How do we move from pilots and beyond the ESG hype bubble to scale the implementation of the circular economy and how do businesses lead in this space? In this episode of the Circular Economy Show, host Seb is joined by Lindsay Hooper, CEO for the Cambridge Institute for Sustainability Leadership (CISL), and Joe Murphy, Executive Lead of the Ellen MacArthur Foundation’s business network.
Together, they’ll explore the insights from CISL’s Competitive Sustainability report and the Foundation’s business network, offering perspectives on the state of the circular economy and related efforts. What will it take to scale? Join us to find out!
Read the full report discussed in this episode: Survival of the Fittest: From ESG to Competitive Sustainability.
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Episode Summary
How do we move from pilots and beyond the ESG hype bubble to scale the implementation of the circular economy and how do businesses lead in this space?
Episode Notes
How do we move from pilots and beyond the ESG hype bubble to scale the implementation of the circular economy and how do businesses lead in this space? In this episode of the Circular Economy Show, host Seb is joined by Lindsay Hooper, CEO for the Cambridge Institute for Sustainability Leadership (CISL), and Joe Murphy, Executive Lead of the Ellen MacArthur Foundation’s business network.Together, they’ll explore the insights from CISL’s Competitive Sustainability report and the Foundation’s business network, offering perspectives on the state of the circular economy and related efforts. What will it take to scale? Join us to find out! Read the full report discussed in this episode: Survival of the Fittest: From ESG to Competitive Sustainability.Show Less
Transcript
Seb Egerton-Read 00:00Welcome to the Circular Economy Show, brought to you by the Ellen MacArthur Foundation. My name is Seb, and in this episode, I'm joined by guests Joe Murphy, who's the Executive Lead for our Business Network at the Ellen MacArthur Foundation, and Lindsay Hooper, who is the CEO at the Cambridge Institute for Sustainability Leadership, or CISL. In the conversation, we'll be talking about the end of the ESG and circular economy hype bubble, what that means for business leadership and how we scale implementation for a circular economy. So coming to you first, Lindsay, thanks so much for joining the Circular Economy Show. Kind of, in some ways, the concept of this, of this conversation, this podcast, started with a paper that the CISL published, which was titled, provocatively, survival of the fittest, from ESG to competitive sustainability. I wonder if you could say first what kind of inspired you as one of the co-authors of that paper to write it.Lindsay Hooper 01:04sure pleasure to be here. We, when I say we, my co-author, Paul Gilding, and I were frustrated at the quality of debate. We could see that there were very real reasons why the height bubble, as we call it, or the ESG parties EFT called it why that had burst, why the tide was going out. But we're very concerned that the quality of the debate then was in some way throwing the baby out with the bathwater. It was ignoring the hard and fast laws of nature, the underlying drivers of the need for business action, the real risks to businesses of of a failure to act. And it was simply, uh, look, you're either doubling down on ESG and claiming somehow, in spite of the evidence the contrary, it's going to deliver, or saying it was all nonsense, and we should just get to back, back to business as usual. So it was a an intent to really provoke a different quality of conversation. We're not the only ones who landed in the same place of recognizing that many businesses are stuck between a rock and a hard place. They have the underlying drivers of a need to act, but lack of market support for action. Many others are landing in a similar place. Their arguments have been made over many years, but we felt that they were really being overlooked, and really wanted to put a stake in the ground. And to say, you know, it may not be popular, market sentiment may have shifted, but climate change is still real. It's still here, and the risks are really just going to escalate.Seb Egerton-Read 02:36And for the 1% of our audience who doesn't know, the ESG hype bubble that you kind of refer to, that ESG refers to environmental and social governance. And the hype bubble you refer to references this kind of wave of business targets and ambitions on a number of things, from from plastics to the climate crisis to biodiversity or nature positive targets the businesses have made with this kind of ambition to be both kind of economically viable in the long term or economically resilient, but also, you know, achieving success or a number of other things that we care about, such as tackling the climate crisis. I wonder if you could say, like, what in response to that, and the paper kind of articulates that that hype bubble might be coming close to bursting, or maybe already has burst in some respects. What does for anyone who doesn't, hasn't read the paper yet, who doesn't read the paper, what's the kind of two minute synopsis of what the paper says?Lindsay Hooper 03:31Briefly the argument is, or the case we're making, is that the case for business action should be grounded in the reality of and the real risks of climate change, of environmental degradation, not short term reputation, market sentiment. So that case for action has not gone away. It acknowledges, though, that the markets that businesses are acting in today often don't reward the action, the investment that will be needed to transform the business to be able to sustainably, sustainably meet society's needs. So leading businesses are increasingly hitting the barriers of market limits, market willingness to pay more shareholder willingness to where the costs of investment in transition. And so businesses collectively are being limited only to the win wins, only to the things that can be afforded within today's markets and everything else is really being left, and the cumulative impact of all businesses doing only what can be afforded in today's markets will put all businesses at risk. So the argument is, the science is clear and the risks are increasing. The markets are providing limits to transition. Businesses are between a rock and hard place. It's therefore, in their own interest to assertively