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Integrating Regenerative Design with Free Market Economics: The Role of ESG in Creating Sustainable Value

By on 7th July 2024

In this article I explore the intersection of regenerative design, shifts to long-termism, free market economics, and how businesses can start on the path to sustainability.

In today’s evolving business landscape, the integration of regenerative design within the framework of capitalism is gaining momentum. At the heart of this intersection lies Environmental, Social, and Governance (ESG) criteria, which provide a vital roadmap for businesses aiming to achieve sustainability while seeking growth

How It Can Work

  • Investment and Funding: ESG metrics are becoming crucial for investors seeking sustainable and ethical investments. Companies adopting regenerative design can attract ESG-focused investors by demonstrating long-term, impactful practices .
  • Risk Management: ESG helps businesses manage risks related to environmental and social issues. Regenerative design further mitigates these risks by creating resilient and sustainable systems, ensuring stability and adaptability .
  • Market Differentiation: By integrating ESG and regenerative design, companies can differentiate themselves in the market. Consumers and clients increasingly favor businesses committed to sustainability and positive social impact .
  • Regulatory Compliance and Incentives: Governments are setting standards and providing incentives for ESG compliance. Companies embracing regenerative design are better positioned to meet these regulations and benefit from associated incentives .
  • Innovation and New Business Models: The convergence of ESG and regenerative design fosters innovation, leading to new products, services, and business models that are both profitable and beneficial to society and the environment .
  • Shift from Short-termism to Long-termism: Embracing a long-term perspective is crucial for aligning capitalism with regenerative design. Prioritizing long-term benefits over short-term gains ensures sustainable success and resilience against future challenges.

Challenges to Overcome

  • Short-term vs. Long-term Thinking: Traditional capitalism often prioritizes short-term profits, which can conflict with the long-term focus of regenerative design. Shifting this mindset to long-termism is crucial for sustainable success .
  • Valuing Non-financial Metrics: Regenerative design emphasizes ecological and social value, which may not be immediately quantifiable in financial terms. Businesses need new metrics to recognize the full spectrum of benefits .
  • Collaboration and Systemic Change: Regenerative design often requires cross-industry collaboration, challenging the competitive nature of capitalism. Embracing cooperative and systemic approaches is essential for achieving regenerative outcomes .

By embracing ESG principles and regenerative design, and shifting from short-termism to long-termism, businesses can align their operations with the demands of a sustainable future while thriving in a capitalist economy. This holistic approach not only ensures profitability but also contributes to the well-being of society and the planet.

By regenerative design I mean an approach to creating systems and structures that restore, renew, and revitalize their own sources of energy and materials, resulting in a net positive impact on the environment, society, and the economy.

Capitalism is an economic system in which private individuals and businesses own and control the means of production and operate for profit, driven by the forces of supply and demand in a competitive marketplace, generally when demand remains high, resources are exploited until they are depleted. At that point, new resources are sought. This is a key feature of capitalism.

References

Speaking Machine

By on 28th December 2023

I enjoyed How to Speak Machine by John Maeda. Language and thinking to move our understanding of the current ‘AI’ moment beyond the hype. A non-exhaustive list of resonating quotes from the book. I love neologisms to understand differently and the idea of trying out new technologies for yourself, to play.

Computation

Computation is an invisible, alien universe that is infinitely large and infinitesimally detailed. It’s a kind of raw material that doesn’t obey the laws of physics, and it’s what powers the internet at a level that far transcends the power of electricity.

A new form of design has emerged: computational design.

These new kinds of interactions with our increasingly intelligent devices and surroundings require a fundamental understanding of how computing works to maximize what we can make.

Design matters a lot when it is leveraged with a deep understanding of computation and the unique set of possibilities it brings.

More than mathematics and electricity

… computation has expanded both in technical capability and sociocultural impact.

We are entering an era in which the computing machines we use today are powered not just by electricity and mathematics, but by our every actions and with insights gained in real time as we use them.

I have always believed that being curious is better than being afraid – for when we are curious we get inventive, whereas when we are afraid we get destructive.

Demystify it for yourself

There is a common lack of understanding of what computation fundamentally can and cannot do. Rather than give away your power of understanding to someone else, I invite you to be curious about the computational universe.

A meta machine that never gets tired

It is a meta mechanical machine that never experiences surface friction and is never subject to the forces of gravity like a real mechanical machine – so it runs in complete perfection.

Software above physical devices

In essence, he was describing the era we live in today, in which there are apps for everything and we depend more on the software than the actual physical devices in which they function.

Recursion

…nature paints with recursion quietly and obviously.

The central idea is to express the definition of something with a definition of itself, which is a vaguely imaginable idea that doesn’t have a home in the real world but is completely native in the realm of cyberspace.

Complexity

‘Complicated’ means something that is knowable, and although it may take time, it’s wholly possible to understand.
‘Complex’ means something that is not knowable, and even brute force can’t easily tackle it.

The Cloud – tentacles of a cyber machine

Today we are at the point when holding any digital device is like grasping the tiny tentacle of an infinitely large cyber machine floating in the cloud that can do unnaturally powerful things.

The cloud model represents a fundamental shift in how companies can get built, where the raw materials are all completely etherial, virtual, and invisible.

