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The Transcommercial Enterprise
Alex Steffen, 25 Nov 03

I'm working on an essay about business' role in changing the world. This is still an early draft, but I'd really welcome thoughtful comments on this idea of the transcommercial enterprise.

Beyond Commerce, Profits: How a New Form of Business Will Thrive by Helping Change the World
by Alex Steffen

Is business the enemy? Some seeking social change certainly think so. They're wrong.

They're wrong not because markets provide the best mechanism for meeting a great many (though certainly not all) social goals. Neither are they wrong because many smart, decent, responsible people are working for large corporations while attempting to do the right thing. They're wrong because the very nature of business itself is changing.

Businesses which hope to succeed in the coming decade have to think of themselves and their actions in a context much broader than they're used to, as part of the fabric of society, not as sovereigns over some commercial fiefdom. Smart business leaders seem increasingly to know this. They are beginning to convert their corporations into a new type of entity, one which sees changing the world as the avenue to profits – the transcommercial enterprise.

In short, there is a transformation afoot, and four forces drive it:

The first force is efficiency. It is inefficient over the long term to pollute, waste energy and mistreat workers. Study after study has shown that many, if not most, socially- and environmentally-desirable goals can be pursued by companies in ways which make them not only better corporate citizens (with happier workers and neighbors) but more competitive.

Take environmental efficiency. Amory Lovins has been demonstrating for decades that new efficiency is almost always cheaper than new capacity, whether we're talking about energy, water or raw materials.

And Lovins is coming from a pre-Moore's Law perspective. Computers are getting twice as fast every eighteen months. Bill Joy, a co-founder of Sun Microsystems, confidently predicts that we have at least a decade of Moore's Law still ahead of us, and that computers in 2014 will be 100 times as fast as the ones we use today – and roughly the same price.

What's the connection with efficiency? Two things. One: design today is computerized design. Faster computers open up new vistas for the design of things and processes to evolve in much more sustainable directions, much more quickly. Today's dreams (like biomimicry – design from nature's forms) are becoming tomorrow's prototypes. Two: as computers get faster, smaller computers get cheaper, and sensors are just small computers. Therefore, we are gaining the ability to cheaply and accurately measure all sorts of flows of energy and materials, making inefficiencies – at least for those who want to find them – easier to spot and correct. The invisible is becoming plain to see, if you want to look.

Then too, efficiencies are starting to become mutually-reinforcing, making new innovations happen faster still. The envelope for doing "more, better, with less" is expanding far more rapidly than business is adopting better practices. As Jesse Ausubel notes in his recent paper The Environment for Future Business,

"High environmental performance forms an integral part of the modern paradigm of total quality. ...[I]n general, efficiency in energy favors efficiency in materials; efficiency in materials favors efficiency in land; efficiency in land favors efficiency in water; and efficiency in water favors efficiency in energy. ... [N]owhere do averages appear near the frontier of current best practice. Simply diffusing what we know can bring gains for several decades. Overall, society hardly glimpses the theoretical limits of performance."

To review: efficiency equals profits; we're getting better and better at being more and more efficient; efficient companies will eat their inefficient competitors' lunches, over time.

The main barrier to harnessing efficiency has been the culture of investment. When your investors demand more profits this quarter, it's pretty hard to invest in technologies and processes which will return even greater profits in five years. But with long-term investors committed to responsibility, that dynamic changes. Say it again with me: competitors' lunches, yum.

And patient, principled capital is available. The second force is the rise of investors, lenders and institutional customers which demand social responsibility.

Funds basing investment decisions on whether a given company is socially responsible and accountable for its behavior now total at least twelve percent, and perhaps as much as twenty percent, of the total capital available in the United States. That's a lot of money. As just one example, the Carbon Disclosure Project, representing 75 institutional investors with more than $7 trillion in assets, has demanded that every Fortune 500 company release an audit of its greenhouse gas emissions and commit to reductions plans.