advocate for and work in support of market shifts, and that requires a combination of innovation, demonstrating that it's doable, assertive advocacy, and also building wider political and social support for change to markets. To effectively design out the tension between profitability and sustainability.Seb Egerton-Read 05:05And we'll definitely be coming back to those themes during the course of this conversation, Lindsay, especially those kind of three areas of action that you mentioned. I wanted to bring Joe into the conversation this point, because I guess a lot of the themes that Lindsay is mentioning, Joe, given your role at the Foundation, working very close to our business network will be extremely familiar in the world of circular economy, we've worked for a long time with some of the kind of early movers, if you like, in the across different industries.Joe Murphy 05:34Yeah, for sure. And the report was really well received. You know, within our organisation, it definitely got a lot of us talking and across the network, I think it, you know, it kind of said the right words at the right time to capture a sentiment, just to take a step back on the circular economy. And, you know, I've been at the Foundation for nearly nine or 10 years now. And the very when we really first started, the whole premise of the circular economy was about making new markets. You know, that was the idea as an economic thesis. So saying, how, how do we design an economy which actually capitalizes on some of the shortcomings of the linear economy and just builds a more more prosperous, more rez, more more resilient economy? And fundamentally implicit in that has always been the need to actually create whole new value chains, create whole new markets. So again, the paper was also quite a helpful sort of validation of that core original thesis for the circular economy. I think circular economy has quite a nuanced positioning in the world of sustainability and sustainability efforts, and we've seen lots of progress and action across our network. We've also seen lots of challenges and failures and things not working. And what we're doing at the moment is trying to categorize that action into different sort of archetypes, if you like, how do you actually do market making? How does that actually work in practice?Seb Egerton-Read 06:57And I guess what you know, the foundation, I also, like you, have worked for quite a long time at the foundation, and when we started, of course, the circular economy was not a well known concept at all. There was, like, a very small number of businesses almost more curious about it than acting upon it. I guess what we seen during that build up of our activities is a lot of in of what I guess Lindsay would describe as, like individual organisations trying to do things and then some efforts that are a bit more cross sectoral, or more in that kind of policy advocacy space. What are some of the big learnings that we've had as an organisation, or that we see kind of coming out from our network of businesses and wider network as well?Joe Murphy 07:39Yeah, so maybe just to give three examples. So one of the archetypes we're looking at is really just individual companies taking this set of ideas and trying to implement it and capture, generate and capture value by themselves. So if you take someone like Philips, they have set a target to grow the revenue they earn from circular-economy related products and services to 25% of their total revenue by 2025 and they're actually on track to achieve that. Have achieved that. So Philips is a great example where whether that's redesigning specific products or changing the business model around how they sell MRI scanners to hospitals, they've actually been able to demonstrate, individually, the ability to generate a greater percentage of revenue from these products and services. Another example, which is more sort of collective action, is what the work that we did on the genes redesign, we got 100 brands to sign up to a set of guidelines to show how they would redesign genes to be fit for a circular economy, so removing some of the aspects of the design today that make it problematic for onward pathways once someone has used a pair of genes. So brands agreed on a set of definitions and guidelines, but then innovated individually and sort of competed, if you like, individually to actually implement those changes, and the net result has been 1.5 million pairs of genes on the market, and that's increasing year on year. And the global commitment for plastics has done a similar thing for plastics packaging at an even bigger scale. The third example is not from our network, but is an example that I quite like is a project called Project Zemba, which was run by the Aspen Institute and involved Amazon and Patagonia and a number of other brands. And that's a collective Buyers Club, essentially. So companies collaborating are going one step further than agreeing common definitions are actually aggregating their purchasing power by putting money into a third party who then contracts on their behalf and ultimately secures lower carbon bunker fuel for future shipping of their products in the future, which allows them to hit their CO2 targets. So. There are different archetypes and different examples, many examples that we've come across. But what we're really trying to understand now is, how do you actually design how do you facilitate those acknowledging that there are it takes all sorts of of effort to make new markets.Seb Egerton-Read 10:16And to some degree, we need all, all of the all the above, at some level, in the in the economy.Joe Murphy 10:24Yeah, arguably, we need a generation of 1000s of these type of activities and intermediaries to set up to actually facilitate the new markets, build the new infrastructure, implement the new technology that's going to enable companies to really make this transformation and bring some these, certainly solutions, into the money so they're commercially viable. To Lindsay's original point, that if it's just sort of tinkering on the edges, and it's leveraged mainly around target setting and reputation, you're not actually able to bring solutions that are commercially viable. It's going to be extremely hard to transition at scale, just it just won't happen.Seb Egerton-Read 11:03And Lindsay one of the... Oh, please do, yeah.Lindsay Hooper 11:06Sorry. No, go ahead. I was just