We Need to Redesign Our Economy

FILE - This December 1968 file photo provided by NASA shows Earth as seen from the Apollo 8 spacecraft. The images provided b
FILE - This December 1968 file photo provided by NASA shows Earth as seen from the Apollo 8 spacecraft. The images provided by the NASA mission were the first to how the planet in its entirety. NASA, the agency that epitomized the "Right Stuff," looks lost in space and doesn't have a clear sense of where it is going, an independent panel of science and engineering experts said in a stinging report Wednesday. (AP Photo/NASA, File)

We need to face it: if we are to make our economic system really sustainable, it is inevitable that we redesign it. This requires an approach in which we will create value on three dimensions simultaneously: People, Planet and Profit. The primary goal for business should be to create societal, ecological and economic value. This triple value creation will provide the foundation for really addressing the main global challenges of today. The increased impact and power of business need to lead to an increased responsibility to contribute to the real, higher goals of our economy, to serve society. "You cannot be successful, nor call yourself successful, in a society that fails," says Feike Sijbesma, CEO of Royal DSM.

When the richest quarter of the world's population use about half of our global resources -- and take the liberty to produce half of the global waste -- while another third live in poverty, it is clear that our economic and societal systems are failing us. And that is even before we have reached the point where our planet needs to accommodate 9 billion mostly urbanized and aging people. Add in the rapidly growing middle class in China, India and elsewhere who also want their share, and it is easy to see that our current path is unsustainable.

Over this hangs the cloud of climate change, which is already having huge consequences. Scientists agree that we face the risk of even more severe floods and droughts, which is clearly related to our addiction to fossil resources, necessitating an inevitable transition to renewable, alternative energy sources. And we need to address food and water security too, for we cannot accept that 2 billion people are malnourished, half of whom go to bed hungry every day.

These urgent global challenges surely provide the impetus to redesign our economic system. We need a new approach that recognizes the importance of Profit, but which gives equal weight to the impact of economic activity on our Planet and its People too. In short, a triple P approach in which societal, ecological and economic value creation are seen as three equal goals for business. This is not just a matter of applying business ethics; we also need to embed this in our economic and business system, using new legal and accounting rules, so as to recast the role of business in society.

Why? Because the impact of the private sector has increased enormously over the last 50 to 100 years. Some of the largest companies now have cash balances that are bigger than some countries' GDP. The harm companies can do, but also the good, is impacting our planet and its people on a scale never seen before. And it is private companies who, with their technological expertise and innovative power, can provide the answers to the world's biggest challenges.

I believe that with this increased power comes increased responsibility. We can no longer rely on the traditional paradigm, where governments and the private sector have their separate realms (with international institutions helping on issues crossing national boundaries). The challenges we face are so big that we need companies to take more responsibility, working together with governments and international institutions in private-public partnerships. Nobody can address these issues alone.

The transition from the current fossil age to a new bio-based, renewable age is one such challenge. To go forward here, we need to go backwards to a time when we lived off the land, using renewable resources like the sun, wind and water. We need to use these truly renewable resources in a much more innovative manner than in the past. Therefore we are working to harness the power of 2nd generation biotechnology so that we can use all of the molecules from agriculture, including so-called residues, to produce food, fuels and materials.

We need an overhaul of our economic system to enforce this new corporate responsibility. This will not be the end of capitalism, as some say, but we will be using the capitalist system's own tools to change behavior.

First, to get to a more circular economy where sustainability is an integral part of business decisions, we need agreed systems to measure the impact of our economic activity on People and Planet. Today we have accounting systems, like IFRS, to calculate profit, which are much more complex than simply revenue minus costs. We need similar systems that supplement the profit calculation with a company's impact on our planet, its use of the world's resources and 'externalities', and its ecological footprint. We need an aligned definition and calculation of what is sustainable, green or 'eco'. Something similar needs to be developed for the People dimension, looking to the impact of companies on people with respect to health, wellness, labor and other societal aspects.

When these have been agreed, we can move to the second stage, where People and Planet metrics become accepted tools for company valuation, alongside profit. If company leaders know that analysts are following their societal and ecological ratings as closely as their profits, they may feel stimulated to make business decisions differently.

Accordingly, we should anchor value creation (or destruction) on the People and Planet dimensions in the overall valuation of companies. One approach might be to introduce differentiated tax regimes depending on companies' performance or contribution on the ecological or societal axis. A logical complement to such an approach would be to consider increased taxing on the use of scarce resources, whilst diminishing taxes on labor. This would help to tackle the scourge of unemployment and could make it easier to create jobs for older people as well as in certain services that society wants but that have become almost unaffordable.

Moving to such a new model will not be easy. Change triggers resistance. So this transition will require coordinated leadership. Governments, civil society and business will need to show courage. Asian leaders have a significant contribution to make, since their region will see the greatest increase in resource use and their economic models are rooted in different philosophies than those in the West.

The business community will also need to join forces. We need to pool our ideas and resources to achieve global progress like Governments do at the UN - we could call this approach United Businesses.

Together, businesses have the power to deliver tremendous progress, and a unique ability to make this world a better place. But this will happen only if we see the economy not as a goal in itself, but as a means to contribute to our planet and its people. This is a notion that we have more or less lost over the last few decades. We should redesign our economic system for a sustainable future -- starting right now.