Categories
Podcast episode

Do environmental and business sustainability go hand in hand? w/ John Engelander  – EP172

Planet Earth Cleaning Co. and Ecobin founder John Engelander proposes that environmental and business sustainability can go hand-in-hand. Show host Gene Tunny asks John about the benefits and costs of businesses adopting more environmentally-friendly practices. 

Please get in touch with any questions, comments and suggestions by emailing us at contact@economicsexplored.com or sending a voice message via https://www.speakpipe.com/economicsexplored

You can listen to the episode via the embedded player below or via podcasting apps including Google PodcastsApple PodcastsSpotify, and Stitcher.

What we discuss with John Engelander, founder of Planet Earth Cleaning Co. and Ecobin

  • John’s epiphany that led to the birth of the Planet Earth Cleaning Company [4:15]
  • What are the costs and benefits of adopting environmentally friendly business practices? [8:00]
  • “It’s not an investment if it is destroying the planet” discussion, in which Gene mentions how economics has been trying to account for environmental impacts [20:38]
  • Do we have enough time to avoid a climate/environmental crisis? [25:50]
  • John asks Gene if we need to own cars? [33:54]
  • John’s final thoughts on the importance of being a conscious consumer [44:29]

About this episode’s guest: John Engelander

A true force of nature, CEO & Founder John was green way before it was cool. It was his belief in profit with a purpose that led him to start The Planet Earth Cleaning Company circa 1994, and he has been inspiring people and companies to be greener and better for the planet ever since.

In 2007, John completed his certificate in Sustainability Advocacy at Swinburne University.  He believes, “when you look after the planet, you look after yourself”. When we influence others to take responsible actions, there is a ripple effect. And that’s part of doing good by being good.

Today, John works with people that are looking for a healthier alternative & genuinely cares about making a difference to the planet, whether that’s through The Planet Earth Cleaning Company, the EcoBin business, or his personal advocacy & public speaking. John believes “conscious consumption is a great way to start. After all, less is more, and your planet will be healthier for it.” Now that’s good for business.

Out of the office, John burns off some of his high energy levels with water sports, snow skiing, mountain bike riding, cardio pilates and enjoying time in nature. And when not running after his kids and dogs, he likes to tinker on the piano, watch movies and have dinner with friends.

Links relevant to the conversation

John’s business EcoBin:

https://www.ecobin.com.au/

Quote by Vandana Shiva:

https://quotefancy.com/quote/925201/Vandana-Shiva-It-s-not-an-investment-if-its-destroying-the-planet

Mastercard study quoted by Gene:

https://www.mastercard.com/news/insights/2021/consumer-attitudes-environment/

CSIRO article on natural capital accounting:

https://ecos.csiro.au/knowing-the-price-of-nature-the-rise-of-natural-capital-accounting/

UN article on The Rise, Fall and Rethinking of Green GDP:

https://seea.un.org/news/rise-fall-and-rethinking-green-gdp

Australian Government guidance note on cost-benefit analysis, which makes it clear CBAs should consider environmental impacts, quantitatively if possible but otherwise qualitatively:

https://www.pmc.gov.au/sites/default/files/publications/cosst-benefit-analysis.docx

Transcript: Do environmental and business sustainability go hand in hand? w/ John Engelander  – EP172

N.B. This is a lightly edited version of a transcript originally created using the AI application otter.ai. It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.

Ep 172 31 December 22

Sat, Dec 31, 2022 6:16AM • 49:58

SUMMARY KEYWORDS

people, business, economists, cleaning, planet earth, john, economics, planet, sustainability, clients, cleaners, green, company, eco, thought, buy, organisation, price, good, world

SPEAKERS

Gene Tunny, John Engelander, Female speaker

Gene Tunny  00:00

Coming up on Economics Explored,

John Engelander  00:03

And I do believe that businesses that are purpose driven, people are attracted to that. And that attraction makes people happier and more productive.

Gene Tunny  00:15

Welcome to the Economics Explored podcast, a frank and fearless exploration of important economic issues. I’m your host Gene Tunny broadcasting from Brisbane, Australia. This is episode 172 on environmental and business sustainability. My guest is John Engelander, founder of the planet Earth cleaning company, and also the founder and CEO of Ecobin. In this episode, John and I discussed his proposition, but environmental and business sustainability go hand in hand. After my chat with John, I provide some reflections on the conversation, so please stick around for those. Also, please check out the show notes for relevant links and information and for details where you can get in touch with any questions or comments. Let me know what you think about what either John or I have to say in this episode, whether you have any thoughts on environmental and business sustainability? To what extent are they aligned or in conflict? I’d love to hear from you. Before we get into it, I would like to let you know that I’m going to take a short break from the podcast over January and come back in early February. Righto, and now for my conversation with John Englander of Ecobin. Thanks to Obsidian Productions for their assistance in producing this episode. I hope you enjoy it. John Engelander, welcome to the programme.

John Engelander  01:26

Well, it’s an absolute pleasure to be here today, Gene. So, thanks for having me.

Gene Tunny  01:30

It’s it’s fantastic to chat with you, John. So you’re very keen to chat about issues around business and environmental sustainability. So you’ve had a very successful career as a business owner, with the planet Earth cleaning company. And also with you’ve been involved in Eco Bins. I’m keen to understand those businesses, what you’ve done there. To start off with, I’d like to ask you about this. This philosophy of yours, I think it is that environmental and business sustainability go hand in hand. I mean, what do you mean by that? What does that mean to you, John?

John Engelander  02:14

Okay, it’s a good one because often I feel incredibly fortunate that I’ve been able to combine sustainability, and commerciality almost as a cocktail. And ther is some perfection in that because you give a lot of thought, I give a lot of thought and consciousness to how we think about the products that we consume, or what we offer our clients. Because I feel that the impact matters. And I think the price we pay for something, let’s call it whatever it might be, dollars, whatever. And then the price we have on our planet require some kind of balance, because, frankly, we don’t have an economy without getting it right with the ecology. Wouldn’t you say?

Gene Tunny  02:58

No, I absolutely agree with you there. I mean, we certainly need the environment to sustain us. So yeah, absolutely, absolutely, agree there. And would you be able to tell us about the planet Earth cleaning company? How you got involved in that? How did you figure out that this was a way that you could have a business that that met these, you know, that was both financially sustainable, and also environmentally friendly?

John Engelander  03:28

I think the like most things that can work out well, is there’ll be a problem. And if you can solve a genuine problem, then there’s likelihood there’s an opportunity, I don’t think you can make up. Often an idea, I’ve done it many times, it’s a good idea should do it. But in fact, there’s no problem to really fix or it’s not going to give people a great deal of joy. And I think there’s a problem when people buy a mountain bike, they buy that for joy, that’s not a problem. So it’s two ways, you either look at it as joy or you’re solving a problem. From my perspective. So how did it come about? I think, purely, it was by accident. I wasn’t planning on going into the cleaning industry at all. In fact, I still don’t plan on getting into the cleaning industry. I plan on trying to resolve something that made sense, and that was that. For those who have heard my story before, it was that one of the cleaners were sick, like they didn’t show up, and I ended up rolling my sleeves and ended up in a toilet cubicle of all things. Cleaning a toilet bowl, which never imagined that would happen. And as I opened up, the cleaning chemicals, the fumes were intoxicating. I also thought I was gonna suffocate and then if I thought that was bad, my hands were starting to crack split from the stingingness, I felt stinging you know, it was like burning, and that was it. Honestly, there’s got to be a better way. How can you subject people to this who were cleaning every day when that happened, and I guess that was one would call an epiphany moment, you know, if there has, if I can look after a way of fixing it for people cleaners, then there’s a there’s possibly a business opportunity, hang on a minute, if it’s good for them, it’s good for the planet. And that was essentially the birth of the Planet Earth cleaning company. Totally. Now, that didn’t mean that three decades ago, people talked about sustainability, then you can talk about green, greens is a fairly new word, back then it was just a colour. So I guess, feeling and believing and having purpose in my day-to-day life all the time drove me. And I could actually lead my people. So they understood that I was actually looking for a way to make their lives healthier. And that was a huge thing, until people started to wake up. Probably more recently, and I say recently went out when Al Gore brought out the documentary Inconvenient Truth, there was a bit of aha moment. And then that slowed down. And that now it just seems, there’s a real inertia in terms of the word impact. And it seems like that the whole idea of impact has become a big topic around what I do and probably attract investors, you know, get the calls, you know, I’ve been doing it for so long that I must know. I do. So that’s it sort of come together. So yeah, it was by accident to see a problem, the problem made sense to fix. And then I figured this is a good business to get into.

Gene Tunny  06:40

Yeah, for sure. John, would you be able to tell us a bit about I mean, how, what your scope of operations mean, where you operate the types of clients or customers that you have

John Engelander  06:52

Sure, so our clients are boutique large, or not so large, when I say not so large, that can fall under the type of clients that that would work with us. we have clients like Katmandu, we have clients like realestate.com, seek.com built a whole lot of building companies, McConnell Dow, which ones largest structural engineering firms in the world, and so forth, just to name a few and Cricket Australia, and other ones. So just a little, few little companies that probably they have good branding, good identity, recognise the need to not just take on cleaning, but see that by having planet Earth, it’s a huge upside for them in terms of letting their people know, when think about what that does to culture when you know, you’re a values based organisation. And we do this in Melbourne and Sydney, we’re looking at Brisbane, but at the moment, it’s really, really the two main cities in this country.

Gene Tunny  08:00

Okay, could you tell me a bit about what you do your operations? I’m interested in this because you mentioned the, the fumes, you mentioned the chemicals that cleaners traditionally use? And I imagine there are companies out there that are still using these chemicals? I mean, what what precisely are they are there some examples you could talk about? And then what what are substitutes? And are they as good? I mean, the thing that I’m wondering is, okay, do you do get the same quality of cleaning is at higher costs. So is this something that is a bit is a bit of a luxury? Or is this something that businesses across the economy can afford? Could you just talk about that, please?

John Engelander  08:44

Great question. First of all, chemicals. What price do you pay for your people getting sick? When those fumes go through your air conditioning wafting through something must happen, can’t measure it. But something must be going on, if it’s happening to my cleaners, because they’re right there and then it’s going to be happening somehow, indirectly to the clients. Better cleaning. Okay, let’s look at acid. It’s really good, isn’t it? I mean, you think about it, you’ve seen urinals we all have as men go into toilets and urinals and the only way to clean a urinal properly apparently is with acid, really. And an interesting story was some years ago, one of my prospective clients who became a client loved the whole story about Planet Earth, but he thought he would prepare cleaning his urinal without telling us so he went out and bought acid and did it. And a very sad story. He suffered for years. Now he called on us I would have gone no way. I’d never give that to my own people. He’s a client. I really adored this person. He took us on board for the very right reasons. And yet, sometimes consciously, it’s possible not to think so his health got a price when he paid for that. Do we have enough money for it? Well, I’m sorry, if you can’t look after yourself and pay for that. There’s an issue, how much more you pay is interesting, right? So think about this, we use chem free, we have a system, which is chem free by planet Earth, we actually installed it in the building’s plumbing system, it converts water through an electrolysis process and turns it into a sanitizer cleaner. The Cleaners just turn up with their little spray bottle, push it in, plug it in, it does that good noise rush, and then it fills the bottle up. And they can use that to clean and yes, it’s effective. And it’s not toxic. It was water, water through electrolysis process. Now, not every body wants to invest in that. So could you say it just cost us not, can do. But are we interested in getting it right for our people? And let’s face it, when you throw away chemicals into your waterways, after you clean toliets or mop floors, do you think that’s really good, can’t be good for the planet. And so all of that, and the beauty of about chem free is that we don’t have the containers. Because when you have containers delivered, that’s transport emission, then you have great big plastic containers filled with chemicals. That’s transport not only transported, but the plastic it took to make it one use. Maybe not, maybe you can send it back to the factory and they fill it up. Well, it’s got to be sent back again, transport. But imagine all you do is plug a little spray bottle in and it fills that up. Now, sometimes you just got to use a little bit more elbow grease. But if you care enough, you’ll do that. Is the price higher? I doubt it. I think what, if anything, it’s really good value. And it all comes down to the effort you put into the job. So the beauty also of that is, if I may, is that, think about this? Is everyone complaining about not being able to get labour at the moment, in this time? It’s 2022. And it’s really hard to find labour. Why is it that a purpose driven company like us doesn’t have a problem, that has to have a great outcome for our clients, because you’ve got people that actually are doing something because it matters for them beyond a dollar, because you’d never pay cleaners enough money to come do their job. But purpose will drive. And purpose if the message is properly conveyed to our clients, people, it all becomes it starts to build culture in terms of value based. And I do believe that businesses that are purpose driven, people are attracted to that. And that attraction makes people happier and more productive. Can you put a price to that? You betcha. You spent $100,000 on cleaning, you’ll get an outcome of three, four times then in your culture development, if you make sure you promote that you’ve taken on Planet Earth Cleaning Company, because it’s a big deal to make the right choices.

Gene Tunny  13:07

Yeah, I think the point you make about health and safety is a good one. I’m not familiar with the data for cleaning, I’ll have to check it out after this. I mean, I’m not sure what the studies show whether there is a significant improvement in health and safety outcomes with using these environmentally friendly products. 

John Engelander  13:35

Yeah, no, I’m saying the same thing I can’t measure. All I can say is it’s a good chance. But it’s good to know, if you’ve taken on a cleaning company they care enough about their people to you know, I mean, we go as far as even caring about their mental health, we have a service where they can call up if they’ve got issues. None of my management are allowed to know about it. So yeah, we’ve gone from product to people’s minds to actually having them, you know, on board with, with, with this whole idea of we’re getting it right, because let’s face it, we all have the planet in common.

Gene Tunny  14:13

John can ask you betting impact investing? I think you were talking about that earlier, you were talking about impact everyone people are interested or investors are interested in impact now. So does that. Have you been dealing with that in investment impact or what does it impact investing community? How substantial Do you think that is? Is? Is that going to help support or help grow a lot of businesses such as yours or other businesses and that are environmentally friendly?

