1.1 It’s the Economy, Stupid … or Is It?

We have entered an era of perverse economic growth. Our current model is increasingly generating economic growth at the expense of natural and social capital. A study by Reference TrucostTrucost (2013) concluded that the annual externalities, the cost to natural capital, of our economic activity were $7.3 trillion, roughly 13 per cent of global GDP, with greenhouse gas (GHG) emissions from coal power generation in East Asia and North America, land use from cattle ranching in South America and South Asia, and water use in wheat farming in South Asia topping the list of externalities.

Similarly, Reference Goh, Pfeffer and ZeniosGoh, Pfeffer and Zenios (2015) estimated the spending on health care to combat depression and burnout to be more than $190 billion per year in the USA alone. Ironically, this expense resulting from the deterioration of social capital is formally considered a contribution to GDP. Another striking example is the expense of war. Despite often being at the expense of forms of social capital like education or health, the $14 trillion spent by the Pentagon since the start of the Afghan war in 2001 perversely counts towards GDP growth, while the loss of lives and the destruction of assets are not directly accounted for in the GDP calculation (Brown University, 2021).

We need to generate economic well-being, but not at the expense of natural, human and social capital, thus avoiding perverse growth. Anthropogenic climate change, water and resource shortages, biodiversity loss and social inequity, with their interrelations and knock-on effects, significantly impact business and society. In the next ten years, they all pose an enormous threat in terms of both likelihood and impact. According to the Global Risks Report 2023 by the World Economic Forum (WEF, 2023), eight of the top ten most severe global risks over the next ten years are environmental and societal (see Figure 1): failure to adapt to and mitigate climate change, natural disasters, biodiversity loss, extreme weather events and ecosystem collapse will directly influence and be influenced by other significant risks identified in the report, such as large-scale involuntary migration, natural resource crises, erosion of social cohesion, geo-economic confrontation and large-scale environmental damage events.

Figure 1

Eight of the biggest global risks in the next ten years are environmental or social.

Our obsession with economic GDP has made us collectively lose sight of the fact that, according to the WEF (2020), $44 trillion of economic value generation – more than half of the global GDP – relies moderately or highly on nature and its services, and is therefore exposed to losses of nature. But we extract more natural resources, return more GHG to the air and generate more waste than the earth’s natural cycles can compensate for.

We will soon see our GDP growth negatively affected by our failure to act effectively to mitigate climate change. A 2021 analysis of climate and transition risks by the world’s largest insurance company, SwissRe, concludes that under the current trajectory, the impacts of climate change are likely to reduce global GDP by 11–14 per cent by 2050 compared to a situation with no climate change (Reference SwissSwissRe, 2021). By comparison, during Covid-19 lockdowns in 2020, global GDP dropped 3.3 per cent. Moreover, because social and environmental issues are so closely related, this also contributes to social injustice and a decline in social capital. Agriculture and natural resources are essential for the survival of three out of every four individuals who live in poverty. Owing to their increased exposure to food and livelihood insecurity, conflict and the health implications of extreme weather events, they are more likely to be disproportionately impacted by climate change.

In an exploratory scenario analysis of the vulnerability and readiness of 135 countries in relation to climate change over the next 30 years, S&P Global Ratings (2022) finds that because lower- and lower-middle-income countries are more exposed to the effects of climate change and have less capacity to adapt, owing to weaker institutions and lower financial capacity, these countries are likely to see 3.6 times more losses on average owing to climate change incidents than higher-middle- and higher-income countries. Reference SwissSwiss Re’s (2021) stress tests show that climate change will impact forty-eight countries, representing 90 per cent of the world economy. The disruption and the investment required for economies and societies to adapt are highest in Asia: China is at risk of losing 24 per cent of its GDP without any mitigation actions, while Europe is heading to a loss of 11 per cent and the USA stands to lose close to 10 per cent. Southeast Asia could see GDP reduced by as much as 29 per cent.

Most of our economic growth models are based on material throughput, population growth and the myopic belief that more people producing and consuming more stuff will grow our GDP and, thus, our well-being. Despite history being full of examples of civilisations falling because of living in imbalance with their natural environment (such as the Sumerian, the Mayan and the Angkor civilisations), these last decades we are again learning the hard way that our legacy growth model, too focussed on economic wealth creation alone, is bringing unintended and undesired consequences. Despite having created tremendous economic value, it has become, in many ways, a destructive force, causing climate change and depleting natural capital, promoting short-term wins over long-term prosperity and widening social exclusion. Environmental and social costs, inherent but previously hidden in the old growth model, make it glaringly evident that our old model is unsuitable for the future.

Humanity’s biomass accounts for only one ten-thousandth of the life on Earth, measured by the dry weight of carbon that makes up the structure of all living things (Reference Bar-On, Phillips and MiloBar-On et al., 2018). However, humans have an enormously outsized influence on all other living things and, because of that, our current pathway looks as follows:

• The human population has grown from 2 billion in the 1920s to more than 8 billion today. Moreover, this trend will only continue, reaching 10 billion people globally in the mid-2050s. Therefore, the biggest challenge of our generation is to satisfy the needs of 8 billion to 10 billion people in ways that do not surpass the environmental limits or erode the social foundations of our societies.

• Climate change is one of the biggest crises the world is currently experiencing. It is accelerating and bringing the world close to irreversible change: out of fifteen climate tipping points identified by the Intergovernmental Panel on Climate Change (IPCC), nine are already at the point of no return, such as the warming of tundras in the northern hemisphere, which is causing a thawing of permafrost, releasing vast amounts of the potent GHG methane into the atmosphere and triggering feedback loops that bring the climate, and us, dangerously close to irreversible tipping points (IPCC, 2020).

• Our global annual burning of fossil fuels is the equivalent of the growth of all plants worldwide for 400 years. Meanwhile, relentless deforestation – the equivalent of one football field every 2 seconds, only half of which is replanted (FAO, 2020) – primarily for agricultural conversion, has turned the Amazon from a carbon sink into a net emitter of GHG.

• We lost two-thirds of the world’s animal population in the past fifty years, partly driven by deforestation and by a tenfold increase in the number of dead zones in our oceans owing to agricultural run-off of fertilisers and pesticides (IPBES, 2019). This loss directly affects the robustness of food chains and nature’s capacity to defend itself and us against pests and the effects of climate change.

• More extreme weather events caused by climate change will affect food production and livelihoods. The World Bank (2021) predicts 216 million additional climate change migrants by 2050 in Africa, Asia, South America and Eastern Europe alone.

• By 2030, a 40 per cent disparity between water availability and demand is anticipated, and as many as 700 million people could be displaced by water scarcity (HLPW, 2018). Water shortages are predicted to affect one in four people worldwide by 2050, not just in geographies like the Middle East, North Africa and India but also in sections of the USA, Spain and even major cities like London. In addition, water scarcity threatens to push up food costs, which could cause instability and conflict.

• The global economy extracted and used more resources in the past six years than in the entire twentieth century, and levels of waste in our environment have never been higher (CGRI, 2023).

• Only 9 per cent of the 300 million tons of plastics we produce yearly – roughly the equivalent of the weight of the entire human world population combined – is recycled. Most plastics end up in landfill, and an estimated 8 million tons end up in our oceans (WEF et al., 2016). By 2050, more plastic than fish will be in the ocean if the current overfishing and plastic production rate continues.

• Inequality is on the rise. Of all the new wealth in the world, the wealthiest 1 per cent of the world’s population on a per-person basis captures more than 110 times the wealth captured by the poorest 50 per cent, who together own just 2 per cent of the world’s economic wealth, according to World Inequality Report 2022 (World Inequality Lab, 2022).

• Covid-19 had a disproportionate impact on poor people. In 2021 alone, 97 million people were pushed back into extreme poverty, bringing the total number of people worldwide living on less than $1.90 per day by the end of 2022 to an estimated 685 million people, according to the World Bank (2022). Moreover, this number might rise further as the knock-on effects of the pandemic (inflation, economic downturn) take shape.

Nature has a remarkable potential to sustain us, whether through the recycling of our water, the digestion of our waste, the production of our food or the removal of CO₂ from the air to create the oxygen we breathe. However, as our species expands, so does our impact. As a result, as man’s dominion over nature increases, the capacity of nature to supply its services and to compensate for our impact decreases, exacerbating the effects of our perverse growth and accelerating the ‘degeneration’ of natural capital. Furthermore, as our natural capital erodes, low-income populations are most heavily affected, widening the gap between rich and poor and eroding the social fabric.

Reason enough to stop and think. Is this the type of economic growth we want? Instead of accelerating our demise, we need to mobilise our innovation and collaboration capacity, not only to reinvent growth to fit within the planet’s ecological boundaries and not deteriorate our social foundations but also to regenerate nature’s capacity to help us solve our problems and to bolster our social capital through higher levels of inclusion.

1.2 Systemic Challenges Require Systemic Solutions

Most sustainability challenges, such as climate change, waste and resource challenges, natural capital loss, poverty and inequality, are systemic challenges: they involve multiple actors, stakeholders and numerous connected subsystems – social, institutional, cultural, political, economic, technical and ecological – often with governance contexts and dynamics of their own. As a result, these problems are complex, with multiple causal relationships, feedback loops and often unforeseen consequences.

Focussing on individual causal relationships and intervening in just one aspect of these complex systems will almost never solve the problem; rather, it will relocate the problem or cause other unforeseen consequences beyond the causal relationship of focus. Systemic challenges require systemic solutions. This requires a deep understanding of the complex systems surrounding the challenges. Thinking in terms of systems helps us understand the relationships between the components and the actors in a system and foresee the intended and the unintended ripple effects of one’s interventions in that system, thus enabling us to envision the most responsible approaches to solving complex societal challenges.

Section 2 will explore system dynamics in more detail, but for a good understanding of our analysis and recommendations, we briefly clarify what we mean by systems, systems thinking and systemic change. Systems thinking expert Donella Meadows defined a system as a set of things – people, cells, molecules or others – interconnected so that they produce their pattern of behaviour over time (Reference MeadowsMeadows, 1999). Systems exist in the physical world. These can be natural ecosystems, such as the marine environment, and our social systems, such as the food or health-care systems. They can also be socially created systems such as belief systems. When we talk about systems in this Element, we generally refer to the system of actors, conditions and the dynamics between them, and possibly adjacent systems, that have formed around satisfying a societal need, such as societies’ need for nutrition, mobility, shelter, health, safety and comfort. These systems are enabled by supporting systems such as finance, energy, education or governance. All these systems involve various smaller parts and organisations at multiple levels that form an intricate whole whose behaviour is influenced by the system’s structure, the interaction of its parts and the conditions affecting the system and its parts.

Pioneered by biologists but divided over several disciplines, the main characteristics of systemic thinking or ‘thinking in systems’ arose in Europe during the 1920s (Reference Capra and LuisiCapra & Luisi, 2014). These ideas, especially Bertalanffy’s concepts of general systems theory and open systems, helped to give birth to a new way of thinking: thinking in terms of patterns, relationships, connectedness and context. The ability to see the interdependence between multiple events happening in different parts of the world, instead of seeing them as isolated events, allows for a richer understanding based on the incorporation of multiple and different (sometimes even conflicting) views. The understanding that ‘properties of the parts are not intrinsic properties but can be understood only within the context of the larger whole’ was a profound revolution in the history of Western scientific thought. The tremendous shock in twentieth-century science is that ‘living systems cannot be understood by analysis’ (Reference Capra and LuisiCapra & Luisi, 2014, p. 66). In contrast to analysis (originating from ancient Greek ‘ana’ and ‘luein’, meaning ‘loosening up’), in which you take something apart to understand it, system thinking concentrates on putting things in the context of a larger whole. This makes systems thinking contextual, which is the opposite of analytical thinking.

