‘Sustainable’ has probably been the most fashionable word of the last three years. With climate disaster looming on the horizon, that’s no coincidence. People, governments and businesses alike are starting to realise that the way in which we are operating our world has some serious flaws. The capitalist engine is starting to sputter.
Have you noticed that many companies seem to have forgotten that the profits they make are built on contributions made by many others, from both inside and outside their organisation? In the philosophy of the well-known American economist, Milton Friedman, these organisations focus on maximising profits without really looking at the consequences; as long as it is legal, it’s fine.
You may feel a visceral anger about this. Maybe we should blame these people, or maybe not. The chances are that many of them didn’t really give it that much conscious thought. They are children of their time, which was a time which had its own set of values and that’s the context in which they made their decisions.
However, Milton and company have been proved wrong: increasing inequality and insecurity leads to burnout, the deterioration of our social fabric and environmental horrors. All of these are the result of a system where value is not properly allocated. Poverty, although diminished, is still abundantly present and inequality is unfortunately on the rise again in many countries.
In an era where value becomes more important than mere money and happy is the new rich, it is worthwhile to rethink the business models to make them become ‘sustainable’. That is, they refocus on non-monetary value instead of profit and rebalance private interests with the ‘common good’.
At Happonomy, we aim to develop and apply sustainable business models. We have also gathered some other examples of sustainable business models that made us think, “Wow!”
Maybe you have already encountered the following…
You subscribe to a promising online software tool; you try it, use it for a while, but are not sure if you like it, so you leave it and forget to cancel your subscription. You see the subscription amount month after month in your credit card statement, but you forget to cancel it or you just have too much on your plate.
At the end of the year, you have spent quite a large sum of money on a tool that didn’t provide any value. Technology only offers value if it is used, something which many software companies seem to forget.
Value-driven software companies can apply a different perspective, by proactively monitoring whether or not accounts are still live and then contacting these clients to ascertain whether the tool still gives them the value they are looking for; that is, you reset the balance.
At Happonomy, clients of Tribeforce, our organisational development software tool, can count on the fact that we reach out proactively and pause their subscription after three months if they haven’t logged in.
The entire service industry is stuck in a race to the bottom as marketplaces for ‘gigs’ are becoming increasingly globalised and automated.
With artificial intelligence (AI) and machine learning increasingly ready to do the heavy lifting in many domains, expect a surge in competent, highly-educated service providers who will ‘flood the market’ and compete for the same projects. The capitalist logic here is simple: increased supply means lower prices with increasingly more independent service providers struggling to have a high-quality life.
There is a different perspective though. What if we chose a high-quality life over the lowest cost? What if we paid service providers the rates they need to live a good life?
At Happonomy, we are building a Federation of value driven business experts who charge these rates exactly; each one of them has reflected on what they find important in their lives and has calculated in detail what this means financially. This rate serves as their indicative base rate for their services. There’s no need to ’negotiate’, as your organisation guarantees that people are paid enough to have the life they want.
In business, giving is a word which is not used very often. Business, through the creation of its products or services, focuses on driving value. However, this value comes at a cost, literally.
Giving, meant as an altruistic token of value for which gratitude is its currency, can be implemented in organisational policies though.
Epic Fondation, a global philanthropic innovator, developed several giving solutions which put the value of the gift centre stage to alleviate poverty.
The foundation developed different solutions, all aimed at giving to those in need. Each solution offers a unique tool in the sustainability toolkit of a company. For example, employees might give away a part of their wage (“employee giving”), entrepreneurs might give away a part of the money after selling their company via an entrepreneurial pledge, and clients might pay a surplus (“transactional giving”).
Let’s face it, sustainable business models seldom touch on the foundations of a company and its statutes. Too often, statutes are generic, ‘shareholder-first’ types of documents. How can we build a sustainable business if its foundations aren’t designed for sustainability?
There is hope though. The trailblazers of business are exploring alternative, more sustainable avenues. With regards to corporate structure and governance, the benefit corporation, the B-Corp, is gaining traction. It focuses on purposeful activities, ethical behaviour of its directors and transparency towards all stakeholders involved.
