The Great Disruption (32 page)

At the other end of progressive financial markets are emerging institutions that are experimenting with not just a different investment focus, but different ownership structures and missions. Triodos Bank, started in the Netherlands in 1980, is a fine example, a pioneer of such approaches and one to watch. Their mission is all about social purpose:

Triodos Bank finances companies, institutions and projects that add cultural value and benefit people and the environment, with the support of depositors and investors who want to encourage corporate social responsibility and a sustainable society.

Triodos's values and strategy run deep in this area, and they focus all their commercial activities on businesses and projects that have an overt social objective. Their mission continues, stating they seek to “help create a society that promotes people's quality of life and that has human dignity at its core.”

I met their CEO, Peter Blom, when I was living in Amsterdam with Greenpeace in 1994. I was amazed then to find such radical thinking in a bank but saw it as a niche peculiar to the Netherlands, long famous for interesting social experiments.

When I had dinner with Peter again recently, I was forced to recalibrate the significance of what they are doing. Their results in 2009 were pretty impressive, with funds entrusted to the group that year up 30 percent to EUR 5 billion, customer numbers up 27 percent in a year, and offices now in the Netherlands, United Kingdom, Spain, Belgium, and Germany. They had also just received the
Financial Times
Global Sustainable Bank of the Year award. Triodos are starting to show the power of what's possible within a business framework when you work with a clear social agenda—what I would call a purpose-centered strategy, as we discussed in chapter 11.

They have long been pioneers, driving change in their sector that others follow. After the global financial crisis led to a push for greater transparency on how banks used people's money, Triodos provided their customers with an online tool that listed all the bank's investments and loans so depositors could see exactly where and how their money was being used—not in general, but specifically which businesses had borrowed it. They even allow customers to search by postcode so they can see if their deposits are being used to help their local economy.

When you meet Peter Blom, he projects like a modern banker with his sharp suit and solid image as the kind of guy you'd trust your money with. When the conversation turns to business, though, you realize you might be talking to the future of banking. He talked about cultural contribution, enhancing the cohesion of communities, and he explored ideas like how they can help build the organic food industry by bringing the value chain together to discuss blockages to mainstreaming. He explained how they had recently established a culture fund to invest with the intent of expanding arts activity. He spoke about how hard it is for artists to get loans for the tools of their trade, such as musical instruments or art studios. He smiled as he described how the risk department had to consider an eighteenth-century violin as security!

He clearly knows how to make money, even though their objective is solid and steady returns rather than the risky spectacular ones that drove the 2008 financial crisis. He gave a little chuckle as he explained that their returns are so solid and consistent, he has to resist demands by pension funds to buy more of the bank's shares—they have a limit on what percentage any one investor can hold to reduce the risk of undue influence on their mission. Triodos further guarantees their independence and strict adherence to their social purpose focus through a share-holding trust that separates the economic benefits of share ownership from control over the bank.

It is true that many of these examples are still marginal relative to the overall size of the markets they play in. In that context, though, it is important to remember how fast this could change. Google, which was started only in 1998 and listed in 2004, had a market cap of $180 billion in 2010. While many activists dislike globalization, this is the upside of a connected world and global market—ideas and companies can transform large parts of an economy rapidly. So who's to say that companies like Triodos couldn't dominate the financial sector in ten to fifteen years' time, in a backlash against the reckless behavior of the current incumbents?

There are many more issues we could cover.

Are there ownership and capital structures that would work better than listed stock exchange markets? While there are clearly some upsides to listed public companies, there are many other models and approaches, some of which are well established and mainstream but lack public attention or market credibility. While the one-degree war will reinforce some current business and investment models in the short term, the realization that growth has truly ended will steadily discredit many existing businesses and old models. That's why I think we'll see some of the approaches on the fringes today become mainstream as the new economy kicks in.

Is there potential for the reemergence of cooperatives, an old idea and still a powerful force in the global economy? Fonterra, the New Zealand milk cooperative owned by eleven thousand New Zealand dairy farmers, now accounts for 20 percent of New Zealand's total exports and 7 percent of the country's GDP. The Swedish forestry company Sodra is owned by fifty-two thousand forest owners and is one of the world's most successful and sustainable forestry and pulp companies, the third largest provider of market pulp for the production of paper and board.

When I met with Sodra CEO Leif Broden, it was clear the company had a culture and strategy based on the interest of its members, who, being forest owners, think in longer time frames than listed company shareholders. Leif is passionate about climate change, proudly explaining that they have recovered so much waste energy from their operations, they now produce more electricity than they use and have become an energy and forestry company. They are investing in windmills on co-op owners' land, giving landowners an additional income source and boosting Sodra's energy production even further. Sodra has long been committed to these issues, having led the industry on totally chlorine-free pulp mills and adopting strict forestry standards using the Forest Stewardship Council's external certification process.

Sodra's environmental leadership gives them a considerable competitive advantage as a trusted partner as they expand around the world. My friend and former Greenpeace colleague Joakim Bergman brought Leif to Australia to meet various environmental NGOs and government representatives when Sodra was exploring investment opportunities in the Australian forestry industry. The environmentalists and government ministers were taken aback to hear the CEO of one of the world's largest pulp companies arguing passionately for action on climate change, the need to eliminate chlorine from pulp manufacture, and the reasons we should protect our forests for future generations. A senior politician commented after meeting with Leif: “That was not the type of conversation we normally have with a CEO!”