John Engelander  14:43

I think that look I don’t know a lot about impact investing. I prefer to invest in myself. But the truth of the matter is that I do believe that there’s a there’s a whole movement towards looking at being ethical, and ethical and impact seems to have they complement each other, don’t they? So let’s, let’s look at it this way. My couple years ago, I think my brother in law showed me a return on investment with an organisation called Australian ethical. Did that year, he made close to 50%? I’ve never heard of that in my life. I fact, I was blown away. I don’t know if they continue to do that. Was that just a fluke that year? Either way, was it settled? It spoke volumes? Didn’t you look at businesses like? Well, if you bought Tesla a few years ago, just 2000. And I don’t know, let’s call it 2020 20, February to 2020. And that share price is $480. I know because I actually invested in that. And it got it went up and up and up and up, went to 2400 got split by five, what was that worth? Then it went up and up. And now I’ve got slipped by three, not doing so well at the moment, which is really interesting, because they’ve been more profitable than they ever have been. But they’ve actually led the field where they go to in the next 10 years. Who knows. Some have faith in it, and some don’t. But it brings a whole lot of other industries together about looking at what’s viable, both commercially and sustainably. Have To be frank, I’m not a big fan of the word sustainable. So which often shocks people, but I think we should consider the idea of being enabled enable the planet, the planets in trouble, we say it’s overheating the the blanket in the sky of greenhouse emissions that are just get thicker and thicker, holding the heat under. So our temperatures change on the planet. Is is that an interesting? An interesting idea. So I think, you know, when we consider the future we’re talking about so that the health of the planet, you know, with all these things, that people plan it all together pretty, pretty combined. I think there’s a good investment even to look after our children’s future that is enabling the planet, I think it’s an essential part of it all. So, you know, often I can call our teams and enablers, they’re proud of it. We recently had our tree growing programme, we do this, you know, half day tree grow, growing programme. And we’re actually looking to do that for our clients next year, too. So because the half day programme really enables a whole, I guess, one’s team to really come together and, and be connected, which is another part of it, too. We all feel connected, we feel better about ourselves and have something in common. So that whole thing has to be viable, I believe for the organisation. To give you an idea when we when we did the most recent one 30% of our staff actually weren’t working that morning. But they showed up to be part of it. What does that say? Yeah,

Gene Tunny  17:59

yeah, that’s a good culture. Yeah, not bad. That’s really good.

John Engelander  18:04

So that has to make, you know, if you have happy culture, and they’re more productive, which I mentioned earlier, that’s going to be a viable proposition for anybody.

Gene Tunny  18:11

Yeah, yeah. Okay, we’ll take a short break here for a word from our sponsor.

Female speaker  18:20

If you need to crunch the numbers, then get in touch with Adept Economics. We offer you Frank and fearless economic analysis and advice. We can help you with funding submissions, cost benefit analysis, studies, and economic modelling of all sorts. Our head office is in Brisbane, Australia, but we work all over the world, you can get in touch via our website, http://www.adepteconomics.com.au. We’d love to hear from you.

Gene Tunny  18:49

Now back to the show. I think I may have asked you this. So I think you may have answered it before. But one thing, one thing I’m interested in is whether it does cost you money to do the right thing as a as a business owner. So does it make you less profitable than than otherwise? You may have answered that earlier. But if you can just reflect on that, please, John, that’d be great. Good.

John Engelander  19:13

Okay. So yes, it can and, and like anything, what you choose quality always cost more. But let’s look at it this way. If it’s not, if you don’t see it as quality, but you see it as doing the right thing. Can it cost more? Possibly? I don’t believe if you buy quality, like if we offer a quality service, you pay for it. If we provide green, I don’t believe we’d need to charge you more because we’re agreeing. I don’t think that’s necessary if we manage it fine, right. But when you can talk about what would you pay to drive your workforce? Because you’re purpose driven? What would you would you bring a you know the term people and culture that and companies bring people in and spend Lots of money, right? We don’t have to do that with us. And I think that’s a huge, huge tip, as is bringing in Sustainability Consultants, you don’t need that we, we can give it all eco been planning to go in and give advice on what to do next next year will be big plans to helping organisations transition to a green future. Because I really believe that’s the direction we need to take otherwise, why would you do business with companies that are destroying the planet, and then look at that. It’s not investment, it’s destroying the planet.

Gene Tunny  20:38

So this is a quote behind you. That whose it

John Engelander  20:42

by John, Dr. Vandana Shiva writes it. 

Gene Tunny  20:47

not an investment if it’s destroying the planet? So look, I don’t think that that makes sense. What it’s suggesting, as an economist, the way I think about that, is that if you do have something that is degrading the environment, then if we were properly account doing if we were properly doing the economic accounts, then what we would do is we would, we would recognise the subtraction of value in the environment. And, look, I know that economists, you probably object to the way that economists look at this sort of thing, economists would put a value, they would try to put a value on the environmental capital stock, or the natural resources. And then to the extent that there’s degradation of that you could subtract from that. And we should be recognising that in our national accounts as a, as a negative investment as a disinvestment in that in that natural resource asset. So there is a, there are economists that are looking at how we can measure that environmental damage that’s occurring. And it’s a field called natural capital economics, if I remember correctly, or there’s an environmental economics field, and there’s ecological economics, which takes a different perspective. Yep. So it’s not as I mean, economists are thinking about these issues. So yeah, I think that’s that is an interesting quote, to reflect on. I’ll put a link in the show notes to while reproduce it in the show notes and link to put some links regarding it, because I think it is a it is a very good quote.

John Engelander  22:33

Look, I don’t blame economic, economical economists. I often believe that where I sit in this world is to be highly relatable. And you can’t do that without understanding others. It’s not enough for me to be persuaded and say, hey, you know, staunch Greenie and you guys are bad. I think that’s not the way to go. And nor is that the other way. Extreme. No one listens to extremist. Really, really interesting. I mean, look, I know both sides of the story. I don’t know if you’ve ever read the book, how the world really works. And it believes that we’re in such a heavy hitter, but

Gene Tunny  23:12

I’m trying to remember if maybe, maybe I haven’t read that one. I’ve read a I’ll have to look it up. I’ve read a book about maybe a thinking of a book about the deals that made the world I think I got confused momentarily. I don’t think I have read it. Sorry, John, can you tell me a bit about it’s okay,

John Engelander  23:29

so, look, all of us we don’t think about what we buy, we just buy it that way. And so don’t consider if we buy a plastic tub, how much oil has gone into it? Or we don’t think about whatever it might be. Oh, when was it the Climate March and I was wearing my planet Earth t shirt. And some young 21 year old came up to me and says, Hey, dude, I love your planet Earth T shirts. And hey, dude, I love your one use water bottle. And it went red. And I actually looked back at him. I said, Look, I’m really not looking at you. And judging, I just think we do forget not thinking. But when when you think about the different layers. For example, ATP is a good good case in point, we brought out a waste system for being able to separate your waste using different colours, red landfill blue for paper, green for food, yellow for recycling, and so forth for plastic recycling aluminium. And, and I’ll go back to the book in a second because it’ll all come together. And when I chose to do that, it’s really good that we’re able to help people sort waste because let’s face it when you change people’s ways, habits through colours, it’s much easier Yeah. Now it’s made in Melbourne, Australia. Not only is it Australia and I thought about what’s called an LCA, a lifecycle analysis, went through the whole thing and understood how much carbon we were able to find a plastic fabric, plastic, believe it or not, but a certain type of plastic that used to 80% less energy and its manufacturing of an equivalent sized plastic bin. How’s that? So the consideration was good, by the way, cost less to make. So I can charge less for other people use the no excuse. It’s quite affordable. So talk about is it costly? Do grain not in that case, but the separation of it means imagine, you throw a plastic whatever in there. And it turns eventually into plastic garden furniture. I mean, it’s it’s pretty phenomenal, isn’t it? I mean, you didn’t have to steal the resources out of Mother Earth. You actually did it, because it was available there and then and didn’t have to go back into it didn’t have to end up in landfill. It ended up converted, right. Good point, right. Here’s the thing. Look at this book. And it’s bizarre how the world really works. And it says, we’re addicted to plastic. We’re addicted to oil. We’re addicted to steel, we’re addicted to ammonia. How are we ever going to change? Then I’ve got another book on the other side of it called the carbon carbon Almanack. It’s not too late. So which one do you believe?

Gene Tunny  26:08

Which one do you believe the carbon Albert ACK or the how the world really works?

John Engelander  26:13

Yeah. Because the Almanack says it’s not too late. And the other one says are we’re in? We’ve got all these habits. Yeah. Plastic oil, you know, ammonia, concrete, you know?

Gene Tunny  26:25

Yeah. Well, I mean, I’d like to think it isn’t too late. I recognise that there is a need to decarbonize our economies? Our look, I think it’s, I mean, I’m, I’m of the view that we need to, I’d be probably advocating a more gradual transition, then then many others, including many other of my fellow economists, I think most economists would support a carbon tax or an emissions trading scheme, which imposes a carbon price, I think there’s a recognition that we need the right signal air to, so that businesses and consumers are considering the what you call the marginal social cost of, of greenhouse gas emissions. So that’s included in the in their economic calculation. So I think there’s there is a recognition that something needs to be done. I’ve just been concerned about the pace of it. And I think, with the issues over energy here in Australia at the moment, cost of energy rising. That’s, that’s something I’ve been concerned about. But I would like, yeah, so I guess I’m saying I’m probably more of a carbon Almanack view. Because I’m just trying to, I think we just need to understand that the world the way that economists think about this, and it is that with these resources, I mean, you mentioned these resources that have been depleted or being used. And you could say, you know, maybe they been used unsustainably. But the standard way that economists look at this is that to the extent that they are, then that’s going to be reflected in the price. And that will encourage conservation of those resources. So that’s the way the the economists tend to look at it. And the argument would be that we really haven’t run out of any essential resource globally. So that’s the that would be the economic argument there. So I guess what I’m saying is that if he asked me to choose between those two, those two books, what was the one that how the world really works?

John Engelander  28:44

It really works and the carbon Almanack Carbonell Almanack. It’s not too late. It says underneath it. Yeah.

Gene Tunny  28:49

Yeah. I mean, my, my view, or rather, my hope is that it isn’t too late. I think it’s something perfect. We can, we can sort out in time. I mean, a lot of these predictions of Apocalypse are coming from numerical models of the climate. Yeah. So Well, yeah. Okay. I know that there are there have been there. Definitely. There’s definitely change occurring. I’m not denying that. But my hope. And I guess my expectation, if I had to put if I had to make a best guess, my best guess would be that we have time. But look, I may be wrong. I’m not. I’m not 100% confident in that, that.

John Engelander  29:34

You don’t have to be Gene. I think the the point here is why wouldn’t we just do the very best we can? Yeah, there’s no harm in that sort of harm. And the other way, there’s no harm in that. And so you think we all live pretty well. Let’s look at look at Australia. How many TVs do we have in our house? How many cars do we drive? And what kind of is that quality of life or is there something else that’s actually hot at a higher value? I have to tell you I much prefer getting on my mountain bike in the country and writing that than then jumping into someone’s petrol car, you know? So it’s it’s those considerations, what is life? What is it? What is really the essence of the quality? That one would really require the kind of 140 square home carpark underneath? Or do we really need that much? Do we? I’m not saying it’s not a judgement call, by the way. Choices are there? But I don’t know, it’s like, I think it brings it down in my fundamental philosophy. And that is, if someone was to ask be you’re really passionate about the planet? And I’d say no. And so that shocks, but there’s a reason behind that. It’s not important for me to be passionate about that. I mean, I love my you know, I could have someone you ask someone, do you love your mother? Yeah, very much. Are you passionate about it? No. Love it. And so it’s those things that you kind of look at, it’s logical, I look after myself, do you look at yourself? Do you eat good food? Do you do all the right things for yourself? So you do it for the planet, wouldn’t you? You don’t have to be passionate, just passionate. From my perspective, live life fully is my passion. I do stuff, you know, I get out there enjoy the fresh air. I don’t want it to go naturally I want to look after and preserve what’s happening. And what price do you put to that? Now? $1 financial, you know, it’s not important. Entirely. Put it in perspective. But if you have very little it is important. But when you have more, how much more do you need? What is at what point do you say it’s enough? At what point do you tell your shareholders that, you know, we’re going to deliberately make this? It’s okay. But maybe it’s not? Because I didn’t come into business just on that basis, I need to be interested in what I do. And when I’m interested, that fuels me, and somehow Money takes care of itself. Not always. But most of the time, yes, I’ve made, we’ve all made mistakes, I brought out a product called Eco to life. Would it be 14 years ago, that in 14 years ago, while I was trying to and as we were building the product together, it was actually concentrate to sugar cane and corn made into a cleaning product. And there’ll be little little packets, he buys spray bottles. So once you once once you buy spray bottles, you’d have to buy them again, you have to go to the supermarket and get more, but you just add this little bit at the waters, you’re not carrying heavy loads of water home either. And I thought that would be a good idea. And I threw a lot of money into this idea. And it didn’t, didn’t happen. So the timing, you know, today I know what’s happening because I you can buy this, you can buy this. So in a sentence pioneering is it’s very painful. But I’m interested in the topic and it becomes part of my story. And I’m good with that. Instead of being sort of being a victim, you look at it and go, What have I learned? Where can i What, how can I use that moving going forward? And I do believe we’ve got a chance. And it’s a great story for all of us to come together and get it right. And there’s so much new technology coming out. It’s unbelievable. In terms of what we’ll see we’ll see people with solar on their roofs, sharing their power with other people. That’s a great example. Yeah. What about geothermal, and housing your home with heat and air conditioning from the natural substance of Earth, underneath us, and by the way, that could be economical to once we get the price down in terms of that technology.

Gene Tunny  33:54

I think the point you make about the local energy grids or whatever you call them, with the sharing of solar and if we can use EVs as batteries, and if we have smart metres in the household, I mean, there has to be a lot of investment that occurs before this all happens and you know more batteries around the place that Yep, EVS mean, everyone will need to get an EV they’re currently twice as expensive as they probably need to be to have widespread adoption by consumers.