We admit that it is a rather sad state of affairs when you have to design a new company model to emphasise sustainability, transparency and ethical behaviour. Shouldn’t all companies be held to that standard?
That being said, B-Corp is a great initiative aiming to rebalance what is going wrong. Unfortunately, it only goes so far. It does not model how shares are divided fairly, nor does it cover how profits for the good of all stakeholders can be handled.
That is why, at Happonomy, we are developing The Slingshot, an open source legal model to create a business with fairness and balance built in its DNA. With Slingshot, founders of new companies and owners of mature companies can ensure that ownership is allocated fairly and profits are distributed to benefit all stakeholders involved.
Our capitalist system is deeply flawed and is a product of an era where financial security and consumption were considered to be quite valuable. That was then.
Today, in mature Western societies, values and priorities have shifted. In the rich, economically developed countries, people are craving different things, such as time and ease; valuable relationships; sustainability; meaning.
Although the root-issue, i.e., a flawed monetary system, is not tackled with any of the above examples, the good news is that we don’t need to wait for the perfect system to move things forward.
Entrepreneurs and leaders can lead their organisations by installing novel policies and sustainable business models which include the needs of all stakeholders and realign money with those things that truly matter.
The clock is ticking…
Are you an entrepreneur or a business leader who wants to be a force for good? Reach out to explore whether our solutions can help you to move the needle.
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In spite of the rise of vegetarianism, we still consume about 500 million tons of meat each year. Large quantities of natural resources are needed for meat production, and these resources deplete our planet. Unfortunately, this isn’t the only problem facing us. Because of the continuing population growth, increasingly more meat will have to be produced. How can we increase meat production without causing too much damage to our planet and our live stock?
Several companies (such as Modern Meadow) and scientists specialise in transforming human and animal stem cells into tissue. This technique allows them to grow synthetic meat, often referred to as cultured meat, separate from actual animals. Stem cells from living animals are placed in a growth medium of amino acids, fats and sugars, in which they naturally multiply and transform into muscle tissue.
High resource costs and environmental degradation
Producing meat requires plenty of natural resources. It involves live animals who require specific food. This food needs to grow, and therefore, needs water. To harvest the food, machines are needed. To turn the food into animal feed, resources are needed. To transport animal feed, fuel is needed. Live stock requires outdoor or indoor living spaces. If animals are kept in a barn, then that barn will need electricity. When animals are ready for slaughtering, they need to be transported, which again requires fuel. Electricity is used during the slaughter procedures, and the transport of meat to shops and wholesalers leads to even more fuel consumption. On top of that, livestock such as cows produce high amounts of methane and other greenhouse gases. These gases contribute to global warming and all of its negative effects.
It is obvious that the production of meat requires a significant share of our limited resources.
Nature
Cultured meat reduces the amount of water and land needed by 95%. If fewer animals are needed for meat production, we can give more land back to nature. Besides that, cultured meat needs far less hormones and antibiotics, which means fewer negative effects on our health.
Growing demand
The demand for meat is growing, despite the trend of vegetarianism. This is partly because of the increasing world population. It is expected that a lot more meat will be needed in the future, particularly in countries such as Russia, China and India. Increased mass production will lead to an increased strain on resources and, quite likely, a deterioration in animal welfare as well.
Animal welfare
On the other hand, cultured meat will improve animal welfare. Fewer animals will need to be killed for their meat, so there will be no more need for mass production and, as a result, animals will have a higher quality of life.
Tailor made
Tailor made meat isn’t something that will be available right away, but in the future, it could be possible to have a variety of meat types for different types of consumers. For instance, certain vitamins could be added that are not naturally present in regular meat.
Status
A hamburger made from cultured meat has already passed the taste test in London. Steak chips, made from cow muscles, have been tested as well, with good results. It will take a while before you’ll find them in the supermarket though, due to the laws that will have to be approved first.
Usually this process takes about eighteen months. During this time, the producers will have the opportunity to prove that their product is safe and healthy.