From AI to Machine Learning and Deep Learning

When taking about this sea change, we tend not to use the term ‘AI’, because it carries some negative connotations from the past. Instead, we prefer two terms to describe this newer kind of artificial intelligence: ‘machine learning’ ML and ‘deep learning’ DL.

Manage inputs, not outputs

By on 1st April 2023

I keep returning to Working backwards. Insights, Stories, and Secrets from Inside Amazon. A great insiders view of Amazon’s period of growth and mindset of customer obsession.

I want to focus here on what Amazon calls input and output metrics. Amazon focuses on controllable input metrics, the drivers, when managed well can lead to profitable growth.

The CEO, and companies in general, have very little ability to directly control output metrics. What is really important is to focus on “controllable input metrics,” the activities you directly control, which ultimately affect output metrics such as share price.

Amazon calls leading indicators, ‘controllable input metrics’ and lagging indicators ‘output metrics’. Input metrics are factors that you can control like SKUs in a category. Output metrics can’t be directly manipulated in a sustainable manner over the long term, like sales. It now becomes clear that focusing on inputs that don’t have an impact on outputs is waste. Choosing the right metrics, and tools to measure them takes time.

Output metrics show results. Input metrics show guidance. Trends will show up earlier in input metrics, if you only focus on output metrics like ‘revenue’ you won’t see the effects of, for example, customer deceleration for quite some time.

If you look at the input metrics for Amazon, they often describe things customers care about, such as low pricers, lots of available products, fast shipping, few customer service contacts, and a speedy website or app. A lot of the output metrics, such as revenue and free cash flow, are what you’d typically see in a company’s financial reports. Customers don’t care about those.

Controllable input metrics are quantitative (diving deep with data) and qualitative (anecdotes) way of measuring how well the organization is satisfying those customer interests so that the output metrics trend the way the company desires.

Input and output metrics is such a simple way of looking at systems and can be applied to both business and life in general.

Design for Good

By on 10th January 2023

2022 is the first iteration of Design for Good. There are 10 contributing organizations and each provides their designers 5 days to contribute to the project. Participants across member organizations self-organize into small teams to ideate, prototype, and test ideas. Based on the outcome of the first iteration the network of participating organizations will be expanded for the second iteration.

Design for Good brings together designers around the world with a shared goal of improving lives through human-centered design. They develop products & services with impacted communities, that are donated fully open-source.

The United Nations adopted 17 Sustainable Development Goals (SDGs) in 2015; summarizing humanity and the planet’s greatest challenges. The goals area: No poverty, zero hunger, good health and well-being, quality education, gender equality, clean water and sanitation, affordable and clean energy, decent work and economic growth, industry, innovation and infrastructure, Inequality, Sustainable Cities and Communities, Responsible Consumption and Production, Climate Action, Life Below Water, Life On Land, Peace, Justice, and Strong Institutions and Partnerships for the Goals. 

Targeting one United Nations Sustainable Development Goal goal each year.

In 2022, Design for Good focuses on Goal 6: clean water & sanitation. We have selected SDG 6 based on three criteria. Firstly urgency: it was one of the most highly prioritised goals during COP26. Secondly globality: it has immediate needs in most of the 200 nations. Thirdly diversity: the needs range from physical products to digital apps to service designs, which allow for participation by a broad range of participants.

Thriving in Consulting

By on 2nd September 2022

Working in consulting, or the broader knowledge economy, requires continuous soul searching: being clear on your ‘why’, awareness of the trade-offs, and working on yourself to maintain a healthy mindset enabling you to grow and move forward. Companies have playbooks for this, but the frameworks in the playbooks can be out of synch with ‘reality on the ground’. I found Beyond Collaboration Overload helpful to refocus on networking and collaboration, a useful reminder that these are the foundations of the consulting world, a world where the project is the product. A research based guide to ‘Play offense’, be in control, whilst controlling health and happiness.

Renewal strategies – essential collaboration:

Tapping broad networks early in the life of each new project whilst simultaneously investing in longer-time-horizon relationships for efficiency and innovation (which is much more counter-conventional than it may sound.)

Becoming an energizer to stimulate a flow of great ideas and great people toward you.

Engaging in targeted collaborative renewal activities to build greater physical and mental well being.

Energy trumps all:

We have consistently seen that people who create energy or enthusiasm in networks are far more likely to become and remain high performers as well as move more fluidly in and out of groups.

For me the biggest challenge has been managing distractions, both external and of my own making. The following paragraph really hit home:

But to become an essential collaborator, you must be able to overcome the factors that keep you focused on the distractions of the everyday–factors such as ego, reactivity, inertia, defensiveness, and fear–so that you can initiate innovative responses and mobilize people affectively, while also taking care of yourself.

Be more anti-fragile by building a noninsular network.

These structurally divers networks often bridge expertise domains, cultures, geographical regions, functional areas, and other pockets of mastery and opinion.

Another concept I found helpful is the idea of networking across time horizons: short, medium, and long term.

The point is that these long-term explorations are an essential part of the work of successful people in today’s hyperconnected organizations. These interactions are not things to do when you have time. The are as essential as the work itself.

Overall the book is helpful in making what we do intuitively, in my case not optimally, more visible with a structured framework to be more purposeful and effective.