Since the start of the industrial revolution, our focus on growth has led to an ever-thickening web of interdependence worldwide (Reference Senge, Lichtenstein, Kaeufer, Bradbury and CarrollSenge et al., 2007). At a global scale, cities are connected through investment patterns, consumer choices and international trade. As a result, actions on one side of the planet, which affect supplies ranging from pharmaceuticals to imported staple food, affect livelihoods and employment on the other side of the planet. For example, during the Bangkok floods of 2011, local manufacturing facilities flooded completely and were inoperable for almost two months. As a result, global supply chains for computer and automobile components were severely disrupted, which led to temporary factory closures and lay-offs in many cities outside Thailand (Reference Tyler and MoenchTyler & Moench, 2012).

The term ‘systemic’ relies on the concept of elements or components coming together to create a unified whole or a collective of participants. Systemic means ‘of or relating to the system’ and relates to the complex interactions of multiple actors and conditions in a system. It is often used to describe some phenomenon – an illness, a social problem – that affects every part of an entire system. Of the five interpretations of the word ‘systemic’ that Reference Midgley and LindhultMidgley and Lindhult (2021) identify, the two dimensions most recently introduced in the literature on systems thinking are ‘collaboration’ and ‘thinking and action’. Collaboration recognises the interdependency of actors in a community or business setting, leading to a need to innovate and co-create value together. In the thinking and action dimension, change is viewed as a process constructed in such a way that ‘participants within it use methodologies, methods and techniques to make their thinking and action more systemic’ (Reference Midgley and LindhultMidgley & Lindhult, 2021, p. 643). Following these definitions, the term ‘systemic change’ refers to change involving multiple actors in a system of often interconnected systems, such as social, institutional, cultural, political, economic, technical and ecological systems, as long as it operates in the context of thinking and action towards creating change, which is required when efforts to change one aspect of a system fail to fix the systemic problem.

In the 1980s, prominent American universities and their business schools started focussing on systemic change. It began to gain traction in business and management fields as a way to address the complex and interrelated challenges faced by organisations and society (Reference Bennis and O’TooleBennis & O’Toole, 2005), emphasising the need for a holistic, collaborative and integrated approach to problem-solving rather than relying on isolated or incremental changes. Systemic change affects how the whole system functions (including all its components and relationships), and the change must be fundamental. Moreover, it often changes the system’s output (the system-changing impact created).

British plant ecologist Arthur George Tansley coined the term ‘ecosystem’ in 1935 to characterise animal and plant communities. In 1993, James F. Moore used the biological ecosystem as an analogy to explain business environments and introduced the term ‘business ecosystem’ (Reference Graça and Camarinha-MatosGraça & Camarinha-Matos, 2017). A business ecosystem is ‘an economic community supported by a foundation of interacting organisations and individuals – the organisms of the business world. This economic community produces goods and services of value to customers, who themselves are members of the ecosystem’ (Reference Graça and Camarinha-MatosGraça & Camarinha-Matos, 2017, p. 237). In an interdependent business environment, the business ecosystem actors ‘co-evolve their capabilities and roles’ (Reference Graça and Camarinha-MatosGraça & Camarinha-Matos, 2017, p. 237). A business ecosystem approach allows a vast network of actors to collaborate, build systemic solutions and create holistic ways forward. It represents a new operating logic that is essential to achieving systemic change (Reference Kapetaniou and RiepleKapetaniou & Rieple, 2017). For some companies, like start-ups, the business ecosystem logic is at the core of business. However, for other companies, a more cooperative and open approach, collective action, bilateral partnerships, holistic thinking, sharing knowledge and capabilities or sharing risks in initial capital investments, and systemic understanding at the individual, organisational and societal levels, are challenges.

1.3 A New Notion of Value

Focussing solely on GDP growth as a measure of value might have seemed reasonable when civilisations were unaware of environmental and social constraints. However, there is ample evidence today that reality is complex and that we must strike a new balance. Our systemic challenges of the climate crisis, natural capital destruction and rising income inequality unfairly impact the bottom of the pyramid, putting pressure on the social contract and risking geopolitical stability while materially impacting business. Whether we believe that policies and regulations should be used to shape new forms of production and consumption, or that new technologies will magically solve all our problems (tech utopianism), our growth model and definition of value need to be revised for the societal and environmental realities of the twenty-first century. There is a need for a new growth model that works with nature rather than against it, that emphasises well-being in the longer term rather than the short, and that encompasses everyone rather than just a fortunate few.

Business leaders and academic experts have developed various models to redefine value. While a sustainability transformation is underway, challenges and resistances remain. Nevertheless, there are currently five leading value-creation concepts that reconceive business’s value to society (Reference Weenk and HenzenWeenk & Henzen, 2021):

1. 1. Stakeholder Value: Central to this concept is how stakeholders work cooperatively to create value through a set of relations among specific groups that have a stake in the activities and outcomes of the business and upon whom the business depends for achieving its objectives.

2. 2. Blended Value: In this conceptual framework, businesses, investments and non-profit organisations are evaluated based on their ability to generate a blend of social, environmental and financial value. This holistic approach is sometimes used interchangeably with the triple bottom line’s people, profit and planet.

3. 3. Shared Value: In this framework, a business’s success and social progress are interdependent. It enhances a business’s competitiveness while advancing the economic and social conditions of the communities in which it operates.

4. 4. Sustainable Value: The framework views global sustainability challenges through the business lens, which helps identify the right practices and strategies to contribute to a more sustainable world, while simultaneously driving shareholder value.

5. 5. Integrated Value: This relates to the simultaneous building of multiple ‘non-financial’ capitals, such as human, ecological, social, technological and infrastructural capital, through synergistic innovation across the nexus economy (including the circular, well-being, access, exponential and resilience economies), that results in net-positive effects, thus making our world more satisfying, sustainable, shared, smart and secure.

As awareness of our need to find new value-creation models grows, paradigms shift. New growth concepts and paradigms are emerging around these new notions of value. In 2004, Wen Jiabao, the Chinese premier, had ambitions for a green GDP index to replace the Chinese GDP index as a performance measure: green gross domestic product (GGDP) is a measure of economic growth with environmental consequences (degradation, resource depletion, cost of protection and restoration) of that growth factored into a country’s conventional GDP. But, in 2006, the first GGDP accounting report showed that the financial loss caused by pollution was $66 billion, or 3 per cent of China’s economy (Reference DialogueChina Dialogue, 2006). As the adjustment for environmental damage would reduce the growth rate to politically unacceptable levels, nearly zero in some provinces, the government withdrew its support for the GGDP methodology the following year. However, in China’s recent push for greener development, experts have argued for the return of GGDP, and China’s Five-Year Plans now explicitly make local governments accountable for environmental quality and ecological conservation (Reference WangWang, 2016).

Like the leading value-creating concepts or the GGDP, more concepts recognise natural and social capital alongside economic capital as sources of value and well-being. In the same way that an investment in economic capital, such as production capacity or financial assets, can yield economic profits, natural capital (the stock of biomass, biodiversity or natural resources in sustainable natural cycles) produces value in the form of natural services, such as clean water, clean air, food, natural resources and medicine (almost half of our medicines originate in nature) or even recreation space (Reference WongWong, 2001). Moreover, societies with high social capital, referring to the extent to which individuals are educated, physically and mentally healthy and part of a safe, transparent and inclusive society, yield trusted, collaborative relationships that are much more productive than societies with lower levels of social capital.

Recognition of social and natural capital alongside economic capital gives rise to new ways of framing and calculating growth. The concept of Gross National Happiness, pioneered by the Bhutan government, inspired Jeffrey Sachs at the Sustainable Development Solutions Network (SDSN) to develop the World Happiness Report. It ranks countries based on a mix of criteria, including GDP per capita, social support, life expectancy, freedom to make choices, generosity and perception of corruption. Even though the economic picture is uneven across Europe, the democracies of continental northern Europe provide interesting learning on how highly transparent, egalitarian, inclusive societies that value natural and social capital alongside economic capital consistently rank among the world’s happiest countries. Finland, Iceland, Denmark, the Netherlands, Sweden and Norway ranked among the World Happiness top eight every year from 2019 to 2022 (Reference Helliwell, Layard and SachsHelliwell et al., 2022).

The triple bottom line concept of ‘people, profit and planet’ has evolved into frameworks that aim to optimise value creation within planetary and social boundaries. Doughnut Economics, championed by Kate Reference RaworthRaworth (2017), identifies the space in which humanity can optimise its well-being, while making sure not to break through the social foundations of individuals’ equal and fundamental rights to education, health, justice, housing, energy, food and income or to exceed the ecological boundaries for factors such as biodiversity loss, air pollution, freshwater withdrawals, land conversion or climate change. The City of Amsterdam (2020) in the Netherlands is the first city to adopt the Doughnut Economics model to inform city-wide strategies and developments to provide a good quality of life for everyone without putting additional pressure on the planet.

A more constructive focus on the shared value potential is provided through the concepts of regenerative and inclusive growth, which aim to restore natural and social capital and resilience while being economically sustainable. Originally applied mainly in agriculture, regenerative business practices are entering other sectors such as tourism, medicine and consumer goods. For example, Reference DanoneDanone (2017) is teaching and incentivising regenerative practices to farmers in its supply chain and frames it as a crucial part of its commitment to become water impact positive and achieve net zero emissions by 2050. At a global level, the Reference ChallengeBonn Challenge (2011) has already mobilised commitments from sixty countries in the last decade to restore 210 million hectares of degraded and deforested land. Even though the commitments are numerical, and the quality of reforestation remains an issue, the challenge is on track towards bringing 350 million hectares into restoration by 2030.

Nature-based solutions (NBS) are based on the realisation that nature can be our biggest ally. Restoring or leveraging nature’s ability to provide its services can yield substantial economic, environmental and health benefits. For example, knowing the potentially disastrous impact of their activity on coastal ecosystems, several oil companies around the world have started investing in mangrove restoration projects. The high carbon-sequestration potential of mangroves, removing up to four times more CO₂ from the air than mature tropical forests, contribute to these companies reaching their carbon reduction targets while providing essential benefits to coastal communities through increased biodiversity, fishery nurseries and coastal protection. Another example of cost-effectively harnessing nature is how New York City achieves some of the cleanest drinking water of any city in the world (Reference HuHu, 2018). By investing $1.7 billion since the early 1990s in conserving 400,000 hectares of the upstream watershed and letting nature filter its drinking water, the city has avoided building a massive $10 billion filtration plant and is saving at least another $100 million annually on its operation.

Especially when dealing with environmental challenges, through hundreds of millions of years of evolution, nature harbours enormous wisdom and potential solutions to our problems. As explored in Reference BenyusJanine Benyus’s (2002) work, biomimicry is the design and production of structures, systems and materials modelled on biological entities and processes. In addition to us sourcing medicines from nature, the fascinating discipline of biomimicry has inspired multiple innovations, such as:

• reverse osmosis membrane filtering technology that is used for water purification and desalination and that mimics how the roots of mangrove trees separate salt from seawater;

• water harvesting from the air, already deployed as an essential solution to water scarcity in places like Ethiopia and Chile, that was inspired by Stenocara beetles surviving in dry climates;

• the growing application of passive cooling techniques in architecture, inspired by African termites drilling tiny holes to stimulate airflow to cool down their mounds;

• the development of nano-paints, inspired by the skin of sharks and lotus flowers, that reduce water resistance and increase ships’ speed and energy efficiency.