John Engelander  34:27

Jane, question though, do we need to own cars? Ah, we currently use if you’re lucky one and a half hours worth of driving a day.

Gene Tunny  34:37

Yeah. Look, I agree with you there, John. And I mean, I’ve I myself have spent several years of my life without a car. But I recognise that the only reason I was able to do that was because I lived in the inner city. So I didn’t have to commute. I didn’t have a family to to ferry around. into. So I think I think it’s a fair point. And you know, we could look at mobility as a service, I think they call it. So yeah, yeah.

John Engelander  35:12

Call on it when you need it. And now that way, because battery technology, if it’s function properly, it can go a long way. Otherwise, we’re wasting a terrible resource. And we can have less cars on the road. And instead of people going, our batteries are bad. Well, maybe we can turn that whole notion to something that’s productive, as opposed to focusing on what’s wrong, rather than what’s right. You think?

Gene Tunny  35:42

Yeah, well, yes. I mean, I’m all for having fewer cars on the road. I try and walk wherever I can. I just, but that’s partly for self interested reasons. It’s not necessarily for the environment. I think it’s good that it is positive environmentally. But I, I look at it as incidental exercise. I mean, I think that I find that if I don’t, if I don’t walk, to go down to the shops then that I lose an opportunity to do a bit of exercise, and then I’ll go to the gym. But I find that if I can not take the car, I get a benefit that way. And yes, it is good that it is good for the planet. That wasn’t that probably wasn’t my first consideration, though.

John Engelander  36:25

But you know, you said something really profound is that you looked after yourself. Look at the planet, you look up.

Gene Tunny  36:34

Yeah, there’s a nice correlation. There are a nice coincidence of, of interest there. Yeah, yeah.

John Engelander  36:40

Yeah. I just, I just hope that the economists see the logic and the fact that, from what I understand is a sustainability scorecard that I that I believe will will come to come to businesses, whereby it’ll be just as important as your financial accounting, as it will be to show that you’re actually showing your impact.

Gene Tunny  37:04

Yeah, yeah. I mean, one thing I’m interested in it is, to what extent can this be led by this transition? To what extent can be led by business and consumers directing? Well, by their purchasing power, directing, production, directing the commercial activities of businesses and how they treat the environment? In particular, we have the scorecards, if there’s greater transparency, to what extent can change be led, in a bottom up way, rather than top down with government policy to have any thoughts on that? I mean, to what extent is a lot of this stuff already happening? Or does it? Or do we? Or do you need government policies such as carbon pricing as well?

John Engelander  37:53

Yeah, it’s, it’s, it can be, it feels a bit disappointing if you thought that’s what it would have to happen. Look, look at our young generation, they want to work for companies that are values based, they care that have this notion about the planet. So it could happen from the bottom up, down, right? Because you do attract. I’ve heard this so often attract and retain staff. I know, it happens, we do it. So if you, you can do it from the bottom up. And I don’t really want to see people forced to engage being engaged. It’s like leading a horse to water, isn’t it? So imagine if you just got people from a feeling of what would we call it excitement, or at least be happy and joyful about the fact that work for a company that actually cares put together green teams develop ideas together. It’s, that’s one of my missions next year, actually, is to help business transition to a green future. And there’ll be in this regard our membership base solopreneurs, coming together, and having evening discussions about what’s possible, and then see what of the possibilities we can actually put into action or influence others to put into action. But to I can’t have all the answers, but I can certainly bring the right people together in order to support the needs of of local organisations. And certainly one of the things I do find really of high value. And I mean, when you talk about bottom up, if I get invited as a speaker into an organisation, I’m talking with a level of enthusiasm that will that I’m believable, inspire everyone to actually feel like we can do this. We can all be planted enables. Because by that way, we enable the planet and they’re viable because they’ve got a sense of purpose when they come to work every day.

Gene Tunny  39:47

I think that does make sense. The challenge is, and this is this is probably obvious. It’s probably rather a trivial point. But the challenge is that you as a Business, you could be doing the right thing. But if your competitors aren’t doing the right thing, then they can get a competitive advantage by having a cheaper product. But then you’ve got the advantage that you’ve got, you can label well, you can promote yours as the clean green, the environmentally friendly alternative. So that could give you an edge in the marketplace.

John Engelander  40:20

I think it would accept that when you say that, and you have a cheap, cheap and nasty cleaning company, putting it together a quote, one needs to ask, what are you really getting for the money? Let’s put aside the green aspect. The Greens there to you know, from my perspective, you have that as a product, it better be good. Once it’s good, everything else should come together. I hope you know. And so I don’t, yes, it does give it does allow people to have their eyes pop out and go up, I’m going to listen to you because you’ve got a green way of doing things, but also gives you an opportunity to say how you’ll do it. And how you’ll do it better for them. If you get that chance that really shouldn’t have that boring conversation that most companies are, oh, you should use our business because we’re we give good service to our customers. And we do this and we do that. And you know, I’ve heard that everyone, everywhere. So what makes you really stand out? And it’s what you stand for. That makes you stand out?

Gene Tunny  41:27

Right? Yeah. And I mean, have you had? How do you prove that to to your customers? John, how do you are the fact that you’re the sustainability? You’ve got testimonials? And you’ve got? I mean, you got a track record now, haven’t you? I guess one thing that would be it seems like you’re talking about the service people trying to promote themselves based on superior service. And I mean, a lot of businesses will say that. How? Yeah, yeah, exactly. So I guess you do need to demonstrate that if you have this environmental commitment, you need you need some is that there’s a certification, I’m just trying to think how

John Engelander  42:13

it’s a great term certification, I think that does belong to some people who need it. And so when you’re born green, the birth of a planet back in 94. So essentially, that’s us were born green, we know it, we should be the ones giving the certification to others. And that’s why when companies take us on, they suddenly become greener, they, they have an opportunity to tell their people. And let me tell you that that’s a good news story for their for them. That’s, they want that message. And so when you offer eco bins, colour coded bins, systems, and you roll it out for no charge whatsoever, and then you give a morning tea talk on why we do what we do, and how they can also become plant enablers. The who does that, and then with, with all those other aspects about talking about chemical free cleaning, and then everything just comes together, you can’t find that just anywhere. You can’t. Even in the name planet Earth, we imagine this, you have the person who made the decision they send on their intranet, to their 500 cluster. We’d like to welcome to planet earth, their new caretakers around our building, starting on Monday, you can’t do that if you’re gonna make up a name Zen topless and Sons cleaning service, it just doesn’t feel it just it doesn’t register, right. And that’s more than ever, this whole idea, it has never been more relevant for what’s going on in business. And what’s and it’s relevant for what they tell the people, it’s relevant to attract people to your company. By golly, you know, all you have to do is ring up, see, all you have to do is ring up any of our clients. You know, it’s it’s a given. And in my decision, because I’ve done it for three decades, and know what I know and want to help and support organisations. How do you beat that? Warren Buffett has a great line. And he talks about enduring, competitive advantage. You can’t beat three decades. He can’t beat being born green. Can you?

Gene Tunny  44:29

Exactly John, that’s, that’s terrific. Any final thoughts before we wrap up?

John Engelander  44:35

Yeah, whatever you do, start to think about the choices. Because our choices do have impact. And being a conscious consumer makes a huge difference. And people notice you. They do they do when I when I bought my first TV seven years ago, boy, did they have a message. I didn’t just buy a car. So I think being conscious and other people watching you do what you do. You don’t even have to tell people, if they watch how you do it. Let them ask you the questions, but really, that don’t. I don’t think it’s a good idea to be an extremist. If you want to be listened to, and and hold an open mind, and we’d live with what’s possible, that’s what I do.

Gene Tunny  45:22

Okay, so a steady, can we take a steady approach? I mean, I’d like to be more conscious, more environmentally conscious. I’d find a difficult making radical changes at the moment. But I know that because I know there’s a movement for people to live off the grid. I don’t think I mean, I could never imagine myself doing that. But I mean, is that something you’d be considering? John?

John Engelander  45:43

Not? Yeah, I have solar and I have batteries. And very convenient. But depends. I like this term shades of green. Okay, where you sit, let’s just get, we don’t have to be perfect. Let’s you don’t have to be you just be better, not perfect. And if you just do one thing at a time and think about the one thing you can do today, I think that makes it simple. Otherwise, it becomes complex. And honestly, it’s not as hard as you think.

Gene Tunny  46:15

Yeah, I think that’s a great message to end on John, John Engelander. And that’s been great. I’ve really appreciated your, your thoughts and your insights into business and sustainability. So thanks much for your time.

John Engelander  46:29

It’s a pleasure, and I’m really glad that you’re able to catch up with me. So thanks, Gene.

Gene Tunny  46:36

Okay, so what are my big takeaways from my conversation with John? My first takeaway is that it’s clear that many business owners can have sustainable businesses and look after the environment to John’s businesses are great examples of how that can be done. As an economist, however, I wonder just how widespread this phenomenon can be. In the absence of regulation or policy measures covering all businesses, many businesses will probably choose lower cost and less environmentally sustainable practices. And many consumers will choose lower price options over more expensive, environmentally friendly ones. That said, public attitudes are changing and it’s possible consumer behaviour will drive more environmentally sustainable practices by businesses in the future. Following my chat with John, I found a really interesting study done for MasterCard and 2021. And I’ll put a link in the show notes to it. This study reported that more than half 54% of those surveyed across the world believe it’s more important to reduce their own carbon footprint since COVID-19. And more than three and 560 2% said it’s now more important than before that companies behave in a more sustainable, and eco friendly way. changing attitudes could have big implications for business in the future, and I’ll aim to have a closer look at consumer attitudes and behaviour in a future episode. My second big takeaway from my conversation with John is a reminder that we need to consider any degradation of our natural environment if we’re properly measuring the benefits of economic activities. The discussion I had with John in this point was inspired by a quote that John had on the wall behind him in our conversation over zoom. It’s not an investment if it’s destroying the planet. That quote is from Dr. Vandana Shiva, an Indian scholar and environmental activist. I would know that for several decades now, economists have thought a lot about how to account for any environmental degradation and cost benefit studies of projects. This is not something we’re ignoring or don’t care about. Economists have also thought a lot about how to augment the traditional national accounts to reflect environmental considerations. I’ll aim to cover how economists analyse environmental impacts in some depth in a future episode. For now, I’ll include some links in the show notes relating to the field of what’s called natural capital accounting. And I’ll also add some links regarding how economists have been trying to account for environmental impacts and cost benefit analysis. Okay, those are my big takeaways from my discussion with John Englander. The EcoBin, do you think I picked the most important ones? If you’re willing to share your own takeaways from the episode, please send them to me via contact at economics explore.com or send me a voice message via SpeakPipe. You can find the link in the show notes. Thanks for listening and Happy New Year. Okay, that’s the end of this episode of economics explored. I hope you enjoyed it. If so, please tell your family and friends and leave a comment or give us a rating on your podcast app. If you have any comments, questions, suggestions, you can feel free to send them to contact@economicsexplored.com And we’ll aim to address them in a future episode. Thanks for listening. Until next week, goodbye

Credits

Thanks to Obsidian Productions for mixing the episode and to the show’s sponsor, Gene’s consultancy business www.adepteconomics.com.au

Please consider signing up to receive our email updates and to access our e-book Top Ten Insights from Economics at www.economicsexplored.com. Economics Explored is available via Apple Podcasts, Google Podcast, and other podcasting platforms.

Categories
Podcast episode

Enterprise China: what western businesses need to know w/ Prof. Allen Morrison  – EP171

Professor Allen Morrison has been studying China for over three decades, and he’s an expert on the Enterprise China model, the close relationship between business and state in China. Chinese companies take the lead from Beijing to help meet state objectives, including reduced dependency on the west. In return, they get competitive advantages over western businesses trying to break into China. In this episode, Prof. Morrison, from the Thunderbird School of Global Management at Arizona State University, talks to show host Gene Tunny about his new book with INSEAD’s Prof. Stewart Black on Enterprise China. 

Please get in touch with any questions, comments and suggestions by emailing us at contact@economicsexplored.com or sending a voice message via https://www.speakpipe.com/economicsexplored

What we discuss with Prof. Morrison

  • How the business model in China differs from the model in the west [01:50]
  • How the Chinese Communist Party oversees businesses in China [10:20]
  • What western businesses need to know when doing business in China [12:40]
  • Does China have an imperial ambition? [17:28
  • Companies which have done well and those which have done badly in China [22:29]
  • Challenges to the Enterprise China model and the CCP [27:48]
  • Gene’s takeaways from the episode [39:30]

Please get in touch with any questions, comments and suggestions by emailing us at contact@economicsexplored.com or sending a voice message via https://www.speakpipe.com/economicsexplored.

You can listen to the episode via the embedded player below or via podcasting apps including Google PodcastsApple PodcastsSpotify, and Stitcher.

About this episode’s guest: Allen Morrison

Allen J. Morrison is professor in the Thunderbird School of Global Management. Morrison previously served as CEO and director-general, senior advisor for global management education and executive education initiatives at Arizona State University. Before joining ASU in 2014, Morrison was professor of global management and the holder of the Kristian Gerhard Jebsen Chair for Responsible Leadership in the Maritime Industry at IMD. Professor Morrison was also director of the IMD Global CEO Center, which focuses on the challenges CEOs face while leading their companies in the global economy.

For further information about Prof. Morrison, check out his ASU page:

https://search.asu.edu/profile/2551923

Links relevant to the conversation

Get a copy of Enterprise China: Adopting a Competitive Strategy for Business Success:

https://amzn.to/3YMb1aI

Prof. Morrison’s article “Competing with “Enterprise China” vs. Chinese Enterprises” on the Thunderbird School of Global Management website:

https://thunderbird.asu.edu/thought-leadership/insights/competing-enterprise-china-vs-chinese-enterprises

William Kirby’s HBR article “The real reason Uber is giving up in China”:

https://hbr.org/2016/08/the-real-reason-uber-is-giving-up-in-china

Transcript: Enterprise China: what western businesses need to know w/ Prof. Allen Morrison  – EP171

N.B. This is a lightly edited version of a transcript originally created using the AI application otter.ai. It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.

