Townsend: Capitalism 2.0 will open up new markets
Part 3: Good for Business?
In Part 2 we explored what the future might hold, and how the business landscape might change. In this third instalment, we ask what are the impacts, opportunities, and risks for businesses? In Part 4 we will look at how an economic transformation might come about, along with the challenges involved, and how business leaders can help shape the future.
The features explored in Part 2, if fully enacted, would have a dramatic impact on the way in which our economies work – the goods and services we all decide we want, where we get them from, how much we pay for them, the scale of rewards, and how these are shared.
But with such changes, while there are risks, there are also many opportunities for business.
Some might say it would be getting back to the roots of capitalism, with more emphasis on free trade, local economies, re-localised production, owner-managed businesses, and less about rigged markets and unhealthy corporate domination. For those with a genuine disposition towards free markets, this might be a good thing; reviving the dream of entrepreneurship.
Perhaps the most fundamental impact comes from a greater distribution of wealth and closing the inequality gap – genuinely regenerating personal spending power – and so delivering more customers into the market for (sustainable) goods and services.
This not only makes good sense, but as the recent UNCTAD report shows us, the better performing economies are those with greater income distribution.
And this position is further enhanced by the way in which money is spent.
New markets
Markets will be refreshingly different; there will be less emphasis on virtual and secondary wants, and more on our very real and primary needs – for food, shelter, transport and mobility, and infrastructure to support and enhance life.
New markets will open up to serve the five capitals. This will mean a greater emphasis on innovation, and investment in meeting the challenges of our time in creative and affordable ways – more money in the real economy.
And as recently published research from the Economic Policy Institute shows, the greener the industry, the greater the propensity for job growth.
The emphasis will be on meaningful products and services, that are affordable, value adding, and that support and enable a sustainable economy. It is interesting to see Amazon’s new Vine channel for ‘green’ products – perhaps one day all their products will be green, produced and delivered in sustainable ways?
Many other are grappling with the challenge of how we move towards sustainable consumption too. This is a time for innovation.
And those businesses that will prosper will be those that create thick value – in meeting the real needs of people, communities and the environment – and in universally affordable and sustainable ways. We now know that the size of the green economy is currently worth around £5.4bn in UK. But we should also re-imagine the whole of the economy based on sustainable products and services – creating resilient, profitable and long-lasting enterprise.
A great time for entrepreneurs
As economies become more re-localised – not just in response to economic innovation, but also in response to the drivers of climate change, rising energy costs, and supported by technological innovation – there could be a wealth of opportunities, especially for new business start-ups and for SMEs.
This could be a great time for entrepreneurs, especially those focused on social and environmental markets, and could certainly open up with food and other essentials, too. This of course presents a major impact and opportunity for retailers in their strategic-sourcing programmes.
We should see more self-owned companies, financed and supported by banks that serve. This will allow new models and new entrants in a productive banking sector. Perhaps we will see more socially useful banks built along the lines of Triodos Bank and others involved in the increasingly influential Global Alliance for Banking on Values?
A global reach, based on shared principles and mission, but very much locally rooted – a different way of thinking about ‘scale’.
Jobs. And the re-localized economy
We are already witnessing the re-shoring of jobs in US manufacturing, not just due to the erosion of labour cost differentials, but also significantly due to increasing transportation costs, time, and other business factors.
This move includes companies such as NCR, The Coleman Company, Ford Motor Company, Sleek Audio, Peerless Industries, and Outdoor GreatRoom Company. There is business sense, as well as social, political and environmental sense in this approach.
This move towards re-shoring jobs is becoming a strategic issue for Europe, too. The European Commission has this month unveiled a new strategy, towards a new industrialization, aimed at reversing the region’s massive problems with unemployment and associated social unrest.
Now imagine the possibilities if this form of economic strategy was widely deployed along green and sustainability lines. In moving towards a sustainable and circular economy, we have the opportunity to spend less money on ‘stuff’ and waste, and more on people, profits and reinvestment, reversing the ultimately counter-productive trend of headcount reduction of the last 30 years.