And the movement is growing rapidly. One reason is that socially-responsible investment (SRI) funds have routinely out-performed their "hardheaded" competitors over time. Another is the wave of corporate and trading scandals which rocked the US in the last few years. More and more investors are realizing that a company willing to despoil the environment or mistreat its workers is more likely to defraud its shareholders as well. Evidence suggests they're right: several recent studies have shown that the more open and accountable a company's practices are, the more shareholders make, while a Moskowitz Prize-winning study found that corporations operating in countries with high levels of corruption routinely return less on investments. Investing responsibly, it turns out, is investing smart. After all, how much is that Enron stock your uncle held onto worth now?

But SRI is only part of the equation. Increasingly, large institutional procurement contracts – from governments, labor unions, hospitals, schools and universities – are predicated on social or environmental performance standards: they won't buy paper unless it's recycled, won't buy cars unless they emit less pollution, won't buy uniforms made with sweatshop labor, etc. Taken together, these are multi-trillion dollar markets. The NGO sector alone is thought to be generate $1 trillion a year and employ at least 19 million people. That sort of buying-power, combined with new standards, is itself a huge market disruption.

Those who try to do business carelessly while tailoring their end-products to these standards are at a decided disadvantage to those whose business practices meet or exceed these standards to begin with. And companies are even worse off if they try to hide their carelessness. Transparency, the third force, is making corporate behavior is visible as never before.

Corporations can now build fairly intimate relationships with customers. We all know that corporations are honing their marketing research down to us as individuals, amassing data on our preferences and buying patterns, trying to anticipate our needs But we don't often think about how this truth extends two ways: we're more and more informed about the goods we buy and the companies which make them. Intimacy goes both ways.

For instance, if you're shopping for a computer, you can use the scads of online product evaluation sites to get a startling level of insight into not only prices, but the origin and performance of various models and their constituent parts. And people want to know what's inside. Maine lobsters now come with a rubber band around their claws containing a URL for the lobsterman who caught it. Farmers' markets have proliferated all around North America in part because people like to, as Seattle's Pike Place Market declares, "Meet the Producers." Fanatical user groups for everything from Prius cars to soap operas bring not only the kind of publicity money literally can't buy – they're also the first to cry havoc at a product's faults.

All are part of a new culture where the critical partnership between company and customer is managed more by the customer than the company. And while they may flirt with a self-destructive, irresponsible, deceptive partner, most people won't stay with him. Companies with good relationships need to be more open, honest, and true than ever. Papering over gaffes with PR and advertising work little better than sending flowers after forgetting your anniversary.

Cycling this trend ever-faster is the fact that it's growing harder to get away with stuff – misdeeds from corporate crime to shoddy quality quickly find their way to the Net. Even in remote corners of the world, blunders and bad behavior are ever-more-likely to be captured on video and phoned in over the satellite. As William Gibson writes,

"It is becoming unprecedentedly difficult for anyone, anyone at all, to keep a secret. In the age of the leak and the blog, of evidence extraction and link discovery, truths will either out or be outed, later if not sooner. This is something I would bring to the attention of every diplomat, politician and corporate leader: the future, eventually, will find you out. The future... will have its way with you. In the end, you will be seen to have done that which you did."

In this context, depending on secrecy or distance to cover your tracks is a stupid strategy. Indeed, anything less than full disclosure – open, willing, eager disclosure – is likely to backfire. Even the appearance of opacity will sets alarm bells, like a lover who'll never show you where she lives or let you call her at home.

And if transparency rewards good behavior with more loyal customers, it also allows sharper, more decisive consumer activism, quite above and beyond the scope of government regulations. Hell hath no fury like a pissed-off consumer, and the avenging spirit of the people is now empowered as never before. Actions are much more easily coordinated, damage to reputations much more easily spread. Anyone who thinks public displeasure doesn't matter to a corporation should talk with an executive who's found herself at the business end of a serious international boycott (and such boycotts themselves are easier than ever to coordinate). I am unaware of any large corporation which has been driven out of business through citizen action, but I'd bank that it's just a matter of time until it happens.