Gene Tunny  00:00

Coming up on Economics Explored.

Allen Morrison  00:03

The Chinese model is the enterprise China model. If you want to do business, you will wait for the signalling and the support of the government, the government or the there that like the puppeteer is controlling this.

Gene Tunny  00:16

Welcome to the Economics Explored podcast, a frank and fearless exploration of important economic issues. I’m your host, Gene Tunny, broadcasting from Brisbane, Australia. This is episode 171 on enterprise China. My guest is Professor Allen Morrison of the Thunderbird School of Global Management at Arizona State University. Allen is the co-author of the new book enterprise China, adopting a competitive strategy for business success. In this episode, I chat with Allen about the close relationship between Chinese companies and the Chinese government and what that means for businesses wanting to compete in China. I also ask Allen about just how worried we should be about China’s global ambitions. Please check out the shownotes relevant links and information and for details they can get in touch with any questions or comments. Let me know what you think about this episode. I’d love to hear from you. Right now in my conversation with Professor Allen Morrison on enterprise China. Stick around to the end of the conversation for what I think are the big takeaways. Thanks to my audio engineer, Josh Crotts visit assistance in producing this episode. I hope you enjoy it. Professor Alan Morrison, thanks for joining me on the programme. 

Allen Morrison  01:30

Great to be here. 

Gene Tunny  01:33

Excellent. Allen, I’m keen to chat with you about your new book, Enterprise China. Could you begin please, by explaining what motivated you to write this book? And then what do you mean by Enterprise China, please?

Allen Morrison  01:50

Right. Right. Well, thank you. It’s good to be here. Thanks for having me. So I’ve been working in and around China for my entire professional career, well over 30 years. In fact, I was in China in Beijing in Tiananmen Square when they declared martial law. I’ve been a visiting professor several times in China, I’ve spent well over a year living in hotel rooms in China, advising Western companies, Chinese companies, also state enterprises in China. So my interest in background in China goes back more than three decades. What has fascinated me about China is that the story about China is very different than anywhere else in the world. And the business model is very different, how the approach to business is very different. In the West, we have long held the belief that if we invest in China, China will grow and it has grown. If we help them with technology, China will grow, and it has grown. And we have believed based on our own experience and values that as China advances up the per capita income curve that the public would hunger for democracy, China would open up would befriend everyone in the West. We also believe that as capitalism flourished, the role of the state would diminish. China has flourished, the economy has prospered the people are richer, 800 million people have been taken out of poverty. But the system didn’t change. In fact, the state is doubling down. And what has emerged is a very successful model we call the enterprise China model, where the state and the enterprise in a free market environment, a free market background, if you will have come together to create a very different model of competing, the model has enabled China to prosper. And we in the West are a not we’re not accepting of the model. We just don’t understand it. We are convinced it’s going to fail. It hasn’t failed and may not fail, and we don’t have a good solution for it. So that really prompted us my clue my co author, Professor Steward Black, was affiliated with INSEAD great business school, that really prompted us to better understand how the Chinese model works with the state and companies working together and how we in the West can best respond.

Gene Tunny  04:40

Gotcha. What I think is great about the work you’ve done, Alan, is that you’ve highlighted just how extraordinary this change has been just what’s been happening with China and there was an article that you wrote a couple of years ago Competing with Enterprise China versus Chinese enterprises, which summarises this, and I might just read this out, because I think it’s fascinating. In 2020, China dethrone the US from the top of the Fortune Global 500. In 2021, China extended its lead with 13 more firms on the list than the US, 135 versus 122. And I think that would, that would surprise a lot of people. So could you tell us a bit more about this enterprise China model, please? How did you learn about it? What is there a framework? I mean, are they are these companies? Are they been directed by the administration? I mean, how does it work?

Allen Morrison  05:39

Yeah, so enterprise, China consists of three types of Chinese enterprises, which captures most of the economy. Okay. On the one hand, we have state owned enterprises owned by Beijing, we’ll just say 100 of these firms. Not many of them. Many of the biggest firms in the world on that Fortune list are these firms. They are owned by the state, they’re an appendage to the state. The second level of firms are also state owned enterprises. But they’re owned by provincial governments, municipal governments, there’s 150,000 of these firms. Some of the big firms on that list are also in this set. But there are a lot of these firms out there, the third set are privately owned enterprises. These are firms like Alibaba, Tencent, and so on. But these firms are also heavily influenced by the state. And that owner influence comes in two ways. One is the state typically owns a small piece of these enterprises. They own 4% or 8%, or 12%, either of the parent or subsidiary organisations. So you scratch the surface of we’ve been quite, quite rigorous and looking at a whole swath of mid sized and large Chinese firms. Every single one of them has some component of Chinese ownership, albeit 4% 6%. So the second way they influence these firms is simply by, you know, through regulation or through signalling. So for example, you know, we go back to 2020, when, when Alibaba Jack Ma, Alibaba has, you know, market cap was $665 billion. Jack Ma himself personally was worth about $50 billion. And part of Alibaba is ecosystem is this company called Ant Financial, Jack Ma wants Ant to go public, it would bring in about 300 would value at $315 billion and bring in about $35 billion from the IPO, that would value add at more than Deutsche Bank, Credit Suisse, Barclays, ING, Goldman Sachs, together, huge. But then Jack Ma makes a few comments that this state viewed as disrespectful, shall we say? The IPO is shut off. Jack Ma is basically exile, the stock plummets in value. And this is just a signal to other tech companies that who’s in charge. It’s the state. And so the state can influence these and they influence them directly and indirectly, that what is very typical with these firms, even the privately owned firms are those that are traded in Hong Kong or those that are traded in the NASDAQ. These firms will partner with a state enterprise or a municipality, and they’ll say look, you know, municipality will say here’s the deal, we’ll give you the factory, we’ll give you the land. We’ll provide infrastructure, we want 6% ownership of your company. And we’ll give you discounted finance. So the Chinese partner, the Chinese, privately owned enterprise, they work with the state, then the state will say we’d like you to work with another company, a sister company, and so they’re matchmakers that put it together. This is this kind of ecosystem. If you want to compete in China, you have to be part of that ecosystem. And that we kind of refer to as the enterprise China It ecosystem. Right. Okay.

Gene Tunny  10:03

Now, this is yeah, this is interesting. I think I understand how they’re getting a competitive advantage. It’s because they’re getting some support from the state. Is that right? You mentioned that they might get land for a factory or there could be some rights, some incentives.

Allen Morrison  10:20

Right, but it’s more than that. It’s the ability to play in it to be in the game. Okay. So if you want to compete in China, you will be part of this ecosystem. You know, the, the Japanese had their model, the Keiretsu Model, the Koreans had the Chaebol Model, the old Hong’s of Hong Kong, it’s these interlocking ownerships and so on, the Chinese model is the enterprise China model. If you want to do business, you will wait for the signalling and the support of the government, the government or the there, they’re like the puppeteers controlling this. So it’s not just that we’ll give you a little discount on the financing, it’s not just that we’ll give you an old factory, it’s that if you want to play the game, here, you will listen to take direction from the subordinate to the state. One other thing many in the West don’t recognise is that companies in China with 50 or more employees must have on site and office of the Chinese Communist Party. They have a representative on site, medium companies, well, any company over 50 employees. So they’re all listening waiting for the signalling of the state. So it’s a matter of, you know, come almost arranged marriages and partnerships, that, that and I don’t want to say that that government is always, you know, always has tremendous foresight, they don’t. But even if the initiative is taken at the company level approvals, and a wink and a nod from the government, at the state, municipal level, are, are essential. Now I have to say, that’s a Chinese from a Western perspective, you have to think so what are we as are, what do we do about that? We want to do business in China? How do we integrate ourselves with that model? And that’s what much of our book is focused on? What do we in the West do about this?

Gene Tunny  12:29

Okay, okay. Well, I might ask about that, then, Alan, what do we do about it? I mean, I guess when you’re in Rome, you have to do as the Romans do, is that what you’re arguing in your book.

Allen Morrison  12:40

to some degree, it’s obviously not black and white. The first thing we look at in our book is, is we create a model or identify a model for strategy involving China. And on the one hand, one kind of strategy for China involves companies that are primarily focused on accessing China as the factory of the world. So I want to do business in China because I can buy, you know, my cheap couches or coffee pots, or whatever that is they become the factory that was so I’m interested in. That’s my, that’s my focus for China. There are other Western companies that are focused on the Chinese market. So I want to be in China because I want to access corporate or individual customer accounts. And in many industries, China is the second largest market in the world. And in many industries, it’s the biggest market in the world. So your approach to China depends in part on why you’re there. Most companies in the West there’s over a million companies in the West, doing business in and with China today, a million companies. Most of them are small, have a small, relatively inconsequential presence. They’re basically buying an option. They’re there, they don’t really understand why they’re there. They kind of burned the box checking business. Those companies are at risk. They’re at risk. So number one is understand why you’re there. Secondly, is to think very carefully about the industry you’re in because China has targeted 10 industries. Where if you’re a Westerner you’re going to be in deep, deep trouble. If you don’t think you know two or three steps ahead of the Chinese. These are the industries we typically think of associated with the Fourth Industrial Revolution, the kind of the industries of the future, robotics, pharmaceutical, aerospace, advanced materials. The Chinese have put a big umbrella up You know, and they keep reading, readjusting the definition. But these are the industries most in the West who would say, look, we’d really like to be there. In those industries, if you’re a Western company competing in those industries, the Chinese have been clear about this. They have identified market share levels, hurdles, and they go from 70, to 80, to 90%, domestic production domestic market share in these industries. So if you’re an aerospace, it’s going to be about 80% of the industry must be controlled by Chinese enterprises, period, doesn’t matter how good your technology is, doesn’t matter how good your service is, your market share it has been determined will be reduced to at most that 20%. But you’re gonna have to cut that up and share it with other Western firms. So be very cognizant of what the Chinese are after the Chinese are, after three things, they’ve been very clear about this, it’s been published, it’s not, you don’t have to be a spy and go in there and take pictures of their, you know, secret ID documents, their strategy is based on three steps. Number one, we want to become less dependent on the west, we want to reduce our dependency. Number two, they want to dominate domestically. And number three, they then want to go out into the world and lead the world to flip that dependency relationship. So we in the West are dependent on China. That’s that’s their approach. And they’ve been doing this for 30 years. And they have articulated it since the early 2000s. And so in the West, we need to be very aware of, of what we’re up against. That does not mean that China wants to decouple from the west. I think the worst thing that could happen to China is it would decouple from the west. And by the way, it would not be a good thing for the West to decouple from China. But they clearly have an engagement strategy and a strategy. That’s whose objective is to ultimately win and flip that dependency relationship.

Gene Tunny  17:28

So do you think that’s the main thing thereafter? It’s, it’s reducing that dependency, rather than? I mean, to what extent do they have imperial ambitions I suppose you could call it was one of the concerns we’ve had in or people in Australia have had is that there are concerns about espionage. And we blocked the telecommunications company, Huawei from being involved in our 5g rollout. So to what extent should we be concerned about that? It’s not just about them, wanting to become more independent. It’s a broader, it’s a bigger game.

Allen Morrison  18:08

You have a former, well, relative of mine, Morrison, who was the prime minister who lashed out on some of this. So yes, by the way, if we’re not closely related, okay. Don’t blame me. So look, I think that the Chinese to understand the Chinese you understand need to understand the history. Every country has its history. But China fresh in China’s memory is what happened in the 19th century when China was subjugated by the West by Britain, to a lesser degree, the US, but you know, that particular animosity visa vie, the Japanese, it was a last century is the century of embarrassment for them. A humiliation is what they refer to it, as they do not ever want to go back to that. They that is, even though it’s 150 years old, it is still part of the Chinese psyche. So they, rather than think of them as imperialist, I would think of them more than seeking respect and seeking a return to what they we all refer to as the Middle Kingdom of China. You know, for 900 years, China led the world as the world’s biggest, most influential, most prosperous economy. And they want to return to that. And so, you know, to the degree imperialism, you know, helps, sure, they’re not going to push back on that, but it’s not. They’re not culturally, an imperialist by mentality, as opposed to say the Russians. So it’s about respect. It’s about power. It’s about control. It’s about influence. More than I would think it’s about imperialism. Now, does that mean we shouldn’t be a lot smarter about it? We should be a lot smarter about how we think about China. And we’ve been, I think, pretty naive about the Chinese. And we’re starting to wake up in the West about what it means to contain the ambitions of China.

Gene Tunny  20:26

Right? And what does that mean for a company say that? I mean, there are plenty of Chinese companies that are operating in the West, does that mean we need to have closer there needs to be closer scrutiny? There’s a lot of talk about tick tock in the US, for example. Do you have any thoughts on that?

Allen Morrison  20:45

Yeah, I mean, that what you need, just think about the kind of mindset I hope we can communicate with with this book, is when you think about China do not think about it as Chinese enterprises, as individual entities, think of them as having an umbilical cord back to the state. So when you do business with Chinese enterprises, you are ultimately doing business with this whole ecosystem, and ultimately, with the state, so it doesn’t mean you can’t do business with them. But you have to recognise that whatever you share, whatever you give them will be absorbed and spread throughout the Chinese eco ecosystem. In terms of best practices. I think that one of the keys to the you know, for the West, is to understand how that model provides big advantages to China, but also provides some significant barriers and problems for the Chinese.

Gene Tunny  21:55

Okay, we’ll take a short break here for a word from our sponsor.

Female speaker  22:00

If you need to crunch the numbers, then get in touch with Adept Economics, we offer you Frank and feel is economic analysis and advice. We can help you with funding submissions, cost benefit analysis, studies, and economic modelling of all sorts. Our head office is in Brisbane, Australia, but we work all over the world. You can get in touch via our website, http://www.adapteconomics.com.au. We’d love to hear from you.

Gene Tunny  22:29

Now back to the show. Allen, do you have any examples of companies that are engaging with China? Well, and then perhaps some that have been burned or that are doing it badly?

