorism; and war. But there is hope. This book tells how transformation is taking root in the corporate world – the last place many of us would look for solutions.

The book tells the stories of seven exceptional companies. Their shared secret is a new mental model of the firm that is the virtual opposite of industrial capitalism. Each company, if not already a household name, is a significant player within their industry and, crucially, has outperformed their competitors. Lessons can be learned.

It works like this. Instead of modeling themselves on the assumed efficiency of machines – a thought process that emerged during the industrial age – these firms model themselves on living systems. Firms with open, ethical, inclusive traditions – where employees have a voice and a stake in what happens – have a distinct advantage over traditionally managed companies where most decisions are made at the top.

Understanding that everything of value ultimately arises from life, they place a higher value on living assets (people and Nature) than they do on non-living capital assets. The energy they invest in stewarding those assets – a practice described in the book as living asset stewardship (LAS) – is transformative.

1
Changing paradigms

Paradigms are the sources of systems. They are the assumptions that govern our behavior.

Donella Meadows¹

The vision we set ourselves is to double the business and outperform market growth, whilst at the same time reducing our overall environmental impact.

Paul Polman, CEO, Unilever²

The world of business is in the midst of a major paradigm shift from the long-standing machine model of the firm to an emerging one that mimics living systems. Having briefly described the new paradigm in the Introduction, this chapter tells the story of Unilever—an original member of the Global LAMP Index^® and a leader in the new paradigm’s development.

Unilever is the world’s second-largest manufacturer of food and household products with annual revenues exceeding $70 billion. It is comprised of two separate British and Dutch companies—Unilever Ltd. (London) and Unilever NV (Rotterdam)—operating under a shared board of directors. It is also parent to hundreds of quasi-independent operating companies with products sold in more than 190 countries. With so many moving parts, one wonders how Unilever can operate coherently as an organic whole; much less, how it has emerged to become a global sustainability and profit leader.

The key is to think of Unilever as a large ecosystem: an organic network comprising millions of individuals (species)—employees, suppliers, customers, and other stakeholders—who collectively use their expertise and exchanges of value to grow the health and abundance of the whole system. Thinking of the company as such presents a radically different mental model of the firm than the more prevalent hierarchical one we find at most companies. And, as we shall see, it works brilliantly.

Consider the facts. In the 16 years since the turn of the millennium (2000–15), Unilever’s shares returned roughly five times the S&P 500 Index and 1.3 times its largest direct competitor, Procter & Gamble. In January 2016, Corporate Knights listed it for the 12th consecutive year as one of the world’s 100 most sustainable companies. In 2015, it was a sector leader in the global Dow Jones Sustainability Index for the 16th consecutive year—one of a rare few companies to sweep both indices since they were conceived. In May 2015, for the fifth straight year, the GlobeScan survey—which spans experts from business, government, nongovernmental organization (NGOs), and academia across 87 countries—rated Unilever by a wide margin as the number one corporate leader in sustainability.

Wonderful as these credentials are, Unilever is the subject of this chapter for one other compelling reason. In 2009, the company committed to a deeply life-affirming goal: to halve the environmental footprint of its products while doubling its sales and helping to improve the living standards of more than a billion people in emerging markets, where it sources its raw materials. This strategy, called “the Compass,” is the heart of the Unilever Sustainable Living Plan and it has powerfully accelerated the reinforcing cycle of living asset stewardship (LAS), organizational learning, innovation and profit discussed in the Introduction (Figure 0.1).

The importance of such idealistic visionary goals cannot be overstated—especially for companies, such as Unilever, which have radically decentralized structures and localized decision-making. Employees connect more effectively when they are inspired by their work than when they are ordered to meet statistical (profit) goals handed down from a remote hierarchy. They are more responsive when treated as respected partners instead of mechanistic factors of production; and they become more engaged when they believe their opinions and insights matter. These advantages give firms organized around life-affirming goals an inner cohesiveness that eludes those organized around profit alone.

