New Rules of Business Sustainability

Question: What are the new rules of sustainable business?

Blair Sheppard: The question is sustainability starts with a premise that our existing model, be it sort of the value chain of business is based on, or how we do the math, presumes an infinite source of material which is just not there.

Three simple examples.

First, in our accounting, we don't incorporate public goods as part of the cost. Because we don't incorporate public goods as part of the cost, the consequence is that we can treat them as inexhaustible because they don't have any downside in the accounting model.

The second one is a simple one, which is that in economics, growth is always good. That was actually a reasonable assumption when the majority of people in the world were really badly off. As an increasing percentage of people in the world are reasonably well off, that may not be a perfect assumption. So it's a question of relative growth, for example, that matters.

The third one is that, as we de-constructed our value chain to get increasingly efficient, we actually lost track of what harm we were doing in any step of that value chain. We took things that in the US, for example, that were regulated or had control over environmental impact or societal impact or personal impact, because we gave it to somebody else, what we really did was offload our problems to someone else, and made them invisible. You put any one of those as a problem, you put all three together, it's a real issue. Whether be environmental sustainability or social sustainability or inequity and compensation around the world. Whatever it is, the three together cause an unsustainable model.

That's coming home to roost in a whole series of ways. I think there are two reasons why we in business should worry about it.

The first is, you don't want to create a model that doesn't work in the long term. So just pragmatically we should be worried. And the second is that, if we don't create a sustainable model, we won't be allowed to play.

Question: Where are the greatest opportunities in the next economy?

Blair Sheppard: Energy and environment is huge, and it's huge for the reasons I described earlier, which is, we have an unsustainable model in its present form, and we don't have loan to fix it.

An important point there is, there's opportunities cross the entire spectrum. There's opportunities in entrepreneur activity, because we're going to have to innovate our way out of things, and there's opportunities in working with the big utility firms because it turns out the grid is at the heart of it.

If you're interested in energy of any kind, be at financing energy, consulting energy, building a windmill, getting natural gas out of the ground, across the entire spectrum, there's a huge opportunity there. And I think the lack of availability of human capital is going to be the rate limiting factor in that sector.

The second sector, obviously, is health because we're all getting older, and it turns out as we get older, we have greater needs. The challenge there is going to remain profitable, because it's going to be increasing regulated but about a huge opportunities in that sector.

I think there are phenomenal opportunities in IT media. The convergence of traditional information technology with media with entertainment is happening really, really fast.

Think about this is an example. There's a whole different way of bringing information to the market, that wasn't possible, that has a business model that are actually pretty interesting, of the kind that we're associated with here, and put all that together is probably three, three and a half trillion dollar industry that is actually changing form in real-time. Whenever you have growth and form change, you've got huge opportunity.

Where's that exist? Those three sectors are interesting in every place in the world, from sub-Saharan African to China and India to Russia. So, I'd play sector.

Then I think the important point is that wherever you grew up, don't take your first job there. Take your first job somewhere else because it's a pretty good bet that your ability to understand how other places in the world play is going to be increasing important in our future. So if you're Chinese, work in India, United States, Russia. If you're an American, work anywhere but the United States as your first job. You can always go home, raise a family where you want, but the degree to which you know well other places will be a huge competitive advantage.

 

How sustainability became embedded into global business plans and where to search for the next big opportunities.

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