In a transparent world, business must at very least appear to be good, and having appeared to be good, must at least be seen to be making an effort to change, admitting faults and being candid about failures:

“Today, social responsibility is no longer a matter of corporate discretion, due in large part to the NGO community’s growing influence,” says Bennett Freeman, managing director for corporate responsibility at Burson-Marsteller. “NGOs and other stakeholders are more likely to acknowledge progress and success if companies are candid about problems and even mistakes.”

And once a business has proclaimed a desire to change, and admitted its failure to do so, pressure begins to mount, driving even reluctant companies to do better or suffer dire consequences. As Don Tapscott and David Ticoll argue in The Naked Corporation,

"If you have to be naked, you had better be buff. We are entering an extraordinary age of transparency, where businesses must for the first time make themselves clearly visible to shareholders, customers, employees, partners, and society. Financial data, employee grievances, internal memos, environmental disasters, product weaknesses, international protests, scandals and policies, good news and bad; all can be seen by anyone who knows where to look. Welcome to the world of the naked corporation. Transparency is revolutionizing every aspect of our economy and its industries and forcing firms to rethink their fundamental values."

In a transparent world, your company can't beat 'em with secrecy, and if you're smart, you won't try: instead, you'll invite them to join you, and collaborate. Indeed, the explosion in collaboration itself – the Tech Bloom – is the fourth and perhaps most powerful force.

The "Tech Bloom" describes the universe of noncommercial, collaborative, distributed networks which form, fade, and re-form around a whole variety of socially-advantageous goals. These networks first emerged in software, where they've built operating systems like Linux at dizzying speed, with unmatched complexity and quality. But the paradigm is rapidly spreading to enfold all sorts of technical projects, from sustainable energy systems to medical technologies for the developing world. It's even sweeping through non-technical arenas. Nets of people are now translating schoolbooks into underserved foreign languages, building online collaborative encyclopedias and creating democratic news services.

Whatever the goal, though, all open source projects share four defining characteristics: they "share the goal" – as Thomas Goetz writes, "open source projects succeed when a broad group of contributors recognize the same need and agree on how to meet it"; they use distributed methods of working, so large numbers of people can work together across distances, creating an “architecture of participation”; they break huge goals into small problems, encourage innovative answers, recognize quality contributions and allow anyone to look for (and fix) problems; and they mandate that the results be freely-available to all. "Think of it," Goetz writes, "as the triumph of participation by the many over ownership by the few."

The Tech Bloom is redefining our economic landscape, and it's barely just begun. Distributed collaboration produces better results – any company which lines itself up against it, instead of aligning with it, is toast. But the Tech Bloom requires those corporations who would benefit from collaboration to act as collaborators themselves, rather than owners.

In the Tech Bloom, you don't own the building blocks of a new innovation, even if you helped design them. Instead, you sell your convenient pre-packaged assemblies of bricks, your expertise as mortar for putting them together and a handful of new kinds of bricks you've invented as add-ons. Apple gets this. In 1999 it opened up the code for its MacOSX software while keeping proprietary certain key surface innovations (like its user interface).

Being a free-rider, much less attempting to establish wide-ranging proprietary domains practically guarantees the hostility of these collaborative networks, whereas allying oneself with them maximizes opportunities for swarms of innovators around the world to work with you. Again, the choice is simple – ride the rising tide of collaboration, or waste more and more of your efforts piling up leaky dikes of legal protections around your intellectual property.

Let me propose a scenario for how businesses which hope to survive these forces – much less thrive within them – will have to reconstitute themselves. I can, after all, easily imagine a future where by the end of the decade, the most competitive companies on Earth will see themselves in a new, *transcommercial* light.

If that future comes to pass, how will transcommercial enterprises act? More importantly, how will they think? Let us imagine transcommercial enterprises blooming – how will they be different?

Transcommercial enterprises have at their very core a different conception of what it means to do business. Corporations today sometimes still think they can get away with anything, but more and more frequently they see the need to paper over their faults with pronouncements of goodwill, public relations campaigns and sideline charity-giving. This is not transcommercial.

Transcommercial enterprises won't see doing the right thing as good PR or a desirable goal... if it doesn't interfere too much with profits. Instead, they'll see doing the right thing *as* the path to profits. If there's a conflict between doing the right thing and doing the profitable thing, that just means that there's a market opportunity for figuring out how to make the right thing more profitable.