At Unilever, the evolution of such cultural qualities reflects a growing awareness that the firm itself is a living system—a community of people—working at the intersection of the larger living systems of biosphere and society on which all commerce depends. From this perspective, the health of the firm is symbiotically linked to the health of these larger systems and to the spiritual well being of employees, who want their lives and work to matter.

When CEO Paul Polman introduced the Sustainable Living Plan, few companies were thinking beyond incremental reductions in their ecological footprints. He nevertheless took this leap of faith, sensing that Unilever’s lifelike qualities endowed it with a unique capacity to achieve the plan’s ambitious goals. And he was right. Since the Sustainable Living Plan was introduced, Unilever has become one of the world’s most popular employers, a status—affirmed by both Glassdoor and LinkedIn—that enables it to attract an extra ordinary depth of young talent.

To investors who questioned or disagreed with Unilever’s new strategy, Polman famously responded: “Don’t put your money in our company.”³ It was an audacious challenge to money managers to begin thinking beyond the short term and it sent a message to employees that he had confidence in their ability to meet the new goals.

Early focus on living assets

Nearly two decades before Polman introduced the Sustainable Living Plan, the firm decided to double down on its historic steward-ship model—a legacy of William Lever’s 19th-century ideal of making the world a better place—and began to move toward a more symbiotic stakeholder focus. A key part of this mental shift was an implicit recognition that living assets (people and Nature) are the source of capital assets, which meant Unilever’s future resided in how well it stewarded those assets.

This change of focus coincided with a new emphasis on Asian markets, which in the early 1990s were growing nearly twice as fast as more mature ones in the U.S.A. and Europe. Reflecting on the ethnic diversity of these markets and the need to understand their tastes, then Chairman and CEO, Floris Maljers decided to reorganize Unilever in a way that would benefit from everybody’s creativity and experience within a structure that shared a common vision and understanding of corporate strategy. Accordingly, he began to give business units more localized autonomy. Described as “streamlining,” the idea was to push decision-making out to the front lines where know ledge of local conditions and needs was most keen.

One of Maljers’ greatest insights was to understand the importance of natural resources in these (and other) markets, where populations and consumer demands were beginning to stress local ecosystems. Consequently, he committed Unilever to three fundamental principles:

1. Sustainable agriculture
2. Sustainable fishing
3. Clean water

As Unilever shifted its focus to new emerging markets, it also brought indigenous people into the management of its business units, which were then spread over 75 countries. To these new employees, Unilever’s culture of stewardship and respect was salutary and they responded by becoming committed partners in the company’s success. As a result, Unilever’s productivity and profits in Asian markets surged. In keeping with the reinforcing cycle of LAS, this reinforced the morale of employees and their commitment to Unilever’s goals.

Raising the ante on living asset stewardship

In the two decades since Maljers moved Unilever toward a culture of LAS, humanity’s global ecological footprint and climate change shifted from being marginal corporate concerns to vitally important risk issues. In fact, the year before the Sustainable Living Plan was launched, global markets crashed: an event caused by the convergences of ecological overshoot, financial overreach, and related economic stresses.

Discerning the linkages between these stresses, and the growing threats they posed to global commerce, Polman raised the ante on Unilever’s culture of stewardship. By directly addressing the systemic causes of the malaise, his Sustainable Living Plan set a new standard in the emerging paradigm of companies that mimic life.

To Polman, as with other forward-thinking corporate leaders, the most worrisome aspect of this cycle of ecological decline and financial overreach was how the two elements reinforced each other and accelerated their deleterious effects. Since the late 1970s, when humanity’s ecological footprint began to overtake the Earth’s biological carrying capacity, there had been a parallel rise of borrowing in the world’s industrial economies. Although possibly unrelated at the start, as time progressed, this debt became increasingly linked to ecological overstep as the costs of pollution, ecosystem collapse, climate change, and social stress built up in world economies.