Many new business models are emerging to achieve growth on a finite planet, decoupling economic growth from material use and focussing on satisfying needs rather than providing goods, thus dematerialising growth. The sharing economy, or collaborative consumption, aims to minimise material use per unit of customer satisfaction by optimising the usage of existing stock and infrastructure. For example, there are approximately 1.45 billion vehicles worldwide, of which about 1.1 billion are passenger cars. However, the average car is parked for 23 hours daily and is highly inefficient as less than 1 per cent of total life-cycle energy input is used to move a person (Reference NaglerNagler, 2021). Carpooling or car-sharing schemes, like ZipCar, Lyft or Uber, address this radical inefficiency. This economic model has already disrupted several industries, especially asset-intensive ones like transportation and hospitality. Despite this collaborative consumption model having taken a hit during the Covid-19 pandemic, analysts forecast that it will continue making inroads into the consumer goods, media and entertainment, and health-care sectors and grow more than fivefold to $335 billion by 2025 (PwC, 2015).

Anything-as-a-service (XaaS) also addresses this efficiency challenge, especially in fast-changing sectors such as information technology (IT), by offering products, tools and technologies as a service over a network instead of on-site locally. The XaaS models are expected to grow by 19 per cent annually between 2022 and 2028, reaching a $1.6 trillion market share by 2028 (KBV Research, 2022). For example, Signify, formerly Philips Lighting, offers lighting-as-a-service to its public sector and commercial customers. The customers pay a monthly service fee for light; in turn, Signify installs, operates and maintains the lighting systems. These systems are designed for easy replacement and repair during operational life, and, in the after-use stage, they can be easily reused or recycled. Signify reports multiple benefits of its XaaS model, such as a 75 per cent longer lifespan, a reduction in energy consumption, and a significant emissions and energy reduction compared to its conventional counterparts (Ellen Reference MacArthur FoundationMacArthur Foundation, 2023).

In 2012, a Google search for ‘circular economy’ yielded 22,600 results; that exact same search today leads to more than 190 million hits. The primary schools of thought related to circular economy are performance economy, biomimicry, blue economy, regenerative design and cradle-to-cradle. The last one, in particular, is seen as a conceptual breakthrough in the maturity of circularity, but circularity itself is nothing new: between the 1970s and the 1990s, it focussed mainly on dealing with waste; from the 1990s to 2010 the focus lay on connecting input and output in strategies for eco-efficiency; currently, circularity focusses on maximising value retention in the age of resource depletion, having introduced the 10 R strategy framework of Remine, Recover, Recycle, Repurpose, Remanufacture, Refurbish, Repair, Resell/Reuse, Reduce and Refuse (Reference Reike, Vermeulen and WitjesReike et al., 2018). The circular economy model focusses not just on eliminating pollution and waste, circulating materials and products for as long as possible or dematerialising consumption, but also on regenerating nature in an economic system that benefits businesses, people and the natural world equally. Shanghai-based company Waste2Wear is an excellent example of adopting the circular economy model. It produces 100 per cent RPET (recycled polyethene terephthalate) from pre-ocean and pre-landfill plastic bottles and RPP (recycled polypropylene) from end-of-life single-use food containers and domestic appliances and turns that into yarn, fabrics and other finished products. On top of this, it has also introduced an award-winning sustainable supply chain management system that is verified by blockchain technology (Waste2Wear, n.d.).

Dematerialisation models such as XaaS, the sharing economy and the circular economy can be very successful due to lower per-unit footprint and cost. However, the dirty not-so-little secret of these models might be harder to address. As things become cleaner and cheaper, we tend to use more of them, diminishing the beneficial effects of the new technology or measure. This is called the rebound effect. For example, while XaaS brings down the per-unit environmental footprint of IT solutions, the rebound effect of the increased overall consumption of cloud-based services because of increased accessibility is causing the industry’s overall environmental footprint to boom. Global internet traffic has increased twentyfold since 2010, and data centres and transmission networks today consume 2–3 per cent of the world’s electricity, which is more than the entire global aviation industry (International Energy Agency, 2022). The impact is expected to continue to grow in the decade ahead, despite data service providers setting up centres in cold climate regions with high availability of renewable energy, such as the Scandinavian Arctic Circle and Iceland.

Shifting our focus of intervention, can we help societies be happier and healthier by encouraging and providing more mental rather than material growth? Without denying consumerism, brand builders are perfectly equipped to optimise the intangible attributes in their product development and marketing, thus ‘dematerialising’ consumption without diminishing perceived value. For example, Japanese culinary culture carries some of this philosophy, mastering the art of serving one strawberry for dessert as the minimalist climax of a special dinner.

1.4 Change in a VUCA World

Change is accelerating. In the early twentieth century, it took 75 years for the telephone to scale to 100 million users. Mobile phones took 16 years, Facebook 4.5 years, Instagram 2.5 years, TikTok 9 months and ChatGPT amassed more than 100 million users within 2 months of its launch in November 2022 (Reference MilmoMilmo, 2023). The emergence of disruptive and exponential business models in a hyper-connected, increasingly digital world is leading corporate and individual fortunes to be made and lost quicker than ever. For example, 52 per cent of the companies listed in the Fortune 500 in 2000 no longer exist today. Within one generation, Jeff Bezos and Elon Musk, founders of Amazon (1994) and Tesla (2003), respectively, became the wealthiest people on the planet. Today’s average tenure of an S&P500 company is less than twenty years, down from sixty years in the 1950s (Capgemini Consulting, 2015).

Digital hyper-connectedness can be a force for good, as we have seen in Ukrainian citizens connecting and coordinating their efforts to defend themselves against the 2022 Russian invasion. However, it can also be a destabilising factor. Impulsive, indiscriminate sharing helps sensationalist fake news spread online, contributing to the algorithms embedded in many social media feeds polarising rather than uniting society. As a result, free speech has come under discussion, and not only authoritarian governments are responding with stricter internet controls.

So-called black swan events are on the rise. But these surprises might not be entirely unexpected if we look at the bigger picture. As humanity continues to destroy biodiversity and heat the planet, we also deplete nature’s ability to provide natural protection against extreme weather events and pests or viruses like bird flu or Covid-19. Recent events showed how sensitive to disruption most industries’ supply chains are. Many governments are defaulting to responding to crises by injecting enormous financial recovery packages into the economy. However, as the world rebounds from the pandemic, supply shortages in, for example, fossil fuels, compounded by the impacts of the Ukraine war, translating into inflation levels not seen in most parts of the world in forty years. This uncertainty is made investors nervous, thus pushing up volatility in the stock markets. The S&P500 index in 2022 showed a level of volatility not seen since the financial crisis of 2008.

Being a world population that is growing exponentially on a finite planet requires us to urgently and radically reinvent how we produce and consume if we are to remain within the Earth’s sustainable boundaries. Nevertheless, despite progress over the last decades, mainly thanks to China’s spectacular achievement of lifting 770 million of its people out of poverty in the last 40 years, in 2022 almost half of the global population still lived in poverty, making less than $7 per day, a number that could rise further due to the compounded effects of Covid-19 and the Ukraine war, according to the World Bank (2022). This is forcing us to confront the ambiguous challenge of dematerialising the consumption of a growing world population while finding ways to provide affordable and accessible energy, health care, nutrition and basic opportunities for the less fortunate members of our societies.

Complex societal issues like the climate crisis, inequality, biodiversity loss and natural capital degradation can no longer be ignored. The anticipated costs and impacts of anthropogenic climate change are enormous. The United Nations Environment Programme has estimated that the global cost of adapting to the impacts of climate change is expected to grow to $140 billion–$300 billion per year by 2030 and to $280 billion–$500 billion per year by 2050 (United Nations Environment Programme, 2021). This has forcefully motivated nations, cities and companies worldwide to commit to radical reductions in GHG emissions. As of early 2023, more than 132 national governments have made net zero commitments. In addition, more than 11,000 non-state actors, including 8,300 companies and more than 1,100 cities, have also made net zero commitments as part of the United Nations Race To Zero (United Nations Climate Change, n.d.). This will require a radical reinvention of how we produce, distribute and consume, affecting virtually all industries, supply chains and geographies worldwide.

In this VUCA reality, companies need to reinvent themselves and the systems they are part of. However, VUCA means that it is increasingly hard to understand and predict the future and the outcomes of one’s actions. Strategies can no longer be based on extrapolating existing situations and legacy business models but must increasingly lean on the agile pursuit of a compelling vision supported by multiple stakeholders. Nevertheless, due to exponential technological progress and the size of our impact (compare a train derailing at 30 kilometres/hour in the early 1800s to one derailing at 300 kilometres/hour today), the stakes are too high to continue progressing through trial and error. Our imperative to achieve change in a VUCA world increases the importance of a specific set of future-fit leadership skills and the ability to collaborate, which we discuss in Section 3.

1.5 We Are Running Out of Time

In the early 1970s, Paul Ehrlich and John Holdren developed and popularised the IPAT equation to describe how humanity’s impact (I) on the planet is a function of population size (P), affluence (A) and technology (T) (see Figure 2) (Reference HoldrenHoldren, 2018).

Figure 2

Humanity’s impact is a function of population, affluence and technology.

Population growth has not helped to lessen the human impact. A hundred years ago, a newborn would have come into a world with fewer than 2 billion people. The number of people on our globe exceeded 8 billion in November 2022 (The World Counts, 2023). Although relative growth has slowed significantly, the population of the globe continues to rise by 200,000 people every single day. Affluence, the amount of consumption per person, if reflected as a measure of per capita GDP, albeit spread unevenly, has more than tripled worldwide in the last thirty years (World Bank, 2023). This puts all our hopes on technology. Tech-utopianists will argue that technology is a powerful force that has brought tremendous progress in many ways, and they trust that technological innovations will solve humanity’s problems (Reference Hickman and BanisterHickman & Banister, 2009). However, they frequently overlook three crucial elements that have caused impact to rise far more quickly than it has fallen as a result of improved technology:

1. 1. The rebound effect: As described in Section 1.3, price reductions brought on by efficiency incline us to consume more of what we intended to conserve. As air conditioners become more efficient, we install more of them. As flying has become cheaper in the last fifteen years, the number of miles travelled has more than doubled.

2. 2. The unintended consequences of technological advancement: The promise of positive features frequently causes us to overlook the potential negative impact of innovations. Examples are when new technology, such as 5G, exacerbates inequality because the investment required to provide the technology is feasible only in rich and densely populated geographies, or the way social media not only connects people but also facilitates the spread of misinformation, not to mention the impact it has on the psychological well-being of many users.

3. 3. Politics and vested interests: Even though money is available to address issues like poverty, climate change and pollution, the adoption of technological innovations frequently slows down due to opposed political ideologies or the influence and interests of legacy industries, such as the fossil fuel industry.

Given the dramatic and unfavourable trend of the components making up the above formula, the world must catch up on almost all of the United Nations SDGs. According to the latest SDG Report (United Nations, 2022b), significant challenges remain for most SDG indicators, especially in low-to-medium-income countries. As of 2023, only 18 per cent of the SDG targets are on track, with most facing serious challenges and 15 per cent of SDG targets, including those on hunger, poverty and CO2 reversing (Sustainable Development Report, 2022). According to the United Nations Framework Convention on Climate Change (2016), by 2030, GHG emissions must be reduced by 45 per cent from 2010 to prevent global warming from reaching uncontrollable levels. All national action plans together, however, might not be enough: taking all national action plans as of October 2022 into account, in the upcoming eight years, emissions are still anticipated to climb by 10 per cent (United Nations, 2022a). Moreover, in its latest update of March 2023, the IPCC (2023) concludes that there are significant delays in implementing the national action plans; these are pushing the Paris goal of limiting global warming to 1.5°C out of reach. The IPCC is instead projecting that without strengthening policies, an increase of 3.2°C by the end of the century is very likely.