Indeed, I expect transcommercial enterprises to appear almost unrecognizable to people whose minds are locked in today's business culture. They won't *look* like Fortune 500 companies do today. They'll seem amorphous and networked and rapidly-changing, with a lot of bright idealistic people floating around doing things which seem only tangentially "business-like."

In fact, those people will be the core of the business. Transcommercial enterprises will be all about having deep, open, honest two-way relationships with long-term investors, NGOs, government regulators, collaborative networks and consumer groups. Growing and nurturing those relationships will be a major part of the business operation, because they will be the founts from which slow and deliberate capital, new innovation and customer loyalty all spring. And those relationship can only be grown and nurtured by folks who consider themselves active forces for positive change. Transcommercial enterprises' company retreats will be full of people who'd be quite at home at funky nonprofit benefit fundraisers.

Transcommercial enterprises will be big on declarations of principle and measured adherence to them. They'll trumpet their openness, accountability and transparency, pay for the privilege of being audited by independent do-gooders (like the LEED program ), and be the first to publish the results, warts and all, with plans to do better. Their books will be open, their corporate strategies discussed in online communities, and their products and services willingly submitted to very public scrutiny and appraisal.

Transcommercial enterprises will be intensely neophilic, constantly on the look-out for better ways of doing what they do. They will aggressively pursue every possible innovation and efficiency. In fact, knowing that waste is lost profit, transcommercial enterprises will be nearly OCD about knowing precisely how much energy they're using, exactly what resources they're using and what wastes they're emitting, and squeezing every last gram of efficiency out of those flows. Human capital, I'd suspect, will be as intensely cultivated, with the goal being creating happy, delighted, extremely dedicated employees armed with best new tools and techniques, people who feel they are pursuing their life's work – rather than pushing people right up to the limits of what they'll take without quitting. I suspect these employees will be far more productive over the long-run than those of their old-fashioned competitors.

Finally, transcommercial enterprises will do many things which would have seemed ten years ago as besides the point, or maybe even more the mission of a non-profit NGO. They will partner with collaborative networks, giving away much of the fundamental innovation they create, and facilitating work which by today's standards doesn't benefit them, solely to keep solidly enmeshed in the Tech Bloom's networks of innovators. Their research-and-development teams will spin off non-commercial products for non-market customers (like environmental refugees) on a regular basis. In moderate, sensible, soft-spoken and extremely effective ways, they'll champion political reforms reducing corruption and pay-to-play government (which only hurt them), making it clear they're good corporate citizens.

Will all this happen? Well, prediction is a fool's labor. The world's changing too fast. Almost certainly, people reading this in ten years will be able to laugh at everything I've gotten wrong here. But I hope this essay does illuminate a central fact: a battle over the shape of the future is being fought.

Shortsighted multinational corporations with outdated thinking have hardly been driven from the field. Instead, they are counter-attacking, trying to use captured government agencies to regulate away innovation and trade agreements to break the back of citizen power. Short-term thinking, irresponsibility and carelessness are still making people rich, and those people will fight with every weapon they can find to keep the money rolling in, consequences be damned. Even if those consequences are a ruined planet, blighted lives and strangled democracies.

But those dinosaurs are fighting not just against those who want a better world, they're fighting against the evolution of business itself. Efficiency, responsible capital, transparency and collaboration are forces that have emerged from both the desires of billions of people and the natural trajectories of technological innovation. Those of us who would like to see business working to change the world don't need massive government subsidies or global governmental regulations or divine intervention. We just need a level playing field and the continued spread of tools for working together.

Give us that level playing field and widespread collaboration, and these forces of change will be revealed for the dinosaur-ending meteor they are. The future will belong to those many small, fuzzy and frisky enterprises which are evolving beyond commerce.

[copyright 2003, Alex Steffen.]

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Comments

Alex, this may well be my favorite thing you've ever written.


Posted by: Jamais Cascio on 25 Nov 03

Alex,

Thanks for the chance to react to an early draft.