Allen Morrison  22:42

Yeah, absolutely. So the companies easily that had been burned or doing it badly. I think they come in a couple of different categories. The first stars are many of these tech companies, which have been pushed out of China. These are companies like Amazon and Uber, typically tap tech companies that have through because they’re threatened because of their target industries, their initial investments have been wasted, and they’re out of the country. So it’s not difficult to find those examples. Companies that have done it well, in China. I think I would, first we and we do this in the book identify kind of a continuum of what that means and how they’ve done it. But on you have companies like for example, Honeywell, Honeywell is approach to China has to basically go in with the following premise. That is, they want to be in China, for China. They’re not in China, you know, to suck profits out to invest in another part of the world. They are in China to look after the Chinese to as best they can to become an insider in the Chinese market. And because of that they’ve had a CEO who has become fluent in Mandarin. He just recently retired. They’ve been fully engaged with Chinese partners, ingratiating themselves with the Chinese ecosystem. And so other companies like Coca Cola have done the same. They have a myriad of partnerships in China. They every one of these has some tie in, typically with a municipal government. Their approach to China is to be in China, for China. Then you have a company like Yum brands, these are the guys who are Kentucky Fried Chicken, Pizza Hut. They went so far as to say if we’re really going to be in China for China, we cannot have ties back to the corporate parent.  And there are some reasons for that because of public relations because of oversight. And so they have determined that for them, they need to create a separate publicly listed company, Yum China, which is only focused on China. And there are some good reasons for that. By the way, it does protect the parent company, from Chinese behaviours that many in the West will find embarrassing. So we’re seeing companies that are having problems in China, are the ones who, despite making lots of money in China, are compromising some of their values to be there. We’re seeing examples, left, right and centre, whether it’s Daimler Dolce and Gabbana, or the NBA National Basketball Association, whether it’s Apple, Apple, which has a heavy overhang in China, heavy exposure to China, they have made in many ways deals that would be unacceptable were they to be brought to full light in the West. One of those, for example is their iCloud, basically data farm, in that they’ve created with a Chinese partner, which they had to do to bring on a partner in order to do this. But they then stepped out to let the partner manage it gave them the encryption codes. And this partner has ties to the state. So if you are using Apple in China, the state can access all of your data. And by the way, that includes a data that could compromise potentially your identity and your and your personal security. In the West, Apple would never engage in this kind of behaviour. Nor if it was really made public. With China, would Apple be able to survive? I think the torrent of negative press that that would overwhelm it. So I think you’re seeing a lot of these deals going on, to make peace with China, through apology tours, that in the West, are going to cause some problems. So working in that, you know, that model of in China for China is going to require Western companies to rethink some of their global values and the degree to which they need to cut the umbilical cord, just like we’ve seen with young China.

Gene Tunny  27:48

Yeah. Okay. One last question, Allen. Can I ask you about how sustainable you think this enterprise China model is given that economists would argue that this is not the best way to run a company or that it’s going to you’d have less efficient corporations? I mean, how sustainable is this and also, there are the issues with the lack of democracy in China, just how sustainable is this whole model in the next, over the next decade, two decades, etc.

Allen Morrison  28:23

You know, we have been more than happy to interpret China through the prism or the lens of the West, which may not be the most effective lens out there. And let me add the other caveat, we’ve been wrong about China too many times to to do predict with any accuracy, what’s going to happen. So here’s a couple of things that the Chinese have to deal with, which are significant problems. Problem number one is the shift from what we call vertical China to horizontal China. Vertical China’s a command and control going back to Mao the state controls everything, you know, why did your factory makes shoes you know, pairs of shoes because we’re only told to make the left shoe and not the right shoe. Just stupid things that come when the state controls everything. That’s traditionally been the model, horizontal China’s where we have empowered consumers educated informed with resources with money, the ability to travel, the ability to think for themselves. And horizontal China also includes municipal you know, mayors and governors, which are pulling and tugging, you know, and trying to fight the horizontal model of Xi Jingping. So there is that pressure out there. And that pressure is not going away. If anything, it’s going to get worse. Number two, despite China’s efforts to break the dependency curve, the dependency cycle, they have not been able to do that in the areas of highest technology, which, you know, I’m thinking semiconductors microprocessors, for their most advanced three nanometre chips. They are wholly dependent on Western technology, including Taiwan Semiconductor, which is, you know, across the straits. They don’t have the capability to do they barely have, they certainly don’t have enough capacity by indigenous Chinese firms even handle five nanometer technology at a level that would satisfy demand. They have not been able to do this. They’re several generations behind. They have committed $250 billion to kick starting this. But there are some reasons why I’d be concerned that they’ll be able to do this, I’m not sure they will be able to do this, because we in the West have increasingly stopped allowing the shipping of tools, foundry tools and so on for these plants. Number three, there are some phenomena in China called a byline, which translates to let it rot. That’s it. That’s this kind of younger millennials, the Gen Z age who are, you know, 28 years old, who are because of the clamp down on technology in particular, finding themselves unemployed, underemployed, and spend their days playing video games, and fighting and chafing against the state, the state with the motto in the West, translated, let it rot, we hope the whole system burns down. So there’s this anger palatable. I would also argue demographics are, are probably China’s worst enemy. We saw this exact model play out in Japan, where we saw the Chinese population peak in the 90s, has been on a steep decline. It’s paralleling that in China, Chinese population reached its peak in about 2007. Between now and 2050, China’s slated to lose about 230 million people, 230 million people, when the economy shrinks by that amount, the only way the economy can keep its own, if you will, is by dramatically increasing its productivity levels to offset declining population, or they can open the door and have all kinds of immigrants coming in. There’s not a chance of the second happening. And, so can they increase productivity? Not like they have in the past. They have many internal problems, those agrarian farmworkers who left to come to the cities, that’s all played out the ability tp increasingly used capital, that’s to drug jackup product that is decreased, particularly as the economy gets so big, this issue of the challenge of numbers. So China is facing some serious headwinds. And we haven’t even talked about the political blowback from the west restrictions increasingly blocking the transfer of technology. Huawei, you mentioned earlier, Huawei is in many ways, yes, absolutely world class company. But pretty much every major technology advanced made by China made by Huawei, was made outside of China at Huawei facilities outside of China. So China’s seem very adept at importing expropriating technology from the West, not the greatest at doing it in house. They are facing a lot of headwinds, China.

Gene Tunny  33:52

Right. Okay. So I mean, are you saying that we’ll look at there are a lot of challenges. So look, I mean, who knows what could happen? I mean, there is there is this growing dissatisfaction. That we’ve got the demographic issues. So yeah, the whole, so the legitimacy of that administration. Am I right, that it was based on strong economic growth since the 80s. Since the liberalisation and bringing hundreds of millions of people out of poverty that underpins the legitimacy of the administration. Right.

Allen Morrison  34:30

right. Yeah, it does. And, of course, COVID crackdown hasn’t helped. Yeah, I’ll just share one story with you. And maybe the the audience would be interested in this in the late 1980s, when I was in in Beijing, and we had all those demonstrations and martial law. I had dinner with a very senior university administrator, very senior, I don’t want to embarrass him or implicate him. And we were talking about These demonstrations and the tanks rolling and so on, I asked his opinion, his opinion it kind of shocked me, very informed guy. He said, first off, I doubt that the demonstrations really took place the way they’re portrayed in the West. Like, really? Secondly, he said, but even if you’re accurate, he said, What you fail to understand in the West is that in China, we don’t care particularly about democracy. I said, Really, that’s shocking to me. He said, Here’s the reason what I am one vote. In a country with over 1.2 billion people. My vote has no impact on anything. What I care about, is economic prosperity. That’s what I care about. And so when you look at this, from that perspective, where that stability and prosperity, what will propel the regime forward is prosperity, economic growth, and so on, when you start to make compromises, and when you start to say, no politics trumps prosperity, politics trumps economic growth, then you’re going to see this, you know, empowered middle class and upper class begin to change more and more and more, I’m by no means predicting that, you know, that we’re going to see a change in regimes in Beijing, what I am predicting is that tensions within China are going to continue to rise. And either the government will clamp down on that, or we’ll have to become more open. And I’ve taken great, you know, satisfaction and seeing Xi Jinping relaxed, some of those COVID restrictions, based a week or 10 days ago on kind of this groundswell of, of opposition. So I think the Chinese are in for a very interesting 5,10, 15 years going forward. I’m not predicting that, you know, we’ll see a groundswell of change. But I do think that the Chinese model will evolve. One final thing I will say about this is that, it would be a mistake to think that Western companies, by in large, are losing money are getting somehow hammered in China. Some of Western companies, most profitable businesses, one of the kind of ugly secrets out there, they’re coming out of China. There many companies are making embarrassing amounts of money in China. And the Chinese are fine with that. The Western companies are kind of hiding that obfuscating that through transfers, through creating, you know, trading centres in Malta or something, and funnelling money, very smart about this. Where the Chinese will get very upset is if you’re in one of these targets, very upset, and focus is your one of these target industries. And if you refuse to play in their sandbox in their ecosystem, you can figure out how to do that. And you can get out of the way of these strategic industries, China can and will remain or can be and will remain a very viable market for Western firms into the decades ahead.

Gene Tunny  38:37

Okay. Oh, that’s, that’s been great. I think it’s a well researched book, published by Wiley. Is that right? So very reputable.

Allen Morrison  38:46

Wiley and yeah, thank you. We love the book.

Gene Tunny  38:50

Yes, absolutely. So I’ll put a link in the show notes to it. So people who can get a copy. Any final thoughts before we wrap up?

Allen Morrison  38:58

No, I’m delighted you’re you’re talking about this. China’s a huge issue of the day. I will only say that our book steers clear of politics, and focuses on what’s happening with business and what business leaders can do to prepare their companies better in a world where China is not going away.

Gene Tunny  39:19

Okay, gotcha. Righto. Well, Professor Allen Morrison, thanks so much for appearing on the show. I really enjoyed the conversation.

Allen Morrison  39:27

Thank you so much.

Gene Tunny  39:30

Okay, so what am I big takeaways from my conversation with Allen? My first takeaway is that enterprise China, this close relationship between business and government has a wide reach, and it has huge implications for companies wanting to do business in China. In the words of Allen and his co author, enterprise, China extends far beyond this core cluster of state owned enterprises and includes virtually all privately owned enterprises of any significant size or importance. That’s pretty concerning if you’re trying to compete in China. This leads into my second takeaway, but it is very challenging for Western businesses to do business in China. Various Western companies such as Uber have lost a lot of money trying to break into the Chinese market. It couldn’t compete against enterprise China. I found a great quote from Harvard Business School professor William Kirby in 2016, about what happened with Uber. Uber is leaving China, not because of interference from its rivals, but because of interference from the state. It was worried about the prospect of unfavourable national regulations that would damage its business in China. Disney is another prominent example of a company which has had difficulties in China. As Allen and his co-author noted the book Disney’s 2020 Milan film was not only bad for Disney’s reputation in the West, because it was filmed in a region where Uighurs are oppressed. But the Chinese government shut down coverage of the film in China, so very few Chinese people ended up seeing it. The government apparently was concerned that a lot of the media coverage drew attention to China’s human rights abuses. Reflecting on what happened with Disney, Allen and his co author write in the book, beyond appeasing the Chinese state with carefully chosen words and at the ready heartfelt apologies. Western companies face an even larger challenge, responding to rules and regulations that are inconsistent with their home country values. Many of these rules govern the collection and sharing of sensitive data with the Chinese state. As an example, many Western executives in China report being pressured to facilitate China’s social credit system that uses data on such things as credit scores and parking tickets to determine social benefits, and even employment opportunities for Chinese citizens. Okay, that’s very concerning for sure. My third takeaway is that China faces some big headwinds, which will challenge the enterprise China model and the regime in the coming decades. These include China’s ageing and declining population, demographic changes will reduce the rate of economic growth. As I discussed with Allen, economic growth in recent decades has helped the regime stay in power. And I expect that as growth slows, the regime will become even more unpopular as an economist to expect that the enterprise China model will ultimately deliver inferior results to our more free market style of capitalism in western economies. Okay, those are my big takeaways from my discussion with Professor Allen Morrison on enterprise China. Do you think I pick the most important ones? Do you agree or disagree with my takes? If you’re willing to share your own takeaways from the episode, please send them to me via contact@economicsexplored.com or send me a voice message via SpeakPipe. You can find the link in the show notes. Thanks for listening. Okay, that’s the end of this episode of Economics Explored. I hope you enjoyed it. If so, please tell your family and friends and leave a comment or give us a rating on your podcast app. If you have any comments, questions, suggestions, you can feel free to send them to contact@economicsexplored.com and we’ll aim to address them in a future episode. Thanks for listening. Until next week, goodbye

Thanks to Obsidian Productions for mixing the episode and to the show’s sponsor, Gene’s consultancy business www.adepteconomics.com.au

Please consider signing up to receive our email updates and to access our e-book Top Ten Insights from Economics at www.economicsexplored.com. Economics Explored is available via Apple Podcasts, Google Podcast, and other podcasting platforms.

Categories
Podcast episode

Thriving w/ Wayne Visser, Cambridge & Antwerp sustainable business expert – EP130

In Economics Explored EP130, we explore a new book Thriving: The Breakthrough Movement to Regenerate Nature, Society, and the Economy, by Professor Wayne Visser of the Cambridge Institute for Sustainability Leadership and Antwerp Management School. Wayne is reassuringly optimistic about the future of the planet due to a variety of technological and business practice changes that mean we are approaching “tipping points”, after which we will rapidly reduce the stress we are placing on the environment – all going well, of course, as nothing is guaranteed. 

In the episode, Wayne speaks about a convergence of positive developments, such as rapidly improving electric vehicles, cultured/lab-grown meat, blockchain and synthetic DNA to aid traceability of supply chains, green hydrogen, and Unilever committing to deforestation-free palm oil (by 2023, and whether it achieves that is still to be determined). You can listen to the conversation with Wayne using the embedded player below or via Google PodcastsApple Podcasts, Spotify, and Stitcher, among other podcast apps. 

Here’s a short video clip from the conversation in which Wayne introduces the concept of Thriving:

Links relevant to the conversation

DNA Spray-On Technology Could Revolutionize Food Traceability

Transcript of EP130 – Thriving w/ Wayne Visser

N.B. This is a lightly edited version of a transcript originally created using the AI application otter.ai. It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.

