Sustainable growth – it is a term that has become the focus of the brightest business minds’ around the world; however, there is one issue – in today’s environment, it is an oxymoron. Politicians and economists want us to focus on growth in order for them to try and repay the mountain of debt that they piled on in the name of ‘prosperity.’ Environmentalists and activists, on the other hand, want us to focus on sustainability and preserving the planet. The problems is that we can’t just pick one or the other, we need to do both simultaneously. That’s why in today’s blog we are going to explore the term sustainable growth and discuss how to turn it from an oxymoron into the new standard for business.
A few weeks ago, I was browsing the Internet when I stumbled across the Capital Institute’s website, which brands itself as the Future of Finance. Started in 2009 by the former Managing Director for JP Morgan, John Fullerton, the Capital Institute aspires to spark discussion about the role of finance in our society and what business will look like in the new economy. One video in particular, called the Biospheric Reality (embedded below), caught my attention and inspired me to start to think deeper about the role that both business and financial institutions should play in our society.
Among a number of great concepts that were illustrated in the video, the one that really struck me was the analogy that compared our financial system to the biosphere. In Mother Nature, when the environmental ecosystem starts becoming highly unbalanced, a period of chaos ensues. That is what is currently happening in our global economy. Following the period of chaos, a higher order emerges and the entire ecosystem starts to rebalance itself over a period of a number of decades. This is what lays ahead in the next several decades for our global economy.
In our last blog, Finance 2.0 – Wall Street Meets the Web, we discussed how the new crowdfunding movement will be a key catalyst in the creation of a new financial ecosystem. But this is just a small component of the whole, as the global shift that has begun is composed of a series of movements and new paradigms that are all contributing to reshape our economic landscape. The motivator for the entire shift, in my opinion, is the desire to rebuild our economy around the principle of sustainable growth.
But what is sustainable growth?
Sustainable growth is a philosophy that recognizes that economic growth (in today’s terms) is constrained by our finite resource base; therefore, despite the fact that economists’ models are based on the principles of infinite growth, we have to recognize that the environment (ie. our planet) that nourishes our existence is in fact composed of a finite amount of resources. The sustainable-growth model focuses on ‘growth’ (in an economic sense) that is balanced with our social and environmental surroundings.
Rather than looking for opportunities to profit at the expense of both people and the planet, the new paradigm is built on the premise that we can make profit while improving the lives of people and the state of our planet. Instead of trying to find opportunities in every crevice of the globe just to keep the current economic model alive, we should instead focus on redefining what we are trying to achieve in the first place. In the video above, John Fullerton parallels this to the Copernician moment, which happened centuries ago when everyone on the planet realized that the world was not flat as they had been brought up to believe.
So what does sustainable growth look like?
First we need to plant the seeds to the first trees (businesses) that will begin to sprout their first leaves (profits).
The (sustainable) growth of the tree (business) will unfold until it has fully blossomed (profit threshold).
At that point, other businesses in the external environment (the forest) will take notice and begin to follow the sustainable-growth model – a new forest (new industries) will begin taking shape.
The businesses who fail to adopt the principles of sustainable growth will inevitably fail and a full-growth forest (interconnected industries) will develop – then one day the forest will merge with the surrounding ecosystem (global economy) and mark the beginning of an entirely new economic paradigm.
That’s how we see the sustainable-growth model in the new economic environment. It remains to be seen how quickly this new growth model starts to become implemented, but we expect that a business that takes root one decade from now will not look, or think, anything like the businesses of today. It’s time to turn sustainable growth from an oxymoron into the new standard for doing business.
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