Imagine the possibilities of a million-plus new jobs in UK alone – and the combined spending power this represents.
New opportunities
And this is where the ideas of re-use, the sharing economy, and the circular economy help us to see new opportunities; product take-back strategies are already being explored by companies like Interface and Life Technologies. Others are creating new products from re-used or re-cycled materials, drawn from other markets – and this is not just an opportunity for the big boys either – as companies like Wightsails remind us.
Scaling this principle up, we can see the opportunity for industrial symbiosis across entire economic regions, with one company’s waste becoming the feedstock for another company’s processes. Kalundborg in Denmark has been leading the way for 40 years, and others are starting to learn from its pioneering approach.
Technology is a key enabler in the move towards more re-localised economies. In addition to communications technology, connecting people everywhere, there are other important advances; for example, 3-D printing allows production in much smaller quantities than is currently economically feasible, enabling low cost customised production for new niche products and opening up new market opportunities for innovative small and medium-sized enterprises.
And this form of production can take place almost anywhere – and thus production can be located much closer to demand – reducing the need for increasingly expensive transport and other large company costs. On its own, this approach really does present a revolution in manufacturing.
Is there a downside?
Ultimately, the dynamics described may be seen as a threat by many large businesses, and other incumbents that have prospered under the old order. Or would they?
Let us remember, that continued prosperity is itself being undermined by the deficiencies of Capitalism 1.0. In a zero-sum game, where do you go when the minority of players have accumulated the wealth, and our planet can no longer sustain human life?
In reality, given the very real long-term threats we all face, it is ultimately in the best interests of all corporations to have a new model for fairer and more sustainable capitalism.
And all businesses need to look for the opportunities that these changes herald – for new, sustainable, and profitable markets, in the green/sustainable economy, that can extend the shelf life of businesses and their true competitive advantage.
Better to be smart, than get left behind.
And for the established larger or global businesses, it might mean re-structuring along more local, resilient models with production closer to demand, and with more shared/local ownership. This way it can be possible to retain global presence, but not necessarily domination – a smaller share of a still very substantial pie?
Perhaps this brave new world will also provide greater levels of that elusive commodity ‘confidence’ again – with a clear, consistent and sustainable direction, we should see investment to flow to where it is needed; just so long as pour policy makers start thinking and acting more progressively.
For those companies sitting on cash, perhaps they too can move forward with confidence. And, quite importantly, we can collectively share a real sense of purpose again, with a well-motivated and rewarded workforce, as opposed to one coerced by fear.
A quiet revolution?
What this agenda for change really amounts to is a re-distribution of power; away from the dominant, but rather narrow interests of global corporations and their shareholders, to the wider interests of people everywhere.
But the positive impacts for business are there, if we choose to seize them – through longer lasting, more durable markets and business models, creating genuine value for the many.
Profitable business can continue for longer this way. And of course, we can sustain life on our planet for longer, too.
Perhaps we are already witnessing the start quiet of a quiet revolution through a more conscious approach to capitalism?
Next time we will look at how an economic transformation might come about, where change is already happening, the challenges involved, and how business leaders can help shape and navigate towards this future.
To read Part One in this series, click here.
To read Part Two, click here.
Author’s note: I owe a big debt of thanks for the seminal work produced by David Boyle, John Elkington, John Gray, Al Gore, Charles Handy, Umair Haque, Tim Jackson, David Korten, Paul Krugman, Lester Thurow, Jonathon Porritt, Klaus Schwab, Andrew Simms, Peter Victor, and many others, that has made the synthesis in Part 2 possible, and allowed me to make some inroads into thinking about the future impact and opportunities for business in Part 3.
This article was originally published on the 2degrees network
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Michael Townsend is the Founder and CEO of Earthshine Solutions. He is passionate about promoting the benefits of sustainable business, and author of The Rough Guide to Sustainable Business (forthcoming). Michael is an engineering graduate and MBA: a business transformation leader with over twenty-five years experience in a range of sectors. Michael has developed “best in class” performance for a range of organisations, including Norwich Union (Aviva) Insurance, BAA, British Airways, Mace, The Home Office and Gazeley, amongst others.