Gene Tunny  00:01

Coming up on Economics Explored.

Wayne Visser 00:04

Being optimistic or at least having thriving as a lens is just a more effective way to be, no matter what the state of the world is.

Gene Tunny  00:13

Welcome to the Economics Explored podcast, a frank and fearless exploration of important economic issues. I’m your host Gene Tunny. I’m a professional economist based in Brisbane, Australia, and I’m a former Australian Treasury official. This is Episode 130. In this episode, we explore a new book from a world leading expert in sustainability, Dr. Wayne Visser, who joins us from the UK via Zoom.

Wayne’s new book, published by Fast Company Press is Thriving: The Breakthrough Movement to Regenerate Nature, Society, and the Economy. Wayne currently serves as head tutor, fellow and lecturer at the University of Cambridge Institute for Sustainability Leadership. He is also Professor of Integrated Value at Antwerp Management School, where he holds the world’s first Academic Chair in Sustainable Transformation, as well as being a world leading authority on sustainability. Wayne is an accomplished poet, and he shares some of his poetry with us toward the end of this episode. Wayne’s new book Thriving considers issues with huge implications for our economies, so I was very glad to chat with him about it. His book contains lots of valuable examples of how businesses and communities worldwide are attempting to make themselves more sustainable.

Please check out the show notes for links to materials mentioned in this episode, and for any clarifications. If you have any questions, comments or suggestions related to this episode or the previous ones, please get in touch by SpeakPipe. See the link in the show notes or email me via contact@economicsexplored.com. I’d love to hear from you. Righto. Now for my conversation with Dr. Wayne Visser on his new book, Thriving. Thanks to my audio engineer Josh Crotts for his assistance in producing this episode. I hope you enjoy it. Professor Wayne Visser, welcome to the programme.

Wayne Visser  02:23

Hi. Great to be joining you.

Gene Tunny  02:25

It’s fantastic to have you on, Wayne. Yes, very happy to be chatting with you about your new book, Thriving, which is on a topic that is of great interest to me, and I know to many of my listeners. It’s this issue of sustainability. Climate change is related to that, obviously a big environmental challenge. I’d like to explore what your book is about, why you wanted to write it, what those key messages are. First, I’ve just got a couple of questions about your work. You’re at the Cambridge Institute for Sustainability Leadership. Could you tell us a bit about that, please?

Wayne Visser  03:20

Yeah. Great pleasure to be talking to. The Cambridge Institute is a department of the university that was set up many decades ago actually, firstly, mainly, at the request of the Prince of Wales, Prince Charles, one day soon to be king, I guess, who’s always had a passion for sustainability. He set up a business and environment programme through the university, and it just evolved from that. And ow they it’s a very large office and runs many, many programmes, I head up their business sustainability management online programme, which is getting great traction. We have upwards of 900 students, taking that four times a year. We’re seeing the uptake. I’ve been associated there for nearly 10 years, and I really see how it’s changed. In fact, 20 years. Yeah, since 2003. Really, the interest levels are up, and the demand for solutions, especially from business, is really rising.

Gene Tunny  04:39

Right. You’re certainly right about Prince Charles. I remember visiting his country estate, just as a tourist, Highgrove in Gloucestershire, and before you go on a tour of the estate, you have to sit through a 10 or 15-minute video of Charles, of the Prince of Wales talking about the importance of sustainability. I think he’s into organic farming and that sort of thing. I’ve certainly seen his commitment to that, so very good…

Wayne Visser  05:19

He was way ahead of his time, especially on the organics side, or what they sometimes call in Europe, Europe bio. Many of the programmes have been very specific. We have very good climate legislation in the UK, for example, and also in Europe. That’s partly down to the Prince of Wales Business corporate leadership group that we set up at Cambridge on climate change, where we tried to be an intermediary between business and government, because business was saying they couldn’t be bold in their commitments, because they didn’t have clear policy guidance, and the politicians were saying they couldn’t be bold in policy, because they thought business would lobby against them. Playing that kind of role has been very, very effective in making the progress that we need to make.

Gene Tunny  06:11

I’d like to ask you later about good legislation in the UK. and EU. I’m interested in what you consider good legislation. That’s something we can chat about. Also, you’re a professor at, is it University of Antwerp, is it, in Belgium?

Wayne Visser  06:31

Yes, Antwerp Management School. It’s actually a sister organisation of the university, but it is independent. Yes, I have a chair there in sustainable transformation. It’s supported by corporate partners, BASF, Port of Antwerp and Ronstadt. I run the Sustainable Transformation Lab there, where we mainly work with corporate partners on advancing sustainability, but also on embedding it into all of the teaching for the full-time and the executive MBA students.

Gene Tunny  07:04

BASF, this is one of the biggest chemical corporations in the world, isn’t it? It’s a huge company, isn’t it?

Wayne Visser  07:14

It is, and right there, Port of Antwerp Zone, which goes for more than 30 kilometres, has one of the biggest chemical clusters in the world. And of course, it’s a great challenge, I must be honest, because the chemical industry has many, many impacts, and is one of the institutions, one of the sectors that has to transform, if you look at something like climate, and it’s not easy. There are massive technology investments that have to be made, whether that’s on using green hydrogen, to get their energy for their crackers, or even going for carbon capture and storage, investing in renewables, which they’re doing as well. But at least they’re one of the progressive ones, I would say, and they really are seeing that this is the future and they have to invest in it.

Gene Tunny  08:10

Okay, Wayne, what was that word you used? Was it crackers?

Wayne Visser  08:14

Yes, yes. Crackers are just the way that they get them, the molecules, the chemical molecules, how they break them apart. This is a very, very intensive, energy-intensive process, much like many other industries. Smelting I know is being done in Australia, for example, aluminium smelting, cement making. These are all very intensive industrial processes where there is no easy solution. For climate change, they really have to come with new technology, such as green hydrogen, where you get the renewable electricity to power the creation of hydrogen from water normally. That takes a lot of energy. But once you have that hydrogen, that can then create the heat that you need for these large industrial processes.

Gene Tunny  09:07

We might have to chat about that a bit later. I guess one of the things I’ve been fascinated by is just how a lot of these big corporations are… They’re seeing the future and they realise—well, many of them, I mean the more enlightened ones are realising, we probably have to get on top of this now, to start addressing this, or we could lose out in the future. I think that’s an example of that. Very good. One other thing I’ve saw in your bio, which I thought was really interesting, so you’re also a poet as well as a pragademic, if I’ve got that right, or pracademic. You’re a pracademic. You’re an academic and you’re also doing practical things involved in policy. You’re also a poet, and it turns out you’ve written 40 books. There are books on both environmental issues and also poetry? Is that right?

Wayne Visser  10:14

Yes, it is a mix. I must say, the majority of them are on sustainable business. And they range from the encyclopaedic, literally because I did an encyclopaedia the A to Z of corporate social responsibility, nd I’ve done a world guide on sustainable enterprise covering countries around the world, so that kind of reference work through to yes, even a fiction. Some poetry books, but also some fiction. There’s a parable on leadership, called Follow Me, I’m Lost, about a goose, a Scottish goose, who gets lost on the way to leadership school in London and ends up in Africa, travelling down and meeting strange creatures who each teach him a leadership lesson. There’s the full range.

Thriving is, I would say, in the middle. It’s really written for a broad audience. But it is about how we change society and the economy fundamentally. It includes some of the poetry actually in the book, as well as many stories, both personal stories, but also stories of the innovation that’s happening. I guess we’ll dive into that. But that’s one of the reasons I wrote the book is, there’s so much doom and gloom around now. Look at the statistics on many trends. Some of that is justified, even what’s going on in the world today with war breaking out in Europe. It’s hard not to be pessimistic, but you also have to take the bigger picture and see this global system that is in transformation and is actually speeding up. Many of the signals are all headed in the right direction. There’s so much innovation out there. This book was about capturing that innovation that’s happening.

Gene Tunny  12:09

That sounds great. That sounds great. With Thriving, so what you wanted to do, is basically you wanted to counter the doom and gloom. Is that what you’re saying? You think there’s too much doom and gloom? There’s actually a lot of innovation occurring out there, and are you trying to suggest, okay, given all of this innovation, this is what the appropriate policy settings are? Are you touching on policy settings at all, Wayne?

Wayne Visser  12:43

I touch on policy, but I would frame it like this. In fact, I start with something in the early chapter, called the Stockdale paradox. And this is named after Admiral Stockdale who survived a prisoner of war camp, I think he might have been in there for seven years, and came up with this philosophy that what you need to do to survive and thrive is to face the absolute reality, all the brutal facts, completely honestly. So don’t kid yourself about the state that you’re in. But at the same time, you can never give up faith or hope that things can change and can get better.

You’ll see in the book, it’s not a book of denial, or wishing things were better. I set out a lot of the facts on what’s going wrong, what’s really challenging, when nature, society, and the economy are breaking down. But then I look at the larger system and I look at how systems change, especially living systems, of which society is one nature is another, organisations as well. When you distil it down to the scientific principles of how those systems change and thrive, you actually see many signs that we are heading into a tipping point of change towards the better. It’s not that we don’t face these big challenges, but we’re seeing many transformational signals. And most people are not aware of that. And so yes, they get trapped in the pessimism or the doom and gloom.

It’s also that, you know, being optimistic, or at least having thriving as a lens, is just a more effective way to be, no matter what the state of the world is, because if you’re trapped in in pessimism, you’re disempowered. You sort of just give up before you’ve even made it a try to tackle the issues.

It’s a little bit philosophy, but it’s also backed up by some science of how change happens. And then lots of examples of where business especially, is really charging ahead and bringing the solutions that we need and starting to scale them, which is something that in my 30 years plus working in sustainability was always missing. We always had many of the solutions, but they weren’t scaling. Now they’re scaling. Tesla’s one of six trillion-dollar companies now, and its core mission is a sustainability mission. It’s to speed the transition to sustainable energy. That’s scaling. And it’s valued at more than all the other auto manufacturers, even though it makes less than 1% of the cars.

Gene Tunny  15:53

That’s extraordinary. That’s extraordinary. I want to go back to this point you made. You’re generally optimistic. However, you did note before that there are places where nature, society, and the economy are breaking down. Where is that, Wayne? Are you able to describe or tell us where that is most acute, because we hear all of these horror stories about bad things that could happen, tipping points, and all of that, but where are things breaking down? Could you tell us, please?

Wayne Visser  16:30

This gives a little insight into the structure of the book, really, because I structured into these six great transitions that we’re going through and that we need to go through. There are two breakdowns in nature, two in society, and two in the economy. I’ll briefly touch on each.

In nature, what we see is huge breakdown in ecosystems, so degradation of ecosystems. You’ve got the Great Barrier Reef on your shores there, and it’s literally dying, bleaching, just as one example. The loss of species is actually catastrophic right now. We are going through the sixth mass extinction. And we’ve lost 67% of wildlife populations since 1970. Something that took 3.8 billion years to build up on the earth, we’ve wiped out in one generation.

Yes, huge breakdown in ecosystems. But there is this counter movement of restoration, so protection and restoration of ecosystems. Yu start to see, there’s in fact a lot of work going on through the UN trying to create an equivalent international agreement to the Paris Agreement, which is on climate change, to have one on nature now. There is a widely promoted target for the world now to protect and restore 30% of our land and our oceans by 2030. Likewise, there’s a lot of work going on around deforestation coming out of the 26th Conference of Parties on Climate Change in Glasgow last year, where we have now more than 90% of the world’s countries committed, that have forests, committed to end deforestation and reverse it in the next few years. A lot of movement happening there, and a lot of big companies starting to actually put money into helping to protect and restore. If you look at the Bezos Earth Fund, putting more than a billion into the Congo, the rainforest in Africa, which always gets forgotten about because we know the Amazon, but the second largest tropical rainforest is the Congo. So that’s one example of a transition.

The second breakdown is depletion of resources. This is many, many nonrenewable resources, whether it’s water or timber or topsoil. All of these are being depleted at an alarming rate, nothing like what the earth can sustain. This has been going on—we call it the great acceleration—since about 1950, when we’ve had this exponential growth of economics, of economies and consumption, and of course, resources are finite.

The solution there is renewal of resources. This links to one of the market solutions I write about, which is the circular economy. How do we get it so that everything we use in our products and services either is made from nature and goes harmlessly back to nature—that’s one type of circle or loop—or is made artificially like chemicals and plastics and metals and so on, but continues to go back into manufacturing in an endless cycle. That’s the circular economy. Today, we’re around about 10% circular in the world. This is a massive transition. We have 90% of the economy that we need to change from a linear take make waste economy to a take or borrow, make and return economy. So that’s the second transition. Those are the two breakdowns and breakthroughs in nature.

In society, what we’ve got is disparity. Despite all of our economic growth over the last 50 years, inequality has gone up in almost every country. Even though we’ve had hundreds of millions of people coming out of poverty, the gap between the rich and the poor has gotten wider. And effectively, the rich are getting richer, faster than the poor are getting richer. And this has all sorts of social implications as well. If you look at a book like The Spirit Level, they do the research on this, and they find all sorts of social problems occur in the countries that have the highest inequality, including many developed countries.

The counterforce to that is responsibility. It’s actually to have what we call an access economy where we take care of diversity and inclusion. And again, there’s a big movement for that, but still a long way to go. If you just look at gender equality. If you look at the gender pay gap, according to the World Economic Forum, it will take more than 250 years to close that gap, if we continue on current trends, which is just ridiculous in the 21st century, but we still have a lot of progress to make there.

And then we have the second breakdown in nature, which is disease, which we’ve learned a lot about in the last few years with lockdown and everything else.

Gene Tunny  22:07

Sorry, Wayne, this is in society, you mean, is it? Second breakdown in society, disease.