going to jump in, but go ahead. Well, I was going to maybe, maybe this offers the link as well. I was going to say one of the things I really liked about the paper that you published was it somehow straddled the line between being quite realistic while still remaining optimistic, like, you know, offering a pathway forward. And I wondered whether, and part of that is being realistic about what has or hasn't really been achieved. But also there are, you know, you point towards solutions and the direction of travel, the things you think businesses should be doing to move towards competitive sustainability. And I wonder if you could say something about those solutions, and maybe in the context of commenting on some of the solutions that Joe was speaking about there, or some of the archetypes that Joe was speaking about there. Absolutely. And so the point, I really liked exam, all of those examples, and I was going to jump in on all of them. And I think the first one was a really good example of how the target setting was aligned to a strategic pivot. There was a clear commercial case and a plan, not simply we'll set a goal because everybody else is and we think they ought to. So I think that's really key to success, having that that value lens, and also Value at Risk lens on why would we set this goal and also a commercial strategy, then to make the most of it, rather than hoping that somehow rankings or reputation will translate into financial value. I think in the some of the challenge that we the one of the examples we had in the paper was around plastics and to your second archetype around the recyclability being important, that's a necessary but insufficient piece. We also need the infrastructure. We're going to need the collection piece at the end. So how do we then look at the wider set of interventions that are needed? And the point around government action wasn't simply it's just a blunt tool of, say, carbon pricing, or that may part of the mix. It's also around public procurement, and it's around infrastructure. It's around putting in place the broader structures that will be need to needed in order to transition whole industries. So I think that there are some really important and practical things there for business. It is. There is actually quite a lot of low hanging fruit efficiency gains, reducing exposure to some of the price shocks. There's obviously, as you've highlighted, some of those future business models where there can be real commercial strategies. And then I think we've where we've seen huge momentum has been in places where we've had that package of government incentives and infrastructure, and that's really driven faster change than had been anticipated. So we know that it's possible. We know that change can be achieved. We just haven't yet designed markets to do that in a whole range of ways. So I think there are lots of positive insights and lessons there, then there. But the other point you highlighted was the one of scale. I think we've learned that relying on a small group of leading businesses is not enough. It may take a small group of leading businesses to start building momentum, but we're going to need trade associations. We're going to need this needs to be the business voice at scale, not just the usual suspects who've been calling for and pushing for action, we're going to have to get huge scales. So that means those businesses not saying we're great, we're at the leading edge, those businesses working to activate trade associations, industry bodies more widely, activating their supply chains.Seb Egerton-Read 14:36And it's quite interesting, because in some let's look on, I guess business lobbying has a kind of like, kind of negative connotation. But in many ways, the conversation we're having here is like framing it as an absolutely necessary part of like, if progressive businesses are lobbying, are giving policy makers confidence, are uniting around the kind. Packages you were talking about Lindsay that have a real opportunity to shift the market. That feels like you're arguing that's an absolutely essential part of tackling things like the climate crisis.Lindsay Hooper 15:11I think so. And I we have as an organisation, been very active in this space, as you know, for a long time. We hold the Corporate Leaders Group in for a long time in the UK, in the EU, and now in in South Africa and in Kenya, bringing a voice of businesses who recognizes in their interests to get market reform. But of course, we do speak to organisations. I've been in boardrooms where they've said, Look, you know, it's the bad guys that do lobbying. We're the good, responsible guys. And then I said, Well, what is your strategy? You going to sit and wait and hope the market transitions? Or are you going to actively work to to try to accelerate that transition? And I think at the moment, it's also naive to be thinking the responsible thing is to sit back. We're in a context in which we know that those who benefit from blocking progress have got very deep pockets, are very focused on spending money on using strategic communications and advocacy to block progress. So sitting back is basically enabling arpeggiating the status quo. I don't think we will get change without those who've got resources and can see the need for change to be really assertive in pushing for it. So I think, of course, that needs to be done responsibly, and there are good guidelines around how to be responsible in lobbying and engaging with democratic processes. But at this stage, it does seem somewhat naive to simply sit back, recognising that others are lobbying very hard to block any progress.Seb Egerton-Read 16:45Yeah, and Joe, I was reflecting on our, you know, our time together in the circular economy space. It's almost unimaginable 10 years ago that the circle economy be as prolific as it is now in policy and business strategies. But similarly, it feels like there's this moment in time from kind of individual business or individual organisation transformation to market transformation, that is, it's a pretty big stepping stone for the circular economy to move from being a kind of really good idea or something that, you know, we can see can work when the context is just about right in certain circumstances, to something that has the impact that foundations kind of forecasting and suggest it can have, and not just the foundation of any other organisations.