Because an ever-growing number of companies are starting to see the potential of cultured meat, the amount of research being done is increasing. This can help bring cultured meat to the market faster than was expected initially. Based on current predictions, it could be as early as 2021, with some companies even aiming for 2020.
Organisations
Currently, there are companies worldwide researching cultured meat. One Dutch company doing just that is Mosa Meat. Its owner launched his first cultured burger in 2013. Although the burger was a bit dry, Mosa Meat is trying to create juicier meat now, and on a large scale. It will be sold as a luxury product initially, at sixty euros per kilo. Right now, they are growing the meat in the foetus of a slaughtered cow, but if the company wants to turn this into a success, they’ll have to create a better solution. After all, the principle is to produce meat without the need to slaughter any animals.
The dilemma that the cultured meat industry is facing, is that consumers obviously want to know what they are eating, while the producers want to keep their recipes out of their competitors’ hands. American NGO New Harvest is financing five universities to research the options for a wider offer of cultured meat, including turkey and lobster. In the US, Finless Foods and Blue Nalu mainly research cultured fish, which is a cheaper process because fish cells require a lower temperature and therefore less electricity.
At the time of writing, it is difficult to predict the long-term effects of cultured meat, simply because it is not yet being produced and consumed in large amounts. Current research shows that it is still too early to determine if cultured meat is the ideal solution for the environment. In many cases, the required electricity will still be generated through fossil fuels. On top of that, more water will be needed than was initially expected. Cultured meat doesn’t have an immune system, so it will have to be sterilised, requiring large quantities of water.
Not all animal ingredients and animal products can be replaced by cultured meat, such as ingredients in cosmetics and pharmaceutical products, and other useful commodities such as leather. These products are much more difficult to replace than actual meat. We still need to do a lot more research if we wish to replace all animal products completely.
Want to find out in what way food impacts our quality of life? We got you covered! Find out more about food and surviving.
string(3) "yes" NULLCompany bonuses are often the best way to incentivise people to do the best they can to achieve a company goal. The goals can be anything, although they are often financially related and purely number driven; the goals themselves do not hold any ‘moral’ value.
Bonuses, in today’s world, do not take into account any interest other than that of the organisation either. As a consequence, they can be used to reward behaviour that is not necessarily in the best interest of all.
We live in a world where we expect a reward if we achieve a goal in business. This reward feeds our self-esteem, helps us to build financial security and enables us to experience or buy new things that give us a richer life.
As long as bonuses are linked to merit and achievement, we have few objections. Sometimes though, bonuses feel unjust, mainly if they are excessive towards the people receiving them.
Today, there is a clash of perspectives regarding the bonuses given in the financial sector. Bonuses of financial executives are still considered by many to be disproportionate. Privately owned banks were saved from bankruptcy with public funds and paying executives substantial amounts of bonuses, seems unjust.
However, when looking at the perspective of the executives, their bonus seems to be warranted; they reached goals that protect or grow the shareholder value, using the financial system we collectively created.
We can resolve this seemingly diametrical opposition, but it requires a leap in perspective with those working in the financial sector. If we understand that the financial system is not a goal in itself, but just a means to procure a high-quality life all people, including themselves, then the insatiable hunger for bonuses may be halted.
Unfortunately, changing perspectives of people takes a long time. Radical systemic events like wars and financial crashes or personal events like the death of a loved one can be catalysts. Without them though, we need intermediate solutions.
As long as we require a monetary incentive to perform to the best of our abilities, bonuses seem to be the way forward. As you’ll read later though, bonuses have very limited impact, suggesting that we could get rid of them and not much would change. However, for now, let us assume that we do keep purely financial bonus structures.
The question arises about how we can align them according to behaviour that takes into account the interests of all parties involved.
In theory, the answer is simple: companies can transcend their own financial shareholder value and weigh in all interests in their bonus schemes.
We can explore an example to see how this could be put into practice.
