Article

Defining Systems Change in Sustainable Business: Part I — Opening Statement

Posted April 26, 2022 | Sustainability | Leadership | Amplify
Defining Systems Change in Sustainable Business: Part I
In this issue:

 AMPLIFY  VOL. 35, NO. 4
  

Climate change, in its truest sense, is more than an environmental issue. It is a breakdown in the climate and weather systems that our economic, social, and political institutions rely on. Changes in those systems have widespread implications for human life, affecting agricultural productivity, disease proliferation, coastal flooding, drought severity, heatwaves, wildfires, and more. Adding urgency, climate change is just one of nine planetary system breakdowns caused by human transgression of boundaries that scientists warn that we cross at our peril. Doing so has led them to label a new geological age defined by human domination of the Earth: the Anthropocene. By exceeding sustainable-use boundaries on land systems, nitrogen and phosphorous cycles, and novel chemical releases, we are causing species extinctions, reducing productivity of soil, and degrading marine ecosystems. These impacts inspire widespread calls for systems change to prevent the worst projected outcomes. This first of two Amplify issues on this topic probes the necessary scope and scale of systemic solutions. What does systems change mean? What systems need to change, and how? Which possible future world do we want, which do we need? How can markets deliver such change?

Many have argued that systems change means we must fundamentally alter the form of our economic, political, and social institutions. Proposed solutions include moving business from reducing unsustainability toward creating sustainability, from enterprise integration toward market transformation, from incremental adjustment toward transformative change, or from our present economic institutions toward regenerative capitalism, donut economics, or a steady-state economy. These changes have been depicted as occurring in industrial sectors or society-level change via new systems of material flows and supply chains, corporate governance, valuation techniques and metrics, legal and tax structures, global ethics, cultural values, and more. Some compare the scale of needed changes to transformations like the Islamic Golden Age, the Scientific Revolution, the Enlightenment, or the Protestant Reformation. All this suggests we need a massive systemic shift but leaves us unclear on exactly what that shift looks like and how to make it happen.

To explore this, we have invited authors and experts to consider the question, “What does systems change mean for the future of sustainable business in the Anthropocene?” The answers approach the question from two directions. The first explores what systems change means by examining the mental models we bring to the challenges we face, both at the individual level and the cultural/institutional level. The second examines the process elements of systems change to identify political and social mechanisms through which market actors can change systems.

In This Issue

What Does Systems Change Mean?

John R. Ehrenfeld begins the inquiry into “Why is the planet struggling?” by asking, “Why is this happening now?” He looks to the present model of the brain, in which fundamental rationality is taken for granted, and asks if the answer to the need for systems change lies in the ways the human brain works. This argument raises provocative and (perhaps) discouraging implications. If our economic, social, and political systems reflect the biological structure and function of the brain, what is the potential for changing those systems? Does systems change require fundamental change to cognition, and, if yes, how might that be accomplished? What are the ethical implications of equating systems outside the body with systems inside the body, given the apparent diversity of human thought and behavior? Do we risk valuing one way of thinking over others? If yes, will the privileged group occupying positions of political power decide system structure and function?

Next, Ron Nahser and Dwight Collins examine the beliefs driving the dominant capitalist and democratic systems that govern the West. They believe we need to change the way we think to imagine a future where all life flourishes. For them (and the editors agree), social transformation must be at the scale of previous transformations like the Enlightenment and the Scientific Revolution. Accomplishing this will require change across many social systems, but Nahser and Collins target one in particular: MBA programs. The MBA is one of the most successful degree pro­grams of the past century, and it influences people who move into decision-making roles at organizations that influence society-scale systems. The authors opine that business schools must ground MBA programs in the liberal arts and science traditions of the great medieval universities while challenging students to approach their work as a calling and using organizational meth­ods and resources to create values-driven, society-scale change. This raises questions about whether medieval university models are appropriate for a world that is very different from the medieval period, especially in technology, global connectedness, and human impact on the natural world. Can those models address prob­lems like fossil fuels, labor issues in global supply chains, and the denial of economic opportunity from global financial flows? Further, if MBA programs encourage values-driven change, whose values should be used?

How Can We Create Systems Change?

Next, we consider the processes and mechanisms that can create systems change. Laura E. Asiala and Neil C. Hawkins argue that systems are designed to produce their results, even when their results are far from perfect. Systems also have internal “negative feedback processes” that maintain system stability by canceling out disruptions. Overcoming these stabilizing systems can be challenging, and pushing a system far enough to initiate change can result in sudden, highly disrup­tive shifts to a new system. Rather than cause such disrup­tive change, Asiala and Hawkins advocate for incremental shifts to avoid the kind of wholesale disruption that could leave financial, social, and political systems in shambles. Incremental shifts are more likely to become ingrained, and there is evidence that courageous leadership and collaboration across sectors, including business, can lead to more reliable, accepted, and sustainable results. They focus their inquiry on the effective shift of financial systems and the demands of their investors, highlighting three cases of such shifts — two that have already delivered significant change over time and one that holds great promise. In each case, leaders who benefit from being inside the system stood apart from it and identified the key point of intervention to initiate incremental change that would overcome negative feedback without causing disruption. The key point is about driving greater transparency to the systems and players within it. Incremental systems change starts with vision, courageous leadership, and a willingness to collaborate. We need to embrace this approach to systems change, both to overcome existing systems’ tendency toward stability and to avoid disruptive shifts that leave us worse off. Alone, incremental steps might seem insufficient, but together they can shift a system into a new state that, in hindsight, is transformative.

