Why sustainability needs an ecosystems approach

Lately, there has been a lot of talk about companies needing to integrate an ESG (Environmental, social, and corporate governance) approach into their strategy, business models, processes etc. Not just for the greater good, but because consumers and (future) employees expect this. And there are indeed some pretty interesting examples out there, like Ørsted which transitioned from one of the most coal-intensive energy companies in Europe into a sustainable energy company. And Patagonia that produces fair and sustainable apparel. Or Tony’s Chocolonely that wants to make chocolate 100% slave free.

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And though it is fantastic that an increased number of companies are trying to build a better world, we will also need a more collaborative, connected and systemic methodology if we want to address some of this era’s biggest problems. Standalone companies developing better business models, strategies, processes etc. will not be able to fight poverty, infectious diseases, climate change, inequality, human rights violations, migration, terrorism, war, marine pollution, water scarcity, etc.

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Wicked problems

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That’s because all of the latter are wicked problems, which are difficult or even impossible to solve for 4 reasons:  

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1. incomplete or contradictory knowledge,  

2. the number of people and opinions involved,  

3. the large economic burden,  

4. and the interconnected nature of these problems with other problems.

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Just to give an example of their complexity: poverty is linked with education, nutrition with poverty, climate change with migration, water scarcity with climate change… And if you pull one of the strings in one area, you will affect all the others, positively or negatively. You can see how one company, in one country, or even many together, but with standalone solutions won’t be able to make a real difference here. In fact, even thinking of wicked problems in terms of solving them, is ineffective. It’s better to think in terms of mitigating: of reducing the negative effects and increasing the positive ones.  

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Take the example of Tony’s Chocolonely. They define the initial problem they are trying to address like this on their website: ‍

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Things aren’t being shared evenly in the chocolate supply chain. The chain starts with millions of farmers who produce cocoa and ends with the billions of consumers who enjoy chocolate. But what about the bit in the middle? This section is dominated by a handful of chocolate giants that profit from keeping the price of cocoa as low as possible. As a result, farmers are forced to live in poverty. And that leads to illegal child labour and modern slavery.

Right now there is modern slavery on cocoa farms in West Africa. This is a result of the unequally divided cocoa chain. Tony’s Chocolonely exists to change that. Illegal child labour and modern slavery are against the law - it needs to stop.

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They explain that way that they want to tackle that problem is with their three pillars:

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1. They create awareness amongst local farmers and the general public.

2. They lead by example, invest in long-term partnerships with farmer cooperatives and help them professionalise.

3. They inspire other key players to take action and are actively seeking partners who would be interested in applying their model. They maintain an ongoing dialogue with politicians, NGOs and academia to increase the pressure on the industry.

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Systemic approaches

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Though Tony’s Chocolonely does go pretty far to inspire others to follow their example (and I do want to stress that that is fantastic), talking with key stakeholders like politicians or NGOs, what they basically do is filter out the unethical chocolate category kings from their process. That also means they are not directly focussed on stopping them. Yes, they do want to change the system which is not functioning right because of a wicked combination of unequal power distribution, poverty, lack of education etc. But they are doing this indirectly, and on a very small scale. If they really want to drive systemic change, they should not only talk with the other stakeholders, but involve them and collaborate with them. And that is where an ecosystems approach would be very beneficial, following a holistic methodology rather than a reductionist one.

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One might argue that the latter is not the job of commercial companies. Companies exist to make a profit, not change the world, right? Well, first of all, the narrative around that is evolving, and fast, and we might live to see a paradigm change in what defines a company. Second, there are companies out there, like Philips, that really are taking a systemic approach, moving beyond their own products and services to fulfill their broader mission.

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So how do you try to subdue the wicked problems that come with the ESG terrain? Certainly not with one Big simple solution, from one company. Leadership is important, obviously, and gathering multiple perspectives. Long term thinking, of course. As well as an iterative approach and learning to become more comfortable with uncertainty. But what I want to zoom in on here, is how wicked problems can only be made better through collaboration, with all of the stakeholders involved. So, not just those in well off and powerful countries. Not just companies. Not just governments, and certainly not only local ones. Not just consumers. Not just academia. But all of them, working together in ecosystems. For instance, you cannot solve terrorism by focusing solely on the safety of European and US citizens. Making it better involves tackling water problems, climate problems, resource problems, inequality, political problems, religious problems and, basically, taking away all of the reasons that drive people to become terrorists. Systemic problems need systemic approaches, not reductionist or analytical ones.

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Philips’ systemic approach

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That is why I really love the case of Philips. Very recently, we at nexxworks talked to Reon Brand and Simona Rocchi (read the interview here), who are conducting pioneering research at Philips, about how their company follows a systemic view in order to design the solutions for tomorrow. It’s really impressive to see how it transformed itself from a consumer electronics giant into a purpose-driven organization focusing on health technology.

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Their mission is very concrete, aiming to improve the health and well-being of 2.5 billion people per year, including 400,000 people in medically underserved communities, by 2030. Such an ambitious goal cannot be achieved with single, standalone solutions, of course. If you want to offer access to primary healthcare in countries where there is little of that, you need to fix the backbone of the system first. And so Philips is building community life centers for healthcare, providing electricity there and collaborating with all types of (local) institutions and governments in a shared value approach. This is how Rocchi voiced it in the interview (which you can read here):

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‍'It's not just a challenge of technology and healthcare solution development; you need to create an ecosystem of partners around a common goal, shared responsibilities, individual benefits and a business model that enables fair value sharing. Even then, there are many other systemic challenges to address. For example: if you provide a healthcare solution in a public facility, but there are not enough doctors to operate it, or resources for proper maintenance, your solution will fail to deliver the expected results over time. It is difficult or even impossible for competitors to expand and sustain business in Sub-Saharan Africa without building an effective network to leverage, a joint commitment to tackle systemic challenges, and a strong engagement with local communities. To develop a competitive advantage, you must provide local stakeholders with a sense of ownership, provide content that makes sense in their cultural context and make them an active part of the transformation process.

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These are exactly the types of ESG endeavours that will have the most impact, much more than single solutions from single companies. I realize that it won’t be easy because working with multiple players towards a shared goal, also further increases complexity. But I have hope. Today, we have already evolved several stages on the sustainability ladder:

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• from no attention to it at all,  
• to a mostly marketing-driven sensitivity, with very little (if any) impact,  
• to integration into company processes (energy consumption, mobility etc.) for reasons of efficiency,
• to integration in overall strategy and business models for reasons of purpose and innovation.

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Today, the next step we need to take in SDG is one of deep and impactful collaboration through an ecosystems approach. And companies like Philips are leading the way. They prove that, though it is hard and complicated, it can be done. And this is how new business paradigms are forming. ‍

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Do you want to share examples of ecosystems that have a sustainable purpose? Let us know in the social comments or through blog@nexxworks.com.