We are running out of time for marginal, incremental improvements. It is crucial to recognise when incremental change is insufficient for achieving desired objectives; now, revolutionary change must be attempted (Reference Kenny and MeadowcroftKenny & Meadowcroft, 1999; Reference Kates, Travis and WilbanksKates et al., 2012). In its climate report on impact, adaptation and vulnerability, the IPCC (2022) warns that transformational change is no longer optional; it is necessary. To keep the possibility alive of us living within the planet’s natural boundaries in socially just ways, we must dramatically accelerate the sustainability transition and radically improve the sustainability of some of the most critical systems that support us, such as the food, energy, transport and infrastructure systems. Furthermore, we must rethink critical enabling systems such as financial, urban, educational and social systems.

Governments are committing trillions to support mitigation and transformation efforts over the coming decades. Sustainability is not a ‘nice to have’; it is critical and urgent if we want to avoid the disruptions and the dramatic costs to natural and social capital that are escalating under our business-as-usual model. We need radical reinvention, not marginal or incremental change of our systems. Radical, from the Latin ‘radix’, means ‘at the roots’, not shallow or superficial. The societal need to mitigate and adapt to the effects of climate change and natural capital loss and to radically reinvent our systems is the biggest challenge and the most prominent commercial opportunity of this generation.

The order is tall. And the tension is rising. Many of our current critical systems are not fit for the future and need to be reinvented. But systemic change is hard and complex; we are running out of time and the context is more VUCA than ever. This is why we need a better understanding of how systems work and how we can create the conditions and equip our decision-makers to achieve systemic change.

2.1 The WHAT, HOW and WHY of Systemic Change

The USA and the EU have launched projects of unprecedented ambition in response to climate change. The US Senate approved a $369 billion climate budget, aiming to halve US carbon emissions by 2030 from 2005 levels (Reference MorganMorgan, 2022). The EU is backing up its Green Deal with various funding mechanisms worth more than €1 trillion, including a Climate Action Fund and a Just Transition Mechanism, with the objective to make the world’s third-largest economy climate-neutral by 2050 (EUcalls, 2022). In the Asia-Pacific region, a study by PwC (2022a) forecasts sustainability assets under management to triple to $3.3 trillion between 2021 and 2026, showing that this part of the world is quickly joining the race to create more sustainable models.

Transformation sometimes requires an upfront investment; therefore, financial and regulatory support in the early phases is vital to de-risk investments for the private sector and accelerate the development of new solutions. However, it is not the amount of money pledged that guarantees successful systemic change. The question remains where and how to invest the resources. Which intervention areas will most effectively drive systemic change?

To illustrate that intervention points are often counter-intuitive, system thinking expert Reference MeadowsDonella Meadows (1999) often uses economic growth as an example: ‘Growth has costs as well as benefits, but we typically do not count the costs – among which are poverty and hunger, environmental destruction, and so on – the whole list of problems we are trying to solve with growth! What is needed is much slower growth and, in some cases, no growth or negative growth’ (p. 1). She states that vision without action is useless, but ‘action without vision does not know where to go or why to go there. Therefore, vision is necessary to guide and motivate action. More than that, when widely shared and firmly kept in sight, vision brings into being new systems’ (Reference Meadows, Meadows and RandersMeadows et al., 1992, p. 224).

To synthesise Reference MeadowsMeadows’ (1999) original intervention points for systemic change, and create a practical translation for the business community, we have categorised these levers into the WHAT, HOW and WHY of systemic change in increasing order of transformational potential (see Figure 4).

Figure 4

Levers for systemic change.

2.1.1 WHAT: The Conditions of the System

Tweaking parameters, such as price subsidies, minimum wages, bank reserves, taxes and funding models for transition risk-sharing, can all improve systemic change conditions (see Table 1). However, these levers can be categorised as shallow or low potential intervention points (Reference MeadowsMeadows, 1999). Changing a system’s parameters can help a system find a new balance, but systemic change will often be limited unless supported by and coherent with a new mindset and objectives. For example, a one-off windfall tax or increased capital gains taxes for the wealthy, as discussed following the Covid-19 pandemic to address income inequality, will not change the system if the system is still designed to have economic gains flow towards capital providers. It will likely only motivate the wealthy to find new ways to avoid taxes. Similarly, setting a minimum quota for women on an executive team will not solve gender inequality unless efforts are made to improve women’s access to relevant, quality education and change corporate mindsets regarding equal opportunities and participation.

Table 1Overview of the WHAT of interventions.

2.1.2 HOW: The Dynamics of the System

A more powerful lever over the performance (see Table 2) of a system is the ability of actors to influence the rules of the system, for example through incentives, punishments and constraints, or its structure, for example through the strengthening of positive or negative feedback loops. This ability is strengthened through improved information flows to and engagement of relevant stakeholders and a fair distribution of power. A simple intervention in the flow of information – adding a new loop of information – causes people to behave differently. For example, sustainable food labelling and certification have increased consumer awareness. They are driving consumer behaviour change, as well as collaboration and cooperation among different actors in the food value chain (Reference Swinnen and KuijpersSwinnen & Kuijpers, 2019). Similarly, extended mandatory guarantee periods on appliances are proving to slow down the buy-use-replace feedback loop, boosting local repair and recycling business sectors and radically reducing waste in the system. The systemic change potential of these medium-potential levers is enhanced if the actors and stakeholders in the system share the same paradigm, mindset, purpose and vision.

Table 2Overview of the HOW of interventions.

2.1.3 WHY: The Purpose of the System

The most powerful, deep leverage points for systemic change are related to the intent and purpose of the system: What human or social need is the system aiming to satisfy? What type of world is the system aiming to build? In practical terms, this refers to the objectives set for the new system, the values and mindset from which the new system emerges and the ability to transcend existing paradigms (see Table 3). Reference Kramer, Kania and SengeKramer et al. (2018) have also underlined the importance of mental models as highest potential intervention points from which to change systems. They argue that due to the interdependent nature of the other conditions of systems change (which they identify as relationships and connections, power dynamics, policies, practices and resource flows), intervening in these deep WHY leverage points should be supported by consistent interventions in the shallower HOW and WHAT leverage points. For example, to create a world in which protecting or restoring natural capital is critical and where the objective is to dematerialise, that is, decouple economic growth from resource use, taxing critical resource use could make more sense than taxing income.

Table 3Overview of the WHY of interventions.

We want to suggest a refinement of Meadows’ original categorisation of subsidies as a shallow WHAT lever. Direct price subsidies could be considered shallow as they have the side-effect of distorting market mechanisms. However, while market mechanisms ideally need a level playing field to function optimally, policymakers realise that significant transformations require support in the upfront investment required to develop and scale new solutions. Subsidies have the potential to enable Moore’s law, accelerating the learning and cost curves, thus facilitating the scaling of new technologies far beyond where they would have scaled without subsidies, which might turn out to be crucial in a world that urgently needs radical change (Reference WessnerWessner, 2003).

The direct industry and technology subsidies provided by China and the USA, such as those announced under the $369 billion Inflation Reduction Act, are putting pressure on Europe, which so far has been trying to steer clear of direct subsidies, to join the clean tech subsidy race. However, acknowledging the potential of subsidising research, development and innovation (RD&I), such as through Horizon Europe, the European Commission in late 2022 adopted amendments to the state aid framework that make it easier for member states to access Green Deal funds to financially support RD&I activities to accelerate the green and digital transitions (Reference Allenbach-AmmannAllenbach-Ammann, 2022). Leveraging public funding to mobilise private RD&I funding and, more powerfully, facilitate RD&I platforms and ecosystems will accelerate the learning feedback loop, amplify information flows and allow more actors to participate in innovating the processes and design aspects of a system. Subsidising RD&I efforts could therefore be seen as a medium-potential HOW lever.

Reference MazzucatoMazzucato (2018) is a strong voice in favour of mission-oriented research and innovation (R&I), demonstrating how public expenditure can de facto operate as an industrial policy by addressing grand societal challenges such as climate change. Reference MoweryMowery (2012) argues that lessons from the government’s mission-oriented research and development (R&D) spending on national defence, for example, could be applied to society’s grand challenges. Defence R&D spending changed many systems beyond defence, facilitating the development of solutions as wide-ranging as the Internet, the Global Positioning System (GPS), radar, virtual reality and even feminine hygiene products (Reference Frohlich, Comen and SunesonFrohlich et al., 2019). While we acknowledge the subsidising of RD&I as a potential lever for systemic change, we also want to recognise the risk of biases and the malleability of research design. History is full of examples of subsidised research where the underlying paradigm or mindset of the sponsors influenced the research design and conclusions. Players in the tobacco, meat and oil sectors have been spending millions on what they call a balanced scientific approach; what they are referring to, in less euphemistic terms, is sponsored research to downplay the negative impacts of their industries (Reference KeaneKeane, 2020).

2.2 Lessons from Systemic Change in Practice

In their literature review of 301 articles on interventions in the food and energy systems, Reference Dorninger, Abson and ApetreiDorninger et al. (2020) concluded that 80 per cent of interventions are not explicitly transformative (or systemic). We identified six key learnings from our analysis of transformation examples and literature:

2.3 Complex Systemic Change in Practice: The EU’s Farm to Fork Strategy

Established in the 1960s, Europe’s Common Agricultural Policy (CAP), which occupies more than a third of the EU’s budget, aimed to optimise cheap food production by subsidising large-scale farming across the continent. While this objective made sense in the early days, the CAP has become an indirect subsidy to support EU-based food companies’ international competitiveness in their export markets.

Its focus on industrial, conventional farming practices had significant sustainability implications, driving biodiversity collapse in Europe, especially close to areas of intense livestock farming, and contributing to the global climate catastrophe, while eroding the food sovereignty of the destination markets of Europe’s subsidised food, causing local farmers to be exploited or go out of business, while at the same time making European farmers overly dependent on the subsidies and taking up ever more of the EU budget (Reference AbboudAbboud, 2018). For example, according to European Commission data, up to 90 per cent of cattle farmers’ income is derived from subsidies, despite indications that as much as 87 per cent of global farming subsidies – approximately $470 billion – is distorting price and environmentally and socially harmful (FAO, 2021).

The Farm to Fork (F2F) strategy is Europe’s effort to reinvent its old unsustainable food system (European Union, 2020). To evaluate the effectiveness of Europe’s F2F strategy, we will apply the levers framework outlined in Section 2.1. By examining the F2F strategy through this lens, we can gain a comprehensive understanding of its potential impact and identify areas that may require further attention or enhancement to achieve the desired systems transformation.

3.1 Conditioning Factors for Systemic Interventions

In practice, multi-stakeholder collaborations are challenging for all parties involved, and this often leads to suboptimal outcomes. Systemic change is complex and contested, and its co-evolving nature raises significant questions regarding what factors can move system-actors to collectively seek systemic change. Different actors and factors can influence and create the conditions to enhance the systemic impact of these levers (see Figure 5).

Figure 5

Conditioning factors for systemic interventions.

3.1.6 Effective Change Governance

How can governance facilitate or contribute to shaping or steering systemic transformations? It is tempting to focus only on the hard aspects of planning and managing a collaborative change process. However, critical and often underestimated are the soft factors of collaboration, the interaction that is needed between system partners in order for them to build trusted and constructive collaboration. Investment in these soft factors improves the effectiveness of the hard factors, which are strong foundations, alignment, momentum and inclusive leadership (see Figure 6 and Box 3). New hybrid forms of governance, such as multi-level governance, adaptive management and decentralisation, have become prevalent. Although these terms are conceptualised differently in practice, they share core principles: adaptive learning, self-organisation and diversity in cultures, institutions and processes (Reference Vakkuri and JohansonVakkuri & Johanson, 2021).