The resulting rise of global debt/GDP ratios was later compounded by the explosive growth of financial derivatives. These bets on the future direction of asset prices quickly became a device for gaming stressed markets and credit conditions. In 2008, when global financial markets crashed, the notional amount of derivatives outstanding in world markets reached an astonishing $684 trillion—roughly ten times world GDP.

To Polman, the convergence of collapsing ecosystems with the explosion of debt and derivatives was taking the world economy in precisely the wrong direction. What he saw was an increasingly dangerous bubble based on the false notion that nonliving capital assets (via financial engineering) could compensate for the ongoing degradation of the Earth’s biological carrying capacity.

Although such behavior may have seemed rational and necessary to those living inside the bubble, those who saw it in a more systemic context recognized that the world of commerce was in ethical crisis and in dire need of change.

The crisis of 2008, which I’ve always called a crisis of ethics more than anything else, has made a lot of people think differently about the way our society needs to function. Not in the sense of questioning capitalism per se—I’m a capitalist at heart as well—but in questioning the way that we achieve this.

Paul Polman, CEO, Unilever⁴

The renowned physicist and historian, Thomas Kuhn, who coined the term “paradigm shift,” had a name for unanticipated negative feedback effects, such as those that caused the 2008 crash. He called them “anomalies.” As these accumulate and reveal previously unforeseen systemic weaknesses, they compel people to seek new insights and solutions.

The remarkable attribute of Unilever and other Global LAMP Index^® companies is that they saw the anomalies of industrial capitalism far ahead of their peers and began to experiment with new approaches that put life at the center of their thinking rather than on the periphery. In doing so, they discovered better ways to understand and relate to the living world of society and Nature that is the ultimate source of their profit.

This book is all about such harmonic strategies. It presents LAMP companies as living, adaptive learning organizations seeking to thrive in a fast-changing ecological, social, and business environment. As indicated in the Introduction, their approach to managing in this milieu is to operate with full-spectrum consciousness (described in Chapter 7)—an awareness they attain by becoming more competent at mimicking life (described in Chapters 2–6).

Given the acceleration of global ecological overshoot, climate change, debt/GDP ratios, and related challenges, companies need such awareness as never before. If they don’t continually learn and adapt as these conditions change, no matter how good they once were, they will be vulnerable.

Paul Polman clearly understood this. He also knew there is a limit to what top corporate leaders can do to effect change on the front lines where the company does most of its business. If Unilever was to be effective, it would have to address the whole system, not just part of it. That is why a critical part of its Sustainable Living Plan was to engage people in Unilever’s hundreds of local business units in cocreating new solutions.

The rationale behind this policy was simple. The only way to engage the whole living system in which Unilever operated was to engage the eyes, ears, and senses of the whole organization. That meant stepping away from traditional command-and-control policies and creating a radically decentralized network of self-organizing local cells, much like the organs of the human body.

Dee Hock, the visionary founder of Visa, called this a “chaordic” organization: a term he used to describe the way “autocatalytic, nonlinear, complex, adaptive systems” create order on the edge of chaos. To imagine how it works, envision a forest ecosystem.⁵ There is no hierarchy here, only a web of interconnected food chains in which organisms, from bacteria up, self-organize in seemingly chaotic ways to produce a well-ordered system whose strengths exceed the sum of its individual parts.

The leverage in biomimicry

Human organizations work best when they operate on the chaordic principles found in Nature. As mentioned in the Introduction, this leverage is realized in two ways:

1. By engaging the minds of all employees rather than just those of top executives (which broadens corporate vision)
2. By inspiring employees with vi...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Contents
• Figures and tables
• Foreword
• Dedication and acknowledgment
• Introduction
• 1. Changing paradigms
• 2. The power of the network
• 3. Management by means
• 4. Conservation of resources
• 5. Openness
• 6. Sense of purpose
• 7. Consciousness
• 8. Toward industrial symbiosis
• 9. The emerging corporate renaissance
• Epilogue
• Appendix 1: The Global LAMP Index®
• Appendix 2: Global LAMP Index® returns vs.comparator indices
• Appendix 3: Moody’s credit ratings on LAMP companies
• About the author