Suppose a company is profitable but it wants to restructure its organisation. As they close down a profitable entity of their company, they decide to lay off 500 people. Most of us would feel bonuses out of place in this situation. However, company boards and shareholders do use these kinds of criteria to reward their management team.
Zooming in on the different stakeholders impacted, it is clear that the shareholders are the main beneficiaries. On the other hand, the company employees on the other hand are those who are directly negatively impacted; they lose their jobs and financial security because of profit maximisation purposes.
Indirectly, society as a whole is also negatively impacted; social benefit costs increase when people are laid off.
In the case described above, we have one stakeholder (the shareholders) that profits and two stakeholders (the employees and society) who experience negative impact. A variety of bonus mechanisms can be applied, depending on the extent to which one is willing to focus on the kind of value that is created.
If an organisation focuses on the private value instead of the societal value, only a percentage of the original bonus can paid.
As we have only have one out of every three stakeholders benefiting from the action, an organisation can choose to pay only 33% of the total bonus.
The other point of view emphasises the societal value over the private value: if there is one stakeholder that is not benefiting from a company measure, no bonus is paid at all.
In his book “The surprising thruth about what motivates us”, social scientist Dan Pink shows that bonuses only make sense if people have to execute repetitive and mainly uncreative tasks.
In other types of activities, the fact that people can apply their talents and work creatively and independently is much more motivating. Bonuses in this scenario only give a quick motivational fix.
Both from a motivational and a financial point of view, this is sub-optimal. Yet, in today’s business culture, bonuses are widespread amongst top executives.
So, the questions that company owners, managers and policy makers need to ask are, “Why do we need bonuses?” and “Do we believe top talent will not be willing to work for a generous salary provided they believe in the organisation’s mission where they can grow their skills?”
Shareholders can appoint executives who are intrinsically motivated by what an organisation does rather than the potential size of their bonus.
Do you know what the irony is?
The bottom line will bloom by doing just that…
What about you? What intrinsically motivates you?
Do you know the answer to that question? If you don’t know what motivates you, you can use our Happonomy Value Canvas freely to find out.
Go check it out! And yes, it is free.
string(3) "yes" NULLYou know what they say: “what gets measured gets managed”.
In our society today, economic measurements dominate the debate. We are talking about how much our economies grow, how much debt a nation has and what the employment ratio is. You may come up with some other economic metrics yourselves.
Let’s dive into the main metric we use today and explore which alternatives could work…
First, let’s look at what we measure today. At the core of the economic metrics is the Gross Domestic Product (GDP). Simply put, it is the turnover of a country or the value of all goods and services produced within a country’s borders.
To avoid confusion, this is not the production of all people with the same nationality. That is called the Gross National Product (GNP). So, foreign people living in your country contribute to the GDP but not the GNP of your country. Oppositely, your fellow countrymen living abroad do not contribute to your country’s GDP but they do add to the GNP.
The GDP initially requires correction for the impact of inflation because inflation increases the GDP without having any additional production. This corrected GDP is a metric that captures the real expansion of creation of goods and services very well.
It includes the production of consumer goods and services, government spending and even investment goods. It also discounts goods that are used as production goods for other goods (‘intermediate goods’).
1. Do we all use the same definition of GDP?
The answer is “no”.
It may come as a surprise that countries do not have a uniform interpretation of the GDP metric. Several of the G20 economies have modified their definition of what GDP consists of over the last few years, all suggesting growth of their economies.
For instance, the United States mid-2013 added a couple of variables, growing their economy by 3%, one day to the other. It may be quite valid to add R&D to the equation or even adding future pension payments. There is nothing wrong with that per se but it does render comparing economies impossible.
It is like comparing apples with bananas.
Another example is India, whose GDP grew from 4.7% to 6.9% in 2014, just by modifying the way that their GDP is calculated. Again, there is no blame to India for doing this, but it does illustrate that GDP is not an ‘absolute’ number.
Finally, in the EU, several countries also added parameters to the equation. France refused. We will not tell you what they added yet; read on to find out. So, even within the EU block, different metrics for GDP are used.