Box 3Managing Collaborative Transformation Efforts

Contemporary studies of transition management focus on the complex adaptive systems nature of transitions (Reference Barton, Davies and DooleyBarton et al., 2018). According to Reference LoorbachLoorbach (2010), transition pathways generally identify four areas of activity:

• Strategic: Create a transition arena, particularly focussing on frontrunners and collaborative visioning.

• Tactical: Develop a concrete transition agenda, including possible transition paths and barriers to overcome.

• Operational: Encourage transition experiments and attempts to scale up promising options.

• Reflexive: Monitor, evaluate and reflect on actors, actions and progress towards the transition.

The importance of the relational aspect of these collaborative efforts, in addition to the conceptual and action-driven aspects of systemic change, was recognised by Reference Senge, Lichtenstein, Kaeufer, Bradbury and CarrollSenge et al. (2007). A 2016 study of thirty-nine complex cross-sectoral collaborations by Xynteo, GLTE and Royal Dutch Shell (2016) highlights the soft factors that are critical for successful collaborations and shared practical recommendations. Investment in these soft factors improves the effectiveness of the hard factors (see Figure 6), which are:

• Strong foundations: Partners should have a strategic fit and invest in building personal relationships. When co-developing a clear shared purpose, to clarify the reasons behind the partnership and the mutual necessity, it is imperative to ensure that the partnership is diverse and includes quieter, potentially influential voices.

• Alignment: Engage a wide range of stakeholders, gathering, sharing and evaluating data to come to a shared understanding of the context of the system challenge. This builds trust among partners, helps to identify potential conflicts and supports change efforts. Convert the shared vision into a short, engaging narrative; focussing at this stage on the why rather than the how or the what will help to keep the collaboration on track later. Appointing a neutral anchor can facilitate this process.

• Momentum: Maintain a collaborative mindset and ensure that new personnel joining the project understand the work’s collaborative nature and shared objective. Encouraging mutuality and joint learning from pilot results and communicating quick wins builds trust internally and externally for scaling. Agreeing on early in-principle commitments for scaling will allow the collaboration to keep the momentum into the scaling phase.

• Inclusive leadership: Identify where in the system the energy is to initiate change and empower change agents to drive the process. Foster a shared feeling of ownership and responsibility for change and ensure that the collaboration’s own culture and the project’s values come from enough different voices to be upheld by everyone.

Figure 6

Hard and soft success factors of the collaborative transformation process.

3.2 Business-Led Collaboration for Systemic Change

Complex societal issues, such as the climate crisis, inequality, systemic racism and the degradation of natural capital, cannot be ignored by businesses anymore. This is true not only because these issues are materially affecting business and posing operational and compliance risks (Reference RogersRogers, 2019) but also because policymakers and regulators are driving change, and increasingly discerning consumers expect businesses and industries to have a positive impact on natural and social capital (Reference Mohr, Webb and HarrisMohr et al., 2005). Never before has the perfect storm been so promising – policymakers, business actors, finance, talent and consumers all desire change towards more sustainable approaches.

Businesses must play a leading role in solving many of the environmental and social challenges we face because governments do not have the expertise or permanence to do the work alone. Governments are limited by their borders and cannot attack systemic problems that are global in nature. Besides, they are limited by election cycles (Reference Senge, Lichtenstein, Kaeufer, Bradbury and CarrollSenge et al., 2007). Governments need the skills and knowledge of businesses to develop the transition’s technical specificities and to institutionalise the transition mechanisms. Businesses have the reach, agility and intellectual and innovative capacity to be powerful drivers of the sustainability transition (Reference Scheyvens, Banks and HughesScheyvens et al., 2016). Risk sharing through blended public and private finance also facilitates the transformation to sustainable models (Reference Choi and SeigerChoi & Seiger, 2020).

According to the Edelman Trust Barometer, in today’s climate of economic and existential anxiety, polarisation and disinformation, business is the sole institution trusted by the public as competent and ethical compared with non-governmental organisations (NGOs), government and media (Edelman Trust Institute, 2023). As a result, business is under pressure to step into the void left by government. The public expects businesses to lead on societal issues, driving collaboration with government, restoring economic optimism and advocating for the truth. This would increase levels of trust and support for measures proposed by both governmental and business leaders while accelerating the sustainability transition the world needs.

Societal stakeholders have compelling reasons to collaborate. Business is inherently motivated to organise resources to respond to needs and capture commercial opportunities in suboptimal systems. Governments are focussed on shaping systems that support societies’ needs as effectively as possible. And in free societies it is only when business and government effectively satisfy societies’ needs that citizens are willing to extend them their licence to operate and govern.

As described earlier, collaborative systemic change is often a complex co-evolutionary process involving multiple actors and subsystems; however, it can be initiated and driven by a dominant actor with a strategic agency. Government-initiated institutional or systemic change is often associated with top-down, centrally planned change efforts. For example, one could think of the rigorous city development and digital transformation efforts driven by the Singaporean government (Reference TanTan, 2020). This could also take the form of a powerful multinational driving implementation of a transformational new policy in its supply chain. Even though this section focusses on business-led collaboration for systemic change, the concept of strategic-agency-driven systemic change begs the controversial question of to what extent authoritarian regimes are better positioned to address systemic issues. Reference GilleyGilley (2012) suggests that authoritarian regimes may effectively produce policy outputs related to sustainability challenges, but the impact on policy outcomes is unclear. Several authors have suggested that systemic change is more likely to occur in authoritarian regimes when there is social pressure for change and when the government is able to make policy concessions or during times of crisis (Reference ChanChan, 2013; Reference Chen and XuChen & Xu, 2017).

In the same vein, the complex and multi-stakeholder nature of many of our big challenges would lead one to expect that societies with a collectivist mindset could be better set up to collaborate to face systemic issues than individualistic societies. Dutch social psychologist Reference HofstedeGeert Hofstede (2011) observed there to be a radical difference between the extreme individualism prevalent in the USA and Europe and the collectivist cultures of East and Southeast Asia. The relatively harmonious public response to the initial Covid-19 outbreak in East and Southeast Asia compared to Europe and the USA seems to illustrate this. Measures to curb public behaviour in East and Southeast Asia did not meet with public resistance. They managed to limit the spread of Covid-19 relatively successfully. At the same time, EU and US outbreaks got out of control in large part because of a strong reluctance of the individuals in those locations to adopt a common behaviour. The EU and the USA survived more by the grace of the virus mutating into a less deadly variant than because they managed to contain the spread through behaviour change. At the root of this collectivist behaviour is the paradigm that societies develop more harmoniously when people display civil behaviour in the interest of the whole rather than individualistic behaviour guided by self-interest.

Systemic change efforts can also be initiated by a corporate actor or coalition of actors mobilising entire supply chains to take innovative approaches to old problems. An example of such a business-driven and regulator-supported transformation of critical systems is when telecommunications company Vodafone in 2007 launched a mobile money-transfer system, M-PESA, in Kenya (McKinsey & Company, 2022). By leveraging the country’s high mobile-phone penetration rate, M-PESA offered a new service to the unbanked members of Kenya’s population, who previously had to rely on inefficient and insecure cash-based payments. Financial institutions, regulators and the Central Bank of Kenya worked together to support regulation. Today, nearly 50 per cent of the country’s GDP flows through M-PESA, and 2 per cent of Kenyan households have been lifted from poverty. At the same time, more than 51 million customers use M-PESA across seven African nations.

Visionary corporate players and progressive supply chain partners that take leadership positions in the reinvention of the systems they operate in will reap unprecedented benefits. Empirical evidence over recent years has shown that purpose-driven companies at the forefront of the sustainability transition attract highly motivated employees and see higher sales growth from increased customer loyalty and higher levels of innovation; they also improve operational risk and supply chain resilience, and see this reflected in higher valuations and lower cost of capital (Reference Freiberg, Rogers and SerafeimFreiberg et al., 2020).

But how can companies develop into transformational organisations, and become drivers of systemic change? Let’s first explore what makes transformational organisations different.

3.2.1 Transformational Organisations

Making the world into a better, more sustainable place requires more than a smart marketing campaign, ticking a few ESG boxes or installing EV charging poles. To transform our value-creation models into models that build economic but also natural and social capital, we need leaders and companies that go beyond lip service and greenwashing. It requires companies that feel responsible not only for their operations but also for the value and impacts to society that they create through the wider systems in which they participate. These transformational organisations have social responsibility and sustainable thinking ingrained in their culture and day-to-day decision-making at all levels.

Corporate social responsibility (CSR) has evolved constantly in the last decades (Reference Moura‐Leite and PadgettMoura-Leite & Padgett, 2011). Reference CarrollCarroll (2016) defines the economic, legal, ethical and philanthropic dimensions of CSR behaviour in his much-quoted CSR pyramid. Reference Maon, Lindgreen and SwaenMaon et al. (2010) offer a multidimensional, dynamic perspective of the CSR development process, based on a stakeholder-oriented conceptualisation of CSR that integrates moral, cultural and strategic aspects, together with its organisational implications. Even though the combination of political, economic, social, environmental and regulatory trends may vary by region, from our experience assisting companies across multiple sectors in their sustainability journeys, a pattern emerges regarding how corporates’ responsibility towards society tends to evolve in practice; this is true for most companies, from the most inward-looking to those that are increasingly outward-looking and transformational. Understanding this evolution will help companies recognise where in the evolution they are and how to evolve more quickly. Five stages of evolution can be identified (see Figure 7), each with distinct characteristics in terms of the motivation and scope of the organisation’s socially responsible behaviour, how it engages stakeholders and how it communicates its contribution to a more sustainable world (Van der Zanden, 2022):

1 Basic Phase

In the period before the social and environmental costs caused by business were recognised as compromising our longer-term ability to create corporate and societal value, most businesses had a different predominant focus. As Reference FriedmanMilton Friedman (1970) phrased it, ‘the social responsibility of business is to increase its profits’ (p.1). Externalities, the social and environmental costs of doing business, were typically not considered the responsibility of the company unless they directly affected the company’s capacity to operate. Companies concentrated on maximising shareholder value, frequently in the near term, as capital markets evolved towards expecting quarterly financial reporting. Relationships with stakeholders like suppliers, employees and local communities were largely transactional; companies would draft in industry associations to lobby for their interests. If profits allowed, some owners of companies would donate to philanthropic or charitable causes to enhance their reputation and preserve their social licence to operate. Some companies still behave according to these basic principles.

2 Compliance Orientation

Stricter health, safety and environmental regulations reflected an increasing societal awareness of the need to protect workers, communities and the health of our planet. As fines, sometimes retroactive, could be severe, companies became concerned about abiding by the rules and ‘doing no harm’. During this compliance-oriented phase, CSR often moved from the HSQE (health, safety, quality and environment) office, where it tended to originate, into the public affairs or communications space, as companies expanded their legal and communications departments. In this phase, CSR activities and partnerships with NGOs were frequently oriented towards showing the company to be a decent member of society, while restricting disclosure of environmental and social impacts to the legal minimum.

3 Risk Orientation

Environmental and social factors increasingly constituted legal and reputational risks to businesses. This was in addition to operational risks, like supply chain disruptions, which could also have a significant material impact. Often guided by the head of finance, companies in this stage of the CSR evolution handled these risks by adopting a more structured approach towards evaluating the material risks to their business. They introduced ESG rating as a framework through which to quantify the level of risk embedded in their sustainability performance, although this not infrequently led to some form of greenwashing. They also began to publish CSR reports, disclosing the risks and impacts via materiality analysis. They primarily used stakeholder engagement to monitor and manage potential conflicts.