I agree with your main thesis- business is a major force for good (or can/should be) and agree with two of your drivers (transparency and customer/investor pull). I'm less sure about efficiency and technology.

Efficiency is important, but generally not a strategic, board-level driver. It comes from, and re-inforces, the need to "make this quarter's numbers." Its benefits are felt fast (reduced costs drop straight to the bottom line, but fail to feed the top line and do not drive growth.

Technology is also tactical, or at least a two-edged sword. It is tactical to the extent it drives efficinecy gains. To the extent that all new technologies have a risk of unintended, negative consequences, new technologies (think GM crops)may have social downsides.

Interestingly, businesses are returning to a "transcommercial" focus. The excesses of financial engineering (junk bonds, earnings management, etc.) that distracted companies from serving customers are being better "priced" in the capital markets. This allows companies to get back to their real business- creating customers. Profits are just a way of keeping track and ensuring that investors capital risks are adequately compensated (this last paragraph is Peter Drucker's thesis, I just happen to agree!)

Anyway, I've given this topic a bit of thought (that is probably cleverly hidden in the above ramble). I'd be happy to share more. Drop me a line if you care to carry on a conversation in electrons!)

Dave
drankin@glpf.org
www.glpf.org


Posted by: David Rankin on 25 Nov 03

yea, i think if efficiency includes recycling -- eg http://frontwheeldrive.com/reviews_cradle_to_cradle.html -- such that social/environmental cost externalities are figured in, accounted for and affect critical decision making, then alone while desirable is not necessarily sustainable... for that new accounting systems may be more necessary than new business models -- viz http://www.gristmagazine.com/books/books111000.asp -- and perhaps a new currency cut from whole cloth ( http://www.transaction.net/money/gc/gc01.html ) to engender systemic change away from a creaky, usurious global financial architecture that seems to promote rather than counter greed, scarcity and instability!

also some orgs working along these lines btw are...

http://gbn.com/
http://www.tni.org/
http://www.zpluspartners.com/index2.html
http://www.davinciinstitute.com/home.php

and yah, peter drucker is great... his age of social transformation is like a classic essay btw :D

http://www.theatlantic.com/politics/ecbig/soctrans.htm


Posted by: smerkin on 25 Nov 03

I think you're on to something.

Here's why:

The fundamental tenet of both environmental law and social justice is that the polluter pays: companies must be unable to externalize costs through legislation or fair business practices.

However, **the**entire**purpose**of**limited**liability** is to externalize costs: a company is sued, goes bankrupt, but all the profits made by the company are safely in the pockets of shareholders, immune from retrieval to pay for the damage the company which made that money has caused.

Ergo, it's always going to be possible to make "hit-and-run" money - do damage, make a bundle, get sued into oblivion but leave rich shareholders.

Can we still do business without limited liability? Sure... but that's a very, very different world.

For a start, very large companies become very likely targets for serious hammerings at the hands of liability lawsuits when they don't have mazes of wholly-owned-subsidiaries to hide behind.

Secondly, the playing field is levelled - if you're in business, and there's no limited liability, then by god you're going to have to do the right thing, or die trying.

Thirdly, a full-liability environment heavily discourages passive ownership and stock-holding: people are going to want to watch their investments like a hawk, because malpractice by any company they own stock in could wipe them out personally, financially speaking.

I'd say, though, that without scrapping limited liability, it's hard to see how this could all happen. Coase's work on transaction costs pretty much defines when big is better and when small is better, and unless transaction costs between small entities drop remarkably (executable contracts such as the E-rights folks might do it) it's hard to see how the landscape could change to allow the rabbits to outgraze the behemoths...

$0.02


Posted by: Vinay on 25 Nov 03

Oh, sorry to be such a drag, but aren't company directors in America now bound to *only* consider increases in financial shareholder value when making decisions, and indeed can be subject to liability if they can be shown to consider any other criteria in decison-making?

Ugh. What a frickin' mess: laws to make people safe from consequences, and laws against doing the right thing...


Posted by: Vinay on 25 Nov 03

One way to reach business is to use the idea of quality and extend it to environmental quality. W. Edwards Deming talked about statistical quality control through the goal of zero defects on a production line and the rigorous practice of total quality management.