Cooperatives like Sodra now employ one hundred million people worldwide, 20 percent more than multinational companies,
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a strength in the real world that is certainly not reflected in co-ops' market profile or government support.

And how will the nature of work and employment change? Clearly, if we have a steady-state economy, people in developed countries are going to be buying less stuff and needing less money. Given population growth, and a lower throughput economy, this implies fewer working hours in return for lower income. This has far-reaching consequences for many issues, from transport in cities to job design, to government tax revenues, and to work-life balance.

One of the central tenets of modern market economics is constantly increasing productivity of the workforce and technology. While it's hard to argue against this in principle—doing things more efficiently must be good—is it actually improving our lives very much? It rarely translates into sustained higher profits (competitors soon catch up) or higher wages. It generally results just in lower prices, which drives more consumption.

What if improvement in productivity instead translated into fewer working hours? What if the harder and smarter we worked, the less we had to work? Surely that would be a better motivating factor for workers to increase productivity than having the company you work for sell more stuff, more cheaply.

A personal social dividend for productivity is a powerful idea and an inherently rational approach. There is also more to life than efficiency and productivity. As argued by economist E. F. Schumacher in
Small Is Beautiful
:

Our ordinary mind always tries to persuade us that we are nothing but acorns and that our greatest happiness will be to become bigger, fatter, shinier acorns; but that is of interest only to pigs. Our faith gives us knowledge of something better: that we can become oak trees.

Another big challenge, and an exciting one, is to make our communities stronger, safer, and more connected and trusting. People all over the world are lamenting the loss of community in our cities and towns, as people's lives get overrun by working longer hours to buy stuff they haven't got time to use. What if, for example, through a combination of lower consumption and increased productivity we all spent 20 percent less time at work? Surely our quality of life would improve if this enabled us to slow down and spend more time having a deeper engagement with leisure, culture, and the community?

The reality is we will all need to work less in a steady-state economy. When labor productivity increases, as it does year on year, we can produce the same amount of stuff with fewer people. So at the moment, if we want to keep everyone in work and prevent spiraling unemployment, we need to produce and consume more—so improving productivity means more work, more money, more stuff, and less time to use it. But there's another option, which becomes the only option when we can't produce more stuff anymore. We all work less. We can then have the same number of people in employment, but all working fewer hours per week. It is true we will then have to take more holidays and long weekends or go home at two p.m. I think we'll cope.

Perhaps these lower working hours would enable us to reengage in our communities, making them places that live during the day, vibrant places that are designed for human-scale interaction. Maybe we would use the time to volunteer more, exploring the potential for greater community involvement in key institutions like schools.

I had a powerful experience of the latter when I worked with Mike Hawker, then CEO of Australia's largest insurance company, IAG. Mike was deeply concerned about the breadth and depth of challenges facing disadvantaged communities, and he saw the consequential social problems translating into insurance claims. Not one to just sit around, Mike brought together the CEOs from some of Australia's largest companies to work out how they could contribute. I joined the board and after much discussion, we concluded that education was the most powerful intervention the companies could make, and the Australian Business and Community Network was formed. We made a condition of joining that CEOs involved would personally commit to regularly mentoring the principals of some of Australia's most disadvantaged schools. A few years later, Mike's initiative had resulted in twenty-five companies engaged, with over two thousand of their staff joining the CEOs in various programs at 150 schools. The school principals are amazed to find these major corporate CEOs, normally distant figures they see on the TV news, now sitting in their schools sharing their experience. The passion and commitment of the CEOs are palpable—they take real delight in being able to contribute to the community that has nurtured their careers and success. They also learn a great deal from the school principals about managing in tough situations!

So I have no doubt that extra time can be put to good use. We can also use the extra time to save money and benefit the environment, like getting involved in bartering goods and freecycling, using the process to meet others in our communities and forming relationships that we need for the safer and more connected community we all wish for.

Many studies have shown that more leisure time enhances quality of life, including increased health, fitness, and life satisfaction.
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The same studies suggest it can also lead to a lower environmental impact of our lives.

Strong communities develop because of well-defined behaviors—behaviors that we understand create “social capital”—connections and relationships that can then be drawn on when needed. Social capital is basically the idea that social networks and connections have value—which could be as simple as borrowing the drill from the neighbor or the fact that having good friends is known to increase our well-being. Just as we might invest in our human capital by giving ourselves or our children a good education, we can also invest in social capital. By deliberately encouraging this, individuals, governments, and city designers can all help build communities that are better connected and therefore more resilient. This means if we're heading into tough times, they will be better, stronger, and safer places to live.

Actions as diverse as street parties, volunteering, Men's Sheds,
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freecycling, community vegetable plots, exchange of goods, collective purchases of house upgrades like solar hot water, and car sharing can all reduce environmental impact, save money, build economies, create friendships, and make our lives happier and more satisfying. This can be done in existing communities to build greater strength, or it can provide a set of principles for housing developments deliberately designed to encourage stronger, safer, higher-trust communities. Around the world, town planners, architects, and focused groups like the Cohousing Association
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are experimenting and promoting this approach. By 2008, there were already 113 cohousing communities built and occupied in the United States.