4 Competitive Awakening

As businesses began to understand that tackling sustainability challenges could result in better resource management, increased resilience, lower cost of capital, stronger innovation and new market opportunities, sustainability began to take on a more strategic role. This is where the chief sustainability officer – one of the fastest-growing new roles in recent years, according to a PwC study (PwC, 2022b) – entered the picture, and frequently the board room. To fully capitalise on this competitive potential, companies in this phase attempted to articulate a vision for sustainability as a new growth opportunity and to engage in programmes to integrate sustainability throughout the functional areas and levels of the company. This was frequently done in conjunction with voluntary disclosure of impacts and mitigation measures on a broader range of sustainability issues, as well as setting and reporting progress on specific and incremental SDG targets. Because, typically, the majority of life-cycle impact occurs in the upstream and downstream supply chain (Scope 3), companies engaged their supply chain partners, exploring opportunities to collaboratively find solutions with positive impact and/or commercial promise.

5 Transformational Organisations

Nowadays, an increasing number of enlightened leaders are championing sustainability because it is the right thing to do in order to build a better, more sustainable society. They recognise that business cannot prosper in the long run if it is at the expense of natural and social, or human, capital. These leaders demonstrate vision and purpose; they feel responsible not only for their organisations but also for the larger system in which they operate. Rather than lobbying for industry interests, transformational organisations advocate cross-sector collaboration and rally stakeholders across the supply chain and industries into joining forces for the sustainable reinvention and transformation of the systems they are a part of, whether the food system, the energy system or the health system. In addition, transformational businesses act as advocates for progressive, holistic public policy, as both hard policies, such as laws and regulations, and soft policies, such as subsidies and tax incentives, impact the performance of a system. This advocacy, at the same time as businesses demonstrate that market demand exists for sustainable solutions and pro-climate reforms, will give policymakers the confidence to support systemic change. We can see this already happening in the food system, where investments in bovine food additives and other methods for lowering emissions from livestock are being developed by several corporate players. At the same time, governments around the world are subsidising $360 million in research into alternative, sustainable proteins, including cultivated meat and fermentation-based foods (Good Food Institute, 2022).

Companies that demonstrate transformational leadership in addressing complex societal issues, like plastic waste, inequality, migration and water scarcity, are deliberately pursuing the creation of shared value, exploring regenerative and inclusive growth models. A crucial function of the chief sustainability officer is to be a catalyst of cultural change, building a transformative movement rooted in a sustainable mindset and collaborative behaviour across all company levels (Reference GreenwaldGreenwald, 2023).

Figure 7

Evolution of corporate sustainability strategy.

Box 4Transformational Potential of Finance

Because of the enabling role of finance, the banking sector has great potential as a driver of systemic transformation. As of 2021, nearly 5,000 financial institutions managing more than $120 trillion in assets had signed up to the United Nations Principles of Responsible Investment (2022), committing to incorporate ESG considerations in their investment decisions. The ESG rating concept championed by the sector to enable investors to optimise social and environmental impacts alongside financial returns could establish a powerful feedback loop influencing investor decisions. Critics, however, say that ESG rating was invented by the sector rather to create a new service offering (read: revenue opportunity) and investment category, a way for some banks to gain credibility in their efforts to capture ESG funds (Reference TricksTricks, 2022).

After an initial gold rush into ESG funds in the decade up to 2021 and ESG funds outperforming non-ESG returns, the infant-stage drawbacks of ESG rating (complexity, cost and quality of data, lack of transparency, inconsistency across rating agencies, ambiguous weighting of different categories, risk of greenwashing) generated controversy and even political backlash in the USA (Reference Temple-West and MastersTemple-West & Masters, 2023). Addressing the ESG rating challenges is essential to restore trust in ESG investing, return capital inflows and further anchor a sustainability mindset across business and finance sectors. An international taxonomy, simplification – perhaps focussing mainly on the ‘E’ – and possibly disintegrating the rating to improve the transparency of ESG data and the weighting in the rating process could all contribute to this.

Impact-oriented funding could facilitate projects that aim to improve system-level impacts. The private impact market grew to approximately $1.2 trillion at the end of 2021 – up 63 per cent since 2019, according to the Global Impact Investing Network, an international think tank on impact investing – but it is still a small part of the total assets under management (Reference Hand, Ringel and DanelHand et al., 2022). The European Commission has made €20 billion available through the Just Transition Mechanism to support companies and regions through the transition to carbon neutrality. In addition, to increase transformation funding, the EU Invest Fund and the European Investment Bank (EIB) are allowing highly regulated banks to offer riskier sustainability credits by offering sustainability guarantees covering 70 per cent of bank investments.

Scandinavian Nordea Bank is one of the pioneering banks that are proactively driving system transformation by taking on activist shareholder roles and growing their sustainability advisory offering to help their corporate customers develop transition plans or simplify ESG reporting for SMEs. The bank also mobilises innovation partners to develop new sustainable products, such as financing for circular business models.

3.2.2 How to Become a Transformational Organisation

Most people and companies want to be good citizens and contribute to a better world. But how do you mobilise an organisation’s resources and capabilities so that the organisation can purposefully evolve towards being transformational, creating value by driving change towards sustainable models of growth within itself, its supply chain and the larger system it operates in?

A guideline for transforming organisations, provided by Reference Serfontein, Basson and BurdenSerfontein et al. (2009), describes factors such as strategy, organisational design, organisational culture, leadership and communication. Reference KarpKarp (2006) highlights the role of leadership during transformations and, given the chaotic nature of change processes, advocates for taking a systemic view and applying principles of self-organising to foster a facilitative environment when transforming organisations. In practice, harnessing the power of business to build a more inclusive, equitable and regenerative global economy, movements like B Corp are encouraging a growing group of certified corporate members to become champions of systemic transformation and promoting a systemic mindset through adherence to the B Corp standards.

While cultural and strategic contexts can vary, we have extracted a framework based on three essential pillars from our observation of the evolution of organisations with ambitions to demonstrate sustainability leadership and systemic agency. Companies that evolve successfully into transformational organisations ensure that they invest in developing strategic clarity, shaping their organisational behaviour and building the required ecosystems for innovation and scaling of impact. Within these three building blocks, further concrete steps can be identified (see Figure 8).

Figure 8

Roadmap towards becoming a transformational organisation.

1 Strategy and Foresight

The most successful transformational companies dedicate resources to open-mindedly and proactively exploring strategic scenarios and evaluating how to prepare the company to move into new markets and realities. This can take the form of disruption teams, which are tasked with monitoring potentially disruptive forces, such as technological developments, supply- and demand-side disruptions or institutional change, and reinventing the company, that is, self-disrupting before being disrupted, which Reference D’AveniD’Aveni (1999) describes as a sign of strategic supremacy. To avoid the limitations of incumbent mindsets, these disruption teams often include external agitators and report directly to C-level to protect them from the immune system of the core business.

2 New Growth Narrative

Scholars have underlined the powerful role of narratives in change processes (Reference SonensheinSonenshein, 2010; Reference Vaara, Sonenshein and BojeVaara et al., 2016). Narratives mobilise change most effectively if they communicate the purpose and the strategic imperative for change through the value frame of the stakeholders (Reference Parmar, Freeman and HarrisonParmar et al., 2010). Building on strategic foresight, transformational leaders develop and anchor new narratives that inspire internal change and enable external market position. They describe a vision and objectives, inspiring and empowering the organisation to develop concrete measures to achieve these.

3 Leadership and Learning

In many cases, developing a company into a transformational sustainability leader requires updating the competencies of its key personnel, especially their communication and joint visioning skills, so that they can excel as change leaders through the transition process (Reference DoyleDoyle, 2002; Reference Vakola, Soderquist and PrastacosVakola et al., 2007). Getting a critical mass of people in the organisation to operate with the right mindset and skills can be achieved through talent acquisition, ‘hiring into the new mindset’, and developing existing employees into change agents. For example, aluminium giant Norsk Hydro found an effective way of learning how to embark on the sustainability transformation journey. It invested in two-way learning exchanges between leaders from its strategy, innovation and sustainability areas and senior executives from other industries, leading to a sharper vision, deeper understanding of critical transformation skills and identification of unexpected collaboration opportunities.

4 Future-Fit Culture

Sustainability cannot be just a statement from top leadership, an investment in clean technology or a CSR report prepared by the communications team. In line with Reference MeadowsMeadows’ (1999) categorisation of mindset as a powerful lever for systemic change, building a future-fit culture not only enables companies to effectively capture the potential benefits of the sustainability transition but, more importantly, equips them to credibly drive transformation in the wider system. For example, during the 2010s, Dutch beer giant Heineken deliberately created a sustainability movement by encouraging people across the organisation to propose, shape and lead sustainability initiatives. Activating and channelling this enormous source of latent energy made the new values visible and anchored the Brew a Better World culture that today is a critical driver of Heineken’s EverGreen strategy for balanced growth. The strategy includes systemic commitments to have a carbon-neutral value chain by 2040, and ambitious targets on social justice and responsible consumption (Reference HeinekenHeineken, 2021).

5 Integration

Sustainability must be integrated into strategic and daily decision-making to effectively translate the sustainable culture and values into material impact and new growth. Reference Stefano, Bagdadli and CamuffoStefano et al. (2018) claim that the contribution of human resources (HR) departments in facilitating more socially responsible and sustainable organisations remains unclear and presents a framework with which to classify the role that HR might play. Leading companies reflect their sustainability objectives in HR strategy and appraisal systems, making sustainability an integral part of target setting for business and operational units and tying ESG indicators to the remuneration and long-term incentives of leaders across the organisation. Building on previous Unilever CEO Paul Polman’s promotion of purpose-driven values under his Sustainable Living Plan, new CEO Alan Jope introduced Unilever’s Compass Strategy, engaging the entire organisation in translating sustainability strategy into business objectives across all areas of the company, such that it guides everyday business decisions and powers purpose-driven innovation and high-growth sustainable brands.

6 Innovation and Acceleration

The times when companies used to compete largely based on their in-house R&D capabilities and focussed much of their innovation on incremental improvements of their legacy business are long gone. Navigating today’s fast-changing environment and the complexity of sustainability-related challenges, companies that emphasise open innovation, bringing in new capabilities, insights and expertise, are more likely to create radical reinvention and scale successfully (Reference Inauen and Schenker-WickiInauen & Schenker-Wicki, 2012). Companies that aim to be at the forefront of the sustainability transition have started to set up corporate accelerators to in-source innovation capabilities through collaboration with start-ups, resulting in access to new technologies, industries, markets and customers, giving start-ups access to expertise and resources in exchange (Reference KohlerKohler, 2016; Reference Moschner, Fink, Kurpjuweit, Wagner and HerstattMoschner et al., 2019). This can range from Unilever’s Foundry (Unilever Foundry, n.d.), an entire floor in its Southeast Asian headquarters in Singapore that is available for start-ups, to Microsoft or Amazon fuelling their innovation ecosystems through, respectively, their $1 billion Climate Innovation and $2 billion Climate Pledge Funds (Microsoft, n.d.; Amazon, n.d.).

7 Collaborations for New Growth

Capturing new growth opportunities while driving sustainability in society requires building purpose-driven and cross-sectoral collaborations. These can be supply chain–, sector- or issue-specific. For example, H&M, IKEA, Adidas and other founding members of the WWF-initiated Better Cotton Initiative (2021) created supply chain transparency and demand for sustainable cotton, now covering 2.2 million cotton farmers or 20 per cent of the world’s cotton production. In Thailand, companies like CP Group, one of the largest agri-food companies in the country, engaged supply chain partners for education, training 27,000 rice farmers in the country on how to work with low-emission rice cultivation techniques, leading to a nearly 40 per cent reduction in the carbon footprint for white rice (Reference PostBangkok Post, 2022). The strongest collaborations are driven by opportunities to accelerate new growth, such as Yara and IBM collaborating to advance digital farming to enhance both the lives of farmers and the sustainability of farming, aiming to cover 150 million hectares or 10 per cent of the world’s arable land (IBM, 2022).