Rachana Shah explores system stability and points of intervention in a specific, highly complex system: the New York City waste system. Shah uses systems theory to analyze specific actors and their actions to reveal key leverage points for change within the system. These leverage points capture the kind of incremental change opportunities advocated by Asiala and Hawkins, where a small change in a specific element can produce big change in the system. Shah prioritizes the leverage points by their potential for impact on the system, elucidating exactly what each leverage point can change, who will be affected by the change, and what effect the change could have on the system. She then explores the negative feedback processes that resist systems change, pointing out that the higher in impact a leverage point is, the more a system will resist it. Shah’s analysis demonstrates how actors can decompose a system into subsystems, identify key change points, and prioritize each change point by balancing its potential for impact against its potential to generate negative feedback from the system that cancels out the impact of the leverage point. Her focus on actors and their actions raises a valuable point for systems analysis. The way you analyze a system influences what you believe to be the key leverage points in the system and influences the effectiveness of systems change strategies built from that analysis. Conceptualizing the waste system as actors and actions highlights leverage points related to actors themselves. However, this way of viewing the system may obscure system processes and leverage points not related to actors, such as technological leverage points around material production and distribution or biophysical leverage points around waste decomposition.

Next, Helen Chen brings our focus on process and mechanisms to the domain of market-based social activism (MbSA), in which a business seeks to align its activities with moral principles to drive positive change at the society scale. Chen presents the Pyramid of Forces for Good framework that can be used to better organize MbSA to develop a “market for virtue” in which morally sound business activities outcompete those that are morally questionable. A market for virtue applied to green performance is based on three build­ing blocks: (1) valid and reliable green-performance measurement, (2) fair and equitable green-performance valuation, and (3) efficient and scalable green-value apportionment. Establishing a market for virtue would make green practices economically profitable, fundamentally changing the economic system that currently makes unsustainable practices more econom­ically profitable than green practices. Chen’s approach highlights how businesses can play a role in systems change through social activism. It also shows how the competitive environment (the market) is reproduced through time by those participating in it. Like Shah’s highlight of the role of specific actors in building and maintaining a city’s waste system, Chen highlights how the market system is the product of actions taken by specific actors.

Finally, Michael Mahoney, Sally Fisk, and Michael Vandenbergh conclude this issue by analyzing systems for governing greenhouse gas (GHG) emissions in markets in the US. They argue that public-private partnerships (PPPs) have the potential to fill the void in market governance left by the failure of the govern­ment to enact comprehensive climate change legisla­tion. The lack of federal legis­lation means US markets continue to reward unsustain­able business practices, especially those that involve GHG emissions. Whereas Chen proposes MbSA as a mechanism to address this problem, Mahoney, Fisk, and Vandenbergh propose PPPs based on credible GHG emissions reduction targets, which the authors call “a private complement to public governance.” The authors highlight the Science Based Targets initiative (SBTi) as a tool that provides companies and other organizations with the means to make specific, credible plans to achieve decarbon­ization. They argue that aligning PPPs with SBTi target setting would be an effective mechanism to accelerate carbon emissions reductions. Pursuing this mechanism would inspire additional incremental changes in the US marketplace, such as transparency in GHG emissions, meaningful and clear sanctions for missing targets, and rewards for today’s actions in the form of credits under future legislative market restructuring. These initiatives resemble the incremental actions with systemic possibilities highlighted by Asiala and Hawkins, as well as the systems analysis and leverage points discussed by both Shah and Chen.

The variety of topics in this issue reflects the compre­hensive change required to meet the sustainability challenge, especially on GHG emissions. Every company, industry, government, and individual participates in, affects, and is affected by the planet’s climate. We have made great progress identifying the key components of the planet’s climate system, especially on the natural science front. However, much work remains to understand the social systems side of the climate system and how best to intervene. The articles in this issue of Amplify and the next complement work by organizations like Project Drawdown that are busy identifying specific actions and the actors who can take them, all focused around changing the marketplace so sustainable business practices are competitive and unsustainable practices are not.

The next issue will address the age-old challenge of linking environmental and economic systems, redefining how we think of waste, and several relevant technology topics, including innovation, IT, artificial intelligence, and blockchain.

About The Author
Andrew Hoffman
Andrew J. Hoffman, opening keynoter at the recent Arthur D. Little Summit 2022, is the Holcim Professor of Sustainable Enterprise at the University of Michigan's Ross School of Business and School for Environment and Sustainability (SEAS). He is a globally-recognized thought leader in the area of Sustainability and, among the many honors and awards he has received, is winner of The Page Prize for Sustainability Issues (2020). Dr. Hoffman’s… Read More
Nicholas Poggioli
Nicholas Poggioli is a Postdoctoral Research Fellow at the University of Michigan’s Erb Institute for Global Sustainable Enterprise, a partnership between the Michigan School of Business and the School for Environment and Sustainability (SEAS). His research and teaching address how business management can be both profitable and compatible with stable ecological and social systems. Dr. Poggioli soon will be joining the Appalachian State… Read More