We should call for zero emissions in order to achieve real environmental quality. What might a zero defect industry look like? Wouldn't that thought experiment be useful to pursue?

GE has claimed great results through its use of Six Sigma, another quality management regime which calls for "a statistical measure of 3.4 parts defective per million opportunities".
(http://www.tristarvisual.com/sixsigma/SixSigmaBook.html?mgiToken=3F58216639EA9A43F3F)
What would a world look like built to that specification, 3.4 parts per million waste and zero toxics? Wouldn't it be useful to engage GE on its own established standards and practices?

These are ideas and ideals that are already present in the business community. This is language we can use to talk to business and address them where they already live.

I would also introduce Bill McDonough's ecological design principles:
waste equals food
use only available solar income
respect diversity
love all the children

Another thread, altogether different, is the ground up growth of the organic agriculture movement and locally grown food in season. There is an alternative economic system which has been built up in the last thirty years that stands in contrast with the recognized agribusiness model. It is the triumph of the hippies and almost entirely ignored as a social construct and an organizing opportunity. It's time we built on the platform we've already constructed.

We should at least realize that we have that platform and make explicit its dimensions.


Posted by: gmoke on 25 Nov 03

Alex,

Good piece, as always ... but you don't go far enough. Remember your motto, "Another World Is Here." The kinds of companies you are talking about are also already here. They are not numerous, but they are not tiny. A bank in Australia. An infrastructure producer in Japan. And more importantly, the business units within specific larger companies. They aren't doing exactly the model you're talking about -- open sourcing isn't always part of their model -- but the rest of the transcommercial part is. Some huge percentage of major companies (I wouldn't hazard a guess, it's somewhere between 10 and 50%) have "gotten it" at some level and are on a path like the one you describe. I'd take a lot of what you cast as "will happen" and put it into "is happening."


Posted by: Alan AtKisson on 26 Nov 03

Nicely said. It brings a couple of source-material things to mind -- although I'm guessing you are familiar with them, just haven't cited them specifically. First, Bucky Fuller, despite his antagonism toward the fictional "Obnoxico" and its real-world brethren, also seemed to think that transnational companies would become the only viable vehicle (if there were to be any) for worldwide sustainable behavior. Second, the transparency you describe brings to mind the dangers of one-way transparency laid out by David Brin in "The Transparent Society." Who will watch the watchers? I do think that as the technology becomes available, and "the street" finds its uses, the mere fact that watching the watchers is illegal will become just another technical problem to route around.

Finally, a bit of my native cynicism... my experience with most corporations (immortal, no conscience) is that they aren't going to "give" anyone a level playing field, and neither are their "representatives" in government. Out-innovating them only gets you so far. If you are trying to displace an existing behemoth, in very few cases is it really enough to build better mousetraps. There are simply too many structural protections in place. They have managed to make externalizing their costs an integral part of the status quo. Promising developments in sustainable energy, for example, are going to have a hard time staying alive under the proposed US Energy Bill long enough to displace massively subsidized carbon-combustion and nuclear industries.

However, limited liability doesn't mean "no liability," and I think it's increasingly viable (and important) to raise the transaction costs of bad actors enough to provide a bit more level-ness to the field. I don't think it's realistic to think that you can win in the marketplace without taking on the incumbent industries in their legal, legislative, and regulatory lairs. Not because you will win there, but because you must break down at least part of the protective structure they have erected for themselves. Sometimes a good old-fashioned disaster will offer a toehold (e.g., if rising sea level raises the cost of running all those coastal nukes, that gives as good an opportunity for competition to displace them as a strict new regulatory scheme, or a huge liability judgment.)

I think that the day is soon coming that we will see not only "swarm" protests, and (now appearing) swarm politics, but also swarm litigation. The tools are there, the people are there, it's just a matter of applying the tactics in a new arena.


Posted by: David Fishel on 26 Nov 03

Wow! What great and thoughtful responses. I'll try to respond in the depth deserved over the weekend...