Wayne Visser  22:13

The second breakdown in society is disease. We know all about COVID and communicable diseases, but the interesting thing is that 70% of people die from non-communicable diseases. These are things like heart attacks, strokes, diabetes, cancers. Many of these are lifestyle related. In fact, 40% are preventable because they relate to what we eat, especially how much meat we eat, in particular red meat, and also processed foods, and whether we live in toxic environments, polluted environments. Of course, there are things like stress as well that take that toll. What we want is revitalization, and so the well-being economy, which is again, a massive opportunity, lots of investment in innovation, lots of technology going in there, really exciting things happening, but plenty to do there. So those are the two breakdowns, breakthroughs in society.

Then if we look at the economy, I talk about disconnection. This is the technology piece. What’s happened is that we think we’re all connected, but we’re not. There is still roughly half of the world, maybe three or four billion who still don’t have an internet connection. Many, many billions still don’t have a mobile phone or live outside of mobile phone signal areas. The world is not all connected. And this refers to what we call the digital divide. It basically is an amplifier for inequality, because technology gives us opportunity. We have to really look at that gap and work on closing that gap. Meanwhile, of course, many are streaming ahead with the Fourth Industrial Revolution, and with 5Gg and artificial intelligence and virtual reality and all of those things, and so the gap potentially gets wider. So we have to address that.

Then there’s a second kind of disconnection, which is that the machines start to disconnect us. This is really about automation. 25% of jobs today are at high risk of automation, and another 70% at medium risk. It’s not that we want to go backwards, but we have to look at that and take care of that, start re-skilling people, upskilling people, to be ready for that hugely disruptive transition.

The solution there is all about, I call it rewiring. It’s really the digital economy, but it’s mainly about using all of those fantastic technologies, like big data, like 3Dd printing, like all of the other things, to be part of the solution rather than part of the problem. Artificial intelligence, huge potential there, but we very quickly found out that it’s racially biased. We have to take care of how technology is being used and whether it’s being used to solve the problems. I really believe that it does bring many of the solutions.

The last one is disruption. This has to do with crises and catastrophes, which we’ve also learned a lot about recently. This is where climate change comes in. If you look at the wildfires, you look at the storms and floods and the droughts, you know all about that in Australia, but also all around the world now. It’s costing the world hundreds of billions, of which roughly only a third is insured. You’ve got two thirds of the millions of people who are affected by this just left hopeless, so tackling this and other crises. By the way, COVID is another example of a massive disruption. You get industrial accidents, also disruptive. BP lost 50% of its value within 50 days after the Deepwater Horizon oil spill, just over 10 years ago, and has paid $65 billion since.

All of these have to be addressed. What do we want? We want to move to resilience. That’s the breakthrough. That means making our institutions but also our infrastructure more resilient. Some of that is physical infrastructure, like building flood walls and having buildings that can withstand earthquakes and lots of other very practical things we can do, but it’s also about how you build the economy, because what we’ve discovered is that our economy is very brittle in the crisis. Look at what’s happened with supply chains during COVID or during the Icelandic volcano a few years ago. There’s no longer any slack in the system to take the shocks. We think we’ve been very clever by making everything super efficient just in time, everything delivered, next-day delivery, everything like that. But actually, it makes us more vulnerable. This is all to do with a risk economy, everything that can reduce risk, but also help us survive and thrive through crises. Those are the six transitions.

Gene Tunny  27:28

That’s a very comprehensive overview. I’ve probably got comments on a lot of what you said, but I’ve got to ask you about that Icelandic volcano. That’s the one that no one can pronounce the name of, or certainly I can’t, if I remember correctly. Can you remind me what happened there? You mentioned that as an example of a disruption.

Wayne Visser  27:48

It was obviously just, they have a lot of volcanic activity there. But this one was so big that this cloud just spread across Europe and grounded everything, so planes couldn’t fly. As soon as you start messing with logistics, not only does it mean people literally stranded all around the world in countries, but also business grinds to a halt because of all of the trade that happens through logistics. It’s just an example of that kind of disruption. We’re starting to see more and more, the recent supply chain disruptions around COVID, but also to do with the oil price. Lots of these shocks just show us that… Even my book was delayed by over a month, because suddenly, there was no paper. They couldn’t get paper in the world. So we have to prepare for these kinds of shocks. This is the new volatile world, the VUCA world.

Gene Tunny  28:55

Yeah, well, it’s certainly taking a while for everything to get back to normal. I’m an economist, and I’ve got great faith in the ability of markets to adjust ultimately, but it takes time. We could have these sort of disruptions for another year or so. I think I saw one estimate.

Wayne Visser  29:21

And remember, the kind of COVID type disruption, earthquakes, volcanoes are a bit random, but COVID will most likely happen again. It still has a bit of course to run, but another type of infectious disease, we can expect those again. In fact, it’s linked to these risks we’ve been talking about because as we’ve wiped out nature, zoonotic diseases, which are these diseases that leap from animals to humans, also as we have this huge industrial agricultural system with livestock, the chances of, again, diseases going from animals to humans actually is going up. We can expect that kind of shock again. But all of the analysis that we’ve seen of climate change suggests that COVID is just a very mild dress rehearsal for what’s coming on climate change. The point is that we should be expecting to live in a world of disruption. We have to know how to cope with that, and how our economies can cope, how our organisations can cope, and personally, how we cope.

Gene Tunny  30:30

What will that disruption from climate change be, Wayne? What are your thoughts or what’s your expectation as to what we’ll see? You mentioned wildfires, and I guess flooding as well. We’ve just had some flooding here in Brisbane, where I am, on the east coast of Australia. Look, there’s a big debate. It seems to be it’s difficult to attribute any particular natural disaster or to say that that’s related to climate change. I’m not sure you can do that. But certainly, I understand that it could increase the risk of these things, so I accept that. What do you see as the potential future if we don’t stabilise the CO2 in the atmosphere?

Wayne Visser  31:28

You’re right, there’s weather, and there’s climate change, and weather changes. It’s hard to link individual weather events to climate change, although there is now a scientific centre that is doing exactly that through statistical analysis, showing the probability that this could have been just a normal weather event, without the climate driver. They can now very quickly, actually, on most events, give a rating as to whether this is likely to be climate related.

But essentially, what we’re going to look at is just more extremes, I think that’s one of the one of the mis-sellings of what was originally called global warming. People thought it’ll just get a little bit warmer, we’ll go to the beach a bit more. But actually, it is climate change. It’s more disruptive, because it’s hotter and it’s colder. The storms are more intense and more frequent. That’s for complicated reasons, largely that the oceans are warming up, which makes the weather more unstable. Just everything that used to be a very rare occurrence, like a massive storm or extended 10-year drought, will just become the new norm. Temperatures that we never used to see—Canada had its highest temperatures in the last 12 months—will again become the new norm.

This has impacts on all kinds of things. It has impacts on agriculture, of course, the food system, to survive those floods and droughts, but also the climate is moving. So if you’re in a particular area, and that’s no longer good for agriculture, because everything’s got warmer, then that becomes a problem. Tropical diseases will increase because we’re moving to a warmer world. So places that never had to deal with things like malaria or Dengue fever suddenly will be dealing with those. So there are health impacts. And also remember that for every degree, on average, warmer that it is, people are less productive. And there are statistics on that as well. You have economic losses as well, as the world gets warmer.

So lots of different impacts, but it’s all about the volatility and the extremes of climate and wheather our infrastructure and our organisations and even our homes are just ready for that. As I said, you know, only a third is insured of all the climate damage that we’re seeing year on year. So for two thirds of people, it’s not covered.

Gene Tunny  34:25

Okay, we’ll take a short break here for a word from our sponsor.

Female speaker  34:30

If you need to crunch the numbers, then get in touch with Adept Economics. We offer you frank and fearless economic analysis and advice. We can help you with funding submissions, cost-benefit analysis studies, and economic modelling of all sorts. Our head office is in Brisbane, Australia, but we work all over the world. You can get in touch via our website, http://www.adepteconomics.com.au. We’d love to hear from you.

Gene Tunny  34:59

Now back to the show. Wayne, I think what’s terrific, what you’ve done is really good with these six great transitions, I think you call them, so two in nature, two in society, and two in the economy. And if you hear that, then you’re thinking, oh, okay, there’s some big challenges that the world faces. How are these going to be addressed? It sounds like you’re relatively optimistic. To what extent will they be addressed by what’s happening with business, business transforming itself with innovation that’s occurring right now? And then how much needs to be addressed by government policy, or changes in the household that could be encouraged by government policy—changes in households and business? Could you take us through that, please, because just looking at that, those six great transitions, it looks like we need some sort of, I hate to say great reset, because that’s become such a controversial term and really triggers people, so I don’t want to say that. But could you take us through, how are we going to get through this, please?

Wayne Visser  36:19

I don’t think it’s wrong to call it a great reset. It’s become a political term. But it is of that scale. We really are looking at reinventing capitalism and going through another industrial revolution that’s very different. World Economic Forum calls it stakeholder capitalism. Now, that’s a huge shift from shareholder capitalism.

But maybe I’ll give you a little insight into another part of the book, which is to look at the underlying science, because the science tells us where the change is happening. There are six keys to thriving, which is an insight into how these complex systems change. One is complexity. This is all about how many relationships there are in any given system. And what we see is the world getting more and more complex. Of course, we’re getting more and more connected. Social media can help; sometimes it can hinder. But just in so many ways, the connections are increasing.

One of the solutions we start to see more and more, partnerships, so companies getting into partnerships with government, with NGOs, and even getting into partnership sometimes with competitors to change the landscape. When Unilever decided to go for 100% sustainable palm oil, which is a big problem in the world today, if they did it on their own it’s useless. They had to convince their competitors as well to do it. The other big ones like Nestle, for example, Procter and Gamble, and so they went through the Consumer Goods Forum, and they got everybody signed up. We’re seeing far more of those kinds of initiatives. It’s all about creating more and more connections.

Then the second one is coherence. This is about having really big goals to aim for. Now we’ve got the sustainable development goals, which are certainly helping, these 17 global goals that all the world’s countries have signed up to, that has created a common focus. But we also see coherence arising around specific issues. Like I mentioned, the 30% land and water protected by 2030, or on climate change, consensus really has emerged around a 1.5 degree warming target, not even two degrees anymore, and net zero by 2050. That’s just become the new norm that everybody is going for. We see this coherence start to emerge in different ways. Policy certainly helps here, because that’s what good policy does is it sets the destination, and then lets business innovate to get there. And we’re starting to see more and more of that good policy. If we look at the Green Deal in the European Union, it’s a great example of that.

Gene Tunny  39:18

Sorry, the Green Deal. I’ve heard of the Green New Deal in the US, but that’s not been implemented. There’s just some sort of wish list from AOC and people of that sort of persuasion, but you mentioned a Green Deal.

Wayne Visser  39:44

Yep. EU Green Deal. It’s effectively Europe’s strategy on climate change. It’s very, very comprehensive and very ambitious. And it touches everything. It’s got a Farm to Fork area which touches agriculture. It’s got a mobility area, around electrification of mobility. It’s got a circular economy element. It’s got a finance element. It’s a very, very strong policy. In some ways, America is trying to copy that with the New Green Deal. Yes, policy helps with the coherence piece.

Then you’ve got creativity, which we’ve talked about a little already. For things to change, for all living systems to change, they need innovation. And that happens through diversity. Again, there’s something we’re working very hard on, but we are living in an age of innovation, no doubt about it. In many of our most difficult problems, we are seeing some amazing solutions coming. If we just pick on one, for example, we know electric cars. I’ll leave that alone, but just remember that that is changing much faster than people think. Norway is burning fossil fuel cars by 2025. That’s just around the corner. In most other countries, UK, it’s 2030. Within 10 years, it’ll really be something to watch.

But take food, for example. There’s a whole movement of course around going more plant based. That makes sense from a health perspective, because 20% of mortality can be reduced just by going more plant based, but also from a climate perspective, and a biodiversity perspective, and of course an animal welfare perspective. But here we see innovation. You’ve seen the Beyond burger and the Impossible burger. These are really engineered to look and taste like the real thing. I know that may be a hard sell in in Australia, but on blind tests, actually, they’ve done extremely well.

Not only that, but we’ve got cultured meat coming. This is grown in labs meat, essentially grown fermented, grown in fat, like you do for insulin. And this is this is going to completely change everything, because again, you don’t have the input of land and water. You have much lower energy input, and you’re not killing anything. You’re literally just taking cells, live cells from a cow, for example, and you’re creating that. In Singapore, you can already go to a restaurant that sells cultured chicken. This is innovation happening very fast. Massive amount of investment going into this.

Gene Tunny  42:41

Sorry, by cultured chicken, do you mean lab grown, do you?

Wayne Visser  42:46

Yes, lab grown.

Gene Tunny 42:48

Wow.

Wayne Visser 42:48

That’s the popular—

Gene Tunny 42:49

In Singapore.

Wayne Visser 42:50

For everything, for steak, and you can literally grow it how you want to try, so lean or however you want it. It is real meat. It’s just that it’s grown from cells rather than the living cow that you have to slaughter or chicken you have to slaughter. And it’s very sustainable, not only in terms of those impacts, but literally, if I remember the numbers correctly, if you’ve got a factory that’s making this, every two days that meat replenishes itself. It grows back. You’ve just got this endless supply of meat that is growing much faster than a cow that you have to grow for months and months, or years. It’s just an example of innovation happening. That’s the creativity piece of the underlying science.

You’ve got a really interesting one, which is convergence. Convergence is very linked to innovation. It’s really the perfect storm. It’s when things reinforce one another. We call this in the science, positive feedback loops. And this is what creates tipping points. And here again, if you look at what’s happening, there are many of these positive reinforcing tipping points. When you were asking do we need more policy, do we need more market forces, what do we need, this is where we’re seeing the convergence because in fact, what we’ve got are the breakthrough technologies, which are starting to scale, plus the policy, which has really been a huge amount of policy reform in the last five years. We’ve just had the UN agree, for example, now to also create a plastics treaty globally, similar to the climate treaty, which countries will need to sign up to. That will happen by 2024. A lot happening on the policy front. Plus the market forces are kicking in. The likes of a Tesla or an Ørsted, which many people don’t know the name, but used to be a fossil fuel company in Denmark, completely transformed to a renewable company and now is one of the largest offshore wind companies in the world. We’re seeing this kind of transformation really happening very quickly.