2. Do we measure GDP accurately today?
A second question one needs to ask himself is, “Even with different definitions, do we measure GDP properly?” Again, the answer again is “no”.
In order to be able to come to a correct figure, one needs to receive the correct data. This is where things go wrong. By definition, governments don’t have any reliable statistics available on underground economies. So, it is an educated guess at best.
The economic infrastructure varies vastly across the world and not every country is able to gather all numbers, as you need a generally recognised central government to be able to report all statistics.
Countries struck by civil war are already excluded as they don’t receive statistics or taxes from parts of the country. This means that countries like Syria, Iraq or Afghanistan are unable to calculate credible GDPs.
Thirdly, some components of the GDP equation are not objectively measurable.
The contribution of government services like education or health does not have an objective ‘market’ price as it is the government that regulates the wages of teachers and doctors. This means that policy decisions which are by their nature ‘subjective’, have an impact on the GDP metric.
3. Does GDP contain everything that increases quality of life?
Provided one agrees with the fact that are economy should be designed to propel us forward, does the GDP metric take into account the things we find valuable?
Once again the answer is “no”.
GDP as a metric provides an indication of output, irrespective of the fact of whether something is considered to be wanted or not.
So, the first question we need to ask is: what do we want? Only then can we create a statistic to mean something that better encapsulates what we need.
There are also some paradoxes in the GDP calculation. For instance, we do not economically value the hours we care for our children, while if we hire a babysitter or nanny this is considered to be valuable and part of the equation.
If you have children, you know how valuable spending time with them is. So why isn’t this value taken into the GDP? It is a service you provide to another person. You are just not getting formally paid for it.
This suggests a design flaw present across our entire economic system: economy is reduced to money driven transactions, not transactions that create value.
4. Does it measure what we want?
The general public is so used to hearing about GDP that we do not reflect on its contents or its goal anymore.
We need to ask ourselves the question: do we want to measure growth for the sake of growth alone? Aren’t we better of measuring that what improves our quality of life and well-being instead?
GDP does not measure fairness nor the sustainability of the actual production.
It may sound a bit cynical: GDP is better off to have environment pollution as this creates new “production”.
Prostitution and drugs
Earlier in the article, we mentioned that several EU countries had added parameters to their GDP, but didn’t tell which ones were added. Well, here it is: Did you know that recently several countries like Spain, Italy and the UK expanded the GDP metric with the production value of prostitution and drugs?
It is understandable that we measure these things for policy reasons. However, do we want the ‘value’ of these activities in our key economic metric indicating how well our economy is doing?
What would it take to have an alternative to GDP?
It is easy to be a critic, but it is probably more valuable to try to find an alternative.
Firstly, let us look at what we would expect from an alternative guiding metric. At its core it should monitor the progress of individuals and the quality of life, so we can improve it. The four key differences with GDP are that:
There are literally dozens of alternative ‘value systems’ available, both on a macro- and a micro-level. We can choose to create a new one, or work from an existing one.
To be clear, this article does not aim to state any preferences; rather, it illustrates what can be considered. Each system will very likely have its own potential flaws or differences. As long as we don’t collectively agree on all what we want to achieve, this will always be the case.
That should not be an excuse to not move forward. Take a look at what exists already!
Gross National Happiness Index – The Kingdom of Bhutan is well known for its alternative economic system focusing on happiness. You can read more about it here.
OECD guidelines for measuring well-being – The OECD, the Organisation for Economic Co-operation and Development, has extensive policy guidelines to measure ‘subjective well-being’ in our economy.
The Prosperity Index – This has been built by the Legatum Institute for 142 countries. It looks at 8 categories and 92 parameters.
The Happy Planet Index – This was built by NEF (New Economics Foundation), a UK think-thank.
The Human Development Index – This is governed by the UNDP (United Nations Development Programme).
We are sure there are many more.
Don’t forget it all starts with just one question: “What do you want in life?” Measure that and we are well on the way.
In the mood for more food for thought?
We redesigned our money system in a way that it supports our quality of life. We call it the Sustainable Money System. Do you want to find out more about it? Go explore the model!
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