In the meantime, Jer Faludi sends over these comments, part of a much longer email. I don't agree with everything he says, but thought it might be of interest.
-Alex

"Study after study has shown >that many, if not most, socially- and environmentally-desirable goals can be pursued by companies in ways which make them not only >better corporate citizens (with happier workers and neighbors) but more competitive."

This is true for pollution/health & energy & skilled or somewhat-skilled labor, but unfortunately not for unskilled labor. No
fast food chain will become more competitive by raising salaries. ...And it's only true for
pollution/health if the companies are held responsible for the externalities, which is still only true some of the time.

"And Lovins is coming from a pre-Moore's Law
perspective. Computers are getting twice as fast every eighteen months."

This'll definitely enable better sensor &
data-crunching / adaptive capabilities for manufacturing, as you said. That could revolutionize many non-high-tech industries.

"Overall, society hardly glimpses the theoretical limits of performance."

Yes, but on the other hand, often even the frontier of best practice doesn't get us as far as we need. Amory's been working on this project to write an engineering textbook on how to do efficient design, called Factor 10 Engineering (after his earlier book Factor Four), and he's had an assistant looking for examples of 10x engineering for about six months now--there are basically very few. 2x, 4x, and the like aren't too hard to find, but what first-world industry needs for sustainability is 10x - 100x+.

This means fundamental new directions are required, rather than following a particular path of steady innovation like the computer industry can. Of course, this is harder for business reasons as well as science/engineering reasons.

"...won't buy cars unless they emit less pollution, won't buy uniforms made with sweatshop labor, etc. Taken together, these are multi-trillion dollar markets."

Yeah, and hopefully this'll happen more often; the barrier so far is that no one buyer tends to have enough clout to move the market, and in order to have enough clout they often have to team up with competitors & share their specs with each other. Hard to talk people into, but RMI's starting to make it happen a teeny bit in cooperation with Society for Organizational Learning and a few different companies.

"...good relationships need to be more open, honest, and true than ever. Papering over gaffes with PR and advertising work little better than sending flowers after forgetting your
anniversary."

Mmm, I don't think this is true. Word of mouth
travels pretty far online, but nowhere even approaching as far as TV ads & mass media press releases travel. Whistleblowers, bloggers, and independent news sources reach small audiences who're already disposed to have matching opinions. For the other 90% of the country, it's lost in the noise. Witness the percentage of Americans who still believe we found WMD's in Iraq and that Al Qaeda was linked to Hussein, despite establishment-mass-media coverage to the contrary. It's true that eventually you'll be seen to have done what you did, as Gibson said, but that'll be ten years later when nobody cares or remembers anymore, much less has the ability to do anything about it.

"Transcommercial enterprises will be big on
declarations of principle and
measured adherence to them... their products and services willingly submitted to very public scrutiny and appraisal."

You're absolutely right that high-end boutique enterprises (like Apple) will do this. But there will always be a segment of the market whose first (or only) priority is low price, and this is almost always the majority. The biggest employer in the nation is Wal-Mart, not Apple.


Posted by: Alex Steffen on 26 Nov 03

Great stuff, Alex. You're articulating ideas I suspect many of us have been vaguely churning over for a long time, but haven't been able to express - thanks!

But...

I think you're still making the mistake of looking at this from the 'company' rather than from the 'individual' point of view. I think/hope one of the main forces driving the changes you discuss is that there will be more enterprises formed when a group of people think "we've got this cool idea, let's see how far we can get with it".

Given that these kinds of people aren't be on the poverty-line, they're able to think about more than profit. And if you're a small and fairly informal group, you can agree to do the right thing, even if it isn't the best way of making money.

This is where I disagree with you, at least in emphasis. There are times when ethics coincide with profits, but these are limited, and they're the easier end of the problem (niche markets, luxory goods, etc). What's exciting - and already happening, in open source and elsewhere - is the mixing of commercial and social ends, not because one is a means to the other, but because workers want both. That opens up a whole field of part-commercial part-social entrepreneurship.

Also agree that we're talking about a very small segment of the economy, but that doesn't stop it being thrilling.