While system innovation is frequently viewed as a threat by legacy industries, some businesses have realised that reinventing themselves and how they interact with customers may increase their success. One of those is consumer goods giant Unilever (2020), which increasingly uses systems thinking to drive the redesign of products and processes. The company has been vocal about the need for policymakers to support systemic changes, and it is leading advocacy and initiatives for change in the energy, water and agricultural systems that it forms part of. In Southeast Asia, Unilever is making efforts to address the region’s plastic waste challenge. By creating demand for recycled materials, backed up by public commitments to halve its use of virgin plastics by 2025, and empowering and engaging the informal waste sector, the company is fuelling the development of a plastic collection and recycling ecosystem in Southeast Asia, with the objective to drive circular business models, reduce waste, improve lives and capture savings in the process. But while larger plastic containers fit this solution, finding circular solutions for the 40 billion smaller sachets Unilever sells annually continues to be a big and controversial challenge (Reference Brock and GeddieBrock & Geddie, 2022; Reference McVeigh and Holliani CahyaMcVeigh & Holliani Cahya, 2022).

3.3 Future-Fit Mindsets

Getting citizens, policymakers, industry and scientists to come to a consensus in terms of the complex nature of sustainability challenges, as a precondition for collaboration for systemic change, is a process that requires effort and time. This is particularly true as it is increasingly recognised that a change of mind is required, a profound shift of awareness of the changes needed that is on the transformational level of a paradigm shift (Reference Laininen and CookLaininen, 2018). Political economist Reference PolanyiPolanyi (1944) already recognised the importance of mindset by defining transformation as a profound alteration of human mentalities that generates new institutions that in turn reconstruct the economy, the state and distributional relations. In line with Reference MeadowsMeadows’ (1999) identification of the deep potential of paradigm and mindset change for systemic transformation, what paradigms and mindsets do we need to drive the right kind of systemic change? And how can we build these mindsets and amplify this powerful lever?

3.3.1 Shifting Paradigms

Kuhn coined the term ‘paradigm shift’ in 1962, referring to a shift in science from Newtonian to Einsteinian physics (Reference Voulvoulis, Giakoumis and HuntVoulvoulis et al., 2022). Paradigm shifts occur when ‘the anomalies and shortcomings of the current paradigm are repeatedly pointed out; proponents of the new paradigm speak loudly and with assurance about it and are placed into positions of visibility and power; and energy is focused on converting those people who are likely to be open-minded to the change’ (p. 3). Unless due to some revolutionary innovation or discovery, the process of a paradigm shift is often triggered by a period of crisis or accumulation of anomalies. This leads to a phase of exploration and critical thinking, of challenging the status quo and finally of scaling the new paradigm and the models and systems that emerge from it.

Interesting parallels exist between trends today and events that led to previous major shifts in mindset. The European Enlightenment, following a period of religious intolerance and polarisation in the first half of the 1600s that resulted in Europe’s most devastating Thirty-Year War, triggered a loss of faith in the church and monarchy, the institutions that dominated society at that time. The scientific revolution brought critical thinking, while discoveries from geographic exploration at the time fed curiosity and brought new ideas, the exchange of which was fuelled thanks to urbanisation, the spread of the press and increased literacy. This empowered society to reinvent itself and change its purpose so as to improve the human condition on Earth rather than serving religion in the hope of an afterlife.

Today’s world is in a climate of (geo)political polarisation, growing social inequity, failing institutions and, as mentioned before, a lack of public trust in government, NGOs and media (Edelman Trust Institute, 2023). The situation is further destabilised by the impacts of the recent Covid-19 pandemic and the ever-clearer disrupting effects of the climate crisis. Coupled with rapid technological progress and connectivity, the conditions seem right for Enlightenment 2.0, a recalibration of paradigms: a different understanding of welfare, progress and freedom. While the list in Table 4 does not pretend to be exhaustive and universal, and the changes are gradual rather than absolute, it does show ten shifts in paradigms and mindsets, in line with Enlightenment 2.0, that we see emerging.

Table 4Ten emerging paradigms for a sustainable twenty-first century.

Enlightenment 2.0 calls for an open-minded mindset, characterised by contextual curiosity, the effort to understand the broad spectrum of information that makes up the full picture, sometimes coming from antagonistic sources, and the willingness to question existing paradigms. This mindset can be supported by skill development in the areas of empathic listening, conflict resolution, shared visioning and collaboration and the creation of podia for civilised dialogue, today’s equivalent of the English coffee houses or the French and central European salons during the first Enlightenment, where facts and feelings can be heard, identified and considered when discussing and designing collective action. The ‘light’ in Enlightenment 2.0 is the light of reason of the future-forward mindset, of comprehending our place on Earth in a new system more befitting the emerging paradigms.

3.3.2 The Dynamics of Mindset Change

While literature generally suggests that cognitive, emotional and cultural factors bring about paradigm shift and the accompanying mindset change, the role of emotions in psychological change garners particular attention (Reference Frijda, Manstead and BemFrijda et al., 2000; Reference WoodWood, 2000; Reference Marsella and GratchMarsella & Gratch, 2002). In line with this, Reference McPhearson, Iwaniec and BaiMcPhearson et al. (2016) argue that inspirational visions can be key components for behavioural change and action. More information transparency on, for example, life-cycle impact, hidden subsidies or the societal business case could be a cognitive driver of systemic change. However, combined with deeply emotional, spiritual or eye-opening experiences, it could also change the social sentiment and trigger cross-stakeholder empathy and collaboration. This was the case when Apollo astronaut Bill Anders took the Earthrise photograph from the Apollo spacecraft on Christmas Eve in 1968 (Reference AndersAnders, 1968). Seeing the beauty and the vulnerability of our planet from space was the beginning of a change in our relationship with the world and our understanding of our shared fate (see Figure 9).

Figure 9

The Earthrise image: creating shared fate and responsibility.

In addition to the cognitive, emotional and cultural dimensions, we would like to add a fourth dimension: the leadership itself of the change process. Transformative leaders build movements, energising stakeholders by creating a sense of urgency, helping them build a rich, joint vision of the challenge at hand and inviting them to reflect on how individual stakeholders’ purposes align with the shared purpose. Transformative leaders deliberately lead their employees and other stakeholders, such as investors or consumers, to new paradigms. When former Unilever CEO Paul Polman, days after taking the helm of the multinational, famously announced to shareholders that Unilever would move from trimestral to annual financial reporting, not only did he signal and set expectations towards investors but he also catalysed a longer-term mindset and ignited a sense of purpose with his employees and supply chain partners (Reference Skapinker and DaneshkhuSkapinker & Daneshkhu, 2016).

Another company leveraging its size and credibility to drive a consumer paradigm shift is Ikea. After being one of the first large retailers to ban incandescent light bulbs in favour of the hugely more efficient LED lights, it is now replacing its famous meatballs, of which it sells more than a billion per year, with plant-based versions. According to the Sierra Club, the production of a plant-based burger generates 12 times fewer GHG emissions than one made of beef, uses 50 times less water and requires 20 times less land (Reference SteinbauerSteinbauer, 2020); thus, Ikea’s swap will help the company meet its objective of being climate-positive by 2030. But, more importantly, it will encourage its customers to adopt healthier consumption patterns for them and the planet.

Given the all-encompassing nature of systemic change and learning from the challenges and failures described in Section 2, for successful implementation, it is essential to align the cognitive and emotional mindsets not only of the decision-making stakeholders but also of the citizens affected by it. We will therefore explore the reciprocal dynamics of mindset change between decision-makers and stakeholders, particularly citizens.

3.3.2.1 Widespread Mindset Shifts – Manipulation versus Engagement

Digital technology can be used to influence paradigms, mindsets and behaviours. Reference GladwellGladwell (2000) describes in his book The Tipping Point that an idea can exist underneath the surface in a society or among a small group of people and then, seemingly overnight, suddenly erupt everywhere, changing the way an entire society acts or thinks. Or drinks … As the benefits of oat milk compared to cow milk went viral on social media early on in the Covid-19 pandemic, consumers in the USA turned to oat milk, causing a 478 per cent rise in oat milk sales in the second week of March 2020 compared to the same week in 2019 (Reference IversenIversen, 2020). Social media making indiscriminate sharing so effortless carries the risk of conditioning people to follow trends and support opinions in shallow and frivolous ways, and sometimes influence is lost as fast as it was gained. Even though this is not new in sustainability circles, one current online phenomenon that can influence mindsets towards more sustainable models is de-influencing, where influencers – content creators in a specific niche or with specific expertise, a large online following and the ability to influence their audience – encourage their followers not to buy or do something as an antidote to consumerism and our linear way of living. The hashtag’s popularity – currently 300 million views on TikTok and growing – makes it part of the internet discourse at large. Almost half of Gen Z (born between 1996 and 2012) makes purchase decisions based on influencer recommendations, so de-influencing could well become part of the wider mindset shift needed to address systemic issues (Global Fashion Agenda, 2023). If de-influencing moves beyond being another social media trend, it has the power to mark a shift in the current cultural zeitgeist and help catalyse the tipping point from short-term materialism to a paradigm focussed on long-term well-being.

But, besides social media trends, recent history has also shown examples at the other end of the spectrum of how digital technologies can amplify and accelerate deep mindset change, sometimes with radical consequences for the relationship between corporations, governments and citizens, as several Middle Eastern and North African regimes learnt when they were toppled by digitally connected citizens during the Arab spring.

A distrust of large foundations, science and governments and a fragmenting social fabric characterise today’s society. Facts are viewed as subjective; even the most provable and basic ones are disputed (Reference Wardle and DerakhshanWardle & Derakhshan, 2017). In this post-truth era, ushered in by US claims surrounding the Iraq war (Reference BayoumiBayoumi, 2023), objective facts seem less influential in shaping public opinion and political views than alternative facts based on personal biases and emotion. In the digital age, there is always a danger of manipulation of public opinion through information disorder, such as the prevalence of spreading disinformation and fake news. The Cambridge Analytica scandal showed how digital platforms can be used to manipulate public sentiment in less noble ways. In a defensive move against the power of social media, several governments including Russia, Turkey, Indonesia and China have taken steps to regulate and control its use, while at the same time leveraging its manipulative potential for their benefit.

Several scholars have argued that to negate the force of information disorder, it is essential for opinion-makers, scientists and influencers to provide society with reliable information and to focus on responsible science (Reference Vogt, Wilderer, Grambow, Molls and OexleVogt, 2021; Reference Tanwar, Chaudhry and SrivastavaTanwar et al., 2022). This seems to be in line with the system lever described by Reference MeadowsMeadows (1999) as the structure of information flows: who does and does not have access to specific information at specific places influences how people behave or don’t behave, based on that information. However, similar to the erroneous belief that more growth would solve many of the problems caused by growth, it is not simply strengthening of the responsible scientific information flow that will mitigate the problem of alternative facts. Rather, what is needed is de-polarisation, relaxing defensive attitudes and reviving the willingness to acknowledge all voices. This requires platforms for constructive dialogue. The importance of constructive dialogue in conflict resolution and de-polarisation has been widely discussed (Reference YankelovichYankelovich, 1999; Reference Ropers, Austin, Fischer and RopersRopers, 2004; Reference ErcanErcan, 2017). However, accelerated by Covid-19, large parts of our communication have moved online, radically changing the nature of interaction and necessitating a rethinking of public engagement and dialogue online. In more open societies, social media still plays an important role in shaping public consciousness and enabling citizens to engage with politics in new ways (Reference Miller and VaccariMiller & Vaccari, 2020). But this is not always a straightforward process. Many governments are exploring ways for technology to enable constructive stakeholder dialogue while finding a balance between protecting citizens’ rights and ensuring public safety. For example, through its minister of digital affairs, Reference TangAudrey Tang (2019), Taiwan has arguably been among the most progressive at introducing digital democracy, allowing connectedness to facilitate input rather than conflict, promoting citizen-led fact-checking and public opinion collation, and applying cyber security for civil society.