And then, in addition to that, so we’ve got the policy force, we’ve got the technology force, we’ve got the market force, and then you’ve got the social movements that are kicking in. This is whether it’s the climate strike movement, or the Black Lives Matter movement, or the Me Too movement, or the extinction rebellion, these are very, very significant, with millions and millions of people, especially younger generations of people, who are just starting to say, “We want a different world. We don’t want our future sold out.” All of these are reinforcing one another.

And if I throw in one last one, finally, finances come on board, coming out of the Glasgow climate agreement. From November last year, there was something called the GFANZ. It’s now the Global Financial Alliance. This is $130 trillion of assets under management that is lined up now from the 450 largest financial institutions in the world, top 10 banks in Europe, top 10 banks in America, all committed now to fund this transition to net zero carbon. Now, practically what that means is they have to go back now to their corporate clients and say, “Show me your plan to get to net zero not only by 2050, but how you’re going to halve your emissions by 2030.” It starts to put massive pressure right through the value chain. All of these things are reinforcing one another, which is why the change is speeding up and why I think on many of these issues, we’re getting to these positive tipping points.

Gene Tunny  47:03

You’ve got a lot of great examples in your book. I would recommend, if you’re listening in the audience, and this sounds interesting, then yeah, please, you should get a copy of the of the book. There’s lots of great examples in there.

I wanted to go back. You mentioned palm oil. That’s something of great interest to me. I’ve done a little bit of work with Indonesian ministries, and palm oils are a major commodity in Indonesia. And if you go to, I think it’s in Bogor, just south of Jakarta, if I remember correctly, there’s a botanic gardens near the presidential palace, and there’s an extraordinary thing. There’s a monument or a statue or a tribute to a palm oil tree I think it is, because it’s such an important crop in Indonesia. I think it was first they imported it to Indonesia from elsewhere in the world, maybe from Africa. I can’t remember correctly. But they tested it in Indonesia, in that the gardens there. There’s a large amount of deforestation, I think in Borneo, due to it. But you mentioned Unilever is now committed to, is it renewable palm oil? Is that right? Is that having a practical impact on deforestation?

Wayne Visser  48:35

Yeah. A couple of things happening there. And you’re absolutely right, I think Indonesia maybe supplies 60 or 70% of the world’s palm oil, along with Malaysia, which provides another 20 or so. It has been absolutely devastating for forests. Indonesia has the third of the world’s largest tropical forests, and that’s really under threat. So we’re destroying these lungs of the earth for commercial interests, because the demand is there. And often the demand is from us in the West, isn’t it, the rich countries, because palm oil is in one in 10 products that we buy, everything from detergents to food. It’s very, very useful.

Yes, quite some time ago now, they set up something called the Roundtable on Sustainable Palm Oil. This has a way of growing palm that doesn’t have the impact that the old commercial approach does, and doesn’t have the deforestation but also the biodiversity impact. Companies can get certified and supply chains can be certified to that RSPO standard. All the big players are on board, whether it’s Nestle or Unilever or Procter and Gamble. They’ve all committed to go 100% to that. It takes a bit of time, but there are large parts of the sector that are still not committed to that, and so it’s a partial solution right now.

But again, here you start to see the value of policy. Part of the EU Green Deal, one of the most recent things they’ve done in the last few weeks, they have a law being drafted now that they will refuse any export or import of commodities, of which palm oil is one, that can’t prove that they haven’t caused deforestation. The onus is on the supplier. If you’re Indonesia, and you can’t prove that this is palm oil that’s deforestation-free, you’ve just lost Europe as a market. This is going to have huge impacts. It’s not just palm oil, it’s coffee, it’s tea, it’s timber, and several others. This is how change really happens.

Gene Tunny  50:58

Yeah. One of the technologies you talk about in the book is blockchain. Can blockchain help us with traceability, with understanding the origins of or the history of the products that we consume?

Wayne Visser  51:16

Yes, blockchain has massive potential, and is one of those ones, it’s an early stage technology, which still has unfortunate unintended consequences. The upside is traceability. And there are companies using that, to show the sustainability of supply chains. A company called Provenance in the UK is a good example. They track and trace a whole value chain for fish or for gold, and they can show, in a very secure way, every step of that process. Another example is a company called Circularise that does this for plastics and can track all the… They actually even use artificial DNA, which they put into the plastic so that just by scanning it, you can tell at every stage of the supply chain, exactly what is in that plastic and how it needs to be recycled. That’s the upside.

The downside is the blockchain, like cryptocurrencies, takes massive amounts of energy. Until we can solve the energy problem—it helps of course if it’s 100% renewable energy—but so long as it’s largely fossil fuel energy, it’s just adding to the problem of climate change.

Gene Tunny  52:34

I’ll have to look up artificial DNA. I wasn’t aware of that. That sounds fascinating. I’ll put a link about artificial DNA in the show notes. Okay. Before we wrap up, Wayne, I want to ask you about a passage in your book. Now, you talk about economics. This is an economic show. I need to ask about this passage, because I’m not sure I entirely agree with it, but that’s fine. Look, I’m trying to be open-minded on this show.

You write that, “Contemporary economics is degenerative. It systematically disregards ecological limits and fails to ensure that fundamental human needs are met. Economy is good at creating jobs, product services and technologies, but what is the quality of these outputs? Do they create more harm than good? The impacts of economic activity are explained away as negative externalities, as if environmental integrity and social justice exist in some realm outside of the economy, but that is not true. Everything is interconnected.”

Look, I agree everything’s interconnected. My view is you’re probably being a bit unfair on economists. I think contemporary economics is trying to embrace the environment more. There’s a discipline of environmental economics, as I’m sure you’re aware, and even ecological economics, although that’s really sort of a minor discipline. My view would be that economists are increasingly conscious of these issues. I think externalities is an incredibly powerful concept. And it can help us think about potential policy solutions. My concern is that we’re not going to be able to get to net zero globally, because to do so you really need some sort of carbon tax. You need a carbon price of some kind. But to do that properly, you need to have that agreed internationally and you have to have it applying internationally, to the same extent. I just think that we’re just not going to get that international cooperation to be able to do that by 2050. I’m a bit pessimistic on that.

I just wanted to note that, that as an economist I probably… That was the one thing in the book I really reacted to. I’m not negative about the book because of that. But I just wanted to get an understanding of where you’re coming from there. Do you really think contemporary economics is really that bad?

Wayne Visser  55:19

Let me start by saying that I’m not anti-economics, I did a major in economics in my business degree. And I studied environmental, ecological and resource economics in my master’s degree. Economics is a tool that we use to better understand the world and to help manage our economies.

What I think we have to look at is what kind of economics system we’ve had, and what kind of behaviour it’s promoted. Certainly, since the neoliberal economics really took off, since the 1970s, and alongside that, the push for deregulation, it’s been a disaster for the environment. There’s just no other way to say that. It has externalised a lot of the costs. It’s gone for production in places where the environmental standards are the worst, where the social standards of the worst, labour standards are the worst. It has resulted in modern day slavery. We have more people in slavery today than we had when it was officially abolished in the 1700s. That’s all kinds of forced labour. It really hasn’t managed to create a system that is consistently good for all people and for the planet on which we depend. That’s the issue. It’s created an economy that is linear, that take make waste economy, where many of the resources are simply not priced right, they’re just too cheap. If you look at Virgin plastic, for example, it’s just too cheap. It doesn’t take into account those social and environmental costs that we have.

I do think the concept of externalities can be effectively applied to remedy some of this. If we do have taxes on carbon, for example, or on poor social labour standards, this can certainly start to rectify that. But we just have to ask whether those are strong enough.

I actually do believe that we will get a carbon price. It may not emerge as one global price, but I think it’s emerging in different places all around the world, lots of emission trading schemes popping up, lots of companies providing their own internal carbon pricing. I think a consensus will start to emerge on what that price is, and governments will start to impose it in different ways. They have to, because they can’t get to their net zero targets without imposing that restriction on companies and on citizens. It’s definitely coming.

Of course, we don’t get to net zero only by changing production. We also need to invest in nature. That’s the way that you also can draw down some of the carbon to make up… It’s a kind of a Pareto rule, like 80% you need to reduce directly from your lifestyle or your operations or your value chain, and then the remaining 20—or some say it needs to be more like 10%—should be in actually restoring nature, which makes up the balance.

I think all of those things are happening and will happen. I do think there is a brand of economics or a new understanding of economics that can get us there. If you look at Doughnut Economics, which you’re probably familiar with, Kate Raworth and her book, I think that’s the best coherently argued alternative to what would be more conventional economic thinking. All it’s really doing is saying, how do we better build and the ecological limits, or what we sometimes call the scientific planetary boundaries beyond which the whole system is in danger of collapse, and how do we build in those social foundations, the minimum requirements that people need. Economics has been dabbling with those things, but just hasn’t been very effective if you look at some of these trends we’ve been talking about. It’s just how do we improve economics and have a new version that is more effective than we have at the moment.

Gene Tunny  1:00:09

Wayne, you’ve written a really fascinating book with lots of great examples of what business and what communities around the world are doing to try to tackle these challenges to improve sustainability. Is there anything you’d like to say to wrap up, to conclude? This has been a great conversation, and we’ve gone over a lot. I could talk to you for another few hours, but we’ll probably have to wrap up for now. Is there anything you’d like to say in conclusion?

Wayne Visser  1:00:46

Yeah, let me just mention two things, and then I’ll have a cheeky suggestion. One is that there is a chapter on the book specifically on business and how business needs to integrate thriving, the practicalities of how they do that, and there’s six steps to that. That’s based on work that I do with companies, big companies like Johnson and Johnson, where we take them through these steps of integrating. It touches on all kinds of things, on how you consult with stakeholders, how you relook at your values, how you relook at your strategic goals, how you build in new and different metrics, how you redesign your portfolio of products and services. Just be aware that there is, if you’re coming from the business world there, besides all the innovation examples, there’s also this very practical, how do I do this on Monday morning.

There’s a chapter on leadership, because that is really crucial. We are seeing a different brand or a different type of leadership emerging, that is able to tackle these big challenges and turn them into breakthroughs and into thriving. I look at the different characteristics that those leaders have, obviously, with lots of examples.

The cheeky suggestion to end with—I’ve started to do this even in keynote speeches—is to end with a poem, since as you mentioned, I’m not only a professor, but a poet. I just find that it taps into a different part of the brain. With your indulgence, I might just end with one of those.

Gene Tunny  1:02:19

Please. Thank you.

Wayne Visser 1:02:21

I’ll do the one which actually opens the book. It is a poem called Thriving. It even has a stanza that is really all about markets and economics, so you should like it. But see what you think of this. Thriving.

Our life is so much more than a duty or a chore of merely getting by without a why or what for, the law of tooth and claw, the struggle to exist, to rally and resist against life’s slow decay, the way of entropy of living just to see another day, to stay, to endure and survive. No. Life is meant to thrive. In nature, all things grow from seed to tree. We know the cycle of living through giving of reap and so, the flow. Things come and go. The cycles of grooming from sprouting to blooming of stretching for the light, the bright palette of hope, the diverse ways to cope, to cherish and flourish, bursting forth and alive, for nature means to thrive. Society lives too. A melting pot we brew from cultures and crises with spices for flavour and kindness to savour, ideas for conceiving and goals for achieving, that stretch us and bind us, that find us together in all kinds of weather, wanting what’s fair, to care, longing to love and strive for society to thrive. The markets live and breathe in complex webs we weave. The synapses of trade have made the things we need, each deed a chance to lead. While tech is getting smart, yet still it needs a heart, a compass as a guide to tide us through the storm and find a better norm. A breakthrough to renew an innovation drive. Yes, markets too can thrive. All life is meant to rise, to reach up for the skies, to move beyond the edge, to fledge with hopeful cries. Life tries until it flies. It shakes and spreads its wings and trills each note it sings. While given time and space, the race of life is run, full powered by the sun, on land, in seeds, like bees’ sweet nectar from the hive. All life is made to thrive.

Gene Tunny  1:04:57

Very good. Excellent. Professor Wayne Visser, this has been terrific. I really enjoyed our conversation and your poem at the end and fully agree. All life and society and nature and markets are meant to thrive. What a great message to the end on. I’ll put links to all your social media and your website for the book in the show notes. This has been terrific. I really, really value your time and your thoughts and all the great insights in your book. Well done and thanks so much. Hopefully I’ll look forward to your future work. I’d really look forward to chatting with you in the future. That’s been great, learned so much. Thanks again, Wayne.

Wayne Visser  1:05:54

Thanks so much for having me on. Of course, I’m always happy to find an excuse to visit you down under. I used to teach also in Melbourne, and love it down there. I look forward to those opportunities. Just also to say for people, there are different ways to access the book, so not only e-book and hardback, but also an audiobook version, so whatever takes your fancy. Delighted actually that it’s already hit Amazon bestseller status, so really looking forward—

Gene Tunny 1:06:33

Wow.

Wayne Visser 1:06:34

That’s in its first week, and number one on the new titles in various categories, including several economics categories. I’m delighted with that. Just thanks very much for having me on. I love the conversation and I hope your listeners do too.

Gene Tunny  1:06:51

Oh, very good. I’m sure they will. Thank you, Wayne. Really enjoyed it.

Wayne Visser  1:06:55

Thanks a lot. Bye now.

Gene Tunny  1:06:57 Okay, that’s the end of this episode of Economics Explored. I hope you enjoyed it. If so, please tell your family and friends and leave a comment or give us a rating on your podcast app. If you have any comments, questions, suggestions, you can feel free to send them to contact@economicsexplored.com and we’ll aim to address them in a future episode. Thanks for listening. Until next week, goodbye.

Credits

Big thanks to my guest Dr Wayne Visser and to the show’s audio engineer Josh Crotts for his assistance in producing the episode. 

Please get in touch with any questions, comments and suggestions by emailing us at contact@economicsexplored.com or sending a voice message via https://www.speakpipe.com/economicsexplored. Economics Explored is available via Apple PodcastsGoogle Podcast, and other podcasting platforms.