Posted by: Dan O'Huiginn on 27 Nov 03

I did not read the whole thing, but I did notice that you treated the corporation as a single entity.

From my own personal experience the biggest problem with corporations is that they are legally and culturally set up to allow the people at the top to make decisions without feeling responsible for the results. Quite simply, they can reap the rewards and evade the consequences. Ken Lay is a great corporate leader one day and the next he says he was just a figurehead.
I have my own one man gig, so I could just have people pay me, but I paid the state $200 and made up a silly name and all of a sudden my liability is limited. It is up to me not to abuse the cover that I was given.

Principles, morals and ethics are not in the spreadsheet of decision making and otherwise good people do things that they would not do.

Reforming the corporations requires that the leaders and employees accept respoinsibility instead of the Nuremburg like defense: I'm just doing my job.

That is why some people are avoiding the corporate life, it can place you in a situation where you may compromise your integrity and the corporate culture is not built around integrity. Too many at the top have rationalized it away.


Posted by: sinchlep on 27 Nov 03

Gennifer sends this link to Ashoka's view on this issue:

http://www.changemakers.net/journal/03november/index.cfm


Posted by: Alex Steffen on 30 Nov 03

This is an interesting discussion and something about it doesn't sit well in my gut.

I think that I applaud what Alex is trying to do. We need to _know_ that things can be done differently. The more examples that senior executives come across the more they will begin to believe that ethical business is possible.

From my personal experience and that of my many friends in the corp sector I feel that we have a long ass way to go.

Sometimes the problems are of intention. I personally know three bright young people who laboured for five years to introduce sustainability and triple bottom line accounting practices at one of the world's largest accountancy practices in the world (with a mandate from the top). A new CEO came in, took one look at what they were doing, at the market and axed five years of work. While it might not be back to square one they don't have a whole lot to show for their blood and sweat and they're all in new gigs now and bitter.

On the other hand I know a young exec working directly with the Chairman of one of the world's largest mining companies. The Chairman has basically given this guy a mandate to change the way business functions to make it more ethical and sustainable. The exec now has the rather formidable problem of figuring out what the heck to do. He's a very smart guy but the practicalities of the task are immense.

I don't think we should think changes are inevitable. I feel that we'll have to keep sweating blood and tears in order to make change happen and we shouldn't underestimate the task at hand.


Posted by: Zaid Hassan on 1 Dec 03

Alex, I always enjoy energy and optimism, and I agree with a lot of what you are saying. In spiral dynamics the concept of a critical mass is relevant in that it can tip the scales to a more sustainable, socially responsible, adaptive global economy - quantam leap.

I resonate completely with the problem of corporations and even individuals being isolated from the full range of consequences of their actions. Could WalMart exist if the cost of a bag of charcoal also included part of the cost of the lost local grocer downtown, the unemployment paid to the former WalMArt worker when she was laid off after they gobbled up all the workforce in my little town?

A few other thougths...

Buying cars with low emissions, organic foods, or other socially responsible practices are possible for those who can afford to pass up WalMart's cheapest prices. So the people weilding their individual/collective influence by these purchases are in a fairly select socio-economic-cultural niche. If we could build a Chevy Suburban that got 80 mpg, would it be a socially responsible vehicle?

Where does entropy fit in to all this?

Anyone read the book Technopoly? Your article speaks to the vast potential of technology, but if we continue to do it "because we can" instead of asking whether we should or not, we will continue to be blindsided by the unintended consequences of technology. Did you know that more and more children are beginning to ring doorbells with their thumbs? Why? Cell phones and nintendo. What are the long-term consequences of this? Do we ever stop to ask?

Thanks for provoking good thinking and opening up this great dialogue.

Nate.


Posted by: Nate Regier on 8 Dec 03

During the late 1960s, "social indicators" were included in the annual reports of a number of companies. If today such indicators were refined, objectified, and quantified, and then tied to modest and realistic tax incentives and disincentives, a carrot-and-stick approach to changing the behavior of companies would become available. Perhaps it might be called something like "The Free Market and Humane Community Reconciliation Act."


Posted by: Mark Goldes on 10 Dec 03



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