3.3.2.2 Citizen Power – Activating a Virtuous Cycle

Besides citizen power nudged on by governmental influence, we see more and more frequently that societal action born of intrinsic motivation can also influence corporate or government decision-makers. Intrinsic motivation can be cognitive, emotional or value-based (Reference Schulz and SiriwardaneSchulz & Siriwardane, 2015). For example, in the Netherlands, 900 citizens together with the Urgenda Foundation sued the Dutch government, demanding that it do more to prevent global climate change, in the first-ever climate case. They won in 2019 and inspired other climate litigations worldwide (Reference LeijtenLeijten, 2019). Globally, citizens unite in Extinction Rebellion, a non-partisan and non-violent network to bring forth a true sense of urgency for the climate crisis, organising citizens’ assemblies and promoting participative democracy using disruptive direct action (Reference RebellionExtinction Rebellion, 2022).

In the case of the following example, intrinsic motivation is values- and emotions-based. After years of non-participatory decision-making by the local government, in which Jakarta’s poor kampung settlements were demolished to make way for flood protection measures, in the face of eviction threats the increasingly marginalised citizens of Tongkol formed the Ciliwung River Community, a forum of about 1,000 households, to facilitate the discussion of strategies to claim back their community. They rebuilt their homes 5 metres from the waterway, created clear access along the riverbank, cleaned up their river, planted trees, set up a community-wide composting and recycling scheme, encouraged self-sufficiency with vertical vegetable gardens and became ‘guardians of the river’, attracting tourism to a part of Jakarta that was largely hidden from the public gaze before (Reference Dovey, Cook and AchmadiDovey et al., 2019). The Tongkol citizens showed the local government that citizen empowerment could lead to community-based upgrading of urban systems and an eco-friendlier future for the city. They influenced the approach to flood management in Jakarta and beyond.

Empowering citizens through engagement and information can start a virtuous cycle, enabling them to understand the bigger system perspective, to think critically, to realise their responsibility and potential, and to keep companies, institutions and politicians in check (Reference McGann, Wells and BlomkampMcGann et al., 2021). Climate change will have unavoidable impacts on populations and urban systems, especially in Asia where many large cities are exposed. The example from Jakarta illustrates that decision-making processes should be inclusive and participatory, inviting the citizens that are most affected by climate hazards to play an active role in determining how best to avoid them, build resilience and pave the way for systemic change. Policymakers that proactively evolve participation beyond consultation through joint visioning processes, gathering input from citizens and enabling more inclusive decision-making processes, such as policy co-design or participatory budgeting, build the kind of stakeholder support that is essential to any systemic change or sustainability transition (Reference Angheloiu and TennantAngheloiu & Tennant, 2020).

Following the principles of The Wisdom of Crowds (Reference SurowieckiSurowiecki, 2004), yearly more than 2.3 million volunteers worldwide collect data in thousands of biodiversity projects. This so-called citizen science, in which the public is involved in scientific research, spans multiple disciplines such as psychology, astronomy, ecology and environmental science, biodiversity and tourism. The strength of engaging citizens in science lies in the potential for getting new and outlying perspectives that could be crucial in addressing the complex, wicked problems of our time (Reference Rowbotham, McKinnon, Leach and LambertsRowbotham et al., 2019). Most of all, citizen science creates a sense of inclusiveness and has the opportunity to translate global problems to a local scale and reality; this is much needed in the current post-truth era.

3.3.3 Educating Mindful Leaders

The inability of our institutions to avoid war, banking crises, business and religious scandals, inequality and climate action failure has eroded trust in capitalism, business and government leaders to the lowest level in decades. As a result, a leadership change is taking place. Traditional leaders that are uncomfortable in the VUCA environment are receding into the historic paradigms and values they are comfortable with, such as the pursuit of short-term profit. At the other end of the spectrum, a new generation of leaders who are mentally and functionally equipped to drive change in a VUCA world is emerging.

Models emerging from the scientific Enlightenment and industrialisation have brought a lot of economic growth. However, in our singular focus on GDP growth, we have forgotten about the importance of the quality and distribution of GDP. We need a more widespread recognition that well-being for individuals and society emerges from a balance of natural, social and economic capital. We must build models and systems to satisfy society’s needs that stay within environmental boundaries and don’t erode societal foundations. How can we embed this vision and future-fit mindset in leaders to help them make better decisions in their personal realm, in their public or business organisations and, most importantly, in the bigger systems they participate in?

Business schools are pivotal in educating and equipping future leaders as agents of change. To change the systems in which we operate, we need to equip our future leaders with the mindset, skills and tools to drive systemic change on a playing field that is becoming increasingly VUCA. This requirement adds a whole new layer to the traditional functional areas of management education.

Reference Sterman and SweeneySterman & Sweeney (2007) and Reference Valerdi and RouseValerdi & Rouse (2010) concluded that systems thinking performance, even by highly educated people, can be poor. This is consistent with research by Reference Palmberg, Hofman-Bergholm, Jeronen and Yli-PanulaPalmberg et al. (2017) and Reference Ndaruhutse, Jones and RiggallNdaruhutse et al. (2019) revealing that, currently, education does not adequately develop systems thinking competence. It coincides with calls for policymakers to move systems thinking competencies higher up the educational agenda (International Commission on Financing Global Education Opportunity, 2016). Other authors suggest that incorporating systems thinking in education could benefit students by helping them acquire a more holistic view of and a mindset that facilitates addressing sustainability challenges (Reference Hofman-BergholmHofman-Bergholm, 2018; Reference Žalėnienė and PereiraŽalėnienė & Pereira, 2021). In addition, systems thinking supports interdisciplinarity by building shared thinking space and knowledge that cuts across the boundaries of various disciplines (Reference Barile, Saviano and MinatiBarile & Saviano, 2021). It also encourages public engagement with science through intentional, meaningful interactions that provide opportunities for mutual learning between scientists and members of the public and thus promote familiarity with a breadth of perspectives, frames and worldviews (Reference StaveStave, 2002).

The Sasin School of Management in Bangkok believes that in an increasingly VUCA world, successful leaders must continuously transform themselves, their organisations and the systems in which they operate in sustainable and profitable ways. Sasin addresses this need by teaching mindful leadership, which identifies six interrelated capabilities (see Figure 10) (Reference Van der ZandenVan der Zanden, 2023):

1. 1. Contextual mindfulness: the humility and critical thinking needed to seek and make meaning of intelligence from a range of sources, to connect the dots between disparate data points while being aware of filters and biases, and to engage with trends before they become clear and present.

2. 2. Future consciousness: the ability to imagine the future through divergent thinking, using multiple lenses and scenarios, while applying multigenerational empathy and agency over the long-term futures of humans and society.

3. 3. Systems range: the sense of leadership responsibility and stakeholder empathy that is needed not only to run high-performing organisations but also to co-shape and enrich the systems in which we operate by understanding the relationships between the components and actors in a system and foreseeing the intended and unintended ripple effect of one’s interventions in that system.

4. 4. Cross-collaborative competence: the ability and capacity to successfully engineer and lead transformative collaborations with non-traditional change partners, mobilised through a compelling shared vision and trusted relationships.

5. 5. Radical impact agility: the ability to keep a relentless focus on delivering radical impact, despite being surrounded by VUCA, deploying disruptive intent, an entrepreneurial bias for action and the mental and physical agility to continuously question the status quo and to explore, develop and evolve radical new models of impact and value creation.

6. 6. Purpose: the self-knowledge, integrity, moral compass and clarity of purpose that will inspire others to reimagine and align their activities with the bigger purpose.

Integrated into the teaching of mindful leadership are the principles of the sufficiency economy, an ethical philosophy introduced in 1997 by Thailand’s King Bhumibol Adulyadej as an alternative to an economy of excess risk that had caused the economic crisis of that time. His Majesty’s vision was of an economy that is sufficient rather than excessive, with a concern for gradual, holistic development across all of society, not just for affluent urban elites, and that proceeds with care, economy and foresight to prevent mistakes (Reference MongsawadMongsawad, 2012). Numerous sectors have successfully adopted the philosophy in Thailand, most notably the financial sector, improving stakeholder satisfaction and reducing both risk and cost of capital.

Box 5Sufficiency Economy

The sufficiency economy philosophy is based on the Theravada Buddhist principles of moderation (Pho praman), reasonableness (Mi het phon) and risk-resilience (Phumikhum kan nai tua), providing strategic guidance for companies in their aim to be responsible, sustainable businesses. It applies the Buddhist practice of mindfulness in business decision-making, improving systemic understanding and stakeholder awareness, and contributing to prudent risk management and shared value creation:

• Moderation is the prudent management of risks based on normal, sound business grounds. Moderation provides a balanced approach towards stakeholder relationships and risk–reward opportunities: balance is the path of virtue, a middle way that provides a buffer against risk, where no one stakeholder can trump the interests of the others, and which prevents succumbing to irrational exuberance and market distortion.

• Reasonableness is driven by a win–win mentality that builds trust, mutuality and cooperation rather than competition. It calls for understanding the full consequences of our conduct for other stakeholders, not only in the short term but over the long term as well.

• The risk-resilience of a company and its surrounding system, and thus the company’s present value, is increased in the sufficiency economy by building financial, human, social and reputational capital through the application of moderation and the avoidance of unreasonable relationships.

The sufficiency economy promotes two-character virtues, which are particularly relevant in today’s crisis of distrust, polarisation, greenwashing and misinformation – knowledge (kwam ru) and integrity (khunatham) – as essential pillars for quality of management and constructive stakeholder relationships.

Mindful leaders consider their actions’ long-term future and system-level consequences, which requires knowledge and judgement, not passion, in making decisions. Integrity, the moral faculty of self-control and regard for others, requires deep reflection on ourselves, our values, beliefs and biases in relationship to our stakeholders’ potential, needs and values. It is built through good governance, transparency and keeping promises.

Figure 10

Mindful leadership skills, critical for sustainability transformation.

In his address at the leadership forum The Performance Theatre, former professor of Indo-Tibetan Buddhist studies at Columbia University Reference ThurmanBob Thurman (2014) explained how the Buddhist belief in reincarnation translates into a powerful transgenerational motivation for sustainability. As we deteriorate our natural and social environment, we deteriorate the conditions we will have to live with after reincarnation. Only when we leave the world in a better state than we found it do we have a chance to reach Enlightenment.

Agricultural societies worldwide survive by the grace of the interdependency between man and nature. Especially in smaller-scale agricultural communities, this has translated into the concept of stewardship, living sustainably in the environment and preserving natural capital for the next generations. Eastern wisdom traditions have a deep-rooted conviction that everything is connected and that all forms of life are equally sacred and deserve to be preserved. The paradigm at the base of the Western mindset, namely that nature was created in the service of man and is there for man to exploit, might have accelerated the destruction of natural capital for economic gains. But progressing awareness and insight into the need to restore natural capital and build its capacity as our ally against many of the challenges we face as a society is giving rise to a boom in regenerative practices, and interest in biomimicry.

Irrespective of the underlying religion, life philosophy or wisdom tradition, the right thing to do is to educate more mindful leaders to empathically understand the bigger picture and equip them to lead the (re)design of the systems that we live in to create future societies that are more in harmony with themselves and with nature.